Title
Public Hearing to Consider Introduction of Ordinance Authorizing the City Manager to Execute a Ground Lease Agreement between Eden Housing, Inc, and the City of Alameda for a 70-Unit Family Affordable Housing Project on Block 8, within Site A at Alameda; and (2) Introduction of Ordinance Authorizing the City Manager to Execute a Ground Lease Agreement between Eden Housing, Inc., and the City of Alameda for a 60-Unit Senior Affordable Housing Project on Block 8 within Site A at Alameda Point. (Base Reuse 819099)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Public Hearing to Consider Introduction of Ordinance Authorizing the City Manager to Execute a Ground Lease Agreement between Eden Housing, Inc, and the City of Alameda for a 70-Unit Family Affordable Housing Project on Block 8, within Site A at Alameda; and (2) Introduction of Ordinance Authorizing the City Manager to Execute a Ground Lease Agreement between Eden Housing, Inc., and the City of Alameda for a 60-Unit Senior Affordable Housing Project on Block 8 within Site A at Alameda Point
BACKGROUND
In June 2015, the City Council unanimously approved the Site A Development Plan and a Disposition and Development Agreement (DDA) with the private developer, Alameda Point Partners (APP), for a 68-acre area within Alameda Point that extends generally from the Main Street entrance of Alameda Point to the eastern edge of the Seaplane Lagoon. Site A includes 800 housing units, 600,000 square feet of commercial development, and extensive parks and utility infrastructure (Site A Project). The Site A Project represents the first major public/private development at Alameda Point since the base closed and lost 18,000 jobs in 1997. It is an important first step toward achieving the community’s vision of a mixed-use transit-oriented development at Alameda Point.
Two hundred (200) of the residential units (25%) at Site A are required to be affordable units. One hundred thirty (130) affordable units will be provided in two projects on Block 8: a family project with 70 units, and a senior project with 60 units (Block 8 Projects). The moderate-income units will be provided in a teacher housing project with Alameda Unified School District (AUSD) or distributed among the market-rate units in the other buildings provided by APP.
In March 2016, APP assigned the Affordable Housing Implementation Plan approved as part of the DDA to Eden Housing, thereby designating Eden Housing as the Qualified Affordable Housing Developer for the development of the low- and very-low income affordable units within Site A consistent with the DDA. Eden Housing is a highly qualified nonprofit affordable housing developer that constructs and managers thousands of units of affordable housing throughout the Bay Area. Eden Housing, in coordination with APP, has expended significant staff and financial resources securing financing sources to fund the Block 8 Projects and have been successful at obtaining numerous funding sources, as described in greater detail below. Eden Housing is also pursuing additional financing options, including re-applying to the State of California through the Affordable Housing Sustainable Communities (AHSC) grant program, applying for 4% non-competitive and 9% competitive Low Income Housing Tax Credits (LIHTC) and/or the State’s Housing and Community Development (HCD) Infill Infrastructure Grant program (IIG) in 2017/2018. Many of the already obtained, as well as pending financing sources, require that Eden Housing demonstrate direct site control with the land owner for Block 8, which is the City, and an infrastructure contingency plan in the event of further delay by APP in order to maintain strict deadlines for starting construction once funds have been committed.
While APP cured its recent default by making a $1.35 million option extension payment to the City to extend the Phase 1 outside closing date to April 9, 2018 and the DDA with APP remains in full force and effect, uncertainty remains regarding the exact timing of closing of the Phase 1 property and delivery by APP of the new backbone and site-specific infrastructure for Block 8. As a result of this uncertainty and the issues raised by AHSC staff (and other funders) regarding using the DDA as Eden Housing’s evidence of site control in the first unsuccessful attempt at obtaining funds through AHSC last fall, Eden Housing has requested that the City enter into a direct relationship with them via long-term ground leases for each of the Block 8 Projects (Ground Leases).
Ground Leases between the City and Eden Housing provide Eden Housing with direct site control over the two Block 8 projects and allows Eden Housing to implement an infrastructure contingency plan in order to commence construction of the Block 8 Projects regardless of the actions taken by APP, significantly increasing Eden Housing’s competitiveness for the upcoming AHSC grant cycle and the upcoming LIHTC rounds, as well as for meeting the readiness and delivery requirements of the Alameda Housing Authority veteran’s vouchers (VASH Vouchers) program already awarded to the Block 8 Projects.
The following provides a summary of Eden Housing’s current financing plan and commitments for the Block 8 family and senior projects:
Block 8 Family Project Financing Plan and Commitments
|
Source of Funds |
Amount |
Status |
|
Land Donation |
$5.1 million |
Committed |
|
Bank Loan |
$4.2 million |
Committed |
|
VASH Voucher Loan |
$3.0 million |
Committed |
|
AHSC State Grant |
$9.0 million |
Apply Fall 2017 |
|
LIHTC 4% Investor Capital |
$16.5 million |
Apply June 2018 |
|
Section 811 Loan |
$3.1 million |
Pending Final Approval |
|
HCD Infill Infrastructure Grant |
$3.0 million |
Apply Fall 2017 |
|
GP Equity |
$3.4 million |
Committed |
|
Inclusionary Contribution |
$2.0 million |
Committed if APP Closes |
|
TOTAL SOURCES |
$49.3 million |
|
Block 8 Senior Project Financing Plan and Commitments
|
Source of Funds |
Amount |
Status |
|
Land Donation |
$4.4 million |
Committed |
|
Bank Loan |
$1.8 million |
Committed |
|
VASH Voucher Loan |
$5.8 million |
Committed |
|
County of Alameda Measure A1 |
$5.0 million |
City Committed - County Approval |
|
Affordable Housing Program (AHP) |
$0.6 million |
Committed |
|
Inclusionary Contribution |
$1.0 million |
Committed if APP Closes |
|
Veteran Housing Homelessness Program Loan |
$1.4 million |
Committed |
|
LIHTC 9% Investor Capital |
$10.5 million |
Apply March 2018 |
|
HCD Infill Infrastructure Grant |
$2.0 million |
Apply Fall 2017 |
|
TOTAL SOURCES |
$32.5 million |
|
A complete copy of the proposed Ground Leases are attached as Exhibits 1 and 2.
DISCUSSION
City staff is recommending entering into the Ground Leases so that Eden Housing can deliver the 130 units of affordable housing as quickly as possible by increasing the competitiveness of obtaining all of the pending public financing and by complying with all of the readiness requirements of the commitments already obtained by Eden Housing. The following provides a summary of the key provisions and implications of the Ground Leases with Eden Housing:
1. Parties: The parties to the Ground Leases are the City of Alameda and Eden Housing. While APP will not be party to this agreement, the Ground Leases refer to the DDA with APP and the obligations required of APP and Eden Housing as part of the DDA, which will remain in effect as long as the DDA is not terminated.
2. Purpose: The purpose of the Ground Leases is to put Eden Housing in the most competitive position possible to not lose any of their existing financing commitments and to obtain all of their remaining sources of financing by providing them with direct site control over the Block 8 property and to allow them to implement with an infrastructure contingency plan (described below), which allows them to move forward with the development of the Block 8 Projects even if APP and the larger Site A project is delayed.
3. Project: As described above, Eden Housing is obligated to develop two affordable housing projects targeted at low- and very-low-income households: a 70-unit family housing project and a 60-unit senior housing project.
4. Term and Option to Purchase: The terms of the Ground Leases are for 87 years from the time Eden Housing has satisfied its conditions to closing (as described below). The long term of the lease is necessary in order to satisfy potential investor requirements. Eden Housing has the option to purchase the property for a $1, only if all of the conditions to close have been met and all new backbone infrastructure is installed and accepted by the City consistent with the DDA and the Master Infrastructure Plan for Alameda Point (MIP) (Backbone Infrastructure).
5. Conditions to Close and Financing Commitments: The delivery of the premises and the closing on the commencement of the Ground Leases do not occur unless Eden Housing has met all of its obligations under the DDA and obtained all of its financing commitments.
6. Infrastructure Contingency Plan: While it is expected that APP will close and deliver all of the Backbone Infrastructure necessary to meet all of the financing requirements and for occupancy of the Eden Housing projects, the exact closing date is uncertain and there is the unlikely possibility that APP will not close by the April 9, 2018 date. As a result, Eden Housing needs to be able to assure its investors that it can move forward with the Block 8 Projects without APP or else they could lose their already committed financing or not be competitive for obtaining the remaining financing sources. The Ground Leases, therefore, contemplate an infrastructure contingency plan where Eden Housing finances and installs the infrastructure necessary to facilitate occupancy of its units, which is expected to include a combination of permanent and interim infrastructure to ensure that the infrastructure is sufficiently sized and reliable for the needs of the Block 8 Projects consistent with the MIP and building codes. Per the Ground Leases, however, under no circumstances is Eden Housing permitted to obtain occupancy permits for any of their units until permanent East Bay Municipal Utility District (EBMUD) potable water and fire protection infrastructure is installed. Eden Housing and City staff have met with all of the infrastructure utility providers and determined preliminarily that it is possible for Eden Housing to proceed with just Block 8-specific interim improvements (other than the required permanent EBMUD water infrastructure) with certain repairs and improvements that would be specified and required as part of a future City improvement plan permit process. If the infrastructure contingency plan is implemented by Eden Housing, the Backbone Infrastructure, consisting of all new upgraded permanent infrastructure, would ultimately be installed once the larger Site A development proceeds.
7. Other Provisions. The Ground Leases contain numerous other provisions, such as insurance, events of default, mortgage protections, assignments and transfers, and indemnity, including for any liability associated with the installation of Block 8-specific infrastructure by Eden Housing.
As discussed above, City staff recommends approving the Ground Leases with Eden Housing to help Eden Housing preserve their existing financing commitments and to increase their competitiveness for obtaining the remaining financing sources. Eden Housing and City staff are concerned that without the Ground Leases providing direct site control and an infrastructure contingency plan, Eden Housing is in jeopardy of not being able to move forward with 130 units of affordable housing.
FINANCIAL IMPACT
There is no financial impact to the General Fund or Base Reuse budgets other than staff time and legal costs already budgeted in the Base Reuse budget.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
These actions are consistent with the approved General Plan, Zoning Ordinance, Town Center Plan, MIP, Site A Development Plan, and DDA.
ENVIRONMENTAL REVIEW
On February 4, 2014, the City of Alameda certified the Alameda Point Final EIR in compliance with the California Environmental Quality Act (CEQA). The Final EIR evaluated the environmental impacts of redevelopment and reuse of the lands at Alameda Point consistent with the Town Center Plan, which included Block 8 within Site A. No further review is required for this review of the project designs.
RECOMMENDATION
Hold a Public Hearing to consider introduction of Ordinances authorizing the City Manager to execute two ground lease agreements between Eden Housing, Inc, and the City of Alameda for two affordable housing projects on Block 8 within Site A at Alameda Point to provide direct site control and to allow an infrastructure contingency plan for Eden Housing in order to obtain public financing for both projects: (1) Site A 70-Unit Family Project; and (2) Site A 60-Unit Senior Project.
Respectfully submitted,
Jennifer Ott, Base Reuse and Transportation Planning Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. Ground Lease Agreement - Family Project
2. Ground Lease Agreement - Senior Project