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Transmittal - 9/16/2021REDEVELOPMENT AGENCY OF SLC RICHMOND FLATS HIGH OPPORTUNITY AREA AFFORDABLE HOUSING LOAN TERM AMENDMENT RDA BOARD OF DIRECTORS MEETING –SEPTEMBER 14, 2021 PROJECT OVERVIEW 2960 Richmond Street PROJECT SUMMARY •$1.8 M loan approved to Community Development Corporation of Utah (CDCU) in two phases •55 Units -100% affordable to households between 25%-50% AMI •Mix of one-, two-and three-bedroom units •Built under Energy Star and Enterprise Green Community programs •Project has been re-zoned, planned, designed, and financed. •Due to high land cost and impact on tax credits, CDCU needs to restructure the loan PROPOSED LOAN TERM AMENDMENT APPROVED TERMS Collateral: Lien on land and improvements PROPOSED AMENDMENT Collateral: Lien on land only and not on improvements Other minor clarifying language modifications RDA FINANCE COMMITTEE RECOMMENDED APPROVAL OF THE PROPOSED AMENDMENT APPROVED TERMS W/ PROPOSED AMENDMENTS Amended Request:Up to $1,800,000 in 2 phases Phase: I (Acquisition)II (Permanent) Amount:Up to $1,520,000 (or 100% of as-is appraised value)Not to exceed $1,800,000 (including the outstanding balance of the acquisition loan amount from Phase I) Interest Rate:1%, interest shall begin to accrue upon disbursement of funds 1-3% depending on capacity for repayment Term/Am:2 years (24 months)30 years Collateral:First position lien A lien on the property, both on the land and improvements, that may be subordinated to senior lenders Payments:Deferred payments, with the outstanding principal balance, together with all accrued and unpaid interest, due and payable at the end of the Term, unless Phase II is executed Payments shall be based on annual surplus cashflow paid to borrower unless the project demonstrates financial capacity for guaranteed monthly repayments. If the loan has not been fully repaid by the end of the loan term, the entire outstanding loan amount shall be due at the expiration of the term. Contingencies On a quarterly basis, the Applicant shall provide the RDA with written notice to provide assurance as that as the Project progresses, it achieves the provisions of the loan agreement. Applicant shall be required to meet the following prior to the execution of Phase II: •Property to be rezoned •Obtain sufficient sources of financing •RDA to approve final financing package development plan •Completing an RDA design review process •Obtaining zoning and permitting approvals •Applicant to receive all other City/RDA approvals Phase II Approval n/a Evaluation and approval of Phase II funding shall be provided by the RDA Finance Committee in accordance with 1) meeting satisfaction of the Contingencies contained herein, and 2) review and approval of the final loan terms pursuant to the terms contained herein CONSIDERATIONS AND NEXT STEPS •Land itself provides adequate collateral with 82% LTV •Amendment will help with project’s credit efficiency rating on their tax credits •First development using high opportunity area funds •If approved, CDCU will work to close on 2nd phase of loan and other financials in October. •Ground-breaking and 12-month period construction to commence after closing SALT LAKE CITY CORPORATION 451 SOUTH STATE STREET, ROOM 118 WWW.SLC.GOV · WWW.SLCRDA.COM P.O. BOX 145518, SALT LAKE CITY, UTAH 84114-5518 TEL 801-535-7240 · FAX 801-535-7245 MAYOR ERIN MENDENHALL Executive Director DANNY WALZ Director REDEVELOPMENT AGENCY of SALT LAKE CITY STAFF MEMO DATE: PREPARED BY: RE: August 27, 2021 Tracy Tran Consideration of an amendment to the term sheet for a loan to Community Development Corporation of Utah (CDCU) for an affordable housing project to be constructed at approximately 2960 South Richmond Street REQUESTED ACTION: Consider approving a resolution authorizing an amendment to the term sheet of a $1,800,000 loan to Community Development Corporation of Utah for the construction of Richmond Flats. POLICY ITEM: Affordable housing. BUDGET IMPACTS: $1,800,000 of the $4,500,000 funds set aside for affordable housing in High Opportunity Areas. EXECUTIVE SUMMARY: In December 2019, the RDA Board of Directors (“Board”) approved a resolution that allocated $1,800,000 and established a conditional commitment to Community Development Corporation of Utah (“CDCU”) for an affordable housing development located in a high opportunity area (Attachment A: Resolution (2019): NOFA Allocation for High Opportunity Area Affordable Term Sheet Amendment for Loan to Community Development Corporation of Utah. In May 2020, the Board approved amended terms for the acquisition and redevelopment of the properties. The loan was approved to be issued in two phases, with Phase I executed in 2020 as a short-term loan in the amount of $1,520,000 for acquisition. Phase II is yet to be issued and is intended to be a construction-to-permanent loan in an amount of up to $1,800,000, to include the outstanding balance of the loan provided through Phase I and any additional funds up to the total of $1,800,000. Since acquiring the properties in 2020, CDCU has re-zoned, planned, designed, and financed Richmond Flats, a 55-unit affordable housing project located at approximately 2960 S Richmond Street (“Project”). Prior to entering into Phase II of the loan, certain conditions must be achieved pursuant to Attachment B: Resolution (2020): Term Sheet Amendment for Loan to Community Development Corporation of Utah. One of these terms is that the lien for the RDA loan will be on the land and improvements. Due to the high land acquisition cost and the impact of this on their tax credit application, CDCU would like to restructure the loan so that the RDA lien is on only the land and not on the improvements. As such, an amendment of this requirement is necessary to execute Phase II of the 1 loan - Attachment C: Resolution (2021): Term Sheet Amendment No. 2 for Loan to Community Development Corporation of Utah has been provided for the Board’s consideration. REDVELOPMENT ADVISORY FINANCE COMMITTEE RECOMMENDATION: •Original Loan Terms: On October 15, 2019, the RDA Finance Committee (“Committee”) reviewed the original request and recommended approval of the terms without any additional conditions or contingencies. •Amended Loan Terms: On April 7, 2020, the RDA’s Finance Committee reviewed the amendment to the loan terms and recommended approval of the terms without any additional conditions or contingencies. •Amended Loan Terms #2: The Committee is scheduled to review the amended loan terms regarding the lien language. The Committee’s recommendation will subsequently be forwarded to the Board. ANALYSIS & ISSUES: Project Overview The project concept includes a three-story project with approximately 55 affordable housing units. Refer to Attachment D for a site plan and renderings of the project concept. •Estimated Total Project Cost: $12,920,680 •Housing: The project is proposed to have 100% of the units affordable to households earning between 25% and 50% of the area median income. The development plan includes 12 one- bedroom, and 26 two-bedroom units, 11 three-bedroom units, and 6 four-bedroom units for a total of 55 units. While it is a priority for the Board to support mixed-income projects, this project is located in a high opportunity area with limited affordable housing in proximity. As such, the project will provide critically needed affordable units for the neighborhood. •Sustainability: The project will be built under both the Energy Star and Enterprise Green Community programs to ensure the project is designed and constructed to the latest sustainability standards. •Location: The Property is located within a high opportunity area. Amendment to Lien Language and Minor Clarifying Modifications Pursuant to housing loan policies, loans shall be secured, generally in the form of a lien/Deed of Trust. The approved term sheet states that a lien shall be placed on the land and improvements. CDCU is requesting a lien on the land only. The land itself provides adequate collateral to the RDA with a loan-to-value ratio of 82%. In addition, the updated term sheet provides a few minor clarifying language modifications that does not substantially impact the loan terms. Financial Overview Ownership and financing of the land and improvements will be separated, with the land owned by CDCU and the improvements owned by Richmond Flats, LLLP. CDCU will enter into a 99-year ground lease with Richmond Flats, LLLP, who will ultimately be responsible for building, leasing and operating the project. The RDA loan shall be on the land, with repayment terms structured as follows. The proposed amendment is redlined in the following chart under Phase II of the terms: 2 Amended Request: Up to $1,800,000 in 2 phases Phase: I (Acquisition)* II (Permanent) Amount: Up to $1,520,000 (or 100% of as-is appraised value) Not to exceed $1,800,000 (including the outstanding balance of the acquisition loan amount from Phase I) Interest Rate: 1%, interest shall begin to accrue upon disbursement of funds. 1-3% depending on capacity for repayment Term/Am: 2 years (24 months) 30 years Collateral**: First position lien A lien on the property, both on the land and improvements, that may be subordinated to senior lenders Payments: Deferred payments, with the outstanding principal balance, together with all accrued and unpaid interest, due and payable to at the end of the Term, unless Phase II of the loan is executed. Payments shall be based on annual surplus cashflow paid to borrower unless the project demonstrates financial capacity for guaranteed monthly repayments. If the loan has not been fully repaid by the end of the loan term, the entire outstanding loan amount shall be due at the expiration of the term. Contingencies: On a quarterly basis, the Applicant shall provide the RDA with written notice to provide assurance that, as the Project progresses, it achieves the provisions of the loan agreement. Applicant shall be required to meet the following prior to the execution of Phase II: • Property to be rezoned • Obtain sufficient sources of financing • RDA to approve final financing package development plan • Completing an RDA design review process • Obtaining zoning and permitting approvals • Applicant to receive all other City/RDA approvals Phase II Approval n/a Evaluation and approval of Phase II funding shall be provided by the RDA Finance Committee in accordance with 1) meeting satisfaction of the Contingencies contained herein, and 2) review and approval of the final loan terms pursuant to the terms contained herein. *Note: The Phase I loan has been executed and the funds have been disbursed. The RDA and CDCU are currently working toward execution of the Phase II loan pending approval by the Board of the requested amendment to the Phase II terms. **Note: The mortgage lien will be recorded on the land, not the improvements. PREVIOUS BOARD ACTION: • December 2017: The Board adopted the third amendment for FY 2017-2018, which includes $4,500,000 for a high opportunity area NOFA. • June 2018: The Board adopted policy guidelines and funding priorities for the NOFA. • December 2019: The Board adopted Resolution R-25-2019, which allocated $1,800,000 and established a conditional commitment to the Community Development Corporation of Utah (CDCU) for an affordable housing project located within a high opportunity area. • May 2020: The Board adopted Resolution R-10-2020, which amended the loan terms to structure the loan into two phases with conditions. 3 • March 2021: The Board adopted the Housing Development Loan Policy, which repeals the Affordable Housing Notice of Funding Availability Policy. ATTACHMENTS: A. Resolution (2019): NOFA Allocation for High Opportunity Area Affordable Term Sheet Amendment for Loan to Community Development Corporation of Utah B. Resolution (2020): Term Sheet Amendment for Loan to Community Development Corporation of Utah C. Resolution (2021): Term Sheet Amendment No. 2 for Loan to Community Development Corporation of Utah D. Site Plan and Renderings 4 REDEVELOPMENT AGENCY OF SALT LAKE CITY RESOLUTION NO. R-25-2019------- Notice of Funding Availability (NOFA) Funding Allocation for High Opportunity Area Affordable Housing Loan to Community Development Corporation of Utah R 19-2 RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING PRELIMINARY LOAN TERMS FOR A LOAN TO COMMUNITY DEVELOPMENT CORPORATION OF UT AH FOR AN AFFORDABLE HOUSING PROJECT LOCATED AT 2960 SOUTH RICHMOND STREET. WHEREAS, the Redevelopment Agency of Salt Lake City ("RDA") was created to transact the business and exercise the powers provided for in the Utah Community Reinvestment Agency Act (the "Act"). WHEREAS, the Act provides that tax increment funds may be used for the purpose of increasing the affordable housing supply within the boundaries of Salt Lake City. WHEREAS, pursuant to a motion adopted by the RDA Board of Directors (the "Board") on December 5, 2017, the Board set aside $10,000,000 for a "Notice of Funding Availability" (NOF A), contingent upon an application and review process administered by the RDA to facilitate funding of qualified projects which meet the goals established by the NOF A guidelines with $4,500,000 of the funds to be dedicated toward areas of high opportunity. The high oppol1unity funds remain open on an ongoing basis until funds are expended. WHEREAS, the RDA facilitated a loan application and review process pursuant to the RDA's NOFA policy set forth in resolution R-17-2018 (the "NOFA Policy"). WHEREAS, the Community Development Corporation of Utah ("the Developer") submitted a loan application for a loan of NOF A funds for an affordable housing project in a high opportunity area to acquire a property located at approximately 2960 S Richmond Street. WHEREAS, on October 15, 2019, the RDA's Finance Committee reviewed the Developer's loan application. WHEREAS, based on the Finance Committee's recommendations, the RDA staff recommends that the Board approve a loan to Developer as described on Exhibit A attached hereto and incorporated herein, and that the RDA shall provide a conditional commitment period determined by the RDA, during which the Developer shall have the opportunity to obtain needed financial, legal, and regulatory approvals as well as satisfy other conditions determined by the RDA in order to finalize the loan terms. ATTACHMENT A: RESOLUTION (2019) 5 6 7 8 REDEVELOPMENT AGENCY OF SALT LAKE CITY RESOLUTION NO. _______________ Term Sheet Amendment for Loan to Community Development Corporation of Utah RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING AN AMENDED TERM SHEET FOR A LOAN TO COMMUNITY DEVELOPMENT CORPORATION OF UTAH FOR AN AFFORDABLE HOUSING PROJECT LOCATED AT 2960 SOUTH RICHMOND STREET, 2964 SOUTH RICHMOND STREET, AND 2970 SOUTH RICHMOND STREET. WHEREAS, the Redevelopment Agency of Salt Lake City (RDA ) was created to transact the business and exercise the powers provided for in the Utah Community Reinvestment Agency Act the Act ). WHEREAS, on October 10, 2019, the Board of Directors of the RDA (the Board ) approved resolution R-25-2019 allocating the funding and approving the preliminary terms of a loan to Community Development Corporation of Utah (the Developer ) in connection with a mixed- income housing project to be known as Richmond Flats located at approximately 2960 S Richmond Street, 2964 Richmond Street, and 2970 Richmond Street (the Project ). WHEREAS, the e Committee. WHEREAS, Developer has requested an amendment to the approved preliminary terms of the loan. WHEREAS, on April 7, 2020, the RDA s Finance Committee reviewed the Developer s final loan terms and proposed amendment to the preliminary loan terms approved by the Board. WHEREAS, based on the Finance Committee s recommendations, the RDA staff recommends the attached set of terms Term Sheet ) for an affordable housing loan to Developer, as Borrower, for the Project. NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY,that the loan to Developer outlined in the Term Sheet attached hereto is approved, subject to revisions that do not materially affect the rights and obligations of the RDA hereunder. The Board authorizes the Executive Director to negotiate and execute the loan agreement and any other relevant documents consistent with the Term Sheet, and incorporating such other terms and agreements as recommended by the City ATTACHMENT B: RESOLUTION (2020) 9 Deputy 10 EXHIBIT A Term Sheet Amendment for Loan to Community Development Corporation of Utah 11 1 REDEVELOPMENT AGENCY OF SALT LAKE CITY RESOLUTION NO. _______________ Term Sheet Amendment No. 2 for Loan to Community Development Corporation of Utah RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING A SECOND AMENDED TERM SHEET FOR A LOAN TO COMMUNITY DEVELOPMENT CORPORATION OF UTAH FOR AN AFFORDABLE HOUSING PROJECT LOCATED AT 2960 SOUTH RICHMOND STREET, 2964 SOUTH RICHMOND STREET, AND 2970 SOUTH RICHMOND STREET. WHEREAS, the Redevelopment Agency of Salt Lake City (“RDA”) was created to transact the business and exercise the powers provided for in the Utah Community Reinvestment Agency Act (the “Act”). WHEREAS, on October 10, 2019, the Board of Directors of the RDA (the “Board”) approved resolution R-25-2019 allocating the funding and approving the preliminary terms of a loan to Community Development Corporation of Utah (“CDCU”) in connection with a mixed-income housing project to be known as “Richmond Flats” located at approximately 2960 S Richmond Street, 2964 Richmond Street, and 2970 Richmond Street (the “Project”). WHEREAS, on May 5, 2020, the Board approved resolution R-10-2020 amending the terms of the loan to CDCU for the Project that structures the loan into two phases. Phase I was executed and funded in 2020 as a short-term loan in the amount of $1,520,000 for land acquisition. Phase II was approved as a construction-to-permanent financing loan in an amount of up to $1,800,000, which would include the outstanding balance of the loan provided through Phase I and any additional funds up to $1,800,000. WHEREAS, prior to funding Phase II of the loan, certain conditions must be achieved pursuant to the approved terms. One condition is that the loan is secured with a lien on both the land and improvements. WHEREAS, CDCU has entered into a partnership with __________ as Richmond Flats, LLLP (the “Developer”). CDCU will continue to own the land and will lease the land to the Developer for development of the Project. CDCU has requested an amendment to the loan terms in order to facilitate the development of the Project. WHEREAS, on _________, the RDA’s Finance Committee reviewed the proposed second amendment to the loan terms previously approved by the Board. WHEREAS, based on the Finance Committee’s recommendations, the RDA staff recommends the attached set of amended terms (the “Term Sheet”) for the Phase II loan to CDCU. ATTACHMENT C: RESOLUTION (2021) 12 2 NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY, that the loan to CDCU outlined in the Term Sheet attached hereto is approved, subject to revisions that do not materially affect the rights and obligations of the RDA hereunder. The Board authorizes the Executive Director to negotiate and execute the loan agreement and any other relevant documents consistent with the Term Sheet, and incorporating such other terms and agreements as recommended by the City Attorney’s office. Passed by the Board of Directors of the Redevelopment Agency of Salt Lake City, this _______ day of _______________, 2021. ________________________________ Ana Valdemoros, Chair Approved as to form: __________________________________ Salt Lake City Attorney’s Office Kimberly K. Chytraus Date:____________________________ The Executive Director: ____ does not request reconsideration ____ requests reconsideration at the next regular Agency meeting. ________________________________ Erin Mendenhall, Executive Director Attest: ________________________ City Recorder August 26, 2021 13 3 EXHIBIT A Term Sheet Amendment for Loan to Community Development Corporation of Utah Amended Request: Up to $1,800,000 in 2 phases Phase: I (Acquisition) II (Permanent) Amount: Up to $1,520,000 (or 100% of as-is appraised value) Not to exceed $1,800,000 (including the outstanding balance of the acquisition loan amount from Phase I) Interest Rate: 1%, interest shall begin to accrue upon disbursement of funds. 1-3% depending on capacity for repayment Term/Am: 2 years (24 months) 30 years Collateral: First position lien A lien on the land, that may be subordinated to senior lenders [Amended to delete the lien on improvements] Payments: Deferred payments, with the outstanding principal balance, together with all accrued and unpaid interest, due and payable to at the end of the Term, unless Phase II of the loan is executed. Payments shall be based on annual surplus cashflow paid to borrower unless the project demonstrates financial capacity for guaranteed monthly repayments. If the loan has not been fully repaid by the end of the loan term, the entire outstanding loan amount shall be due at the expiration of the term. Contingencies On a quarterly basis, the Applicant shall provide the RDA with written notice to provide assurance that, as the Project progresses, it achieves the provisions of the loan agreement Applicant shall be required to meet the following prior to the execution of Phase II: • Property to be rezoned • Obtain sufficient sources of financing • RDA to approve final financing package development plan • Completing an RDA design review process • Obtaining zoning and permitting approvals • Applicant to receive all other City/RDA approvals Phase II Approval n/a Evaluation and approval of Phase II funding shall be provided by the RDA Finance Committee in accordance with 1) satisfaction of the Contingencies contained herein, and 2) review and approval of the final loan terms pursuant to the terms contained herein. 14 ATTACHMENT D: SITE PLAN AND RENDERINGS 15 16 17