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R-020-2019 - Loan to Central Ninth Development Partners II, LLC; 912-916 Jefferson Street R 19-2 REDEVELOPMENT AGENCY OF SALT LAKE CITY RESOLUTION NO. R-20-2019 Loan to Central Ninth Development Partners II, LLC RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING THE TERM SHEET FOR A LOAN TO AN AFFILIATE OF CENTRAL NINTH DEVELOPMENT PARTNERS II, LLC FOR A MIXED USE PROJECT LOCATED AT APPROXIMATELY 912-916 JEFFERSON 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. WHEREAS, the Board of Directors of the RDA (the Board") and the governing body of Salt Lake City (the "City") adopted a redevelopment plan for the West Temple Gateway project area. WHEREAS,the RDA has a revolving loan fund to provide construction loans for projects located in its project areas. WHEREAS, an affiliate of Central Ninth Development Partners II, LLC, a Utah limited liability company (the"Developer")will construct a mixed use development with three affordable housing units ("Project") on 0.25 acres of property located at approximately 912-916 Jefferson Street ("Property"). WHEREAS, the Developer is purchasing the Property from the RDA for $0 pursuant to the Board Resolution R-29-2018 approved on August 21, 2018. WHEREAS,the Developer has requested a loan from the RDA to assist with construction costs for development of the Project. WHEREAS, on October 15, 2019, the RDA Finance Committee reviewed the loan application. WHEREAS, based on the RDA Finance Committee's recommendations, the RDA staff recommends the attached set of terms for a loan to the Developer, as borrower, for the Project ("Term Sheet"). NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Redevelopment Agency of Salt Lake City that it approves the loan outlined in the Term Sheet attached hereto, 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 A ency of Salt Lake City, this 42- h day of November , 2019. c—_ Fo air Approved as to form: S It Lake City Attorney's Office Kimberly K. Chytraus Date: 1r ?-� Transmitted to the Executive Director on November 12, 2019 The Executive Director: does not request reconsideration requests reconsideration at the next regular Agency meeting. Ja queline M. Biskupski, Executive Director Att MFNTgC-q VORAre �20�a G a �� sE C rty Recorder -S,gL7 LAKE di /,10 LOAN TERM SHEET APPLICANT • Applicant: A limited liability corporation formed by Central Ninth Development Partners II, LLC PROPERTY • Acreage: 0.25 • Address: approximately 912-916 Jefferson Street • Unit mix: approximately 4,600 square feet of ground floor retail space, three 1-bedroom housing units on the second level (approximately 600 square feet each), and 11 parking stalls PROPOSED LOAN TERMS • Amount: The loan amount will be based on actual gap financing needs and will be sized to the lower of$1,997,171 or a maximum of a 95% loan-to-value per the value determined by the as-complete appraisal. • Interest Rate: RDA Loan Program Base Rate (U.S. Treasury Yield plus 3%) 4.35% Public Benefit Interest Rate Reduction: Sustainability -0.5% Public Benefit Interest Rate Reduction: Public Amenities -0.5% Public Benefit Interest Rate Reduction: Architecture &Urban Design -0.5% Public Benefit Interest Rate Reduction: Transit Alternatives -0.5% Public Benefit Interest Rate Reduction: Economic Impact -0.5% Public Benefit Interest Rate Reduction: Affordable Housing -0.5% Final Interest Rate" 1.35% "The interest rate provided is an estimate. The final interest rate will be based on the U.S. Treasury Yield Curve Rate, as determined by the term of the loan, at loan closing. The rate shown is the 5-year Treasury Yield Curve Rate on October 4, 2019. • Interest Rate shall increase in Year 6 to 3.35% • Interest Accrual: Interest shall accrue during construction beginning upon the first disbursement of funds. • Term: 120 months • Repayment: The RDA loan will be repaid by Developer using proceeds from the rental income generated by the commercial and residential tenants of the building. Assuming stabilization occurs as anticipated, the project is estimated to have positive cash flow and reach stabilization in Year 1. The outstanding balance of the loan shall be paid in full at the end of the loan term using a loan from a traditional financing source. • Disbursement: Loan proceeds shall be disbursed through construction draws to begin once developer equity is fully drawn down. Any funds not disbursed 24 months after closing will be used to pay all outstanding interest and principal from the loan. To the extent that project sources exceed project uses at project close out, savings would be allocated to pay down the RDA loan. • Expenses: Applicant will pay all loan expenses and closing costs, including title insurance. • Assumption: The loan is not assumable. • Recourse: The loan shall be full recourse until the certificate of occupancy is granted, at which point it will convert to nonrecourse. • Affordable Housing Compliance: Prior to Property conveyance, the RDA will record a Restrictive Use Agreement on the property to ensure affordability of the three residential units for a term of at least 30 years from the date of conveyance. The three units shall be affordable at or below 60% of the Area Median Income. In addition, the Applicant indicates they will use Evergreene Property Management, who manages tax credit properties, to review their residential leases annually to make sure the tenant income levels comply with the affordability requirements. COLLATERAL AND GUARANTEES • A deed of trust lien, recorded in first position, on the Property. • Personal guarantees from persons maintaining 20% or more ownership in the ownership entity. DESIGN REQUIREMENTS The Project received approval from a Design Review Committee convened by the RDA on July 9, 2019. CONDITIONS FOR LOAN CLOSING Prior to loan closing, the Applicant will complete the following: • RDA approves all terms of the loan. • Secure sufficient sources of project financing (equity). • Execute loan documents (e.g. promissory notes, loan agreements, security documents, and guarantees) as deemed necessary by the RDA and its legal counsel. • Receive all necessary approvals from the City, as further defined in the loan agreement. • Receive approval from the RDA and its legal counsel on all matters pertaining to title, legality of the loan, and the legality, sufficiency, and the form and substance of all documents that are deemed reasonably necessary for the loan transaction. • Provide evidence of insurance in such amounts and with such coverage as deemed necessary by the RDA for the Property. • Such other terms as recommended by the RDA's legal counsel and staff, including an easement recorded on the property to allow the public to access the proposed mid-block walkway.