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HomeMy WebLinkAbout04 of 2025 - Commercial Development Loan Program (CDLP) PolicySALT LAKE CITY COMMUNITY REINVESTMENT AGENCY RESOLUTION 04 of 2025 Commercial Development Loan Program Policy RESOLUTION OF THE BOARD OF DIRECTORS OF THE SALT LAKE CITY COMMUNITY REINVESTMENT AGENCY REPEALING THE LOAN PROGRAM POLICY AND THE GRANARY DISTRICT ADAPTIVE REUSE PROGRAM POLICY AND REPLACING THEM WITH THIS COMMERCIAL DEVELOPMENT LOAN PROGRAM POLICY WHEREAS, the Salt Lake City Community Reinvestment Agency (CRA) was created to transact the business and exercise the powers provided for in the Utah Community Reinvestment Agency Act, Utah Code Title 17C; and WHEREAS, the Utah Community Reinvestment Agency Act grants the CRA powers to use funds to provide for project area development within project area boundaries; and WHEREAS, pursuant to Resolution 37-2016, the CRA Board of Directors (CRA Board) adopted the Loan Program Policy; and WHEREAS, pursuant to Resolution 8-2017, the CRA Board adopted the Granary Adaptive Reuse Program Policy; and WHEREAS, the CRA Board now supports the goal to policies that serve commercial businesses by repealing both the Loan Program Policy and the Granary Adaptive Reuse Program Policy and replacing them with this Commercial Development Loan Program Policy. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE SALT LAKE CITY COMMUNITY REINVESTMENT AGENCY, that the Loan Program Policy adopted pursuant to Resolution 37-2016 and the Granary District Adaptive Reuse Program Policy adopted pursuant to Resolution 8-2017 are hereby repealed in their entirety and replaced with the following policy for a Commercial Development Loan Program: 1. PURPOSE The Commercial Development Loan Program (CDLP) provides critical financing to support and incentivize the development of commercial and mixed-use projects that advance the CRA core mission, values, and project area objectives. 2. INTENT Funds distributed through the CDLP are intended to: a. Incentivize the creation of new commercial spaces and formation of unique business districts throughout CRA project areas. b. Encourage the provision of attainable rental or ownership opportunities for local and independent businesses and community-serving non-profits. c. Provide opportunities to establish new services, amenities, or underrepresented business types within a neighborhood, such as childcare facilities and after-school programs. d. Invest in mixed-use projects with residential components that advance adopted priorities of the CRA Housing Development Funding Strategy. e. Support the preservation or rehabilitation of existing building stock. f. Incorporate green-building elements to lower operating expenses, conserve resources, and promote resiliency. g. Maximize CRA impact by leveraging other, private funding sources capital stack. h. Promote neighborhoods with balanced economies that produce quality jobs through employment opportunities and workforce development programs. i. Enhance the capacity for non-traditional applicants to apply for and utilize CRA funds. 3. FUNDING PRIORITIES Funding priorities are required and incentivized through this policy as threshold requirements (including Qualifying Livability Benchmarks) and incentivizes (including Incentivized Livability Benchmarks and incentives for building preservation and rehabilitation). To provide flexibility to address current priorities and needs, certain priorities may be given preference over others with increased potential for interest rate reductions and/or higher scoring in a competitive application process. Current priorities will be reflected in the CDLP administrative guidelines. 4. PROGRAM ADMINISTRATION Administration of the CDLP shall be guided by this policy and corresponding administrative guidelines. Funding may be offered on an ongoing basis or periodically throughout the year, and may be competitive or open-ended, subject to the availability of funds and the level of demand. 5. THRESHOLD REQUIREMENTS To be eligible for funding through the CDLP, projects must, at minimum, meet the following threshold requirements, in addition to further requirements that may be set forth in the CDLP administrative guidelines. a. Eligible Project Types The CDLP provides funding to facilitate various commercial and mixed-use development projects, including new construction, building preservation/rehabilitation, significant site work, and/or other improvements that will remain with and benefit the property long-term. Mixed-use projects must include activated commercial space on the ground floor. Activated commercial space means that a minimum of 50% of the length of all street-facing building facades must, on the ground floor level, contain a non-residential use (retail goods/service establishments, restaurants, bars, art and craft studios, entertainment, office, etc.) that is open to the public, not exclusive to the tenants of the building, and encourages pedestrian activity and walk-in traffic. Activated commercial spaces shall have a minimum depth of twenty-five (25) feet. An exception may be provided for projects that involve the preservation or rehabilitation of an existing building and are unable to meet the minimum dimensions of activated commercial space required. b. Eligible Costs Funding is made available for construction costs, or hard costs. Use of funds for property acquisition, infrastructure improvements, environmental remediation, demolition, project- related soft costs, or tenant-specific improvements will be considered on a case-by-case basis, if part of a larger redevelopment project. Refinancing of existing debt is ineligible. c. Eligible Applicants Applicants must be the title owner or long-term ground lessee of the property. Current or prospective commercial tenants who lease all or a portion of the property may also apply. Applicants must provide sufficient evidence of their capabilities to successfully complete the project, and their credit history must demonstrate prompt payment of past obligations. Applicants and affiliated entities must be in good standing on all existing contracts administered by the CRA, Salt Lake City Corporation, Salt Lake County, and the State of Utah. i. Property Owners/Ground Lessees Evidence of site control must be demonstrated through proof of ownership, option to purchase agreement, purchase and sale agreement, long-term ground lease agreement, or equivalent. Property taxes and special assessments must be current, with no outstanding judgments or liens against the applicant(s). ii. Tenants Evidence of a lease agreement that will remain in place for, at minimum, the duration of the loan term shall be provided. Proposed project activities must be approved by the property owner. d. Project Area Objectives The project must be located within an eligible CRA Project Area and must support at least one Project Area Objective as provided in the most recent Project Area Work Plan. e. Timeliness To support projects that have a reasonable timeframe for completion and ensure ongoing funds availability, projects must be prepared to break ground within twelve (12) months of receiving conditional funding approval. f. Qualifying Livability Benchmarks The CR CR overarching values: Economic Opportunity, Equity and Inclusion, and Neighborhood Vibrancy. Projects that receive funding shall satisfy a minimum of two (2) of the Qualifying Livability Benchmarks and associated criteria listed below. Mixed-use developments that contain a residential use may supplant one of the Qualifying Livability Benchmarks with one of the adopted priorities of the CRA Housing Development Funding Strategy for the current fiscal year. 1 Projects that satisfy more than two (2) Qualifying Livability Benchmarks, inclusive of priorities of the Housing Development Funding Strategy, are eligible for a reduction to the standard interest rate as described in 6.c.ii., Incentivized Livability Benchmarks. Compliance with Qualifying Livability Benchmark criteria may be required beyond the loan term. 1 This provision shall only apply to adopted priorities of the CRA Housing Development Funding Strategy that are not also threshold requirements of the CDLP. Qualifying Livability Benchmarks Criteria Leveraging 10% or less of the total development cost. Permanent Job Creation The project attracts employers as tenants that create at least one full-time job per every 500 square feet of non- residential space that is paid above a living wage (at least 110% of the average Salt Lake County wage per incorporates a robust workforce development program offering internships, apprenticeships, or other job training opportunities. Commercial Vitality The project reserves at least 50% of its net leasable commercial space for one of the following tenant types: Local and independent businesses;2 Minority and/or veteran-owned businesses;3 Community-serving non-profits;4 Childcare facilities or after-school programs; or Entities that provide products or services that are underrepresented in the neighborhood. Ownership The project includes commercial space that will be made available for purchase by a tenant who will occupy the space. g. Design Requirements Projects shall comply with all applicable Salt Lake City and CRA policies, ordinances, and codes. h. Sustainable Development Projects shall comply with the CR i. Tenant Displacement Displacement of current residential and commercial tenants is strongly discouraged but may be unavoidable. For residential displacement, the applicant shall submit a relocation plan that complies with applicable federal, state, and local policies for temporary or permanent displacement. For commercial displacement, the applicant shall disclose the number of commercial units lost, their respective sizes (in square feet), the names of impacted businesses, efforts made to accommodate them elsewhere, and other relevant information 2 Local and independent businesses are defined as those that originated in the State of Utah, are not owned by another company, are not associated with a franchise corporation, and operate autonomously. 3 Minority and/or veteran-owned businesses are defined as businesses that are >50% owned, controlled, and managed by one or more individuals who identify as a minority race, ethnicity, and/or gender, veteran, and/or other socially and/or economically disadvantaged group. 4 Community-serving non-profits are defined as those that primarily focus on providing services, programs, or advocacy efforts that are aimed at addressing the needs and improving the well-being of the local community and its residents. as requested in the application for funding. 6. LOAN AMOUNT, TERM, & INTEREST RATE a. Loan Amount The applicant must provide sufficient evidence that the amount of funds requested from the CRA is necessary for the project to succeed. The applicant must demonstrate that borrowing capacity is inadequate, future revenues are inadequate or cannot accommodate the timeliness necessary to complete the project, or costs would place an undue financial burden on the applicant. A loan commitment should be secured (evidenced by a letter of interest and term sheet) from a private lending source at the best possible rate and terms and in the maximum size available, based on the economics of the project. i. Maximum Loan Amount All projects shall have a maximum loan amount of $2,000,000. ii. Gap Financing Loan maximums are limited to the demonstrated gap in available financing to cover project costs and shall be sized to support a debt service coverage ratio (DSCR) of 1.1 or a loan to value (LTV) of 95%, inclusive of all debt on the project, whichever results in the lower loan amount. iii. Primary Financing development costs, loans shall be sized to support a debt service coverage ratio (DSCR) of 1.2 or a loan to value (LTV) of 90%, inclusive of all debt on the project, whichever results in the lower loan amount. b. Term & Amortization The loan term and amortization schedule shall be determined as follows: i. Term The loan term shall be up to five (5) years. An option to extend the overall loan term to 10 years may be available through a preauthorized extension that provides an interest rate increase of 2% beginning in year six (6). ii. Amortization The standard amortization period is up to 20 years with balloon payment due at loan maturity. c. Interest Rate The interest rate shall be determined as follows: i. Standard Interest Rate The interest rate is fixed at 300 basis points (3%) plus the U.S. Treasury Yield Curve Rate, to be locked in within a month of loan closing. For example, if the U.S. Treasury Yield Curve Rate is 4.5% when the rate is locked in, the CDLP standard interest rate is 7.5%. Interest shall accrue beginning with the first draw of funds. In the event of a default, the interest rate will increase to 14% on the unpaid sum. ii. Incentivized Livability Benchmarks A reduction to the standard interest rate is available for projects that meet additional Livability Benchmarks beyond the threshold requirements listed in section 5.f., Qualifying Livability Benchmarks, as provided in the administrative guidelines, with the ability to reduce the interest rate to a minimum of 3%. 7. BUILDING PRESERVATION OR REHABILITATION Projects that involve the preservation or rehabilitation of a chronically vacant, underutilized, and/or economically challenged building may be eligible for forgiveness of twenty percent (20%) or $200,000 of the loan principal amount, whichever is greater, at the end of the loan term. If the conditions below are met throughout the loan term, interest will not accrue and loan payments will not include the principal amount to be forgiven. a. Building Age The existing building to be preserved or rehabilitated shall be a minimum of fifty (50) years old. b. Building Condition Eligible buildings are those that are chronically vacant, underutilized, and/or economically challenged, preventing or limiting their productive use. This may occur for an array of reasons, including but not limited to, market conditions, economic hardship, the size of the building, a substantial degree of deterioration, environmental contamination, inability to meet modern building code requirements, etc. c. Minimum Footprint of Eligible Building The footprint of the eligible building to be preserved or rehabilitated covers a minimum of twenty-five percent (25%) of the total development area, which may be comprised of one or multiple abutting parcels. A lower percentage may be considered if the building has frontage on a public street or would be highly visible from publicly accessible spaces within the interior of the site. d. Modifications to Existing Building A maximum of twenty-five percent (25%) of each street facing building wall may be removed to accommodate modifications or additions. No more than fifty percent (50%) of the building's exterior walls may be removed. Portions of a building wall with character defining architectural features shall not be removed. e. Restrictive Covenant Required Projects that are eligible for the financial incentive offered herein shall be subject to a legally binding restrictive covenant that is recorded on the property with the Salt Lake County Recorder upon loan closing and guarantees that the physical elements of the building being preserved or rehabilitated shall remain in substantially the same form and exterior features important to the character of the building shall be preserved for thirty (30) years. At the discretion of the CRA, if the Planning Division, through zoning incentives offered in Title 21A.52.060, requires the recording of a restrictive covenant with similar requirements that are no less restrictive than the covenants required under this policy, that document may take the place of the one being required herein. 8. COLLATERAL AND GUARANTEES Adequate security shall be required, generally in the form of a deed of trust, personal guarantees, UCC filings for business assets, vehicle titles, personal property and assets, and/or other acceptable forms of collateral as established by the CDLP administrative guidelines. 9. EVALUATION & APPROVAL PROCESS a. Application Process The process for distributing and collecting loan applications and supporting documentation shall be established by the CDLP administrative guidelines. b. Underwriting by CRA Staff CRA staff shall carry out an underwriting process according to the CDLP administrative guidelines and shall ensure the proposed loan is consistent with any applicable laws or regulations. If either the applicant or proposed project fails to demonstrate the ability to meet underwriting requirements, or such loan conflicts with any laws or regulations, CRA staff shall reserve the right to deny the loan application. c. CRA Finance Committee Review Once underwriting standards have been met, applications shall be forwarded to the CRA Finance Committee. The CRA Finance Committee shall evaluate applications, supplemental materials, and underwriting reports to determine if the application shall be recommended for conditional loan approval. d. Conditional Approval Process All applications and requests for adjustments from the standard loan terms provided herein shall be reviewed by the CRA Board for conditional loan approval. e. Loan Finalization Once an applicant receives conditional loan approval, CRA staff shall finalize the loan according to the CDLP administrative guidelines. f. Fees Applicable application and legal fees, as well as closing costs, as outlined in the CDLP administrative guidelines, shall be borne by the Borrower. 10. LOAN DISBURSEMENT & REPAYMENT a. Disbursement of Funds Funding shall be disbursed as construction draws evidenced by supporting documentation demonstrating that the work has been completed and that the project is in good financial and legal standing. Applicant equity must be utilized prior to CRA funds being drawn. On a case- by-case basis, funds may be disbursed at loan closing. b.Repayment The first payment shall be due at the beginning of the fourth (4th) month after the project receives a Certificate of Occupancy. Loans may be prepaid in whole or in part at any time without penalty. 11.MONITORING & COMPLIANCE Reporting requirements, as determined by CRA staff, may be put in place to ensure that projects are in compliance with obligations associated with CDLP threshold requirements and incentives, including Qualifying and Incentivized Livability Benchmarks. Some commitments may be memorialized in loan agreements, restrictive use agreements, or other form of agreement that is executed at closing. Obligations may extend beyond the approved loan term. 12.LOAN MODIFICATIONS In the event of extenuating circumstances, the CRA may provide payment forbearance, payment deferment, an adjustment to terms, or loan write-down. Such adjustments shall be considered on a case-by-case basis and other relevant information. The process for providing loan modifications shall be considered and authorized as follows: a.Forbearance/Deferment The Director of the CRA may elect to provide the Borrower with a temporary forbearance or deferment of payment for up to one (1) year. For periods of forbearance or deferment longer than one (1) year, the CRA Finance Committee shall provide a recommendation that is forwarded to the Board, who shall consider and act upon all such requests. b.Adjustment to Terms The Director of the CRA may elect to authorize an extension of the repayment term by an additional five (5) years (beyond the term that was initially approved), and/or re-amortization up to 30 years. c.Loan Write-down The CRA Finance Committee shall provide a recommendation that is forwarded to the Board, who shall consider and act upon all such requests. 13.TRAINING & TECHNICAL ASSISTANCE The Finance Committee or CRA Board may elect to require a Borrower, as a condition of loan approval, to attend one or more technical assistance business classes or programs, or to access any business resource center or similar program. 14.COMPATIBILITY WITH OTHER CRA FUNDING PROGRAMS Applicants who have obtained approval for a tax increment reimbursement for the same project under the CR s may not utilize the CDLP. The CDLP may be combined with other CRA funding programs, for the same project, assuming that the project satisfies requirements of all programs. 15.EXCEPTIONS The CRA Board of Directors, by a majority vote of those present, may waive or make exceptions to the foregoing requirements with a finding that the intent of the CDLP will be furthered by such waiver or exception. 16. REPORTING ON LOAN PORTFOLIO The CRA shall provide a written briefing to the Board, no less than semi-annually per fiscal year, which contains an update on the commercial development loan portfolio. Such briefing shall include a summary of new loans, outstanding principal balance, available loan funds, and delinquencies. Passed by the Board of Directors of the Salt Lake City Community Reinvestment Agency, this 18th day of March 2025. __________________________________ Darin Mano, Chair Approved as to form: __________________________________ Jennifer Huntsman, Senior Attorney Date: ______________________ The Executive Director: ____ does not request reconsideration ____ requests reconsideration at the next regular Agency meeting. ________________________________ Erin Mendenhall, Executive Director Attest: ________________________ City Recorder