THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF , CALIFORNIA

M E M O R A N D U M 3

DATE: FEBRUARY 17, 2011 C91560 100071 TO: CRA/LA BOARD OF COMMISSIONERS

FROM: CHRISTINE ESSEL, CHIEF EXECUTIVE OFFICER

STAFF: DAVIDI RICCITIELLO, REGIONAL ADMINISTRATOR JENNY SCANLIN, PROJECT MANAGER WILLIAM CIPES, ASSISTANT PROJECT MANAGER

SUBJECT: Dunbar Village. Replacement Housing Plan for the Dunbar Village Project, located at 4201-4219, 4225-4233 and 4251-4263 South Central Avenue in the Council District Nine Corridors South of the Santa Monica Freeway Recovery Redevelopment Project Area. DOWNTOWN REGION (CD 9)

RECOMMENDATION

That the CRA/LA Board of Commissioners:

1. Adopt a Resolution approving the Replacement Housing Plan for the Dunbar Village Project.

SUMMARY The recommended action is for the approval and adoption of a Replacement Housing Plan for the Dunbar Village project. Dunbar Village consists of the rehabilitation and restoration of the historic Dunbar Hotel (4225-4233 S. Central Avenue), and the substantial renovation of Somerville I (4251-4263 S. Central Avenue) and Somerville II (4201-4219 S. Central Avenue) properties, including the long-term preservation of eighty two (82) units of affordable housing for seniors and families (the “Project”).

CRA/LA is currently in an Exclusive Negotiating Agreement (“ENA”) with Thomas Safran & Associates (“TSA”) for the development of the Project. Staff expects to return to the Board for approval of a Disposition, Development and Loan Agreement with TSA on March 3, 2011.

The Dunbar Hotel is jointly-owned by CRA/LA and the City, acting by and through the Los Angeles Housing Department (“LAHD”). Somerville I and II are owned solely by LAHD. All three properties are currently managed by LAHD.

LAHD is providing a significant portion of the gap financing for the Project using Neighborhood Stabilization (“NSP”) Funds. Due to restrictions on the use of NSP funds and the timing of other funding sources, the DDLA must be executed by mid-March 2011. Pursuant to California Redevelopment law, not less than thirty (30) days prior to the execution of an agreement for the disposition and development of property which would lead to the destruction or removal of dwelling units from the low- and moderate-income housing market, CRA/LA is required to adopt a replacement housing plan.

The Dunbar Hotel currently has seventy-two (72) single-room occupancy (“SRO”) units, all of which are deed restricted for occupancy by low- and moderate-income persons. Only twenty- two (22) units are currently occupied, and the building is dilapidated and in need of substantial rehabilitation. As part of the Project the existing floor plan in the Dunbar Hotel will be DUNBAR VILLAGE DDLA PAGE 2

reconfigured to provide forty-two (42) larger units, including a mix of studios, one-bedrooms, and two-bedrooms. Following rehabilitation, a new fifty-five (55) year covenant will be recorded restricting occupancy to very-low income seniors (with the exception of one (1) two-bedroom manager’s unit). Thus, the Project will result in a net loss of thirty-one (31) deed-restricted units (27 bedrooms). The Replacement Housing Plan provides for the replacement of these units in the proposed Florence Mills Housing project, which is expected to be completed within the four- year time-frame required under redevelopment law.

PREVIOUS ACTIONS December 17, 2010 – Council authorization for CRA/LA and LAHD to enter into an ENA with Thomas Safran & Associates (CF#10-1886).

December 2, 2010 – CRA/LA Board authorization to enter into an ENA with Thomas Safran & Associates for the disposition and rehabilitation of a mixed-use affordable residential and commercial project located at 4201-4219, 4225-4233 and 4251-4263 South Central Avenue (CF#10-1886).

June 10, 2010 – Council authorization for LAHD and CRA/LA to issue an RFP to sell, rehabilitate, and develop mixed-use affordable housing projects on City-owned properties located at 4201-4219, 4225 and 4251-4263 S. Central Avenue (CF#10-0920).

November 19, 2009 – Report to CRA/LA Board on intent to issue an RFP for a mixed-use affordable residential and commercial project located at 4201-4219, 4225-4233 and 4251-4263 S. Central Avenue.

August 7, 2008 – CRA/LA Board Authorization to enter into a Cooperation Agreement with LAHD to own, manage and dispose of the Dunbar Hotel and provide funds for consultant costs related to the ownership management and disposition of the Dunbar Hotel. (CF#08-2118)

DISCUSSION & BACKGROUND

Description and Project Context The Site consists of three separate mixed-use buildings located on the 4200 block of Central Avenue. The Dunbar Hotel was built in 1928 as a luxury hotel for the African American community, at a time when Central Avenue thrived as a mecca for west coast jazz. In its heyday during the 1930s and 1940s, the hotels’ guests included W.E.B Du Bois, and .

In 1988 the Dunbar Hotel was redeveloped as affordable housing, with a scope of work that included a seismic reinforcement, replacement for all major systems, and registration as a historic landmark by the and the City of Los Angeles. Since that major rehabilitation, the property has fallen into disrepair and was cited for code violations, which have been corrected. In December 2008, the Dunbar Hotel was foreclosed upon by the City and CRA/LA. The roles and responsibilities of CRA/LA and LAHD in managing and disposing of the Dunbar Hotel are delineated in a Cooperation Agreement, which was approved by Council and the CRA/LA Board in 2008.

Somerville I (17 units) and Somerville II (24 units) are mixed-use affordable residential properties with ground-floor commercial space fronting on Central Avenue. Both properties were completed in 1996, and are currently fully occupied with income-eligible tenants. In October 2009, the City foreclosed on Somerville I and II, and the buildings are currently being managed through the LAHD. The City still holds covenants on the property for affordable family housing, which are expected to be extended for 55-years as part of the proposed Project. DUNBAR VILLAGE DDLA PAGE 3

Somerville I and II will be rehabilitated without permanently relocating existing tenants. This rehabilitation will be subject to CRA/LA’s In-Place Rehabilitation Guidelines.

Dunbar Village will knit the three properties together into a mixed-use intergenerational community for seniors and families. The scope includes restoring the Dunbar Hotel and enhancing Somerville I and II, providing quality management to ensure the project quality and ongoing preservation of the Dunbar Hotel, and reactivating street life to revitalize the neighborhood and enhance public safety. Funding for the Project will include 4% Low Income Housing Tax Credits, Historic Tax Credits, a CRA/LA Predevelopment and Construction Loan and LAHD Loan, using NSP funds.

Project History In 1987, the CRA/LA and the City, through the Community Development Department, jointly provided a loan in the principal amount of $2,900,000 for the rehabilitation of the Dunbar Hotel and covenanted its use for affordable housing and a museum of the African American and Jazz history in the Central Avenue area. The CRA/LA provided $1,200,000 and CDD provided $1,700,000 of the original principal balance in the form of a fully amortizing loan (CDD transferred their interest in the Loan to LAHD in 1990). The borrower never made a payment on the loan to either CRA/LA or LAHD. A forbearance agreement executed in 2006 between the borrower and CRA/LA and LAHD failed to remedy the default. CRA/LA and LAHD jointly issued a Notice of Default on the property in 2007, and in December 2008 CRA/LA and LAHD assumed fee ownership of the Dunbar Hotel following a Trustee Sale.

Although CRA/LA has no ownership interest in the Somerville properties, once it became clear that Somerville I and II would become the responsibility of the City, it was cooperatively decided that these two properties along with the Dunbar Hotel would be combined into one Request for Proposals (RFP) from developers.

In 2010, CRA/LA and LAHD released an RFP for the development of the properties, which resulted in the ENA with TSA.

SOURCE OF FUNDS

No CRA/LA funds are required for this action.

PROGRAM AND BUDGET IMPACT

This action is consistent with the amended CD9 Project Area FY2011 Budget and Work Program.

There is no impact on the City’s General Fund as a result of this action.

ENVIRONMENTAL REVIEW

Approval of the Replacement Housing Plan is statutorily exempt from provisions of the California Environmental Quality Act (CEQA), pursuant to Section 15262 (Feasibility and Planning Studies) of the State CEQA Guidelines. The project will be evaluated in full compliance with CEQA, prior to CRA/LA Board’s consideration of a Disposition, Development and Loan Agreement.

DUNBAR VILLAGE DDLA PAGE 4

Christine Essel Chief Executive Officer

By:

Calvin E. Hollis Chief Operating Officer

There is no conflict of interest known to me which exists with regard to any CRA/LA officer or employee concerning this action.

ATTACHMENTS

Attachment A: Location/Site Map Attachment B Project Summary Report Attachment C: Replacement Housing Plan Attachment D: Replacement Housing Plan Resolution