--.·• MAJOR PROJECTS Los Angeles Antonio R. Villaralgosa. Mayor u~~fjment Mercedes Marquez. Genere!!1Aanager 0 r--:1 _,., -1 = -., 1200 W. . 8th fl.. Los Angeles. CA 90017 -< c:T'<- 0,.,, tel 213.808.8936[ fax 213.808.8918 0 :D'> --1 -r·, ~ ·,.o www.lacity.org/lahd I ·n·"""~·' 0 w '" -1 Vl -o December 22, 2005 ~-~ r ;::3: . ~ ·-··;~ - ·-· •. _·_.. 04-264'6' r:-? Council File: w '""'-a Council District: 14 1"•', w Contact Persons: Lynn Hansen (213) 808 -8662 Vasken Djansezian (213) 808-8951 Apolinar Abrajan (213) 808-8947 The Honorable Antonio R. Villaraigosa Mayor, City of Los Angeles 3rd Floor, City Hall

Attention: June Lagmay, Legislative Coordinator

TRANSMITTAL: REQUESTING THAT THE MAYOR AND CITY COUNCIL AUTHORIZE THE ISSUANCE OF A TOTAL OF UP TO $1,225,000 IN SUPPLEMENTAL TAX-EXEMPT MULTIFAMILY HOUSING REVENUE BONDS BY ADOPTING THE ATTTACHED RESOLUTION FOR THE VICTOR CLOTHING APARTMENTS PROJECT.

SUMMARY

The Los Angeles Housing Department (LARD) requests authority to issue supplemental tax­ exempt multifamily housing revenue bonds totaling $1,225,000 for the development of the Victor Clothing Apartments Project. The California Debt· Limit Allocation Committee (CDLAC) has established March 21, 2006, as the closing date for the issuance of the bonds.

The proposed project is to be located at 242-246 South , Los Angeles, CA 90012, in 1 the 14 h Council District. The project will provide 37 affordable housing units above commercial use space.

RECOMMENDATIONS

The General Manager, LARD, respectfully recommends the following:

1. That your office schedule this transmittal for consideration by the appropriate Committee(s) of the City Council at the next available meeting(s), and forward it to the City Council for review and approval immediately thereafter.

An Equal Opportunity Affirmative Action Employer Honorable Antonio R. Villaraigosca Transmittal : Victor Clothing Apartments Page2

2. That the City Council:

a. Adopt the attached Resolution authorizing the issuance of up to $1,225,000 in supplemental tax-exempt multifamily housing revenue bonds (Bonds) for the Victor Clothing Apartments Project.

b. Approve the related bond documents, subject to the approval ofthe City Attorney as to form.

c. Authorize the General Manager, LAHD, or designee, to negotiate and execute the relevant bond documents, subject to the approval of the City Attorney as to form.

3. That the Mayor concur with the action of the City Council.

BACKGROUND/PROJECT DETAIL

Neighborhood Effort is the developer of this project. The existing five story structure is located 1 at 242-246 South Broadway, Los Angeles, CA 90012, in the 14 h Council District and in the City Center Redevelopment Project Area. The current proposal calls for the rehabilitation of a previous commercial use and currently vacant building to provide a mixed use project of affordable family housing above commercial space. The commercial use space will be located on floor one at street level.

The project will include a computer learning center, elevator service, security intercom system, four separate laundry rooms (on floors 2-5), as well as a community room with a kitchen and bathroom. The computer training courses will be provided for the project tenants by Illiternet, a Los Angeles based organization that provides computer training services. Romey Case Management Services will provide case management and social services for the residents of the project.

Financing History

On July 12, 2002, the City Council and Mayor of the City of Los Angeles authorized LAHD to fund the development of the Victor Clothing Apartments Project. Funding was authorized in the amount of up to $2,030,00 under the 2002 Notice of Funding Availability (NOFA) program (CF# 02-0605-Sl).

On September 23, 2002, the California Debt Limit Allocation Committee (CD LAC) approved an allocation of up to $5 million in bond authority for the project. In accordance with CDLAC guidelines, the bonds had to be issued within 90 days or by December 23, 2002.

On Decemb~r 13, 2002, the City Council and Mayor authorized the issuance of a total of $4,138,550 in bonds comprised of$3,738,550 in tax exempt and $400,000 in taxable multifamily housing revenue bonds for the Victor Clothing Apartments Project (CF# 02-0605-S6). Also on this date, the $2,030,000 HOME funds loan agreement (C-104165) was executed between Honorable Antonio R. Villaraigosa Transmittal : Victor Clothing Apartments Pagel

LAHD (Lender) and Victor Clothing Apartments, L.P. (Borrower) for the acquisition, predevelopment, and permanent financing of the project.

On December 27, 2002, the bonds were issued in the amount of $4,061,000 comprised of $3,738,550 (series 2002L) and $322,450 (series 2002M). The bonds were purchased by Hanmi Banl(.

On December 18, 2002, the project received a reservation of 4% Low Income Housing Tax Credits (LlliTCs) from the California Tax Credit Allocation Committee (TCAC).

After the funding in late 2002, the project suffered a series of setbacks, which delayed the start of construction and involved increased development costs. In 2003, the developer reported that the construction costs increased due to increases in the costs of materials in the market. To address this problem, the developer spent considerable time re-negotiating the construction costs with the then proposed General Contractor, Fassberg Construction Company (Fassberg). In addition, the developer worked to seek and secure additional funding sources. In 2004, the developer reported that the Los Angeles Fire Department conducted a re-review of the plans and required that one unit be removed because the unit window was located near the property line and this was not allowed. In early 2005, the developer became involved in a lawsuit with its then proposed tax credits equity investor, JER Hudson Housing Capital, LLC; the lawsuit was later settled around mid 2005. On April1, 2005, Fassberg filed for Chapter 11 (reorganization) bankruptcy petition.

On April 20, 2005, LAHD received authorization from the City Council and Mayor of the City of Los Angeles to induce the project, enabling the project sponsor to apply for a supplemental tax-exempt bond allocation from CDLAC. LAHD was authorized to apply for up to $1,500,000 in tax-exempt bond authority. On September 14, 2005, LAHD conducted a public hearing in accordance with the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). On October 18, 2005, the TEFRA Resolution and Minutes were adopted by the City Council (CF 04-2646).

On October 21, 2005, on behalf of the project sponsor, Neighborhood Effort, Inc., LAHD submitted an application for an allocation of up to $1,225,000 in tax-exempt bonds from CDLAC. On December 21, 2005, the project received an allocation of Private Activity bonds fromCDLAC.

The project's proposed financial structure is comprised of public agency funds, 4% tax credits, and tax-exempt private activity bonds. In accordance with CDLAC requirements, the Bonds must be issued by March 21, 2006.

Affordability Restrictions

UNIT TYPE 50% AMI 60%AMI Mgr. TOTAL OBDR 1 1 2 1 BDR 7 11 18 2BDR 3 8 1 12 3BDR 1 4 5 TOTAL 12 24 1 37 Honorable Antonio R. Villaraigoso Transmittal : Victor Clothing Apartments Page4

Pursuant to the Regulatory Agreement associated with the issuance of the tax-exempt bonds, the above referenced restrictions will remain in effect for the duration of the Bonds, with a minimum term of 15 years. Also, because the project received 4% LlliTCs, the associated Regulatory Agreement will restrict the subject units for a minimum term of 55 years; the LAHD covenant will also be in effect for 55 years.

Development Team

The owner of the subject site is Victor Clothing Apartments, L.P. which is comprised of Neighborhood Effort, Inc., as its managing General Partner, and a Tax Credit Syndicator, which will be determined at a later date, as its Limited Partner.

Neighborhood Effort, Inc. was incorporated in the State of California on June 15, 1995, as a non­ profit corporation. To date, Neighborhood Effort, Inc. has seven years of experience in the development of multifamily rental housing in California. It has completed two projects and two are under rehabilitation. The completed projects are: Los Altos Apartments located at 4121 , Los Angeles, CA 90010, and Empress Apartments located at 514 South Westlake Avenue, Los Angeles, CA 90057.

The following related project participant is in compliance with LAHD's New Business Policy:

Developer: Neighborhood Effort, Inc. 15303 Ventura Blvd. (Ste. 250) Sherman Oaks, CA 91403 Tel. (818) 285-0616 Fax (818) 285-0621

Executive Director and President- Mr. Allen G. Gross Vice President and Secretary- Arax Harutunian

The additional development team members are:

Architect Hatch Colasuonno Studio Architecture & Planning 1331 Goucher Street Pacific Palisades, CA 90272 Tel. (31 0) 573-4300 Fax (310) 573-4347 Contact: Principal -Harriet E. Hatch

General Contractor: (To be selected via a competitive bid process.)

Property Manager: Eberly Company 5900 Wilshire Blvd. (Ste. 550) Los Angeles, CA 90036 Honorable Antonio R. Villaraigosa Transmittal : Victor Clothing Apartments PageS

Tel. (323) 937-6468 Fax (323) 965-0243

Tax Credit Investor/ Apollo Housing Capital, LLC Syndicator: 600 Superior A venue (Ste. 2300) Cleveland, OH 44114 Phone (216) 875-2626 Fax (216) 875-2612

Financial Structure

In year 2002, Hanmi Bank purchased the original $4,061,000 in bonds ofwhich $3,738,550 was tax-exempt and $322,450 was taxable bonds. Under the new and current structure, the tax­ exempt portion will be increased by an additional $1,225,000 for a total of $4,963,550, and the taxable portion will be reduced to $261,450; the aggregate total will be $5,225,000. Hanmi Bank will provide construction and permanent fmancing for the development of the project. The construction loan will be in the amount of $5,225,000 with a loan period of 18 months at Hanmi Bank's Prime rate, plus one percent (Prime+ 1.00%). Following the completion of construction, the loan will be paid down to a remaining balance (permanent loan) in the amount of $2,553,800. The permanent loan term will be for 30 years at 6. 73% fixed interest rate.

Sources and Uses:

INTERIM Sources Per Unit %Total LAHD $2,030,000 $54,865 22% Tax Credit Equity 861,975 23,297 9 Bond Proceeds 5,225,000 141,216 56 GP Loan 149,300 4,035 2 Deferred Costs & 1,123,635 30,369 12 Fees Total $9,389,910 $253,781 100%

PERMANENT Sources Per Unit %Total LAHD $2,030,000 $54,865 22% Tax Credit Equity 3,618,175 97,789 39 Tax Exempt Bond 2,553,800 69,022 27 GP Loan 149,300 4,035 2 Deferred Dev. Fee 788,635 21,314 8 Deferred LAHD 250,000 6,757 3 Interest Total $9,389,910 $253,781 100% Honorable Antonio R. Villaraigosa Transmittal : Victor Clothing Apartments Page6

USES OF FUNDS Total Uses Cost Per Unit Acquisition $2,100,000 $56,757 On-site & off site costs 637,300 17,224 Hard construction costs 2,788,000 75,351 Architecture & Engineering 156,161 4,221 Contractor OH!Profit 250,000 6,757 Developer Fee 1,101,835 29,779 Cost oflssuance (COl) 192,695 5,208 Other Soft Costs 1,941,856 52,483 Capitalized Interest 222,063 6,002 Total $9,389,910 $253,781

The LAHD Bond Team for the financing of the Victor Clothing Apartments project is as follows:

Bond Issuer Financial Advisor Bond Counsel CSG Advisors, Inc. KutakRock One Post Street (Ste. 320) 1650 Farnam Street San Francisco, CA 91401 Omaha, NE 68102

Bond Issuer Counsel Los Angeles City Attorney 1 200 N. Main Street (9 h floor) Los Angeles, CA 90012

Labor Costs The labor costs of the project will be at Davis Bacon wage rates.

Environmental Considerations The development of the project was previously approved for environmental clearance and has been funded by LAHD.

Timeline - Bond Closing Date CDLAC has established March 21, 2006, as the closing date for the issuance of the tax-exempt bonds.

HSCALIMPACTSTATEMENT

There is no impact on the General Fund as no new direct City loan funds are being requested or used at this time. Honorable Antonio R. Villaraigosa Transmittal : Victor Clothing Apartments Page7

Prepared By:

fJttutf&~LINARAB AN Financial Development Officer- I Manager-

Submitted By: Approved By:

MERCEDES MARQUEZ~ General Manager ~ RESOLUTION

CITY OF LOS ANGELES

A RESOLUTION AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF A BOND BY THE CITY OF LOS ANGELES DESIGNATED MULTIFAMILY HOUSING REVENUE BOND (VICTOR CLOTHING APARTMENTS PROJECT) SERIES 2006B IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $1,225,000 TO PROVIDE PERMANENT FINANCING FOR THE ACQUISITION, REHABILITATION AND EQUIPPING OF THE MUL TIF AMIL Y HOUSING PROJECT SPECIFIED IN SECTION 16 HERETO AND APPROVING AND AUTHORIZING THE EXECUTION AND DELIVERY OF AN AMENDED AND RESTATED INDENTURE OF TRUST, AN AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS AND AN AMENDED AND RESTATED LOAN AGREEMENT, RELATED DOCUMENTS AND AGREEMENTS AND THE TAKING OF RELATED ACTIONS INCLUDING THE EXECUTION OF AMENDATORY DOCUMENTS THERETO.

WHEREAS, The City of Los Angeles (the "City") is authorized, pursuant to the provisions of Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California (the "Act"), and pursuant to Section 248, as amended, of the City Charter (the "Charter") of the City and Article 6.3 of Chapter 1 of Division 11 of the Los Angeles Administrative Code, as amended (the "Law"), to issue its revenue bonds for the purposes of providing permanent financing for the construction and development of multifamily rental housing for persons and families of low or moderate income (the "Program"); and

WHEREAS, the City has previously issued its Multifamily Housing Revenue Bonds (Victor Clothing Apartments Project) Series 2002L (the "Series 2002L Bonds") in an initial principal amount of $3,738,550 and its Taxable Multifamily Housing Revenue Bonds (Victor Clothing Apartments Project) Series 2002M (the "Series 2002M Bonds") in an initial principal amount of $322,450 each pursuant to an Indenture of Trust dated as of December 1, 2002 between the City and U.S. Bank National Association as Trustee (the "2002 Indenture") to provide funds to the below-defined Owner to finance a portion of the acquisition and rehabilitation of the below-defined Project; and

WHEREAS, the City now desires to issue its revenue bonds to provide permanent financing for the acquisition, rehabilitation and equipping of that multifamily rental housing project described in Section 16 below (the "Project"); and

WHEREAS, the Project is located wholly within the City; and

WHEREAS, it is in the public interest and for the public benefit that the City authorize additional financing for the Project, and it is within the powers of the City to provide for such a financing and the issuance of such bond; and

4840-9495-2704.2 WHEREAS, the City proposes to issue, pursuant to the Act and in accordance with the Law, its Multifamily Housing Revenue Bond (Victor Clothing Apartments Project) Series 2006B in an aggregate principal amount not to exceed $1,225,000 (the "Bond"); and

WHEREAS, the City proposes to amend and restate the terms of the 2002L Bonds and the 2002M Bonds in connection with the issuance of the Bond and to restate its intent to issue and fund the 2002M Bonds; and

WHEREAS, the City proposes to use the proceeds of the Bond to cause the financing of the Project and, if applicable, to pay certain costs of issuance in connection with the issuance of the Bond; and

WHEREAS, Hanmi Bank, a California banking corporation (the "Purchaser") has expressed the intention of the Purchaser to purchase the Bond authorized hereby, and this City Council finds that the public interest and necessity require that the City at this time make arrangements for the sale of such Bond; and

WHEREAS, the interest on the Bond may qualify for a federal tax exemption under Section 142(a)(7) of the Internal Revenue Code of 1986, as amended (the "Code"), only ifthe Bond is approved in accordance with Section 147(f) ofthe Code; and

WHEREAS, pursuant to the Code, the Bond is required to be approved, following a public hearing, by an elected representative of the issuer of the Bond and an elected representative of the governmental unit having jurisdiction over the area in which the Project is located; and

WHEREAS, this City Council is the elected legislative body of the City and is the applicable elected representative required to approve the issuance of the Bond within the meaning of Section 147(f) ofthe Code; and

WHEREAS, pursuant to Section 147(f) of the Code, the City caused a notice to appear in the Los Angeles Times, which is a newspaper of general circulation in the City, on August 29, 2005 to the effect that a public hearing would be held on September 14, 2005 regarding the issuance of the Bond; and

WHEREAS, the Los Angeles Housing Department held the said public hearing on such date, at which time an opportunity was provided to present arguments both for and against the issuance of the Bond; and

WHEREAS, the minutes of such hearing, and any written comments received with respect thereto, have been presented to this City Council;

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Los Angeles, as follows:

1. The recitals hereinabove set forth are true and correct, and this City Council so finds. This Resolution is being adopted pursuant to the Law.

4840-9495-2704.2 2 2. Pursuant to the Act and in accordance with the Law and the Indenture (as hereinafter defined), a revenue bond of the City, to be designated as "City of Los Angeles Multifamily Housing Revenue Bond (Victor Clothing Apartments Project) Series 2006B," in an aggregate principal amount not to exceed $1,225,000 is hereby authorized to be issued. The principal amount of the Bond to be issued shall be determined by a Designated Officer (as defined below) in accordance with this Resolution. The City hereby restates its intention to issue and fund the 2002M Bonds as set forth in the below-defined Indenture.

3. The proposed form of an Amended and Restated Indenture of Trust (the "Indenture") by and between the City and U.S. Bank National Association as trustee (the "Trustee"), substantially in the form attached hereto, is hereby approved. The Indenture will amend and restate the 2002 Indenture and the terms of the Series 2002M Bonds and Series 2002L Bonds in addition to providing for the issuance of the Bond. The Mayor of the City, the General Manager, the Interim General Manager or any Assistant General Manager or Interim Assistant General Manager of the Los Angeles Housing Department (each hereinafter referred to as a "Designated Officer") are hereby authorized and directed to execute and deliver, for and in the name and on behalf of the City, said Indenture with such additions, changes and corrections as the Designated Officer executing the same may approve upon consultation with the City Attorney and Bond Counsel to the City and approval of the City Attorney, provided that such additions or changes shall not authorize principal amount of the Bond in excess of the amount stated above, such approval to be conclusively evidenced by the execution and delivery of the said Indenture with such additions, changes or corrections.

4. The proposed form of the Bond, as set forth in the Indenture, is hereby approved, and the Mayor and City Treasurer or Deputy City Treasurer of the City are hereby authorized and directed to execute, by manual or facsimile signatures of such officers under the seal of the City, and the Trustee or an authenticating agent is hereby authorized and directed to authenticate, by manual signatures of one or more authorized officers of the Trustee or an authenticating agent, the Bond in substantially such form, and the Trustee is hereby authorized and directed to sell and deliver such Bond to the Purchaser in accordance with the Indenture and the Loan Agreement (hereinafter defined). The date, maturity date, interest rate (which may be either fixed or variable), interest payment dates, denomination, form of registration privileges, manner of execution, place of payment, terms of redemption, use of proceeds, and other terms of the Bond shall be as provided in the Indenture as finally executed; provided, however, that the principal amount of the Bond shall not exceed $1,225,000, the interest rate on the Bond shall not exceed 12% and the final maturity of the Bond shall be no later than October 1, 2038. The initial purchase price ofthe Bond shall be 100% ofthe par amount thereof as advances are made with respect to the Bond by the Purchaser. Such Bond may be delivered in temporary form pursuant to the Indenture if, in the judgment of the City Attorney, delivery in such form is necessary or appropriate until the Bond in definitive form can be prepared.

5. The proposed form of Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants (the "Regulatory Agreement") to be entered into by

4840-9495-2704.2 3 and among the City, the Trustee and the owner of the Project (as set forth in Section 16 below, the "Owner"), substantially in the form attached hereto, is hereby approved. Any Designated Officer is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Regulatory Agreement, with such additions, changes and corrections as the Designated Officer may approve upon consultation with the City Attorney and Bond Counsel and approval of the City Attorney, such approval to be conclusively evidenced by the execution of said Regulatory Agreement with such additions, changes or corrections. Any Designated Officer is hereby authorized and directed for and in the name and on behalf of the City to execute amendments to the Regulatory Agreement in order that interest on the Bond remain tax-exempt.

6. The proposed form of Amended and Restated Loan Agreement (the "Loan Agreement"), by and among the City, the Purchaser and the Owner, in substantially the form attached hereto, is hereby approved. Any Designated Officer is hereby authorized and directed, for and in the name and on behalf of the City, to execute the Loan Agreement, with such additions, changes or corrections as the Designated Officer may approve upon consultation with the City Attorney and Bond Counsel and approval by the City Attorney, such approval to be conclusively evidenced by the execution of the Loan Agreement with such additions, changes or corrections.

7. All actions heretofore taken by the officers and agents of the City with respect to the sale and issuance of the Bond are hereby approved, confirmed and ratified, and each Designated Officer of the City, the City Clerk and other properly authorized officers of the City are hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents, including, but not limited to, those described in the Indenture, the Loan Agreement and the other documents herein approved, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bond and the implementation of the Program in accordance with the Act and the Law and this Resolution and resolutions heretofore adopted by the City.

8. The City Clerk of the City or any deputy thereof is hereby authorized to countersign or to attest the signature of any Designated Officer and to affix and attest the seal of the City as may be appropriate in connection with the execution and delivery of any of the documents authorized by this resolution, provided that the due execution and delivery of said documents or any of them shall not depend on such signature of the City Clerk or any deputy thereof or affixing of such seal. Any of such documents may be executed in multiple counterparts.

9. In addition to the Designated Officers, any official of the City, including any official of the Los Angeles Housing Department, as shall be authorized in writing by the Mayor of the City, is hereby authorized for and on behalf of the City to execute and deliver any of the agreements, certificates and other documents, except the Bond, authorized by this Resolution.

4840-9495-2704.2 4 10. In accordance with procedures established by an amendment to the City Charter, the City Council, by adoption and approval of this Resolution and with the concurrence of the Mayor, does hereby direct that the proceeds of the Bond be delivered directly to the Trustee, instead of the City Treasurer, to be deposited into the funds and accounts established under the Indenture.

11. Pursuant to Section 147(f) of the Code, the City Council hereby approves the issuance of the Bond to finance the Project. It is intended that this Resolution constitute approval of the Bond by the applicable elected representative of the issuer of the Bond and the applicable elected representative of the governmental unit having jurisdiction over the area in which the Project is located, in accordance with said Section 147(f).

12. Pursuant to the Los Angeles City Charter all agreements to which the City is a party shall be subject to approval by the City Attorney as to form.

13. Each Designated Officer and other properly authorized officials of the City as specifically authorized under this resolution are hereby authorized, directed and empowered on behalf of the City and this Council to execute any other additional applications, certificates, agreements, documents or other instruments or any amendments or supplements thereto, subject to approval by the City Attorney as to form, or to do and to cause to be done any and all other acts and things as they may deem necessary or appropriate to carry out the purpose of the foregoing authorizations and to address any issues arising with respect to the Bond, the 2002L Bonds, the 2002M Bonds or the agreements relating thereto subsequent to their issuance.

14. The Bond shall contain a recital that it is issued pursuant to the Law and in accordance with the Act.

15. This Resolution shall take effect immediately upon its passage and adoption.

16. The "Project" and "Owner", as used herein shall have the following meanmgs Number Project Name of Units Address Owner

Victor Clothing Building 37 242-246 South Victor Clothing Apartments Broadway, Los Apartments, L.P ., a Angeles, California California limited 90012 partnership

17. The terms of the 2002M Bonds and 2002L Bonds and the documents under which they were issued will be amended as set forth in the documents approved by this Resolution and otherwise as approved by a Designated Officer.

4840-9495-27042 5 PASSED AND ADOPTED this _ day of ____ 2006, at Los Angeles, California.

By ______Title------

I certify that the foregoing Resolution was adopted by the Council of the City of Los Angeles at its meeting on _, 2006.

By ______Title ------

4840-9495-2704.2 6