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--.·• MAJOR PROJECTS Los Angeles Antonio R. Villaralgosa. Mayor u~~fjment Mercedes Marquez. Genere!!1Aanager 0 r--:1 _,., -1 = -., 1200 W. 7th Street. 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 Broadway, 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 Wilshire Boulevard, 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%).