Meeting of August 4, 2015 MEMORANDUM TO
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118-0102015-002 Agenda Item No. 5(d) Meeting of August 4, 2015 MEMORANDUM TO: Community Investment and Infrastructure Commissioners FROM: Tiffany Bohee, Executive Director SUBJECT: Authorizing a Loan Agreement with TB8 Housing Partners, L.P., a California limited partnership in the amount of $16,000,000 for development activities related to the construction of 79 affordable housing units plus one manager's unit at Transbay Block 8 (also known as 250 Fremont Street) and adopting environmental findings pursuant to the California Environmental Quality Act; Transbay Redevelopment Project Area EXECUTIVE SUMMARY The Transbay Redevelopment Project Area (the "Project Area") was adopted in 2005 with the purpose of redeveloping 10 acres of property owned by the State of California (the "State-owned parcels") to generate funding for the Transbay Joint Powers Authority ("TJPA") to construct the new Transbay Transit Center (the "TTC") and meet the affordable housing requirements of Assembly Bill 812 ("AB 812") (Cal. Pub. Res. Code § 5027.1(b).). AB 812 is an enforceable obligation which requires the Office of Community Investment and Infrastructure ("OCII"), as the Successor Agency to the former San Francisco Redevelopment Agency ("Former Agency"), to ensure 35% of the new housing units built in the Transbay Project Area are affordable, and occupied by, low- and moderate-income households. OCII is on track to achieve the 35% mandate of affordable housing in the Transbay Project Area. The Transbay Redevelopment Project Area Implementation Agreement ("Implementation Agreement") is another enforceable obligation that requires OCII to "prepare and sell [certain State-owned parcels that OCII is authorized to acquire] to third parties." (Section 2.1 (a) of the Implementation Agreement on p. 4). On April 15, 2013, the California Department of Finance ("DOF") determined "finally and conclusively" that AB 812 and the Implementation Agreement area enforceable obligations that will not require additional DOF review in the future, although expenditures under these enforceable obligations are subject to DOF review. On November 20, 2013, pursuant to the Implementation Agreement, the Former Agency issued a Request for Proposals (the "RFP") from development teams including a for-profit developer as well as a non-profit affordable housing developer to design and develop a high-density, mixed- income, mixed-use project on Block 8 in the Project Area. The RFP for Transbay Block 8 set a specific target that 27% of the project be affordable; that specific percentage, when balanced with other 100% affordable blocks in the Project Area, will allow OCII to meet the overall 35% affordability mandate. The RFP assumed that OCII would provide an affordable housing subsidy of $200,000 per unit for the standalone affordable portion of Block 8. On June 17, 2014, after a 118-0102015-002 Page 2 competitive selection process, the Commission authorized the Executive Director to execute an Exclusive Negotiations Agreement ("ENA") for the Development of Block 8 with the development team led by Related California Urban housing, LLC ("Related" or the "Master Developer") as the for-profit developer and Tenderloin Neighborhood Development Corporation ("TNDC") as the affordable non-profit developer, along with Office of Metropolitan Architecture ("OMA") as the lead architect for the tower component of the development and Fougeron Architects ("Fougeron"), a small business enterprise, as the architect for the low-rise buildings (together referred to as the "Development Team"). Based on the ENA, OCII staff negotiated the terms of a disposition and development agreement ("DDA") with Transbay 8 Urban Housing, LLC (a Related entity) and Tenderloin Neighborhood Development Corporation for the sale and development of Block 8. On April 21, 2015, the Commission approved the DDA, which provides for a purchase price of $71,000,000 for the land parcel and allows for the construction of up to 554 residential units comprised of 404 market-rate units and 70 inclusionary below market-rate ("BMR") affordable units in a 550 foot tower, and 80 OCII-funded affordable units, at a per unit OCII subsidy not to exceed $200,000 per unit in two mid-rise, standalone affordable buildings. Also, on April 21, 2015, the Commission approved the Schematic Design of the project. The Development Team has since refined the design and removed 8 market-rate units for a revised total unit count of 546 units. The number of affordable units remains unchanged. TB8 Housing Partners, L.P. (the "Developer") is now requesting that the OCII Commission authorize a $16,000,000 gap loan for the 80 OCII-funded affordable units (the "Affordable Project"). The Affordable Project is comprised of 39 one-bedroom units, 16 two-bedroom units, 24 three-bedroom units and 1 one-bedroom manager's unit. It includes two rooftop decks, a community room and laundry facilities. Block 8 is adjacent to Transbay Block 6, which includes a market-rate residential tower being constructed by Golub and a mid-rise 70-unit affordable small family project being developed and eventually operated by Mercy Housing on a shared podium. The Transbay Block 7 development, being developed by Mercy Housing as well, also borders Block 8. Currently in predevelopment, the Block 7 project will be a 120-unit affordable . family development. The source of the requested funds will be Transbay Developer Fees, Transbay Affordable Housing Fees, and Tax Increment funds. On July 17, 2015, the Citywide Affordable Housing Loan Committee ("Loan Committee") recommended approval for this request. Staff recommends authorizing the Permanent Loan Agreement with TB8 Housing Partners, L.P., a California limited partnership in the amount of $16,000,000 for development activities related to the construction of 79 affordable housing units plus one manager's unit at Transbay Block 8 and adopting environmental findings pursuant to the California Environmental Quality Act; Transbay Redevelopment Project Area Project Description 118-0102015-002 Page 3 The Transbay Block 8 development includes a tower with market-rate condominiums, market- rate rental apartments, BMR rental apartments and 2 townhouses attached to the tower; one 65- foot tall affordable podium building; and another 85-foot tall affordable podium building with 5 affordable townhouses attached to it. The 80 OCII-sponsored affordable units are located in the two podium buildings and the 5 townhouses that are attached to the 85-foot podium building. The other 70 developer-sponsored affordable units are located in the tower component of Transbay Block 8. Related California is responsible for financing and operating the Affordable Project and TNDC will provide services to the residents. The tower sits at the corner of First and Folsom Streets, while the two lower podium buildings front a portion of Folsom street and the length of Fremont Street between Folsom and Clementina. The 7 townhouses are all located along the northern edge of the block on Clementina Street. The design team incorporated a midblock alley that diagonally bisects the entire block. This mid-block passage between Folsom and Clementina enables residents and the public to access the block's interior open space. At the podium level the two midrise affordable buildings flank both sides of the mid-block pedestrian pathway. The facades of the podium buildings facing the alley slope back to allow more light and air into the center of the block. (See pages 32 — 45 of Exhibit A for the Block 8 site plan and the Affordable Project floor plans and renderings.) The Folsom Street side of the Block 8 is lined with retail stores and residential lobbies. Four ground floor retail spaces in the affordable podium buildings, which line much of the street frontage of Fremont and Folsom streets, also face inward towards the pedestrian alley. The commercial spaces are condominiums owned by the Master Developer, who will be responsible for marketing those spaces to retailers. The four commercial spaces within or connected to the affordable buildings measure 415 square feet, 2,065 square feet, 1,990 square feet, and 2,825 square feet respectively. The Affordable Project includes 39 one-bedroom units, 16 two-bedroom units, 24 three-bedroom units and 1 one-bedroom manager's unit for a total of 80 units. The affordable podium buildings each contain amenities and community spaces from which residents will benefit. Both the 85- foot and 65-foot podium buildings feature rooftop decks. The taller building includes a 1,900 square foot community room, and both the podium buildings and townhouses have dedicated laundry facilities. The residents living in the 80 OCII-sponsored units will also have access to amenities located on the 7th floor of the Block 8 tower. These amenities include a full gym with pilates and yoga studios; a pool; a children's playroom; a library and lounge space. OCII will retain ownership of the Affordable Project's air rights parcel and, subject to OCII Commission approval expected to be requested in late 2015, will enter into an air rights lease with T8 Housing Partners, L.P., to construct the Affordable Project, consistent with OCII's typical air rights lease terms. T8 Housing Partners, L.P. will own the improvements. Once the it is completed, OCII will seek Oversight Board approval to transfer the loan and air rights lease to the Mayor's Office of Housing and Community Development ("MOHCD") as the Housing Successor Agency under Redevelopment Dissolution Law. 118-0102015-002 Page 4 The Transbay Block 8 development program and schematic design were approved by the Commission in April 2015 and conform to the goals and requirements of the Redevelopment Plan, the Development Controls and Design Guidelines ("DCDG"), and the Transbay Redevelopment Project Area Streetscape and Open Space Concept Plan ("the Streetscape and Open Space Plan"). Background Leading up to this Request The Transbay Redevelopment Project Area was adopted in 2005 with the purpose of redeveloping 10 acres of property owned by the State of California in order to generate funding for the TJPA to construct the new TTC.