PREPARED BY: ELIZABETH LOPEZ DATE OF MEETING: 07/15/2024
SUBJECT:
TITLE
CONSIDER ADOPTING RESOLUTION APPROVING AND AUTHORIZING THE EXECUTION OF AN ASSIGNMENT, ASSUMPTION AND MODIFICATION AGREEMENT WITH GIANT DEVELOPMENT, L.P., AND GIANT DEVELOPMENT II, LP, PROVIDING FOR THE RESTRUCTURING OF A LOAN MADE BY THE FORMER REDEVELOPMENT AGENCY TO ENABLE THE MAJOR REHABILITATION OF THE GIANT ROAD APARTMENTS
CEQA: A Mitigated Negative Declaration was prepared for the Giant Roads Apartment Project in November 2003 and circulated for review and comment. Comments were received and incorporated into a Mitigation and Monitoring Report subsequently adopted by the City Council. The Project applicant at that time complied with the Mitigation and Monitoring Report by preparing various environmental studies demonstrating that no significant impact would result from the Project. An addendum to the Mitigated Negative Declaration was then prepared, demonstrating that the Project would not result in significant environmental impacts. By City Council Resolution No. 2004-053, adopted on April 5, 2004, the City Council approved the addendum to the Mitigated Negative Declaration, acknowledged that the applicant had complied with the requirements of the Mitigation and Monitoring Report and found that there was no substantial evidence that the Project, as mitigated, would have a significant effect on the environment. The Project was completed and a certificate of occupancy was issued in August 2006. The proposed rehabilitation of the Project does not involve substantial changes or new information that would require the preparation of a subsequent environmental document in accordance with Section 15162 of the State CEQA Guidelines (14 Cal. Code Regs. § 15000 et seq.).
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt Resolution
Body
Compliance statement
Diversify and improve the quality of housing stock is an adopted policy items contained in the FY 2023-25 City Council Priority Workplan, effective May 1, 2023.
BACKGROUND
Pursuant to that certain Owner Participation Agreement dated as of September 28, 2004, as modified by a First Amendment to the Owner Participation Agreement dated as of August 16, 2005 (herein together the “OPA”), the Redevelopment Agency of the City of San Pablo (the “RDA”) authorized an interest-free $500,000 loan for the Giant Road Apartments, an 86-unit affordable rental dwelling project (the “Project”) located at 2832 Giant Road, San Pablo, California (the “Property”). An additional interest-free $1,200,000 loan was authorized by the RDA on August 16, 2005, for a total Project loan of $1,700,000. Funding for the Project also included loans from the State Department of Housing and Community Development (“HCD”), the County of Contra Costa (the “County”) and low-income housing tax credits.
On February 1, 2012, the RDA was dissolved. The City of San Pablo, as the housing successor of the RDA, is now the entity entitled to repayment of the Project loan (hereinafter the “City Loan”).
The current balance of the City Loan is $1,549,164 and is due no later than August 16, 2060. The City Loan is being repaid from 75% of residual receipts from the Project which are shared with repayment of the loans from the County and HCD, all as provided in an Amended and Restated Intercreditor Agreement dated July 1, 2009 and recorded against the Property.
Giant Development II, LP, a California limited partnership, is acquiring the Property and the Project from Giant Development, L.P., and is in the process of obtaining new and restructured financing for a major rehabilitation of the Project. The Project needs major repair due to ongoing and pervasive water intrusion issues. The general partner of Giant Development II, LP, is a California limited liability company owned and controlled by East Bay Asian Local Development Corporation (“EBALDC”), a California nonprofit public benefit corporation.
As part of the recapitalization of the Project, Giant Development II, LP, has asked that the City extend the repayment term of their current loan for approximately 21 years by resetting the term to 57 years from the date of closing for the new Project funding. The date of closing is expected to be July 25, 2024, meaning the new final repayment date for the City Loan would be July 25, 2081. The extension would also reset the affordability covenants to 57 years from the date of closing for the new Project funding. This new and restructured funding would help maintain quality affordable housing in San Pablo and ensure its continuation for an additional 20 years; the existing affordability covenants would expire August 2061.
The City Loan is currently evidenced by the following documents (the “City Loan Documents”):
1. The OPA (following completion of the original Project, the only continuing obligations thereunder are set forth in Sections 301-304 pertaining to permitted and restricted uses of the Property);
2. An Affordable Housing Covenant Agreement dated as of September 28, 2004, and recorded against the Property in the Official Records of Contra Costa County on September 30, 2004, as Instrument No. 2004-376346;
3. A Promissory Note in the principal amount of $500,000 dated as of September 28, 2004, without interest;
4. A Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated September 28, 2004, and recorded against the Property in the Official Records of Contra Costa County on September 30, 2004, as Instrument No. 2004-376350, as amended by a First Modification to Deed of Trust, Assignment of Rents and Security Agreement dated as of August 16, 2005, and recorded against the Property in the Official Records of Contra Costa County on August 18, 2005, as Instrument No. 2005-0311383 (together, the “Deed of Trust”);
5. A Promissory Note (Supplemental Project Loan) in the principal amount of $1,200,000 dated as of August 16, 2005, without interest; and
6. An Intercreditor Agreement dated as of September 30, 2004, and recorded against the Property in the Official Records of Contra Costa County on September 30, 2004, as Instrument No. 2004-376351, as modified by a First Amendment to Intercreditor Agreement dated as of August 15, 2005, and recorded in the Official Records on August 18, 2005, as Instrument No. 2005-311384, as further modified by an Amended and Restated Intercreditor Agreement dated as of July 1, 2009, and recorded in the Official Records on September 11, 2009, as Instrument No. 2009-0216915 (collectively, the “Intercreditor Agreement”).
The requested modification of the City Loan and City Loan Documents is provided in the proposed Assignment, Assumption and Modification Agreement attached to this staff report. Generally, the City Loan Documents would be modified as follows:
A. The two original Promissory Notes would be cancelled and replaced by an amended Promissory Note in the principal amount of $1,549,164 (the current loan balance) that provides for (i) interest accruing at the Applicable Federal Rate on the date of the amended Promissory Note, (ii) repayment that shall be extended to be not later than 57 years from the date of the amended Promissory Note, and (iii) repayment terms that adjust the percentages of Residual Receipts available to make payments on the City Loan to allow for the extended loan term and for the payment of a larger Developer Fee;
B. The Affordable Housing Covenant Agreement would be amended in the form of a “First Amendment to Affordable Housing Covenant Agreement” to extend the duration of the restrictive covenants against the Property thereunder for a period of 57 years from the date of the First Amendment;
C. The Deed of Trust would be reconveyed and replaced by a new Deed of Trust that will serve as security for the amended Promissory Note and the Affordable Housing Covenant Agreement, as amended by the First Amendment to Affordable Housing Covenant Agreement;
D. The Intercreditor Agreement would be modified by a “Second Amended and Restated Intercreditor Agreement” reflecting, among other things, the assignment to and assumption by the Assignee of the City Loan Documents as modified by this Agreement.
The forms of the proposed modifications to the above documents are attached to the proposed Assignment, Assumption and Modification Agreement.
FISCAL IMPACT
Approval of the proposed Assignment, Assumption and Modification Agreement would delay repayment of the City Loan but would offset the delay by now providing interest on the remaining amount of the City Loan.
ATTACHMENTS
Att A - Resolution Approving and Authorizing Execution of an Assignment, Assumption and Modification Agreement with Giant Development, L.P., and Giant Development II, LP, Providing for the Restructuring of a Loan made by the Former Redevelopment Agency to Enable the Major Rehabilitation of the Giant Road Apartments
Att B - Draft Assignment, Assumption and Modification Agreement