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HomeMy WebLinkAboutMINUTES - 06262012 - C.63RECOMMENDATION(S): 1. CONSENT to the proposed change of limited partners in Lao Park Associates, a California Limited Partnership (the Partnership), owner of Rumrill Place apartments in San Pablo, from National Equity Fund to Lao Family Community Development, a California nonprofit public benefit corporation, and DIRECT County staff to deliver a letter of consent from the County to the Partnership; 2. CONSENT to the transfer of Rumrill Apartments from the Partnership to Lao Park Housing Corporation, a California nonprofit public benefit corporation, and AUTHORIZE the Director of the Department of Conservation and Development (Director), or her assignee, to execute to an assignment and assumption agreement; and 3. AUTHORIZE the Director, or her designee, to execute a subordination agreement in a form acceptable to County Counsel to subordinate $90,000 in Community Development Block Grant (CDBG) funds and $525,000 in HOME Investment Partnerships Act (HOME) funds to One Pacific Coast Bank FSB. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 06/26/2012 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor Federal D. Glover, District V Supervisor Contact: Kara Douglas, 925-674-7880 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: June 26, 2012 David Twa, County Administrator and Clerk of the Board of Supervisors By: Carrie Del Bonta, Deputy cc: C. 63 To:Board of Supervisors From:Catherine Kutsuris, Conservation and Development Director Date:June 26, 2012 Contra Costa County Subject:Request for consent and subordination for a change of ownership and refinancing of Rumrill Place Apartments in San Pablo FISCAL IMPACT: No General Fund impact. CDBG and HOME funds are provided to the County on a formula allocation basis through the U.S. Department of Housing and Urban Development (HUD). BACKGROUND: In 1996, the County loaned Lao Family Community Development, Inc. (LFCD) $615,000 in Community Development Block Grant (CDBG) and HOME Investment Partnerships Act (HOME) funds to assist with the development of Rumrill Apartments. The loan included $90,000 in CDBG funds and $525,000 in HOME funds. The original development financing included low income housing tax credits (LIHTC). As is typical in LIHTC transactions, LFCD formed a limited partnership. Lao Park Housing Corporation (LPHC) is the general partner and an equity investment company, National Equity Fund, Inc. (NEF), is the limited partner. These partnerships typically last for 15 years. At the end of 15 years, the investor limited partner has received all of its tax credit benefits and negotiates its exit from the partnership with the general partner. This Board action will allow the Partnership and LPHC to undertake three transactions: 1. Replace NEF with LFCD as the limited partner so that NEF can exit the Partnership. 2. Allow LPHC to purchase Rumrill Place apartments from the Partnership. The County loan agreement pre-approved the transfer of the Rumrill Place apartments from the Partnership to LFCD or an affiliate of LFCD provided that the transferee assumes the obligations of the original borrower utilizing a form of assignment and assumption agreement to be provided by the County. LPHC is an affiliate of LFCD. LPHC has agreed to draft the assignment and assumption agreement and it will be approved as to form by County Counsel. 3. Allow LPHC to refinance the existing bank loan with a $1.45 million loan (the Senior Loan) from One Pacific Coast Bank FSB (the Senior Lender). It is expected that the Senior Lender will request the County to subordinate its existing CDBG/HOME loan to its loan as a condition of providing the loan to LPHC. Both the Senior Lender and LPHC wish to close on the new loan no later than June 29, 2012. Approval of this Board Order would allow the Director to execute a subordination agreement in a form to be approved by County Counsel. The Lender and LPHC would have to confirm all of the following to receive such approval: (a) All of the proceeds of the proposed Senior Loan, less any transaction costs, must be used to provide acquisition, rehabilitation and/or permanent financing for the Development. (b) The Senior Lender must be a state or federally chartered financial institution, a nonprofit corporation or a public entity that is not affiliated with Borrower or any of Borrower's affiliates, other than as a depositor or a lender. (c) Borrower must demonstrate to the County's reasonable satisfaction that subordination of the Deed of Trust and/or Regulatory Agreement is necessary to secure adequate acquisition, rehabilitation and/or permanent financing to ensure the viability of the Development, including the operation of the Development as affordable housing, as required by the Loan Documents. To satisfy this requirement, Borrower must provide to the County, in addition to any other information reasonably required by the County, evidence demonstrating that the proposed amount of the Senior Loan is necessary to provide adequate acquisition, rehabilitation and/or permanent financing to ensure the viability of the Development, and adequate financing for the Development would not be available without the proposed subordination. (d) The subordination agreement(s) must be structured to minimize the risk that the Deed of Trust and/or Regulatory Agreement would be extinguished as a result of a foreclosure by the Senior Lender or other holder of the Senior Loan. To satisfy this requirement, the subordination agreement must provide the County with adequate rights to cure any defaults by Borrower, including: (i) providing the County or its successor with copies of any notices of default at the same time and in the same manner as provided to Borrower; and (ii) providing the County with a cure period of at least sixty (60) days to cure any default. (e) The subordination(s) described in this Section may be effective only during the original term of the Senior Loan and any extension of its term approved in writing by the County. (f) No subordination may limit the effect of the Deed of Trust and/or Regulatory Agreement before a foreclosure, nor require consent of the holder of the Senior Loan to exercise of any remedies by the County under the Loan Documents. (g) In the event there is a foreclosure of the property, the Regulatory Agreement shall be revived according to its original terms if, during the original Regulatory Agreement term, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in Rumrill Place. Upon a determination by the Director that the conditions above have been satisfied, the Director or her designee will be authorized to execute the approved subordination agreement without the necessity of any further action or approval. CONSEQUENCE OF NEGATIVE ACTION: If the County does not subordinate to the new loan, the owner may be at risk of default on the terms of its existing loan. CHILDREN'S IMPACT STATEMENT: N/A