For Economic Development Committee January 30, 2025
TO: Honorable Economic Development Committee Members
APPROVAL: Colby Cataldi, Director of Community Development
FROM: Paul Guerrero, Economic Development Manager
Title
Rialto Housing Authority Loan Modification for National CORE Citrus Grove Renovation Project
Body
BACKGROUND
1432 North Willow Drive - Citrus Grove Apartments (formerly known as Willow-Winchester Condominiums)
In 2005, the Rialto Housing Authority (RHA) entered into an Affordable Housing Agreement with the Southern California Housing Development Corporation to acquire, renovate, and convert a 152-unit condominium complex into affordable rental units. The property is located on Winchester Drive, Clifford Street, and Millard Avenue, west of Willow Avenue. The appropriated funds for the project were $18,322,000 at a three percent (3%) interest rate. Under the agreement, the developer committed to leasing fifty percent (50%) of the units to very low-income households and the remaining to lower-income households, all at affordable rent levels. The affordability period was set at fifty-five (55) years from the date the Certificate of Completion was issued.
ANALYSIS/DISCUSSION
Over fifteen (15) years have passed since the last renovation of Citrus Grove, and the property now requires significant repairs due to aging infrastructure and deferred maintenance. The cost of these repairs exceeds the property’s operational cash flow.
In 2023, National CORE applied for four percent (4%) credits from the California Tax Credit Allocation Committee to fund a complete rehabilitation, estimated at approximately $70,000 per unit for a total estimated project cost of $11,300,000. On December 6, 2023, National CORE was awarded the funding. The deadline date for all document submittal is March 12, 2025. The planned upgrades include new ADA-compliant units and path of travel, replacement of appliances and HVAC equipment, energy efficiency improvements, stairs safety upgrades, flooring and windows replacements, and balcony repairs and other necessary improvements. These updates will not only improve the quality of life for current and future residents but also extend the life of the property, making it more sustainable and habitable in the long term.
However, due to the impact of tax implications on the appraised value, the property was reappraised, resulting in a reduced valuation. This reduction in property value subsequently decreased the eligible acquisition credits, causing the property’s outstanding debt to rise to an estimated $40,000,000, exceeding the appraised value of $26,600,000. Given that the RHA debt is a critical component of the project’s financial structure, National CORE is requesting RHA forgive $14,054,480 of the current loan balance of approximately $21,802,480 (inclusive of both principal and accrued interest). Furthermore, the deal structure necessitates that the remaining balance of approximately $8,000,000 to be converted into long-term debt, supported by a new residual receipt loan post-construction completion. Payments on the new loan will be made from the project’s net cash flow, and the loan will carry a market interest rate of 4.53%. During the 18-month construction period, the $8,000,000 balance will be converted into a construction bridge loan, held by JMP Chase Bank. In addition, National CORE will make a one-time payment of $250,000 to the City. The affordability period would be extended for another 55 years from the completion date. This will ensure that 50% of the units are reserved for very low and low-income households.
Below is a summary table.
|
DESCRIPTION |
ORIGINAL |
PROPOSED |
DIFFERENCE |
|
UNITS INFORMATION |
|
Total Number of Units |
152 |
150 |
- 2 Units |
|
Very Low-Income Units |
80 |
75 |
-5 Units |
|
Low-Income Units |
80 |
75 |
-5 Units |
|
One Bedroom |
0 |
0 |
0 |
|
Two Bedrooms |
0 |
0 |
0 |
|
Three Bedrooms |
0 |
0 |
0 |
|
|
ORIGINAL |
PROPOSED |
DIFFERENCE |
|
AFFORDABILITY |
|
55 Years Ends |
2061 |
2081 |
+ 20 Years |
|
|
ORIGINAL |
PROPOSED |
DIFFERENCE |
|
INTEREST RATE |
|
Percentage |
3% |
4.53% |
Current % Rate |
|
|
ORIGINAL |
PROPOSED |
DIFFERENCE |
|
FINANCING SUMMARY |
|
Permanent Loan - US Bank |
$2,591,000 |
$3,575,567 |
$0 |
|
California HCD |
$8,362,659 |
$11,765,324 |
$0 |
|
Rialto Housing Authority |
$14,754,722 |
$0 |
-$14,754,722 |
|
County of San Bernardino |
$3,000,000 |
$4,773,912 |
$0 |
|
|
|
|
|
|
APPRAISAL |
|
|
|
|
September 2024 |
- |
$26,600,000 |
Based on appraisal |
|
DEBT |
|
|
|
|
September 2024 |
- |
$41,171,648 |
Based on appraisal |
|
DESCRIPTION |
BALANCE |
PAYMENTS |
ADJUSTED BALANCE |
|
Original Loan Amount |
$14,754,722 |
$700,242 |
$14,054,480 |
|
Accrued Interest (3%) |
$7,748,000 |
$0 |
$7,748,000 |
|
Total |
$22,502,722 |
$700,242 |
$21,802,480 |
|
|
|
|
|
|
Forgiveness |
$14,054,480 |
$0 |
$0 |
|
One-Time Payment |
- |
$250,000 |
- |
|
|
BALANCE |
PAYMENT AMOUNT |
ADJUSTED BALANCE |
|
New Residual Loan |
$8,000,000 |
$X |
$8,000,000 + 4.53% |
FINANCIAL IMPACT
The City of Rialto would receive a one-time repayment of $250,000. The Rialto Housing Authority would forgive $14,054,480. A new residual receipt loan amount of $8,000,000.
RECOMMENDATION
Staff recommends that the Economic Development Committee receive this update and provide comments.