MEETING DATE:
April 8, 2025
SUBJECT:
Title
RESOLUTION SHA NO. 2025-049 & RESOLUTION NO. 2025-9426 - APPROVAL OF AMENDED AND RESTATED DEVELOPMENT AND LOAN AGREEMENT WITH NCRC RICHMAR SENIOR VILLAGE, LP, AND RELATED ACTIONS, INCLUDING REAL PROPERTY TRANSFERS
Body
Recommendation
Recommendation
1. City Council, acting in its capacity as the Successor Housing Agency, OPEN, CONDUCT, and CLOSE a public hearing under Health & Safety Code Section 33433(a)(1) to consider (a) all of the terms and conditions of an Amended and Restated Development and Loan Agreement with NCRC Richmar Senior Village, LP; and (b) all of the information contained in the Summary Report Pertaining to the Proposed Conveyance of Certain Real Property Interest within the Redevelopment Project Area dated March, 2025 (“33433 Report”) attached as Attachment 6.
2. City Council, acting in its capacity as the Successor Housing Agency, ADOPT SHA resolution: (a); approving the Amended and Restated Development and Loan Agreement with NCRC Richmar Senior Village, LP, which includes approval of a housing development for low to moderate income persons and related $6 million loan; (b) authorizing the City Manager, acting as the executive director of the SHA, to accept conveyance of the City Phase 1 Property, Developer Phase 1 Property and the SHA-Funded, Developer Properties to the SHA; (c) authorizing the City Manager, acting as the executive director of the SHA, to ground lease the Site to the Developer for a term of 99 years; (d) approving the Section 33433 Report; and (e) authorizing the City Manager, acting as the executive director of the SHA, to execute all documents and instruments that are necessary and/or appropriate to implement these approvals and to take all actions necessary and/or appropriate to implement these approvals.
3. City Council to ADOPT resolution approving the Amended and Restated Development and Loan Agreement with NCRC Richmar Senior Village, LP, which includes approval of the transfer of City-owned property to provide housing for low to moderate income persons.
Body
Prior Board or Commission Action
City Council Resolution No. 2012-7607 dated January 10, 2012, by which the City elected to become the Successor Agency to the San Marcos Redevelopment Agency.
SHA Resolution No. 2014-008 dated September 9, 2014, authorizing an Exclusive Negotiating Agreement and related predevelopment loan.
SHA Resolution No. 2015-014 dated August 11, 2015, authorizing a development and loan agreement with Richmar Station LP
Relevant Council Strategic Theme
Planning for the Future
Executive Summary
NCRC Richmar Senior Village LP, formerly known as Richmar Station San Marcos LP (NCRC), has requested a development loan up to $6,000,000 from the City’s Successor Housing Agency to support a 100 percent affordable development. The project is located in the Richmar neighborhood on three separate parcels located between Pico Avenue and Firebird Lane, north of Richmar Ave. The proposed project would develop 51 units of senior housing in the 30%-60% area median income levels, and one manager’s unit.
Discussion
Background. On January 10, 2012, following the State of California’s dissolution of Redevelopment Agencies statewide, the City of San Marcos City Council established the Successor Housing Agency (SHA) to serve as the City’s Housing Successor, which would receive the housing assets of the dissolved San Marcos Redevelopment Agency. Under State law, Housing Successor assets must be held and administered by the SHA in an account called the Low-Moderate Income Housing Asset Fund (Housing Fund), which is subject to expenditure restrictions.
The Housing Fund must be maintained and expended in accordance with state law. Allowable expenditures include the development of affordable housing, administration including the preservation and monitoring of affordable housing, homeless prevention and rapid rehousing services for those experiencing homelessness, and State mandates that funds be allocated to developing rental housing affordable to individuals and families earning incomes between 30-60% of the area median income. Limited funding may be utilized for administration and homeless prevention services.
The former Redevelopment Agency began acquiring land for this project in 2008. In 2015, the developer, National Community Renaissance (National CORE) and the SHA entered into the initial development and loan agreement for the project, which was then anticipated to be much larger in scope and size. Subsequent amendments to the original DLA occurred in 2017 and 2018, with limited activity occurring until 2023, when the developer, National CORE, initiated entitlement activities for a condensed project scope, including only APNS 220-082-03, 220-082-04, and 220-082-05 as depicted in the Vicinity Map (Attachment 5). The property is currently vacant and owned by three separate entities: the City of San Marcos, the Successor Housing Agency, and NCRC.
Surplus Land Act. The City of San Marcos published a Surplus Land Act notice of exemption on January 24, 2025 in the San Diego Union Tribune. The City determined the parcels to be used for the development to qualify as exempt surplus land under the Surplus Land Act, pursuant to Government Code Section 54221(f)(1)(A). The Department of Housing and Community Development approved the Surplus Land Act exemption on March 13, 2025.
The City intends to develop the parcels into affordable housing for low-moderate income households, as defined by Section 50093 of the Health and Safety Code or as defined by the US Department of Housing and Urban Development. The City of San Marcos aims to create an affordable housing development of no less than 51 units, all at the 60% AMI level or lower, except for 1 unrestricted manager’s unit. The development will be restricted by a regulatory agreement including the covenants and conditions of the agreement binding for a minimum of 99 years, which will be recorded in the office of the San Diego County Recorder.
Development Description. In coordination with Housing Special Counsel, Housing Staff have negotiated an Amended and Restated Development and Loan Agreement (DLA) with National CORE to develop 51 affordable senior rental units, comprised of 10 studio units, 41 1-bedroom units and 1 unrestricted 3-bedroom manager’s unit. The proposed Project will also have a community room, lounge areas, outdoor seating areas, raised garden beds, as well as communal laundry rooms. All units will have either a patio or balcony. The proposed unit matrix and affordability levels are identified below.
|
Unit Type |
Average Unit Size |
Number of Units |
30% AMI Level |
40% AMI Level |
50% AMI Level |
60% AMI Level |
|
Studio |
328 sq. ft. |
10 |
2 |
2 |
2 |
4 |
|
One Bedroom |
520 sq. ft. |
41 |
4 |
7 |
13 |
17 |
|
Three Bedroom (Manager’s Unit) |
1064 sq. ft. |
1 |
|
|
|
|
|
Total Units |
|
52 |
|
|
|
|
The proposed development site is comprised of three contiguous parcels located at 220 and 226 Richmar Avenue, and 352 Firebird Street. The Conceptual Plan for the project (Attachment 4) depicts a three-story development of 52 units on .85 acres north of Richmar Avenue, south of Alley 3N, east of Firebird Lane and west of Pico Ave. The property is zoned R-3-10, which is medium density residential. The property is currently vacant and owned by three separate entities, the City of San Marcos, the Successor Housing Agency, and NCRC.
Project Pro Forma. To assist in the evaluation of the requested loan funding and development feasibility, staff engaged Keyser Marston Associates, Inc. (KMA) for a third-party financial analyst review and evaluation. KMA has reviewed the proposed development and viability of the project to ensure the Successor Housing Agency is utilizing the funds and property for the highest and best use. KMA’s findings are set forth in the Summary Report Pertaining to the Proposed Conveyance of Certain Real Property Interest within the Redevelopment Project Area dated March, 2025 (“33433 Report”) attached as Attachment 6.
The total cost of the proposed development is estimated at approximately $32,021,921. The KMA proforma analysis has confirmed the current request of up to $6,000,000, which equates to $117,647 per unit, to be the amount required to ensure the proposed project is viable and competitive for state tax credits. The proposed local funds contributed to the development are higher than regional contributions from the County or other local jurisdictions; however, the development has had several unique challenges which have created increased expenses. The development initiated prior to the dissolution of redevelopment and included an original scope of work that was much larger than the current proposed project site. The revised project stalled with limited redevelopment funding, the removal of one developer who backed out of the original project, changes in the Surplus Land Act, and the transition of city staff. Funding contributions from the Successor Housing Agency for future affordable developments will be more constrained, and aligned with County and regional funding to optimize and allocate resources more efficiently. Additionally, the proposed project will include a 99-year ground lease from the Successor Housing Agency to the developer, which will return the property to the City at the end of the affordability covenant.
Development Financing. The developer is requesting $6,000,000 to support the Richmar Senior Development Project. The developer was previously awarded a loan of $4,291,870, which was utilized for predevelopment costs and to acquire land for the original Richmar Station development. All parcels previously acquired for the project will be returned to the Successor Housing Agency and be made available for affordable housing in the future. The previous loan of $4,291,870 is proposed to be forgiven in exchange for with the conveyance of parcels from the original project scope back to the Successor Housing Agency. Parcels within the new project scope, APNS 220-082-03, 220-082-04, and 220-082-05, will be ground leased for 99 years for a total consideration of $1.00 per year.
The developer is applying for competitive County of San Diego funding ($4 million in HOME funds), of which they will be notified of award status in April. Additionally, the developer will be applying for 9% Tax Credits through the State of California’s Low Income Tax Credit Program. The tax credits are issued through the Tax Credit Allocation Committee which is government agency responsible for distributing tax credits to developers who build affordable housing. The tax credits encourage private investment in affordable rental housing. The developer anticipates applying for tax credits in July 2025. Tax Credit funding is highly competitive and may require the developer to apply for more than one round of funding. If awarded the competitive tax credits, the developer would be notified in September 2025 and could begin construction in February 2026 if awarded tax credits.
Service Population. The identified service population is seniors age 55 years and older. Additionally, the developer is requesting 17 Project Based Vouchers (PBV) from the County of San Diego Housing Authority. A PBV is a type of housing assistance provided through HUD, where the rental subsidy is connected to a specific site or address and not with an individual. Individuals will have to qualify through the San Diego Housing Authority to be eligible for the PBV units. Additional on-site supportive services will be offered from Hope through Housing, a non-profit partner supporting National CORE residents. The proposed development is also requesting eight units dedicated to veterans who are seniors age 55+, with Veterans Affairs Supportive Housing (VASH) vouchers provided by the US Department of Housing and Urban Development. VASH Vouchers are pending approval of San Diego County funding.
Summary Report and City Council Action. The City Council, acting in its capacity as the Successor Housing Agency, is required by Section 33433(a)(1) of California Health and Safety Code, to hold a public hearing to consider approval of the Amended and Restated Development and Loan Agreement and to review and consider the ramifications thereof as set forth in the Section 33433 Report. The City Council acting in its capacity as the Successor Housing Agency, must consider the terms of and approve the Successor Housing Agency’s proposed ground lease in order to proceed with the transaction. A third-party financial consultant has prepared the 33433 Report with a financial analysis of the project (Attachment 6). The analysis concludes that the disposition of the site is not less than fair market re-use value of the property consistent with the redevelopment plan.
Terms and Conditions of the Amended Development and Loan Agreement
Adoption of the resolutions accompanying this item will result in approval of the proposed Amended Development and Loan Agreement, included as Attachment 3. The key provisions of the DLA are as follows:
(i) amend and restate the Original DLA;
(ii) transfer the Developer Phase 1 Property to the SHA in consideration for the release of the Prior SHA Loan,
(iii) transfer the City Phase I Property to the SHA such that the Site will be held in fee by the SHA, it being the intent that ultimately the SHA (in such capacity, the “Ground Lessor”) will ground lease the Site to NCRC for a term of at least 99 years;
(iv) secure NCRC’s agreement to construct a residential development on the Site which will consist of fifty-one (51) deed restricted affordable units, and one (1) unrestricted three-bedroom manager’s unit and certain on and off-site improvements;
(v) memorialize the SHA’s agreement to make a $6,000,000.00, 3%, 55-year residual receipts loan to NCRC;
(vi) provide for NCRC’s transfer of the SHA-Funded, NCRC properties to the SHA; and
(vii) Require that all development of the Site be subject to review and approval by the City Manager on behalf of the City and SHA.
Environmental Review
The City of San Marcos evaluated and determined these actions, (DLA, transfer of real property and associated loans) considered herein are Categorically Exempt pursuant to California Environmental Quality Act (CEQA) Guidelines Section 15061(b)(3) under the general rule in that the action being taken herein can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment; and future project development shall comply with all applicable CEQA requirements.
Fiscal Impact
The Successor Housing Agency is proposing to contribute $6,000,000, in the form of a 3%, 55-year, residual receipts loan to partially fund construction of the project, from the Low-Moderate Income Housing Asset Fund (Housing Fund). Previous funding in the amount of $4,291,870 has already been committed to the previous iteration of development but will be forgiven as the properties acquired with the previous loan are being returned to the City for future affordable housing development. Beginning on the May 1, immediately following the calendar year in which the Project is completed (as evidenced by a certificate of occupancy), and annually on May 1 of each year thereafter, the Developer will pay fifty percent (50%) of Residual Receipts to the SHA.
Attachment(s)
1. SHA Resolution, approving the Amended and Restated Development and Loan Agreement with NCRC Richmar Senior Village LP, in its capacity as the Successor Housing Agency (SHA)
2. City Council Resolution, approving the Amended and Restated Development and Loan Agreement with NCRC Richmar Senior Village, LP
3. Proposed Amended and Restated Development and Loan Agreement
4. Conceptual Plan
5. Vicinity Map
6. 33433 Report
Prepared by: Sylvia Solis Daniels, Housing & Neighborhood Services Director
Reviewed by: Jill D. S. Maland, Assistant City Attorney
Approved by: Michelle Bender, City Manager