THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA M E M O R A N D U M

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1 THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA M E M O R A N D U M DATE: JULY 7, 2011 PC TO: CRA/LA BOARD OF COMMISSIONERS 8 FROM: STAFF: SUBJECT: CHRISTINE ESSEL, CHIEF EXECUTIVE OFFICER MARGARITA H. DE ESCONTRIAS, REGIONAL ADMINISTRATOR DURAN VILLEGAS, PROJECT MANAGER STEVEN BRADY, SENIOR REAL ESTATE DEVELOPMENT AGENT Sylmar Court Apartments Property Acquisition and Exclusive Negotiating Agreement. Negotiate and execute a Purchase and Sale Agreement with Sylmar Court, L.P. not to exceed $2,900,000 for the acquisition of parcels at San Fernando Road and Astoria Street; and expend up to $800,000 for relocation costs; to clear site improvements, remediate adverse site conditions; prepare and manage site; and execute an Exclusive Negotiation Agreement with Sylmar Court, L.P.; and related actions for the development of the mixed-use Sylmar Court Apartments, located inside and outside of the Earthquake Disaster Assistance Project for Portions of Council District 7 (Pacoima/Panorama City Project Area). EAST VALLEY REGION (CD7) INVESTMENT COMMITTEE: N/A RECOMMENDATION(S) That the CRA/LA Board of Commissioners: 1. Adopt a resolution certifying that it has reviewed and considered the environmental effects of the project described in the City of Los Angeles Mitigated Negative Declaration ENV MND ( MND ), pursuant to the California Environmental Quality Act ( CEQA ) Guidelines set forth in California Code of Regulations Section 15096(f); 2. Approve and adopt the Draft Model Relocation Plan for Sylmar Court; 3. Adopt a Resolution approving the Replacement Housing Plan for Sylmar Court; and 4. Request that the City Council acknowledge and approve CRA/LA s implementation of the Sylmar Court project under the Cooperation Agreement for Payment of Costs Associated with Certain CRA/LA Funded Capital Improvements, Public Improvements and Affordable Housing Projects, dated as of March 10, 2011 between the CRA/LA and the City of Los Angeles. That the CRA/LA Board of Commissioners, subject to City Council approval:

2 Sylmar Court Acquisition of Development Parcels PAGE 2 SUMMARY 5. Amend the Pacoima/Panorama City proposed FY12 Budget to transfer $1,824,000 of tax increment funds from budget line item Economic Development (PC 2210) to budget line item Affordable Housing (PC 1450) for development of Sylmar Court Apartments; 6. Adopt, and request the City Council to also adopt, a Finding of Benefit resolution making a finding that the expenditure of Low and Moderate Income Housing Funds and Tax Increment Funds outside of the Pacoima/Panorama City Project Area for the proposed Sylmar Court project is of benefit to the project area; 7. Authorize the Chief Executive Officer (CEO) or designee to negotiate and execute, not sooner than 30 days after approval of the Replacement Housing Plan and Draft Model Relocation Plan, Purchase and Sale Agreement ( PSA ) and other related documents with Sylmar Court, L.P., a California limited partnership, for the purchase of the sites located at San Fernando Road and Astoria Street at a combined purchase price not to exceed $2,900,000 (collectively the Site ); 8. Authorize the CEO or designee to execute an Exclusive Negotiating Agreement ( ENA ) with Sylmar Court L.P. for a period of up to 180 days, with two optional 90 day extensions, for the proposed development of the Sylmar Court affordable senior mixed-use project located at the Site; 9. Authorize the CEO or designee to take such actions as may be necessary to carry out the PSAs and the ENA, including, but not limited to, executing the acquisition documents, escrow instructions and contracts for the relocation, clearance of the improvements on the Site, contracts for remediation of hazardous materials on the Site, and other all other contracts necessary for the preparation and management of the Site for development in an amount not to exceed $800,000; and 10. Authorize the CEO or designee to take such actions as may be necessary to carry out the Relocation Housing Plan including the payment all legally required relocation expenses. The recommended actions would authorize the purchase of the Site in an amount not to exceed $2,900,000 from Sylmar Court, L.P. ( Seller / Developer ), expend up to $800,000 for predevelopment expenses, and the execution of an ENA for the proposed development of the Sylmar Court Apartments ( Project ), which is anticipated to be a 150-unit affordable housing mixed-use development that will serve seniors; authorize expenditures outside of the Project Area; and approve the Model Relocation Plan and draft Replacement Housing Plan. Authority for the CRA/LA to acquire the Site and enter into an ENA with Developer will secure the acquisition opportunity and allow the Developer to compete for and obtain other outside funding sources. The proposed Project entails the demolition of the existing improvements and Site remediation, Site preparation and management, relocation of residents in one of the existing two residential units, and the new construction of a five-story building with 150 affordable units (including one resident manager s unit), above 3,461 square feet of commercial space and at-grade parking spaces located in the Sylmar community (see Attachment A Location/Site Map). The Project has been designed with 55 one-bedroom and 95 two-bedroom apartment units in 4 stories of residential above commercial/parking. The ground floor commercial space is targeted to serve a pharmacy and general retail uses.

3 Sylmar Court Acquisition of Development Parcels PAGE 3 PREVIOUS ACTIONS Initial Action. DISCUSSION & BACKGROUND Location and History It is anticipated that the Project will be developed on the 56,307 square foot site that includes two properties. The San Fernando Road property is comprised of four parcels (APN #s: , , , and ) located at San Fernando Road; and the Astoria Street property is a single parcel (APN # ) located at Astoria Street; in Sylmar. Three of the four San Fernando Road parcels are located within the Pacoima/Panorama City Project Area ( Project Area ) and one parcel is outside the Project Area ( ); the Astoria Street parcel is located outside the Project Area ( ). Since the project is at least partially located outside the Project Area, a Finding of Benefit Resolution is required (Attachment D Finding of Benefit Resolution). The Site is located on a main commercial thoroughfare next to a primarily single-family residential neighborhood (see Attachment C Community Context Report). The Site comprises two separately owned properties currently under escrow to be purchased by the Developer. The San Fernando Road property contains a closed and vacant motel and laundromat, and one vacant two-bedroom single family home. The Astoria Street property contains one occupied three-bedroom single family home. The Site is controlled by the Developer through a Purchase and Sale Agreement ( Purchase Agreements ) for each of the two properties, entered into between DDCM, Inc., the operating general partner of the Developer ( Buyer ) and the respective sellers. The Buyer will assign the Purchase and Sale Agreements to the Developer at closing. The current owner of the San Fernando Road property originally entered into a purchase agreement with the Buyer in December The current owner of the Astoria Street property originally entered into a purchase agreement with the Buyer in May Several amendments have allowed for extensions to the closing dates with a current closing date of June 30, 2011 for the San Fernando Road property, and October 2011 for the Astoria Street property. The CRA/LA will deposit the acquisition price into escrow and will purchase the property from Developer concurrently with the Developer s purchase of the Property from the current property owners. Developer Entity The Developer s operating general partner, DDCM, Inc. ( DDCM ), is a California corporation that was established in 1982 and began developing tax credit projects in DDCM will also be a partner to the general contractor and professional property management company in this transaction. The president of DDCM is Kurken Alyanakian, who trained as an architect in Istanbul and graduated from the UCLA Graduate School of Architecture and Planning. Mr. Alyanakian is also a registered general contractor in California, and acts as such on all development projects, including the proposed Project. DDCM has developed 11 projects in the City of Los Angeles, totaling over 600 residential units. The firm has two existing loans with the CRA/LA, including LA Colorado Terrace Loan # ($3,015,824) and Arminta North & South Loan # ($463,431). Both loans are current and in good standing. DDCM is a for-profit company with a real estate development staff of seven that includes Mr. Alyanakian, and a staff that specializes in finance, design and construction.

4 Sylmar Court Acquisition of Development Parcels PAGE 4 The borrowing entity will be Sylmar Court, L.P. a California limited partnership comprised of the Coalition for Better Living, a California non-profit corporation as the Managing General Partner with a 0.01% ownership interest; DDCM as the Operating General Partner with a 0.01% ownership interest; and a to-be-determined tax credit investor will be admitted as limited partner at close of construction financing. DDCM currently holds the 99.8% limited partner ownership interest. Description and Project Context The Site is located in an older commercial area of Sylmar that has experienced continued deterioration and lack of new investment and development over the past five years. To effectuate the development of the Site, the CRA/LA s acquisition of the land and ENA with the Developer allows for the proposed Project to be the catalyst for redeveloping this portion of San Fernando Road. The Project, as proposed by the Developer, will be a new mixed-use development with 150 units of affordable housing targeting seniors age 55 years and older, in one 5-story Type V building with four floors of residential over 3,461 square feet of commercial space on the ground floor on a 1.28 acre Site. The Project has received its entitlements, including a 7.4% density bonus from the City of Los Angeles, providing an extra ten (10) units to the 140 by-right units. Through the ENA, the CRA/LA will work with the Developer to refine the Project s scope, design and feasibility. Relocation Plan Shober Consulting, Inc. produced the attached draft Model Relocation Plan in June 2011 (see Attachment E Model Relocation Plan). As of the date of the Plan, there was one (1) household living in the subject property. The household will be permanently relocated and the development budget includes funds for this expense. The purpose of the draft Model Relocation Plan is to identify the various types of relocation assistance that current residents may be eligible to receive. The draft Model Relocation Plan was prepared in accordance with all applicable local, state, and federal requirements. In accordance with the CRA/LA s practice, copies of the draft Model Relocation Plan will be made publicly available for thirty (30) days; however, the 30 day period began on June 23, 2011, which will expire after the CRA/LA Board considers the item. Copies were posted on the CRA/LA website, sent to the Neighborhood Council, and provided to the CRA/LA Records Department. In the event that comments are received by the public during the four week notice period, they will be incorporated appropriately within the Final Model Relocation Plan. The Final Model Relocation Plan will include any comments received, pursuant to the required public review period. The CRA/LA will not execute the PSA less than 30 days from CRA/LA Board approval of the Model Relocation Plan. Replacement Housing Plan Pursuant to California Redevelopment Law, redevelopment projects that receive financial assistance are required to replace any residential units occupied by low and moderate income households that are demolished as part of the project. Replacement units must match the bedroom count and level of affordability of the demolished units, and must be built within 4 years of demolition. As required, staff has prepared the attached Replacement Housing Plan (see Attachment F Resolution Adopting the Replacement Housing Plan) for Sylmar Court, which has been made publicly available for thirty days prior to consideration of adoption.

5 Sylmar Court Acquisition of Development Parcels PAGE 5 Community Benefits Sylmar Court will replace two underutilized lots, totaling approximately 1.28 acres, with an attractive and secure housing development and commercial use. The Project will provide quality and affordable housing opportunities for seniors and is expected to create 198 jobs, including 187 construction jobs and 11 permanent jobs. The Project will be a catalytic project in the area, and complement a number of CRA/LA initiatives in the Sylmar Area, including the recently-created Sylmar Business Improvement District (BID), Sylmar Streetscape Improvements along San Fernando Road and active Business Assistance Program (BAP). Unless noted otherwise below, all applicable CRA/LA policies will be required of this Project as listed in the Project Summary Report (see Attachment G), and three waivers from the CRA/LA Housing Policy are being sought. The Project will provide a number of community benefits, including: Removal of Blight. Currently, the Project Site includes a vacant motel and laundromat in poor condition, and two single family homes in below average condition. Demolition of these buildings will remove significant blight, as well as places where bulky items and garbage are routinely dumped. Catalytic Project. The Project will provide quality new construction in an area that was prime for development just three years ago, which stopped completely due to the economic recession. This project is also the first new mixed-use investment within the Sylmar BID boundaries that directly supports and impacts several existing projects, including a four acre ownership housing Site to the south of the subject property, and newly renovated commercial and manufacturing uses within one mile of the subject property. Affordable Housing. The Project, per HCD, will provide 42 units of low-income and 107 units of moderate-income senior housing, which is needed in the Sylmar community. New Retail in Declining Commercial Corridor. The Project includes 3,461 square feet of retail to an existing commercial corridor that is aging, in average/below average condition, and has adverse influences. The presence of new retail and commercial uses will provide needed neighborhood serving retail (and parking), and help to revitalize an aging yet critical commercial corridor within the Project Area. Transit Oriented Development. The Project places new housing units within one quarter of a mile of the Metrolink Sylmar Station, providing access to Metrolink train service throughout Los Angeles and the Southland. This Project supports CRA/LA Strategic Plan Goals and Acquisition Analysis The CRA/LA s total acquisition cost shall not exceed $3,700,000, and is comprised of acquisition costs totaling not more than $2,900,000 and $800,000 for relocation, and site clearance, remediation, preparation and management. The CRA/LA appraised each property in March 2011, and the acquisition shall be no higher than the appraised value. Appraisals were conducted by Keith Settle & Company, and a review appraiser approved each report and corresponding value.

6 Sylmar Court Acquisition of Development Parcels PAGE 6 Developer Existing Loan Performance DDCM, through limited partnerships, currently has two CRA/LA loans, including: LA Colorado Terrace, 2455 Colorado Boulevard, Los Angeles (Eagle Rock). Loan # This is a mixed-use project built in Loan is current and in good standing. Arminta North and South, Arminta Street, Los Angeles (Sun Valley). Loan # Loan is current and in good standing. DDCM, through limited partnerships, currently has four LAHD loans, including LA Colorado Terrace and Arminta North and South. During its due diligence, the CRA/LA learned that Mr. Alyanakian submitted a letter to LAHD on April 8, 2011, requesting assistance to cure annual operating deficiencies that the LA Colorado Terrace project has and continues to experience. CRA/LA staff contacted the Developer and LAHD, and learned that LAHD has not processed the Developer s request for assistance. Based on the fact that the Developer remains current with the LAHD loan, and is current and in good standing with the CRA/LA loans, CRA/LA staff recommends that CRA/LA Asset Management monitor the any further developments regarding the proposed project. ECONOMIC IMPACT The following table* describes the economic impacts estimated to be created by this project. Estimated Economic Impacts Created by this Project* Estimated Construction Jobs Created 187 Estimated Permanent Jobs Created 11 Estimated Gross Property Tax Increment (TI) Revenue (Year 1 of Tax Increment Generated) Estimated Net Present Value (NPV) of Net Property TI Generated (Revenue to the CRA/LA Project Area through the last Tax Increment Receipt Date) Estimated NPV of Property TI for Affordable Housing (25% set-aside towards the CRA/LA Low and Moderate Income Housing Fund through the last Tax Increment Receipt Date) Estimated NPV of Utility User Tax Revenue (Revenue to City of Los Angeles) Estimated NPV of Sales Tax Revenue (1% portion of taxable sales to City of Los Angeles) Estimated NPV of Business Tax Revenue (Revenue to City of Los Angeles) $104,873 $530,811 $370,788 $749,145 $184,175 $23,390 *The figures provided in the table about are for estimation purposes only; actual fiscal impact or job creation may be higher or lower than these estimates. Standardized formulas were used to generate these figures and are based on accepted econometric practices and basic tax calculations taken from research performed by a variety of sources, including the Los Angeles Economic Roundtable, California Redevelopment Association, US Department of Housing and Urban Development, CRA/LA, and the City and County of Los Angeles. SOURCE OF FUNDS Pacoima/Panorama City Redevelopment Project Area Low and Moderate Income Housing Funds and Tax Increment Funds.

7 Sylmar Court Acquisition of Development Parcels PAGE 7 PROGRAM AND BUDGET IMPACT This item will require amending the Pacoima/Panorama City Project Area proposed FY12 Budget to transfer $1,824,000 of tax increment funds from budget line item Economic Development (PC 2210) to budget line item Affordable Housing (PC 1450). Sufficient funds are available under budget line Affordable Housing to fund the remaining $1,876,000 portion of site acquisition and predevelopment expenses for the Sylmar Court Apartment project. There is no impact on the City s General Fund as a result of this action. ENVIRONMENTAL REVIEW The City of Los Angeles is the lead agency for the proposed Project for purposes of CEQA. The City Planning Department, acting through its Planning Commission, adopted the abovedescribed MND, and approved the Project on June 24, CRA/LA s environmental responsibility, as a Responsible Agency under CEQA, is to consider the environmental effects of the proposed Project as shown in the MND prepared by the lead agency prior to acting on the Project (see Attachment B Environmental Resolution). AUTHORITY GRANTED TO CEO OR DESIGNEE If the PSA and the ENA are approved, the CRA/LA Chief Executive Officer or designee would be authorized to take such actions as may be necessary to carry out those agreements, including, but not limited to, executing the CRA/LA acquisition documents and the ENA and taking the following actions: (1) extending the Initial Term of the ENA by up to two additional 90 day periods for a total not to exceed one year; (2) approving revisions to the proposed project, subject the Board s approval of a disposition and development agreement with Developer; (3) negotiating and executing agreements for the clearance of the improvement on the Site, remediation of hazardous materials on the Site, and all other necessary agreements to prepare the Site for development in an amount not to exceed $750,000; and (4) negotiating and executing relocation assistance payment in the amounts required by law. PROJECT SUPPORT Councilmember Richard Alarcón supports the recommended action. Christine Essel Chief Executive Officer By: Dalila Sotelo Deputy Chief Executive Officer Housing and Development Services

8 Sylmar Court Acquisition of Development Parcels PAGE 8 There is no conflict of interest known to me which exists with regard to any CRA/LA officer or employee concerning this action. ATTACHMENTS Attachment A: Attachment B: Attachment C: Attachment D: Attachment E: Attachment F: Attachment G: Location/Site Map Environmental Resolution Community Context Finding of Benefit Resolution Model Relocation Plan Resolution Adopting the Replacement Housing Plan Project Summary Report