CRA/LA 8w1ding communities

CRA/LA 8w1ding communities Community Redevelopment Agency of the CITY OF LOS ANGELES 354 South Sprmg Street I Sufte 800 Los Angeles I California 90013-1258 DATE I FILE CODE I AUG 1 9 20W T 213 977 1600 IF 213 977 1665 www.crala.org Honorable Council of the City of Los Angeles John Ferraro Council Chamber 200 N. Spring Street Room 340, City Hall Los Angeles, CA. 90012 CRA File No. qlfz Council District: _1: Contact Person: Neelura Bell (213) 977-1906 COUNCIL TRANSMITTAL: Transmitted herewith, is a Board Memorandum adopted by the Agency Board on August 19, 2010 for City Council review and approval in accordance with the "Community Redevelopment Agency Oversight Ordinance" entitled: VARIOUS ACTIONS RELATED TO: SERVICE REPAYMENT LOAN AGREEMENT IN THE AMOUNT OF $1,910,905 AND A LAND USE COVENANT WITH HOLLYWOOD COMMUNITY HOUSING CORPORATION FOR THE REHABILITATION, ADAPTIVE REUSE, AND OPERATION OF ORCHARD GABLES COTTAGE LOCATED AT 1277 WILCOX AVENUE IN THE HOLLYWOOD REDEVELOPMENT PROJECT AREA HOLLYWOOD & CENTRAL REGION (CD 4) RECOMMENDATION That City Council approve(s) recommendation(s) on the attached Board Memorandum. ENVIRONMENTAL REVIEW The recommended action does not constitute a "project" as defined by the California Environmental Quality Act "CEQA") FISCAL IMPACT STATEMENT There is no impact on the City's General Fund. Christine Esse!, Chief Executive Officer

cc: Sharon Gin, Office of the City Clerk. (Original & 3 Copies on 3-hole punch) Lisa Johnson Smith, Office of the CAO lvania Sobalvarro, Office of the CLA Steve Ongele, Office of the Mayor Noreen Vincent, Office of the City Attorney Council member Torn LaBonge, CD 13

CRA/lA Building communities Cornmuniitv Redevelopment Agency CITY OF LOS ANGELES 354 South Spnng Street I Suite 800 los Angeles I California 90013-1258 DATE 1 FILE CODE/ AUG 1 9 zaw T 213 977 1600 I F 213 977 1665 www.crala.org Honorable Council of the City of Los Angeles John Ferraro Council Chamber 200 N. Spring Street Room 340, City Hall Los Angeles, CA. 90012 CRA File No. q2j)z Council District: _:!. Contact Person: Neelura Bell 1213) 977-1906 COUNCIL TRANSMITTAL: Transmitted herewith, is a Board Memorandum adopted by the Agency Board on August 19, 2010 for City Council review and approval in accordance with the "Community Redevelopment Agency Oversight Ordinance" entitled: VARIOUS ACTIONS RELATED TO: SERVICE REPAYMENT LOAN AGREEMENT IN THE AMOUNT OF $1,910,905 AND A LAND USE COVENANT WITH HOLLYWOOD COMMUNITY HOUSING CORPORATION FOR THE REHABILITATION, ADAPTIVE REUSE, AND OPERATION OF ORCHARD GABLES COTTAGE LOCATED AT 1277 WILCOX AVENUE IN THE HOLLYWOOD REDEVELOPMENT PROJECT AREA HOLLYWOOD & CENTRAL REGION (CD 4) RECOMMENDATION That City Council approve(s) recommendation(s) on the attached Board Memorandum. ENVIRONMENTAL REVIEW The recommended action does not constitute a "project" as defined by the California Environmental Quality Act "CEQA") FISCAL IMPACT STATEMENT There is no impact on the City's General Fund.

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CRA/lA Building communities cc: Sharon Gin, Office of the City Clerk. (Original & 3 Copies on 3-hole punch) Lisa Johnson Smith, Office of the GAO lvania Sobalvarro, Office of the CLA Steve Ongele, Office of the Mayor Noreen Vincent, Office of the City Attorney Council member Tom LaBonge, CD 13

THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CA REVISED Page 3 as noted MEMORANDUM DATE: TO: FROM: AUGUST 19, 2010 CRA/LA BOARD OF COMMISSIONERS CHRISTINE ESSEL, CHIEF EXECUTIVE OFFICER HW6130 HW6990 RESPONSIBLE PARTIES: SUBJECT: COMMITTEE REVIEW: LESLIE LAMBERT, REGIONAL ADMINISTRATOR NEELURA BELL, PROJECT MANAGER FRANCO PACELLI, SENIOR REAL ESTATE DEVELOPMENT AGENT KIP RUDD, SENIOR PLANNER SERVICE REPAYMENT LOAN AGREEMENT IN THE AMOUNT OF $1,910,905 AND A LAND USE COVENANT WITH HOLLYWOOD COMMUNITY HOUSING CORPORATION FOR THE REHABILITATION, ADAPTIVE REUSE, AND OPERATION OF ORCHARD GABLES COTTAGE LOCATED AT 1277 WILCOX AVENUE IN THE HOLLYWOOD REDEVELOPMENT PROJECT AREA HOLLYWOOD & CENTRAL REGION (CD4) APPROVED BY THE LOAN COMMITTEE ON JUNE 23, 2010 RECOMMENDATIONS That the CRA/LA Board of Commissioners, subject to City Council review and approval, authorize the Chief Executive Officer or designee to execute a service repayment loan agreement with Hollywood Community Housing Corporation ("HCHC") for the proposed rehabilitation and adaptive reuse of the Orchard Gables Cottage located at 1277 Wilcox Avenue and execute a use covenant with HCHC restricting the use of the second floor of the structure for public uses that advance the goals and objectives of the Hollywood Redevelopment Plan. That the CRA/LA Board of Commissioners: SUMMARY 1. Authorize an institutional, nonprofit use in a residential area as permitted by Section 508.3 of the Hollywood Redevelopment Plan. 2. Permit new commercial uses in a residentially designated area and make certain findings as required by Section 505.4 of the Hollywood Redevelopment Plan. The recommended action will fund the predevelopment and construction costs to rehabilitate and adaptively reuse the historic Orchard Gables Cottage. The recommended action will also authorize execution of a land use covenant between HCHC and CRA/LA that will restrict for 20

Orchard Gables Cottage Service Repayment Loan 2 years from date of execution of this Agreement the use of approximately sixty percent (60%) of the floor area of the cottage. The covenant will stipulate that this space shall be made available to the tenant with a rent subsidy that will require the tenant to pay only its NNN expense reimbursements. The primary use of the Cottage occupying approximately 64% of the floor area is intended for arts, cultural, arts education or other community arts related organizations or groups ("Public Use Space"). Secondary uses, occupying approximately 36% of the floor area, will include small scale, commercial-related businesses that are allowed by the City's Zoning Code in this zone, such as professional office, small retail less than 800 square feet, art galleries, or small restaurants of 25 seats or fewer ("Commercial Use Space"). The proposed use covenant would reduce the use restriction requirement to approximately 64% of the floor area of Orchard Gables Cottage for public use from the 100% of the floor area of the Cottage as originally authorized by Exhibit "H" (Agreement Containing Use Restrictions) of the Covenant Transfer Agreement and Joint Escrow Instructions originally approved on June 7, 2007. In addition to supporting CRAILA strategic plan goals related to partnering with local community organizations; providing community benefits related to retaining historic resources, eliminating blight, and enhancing access to public services, the rehabilitation and adaptive reuse of the Cottage will implement the following adopted goals of the Hollywood Redevelopment Plan: 3) Promote a balanced community meeting the needs of the residential, commercial, industrial, arts and entertainment sectors. 4) Support and encourage the development of social services with special consideration given to participating in projects involving community based organizations that serve runaways, the homeless, senior- citizens and provide child care services and other social services. 8) Promote and encourage the retention and expansion of all segments of the arts community and the support facilities necessary to foster the arts and attract the arts through land use and development policies such as the creation of a theater district. 11) Recognize, promote and support the retention, restoration and appropriate reuse of existing buildings, groupings of buildings and other physical features especially those having significant historic and/or architectural value and ensure that new development is sensitive to these features through land use and development criteria. 13) Promote and encourage the development of health, education, child and youth care,' and senior citizen facilities and programs to enable the development of a community with a variety of lifestyles. TERMS OF THE LOAN The service repayment loan will be $1,910,905. The term will be 20 years, 3% simple interest, forgivable at 1/20 of the loan amount per year (including the accrued interest) subject to a Use Covenant and a Historic Preservation and Maintenance Covenant. HCHC will be required to submit an annual report to the CRAILA detailing that the Public Use Space is occupied by a group or organization, such as arts, education, social service, or other organization, that advances one or more goals and objectives set forth in the Hollywood Redevelopment Plan. CRAILA staff will review the annual report to ensure that the actual services performed by the group or organization meets the requirements for annual loan forgiveness.

Orchard Gables Cottage Service Repayment Loan 3 HCHC will be required to rehabilitate the Cottage in compliance with the Secretary of Interior Standards for Rehabilitation. and to donate a fayade easemeflt to the los Angeles GGf!ser~-he loan will be seoufed by a First Deed of Trust and an /\ssi nment of Rents and gecur+ly-dbpesit&.- HCHC will receive 50% of the net operating income after deducting $10,000 per year for a capital reserve sinking fund to be used for major repairs and renovations as necessary. The remaining 50% of the NOI (after the $1 0,000/year deduction for capital reserves) would be deposited into an operating reserve fund. HCHC will be restricted from selling the property during the 20-year term of the Loan; but may transfer ownership at no cost either to the CR/\/LA or to another non-profit or other public entity which agrees to operate the property pursuant to the terms of the recorded Covenants. PERMITTED LAND USES AND NECESSARY RESTRICTIONS Section 508.3 of the Hollywood Redevelopment Plan authorizes the establishment, alteration or enlargement of public, semi-public, institutional, or non-profit uses. including uses providing social services such as, among others, educational services throughout the Hollywood Redevelopment Project Area. The Redevelopment Plan allows the CR/\/LA to impose restrictions upon such uses as are necessary to further the goals of the Redevelopment Plan and protect the development and the use of the Project Area. The service repayment loan agreement restricts use of a portion of the Cottage to public uses that advance the goals and objectives of the Redevelopment Plan. No further restrictions are necessary. Section 502 of the Redevelopment Plan allows land uses permitted by the City's zoning ordinance. Section 12.24X.12 of the City's zoning code allows certain small-scale commercial uses in the R3 zone upon approval by the City's Zoning Administrator. The Zoning Administrator approved the commercial uses allowed by the service repayment loan agreement on September 24, 2009. August 6, 1986 - CR/\/LA execution of feasibility loan agreement with Orchard Gables Venture General Partnership for Orchard Gables Convalescent Home August 5, 1993 - CR/\/LA authorization to modify loan agreement with Orchard Gables Venture Partnership for the Orchard Gables Convalescent and Rehabilitation Hospital June 7, 2007 - Authorization to execute a covenant transfer agreement and joint escrow instructions with Hollywood Community Housing Corporation which provides for the release of an affordability covenant on the property located at 1277 Wilcox Avenue. the extension of an affordability covenant on the property located at 5552 Carlton Way, and the receipt of $198,000 by the CRA!LA. SOURCE OF FUNDS Hollywood Arts Trust Funds and Tax Increments Funds

Orchard Gables Cottage Service Repayment Loan 4 PROGRAM AND BUDGET IMPACT The proposed action is consistent with the FY11 Budget and Work Program relating to the Hollywood Redevelopment Project Area. Following the approval of this Project, $17,868,595 of $19,779,500 will remain for Economic Development Opportunities. Sufficient funds exist to make any legally-required State ERAF payments in FY11. There is no impact on the City's General Fund. ENVIRONMENTAL REVIEW The first recommended action is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15331 of the CRAJLA CEQA Guidelines and the second recommended action is not a project as defined by CEQA. BACKGROUND On June 7, 2007, the CRAILA Board authorized the release of an affordability covenant that was due to expire in 2016 for 59-beds at a vacant convalescent horne on an approximately 1.6 acre property located at the southwest corner of Wilcox and Fountain Avenues. The City Council approved the CRAILA action on July 13, 2007.. The early approval of the release and transfer of the affordability covenant on the Orchard Gables property, and development of the site, was contingent on the following: 1. HCHC extending an existing affordability covenant which was scheduled to expire in 2021 on property occupied by the Dunning Apartments located at 5552 Carlton Way by an additional 25 years to 2046; 2. Property owner conveying to HCHC the Orchard Gables Cottage and its parcel; 3. HCHC recording a covenant on the Orchard Gables property restricting the use of the property to public uses, such as social service or arts organizations, that advance one or more goals and objectives set forth in the Hollywood Redevelopment Plan; and 4. Property owner depositing $198,000 into the Hollywood Low and Moderate Income Housing Fund. All conditions except Number 2 have been met. HCHC elected not to take ownership of the property during the predevelopment phase to avoid holding costs for insurance, taxes, and security during the predevelopment phase. The subject actions will further implement the action taken by the Board in 2007. SITE DESCRIPTION The Orchard Gables Cottage is part of a property which is subdivided into 35 parcels which will accommodate a 34-unit, market-rate, townhouse complex developed under the City's "small lot subdivision" ordinance. The remaining parcel is occupied by the Orchard Gables Cottage. Phase 1 of the townhouse development containing 13 units is complete. Construction of the remaining two phases is expected to commence shortly.

Orchard Gables Cottage Service Repayment Loan 5 The property is located at 1277 North Wilcox Avenue on the southwest corner of Wilcox and Fountain Avenues. It is zoned R3 1XL which permits residential and small scale commercial businesses by approval of the City's Zoning Administrator. The Hollywood Redevelopment Plan designates the property as "Low Medium Residential". The two-story, Orchard Gables Cottage contains approximately 4,145 square feet. It was built in 1904 and was part of the "Colegrove" community developed at the turn of the century by Cornelius Cole who was a United States Senator from 1867-1924. It is the last remaining house dating from the Colegrove period of Hollywood's development and represents a rare example of the English Country Cottage revival style with its asymmetric massing, steeply pitched shingle roof, shed dormers, exposed rafters, and multiple curved side gables. Its orientation is angled toward the intersection of Fountain and Wilcox Avenues that reflects its original setting along a dirt road that cut across the surrounding citrus groves before the orthogonal street grid was platted over the area. Based on an appraisal completed in 2006, the value of the portion of the property to be transferred to HCHC was approximately $3 million. This amount is roughly equal to the differential in value of the land between removing the structure and developing townhouses versus preserving the house. PROPOSED PROJECT HCHC will complete renovation of the Orchard Gables Cottage which will meet the Standards of the Sectary of the Interior. The renovated facility will include 4,145 square feet and will accommodate at least two tenants. The first floor space has 11,192 square feet, and there is 2,090 square feet on the second floor. Additionally, on the ground floor, there is 863 square feet of common area space that includes an entrance lobby and a meeting room. HCHC will utilize the loan to reimburse the cost to prepare plans and obtain entitlements, and to complete the rehabilitation and adaptive reuse of the Cottage. It is anticipated that rehabilitation and reuse of the Orchard Gables Cottage will cost approximately $1,910,915 (See Attachment C) CRNLA staff is working with HCHC to identify tenants to occupy the house. Staff recommended to HCHC that a portion of the house be leased to the Los Angeles Center for Education Research ("LACER"). LACER is one of the pre-qualified arts groups approved for the Hollywood Arts Retention Program ("HARP"). LACER has submitted a Letter of Intent to lease the space and is expected to execute a lease agreement as a condition of the loan closing. The remaining portion of the Cottage could be occupied by small scale commercial uses permitted in the zoning district. HCHC will be required to retain the services of a broker to identify a second tenant. CRNLA POLICIES On October 19, 2006, the Board revised the CRA!LA's Policy Guidelines on Conditional Grants and Service Provider Operating Guidelines ("Conditional Grant Policy"). The revision was approved by the City Council on January 24, 2007, with a requirement that the Council approve any project that deviates from the Conditional Grant Policy. The Conditional Grant Policy requires a 25% match on conditional grants in excess of $500,000. The grant amount recommended for this Project is 100% of the rehabilitation and adaptive reuse costs. However, previous actions approved by the Board and proposed covenant restrictions related to this project result in costs and loss of income to HCHC that staff recommends be considered a "match" of the loan amount. These costs and loss of income include the following:

Orchard Gables Cottage Service Repayment Loan 6 1. The value of transferring the remaining affordable housing covenant years on Orchard Gables to and extending the Dunning Apartments covenant by 25 years is valued at $416,000 based on the following calculation: Additional covenant years on Dunning Remaining covenant years on convalescent home Net new years #of units Value per year Total value 20 units x $1,300/yr x 16 years 25 9 16 20 $1,300 11 ) $416,000 11 ) Average CRA/LA loan $71,00/unit/55 year covenants= $1,290/year- rounded for this purpose 2. The value of the 20 year covenant limiting the lease the second floor to a cultural service provider with a subsidized rent is valued at $880,000 based on the following calculation. Second floor square footage, Broker's projected lease rate for remaining commercial space Annual subsidized rent Total20 years. Net Present Value (at 6%) 2,090 $1.75 $43,890 $877,800 $503,400 The value of the two covenants totals $1,293,800 ($919,400NPV) which exceeds the 25% or $477,728 match for the $1,910,915 that would be required under the Conditional Grant policy. Therefore, staff is requesting approval of these contributions by the developer as the required match. BORROWER HCHC was formed in 1989 for the purpose of preserving and expanding the supply of affordable housing for lower income households in the Hollywood area. It is now a very highly regarded developer and operator of affordable rental housing. In its 21-year operating history, HCHC has developed 23 buildings that serve 717 households. Over the years, HCHC has received numerous awards for the quality of its developments as well as for the outstanding support that it provides to its residents. Over its 21-year operating history, HCHC has received CRA/LA financial support for numerous projects. All of those projects have been satisfactorily completed and are operating as agreed. Most recently, CRA/LA loaned an HCHC-controlled entity $7.5 million for the rehabilitation of the Hollywood Bungalow Courts. HCHC has completed construction on the 42-unit, scattered-site development and it is now fully leased. AUTHORITY GRANTED TO CEO OR DESIGNEE If the Service Repayment Loan Agreement is approved, the CRA/LA Chief Executive Officer or designee would be authorized to take such action as may be necessary to carry out the Agreement, including approving revisions to the Project Budget, so long as the changes do not increase the amount of the CRA/LA Loan or otherwise have a material adverse impact on the feasibility of the project, as specified in Section 3.2d and Section 8. 7 of the Loan Agreement.

Orchard Gables Cottage Service Repayment Loan 7 Christine Esse! Chief Executive Officer By: ~de::. Calvin E. Hollis, Chief Operating Officer Real Estate and Economic Development 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 - Project Site Map Attachment B - Historic and Current Photo of Cottage Attachment C - Project Budget

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A TT AC HMENT "C" Orchard Gabies Devsioper Case (based on Developer proforma dated 5-25~10) PerGBA jpuiehase Price!Title/Recording/Escrow Costs psf $0.00 $1.01 $10 $10,000 ACQUISITION COSTS $10,010 -GC land sf psf $2.01 $20,000 Asbestos/Lead/Mold Abatement- GC Other Environmental Abatement - HCHC -GC and Irrigation - GC Site Improvement/Landscape - HCHC Improvements - HCHC & Partdng Construction - GC General Conditions Overhead & Profit Bond & Insurance GBA 4,145 4,145 4,145 4,145 $6.24 $4.03 $3.22 $4.03 $1.01 $0.50 psf $161.84 $11.94 $7.96 $6.57 5.6% of Hard Costs (not incl. Conting.) 3.7% of Hard Costs (not incl. Canting.) 3.1% of Hard Costs (not incl. Canting.) $62.000 $40,000 $32,012 $40,000 $10,000 $5,000 $670,831 $49.491 $32,994 $27,220 20% of Hard Costs {not incl. Canting.} $200,000 HARD COSTS GBA 4,145 psf $286.98 $1,189,547!Technical Consultants Predevelopment Inspections Consultants Architectural & Structural (incl. as builts) Landscape Architect Surveyor and Utilities Deputy Inspector 2.10% 13.87% 0.80% 1.03% 1.26% of Hard Costs of Hard Costs of Hard Costs of Hard Costs of Hard Costs $25,000 $164,981 $9,500 $12,270 $15,000 $6.03 $39.80 $2.29 $2.96 $3.62 CRAILA Capital Finance 611512010

Orchard Gables Developer Case (based on Developer profonna dated 5-25-10) '~~ =-:;:;;;:-~~o;n,"<-..,.::tc'!'~c::;:;~ Planning Consultant Cost Estimator Construction Manager Total Technical Consultants Legal Foes Variance Fees Local Permits and Fees Security Marketing (Leasing Broker} Audit/Cost Certification Administrative & Organizational Real Estate Taxes Liability/All Risk Insurance Operating Reserve Soft Cost Contingency Developer Fee (Deferred) Total SOFT COSTS (including Developer Fee) Total 2.19% of Hard Costs $26,000 0.95% of Hard costs $11,300 2.10% of Hard Costs $25,000 24.30% of Hard Costs '$289;031 0.00% 1.68% of Hard Costs $20,000 2.10% of Hard Costs $25,000 2.28% of Hard Costs $27,157 4.20% of Hard Costs $50,000 0.42% of Hard Costs $5,000 0.42% of Hard Costs $5,000 0.42% of Hard Costs $5,000 1.51% of Hard Costs $18,000 1.37% of Hard Costs $16,255 0.84% of Hard Costs $10,000 6% of Soft Costs (not incl. Canting. & Dev. Fee) $30,000 16.81% of Hard Costs $200,000 58.88% of Hard Costs $700,443 None Total FINANCING COSTS 1 ota~ Deveiopment Costs $0 $0 $1,900,000 $409.16 CRAILA Capital Finance 611512010