HomeMy WebLinkAboutStaff Report 3612
City of Palo Alto (ID # 3612)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 4/8/2013
City of Palo Alto Page 1
Summary Title: Moldaw BMR Amendment
Title: Approval of Amendment to the Agreement Between Moldaw Family
Housing and City of Palo Alto for the Below Market Rate (BMR) Units at 899
Charleston Avenue to Restructure the Repayment Options
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that the City Council approve and authorize the City Manager or designee to
execute the amendment to the Agreement between 899 Charleston, a California Nonprofit
Public Benefit Corporation, and the City of Palo Alto Requiring Provision of Below Market Rate
Dwellings at 899 Charleston Road, to restructure the repayment option.
Executive Summary
In 2007, the Taube-Koret Campus for Jewish Life (TKJCL) developed its campus, which included
the 899 Charleston Project, now known as the Moldaw Family Residences (Moldaw), a 193-unit
senior care housing for independent and assisted living and dementia care. As part of the
Planned Community (PC) rezone, TKJCL agreed to provide 24 Below Market Rate (BMR) units in
Moldaw as a public benefit in which the BMR units receive a substantial discount in the entry
fee and monthly fees. Since the opening of the facility, Moldaw’s management team has had
considerable difficulty attracting residents for the BMR units, primarily due to the fact that the
BMR resident, after five years of occupancy, does not receive back any of the entry fee, while a
market-rate resident is allowed a refund on a portion of the entry fee (50% or 90% depending
on the amount of the entry fee). The amendment to the BMR Agreement provides a second
repayment option with a 50% refund of the entry fee. It is anticipated that this adjustment will
better facilitate occupancy of BMR units.
Background
In September 2006, the City Council approved the Planned Community (PC) application
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submitted by the TKCJL for the development of the former Sun Microsystems site. The Oshman
Jewish Community Center, T’enna Preschool and Leslie Family Early Childhood & Family
Education Department, the Schultz Cultural Arts Hall and the Moldaw Family Residences
(Moldaw), formerly known as the 899 Charleston Project, constitute the TKJCL development.
Moldaw offers 193 residential units of independent senior living, assisted senior living and
dementia care. Of the 193 units, 170 units are independent living, 12 units are used for assisted
living and 11 units for dementia care. The independent living residents of Moldaw pay an initial
entry fee and monthly payments. The monthly payments allows access to the numerous
services the TKJCL has to offer including the variety of activities offered by the Moldaw facility,
the exercise facilities at the JCC, and events at the Arts Hall.
As a public benefit, TKJCL agreed to provide 24 BMR units in the Moldaw development. As
outlined by the executed BMR Agreement (Agreement), the BMR program is designed to
provide 12 independent living units and 12 assisted living units. All 24 units are one bedroom
units and are identified in the Agreement. The intent is that those BMR residents would reside
in the independent living units until they were unable to live independently and that their unit
would transition into an assisted living unit as part of the “aging in place” model.
Discussion
Moldaw began operations in 2007. From the inception, it was difficult to attract BMR residents
for the units. Despite local and regional marketing efforts by Moldaw to advertise the BMR
units, they are having difficulty finding residents for the BMR units. Currently, only 7 of the 24
BMR units are occupied.
A number of factors have contributed to the high BMR vacancy rate:
1. BMR Amortization Rate - In the BMR program, the entry fee is amortized over a 60
month period. Every month, 1/60th of the entry fee is deducted and non-refundable.
Therefore after the 60 month term, if the BMR unit is transferred, the BMR resident
would not receive any of the entry fees back. If the unit is transferred prior to the end
of the 60 month term, a pro-rated amount would be returned to the resident. In
contrast, a market rate resident is offered two additional options: one with a 50% or
guaranteed return on the entry fee and one with a 90% return on the entry, regardless
of length of occupancy. For example, a BMR resident pays an entry fee of $250k and a
market rate resident pays an entry fee of $500,000. After five years, the BMR resident
would not receive any of their entry fee as a return while the market rate resident
would receive a minimum return of $450,000. While there are a number of Moldaw
amenities that were attractive to a potential BMR resident, the potential of not
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recouping any of the entry fee after five years was an overriding consideration.
2. Housing Market Decline – Another factor in the high vacancy rate was the housing
marking decline in 2008. This has not only affected the BMR units but the market rate
units as well. The vacancy rate of the market rate units is not as high as the BMR units
but higher than initially projected. With the market decline, many prospective BMR
residents decided to remain in their current living conditions rather than relocating.
3. BMR Asset Requirement - In addition, some senior residents have been interested in the
BMR units but were determined to be not eligible. To be eligible for a BMR unit, the
household must meet certain income requirements. While the senior household may
meet the annual income requirements, the BMR program guidelines also have a
maximum asset limit. The program requires that the household assets cannot exceed
twice the amount of the unit’s entry fee. Even with the market decline, some residents
had gained a substantial amount of equity in their residence that they exceeded the
City’s maximum asset limit.
Amendment to the BMR Agreement
Because of the concerns about the vacancy rate of both the BMR and market rate units,
Moldaw staff met with PAHC and City staff to discuss possible options to address the issue.
From the discussions, both parties agreed that: a) the BMR Amortization Schedule needed to be
revised and b) there needed to be some flexibility in managing the BMR units.
a. Amortization Schedule
In discussion with the Palo Alto Housing Corporation (PAHC), administrators to the BMR units,
and Moldaw, staff believes the biggest barrier in attracting residents to the BMR units is the 60
month amortization rate. In response, Moldaw has offered to provide a second amortization
option that offers a lower discounted entry fee rate, 30% (instead of the current 47% discount)
but guarantees a minimum 50% return of the entry fee to the BMR resident when the unit is
transferred.
b. BMR Unit Flexibility
In addition not being able to occupy the BMR units, Moldaw was finding that there is a greater
demand for market rate one bedroom units than the two and three bedroom units. However,
all the market rate one bedroom units are occupied. In order to meet their occupancy
requirements with their other lenders, Moldaw approached the City about possibly revising the
Agreement to move from “fixed” BMR units to “floating” units.
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Therefore, the amendment will revise the following sections of the Agreement:
1. 60 month amortization. The original agreement provided a 47% discount from the
market rate fees with the 60 month amortization schedule for the 24 BMR units. The
agreement will be amended to offer the BMR resident a choice of one of two plans:
a. A discount of 47% from the initial market rate Entry Fee with a 60 month
amortization term. A prorated share of the Entry Fee will be deducted for each
month of occupancy. After 60 months of occupancy, the BMR resident does not
receive back any of the original Entry Fee; or
b. A discount of 30% from the market rate fee but with a 50% refundable plan. The
entry fee would be amortized by 2% over 25 months but the BMR resident is
guaranteed a 50% refund on the entry fee.
2. Floating BMR units. To provide greater flexibility to Moldaw, staff proposes to revise
the Agreement to have the 24 BMR units be “floating” instead of “fixed”. The
Agreement will always require that at least 21 of the BMR units be one bedroom units
but no longer shall there specific residences associated with the BMR units. The
remaining 3 BMR units will be two bedroom units for the possibility of shared living
situations.
All other provisions in the Agreement and Summary shall remain in full force and effect.
The public benefit of the BMR units is preserved through the 30% discount. Although the 30%
discount is less than the original 47% discount, with the second amortization option, the BMR
resident is guaranteed a 50% refund on the entry fee. Current BMR Entry Fees range from
$238,000-$398,000. With the new amortization plan, a BMR resident would receive back a
minimum of approximately $119,000-$198,000 as compared to the current plan where the
BMR resident does not receive back any of the Entry Fee.
Timeline
If approved, the amendment will take effect immediately.
Resource Impact
There is no Resource Impact with this amendment to the existing BMR Agreement.
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Policy Implications
The actions recommended in this report implement the City’s Housing Element policies and
programs supporting the City’s Below Market Rate program. The amendment will better
enhance the effectiveness of the BMR program for this development. The 24 BMR units have
already been counted towards the City’s Regional Housing Needs Allocation (RHNA)
requirements when the project was entitled. This amendment does not affect the City’s RHNA
numbers.
Environmental Review
On September 25, 2006, An Environmental Impact Report (EIR) was certified for the TKJCL
development. The amendment does not trigger any CEQA review.
Attachments:
Attachment A: First Amendment to BMR Agreement (PDF)
This Document is Recorded
for the Benefit of the City of
Palo Alto and is Entitled to be
Recorded Free of Charge in
Accordance with Section 6103 of
the Government Code
After Recordation, Mail to:
OFFICE OF THE CITY ATTORNEY
250 Hamilton Avenue
Palo Alto, CA 94301
FIRST AMENDMENT TO THE AGREEMENT BETWEEN 899
CHARLESTON, A CALIFORNIA NONPROFIT PUBLIC BENEFIT
CORPORATION AND CITY OF PALO ALTO REQUIRING PROVISION
OF BELOW-MARKET -RATE DWELLINGS AT
899 CHARLESTON ROAD, PALO ALTO, CALIFORNIA
This First Amendment ("First Amendment") to the Agreement titled above is
made and executed this ~ day of MRtrC)/ , 2013 by and between the City of
Palo Alto, a municipal corporation of the State of California ("City") and 899 Charleston,
a California nonprofit benefit corporation ("899 Charleston").
RECITALS
A. The Agreement was entered into on June 13, 2007 between the City and
899 Charleston and recorded on July 16, 2007 to set out the Below Market Rate
("BMR") public benefits of the 899 Charleston project for seniors developed as part of
the Taube-Koret Campus for Jewish Life ("TKCJ L"); and
B. 899 Charleston is required to set aside 24 one bedroom BMR units, but
despite extensive marketing efforts has succeeded in selling only 10 of these in the last
7 years, and only 8 are currently occupied; and
C. The City and 899 Charleston agree that changes in the administration of
these units should result in more units being occupied, a benefit to BMR seniors
seeking housing as well as to 899 Charleston.
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NOW, THEREFORE, the parties hereto mutually covenant and agree as follows:
1. Paragraph 6 of the 899 Charleston Road Summary of Below Market Rate
Program Agreement ("Summary") attached to the Agreement is hereby amended to
read as follows:
6. Location and Physical Description of the 24 BMR Units:
899 Charleston shall have flexibility in using units in different locations for
BMR units at different times, provided that at all times 24 units are either
occupied BMR units or available as BMR units. Of these 24 BMR units, at
least 21 units at all times shall be one bedroom units. To accommodate
shared living situations and to further increase affordability, 899
Charleston may designate up to three BMR units as two bedroom units,
provided at least 21 BMR units remain designated as one bedroom units.
If the City determines that any of the three BMR units not designated as
one-bedrooms are not marketable to BMR applicants, the City shall notify
899 Charleston in writing that it would like to re-designate such units as
one bedroom units and 899 Charleston shall as soon as reasonably
feasible reserve the requested number of one bedroom units for use as
the BMR units.
2. Paragraph 7 of the Summary is hereby amended to read:
7. Discount for BMR Units: All 24 of the BMR units shall be offered for
sale 'under one of two plans:
(a) Plan A. A discount of 47% from the initial market-rate Entry Fees, but
these BMR residents' Entry Fees will be amortized over 60 months with a
prorated share of the Entry Fee deducted for each month of occupancy.
Thus, after 60 months of occupancy, the BMR resident will not receive
back any of the original Entry Fee.
(b) Plan B. A discount of 30% from the initial market-rate Entry Fees, but
these BMR residents' Entry Fees will be subject to a 50% refundable plan.
The plan, similar to the 50% refundable plan for market rate units,
amortizes down to a minimum of a 500/0 rebate over 25 months (2.00% per
month).
3. This First Amendment and other provisions of the Agreement and
Summary, which shall remain in full force and effect, are binding on the property
described in Exhibit A attached hereto.
[signature page to follow]
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IN WITNESS, WHEREOF, the parties hereto have caused this Amendment to be
executed on the day and year first written above.
CITY OF PALO ALTO, a California
municipal corporation
By: ________________________ _
Name: -----------------------
Title: ------------------------
Date: ______________________ __
APPROVED AS TO FORM:
Cara Silver, Sr. Assistant City Attorney
APPROVED AS TO CONTENT:
Curtis Williams, Director of Planning and
Community Environment
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899 CHARLESTON, a California
nonprofit public benefit corporation
.... ,~I J
By: {?\~?0~
Name: LA ~ Y jV1.4 R ;! ~'
Title: BOARD 1:t1?/£S'I[}/21V7
MeLO/l-VV /<15sI0frll/c.~ )to
Date: /'--1/7 I? c 1--1 CD, '2013
* fj99 CHtCJ(eL/rS7oN ~
Macintosh HD:Users:charles:Desktop:Amend-1.agmt.doc
STATE OF CALIFORNIA )
S ~\A, \Fr &lI\u'X (j) ) ss:
COUNTY OF SANTA-CLARA ),
On Mdtrvh 0, ?-v1.3 ,before me, -re:ieJL kvJ!U' ,Notary
Public, personally app~ared 1-(1 II'(~ Md O?5 .' who proved to me
o'n the basis of satisfactory evidence to be the person whose name is subscribed fo the
within instrument and acknowledged to me that he/~executed the same in his/hef
authorized capacity, and that by his/t:ter-signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
Signature
<II
Legal Description
A CONDOMINIUM COMPRISED OF
REAL PROPERTY situated in the City of Palo Alto, County of Santa Clara, State of CaJifomiB~
described·as follows:
PABCELONE:
Unit 899, as said unit is defined in that certain document entitled "Declaration of Conditions
Covenants, and Restrictions of Taubu KoretCampus for Jewish Life. a Condominium Project",
whlch shall hereafter be referred to as the "Declaration", said Declaration recorded At ~ US t I ~ • 2007 lIS Document No. " 5 'i"t s=T7 • Official Records; said 1IIli! being com sed oJ those areas designated 1&899" on that certain Condominium Plan entitled "Taube-
Korct Campus for Jewish Life Condominiwn Plan", and attached as Attaclunent "B" to· the
Declaration and which shall hereafter be referred to as the "Plan", as wen as the "Subdivided
Units" as same are defined in the Declaration and shown on the PJan, said Unit beinS situated on
Parce1 1 as said parcel is shown upon Chat certain Parcel Map filed in the Office of the Recorder,
County of Santa Clara, State of Cali fomi a on July 16th, 2007, in Book 816 of Maps, at pages 16
and 17, Santa Clara County Records.
EXCEPTING and RESERVING THEREFROM, for the benefit of the owners of "l1nit ALSJCCJ'
and "the Associationn, and their successor's in interest, rights and easements for utilities,
maintenance, construction, support, encroaclunents and other purposes over, under, upon and
through said Unit 899 as such easements and rights are described and defined in the Declaration.
PARCEL TWO:
A 42% undivided interest in the Common Area as defined in the Declaration and depicted on the
Plan.
EXCEPTINO AND RESERVING FROM THE COMMON AREA THE FOLLOWING:
I.
2.
3.
4.
Unit ALSICC 8Ild Unit 899 as depicted on the Plan and defined in the Declaration.
Easements for access, ingress, egress, support, utilities and other
rights, as said easements and rights are defined in the Declaration.
Exclusive Use Areas as defined in the Declaration.
Exclusive Usc Area Improvements as defined in Ihe Declaration
B-J
-. ------,. ---
PARCEL THREE:
Easements and rights, appwtenant to . Parcel One above, for utilities, maintenance, construction,
support, encroachments and other purposes over, under, upon and through said Unit ALSJCC and
the Common Area as said easements and rights are described and definedin the Declaration.
PARCEL FOUR:
Those certain Exclusive Use Common Areas appurtenant to Parcel One as defmed in the
Declaration and depicted on the Condo Plan as "EUCA "899".
PARCEL FIVE:
Exclusive fee ownership of those structures and improvements defined as Exclusive Use Area
Improvements, in the Declaration and located or built upon those certain Exclusive Use Common
Areas appurtenant to Parcel One as defined·jn the Declaration and depicted on the Condo Plan as
"EUCA "899".
B·l