The URL can be used to link to this page

Home My WebLink About0159.093\ ~. • • .' ,,'." ,';'; ,- February 11, 1993 THE !;oNORABLE ClTY COONCIL Pal~ Alto, C~liforn,a STATUS OF ;RASTRADERO PARK APARTMENTS. 574 ABASTRADERO ROAD ReRort in Brief This report forwards to Council a status report on th~ federally subsidized Arastrtdero Park Ap~rtments at 574 Arastrade~a Road. This report is for 1nfo~tjon only and no Council action is required~ The Arastraderc Park Apartments is a 66 r unit, feder.lly subsidized. family complex. On December 1, )992, the own~rs, Araspark Associates, filed a formal "Notice of I .. tent~ to offer to sell the property unde'r the provisions of tne federal low rncome Housing Preservation and Resident Homeownership Act of 1990 (LfHPRHA). This report s~ariles the procedures and ~chedule which will be followed under the law ind describes the protect;~ns which are provided to the tenants. There is also discussion of the federal subsidies available tD assist in the purchase and preservation of the complex as low income rental housing. Background Arastradero Park Apartments "as built in the mid-sev~nti..-s and financed by HUD under th! Section 236 mortgage program. In return for advantageous financing at a very low interest rate. the de~eloper was required to rent to lo~ income te'lants at rents control led by HUD. The origi nal mortgage terms al 1o~ed pa~off of the loan and termination of the low income use restrictions after 20 years. ArlStra6~"'rQ Park is one of the 1,£00 HUD subsidized rental pt'ojects (containing 117,~OO units) in California which are eligible for conversion frorn low incomP housing by the year 2008. In response to publ i c outcry about the hardsnip ",nat could resu"lt from tne 1055 of su<:h a 1.irge proportion of the country's low income rental stock, Congress passed a series of moratori lJrns and laws to limit the ability of owners to prepay their mortgages and thus terminate the use restrictions. The law in effect today is the low Income Housing Preservation and Resident Hn"",o.nership Act (LlHPRHA) as im.nded in 1992, lIHPRHA sets "P i specific CMR:159:93 -----------~---------------- / -----------~ o process and time frame within which det:isions are made on the future of the property. The key steps and the timetable for Arastradero Park ire: 1. O\iner Files Fir::.t Not (.:;e of Intent to Sell: Done 12/1/92 2 _ HUO appraises property (the appraised va1ue determines the owner's equity and the permitted sa1es price); HUD a150 determines the higher rents · .... hid will be necessary to cever operati!'1g costs and paympnts 071 a neloi p'Jrc~ase mortgage; Deadl ine: 9 mCl~ths or 8/31/93 3. Owner F11es Second Notice of Intent to Seli: 30 days later 4. Property A'lai1abl~ for Offers from {lualified 8uyers: 15 months A. Tenant Purchase: 6 months B. Nonpr<:lfi t Purcha.se: 5 mO"lths C. P .... rchase by Any Buyer with Continued Use Restrictions: 3 months 5. OWner Accepts an Offer/~PTan of Action~ prepa~ed a~d appro¥ed by HUDj P1an describes rehabilitation p1ans and fina~cing: 3 to 5 months 6. loan Application and Processing: 6 to 12 months 7. Purchase Conel uded: 2 to 3 months (U kely date June, 1995) Congress has pro¥ided separate funding for the ccst of preserving these projects. for fY 93, $538 mi n i on is author i zed and fer FV 94, .5665 milli on is authorized. HOME funds cannot be used for LIHPRHA projects, although COBG funds could be utilized. Adoitlonal detad on the steps invoived is pro'lided in Attat~nt 1. Impact Upon Current Tenants and Rent Increases The Act provides numerous prot~'tiQns to current tenants of these developme~ts+ In the wor~: case ,in which no purchaser is able to successfully complete the acqulsition under the Act and the owner is thus able te> convert the project to market rate housin~', the l'Jw income tenants would be provided with their own Secti~n 8 certificate or voucher. Fifty percent of thE tenants' ~~in9 expenses are a1so paid. In tight r~ntal markets such as Palo Alto's, tenants wauid be allowed to re~ain in their units for three years at current r~nts before having to reloca~e. In the situation where the project remains as affordable re~tal housing, part of the incentive packCige j available lioth to owners ... ho continue {)",ner~h~p and to new purchasers, is a project-based Section 8 contract. Section 8 rental assistance is provided to all low income tenants, which wruld be about CMR:159:93 p:\CMR\AAAS,~ 2/11/93 Page 2 / I -- ~-c - ---~-----=~=.~~---------- a8 ptrcent of tnt existing Arastradero P .. r~ tenants. Undilr Section 8~ tenants Pi.Y 30 per':ent of their 'income fo,-rent. For tt:@ ter1aots whos.e inco~s exceed the Section 8 limits (ex.mple: $38,600 for a family of four), their rent wil' become the full fair market rent allowed by HUO for the project after acquisition. For SOle tenants, the change to Section S, may mean a significant increase ever their curr~~t rent payments. This is because under the Sectio~ 236 prognm. T(:nts are based upon the project's operating costs and de-bt service costs, not upon the tenants' incomes. For exa~p'!r some te~ants will face onl,)' fairly modest increas!!s of QbolJt 10 percent or $50 per m!lnth, while others will see their rent ir.crease 100 percent OT more. Federal r!Qulations require that 1.1'1)' h.rge rent increas.es {exceeo)lig '50 percent} be phased :,n O'ier a three year period. Generally, the tenants with th! ~ery lowest incomes will benefit from t~e Settion 8 assistance, while tenants with ~i9het incomes will have to pay more. S!E Attachment 2 for the existing rent stru,ture. Prilfile of Arastradero Park fn Jun! of 199L the Palo Alt~ Housin-g Corporation suneyed an e:<isting subsidized housing within the City. Information was gathered on the existing rent lewels end the occupancy characteristics of the tenant.. The inf~rmation from that survey for Ar~stradero Park is included in this report. Some of t~is information has been updated oj' the resident rrrat'liiger. According to the manager, the tenants are very stable~ with 13 bein9 original Gccupants and IR(Ist hillv'ng 11Y~d there for 8 to 10 years. Turnover averages only two or three units per year. Tn! typic~ tenant is a low income, ~orking, single mother ~ SeYenty·five percent {o'!" 49} tlf t~e 65 rented uflits ife occupied by ve~·y low income tena~ts (below 50 percent of median inc~me). Ten of the units are ilc.cupied by elderly households. Two hOllsenolds are headed by w"eeTdlair us~rs. Seven households are large families with five Dr more persons. lnttmes range fr"m a low of 53 1 000 per yea!'" to a high of $50,000 per yea!" for a household ~f four. ~ee Attac~ment 3. Firancial Assistar,ce from HUD for Pre-Acquisition Costs, Tenant Organizing and Technical Assis;."'aC2Jn .. c"e ____ _ HUO hlS technic.1 assist~nce and pre-acquisition grants of up to il2S,UQO available t~ ajd a resident 9rouP or a low income/community based group in organizing themseTve~ to purchase the property. Up to 525,000 is available for start-up funding. Up to S50 ,000 'is alj~1'able to prepare and submH a purchase offer and ar,other 550,000 can bi: obtained to secure financing and conclude the 4c.Quisition. The Palo Alto Housing Corporation can access these grants 2nlY if they plan to use the grants to form a separate, community based nonprofit with Doe-third of its board composed of low income persons or r!presentatives of' low income perscns. CMR: 159:93 -·.'-'L-·· 1/11/93 Page 3 -.--~.----~-.. .. -0. -. ------~-''''' .. ----~---.... - o Estlm.ted Cost. tn.t City Mi9ht be Asked to fay to Suppqrt a NonRrofit Pyrcha$e At this point, it ;s not possiole to makE ever a rough estimate .of costs that the Cit~ eight be asked to pay if a final decision is made to preserve Arastradero Park as law lr;CQIIH:! rental hOlJslng. Jf i nonprofit housing group should b~y the property, t~e City would probably be as~ed to pro~;de funds to cover the required S percent equity and so~ predeyel0pm~nt costs. T~e main u~known$ are: the ~irket ~alue of the property. the amount of necessary repairs, the am01Jnt of rerlts HUD will agree to pay under the new Sectio~ 8 contract and the amcunt of pre-acquisition costs t"at will not be funded by H~D. Conclusion Staff and PAHC will continue tn monitor the vwn€r's proposa1 tn sell the Arastradero Park Apart~nts and will keep the Counctl inforrr~d. Respectfully submitted, :J£tlUu ~~ CATHERINE SIEGE~ --67-~~ Senior Planner, Ho~s!ng ~. FLEMING MJ~IV""'Q,. ~~y anager KENNETH R. SCHREIBER Director of Planning and Community Environment Attachment s: 1. Steps Inyol~ed In A Sale With Incenti~es 2. Current Rent structure 3. Occupancy Characteristics cc: Arastrad~ro Park Tenants c/o Sally Croft, 574 ftrastradero Rd., Apt. 34, Palo Alto, CA. 94306 Araspark Associates ~/o Sam ~ebster, General Partner, 265 lytton A~e., Palo Alto, CA. 94301 firit Charter Propejties, c/c Mona Dean. 1752 Techn~lcgy Or. Suite 120, San Jose, CA. 95110 Marlene Prendergast, Palo Alto Housing Corp. 540 Co~per St. Suita G. Palo Alto, CA. 94301-1806 Lucy Btlokbinder, U. S. Department of HUD, Housing Management Division, P. O. Box 36003, San francisco, CA. 94102 lisa G. Harnilt~n, G. R. Bill Company, 2333 Camino Del Rio, South ;150, San Diego, CA. 92108 CMR: 159:93 2/11/93 Page 4 p'.1CMR\AAAS CMP. -'-'-,:;;:(,.~" ':-' • u •.... ' .. ' .•....•. -. •..•.... ' •.•• '._. :?L~ .. ' ..... _-.: :.'""'0 ';- :' ,"'--'''- '/.:' '. Step I. • • Step 2. • • • Steps rnvo1<~ In A Sale With Incentl,.s Notice of Intent filed b~ owner with HUD, (l.Y and t.enan~~. This starts the clock on the appraisal pt'ocessj (Dec. 1. 19~2) [ndicates owners' intentions, but is not binding. Appra1sal Process: Property is apt'raised; HUD and OW:le,.. agree on a "P,..ese-rvation Value~; HUD calculates equity, ·Preservation Rents· and determines if 9roject can fit wit~in the ·federal cost 11mit~·: Deadline: August 31, 1993; und~rway now. City provided 1nput into the appriisal research. Step 3. Owner Decision / Second Notice: Step • o.~e,.. decides whether to continue ownership lnd seek fina~cial incentives f~om HUn OR OWner files a Second Notice of Intent To Sell: • Oeadline: 30 days from Step 2: (5.pt. 30. 1993) • The second notice starts the IS r~nth period wtthin whlch interested b,Jyers may submit offers to purch~se to the owner. • ihe owner may still change this decision and lat~r decide to keep the property. 4. • • • • • I. ~Dluntary Sale & Gontinuation Of USt As low Income Housing Mast likely scenario in this case. T; .... Frame: October, 1993 through December, 1994 (15 months) Owner 1S not obligated to accept any purchase offers. All effers must be at the HUD approved va1ue. Proce o;s: Months 1-6: Offers on11 from ten.nt councils for homeownership or rental or from a Community Housing Oevelupment Orqanization, "CHDO" (a nonprofit '.hid includes low income representat 1 on) 2. MontHs 7-12: Offers from the above or from a nonprofit housing organization. • Tnis is the point in the process when the Palo Alto Housing Corporation could offer to purchase the property. be~innin9 in April. 1994. 3. Months 12-15: Off~rs may be made from any purchaser who is ,dlHng to continue the long··term low income use restrictions including for profit developers. \ " o step S. Offer Accepted 8y ~er / Owner and Buyer SubmIt ·Plan ~f Action-to HUD Requesting r~nao'i.l Assistance To C~Tete the Sa1e • Time F~ame: 3-6 months • Buyer a~pl1es for HUD finanting tT~e A,t p~~vid~$ fede~.l finarlcing for 95% of the ac~u1s1tlr)n price and .. n of He rehabilitation c~sts) a"d ~UD gr~nls for re1mbur~ement of acquisition costs. Step 6. Final l~~n Packagin; and Escrow Closing • Time Fr~: 8 -IS months • New rent structure art~r change of ownership --", ",,' Notes: """" . . _c:::::.~ / Attac~r.t 2 AAASTRADERa PARK APARTI!ENTS Current Rent Structure Under Sec. 236 Pro r~ Mlnl_ Rent R.nge of Max 11lU11 l~nt Una She -Basic· Le\lel' Basic Rel"t.t ·Mark:et ll level3 I S' $285 $285 351 $352 2 6R $337 $338 415 $4l6 3 BR $390 533l 3BI 5482 4 BP. $432 1433 533 5534 Ga t 1t rent is paid by th~ low~st income tenants. Som~ of these tenants aay be currently paying more than 30t ~f their income for rent. As a tena~ts/ income increases, the basic rent goes up. Each year, the basic rent tenants are recertified. After a tenants' income exceeds a certain level {based on the sile of unit they ire living in), then their rerlt is set at the "market-1e'l'el. For example, fer a two bedroom un;t, iii tenant with an income over $17,000 pays t"~ market rent. ~arket rents only increase when permitted by HOD based on operating costs. Market rent tenants do not ~ave their incomes recertified. Thert is no max;~um income for market rent tenants. t<, ,~ j:'.''t ,,>," - ~ ---~'-'.'---~--' . • -.----. ------------.~----~"---'-----_"I!r. Yery low [ncOllle lew [ncORle noderate ["COM TOTI.t.S l!!!1!., Source: --~---~-.--- J ~ Attachlllent 3 ARASTRAOERO PARK APARTM£KTS Occu ancy ChaTacter1st1~:! Oc:cu anc-os of 6 91 Total Elderly Sm F"", 19 Fom Other 2-4 49 10 29 3 7 9 0 6 3 0 8 6 0 66 11 41 7 7 Incomes rang! from • low of 53.000/year to • nign of SSO,OOO/year for a household of 4. Surve,Y of £Xfstfnq Subsidized Housing Cmrrpleted for tnf:! eH.AS Updated wlt~ Resident Manager, January '93 . -. , ". /