The Housing and Community Development Department (HCDD) is requesting council approval of 1) a Fifth Amendment of an existing Loan Agreement among the City of Houston, Pleasant Hill Community Development Corporation and Pleasant Hill Community Apartments, L.P.; and 2) a Grant Agreement with Fifth Ward Community Redevelopment Corporation to replace a now-expired Loan Agreement approved by City Council in December 2015, to eliminate the entirety of the CDBG award and use TIRZ funds as the replacement funding source. Additionally, the Grant Agreement will substantially increase the total award from $2,000,000.00 to $3,017,201.06. The Fifth Amendment will convert a payable $757,000.00 loan issued by the City of Houston in 1996, that is currently matured, to a forgivable grant. The City of Houston will distribute proceeds from the Grant Agreement to Fifth Ward Community Redevelopment Corporation (FWCRC), which will loan them to the owner,Pleasant Hill Community Apartments, L.P. The proceeds will be used towards a limited scope rehabilitation to address critical immediate repairs including HVAC replacement, roof replacement, minor interior and exterior upgrades, and electrical upgrades.
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Sources & Uses
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Sources:
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Uses:
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City of Houston Request (TIRZ)
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$3,017,201.06
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Hard Cost
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$2,790,666.00
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Owners Contribution (PHCDC)
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$214,001.00
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Soft Cost
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$440,536.06
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Total Source of Funds:
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$3,231,202.06
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Total Project Cost:
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$3,231,202.06
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Pleasant Hill Village is a 165-unit affordable housing project completed in January 1998. The 1.75-acre site is at 3814 Lyons Avenue in Houston, Texas in the Fifth Ward Community, about 2.5 miles northeast of downtown. A single "L" shaped four-story building contains apartments for seniors to include 20 efficiencies, 120 one-bedrooms and 25 two-bedrooms. An all bills paid complex, rents range between $600.00 to $800.00. All units are affordable to residents at 60% of Area Median Income and below. Sponsors for the project are PHCDC led by Rev. Harvey Clemens, Jr. PHCDC procured Kathy Payton, from Fifth Ward Community Redevelopment Corporation, as a consultant.
In 1996, the Housing and Community Development Department (HCDD) partially financed the construction of Pleasant Hill Village with a repayable loan totaling $757,000.00 that matured in September 2016. In December 2015, City Council approved an Amendment, Modification and Assumption Agreement to modify the $757,000.00 repayable loan to a cash flow loan. The amendment, Ordinance 2015-1310, also authorized a Loan Agreement among the City of Houston and Pleasant Hill Community Development Corporation (PHCDC) providing for $2,000,000 in CDBG funds for the renovation of Pleasant Hill Village Apartments. The agreement included a structure with $4,300,000.00 of Housing Tax Credits (HTC) as well as $5,200,000.00 of tax exempt bonds. After a prolonged underwriting period, the HTC investor did not close on its financing due to potential environmental site risks. HCDD’s environmental review certifies the site meets its standards.
Due to the property’s immediate repair needs, PHCDC requested they close on the HCDD financing without the HTC structure. PHCDC also requested an increase of the HCDD award by an additional $1,017,201.00 and reduce the scope of the renovations to include HVAC replacement, roof replacement, minor interior and exterior upgrades, and electrical upgrades.
The property has significant deferred maintenance issues that present health and safety concerns for residents. Such issues have led to a 30% decrease in occupancy with up to 50 vacant units. To avoid complete functional obsolescence, HCDD recommends moving forward on the proposed limited scope renovation to address critical immediate repairs. Modifications to the transactions approved by the December 2015 Ordinance will include:
- Revising the contract to permit funding for the current repairs without the HTC structure
- Amending payment terms to an existing loan balance totaling $757,000.00. The existing loan terms require an initial principal payment of $150,000.00 at closing of the HTC financing, monthly installments of $2,500.00 and balance of $457,000.00 paid at maturity (5 years after closing). Without the HTC investment the borrower is unable to make the principal reductions. The proposed amendment will convert the existing contract to a grant with no payments as the project meets certain occupancy requirements.
- Replacing the previously approved $2,000,000.00 CDBG loan with a $3,017,201.06 grant of TIRZ proceeds. No CDBG funds will be used for this project.
The request will preserve approximately 115 affordable units and house up to 50 additional senior households in the Fifth Ward Community. The property is encumbered to a 40-year Land Use Restriction Agreement with Texas Department of Housing and Community Affairs (TDHCA) to conclude in 2038. PHCDC will be required to notify HCDD of its TDHCA compliance standing on an annual basis to ensure affordability. HCDD will require a “reach back” clause that if the property falls out of compliance with the TDHCA standards, the contract will be in default and all grant proceeds will become immediately payable. New terms will ease the administrative and fiscal burden placed on Pleasant Hill Village while offering them financial self-sustainability.
Housing and Community Affairs Committee reviewed this item on May 15, 2018.
Fiscal Note: Funding for this item is included in the FY2019 Adopted Budget. Therefore, no Fiscal Note is required as stated in the Financial Policies.
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Tom McCasland, Director