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HomeMy WebLinkAboutAgenda - 06-20-2017 - 6-c - Community Home Trust Acquisition of The Landings at Winmore 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 20, 2017 Action Agenda Item No. 6-c SUBJECT: Community Home Trust Acquisition of The Landings at Winmore DEPARTMENT: Housing, Human Rights and Community Development ATTACHMENT(S): INFORMATION CONTACT: Letter from Community Home Trust Annette M. Moore, Interim Director, Housing Human Rights and Community Development (919) 245- 2492 PURPOSE: To consider approving Community Home Trust's request, as outlined in the attached letter, for BOCC approval of the acquisition of The Landings at Winmore, and to modify the terms of the Development Agreement attached to the property to allow the acquisition of the property. BACKGROUND: In 2007, Orange County as a member of the Orange County HOME Consortium awarded Community Home Trust and The Landings at Winmore, LLC $300,000 in HOME funds to acquire land in Carrboro to develop a low income tax credit property. The property, The Landings at Winmore, is a fifty-eight (58) unit tax credit housing development with rental housing specifically for 15 families earning less than 40% area median income ("AM I"), 21 families earning less than 50% AMI and 22 families earning less than 60% of AMI. On April 13, 2011 Orange County entered into a Development Agreement with The Landings at Winmore LLC, Crosland LLC, Community Home Trust, outlining the terms of the loan. In addition, the parties entered into a declaration of restrictive covenant ensuring the long term affordability of the project and a deed of trust and promissory note securing the loan on the property. The loan of HOME funds to the Landings at Winmore, LLC was a 30-year loan at two percent (2%) interest with a monthly payment of $1,108.86. The balance of the loan is currently $252,090.51. In a separate agreement, the Community Home Trust (formerly The Orange Community Housing and Land Trust) was given an option, by the Owners of the property, to purchase the units at the end of the tax-credit qualifying period of sixteen years. The Owners of the Landings at Winmore are now interested in transferring the property to the Community Home Trust. The affordability restrictions attached to the property would continue to insure that the apartment units would be rented to individuals and families earning 60% or less 2 of area median income. However, a portion of the development agreement that describes the agency that could purchase the property would need to be modified. The current language describes the qualifying agency as an agency that exclusively serves families with incomes not exceeding 80% of area median household income: "If Owner no longer uses the Property as rental property or is unable to continue ownership, then the Owner must sell, transfer, or otherwise dispose of its interest in the Property only to an agency with similar interest in affordable housing and serve families with incomes not exceeding 80% of the area median household income by family size, as determined by the U.S. Department of Housing and Urban Development at the time of transfer. The non-profit fund, foundation, or corporation of like purpose must have established its tax-exempt status under Section 501(c)(3) of the Internal Revenue Code." Since the Community Home Trust serves families who are purchasing properties with incomes up to 110% of area median income, the language would need to be broadened to allow the purchasing agency to serve other individuals and families up to 110% of area median income. Community Home Trust currently serves families with incomes under 80% of area median income but not exclusively. The language could be modified as follows to broaden the population served by the purchasing agency: "If Owner no longer uses the Property as rental property or is unable to continue ownership, then the Owner must sell, transfer, or otherwise dispose of its interest in the Property only to an agency with similar interest in affordable housing that serves families with incomes under 80% of the area median household income by family size, as determined by the U.S. Department of Housing and Urban Development at the time of transfer. The non-profit fund, foundation, or corporation of like purpose must have established its tax-exempt status under Section 501(c)(3) of the Internal Revenue Code." The Community Home Trust has done due diligence on the property and has reported the following: 1. The property has been losing money for the past several years; 2. The Owners have drawn down their operating reserves by more than 50%; 3. An inspection revealed the need for several immediate repairs —with an estimated cost of about $50,000; 4. Community Home Trust is commissioning a phase I environmental assessment; 5. Community Home Trust has met with representatives of the management company who provided them with their perspective on the tensions at the Property; 6. Community Home Trust has met with a tenant to hear her perspective on what is working and what is not working; and 7. Community Home Trust has also met with Justice United. Community Home Trust will contract with a property management company certified by the North Carolina Housing Finance Agency to manage the property. FINANCIAL IMPACT: There is no financial impact associated with this item for the County. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goals are applicable to this item: 3 • GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY The creation and preservation of infrastructure, policies, programs and funding necessary for residents to provide shelter, food, clothing and medical care for themselves and their dependents. The creation and preservation of affordable housing options helps to meet a basic need and advances economic self-sufficiency. • GOAL: CREATE A SAFE COMMUNITY Affordable housing options allow individuals to reduce risks associated with being unhoused. • GOAL: FOSTER A COMMUNITY CULTURE THAT REJECTS OPPRESSION AND INEQUITY The fair treatment and meaningful involvement of all people regardless of race or color; religious or philosophical beliefs; sex, gender or sexual orientation; national origin or ethnic background; age; military service; disability; and familial, residential or economic status. RECOMMENDATION(S): The Manager recommends that the Board consider the request. If the Board chooses to approve the request, the Board should approve the Community Home Trust's request to acquire the property and approve the modifications to the Development Agreement as described in this abstract. 4 June 7, 2017 1p /a0000 i,t i Ms. Annette Moore /001; 9/////%%/////O% 1 Interim Housing Human Rights and Community Development Director Dear Annette: 0111.0711011 FiriM Thank you for your assistance with our potential acquisition of the Landings in Winmore. TRUST As we have discussed, Community Home Trust (CHT) has a right of first refusal to BOARD OF purchase the Landings, which consists of 58 affordable apartments. The Landings is DIRECTORS located within the Winmore development north of Homestead Road. Jennifer Ferris The Landings was supposed to be a Low-Income Housing Tax Credit development, but President due to the financial crisis, tax credits were unavailable. In response, the federal Emily Hinkle government allowed replacement of tax credits with forgivable debt. The Landings was Vice President financed with six layers of debt, the largest portion of which was a $5 million interest- free, payment-free loan from the NC Housing Finance Agency. Gordon Merklein Secretary Another portion of the financing package was a $300,000 HOME loan administered by Ken Reiter Orange County. The 30-year HOME loan pays 2%annual interest and matures in May Treasurer 2041. The outstanding balance of that loan is currently about $255,000. Monthly loan payments are $1109 each month. George Barrett David Brehmer The current owners of the Landings cannot sell the property without approval of Orange County. Although the CHT board has not yet approved acquisition of the Landings, we Bethany Chaney would like to ask the County to approve CHT as the purchaser, prior to your summer break. We expect to be negotiating acquisition terms during the summer. Mark Dorosin Kathleen Ferguson I should inform you that the Landings is not doing well financially, but cash flow will be improved significantly if CHT becomes the owner. As a nonprofit organization, we will be Sally Greene eligible for exemption from property taxes, which will amount to about $27,000 in 2017. Kelley Gregory Our intention will be to maintain these 58 apartments as affordable in perpetuity. We Debra Ives recognize we will face challenges if we assume ownership of the Landings, but with your Jim Merritt support, we fully expect to be successful. Ava Miles Thank you for your consideration of this request. Please let me know if you have any Charles Mills questions. Executive Director Sincerely, Robert Dowling Robert Dowling Executive Director P.O. Box 2315,Chapel Hill, NC 27515 1 919-9674545 IIIIIN�Nlllullll➢ l liul u '�..I o N rrr a