Explanation
BACKGROUND:
To authorize the Director of the Department of Development to forgive the principal and accrued interest on a HOME note and mortgage loan down to $2,000.00 and reduce the interest rate to 0% with Hilltop Senior Village II (Hilltop II) currently owned by Hilltop II Senior Housing Limited Partnership which is wholly owned by National Church Residences and is Phase II of the Hilltop Senior Village Project. The property located at 300 Overstreet Way, Columbus, Ohio 43228 was originally developed by Hilltop II Senior Housing Limited Partnership for low-income senior housing. A HOME loan was made on August 4, 2003 in the amount of $555,000.00 from the City of Columbus for construction of the project which has been providing affordable senior housing for eligible residents since that time. The interest rate on the loan is 4.36% with a maturity date of August 4, 2033 which has resulted in approximately $932,933 in interest. The current balance of the loan with interest exceeds $1,487,933.00. The ground lease with the City of Columbus matures in 2097 and will remain in place. The required federal compliance period for this loan is complete and the restrictive covenant can be released. The completion of the 20-year HOME affordability period has passed and the owner would like to recapitalize soon.
Hilltop Senior Village II is located within the Hilltop neighborhood. It was built in partnership with the City of Columbus in two phases in 2000 and 2004. Hilltop Senior Village (I and II) totals 200 units offering a wide range of one and two bedroom, midrise and cottage style apartments to senior residents age (55+ years old) and of various income levels. Phase two (Hilltop Senior Village II) of the project has 85 Low Income Housing Tax Credit (LIHTC) units and 15 market-rate units. The 85 units are rent and income restricted to residents as follows: 40 units at 60% of Area Median Income (AMI) 33 units at 50% AMI and 12 units at 40% AMI.
In addition to the City loan and land lease, the current debt profile includes a first-position $2.0 million Ohio Capital Finance Corporation (OCFC) bridge note that matures July 31, 2026.
The developer is planning to refinance and re-syndicate to allow the property to remain affordable housing for decades to come. In order to refinance, the owners must show the OCFC debt and the existing city debt can be paid in full for any new debt to not be considered a grant. If it is considered a grant, the low-income housing tax credit basis and the corresponding tax credit equity will be reduced causing a funding gap.
Emergency action is requested so that Hilltop II Senior Housing Limited Partnership can remove the debt from its financial statements for the property to be refinanced and or recapitalized and allow the property to continue to remain affordable.
FISCAL IMPACT: There will be a loss of about $1,485,933.00 in fully reserved HOME receivables.
Title
To authorize the Director of the Department of Development to forgive the principal and accrued interest down to $2,000.00 and reduce the interest rate to 0% and extend the maturity date of the loan to December 31, 2099 for Hilltop Senior Village II currently owned by Hilltop II Senior Housing Limited Partnership on a HOME loan due to the City of Columbus that has a current balance totaling over approximately $1,487,933.00; and to declare an emergency.
Body
WHEREAS, the Department of Development has approximately $1,487,933.00 in principal and accrued interest owed to it for a HOME loan made to Hilltop II Senior Housing Limited Partnership for the Phase II of construction of the project located at 300 Overstreet Way, Columbus, Ohio 43228; and
WHEREAS, this legislation would forgive approximately $1,485,933.00 of principal and accrued interest on the HOME loan; and
WHEREAS, this loan was made for the construction of these rental units for low-to-moderate income (60% or below area median income) rental housing with a mortgage and terms that the loan would be repaid upon sale or transfer of the property, and
WHEREAS, the restricted cash flows due to affordable rents along with the ongoing operation and maintenance of this project lead the owner to believe that the loans cannot be repaid; and
WHEREAS, the property will continue to provide affordable housing; and
WHEREAS, the City will have a loss of up to $1,485,933.00 in HOME principal and accrued interest receivable; and
WHEREAS, the City would reduce the interest rate to 0% on the HOME loan and forgive all but $2,000.00 of that loan and extend the maturity date of that loan to December 31, 2099.
WHEREAS, an emergency exists in the usual daily operation of the Department of Development, Housing Division, in that it is immediately necessary to authorize the forgiveness of the HOME loan down to $2,000.00 and reduce the interest rate to 0% that is due to the City of Columbus in order to allow the loan to be removed from the project owner’s financial statements for it to be recapitalized in the future; and NOW, THEREFORE,
BE IT ORDAINED BY THE COUNCIL OF THE CITY OF COLUMBUS:
SECTION 1. That the Director of the Department of Development be and is hereby authorized to forgive $553,000.00 of principal and all the accrued interest totaling approximately $932,933.00 for the City HOME loan to Hilltop II Senior Housing Limited Partnership and reduce it to $2,000.00, reduce the interest rate to 0%, and extend the term of the HOME loan to mature on December 31, 2099. There will be a loss of approximately $1,485,933.00 in principal and accrued interest receivable for the HOME Investment Partnerships program income
SECTION 2. That this modification is made pursuant to Chapter 329 of the Columbus City Code.
SECTION 3. That for the reasons stated in the preamble thereto, which is hereby made a part hereof, this Ordinance is declared to be an emergency measure and shall take effect and be in force from and after its passage and approval by the Mayor, or ten days after passage if the Mayor neither approves nor vetoes the same.