Explanation
BACKGROUND: This legislation authorizes the unplanned modification of a HOME Investment Partnerships loan package with New Canterbury Way LTD., that utilized funding from the U.S. Department of Housing and Urban Development (HUD) and authorizes the Director of the Department of Development enter into amended and restated documents that include but are not limited too these newly amended and restated documents will reflect that the reduction of the interest from 4.65% to 0% moving forward. The five-year federal affordability compliance period has been fully satisfied and there is a need to release the restrictive covenant as well as authorize the Director to forgive any remaining interest associated with the New Canterbury Way LTD HOME loan so the developer may secure additional Low-Income Housing Tax Credits (LIHTC) funding for a substantial property renovation and keep the property affordable.
On January 24, 2008, the City of Columbus issued a $500,000.00 HOME Investment Partnerships Loan to New Canterbury Way LTD (wholly owned by Fairfield Homes) to support the comprehensive rehabilitation of Canterbury Way Apartments. Located at 618 Canterbury Way, this 46-unit affordable housing community serves low-income families and consists of thirty 2-bedroom units and sixteen 3-bedroom units. Of the total units, 34 of the 46 units were HOME assisted with strict income limits: 27 units are reserved for households earning below 50% of the Area Median Income (AMI), and seven units are reserved for households below 30% AMI.
The Original loan carried a 4.65% interest rate with a maturity date of January 1, 2051. Because payments were structured as 25% of annual cash flow, interest has continuously accrued since 2010. The current balance is over $822,572.53, which includes $500,000.00 in principal and over $322,572.53 in accrued interest. The five-year federal affordability compliance period has been fully satisfied; the complex requires comprehensive recapitalization to ensure long-term structural viability. Therefore, it is necessary to authorize that the documents be amended and restated so the owner may execute new financing to make the necessary renovations as well as keeping the affordable housing commitment.
Emergency Designation: An emergency exists as this unplanned modification requires amending and restating certain documents as part of the loan package to reduce and forgive interest as New Canterbury Way Ltd. is facing rigid underwriting deadlines for its pending refinancing and recapitalization schedule. To satisfy the mandates the entity must immediately clear this critical liability from its financial statements. Failure to enact this on an emergency basis will result in a severe disruption to the financing timeline and any delay will force the facility into disrepair and create hazards for occupants within the community.
Contract Compliance: the vendor number is 055861 and expires 08/07/2028
Fiscal Impact: A reduction of interest to be received by the City as part of the fully reserved HOME Loan.
Title
To authorize the Director of the Department of Development to enter into an unplanned modification of the HOME loan package with New Canterbury Way Ltd; to authorize the amendment and restating of documents as needed that are to reflect the change in the reduction of interest from 4.65% to 0% and to forgive the remaining interest associated with the loan; to authorize the release of the restrictive covenant; and to declare an emergency. ($0.00)
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WHEREAS, the City of Columbus is a participating jurisdiction of the U.S. Department of Housing and Urban Development; and
WHEREAS, the City of Columbus is the recipient of HOME Investment Partnerships funds from the U.S. Department of Housing and Urban Development; and
WHEREAS, the City of Columbus on January 24,2008 authorized the support of and issued a HOME Investment Partnerships Loan with New Canterbury Way Ltd. for the renovation of low-income housing at the Canterbury Apartments; and
WHEREAS, the five-year federal affordability compliance period has been fully satisfied and the development has been operating in a deficit and requests the documents be amended and restated to reduce the interest from 4.65% to 0% as well as the forgiveness of the remaining interest in an amount over $322,572.53 and the release of the restrictive covenant so they may refinance and renovate the Canterbury Apartments to assure it remains affordable; and
WHEREAS, an emergency exists in the usual daily operation of the Department of Development in that it is immediately necessary to authorize the Director of the Department of Development to amend and restate the necessary documents of the HOME loan package to reduce the interest to zero% and forgive the existing interest and release the restrictive covenant so they may secure LIHTC funding per the rigid timelines in order to renovate and keep the complex affordable and in good working condition for residents for the immediate preservation of the public, health, peace, property, safety, and welfare; NOW, THEREFORE,
BE IT ORDAINED BY THE COUNCIL OF THE CITY OF COLUMBUS:
SECTION 1. That the Director of Development is hereby authorized to modify a Home Loan package and execute amended and restated documents as needed to reflect the change in the interest from 4.65% to 0.00% the documents include but are not limited to the loan agreement, note, and mortgage; forgive the remaining interest in an amount over $322,572.53; and to also release the restrictive covenant with New Canterbury Way Ltd., so they may secure LIHTC financing for the renovations of the Canterbury Way Apartments project.
SECTION 2. That for the reasons stated in the preamble hereto, which is hereby made a part hereof, this Ordinance is hereby declared to be an emergency measure and shall take effect and be in force from and after its approval by the Mayor, or ten days after passage if the Mayor neither approves nor vetoes the same.