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HomeMy WebLinkAboutapril 2011 min HOUSING & REDEVELOPMENT AUTHORITY MINUTES OF THE SPECIAL MEETING OF APRIL 7, 2011 Call to order – 1.The meeting was called to order by Vice Chair Williams at 6:37 pm Roll Call 2. – Members present: Bruce Nawrocki, Donna Schmitt, and Bobby Williams. Gary Peterson arrived at 6:43 pm and Tammera Diehm arrived at 6:50 pm Staff Present: Executive Director-Walt Fehst, Community Development Director-Scott Clark, Assistant Community Development Director -Sheila Cartney, and Secretary-Shelley Hanson Others Present: Marlaine Szurek and Gerry Herringer from the EDA Commission. 3.Pledge of Allegiance - Recited BUSINESS ITEMS 4.PRESENTATIONS FROM COMPANIES THAT SUBMITTED RFQ’S FOR THE PURCHASE OF PARKVIEW VILLA Clark stated that as part of the 2010 PHA Plan the HRA directed staff to begin a process of identifying potential buyers of Parkview Villa North and South. Staff spent last year in a number of discussions with both for-profit and non-profit housing owners to identify interest. The difficulty in obtaining interest rested on several factors: 1)Parkview is a hybrid-asset with Parkview Villa North being under subsidy contract with the Department of Housing and Urban Development (HUD) and the dissolution of the contract will need HUD approval. Staff has been consistent and clear in all discussions (to both the HRA and potential owners) that HUD could refuse to allow the dissolution, meaning that time and resources spent may not allow the transaction to occur. Parkview Villa South has no outside controls, but over the years the HRA has maintained rental levels slightly below market. 2)A new owner will have to secure some type of financing that will allow a subsidy to remain for Parkview Villa North. 3)This project also has internal complexities regarding pricing. Parkview Villa South potentially has minimal value due to the current rent structure and the need to capitalize a rehabilitation fund. The value in this project comes from Parkview Villa North which was funded by HUD with minimal equity by the HRA. The question is how can the HRA achieve adequate proceeds from a sale? On January 25, 2011 the HRA gave direction to staff to proceed with a Request for Qualifications with Intent to Purchase (RFQ). A copy of the RFQ was provided to the members and contains the HRA’s goals regarding the sale. Staff has received two very qualified proposals, the companies are CommonBond Communities and Aeon (formerly Twin Cities Housing Trust Corporation), both non- profits. Both companies are making a presentation to the HRA and reviewing their RFQ’s. The central issues are: 1) Which company will be successful in getting HUD to agree to a dissolution? 2) Which company will be the most successful in obtaining new financing? 3) Will there be value added assets that will be part of the sale? HRA Special Meeting Minutes Page 2 April 7, 2011 Clark reviewed the status of the buildings. He explained that Parkview began as a senior housing complex, but PHA rules changed over the years, that now allows non-seniors (handicap and disabled adults), to also qualify for residency. Currently 54% of the residents are non-seniors. There are 25 people on the waiting list and of that amount, 19 of them are non-seniors. Clark then went on to review the goals that were set by the HRA and the challenges to be faced to accomplish the goal. Clark stated that after the presentations staff wants direction from the HRA as to which non-profit they desire to partner with, and if there are any additional issues they have regarding the process and/or constraints. CommonBond Representing CommonBond were the following: Paul Fate, President – Kurt Keena, VP of Property Management – Cynthia Lee, Finance – Kelly Matter, Advantage Services. Paul told members that CommonBond was the largest non-profit provider of housing services in the area. They have been in this business for 40 years and have locations throughout Minnesota, Wisconsin, and Iowa. He reviewed the core strategies of the company. Kurt stated that it will take about 9-12 months to dissolve the HUD PHA status. They have successfully done this on other projects and have the ability to delineate and validate the criteria to do so. They have a good working relationship with HUD at both the Regional and National levels. He said CommonBond also strives to protect the residents throughout the process. Cynthia told members that CommonBond is committed to finding creative financial alternatives to increase the feasibility of accomplishing the goal and to get the best return to the City. They would work hard to secure long term rent assistance for Parkview Villa North. The most promising option would be HUD’s Transferring Rental Assistance Initiative, if it is approved by the legislatures. If the TRA legislation is enacted, it would allow rents to go up which would increase the cash flow. Other options include joint ownership or a lease structure to allow PHA rent subsidies to be passed through to the new owner. Kurt said they have managed the building for three years so they are familiar with the building, as well as the residents. He feels this is very beneficial in moving forward with the sale of the building. Kurt stated that they understand the unique situation of the two buildings and the capital improvements that have been done and those that are scheduled. Kelly told members that CommonBond is committed to deliver services that enable residents to remain independent for as long as possible. They strive to provide community engagement, provide wellness activities, and health care checks. If they become the new owners, they would do a community needs survey of the residents to better provide services they feel are important. The usual items that are important to residents of their other facilities are transportation options, healthcare access, resources for community living, and social activities. HRA Special Meeting Minutes Page 3 April 7, 2011 Clark reminded the members that one of the goals to turn Parkview Villa back into a Senior Community will be a long process. They can’t displace current residents. Questions from the members: Nawrocki asked what kind of connection they had with HUD. They have experience and a good relationship with HUD representatives, both regionally and nationally. They have found Senators Klobuchar and Franken to be very helpful in other projects. He also said Paul Wetch has been a good resource for them. Paul said they have successfully obtained financing in the past to satisfy HUD’s requirements. Diehm asked if they had financing options in mind that would present the opportunity to return this to a senior building. Paul stated that there aren’t a lot of financial options that are targeted to just senior housing complexes. There is financing available that is compatible with senior buildings, but usually not for exclusively senior buildings. Herringer asked how CommonBond charges for managing the facility now. Kurt responded that the fee is usually 5-6% of the rents collected. Szurek asked what type of updating has been done during the last couple of years at Parkview. She was told that there has been some work done on the exterior of the building such as windows, siding, and concrete work. They also have been doing some interior remodeling or updating, one floor at a time, over the last few years. This work included updating the kitchens and bathroom such as retrofitting the toilets and faucets, making hallway improvements, making modification to ensure they are ADA compliant, and replacement of some of the appliances. Nawrocki asked how much they estimated the City would receive if the sale of the building can be accomplished. CommonBond personnel said there are many factors that would affect the bottom line. Based on the current rate structure, they felt a conservative price point would be approximately $870,000 based on the capital improvements needed and factoring in transaction costs. Hopefully that figure could be increased if rent subsidies could be assured. If that were the case, then possibly as much as 1.5 million would be realized. Nawrocki questioned whether the reserves for the south building would revert back to the City after the sale. He was told that money set aside for capital improvements would be part of the negotiations, but ultimately could come back to the City. Herringer asked them if they currently had a ground lease anywhere else. Kurt told them they had this type of agreement in Hastings. HRA Special Meeting Minutes Page 4 April 7, 2011 Schmitt asked for an explanation of project based Section 8 versus voucher based Section 8. She then asked what kind of help CommonBond expected from the City in this process as referenced on page 6 of their RFQ. They responded that referred to the help they would need to research documents to satisfy HUD requirements, to supply service provider information, and other local resources that may be needed to process the transaction. The City’s involvement would mostly be in staff time and possibly coordination with our legal advisors. Diehm asked how the size of the units at Parkview compare to others they own. Paul stated that for a building constructed when it was, it was somewhat common. The units are small and compact and provide modest, yet adequate space for a single person. Newer buildings usually have more square footage. She asked if options for financing would be affected since they are just one bedroom units. Paul said that shouldn’t be an issue as that is common for this type of housing project. Aeon Representing Aeon were Alan Arthur, President—Winifred Smith, COO – Gina Ciganik, VP of Housing and Redevelopment. Alan told members they have been in business for 25 years, and their goal is to do affordable housing better than anyone. They want people to feel at home in their surroundings, and to be part of a community. They feel it should be a sanctuary for residents and something they can take pride in being a part of . Winifred stated they concentrate on community and recognizing each individual. Gina reviewed the goals set by the HRA. She said that Aeon would be an effective partner and that they have a track record of completing complex development projects. They blend creativity and practicality. Aeon has high standards and focus on community and resident engagement. She reviewed several properties they have redeveloped, and stated that they sometimes use up to 30 sources of financing or funding. Gina stated Aeon would weigh the pros and cons of each option along the way, and work with the City to reach the goal. They would research various funding sources and listed several examples. Questions from members: Diehm asked if they would briefly explain each scenario they had listed in their RFQ report. Gina explained--#1 is the disposition and elimination of rental assistance-this option doesn’t meet the City’s goal. Rents would be increased and it would not support a mortgage. Purchase price would be low and it could not serve the current population. #2 is to convert to a Section 8 voucher system and increase to FMR rents-this option would provide a higher purchase price and it could continue to serve the current population. Estimated price range $4- $5.2 million HRA Special Meeting Minutes Page 5 April 7, 2011 #3 is to convert to a Section 8 voucher system and increase beyond FMR to current Payment Standard- this would provide a higher purchase price and could continue to serve the current population. Estimated price range $4.6-$6 million. #5 is a Mixed Finance Transaction-It would remain a PHA (required to be affordable for 40 years). Purchase price would be high and could serve current population long term. Estimated price range $1.9-$2.4 million. Nawrocki asked if Aeon would be the new owner or if they would be passing it on to someone else. They responded they would be the owner of the property. Nawrocki then asked what type of connections they had. Alan explained they use a law firm from Washington D.C. and they have a good working relationship with HUD at the local, regional, and national levels. They also work closely with Paulsen, Franken, Klobuchar, and Ramstad. Herringer questioned them on financing options they had listed in the report and wanted details on the TIF reference. Aeon responded that it would be more like a PILOT Program (Payment in Lieu of Taxes). Before deciding on any financing options, a decision would have to be made whether we want a higher tax base or more capital to work with. Nawrocki asked what price range they thought the City could realize. Gina stated each scenario had a price range as noted in the proposal. Nawrocki asked if we would have any significant fees in this process that would reduce those fees such as legal expenses. Alan told him that most of the legal expenses would be Aeon’s and that fact is already factored into the figures given. Clark clarified that we would also have some legal/attorney expenses on our end to protect the City’s interest throughout this process. Diehm referred to a project in Roseville whereby they remodeled the units/building. She asked if they had any thoughts about major remodeling to change the looks of the units or overall appearance. They responded that they would not change the size of the units, but they expect to do some upgrades throughout the building, especially to reduce energy expenses. They look at improvements in a practical manner and expect improvements to help reduce costs in the overall operation (such as energy efficient appliances). Herringer asked if they truly felt a 7% cap rate to the City was realistic. Gina said it usually is between 7-9% and would depend on several factors. Nawrocki asked if they have worked with Anoka County. Alan said he has worked as a consultant, but has not been involved in any specific property redevelopment projects. Nawrocki asked how they would move to getting it back to a more senior oriented housing facility. Winifred responded that it would be done mostly through marketing and by providing services that are attractive to that group. Nawrocki stated that HUD requirements have changed the overall make-up of the resident population and has therefore, changed the intended use of the facility. Clark stated that Fair Housing regulations will affect how residents are dealt with throughout this process. HRA Special Meeting Minutes Page 6 April 7, 2011 Schmitt agreed that the City intended for this building to be a seniors only building, and that some of the residents find it difficult to adapt to the mix that has happened over the last several years. She asked Aeon if they are considering using this facility for low income families or for housing the homeless. They responded that since the building is made up of one bedroom units, it prohibits any families being placed there. He assured the Board that they would accommodate what the City wants the building used for to the best of their ability. Peterson asked what their plans were for the south building. Alan stated they would combine them and consider them as one building. It is more economical to combine them into one operating entity. Williams is familiar with some of Aeon’s other projects and knows they have been very successful. Diehm stated that she thought Aeon’s proposal was very thorough and thanked them for addressing the issues in such detail. Discussion: There was a brief discussion on the price points of the two proposals. Aeon had a wide range of values depending on the different scenarios. Clark reminded members that the price points aren’t necessarily the thing to focus on at this time as the prices will vary depending on many factors and what decisions the City may make during this process. Diehm said that funding options the developer secures will also affect the bottom line. The more grants the project qualifies for, the more the City would ultimately receive. Nawrocki asked Clark what other entities had been contacted. He told members that he had contacted at least 12 companies plus other development entities, and that the RFQ was distributed on the League of Minnesota Cities’ website. Most companies weren’t interested in pursuing this since there was no guarantee that the sale will be completed. Most did not want to spend time and resources on something that may not happen if things can’t be worked out with HUD. Herringer asked what experience we’ve had with CommonBond as managers of Parkview Villa. Clark said they have been an excellent company to work with. They have top notch staff and have been easy to work with over the last 3 years. The Board agreed with Clark. Schmitt asked if CommonBond was the one who initiated the rehab work that has been done at Parkview. Clark answered that no, the HRA had that in place when they came on as managers. However, he said their staff has coordinated the projects since coming on board and have been proficient in the oversight of the remodeling. Nawrocki commented that he thought Aeon seemed more astute at the financial aspects of taking on a project such as this and seeing it through to completion. However, he was, and has been, impressed with how CommonBond is so resident oriented. HRA Special Meeting Minutes Page 7 April 7, 2011 Diehm stated that she was very impressed with how much effort Aeon put into their proposal. She said she would like to see some of their properties. Peterson thought it would be a good idea to arrange a tour. Schmitt was also impressed with Aeon’s proposal and with the groups they have worked with in other projects. Szurek had no previous knowledge of CommonBond or Aeon coming into the meeting. She thought that Aeon’s proposal was very informative and to the point. She was impressed that they work on a variety of housing projects from providing shelter to the homeless, to affordable housing, to market rate housing, to high end development and management. It proves they have experience in every facet. It was the general consensus that Aeon seemed better equipped to handle complex projects and has past experience to tap various resources to provide hybrid financing opportunities to get the project done. The Board directed staff to prepare a Memorandum of Understanding for approval at the next HRA meeting on April 26, 2011, between the City and Aeon. They also instructed staff to set up a tour of th two of Aeon’s properties in Minneapolis for Monday, April 18 at 10 am. The Special meeting was adjourned at 9:00 pm. Respectfully Submitted, Shelley Hanson Recording Secretary