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HomeMy WebLinkAboutRES NO 009-09RESOLUTION NO. 0 0 9 '' ~ 9 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BAKERSFIELD APPROVING THE SALE OF REAL PROPERTY BY THE BAKERSFIELD REDEVELOPMENT AGENCY FOR $1,000,001.00 TO CREEKVIEW VILLAS, LLC., AND THE AGREEMENT WITH THE AGENCY FOR USE OF CaIHFA FUNDS WHEREAS, the Redevelopment Plan for the Southeast Redevelopment Project Area (the "Redevelopment Plan") was approved and adopted by the City Council of the City of Bakersfield; and WHEREAS, the Bakersfield Redevelopment Agency (the "Agency") is authorized and empowered under Community Redevelopment Law to enter into agreements for the acquisition, disposition and development of real property and otherwise assist in the redevelopment of real property within a redevelopment project area in conformity with a redevelopment plan adopted for such area, to acquire real and personal property within redevelopment project areas, to receive consideration for the provision by the Agency of redevelopment assistance, to make and execute contracts and other instruments necessary or convenient to exercise its powers, and to incur indebtedness to finance or refinance redevelopment projects; and WHEREAS, the Agency owns that certain real property of approximately 1.91 acres within the Southeast Bakersfield Redevelopment Project Area, and located in the Cit~ of Bakersfield between "R" Street and "S" Street, and California Avenue and the 14 "Street, comprised of portions of assessor parcel nos. 006-480-08, 006-491-03, 006-491-05, 006-491-07 ("the Property") and is more particularly described in Exhibit "A" ("Legal Description"), which is attached hereto and incorporated herein by reference; and WHEREAS, CREEKVIEW VILLAS, LLC. ("the Buyer"), desires to acquire the Property to develop a 36-unit multi-family affordable townhome complex on the property. The use of the Property is in accordance with the Redevelopment Plan and the requirements of the City of Bakersfield; and WHEREAS, the Agency and Buyer have negotiated a Disposition and Development Agreement ("DDA") in good faith in order to implement the provisions of the Redevelopment Plan by providing for affordable housing in a mixed use project; and WHEREAS, the purchase price negotiated for the Property as part of the DDA is the amount of One Million Dollars ($1,000,001.00), which price was determined upon the original price, comparable sales in the area, and fair reuse analysis conducted by Keyser Marsten Associates, Inc.; and o`` gAKF9~ J:\Agreement\2009 Resos\33433 reso Creekview Villas cc.DOC 1 ~-- m v o ORIGINAL WHEREAS, pursuant to Section 33433 of the California Health and Safety Code, the Bakersfield City Council may, after a duly noticed public hearing, authorize the Agency to sell or lease the Property, for the development pursuant to the Redevelopment Plan upon a determination by the City Council that the disposition of the Property will assist in the elimination of blight, and is consistent with the implementation plan adopted for the redevelopment project area pursuant to the Health and Safety Code Section 33490, and the consideration for such disposition is not less than either the fair market value or fair reuse value of the Property in accordance with the covenants and conditions governing the disposition and development costs required thereof; and WHEREAS, the proposed Agreement, and a summary report meeting the requirements of the Health and Safety Code Section 33433, were available for public inspection consistent with the requirements of the Health and Safety Code Section 33433; and WHEREAS, notices of the public hearing before the City Council were duly published on January 14, 2009 and January 21, 2009; and WHEREAS, the project has a finding of no significant impact (FONSI) under the National Environmental Policy Act (NEPA), and qualifies under CEQA exempt under Section 15332 under Infill Development and therefore will not result in any significant effects relating to traffic, noise, air or water quality; and WHEREAS, the City Council has reviewed the summary report required pursuant to the Health and Safety Code Section 33433 and evaluated other information provided to it pertaining to the findings required pursuant to the Health and Safety Code Section 33433; and WHEREAS, the City Council has duly considered all the terms and conditions of the proposed Agreement and believes that the disposition of the Property pursuant thereto is in the best interest of the City of Bakersfield and the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of the applicable state and local laws and requirements; and WHEREAS, the City Council has certain HOME Investment Partnership ("Home") funds available for eligible project; and WHEREAS, the proposed DDA contemplates construction assistance to the Developer from the Agency including up to Two Million Dollars provided through an agreement with City for use of its CaIHFA funds; and WHEREAS, CaIHFA froze the Two Million Dollars construction assistance due to the State of California budget deficit and CREEKVIEW VILLAS, LLC. ("the Buyer"), desires to construct the first seven (7) units with private equity investor financing; and J:Wgreement\2009 Resos\33433 reso Creekview Villas cc.DOC 2 ~'~KF9 cP~ m r O t~~3ZI~~IN~L NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED BY THE BAKERSFIELD REDEVELOPMENT AGENCY OF THE CITY OF BAKERSFIELD, AS FOLLOWS: 1. The City Council finds and determines that, all of the above recitals are true and correct findings and based upon evidence provided in the record before it, the consideration for the Agency's disposition of the Property pursuant to the terms and conditions of the Agreement, is not less than the fair reuse value in accordance with the Redevelopment Plan. 2. The City Council hereby finds and determines that the disposition of the Property pursuant to the Agreement will: (i) assist in the elimination of blight by providing for the development of affordable housing which will serve as a catalyst for the development of other property in the Southeast Bakersfield Redevelopment Project Area and will also help to create new employment opportunities, and (ii) is consistent with the implementation plan for the Southeast Bakersfield Redevelopment Project Area adopted by the Agency pursuant to the Health and Safety Code Section 33490. 3. The City Council hereby approves the proposed sale of the Property by the Agency to the Buyer upon the terms and conditions set forth in the DDA. 4. The City Council hereby approves the Agreement for Use of Home Investment Partnership Funds ("Home Agreement") with the Agency for up to One Million dollars for the DDA Project. 5. The Mayor is authorized to execute the Agreement For Use of Home Investment Partnership Funds with the Agency and the City Manager or his designee is hereby authorized to take all actions necessary to effectuate the Home Agreement. 3 J:\Agreement\2009 Resos\33433 reso Creekview Villas cc.DOC ~ ~, A .K ~~ T ~- o Jr,~GINAL I HEREBY CERTIFY that the foregoing Resolution was passed and adopted by the City Council of the City of Bakersfield at a regular meeting thereof held on JAN ~ 8 2009 , by the following vote: AYES: COUNCIL MEMBER HANSONON BENHAM, fn4R~6N, 69k~H,$~RI NV ER, SULLIVAN, EW IR NOES: COUNCIL MEMBER K.flX.~ ABSTAIN: COUNCIL MEMBER Ul.Ox1L ABSENT: COUNCIL MEMBER ~r~~UYL~ r~u r,G. CITY CLERK and Ex Officio Clerk the Council of the City of Bakersfield APPROVED: JAN 2 8 2009 APPROVED AS TO FORM: VIRGINIA GENNARO By: ~_ J HUA H. RUDNICK eputy City Attorney II J:Wgreement\2009 Resos\33433 reso Creekview Villas cc.DOC 4 ,__ -- r ~ ? O oF,ICIIVS~L EXHIBIT "A" LEGAL DESCRIPTION LEGAL DESCRIPTION FOR THE PROPOSED TOWNHOME PORTION OF PROPOSED SOUTH MILL CREEK PROJECT IN THE CITY OF BAKERSFIELD ALL THOSE PORTIONS OF THE SOUTHEAST QUARTER OF SECTION 30, TOWNSHIP 29 SOUTH, RANGE 28 EAST, MOUNT DIABLO MERIDIAN, IN THE CITY OF BAKERSFIELD, COUNTY OF KERN, STATE OF CALIFORNIA MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE CENTERLINE INTERSECTION OF 14~' STREET AND "S" STREET; THENCE NORTH 89°59'44" WEST ALONG THE CENTERLINE OF SAID 14T" STREET, A DISTANCE OF 201.39 FEET TO THE POINT OF BEGINNING; THENCE (1) SOUTH 00°00'00" WEST, A DISTANCE OF 383.62 FEET; THENCE (2) NORTH 90°00'00" WEST, A DISTANCE OF 64.00 FEET; THENCE (3) SOUTH 00°00'02" WEST, A DISTANCE OF 23.55 FEET; THENCE (4) NORTH 89°59'46" WEST, A DISTANCE OF' 39.96 FEET TO THE EAST RIGHT-OF-WAY OF "R" STREET; THENCE (5) NORTH 00°00'15" EAST ALONG SAID RIGHT-OF-WAY, A DISTANCE OF 60.76 FEET TO A POINT ON THE EASTERLY PROLONGATION OF THE CENTERLINE OF 13T" STREET; THENCE (6) NORTH 90°00'00" WEST ALONG THE CENTERLINE OF SAID 13T" STREET, A DISTANCE OF 135.46 FEET TO THE EAST BOUNDARY LINE OF THE KERN ISLAND CANAL; THENCE (7) NORTH Ol°09'06" WEST ALONG SAID EAST BOUNDARY LINE, A DISTANCE OF 346.50 FEET TO THE INTERSECTION OF SAID EAST BOUNDARY LINE AND THE WESTERLY PROLONGATION OF THE CENTERLINE OF 14T" STREET; THENCE (8) SOUTH 89°59'44" EAST ALONG SAID WESTERLY PROLONGATION, A DISTANCE OF 27.95 FEET TO THE NORTHWEST CORNER OF THE LAND OWNED BY CALIFORNIA WATER SERVICE COMPANY AND IDENTIFIED BY KERN COUNTY ASSESSOR'S PARCEL NUMBER 006-480-05; THENCE ALONG THE BOUNDARY LINE OF SAID CALIFORNIA WATER SERVICE PARCEL THE FOLLOWING THREE COURSES; THENCE (9) SOUTH 00°00'15" WEST, A DISTANCE OF 173.22 FEET; THENCE (10) SOUTH 89°59'38' EAST, A DISTANCE OF 32.00 FEET TO A POINT ON THE WEST RIGHT-OF-WAY LINE OF "R" STREET; THENCE (li) NORTH 00°00'15" EAST, ALONG SAID WEST RIGHT-OF-WAY, A DISTANCE OF 173.22 FEET TO A POINT ON THE WESTERLY PROLONGATION OF THE CENTERLINE OF SAID 14T" STREET; << ~> A KF9 5 ~=~ s~ J:Wgreement\2009 Resos\33433 reso Creekview Villas cc.DOC ~ c~ O (Jf SiGW~L CONTINUED ON NEXT PAGE THENCE (12) SOUTH 89°59'44" EAST ALONG SAID WESTERLY PROLONGATION AND THE CENTERLINE OF SAID 14T", A DISTANCE OF 186.43 FEET TO THE POINT OF BEGINNING. CONTAINS 83,408 SQUARE FEET (1.91 ACRES) MORE OR LESS. ~~~~~~ LAND SG ~ ROLLAND J. .~ VAN DE VALK °o L.S. 7214 * Exp. 03-31-10 ~~qrF CF CAI.\F~~\P 6 J:\Agreement\2009 Resos\33433 reso Creekview Villas cc.DOC o, P k'~r~~~ ~~ ~- o O'rZiGWAL Reuse Valuation Creekview Villas Affordable Housing Project Bakersfield, California Prepared for: Bakersfield Redevelopment Agency Prepared by: Keyser Marston Associates, Inc. December 2008 < F""~~~ :.r r r-- ~`' ,_ o C? 4iGINAL TABLE OF CONTENTS Page Summary of Salient Factors and Conditions Nature of the Assignment 3 III. Reuse Valuation 5 IV. Conclusions and Limiting Conditions 10 ~;Alf~ } } , ;Y~~ `- r O SUMMARY OF SALIENT FACTORS AND CONDITIONS A. Assignment Keyser Marston Associates, Inc. (KMA)'s assignment is to determine the fair reuse value for the site and development interest being conveyed by the Bakersfield Redevelopment Agency ("Agency") to Creekview Villas, LLC ("Developer"). Reuse value is defined as the highest price in terms of cash or its equivalent which a property or development right is expected to bring for a specified use in a competitive open market, subject to the specific covenants, conditions, and restrictions imposed by the Disposition and Development Agreement ("DDA"). The DDA restrictions and guidelines affect the characteristics of the physical development and other features and impose certain requirements relating to how the Project will be developed, to the operation of the Project and to the transferability of the Developer's interest. The covenants and conditions strongly affect the development economics of the Project and hence the value of the interest to be conveyed to the Developer, as described in this report. Among other obligations, the DDA requires the Developer to design and construct a 36-unit affordable for-sale townhouse complex ("Project"). The project is known as Creekview Villas. B. Project Description The Project is proposed to consist of the following elements: ^ 36 affordable for-sale townhouse units, all of which will contain three bedrooms. The DDA will restrict the units to Low- and Moderate-income households. ^ The Project will be configured in three-story, townhouse style buildings. ^ Each unit will include atwo-car private garage on the ground floor. ^ The project will include landscaped areas and a recreation area along the adjacent canal. C. Site/Location The approximately 1.91-acre site to be conveyed by the Agency to the Developer is located immediately east of th a South Mill Creek canal between 13t" Street and 14t" Street. The site is located within the Southeast Redevelopment Project Area. The proposed Project is a portion of the Redevelopment Agency's larger South Mill Creek Mixed-Use Redevelopment project. Later phases of the larger project will include market rate residential units, additional affordable units, and non-residential uses. -- Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs1\wp\10\10410\004\001-002(Reuse).doc Page 1 `~, f. K x'g ,:, `T ,- c ±1 .~ _ ~ ~3 D. Zoning This analysis presumes that zoning will permit the development of the Project in accordance with the provisions of the DDA. E. Present Use The Site is currently vacant. F. Reuse Conditions The DDA includes covenants and conditions that impact the development economics and hence the value of the interests conveyed to the Developer. The key restrictions are the following: ^ The units must be sold to qualified Low- and Moderate-income households. ^ A covenant will be recorded on each unit limiting the occupancy to income-qualified households for a period of 45 years and imposing restrictions on re-sale of the units. ^ The Developer is to design and construct the Project within the times specified in the Schedule of Performance. Speculation is not allowed. G. Date of Valuation December 2008 H. Fair Reuse Value Reuse Value is defined as the highest price in terms of cash or its equivalent which a property or development interest is expected to bring for a specified use in a competitive open market, subject to the covenants, conditions, and restrictions imposed by the DDA. As more particularly described in Section III of this report, it is concluded that the fair reuse value of the interest being conveyed, given the specific covenants and conditions of the DDA, is a negative $2 million. In other words, the Project cannot afford to pay for the land parcel (Site) and, in addition, a $2 million subsidy is required by the Agency in order to render the Project financially feasible. Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs1\wp\10\10410\004\001-002(Reuse).doc Page 2 C~~~~ ~, ~'~ F - ~~ ire L'1 ~r Qriir iN~~.L II. NATURE OF THE ASSIGNMENT A. Purpose of the Valuation The Agency has established development criteria for the redevelopment of this Site with a 36- unit affordable for-sale townhouse complex. These criteria serve as a guide in directing development and are incorporated into a DDA. Fundamental to the development are the covenants and conditions included in the DDA. The DDA restrictions and guidelines affect the characteristics of the physical development and other features and impose specific requirements relating to how the Project will be developed and to the long-term affordability of the Project. The covenants and conditions strongly affect the development economics of the Project and hence the value of the interest to be conveyed to the Developer, as described in this report. The purpose of this reuse valuation is to estimate the fair reuse value for the Site being conveyed to the Developer, Creekview Villas, LLC, based upon the covenants and the conditions included in the Disposition and Development Agreement ("DDA"). The reuse value specifically requires compliance with the limiting conditions and assumptions of this report as stated in Section IV. B. Definition of Value Fair reuse value is the fair market value in accordance with covenants, conditions, and easements governing the sale of the property as contained in the DDA. It is the highest price in dollar terms which the property would be expected to bring for the specified purpose in a competitive and open market under the reuse conditions established by the Agency, with the buyer (Developer) and seller (Agency) each acting prudently and knowledgeably, assuming the price is not affected by undue stimulus. Also essential to an estimate of a fair market value is the notion that the conveyance of the property will result in near-term development, not speculation. Implicit in this definition is the consummation of a sale as of a specified date under conditions whereby: 1. Both parties are well informed and well advised, and is each acting prudently in what it considers its own best interest. 2. Financing is on terms generally available for the use proposed at the date the property is ready for construction. 3. The definition of reuse value is further augmented due to certain conditions imposed by the Agency, and assumptions as follows: t', p. k'r,n Keyser Marston Associates, Inc. 12/19/2008 `~ ~~ \\Sf-fs1\wp\10\10410\004\001-002(Reuse).doc Page 3 ~~~ O a. The seller is a public agency having definite controls over the development. Due to the complexity of the financing plan, the Developer must contend with a series of regulations and controls, which are not common in the conventional real estate market. The Agency will provide continued monitoring with respect to the ability of the Developer to perform within prescribed conditions. The Developer, like the Agency, is unique in the real estate market. Due to the various development requirements and time restrictions imposed by the development program, the potential developers are limited to individuals or organizations with specialized expertise in developing affordable housing. In order to appeal to the limited market of potential buyers, market value must be equated to the price a restricted and limited market is willing to pay based upon risk and investment return factors. c. The Agency's development plan imposes development restrictions and/or requirements, including that development must commence shortly after conveyance. Accordingly, the market value must reflect the advantages created by the Project as well as the requirements and limitations on land uses to be imposed on the Developer by the Agency. 4. The Agency conveys the site to the Developer based upon the specific terms and conditions agreed to in the DDA. 5. Development will proceed as agreed to in the Schedule of Performance. C. Rights Valued The rights valued assume that the Site is free and clear of all encumbrances except those covenants, conditions, and easements specified in the DDA. D. Function of this Report It is understood that this report will be used to establish a fair reuse value for the Site, subject to the covenants and conditions in the DDA, specifically the reuse conditions stated in this report. Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs1\wp\10\10410\004\001-002(Reuse).doc Page 4 ;,7~ '' U/1 r=. C) ;.~ V/~~. III. REUSE VALUATION The purpose of this analysis is to establish the reuse value of the Site being conveyed to the Developer, subject to the specific terms and conditions of the Disposition and Development Agreement ("DDA") that control the reuse of the Site. The valuation of real estate is derived principally through three approaches to market value: the cost approach, the market data comparison approach, and the income approach. From the indications of these separate analyses and the weight accorded each, an opinion of value is reached, based on the quantity and quality of the factual data considered, tempered by the judgment and experience of the analyst who is utilizing commonly accepted methods and techniques within the framework of the valuation process. The cost approach is not applicable due to the fact that this valuation is a valuation of a vacant piece of land where a new Project will be built. The market data comparison approach to value is based upon the principle of substitution; that is, when a property is replaceable in the market, its value tends to be set at the cost of acquiring an equally desirable substitute property, assuming no costly delay in making the substitution. The typical valuation technique used to estimate value through substitution involves the collection and analysis of sales and listings data on various properties having as many similar characteristics as the property being valued. The DDA requires a specific Project with covenants and conditions restricting the use of the Site to a 36-unit for-sale townhouse complex affordable to Low- and Moderate-income households. As a result of these very specific conditions of the DDA, there are no truly comparable land sales in the area that adequately reflects the unique aspect of the proposed development. Thus, in our view, valuation based on comparable land sales for this Project is of sharply diminished usefulness. The income approach is based on the income and cost characteristics of the proposed Project. For the purpose of determining the reuse value, this approach compares the difference between the sales revenues that can be generated by sale of the units and the total costs to develop the Project inclusive of a reasonable developer profit. In the valuation of this Site, we have relied on the income approach to value. A. Development Costs The Developer's development cost estimate was reviewed for reasonableness by KMA. In terms of the direct construction costs, it is important to note that the cost estimates are necessarily preliminary given the preliminary level of project design and development and, therefore, refinements to the budget will be made as the Project nears the start of construction. The Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs1\wp\10\10410\004\001-002(Reuse).doc Page 5 c~rk~~ -. nr :-. ~- Cs ... ., ~ .i~k! _..,.. construction cost estimate does not assume payment of prevailing wages due to the fact that the Agency is using only its Low/Mod Housing funds to financially assist the project. Table 1 presents the estimated costs to develop the Project excluding land acquisition cost. As shown, total development costs are estimated at approximately $8.06 million. The major assumptions behind the development cost estimates are as follows: Direct construction costs including Site Costs estimated at $5.89 million, or $91 per sq. ft. of saleable building area; Indirect costs such as A&E, permits and fees, taxes, and insurance estimated at $1.86 million; ^ Financing costs including construction loan interest estimated at $302,000. The direct construction costs were estimated by the Developer and appear to us to be within a reasonable range for the proposed project. Overall, the estimates of indirect and financing costs also appear reasonable. B. Sales Revenue As shown on Table 2, the average sale price of the 36 units is estimated to be $196,000. The sale price estimates are based on requirements of the California Community Redevelopment Law which takes into account the Area Median Income for Low- and Moderate-income households, adjusted for household size, and estimates with regard to mortgage underwriting, property taxes, utilities, HOA and insurance dues, and the amount of the down payment made by the home buyers. The total sale revenue generated by the project is estimated at $7.05 million. The net sale revenue, after consideration of sales commissions and closing costs, is estimated at $6.74 million. It should be noted that there may be some flexibility in the sale price of the six Low-income units due to the fact that the Agency may provide down payment or other financial assistance to the home buyers of the six Low-income units. The possibility of such assistance is provided for in the DDA, which specifies that the Agency may provide home buyer assistance up to $100,000 for each of the six Low-income units. If such Agency assistance results in home prices higher than those estimated in this Reuse Valuation, the conclusions in the Reuse Valuation are subject to change. It is also important to note that, despite the depressed condition of the present real estate market, the Developer believes that conditions remain favorable for the proposed project due to the fact that there is an on-going demand for affordable housing projects, the project will be newly built and will include amenities not available in other homes on the market, and because the construction loan needed for the project will be relatively small due to the Agency's financial assistance. In addition, the Agency's experience with other affordable for-sale housing projects Keyser Marston Associates, Inc. \\Sf-fs 1 \wp\10\10410\004\001-002(Reuse).doc 1,k~/' 12/19/2008 ~ ~t Page 6 ~T; -.. ,,~Vr^ L in Bakersfield indicates that FHA mortgage financing remains available for Low- and Moderate- income home buyers. C. Residual Land Value (Reuse Value) The residual land value is the amount by which the net sale revenues estimated to be generated by the project exceeds the estimated costs to develop the project, including a reasonable factor for developer profit. As shown on Table 2, it is estimated that an approximately $680,000 profit will be generated by the Project. In our opinion, this is not an excessive profit for the proposed project. As shown on Table 2, the estimated development costs of $8.06 million plus the $680,000 of developer profit exceeds the net sale proceeds expected to be generated by sale of the units by $2.0 million. Therefore, the reuse value of the property is estimated to be a negative $2.0 million. In other words, the Project cannot afford to pay for the land parcel (Site) and, in addition, a $2.0 million subsidy is required by the Agency in order to render the Project financially feasible. Keyser Marston Associates, Inc. 12!19/2008 G `z \\Sf-fs1\wp\10\10410\004\001-002(Reuse).doc Page 7 ~_= ri r- U p ®~ECI~~~ Table 1. Development Costs excluding Land Creekview Villas City of Bakersfield I. Land Acquisition II. Directs Offsites (Rec Area, Landscaping) S itework Building Costs Contingency Total Directs Per Unit Total 36 $0 $0 $5,830 $210,000 $9,380 $337,500 $140,650 $5,063,500 $7,790 $280,600 $163,660 $5,891,600 Indirects A&E Environmental/Soils Consultants Permits and Fees Legal/Appraisal/I nsurance/Taxes Marketing/Models 3rd Party Project Mgt. Overhead/Contingency Total Indirects $10,590 $381,100 $970 $35,000 $4,170 $150,000 $13,760 $495,400 $4,080 $147,000 $4,440 $160,000 $2,000 $72,000 $11,810 $425,000 $51,820 $1,865,500 IV. Financing Costs V. Total Costs excluding Land $8,390 $301,900 $223,860 $8,059,000 Source: Developer pro forma (11/21/08); figures rounded. Prepared by Keyser Marston Associates, Inc. \\Sf-fs1\wp\10\10410\004\Pro forma 12 8 08.x1s; Table 1; 12/19/2008 a, 1C ~n r- •. .'f_'. 114 i'iL Table 2. Sales Revenue & Residual Land Value Creekview Villas City of Bakersfield 1. Sale Revenues 3-Bedroom -Low-income 3-Bedroom -Moderate-income Total Safes (Less) Sale Commissions /Title & Escrow Net Sale Revenues II. Residual Land Value Net Sale Revenues (Less) Development Costs excluding Land (Less) Developer Profit Residual Land Value Per Unit Total $187,180 $6,738,500 ($223,860) ($18,880) ($8,059,000) ($679,500) ($55,560) ($2,000,000) Source: Sale prices estimated by KMA, subject to adjustment at the time units are sold for current mortgage terms, amount of down payment, etc.; Sale Commissions/Title & Escrow percentage estimated by Developer. Prepared by Keyser Marston Associates, Inc. \\Sf-fs1\wp\10\10410\004\Pro forma 12 8 OS.xls; Table 2; 12/19/2008 Units Unit So. Ft. Avg. Price Total 6 1,794 $91,000 $546,000 30 1,794 $217,000 $6,510,000 36 1,794 $196,000 $7,056,000 4.5% ($8,820) ($317,500) $187,180 $6,738,500 ~- . , v IV. CONCLUSIONS AND LIMITING CONDITIONS A. Opinion of Value/Conclusion Section III of this report discussed the estimated reuse value of the Site. It is concluded that the fair reuse value is a negative $2.0 million for the specific Project required to be developed on the Site. In other words, the Project requires free land plus a $2.0 million subsidy in order for the Project to be feasible. This reuse value is subject to the reuse conditions and the limiting conditions stated in this report. B. Reuse Conditions The Project is subject to specified development standards and restrictions set forth in the DDA. The DDA requires the development of a specific Project with covenants and conditions that impact the development economics and hence the value of the Site conveyed to the Developer. If the reuse conditions are changed, then the reuse value is subject to change. The most important economic condition is that the 36-unit Project be sold to Low- and Moderate-income households. C. Statement of Limiting Conditions and Assumptions The conduct of any valuation is necessarily guided, and its results influenced, by the terms of the assignment and the assumptions that together form the basis of the study. The following conditions and assumptions, together with lesser assumptions embodied in this report, constitute the framework of our analysis and conclusions. It is assumed that the title of the Site is good and marketable. No title search has been made by KMA, nor have we attempted to determine the ownership of the Site. The value estimates are given without regard to any questions of title, boundaries, encumbrances or encroachments. It is assumed that all assessments, if any, are paid. No legal description of the Site was furnished. In lieu of the legal description, our understanding of the Project is based on the site plan provided to us by the Redevelopment Agency. We assume that the Project will be in conformance with the applicable land use designation and building ordinances over the economic life of the property. Information provided by such informed local sources as the Redevelopment Agency, governmental agencies, the Developer, financial institutions, realtors, buyers, sellers, and others was weighed in the light in which it was supplied and checked by secondary means; however, no responsibility is assumed for possible misinformation. KMA is not required to give testimony or appear in court because of having made this valuation, with reference to the Site in question, unless arrangements have been previously made therefore. ~ ~<~ ,;( Keyser Marston Associates, Inc. 12/19/2008 ~` \\Sf-fs1\wp\10\10410\004\001-002(Reuse).doc Page 10 ''' c~ r ' SUMMARY REPORT PURSUANT TO SECTION 33433 OF THE CALIFORNIA HEALTH AND SAFETY CODE ON A DISPOSITION AND DEVELOPMENT AGREEMENT BY AND BETWEEN THE BAKERSFIELD REDEVELOPMENT AGENCY AND CREEKVIEW VILLAS, LLC INTRODUCTION The California Health and Safety Code, Section 33433, requires that if a redevelopment agency wishes to sell or lease property to which it holds title and if that property was acquired in whole or in part, directly or indirectly, with property tax increment funds, the agency must first secure approval of the proposed disposition and development agreement ("DDA") from its local legislative body after a public hearing. A copy of the proposed DDA and a summary report that describes and contains specific financing elements of the proposed transactions shall be available for public inspection prior to the public hearing. As contained in the Code, the following information shall be included in the summary report: The cost of the agreement to the redevelopment agency, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the agency, plus the expected interest on any loans or bonds to finance the agreement; 2. The estimated value of the interest to be conveyed or leased, determined at the highest and best use permitted under the redevelopment plan; 3. The estimated value of the interest to be conveyed in accordance with the uses, covenants, and development costs required under the proposed agreement with the Agency, i.e., the reuse value of the site; 4. An explanation of why the sale or lease of the property will assist in the elimination of blight, as required by Section 33433; and 5. The purchase price or sum of the lease payments which the lessor will be required to make during the term of the lease. If the sale price or total rental amount is less than the fair market value of the interest to be conveyed or leased, determined at the highest and best use consistent with the redevelopment plan, then the agency shall provide as part of the summary an explanation of the reasons for the difference. Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs1\wp\10\10410\004\001-001(33433).doc Page 1 ,'ti ; ~, r- ~- .! This report outlines the salient parts of the proposed DDA by and between the Bakersfield Redevelopment Agency ("Agency") and Creekview Villas, LLC ("Developer"), which requires the Developer to develop a 36-unit affordable townhouse complex known as Creekview Villas. The purpose of this analysis is to determine the cost of the Agreement to the Agency. This Section 33433 report is based upon information in the proposed DDA and is organized into the following five sections: 1. Summary of the Proposed Agreement -This section includes a description of the site, the proposed development and the major responsibilities of the Agency and the Developer. 2. Cost of the Agreement to the Agency -This section outlines the cost of the Agreement to the Agency. It presents the terms of the land conveyance to the Developer by the Agency, and sets forth the cost of the Agreement of the Agency. 3. Estimated Value of the Interest to be Conveyed -This section summarizes the value of the site and interest to be conveyed to the Developer. 4. Elimination of Blight -This section includes an explanation of why the sale of the property will assist in the elimination of blight and the supporting facts and materials. 5. Consideration Received and Reasons Therefore -This section describes the purchase price to be paid by the Developer to the Agency. It also contains a comparison of the purchase price and the fair market value at the highest and best use consistent with the redevelopment plan for the interests conveyed. Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs 1 \wp\10\10410\004\001-001(33433).doc Page 2 .~ i - r~:f r- ~_? ~~ .:~~,~ II. SUMMARY OF THE PROPOSED AGREEMENT A. Description of the Site and the Proposed Development Site The approximately 1.91-acre site to be conveyed by the Agency to the Developer is located immediately east of the South Mill Creek canal between 13'h Street and 14'h Street. The site is located within the Southeast Redevelopment Project Area. The proposed Project is a portion of the Redevelopment Agency's larger South Mill Creek Mixed- Use Redevelopment project. Later phases of the larger project will include market rate residential units, additional affordable units, and non-residential uses. Developer The Developer is Creekview Villas, LLC. Development Description The Project is proposed to consist of the following elements: ^ 36 affordable for-sale townhouse units, all of which will contain three bedrooms. The DDA will restrict the units to Low and Moderate Income households. • The Project will be configured in three-story, townhouse style buildings. ^ Each unit will include atwo-car private garage on the ground floor of each unit. ^ The project will include landscaped areas and a recreation area along the adjacent canal. B. Key Terms of the DDA The following are some of the key terms of the Agreement. ^ The units must be sold to qualified Low- and Moderate-income households. ^ A covenant will be recorded on each unit limiting the occupancy to income-qualified households for a period of 45 years and imposing restrictions on re-sale of the units. ^ The Developer is to design and construct the Project within the times specified in the Schedule of Performance. Speculation is not allowed. ^ The Agency will provide financial assistance to the project as described in the following section. Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs1\wp\10\10410\004\001-001(33433).doc Page 3 -,, ~, ; .. ~"~ ~ ,., 4 (',' Lv `' t % ' ~ I III. COST OF THE AGREEMENT TO THE AGENCY The Agency purchased the 1.91-acre site in 2007 for $1.3 million. Per the DDA, the Agency will convey the site to the Developer for $1 and take back a note for the amount of $1 million. The take-back note will be forgiven when the project is completed and the units are sold to qualified home buyers. Per the DDA, the Agency will provide to the Developer $2 million in cash assistance to be used to reimburse the Developer for eligible predevelopment and construction costs for the project. The cash assistance will be provided in the form of a loan and will be funded with the Agency's Low/Mod Housing funds. As with the take-back note for the site purchase, the $2 million loan will be forgiven when the Project is completed and sold to qualified home buyers. The Agency will also contribute up to $100,000 in financial assistance to each of the six buyers of the Low-income units in the project, for a total of up to $600,000. The amount of such assistance will be determined by the Agency at a later time. Finally, the Agency will incur costs related to preparing the site for development, which the Agency estimates to cost no more than $150,000. The total cost to the Agency is as follows: Site Acquisition Cost $1,300,000 Offsite Infrastructure Costs (no more than) $150,000 Cash Assistance to Developer $2,000,000 Low-income Home Buyer Assistance (up to) 600 000 Total Agency Cost (up to) $4,050,000 Of the above costs, only the $2 million cash assistance is a cash contribution to the Developer. To the extent that bonds have been or will be used to fund the Agency's costs outlined above, the interest costs would not likely be significant on a discounted net present value basis due to the fact that the annual discount rate applicable to the Agency's future payments would be approximately equivalent to the Agency's annual borrowing costs. Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs1\wp\10\10410\004\001-001(33433).doc Page 4 ,'~, ~~ ~:~ ,_ ".~~~::, .. ~~~i_~ IV. VALUE OF THE INTEREST TO BE CONVEYED Reuse Value The DDA includes covenants and conditions that impact the development economics and hence the value of the interests conveyed to the Developer. The Reuse Valuation (the reuse value is set forth in an accompanying report entitled "Reuse Valuation") assumes compliance with these covenants and conditions and other conditions imposed by the Agency. The principal condition of the DDA is that the Project be sold to qualified Low- and Moderate-income households. The conclusion of the Reuse Valuation is that the Site, given the covenants and conditions in the DDA, has a reuse value of a negative $2 million. In other words, the Project cannot afford to pay for the land parcel (Site) and, in addition, a $2 million subsidy is required by the Agency in order to render the Project financially feasible. This conclusion is consistent with the DDA which specifies that the Agency will provide the Developer with free land and a $2 million cash contribution. Estimated Value at Highest and Besf Use There is not a current appraisal of the subject site. However, Keyser Marston has reviewed comparable land sales for residential use in the City of Bakersfield (residential is likely the highest and best use of the site consistent with the uses permitted by the Redevelopment Plan). Over the last approximately three years, residential land has been transacting in the City of Bakersfield in the wide range of $3 to $11 per square foot, depending on a number of variables including location, site size and configuration, and timing. Agency staff has estimated that the value of the subject 1.91-acre site is $1,000,000, or approximately $12 per square foot. This estimate falls at the upper end of the land sales reviewed. Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs1\wp\10\10410\004\001-001(33433).doc Page 5 V. ELIMINATION OF BLIGHT The approximately 1.91-acre site to be conveyed by the Agency to the Developer is located within the Southeast Redevelopment Project Area. Development of the proposed Project is a portion of the Redevelopment Agency's larger South Mill Creek Mixed-Use Redevelopment Project. Later phases of the larger project will include market rate residential units, additional affordable units, and non-residential uses. The Implementation Plan for the Southeast Bakersfield Redevelopment Project indicates that the area suffers from a range of detrimental physical and economic conditions and that the Agency has undertaken a comprehensive program of activities including housing assistance programs and direct financial assistance to stimulate quality development. Redevelopment of the subject site and the balance of the South Mill Creek Mixed-Use Redevelopment Project is an important strategy in the Agency's efforts to remove blighting conditions from the area. In addition, the Project will create 36 for-sale townhouse units for the community's Low- and Moderate-income housing stock. r r Keyser Marston Associates, Inc. 12/19/2008 \\Sf-fs1\wp\10\10410\004\001-001(33433).doc Page 6 VI. CONSIDERATION RECEIVED AND REASONS THEREFORE As described in Section III of this report, the Agency is providing the Developer with free land and $2 million in cash assistance in order to render the Project financially feasible, which is consistent with the fair reuse value of the site with the covenants and conditions governing its development. The principal condition affecting the economic value of the Project is that the units be sold to Low- and Moderate-income households (see accompanying report entitled "Reuse Valuation"). The reason why the reuse value is less than the market value at its highest and best use is that the DDA imposes reuse conditions that impact on the economics of the Project, principally that the Project be restricted to Low- and Moderate-income households. Keyser Marston Associates, Inc. \\Sf-fs1 \wp\10\10410\004\001-001(33433).doc 12/19/2008 Page 7 ,. f VII. CONFORMANCE WITH FIVE-YEAR IMPLEMENTATION PLAN Among the stated goals of the Agency's Implementation Plan for the Southeast Bakersfield Redevelopment Project are the following, both of which the proposed Project helps the Agency achieve: 1. Promote the comprehensive planning, redesign, rezoning, replanning, reconstruction and/or rehabilitation in such a manner to achieve a higher and better utilization of the land in the Project Area. 2. Create and promote home ownership and improved housing facilities for individuals and families. The Kern Council of Governments in its Regional Housing Needs Assessment (RHNA) makes a determination of the number of housing units needed at each affordability level in the City of Bakersfield for the period 2006 to 2013. According to the RHNA, approximately 35% of the City's total housing need is for Low- and Moderate-income units during this time period. In the proposed Project, 100% of the units will be affordable to Low- and Moderate-income households. Therefore, the Project's distribution of affordability exceeds the City of Bakersfield's overall need and helps to satisfy the community's need for affordable housing. Keyser Marston Associates, Inc. izi iaitwa \\Sf-fs1\wp\10\10410\004\001-001(33433).doc Page 8 r;