Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors (Acting as the Governing Board of Commissioners of the Housing Authority of the County of San Mateo)
From: Debbie McIntyre, Executive Director
Subject: Authorization to Loan the Housing Authority of the County of San Mateo’s Midway Village Reserve Funds for Phase 2 of the Midway Village Redevelopment Project
RECOMMENDATION:
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Acting as the Governing Board of the Housing Authority of the County of San Mateo, adopt a resolution authorizing:
A) The Housing Authority of the County of San Mateo to loan in a not to exceed amount of $14,000,000 from available Midway Village reserve funds for the construction and permanent financing of Phase 2 of the Midway Village Redevelopment Project; and
B) The Executive Director of the Housing Authority of the County of San Mateo, or designee, in consultation with special legal counsel to the County and the County Attorney, to enter into and execute an agreement and promissory note to loan the HACSM’s Midway Village reserve funds for the construction and permanent financing of Phase 2 of the Midway Village Redevelopment Project.
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BACKGROUND:
Midway Village is an aging, 150-unit affordable rental housing development located on approximately 12 acres in the Bayshore neighborhood of Daly City. The Housing Authority of the County of San Mateo (“HACSM) built Midway Village in the mid-1970s, and it has been continuously owned and operated by HACSM and until recently, HACSM’s affiliate, SAMCHAI.
The history of the Midway Village Redevelopment Project (the “Project”) spans several years. On June 29, 2017, HACSM released a Request for Proposals (“RFP”) seeking experienced and qualified developers interested in redeveloping, owning, operating and managing multiple phases of affordable housing at the Midway Village site, now referred to as the Project. MidPen Housing Corporation (“MidPen”) was selected as the Project’s developer through this RFP process.
On January 23, 2018, this Board adopted Resolution No. 075677 and authorized the HACSM Executive Director to enter into an Exclusive Negotiating Rights Agreement (“ENA”) with MidPen. On March 21, 2018, HACSM and MidPen executed the ENA for the Project.
On April 10, 2018, this Board adopted Resolution No. 075825 and authorized the HACSM Executive Director to enter into a predevelopment loan agreement with MidPen in an amount not to exceed $1,500,000 in Midway Village.reserve funds (“Master Predevelopment Loan”) for MidPen to complete various tasks outlined in the ENA. On June 26, 2018, HACSM and MidPen executed a predevelopment loan agreement for the Master Predevelopment Loan (“Master Predevelopment Loan Agreement”).
On January 7, 2020, this Board adopted Resolution No. 077165 and authorized the HACSM Executive Director to enter into a predevelopment loan agreement with MidPen in an amount not to exceed $1,409,795 in Midway Village reserve funds (“Phase 1 Predevelopment Loan”) for MidPen to complete tasks associated with the first phase of the Project. MidPen and HACSM have contemplated a total of four development phases for the Project. On January 30, 2020, HACSM and MidPen executed a predevelopment loan agreement for the Phase 1 Predevelopment Loan (“Phase 1 Predevelopment Loan Agreement”).
On September 15, 2020, this Board adopted Resolution No. 077672 and authorized the HACSM Executive Director to enter into an Affordable Housing and Property Disposition Agreement (“AHPDA”) for Phase 1 of the Project (“Phase 1 AHPDA”) with MP Midway Associates I, L.P., a limited partnership established by MidPen (“Phase 1 Partnership”) which provides for, among other things, (1) HACSM to loan up to $12,000,000 in Midway Village reserve funds (this amount is inclusive of all predevelopment funds previously or later committed to the Project and loaned to MidPen) to the Phase 1 Partnership, secured by a deed of trust, (2) HACSM to ground lease to the Phase 1 Partnership a portion of Midway Village and a portion of the David R. Rowe Park (“Park”) property, a neighborhood park located adjacent to Midway Village (“Phase 1 Property”), and (3) the Partnership to develop and operate on the Phase 1 Property a rental affordable housing development containing 147 rental dwelling units, with all but two of such units restricted for rental to and occupancy by income-restricted households at restricted rents (“Phase 1 of the Project”). On September 15, 2020, HACSM and MidPen executed the Phase 1 AHPDA.
On September 21, 2020, the City of Daly City transferred fee title of the Park to HACSM. At the end of the redevelopment process, a new park space with better public access and parking will be deeded to the City and will replace the Park.
On October 31, 2020, the HACSM Executive Director executed (i) the first amendment to the Master Predevelopment Loan Agreement, which added $200,000 in Midway Village reserve funds to the Master Predevelopment Loan, for a new total Master Predevelopment Loan amount not to exceed $1,700,000 (“First Amendment to the Master Predevelopment Loan Agreement”) to facilitate the completion of environmental reviews required for the Project, and (ii) an amended and restated Phase 1 Predevelopment Loan Agreement, which replaced the Phase 1 Predevelopment Loan Agreement in its entirety, and added $1,300,000 in Midway Village reserve funds to the Phase 1 Predevelopment Loan, for a new total Phase 1 Predevelopment Loan amount not to exceed $2,709,795 (“Amended and Restated Phase 1 Predevelopment Loan Agreement”).
On May 18, 2021, this Board adopted Resolution No. 078165 and authorized HACSM to transfer and reallocate the reserve funds from Phase 1 AHPDA to Phase 2 of the Project in an amount up to $12,000,000. This resolution also authorized HACSM to execute a loan to the Phase 2 limited partnership (“Phase 2 Partnership”) formed by MidPen for development of Phase 2 in the amount of $7,300,000 to be used to pay for the Phase 2 portion of constructing the single garage structure (“Garage”) during the construction of Phase 1 of the Project to serve residents of both Phase 1 and Phase 2.
On August 1, 2021, in connection with the construction loan closing for Phase 1, (i) the Phase 1 Limited Partnership repaid a portion of the Phase 1 Predevelopment Loan, (ii) the Phase 1 Limited Partnership and HACSM cancelled the Amended and Restated Phase 1 Predevelopment Loan Agreement, and (iii), the remaining outstanding balance of the Phase 1 Predevelopment Loan, in the amount of $1,620,197, was rolled into a permanent loan of Midway Village reserve funds for Phase 1, which loan is evidenced by a promissory note executed by the Phase 1 Partnership at the closing for Phase 1.
On August 17, 2021, HACSM and the Phase 2 Partnership executed a Phase 2 Garage predevelopment loan agreement, in the amount of $7,300,000.
Construction of Phase 1 of the Project was completed in May 2024, providing 147 units of affordable, income-restricted housing and the Garage that will serve residents of both Phase 1 and Phase 2 (when Phase 2 construction is complete). Phase 1 is fully occupied, and no further disbursement of Midway Village reserve funds is needed for Phase 1.
As of June 30, 2024, the completion of construction of Phase 1 of the Project required the expenditure of only $1,249,353.05 of the authorized amount of $1,620,197 from Midway Village reserve funds. Furthermore, because of construction cost savings and the Phase 2 Limited Partnership’s receipt of a Housing for Healthy California loan which paid for some of the Phase 2 Garage construction costs, the cost of construction of the Phase 2 portion of the Garage required the use of only $1,361,438.89 of the $7,300,000 of Midway Village reserve funds previously allocated to Phase 2 for this purpose by this Board pursuant to Resolution No. 078165.
The use of Midway Village reserve funds was well below both the amount authorized for Phase 1 and the amount authorized for the Phase 2 portion of the cost of constructing the Garage. Therefore, the amount of Midway Village reserve funds available for Phase 2 construction is larger than projected on May 18, 2021 when this Board adopted Resolution No. 078165, which authorized the HACSM to allocate up to $12,000,000 of Midway Village reserve funds to Phase 2 costs, subject to certain limitations and conditions that have been met and are no longer relevant to the availability of Midway Village reserve funds for Phase 2.
DISCUSSION:
Phase 2 of the Project will provide new construction of 111 units of new affordable income-restricted housing, 2 managers’ units and a state-subsidized child development center that will replace the aging Bayshore Child Care Center, which has served low-income families of the Bayshore community for more than forty years.
As required by HACSM, Phase 2 of the Project has successfully secured multiple sources of financing from the City of Daly City, the Federal HOME Loan Bank AHP, the County’s Affordable Housing Fund, the Housing for Healthy California program of the State Department of Housing and Community Development, a sponsor loan from MidPen for the Peninsula Family Service Child Care Center, a commitment of construction bond financing, and a recommendation for an award of 4% tax credits from the California Tax Credit Allocation Committee and tax exempt bond financing from the California Debt Limit Allocation Committee. The conditions of the award of tax credit and bond financing require a financing commitment of $14,000,000 from HACSM’s Midway Village reserve funds to complete the financing package for Phase 2 and begin construction in early 2025.
Due to cost savings and financing sources that reduced the total use of Midway Village reserve funds for completion of Phase 1 to only $1,249,353.05, HACSM staff have determined that Midway Village reserve funds are sufficient to award a total loan of $14,000,000 (inclusive of the $1,361,438.89 in Midway Village reserve funds that have already been disbursed for the Garage) for the construction and permanent financing of Phase 2, as requested by MidPen in order to meet conditions of their reservation of tax credits and bonds.
After accounting for the outstanding balance of $1,361,438.89 expended to construct the Phase 2 portion of the Garage built concurrently with the residential portion of the Phase 1, the recommended Phase 2 Loan Agreement and Promissory Note in the total principal amount of $14,000,000 would provide $12,638,561.11 of Midway Village reserve funds for construction and permanent financing of Phase 2.
This amount exceeds the maximum amount of $12,000,000 of Midway Village reserve funds previously authorized by this Board for Phase 2 development pursuant to Resolution No. 078165. Therefore, this resolution is intended to supersede and replace the limitations on the use of Midway Village reserve funds committed to Phase 2 development, which were set forth in Resolution No. 078165.
The County Attorney’s Office has reviewed and approved the resolution as to form.
FISCAL IMPACT:
There is no net County cost associated with this action. There is no fiscal impact to HACSM.