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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 11/17/2020 - RESOLUTION 2020-103 DETERMINING FAIR VALUE FOR THE Agenda Item 11 Item # 11 Page 1 AGENDA ITEM SUMMARY November 17, 2020 City Council STAFF Lindsay Ex, Interim Housing Manager Matt Robenalt, DDA Executive Director Ingrid Decker, Legal SUBJECT Resolution 2020-103 Determining Fair Value for the Property Interests at 143 East Remington Street to be Exchanged by Entities Affiliated with the Downtown Development Authority and Housing Catalyst in Connection with the 140 East Oak Street Affordable Housing Project. EXECUTIVE SUMMARY The purpose of this item is for Council to determine fair value for a property exchange the Downtown Development Authority (DDA) and Housing Catalyst are proposing regarding the 140 East Oak Street affordable housing project, which would include incorporation of the neighboring property, 14 3 Remington Street, into the project. This parcel will be combined with the 140 East Oak Street property, for which Council determined fair value via Resolution 2020-061 at the Council meeting held on July 21, 2020. The project’s 79 units will be a mix of studio, and one- and two-bedroom apartments that serve individuals and households whose earnings range from 30-80% AMI (area median income) with the target of an overall average of 60% AMI. With these combined parcels, the number of parking spaces increases by nine and the building height is reduced from six to five stories, which increases neighborhood compatibility and is in response to community concerns. This work aligns with the Council Priority of Affordable and Achievable Housing Strategies, is a partnership between the DDA and Housing Catalyst, and was approved by the Planning and Zoning Board on September 3, 2020. STAFF RECOMMENDATION Staff recommends adoption of the Resolution. BACKGROUND / DISCUSSION The DDA was created in 1981 with the pur pose, according to Colorado state statute (the “DDA Act”), of planning and implementing projects and programs within the boundaries of the DDA. The DDA and the City adopted a Plan of Development that specifies the projects and programs the DDA would under take. One element of this Plan is housing, and in February of 2019, the DDA and Housing Catalyst began to develop a project concept for the DDA’s property at 140 East Oak Street to increase affordable housing options in downtown Fort Collins. Since this time, the DDA and Housing Catalyst have entered into an Intergovernmental Agreement to develop this property. In addition to the 140 East Oak Street site, Housing Catalyst also has an option through December 30, 2020 to purchase the neighboring parcel at 143 Remington Street for $1,325,000. If the option is exercised and the property purchased, Housing Catalyst will transfer ownership of 143 Remington Street to FC DDA, LLC (the DDA-controlled limited liability company which was formed in connection with the 140 East Oak Street project). In exchange, the DDA, through FC DDA, LLC, will transfer ownership of one ground -floor commercial condominium to Housing Catalyst once the building has been constructed, and will further incorporate 143 Agenda Item 11 Item # 11 Page 2 Remington Street into the project by leasing the property to OAK 140, LLLP (the Housing Catalyst -controlled partnership which was created in connection with the 140 E ast Oak Street project) on the same terms and conditions as the lease for 140 East Oak Street. As with Resolution 2020-061, the DDA Act has specific provisions that must be followed when DDA property is sold or leased. Specifically, the DDA Act (Section 31-25-808(2) C.R.S. as amended, requires the Board of Directors and Governing Body (i.e., City Council) to make a determination that such sale and/or lease is for fair value, with fair value being weighed based on the uses and objectives identified in the DDA’s Plan of Development. The specific statute language is: Any sale or letting of property by the authority shall be at not less than its fair value (as determined by the authority and the governing body) for uses in accordance with the plan of development. In determining the fair value of real property for such uses, an authority shall take into account and give consideration to the uses provided in such plan; the restrictions upon and the covenants, conditions, and obligations assumed by the purchaser or lessee; and the objectives of such plan. On June 11, the DDA Board adopted Resolution 2020-03 (Attachment 1), which found that the lease of the 140 East Oak Street property for $100 for the 99-year term constitutes fair value for the purposes of the DDA Act, given the purpose of the property’s development for affordable housing. On November 12, 2020, the DDA Board adopted Resolution 2020-10, which found that the property exchange with Housing Catalyst described above and below constitutes fair value for purposes of the DDA Act, given the estimated fair market values of the properties being exchanged and the benefits to the project resulting from the exchange and the lease of 143 Remington Street to OAK 140, LLLP. Additional project-specific information is as follows: • If Housing Catalyst exercises the option to purchase the 143 Remington Street property, Hou sing Catalyst will transfer 143 Remington Street to FC DDA, LLC, which is wholly owned and controlled by the DDA. • In exchange, FC DDA, LLC, will: o Lease 143 Remington Street to OAK 140, LLLP, which is the Housing Catalyst-controlled partnership that will own and manage the affordable housing component of the building, for inclusion in the affordable housing project. The existing lease between FC DDA, LLC, and OAK 140, LLLP, which was the subject of Council Resolution 2020-061, will be amended to include this property. o Agree to transfer ownership of one of FC DDA, LLC’s ground floor commercial condominiums in the building to Housing Catalyst once the building has been completed and converted to condominiums The estimated fair market value of this condominium unit is $738,000. • Per the lease agreement between FC DDA, LLC, and OAK 140, LLLP, ownership of the building will revert to FC DDA, LLC, in 99 years. • The project was approved by the Planning and Zoning Board on September 3, 2020. • This exchange of property benefits the project in the following ways: o Allows for a reduction in building height from six stories to five, which makes the building compatible with the surrounding area and is responsive to concerns about the six-story height voiced by neighbors and other community members, as well as those of the Landmark Preservation Committee. o Increases the number of affordable housing units by one and on-site parking spaces by nine. • The lease will be subject to the following restrictions and covenants: o The LLLP will be prohibited from assigning the lease, except to another Housing Catalyst -controlled entity. o The leased premises may be used only for affordable housing. Agenda Item 11 Item # 11 Page 3 This project aligns with the following community-wide goals: • Fort Collins, through the Affordable Housing Strategic Plan, has set a goal to have 10% of the total units in the community be affordable by 2040. • An interim goal was set for the term of the Plan to increase the ratio of affordable units to units overa ll from 5% to 6% - meaning that an additional 940 new homes were needed in this time frame. While 373 homes have been added in the last 5 years with 248 more under construction (total of 621), Fort Collins is still short of the overall goal. • This project could bring an additional 79 affordable units into the community, all for households earning below 80% of area median income, which meets the City’s definition of affordable housing. CITY FINANCIAL IMPACTS This Resolution does not directly impact City finances. However, should the City ever elect to dissolve the DDA pursuant to Section 31-25-803 of the Colorado Revised Statutes, the City would become the owner of 140 East Oak Street and 143 Remington Street and the lessor under the lease. The City has also assigned Private Activity Bond capacity to Housing Catalyst for this project, which is required for the low income tax credit financing that will be used to develop the project. BOARD / COMMISSION RECOMMENDATION The DDA Board unanimously adopted Resolution 2020-03 at its June 11, 2020, meeting (Attachment 1). The DDA Board adopted Resolution 2020-10 at its November 12, 2020 meeting. PUBLIC OUTREACH Neighborhood and community engagement regarding the site plan occurred through the City’s developmen t review process and is outside the scope of this Resolution. ATTACHMENTS 1. Downtown Development Authority Resolution 2020-03 (PDF) 2. Downtown Development Authority Resolution 2020-10 (PDF) ATTACHMENT 1 1 RESOLUTION 2020-10 OF THE BOARD OF DIRECTORS OF THE FORT COLLINS, COLORADO, DOWNTOWN DEVELOPMENT AUTHORITY DETERMINING FAIR VALUE, WITHIN THE MEANING OF C.R.S 31-25-808(2), FOR THE CONVEYANCE AND LEASE OF DDA PROPERTY IN CONNECTION WITH THE 140 EAST OAK STREET AFFORDABLE HOUSING PROJECT WHEREAS, on April 21, 1981, the City Council of the City of Fort Collins, Colorado (“City Council”), adopted Ordinance No. 046, 1981, creating the Fort Collins, Colorado, Downtown Development Authority (the “DDA”); WHEREAS, the DDA was formed pursuant to, and is governed by, C.R.S. § 31-25-801 et seq. (the “DDA Act”); WHEREAS, the DDA adopted a plan of development, as authorized by Section 807(2)(d) of the DDA Act, on July 1, 1981, which plan of development was approved by City Council on September 8, 1981, by Resolution 81-129 (the “Plan of Development”); WHEREAS, on December 16, 1971, City Council adopted Ordinance No. 71-99, creating the Fort Collins Housing Authority, now known as Housing Catalyst (“Housing Catalyst”); WHEREAS, the mission of Housing Catalyst is to create vibrant, sustainable communities throughout Fort Collins, including the development of new residential units; WHEREAS, Housing Catalyst is the community leader in sustainable, long-term affordable housing solutions; WHEREAS, the DDA Board finds that there exists within the boundaries of the DDA (the “DDA District”) a shortage of lower income housing options; WHEREAS, the DDA is the owner of the real property located at 140 East Oak Street, Fort Collins, Colorado (the “DDA Property”); WHEREAS, based upon substantial public outreach and community input, the Board of Directors of the DDA (the “DDA Board”) determined that construction on the DDA Property of a mixed-use building containing qualified-affordable housing would be beneficial to the DDA District (the “Project Concept”); WHEREAS, in February 2019, the DDA engaged with Housing Catalyst to consider and further develop the Project Concept and potential sources of financing for the Project Concept, with a desire to create housing opportunities for individuals and households earning up to eighty percent (80%) of area median income (“AMI”), with a goal of providing a mix of studios, and one (1) and two (2) bedroom units to a mix of individuals and households earning thirty percent (30%), fifty percent (50%), seventy percent (70%) and eighty percent (80%) AMI; ATTACHMENT 2 2 WHEREAS, the DDA and Housing Catalyst have considered many different project iterations and funding alternatives for the Project Concept and have determined that the most beneficial and economically viable project would consist of construction of a single multi-story, mixed-use building containing a ground floor commercial space and seventy-eight or more qualified-affordable housing units (the “Building”), financed with low-income housing tax credit assistance through the Colorado Housing and Financing Authority; private activity bonds issued by Housing Catalyst; federal, state, and local grants and loans; and construction and permanent loans made by banks or other institutional lenders (the “Project”); WHEREAS, the DDA and Housing Catalyst entered into an intergovernmental agreement regarding the Project entitled “Intergovernmental Agreement Regarding Redevelopment of 140 East Oak Street” on May 6, 2020 (the “IGA”); WHEREAS, the IGA envisions that OAK 140, LLLP, a Housing Catalyst-controlled entity, will control and manage the housing component of the Project, which encompasses all floors of the Building above the ground floor, with such portion of the DDA Property being leased to OAK 140, LLLP, for a nominal sum; WHEREAS, the IGA envisions that FC DDA, LLC, a DDA-controlled entity, will retain ownership of the surface of the Property and will own the ground floor of the Building; WHEREAS, pursuant to Section 808(2) of the DDA Act, the sale or lease of DDA property shall be for fair value, as determined by the DDA Board and City Council, for uses in accordance with the DDA’s adopted Plan of Development, and that the determination of “fair value” shall “take into account and give consideration to the uses provided in such plan…and the objectives of such plan”; WHEREAS, on June 11, 2020, the DDA Board passed Resolution 2020-03, determining that the lease of a portion of the DDA Property to a Housing Catalyst-controlled entity for a nominal sum of $100.00 or less, for use in connection with the Project, constitutes fair value for purposes of Section 808(2) of the DDA Act; WHEREAS, on July 21, 2020, City Council passed Resolution 2020-061, determining that the lease of a portion of the DDA Property to a Housing Catalyst-controlled entity for a nominal sum of $100.00 or less, for use in connection with the Project, constitutes fair value for purposes of Section 808(2) of the DDA Act; WHEREAS, on July 29, 2020, FC DDA, LLC, and OAK 140, LLLP, entered into a lease agreement for a portion of the DDA Property on terms consistent with the IGA, as described above (the “Lease”); WHEREAS, subsequent to execution of the Lease, Housing Catalyst, LLC, a Housing Catalyst-controlled entity, entered into an option agreement for 143 Remington Street, which gives Housing Catalyst, LLC, the right to purchase such property through December 30, 2020 (the “Remington Property”); 3 WHEREAS, the Remington Property abuts the DDA Property to the northeast; WHEREAS, the Building, if built on the DDA Property alone, would need to be six stories in height in order for the Project to be financially viable, and would contain seventy-eight affordable housing units and fifty-seven on-site parking spaces; WHEREAS, during the Project planning and entitlement phases, neighbors and other community members, including members of the City’s Landmark Preservation Committee, raised concerns about the compatibility of a six-story building with the surrounding area, particularly as it related to the Remington Property, which contains a small one-story building built along the property line, and the appearance of the necessary five-story firewall between such building and the Building; WHEREAS, incorporating the Remington Property into the Project would allow for a reduction in Building height from six stories to five stories, would eliminate the need for the five- story firewall, and would increase the number of affordable housing units by one and on-site parking spaces by nine; WHEREAS, the DDA and Housing Catalyst have tentatively agreed that, should the Project receive an award of low-income housing tax credits, Housing Catalyst, LLC, will purchase the Remington Property and transfer it to FC DDA, LLC, and in exchange, FC DDA, LLC, will: (1) transfer ownership of one commercial condominium space in the ground floor of the Building (the “Condominium Unit”) to Housing Catalyst once the Building has been constructed; and (2) will lease the Remington Property to OAK 140, LLLP, for use in connection with the Project, on the same terms and conditions as the DDA Property under the Lease (such transaction referred to hereinafter as the “Property Exchange”); WHEREAS, the purchase price of the Remington Property is $1,325,000, and the estimated current fair market value of the Condominium Unit is $783,000; WHEREAS, pursuant to the Lease, FC DDA, LLC, will own the Building, including the Condominium Unit, upon expiration of the Lease term in ninety-nine years; WHEREAS, the DDA’s Plan of Development identifies the following, inter alia, as primary purposes, objectives and priorities of the DDA: 1. To increase, equal to the need, the net supply of parking spaces within the DDA District; 2. To increase the total housing supply within the DDA District; 3. To improve the visual attractiveness of the DDA District; and 4. To encourage all planning to be compatible with its surroundings. 4 WHEREAS, the DDA Board finds that the facts, findings and determinations made in DDA Resolution 2020-03 are relevant to the Property Exchange, and such resolution is hereby incorporated by reference into this Resolution 2020-10; WHEREAS, the DDA Board finds that, given the estimated fair market values of the Condominium Unit and the Remington Property, together with the fact that FC DDA, LLC, will own the Condominium Unit upon expiration of the Lease, the Property Exchange approximates a fair market value exchange, and further, that the Property Exchange improves the Project in ways that advance the DDA’s Plan of Development by: (1) allowing for a reduction in Building height to five stories, thereby making the Building compatible with the surrounding area; (2) eliminating the need for a five-story firewall between the Building and the existing building on the Remington Property, resulting in a proportioned and more aesthetically pleasing building design; and (3) increasing the number of affordable housing units by one and the number of on-site parking spaces by nine; WHEREAS, based on the aforementioned facts and findings, the DDA Board determines that the Property Exchange constitutes “fair value” for purposes of Section 808(2) of the DDA Act; WHEREAS, pursuant to Section 808(2) of the DDA Act, City Council must also make a determination that the Property Exchange constitutes “fair value”; and WHERAS, the DDA Board desires to respectfully request that City Council make such a determination. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE FORT COLLINS, COLORADO, DOWNTOWN DEVELOPMENT AUTHORITY, that: 1. The DDA hereby determines that the Property Exchange constitutes “fair value” for purposes of C.R.S. § 31-25-808(2). 2. The DDA hereby respectfully requests that City Council make a determination that the Property Exchange constitutes “fair value” for purposes of C.R.S. § 31-25-808(2). Passed and adopted at a regular meeting of the Board of Directors of the Fort Collins, Colorado, Downtown Development Authority this 12th day of November, 2020. ____________________________________ Jenny Schultz, Chair ATTEST: _________________________________ Cheryl Zimlich, Secretary -1- RESOLUTION 2020-103 OF THE COUNCIL OF THE CITY OF FORT COLLINS DETERMINING FAIR VALUE FOR THE PROPERTY INTERESTS AT 143 EAST REMINGTON STREET TO BE EXCHANGED BY ENTITIES AFFILIATED WITH THE DOWNTOWN DEVELOPMENT AUTHORITY AND HOUSING CATALYST IN CONNECTION WITH THE 140 EAST OAK STREET AFFORDABLE HOUSING PROJECT WHEREAS, on April 21, 1981, the City Council adopted Ordinance No. 046, 1981, creating the Fort Collins, Colorado Downtown Development Authority (the “DDA”); and WHEREAS, the DDA was formed pursuant to, and is governed by, C.R.S. 31-25-801 et seq. (the “DDA Act”); and WHEREAS, the DDA adopted a plan of development, as authorized by Section 807(2)(d) of the DDA Act, on July 1, 1981, which plan of development was approved by the City Council on September 8, 1981, by Resolution 81-129 (the “Plan of Development”); and WHEREAS, the DDA is the owner of the real property located at 140 East Oak Street, Fort Collins, Colorado (the “Property”); and WHEREAS, there is a shortage of housing options in general, and lower-income housing options in particular, within the boundaries of the DDA (the “DDA District”); and WHEREAS, the Plan of Development identifies “increasing the housing supply” as a primary objective and purpose of the DDA to help achieve the DDA’s goal of the DDA District as “an area of mixed-use residential, commercial and entertainment uses,” and “[encouraging] living within the District” as a way to improve the diversity and attractiveness of the DDA District; and WHEREAS, the DDA’s priorities within the Plan of Development include providing sites for land uses that are important to the economic vitality of the DDA District, and working with developers and builders if their project is highly desirable is consistent with the plans and objectives of the DDA, and may not otherwise be economically viable; and WHEREAS, based upon substantial public outreach and community input, the Board of Directors of the DDA (the “DDA Board”) determined that construction on the Property of a mixed-use building containing qualified-affordable housing would be beneficial to the DDA District (the “Project Concept”); and WHEREAS, on December 16, 1971, the City Council adopted Ordinance No. 71-99, creating the Fort Collins Housing Authority, now known as Housing Catalyst (“Housing Catalyst”); and WHEREAS, the DDA and Housing Catalyst are collaborating to further develop the Project Concept and potential sources of financing for the Project Concept, with a goal of providing one- and two-bedroom units to a mix of households earning thirty percent of area -2- median income (“AMI”), between thirty and fifty percent of AMI, between fifty and seventy percent of AMI, and between seventy and eighty percent of AMI, with a target average household income of approximately sixty percent of AMI; and WHEREAS, the DDA and Housing Catalyst have determined that the most beneficial and economically viable project would consist of construction of a single multi -story, mixed-use building containing a ground floor commercial space, and seventy-eight or more qualified- affordable housing units on the upper floors (the “Building”), financed with low-income housing tax credit assistance through the Colorado Housing and Financing Authority; private activity bonds issued by Housing Catalyst; federal, state, and local grants and loans; and construction and permanent loans made by banks or other institutional lenders (the “Project”); and WHEREAS, the DDA and Housing Catalyst have agreed that FC DDA, LLC, a DDA- controlled entity, will retain ownership of the Property and the Building and will manage the ground floor of the building, while Housing Catalyst, through a Housing Catalyst-controlled entity, will lease the upper floors of the building for a nominal sum (one hundred dollars or less) for up to 99 years (the “Lease”), and will control and manage the housing component of the Project; and WHEREAS, Section 808(2) of the DDA Act require that any sale or letting of property by the DDA shall be at not less than its “fair value”, as determined by the DDA and the City Council, for uses in accordance with the DDA’s Plan of Development; and WHEREAS Section 808(2) also states that this determination of fair value shall take into account and give consideration to the uses provided in the Plan of Development; the restrictions upon and the covenants, conditions, and obligations assumed by the purchaser or lessee; and the objectives of such plan; and WHEREAS, at its regular meeting on June 11, 2020, the DDA Board adopted DDA Resolution 2020-03 making findings and determinations that the lease of a portion of the Property to Housing Catalyst, or a Housing Catalyst-controlled entity, for a nominal sum of one hundred dollars or less, for use in connection with the Project, constitutes “fair value” for purposes of C.R.S. 31-25-808(2), and requesting that the City Council make a similar determination; and WHEREAS, at its regular meeting on July 21, 2020, the City Council adopted Resolution 2020-061 making such findings and determinations regarding the property at 140 East Oak Street; and WHEREAS, Housing Catalyst has an option through December 30, 2020, to purchase a parcel of property at 143 Remington Street (the “Remington Property”); and WHEREAS, if Housing Catalyst purchases the Remington Property, it proposes transferring ownership of it to FC DDA, LLC, to become part of the Property to be used for the Project; and -3- WHEREAS, in exchange for the Remington Property, FC DDA, LLC, would transfer ownership of one ground floor commercial condominium unit in the Project (the “Condominium Unit”) to Housing Catalyst, after the Building is completed, and lease the Remington Property to Oak 140, LLLP, a Housing Catalyst-controlled entity, on the same Lease terms and conditions as for the rest of the Building (the “Property Exchange”); and WHEREAS, the Building, if built on the existing DDA Property alone, would need to be six stories in height in order for the Project to be financially viable, and would contain seventy- eight affordable housing units and fifty-seven on-site parking spaces; and WHEREAS, during the Project planning and entitlement phases, neighbors and other community members, including members of the City’s Landmark Preservation Committee, raised concerns about the compatibility of a six-story building with the surrounding area, particularly as it related to the Remington Property, which contains a small one-story building built along the property line; and WHEREAS, incorporating the Remington Property into the Project would allow for a reduction in Building height from six stories to five stories, and would increase the number of affordable housing units by one and on-site parking spaces by nine; and WHEREAS, the purchase price for the Remington Property is $1,325,000, and the estimated current fair market value of the Condominium Unit is $783,000; and WHEREAS, upon expiration of the Lease, FC DDA, LLC will own the Condominium Unit; and WHEREAS, at its regular meeting on November 12, 2020, the DDA Board adopted DDA Resolution 2020-10 making findings and determinations that the Property Exchange constitutes “fair value” for purposes of C.R.S. 31-25-808(2), and requesting that the City Council make a similar determination; and WHEREAS, in making this determination the DDA Board found that Property Exchange would improve the Project in ways that enhance the primary purposes, objectives and priorities of the DDA under its Plan of Development, including, but not limited to: 1. To increase, equal to the need, the net supply of parking spaces within the DDA District; 2. To increase the total housing supply within the DDA District; 3. To improve the visual attractiveness of the DDA District; and 4. To encourage all planning to be compatible with its surroundings; and WHEREAS, the DDA Board further found that, given the estimated fair market values of the Condominium Unit and the Remington Property, and considering the fact that FC DDA, -4- LLC, will own the Condominium Unit upon expiration of the Lease, the Property Exchange approximates a fair market value exchange; and WHEREAS, the Property would be restricted by the terms of the Lease and by covenants that will limit the use of the leased space to affordable housing and limit the assignment or transfer of the Lease; and WHEREAS, pursuant to Section 808(2) of the DDA Act, City Council must also make a determination that the proposed Property Exchange as described herein, constitutes “fair value” for the property interests the DDA would convey, and the DDA Board is requesting that City Council make such a determination; and WHEREAS, the City Council supports the DDA’s goals of increasing the supply of housing and parking within the DDA District and making such housing compatible with its surroundings; and WHEREAS, the City Council finds that the facts, findings and determinations made in Resolution 2020-061 are relevant to the Property Exchange, and such Resolution is hereby incorporated by referenced into this Resolution. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That the City Council hereby determines that Housing Catalyst’s conveyance of the Remington Property to FC DDA, LLC, a DDA-controlled entity, in exchange for conveyance by FC DDA, LLC, of the Condominium Unit to Housing Catalyst, and the lease of the Remington Property to Oak 140, LLLP, a Housing Catalyst-controlled entity, for use in connection with the Project. all subject to the terms and conditions described in this Resolution, constitutes “fair value” for purposes of C.R.S. 31-25-808(2). Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 17th day of November, A.D. 2020. __________________________________ Mayor ATTEST: _____________________________ City Clerk