HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/18/2017 - SECOND READING OF ORDINANCE NO. 087, 2017, AUTHORIAgenda Item 3
Item # 3 Page 1
AGENDA ITEM SUMMARY July 18, 2017
City Council
STAFF
Beth Rosen, Affordable Housing Program Administrator
Patrick Rowe, Redevelopment Program Coordinator
SUBJECT
Second Reading of Ordinance No. 087, 2017, Authorizing the Release of a Collateral Assignment of Note and
Deed of Trust which Secures Performance of Certain Obligations Related to the 1999 Restoration of the
Northern Hotel.
EXECUTIVE SUMMARY
This Ordinance, unanimously adopted on First Reading on July 5, 2017, authorizes the release of a collateral
assignment of the Note and Deed of Trust made by Funding Partners/NDC, in favor of the City of Fort Collins
which secures performance obligations contained within the Northern Hotel Restoration Agreement, dated
November 15, 1999. The release of the collateral assignment is requested by the property owner, an affiliate
of Funding Partners and the National Development Council, in order to facilitate the sale and transfer of
ownership of the Northern Hotel to an affiliate of Hendricks Communities LLC, an affordable housing developer
with a strong local presence.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on Second Reading.
ATTACHMENTS
1. First Reading Agenda Item Summary, July 5, 2017 (w/o attachments) (PDF)
2. Ordinance No. 087, 2017 (PDF)
Agenda Item 12
Item # 12 Page 1
AGENDA ITEM SUMMARY July 5, 2017
City Council
STAFF
Beth Rosen, Affordable Housing Program Administrator
Patrick Rowe, Redevelopment Program Coordinator
SUBJECT
First Reading of Ordinance No. 087, 2017, Authorizing the Release of a Collateral Assignment of Note and
Deed of Trust which Secures Performance of Certain Obligations Related to the 1999 Restoration of the
Northern Hotel.
EXECUTIVE SUMMARY
The purpose of this item is to authorize the release of a collateral assignment of the Note and Deed of Trust
made by Funding Partners/NDC, in favor of the City of Fort Collins which secures performance obligations
contained within the Northern Hotel Restoration Agreement, dated November 15, 1999. The release of the
collateral assignment is requested by the property owner, an affiliate of Funding Partners and the National
Development Council, in order to facilitate the sale and transfer of ownership of the Northern Hotel to an
affiliate of Hendricks Communities LLC, an affordable housing developer with a strong local presence.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading.
BACKGROUND / DISCUSSION
In the 1970s a fire left a majority of the Northern Hotel in a condition of vacancy and disrepair, and portions of
the building were left in a condemned state. Following a series of failed attempts to restore the hotel, in the
late 1990’s, Funding Partners for Housing Solutions and the National Development Council (NDC) created a
development partnership (the Developer) with the aim of restoring the hotel as a cornerstone of the downtown
area while also adding affordable housing for the community. In support of this effort, the City and the
Downtown Development Authority (DDA) pledged $1,001,000 in support to the project (total project costs were
estimated to be $9,692,823). The public support was memorialized in the Northern Hotel Restoration
Agreement (the Agreement) and was conditioned on the development of forty-seven (47) affordable residential
units, which were to remain affordable for a twenty-year period, historic character facade improvements, the
development of 13,800 square feet of commercial space, and other obligations. (Attachments 2 and 3)
To assure compliance of Restoration Agreement obligations, the City was collaterally assigned a note and
deed of trust against the property, thereby providing the City the recourse of foreclosure in the event of default.
Once the Restoration Agreement terms have been satisfied, the collateral assignment becomes null and void.
Recently the City received a request from Funding Partners for the release of the collateral assignment to
facilitate the sale of the property to an affiliate of Hendricks Communities, a preferred affordable housing
partner with a positive track record with the City. Hendricks Communities plans to acquire the property with a
new allocation of low income housing tax credits, provide substantial rehabilitation to improve the livability of
the units, and commit to an additional 20 years of affordability.
ATTACHMENT 1
Agenda Item 12
Item # 12 Page 2
At present, all Restoration Agreement obligations have been satisfied with the exception of the
remaining/ongoing requirement that the forty-seven (47) residential units remain affordable for a period of
twenty (20) years from final certificate of occupancy of the project, determined to be November 15, 2021. In
addition to the Restoration Agreement, the affordability of the forty-seven (47) units is separately assured
through a separate Low-Income Housing Tax Credit Land Use Restriction Agreement (LURA) executed with
the Colorado Housing and Finance Authority as a condition of receiving Low Income Housing Tax Credit
Financing. The LURA warrants affordability of the 47 units through the year 2041. (Attachment 4)
Additionally, Hendricks Communities LLC has received funding allocations of $675,000 in City Affordable
Housing Fund dollars through the 2016 and 2017 Competitive Process, which also carry affordability
restrictions. Both the Affordable Housing Board and Community Development Block Grant (CDBG)
Commission recommended funding to be used towards necessary improvement costs. Upon deployment of
these funds, the City and developer will execute a Promissory Note, Deed of Trust, and Agreement of
Restrictive Covenants requiring an additional 20 years of affordability.
Although the City is forgoing the superior foreclosure recourse made available through the collateral
assignment, staff believes the existing restrictions and planned future restrictions adequately protect the
remaining 4 years of affordability required under the Restoration Agreement, and go much further by extending
the affordability protections far into the future (2041 for the existing LURA restriction and an additional 20 years
from award for City Affordable Housing Funds).
Given the positive benefits of the sale of the Northern Hotel to a community partner in affordable housing, the
additional affordable restrictions related to the forty-seven (47) low income housing units, and the full
satisfaction of the other Restoration Agreement obligations, staff recommends the collateral assignment be
released and discharged.
CITY FINANCIAL IMPACTS
None. The City-DDA investment in the Northern Hotel renovation project was made in 1999 using City
General Fund dollars and Downtown Development Authority tax increment.
BOARD / COMMISSION RECOMMENDATION
In both the 2016 and 2017 Competitive Process funding allocation cycles, the Affordable Housing Board and
CDBG Commission recommended funding Hendricks Communities LLC $250,000 and $425,000 respectively
for necessary repairs and improvements to the Northern Hotel. (Attachments 5, 6, and 7)
ATTACHMENTS
1. Northern Hotel location map and picture (PDF)
2. Restoration Agreement (PDF)
3. Restoration Agreement Compliance Summary, May 2, 2017 (PDF)
4. Land Use Restriction Agreement (PDF)
5. Affordable Housing Board Recommendations, March 2016 (PDF)
6. CDBG Commission Deliberations (excerpt), April 14, 2016 (PDF)
7. CDBG Recommendations(excerpt), April 2017 (PDF)
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ORDINANCE NO. 087, 2017
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AUTHORIZING THE RELEASE OF A COLLATERAL ASSIGNMENT OF NOTE AND
DEED OF TRUST WHICH SECURES PERFORMANCE OF CERTAIN OBLIGATIONS
RELATED TO THE 1999 RESTORATION OF THE NORTHERN HOTEL
WHEREAS, in the 1970s, a fire left most of the Northern Hotel (the “Hotel”) in a
condition of vacancy and disrepair, and portions of it were left in a condemned state; and
WHEREAS, in the late 1990s, Funding Partners for Housing Solutions and the National
Development Council created a development partnership (the “Developer”) to restore the Hotel
as a cornerstone of the downtown area while also adding affordable housing for the community
(the “Project”); and
WHEREAS, to support the Project, the City contributed $1,001,000 toward the total
Project costs of approximately $9.7 million; and
WHEREAS, the City’s support of the Project was memorialized in a November 1999
Northern Hotel Restoration Agreement between the City and the Developer that was (the
“Agreement”); and
WHEREAS, the Agreement required the Developer to satisfying several obligations
related to the Project and future use of the Hotel, including the development of forty-seven
affordable residential units in the Hotel to remain affordable for a twenty-year period, historic
character facade improvements and the development of 13,800 square feet of commercial space
in the Hotel (“Project Obligations”); and
WHEREAS, to secure its performance of the Project Obligations, the Developer assigned
to the City a $1,001,000 promissory note and deed of trust encumbering the Hotel and did so
under that Collateral Assignment of Note and Deed of Trust recorded with the Agreement on
November 18, 1999, at Reception #0099098903 in the Larimer County, Colorado records (the
“Collateral Assignment”); and
WHEREAS, the Collateral Assignment was subsequently amended and restated by the
City and the Developer by that certain Amended and Restated Collateral Assignment of Note and
Deed of Trust” dated May 10, 2000, recorded on May 22, 2000, at Reception #2000033228 in
the Larimer County, Colorado records (the “Amended Collateral Assignment”); and
WHEREAS, the City has recently received a request from the Developer for the release
of the Collateral Assignment and the Amended Collateral Assignment to facilitate the sale of the
Hotel to an affiliate of Hendricks Communities, a preferred affordable housing partner with a
positive track record with the City; and
WHEREAS, Hendricks Communities plans to acquire the Hotel with a new allocation of
low-income housing tax credits in order to fund a substantial rehabilitation of the Hotel to
improve the livability of its affordable housing units, which will require Hendricks to commit to
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an additional twenty years of affordability for those units (“Tax Credit Affordability
Obligation”); and
WHEREAS, all of the Project Obligations have been satisfied except for the requirement
that forty-seven residential units in the Hotel remain affordable for twenty years from the date of
the issuance of the final certificate of occupancy for the Project, which twenty-year period will
end on November 15, 2021 (“City Affordability Obligation”); and
WHEREAS, in addition to the City Affordability Obligation, the affordability of the
forty-seven units is currently required through a separate Low-Income Housing Tax Credit Land
Use Restriction Agreement (the “LURA”) executed with the Colorado Housing and Finance
Authority as a condition of receiving Low Income Housing Tax Credit Financing for the Project
and the LURA requires affordability of the forty-seven units through the year 2041 (the “LURA
Affordability Obligation”); and
WHEREAS, Hendricks Communities has also recently been approved for an award of
$675,000 in City Affordable Housing Fund dollars to be used for the proposed Hotel renovation
awarded in the City’s 2016 and 2017 competitive process, and to receive these funds Hendricks
Communities will be required to execute a promissory note, deed of trust, and a restrictive
covenants agreement requiring an additional twenty years of affordability for the forty-seven
affordable units (the “Affordable Housing Fund Obligation”); and
WHEREAS, while the release of the Collateral Assignment and the Amended Collateral
Assignment will eliminate security helping to insure compliance with the City Affordability
Obligation, the remaining LURA Affordability Obligation and the new Tax Credit Affordability
Obligation and the Affordable Housing Fund Obligation will continue to provide security
helping insure that the forty-seven affordable units in the Hotel will remain affordable for many
years to come; and
WHEREAS, given the positive benefits of the sale of the Hotel to Hendricks
Communities, a community partner in affordable housing, who will be making substantial
improvements to the Hotel and considering that all but one of the Project Obligations have been
satisfied, City staff recommends the Collateral Assignment and Amended Collateral Assignment
be released and discharged; and
WHEREAS, since the Collateral Assignment and Amended Collateral Assignment
constitute a lien against the Hotel, they are considered under Code Sections 23-110 and 23-111
to be an interest in real property that can only be disposed of by City Council by ordinance if
Council first finds such disposition to be in the best interests of the City; and
WHEREAS, the City Council hereby finds that the release and discharge of the Collateral
Assignment and the Amended Collateral Assignment is in the best interests of the City.
NOW THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
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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 Manager is hereby authorized to execute such documents
and to take such other actions as necessary to fully release and discharge any and all interests the
City has in the Collateral Assignment and in the Amended Collateral Assignment, consistent
with the terms and purposes of this Ordinance.
Introduced, considered favorably on first reading, and ordered published this 5th day of
July, A.D. 2017, and to be presented for final passage on the 18th day of July, A.D. 2017.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
Passed and adopted on final reading on the 18th day of July, A.D. 2017.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk