Attachment 15 - Report to Board of Supervisors of the County of Santa ClaraCounty of Santa Clara
Santa Clara Valley Health & Hospital System
Mental Health Services
74292
DATE: February 24, 2015
TO: Board of Supervisors
FROM: Toni Tullys, Director, Department of Behavioral Health Services
SUBJECT: Loan Agreements for four Senior Housing Solutions Properties
RECOMMENDED ACTION
Consider recommendations relating to Senior Housing Solutions' (SHS) affordable senior
housing properties.
Possible action:
a. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's
Consent and Subordination Agreement for the County Community Development Block
Grant (CDBG) Loan No. 100270, in the amount of $150,000, from SHS to Los Gatos
Senior Homes, LLC, for property located at 185 Anne Way, Los Gatos.
b. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's
Consent and Subordination Agreement for the County Housing Rehabilitation Loan No.
100004, in the amount of $169,150, from SHS to Los Gatos Senior Homes, LLC, for
property located at 14390 Blossom Hill Road, Los Gatos.
c. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's
Consent and Subordination Agreement for the County Home Investment Partnership
Program (HOME) Loan No. 100155, in the amount of $90,493, from SHS to Los Gatos
Senior Homes, LLC, for property located at 14390 Blossom Hill Road, Los Gatos.
d. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's
Consent and Subordination Agreement for the County CDBG Loan No. 100065, in the
amount of $72,359, from SHS to Los Gatos Senior Homes, LLC, for property located at
14390 Blossom Hill Road, Los Gatos.
e. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's
Consent and Subordination Agreement for the County Affordable Housing Fund (AHF)
Loan No. 100167 in the amount of $250,000 from SHS to Milpitas Senior Homes, LLC,
for property located at 751 Vasona Street, Milpitas.
ATTACHMENT 1 5
Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 1 of 6
County Executive: Jeffrey V. Smith
f. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's
Consent and Subordination Agreement for the County CDBG Loan No. 100219 in the
amount of $91,196 from SHS to Milpitas Senior Homes, LLC, for property located at
751 Vasona Street, Milpitas.
g. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's
Consent and Subordination Agreement for the County Housing Rehabilitation Loan No.
100001 in the amount of $68,500 from SHS to Milpitas Senior Homes, LLC, for
property located at 751 Vasona Street, Milpitas.
h. Approve Assignment, Assumption and Modification Agreement and the Junior Lienor's
Consent and Subordination Agreement for the County Housing Rehabilitation Loan No.
100302 in the amount of $40,000 from SHS to Milpitas Senior Homes, LLC, for
property located at 1170 North Park Victoria Drive, Milpitas.
i. Approve a one -time $15,000 payment to Charities Housing Development Corporation
Charities Housing Development Corporation (CHDC), reimbursing CHDC for expenses
it incurred while working with the County, various cities, and SHS to preserve
affordable housing for low income seniors.
FISCAL IMPLICATIONS
Modifying the County's eight loan agreements would help SHS and CHDC preserve 20 units
of affordable housing for low income seniors and would have limited fiscal impacts on the
County. The loans were funded with funds from three Federal programs: Home Investment
Partnership Program (HOME), Community Development Block Grant (CDBG) and Rental
Rehabilitation Program (RRP) funds.
Three of the County's eight loans would have their interest rates reduced from 6% to 3 %.
This would reduce the amount of money that the County could potentially receive if the
properties were sold or if the owner stopped using the properties for affordable senior
housing. In practice, the County does not receive any payment from the owner and the
intention is not to recoup the initial principal, but rather to maintain these assets in the
community by restricting the use of the properties. The loan agreements are structured as
recoverable grants, all payments are deferred for as long as the properties remain affordable
and available to low income seniors. The County does not receive any annual payments
because the properties do not cash -flow. Their revenues are just enough to cover expenses.
Also, the County would not likely get paid back on the loans' maturity dates because, over
time, the properties need to be rehabilitated using new funds and existing loans must be
modified and/or subordinated.
In addition, the $15,000 reimbursement to CHDC would not negatively impact the County
General Fund. The reimbursement would be paid from the Affordable Housing Fund (AHF),
and the revenues and expenditures would be incorporated into the FY2015 mid -year budget
adjustment.
CONTRACT HISTORY
Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian
County Executive: Jeffrey V. Smith
Agenda Date: February 24, 2015
Page 2 of 6
Eight of SHS's 14 properties were acquired with the assistance of County loans. For these
eight properties, the County provided SHS with 15 separate loans totaling $1,965,300. In
addition, two loans from the City of Campbell were transferred to the County. The 15
County loans and the two Campbell loans on the eight properties total $2,090,300.
One of the eight properties with a County interest was located at 455 Cypress Avenue in
Santa Clara. In August 2012, the Board of Supervisors approved actions that transferred the
property from SHS to Mas Milagros, LLC. The receiving organization was in a better
financial position and was able to preserve the property and its five units of affordable
housing for low income seniors.
The transfer of 455 Cypress Avenue to Mas Milagros, LLC, left seven SHS properties with a
County interest. Three of the seven properties are in Campbell. The County, CHDC, the City
of Campbell and other lenders will continue working to preserve the properties. We
anticipate bringing recommendations to the Board related to the three Campbell properties by
May 2015.
Recommended actions a. through h. pertain to four remaining SHS properties that have a
County interest. Two of the properties are in Los Gatos and two properties in Milpitas.
Between 2003 and 2011, the Board approved eight loans to SHS for these four properties.
These loans total $931,698, and were used by SHS to provide 20 units of affordable housing
to low income seniors.
REASONS FOR RECOMMENDATION
In September 2011, SHS determined that it could no longer operate and maintain the
properties due to ongoing operating losses. Over the last three years, SHS, the County, the
Housing Authority of the County of Santa Clara (Housing Authority), and the various lenders
have been working to modify the properties' operations and ownership structure so that the
assets would remain primarily available to extremely low income seniors. At one point,
SHS's 14 properties had a total of 66 residents.
Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 3 of 6
County Executive: Jeffrey V. Smith
Agenda Date: February 24, 2015
Pro a
L13!
Loan Type /Source
Loan Number
Original an
Beds
Start Date
final
Maturity Date
Amount
1
185 Anm Wy.
to$ Gatos
CDBG
1m270
$ S5x,Ox0
5
7/6J2009
7
2
143900lossom HRI Rd.
Los Gatos
Housing Rehab
1
$ 169,150
S
8%4J2005
14390 Blossom Hill Rd.
Los Gatos
HOME
100155
$ 90,493
12/17/2003
12/17/2033
14390 Blossom Hill Rd.
Los Gatos
CDBG
100065
$ 72,359
12/17/2003
12/17/2033
3
7$1 Vasona St
M Itas
AHF
100167
$ 250
6J35/2�6
6 , 4Jm35'
751 Vasona St.
Imilicinas
CDBG
1 100219
$ 91,196
12/11/2006
12/10/2036
751 Vasona St.
Milpitas
Housing Rehab
100001
$ 68,500
11112007
12/1/2027
orth Park Victoria Dr.
Housing Rehab
3tb302
$ 40,000
5
5%5/2011
5 /5(2041
alrlands Ct
ll
HOME
100154
$ 50
5
7({s(1993
11/16/2022:
airlands Ct.
l
Housing Rehab
500005
$ 137,702
1/1/2003
12/31/2033
airla nds Ct.
l
Housing Rehab
RLF transfer
25,000
4/1/2008
4/1/2063
e n Ave.
WPollardRd.
l
VCmbllDBG
HOME
100217
$ 400,000
5
12/20/2007
12/19/2x62
ellyn Ave.
l
Housing Rehab
100006
$ 85,000
10/1/2007
9/1/2027
ellyn Ave.
Housing Rehab
RLF transfer
100,000
4/1/2008
4/1/2063
llard R0.
Hcusm Rehab
100002
$ 57,0
5
11129/2001
1211/2016
ollard Rd.
CDBG
300080
$ 123,900
6/8/2001
6/8/2031
8
4 55 C r4ss
SaOta Clara
HOME
200268
$ 170,000 1
5
7/281A0101
7/3 2x65
$ 2,090,300 1
40
One of the eight properties with a County interest was located at 455 Cypress Avenue in
Santa Clara. In August 2012, the Board of Supervisors approved actions that transferred the
property from SHS to Mas Milagros, LLC. The receiving organization was in a better
financial position and was able to preserve the property and its five units of affordable
housing for low income seniors.
The transfer of 455 Cypress Avenue to Mas Milagros, LLC, left seven SHS properties with a
County interest. Three of the seven properties are in Campbell. The County, CHDC, the City
of Campbell and other lenders will continue working to preserve the properties. We
anticipate bringing recommendations to the Board related to the three Campbell properties by
May 2015.
Recommended actions a. through h. pertain to four remaining SHS properties that have a
County interest. Two of the properties are in Los Gatos and two properties in Milpitas.
Between 2003 and 2011, the Board approved eight loans to SHS for these four properties.
These loans total $931,698, and were used by SHS to provide 20 units of affordable housing
to low income seniors.
REASONS FOR RECOMMENDATION
In September 2011, SHS determined that it could no longer operate and maintain the
properties due to ongoing operating losses. Over the last three years, SHS, the County, the
Housing Authority of the County of Santa Clara (Housing Authority), and the various lenders
have been working to modify the properties' operations and ownership structure so that the
assets would remain primarily available to extremely low income seniors. At one point,
SHS's 14 properties had a total of 66 residents.
Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 3 of 6
County Executive: Jeffrey V. Smith
Agenda Date: February 24, 2015
The first eight recommended actions modify the eight County loan agreements that are
associated with the two properties in Los Gatos and the two properties in Milpitas. The
properties would be transferred to Los Gatos Senior Homes, LLC, and Milpitas Senior
Homes, LLC, respectively. Both LLCs have CHDC as the sole member /manager. By
approving the agreements, the Board would transfer the four properties from SHS to the
LLCs and would preserve 20 units of affordable housing for low income seniors in Santa
Clara County. In addition, the agreements would:
1) Set the minimum age of tenants to 62;
2) Reduce the interest rate from 6% to 3% on the County's residual receipt loans in order
to improve the financial viability of the properties;
3) Extend the use restrictions on the Milpitas properties by 30 years (ending in 2044);
4) Extend the use restriction on the Los Gatos properties by 55 years (ending in 2069);
and,
5) Restrict the properties to serving seniors who have incomes that are 50% or lower of
the area median income (AMI), including properties with Section 8 Project Based
Vouchers.
The intent of the SHS Board of Directors is to dissolve the organization once all properties
have been transferred to organizations that are able to maintain the affordable housing
opportunities for low income seniors. Since September 2011, CHDC has provided technical
assistance to SHS and to the various lenders. Currently, SHS does not have any paid staff
members and has been reliant on CHDC to help wind down the organization and to preserve
the affordable housing. CHDC has been providing property and asset management since July
2013. CHDC has provided $105,000 in unreimbursed personnel expenses to help the County
and the six cities preserve 14 properties that provide affordable housing to 40 low income
seniors in Santa Clara County. CHDC has requested the County's support in recouping some
of these expenses.
The properties are located in six cities. CHDC has requested that the County and the six
cities each pay one - seventh of CHDC's unreimbursed personnel expenses. While CHDC still
negotiating with the cities regarding the personnel expenses, Cupertino, Los Gatos, Milpitas
and Sunnyvale have already provided a total of $1,132,035 for rehabilitation, physical needs
assessments, property reports, legal fees, security deposits and operating subsidies to support
the long -term financial stability of the properties. Approval of the one -time payment to
CHDC would enable the organization to recoup some of the expenses it incurred while
assisting SHS, the County and the six cities that had a financial interest in SHS properties.
The recommended actions support the SCVHHS goal of "Better Health for All" by
preserving affordable housing for primarily extremely low income seniors, especially those
with chronic health conditions.
Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 4 of 6
County Executive: Jeffrey V. Smith
Agenda Date: February 24, 2015
CHILD IMPACT
The recommended action will have no /neutral impact on children and youth.
SENIOR IMPACT
The recommended actions will have a positive impact on seniors. Upon completion of all property transfers
40 units of affordable housing for low income seniors will be preserved and made available for at least 30
years.
SUSTAINABILITY IMPLICATIONS
The recommended actions balance public policy and program interests, and enhance the
Board of Supervisors' sustainability goal of social equity by improving low- income seniors'
access to permanent affordable housing.
BACKGROUND
SHS is a non - profit corporation that provides affordable housing for low- income seniors in
Santa Clara County. Between 1992 and 2011, SHS acquired 13 properties and leased one
property (mainly single family homes). The properties are located in six jurisdictions
throughout the county. The properties were acquired with various loans and grants from the
County, the cities and the Housing Trust Silicon Valley (Housing Trust). All of the public
funding came with use restrictions, the durations of which are generally tied to the loan
terms. The key restrictions are related to minimum age, maximum income of each
household, and maximum rent allowed for each unit. The 14 properties provided a total of
66 units of affordable housing for low income seniors in Santa Clara County.
CONSEQUENCES OF NEGATIVE ACTION
If the agreements are not approved, Los Gatos Senior Homes, LLC and Milpitas Senior Homes, LLC will be
unable to assume the loans. This could jeopardize the availability of the 20 affordable housing units that are
located at the four properties. SHS is no longer in a position to operate and manage the properties.
STEPS FOLLOWING APPROVAL
Upon approval, the Clerk of the Board is requested to send an e -mail notification to: Don
Casillas Qon.Casillas( hhs.scc ov.org) and Rebecca Garcia
(RebeccaLGarcia(2hhs scef ov org) in the Mental Health Department.
LINKS:
• Linked To: 63188: Approve Consent to Assign, Assume, and Modify Agreement and
Assignment, Assumption and Modification Agreement for County HOME Loan
Contract No. HO- 10 -03, from Senior Housing Solutions to Mas Milagros, LLC for the
Cypress Group Residence.
Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 5 of 6
County Executive: Jeffrey V. Smith
A¢enda Date: February 24, 2015
ATTACHMENTS:
• Agreements for 185 Anne Way, Los Gatos, CA (PDF)
• Agreements for 14390 Blossom Hill Rd., Los Gatos, CA (PDF)
• Agreements for 751 Vasona St., Milpitas, CA (PDF)
• Agreements for 1170 North Park Victoria Dr., Milpitas, CA (PDF)
Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 6 of 6
County Executive: Jeffrey V. Smith
Agenda Date: February 24, 2015