HomeMy WebLinkAboutResolution 2016-0015TITLE:
CITY OF WHEAT RIDGE, COLORADO
RESOLUTION NO . .1§
Series of 2016
A RESOLUTION SUPPORTING REDEVELOPMENT OF THE
FRUITDALE SCHOOL THROUGH A PUBLIC-PRIVATE
PARTNERSHIP PROPOSED BY HARTMAN ELY INVESTMENTS
WHEREAS, the City of Wheat Ridge is a home rule municipality operating under
a charter approved by the electorate under Article XX of the Colorado Constitution; and
WHEREAS, the City has facilitated the creation of the Wheat Ridge Housing
Authority, a public housing authority organized and operating under CRS 29-4-201 et
seq ; and
WHEREAS, the Housing Authority has acquired title to certain real property and
associated buildings known as the Fruitdale School building ; and
WHEREAS, the Fruitdale School was constructed in 1927 and is one of the last
remaining school buildings designed by noted Colorado architect Temple Buell; and
WHEREAS, the Housing Authority has entered into a Purchase and Sale
Agreement with Fruitdale School Partners, LLC (FSP) and affiliated entity of Hartman
Ely Investments ("HEI") whereby FSP would acquire the Fruitdale School property and
redevelop the same for approximately five affordable and eleven market rate rental
apartment units (the ''Project"); and
WHEREAS, HEI over the past 12 months has committed approximately
$150,000 in resources developing initial plans for the Project; and
WHEREAS, in order to finance the redevelopment costs for the Project as
contemplated by HEI, public funds in the form of grants and loans will be required ; and
WHEREAS, the Housing Authority and HEI in cooperation with City staff, have
obtained preliminary commitments and expressions of interest from the following
organizations to contribute to the cost of the Project:
• Jefferson County Community Development (HOME funds): $640,000
• Historic preservation tax credits: $1 ,932,080
• Solar power tax credits: $97,415
• Enterprise Zone tax credits: $9,999
• WRHA grant: $170,000
• WRHA loan: $400,000
WHEREAS, HEI has requested that the City Council formally express its support
for a City contribution of funds to the Project in the form of a $1 ,925,000 bridge loan
proposed to be repaid in years 2 and 3 of the project with receipt of HOME funds and
tax credit sale proceeds; and
WHEREAS, HEI has requested that the City Council formally express its support
for a City contribution of funds to the Project in the form of a non-reimbursable grant of
$470,000; and
WHEREAS, in order for HEI , the City, and the Housing Authority to move forward
with negotiation of a detailed development agreement, it is necessary that the City
express its support for the contribution of City funds as a part of the entire cost of the
Project; and
WHEREAS, the preliminary cost and financing terms for the Project are set forth
on the attached Exhibit A; and
WHEREAS, the City Council finds that redevelopment of the Fruitdale School
property as described would be in the best interest of the City; and
WHEREAS, the City Council wishes to express its support for the Project,
understanding that conditions required by the City as a precondition to release of City
funds must be satisfactorily performed.
NOW, THEREFORE, BE IT RESOLVED by the Wheat Ridge City Council:
Section 1. The City Council hereby expresses its support for the proposed
Project to redevelop the Fruitdale School under the general terms described on the
attached Exhibit A, and to include a bridge loan commitment by the City in an amount
of approximately $1 ,925 ,000.
Section 2. The City Council hereby expresses its support for the proposed
Project to redevelop the Fruitdale School under the general terms described on the
attach Exhibit A, and to include a grant commitment by the City in an amount of
approximately $470,000.
Section 3. The City Council's support for the Project as expressed in this
Resolution is conditioned upon the execution of a Development Agreement with HEI
and the Wheat Ridge Housing Authority, acceptable to the Council, to include
appropriate assurances and mechanisms to minimize the City's risk, appropriate public
access to the property consistent with its final developed use, and a mechanism for
eventual ad valorem property taxation of all or a portion of the Project.
Section 4. This Resolution shall take effect upon adoption by the Council and
signature by the Mayor.
DONE AND RESOLVED this <6CL day of }-cl.J..utCIKLf 2016.
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EXHIBIT A
Term Sheet
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February 1, 2016
TERM SHEET FOR A DEVELOPMENT AGREEMENT
BETWEEN THE CITY OF WHEAT RIDGE ("CITY"), THE WHEAT RIDGE HOUSING AUTHORITY
("WRHA"), AND FRUITDALE SCHOOL PARTNERS, LLC ("DEVELOPER")
1. Site and Improvements The site at 10803 West 44th Avenue, Wheat Ridge, Colorado 80033
{the "Property'') consists of approximately 1.5 acres, as depicted on the attached Site Plan. It
includes the historic Fruitdale School, which is to be renovated into approximately sixteen (16)
residential rental units, some of which will be affordable.
2. Development Program The "Development" will include the following key components:
a. Residential-Of the total residential units to be constructed, approximately five will
be restricted as affordable units, assuming that the anticipated $640,000 HOME
funds subsidy is received by the Developer from the Jefferson County Community
Development agency ("Jeffco"") in 2016 and 2017 as shown by the project pro forma.
Rents will not exceed the rents recommended by Jeffco as part of the HOME
program, as adjusted annually by HUD for the Denver MSA. Refer to the pending
Agreement between Jeffco and Developer for details on the affordable units.
b. Site Work-Parking, landscaping, hardscape and solar panels will be provided,
generally as shown by the Site Plan.
3. Project Benefits The intent of the renovation of the Fruitdale School includes:
a. Restoring an important National Register historic landmark within the city
b. Setting the potential for catalytic spin-off development in this part of the city, as the
first loft-style residential development in Wheat Ridge. This may include a local foods
business at the north side of the Property, as part of a future phase development
c. Increasing the supply of affordable housing in the community
d. Providing space for exterior public events. Periodic public access to the
Development's interior areas will also be provided, as a community education benefit
e. Implementing a mutually beneficial redevelopment partnership with Jefferson County
f. Providing shared parking facilities for the adjacent Norma Anderson Preschool
g. Providing potential additional future site improvements to benefit the Preschool as
shown by the Site Plan (shared access road and fire hydrant)
h. Providing community education regarding sustainable development practices,
Including existing building re-use, solar power, energy efficiency, edible landscaping
and other appropriate development strategies
i. Providing mutually agreeable produce at no cost to the City from the Development's
fruit orchard and edible landscaping, as a part of the City's history and national
leadership role with local food production
4. Schedule of Performance Developer, City, and WRHA will fulfill their obligations with respect to
the construction of the Development, as follows:
February 1, 2016
a. Developer will secure financing commitments from tax credit equity investors and
other sources, based on a preliminary commitment from the City per this tenn sheet
by the time Developer purchases the Property from WRHA, currently scheduled for
late summer 2016.
b. Developer will purchase the Property from WRHA at the conclusion of all necessary
entitlements and due diligence investigations, currently scheduled for late summer
2016.
c. The WRHA will provide land swap efforts with the Jefferson County School
District to create a Plat for one larger parcel of approximately 1.5 acres
("Combined Parcel") that combines the current WRHA property with Land Swap
Area #1 as shown by the Site Plan, with one Combined Parcel fee simple title for
Developer to purchase. Developer understands that Land Swap Area #2 may
need to have an easement(s) to yield the net size of that parcel shown by the
Site Plan. The land swap exchange agreement shall be executed by the WRHA
and School District at no cost to Developer and as soon as possible but no later
than March 1, 2016. The city acknowledges th1s land exchange and recognizes it
as exempt from the local subdivision regulations, pursuant to Code Section 26-
402.C.
The Plat would ideally also include a site survey with ex1sting buildings located,
the potential future pre-school addition shown, and, grading information.
Developer is willing to contribute to the additional cost of putting grading
mformation on the Plat. since that information is in addition to the effort required
to accomplish the land swap.
d. The City/WRHA will remove the current deed restriction/reverter clause by March 1,
2016
e. The City agrees to initiate an application to rezone the Property to MU-N, with a goal
to conduct a public heanng on a rezoning ordinance in front of City Council by June
1,2016
f. The Developer will complete site and building plans and submit all needed
documents for building permit approval in a timely way, currently scheduled for mid-
summer, 2016.
g. The City will issue a full build1ng pennit in a timely way prior to Developer's purchase
of the Property, currently scheduled for late summer, 2016. Also, the City and
Developer will investigate the alternative of issuing a partial scope building permit
and/or interior demolition permit at an earlier date, to allow an ear11er Property
purchase and start of construction/completion of the solar power system.
h. The Developer will complete the solar power system as required by the utility
company, Xcel Energy, currently scheduled for October 1, 2016. The exact timing of
this system's completion will be coordinated with the Property purchase.
i. The Developer will complete building renovation and construct the residential units m
a timely way, currently scheduled for late spring 2017.
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February 1, 2016
5. Compensation to Developer, the Citv. and the WRHA An overview of the financial
transactions between entities includes:
a. The WRHA will transfer the Property to the Developer for a sales price of ten dollars
b. The City will provide $470,000 In the fonn of a grant to the Developer
c. The WRHA will provide $170,000 in the fonn of a grant to the Developer
d. The City will provide patient capital in the fonn of a loan to the Developer of a total of
approximately $1,925.000. The Developer will re-pay this loan after receipt of net
amounts of tax equity payments anticipated at $1 ,725.000 (Federal and State of
Colorado historic tax credits and Federal solar tax credit), currently scheduled to
occur no later than December 31, 2018, and the receipt of the net amount of HOME
funds received (currently anticipated at $200,000 and currently scheduled for 2017).
Interest-only payments on the loan principal of approximately $1 ,925,000 will be paid
annually beginning at Substantial Completion of the Development (as defined below).
The rate for such payments will be 1.5% simple interest, non-compounding.
The City understands that Developer's construction and financing cost estimates are
preliminary and may change due to the availability of additional/more detailed
infonnation prior to Developer's purchase of the Property. The City also understands
that the majority of i1s patient capital will be re-paid from the proceeds of historic
Investment tax credits ("HITCs'') and that the Development may have to be re-
designed to receive regulatory agency approval, as a precedent to the Development
being able to receive tax credit benefits. Such additional infonnation and a potential
re-design may change the economic perfonnance of the Development such that
additional patient capital would be required. The City agrees to provide up to
$190.000 of such additional patient capital, as long as the repayment timeline of their
payment is similar to the current proposal.
e. The WRHA will provide patient capital in the fonn of a loan to the Developer of
$400,000. The Developer will pay down this loan with the receipt of HOME funds
received (currently anticipated at $20,000 and currently scheduled for 2017). The
balance of the loan would be paid from a future refinance or sale of the Property, no
later than December 31, 2031 .
Interest-only payments on the remaining loan principal of approximately $380,000
will be paid annually beginning on December 31, 2023.The rate for such payments
will be 5% simple interest, non-compounding.
f. The City and WRHA patient capi1al/toan amounts noted above are approximate,
except as with respect to WRHA as noted previously, and will be confirmed by the
Developer's final pre-closing pro fonna (uPre-closing Pro forma"), within 30 days prior
to purchase of the Property.
The grants and loans noted above will be paid to the Developer as follows:
2.1.1 Initial payments totaling 20% of the Total Grant and Total Loan on the
Closing date when the Developer purchases the Property from WRHA.
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February 1, 2016
2.1.2 Six {6) progress payments with each payment totaling an additional10%
of the Total Grant and Total Loan each month as the Developer
implements the Development. concurrent with Developer's monthly
payments to its Contractor.
2.1.3 A final payment totaling 20% of the Total Grant and Total Loan when
Developer achieves Substantial Completion for the Development.
Substantial Completion Is defined as the date that the Wheat Ridge
Building Department issues a Certificate of Occupancy for the
Development work to the Developer.
2.1.4 Developer will provide a written invoice to both the City and WRHA for
each of their payments. The City and WRHA will make payment to the
Developer withm 30 days of each tnvoice date. Any late payments will
accrue simple interest of 1 0% per annum.
g. The Developer anticipates securing a redevelopment loan of not less than
$1 ,650,000.
h. The Developer will invest project equity as required by its Lender(s). The developer
shall provide equity of not less than $300,000, unless otherwise mutually agreed to
during both parties review of the final project pro forma.
i. The Developer has deferred $200,000 of its development fee as noted In Section 7
below.
j. The City shall waive building permit fees, mspection fees, use tax, and parkland land
dedicatiOn fee 1n lieu on this Development
k. The City will become a passive member of the development entity {i.e.,
approximately 1%, as required by the Jefferson County Assessor's office) to remove
all property tax obligations while the Property has deed-restricted low-income
residential un1ts ("Affordable Units"). The Developer anticipates that the term of the
Affordable Units will be 20 years after Substantial Completion. Property tax
assessments at the then-prevailing rate would begin at any time that the Property
ceases to have Affordable Units. As a passive member, the CityNVRHA would have:
6. Contingencies
i.1 No liability for Developer's opera1ions on the Property.
i.2 Limited participation in cost, profit or loss from redevelopment and
operation of the Property, as stated in the Development Agreement.
i.3 No voting rights within the Developer entity.
a. In the event the Developer is able to secure a larger loan. greater proceeds from
other partners (such as historic tax equity investor proceeds). or additional grant
revenue:
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February 1, 2016
i. If a larger loan and/or greater proceeds are received from HOME funds or tax
equity partners, the resulting Developer equity and/or the City/WRHA patient
capital requirement shall be reduced in a mutually agreeable way.
OR
ii. If additional grant revenue is received, the City and the Developer shall divide
the additional revenue. with 75 percent of the net additional grant revenue
received accruing to the City, likely in the form of Developer payments to the
City and WRHA to reduce their $470,000 and $170,000 grants on a pro-rata
basis, and 25 percent accruing to the Developer. For clarity, any HOME
funds and Federal/State historic/solar tax credits would be excluded from this
net revenue sharing provision (the City and/or WRHA will receive 100% of
the net revenue from additional HOME funds above $640,000, as well as
100% of any net revenue from Federal/State historic/solar tax credits above
$1,725,000 toward repayment of their respective loan funds).
Net revenue for this potential additional grant revenue is defined as gross
revenue minus Developer's reasonable expenses to secure that gross revenue.
Those expenses could include but are not necessarily limited to professional
services, consulting fees, travel expenses, copies, etc.
The City/WRHA portion of any potential additional grant revenue would not be
distributable until after the Developer's Equity Members achieve at least their
projected cash-on-cash return shown by the final. mutually-agreeable version of
the pro forma when the Developer purchases the Property.
The Clty/WRHA portion of any potential additional grant revenue would be
capped at a maximum of $640,000.
The Developer, City and WRHA agree to diligently work together to apply for
and maximize the potential additional grant revenue from timely grant
applications to at least the State Historic Fund by April 1, 2016 and the
Temple Buell Foundation at a mutually agreeable time.
b. In the event the Developer is not able to secure the anticipated grants and investors,
such as the HOME funds, the Developer will provide an alternative loan repayment
schedule prior to purchasing the Property, with interest, for the City to review and
approve at its discretion. However. Developer does not guarantee repayment of City
and WRHA loans, as noted below.
c. The City and the WRHA are committed to the project, based on the tenns outlined in
this document. As the Developer is able to provide more definitive terms based on
the specific commitments from investors and financial partners, the City and WRHA
will be provided the opportunity to review the new terms. If additional funds are
requested from the City or WRHA separate from as stated herein, or if the overall
Development terms are substantially modified, the City and WRHA will have an
opportunity to revisit their financial commitment and participation. However, if the
Development scope/terms are not substantially modified from those stated herein,
the City and WRHA will provide the grant and loan amounts stated herein.
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February 1, 2016
d. In the event the project does not perform financially, the City and the WRHA will not
have financial exposure beyond that stated herein. The City and the WRHA are not
guaranteed Developer's repayment of the loan amounts noted herein. Any potential
recourse on the part of investors or financial partners is limrted to the Property.
e. The developer has stated a need for a cash on cash return for this Development of
20%. However, based on a variety of factors and assumptions, including but not
limited to construction cost assumptions, contingency budgets. rent estimates,
operating expenses. etc., the Development may perform better or worse than the
estimated return. The CityMIRHA shall have full access to all information pertaining
to project costs. rents, operating expenses, etc. In the event those factors result in an
actual project pro forma that demonstrates a cash on cash return above 22% in any
year said excess revenues shall be paid the to the CityM'RHA to be applied toward
any outstanding loan balances.
7. Long-Term Disposition-The value of the property is expected to appreciate over time. The
current investment horizon has been evaluated at a 15-year period. At the culmination of
this period. the outstanding debt on the asset is expected to be approximately $1 ,145,000
with a net value of approximately $2,130,000.
a. The WRHA will be paid in full for any outstanding loan amounts in conjunction with
any refinance or sale of the Property as noted herein and any incremental
appreciation or net proceeds available from such refinance or sale (the "Net
Proceeds") will benefit both the WRHA and the Developer and shall be paid in a
waterfall fashion as Proceeds are available and as noted below. in consideration of
their joint efforts to redevelop the Property. Any reasonable closing costs, fees or
expenses for the Developer to secure the refinance or sale would be deducted from
the gross proceeds to produce the Net Proceeds. The term refrnance does not
include a loan renewal or new loan that the Developer may acqurre to replace its
initial financing at any time, where such renewal or new loan results in less than
$100,000 of net proceeds.
1. The first amount of Net Proceeds shall be paid to the WRHA, to re-pay the
outstanding balance of its patient capital (currently estimated to be
approximately $380,000).
ii. The second amount of Net Proceeds up to a maximum of $200,000 shall be
retained by the Developer for any property improvements that It deems
necessary at that point.
iii. The third amount of Net Proceeds in an amount of $200,000 shall be retamed
by the Developer as its deferred development fee ,
iv. The fourth amount of Net Proceeds shall be paid to the WRHA as a return for
its patient capital mvestment, at a rate of 5% simple interest per year,
beginning on the date of Substantial Completion. As an example, if the
WRHA patient capital amount at Substantial Completion is $380,000 and the
refinance or sale happened exactly 5 years after Substantial Completion, the
amount of this Proceeds payment would be $95,000 ($380,000 x 0.5 x 5)
v. The fifth amount of Net Proceeds shall be split 50% to the WRHA and 50% to
the Developer toward repayment of the WRHA's $170,000 project grant and
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February 1, 2016
other costs previously Incurred by the WRHA on this project, currently
estimated at approximately $300,000.
8. Long-term Maintenance. Improvements. and property recapitalization -The Developer will
establish a reserve fund to cover costs related to long term maintenance and substantial
capital improvements.
9. Remediation Developer will be responsible for all remediation on the site after purchase of
the Property and will remediate hazardous materials that may be discovered during
development.
10. Insurance Developer shall maintain, at its cost and expense. reasonable property protection
and liability insurance.
11 . Indemnity The Development Agreement will provide, among other things, that_Developer
shall indemnify, defend and hold the City and the WRHA harmless from and against any and
all claims resulting or arising from or in any way connected with the following:
a. The existence, release, presence or disposal of any Hazardous Materials introduced
to the Property after Developer purchases the Property from WRHA;
b. The development, marketing, sale or use of the Development by Developer;
c. Any other acts or omissions of Developer or its contractors, subcontractors,
employees, agents or representatives;
d. Any plans or designs for Improvements prepared by or on behalf of Developer.
regardless of whether such plans or designs have been approved by City; and
e. The Development Agreement will provide that the Developer shall have no obligation
to indemnify the City and/or WRHA to the extent cla1ms result from the negligence or
willful misconduct of City or WRHA parties.
f. Neither the WRHA nor the City waives the protections of the Colorado Governmental
Immunity Act or the common law.
12. Third Party Legal Challenges The City, WRHA, and Developer will cooperate in the defense
of any third party challenge of the Development Agreement, the Development. or any project
entitlements or related documents. If Developer elects. in its sole discretion, to contest or
defend a challenge, the Developer shall take the lead role and hold the City and WRHA
harmless from any damages awarded. Any proposed settlement will be subject to the City,
WRHA, and Developer's approval, each in its reasonable discretion. In addition. the City and
WRHA shall have the right. but not the obligation, to contest or defend any challenge, at its
sole expense, in the event that Developer elects not to do so.
13. Assignment
a. Developer will not be permitted to assign or transfer its interests in the Property,
except as explicitly provided in the Purchase and Sale Agreement (PSA} between
the Developer and WRHA. If there are any conflicts between this Term SheeUthe
ultimate Development Agreement and the PSA, the PSA will govern.
14. Remedies
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February 1, 2016
a. Developer's sole and exclusive remedy Is to commence an action for specific
performance, in addition to Its rights in the PSA.
b. In addition to other remedies described below, the City and WRHA will have the right
to institute any action at law or in equity to cure or remedy any default or to recover
actual damages.
c. Each party will bear its own attorney fees in any action.
d. Neither party shall be entitled to claim or receive as a remedy consequential. punitive
or economic damages, including lost profits.
15. Force Majeure-Performance will not be deemed a default in the event of war, strikes.
natural disasters, litigation, reasonably unforeseen site conditions. and fa1lure of
governmental entities to act. The party claiming a force majeure delay must provide notice
Within 30 days of actual acknowledge of the event causing delay. The period of the force
majeure delay shall commence to run from the date of such notice.
16. Term Sheet Nonbinding -This Term Sheet sets forth the intent of the City. WRHA and
Developer regarding certain aspects of the Development but shall serve as a nonbinding
statement of the parties' intent until a mutually acceptable binding Development Agreement
is executed between the parties.
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