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HomeMy WebLinkAbout080393 RDA AgendaAGENDA CITY OF TEMECULA OLD TOWN REDEVELOPMENT ADVISORY COMMITTEE A REGULAR MEETING TEMECULA CITY HALL - MAIN CONFERENCE ROOM 43174 Business Park Drive AUGUST 3, 199~- 5:30 PM CALL TO ORDER: Chairman Dallas Gray presiding Flag Salute Committee Member Jenkins ROLL CALL: Committee Members: Bridges, Gray, Jenkins, Maurice, Pelonero, Reed, Walton PUBLIC COMMENTS A total of 15 minutes is provided so members of the public can address the Council on items that are not listed on the Agenda or on the Consent Calendar. Speakers are limited to two (2) minutes each. If you desire to speak to the Council about an item not listed on the Agenda or on the consent Calendar, a pink "Request To Speak" form should be filled out and filed with the City Clerk. When you are called to speak, please come forward and state your name and address. For all other agenda items a "Request To Speak" form must be filed with the City Clerk before the Council gets to that item. There is a five (5) minute time limit for individual speakers. COMMITTEE BUSINESS 1 Update Reoardino Purchase of Rancho West Apartments EXECUTIVE DIRECTOR'S REPORT COMMITTEE MEMBER REPORTS ADJOURNMENT - 6:00 PM Next regular meeting: September 7, 1993, 6:00 PM, Temecula City Hall, Main Conference Room, 43174 Business Park Drive, Temecula, California ~endN080393 1 07129193 ITEM 1 APPROVAL CITY ATTORNEY FINANCE OFFICER CITY MANAGER ..l>_l~z/n~' TO: FROM: DATE: SUBJECT: CITY OF TEMECULA AGENDA REPORT Temecula Redevelopment Advisory Committee City Manager David F. Dixon August 3, 1993 Rancho West Apartments RECOMMENDATION: Direct staff to forward the Committee's concurrence with the recommendations of the General Counsel to the Redevelopment Agency. BACKGROUND: Attached is a staff report which was sent to the members of the Temecula Redevelopment Agency. It is recommended that the Advisory Committee concur with this report and forward that information to the Agency. Additional information will be presented verbally to the Committee at the meeting. JSG TEMECULA REDEVELOPMENT AGENCY STAFF REPORT TO: FROM: DATE: SUBJECT: General Manager/Agency Members Scott F. Field, General Counsel ~ Harwood T. Edvalson, Assistant City Manager/(~ June 22, 1993 RANCHO WEST APARTMENTS RECOMMENDATION: That the City Council authorize the City Manager to make an offer for the Rancho West Apartments of ~977,267. DISCUSSION: Rancho West Apartments are a 150 unit apartment complex built in 1988 by a private developer and financed by Gibraltar Savings. At sometime during 1989 or 1990, the property went into foreclosure. Gibraltar Savings itself went into receivership with the RTC in June 1990, and in July of 1991, the Savings and Loan was foreclosed by the RTC. Shortly, after the foreclosure of Gibraltar, the property was turned over to Emerson International, an asset management firm, which will continue to be custodians ofthe property until its sale. Emerson International retained the current property managers, Prostar Management Company, in February of 1992. RTC has offered the property to the City to purchase pursuant to its affordable housing disposition program. If the City should not purchase this property, it will be offered to other non-profit agencies to be used for affordable housing. If no other non-profit agency buys the property, it will be available for sale to all other buyers. The City Council has previously authorized staff to submit a Letter of Interest in the purchase of the property. Pursuant to that Letter of Interest, the City has been conducted "due diligence" into the purchase of the property. To that end, the City hired Keyser-Marston Associates (KMA) to prepare an economic evaluation of the property. A copy of their report is attached. In addition, the City Attorney's office has analyzed some of the legal issues involved with the Redeveiopment Agency owning an affordable housing project. Briefly, the KMA Report and staff's own analysis indicates that RTC obtained two appraisals of the property in Fall of 1992, the lowest establishing a value of $4,290,000 assuming the required affordable unit component of at least 20% of the units affordable to very low income households (no more than 50% of median income) and 15% of the units affordable to lower income households (where no more than 65% of median income). Under the terms of the RTC Affordable Housing Disposition Program, the sale price to the City is normally a minimum · of 70% of this value, which is in this case $3,003,000. However, the RTC also requires that the property be evaluated according to the RTC's Affordable Derived Investment Value (ADIV) formula. This formula involves determining the gross income of the property (once the vacancy rate is stabilized) and reducing this figure by annual operating costs as well as anticipated replacement costs. The resulting net income is then adjusted by an asset coverage test, which involves dividing the cash flow by 1.17. According to RTC, this figure is then capitalized at the cost of funds from Fanny Mae, which is at 9.65%. This yields a figure of $3,900,000. It is our understanding that RTC intends to obtain this figure as the sales price. However, the KMA Report indicated that a number of the assumptions made by RTC's appraisals are faulty. Principally, RTC assumes a 7% vacancy rate and KMA indicated that the typical vacancy factor in the area is close to 15%. Further, given the location and amenities of the Rancho West Apartments, the reasonable current rental price for the units is more likely to be $.50 per square foot rather than the higher figures used by RTC's appraisal. After making these types of adjustments, it is staff's conclusion that the proper ADIV formula is closer to $997,000.