REPORT TO THE CITY COUNCIL FROM: JERRY DYER, Mayor Office of Mayor & City Manager MIGUEL ARIAS, Councilmember District 3, City Council THROUGH: JENNIFER CLARK, Director Planning and Development Department PHIL SKEI, Assistant Director Planning and Development Department MARLENE MURPHEY, Executive Director City of Fresno in its capacity as Housing Successor to the Redevelopment Agency of the City of Fresno BY: CORRINA NUNEZ, Project Manager Housing and Community Development Division SUBJECT ..Title Actions pertaining to the affordable residential housing project at 1241-1263 Broadway Mall, commonly known as Hotel Fresno 1. ***RESOLUTION - Supporting Broadway Plaza Family Apartments, LP's Hotel Fresno project and awarding $1.5 million in Permanent Local Housing Allocation funds for development of the Hotel Fresno Housing Project in downtown Fresno (District 3) (Subject to Mayor's Veto) (City Action Only) 2. Approve a Fourth Amendment to the Amended and Restated Owner Participation Agreement with Broadway Plaza Family Apartments, LP ...Body RECOMMENDATION Staff recommends the City Council approve the Resolution supporting the Broadway Plaza Family Apartments, LP's Hotel Fresno Housing Project and awarding $1.5 million in Permanent Local Housing Allocation (PLHA) funds for the development of the Hotel Fresno Housing Project in downtown Fresno. Staff additionally recommends approval of a Fourth Amendment to the Restated Owner Participation Agreement (OPA) with Broadway Plaza Family Apartments, LP. EXECUTIVE SUMMARY The Hotel Fresno project is currently underway and is about 85% complete. The Project has a $1.5 million budget gap due to various amounts of shortfall in other secured funding and delays that were beyond control of the Developer. The proposed resolution will provide Developer with $1.5 million in PLHA funds to close the funding gap. The Fourth Amendment to the OPA will allow release of the Fresno Housing Successor Agency's (Agency) remaining funds of $648,958.52 upon written confirmation that electric utility service (electrification) has been supplied to Project, rather than at the time of occupancy. This will allow the Project to continue moving forward in a timely and effective manner. BACKGROUND APEC International, LLC is the Developer of the Hotel Fresno project which consists of the adaptive/reuse/conversion of the former Hotel Fresno building. Construction of the project began in July 2019 and is currently about 85% complete. However, the Hotel Fresno project has experienced significant delays due to various circumstance beyond the control of the Developer. Shortly after the project started, the worldwide COVID-19 pandemic occurred and severely impacted the project's progress. As time passed, the virus and accompanying distancing restrictions adversely impacted the work force/schedule and the material supply chain (including the availability and cost). Later, in 2021, the project required a Site Plan revision which then triggered revisions to the Civil Plans and the Utility Plans which required Pacific Gas & Electric coordination, further delaying the completion. In addition, there were Building Plan revisions due to unexpected structural conditions. These revisions required consultation with the project's historical consultant and review/approval of the California State Historic Preservation Office and National Park Service. All the above circumstances resulted in significant increases in the overall development costs of the project, including increased financing sources fees and interest. The Developer has made their best effort to mitigate cost increases through securing additional tax credits. However, a shortfall of $1.5 million currently exists. Despite the delays and cost overruns, the Developer has avoided cessation of construction and has made significant progress toward completion of the project. The Hotel Fresno project cost is approximately $32,496,122 comprised of $16,900,000 in Tax Exempt Bonds, $3,037,676 in State Affordable Housing Sustainable Community Grant funds, $1.9 million in Fresno Housing Successor Agency funds, $6,287,100 in tax credit equity, $1,204,134 in developer equity, and $1,667,212 in other deferred development costs. This adapted reuse project consists of the rehabilitation of the former Hotel Fresno into an affordable housing structure that will consist of 41 one-bedroom units of 511 square feet, 25 two-bedroom units of 811 square feet, and 12 three-bedroom units of 1,129 square feet (plus one two-bedroom manager unit). Eleven of the total units will be PLHA assisted. In addition, the Hotel Fresno affordable housing project will be rehabilitated to meet the Secretary of Interior Standards due the Historic nature of the structure and will include on-site amenities consistent with the intended tenant population, including parking spaces on the adjacent property, laundry room, and a community center. Qualifying tenants' income will range from 30% to 80% of area median income. The resolution presented to Council authorizes and directs the City Manager, or designee, to execute a PLHA funding agreement, subject to approval as to form by the City Attorney's Office and consistent with the following terms and conditions: (a) Affordability period of the units shall be no less than 55 years; (b) Funds shall be provided in the form of a residual receipts loan; (c) Loan funds shall have an interest rate of 3% annually; (d) Loan shall have a 55-year maturity date and (e) the Project shall undergo and successfully pass underwriting. The Fourth Amendment to the OPA will allow release of the Agency's remaining funds of $648,958.52 upon written confirmation that electric utility service (electrification) has been supplied to the Project, rather than at the time of occupancy. This will allow the Project to continue moving forward in a timely and effective manner. Over the past six years APEC International, LLC completed other acquisition/rehabilitation projects including the Chestnut Family Apartments project in Fresno, which also serves low-income households. Once completed, the Hotel Fresno housing project will assist the City of Fresno and the Housing Successor with its affordable housing goals and objectives as outlined in the Housing Element of the 2035 General Plan and 2020-2024 Consolidated Plan. ENVIRONMENTAL FINDINGS This is not a project for purposes of California Environmental Quality Act. FISCAL IMPACT The PLHA Program funds for the proposed Hotel Fresno Housing project were appropriated to the Planning and Development Department as part of its fiscal year 2023 Budget. Attachments: Exhibit A - Resolution Exhibit B - Fourth Amendment to Amended and Restated Owner Participation Agreement