AGENDA MEMORANDUM

 

 

Meeting Date:           October 9, 2006

 

From:                          Kenneth L. Thomas, Director of Housing & Economic Development          

 

Subject:                      Resolutions Approving Contracts to Purchase Kristen Court Subdivision

 

 

Staff Recommendation:

Staff recommends approval of all contracts to purchase Kristen Court Subdivision for $3,483,000 with conditions as stated in the purchase contracts. 

 

Analysis: 

The Kristen Court Subdivision is located west of County Road 468 and south of Schoolview Street.  The Subdivision is a 59 unit complex, consisting of 17 triplex buildings, one duplex and one sixplex.  The land area consist of 5.88 acres (256,000’ +/-), the typical lot sizes are 100 x 90 containing 9,000 square feet of land area.  All the individual units are identical three (3) bedroom, one bath units, containing 840 square feet of gross living area.  Each building has two open asphalt parking spaces per unit.

 

Seventeen (17) of the nineteen (19) buildings were in livable condition at the time an appraisal was conducted.  However, two (2) buildings were boarded up and in poor condition.  Both buildings appeared to be structurally sound, but in the early stages of renovation.  Speer Construction, Incorporated estimated the cost of renovating both buildings would be $97,887 and $80,138 respectively.  At the time of the appraiser inspection 3 units were vacant, reflecting an occupancy rate of 91%.  The tenants are paying monthly rental rates between $500 to $700 monthly, the market rental rates for the area is about $600 per month.

 

Why the Public Sector is concerned about acquisition:

·        To increase the tax base

·        To create jobs for the community

·        To attract private investment into a distressed community

·        To prove a market exist for new housing investment

·        To reduce crime

·        To improve housing conditions

·        To reduce code enforcement violations

·        To change public perception of the neighborhood

·        To improve quality of life

 

 

The Plan of Action

 

Successful development of real estate does not just happen.  The development process is a fairly rigorous set of steps engineered by a host of partners. From the initiation of a concept to the disposal of property, certain steps must be followed.  Therefore, staff is recommending that an Advisory Committee consisting of five to seven (5-7) members be created to assist the City in identifying potential development opportunities, investigate the entire realm of possibilities, test the concepts for market feasibility and to reduce the options to a single market concept.  The Advisory Committee will assist staff with the following stages of the development process:

·        Creating the Development Concept

·        Testing the Market

·        Evaluating Site and Design Constraints and Costing-Out Construction

·        Constructing the Pro Forma Income and Expense Schedule

·        Finding the Equity and Gap Financing

·        Disposing of the Property

 

These steps are not a precise road map, but rather a rough outline of the bases that we need to cover while development occurs. 

 

With your approval, the City will advertise seeking volunteers to serve on this advisory committee.

 

We hope that this approach will provide adequate representation and a plan acceptable to the Community so that these units will continue to provide affordable housing for our residents, housing that meets or exceeds all of our codes, and housing in which nuisance or crime is minimized by proper on-site management. 

 

 

 

Pro Forma

 

In the interim, while City Staff is working with the Advisory Committee, an operating cash flow statement has been completed below to reflect the City’s best estimates of rent levels, market vacancies and operating expenses.  Cash flow from operations, which is called Net Operating Income (NOI), is the difference between the rent collected and the cash operating expenses.  It represents the cash flow that is available to repay debt and to provide the City with a return on its investment. 

 

Gross Rent                                          $424,800

-Less Vacancy                                     $  21,240  (5%)

Gross Operating Income                     $403,560

 

Annual Operating Expenses

R.E. Taxes                                           $  60,888

Insurance                                             $  21,000

Property Management                         $  29,736  (7%)

Maintenance                                        $  21,240  (5%)

Total Operating Expenses                   $132,864

 

Net Operating Income                    $270,696 Cash available for debt service

 

 

Options:

1.  Approve purchase contracts to acquire Kristen Court Subdivision; and/or

2.  Such alternative action as the Commission may deem appropriate

 

 

Fiscal Impact

 

The cost of debt service will be capitalized for the first year, allowing sufficient time for the City to obtain a development plan for the property.  The City will need to find an acceptable partner to infuse cash into the property or otherwise fund reconstruction of the housing units.  The cost of this reconstruction cannot be estimated at this time.

 

 

Submission Date and Time:    10/5/2006 2:59 PM10/4/2006 12:14 PM10/4/2006 12:13 PM____

 

Department: ______________________

Prepared by:  ______________________                     

Attachments:         Yes____   No ______

Advertised:   ____Not Required ______                     

Dates:   __________________________                     

Attorney Review :       Yes___  No ____

                                                

_________________________________           

Revised 6/10/04

 

Reviewed by: Dept. Head ________

 

Finance  Dept. __________________                                     

                              

Deputy C.M. ___________________                                                                         

Submitted by:

City Manager _______RS____________

 

Account No. _________________

 

Project No. ___________________

 

WF No. ______________________

 

Budget  ______________________

 

Available _____________________


 

Property Owner

Lot Number

Address

Appraised Value

Asking Price

Difference

Mountain Homes Real Estate

Lot 1

1117 Kristen Street

$185,000

$185,000

$0

Mountain Homes Real Estate

Lot 6

1107 Kristen Street

$185,000

$185,000

$0

Mountain Homes Real Estate

Lot 11

1106 Kristen Street

$185,000

$185,000

$0

Mountain Homes Real Estate

Lot 13

1110 Kristen Street

$185,000

$185,000

$0

 

 

 

 

 

 

David Indar

Lot 2

1115 Kristen Street

$185,000

$190,000

$5,000

Anaa Investments, Inc.

Lot 3

1113 Kristen Street

$117,000

$130,000

$13,000

David Indar

Lot 8

1103 Kristen Street

$190,000

$190,000

$0

David Indar

Lot 17

3005 Schoolview

$185,000

$190,000

$5,000

David Indar

Lot 18

3003 Schoolview

$185,000

$190,000

$5,000

Anaa Investments, Inc.

Lot 19

3001 Schoolview

$350,000

$370,000

$20,000

 

 

 

 

 

 

Deonarine Raghoonath

Lot 4

1111 Kristen Street

$185,000

$185,000

$0

Rohit Nanan

Lot 9

1101 Kristen Street

$145,000

$142,000

$3,000

Suresh Jhinoo

Lot 10

1104 Kristen Street

$185,000

$182,000

$3,000

 

 

 

 

 

 

Mechele Neile

Lot 5

 1109 Kristen Street

$185,000

$189,485

$4,485

see below

Mechele Neile

Lot 12

1108 Kristen Street

$97,000

$97,000

$0  see below

 

 

 

 

 

 

 

Property Owner

Lot Number

Address

Appraised Value

Asking Price

Difference

Ramchand Singh and Nirvana Singh

Lot 7

1105 Kristen Street

$185,000

$185,000

$0

Ramchand Singh

Lot 14

1112 Kristen Street

$185,000

$185,000

$0

Ramchand Singh

Lot 15

1114 Kristen Street

$185,000

$185,000

$0

Ramchand Singh

Lot 16

1116 Kristen Street

$185,000

$185,000

$0

 

 

 

 

 

 

 

 

Note: Lots 5 and 12 both have liens totaling $154,270.25

 

Lot 5 (1109 Kristen St) liens total               $126,432.91

Lot 12 (1108 Kristen St) liens total             $  27,837.34