Staff recommends approval of utilizing the existing Bond Allocation Note funding to renovate the existing 59 unit complex based on the recommendation of the Kristen Court Advisory Committee and sell the residential units to affordable homebuyers.
Since the purchase of the Kristen Court Apartments, the Advisory Committee has met on several occasions to discuss future development of the property and to determine what recommendations were reasonable to propose. The Committee examined the strengths, weaknesses, and opportunities of the project:
Strengths: Structures appear to be intact, the complex is now under one ownership, property allows up to 18 units per acres for development, has potential for affordable housing demand, adjacent to high rated Pre-K Learning Center/School, and the property is located in the Carver Heights Community Redevelopment Area
Weaknesses: Crime is very prevalent in the complex, non-paying tenants occupying units, vandalism, streets and parking area in bad condition, no property manager on-site, open sale of drugs, trash and debris litter the streets, health and safety issues regarding minimum housing standards exist.
Opportunities: Ability to provide affordable housing in an area that lacks affordable homeownership opportunities, remove a 15 year eyesore from the community, increase the tax base, positive return on investment, eliminate blighted conditions, and improve the health and safety of residents.
The Advisory Committee first discussed reasons why the City decided to acquire the property such as to improve the housing conditions, reduce code violations and crime, change public perception of the neighborhood, improve the quality of life, increase the tax base, attract private investment in the distressed community, and prove a market does exist for new affordable housing investment. The Advisory Committee then developed options for reuse of the property and agreed to prioritize them. The options were as follows:
Option 1: Continue to rent the units and hope for 100% occupancy and/or achieve a break- even point;
Option 2: Sell the complex to a Developer who would renovate 56 units and sell as market rate housing;
Option 3: Sell the complex to a Developer who would renovate 56 units and sell the complex as
Option 4: The City would renovate 56 units and sell the complex as affordable housing;
Option 5: Demolish the entire complex and sell the site to a developer.
* Options 2, 3, and 4 would reserve one building for a resident association clubhouse.
After a lengthy deliberation by the Advisory Committee, the consensus of the members was to move forward with Option 4 to renovate 56 units for affordable home buyers and convert one building into a resident association clubhouse. All options were evaluated financially, and all but Option 4 would have resulted in the City either forfeiting part of the initial commitment of $4,000,000 or all of it, to make the deals work.
Option 1 focuses on 100% occupancy rate; however, the pro forma shows the City does not realize sufficient profit to pay the BAN within the 3 year span in which the note becomes due. Therefore, the City would continue to have the obligation to pay for a loan without a sufficient revenue source.
Option 2 is not recommended because the situation would essentially revert back to why the City decided to purchase the property. There is no guarantee that sale to one owner will provide a long-term solution for affordable housing, or that the property will be maintained at an acceptable level.
Option 3 will almost guarantee the City would take a loss on its $4,000,000 commitment. Any development would require at least a guaranteed payback of $71,429 per unit. Therefore, it would be unrealistic to build an affordable housing project with a partner with an estimated sales price of $130,000. It’s unlikely the developer will realize a profit if the City extracted 70% off the top.
Option 4 Staff estimates the cost to renovate 56 units between $840,000 and $1,400,000, which equals $17.65 to $29.42 per square feet. This option will ensure affordable housing for the community. The project will include complete renovation of the kitchen, bathroom, living room, plumbing, roof and HVAC (if needed), interior and exterior painting, and stucco. The complex will also consist of new landscaping and be outfitted with new PVC privacy fencing to encompass the entire property. The street and parking areas will be resurfaced to improve the aesthetics of the complex.
Option 5 would result in the City paying $102,542 to demolish the entire complex and then negotiating the sale of the land. Based on 256,000 sq.ft., of residential land, at a sale price of $2 per square foot, the purchase price of $512,000 will not realize a profit or sustain a break-even point for the City. In fact, the City would have a net loss of ($3,713,582). This would not serve the objective of ensuring affordable housing is available in the neighborhood.
Options 2, 3, & 4 are proposed as having a resident association clubhouse that will be used for various functions such as baby showers, community meetings, birthday parties, workshops, seminars, children’s movie night, and other activities deemed appropriate for homeowners. The clubhouse will consist of handicap accessible restrooms, kitchen, and an open floor plan consisting of 2,550 square feet. The cost to renovate the facility is estimated at $50,000.
The clubhouse, ground maintenance, and other common areas will be maintained by the Homeowner’s Association (HOA) management group. The attached pro forma identifies a $100.00 per month HOA fee that will pay for common area maintenance. The HOA trust account will begin with $50,000 of seed money. The newly formed Townhouse Community will require replatting, and creation of a mandatory HOA.
The additional funding for the project will be derived from several possible sources such as Lake County State Housing Initiative Program (SHIP), Florida Housing Corporation Bond Program, United States Department of Agriculture (USDA), and Federal Home Loan Bank of Atlanta (FHLBA). After closing of each residential unit, a check will be issued to purchase the units now owned by the City of Leesburg. The very-low and low-income homebuyers will have an opportunity to purchase a unit for the selling price of $106,000. However, the low-income homebuyer will receive a $30,000 SHIP subsidy (forgiven after 10 years) and $10,000 of Florida Housing bond financing (not payable unless you sell before mortgage term expires)
$106,000 Sale Price
- 30,000 SHIP Down Payment Assistance (DPA)
- 10,000 Florida Housing Corporation Bond
$ 66,000 1st Mortgage total
Based on the above scenario a low-income homebuyer will have a 1st mortgage of $66,000 and a monthly principal and interest payments of $395.70 (based on a 6% interest rate for 30 years), property tax estimate of $170.00 and HOA fees of $100.00. Therefore, the total monthly payment for the homebuyer would be $665.70 per month.
The very low-income homebuyer would receive an additional $5,000 for DPA, which will bring the monthly mortgage amount including HOA fee to a grand total of $635.73.
1. Adopt the resolution as presented; or
2. Such alternative action as the Commission may deem appropriate
Option 4 Fiscal Impact:
Revenues from sales $5,936,000
(56 Units X $106,000)
Costs of Renovation $1,400,000
BAN Payoff (*Not including interest) $4,000,000
Excess Of Sources over Uses $ 536,000 * other operating expenses will be deducted
Revenues from the General Fund are pledged to cover interest costs of approximately $220,000 per year.
BAN Funding available:
Approved amount $4,000,000
Proceeds used $3,527,632
Amount Available $ 472,638
Prepared by: ______________________
Attachments: Yes____ No ______
Advertised: ____Not Required ______
Attorney Review : Yes___ No ____
Reviewed by: Dept. Head ________
Finance Dept. __________________
Deputy C.M. ___________________
City Manager ___________________
Account No. _________________
Project No. ___________________
WF No. ______________________
A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF LEESBURG AUTHORIZING UTILIZATION OF THE EXISTING BOND ANTICIPATION NOTE FUNDING TO FACILITATE THE RECOMMENDATIONS OF THE KRISTEN COURT ADVISORY COMMITTEE; AND PROVIDING AN EFFECTIVE DATE.
BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA:
THAT the City Commission of the City of Leesburg, Florida, hereby authorizes the utilization of the existing Bond Anticipation Note funding to renovate the 59 units located at Kristen Court Complex utilizing existing BAN funds and applicable grant monies. The renovations shall include fifty-six (56) units to be sold as townhouses and three (3) units to be remodeled as one (1) clubhouse to be deeded to the resident association.
THAT this resolution shall become effective immediately.
PASSED AND ADOPTED by the City Commission of the City of Leesburg, Florida, at a regular meeting held the __11th__ day of __June____ 2007