Loading...
HomeMy WebLinkAbout2001 12 10 Regular F Moss Cove Housing Project . . . t "r II. Regular Agenda Item "F" December 10, 200 101 COMMISSION AGENDA ITEM F CONSENT INFORMA TIONAL PUBLIC HEARING REGULAR X 12110101 Meeting MGR. ~DEPT Authorization REQUEST: City Manager requesting the City Commission to receive an update report on the Moss Cove Housing Project and to provide any comments or direction it deems appropriate. PURPOSE: The purpose of this agenda item is to give the Commission an update on the progress of the project. FUNDING: None Required. RECOMMENDATION: It is recommended that the Commission receive the update report on the Moss Cove Housing Project and provide any comments or direction it deems appropriate. A TT ACHMENTS: None. COMMISSION ACTION: ,,0 ,.... ,1- , .. CITY OF WINTER SPRINGS, FLORIDA 1126 EAST STATE ROAD 434 WINTER SPRINGS, FLORIDA 32708-2799 Telephone (407) 327.1800 Ronald W. McLemore City Manager MEMORANDUM TO: Mayor and Commission Ronald W. McLemore, City Manager ~ FROM: DATE: December 10,2001 SUBJ: Moss Cove Status Report, December 10, 2001 Agenda Item "F" The purpose of this status report is to bring the Commission up to date on the status of the project and to provide the Commission with the opportunity to provide any additional direction to the project it deems necessary. On June 28, 1999 the Commission entered into an agreement with Wyman Fields Foundation to manage acquisition, rehabilitation and conversion to owner occupied town homes, marketing, and management of 52 rental four-plex units in Winter Springs. This project represented the first phase of the conversion of some 262 four-plex units to owner occupied town homes. As predicted this project has experienced a number of challenges that have developed during implementation and which warrant continuous monitoring and evaluation. However, it appears that the project will accomplish its goals and objectives and that the city will recover its financial investments as planned. /jp Attachment 1. QUESTION: What is the purpose of the project? ANSWER: The purpose of the project was to reverse the physical economic and social deterioration of an eight-block area of the city experiencing a deterioration of aesthetics, a deterioration of property values, increases in crime including drug abuse, prostitution, and civil disorder, and a general decline of the viability of the neighborhood. Relatedly, the city developed a multi project strategy to restore the viability of the area that includes: 1. The rehabilitation of 262 four plex rental units to owner occupied town homes. This 52-unit conversion project represents Phase I of the conversion project. 2. Recreation and parks improvements. 3. Street and landscape improvements. 4. Concentrated code enforcement. 5. Concentrated law enforcement. But for the rehabilitative strategy put into place by the city including this project, this pattern of neighborhood deterioration would spread to adjacent areas. This cancerous deterioration of the physical, economic and social fabric of our neighborhoods is inconsistent with Winter Springs goals of developing and sustaining a high quality of life throughout the city, and therefore unacceptable to the leadership of the city. 2. QUESTION: How is the project financed? ANSWER: The project is financed from a partnership of private, local, state and federal funding sources as follows: Acauisition: The Wyman Fields Foundation obtained an acqulSltlOn loan through Peoples Community First Bank through their CRA commitment in the among of $2,674,210 million for Phase I, in April 2000, and $44,000 from a Federal home grant. Re-Construction: The Wyman Fields Foundation obtained a HOME grant of $244,000 from Seminole County Commission Development Department for reconstruction of the building exteriors for Phase I in June 1999. Street Construction: The Wyman Fields Foundation obtained a CDBG grant of $83,200 for the reconstruction of Rhoden Lane into a city street. Wyman Fields Status Report 12-11-01 Page lof6 Relocation: The Seminole County Community Development staff allocated $38,000 from their funds for relocation costs and Wyman Fields provided $18,000 toward relocation. Rehabilitation: The city executed a contract on June 28, 1999 with the Wyman Fields Foundation to provide a revolving loan of rehabilitation dollars for the Moss Cove Project in the amount of$909,655, and $87,000 grant for development fees. SOURCES AND USES SOURCES Peoples Community First Bank City of Winter Springs (Community Development) Seminole County (HOME) Seminole County (CDBG) Wyman Fields Foundation Total $2,674,210 $ 996,655 $ 326,000 $ 83,200 $ 162.420 $4,242,485 USES 1 sl Mortgage (Acquisiton) (Acquisition loan closing costs) Reconstruction/Rehabilitation Hard costs Soft costs Developers Overhead/Fees Relocation Street Construction Hard costs Soft costs $2,674,210 $ 144,000 $ 127,355 $ 70,720 $ 87,000 $ 56,000 $ 74,565 $ 8.635 Total $4,242,485 3. QUESTION: How is the project rehabilitation loan secured? ANSWER: The city has a second mortgage on the project assets. 4. QUESTION: Is there risk in the project? ANSWER: Yes. There is a risk in all development projects. Community Improvement Projects requiring government subsides are particularly risky because they Wyman Fields Status Report 12-11-01 Page 2 of6 often do not have market forces in their favor. If they did, government subsides would not be required. Housing projects involving low and moderate-income persons and declining neighborhoods are particularly risky due to the income of the persons involved and the decline in values of the real estate. Conversions of rental housing properties to ownership properties like the winter springs project are the most difficult projects to do due to the uncertainty of potential low and moderate income buyers who don't have sufficient credit worthiness to purchase a unit with a mortgage. However, conversion of rental units to ownership units has the highest return benefit to the community, since home owners are usually more responsible residents and take more pride in and care of their ownership unit, resulting in better maintenance of aesthetics and property values, and less criminal activity and overall neighborhood improvement and stability. These projects if left unattended have a deterious effect on neighbor hood aesthetics, property values, and criminal that spreads like a cancer if not stopped. Community leadership has to determine how much they are willing to put at risk to prevent this large social economic cost of declining neighborhoods. Winter Springs has an eight-block area that has been in a state of decline including a decline in aesthetics and property values and an increase in criminal activity. This criminal activity includes drug use that feeds on our young people putting their futures as productive contributors to society at risk, prostitution, and criminal disorder. This particular eight-block area was responsible for 30% of the city police activity. This project is the final phase of a project intended to reverse the downward spiral of this neighborhood through the rehabilitation and conversion for rental to ownership of 252 rental units in the eight-block area. This project is being undertaken in conjunction with other redevelopment projects including park improvements, relocation of the city public works facility, street and landscape improvements, and increased code and law enforcement. 5. QUESTION: What is the city's financial role in the project? ANSWER: The city has obligated a total of $996,655 to the project as follows Project Development Grant Project Rehabilitation Loan Total $ 87,000 $909,655 $996,655 Wyman Fields Status Report 12-11-01 Page 3 of6 . . 6. QUESTION: How is the city to be repaid? ANSWER: The city is to be paid back at 101% of the $909,655 loan amount at the closing of each unit as follows: Project Rehabilitation Loan Total Repayment Project Units Project Unit Repayment $909,655 X 101 % = $918,752 52= $ 17,668 7. QUESTION: What is the status of the project to date? ANSWER: The goal is to have all units sold by December and closed by April 2002. Actual to date is as follows: I) All 52 units have bee rehabilitated 2) 17 units closed and occupied. 26 units are under contract 9 units remaining 52 Total Units 3) Aesthetics of area greatly improved. 4) Felony/Criminal activity reduced 70%. 5) All Police Activity reduced 36%. 6) New owners are thus far responsible owners conforming to restrictive covenants. 7) Appraisal values have increased $1,900,000 from $2,080,000 in April 2000 to $3,980,000 for an increase of91.3%. 8. QUESTION: Will the project be financially successful? ANSWER: 1) Peoples First Bank the first mortgage holder is current with all payments. 2) The City of Winter Springs the second mortgage holder is not current due to the first mortgage holder asserting its priority position to remain current. This action was the result of delayed closings that caused the project to fall in arrears with the bank. Of the seventeen units closed the city has been paid on eight units and subordinated on nine units by the bank as follows: Wyman Fields Status Report 12-11-01 Page 4 of6 . . Now that the bank is current and sales and closings have caught p to expectations, the city will begin receiving its payments on a unit by unit basis. 8 Units Closed and Paid 9 Units Closed and Due Total Units Closed $141,344 $159.012 $300,356 Total Units - 52 Units Paid to City November 30.001 Unit Payment Due - 44 $909,655 $141.344 $777,392 At the request of the city, the bank ran three Performa's on November 1,2001 forward. All three scenarios shows that the city will be paid all loans as follows: A vailable for City of Scenario Final Closine Date Distribution Winter SDrines Pav Off Best Case March 30, 2002 $901,082 $777,392 Middle Case April 30, 2002 $873,268 $777,392 Worst Case July 30,2002 $812,678 $777,392 9. QUESTION: Why did the project fall into arrears with Peoples First Bank the first mortgage lender forcing them to assert loan superiority over the city's second mortgage and causing the project to fall into arrears with the city? ANSWER: There are three reasons the project fell into arrears with Peoples First causing the project to go into arrears with the bank and the city. 1. One owner who sold the units to Wyman Fields Foundation misrepresented the rental cash flow the Foundation could expect from purchase of the units resulting in lower than expected cash flow available to the Foundation to pay debt prior to the units being rehabilitated. This resulted in a lawsuit being filed against the previous owner by Wyman Fields for compensation relief for Wyman Fields that has not yet been settled. 2. Unanticipated relocation costs of renter required by the Federal Uniform Relocation Act reduced funds available for debt payment. 3. Unanticipated long closings resulting form lenders having to qualify loan applicants with three different loan criteria's (FHA, State Bond and SHIP) reduced income for debt payment and increased interest cost above projected interest costs. Wyman Fields Status Report 12-11-01 Page 5 of6 c ' \ ~ 10. QUESTION: What should the city do if aU the loans are not repaid due to delayed closings? ANSWER: As stated before, there is a significant element of risk involved in this type community improvement project. Any losses that occur outside the reasonable control of the various people involved in the arrangement of this type project has to assume a public benefit cost if the project attains its pubic benefit goals. If losses and/or failure to meet public goals are the result of malfeasance of misfeasance the city should to the extent it can, to hold those guilty of such acts responsible, including the recovery of any monetary losses that can be recovered. 11. QUESTION: Where do we go from here? ANSWER: We need to begin planning the next phase of the project. In order for future phases to be possible we need to do the following: 1. We must maintain our relationship with Peoples First Bank. Without private sector financing future phases of the project will be all but impossible. 2. Take what we have learned from Phase I and restructure the approach to Phase II accordingly. Wyman Fields Status Report 12-11-01 Page 6 of6