AGENDA BILL Agenda Item No. 5(E) Date: September 22, 2014 To: From: Subject: City Council of the City of El Cerrito Hilde Myall, Senior Program Manager, Community Development Melanie Mintz, Interim Community Development Director Consent to Withdrawal and Substitution of General Partner and Limited Partner of Idaho Apartments Associates, LP ACTION REQUESTED Adopt a resolution consenting to the withdrawal and substitution of the general partner and the limited partner of Idaho Apartments Associates and authorizing the City Manager to execute documents necessary to indicate the City s consent. BACKGROUND The Idaho Apartments, located at 10203 San Pablo Avenue, is a 29-unit affordable housing development providing supportive services to its special needs residents. The property, formerly the Idaho Motel, was acquired in 1995 and redeveloped into affordable housing by Idaho Apartments Associates, LP (Partnership), a limited partnership between Idaho Apartments Housing Corporation (an affiliate of Rubicon Programs, Inc.), as the general partner, and the National Equity Fund as the limited partner. The Project has been owned and operated by the Partnership since it opened its doors in 1999. The Project was, in part, made possible by financial assistance from the El Cerrito Redevelopment Agency and Contra Costa County. In February 1997, pursuant to El Cerrito Redevelopment Agency Board Resolution No. 447, the former El Cerrito Redevelopment Agency loaned $350,000 of Low and Moderate Income Housing Funds to the Idaho Apartments Associates for the Project through an Owner Participation Agreement and associated documents (Idaho OPA). The City acquired the Redevelopment Agency s interest in the Idaho OPA in February 2012 when it became the housing successor to the former Redevelopment Agency. The Partnership was formed in 1995 to utilize federal Low-Income Housing Tax Credits (LIHTCs). The Partnership successfully completed delivery of all scheduled tax credits to the National Equity Fund in 2011, and National Equity Fund withdrew in 2013. The Partnership is currently comprised of two Rubicon-controlled nonprofit entities: Idaho Apartments Housing Corporation (IAHC) as general partner, and Rubicon Programs, Inc. (RPI) as limited partner.
Agenda Item No. 5(E) Rubicon Programs, Inc. has decided that the ownership and management of affordable housing is no longer part of their core mission. RPI is divesting its interest in all RPIowned housing. Their stated goal is to transfer the Idaho Apartments to a qualified nonprofit housing developer who would continue to operate the property as affordable housing with supportive services per the terms of the existing agreements on the property. RPI approached Resources for Community Development (RCD), a non-profit housing developer based in Berkeley, in 2013 regarding potentially acquiring the Project. Since that time, RCD has been working with RPI to acquire the Project. Pursuant to the terms of the City s Owner Participation Agreement with the Partnership, any proposed transfer of the Project or change in entity of the controlling ownership interest, is subject to the City s review and approval. As further described below, RPI and RCD have presented to City staff for review and approval the Assignment and Assumption Agreement and Second Amendment to Amended And Restated Articles of Limited Partnership of Idaho Apartments Associates (Second Amendment), which contains the proposed structure and terms of the transfer and is attached to this agenda bill as Attachment 2. ANALYSIS Acquisition Overview As presented in the Second Amendment, the acquisition of the Project would be achieved through an assignment of Idaho Apartments Housing Corporation and RPI interests in the Partnership to RCD GP, LLC (of which RCD is the sole member) as general partner, and RCD, as limited partner. While partnership composition and control would change from RPI to RCD, Idaho Apartment Associates, LP would continue to own the Project after the acquisition is complete. The obligations of the Partnership under existing lender agreements, including the Idaho OPA, would remain in place and would continue to be obligations of the Partnership. Acquisition is tentatively scheduled for October 1, 2014. There is no financial consideration associated with RCD s admission into the Partnership. RCD and the Partnership would have no financial obligations to RPI after the acquisition is complete. Qualifications of RCD Currently in its 30 th year of operations, Resources for Community Development s (RCD) mission is creating and preserving affordable housing. RCD, a non-profit 501(c)(3) organization, has a portfolio of over 1,900 completed affordable units and has over 400 additional affordable units currently in development, including the 57-unit Ohlone Gardens development in El Cerrito. RCD s Asset Management focuses on long-term sustainability through strong fiscal controls over the RCD portfolio. RCD has overhauled its asset management function in the last decade, and consistently improved year over year performance of their portfolio over the past five years. It currently manages a portfolio of 50 properties serving a population of over 3,500 spread throughout the East and North Bay area. In contrast to the findings of surveys of other nonprofit developers showing that 15% of affordable housing projects generate enough cash flow to make a distribution to its sponsors, over 70% of RCD-run developments generated positive cash flow in FY 2012. Page 2
Agenda Item No. 5(E) Preservation of Affordability & Supportive Services The proposed action does not modify the term of affordability under the Idaho OPA, or the level of affordability. The Project currently serves persons with very-low incomes, not exceeding 50% of area median income. Tenants are provided supportive and social services by RPI through a federal Supportive Housing Program (SHP) grant from HUD. RPI is the grant recipient. RCD and RPI intend for RPI to continue on as the SHP grant recipient and service provider after RCD assumes ownership control. RCD and RPI will enter into a memorandum of understanding pertaining to service delivery at a future date. RCD and RPI are both committed to funding and providing services to tenants of the Project, and will work to ensure that service delivery meets tenant needs during and after the change in ownership control. Staff Recommendation In considering whether to approve this change to the Partnership, staff suggests that the City s concern should be the mission and qualifications of the general partner, the preservation of existing levels of affordability and supportive services, and the continued successful management of the project, which includes both asset management, property management and, in this case, provision of supportive services. Staff believes that the proposed transfer to RCD is reasonable and in keeping with the purpose of continuing to operate Idaho Apartments to provide affordable housing to its existing population of residents with minimal interruption. In addition, RPI is transferring their interest to RCD for one dollar and there is no financial restructuring of the Property s assets that would be detrimental to the long-term interests of the Property. Finally, the proposed transfer would result in the Idaho Apartments being managed by an entity with greater expertise and resources in the area of housing asset management than the existing general partner. FINANCIAL CONSIDERATIONS The proposed action does not commit any additional City funds to the Project. Approval of the proposed resolution does not modify the terms of the City s Owner Participation Agreement, nor modify the terms of other lender agreements. The Partnership remains obligated to perform under the terms of Idaho OPA, including the obligation for the loan of Housing Funds. LEGAL CONSIDERATIONS Legal counsel has reviewed this agenda bill, including the Second Amendment and proposed consent under the OPA. Page 3
Agenda Item No. 5(E) Reviewed by: Scott Hanin City Manager Attachments: 1. City Council Resolution 2014-XX, consenting to withdrawal and substitution of general partner and limited partner of Idaho Apartments Associates 2. Assignment and Assumption Agreement and Second Amendment to Amended And Restated Articles of Limited Partnership of Idaho Apartments Associates Page 4
Agenda Item No. 5(E) Attachment 1 RESOLUTION NO. 2014 XX A RESOLUTION OF THE CITY COUNCIL OF THE CITY EL CERRITO AS HOUSING SUCCESSOR CONSENTING TO WITHDRAWAL AND SUBSTITUTION OF GENERAL PARTNER AND LIMITED PARTNER OF IDAHO APARTMENTS ASSOCIATES WHEREAS, the former El Cerrito Redevelopment Agency (the Agency ) and City of El Cerrito have encouraged redevelopment in specific portions of the El Cerrito Redevelopment Project Area in accordance with the goals and objectives of the City of El Cerrito Redevelopment Plan as amended; and WHEREAS, as part of the 2011-12 State budget bill, ABx1 26 (the Dissolution Act ) was enacted significantly modifying the Redevelopment Law to require the dissolution of redevelopment agencies throughout California and the establishment of successor agencies to wind down the former redevelopment agencies affairs; and WHEREAS, the City adopted Resolution No. 2012-04 on January 17, 2012 electing to retain the housing assets and functions previously performed by the Agency in accordance with Section 34176 of the Redevelopment Law and becoming the housing successor to the El Cerrito Redevelopment Agency; and WHEREAS, the Agency was dissolved effective February 1, 2012 pursuant to the Dissolution Act and all housing assets, less the unencumbered housing balance, and obligations of the former Agency were transferred to the City as housing successor by operation of law; and WHEREAS, Idaho Apartments Associates, a California limited partnership (the Partnership ) was initially formed as a limited partnership by that certain Agreement of Limited Partnership dated November 15, 1996 (as amended) (the Partnership Agreement ), and by that Certificate of Limited Partnership filed with the State of California on November 19, 1996; and WHEREAS, pursuant to Redevelopment Agency Resolution No. 447 adopted on February 3, 1997, the former Redevelopment Agency entered into the Owner Participation Agreement, Promissory Note and related documents (collectively the OPA Documents ) with the Partnership to provide a loan of $350,000 in Low and Moderate Income Housing Funds for the purpose of improving the supply of affordable housing pursuant to California Health and Safety Code 33334.2 and specifically for the acquisition, substantial rehabilitation and new development of 29 units of affordable special needs housing at the former Idaho Motel at 10203 San Pablo Avenue, El Cerrito (the Project ); and WHEREAS, the parties to the Partnership desire to further amend the Partnership Agreement for the purpose of Idaho Apartments Housing Corporation to assign its general partner interest in the Partnership to RCD GP LLC and to withdraw from the Partnership, and for Rubicon Programs Incorporated to assign its limited partner interest in the Partnership to Resources for Community Development and to withdraw from the Partnership; and
Agenda Item No. 5(E) Attachment 1 WHEREAS, any transfer or change in control of ownership of the Project is subject to the review and approval of the City Council of El Cerrito pursuant to the OPA Documents; and WHEREAS, the Partnership has submitted to the City for its review and approval that certain Assignment and Assumption Agreement and Second Amendment To Amended And Restated Articles Of Limited Partnership Of Idaho Apartments Associates ( Second Amendment ); and WHEREAS, the City Council of the City of El Cerrito has reviewed the terms of the Second Amendment and the qualifications of Resources for Community Development to assume control of the Partnership and the Project. NOW THEREFORE, BE IT RESOLVED that the City El Cerrito, after review and consideration of the terms of the Second Amendment, hereby consents to the withdrawal of Idaho Apartments Housing Corporation as the general partner of the Partnership and to the substitution of RCD GP LLC as the general partner, and also consent to the withdrawal of Rubicon Programs Incorporated as the limited partner of the Partnership and to the substitution of Resources for Community Development as a limited partner in the Partnership pursuant to the terms of the Second Amendment, BE IT FURTHER RESOLVED that the City Council of the City of El Cerrito authorizes the City Manager to execute documents necessary to indicate City s consent to the withdrawal and substitution of the general partner and the limited partner, BE IT FURTHER RESOLVED that this Resolution shall become effective immediately upon its passage and adoption. I CERTIFY that at the special meeting on September 22, 2014, the City Council of the City of El Cerrito passed this resolution by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: IN WITNESS of this action, I sign this document on September, 2014. APPROVED: Cheryl Morse, City Clerk Janet Abelson, Mayor
Agenda Item No. X Attachment 2 ASSIGNMENT AND ASSUMPTION AGREEMENT AND SECOND AMENDMENT TO AMENDED AND RESTATED ARTICLES OF LIMITED PARTNERSHIP OF IDAHO APARTMENTS ASSOCIATES This Assignment and Assumption Agreement and Second Amendment to Amended and Restated Articles of Limited Partnership of Idaho Apartments Associates, a California Limited Partnership (the Second Amendment ) is made as of, 2014, by and among Idaho Apartments Housing Corporation, a California nonprofit public benefit corporation ( Idaho Corp ), Rubicon Programs Incorporated, a California nonprofit public benefit corporation ( Rubicon ), RCD GP LLC, a California limited liability company ( RCD GP ) and Resources for Community Development, a California nonprofit public benefit corporation ( RCD ) with reference to the following facts: A. Idaho Apartments Associates, a California limited partnership (the Partnership ) was initially formed as a limited partnership by that certain Agreement of Limited Partnership dated November 15, 1996 (as amended) (the Original Agreement ), and by that Certificate of Limited Partnership filed with the State of California on November 19, 1996 ( Certificate ). B. The Original Agreement was modified by the Amended and Restated Articles of Limited Partnership of Idaho Apartments Associates dated November 18, 1997 (the A&R Agreement ), with Idaho Corp as the general partner of the Partnership, and California Equity Fund 1996 Limited Partnership, a California limited partnership ( CEF ), as the limited partner of the Partnership. C. Pursuant to that certain Agreement for Withdrawal of Limited Partner dated as of January 31, 2014, by and among the Partnership, the General Partner and CEF, CEF withdrew from the Partnership as the sole Limited Partner. D. Pursuant to that certain First Amendment to Amended and Restated Articles of Limited Partnership of Idaho Apartments Associates dated as of January 31, 2014 ( First Amendment ), the Partnership admitted Rubicon as the sole limited partner of the Partnership in place of CEF. The A&R Agreement, as amended by the First Amendment, is referred to herein as the Partnership Agreement. E. The purpose of this Second Amendment is for Idaho Corp to assign its general partner interest in the Partnership to RCD GP and to withdraw from the Partnership, and for Rubicon to assign its limited partner interest in the Partnership to RCD and to withdraw from the Partnership. F. The parties desire to further amend the Partnership Agreement, as set forth below. NOW, THEREFORE, in consideration of the foregoing, the parties hereto mutually agree as follows: Att 2 2nd Amend to LPA - GP+LP Substitution_ Idaho Apts_v2 1
Agenda Item No. X Attachment 2 1. Idaho Corp hereby assigns, grants, transfers and sets over to RCD GP all of Idaho Corp s right, title and interest as the general partner in the Partnership, and RCD GP hereby assumes all of Idaho Corp s obligations as general partner in the Partnership, including without limitation, all obligations of Idaho Corp as the general partner under the Partnership Agreement as if RCD GP had executed any and all of said agreements; however, RCD GP s obligations under the Partnership Agreement shall only arise as to events that occur after the date of this Second Amendment. 2. Rubicon hereby assigns, grants, transfers and sets over to RCD all of Rubicon s rights, title and interest as the limited partner in the Partnership, and RCD hereby assumes all of Rubicon s obligations as limited partner in the Partnership, including without limitation, all obligations of Rubicon as the limited partner under the Partnership Agreement as if RCD had executed any and all of said agreements; however, RCD s obligations under the Partnership Agreement shall only arise as to events that occur after the date of this Second Amendment. 3. Idaho Corp and Rubicon each hereby knowingly and specifically releases, relinquishes and waives any and all claims and rights, currently known and/or unknown, against the Partnership and Partnership assets. Idaho Corp and Rubicon each hereby knowingly waive California Civil Code Section 1542, which provides that a general release does not extend to claims which the creditor does not know or suspect to exist in its favor at the time of executing the release, which if known to it must have materially affected its settlement with the debtor. 4. With respect to the transactions described in the Partnership Agreement, the Partnership, RCD GP and RCD knowingly and specifically release, relinquish and waive any and all claims and rights, currently known and/or unknown, against Idaho Corp, Rubicon, and their assets. The Partnership, RCD GP and RCD hereby knowingly waive California Civil Code Section 1542, which provides that a general release does not extend to claims which the creditor does not know or suspect to exist in its favor at the time of executing the release, which if known to it must have materially affected its settlement with the debtor. 5. The Partnership is a third party beneficiary of this Second Amendment and shall have the right to enforce its provisions. 6. Idaho Corp, Rubicon, RCD GP and RCD, at the request of any of the parties hereto at any time and from time to time after the date hereof, shall execute and deliver all such further documents, and take and forbear from all such action, as may be reasonably necessary or appropriate in order more effectively to perfect the transfers of rights contemplated herein or otherwise to confirm or carry out the provisions of this Second Amendment. 7. Idaho Corp and RCD GP hereby represent and warrant that the admission of RCD GP to the Partnership and the withdrawal of Idaho Corp as the general partner of the Partnership, and the admission of RCD to the Partnership and the withdrawal of Rubicon as the limited partner of the Partnership shall not constitute a default under any obligations of the Partnership, including but not limited to any and all loans the Partnership has obtained in connection with the development of the residential housing development owned by the Partnership. Att 2 2nd Amend to LPA - GP+LP Substitution_ Idaho Apts_v2 2
Agenda Item No. X Attachment 2 8. The Partnership Agreement is hereby amended to: (i) substitute RCD GP as the general partner and to provide for the withdrawal of Idaho Corp as the general partner and (ii) substitute RCD as the limited partner and to provide for the withdrawal of Rubicon as the limited partner. 9. This Agreement shall not be deemed or construed as releasing Idaho Corp or Rubicon from any obligations as general partner and limited partner under the Partnership Agreement or under any documents related to the Project or the construction, operation or financing of the Project incurred prior to the effective date of this Agreement. 10. Upon execution of this Second Amendment, Idaho Corp and RCD GP shall prepare, sign and file in the Office of the California Secretary of State an amendment to certificate of limited partnership in accordance with the Act. 11. This Second Amendment may be signed by different parties hereto in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall be deemed an original of this Second Amendment. 12. Any default under this Second Amendment shall be a default under the Partnership Agreement 13. All capitalized terms not defined herein shall have the meanings ascribed to them in the Partnership Agreement. 14. This Second Amendment may be executed in counterparts. Att 2 2nd Amend to LPA - GP+LP Substitution_ Idaho Apts_v2 3
Agenda Item No. X Attachment 2 IN WITNESS WHEREOF, each of the parties hereto has executed this Second Amendment as of the date first written above. Idaho Apartments Housing Corporation, a California nonprofit public benefit corporation Title: Rubicon Programs Incorporated, a California nonprofit public benefit corporation Title: RCD GP LLC, a California limited liability company Resources for Community Development, a California nonprofit public benefit corporation, its sole member/ manager Title: Resources for Community Development, a California nonprofit public benefit corporation Title: Att 2 2nd Amend to LPA - GP+LP Substitution_ Idaho Apts_v2 4
Agenda Item No. X Attachment 2 CONSENT TO WITHDRAWAL AND SUBSTITUTION OF GENERAL PARTNER AND LIMITED PARTNER OF IDAHO APARTMENTS ASSOCIATES The undersigned lenders of Idaho Apartments Associates, a California Limited Partnership (the Partnership ) hereby consent to the withdrawal of Idaho Apartments Housing Corporation as the general partner of the Partnership and to the substitution of RCD GP LLC as the general partner, and also consent to the withdrawal of Rubicon Programs Incorporated as the limited partner of the Partnership and to the substitution of Resources for Community Development as a limited partner in the Partnership, each pursuant to the foregoing Second Amendment. This consent may be executed in counterparts. The County of Contra Costa, a political subdivision of the State of California Title: Date: The City of El Cerrito, successor housing agency to the El Cerrito Redevelopment Agency Title: Date: Att 2 2nd Amend to LPA - GP+LP Substitution_ Idaho Apts_v2 5