SR - AGR-6368 - GROUND LEASE TRIANGE TERRACE APARTMENTS1. SUBJECT
Ground Lease By and Between City of Orange and Triangle Terrace Affordable, L.P. for Triangle
Terrace Apartments
2. SUMMARY
Triangle Terrace Affordable, L.P. plans to acquire and rehabilitate the Triangle Terrace
Apartments (the "Project "), which is located on City -owned land. The proposed transaction
includes approving a new 60 -year Ground Lease with the partnership, which would enable the
acquisition and rehabilitation to be financed.
3. RECOMMENDATION
(1) Approve the attached Ground Lease with Triangle Terrace Affordable, L.P.
(2) Authorize the Mayor to execute the Ground Lease with Triangle Terrace Affordable, L.P.
and all related documents on behalf of the City.
(3) Authorize the Mayor to terminate the existing Ground Lease with Orange Senior Housing,
Inc. ( "OSH, Inc. ") on behalf of the City.
4. FISCAL IMPACT
The current annual lease payment is $1,181.40. Under the terms of the proposed Ground Lease,
the lease payments would be as follows: Year 1 -15 - an initial lump sum payment of $600,000
covering the lease payments for the first 15 years, Year 16 - a minimum base rent of $75,000
based on adjustments to the Orange County median income, and Year 17 through Year 60 — the
Year 16 base rent with rent increases of 2.5 percent per annum.
Triangle Terrace Ground Lease
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5. STRATEGIC PLAN GOAL(S)
Goal 3: Enhance and promote quality of life in the community.
Strategy c.: Support and enhance attractive, diverse living environments.
6. GENERAL PLAN IMPLEMENTATION
Housing Goal 2.0 Assist in the development of adequate housing to meet the needs of Low and
Moderate Income households.
7. DISCUSSION and BACKGROUND
OSH, Inc. currently owns the Project, a 75 -unit, senior, federally- subsidized housing project
located on City -owned land at 555 South Shaffer Street. OSH, Inc. leases the land from the City.
Under the terms of the current Ground Lease, the annual lease payment will be $1,181.40
through 2041.
OSH, Inc. has entered into a partnership with Reiner Communities to form Triangle Terrace
Affordable, L.P., which plans to acquire and rehabilitate the Project. Reiner Communities has
experience with the acquisition and rehabilitation of senior rental housing. The proposed
transaction includes approving a new 60 -year Ground Lease with the partnership, which would
enable the Project to be financed. The current Ground Lease with OSH, Inc. would be
terminated when the financing is in place.
Under the terms of the proposed Ground Lease, the lease payments to the City would
substantially increase and include an initial lump sum payment of $600,000 covering the lease
payments for the first 15 years. The Ground Lease also includes an Affordable Housing
Regulatory Agreement, which would be recorded to ensure that the Project would remain
affordable to Very Low and Low Income seniors for a minimum of 55 years. Council action is
being requested to approve the proposed Ground Lease and the change of ownership for the
Project.
Proposed financing includes tax - exempt bonds and tax credits. The City will not provide any
financing for the Project, but is required to authorize the issuance of bonds. The proposed bond
issuance and the commitment agreement with OSH, Inc. relating to the reinvestment of the
proceeds from the sale of the Project are discussed under separate staff reports.
8. ATTACHMENTS
• Ground Lease By and Between City of Orange and Triangle Terrace Affordable, L.P.
CITY COUNCIL MINUTES JULY 12, 2016
5. REPORTS FROM COUNCILMEMBERS — None
6. REPORTS FROM BOARDS, COMMITTEES, AND COMMISSIONS — None
7. ADMINISTRATIVE REPORTS
NOTE: Items 7.1 and 7.2 were re- ordered to be heard after Item 11.3.
7.1 Ground Lease by and between City of Orange and Triangle Terrace Affordable, L.P.
for Triangle Terrace Apartments. (A2100.0; Agr -6368)
NOTE: Mayor Smith recorded an abstention on Items 7.1, 7.2, and 11.4 due to a potential
conflict with her employer and left the dais at 8:21 p.m.
City Manager Rick Otto introduced the item and Senior Housing Manager Mary Ellen
Laster provided a staff report. During discussion, City Attorney Winthers clarified that the
Mayor is still authorized to sign the agreements related to this project even though she has
recused from all three items. The applicant briefly thanked Council and staff for their
support on this project.
MOTION — Whitaker
SECOND — Alvarez
AYES — Alvarez, Whitaker, Murphy
ABSENT (RECUSED) — Smith
ABSENT — Nichols
Moved to: 1) Approve the Ground Lease with Triangle Terrace Affordable, L.P.; 2)
Authorize the Mayor to execute the Ground Lease with Triangle Terrace Affordable, L.P.
and all related documents on behalf of the City; and 3) Authorize the Mayor to terminate
the existing Ground Lease with Orange Senior Housing, Inc. (OSH, Inc.) on behalf of the
City.
7.2 Agreement by and between the City of Orange ( "City ") and Orange Senior Housing,
Inc. ( "OSH ") Relating to the Commitment and Reinvestment of Triangle Terrace
Sale Proceeds. (A2100.0; Agr -6369)
NOTE: Mayor Smith recorded an abstention on Items 7.1, 7.2, and 11.4 due to a potential
conflict with her employer. She left the dais prior to Item 7.1 being heard.
MOTION — Alvarez
SECOND — Whitaker
AYES — Alvarez, Whitaker, Murphy
ABSENT (RECUSED) — Smith
ABSENT — Nichols
Moved to approve the agreement with OSH and authorize the City Manager and City Clerk
to execute the agreement on behalf of the City.
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