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DATE: March 20, 2012

ITEM #: 8.B. PREPARED BY: Ed Butterfield and Ben Davis RE: CONSIDERATION AND ADOPTION OF A RESOLUTION OF THE

BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING THE TERMS OF A LOAN TO MARMALADE DISTRICT, LLC.

EXECUTIVE SUMMARY: City & Resort Properties, LLC is a land development company that focuses on developing multi-family, urban infill, housing projects. Marmalade District, LLC is a single-purpose entity affiliated with City & Resort Properties, LLC. Nathan Anderson (the “Applicant”), representing Marmalade District, LLC, is seeking a Housing Property Acquisition Loan to purchase a 0.34-acre parcel on which to build ten environmentally-friendly, metropolitan-styled townhomes. The parcel is located in the Redevelopment Agency’s West Capitol Hill project area at 735 North 300 West (the “Property”). The intent is to sell the townhomes at market rate of $185,000 to $189,000. The townhomes will be designed with either two or three bedrooms, great room/dining area, deck, and two-car garage. A unique feature of the townhomes is that each will be heavily insulated and equipped with a geothermal Geo-star heat exchanger that will either heat or cool the 1,300 square foot unit for approximately $16.00 per month. As a result of the geothermal aspect of the units, each owner will receive an $8,000 federal tax-credit, therefore, providing a strong incentive for potential buyers to purchase. RDA staff has determined that it would be beneficial to standardize its loan briefing materials, and has adopted a new format for presenting these types of requests. Attached is a Loan Committee Memorandum that describes the loan request in detail in this new format. Information about the applicant, the project, and a summary of the proposed loan can be found in these materials. ALTERNATIVES:

1. Adopt a resolution approving the terms for a $175,000 loan to City & Resort Properties, LLC.

2. Do not adopt the resolution.

FUNDING: West Capitol Hill Fund—$175,000

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LOAN COMMITTEE RECOMMENDATION: Loan Committee recommends that the loan be approved by the Board of Directors pursuant to the conditions in Attachment 1—Loan Committee Memorandum. ATTACHMENTS:

1. Loan Committee Memorandum

2. Resolution.

 

LOAN MEMORANDUM FOR BOARD OF DIRECTORS 

 Date:  March 20, 2012  Applicant:  Marmalade District, LLC       Business Location:  4915 S. Waimea Way    Holladay, Utah        Company Established:  2011             Business Owner:  Nathan Anderson  Guarantor:  Nathan Anderson  Type of Loan:  Housing Property Acquisition Loan  Loan Term:  18 Months  Amount Requested:  $175,000         

  1 PROJECT SUMMARY 

 City & Resort Properties, LLC is a land development company that focuses on developing multi‐family, urban infill, housing projects.   Marmalade District, LLC is a single‐purpose entity whose majority contributors have operated under the name Willow Heights, LLC since 1995.   Nathan Anderson (the “Applicant”), representing Marmalade District, LLC, is seeking a Housing Property Acquisition Loan to purchase a 0.34‐acre parcel on which to build ten environmentally‐friendly, metropolitan‐styled townhomes.  The parcel is located in the Redevelopment Agency’s West Capitol Hill project area at 735 North 300 West (the “Property”).  The intent is to sell the townhomes at market rate of $185,000 to $189,000.  The townhomes will be designed with either two or three bedrooms, great room/dining area, deck, and two‐car garage.  A unique feature of the townhomes is that each will be heavily insulated and equipped with a geothermal Geo‐star heat exchanger that will either heat or cool the 1,300 square foot unit for approximately $16.00 per month.  As a result of the geothermal aspect of the units, each owner will receive an $8,000 federal tax‐credit, thereby providing a strong incentive for potential buyers to purchase.    The Housing Property Acquisition Loan would be repaid by Applicant either upon maturity of the loan or the start of construction.  Prior to construction, Applicant is planning to request a New Construction loan from the RDA.    Applicant has proposed the following development timeline:  

Task  Date 

Purchase Property  March 2012

Begin Design of Townhomes  April 2012 

Begin Site Engineering   May 2012 

Present Building and Site Layout to SLC DRT June 2012 

Submit PUD Application   June 2012 

Submit Final Plat  July 2012 

Building and Site Drawings Complete  August 2012

Obtain Building Permits  September 2012

Begin Construction  September 2012

Construction Complete  March 2013

All Units Sold  June 2013 

    2 PROPOSED LOAN  

Loan Amount:  $175,000—Housing Property Acquisition Loan   Loan will be used to acquire property for a housing infill project.  

Loan Terms:      18‐month Term, 3.00% Interest, Interest Only with Balloon Payment.           Monthly loan payments of $437.50 would begin on 04/01/2012 and the          loan would mature on 10/01/2013.  A balloon payment of $175,437.50 would          be paid in cash by Applicant at the sooner of either the loan maturity date or          the start of construction.  

                      Collateral.   RDA will hold a first lien position on the Property and Applicant            will provide a personal financial guaranty for the loan.  

Use of Funds   Expense 

Purchase Property to Build Ten Townhomes $225,000 

Total:  $225,000 

   

Source of Funds   

City & Resort Properties, LLC  $25,000 

Applicant  $25,000 

RDA Housing Property Acquisition Loan  $175,000 

Total:  $225,000   

3 ABILITY TO REPAY RDA LOAN 

 A. Loan Repayment Based on the Applicant’s credit score and a review of his personal balance sheet, RDA staff is confident in the Applicant’s ability to repay the RDA Housing Property Acquisition Loan.  In the case of default, however, the RDA would be able to exercise its first lien on the Property and recoup its investment.  

B. Ratio Analysis  

Overview:  Expense 

RDA Housing Property Acquisition Loan  $175,000 

Applicant Equity Contribution  $50,000 

Appraised Value of Property  $235,000 

Loan‐to‐Value Ratio (90% Maximum)  75% 

   

4 BUSINESS PLAN AND EXPERIENCE  

The business plan for this project is to build and sell, within approximately 15 months, ten market‐rate townhomes in the Redevelopment Agency’s West Capitol Hill project area.  Applicant, representing Marmalade District, LLC, has a proven track record in developing and marketing several projects of similar scope and timeline in Salt Lake City (see Attachment 3).  In fact, Applicant and his team have successfully built and marketed two housing projects in RDA project areas.  The first project, located at 850 South Washington Street, was a seven‐lot townhome development in which all seven units were sold in eleven days.  The units sold between $148,000 and 159,000 and, consequently, two of the units were sold seven months later for $209,000, which can be attributed to, among other factors, the quality of design and construction.  The second project, located at 300 West 700 North, was an eight‐unit live/work townhome project.  This project was built and sold in ten months.    5 IMPACTS OF THE PROJECT AND LOAN  

The issuance of a loan to Applicant is consistent with the RDA’s goals to redevelop communities by eliminating blight and enhancing livability.  The Property is currently vacant and is not being utilized to its highest and best use. This project will promote and fund a variety of housing options while encouraging home ownership, and increase the housing stock in the West Capitol Hill project area in the form of ten owner‐occupied townhomes.  The project will also promote sustainable redevelopment practices with the inclusion of a geothermal heating and cooling system.  Loan proceeds would be disbursed from the West Capitol Hill loan fund, in which it has been verified that there are sufficient funds. The loan would be interest‐only at 3% with a balloon payment due at the end of the 18‐month loan term.   Pursuant to the Housing Property Acquisition Loan Criteria, at least 20% and not more than 40% of the units shall be sold to owner‐occupant households whose income is 80% or less of the median income of Salt Lake County.   

 6 CREDIT HISTORY AND PERSONAL FINANCIAL INFORMATION  

Applicant’s credit score and personal balance sheet suggest that he has the financial capacity to comply with the terms of this loan.   

                  

 

RECOMMENDATION:   If the loan is approved, Staff recommends the following conditions be addressed prior to closing:  1.  Staff will have determined that the loan meets all lending criteria established by the RDA and the RDA’s 

Loan Committee.  2.  Applicant shall provide a minimum of $50,000 in cash equity.  3.  Applicant shall provide personal guaranty with terms approved by the RDA’s legal counsel.  4.  The execution of loan documents (e.g., promissory notes, loan agreements, security documents, and 

guarantees) as deemed necessary by the RDA and its legal counsel.  5.  Applicant shall provide evidence of insurance covering public liability, fire, and such other insurance in such 

amounts and with such coverage as deemed necessary by the RDA for the Property.  6.  The RDA and its legal counsel’s review and approval of all matters pertaining to title, legality of the loan, and 

the legality, sufficiency, and the form and substance of all documents that are deemed reasonably necessary for the loan transaction.  

7.  Applicant shall pay closing costs, including the Agency’s legal fees.  Applicant may use loan proceeds to pay closing costs not to exceed $10,000. 

 8.  Design review of building and site plans with Loan Committee.  9.  Such other terms as recommended by the Agency’s legal counsel.   ATTACHMENTS:   1.   Representative Image of Proposed Townhomes (Nathan Anderson will provide at Loan Committee) 2.   Management and Marketing Synopsis 3.    Recent Housing Projects 4.  Applicant’s Resume 5.  Contractor’s Resume            

    

  

Attachment 1 Representative Image of Proposed Townhomes 

                                            

 

 

Attachment 2 Management and Marketing Synopsis 

                                              

 

Attachment 3 Recent Housing Projects 

                                           

   

 

Attachment 4 Applicant’s Resume 

                                         

    

 

Attachment 5 Contractor’s Resume 

                                             

 

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RESOLUTION NO. 709.____ March 20, 2012 CONSIDERATION AND ADOPTION OF A RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING THE TERMS OF A LOAN TO CITY AND RESORT PROPERTIES, LLC.

WHEREAS, the Redevelopment Agency of Salt Lake City (“Agency”) was created to transact the business and exercise the powers provided for in the Utah Community Development and Renewal Agencies Act; and

WHEREAS, the Agency adopted the “West Capitol Hill Neighborhood Development

Plan” in 1996; and WHEREAS, the Agency desires to extend a Housing Property Acquisition Loan to City

& Resort Properties, LLC, represented by Nathan A. Anderson, for $175,000 to purchase a 0.34-acre parcel at 735 North 300 West on which to build ten environmentally-friendly, metropolitan-styled townhomes; and

WHEREAS, the proposed project is consistent with the RDA goals of redeveloping

communities by eliminating blight and enhancing livability, promoting and funding a variety of housing options while encouraging home ownership, and promoting sustainable redevelopment practices; and

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY, that the Board does hereby authorize the Chief Administrative Officer and Executive Director to execute a loan to City & Resort Properties, LLC in accordance with the Loan Memorandum for Board of Directors attached hereto. The transaction shall also incorporate such other terms and agreements as recommended by Agency counsel.

Passed by the Board of Directors of the Redevelopment Agency of Salt Lake City, this 20th day of March, 2012.

__________________________________ Kyle LaMalfa, Chairperson

ATTEST: ________________________________________ D. J. Baxter, Executive Director

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Transmitted to the Chief Administrative Officer on ______________. The Chief Administrative Officer

___does not request reconsideration ___ requests reconsideration at the next regular Agency meeting.

____________________________________ Ralph Becker, Chief Administrative Officer

ATTEST: _________________________________________ D. J. Baxter, Executive Director Approved as to legal form:___________________________________ Damon Georgelas