TO: MAYOR AND CITY COUNCIL MEMBERS, CITY OF CHINO
FROM: LINDA REICH, CITY MANAGER
SUBJECT
title
Season’s Senior Villas Request for Estoppel Certificate, Consent to Assignment and Term Extension.
end
RECOMMENDATION
Approve request by owner of Season’s Senior Villas apartment complex for estoppel certificate and consent to assign makeup of ownership and reject request for term extension.
body
FISCAL IMPACT
No fiscal impact.
CITY OF CHINO MISSION / VISION / VALUES / STRATEGIC ISSUES
The recommendation detailed above further the City’s values and strategic issues that serve as key pillars on which identified priorities, goals, and action plans are built, by fostering:
• Positive City Image
• Superior Customer Service
• Responsible Long-Range Planning
• Exemplary Leadership
• Public Service Excellence through Internal and External Partnerships
|
Revenue: Click or tap here to enter text. |
Expenditure: |
|
Transfer In: Click or tap here to enter text. |
Transfer Out: Click or tap here to enter text. |
BACKGROUND
On May 17, 1998, the City entered into a Ground Lease with the Chino Housing Investors, L.P. to lease and operate the senior housing project at 13160 6th Street in the City. The project consists of a 104 unit senior citizen rental housing project for low and very low income households and includes 2 manager’s units, a recreation building 2 laundry facilities and related amenities.
On May 13, 2024, representatives of the tenant requested that the City approve a transfer of the current ownership of the tenant entity. The tenant will remain Chino Housing Investors, L.P., but its ownership will change from its current ownership held by Highridge Costa to Standard Communities, which City staff and the City Attorneys’ office confirmed is an experienced multifamily apartment project owner and operator. Standard Communities owns and operates nearly 19,500 residential units, including more than 18,400 affordable and workforce housing units across the United States. (See Exhibit A.) Per the terms of the Ground Lease, attached as Exhibit B, an assignment requires the consent of the City.
The tenant also seeks to have the Chino Successor Agency and the City consent to the assignment under the original disposition and development agreement (“DDA”) between the former Chino Redevelopment Agency and Chino Housing Investors, L.P. The tenant believed this consent is required because the former Chino Redevelopment Agency and City were original lenders under the DDA. However, the City Attorney confirmed that the consent is not legally necessary as the DDA accomplished the sale and development of the property and no longer has any legal force or effect.
The estoppel certificate requested by the tenant is a representation by the City that the Ground Lease is still in effect and that Chino Housing Investors, L.P. is not in default under the terms of the Ground Lease. This is typically required when there is a change of ownership or a request by a tenant to obtain a loan. The estoppel certificate serves as verification in those circumstances to the new owners or lender, respectively, that the Ground Lease remains in full effect.
The tenant also requested that the City approve an extension to the term of the lease. The Ground Lease is currently set to expire in 2055. (Exhibit B) The tenant justified the request by saying that its intent is to be a long-term owner of the property and the relatively short term remaining is inconsistent with the proposed new owner’s planned long term ownership.
ISSUES/ANALYSIS
City staff and the City Attorneys’ office investigated the background of Standard Communities, the proposed new owner of Chino Housing Investors, LP and found that it is in good standing and authorized to do business in the City. The materials provided by the tenant with its May 13, 2024 correspondence to the City (Exhibit A) also demonstrate that Standard Communities has significant experience in operating residential communities similar to the Season’s at Chino Apartments Project. As such, the proposed assignment of Highridge Costa’s current interest in Chino Housing Investors, LP to Standard Communities is justified. (Consent to assignment and letter confirming no consent is required for assignment of the DDA are attached at Exhibit C)
The Finance Department also confirmed that the latest audited statements of the tenant confirm that operator is in compliance with the provisions of the Multifamily Housing Mortgage Revenues Bonds originally issued as part of the DDA. There were also no outstanding amounts due to the City for rent or other financial obligations by tenant to the City under the Ground Lease.
Additionally, on August 22, City staff inspected the Season’s at Chino Apartments Project site. City staff confirmed that no major maintenance issue or other concerns exist at the site. They did identify some deferred maintenance items, such as required landscaping improvements, dry rot areas and deteriorating iron fencing at places. The tenant’s representatives, who accompanied City staff on the inspection, noted all deferred maintenance areas identified by City staff and agreed to address them.
The above confirms that issuance of the estoppel certificate confirming tenant’s compliance with the terms of the lease would be appropriate. As such, the City Attorney’s office and proposed new tenant’s legal counsel negotiated the proposed estoppel certificate attached as Exhibit D.
As for the requested extension of the Ground Lease term, City staff do not support an extension at this time. Over 30 years remain on the current term and the proposed new owners are not committing to make any significant improvements, increase the rent amounts payable to City, or make any other concession to the City in exchange for the additional term. Indeed, market conditions could change in 30 years and it would be prudent to preserve the City’s rights to make adjustments to the terms of the lease at that time rather than committing to lock in the current terms now for a longer period.
Attachments: Exhibit A - D