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Report regarding a Resolution approving the transfer of the Successor Agency to the former Redevelopment Agency real property from the Successor Agency to the City of South San Francisco as Housing Successor and a Resolution authorizing a Second Amendment to the Land Lease Agreement with Magnolia SSF LP for 630 Baden Avenue. (Elia Moreno, Management Analyst I)
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RECOMMENDATION
Recommendation
Staff recommends that:
1. The Successor Agency to the Former Redevelopment Agency of the City of South San Francisco adopt a resolution approving the transfer of former Redevelopment Agency real property from the Successor Agency to the City of South San Francisco as Housing Successor; and
2. City Council adopt a resolution accepting the transfer of former Redevelopment Agency real property from the Successor Agency to the City of South San Francisco as Housing Successor and authorizing a Second Amendment to the Land Lease Agreement with Magnolia SSF LP for 630 Baden Avenue.
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BACKGROUND
The Successor Agency to the Former Redevelopment Agency of the City of South San Francisco is the current owner of the land located at 630 Baden Avenue in South San Francisco. The Former Redevelopment Agency of the City of South San Francisco and South San Francisco Magnolia Plaza Associates, a California limited partnership, were original parties to a Land Lease dated May 1, 1987, which enabled the development of a mix of market rate affordable senior housing units at Magnolia Plaza. BRIDGE Housing Corporation, along with a private owner, comprised South San Francisco Magnolia Plaza Associates.
Following the dissolution of all redevelopment agencies in California under Assembly Bill x1 26 (ABx1 26), the City of South San Francisco elected to serve as the Successor Agency to the Former Redevelopment Agency. As the designated Successor Agency, the City assumed responsibility for managing the former agency’s enforceable obligations and real property assets, including the Land Lease for 630 Baden Avenue.
On December 10, 2021, the Successor Agency and South San Francisco Magnolia Plaza Associates executed an Assignment and Assumption of Land Lease, which was recorded on December 16, 2021. Under the Assignment and Assumption of Land Lease, all right, title, and interest in the Land Lease were assigned to Magnolia SSF LP, a single-purpose entity wholly owned by BRIDGE Housing Corporation, a nonprofit affordable housing developer. Magnolia SSF LP assumed the remaining term and all obligations under the Land Lease. The Successor Agency formally acknowledged Magnolia SSF LP as the tenant under the Land Lease.
DISCUSSION
The Successor Agency and Magnolia SSF LP now seek to amend the Land Lease to accommodate modifications requested by Magnolia SSF LP.
Magnolia SSF LP is in the process of securing a new loan from the County of San Mateo. The proposed County loan is a $3,000,000 low-interest, long-term loan from Measure K funds, through the County’s Affordable Housing Fund. The loan has a 55-year term and is intended to support rehabilitation and related project expenses. As a condition of this loan, the County requires that the Land Lease term with the City be extended to align with the loan term. Magnolia SSF LP has therefore requested an amendment to the Land Lease extending its term accordingly.
To comply with this condition, Magnolia SSF LP has requested to enter into a Second Amendment to the Land Lease to extend its term accordingly. However, during preparation for this amendment, it was determined that the Successor Agency to the Former Redevelopment Agency of the City of South San Francisco remains the fee owner of the 630 Baden Avenue property.
As such, to facilitate both the loan and the long-term preservation of affordable housing, staff recommends that the Successor Agency formally transfer the property to the City as Housing Successor. The City, acting as the Housing Successor, would then execute the Second Amendment to the Land Lease with Magnolia SSF LP.
As part of the negotiations with BRIDGE Housing Corporation regarding the Second Amendment to the Land Lease, City staff proposed changes to the Land Lease Agreement that include marketing available units following current best practices, such as utilizing the Doorway portal, together with requirements for local preferences to apply under the extended 55-year lease term. A significant modification to the operation of the property is the conversion of 13 previously unrestricted, market-rate units to Low Income or 80% of the Area Median Income (AMI) for San Mateo County. Aside from two management units, all of the units at this property will now be subject to either City, County, or project-based voucher requirements to preserve affordability for tenants through the extended lease term.
FISCAL IMPACT
The proposed amendments to the Lease will not change the financial obligations of the Successor Agency or the City as Housing Successor.
CONCLUSION
Staff recommends that the Successor Agency to the Former Redevelopment Agency of the City of South San Francisco adopt a resolution approving the transfer of former Redevelopment Agency real property located at 630 Baden Avenue from the Successor Agency to the City of South San Francisco as Housing Successor and then for the City as Housing Successor to adopt a Resolution accepting the transfer and authorize the execution of a Second Amendment to the Land Lease Agreement with Magnolia SSF LP.