CITY COUNCIL REGULAR MEETING AGENDA PACKET

Page 2 of 4 regulatory agreements, which restrict 13 extremely low-income units at 30% AMI, are set to expire in 2027. In accordance with the existing Ground Lease dated April 1, 1996 (which is set to expire in 2051), the City owns the land and AF Evans Company, Inc. ("AF Evans") owns the buildings and improvements on the site ("Promenade Apartments"), although assigns ownership to two Limited Partnership entities fully controlled by AF Evans, Case Avenue Associates (Case) and Promenade Housing Associates (Promenade). Case and Promenade developed the Project, which consisted of two portions: Case developed and owns the 68-unit affordable multifamily rental residential project (Affordable Project) while Promenade developed and owns the 78-unit market-rate portion of the project (Market Rate Project). In January 27, 2011, the City provided consent to the substitution of Bayside Communities, LLC ("Bayside") for A.F. Evans Company, Inc. as the General Partner of Case Avenue Associates and the General Partner of Promenade Housing Associates. Bayside became the new owner of Promenade Apartments. In September 2023, Bayside notified the City of its intent to sell the Project to OAHS Promenades LP ("OAHS Promenades") and requested City approval of this transaction. Per the existing Ground Lease, while a change in management agent could be approved by the City Manager without City Council action, an assignment of the existing ground lease requires City Council review and approval. DISCUSSION Assignment and Assumption of Ground Lease Bayside is currently under contract to assign the existing ground lease to OAHS Promenades, and OAHS Promenades has agreed to assume all of Bayside's rights and obligations under the Ground Lease. For the sale of the Project to be completed, the City must consent to the assignment and assumption of the Ground Lease and conveyance of the Project to OAHS Promenades. The original ground lease between the City and AF Evans, which was executed on April 1, 1996 and has a 55-year term, formalized the City's lease of its approximately 7.4 acre parcel of land to AF Evans to develop the Project - a 146-unit rental housing development consisting of 68 units (or 46% of the total units) reserved for low-income households at 80% of the Area Median Income (AMI). The ground lease also stipulated an annual rent on the land of $220,000 and two loans ($2,016,576 and $432,532) to assist with construction financing, as previously outlined. As previously described, Bayside replaced AF Evans in January 2011 as the owner of Promenade Apartments. Consent to Transfer Promenade Apartments OAHS Promenades is proposing to pay off all the existing City loans and finance the purchase of Promenade Apartments with a traditional bridge loan facility. With the City consenting to the conveyance of the property, at the closing of the purchase all the existing City loans, which are currently estimated to total $1,011,328 ($998,062 principal loan balances + $13,266 in accrued interests through August 31, 2024) will be fully paid. Option to Extend Ground Lease Term Along with purchasing the Project, in August 2024 OAHS Promenade intends to pursue a 4% Page 261 of 454