CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Pass the ordinance approving a Purchase and Sale Agreement for approximately 4.68 acres of City-owned property, located east of Illinois Route 59 and south of 103rd Street, between the City of Naperville and Tower Court Naperville, LLC (“TCN”) including major business terms for the development of affordable senior and IDD housing (requires seven positive votes)
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DEPARTMENT: Transportation, Engineering and Development
SUBMITTED BY: Amy Emery, AICP, TED Operations Manager
BOARD/COMMISSION REVIEW:
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BACKGROUND:
On September 21, 2021, the City Council issued an RFP to leverage City-owned property to address affordable housing needs in Naperville. Through the process, which included review of written proposals and meetings before the Human Rights and Fair Housing Commission, Accessible Community Task Force, and the Senior Task Force, Gorman & Company, LLC (now Tower Court Naperville or TCN) was selected as the recommended developer.
On June 21, 2022, City Council approved the form and substance of the Major Business Terms (MBTs) negotiated by the City of Naperville with TCN for sale of the property. The MBTs highlight key financial terms and conditions for an affordable senior and IDD housing development project. The purpose of the proposed MBTs is to define the scope of the project and to establish mutual understanding related to:
1. Minimum number of units
2. Tenant age and income restrictions (e.g., seniors age 62 and over; individuals with Intellectual Disabilities and/or Development Disabilities age 18 and over)
3. Expectations for site amenities and service availability
4. Timeframes for project financing, construction, and leasing
5. Financial, legal, and reporting obligations
On July 5, 2022, TCN submitted its bid for purchase of the subject property. In accordance with the requirements of RFP 21-315, the bid included two elements: purchase price and an affordability period. TCN proposed a 99-year affordability period and established a minimum purchase price of $100,000 (equal to approximately 5% of the market value). TCN offered a higher bid amount subject to several contingencies tied to entitlement and funding approvals by other agencies.
Upon review of the bid to purchase the City-owned property from TCN, Council directed staff to continue to negotiate with TCN to improve the offer to better recognize the value of the City property. Negotiations extended for two months and included consideration of alternative funding sources, modified development requirements, and alternative MBT structures to provide a fair deal to all parties.
On September 20, 2022, the City Council selected Gorman & Company, LLC (Tower Court Naperville or TCN) as the project developer and authorized execution of revised MBTs related to the lease of the subject property. City Council also directed staff to continue due diligence concerning the feasibility of obtaining property tax relief for the project and to negotiate terms for the potential sale of the property if determined that the lease conditions could not be met.
On October 20, 2022, Tower Court Naperville submitted a Preliminary Project Assessment to the Illinois Housing Development Authority (IHDA) for Tower Court Residences. This action was required by all applicants seeking to submit a full application for Low Income Housing Tax Credits (LIHTC) to IHDA in February 2023. IHDA accepted the submittal and authorized TCN to proceed with the full submittal.
DISCUSSION:
The Purchase and Sale Agreement sets forth terms and conditions for the sale of approximately 4.68 acres of City-owned property (the Project Property) to located on a portion of the City’s “South 40” property, to the west of the Wheatland Township Road District offices.
The purchase price for the Project Property is $8.50 per square foot and was based on an appraisal obtained by the City. TCN will pay the City $320,000 of the purchase price at the time of closing (on or before September 30, 2024). The City will issue a mortgage and promissory note to TCN for the balance of the purchase price to be paid upon the earlier of sale of the Project Property, resyndication of the project, or within thirty years of execution of the Purchase and Sale Agreement.
Major Business Terms
Attached to the Purchase and Sale Agreement are updated major business terms (MBTs) which set forth provisions related to the construction and operation of affordable senior and IDD housing on the Project Property. The MBTs reflect the change from a lease to a land sale transaction. The shift to a sales transaction does not modify the fundamental structure of the development which includes the amenities set forth in the MBTs, a 71-dwelling unit count, the tenant mix of 75% senior housing and 25% IDD housing, a 99-year affordability period, and the overall project construction timeline (occupancies anticipated to begin in early 2026). In an effort to maximize the tax credit application score for the proposed project, the MBTs have also been modified to increase to 20% (previously 10%) the number of units for those earning up to 30% of the Area Media Income (AMI). This change will increase the supply of units available to those with the greatest need for affordable housing.
Site Design
Over the last four months, TCN has refined its initial development concept to align with the negotiated MBTs, including required site amenities and open space requirements. As part of this effort, in November of 2022, TCN hosted a meeting to solicit additional input from parents and individuals living with IDD in Naperville about site design features. Finally, TCN has collaborated to plan for a single shared stormwater management facility to more efficiently address the collective stormwater needs of the Project Property and other properties to the north and west. This has contributed to a reduction of the project site area by 1.3 acres.
Next Steps
Timely action by the City Council is important as it will allow TCN to submit a full application for Low Income Housing Tax Credits (LIHTC) for the project to IHDA by February 16, 2023. Without action at the February 7, 2023 City Council meeting, project financing will be delayed by a full year to coincide with the next IHDA tax credit application cycle.
As defined in the MBTs, TCN expects to submit a detailed development petition to the City on or before February 15, 2023. This petition will include technical plans (e.g. engineering, landscaping, plats, etc.) required to initiate City staff review prior to scheduling of public hearings to consider requests for zoning and related entitlements later this year.
It should be noted, in accordance with the MBTs, the sale will not be finalized, and no funds will be exchanged, until:
1. Zoning entitlements are approved by the City of Naperville;
2. HOME funds awarded by DuPage County (or equivalent funding is obtained); and
3. Site development funding is secured by TCN (anticipated on or before June 30, 2024)
FISCAL IMPACT:
The City will receive a $320,000 at closing (on or before June 30, 2024). The balance of the purchase price will be paid within thirty years. Fiscal impact will also be affected by City expenditures for the IL Route 59 access and site roadway improvement, estimated at $850,000, which will benefit the Project Property and other properties.