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HomeMy WebLinkAbout15520 Backup14th Street Development LLC 1600 NE 1"t Ave, Suite 3800 Miami, FL 33 132 January 30t", 2024 Commissioner Damian Pardo Chairman Omni Community Redevelopment Agency 1401 N Miami Ave, 2nd Floor Miami, FL 33136 Mrs. Isiaa Jones Executive Director Omni Community Redevelopment Agency 1401 N Miami Ave, 2°d Floor Miami, FL 33136 Re: Proposal to Fully Restrict the '14'" Street Development' Project (the "Project") at Different Affordable and Workforce Housing Levels From 60% to 140% of Area Median Income (AMI). Request for Additional Assistance. Dear Commissioner Pardo and Mrs. Jones: On October 28, 2021, the Omni Redevelopment District Community Redevelopment Agency ("CRA") approved OMNI CRA Resolution CRA-R-21-0044 (the "Resolution"), which authorized an allocation of funds of $15,000,000 for the Project. The Project — which sits on the corner of NE 15' Street and N Miami Ave, adjacent to the School Board Station of the Metromover, within the boundaries of the CRA — consists of a mixed -use 31-story skyrise comprising 398 residential units, of which 120 would be affordable units restricted at 60% and 80% AMI. Per the original plans and CRA allocation of funds, the rest of the units would remain at market rates. This would become NR Investments' fourth development within the CRA's community, following Filling Station Lofts, which was finalized in 2014; Canvas Condominium, delivered in 2019; and UNI Tower, which we estimate will be completed between May and June of this year. Following the approval of the Resolution, on March 28, 2022, the CRA's Executed Director executed the Forgivable Project Loan Agreement for 14" Street Development; the Economic Incentive Agreement for Mixed -Use and Mixed -Income Project; the Declaration of Restrictive Covenants for 14t" Street Development, LLC; the Mortgage and Security Agreement for 14" Street Development, LLC; the Rent Regulatory Agreement for 14' Street Development; the Disbursement Agreement for 14" Street Development, LLC; and the Promissory Note (CRA Funds) for 14" Street Development, LLC (the "Agreements"), which established the terms under which the $15,000,000 fund allocation would take place. The Agreements confirmed the composition of the income -restricted units within the 398-unit Project: 120 units, or approximately 30% of the Project, would be restricted at 60% and 80% AMI; the remaining 278 units, or approximately 70% of the Project. would have market rates. 14`" Street Development LLC 1600 NE 151 Ave, Suite 3800 Miami, FL 33132 Instead, what we propose through this request is for the Project to replicate the income restrictions of UNI Tower, the 28-story affordable and workforce housing high-rise that we are currently developing, with assistance from the CRA, only three blocks away from the Project's site. Comprising 252 units wholly restricted at the entire target income range (60%, 80%, 100%, 120%, and 140% AMI), UNI Tower will become the first fully restricted affordable and workforce housing mixed -use high-rise in the City of Miami, and will include amenities, finishes, and features of comparable market -rate apartment buildings. UNI Tower will completely change the paradigm of what affordable and workforce housing can and should be: not peripheral, but within one of Miami's most coveted areas; not just "good enough", but with the material quality of the market - rate skyrises in the same neighborhood. Crucially, because it will be mixed income and focus on the entire target income range from 60% to 140% AMI, UNI Tower will allow its residents to move up in their incomes without having to move out of the area, deepening their residents' ties. attachment, and commitment to the CRA's community. In this way, we expect UNI Tower to become a crucial recruitment and retaining tool for businesses, organizations, and institutions, by allowing them to provide their employees with the housing they urgently need and deserve. That is exactly our intent behind fully restricting the Project's housing component along the entire target income range. Along with UNI Tower, the Project if all 398 units are restricted — will deliver 650 new mixed income, fully restricted units within the boundaries of the CRA, striking a serious blow to the urgent crisis of housing unaffordability. If will do so while allowing its residents to move up in their incomes without having to move out of the community: or, in other words, by not penalizing them for getting a better paying job or advancing in their careers. As stated before, this will prove crucial in creating a less transient, more committed community of neighbors within the CRA. Importantly, it will also do so while providing an ample variety of unit types. While UNI Tower only includes Studio and 1-Bedroom unit types, the Project will also comprise a substantial share of 2-Bedroom units (along with Studios and 1-Bedrooms). This opens the possibility for larger households — families to access attainable housing, creating a community that's more diverse in terms of not only incomes and professions, but also household size. The Project and the Crisis of Housing Unaffordability The Project will help tackle what is perhaps most pressing issue facing the City of Miami: the urgent crisis of housing unaffordability. This scarcity of attainable housing manifests in ways that directly impact the ability of our City to sustain and grow its economy: I4'h Street Development LLC 1600 NE 1" Ave, Suite 3800 Miami, FL 33132 • By making it increasingly difficult for business and the public sector to recruit and retain their workforce. • By expelling more and more residents, resulting in net population loss for the first time in decades (Wall Street Journal, "Miami Sees Its First Population Drop in Decades": https://www.wsj.comfarticles/miami-sees-its-first-population-drop-in-decades-e 181171 i) Police departments, fire firefighters, schools, the public defender's office, and the state attorney's office, among others, are experiencing serious staffing shortages due to their employees' inability to access adequate housing, with the consequent impact on City services and on our community's human capital. They are joined by businesses, large and small, and organizations of our health care sector, for which unaffordable housing has become a key obstacle to their efforts to expand or relocate. In this way, the Project will become a crucial recruitment and retaining tool for businesses, organizations, and institutions by allowing them to provide their employees with the housing they urgently need and deserve. Comprising 398 units of high -quality, market -rate standard affordable and workforce housing — proposed to be fully restricted at 60%, 80%, 100%, 120%, and 140% of AMI — the Project will allow teachers, civil servants, government employees, Iaw enforcements professionals, fire fighters, and nurses, among others, to live in, or next to, the neighborhoods they serve: 'real life influencers' that will help create a stronger, healthier, and more sustainable CRA community, diverse in incomes, professions, and household sizes. It will enrich the fabric of the neighborhood and have a hugely positive impact for its residents and businesses. Proposed New Income Restrictions In order to completely fulfil this innovative approach to building affordable and workforce housing, and fully realize the benefits listed above, we propose to restrict the Project's total housing component along the entire target income range, as follows: 14th Street Development Proposed Income Restrictions Number of Units Percentage of total units Studios 1-Bedrooms 2-Bedrooms Total Units 398 100% 24 280 94 Affordable to Residents at 60%AMI 19 5% 1 14 4 Affordable to Residents at80%AMI 39 10% 2 28 9 Affordable to Residents at 10o%AMI 60 15% 4 42 14 Affordable to Residents at 120%AMI 81 20% 5 56 20 Affordable to Residents at140%AMI 199 50% 12 140 47 Request for Additional Economic Assistance With the proposed new mix of AMI restrictions in place, the additional economic assistance required from the CRA seeks to support the Project in two ways: 14th Street Development LLC 1600 NE 151 Ave, Suite 3800 Miami, FL 33132 ■ Partial Loss Reimbursement Firstly, by compensating a portion of the higher rent losses that will result from having more income -restricted housing units in the now fully restricted Project. In other words, by providing partial loss reimbursement for the increased lost rent generated by the higher AMI restrictions. A comparison here is apt. In the period between October 28, 2021, when the Resolution was approved, and March 28, 2022, when the Agreements were executed, we had estimated total rent losses, within the life of the restrictions through Year 2047, at S53 679 629. This was calculated with the Project's partially restricted unit mix, where 30% of units would be at or below 60% and 80% AMI, and the remaining 70% of units at market rates. This was the matrix of income restrictions approved by the CRA at the time. Today, with the proposed new restrictions in place — in other words, with all 398 units in the Project restricted at 60%, 80%, 100%, 120%, and 140% AMI — estimated rent losses through the life of the restrictions until Year 2047, as detailed below on Exhibit A, stand at $117 994 248. The difference between the partially restricted building and the fully restricted model is S64,314,619. The additional economic assistance will be used, in part, to offset the much higher rent losses, and enable the creation of a fully income -and -rent restricted centrally located high-rise along the lines of UNI Tower. ■ Construction Costs Since the Resolution was approved and the Agreements executed, there have been substantial construction cost increases across the board. Labor, materials, supplies, and interest rates have all experienced huge upward pressures, which have coincided with the highest rate of inflation in decades. This continues to be reflected in soaring construction and labor costs, including the cost of virtually all trades employed through the construction process, which may have stopped growing as fast as in previous months, but have nevertheless not decreased. This rise in costs places a huge pressure on the Project's underwriting and financial viability. The difficulties pertaining to these much higher costs are compounded by two factors. The first and most straightforward one has been the delay to begin construction. Since the life of the CRA hasn't been extended, and because the funding stipulated the Agreements is subject to that event, we haven't been able to access any of the assistance which, in turn, would have enabled us to break ground. The longer the Project remains on the ground, the more its construction budget swells by cost increases that take place over time. The second factor has to do with our inability to take advantage of rising market rate rents, given that the project is proposed to be fully restricted. So, while construction costs increase, we cannot experience the corresponding financial relief brought about by rising rents; or, in other words, we 146 Street Development LLC 1600 NE 1" Ave, Suite 3800 Miami, FL 33132 are unable to compensate for higher costs by modifying our underwriting to reflect higher rental income. This is, of course, a "feature", not a "bug", of the income -restricted model. But it makes the economic assistance of the CRA a crucial factor in bringing these projects to fruition: especially, when mixed -income large-scale attainable housing developments, in central locations, with amenities and finishes of comparable market rate product, and high-rise construction, such as the almost 400 units of the Project, are concerned. For reference, when we submitted our original request of assistance to the CRA, the Project's total development budget stood at $149,954,312. Today. more than two years after the Resolution was approved, the Project's total development is S174,943,525: an increase of S24,989,213 over the original projection. Additional Economic Assistance With these two factors in play — increased rental loses of S64,314,619 and higher construction costs of S24,989,213 — we request the CRA to amend the Agreements in order to provide additional economic assistance in the amount of S15,000,000. This will allow us to compensate for much higher construction costs and, crucially, apply the full restriction model specified above targeting the entire affordable and workforce housing income range from 60% to 140% AMI. In combination with our existing UNl Tower development, the Project will therefore deliver 650 attainable housing units in the heart of Miami, serving those that serve our communities, in the way they deserve it. We are happy for, and proud of, the true partnership we have forged with the CRA to build high - quality affordable and workforce housing in Miami's urban core, not in the City's periphery but within its Central Business District, and in a way that helps create a revitalized, vibrant, diverse, and sustainable community. We hope to continue to explore ways to work with the CRA to advance its goals and objectives, as more often than not, those are the same as ours. 14'h Street Development, LLC Miami. FL 33132 Tax Years 2024 2025 2026 2027 2028 2029 L030 3031 Annual' Rent Lass: 153,427,428) (53530.251) 03,636,158) ($3,745,2431 03,857,600) (53,973,328) (54,0925281 154,215,3041 Valuation Loss (568,548,560) 1570,605,017) ($72,723,1671 (574.904,862) ($77,152,008) 079,466,568) 081,850,565) 084,306,082) Tax Year; Mt 2033 2034 2035 Z036 2037 2038 M Annual Rent Loss: (54,341,763) 04,472,0161 (54,606,177) 04,744,3621 (54,886,693) 05,033,294) 05,184,292) 05,339,821) Valuation Loss {586,835,265) 09,440,323) {592,123533) 1594,887,239) {597,733,856) ($100,665,871) 0103,685,8481 ($106,796,423) Tax Years 2040 2041 2042. 2043 2044 2043 2046 2097 Annual Rent Loss: (55,500,016) 155,665016) {$5,834,967) (56,010,016) 1$6,150,3161 (S6,376,026) 06,567,3061 1$6,7643261 Valuation Lass 0110,000,316) 0113,300,325) 15116,699,3351 15120,200,315) (5123.806,324) {5127.520,514) {$131,346,129) 0135,286,513) Total Rent Loss: I$117,994,248)