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HomeMy WebLinkAboutNB 2 PRE-ANNEX AGREE 12-15-80DATE: December 15, 1980 NEW BUSINESS Inter - C om -- TO: FROM: SUBJECT: Honorable Mayor and City Council Members Community Development Department Pre-annexation agreement - Variance 80-19 and T.T. 11330 - Con- dominium conversion of 96 units at Red Hill Avenue and San Juan On Monday, December 8, a meeting was held by staff with Mr. Toum,y Golden, RSJ Associates and Bill Olson, EMA Current Planning. The attached outline con- cerning the proposed conversion and affordable housing program at the San Juan complex, as modified, was agreed upon as the County's basis for action on the proposal and modifications recommended by City staff were acceptable to all parties. This document was submitted by RSJ Associates to their attorney, Mr. Dave Colgan, for use in preparation of a draft pre-annexation agreement. Mr. Colgan and RSJ Associates would work with the City Attorney's Office to prepare a final agreement for submittal to City Council and had already been in contact with them. At the Wednesday, December 10 noon deadline for Council book preparation that document was not available in light of the short time span from the December 1 regular meeting, and the technical and binding nature of said agreement. Recognizing the short time span and the upcoming Board of Supervisor's meeting of December 24, 1980, County staff suggested a continuance of the annexation until the agreement is approved. Since the island annexation provisions of MORGA expire at the end of this year, the legality of such an action was ques- tionable. Mr. Golden suggested that if an agreement was not approved or se- curity provided as to the feasibility of the project, they would contact ten- ants/prospective buyers and seek denial of the annexation. However, they would be in agreement to commit to a property owner instigated annexation after receipt of approval of their proposal under County auspices. The preceding discussions were based on the possibility of a final agreement either not being completed or not acceptable to the owners or City Council at the regular meeting of December 15, 1980. Without such prior agreement, the project proponents would not feel justified to support the annexation; not that they were adverse to being a part of Tustin. Included with the draft outline are the initial communications to Rancho San Juan tenants, a detail sheet on the "home equities" concept, and resumes of RSJ Associates' principals for Council information. It is hoped by Community Development staff that the agreement will be available from the legal offices, under separate cover, prior to the meeting or by the meeting, at the latest date. Community Development's position on the agreement would remain the same as expressed in the staff reports on the subject variance and tentative tract map. Conversion Process & Resident Programs As outlined by Tommy Golden to the existing residents of Rancho San Juan and to the Tushin Planning Agency. For joint discussion between Applicant, County Staff, and Tustin Staff on December 8th, 1980. Outline Time Sequence A. Applicant to close Rancho San Juan Escrow on January 15th, 1981. B. Condominium sales to begin 12 to 24 months from January 15th, 1981. C. Ninety (90) day written notice prior to sales. II. Rents A. Rent "Freeze" for residents as of November 18th, 1980. (see Letter to Residents dated November 18th, 1980) Rent freeze effective from time of escrow closes (January 15th, 1981) up to time of condominium sales (12 to 24 months). Residents after November 18, 1980, pay existing rent schedule (See Schedule Attached). Residents as of November 18th that wish to move to another unit in the complex also pay existing rent schedule. III. Refurbish A. Outside 1. All buildings painted. 2. All roofs in good repair and certified. 3. Pool area upgraded, sauna and jacuzzi. 4. All landscaping upgraded. 5. Parking upgraded from 144 spaces to 171 spaces (per Lander Engineering, Inc.) Inside 1. New carpet. 2. New kitchen and bath flooring 3. Painting 4. One year warranty on all appliances, air conditioner, disposal. **Note: 50% of the unity have been upgraded as per i, 2, and 3 above. Balance of units to be upgraded during 12 to 24 month period. IV. Prices Type "A" Buyer - Resident as of November 18, 1980 1. Appraisal made by M.A.I. during the First Quarter of 1981 to determine "Fair Market" value for each unit. 2. Type A buyer give option to purchase his or her unit at Fair Market value less 5%. 3. Option to purchase goo~ for 12 to 24 months. Type "B" Buyer - Resident after November 18, 1980 1. Type "B" Buyer given option to purchase his unit at Fair Market Value as of First Quarter 1981, appraisals at no discount. 2. Option price for 12 to 24 month period will be increased equal to the present increase of the med~ income in Orange County starting date of appraisal. Type "C" Buyer - Public Market 1. All units sold to public at Fair Market Value at the time of sale. Vo Terms of Purchase A. 10% dow~ B. R.S.J. Ass. to "buy" best interest rate during 12 to 24 month period. VI. VII . VIII. Rent Back Program A. R.S.J. Associates to retain up to 25% of the units as rentals. B. Units retained for Senior Citizens first and then worked down by age. C. Units retain for (4) four years from sales. D.~ Rents increas~ equal to the percent of increase of the medi~ income in Orange County. E. After four years, units to be sold at fair market. Re~Zocation Program A. R.S.J. Associates provide re-location expenses up to $750.00 per unit. B. Residents before November 18, 1980, eligible. C. $750.00 paid at the time of notice of sale. (See IC). (This only applies to those residents who moved in before November 18, 1980 and still occupying their unit at the time of notice of sale. Handicap Program A. Three to Five units retained for the handicaped. B. units and parking to be modified to accomodate the handicaped. Co-Owner Program (State of California) no B. C. D. Assembly Bill 333 (See Attached). Residents earning 80% of medium. Up to 25% of the units. 30 year term. XI. XII. Co-Owner Program (Private) Home Equities Management Company (See Home Equities, "The Concept", attached). Residents earning 100% to 120% of medium. Up to 25% of the units. Four Year Term. Deed Restrictions ~/-' 6~/~ A. ~ year period - increase equal to percent of increase of the medium income xn Orange County. B. After ~ year - free market. R.S.J. Associates and Home Equities Management Company A. Resumes - See Attached. Rancho San Juan Apartments 13722 Redhill Avenue Tustin, California 92680 Phone: (714) 838-8399 November 18, 1980 Dear Resident: For the past several years it has been apparent that due to Rancho San Juan's special characteristics of location, design, large floor plans, etc., it could be successfully converted to condominiums. -Also apparent are the advantages and economic benefits that accrue to condo- minium owners by way of tax advantages, property appreciation and determination and limitation of annual housing costs. Continued operation as an apartment complex is economically unattractive from our perspective as owners because of federal and state tax laws which require pay,~nt of 73% of our operating profits as taxes. Therefore, because of these benefits and burdens we have decided we must sell Rancho San Juan. Because the future of Rancho San Juan will be as a condominium and because tax laws prohibit us from perfo~ling the conversion and subse- quent sales to residents we have selected a group headed by Thomas Golden and Peter Ursano to purchase Rancho San Juan from us and perform the conversion. Messrs. Golden and Ursano were chosen because our past dealings with them in the conversion of a property in Laguna Niguel demonstrated to us that their policies of concern and consideration for the existing residents is of the highest quality. In Laguna Niguel they were able to create an attractive resident purchase program which conferred the following benefits to the existing residents: 1. Sales price discount program. 2. Down payment assistance. 3. Monthly payment assistance. 4. For those unable or unwilling to purchase, continued rental opportunities. 5. Generous relocation allowances. As a result of these programs the project was sold out, many residents were able to purchase and no residents were forced to relocate. Messrs. Golden and Ursano would welcome the opportunity to discuss the con- version with the residents and for this purpose will be at the manager's office, and at the model apartment, on Monday, Tuesday and Wednesday, Nove~ber 24th, 25th and 26th from noon until 9:00 P.M. As the builder and only operator of Rancho San Juan during it's eleven years of existance, I am hopeful that our desision to sell and the subsequent decisions of present and future residents to purchase will be in the best interests of all. Sincerely, THONER & BIRMINGHAM REALTY SERVICES, INC. oner gehe~ule A CALIFORNIA tiO~O'.<'~RSHI P · LOCAL GOIz~I~NTAL AGENCY .DETAILED I£1FOR~TION Home E~uities: The Concept Home Equities is a residential program which enables a prospective home buyer ("Resident Investor") to purchase a home that he/she might not otherwise be financially able to purchase. 'Fnis is accomplished by Joining the Resident Investor, as to a 50% interest, with a Limited Partnership, as to a 50~ interest, and thus retains exclusive possession and use of the entire home. The need for Home Equities, from the Resident investor's standpoint, is that the price of new and existing homes coupled with the cost of financing is making home ownership an economic impossibility for a growing number of households. Since 1970 housing prices in Ca~lifornia have risen over 150% compared with a rise in family incomes averagiug less than 80%. As to the mechanics of th~ program, Resident Investor and Partnership share the cost of acquisition (do,~npayment, loan fees, and escrow/closing costs) and the cost of carry (debt service, property taxes, insurance) on a 50/50 basis respectively. Ail utilities and maintenance costs (up to $500 per year) are paid by the Resident Investor. In addition, the Resident ~nvestor rents from the Partnership the 50% of the home he/she does not own. The term of the Tenancy- In-Common Agreement and Lease is fottr years with Resident Investor having the option, at any time, to acquire the Partnership's interest in the home or sell the entire interest in the home ~t a value fixed by appraisal. In the event of a sale of the entire home, Resident Investor and the Partnership ~i~i share in the proceeds from sale on the same 50/50 basis. ~anagement of the Rome Equities Proart% is performed by I{ome Equities Management Company, whose prime responsibility is to a~ninister the partnership agreement between the Resident Investor and the Partnership. (See attached Resumes, Part V Section B) Summary of Home Equities Partnership I A&minist rat ion: Home Equities Management Con,patay has contracted with Turn Key Associates, a local property-management company, to provide the following services: (1) billing and collection of rent and pro rata share of debt service, property t~xes, and instance from Resident Investors; (2) pay~,ent of bills; (3) financial reporting. Any issues or problems are handled directly between the managing General Partner, Steven L. Klosterman, and the Resident Investors. Source of Funding: The Limited Partners: A maximum of 20 investors each investing a minimum of $10,000 and a m~ximum of 10 investors each investing a minimum of $20,000 each for a mmximum total of 30 investors and $400,000. The General Partners can elect to close the partnership with a minimum of $200,000.- Each Limited Partner must have: (1) a minimum $35,000 annual gross income and a $!00,000 worth excluding home, furnishings, and automobiles; or (2) a $150,000 tot~--I net worth. N,~r:ber of Households Assisted: Three (3) ~i'th fourth home in escrow due to c]o~:e December 15, 1980. ~Types of Units Assisted: T~¢o single-f~nily, detached homes and two PUD's (planned ~nit developments)· Length of Operation: .The first home in Partnership I closed escrow October 3, 1980. However, it is important to mention that even though this is the first Partnership, sponsored by Lingo Real.Estate, the firm has matched individual investors and resident investors as tenants in common in single-family homes in at least twenty (20) individual transactions during the past four years. RESUME · R.S.J. Associates Roland J. Jensen, 50 Roland J. Jensen, a longtime resident of Tustin, California, has been involved with the building and development of over 1,000 apartment units in Orange County over the last 25 years as well as several hundred condominium homes in Los Angeles, Orange, and San Bernardino Counties. Mr. Jensen is a general pertner of the Jenville Development Company, a Santa Ana based, firm which is responsible for the actual construc- tion of several apartment projects. He is president of Satellite Management Company which serves as the rental arm of Jenville Development Company. He is also a member in good standing of the Orange County Chapter of the Building Industry Association. Last year he served as a general partner in the development and sale of 57 condominium homes in Laguna Niguel, California. Sales were based on various affordable home ownership concepts. He is principal partner in R.S.J. Associates which is developing 96 condominiums in Tustin, California on a very affordable basis. He is also completing construction on 84 condominium homes in Fontana, California. Again, his overwhelming success is due to the flexibility in marketing, price, and terms, and utilization of affordable home ownership concepts. Peter Ursano, 32 Peter Ursano, a resident of Huntington Beach and a native Southern Californian, graduated from Loyola University of Los Angeles prior to attending the Ahmanson Law Center of Creighton University. Mr. Ursano has been involved in residential real estate development and sales for the past several years in Los Angeles and Orange Counties. He has specialized in the development and sales of "affordable condominium home ownership". Recently he was a general partner in a 76 unit condominium development in Laguna Niguel, California, where 57 units were sold substantially below comparable market value, and 19 others were retained for Senior Citizens on an affordable rent basis. Mr. Ursano is marketing new construction condominium homes in San Bernardino County utilizing an affordable home ownership concept. He is also a general partner in R.S.J. Associates which is processing applications with the City of Tustin for 96 condominium homes. This project will again demonstrate that home ownership with its inherent benefits may be acquired on an affordable basis in Orange County. Thomas D. Golden, 36 Mr. Golden is the founder, an owner, and a Director of Home Equities. He joined Lingo Real Estate as a licensed, independent real estate associate in 1974 and has consistentlyJbeen one of the top producers in the firm. Mr. Golden has been actively involved in matching investors with residents for the purpose of purchasing single-family homes for over four years. Mr. Golden is a general partner in the 76 unit condominium development in Laguna Niguel, California, where 57 units were sold below market value, and 19 others were retained for Senior Citizens on an affordable rental basis. Mr. Golden is marketing new construction condominium homes in San Bernardino County using an affordable home ownership program. He is a general pardoner in'R.S.J. Associates, which is currently processing applications with the City of Tustin for 96 condominium homes. As with the Laguna Niguel project, this will demonstrate that home ownership may be acquired on an affordable basis in Orange County. Mr. Golden attended the University of North Carolina and Lanoir- Rhyne College graduating from %he lather ins~ituhion with a BA Degree in Economics in 1966. Milton E. Naylor, 42 Chief Operating Officer Lingo Real Estate Investments, Inc. As an owner, officer, and a member of the Board of Directors since 1973, Mr. Naylor is responsible for company-wide residential brokerage activities. His career with the firm began in 1971 prededed by employment with Hughes Aircraft as a District Sales Manager and with General Electic as a computer systems engineer. Before being named to his present position in June of 1980, Mr. Naylor served as Executive Vice President/General Sales Manager and prior to that was the number-one salesperson for the Laguna Beach Board of Realtors in 1972 and 1973. Mr. Naylor is a graduate of the University of Arizona with a degree in Engineering and is an active member in the Realtors Marketing Institute and numerous community organizations. Steven L. Klosterman, 29 The day-to-day operations of Home Equities will be the responsibility of Mr. Steven L. Klosterman who is an employee, director and officer of Lingo Real Estate Investments, Inc. Steven L. Klosterman is 29 years old and the Senior Vice President- Finance and Investments of Lingo and is the Chief Financial Officer and a Director of Home Equities. Mr. Klosterman is responsible for developing and expanding the Investment Department of Lingo Real Estate Investments, Inc., and is President of Forest Financial, Inc., a wholley-owned subsidiary, real estate securities corporation. He is a licensed General Securities Registered Representative and manages the financial affairs of Lingo Real Estate and is a member of its Board of Directors. Mr. Klsoterman was previousley associated with the Commercial Brokerage Division of Coldwell Banker and Company, having joined that firm after graduating with honors from the University of California, Los Angeles. Mr. Klosterman hoined Lingo Real Estate Investments, Inc., after receiving an MBA Degree from the Stanford University School of Business. He presently serves as President of the Stanford Business School Club of Orange County and is a member of the Orange County Bruin Club and the Realtors National Marketing Institute. Gail G. Turner, 30 Mrs. Turner is a California Certified Public Accountant, CPA, and with her husband Robert founded Turnabout Management Corporation in 1979. They presently provide accounting services for over 350 units in addition to property management services for over 250 units. Turn Key Associates, a wholley-owned subsidiary, has been contracted to handle all accounting and property-management services for Home Equities Partnership I. Mrs. Turner is a graduate of the University of North Carolina with a BA Degree in Business Administration. Upon completion of her studies, she associated with Exeter Equities, a privately held real estate and property managment company in Massachusetts, as an accountant. During her six years with Exeter Equities, Mrs. Turner enrolled in Bentley College and passed all the courses necessary to obtain the CPA designation as well as the CPA exam itself. Upon moving to California she was hired by Alexander Grant and Company and spent two years on numerous audit assignments.