Pasadena Looks to Forge Deal For Nonprofit to Acquire, Rehab 136-Year-Old Apartment Building

A city committee Tuesday will consider approving an Affordable Housing Loan Agreement with Heritage Housing Partners, a Pasadena nonprofit that promotes long-term affordable homeownership through the preservation of existing historic homes, in order to acquire an apartment building at 1421 N. Fair Oaks Ave. that was originally built in 1885 and currently consists of five dwelling units of varying sizes and a paved car park with 11 parking spaces.

If the Economic Development and Technology Committee approves, the plan will go before the full City Council to consider final authorization.

A report by the city’s Department of Housing said the property was put up for sale by its owners in March at an asking price of $1.45 million and was marketed as a ready-for-occupancy turnkey project with only minor repair items needed. That month, the City made an offer for the property but was informed the owner had accepted an offer from a competing buyer.

When the third-party buyer backed out of the transaction, the City saw a second opportunity and submitted an offer.

Extensive due diligence performed by Housing Department staff on instructions from the City Council found that instead of a turnkey project, some repairs will have to be done on the property before it could be placed in service as affordable rental housing.

Because the property has a high potential for affordable housing use, the City decided to refer Heritage Housing Partners to the owner, leading to an accepted purchase offer of $1.3 million.

HHP did their own due diligence activities and submitted a request for loan assistance to the City, in the amount of $1.54 million, on May 28. The request package included property inspection reports, a project budget, an annual budget for operation of the property as affordable rental housing, and a 55-year cash flow analysis.

Under the proposed Affordable Housing Loan Agreement, HHP will acquire the property, make the necessary remediation and repairs, and operate the property as affordable rental housing for low-income individuals and families.

The Housing Department said the project’s total budget is $1.54 million, consisting of $1.3 million for acquisition, $186,500 for remediation and repairs, $40,000 for capitalized replacement or operation reserves, $10,000 for developer acquisition fee, and $3,500 for title and escrow costs.

The project budget, under the proposed agreement, will be financed entirely with City loan assistance, the Housing Department said.

The Department also recommended that the City Council approve a budget amendment to appropriate $1.54 million from the lnclusionary Housing Fund Unappropriated Fund balance to the Housing Department’s fiscal year 2021 operating budget for this HHP Acquisition Project.

The Housing Department said it believes that the project’s financial assumptions are reasonable, the funding amount is in line with the subsidy levels provided by the City on other affordable housing projects, and that the proposed loan assistance for the project is an appropriate use of City housing funds.

The Economic Development and Technology Committee will meet Tuesday at 4:00 p.m. and may be seen online here.