San Francisco Redevelopment Agency

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Public Initiatives Development Corporation

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Informational Memorandum

TO:                  Board Members of the Public Initiatives Development Corporation

FROM:            Olson Lee, Executive Director

SUBJECT:     Staff Report for the Board Meeting of January 26, 2009

DATE:            January 23, 2009

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I. BACKGROUND

Staff has prepared the following report regarding the progress of the Plaza Apartments project since the Public Initiatives Development Corporation Meeting of the Board of Directors (the “Board”) March 25, 2008.

II. FINANCING

Enterprise Tax Credit Equity

The final portion due of tax credit equity, in the amount of $500,000 and which constitutes the final developer fee payment, was received in June of 2008.  Still outstanding is the “tax credit adjustor” of $137,000 which is due in accordance with the Limited Partnership Agreement, and is calculated based upon the pay-in schedule of the equity, and the timing of receipt of benefits by the Limited Partner.  These funds have been or will be deposited to the PIDC Capital Account.  These funds have been used to fund the tenant improvements in the credit union space and will be allocated to fund tenant improvements in the remaining retail space.

Department of Public Health Rental Subsidy

The monthly rental subsidy from the Department of Public Health continues to support the property operating expenses, net of income from tenant rent payments and commercial income from the Sprint lease.  For additional budget information, please see “Section III Operating Budget”.  

The second annual Program Monitoring report was concluded last and included a Report and site visit by DPH staff and panel members.  Program Management staff of the Department of Public Health conferred a rating of “Commendable / Exceeds Standards”.  This rating was the result of significant efforts on the part of property management staff to improve upon areas such as training, response and availability of staff to residents, site security, and continued collaborations with our partners in this development.  The third annual Program Monitoring report is currently being finalized and is due March 1, 2009.

• PROJECT OPERATIONS-RESIDENTIAL

Occupancy Report

The Plaza Apartments continues to maintain a 97% occupancy rate.  Plaza and Conard House staff continues to work collaboratively to ensure the highest level of housing retention possible.  For additional details, please see attached “Move-Out Report”.

Community Building Activities & Support Services

The Plaza has continued to support ongoing as well as build upon community and activities on-site.  Monthly community meetings provide an opportunity for residents to work with Conard House staff and John Stewart Staff in ongoing operations decisions.  Other activities include:

• Food Bank– Each Monday residents work with the San Francisco Food Bank and Conard House to accept and distribute donations of food.  This has been a highly successful and well attended event, helping residents to stretch their limited income by reducing the need to purchase food.
• Movie nights –movie nights take place in the Community Room each week where refreshments are served and movies screened.
• Game Night- weekly game evenings where residents play various board games
• Support Groups – Conard House provides facilitation of several important support groups including; “Substance Abuse”, “Brain Trauma”, “Stimulant Use”, “Nutrition and Cooking Group” and “PTSD”.
• Monthly there are Birthday celebrations, Tenant Council meetings
• On an occasional basis there are Flea Market, Holiday celebrations, and Bingo night
• Theater and Movie tickets by donation

Conard House Program Director reports that approximately 95% of Plaza residents are participating at some level in the voluntary services provided at the Plaza through the Conard and Housing and Urban Health staff. 

Operations & Maintenance

Over the past year, capital investments have included:

• Replacement of the Community Room Upholstered furniture due to wear and tear
• Ongoing improvements to the security camera system
• Scheduled replacement of some corridor carpeting due to wear and tear

The “Patrol Special Police” continue to play an integral part of security measures at the Plaza Apartments, with patrol officers visiting the site 1-2 times per evening at varying times.  This service also includes expedited response times for emergency calls, reducing response times from 30 minutes to 4 minutes.  Now entering its third year of operation, this service has been well received and residents and staff report feeling safer in their community.

Operating Budget

Pursuant to its contract with the Department of Public Health (“DPH”) for the provision of rental subsidy, the Plaza Apartments is required to provide an annual budget each fiscal year for review and approval.  The annual budget review allows DPH staff to gauge the property performance, anticipate payments and to ensure that subsidy levels meet but do not exceed project needs.  Based upon Plaza Apartments annual audit, income and expense reports, the Plaza Apartments and PIDC staff conducted a thorough review of the 2007-2008 Budget, and presented the 2008-2009 budget proposal in May of 2008.  The budget proposal was reviewed and approved by DPH staff and a contract renewal received in July 2008.

Specific modifications made to the current budget will be discussed in the Executive Director’s Report

Staff recommends approving 2008-2009 operating budget for 106 very-low income rental units at 988-992 Howard Street.

For details of the current budget, please see the attached “The Plaza Apartments Fiscal Year 08/09 Budget”. 

• PROJECT OPERATIONS - COMMERCIAL MARKETING & LEASE-UP

Northeast Federal Credit Union

In November of 2005, pursuant to Resolution 04-2005, the Board authorized the Executive Director to enter into lease negotiations with the Northeast Federal Credit Union (“NFCU”).  The proposed terms of the lease included up to $50,000 in tenant improvement funds from the PIDC in order to assist the credit union in constructing the Plaza branch.  Since that time, Staff and Urban Solutions have worked with the staff of Northeast Federal Credit Union and its partner, Patelco, to execute a lease, obtain Six on Sixth Street improvement funding, complete the design work and obtain construction bids from three contractors.  Additionally, NCFU has applied for an obtained Department of Building Inspection permit approval and is ready to commence construction.  However, due to fluctuations in the construction industry, the un-finished nature of the retail space, and the unique requirements of improvements required by a financial institution, the credit union Plaza Apartments branch budget is in excess of the original projections by over $150,000.  Therefore, the Board approved an additional $50,000 in funds to complete the tenant improvements.  Construction began on the credit union in October 2008 and is nearly complete.

Sprint Spectrum

There has been no change in activity with Sprint Spectrum.  Sprint continues to pay its lease payments on time and meet the terms of its lease.

Performing Arts Space

San Francisco Redevelopment Agency Project Area Manager for the South of Market Project Area has continually met with representatives from Bindlestiff Studio to discuss financing issues related to their Grant Agreement, milestones related to this Agreement, and the ultimate goal of moving back to the Plaza Apartments.  Currently, Bindlestiff has agreed to partner with another arts organization to help sublease the space, manage the daily operations of the theatre.  Negotiations are ongoing and it is anticipated that final lease terms will be reached in the near future, leading to a lease agreement, completion of tenant improvements and re-opening of theatre operations.

Subway Real Estate Corporation Proposal

The remaining retail space, located at the corner of Sixth and Howard Streets, and approximately 1,436 square feet, has received a proposal for lease terms from Subway Real Estate Corporation for a Subway Sandwich restaurant.  The general terms of this proposal include:

• Base Rent $2.00 per square foot triple net (or $2.40 per square foot gross rent).
• Initial Term of 5 years
• Renewal options of three five year terms
• Rent Increase of 15% upon each renewal
• $100,000 of Tenant Improvement Allowance from PIDC

The proposed Franchisee is Mr. Akki Patel, who currently owns 8 Bay Area Subway restaurants.  Mr. Patel will manage the permitting, construction and operations of the Subway restaurant as he has done successfully in the past.  Costs over and above the tenant allowance provided by PIDC will be borne by Subway or its Franchisee.

The restaurant will provide affordable, freshly made sandwiches and meals. 

Staff recommends authorizing the Executive Director to execute a Lease Agreement with Subway Real Estate Corporation, a Delaware Corporation, for approximately 1,436 s.f. of retail space for the preparation and sale of sandwiches and meals, for an initial term of five (5) years with a total value of $172,320 and a tenant improvement allowance not to exceed $100,000, located at 181 Sixth Street at Howard Street

• CORPORATION BUSINESS

The annual audits and reporting for the property and PIDC are in process and are anticipated to be complete on time. 

ATTACHMENTS

Move-Out and Housing Retention Report dated January 2009

Plaza Operating Budget Fiscal Year 2008-2009