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Authorize the Town Manager to Execute a Ground Lease with the Tanyard Branch Trace, LLC Group for the Town-owned parcel at 110 Jay Street.
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Staff: |
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Sarah Vinas, Director |
Affordable Housing & Community Connections |
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Emily Holt, Affordable Housing Manager |
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Overview: The ground lease between the Town and the Tanyard Branch Trace, LLC, allows Tanyard Branch Trace, LLC to develop, own and manage the Tanyard Branch Trace apartment community on Town-owned land located at 110 Jay Street for 99 years. The Tanyard Branch Trace, LLC is an affiliate of the Town’s development partner the Taft-Mills Group and will be the tenant on the lease. As part of the lease, Tanyard Branch Trace, LLC will pay the Town $1 per year in rent (payable in one lump sum at the time of the Ground Lease execution). The ground lease restricts use of the land to only include the plans improvements contemplated by the Conditional Zoning Permit that was approved by Council on April 27, 2022 and expressly prohibits disturbance of undeveloped portions of the land except as may be necessary to allow passive enjoyment of natural areas.
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Recommendation(s): |
That the Council authorize the Town Manager to execute a 99-year ground lease with the Tanyard Branch Trace, LLC for the Town-owned parcel at 110 Jay Street.
Background:
The Town and its outside legal counsel at Stuart Law Firm have worked with the Taft-Mills Group to draft a ground lease that establishes the major terms and conditions related to the lease of Town land for the development and management of the Tanyard Branch Trace affordable housing community.
The Town Council has consistently reviewed and authorized elements of the project leading to consideration of this agreement.
§ In June 2018 Council prioritized the Town-owned Jay Street parcel as an affordable housing site and authorized the Town to pursue development there.
§ In March 2021, the Town executed a Memorandum of Understanding with the Taft-Mills Groups to begin negotiating an agreement to develop the Jay Street site.
§ In June 2021, the Council provided feedback on the concept plan for Jay Street.
§ In January 2022, the Council authorized the execution of an Option to Ground Lease Agreement with the Taft-Mills Group, conditioned on securing all financing, including Low-Income Housing Tax Credit project (LIHTC), and required permits.
§ In April 2022, the Council approved a conditional rezoning of the Jay Street parcel that included the development of 48 affordable units.
§ In November 2022, Council approved the allocation of $2 million in affordable housing funding for a 9% LIHTC project or other Town-prioritized project as part of the FY2023 Affordable Housing Funding Plan. At the time, staff shared with Council that the Jay Street project would be a likely candidate for use of this funding.
§ In April 2023, the Council approved the recommendation to allocate $1,950,000 to the Tanyard Branch Trace project.
Key components of the agreement:
• The 99-year ground lease is subject to customary rights of termination upon occurrence of certain events of default. The conveyance of the ground lease is “as is” and “where is” subject to very few exceptions on condition.
• The Tenant is charged with constructing and maintaining the improvements on the property, and upon termination or completion of the ground lease, those improvements will become assets of the Town.
• The Town has an option to purchase the improvements at the end of the 15-year compliance period of the Low-Income Housing Tax Credit program and a right of first refusal if the Tenant seeks to sell the improvements at any time during the lease term.
• The Tenant has rights to obtain additional funding related to the project using the improvements and its leasehold interest as security for the loan, which is commonplace in this type of financing structure.
• The Tenant will provide all insurance on the property and improvements, and Tenant will have certain rights of restoration in the instance of damage or destruction.
• The ground lease will restrict use of the land to only include plans and improvements allowed by the Conditional Zoning Permit that was approved by Council on April 27, 2022. The remaining portions of the land shall remain undisturbed except as may be reasonably necessary to allow pedestrian access to and enjoyment of natural areas. Any proposed changes to the undisturbed portions of the land will require Council approval.
Fiscal Impact/Resources: This ground lease determines that the Tanyard Branch Trace, LLC will pay $1 per year in rent to the Town for the 99-year term of the lease (payable in one lump sum at the time of the Ground Lease execution).
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Attachments: |
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• Resolution |
A RESOLUTION AUTHORIZING THE TOWN MANAGER TO EXECUTE A GROUND LEASE FOR THE DEVELOPMENT OF THE TANYARD BRANCH AFFORDABLE HOUSING COMMUNITY (2024-06-5/R-8)
WHEREAS, on June 20, 2018 <https://chapelhill.legistar.com/View.ashx?M=F&ID=6331688&GUID=F33634A5-0A6F-4270-92F4-990A14E0C494>, the Council prioritized the Town-owned Jay Street parcel as an affordable housing site and authorized the Town to pursue development on the Jay Street site; and
WHEREAS, on September 18, 2019 <https://chapelhill.legistar.com/LegislationDetail.aspx?ID=4135814&GUID=964ED0B2-5590-4A53-A7A5-E09507E79EB5&Options=ID|Text|&Search=jay+street>, the Council heard the feasibility report on development potential for prioritized Town-Owned affordable housing sites, including Jay Street; and
WHEREAS, on November 13, 2019 <https://chapelhill.legistar.com/View.ashx?M=F&ID=7881855&GUID=5DDDF984-71BF-4B7A-B863-30DDE7FFC84C>, the Council authorized the Town Manager to seek an affordable housing partner for Town-owned land on Jay Street and begin negotiating an agreement under which the parties would prepare a proposed development project; and
WHEREAS, on March 5, 2021, the Town executed a Memorandum of Understanding with Taft-Mills Group to establish the terms and conditions for negotiating an agreement to develop Jay Street; and
WHEREAS, on June 21, 2021 <https://chapelhill.legistar.com/View.ashx?M=F&ID=9506551&GUID=0F494F8B-1646-4091-9FCB-FAFACE5FF7B9>, the Council provided feedback on the concept plan for Jay Street; and
WHEREAS, on January 12, 2022 <https://chapelhill.legistar.com/View.ashx?M=F&ID=10400945&GUID=74AC7208-ED62-4F0B-A9B6-0BA66FE61CC1> the Council of the Town of Chapel Hill authorized the Town Manager to execute an option to ground lease agreement with Taft-Mills Group for the Jay Street site; and
WHEREAS, on April 27, 2022 <https://chapelhill.legistar.com/View.ashx?M=F&ID=10853948&GUID=F019F050-11B3-4C27-8199-3CE3E27487A4> the Council approved the rezoning of the Town’s Jay Street property from R-3 to R-SS-CZD and the accompanying site plan for 48 affordable units; and
WHEREAS, on November 16, 2022 <https://chapelhill.legistar.com/View.ashx?M=F&ID=11464749&GUID=FE3F7401-18E1-45AB-8291-3FC898ED0FB7> the Council approved a funding plan allocating $2,000,000 toward a 9% Low Income Housing Tax Credit (LIHTC) or Prioritized Project; and
WHEREAS, on April 2023 <https://chapelhill.legistar.com/View.ashx?M=F&ID=11932241&GUID=06C33D20-B10E-4AD9-95D5-EAB23D9454C0>, the Council approved the recommendation to allocate $1,950,000 to the Tanyard Branch Trace project; and
WHEREAS, in August 2023, the North Carolina Housing Finance Agency awarded the Tanyard Branch Trace project a 2023 0% Low Income Housing Tax Credit.
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council authorizes the Town Manager to execute a ground lease with the Tanyard Branch Trace, LLC for 99 years
This the 5th day of June, 2024.
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The Agenda will reflect the text below and/or the motion text will be used during the meeting. |
presenter
PRESENTER: Sarah Vinas, Affordable Housing & Community Connections Director
RECOMMENDATION: That the Council authorizes the Town Manager to execute a 99-year ground lease with Tanyard Branch Trace, LLC for the Town-owned parcel located at 110 Jay Street.