Title
Dept/ Agency: Economic Housing and Development
Action: ( ) Ratifying (X) Authorizing ( ) Amending
Purpose: Approving Assignment Agreement
Project Information:
RESOLUTION OF THE MUNICIPAL COUNCIL OF THE CITY OF NEWARK CONSENTING TO THE ASSIGNMENT OF THE FINANCIAL AGREEMENT FROM CLINTON ARMS ASSOCIATES LIMITED (F/K/A CLINTON ARMS ASSOCIATES TO CLINTON ARMS URBAN RENEWAL, LLC FOR FIVE 2 AND 3 STORY ROW HOUSE STYLE GARDEN APARTMENTS CONTAINING SEVENTY-TWO (72) SECTION-8 ASSISTED RESIDENTIAL RENTAL UNITS LOCATED ON THE CITY BLOCK BOUNDED BY MADISON AVENUE, CLINTON AVENUE, HUNTERDON STREET AND PESHINE AVENUE, 453-467 CLINTON AVENUE, IN THE CITY OF NEWARK, NEW JERSEY, 07108 COUNTY OF ESSEX AND CURRENTLY IDENTIFIED ON THE CITY’S TAX MAP AS BLOCK 2684, LOT 1
Additional Information:
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WHEREAS, on November 7, 1984, the Newark Municipal Council adopted Resolution 7Rcz(A.S.) granting a long term tax abatement to Assignor, a New Jersey limited dividend partnership, pursuant to the Limited Dividend Non-Profit Housing Corporations or Associations law, N.J.S.A. 55:16-1 et seq. (the “Limited Dividend Law”) for the construction of five 2 and 3 story row house style garden apartments containing seventy-two (72) Section-8 assisted residential rental units (the “Improvements”), located on the city block bounded by Madison Avenue, Clinton Avenue, Hunterdon Street and Peshine Avenue, 453-467 Clinton Avenue, 453-467 Clinton Avenue, in the City of Newark, 07108, New Jersey, County of Essex and currently designated as Block 2684, Lot 1 (f.k.a. Block 2684, Lots 1, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 36, 37, 38, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, and 51) on the Official Tax Map of the City (the “Property” and together with Improvements, the “Project”); and
WHEREAS, as authorized under Resolution 7Rcz(A.S.)November 7, 1984, the City entered into a Tax Abatement Agreement with Assignor governing the tax abatement for the Project to be constructed on the Property (the “Financial Agreement”); and
WHEREAS, on May 1, 1985, the Newark Municipal Council adopted Resolution 7Rbu, May 1, 1985 amending Resolution 7Rcz(A.S.) to delete all references that the New Jersey Mortgage Finance Agency would be making a mortgage loan to Assignor, pursuant to N.J.S.A. 55:143-30 (the “First Amended Resolution”) (A copy of Resolution 7Rcz(A.S.)November 7, 1984, Resolution 7Rbu May 1, 1985, and the Fully executed Financial Agreement is attached hereto as “Exhibit A”); and
WHEREAS, the Limited Dividend Law was repealed in 1992 and was replaced by the Long Term Tax Exemption Law, N.J.S.A. 40A:20-1 et seq. (the “LTTE Law”), but the LTTE Law explicitly saved from repeal and ratified all existing tax abatements granted under the Limited Dividend Law; and
WHEREAS, the Project is 100% affordable and on April 1, 2009, Assignor and the United States Department of Housing and Urban Development (“HUD”) entered into a Project-based Section 8 Housing Assistance Payment Full Mark-to-Market Renewal Contract for a period of twenty (20) years (the “HAP Contract”), which extended the project-based Section 8 housing assistance payments for tenants residing in the Property until April 1, 2029; and
WHEREAS, the Project is also subject to a Green Initiative Use Agreement for multifamily projects participating in a Mark-to-Market Program under the “Multifamily Assisted Housing Reform Affordability Act of 1997,” Title V of the Departments of Veterans Affairs, Housing and Urban Development and Independent Agencies Appropriations Act, 1998 (Pub. L. No. 105-65, 111 STAT. 1384, approved 10/27/97) (the “Green Initiative Use Agreement,” a copy of which is attached hereto as “Exhibit B”); and
WHEREAS, in connection with, as a condition to and in consideration for the Assignor’s participation in the Mark-to-Market Program, as authorized by the "Multifamily Assisted Housing Reform and Affordability Act of 1997," on March 26, 2009, Assignor and HUD entered into a Green Initiative Use Agreement subjecting the Project to certain affordable rental income limits established by the federal Low Income Housing Tax Credit program pursuant to section 42 of the Internal Revenue Code (26 U.S.C. s.42) as set forth in greater detail in the Green Initiative Use Agreement that is and shall continue be a recorded lien that runs with the land; and
WHEREAS, as set forth in Paragraphs 4 and 12 of the Financial Agreement, the Project shall be exempt from taxation for a period equal to the earlier of fifty years from the completion of the Project or the term of the first mortgage to be placed upon the property in connection with its construction; and
WHEREAS, on April 1, 2009, Assignor and HUD entered into HAP Contract, which extended the project-based Section 8 housing assistance payments for tenants residing in the Property until April 1, 2029 (a true and accurate copy of the HAP Contract is enclosed herewith as “Exhibit C”); and
WHEREAS, the Assignor has entered into a contract with Assignee to sell the Project and transfer the Financial Agreement to Assignee, which contract requires City approval of the transfer of the Financial Agreement to the Assignee under Paragraph 23 of the Financial Agreement; and
WHEREAS, the Assignee has filed an application with the City seeking City’s consent to the sale of the Project and the transfer of the Financial Agreement from the Assignor to the Assignee; and
WHEREAS, the Assignee has represented that on December 5, 1984, a first mortgage on the Property was granted in favor of the United States Department of Housing and Urban Development (“HUD”), which mortgage loan was refinanced by a first mortgage loan made by Evanston Financial Corporation (“Evanston”) and endorsed for mortgage insurance by HUD on March 26, 2009, as modified by that certain Modification of Mortgage Note and Mortgage dated August 1, 2012 between Assignor and Oppenheimer Multifamily Housing & Healthcare Finance, Inc. (“Oppenheimer”), as successor to Evanston, as assigned by Oppenheimer to Walker & Dunlop LLC (“Walker & Dunlop”) by assignment dated June 20, 2016, as modified by that certain Second Modification of Mortgage and Other Loan Documents dated as of March 1, 2020 between Assignor and Walker & Dunlop (as so amended and assigned, the “HUD-Insured Mortgage”); and
WHEREAS, on March 26, 2009, HUD made a mortgage restructuring mortgage loan to Assignor with a maturity date of April 1, 2039 (the “Restructuring HUD Mortgage”); and
WHEREAS, in connection with the transfer of the Project from the Assignor to the Assignee, the HUD-Insured Mortgage and the Restructuring HUD Mortgage shall be paid in full and discharged as liens of the Property in the ordinary course following such repayment. The lien from the Green Initiative Use Agreement shall not be discharged due to the payment of the HUD-Insured Mortgage and the Restructuring HUD Mortgage; and
WHEREAS, pursuant to N.J.S.A. 40A:20-13.2.1(a), “the Governing Body of a municipality may agree to continue a tax exemption for a State or federally subsidized housing project beyond the date on which existing first mortgage financing is fully paid so long as the project remains subject to affordability controls pursuant to project-based federal rental assistance, authorized pursuant to section 8 of the United States Housing Act of 1937”; and
WHEREAS, since the Project and the overall operation of the seventy-two (72) Section-8 assisted residential rental units is 100% affordable and subject to the HAP Contract and the lien from the Green Initiative Use Agreement, the City of Newark is desirous of approving the transfer of all of the rights, title and interest of the Assignor in and to the Financial Agreement, pursuant to N.J.S.A. 40A:20-13.2.1(a); and.
WHEREAS, the City has reviewed Application and has determined that the Assignee has the capacity and experience to own and operate the Project and to assume all of the rights and obligations of the Assignor under the Financial Agreement; and
WHEREAS, the Municipal Council wishes to adopt this resolution in order to reflect the City’s consent to the transfer of the Project and the Financial Agreement to the Assignee and to authorize the Mayor to execute, on behalf of the City, an Assignment and Assumption Agreement between the City, Assignor and Assignee.
NOW, THEREFORE BE IT RESOLVED BY THE MUNICIPAL COUNCIL OF THE CITY OF NEWARK, NEW JERSEY, THAT:
1. Subject to the terms and conditions set forth herein, the City hereby consents to (i) the conveyance of the Project by Assignor to Assignee and (ii) pursuant to N.J.S.A. 40A:20-13.2.1(a), the assignment of the Financial Agreement governing the Project from the Assignor to the Assignee. Such consent is limited solely to the matters expressly stated herein and shall not be deemed a waiver of any rights, remedies, or protections of the City under the Financial Agreement or applicable law.
2. The Municipal Council hereby authorizes the Mayor and/or his designee, the Deputy Mayor/Director of the Department of Economic and Housing Development to execute, on behalf of the City, the Assignment Agreement amongst the City, the Assignor and the Assignee substantially in the form attached hereto, provided that such execution and the effectiveness thereof shall be expressly subject to: (i) the receipt, in form and substance satisfactory to the City in its sole discretion, of all required approvals from the United States Department of Housing and Urban Development (“HUD”), including, without limitation, approval of the transfer of ownership and any assignment, renewal, or continuation of the HAP Contract, which remains subject to the Green Initiative Use Agreement affordable rental restrictions and requirements that are and shall continue to be a recorded lien running with the land (collectively, the “HUD Approvals”); and
(ii) receipt of any required approval from the Newark Housing Authority (“NHA”), if applicable
3. The Assignee shall, at its sole cost and expense, use commercially reasonable efforts to obtain the Required HUD Approvals and NHA approvals, if applicable. Assignee’s legal counsel shall deliver to the City written evidence of the Required Approvals, in form and substance satisfactory to the City, no later than sixty (60) days following approval of this Assignment Agreement by the Newark Municipal Council (the “Approval Deadline”). Time is of the essence.
4. This Resolution and all approvals granted herein shall be of no force or effect unless and until all Required Approvals are obtained on or before the Approval Deadline, as such deadline may be extended pursuant to Paragraph 5 below. Failure to timely obtain the Required Approvals shall automatically render this Resolution null and void without further action by the City.
5. The Mayor and/or his designee, the Deputy Mayor/Director of the Department of Economic and Housing Development, are hereby authorized, in the City’s sole discretion, to grant up to two (2) extensions of the Approval Deadline, each for a period not to exceed one (1) month. Any extension not granted in writing shall be ineffective.
6. An executed copy of the First Amendment to Financial Agreement authorized by this ordinance shall be filed and maintained with the City Clerk.
7. The Assignee, and any successor entity operating the Project, shall comply with all applicable federal, state, and local laws, rules, and regulations, including all nondiscrimination requirements, so that no person shall be subjected to discrimination on the basis of race, religion, color, national origin, ancestry, or any other protected classification.
8. The adoption of this ordinance is expressly conditioned upon the requirement that Assignee pay the City all outstanding taxes and/service charges, and water/sewer charges within thirty (30) days of the date of the adoption of this ordinance. Failure to timely satisfy this condition shall result in this Resolution and all approvals granted herein being deemed null and void.
9. The adoption of this ordinance is expressly conditioned upon the requirement that Assignee register with the City’s Office of Affordability and Sustainable Housing and comply with all their rules and regulations pertaining to the affordable housing units in the Project.
10. This Resolution shall take effect only upon the full satisfaction of all conditions set forth herein, as determined by the City in its sole discretion.
STATEMENT
RESOLUTION OF THE MUNICIPAL COUNCIL OF THE CITY OF NEWARK CONSENTING TO THE ASSIGNMENT OF THE FINANCIAL AGREEMENT FROM CLINTON ARMS ASSOCIATES LIMITED (F/K/A CLINTON ARMS ASSOCIATES TO CLINTON ARMS URBAN RENEWAL, LLC FOR FIVE 2 AND 3 STORY ROW HOUSE STYLE GARDEN APARTMENTS CONTAINING SEVENTY-TWO (72) SECTION-8 ASSISTED RESIDENTIAL RENTAL UNITS LOCATED ON THE CITY BLOCK BOUNDED BY MADISON AVENUE, CLINTON AVENUE, HUNTERDON STREET AND PESHINE AVENUE, 453-467 CLINTON AVENUE, IN THE CITY OF NEWARK, NEW JERSEY, 07108, COUNTY OF ESSEX AND CURRENTLY IDENTIFIED ON THE CITY’S TAX MAP AS BLOCK 2684, LOT 1.