On November 12, 2018, City Council approved the sale of two vacant land parcels known as Peppertree Circle (1471 Mercy Drive) and Peppertree Shores (1014 Mercy Drive) to Blue Sky Communities for redevelopment. Blue Sky Communities, also known as Blue CASL Orlando, LLC. (BCO), plans to develop Fairlawn Village, a 116-unit affordable and permanent supportive housing development. The development will consist of a mixture of one-, two, and three-bedroom units.  Six (6) units will be reserved for tenants with incomes at 22% or less of the Area Median Income (AMI).  Twelve (12) units will be reserved for tenants with incomes at 35% AMI or less.  Thirty (30) units will be reserved for tenants with incomes at 50% AMI or less, eleven of which will be designated as HOME-assisted units. Sixty-eight (68) units will be reserved for tenants with incomes at 60% AMI or less.

The total project budget is $23,476,882.  Tax credit investor equity will provide $8,257,752.  Additional funding sources include Florida Housing Finance Corporation (FHFC) State Apartment Incentive Loan (SAIL) funding at $6,250,000, a First Mortgage from FHFC/Chase in the amount of $4,300,000, Extremely Low Income (ELI) funding from FHFC of $600,000, National Housing Trust Funds (NHTF) from FHFC in the amount of $1,308,000 and a deferred developer fee in the amount of $761,130, leaving a gap of $2,000,000.  On June 3, 2019, the City’s Housing Review Committee (HRC) reviewed BCO’s funding application and voted to recommend City Council approve assistance of $2,000,000 in federal HOME funds for this project. City Council accepted the HRC recommendation on June 17, 2019 as part of the HRC minutes.   

As noted in the council Agenda item on June 17^th, 2019, the City’s Mortgage will be subordinate to the senior lender and potentially other project financing secured for the Low Income Housing Tax Credit project. City Staff is requesting City Council’s approval of the attached subordination agreement from Florida Housing Finance Corporation and Chase Bank.  Due to the junior lien position for the HOME funds and due to the complex nature of the financing of Low Income Housing Tax Credit projects, if the owner defaults, or if the property has to be liquidated to repay all of the funding sources, it is doubtful that the City will be able to recover its investment from the tax credit consortium or from the sale of the property. In such a situation, the City would be responsible for any repayments to HUD.