OCII approves ENA and $3.495 million predevelopment loan for Mercy Housing’s Mission Bay 6 West project

The Commission on Community Investment and Infrastructure on July 18 authorized an exclusive negotiation agreement and a predevelopment loan of $3,495,000 to Mercy Housing California 78 LP to develop approximately 140 affordable family rental units and a ground-floor childcare facility at Mission Bay Block 6 West.

Gretchen Heckman, a development specialist at OCII, told commissioners the predevelopment loan "will pay for architectural design through to construction drawings, survey and engineering work, legal costs, due diligence studies and developer fee." She said the loan carries 3 percent simple interest and is expected to convert to a permanent OCII loan at construction closing. The ENA includes a $10,000 performance deposit, an initial 18-month term and an Executive Director–approved extension of up to 12 months.

The project program calls for 140 units with a range of affordability from 30 to 60 percent of area median income; 35 units will be reserved for households voluntarily relocating from public housing undergoing revitalization through the city’s Hope SF initiative. Staff said the development team is evaluating adding some 4- and 5-bedroom units to meet community redevelopment law replacement obligations related to the Alice Griffith project.

Site amenities will include a subsidized ground-floor childcare facility, community space intended for Blue Bear School of Music (Mercy has not yet signed a lease), a large exterior courtyard, community room, secure bicycle storage sized for each unit, and on-site parking composed of 28 spaces plus two car-share stalls. Staff reported the design team analyzed increasing parking to 42 spaces but recommended retaining 28 spaces because adding parking would add roughly $1,000,000 in costs, reduce the childcare footprint by about half and result in the loss of housing units.

Commissioners pressed staff on how parking slots would be allocated. Heckman said parking is currently distributed through a random-draw lottery but OCII and Mercy are "currently looking at" whether to give preference to larger households; staff agreed to return with analysis. The project’s marketing preference order for the unit lottery will follow OCII practice: certificate-of-preference (COP) holders first, then Ellis Act preference holders, then San Francisco residents or workers, and finally the general public. OCII said consultants are completing a COP survey and expected to present top-line findings in September to inform marketing strategies.

Mercy Housing presented the development team, including Mercy representatives Barbara Guoco (Director of Housing Development) and William Ho (Senior Project Manager), Paulette Taggart of Paulette Taggart Architects and Liz Simpson of Success Center SF. Mercy noted it has used contractor joint ventures on prior projects and is encouraging that approach for the general contractor selection.

Commissioner Bustos moved the authorization and Commissioner Pimentel seconded. The secretary called roll and the measure passed on a 5–0 vote.

Next steps outlined by staff include schematic design review later in 2017, Mercy’s applications for tax credits and bond allocation, return to the Commission in summer 2018 for gap financing authorization and ground-lease approval at the end of 2018 to be ready to close financing and begin construction in spring 2019; staff estimated construction completion and marketing finalization by December 2020.