To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: Approval of Restructured HOME and HOPWA Loans and Approval of New $9,000,000 HOME Loan for the Lakeside Rehabilitation Project in Concord
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
1. APPROVE a loan of HOME Investment Partnership Program (HOME) funds in the amount of $9,000,000 to Lakeside Recap, L.P., a California limited partnership (Developer), for use in the acquisition and rehabilitation of the Lakeside Apartments project located at 1897 Oakmead Drive in the City of Concord (the Property).
2. CONSENT to the assignment of outstanding HOME and Housing Opportunities for Persons with HIV/AIDS (HOPWA) loans to the Developer that the County previously loaned to the current owner of the Property, Lakeside Apartments, L.P., having an original principal value of $2,839,890 (the Existing Loan).
3. AUTHORIZE the Conservation and Development Director, or designee, to execute legal documents subject to approval by the County Administrator and approval to form by County Counsel, or designee, to evidence (i) the $9,000,000 HOME loan (the New HOME Loan), and (ii) the restructuring of the Existing Loan to be coterminous with the New HOME Loan.
4. FIND as the responsible agency, that on the basis of the whole record before the County, including the California Environmental Quality Act (CEQA) review prepared by the City of Concord, as the lead agency, that the development is statutorily exempt under CEQA Guidelines Section 15183; and DIRECT the Conservation and Development Director, or designee, to file a Notice of Exemption for Lakeside Apartments with the County Clerk; and pay any required fee for the filing.
FISCAL IMPACT:
100% Federal funds. HOME funds are provided to the County on a formula allocation basis through the U.S. Department of Housing and Urban Development (HUD).
CFDA: HOME 14.239
BACKGROUND:
Existing HOME and HOPWA Loans
On July 15, 2005, the County loaned $2,500,000 in HOME funds and $339,890 in HOPWA funds to Lakeside Apartments, L.P., an affiliate limited partnership of Resources for Community Development, and the current owner of the development known as Lakeside Apartments located at 1897 Oakmead Drive, Concord (the Property). The HOME and HOPWA funds were to rehabilitate the Property and existing units, to provide 124 units of multifamily rental housing affordable to and occupied by households earning between 20% and 60% of the Area Median Income (AMI).
New HOME Loan; Project Description
On June 25, 2024, the Board of Supervisors (BOS) awarded $5,000,000 in HOME funds as a loan to Resources for Community Development (RCD), the controlling entity of Lakeside Apartments L.P., for the acquisition and rehabilitation of the Property. On June 24, 2025, the BOS awarded an additional $2,000,000 in HOME funds as a loan to RCD. The Affordable Housing Finance Committee (AHFC) recommended a final amount of $2,000,000 in HOME funds on April 29, 2026. The AHFC recommendation is being considered by the BOS as a separate item on this May 19, 2026 Board agenda, as part of the FY 2026/27 CDBG and HOME Annual Action Plan.
The New HOME Loan of $9,000,000 will be used to rehabilitate the Property. The proposed project sponsor is Lakeside Recap, L.P. (Developer), a California Limited Partnership comprised of an affiliate of an RCD-controlled partnership, RCD GP II, LLC (0.01%) as the managing general partner and the initial limited partner, 112 Alves Lane, Inc., a California non-profit corporation and affiliate of RCD. RCD is the sole member and manager of the RCD GP II, LLC.
The proposed project will recapitalize and rehabilitate the existing 124-unit Lakeside Apartments community. The effort preserves deeply affordable housing for households earning 20%-55% AMI. The project modernizes critical building systems and enhances long-term habitability for residents. Project objectives include preserving 124 affordable rental homes (including 31 special-needs units), completing major infrastructure upgrades (electrical, plumbing, and building envelope upgrades), supporting long-term sustainability through electrification and energy-efficient improvements, and maintaining affordability for extremely low- to moderate-income households for an additional 55 years. Two of the 124 units will be designated as property manager’s units.
Of the 122 affordable units, there will be 35 HOME-Assisted, and 52 County-Assisted units. The breakdown of the HOME-Assisted units within the 122 affordable units are as follows:
• 1-Bedroom Units - 59 units
o 2 units at 20% AMI (0 assisted)
o 18 units at 30% AMI (0 assisted)
o 13 units at 50% AMI (13 HOME units)
o 26 units at 55% AMI (26 County units)
• 2-Bedroom Units - 51 units
o 8 units at 20% AMI (0 assisted)
o 11 units at 30% AMI (6 HOME units)
o 6 units at 50% AMI (6 HOME units)
o 26 units at 55% AMI (26 County units)
• 3-Bedroom Units - 14 units
o 2 units at 20% AMI (0 assisted)
o 7 units at 30% AMI (7 HOME units)
o 3 units at 50% AMI (3 HOME units)
The County actions needed to implement the proposed refinancing and rehabilitation include (i) consent to the assignment of the original HOME and HOPWA loan to the Developer; (ii) restructure the original County HOME and HOPWA loan by rolling the accrued interest of approximately $569,238 into the outstanding principal balance of $2,839,890, resulting in an updated principal balance of approximately $3,409,128 of the original HOME and HOPWA loan, and (iii) loaning additional HOME funds in the amount of $9,000,000. Together, the refinancing and the HOME funds will result in a new loan of approximately $12,409,128 The exact amount will depend on the amount of accrued interest at closing on the debt that is being refinanced. The accrued interest amount listed above is based on a closing date of June 2, 2026.
The New HOME Loan will be provided in the form of a 55-year, residual receipt loan with a zero percent interest rate. RCD has requested a reduction of the interest rate for the New HOME Loan and has stated it is necessary because the standard County interest rate of three percent would result in a negative capital account in year 11 which doesn’t provide sufficient cushion for the last year of the tax credit delivery period to ensure the credits are delivered to the Investor. Failure to deliver the credits to the Investor would significantly decrease investor equity. In addition, the use of a 3 percent interest rate would result in substantial exit taxes in year 15. It is not until the interest is reduced to zero percent that the project is able to keep the Investor capital account positive in year 15.
Keeping investor exit taxes to a minimum greatly improves the ability of RCD as a nonprofit sponsor to purchase the project in year 15, and the purchase by a nonprofit sponsor like RCD substantially increases the potential for the project remaining affordable in perpetuity. In addition, allowing the project to maximize its investor equity allows the owner to maintain long-term feasibility for the project by using better quality materials and equipment that reduce the need to drain the project’s replacement reserves and reduce maintenance costs in the long run.
The restructured HOME and HOPWA loans will bear interest at the applicable federal interest rate at the time of transaction closing (4.83% in May 2026) with the same deferred payment/surplus cash flow repayment structure. There may be some loan repayments if the project has a surplus cash flow (also known as “residual receipts”) during the operation of the project.
Affordability and use restrictions are incorporated into the attached County loan documents. The existing Regulatory Agreement recorded on the property will be terminated, and a new Regulatory Agreement will be executed and recorded to reflect the updated terms and the extended term of affordability. The County will have a Regulatory Agreement with a term of 55-years. Additional non-County financing for the project includes funds from restructured City of Concord loan, restructured State of California Multifamily Housing Program (MHP) loan, permanent bank loan, deferred developer fee, 4% tax credits, and tax-exempt bonds issued by the County as a conduit issuer where Lakeside Recap, L.P., not the County, is responsible for making the principal and interest payments on the bonds (a separate item on this May 19, 2026 Board agenda addresses the bond financing).
Due to the high construction costs and limited revenue from the restricted rents, the total amount of the financing provided for the project will likely exceed the value of the completed project. Even though the proposed equity investment from low-income housing tax credits is substantial compared to the amount of long -term debt, the partnership agreement will have numerous safeguards of the investor's equity. These safeguards essentially subordinate the County’s debt to the investor’s equity. Therefore, the County HOME funds may not be fully secured through the value of the property. However, the HOME program funds are granted, not loaned, to the County, so the County general fund will not have any exposure as a result of this loan. The County structures its investments as loans rather than grants in order to maintain involvement in the financial team in the event the project experiences any serious issues over the 55-year term.
Through this action, the Director of Conservation and Development and Director, or designee, is authorized to execute subordination agreements and estoppels that are consistent with the subordination terms in the Loan Agreement.
Environmental Review
National Environmental Policy Act (NEPA): HOME funded projects are subject to NEPA and 24
CFR Part 58 environmental regulations. The NEPA review for this project is complete and the required mitigation actions are included in the development loan agreement. The County, as a responsible agency under CEQA, concurs with the City of Concord’s CEQA determination and will file the appropriate notice with the County’ Recorder’s Office.
Build America Buy America Compliance
The HOME funds require compliance with Build America Buy America enacted under Division G, Title IX of the Infrastructure Investment Act signed into law on November 15, 2021, implementing regulations at 2 CFR 184. All the iron, steel, non-ferrous metals, lumber, and composite building materials utilized in federally funded projects with an aggregate of $250,000 or more of funds for the total project costs, funds must be produced in the United States in a manner that complies with the Build America Buy America Act. The HOME funds provided are allocated out of a combination of 2024, 2025, and 2026 Program Year HOME Grant Agreement between HUD and the County.
CONSEQUENCE OF NEGATIVE ACTION:
Without the approval and execution of the County loan documents, the project will not be able to start construction on the rehabilitation. If the project does not close escrow and begin construction by June 2, 2026, the project will be required to forgo the 4% tax credits and tax-exempt bonds that the project’s financing depends on.