To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: Subordination Agreement of Density Bonus and Inclusionary Agreement - DeAnza Gardens
RECOMMENDATIONS:
APPROVE and AUTHORIZE the Conservation and Development Director, or designee, to execute a subordination agreement with PNC Bank, which will subordinate the Density and Redevelopment Inclusionary Housing Agreement dated June 1, 2003, to a loan being made by PNC Bank, to permit the refinancing of the senior debt associated with an affordable housing development located at 205 Pueblo Avenue, Bay Point.
FISCAL IMPACT:
No fiscal impact.
BACKGROUND:
DeAnza Gardens (Project), a 180-unit multifamily affordable housing development located at 205 Pueblo Avenue (the Property) in the unincorporated community of Bay Point, was developed in 2003-2004. The current owner of the Project is DeAnza Gardens L.P. (Partnership), a California limited partnership with the Housing Authority of Contra Costa County (HACCC) as Limited Partner and DeAnza Housing Corporation, a California Public Benefit Corporation as the General Partner (Corporation). The Project is constructed on property owned by the HACCC and leased to the Partnership pursuant to a Ground Lease.
As part of the development, a Density Bonus and Redevelopment Inclusionary Housing Agreement (Inclusionary Agreement) between Contra Costa County, the HACCC, and the Partnership, was entered on June 1, 2003 and recorded against the Property. The Inclusionary Agreement required the Project to be affordable to and occupied by households earning 30 percent to 60 percent of the median income for 55 years. There were no County funds provided to the Project.
The development of DeAnza Gardens was initially funded with a loan provided to the Partnership by the California Community Reinvestment Corporation (CCRC) that came with a balloon payment of approximately $6.5 million becoming due on October 1, 2023. In addition, two loans were made to the Partnership for $1 million each from HACCC’s Housing Choice Voucher (HCV) program and its public housing programs. HACCC is now seeking to refinance the CCRC loan to avoid the balloon payment and to consolidate all outstanding debt.
To facilitate this refinancing, the Partnership will convey the Project and its leasehold interest in the Property to the Corporation. The Corporation will obtain a loan from PNC Bank for $13 million to pay the acquisition costs for the Project. The Partnership will use proceeds from the sale of the Project to repay existing financing on the Project. Although no County funds are associated with the Project, as the Inclusionary Agreement currently encumbers the Project, PNC Bank is requiring the County’s Inclusionary Agreement to be subordinated to its loan.
After the refinancing and conveyance of the Project to the Corporation, the Project will continue to provide 180 units of affordable housing with a ground lease restriction that will run through the year 2083. The requirements of the Inclusionary Agreement will continue to be in effect for the remainder of the original 55-year term.
CONSEQUENCE OF NEGATIVE ACTION:
Failure to take the actions requested will require the balloon payment to be made, which could potentially cause a default on the current loan. A default could result in the loss of the 180 units of affordable housing in the County.
☒Recommendation of the County Administrator
☐ Recommendation of Board Committee
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I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. |
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ATTESTED: |
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Monica Nino, County Administrator and Clerk of the Board of Supervisors |
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By: |