To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: Approval of subordination agreements to permit the refinancing of the senior loan for Grayson Creek Apartments
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
APPROVE and AUTHORIZE the Conservation and Development Director, or designee, to execute a subordination agreement with Berkadia Commercial Mortgage, LLC, and a subordination agreement with the State of California - Department of Housing and Community Development, to permit the refinancing of the senior debt associated with an affordable housing development known as Grayson Creek Apartments, located at 100 Chilpancingo Parkway in the City of Pleasant Hill.
FISCAL IMPACT:
There is no fiscal impact.
BACKGROUND:
In 1998 the County entered into Disposition, Development, and Loan Agreement (DDLA) with BRIDGE Housing (“BRIDGE”), a non-profit affordable housing developer, to loan $1,750,000 in Community Development Block Grant (CDBG) funds for the new construction of a 70-unit multi-family affordable housing development known as the Grayson Creek Apartments, located at 100 Chilpancingo Parkway in the City of Pleasant Hill.
In 2001 the County provided an additional $825,000 in CDBG funds to BRIDGE for the project. With the additional $825,000 in CDBG funds, the County and BRIDGE executed a Modification Agreement and Memorandum of First Amendment to amend the original Deed of Trust to include the additional $825,000 in CDBG funds and to secure a combined total of $2,575,000 in CDBG funds provided by the County. An Amended and Restated Promissory Note was also executed by BRIDGE, evidencing the additional $825,000 in County CDBG funds and a combined total principal amount of $2,575,000 in County CDBG funds.
In 2003, the California Housing Finance Agency (CalHFA) provided BRIDGE with two loans with a collective amount of $9 million to refinance the senior debt at that time, and CalHFA became the new senior lender. As part of that refinancing, the County executed a subordination agreement with CalHFA to subordinate the County’s $2,575,000 CDBG loan to CalHFA’s senior loan. Also in 2003, the State of California - Department of Housing and Community Development (“CA-HCD”) provided BRIDGE with a loan in the amount of $4,074,510 in State of California Multifamily Housing Program (MHP) funds for the project. The County also executed a subordination agreement with CA-HCD to allow CA-HCD to provide the MHP loan to BRIDGE.
In September 2025, BRIDGE notified County Department of Conservation (DCD) staff that it was in the process of refinancing the CalHFA senior debt with a new senior loan from Berkadia Commercial Mortgage, LLC (“Berkadia”). The refinancing would pay the remaining balance of the CalHFA loan, and the excess proceeds would be used to complete needed capital repairs and rehabilitation of the Grayson Creek Apartments development (including repair/rehabilitation activities to some of the units) and to create a capital reserve for future capital repairs not contemplated with the repairs to be completed with the proceeds from the new Berkadia loan. BRIDGE and Berkadia are requesting the County to consent to the proposed refinancing of the senior loan and to execute a subordination agreement with Berkadia.
As part of this refinancing with the new Berkadia senior loan, CA-HCD is requiring the County to execute a new subordination agreement for the MHP loan provided in 2003. No new MHP funds are being provided; however, CA-HCD requires new documents of existing agreements to be executed when there is a restructuring of senior debt. Refinancing of senior debt is considered a restructuring activity for CA-HCD. Therefore, CA-HCD is requiring the County to approve and execute a new subordination agreement for the MHP loan that was provided in 2003.
CONSEQUENCE OF NEGATIVE ACTION:
Failure to approve the recommended actions would prevent the refinancing and the needed repair/rehabilitation work at Grayson Creek Apartments.