To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: Approval of Transfer of Ownership of Giant Road Apartments in San Pablo, and Related Actions
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
1. APPROVE the ownership transfer of Giant Road Apartments in San Pablo from Giant Development, LP, a California Limited Partnership, to Giant Development II, LP, a California Limited Partnership;
2. APPROVE the assignment and assumption of County Community Development Block Grant (CDBG), and HOME Investment Partnerships Program (HOME) from the current owner to the new owner; and
3. APPROVE and AUTHORIZE the Director of Conservation and Development, or designee, to execute legal documents subject to approval by the County Administrator and approval to form by County Counsel that are required to carry out these approvals.
FISCAL IMPACT:
No General Fund impact. CDBG and HOME funds are provided to the County on a formula basis through the U.S. Department of Housing and Urban Development (HUD).
CDBG CFDA #14.218. HOME CFDA #14.239.
BACKGROUND:
Giant Road Apartments, located at 2832 Giant Road in the City of San Pablo (the Development), consists of 86 units of affordable rental housing that is suitable for extremely low and very low-income families and individuals. In 2004 and 2005, the County loaned $600,000 of CDBG and $1,100,000 of HOME funds to Giant Development, LP, a California Limited Partnership (Prior Partnership), with East Bay Local Development Corporation (EBALDC) as the Prior Partnership’s managing partner. The loans, in combination with additional funds from low-income housing tax credits, the City of San Pablo, the State of California-Housing and Community Development, and a private mortgage loan, were used for the acquisition and new construction of the Development.
The Development’s initial tax credit period has passed, and the Development is in need of rehabilitation to meet current accessibility standards and to remediate water intrusion issues. EBALDC was awarded another low-income housing tax credit allocation and multi-family housing bonds to complete the needed rehabilitation. Together with an allocation of new permanent private financing, and seller carryback loan, the tax credit will provide funds to refinance the existing loans on the Development.
EBALDC, an experienced non-profit affordable housing developer, is not seeking any additional CDBG or HOME funds as a part of this transaction. The purpose of the refinancing is to rehabilitate the Development. The proposed scope of work at the Development includes but is not limited to exterior envelope and structural repairs, removal and replacement of damaged framing, window replacement, painting, waterproofing and accessibility, path of travel improvements, and in-unit upgrades as needed.
In support of the proposed rehabilitation, the County actions needed are: (1) consent to the assignment of the original County CDBG and HOME loans to the borrower; (2) restructure the original CDBG and HOME loans by rolling the accrued interest of $820,846 (through expected closing date of August 8, 2024) plus principal loan balance of $1,700,000 resulting in an updated principal loan balance of $2,520,846.
The existing loan terms are three percent simple annual interest with a term of 55 years with repayments required to be made only when the borrower has surplus cash. Since 2005, the County has received $111,920.89 in interest payments. The restructured loan will have a 55-year term and carry the applicable federal interest rate at the time of transaction closing (4.6% in July 2024) with the same deferred payment/surplus cash flow repayment structure.
The loan documents are attached and include a restructured promissory note and deed of trust, an assignment agreement, an amended and restated intercreditor agreement, an amended CDBG/HOME loan agreement, and amended regulatory agreement. The documents are in their close to final form and will be executed subject to approval by the County Administrator and in a form approved by County Counsel. Through this action, the DCD Director, or designee, is also authorized to execute subordination agreements and estoppels that are consistent with the terms in the amended loan agreement.
CONSEQUENCE OF NEGATIVE ACTION:
Without approval and execution of the legal documents, the acquisition and rehabilitation will not be completed and will continue to suffer from deferred maintenance. The Development must close the transaction and begin construction in July 2024 or forgo the low-income housing tax credits and multi-family housing bonds upon which the project’s financing depends.