To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: Ratify execution of Subordination Agreement and Estoppel Certificate for the Acalanes Court project in Walnut Creek
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
RATIFY approval of the execution of a Subordination Agreement and Estoppel Certificate to a new bank loan for the Acalanes Court development located at 1988 Trinity Avenue, Walnut Creek.
FISCAL IMPACT:
There will be no fiscal impact.
BACKGROUND:
In 2005, the County entered into a HOME loan agreement for $1,064,000 with Satellite Affordable Housing Associates (SAHA) for the construction of the Trinity Avenue Apartments, which was later renamed to Acalanes Court. The executed legal documents included a County Subordination Agreement to a $676,000 loan provided by the California Community Reinvestment Corporation (CCRC). The City of Walnut Creek (City) also provided a loan for this project and subordinated their loan to CCRC’s original loan. The City, County, and SAHA also executed an Intercreditor Agreement as part of the legal documents in 2005.
The $676,000 CCRC bank loan was due in November 2024 with a balloon payment of $450,000. SAHA was able to get two extensions to this original CCRC loan, and the initial extension deadline to pay the remaining principal of the loan was to be by January 31, 2025. CCRC provided SAHA with a bridge loan to pay off the remaining principal from the original loan, but the bank required the County and City to subordinate to the new CCRC bridge loan.
The Department of Conservation and Development (DCD) staff along with County Counsel reviewed a draft subordination agreement provided by CCRC for the new CCRC loan and worked with CCRC and SAHA on the final subordination agreement document language. Due to the short turnaround timeframe and the limited number of Board meetings scheduled prior to the end of January 2025, DCD executed the County Counsel approved subordination document to assist SAHA with the refinancing and to meet the deadline (January 31, 2025) of the original CCRC loan. The City also subordinated their loan to the new CCRC loan and prepared an Estoppel Certificate that acknowledges that the new CCRC loan and new subordination agreements do not affect the rights and obligations of the City, County, and SAHA under the 2005 Intercreditor Agreement. Due to delays by CCRC, the loan closing for the new loan closed on Wednesday, February 19, 2025, which included the new County subordination agreement that subordinates the County’s HOME loan to the new CCRC loan.
The attached Estoppel Certificate was prepared by the City, reviewed and approved by DCD staff and County Counsel, and executed concurrently with the new County Subordination Agreement. Both the County Subordination Agreement to the new loan and the Estoppel Certificate are attached as exhibits to this report.
CONSEQUENCE OF NEGATIVE ACTION:
This action to ratify approval of the executed Subordination Agreement is necessary to accept the action taken due to the availability of meeting dates prior to the new loan closing deadline. If the County Subordination Agreement was not executed, then the bank would not have entered into a new loan and the original bank loan to the borrower would be in default. If the bank declared default, then there would have been a potential loss of affordable units in the county and the loss of the County’s HOME loan to the borrower.