Agenda Item 9.1
Corona Del Rey Amended Agreements
Ask
That the City Council approve
1. Amended and Restated Promissory Note between National Community Renaissance of California and the City of Corona Housing Authority
2. Second Amendment to Operation and Maintenance Agreement between National Community Renaissance of California and the City of Corona Housing Authority
3. Assignment of Agreement between National Community Renaissance of California, NCRC CDR LLC, and the City of Corona Housing Authority
4. Subordination Agreement between JPMorgan Chase Bank and the City of Corona Housing Authority That the Corona Housing Authority review, ratify, and to the extent necessary, direct that the City Council take the above actions
The Site
The Site
Corona Del Rey is comprised of 160
two-bedroom affordable housing
units
This project serves low to moderate
income families with incomes at or
below the Area Median Income
(AMI) limits below:
96 units at 80% AMI
32 units at 60% AMI
32 units at 50% AMI
Background
In 1996, the City entered into an affordable housing development agreement with the Southern California Housing Development Corporation, now known as National Community Renaissance of California (NCRC) for the acquisition and rehabilitation of Corona Del Rey The term of affordability under the affordable housing agreement is in perpetuity On February 4, 1998, the City approved a construction loan in the amount of $1.2 million to provide gap financing to complete necessary rehabilitation repairs on Corona Del Rey Interest on the construction loan was 15% simple interest. A total of $347,936 was disbursed from the $1.2 million construction loan to NCRC. Interest accrued to date brings the current loan balance to $1.7 million
Corona Del Rey was built in the mid-1960s. Due to the age of these apartments, ongoing maintenance and repair needs have impacted the cashflow of this project
For the past several years, NCRC has been assessing short-term and long-term property needs In January 2020, NCRC met with City staff to discuss rehabilitation and financing plans for their existing two housing developments and was seeking to partner with the City on its rehabilitation effort Discussions between the City and NCRC included renegotiating the City’s loan terms and applying for State grant funds
On October 14, 2021, State HCD issued a grant award allocating $8 million to renovate NCRC’s two Corona Properties: Corona Del Rey (160 units) and Corona De Oro (72 units) State Rehab Grant
Grand Re-Opening
• A total of $5.5 million of the $8 million State Grant was used to rehabilitate Corona Del Rey and $2.5 million
was used to rehabilitate Corona De Oro
• The $5.5 million in State funds was combined with
approximately $8.6 million in other public and private
funds secured by NCRC to complete the substantial
rehabilitation work at Corona Del Rey
• The City partnered with NCRC, the County, and the
State to celebrate the Grand Re-Opening on June 18,
2025
Amended Agreements
The long-term plan for NCRC has been to secure tax credit financing to pay off other construction loans and bridge loans as well as to renegotiate the City’s loan terms
These discussions have been ongoing with the City since 2020. Due to demands for tax credits and rules favoring the production of new units, NCRC was unsuccessful in securing tax credits but remained vigilant in seeking alternative funding opportunities
NCRC has identified long-term financing and is in the process of finalizing approval for a Freddie Mac permanent loan from JPMorgan Chase Bank of approximately $12 million, depending upon final approval The proceeds of the new permanent loan will be used to pay off existing construction and bridge loans, a small County HOME funded loan, as well as cover closing legal, title and financing costs associated with the new loan The permanent financing is consistent with discussions with the City over the past several years and is a milestone achievement between the City and NCRC to preserve Corona Del Rey in perpetuity as a reliable source of quality affordable housing
Amended Agreements
Amended and Restated $1,200,000 Promissory Note
Extend maturity date from January 31, 2000, to December 31, 2078 to align with the maturity date for the County ARPA loan and establish a maturity date after the maturity of permanent loan from JPMorgan Chase Bank Revise interest rate from fifteen percent (15%) to three percent (3%) simple interest per annum to align with affordable housing industry standards
Assignment of Agreement
Assign City loan documents from NCRC to NCRC CDR LLC, a newly formed Single Asset Entity (SAE). SAE model is required by permanent lender and is common in the affordable housing industry Subordination Agreement with JPMorgan Chase Bank
Subordination of City loan to the new JPMorgan Chase Bank Loan is a requirement of Freddie Mac City regulatory agreement for affordability in perpetuity will remain senior to the new JPMorgan loan and County ARPA loan will remain junior to the City loan
Amended Agreements
Second Amendment to Operation and Maintenance Agreement • Revised Net Operating Income Distribution:
• 50% to the City; 25% to the County; and 25% to the NCRC to repay any project loans or administrative expenses
• These changes comply with Freddie Mac and align closer to Affordable Housing Industry Standards • Eliminate the $4,000 per month administration fee paid to NCRC and maintain existing capitalized reserves in the Capital Replacement Reserve Account with total annual deposits of $48,000 as required by Chase Bank and Freddie Mac. NCRC draw approval rights held by Chase Bank and City • Establish a new Supplemental Replacement Reserve Account. Upon funding of Chase Loan, NCRC to deposit approximately $830,894 into new Supplemental Replacement Reserve Account. NCRC draw approval rights held by City exclusively
Reserve Accounts
Existing Operations & Maintenance Agreement Accounts
Capital Replacement Reserve Account $ 78,992.46
Operating Reserve Account $652,418.60
Debt Service Account $178,475.74
Total $909,886.80
Amended Operations & Maintenance Reserve Accounts
New Supplemental Replacement Reserve Account
Deposit of approximately $830,894 upon funding of Chase Loan (combines Operating Reserve and Debt Service Account) $820,000 Required Reserve Threshold
Capital Replacement Reserve Account
$78,992 balance to remain
Annual required deposit of $48,000 ($300 per unit)
Allocation of Net Operating Income (aka Residual Receipts) Net Operating Income defined as all income from the project remaining “after” payment of senior debt, required capital reserve account deposits, and necessary operating expenses of project Distribution: 50% to City for City Loan, 25% to County for County Loan and 25% to NCRC to repay any owner loans or other project expenses
Ask
That the City Council approve
1. Amended and Restated Promissory Note between National Community Renaissance of California and the City of Corona Housing Authority
2. Second Amendment to Operation and Maintenance Agreement between National Community Renaissance of California and the City of Corona Housing Authority
3. Assignment of Agreement between National Community Renaissance of California, NCRC CDR LLC, and the City of Corona Housing Authority
4. Subordination Agreement between JPMorgan Chase Bank and the City of Corona Housing Authority That the Corona Housing Authority review, ratify, and to the extent necessary, direct that the City Council take the above actions