Agenda Report
Fullerton City Council
MEETING DATE: APRIL 7, 2026
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: SUNAYANA THOMAS, DIRECTOR OF COMMUNITY AND ECONOMIC DEVELOPMENT PREPARED BY: DANIEL VALDEZ, HOUSING MANAGER
SUBJECT: INTERFAITH HOUSING DEVELOPMENT CORPORATION LOAN CONSOLIDATION AGREEMENT FOR EAST FULLERTON VILLAS
SUMMARY
Request to restructure loan for East Fullerton Villas, a 27-unit affordable housing community, to update 1994 legacy loan terms that no longer align with current affordable housing financing practices and convert an existing non-performing loan into a consistent City revenue stream while preserving long-term affordability and safeguards.
PROPOSED MOTION
Approve the loan consolidation and restructuring payments to the Agreement with Interfaith Housing Development Corporation.
Authorize the City Manager to execute and administer all related documents.
ALTERNATIVE OPTIONS
Approve the Proposed Motion
Maintain existing loan structure
Direct staff to negotiate an alternative structure
Other options brought by City Council.
STAFF RECOMMENDATION
Staff recommends the Proposed Motion.
CITY MANAGER REMARKS
None.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statements:
Fiscal and Organizational Stability
Infrastructure and City Assets.
FISCAL IMPACT
East Fullerton Villas has historically generated little to no income from this project due to its limited net operating income. The proposed restructuring of the Agreement establishes fixed annual payments of $30,000 to the City over a 27-year period, creating a predictable and consistent revenue stream. Accrued interest is not forgiven upfront, but rather spread out over time based on continued compliance and remains recoverable in the event of a default, sale or transfer.
BACKGROUND AND DISCUSSION
East Fullerton Villas is a 27-unit affordable housing located at 2120 East Chapman Avenue. The property was developed in 1994 through a partnership between the City, the former Redevelopment Agency and Interfaith Housing Development Corporation (IHDC). As part of that agreement, the City and RDA provided loans totaling $540,000 with repayment structured based on the project’s available net operating income and interest accrued on a compounded basis.
Due to the project’s deep affordability requirements and limited revenue, payments have historically been minimal and applied primarily toward interest, with no repayment of principal. As of December 31, 2025, the total outstanding balance of the loans, including accrued interest, is approximately $1.86 million. The loans matured in October 2024, and the borrower does not have sufficient funds to repay the outstanding balance.
The property remains a stable and well-maintained asset, fully occupied and in compliance with all applicable requirements. However, the existing loan structure has become financially infeasible because the project is income-restricted affordable housing, which limits rent levels. After operating costs, there isn’t excess revenue to support repayment under the current structure. As a result, the loan has not produced meaningful repayment, and the outstanding balance has continued to grow without reducing the original principal.
The proposed restructuring aligns the loan with the project’s financial capacity by resetting it to the original principal of $540,000 and establishing fixed annual payments of $30,000 over a 27-year term at three percent simple interest. Accrued interest is not forgiven up front, but is instead forgiven incrementally over time, contingent upon continued compliance with the terms of the agreement. If the property is sold, refinanced or falls out of compliance, any remaining balance becomes immediately due.
The property is a stable, well-maintained asset, fully occupied and in compliance with all applicable requirements, with no ongoing City enforcement or operational concerns. Over time, the existing loan structure has become financially infeasible, as it does not align with the project’s operating realities or current affordable housing financing practices. The proposed restructuring right-sizes the project’s capital structure to better reflect available cash flow, allowing the City to begin receiving consistent payments while supporting the long-term viability of the property and preserving an important affordable housing resource.
Attachments:
Attachment 1 – Draft Amendment No. 1 to Disposition and Development Agreement cc: City Manager Eddie Manfro
Interfaith Housing Development Loan Consolidation Agreement for East Fullerton Villas April 7, 2026 - Page PAGE \* MERGEFORMAT 2