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1 CITY OF GLENDALE, CALIFORNIA
REPORT TO THE JOINT MEETING: GLENDALE CITY COUNCIL AND
GLENDALE HOUSING AUTHORITY
AGENDA ITEM
Report: Approval of Ground Lease Amendments and Related Financing Documents for Metropolitan City Lights and Glendale City Lights in Connection with Refinancing of Existing Senior Debt
1. City Council Motion Receiving and Filing this Report Regarding Housing Authority's approval of Ground Lease Amendments and Related Financing Documents for Metropolitan City Lights and Glendale City Lights;
2. Housing Authority Motion Authorizing Executive Director to Execute Third Amendment to Lease Agreement, Ground Lessor Estoppel Certificate, and Subordination Agreement for Metropolitan City Lights, located at 1760 Gardena Avenue; and
3. Housing Authority Motion Authorizing Executive Director to Execute First Amendment to Lease Agreement, Ground Lessor Estoppel Certificate, and Subordination Agreement for Glendale City Lights, located at 3673 San Fernando Road.
COUNCIL ACTION
EXECUTIVE SUMMARY
Metropolitan City Lights and Glendale City Lights are affordable housing development projects located on land owned by the Glendale Housing Authority (Housing Authority) and operated pursuant to long-term ground leases. The project owners are refinancing existing senior mortgage debt through new Fannie Mae financing and, as a condition of the refinancing, have requested approval of required amendments to the Housing Authority's ground leases and execution of related financing documents.
The proposed amendments modify certain substantive rights originally negotiated by the Housing Authority, including provisions governing the Housing Authority's future option to acquire the project improvements. Because the requested changes affect material terms of the original transactions, Housing Authority approval is required.
Item Type: Action Item
Approved for October 6, 2026 calendar
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2 RECOMMENDATION
That the City Council receive and file this report; and That the Housing Authority adopt a motion authorizing the Executive Director to execute a Third Amendment to Lease Agreement, Ground Lessor Estoppel Certificate, and Subordination Agreement for Metropolitan City Lights, located at 1760 Gardena Avenue, and a motion authorizing the Executive Director to execute a First Amendment to Lease Agreement, Ground Lessor Estoppel Certificate, and Subordination Agreement for Glendale City Lights, located at 3673 San Fernando Road.
ANALYSIS
Metropolitan City Lights (MCL), located at 1760 Gardena Avenue, and Glendale City Lights (GCL), located at 3673 San Fernando Road, are affordable housing developments completed in 2007 and 2010, respectively. MCL contains 65 units, including 64 affordable units and one manager unit. GCL contains 68 units, including 67 affordable units and one manager unit. Both developments were constructed on land owned by the Housing Authority pursuant to long-term ground leases and were financed in part with Housing Authority HOME Investment Partnerships Program (HOME) and Low- and ModerateIncome Housing Fund (LMIHF) loans: $2,100,000 (HOME) and $3,700,000 (LMIHF) on MCL, and $1,400,000 (HOME) and $8,420,488 (LMIHF) on GCL. These Housing Authority loans remain outstanding and subordinate to the projects' senior debt.
As part of the original development transactions, the Housing Authority negotiated a ground lease option allowing it, under specified circumstances, to terminate the ground lease and acquire the project improvements. That option becomes exercisable on the 56th anniversary of each project's certificate of occupancy — May 25, 2063 for MCL and January 19, 2066 for GCL — regardless of whether a leasehold mortgage is outstanding at that time.
Each project's senior mortgage loan has matured and must be paid off. MCL's senior loan matured in November 2025; the owner obtained a bridge loan to satisfy it and avoid a lender-initiated default, which could have jeopardized the Housing Authority's subordinate loan security. GCL's senior loan matured March 1, 2026. Both projects are refinancing through new Fannie Mae financing arranged by Berkadia Commercial Mortgage LLC: a new $3,120,000 loan for MCL (5-year term, maturing 2031) and a new $6,000,000 loan for GCL (5-year term, maturing 2031) (loan amounts are estimates, with the final amounts determined at rate lock). As a condition of this refinancing, Fannie Mae requires amendments to the existing ground leases and execution of related financing documents, including Ground Lessor Estoppel Certificates and Subordination Agreements. The proposed amendments include a number of standard lender-protection provisions that do not alter the Housing Authority's substantive rights. One change is more significant.
Because the new loan is secured by the leasehold interest in the property rather than the land itself, the lender needs assurance that the ground lease will remain in place for the life of the loan — if the Housing Authority terminated the lease and took back the 1 26-90438
3 improvements, the lender would lose the collateral securing its loan. To provide that assurance, the amendments provide that the Housing Authority will not exercise its termination option described above for as long as any leasehold mortgage secures any lender's loan on the property — not only the current loan, but any future refinancing as well — even after the 56-year anniversary has passed. This is a standard requirement in leasehold financing, but it is not limited to the current loan term: because affordable housing properties are commonly refinanced over their operating life, the practical effect may be that the termination option remains unavailable to the Housing Authority for the life of the property, for as long as it carries leasehold financing. Staff recommends approval because the amendments are required by the lender as a condition of refinancing, do not alter the projects' affordability requirements, and do not change the Housing Authority's loan balances. Without the amendments, the refinancing cannot close and the project owners would be unable to satisfy their matured senior loan obligations, exposing the projects to foreclosure by the current senior lender — which could eliminate the Housing Authority's subordinate loan security and the recorded affordability covenants.
Housing Authority outside counsel reviewed and negotiated the proposed amendments and related financing documents and advised that the requested changes affect material provisions of the original transactions. As a result, Housing Authority approval is required before the documents can be executed.
STAKEHOLDERS/OUTREACH
The project owners requested the proposed amendments in connection with refinancing the projects' existing senior mortgage debt. Housing Authority outside counsel, Susan Apy of Kane, Ballmer & Berkman, reviewed and negotiated the proposed amendments and related financing documents on behalf of the Housing Authority.
FISCAL IMPACT
The proposed amendments do not change the Housing Authority’s loan balances or the projects’ affordability requirements. However, the amendments would limit the Housing Authority’s ability to terminate the ground lease for as long as the property remains subject to a leasehold mortgage.
ENVIRONMENTAL REVIEW (CEQA/NEPA)
The actions described in this report to authorize amendments to various documents in connection with refinancing MCL and GCL (both already- existing affordable housing developments) (“Project”) are exempt from further environmental review under the California Environmental Quality Act ("CEQA") pursuant to Title 14 of the California Code of Regulations ("CEQA Guidelines") for all of the following reasons: 1) the activity will not result in a direct or reasonably foreseeable indirect physical change to the environment under CEQA Guidelines Section 15060(c)(2) because the Project is already built and the funding will go to refinancing the loans (not subject to discretionary review, so not a project under CEQA); 2) the activity is not a project under CEQA Guidelines Section 15060(c)(3) and 15378(b)(4) because it constitutes the creation of government funding mechanisms or 1 26-90438
4 other governmental fiscal activity that does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment; and 3) the activity is covered by the common sense exemption that CEQA applies only to projects which have the potential for causing a significant effect on the environment, and here, it can be seen with certainty that there is no possibility that the activity may have a significant effect on the environment per CEQA Guidelines Section 15061(b)(3).
CAMPAIGN DISCLOSURE
This item is exempt from campaign disclosure requirements.
ALTERNATIVES TO STAFF RECOMMENDATION
1. Do not adopt the recommended actions and reject the requested ground lease amendments; or
2. Provide staff with alternative direction.
ADMINISTRATIVE ACTION
Submitted by:
Rachel Dimond, Community Development Director
Prepared by:
Michael Fortney, Deputy Director of Community Development/Housing Pamela Jackson, Housing Coordinator
Approved by:
Roubik R. Golanian, P.E., City Manager
EXHIBITS/ATTACHMENTS
Exhibit 1: Draft Third Amendment to Lease Agreement – Metropolitan City Lights Exhibit 2: Draft Ground Lessor Estoppel Certificate – Metropolitan City Lights Exhibit 3: Draft Subordination Agreement (Affordable) – Metropolitan City Lights Exhibit 4: Draft First Amendment to Lease Agreement – Glendale City Lights Exhibit 5: Draft Ground Lessor Estoppel Certificate – Glendale City Lights Exhibit 6: Draft Subordination Agreement (Affordable) – Glendale City Lights