STAFF REPORT
Lancaster Housing Authority
HA CC 2
7/8/2025
TN
Date: July 8, 2025
To: Chair Parris and Housing Authority Members
From: Patti Garibay, Director - Community Development
Nicole Jones, Senior Analyst - Community Development
Subject: Approve Loan Agreement between the Lancaster Housing Authority and Maison's Sierra Phase 2, LP, a California Limited Partnership
Recommendation:
1. Approve, in substantially the form provided, Loan Agreement between the Lancaster Housing Authority and Maison's Sierra Phase 2, LP, a California Limited Partnership in the amount of $3,509,756.67 to fund a portion of the costs associated with the construction of an 171 multifamily residential unit project (TTM 84221), consisting of 169 restricted rental units and 2 unrestricted manager's units. The project will have 132 one-bedroom units, and 39 two-bedroom units, serving tenants with rents affordable to households earning 30%-70% of area median income (AMI).
2. Approve Subordination of the Housing Authority Loan and Deed of Trust to construction loan and permanent loan in a total amount not to exceed $33,846,000.
3. Authorize the Executive Director, or his designee, to negotiate, finalize, and execute all documents necessary or appropriate to complete the transaction, in a form to be approved by the City Attorney.
G.C. Section 84308: No
Fiscal Impact:
The Lancaster Housing Authority will fund $2,319,361.98 (previously paid by Ravello Holdings, Inc. for the purchase of Authority-owned land for phase 1 of Maison’s Sierra) to Maison's Sierra Phase 2, LP and defer payment of the remaining $1,190,394.69 owed to the City for the land until repayment of the loan, for a total loan amount of $3,509,756.67. This Loan shall bear simple interest at the rate of 3.81% per year with an annual payment due in full in 21 years. 2 0
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Background:
On March 14, 2023, the Housing Authority members approved an Exclusive Negotiating Agreement with Ravello Holdings, Inc. On May 9, 2023, the City Council and the Lancaster Housing Authority authorized the execution of a Disposition and Development Agreement (DDA) with Ravello Holdings, Inc. (“Developer”) for the purchase and subsequent development of vacant parcels between Whit Carter Park and Avenue H and south of Avenue H- 8 between Sierra Highway and Cedar Avenue (3135-001-900-919, 3135-005-901, -904-914, 3135-006-900, -901, -903, -905-923, 3135-025-986, -987) (the “Site”). The 60-acre project has been broken down into three phases, consisting of a total of 450-499 affordable housing units (minus 1-2 manager units per phase).
On March 26, 2024, the City Council and the Lancaster Housing Authority approved a First Amendment to the DDA with the Developer and a Partial Assignment and Assumption Agreement in order to allow Developer to assign certain rights and responsibilities under the amended DDA to Maison’s Sierra Phase 1, LP. Lastly, the City Council also Approved a Subordination Agreement, in order to enable Developer to obtain construction financing.
On October 8, 2024, the Lancaster Housing Authority authorized the execution of a loan commitment letter with Ravello Holdings, Inc. stating that Maison’s Sierra envisioned three phases of development, with 196 units in the first phase; 171 units in the second phase; and 132 units in the final phase. All units (minus 1-2 units per phase which are reserved for manager units) are designed as affordable single-family detached homes for a combination of families and seniors with incomes at or below 80% of the area median income. The commitment letter also provided that the Housing Authority loan would be subordinate to the Developer’s construction loan and permanent loan.
Financing for Phase 1 has closed, and Ravello paid the Authority $2,319,361.98 for Authority land for this phase. The original appraised value was $2,466,680.83 and two credits were applied in Amendment No. 1 totaling $89,762.94, bringing the total value down to $2,376,917.89.
Construction on these units is underway. Ravello is now working to finalize financing for the next phase and has requested the financing of a portion of the Authority land costs (Phase 2a appraised value is $1,132,838.78), totaling $3,509,756.67, to bridge the gap between tax credit financing awarded and the total project cost. The APN’s for Phase 2a have been updated to 3135-001-912, -923, -925, -929, -927 (portion) and -920 (portion) from 3135-001-903-904, 907- 909 (“Phase 2A Site”).
The proposed deal structure would provide financing of the land costs in the form of a loan at an interest rate of 3.81%, equal to the 10-year United States Treasury yield. In order to secure the majority of the funding for the project, repayment of the Authority loan would be subordinate to the Developer’s construction loan and permanent loan. The proposed structure is a residual receipts format, with the primary loan and operational expenses funded from rents, while the Authority interest is repaid through 50% of any funds remaining after these financial obligations are satisfied. Any unpaid interest would compound annually, with a balloon payment for any outstanding interest as well as the principal due at the end of the 21-year term. This loan agreement will fund a portion of the costs associated with the construction of 171 multifamily residential units as part of Maison’s Sierra Phase 2, LP (TTM 84221), with the rental of all such units (except two reserved for manager units) restricted to tenants with rents affordable to households earning 30%-70% of area median income (AMI) and intended (but not required) for senior citizens.
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The Authority funds are expressly non-forgivable, with the Developer prohibited from requesting a reduction or waiver of the balloon payment in the future. Should such a request be made, the entirety of the outstanding amount will become immediately due and payable. The funds would also become due and payable upon the sale of the property and/or the refinance of the senior permanent loan.
Attachment:
Sierra Phase 2 Loan Agreement