CITY COUNCIL STAFF REPORT
Meeting Date: November 17, 2025
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
TITLE: Adopt a Resolution Authorizing the City Manager to Enter into Subordination Agreements with Bridge Housing and Two Senior Lenders for the Grayson Creek Apartments at 100 Chilpancingo Parkway
SYNOPSIS
Bridge Housing has requested the City of Pleasant Hill enter into two separate replacement subordination agreements for existing loans for the Affordable Housing project - Grayson Creek Apartments at 100 Chilpancingo Parkway. The subordination agreements would restate the City’s subordinate loan position for the Grayson Creek Apartments. Bridge Housing is refinancing the project to complete various on-site improvements and upgrades including repairs for building balconies, outdoor courtyard, and other interior modifications, including new appliances. The project is not requesting any additional funds from the City, thus, Staff recommends that the City Council adopt the proposed resolution authorizing the City Manager to execute the replacement agreement.
DISCUSSION
Background
The Grayson Creek Apartments was completed in 2002. Prior to development of the project, the former Pleasant Hill Redevelopment Agency agreed to provide a loan to help facilitate the project. The original loan from 1998 was $4,500,000 with a maturity date of 55 years. At that time, the City was also subordinate to the primary loan for the project.
The agreement was amended in 2001 when it was split into a grant and loan. The loan was in the amount of $1,005,000, and is repayable out of residual receipts (i.e., net proceeds) from the affordable housing project, with a maturity date of 55 years after recordation of the Certificate of Completion for the project (2057). The Grant was in the amount of $6,815,000, and the Developer executed a note stating that the Grant would only have to be repaid in the event of a default under the Grant and Loan Agreement. As part of this agreement, the City continued to agree to subordinate its loan and regulatory agreement to a permanent loan from CalHFA in the original principal amount of $5.7 million, and a second loan from HCD in the original principal amount of $4,074,510. The Developer has been paying down the CalHFA loan consistently for several years, and it currently has a remaining balance of approximately $2,570,463. The HCD loan is paid out of residual receipts, and as a result very little principal has been paid down, and the loan has been accruing interest. The current outstanding principal and interest on the HCD loan is $5,774,215.40.
Analysis
Bridge Housing is now seeking to refinance the CalHFA loan, mainly so they can take out additional loan funds to make repairs to the project and fund a reserve fund for future repairs.
The estimated cost of repairs is $747,609; the reserve is $600,000 and there are $365,010.80 in additional costs built into the loan. The new loan amount (with the outstanding balance combined with the money being taken out) is $4,500,000. As part of the newly refinanced loan, they are asking that the City agree to subordinate its loan to the new loan made by Berkadia Commercial Mortgage LLC.
The City’s $1,005,000 loan (and the grant) are subordinate to the existing CalHFA loan, and the original loan document specifically authorized the City to subordinate to the CalHFA loan.
Because Bridge Housing is taking out additional money to fund improvements, they are asking the City to subordinate to a loan amount that is higher than the current outstanding principal (though it is still lower than the original loan amount).
As part of this transaction, HCD is preparing new loan documents to commemorate its existing loan. HCD is also requesting that the City subordinate to these new loan documents; however, this simply preserves the status quo, in that the City is currently subordinate to HCD’s loan, and the outstanding loan amount is not changing.
Staff has reviewed the requests, with assistance from legal counsel, and believes that the improvements proposed are appropriate to continue to provide necessary accommodations for the affordable housing project. These types of projects do not generate a lot of cash flow, so it can be difficult to make needed repairs without refinancing. By refinancing, Bridge Housing is actually reducing its annual debt service and will have money to maintain the condition of the project.
The new primary loan has a 15-year term, with a balloon payment at the end of the period. At some point over the next 15 years, it is expected that Bridge Housing will need to refinance again, or re-syndicate its tax credits to bring more equity into the project. These types of projects generally refinance or re-syndicate regularly to bring more money into the project and keep the units in good condition. The City has not had any prior issues with Bridge Housing and its loan standing; accordingly, given Bridge Housing's extensive portfolio of affordable housing projects, Staff believes there is minimal risk of entering into the subordination agreement for the new primary loan. Similarly, Staff recommends that the City agree to subordinate to the new HCD loan documents, since this simply preserves the priority order between the City and HCD and does not change any of the current loan terms.
FISCAL IMPACT
None, no additional funds are required as part of this request.
PUBLIC CONTACT
Public Contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the Pleasant Hill Senior Center, and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
Adopt the attached resolution authorizing the City Manager to execute subordination agreements with Bridge Housing and two Senior Lenders for the Grayson Creek Affordable Housing Apartments at 100 Chilpancingo Parkway.
ALTERNATIVES TO RECOMMENDED ACTION
Do not adopt the Resolution and provide direction to staff.
ATTACHMENT(S)
Attachment A: Proposed Resolution
Attachment B: Proposed Berkadia Subordination Agreement Attachment C: Proposed HCD Subordination Agreement
Attachment D: Grayson Creek Apartments List of Improvements Attachment E: Amended and Restated Loan and Grant Agreement Grayson Creek Apartments (2001)
Prepared by: Troy Fujimoto, City Planner
Approved by: Ethan Bindernagel, City Manager