City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2025-00978 6/24/2025
[Housing Authority] Approval of Loan Restructuring for Rio Linda Manor File ID: 2025-00978
Location: 2671 Rio Linda Boulevard, District 2
Recommendation: Adopt a Housing Authority Resolution: 1) approving the restructuring of loan terms for Rio Linda Manor; 2) delegating authority to the Executive Director, or her designee, to take any and all actions necessary to restructure the loan terms.
Contact: Christine Weichert, Director, Development Finance, (916) 440-1353, [email protected]; Whitney Hinton, Program Manager, Development Finance (916) 440-1325, [email protected]; Sacramento Housing and Redevelopment Agency
Presenter: None
Attachments:
1-Description/Analysis
2-Housing Authority Resolution
3-Vicinity Map
4-Max Income and Rent Limits
Description/Analysis
Issue Detail: In September 2007, the Housing Authority of the City of Sacramento (Agency) authorized the issuance of Tax-Exempt Bonds, and the Redevelopment Agency of the City of Sacramento approved a $1.8 million loan to Highland Property Development, LLC (Owner) for the acquisition and rehabilitation of Rio Linda Manor (Project). The loan terms must be restructured to ensure the continued financial viability of the Project.
Project Description:
Rio Linda Manor is a 66-unit affordable development for seniors. The three-story building is located at 2671 Rio Linda Boulevard and includes 13 units restricted to 50 percent Area Median Income (AMI), 52 units at 60 percent AMI, plus one manager’s unit.
The property was initially constructed in 1970, and rehabilitation was completed in 2010.
Renovations included redesigning the building façade, replacing the roof, windows, and patio doors, adding a pickup and drop-off lane, and installing security cameras. Interior improvements were made
File ID: 2025-00978 6/24/2025
to the kitchens, bathrooms, and community room.
The rehabilitation financing included tax credit equity, a conventional loan, and a $1.8 million Tax Increment funded Agency loan.
Loan Restructuring:
Since rehabilitation, the property’s rents have consistently been insufficient to cover operating expenses and loan payments. While the current maximum rent for a 60 percent AMI unit is $1,414 a month, the property receives approximately $750 per unit. The location of the Project is a contributing factor in the reduced rents. Numerous attempts have been made by the Owner to lease the units at higher rents, but have resulted in the current residents’ inability to pay and/or the inability to lease vacant units.
The term of the Agency loan is 30 years and accrues interest at 4 percent annually. Due to the property’s reduced rental income, payments on the Agency loan have been deferred to date. The current balance of the loan is over $3 million.
Since the inception of operations, the Owner has advanced over $350,000 to fund operations. In addition to the Agency loan, the property has liabilities that it has been unable to pay, including the developer fee from the renovation and investor exit taxes due soon. Additionally, the bank loan matures on September 1, 2025. The property has received both solicited and unsolicited offers from potential buyers; however, each potential buyer ultimately did not follow through with the purchase due to the conclusion that the property could not attain monthly rents to cover operation and debt.
In order to financially restructure the Project, the Owner has submitted three funding applications to the California Tax Credit Allocation Committee since 2023. The applications submitted contemplate a new first mortgage at a lower monthly debt service and funds for over $100,000 per unit of renovation work that the property needs.
Unfortunately, the financial restructuring still does not demonstrate cash flow sufficient to service debt beyond the bank loan and the property's operations. With or without a new allocation of low-income housing tax credits, it is unlikely the Property will ever be able to generate cash flow to make any significant payment on the prior accrued interest on the Agency loan, or any additional interest accrued thereafter. With the senior bank loan maturing in September, the Agency loan must be restructured.
The Property’s ability to continue as an affordable housing project is dependent upon Agency loan restructuring-modification. The proposal is to eliminate the further accrual of interest on the Agency loan and to restructure the payment terms of the loan to a residual, cash-available-only basis until maturity in 2038.
Project Developer
: Highland Property Development LLC is an affordable rental housing developer
File ID: 2025-00978 6/24/2025
that focuses on the acquisition and rehabilitation of existing rental housing communities. Since 2001, the developer has completed the rehabilitation and construction of several affordable rental units in California.
Property Management: AWI Management Corporation provides property management and compliance for affordable housing developments throughout California, Arizona, and Hawaii. AWI has been the Management Agent for Rio Linda Manor since 2017.
Project Financing: The senior bank loan, which matures on September 1, 2025, has an outstanding balance of over $1.5 million. The Owners have received a commitment to refinance this loan for a five-year term with reduced monthly payments.
The terms of the new senior loan require that the Agency loan be amended, converting any required payments to “residual receipts,” whereby payments are only required to the extent there is available cash flow following the payment of property operating expenses and senior debt service. The Agency loan balance is $1.8 million principal with $1.25 million in accrued interest, maturing March 1, 2038.
Policy Considerations: The recommended actions are also consistent with the Sacramento Housing and Redevelopment Agency (SHRA) Multifamily Lending and Mortgage Revenue Bond Policies adopted by the Council in December of 2019.
Economic Impacts: None.
Environmental Considerations: This activity involves only policy implementation for loan restructuring and does not involve any physical changes to the environment. Therefore, it qualifies as an administrative activity exempt under NEPA pursuant to 24 CFR § 58.34(a)(3). This activity is not considered a project under CEQA pursuant to CEQA Guidelines CCR §15378.
Sustainability: The proposed loan restructuring is consistent with the goals, policies, and targets of the Sustainability Master Plan and the 2030 General Plan.
Commission/Committee Action: Sacramento Housing and Redevelopment Commission: At its June 4, 2025, meeting, the Sacramento Housing and Redevelopment Commission reviewed the staff recommendation for this item. The votes were as follows:
AYES: Duncan, Ramos, Janzen, Jefferson, Nordstrom, Nunley, Ross, Starks, Woo NOES: None.
ABSENT: None.
File ID: 2025-00978 6/24/2025
Rationale for Recommendation: To maintain the affordability of the Property and satisfy the requirements of the new senior loan, the Agency loan must be restructured to eliminate further accrual of interest and modify the payment to a residual, cash-available only basis.
Financial Considerations: Restructuring the Agency loan will eliminate further interest accrual on the loan and convert any required payments to residual receipts.
LBE - M/WBE and Section 3 Requirements: The items discussed in this report have no M/WBE or Section 3 impact; therefore, M/WBE and Section 3 considerations do not apply.
RESOLUTION 2025-
Adopted by the Housing Authority of the City Sacramento
on date of
Approval of Loan Restructuring for Rio Linda Manor
BACKGROUND
A. In March 1999, the Housing Authority (Authority) approved the Loan Servicing Policies and Authorities for Agency Commercial and Residential Loans. The Policies do not specify the conditions under which loan restructuring modification may be considered.
B. Rio Linda Manor (Property) is a 66-unit affordable apartment complex for low-income senior households located at 2671 Rio Linda Boulevard, Sacramento, CA 95815. The Property was originally constructed in 1970 and acquired by HPD Rio Linda, L.P. (Partnership) in 2009. Upon acquisition, the Property was renovated with financing that included tax credit equity from an Investor Limited Partner, a senior mortgage, and a deferred payment loan of $1.8 million in Tax Increment (TI) funds from the Authority, which accrues interest at an annual rate of 4 percent.
C. Within a few years of the commencement of operations, the Property’s attainable rents became insufficient to service its operating expenses and required debt service payments.
D. The senior note has a maturity date is September 1, 2025. The Partnership has received a commitment to refinance this loan . The new senior mortgage note require s that the terms of the Authority loan be amended, converting any required payments to “residual receipts ,” whereby payments are only required to the extent there is available cash flow following the payment of property operating expenses and senior debt service.
E. The Property’s continuity as an affordable housing project is dependent upon the Authority’s loan restructuring modification. The proposal is to eliminate the further accrual of interest on the Authority loan and restructure the payment terms of the loan to a residual, cash - available-only basis until maturity in 2038.
F. The proposed activity in this staff report involves only policy implementation for loan restructuring and does not involve any physical changes to the environment. As such, this activity does not constitute a “project” under the California Environmental Qu ality Act (CEQA) Guidelines, Title 14 of the California Code of Regulations, Section 15378, and qualifies as an administrative activity exempt under the National Environmental Policy Act (NEPA) pursuant to Title 24 of the Code of Federal Regulations, Section 58.34(a)(3).
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE HOUSING AUTHORITY OF THE CITY RESOLVES AS FOLLOWS:
SECTION 1.
All evidence presented having been duly considered, the findings, including environmental findings regarding this action, as stated above, are found to be true and accurate and are hereby approved and adopted.
SECTION 2.
The restructuring of the Authority loan terms for the Property is hereby approved.
SECTION 3.
The Executive Director, or her designee, is authorized to enter into and execute documents, including subordinations, as approved to form by the Office of the General Counsel, and to take any and all actions necessary to eliminate further accrual of interest on the Authority loan and to restructure-modify the payment terms of the Authority loan to residual receipts, cash available only basis.
Attachment 4
Family Size 50% AMI 60% AMI
1 person 41,300$ 49,560$
2 person 47,150$ 56,580$
Unit Size 50% AMI 60% AMI
1 Bedroom 1,179$ 1,415$
Maximum Gross Rent Limits
Maximum Gross Income Limits
Rio Linda Manor
Rents at 50% and 60% of Area Median Income (AMI)
MAXIMUM INCOME AND RENT LIMITS 2025
Tax Increment Funds (TI)