TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: Erik L. Soliván
SUBJECT: Parkmoor Community
Apartments Conversion to
Permanent Financing
DATE: October 5, 2026
Approved Date:
10/15/26
COUNCIL DISTRICT: 6
RECOMMENDATION
Approve revising the use of funds for the Parkmoor Community Apartments located at 1510-1540 Parkmoor Avenue from construction hard costs to paying down the Capital One Bank Construction Loan.
SUMMARY AND OUTCOME
On January 31, 2023, City Council approved a Construction-to-Permanent Loan (City Loan) for Parkmoor Community Apartments (Development)1 for up to $16.8 million. The Development used only $691,119 of the City Loan during construction. The proposed action will allow the remaining City Loan proceeds to be used to pay down a substantial portion of the Capital One Bank Construction Loan and complete the transition to permanent financing. The proposed action does not require additional City funding.
BACKGROUND
The Development is an 81-unit affordable housing development located at 1510-1540 Parkmoor Avenue, on land owned by the County of Santa Clara. The Development includes 79 units with rents restricted to households between 30% and 60% of the area median income and two unrestricted manager units. Of the 79 units, 20 units are designated for transitional-aged youth ages 15 to 24, 18 are general housing units, and 1 Actions Related to the Loan Commitment for New Affordable Housing Development at 1510-1540 Parkmoor Ave, https://sanjose.legistar.com/View.ashx?M=F&ID=11591604&GUID=928AC415-13D4- 4A1C-A50A-7C3DDA7ECF17
COUNCIL AGENDA: 10/27/26
FILE: 26-1118
ITEM: 8.1
HONORABLE MAYOR AND CITY COUNCIL
October 5, 2026
Subject: Parkmoor Community Apartments Conversion to Permanent Financing
41 units are supported by Santa Clara County Housing Authority Project-Based Vouchers.
On January 31, 2023, the City Council approved a City Loan, which was expected to fund hard construction costs during the construction period. Construction financing closed in November 2023, construction was completed in September 2025, and the Development began transitioning to permanent financing.
During construction, Abode Housing Development (Abode) drew only $691,119, or
4.1%, of the City Loan because other available capital sources were used to fund construction costs. As a result, most of the City Loan remained undrawn. Abode notified the City of the funding issue on May 27, 2026.
At the time of conversion to permanent financing, the Development requires $15,670,000 of the City Loan to pay down a substantial portion of the Capital One Bank Construction Loan. The proposed shift in the use of the City Loan will allow the Development to complete the transition to permanent financing without increasing the City’s approved loan amount.
ANALYSIS
Change in Use of City Loan Funds
The Development required less construction-period funding from the City than originally projected. Other capital sources to fund construction costs substantially reduced the need to draw the City Loan. As of September 2026, Abode had only drawn $691,119, or
4.1%, of the City’s original loan for construction costs.
The Development was complete and fully occupied as of December 23, 2025. Approval of the recommendation will authorize the revised use of City Loan proceeds to pay down the Capital One Bank Construction Loan and proceed to permanent operations.
The reduction in senior construction debt to $2.1 million will lower ongoing debt service costs, allowing the Development to meet its permanent debt service obligations and support ongoing operations.
Operating Cost Increases and Financial Sustainability
During the post-construction process for converting to permanent operations, staff identified increases in ongoing operating expenses that Abode had not previously disclosed to the City. Following the start-up of leasing in September 2025, the annual operating budget increased by 8.3% from the approved budget at financing closing, based on operational decisions made by Abode and inaccurate assumptions on operating costs, such as insurance and ongoing maintenance expenses.
HONORABLE MAYOR AND CITY COUNCIL
October 5, 2026
Subject: Parkmoor Community Apartments Conversion to Permanent Financing
The revised projections showed that operating revenue would be insufficient to cover operating expenses and the $153,575 in annual debt service on the remaining $2.1 million Capital One Bank Construction Loan during the compliance period.
Destination: Home Operating Grant
At the City’s request, Destination: Home agreed to provide the Development with a $950,000 conditional grant to cover the Development’s projected operating costs during the 15-year Low Income Housing Tax Credit compliance period. The grant is projected to allow the Development to cover annual operating expenses and Capital One permanent loan payments through the initial 15-year tax credit compliance period.
The additional funding will strengthen the Development’s financial position for a future restructuring of its financing in Year 16.
Repayment of the City Loan is contingent on available cash flow. Current projections indicate that the City may receive approximately $164,000 in total loan repayments before Year 12, when use of the Destination: Home grant is anticipated to begin. After year 12, the Destination: Home grant supports ongoing operations but does not establish sufficient cash flow for City Loan repayment.
EVALUATION AND FOLLOW-UP
Parkmoor Community Apartments, once converted to permanent financing, will be monitored by the City’s asset management team for the 55-year term of the affordability restriction.
FISCAL IMPACTS
The revised use of funds for the Parkmoor Community Apartments, from construction hard costs to paying down the Capital One Bank Construction Loan, is not anticipated to impact repayment of the City loan. As noted above, only $691,119 of the City construction-phase loan was used to complete construction. The construction-phase loan was intended to convert to the permanent phase. The use of the construction phase loan to pay down the Capital One Bank Construction Loan does not change the amount of the permanent City loan for the Development or the repayment of the permanent loan.
COORDINATION
This memorandum was coordinated with the City Attorney’s Office and the City Manager’s Budget Office.
HONORABLE MAYOR AND CITY COUNCIL
October 5, 2026
Subject: Parkmoor Community Apartments Conversion to Permanent Financing
PUBLIC OUTREACH
This memorandum will be posted on the City Council Agenda website for the October 27, 2026 City Council meeting.
BOARD, COMMISSION, COMMITTEE RECOMMENDATION AND INPUT
No board, commission, or committee recommendation or input is associated with this action.
CEQA
The project, Parkmoor Community Apartments, formerly known as 1510-1540 Parkmoor Avenue, is exempt from CEQA review per Public Resources Code Section 21080(b)(1) and CEQA Guidelines Section 15369, Ministerial Project pursuant to Government Code Section 65913.4, File No. ER20-109.
PUBLIC SUBSIDY REPORTING
This item does not include a public subsidy as defined in section 53083 or 53083.1 of the California Government Code or the City’s Open Government Resolution. /s/
Erik L. Soliván
Director of Housing
For questions, please contact Banu San, Deputy Director, Housing Department, at [email protected].