Community Development Agency
www.santa-ana.org/cd
Item # 3
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
June 16, 2026
TOPIC: Subordination Agreement and Lease Rider for FX Residences
AGENDA TITLE
Subordination Agreement and Lease Rider with the State of California Department of Housing and Community Development for FX Residences
RECOMMENDED ACTION
1. Authorize the Executive Director of the Housing Authority to execute a Subordination Agreement with the State of California Department of Housing and Community Development (“HCD”) and Shelter Providers of Southern California, Inc. DBA HomeAid Orange County | Los Angeles (“HomeAid”) to subordinate the Housing Authority’s $1,656,947 loan to a $3,006,567 senior permanent loan from HCD for FX Residences (Agreement No. A-2026-XXX).
2. Authorize the Executive Director of the Housing Authority to execute a Lease Rider with HCD and HomeAid to induce / allow HCD to make a $3,006,567 senior permanent loan for FX Residences (Agreement No. A-2026-XXX).
GOVERNMENT CODE §84308 APPLIES: Yes
DISCUSSION
On December 7, 2021, the Housing Authority approved a Loan Agreement in the amount of $1,656,947 and a ninety-nine (99) year Ground Lease with Shelter Providers of Orange County, Inc. DBA HomeAid Orange County (“HomeAid”) for the development of FX Residences, a 17-unit permanent supportive housing development located at 801, 807, 809, and 809½ East Santa Ana Boulevard (Exhibit 1). [After this approval, HomeAid changed their legal name to Shelter Providers of Southern California, Inc. and their business name to HomeAid Orange County | Los Angeles.] At that time, the Housing Authority also authorized the Executive Director to execute a future Subordination Agreement with a senior lender as may be required to complete the project financing.
The Housing Authority’s loan is secured by a Deed of Trust, Promissory Note, and Affordability Restrictions recorded against the project.
FX Residences was completed in July 2025 and provides permanent supportive housing for individuals and families experiencing homelessness and includes on-site supportive services provided by Mercy House. The project was developed on Housing Authority-
Subordination Agreement and Lease Rider for FX Residences June 16, 2026
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owned land through a 99-year Ground Lease with HomeAid and serves as an important component of the City’s success to reduce homelessness by over 25% since 2019.
Entering into an Agreement with the Housing Authority for the $1,656,947 loan, three (3) project-based vouchers, and a 99-year Ground Lease were instrumental in facilitating the development of the project and leveraging additional public and private investment. In May 2026, FX Residences received the Supportive Housing Development Award at the 2026 Affordable Housing Awards ceremony.
Following completion and stabilization of the project, HomeAid now needs to secure their permanent financing from the State of California Department of Housing and Community Development (“HCD”) through the State’s No Place Like Home (“NPLH”) Program. The NPLH Program was established by the State of California to finance permanent supportive housing for persons in need of mental health services and are experiencing homelessness, chronic homelessness, or who are at risk of chronic homelessness. HCD has approved a permanent loan in the amount of $3,006,567 to support the long-term operation and financial sustainability of FX Residences. As a condition of funding their loan, HCD requires the Housing Authority to execute a Subordination Agreement and Lease Rider in favor of HCD.
Subordination Agreement
The proposed Subordination Agreement with HCD and HomeAid is attached as Exhibit
2. Under the terms of the Subordination Agreement, the Housing Authority agrees to subordinate its existing $1,656,947 loan and related security interests to HCD’s larger, senior, permanent loan. HCD requires a first-priority lien position as a condition of providing their permanent financing for the project. The Subordination Agreement establishes that HCD’s deed of trust, regulatory agreement, and related loan documents will be senior to the Housing Authority’s Deed of Trust and loan documents. However, the Housing Authority’s Affordability Restrictions will remain senior and will not be subordinated to HCD’s loan. The proposed subordination is consistent with standard affordable housing financing requirements by HCD and it is required to facilitate the closing of HCD permanent financing for affordable housing developments across the State of California.
Lease Rider
The proposed Lease Rider to the Housing Authority’s Ground Lease is attached as Exhibit 3. Because FX Residences is located on land owned by the Housing Authority and leased to HomeAid through a 99-year long-term Ground Lease, HCD requires a Lease Rider as a condition of making its NPLH loan. The Lease Rider amends and supplements certain provisions of the Ground Lease to recognize HCD’s interests as a senior lender and to provide HCD with protections customarily required in connection with leasehold financing. Among other provisions, the Lease Rider acknowledges HCD’s loan and regulatory agreement, permits HCD to rely upon the Ground Lease as collateral for its financing, and establishes certain notice and cure rights in favor of HCD in the event of a default under the Ground Lease. The Lease Rider does not alter the Housing Subordination Agreement and Lease Rider for FX Residences June 16, 2026
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Authority’s ownership of the property and does not change the underlying public purpose of the project.
Approval of the Subordination Agreement and Lease Rider will allow HomeAid to receive HCD’s permanent loan financing and complete the transition from construction financing to long-term permanent financing. The Housing Authority’s existing Affordability Restrictions and general public benefits associated with FX Residences will remain unchanged. Moreover, approval of these documents will help ensure the long-term financial stability and continued operation of the project as permanent supportive housing serving vulnerable residents.
If the Housing Authority does not approve the Subordination Agreement and Lease Rider, HCD will be unable to provide its NPLH loan of $3,006,567 for the project. This will jeopardize the project’s permanent financing structure, impair HomeAid’s ability to refinance their existing construction loan obligations, and negatively impact the long-term viability of FX Residences. While the Housing Authority's loan will become subordinate to HCD's senior loan, subordination was contemplated as part of the original financing structure and authorized by the Housing Authority on December 7, 2021. As such, staff recommends approval of the proposed Subordination Agreement and Lease Rider.
FISCAL IMPACT
There is no fiscal impact associated with approval of the Subordination Agreement and Lease Rider. The proposed actions do not increase the Housing Authority's existing loan commitment to FX Residences, require the expenditure of additional Housing Authority funds, or modify the terms of the Housing Authority's $1,656,947 loan.
EXHIBIT(S)
1. Housing Authority Staff Report from December 7, 2021
2. Subordination Agreement
3. Lease Rider
Submitted By: Michael L. Garcia, Executive Director, Community Development Agency Approved By: Alvaro Nuñez, City Manager