Item 05 - Crossroads at Washington Affordable Housing Project at 1126, 1136, & 1146 East Washington Ave.

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Crossroads at Washington Affordable Housing Project at 1126, 1136, & 1146 East Washington Avenue June 21, 2022 Page 5 2 8 1 5 Loan Agreement – Neighborhood Stabilization Program Funds The Neighborhood Stabilization Program Loan Agreement is attached as Exhibit 6. All of the loan terms are the same as the HOME Loan Agreement above except for the Loan Amount below: Loan Amount: $1,637,420 principal amount from the Neighborhood Stabilization Program Disbursement Procedures: 100% of the NSP Loan will be disbursed by the City after the Agreement is recorded This Loan Amount includes $339,727 in additional NSP funds to pay for an unanticipated increase in development costs. On August 17, 2021, City Council authorized the City Manager to execute a first amended and restated pre-commitment letter for an additional $333,742 in NSP funds to pay for an unanticipated increase in development costs. Since that date, the Developer’s costs have continued to increase due to an increase in the interest rate on the permanent loan and increase in construction costs. The increase in construction costs is primarily due to inflation and the increase in construction labor and materials. With City Council’s approval of the NSP Loan Agreement, the new combined total amount of NSP funds for the Project is $1,637,420. The origin of the City’s NSP funds is from the American Recovery and Reinvestment Act of 2009 and HUD will rescind these funds if the City does not use them. The NSP Loan Agreement has been pre-signed by Related to acknowledge their acceptance of the terms. Subordination Agreements Regarding the Subordination Agreement with U.S. Bank, National Association (“U.S. Bank”) the City’s total loans for this Project is equal to $4,644,909 compared to U.S. Bank’s larger loan for over $33.8 million. As a subordinate loan for a large affordable housing project such as this, it is standard practice for a private market senior lender to request a Subordination Agreement for the City’s smaller loans in order to permit the senior lender to complete their underwriting and commit their private market financing. In the case of default, the Subordination Agreement will ensure the senior lender will be paid back before the City’s loans. The Subordination Agreement is attached as Exhibit 7. Regarding the Subordination Agreement with the County of Orange (the “County”), the City’s total capital contribution for this Project is larger than the County’s capital contribution for $2,650,701. However, when the County’s capital contribution is combined with the 43 project-based vouchers being provided from the Orange County Housing Authority, the County’s total financial contribution for the Project exceeds the City and Housing Authority’s contribution. As a result, the County requires a Subordination