Item HA 03 - Subordination Agreement and Lease Rider for FX Residences

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Subordination Agreement and Lease Rider for FX Residences June 16, 2026 Page 2 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