Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Raymond Hodges, Director, Department of Housing
Subject: Oceana Terrace Senior Housing Project - Loan Modification
RECOMMENDATION:
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Adopt a resolution:
A) Authorizing and directing the Director of the Department of Housing, or designee, to negotiate and execute, in consultation with the County Attorney, an agreement to assign certain Community Development Block Grant and HOME Investment Partnerships loan agreements and associated documents, dated in 1993 and 1994, from Oceana Senior Housing Corporation to Mercy Housing California 121, L.P.; and
B) Authorizing and directing the Director of the Department of Housing, or designee, to negotiate and execute, in consultation with the County Attorney, an amended and restated Community Development Block Grant and HOME Investment Partnerships loan agreement and associated documents to provide a restated loan balance, promissory notes, deeds of trust and regulatory agreement to ensure continued affordability of the project in connection with its acquisition and rehabilitation by Mercy Housing California 121, L.P.; and
C) Authorizing and directing the Director of the Department of Housing, or designee, to negotiate and execute, in consultation with the County Attorney, all documents, agreements, certificates, extensions and instruments as necessary to facilitate the closing of the transaction, to provide the amended and restated loan documents, and to effectuate the purposes of this resolution.
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BACKGROUND:
A. Prior Board Authorizations and Loans Relating to the Oceana Senior Housing Project
In the 1990s, this Board adopted resolutions to provide funding for the development of what came to be known as the Oceana Terrace Senior Housing project in Pacifica.
On March 30, 1993, pursuant to this Board’s authorization under Resolution No. 57002, the County entered into a loan agreement with Catholic Charities of the Archdiocese of San Francisco to provide $75,000 in Community Block Development Grant (CDBG) funding for predevelopment expenses to construct a 42-unit low-income senior rental project in Pacifica (the Project).
On October 15, 1993, Catholic Charities assigned its rights to that agreement to Oceana Senior Housing Corporation (OSHC), a California nonprofit public benefit corporation.
On November 16,1993 this Board adopted Resolution No. 57782, which authorized an additional $85,000 of CDBG funding for the Project, for a total of $160,000 for predevelopment expenses and construction of site improvements.
On April 5, 1994, pursuant to this Board’s authorization under Resolution No. 58132, the County and OSHC entered into a loan agreement to provide $350,000 of federal HOME funds under the County’s 1992 HOME funding allocation for site improvement and predevelopment expenses in connection with the Project.
The County set aside an additional $110,000 in the fiscal year 1993 HOME funding allocation for project site work including expenses related to handicapped accessibility required by HUD for the Project.
On April 5, 1994, the County and OSHC amended the agreement to combine the HOME funding from both fiscal years into a single loan of $460,000.
The obligations of OSHC to repay these funds are evidenced by a Residual Receipt Note dated September 27,1994, executed by OSHC, in the amount of $160,000.00 of CDBG funds and $460,000.00 of HOME funds, for a total original principal amount of $620,000.00 to bear simple interest at 6% per annum. As of May 8, 2026, these funds will have accrued interest of $1,176,036.67. The total loan balance as of May 8, 2026, including accrued interest is $1,796,036.67, which amount consists of $463,493.33 in CDBG funds and $1,332,543.33 in HOME funds.
The CDBG and HOME loan funds have been fully disbursed and expended, and the Project now consists of forty-two (42) rental apartments with rents affordable to households with incomes between 20% and 50% of Area Median Income and one (1) unrestricted two-bedroom manager’s unit.
B. Anticipated Acquisition by Mercy Housing California, 121, LP. And Rehabilitation of the Oceana Senior Housing Project
On August 1, 2025, OSHC and Mercy Housing California 121, L.P (Mercy) entered into a Purchase and Sale Agreement, pursuant to which OSHC has agreed to sell the property and improvements located at 903 Oceana Blvd. Pacifica, CA 94044 (APN: 009-293-090) on which the Project is sited, for $11,000,000. The purchase price is to be paid to through a combination of assumed debt, seller financing and/or cash with closing currently scheduled for May 8, 2026.
Mercy has assembled financing to fund the rehabilitation of the Project, effective upon closing of its acquisition of the property. As part of the rehabilitation Mercy will be upgrading 10% of the units conforming to mobility accessible standards, 4% conforming to accessible communication units, improving accessibility in the laundry room, community room kitchen, upgrading existing asphalt paving in accessible parking area and providing additional accessible parking spaces. Unit interior upgrades, elevator modernization and structural framework have also been identified. In addition, installation of more efficient water fixtures, appliances, heaters, common area HVAC and lighting will also be completed.
DISCUSSION:
In connection with its anticipated acquisition and rehabilitation of the Project, Mercy has requested that the County assign and modify its outstanding CDBG and HOME loans to facilitate the rehabilitation.
The original principal balance of $620,000 ($160,000 of CDBG funds and $460,000 of HOME Funds) together with accrued interest of $1,176,036.67 (assuming a May 8, 2026 closing date), would result in a total amended and restated loan balance of $1,796,036.67 (or such additional amounts accruing if closing occurs after May 8). The restated balance would accrue interest at 3% simple interest per annum.
Mercy’s obligation to repay the restated loan balance would be evidenced by a promissory note or notes, secured by deeds of trust recorded on Mercy’s fee interest in the property upon acquisition. In addition, Mercy would agree to the terms of the County’s regulatory agreement requiring continued rental restriction and occupancy by households between 20% and 50% AMI for a period of 55 years, ensuring affordability for senior households within these income limits.
In addition, Mercy is expected to complete the RAD conversion to the Oceana Terrace Section 8 Housing Assistance Payment (HAP) contract, increasing rental revenue and further strengthening the project’s financial position over time.
The County Attorney has approved the proposed resolution as to form.
COMMUNITY IMPACT:
Oceana Terrace Senior Housing provides 41 restricted affordable housing units for seniors between 20% AMI and 50% AMI. Oceana Terrace has served the senior community in Pacifica for 30 years and rehabilitation work facilitated by the proposed loan modification would help to extend the long-term functional life of the project.
This work will benefit both the current residents and all future residents of the project along with the greater community in Pacifica.
FISCAL IMPACT:
There is no net County cost associated with this re-syndication and modification of these loans funded by CDBG and HOME programs. The loans will be repaid through annual residual receipts as reported in the project’s audited financial statements.