Agenda Item AGENDA STAFF REPORT ASR Control 25-000472
MEETING DATE:	09/23/25
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	3
SUBMITTING Agency/Department:	OC Community Resources (Approved)
Department contact person(s):	Dylan Wright (714) 480-2788
	Julia Bidwell (714) 480-2991

Subject: Approve Capitalized Operating Subsidy Reserve Loan for Meadows Senior Apartments

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

No Legal Objection

Discussion

3 Votes Board Majority

Budgeted: N/A

Current Year Cost: N/A

Annual Cost: N/A

Staffing Impact:

# of Positions:

Sole Source: N/A

Current Fiscal Year Revenue: N/A

Funding Source: See Financial Impact Section	County Audit in last 3 years: No
Levine Act Review Completed: Yes

Prior Board Action: 2/25/2025 #22, 10/4/2022 #10, 5/24/2022 #4, 4/26/2022 #44

RECOMMENDED ACTION(S):

Authorize the OC Community Resources Director or designee to utilize up to $1,263,686 of Mental Health Services Act funds to finance a capitalized operating subsidy reserve loan, as outlined in the Financial Impact Section, for The Meadows Senior Apartments in the City of Lake Forest, in accordance with the 2025 Supportive Housing Notice of Funding Availability guidelines and policy.

Approve the capitalized operating subsidy reserve loan commitment to Meadows Senior LP, a limited partnership formed by C&C Development Co., LLC and the Riverside Charitable Corporation, in the amount not to exceed $1,263,686 in Mental Health Services Act, as outlined in the Financial Impact Section, subject to contingencies outlined in this Agenda Staff Report.

Approve subordination of the $1,263,686 capitalized operating subsidy reserve loan at permanent financing to a first trust deed loan of approximately $6,428,370 as set forth in this Agenda Staff Report and authorize the OC Community Resources Director or designee to subordinate to additional senior debt up to 100 percent of the cumulative loan to value based on the as-built appraised market value, if necessary, based on any future changes in the project financing.

Authorize the OC Community Resources Director or designee to execute subordination agreements; standard set of capitalized operating subsidy reserve loan documents; and such additional agreements, contracts, instructions and instruments necessary or appropriate for permanent loan financing per the terms as set forth this Agenda Staff Report.

SUMMARY:

Approval and subordination of the County capitalized operating subsidy reserve loan for the development of The Meadows Senior Apartments will help support the production and preservation of affordable and supportive housing in Orange County.

BACKGROUND INFORMATION:

On April 26, 2022, the Board of Supervisors (Board) approved an appropriation of $27 million in American Rescue Plan Act Coronavirus State and Local Fiscal Recovery Funds (ARPA-SLFRF) to OC Community Resources (OCCR) for the purpose of providing landlord incentives and assisting Orange County Housing Authority (OCHA) tenants with moving costs, thus supporting OCHA’s voucher utilization and supporting production of permanent supportive housing in Orange County.

On September 27, 2022, OCCR requested Board consideration to utilize up to $21 million in previously appropriated ARPA-SLFRF to increase the 2020 Supportive Housing Notice of Funding Availability (2020 NOFA) by $20.1 million (or subsequent NOFA as approved by the Board), and up to $900,000 for administration, and return to the Board for funding commitments to individual projects. Assisted units through the 2020 NOFA receive direct referrals through the County of Orange's (County) Coordinated Entry System.

C&C Development Co., LLC, (C&C Development) in partnership with the Riverside Charitable Corporation (RCC), (Developers) responded to the 2020 NOFA with a funding application for a 65-unit affordable rental housing development in the City of Lake Forest (City), called The Meadows Senior Apartments (Development). The Development, consisting of 52 one-bedroom units, 12 two-bedroom units and one two-bedroom unit for onsite property management staff, is located on an approximately 2.6-acre site within an approved Master Planned Community being developed by The Toll Brothers to satisfy the City's inclusionary housing requirement. The Development provides affordable housing for seniors (62 years or older) earning between 30 percent to 60 percent of the Area Median Income (AMI) with seven supportive housing units for households experiencing homelessness that meet the Mental Health Services Act (MHSA) eligibility criteria earning 30 percent of the AMI or below. Two additional units will be restricted at 30 percent AMI, 37 units at 50 percent AMI, and the remaining 18 units at 60 percent AMI by the California Tax Credit Allocation Commitment (TCAC) and/or other funding sources.

The Development features high quality, contemporary California style architecture, enhanced landscaping and blends seamlessly into the surrounding community. The Development provides for an attractive, supportive rental housing development for seniors with residential amenities that include a club room, BBQ pavilion and outdoor verandas.

On-site property management services are provided by Advanced Property Services, a subsidiary wholly owned by C&C Development. Supportive services are provided through Life Skills Training and Educational Programs, Inc., a non-profit corporation. The seven MHSA units will receive supportive services from the OC Health Care Agency through the County or County contracted program for MHSA eligible households. The upcoming transition of MHSA to Behavioral Health Services Act (BHSA) will have no impact, since this Development is in operations using existing MHSA funding.

C&C Development is a full-service Real Estate Development Company with more than 35 years of experience with a primary focus on building affordable housing to assist cities in meeting their housing production goals.

RCC, a non-profit member, was founded in 1988 and is an approved 501(c)(3). RCC will serve as the managing general partner for the Development. RCC provides partnership management and partners to provide social services to various low-income housing tax credit entities in which it has an ownership interest. The mission of RCC is to help those who cannot afford the necessities of life. RCC has assisted in the development of over 19,869 units in over 157 properties nationwide.

On July 27, 2021, and May 24, 2022, the Board concurred with the Orange County Housing Finance Trust (OCHFT) Board’s recommended funding awards to the Developers for the Development.

On October 4, 2022, the Board approved $1.54 million in capital funding from the 2020 NOFA and the Developers secured a 4 percent tax-exempt bond allocation from the California Debt Limit Allocation Committee and closed on the construction financing in November 2022.

The Development is complete, received its certificate of occupancy and has been fully occupied since January 2025. The County loan is current, and the partnership is not in default with any of its lenders. The Meadows Senior Apartment is being operated in compliance with all regulatory agreements.

On February 25, 2025, the Board approved the recommended changes in policy and process for the 2025 Supportive Housing Notice of Funding Availability (2025 NOFA) and authorized the OCCR Director or designee to issue the 2025 NOFA making up to $12.05 million in funding and up to 150 Project-Based Vouchers available for the development of extremely low-income housing and return to the Board for funding commitments to individual projects.

The Developers responded to the 2025 NOFA with a Capitalized Operating Subsidy Reserve (COSR) funding application for the Development. The 2025 NOFA allows OCCR to implement a County COSR Program utilizing MHSA funds to address operational deficits attributable to restricted MHSA supportive housing units. The COSR Program term will be for a minimum of 15 to a maximum of 20 years, based on current assumptions of operating costs, which is approximately seven percent of the total MHSA COSR funds that will be provided per year as an operational deficit subsidy.

COSR Funding Request

The Development converted to permanent financing in June 2025 and the Developer is now requesting $1,263,686 in MHSA COSR funds to be available to the project. The Development’s financial plan does not currently have rental or operating assistance.

OCCR staff is recommending approval of the MHSA COSR to this Development. COSR funding provides an opportunity to support the long-term operations of affordable housing for extremely low-income households who need wrap around services and to help people who were previously unhoused to remain successfully housed while being connected to resources to meet their life goals. OCCR is also requesting delegated authority for the OCCR Director or designee to execute subordination agreements; standard set of loan documents; and such additional agreements, contracts, instructions and instruments necessary or appropriate for permanent loan financing.

The County MHSA COSR loan will be subordinate to financing as outlined in the financial summary below. OCCR is requesting authorization to subordinate to additional senior debt up to 100 percent of the cumulative loan-to-value based on the as-built appraised market value, if necessary, based on any future changes in project financing. In determining the maximum additional senior debt to which the County will subordinate its loans, OCCR will calculate the senior debt plus the County loans and subtract that total from the current (within last six months) as-built appraised market value. If the current as-built appraised market value exceeds the cumulative senior debt plus the County loans, the County may subordinate to additional senior debt, if necessary, for the viability of the project.

Below is the updated financial summary of the Permanent Financing phase of the Development:

Permanent Sources of Funds	Funding Amount
Lienholders in Order of Priority
Conventional Permanent Loan	$6,428,370
County of Orange – ARPA-SLFRF Loan (previously approved funding)	$1,540,000
County of Orange – MHSA COSR Loan (current request)	$1,263,686
Orange County Housing Finance Trust	$1,192,320
City of Lake Forest – Deferred Impact Fee	$764,300
Non-Lienholder Funds
Tax Credit Equity (4%)	$14,698,185
Master Developer Land Value	$2,760,000
Income from Operations	$175,631
Deferred Developer Fee	$607,913
Total Sources of Funds	$29,430,405

Note: Financing subject to change prior to completion of Development. Underwriting guidelines are in accordance with 2025 NOFA.

Loan Terms for County COSR:

COSR:	Up to $1,263,686
Interest Rate:	0 percent
Term:	Maximum of 20 years
Security:	Third Deed of Trust
Payments:	Deferred and forgivable

The County will overlay the MHSA COSR funds on top of the OCHFT’s seven restricted MHSA units and the County’s ARPA-SLFRF recorded regulatory agreement, which restricts rent and occupancy for individuals experiencing homelessness earning at or below 30 percent AMI for a period of 55 years and does not subordinate to any conventional deed of trust.

Funding of the County COSR is contingent upon the borrower being required to continually seek future commitments of rental or operating subsidies for the MHSA Regulated Units for the life of the MHSA Loan.

During its meeting on June 12, 2025, the Project Review Advisory Panel concurred with OCCR staff recommendation to move forward with the project.

The supportive housing units in this development are part of the 2,396 permanent supporting housing units identified in the Housing Funding Strategy 2022 Update to address housing needs for individuals and households experiencing homelessness. These supportive housing units will contribute to the progress of this effort and provide much needed supportive housing. Additionally, these supportive housing units will follow the best practices, guiding principles and commitments of the Homeless Service System Pillars Report that was created by the Commission to Address Homelessness.

Compliance with CEQA: This action is not a project within the meaning of California Environmental Quality Act (CEQA) Guidelines, Section 15378 (Attachment A) and is therefore not subject to CEQA, since it does not have the potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. The approval of this agenda item does not commit the County to a definite course of action in regard to a project since it is for approval of County's COSR loan and subordination of the County loan to senior debt for the Development and to allow the County’s continued support of the production of supportive housing in Orange County. This proposed activity is therefore not subject to CEQA. Any future action connected to this approval that constitutes a project will be reviewed for compliance with CEQA.

FINANCIAL IMPACT:

The loan will be funded with 100 percent MHSA in Fund 12A.

The loan commitments will only affect the notes receivable balance sheet accounts of the fund. Per budgeting practice, the loan commitments are not built into the fiscal year appropriations budget process. The $1,263,686 COSR is anticipated to be funded on a drawdown basis annually upon request after the COSR loan documents are recorded in late 2025 for up to the 20-year COSR term (totaling $1,263,686).

STAFFING IMPACT:

N/A

REVIEWING AGENCIES:

OC Health Care Agency
Office of Care Coordination

ATTACHMENT(S):

Attachment A - California Code of Regulations Title 14 Section 15378