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CalHFA approves permanent loan increase for College Creek Apartments after construction cost overruns
Summary
CalHFA approved an increase to the permanent loan for College Creek Apartments, citing COVID-era cost increases, higher construction interest rates and inspection-related delays; staff said the agency re-underwrote the loan and is comfortable with the revised amount.
The board of the California Housing Finance Agency approved an increase to the permanent loan for College Creek Apartments after staff described material cost increases during construction.
"This project experienced pretty significant cost increases through the construction period," Director Russell said when presenting the item. Staff cited COVID-era cost escalation, labor shortages, delays related to PG&E inspections and a construction loan that was underwritten at roughly a 3.25% rate but was actually paying closer to 7% during completion.
Director Russell said the project faced about an $11 million funding gap; staff recommended increasing the permanent loan to cover just over half of that amount after re-underwriting the project and updating the appraisal. "We are comfortable at this increased permanent loan amount; it meets all of our requirements," CalHFA multifamily staff told the board.
Board members said they expect similar requests from projects that closed construction during the same COVID-era cycle and asked staff to track common causes and patterns. The motion to approve Resolution 25-07 passed on a roll call vote with all directors recorded in favor.
