Glendale housing authority and council approve purchase of Metro Loma first trust deed to avert foreclosure and preserve affordability

The Glendale Housing Authority and Glendale City Council voted May 20 to buy the first trust deed on Metro Loma Apartments, a 44‑unit affordable housing project at 328 Mira Loma Avenue, to stop a foreclosure that staff said would extinguish the city's subordinate loans and likely eliminate the property's affordability covenants.

City staff presented a plan that would inject a total of $2,255,000 into the project, apportioned pro rata between the Glendale Housing Authority and the Los Angeles County Development Authority (LACDA). Under the formula staff proposed, Glendale’s share is about 77.6 percent and LACDA’s share 22.4 percent; staff asked the housing authority and council to authorize $1,373,891 at this meeting, which reflects the larger figure while backing out a $376,000 draw the authority approved in March.

The project has been in operation since February 2009 and, staff said, has run at a negative cash flow, with last year’s shortfall around $200,000. Mike Fortney, deputy director of housing, told the board that the first‑position lender CCRC stopped payments on its loan in November and has initiated foreclosure. Fortney said purchasing the first trust deed, combined with reserves, targeted repairs, a transition to a new operator and carefully structured rent adjustments, is the best available option to make the project financially feasible and preserve the affordability covenants.

Mayor Ara Najarian summarized the stakes for the public: "If a foreclosure occurs, that building is taken away from us. Our loans are extinguished as a second and a third loan due to the nature of foreclosure, and we would most likely see all the affordability of that building gone." Fortney added, "In case of foreclosure, we would lose the affordability covenants. No doubt about it." The council and housing authority cited those risks in voting for the purchase.

Staff gave a line‑item breakdown of the rescue plan. CCRC holds the first lien; Fortney said the original first loan was $1,890,000 and the current payoff is approximately $1,527,000. Glendale has two subordinate loans on the property totaling just over $5 million; LACDA holds a separate loan of about $1,472,000. The proposed funds would cover the first‑trust payoff and create a set of reserves: a property preservation (P&A) reserve — staff’s property assessment identified roughly $220,000 of immediate repairs and the budget sets $240,000 with contingency — a transition reserve to cover revenue loss during operator change, a replacement reserve top‑up (staff proposed adding about $110,000 to bring the replacement reserve to the target level), and a modest operating reserve and transaction/closing costs. Staff also proposed a transaction fee to help attract a new developer/lessee and cover initial on‑site management costs.

Fortney said the package also contemplates targeted rent adjustments in three tiers: very low‑income tenants likely would receive the least or no increase for one to several years; tenants within the project’s target income range could face modest increases; and higher‑income occupants — Fortney said some residents report incomes above 60 percent of area median, and a few markedly higher — would face larger increases intended to restore the property’s tax‑exempt profile and open units to income‑qualified households over time. Fortney emphasized the specifics of any rent changes were still under negotiation with prospective lessees.

The Los Angeles County Development Authority is participating in the rescue; staff said LACDA will fund the P&A reserve and transition reserve in full and share other costs pro rata. City staff and council members repeatedly framed the action as preservation of affordable housing rather than a bailout of the developer: council speakers noted the entity Wentwood/MetroLoma LP defaulted on loans and that the proposed funds are loans to the project that accrue interest and are intended to be repaid if the property becomes financially stable.

The housing authority motion to authorize purchase of the first deed of trust and related council resolution appropriating $1,373,891 passed on roll call. The housing authority and the council also adopted a motion authorizing the release of the funds to implement the transaction.

City staff said they will continue negotiating terms with prospective new developers/lessees and work through final documentation with LACDA. The council and housing authority made no additional commitments beyond the approved appropriation and the purchase authorization; staff said further steps, including detailed rent adjustments and longer‑term management agreements, will return to the agencies as needed.

Votes at a glance: The housing authority motion to purchase the first deed trust, the council resolution appropriating $1,373,891, and the council motion authorizing the release of funds all passed on roll call during the May 20 joint meeting.