Council approves $1.5 million rehab loan for Market Street Manor conversion to permanent housing

The Redding City Council approved staff’s recommendation to provide a $1.5 million rehabilitation loan from the Housing and Homeless Incentive Program fund to support conversion of the Market Street Manor motel at 2171 Market Street into permanent housing operated by Project Restoration.

Nicole, a housing division staff member, presented the item and said the city previously authorized negotiation of a $1.2 million assistance agreement; staff now proposes increasing that to $1.5 million to support conversion and required upgrades. “Staff now proposes a $1,500,000 housing and homeless incentive program fund rehab loan, an increase from the original 1,200,000.0 previously discussed to support the conversion of the property into permanent apartment units,” she said.

According to staff, Project Restoration will acquire the property from CNM Opportunities for $2,000,000; financing will include a $1,100,000 loan from 5 Star Bank and a seller carry-back note from CNM Opportunities for $900,000. Nicole said the rehab loan would carry a 1% interest rate over 20 years and that repayment would be required only if the project generates positive cash flow. Staff noted the city typically takes a subordinate position in such affordability-focused transactions and that the city’s affordability covenants will be recorded in priority to the grant deed to preserve long-term affordability.

Council members raised concerns about related-party transactions and loan positions — in particular that related parties were involved in the buyer and seller roles and that the city’s loan would be subordinate to both first and second loans. Robert Kronig, identified during discussion as the managing partner of CNM Opportunities and CEO of Project Restoration, was referenced in the conversation as related to the ownership and operator roles.

After questions and discussion, a council member moved to approve the staff recommendations; the council seconded and voted in favor. Staff recorded that 16 units would be subject to affordability restrictions and that non-restricted units could be rented at market rates to help cash flow. Staff also noted that the project’s cash flow assumptions rely on high occupancy and the ability to rent non-restricted units at market rates when necessary.

The motion passed and staff will proceed with loan documentation that includes affordability covenants. Council members asked that staff continue oversight of performance and report back on the loan and occupancy outcomes.