Title
Report regarding a resolution approving Budget Amendment Number 26.059 appropriating up to $3,115,000 from the Commercial Linkage Fee Fund to support Synergy Community Development Corporation’s acquisition of the Metropolitan Hotel at 220 Linden Avenue and authorizing the City Manager or their authorized designee to execute a loan agreement with Synergy Community Development Corporation to preserve affordable housing. (Mike Noce, Housing Manager; Pierce Abrahamson, Management Analyst II)
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RECOMMENDATION
Recommendation
Staff recommends that the City Council adopt a resolution approving Budget Amendment Number 26.059 appropriating up to $3,115,000 from the Commercial Linkage Fee Fund to support Synergy Community Development Corporation’s acquisition of the Metropolitan Hotel at 220 Linden Avenue and authorizing the City Manager or their authorized designee to execute a loan agreement and supporting documents with Synergy Community Development Corporation to preserve affordable housing.
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BACKGROUND
A City regulatory agreement, recorded on May 1, 2009, controls the affordable rents of 62 of the 68 single-room occupancy (SRO) units at 220 Linden Avenue, known as the Metropolitan Hotel (Metro Hotel). The regulatory agreement, which expires in April 2031, requires the 62 restricted units to be affordable and occupied by low-income households. Specifically, households may earn up to 60% of the area median income (AMI) and the maximum rent for these units is roughly $1,648 per month. The City served the current owners of the Metro Hotel with a Notice of Default in October 2024 for failing to comply with the City’s rental restriction requirements. At that time, staff had identified that the owners were substantially out of compliance with the City’s regulatory agreement for multiple years. Over the last year, the owners made some progress on correcting their compliance issues; however, the property’s default status remains unresolved.
The City’s regulatory agreement provides the City with the right to approve any purchaser of the property. With the City’s consent, in September 2025, the owners of the Metro Hotel listed the property for sale at a sales price of approximately $7 million. Shortly thereafter, Synergy Community Development Corporation (Synergy), a non-profit affordable housing developer, approached the City about purchasing the property. Synergy negotiated a $5.2 million purchase price and entered into a Purchase and Sale Agreement (PSA) with the sellers.
Available Affordable Housing Funding as of February 2026
The City has three main affordable housing funds: the Housing Trust Fund (Fund 205), the Low/Mod-Income Housing Asset Fund also known as the Housing Successor Fund (Fund 241), and the Commercial Linkage Fee (Fund 823). The City also receives a formula entitlement grant from the State known as the Permanent Local Housing Allocation or PLHA, which has already been earmarked and is not listed below. The unencumbered balances of these funds, as of February 2026, are listed in Table 1. The City Council approved funding appropriations for the Rotary Gardens (500 Linden Ave.) affordable housing development on January 14, 2026, and the reduced available funding balance of $7.25 million for Fund 823 is shown in Table 1, accounting for that recent appropriation.
Table 1: Affordable Housing Funds as of Feb 2026
|
Fund |
Balance |
|
Housing Trust Fund (Fund 205) |
$1,200,000 |
|
Low/Mod-Income Housing Asset Fund (Fund 241) |
$1,000,000 |
|
Commercial Linkage Fee Fund (Fund 823) |
$7,250,000 |
|
TOTAL HOUSING FUNDS |
$9,450,000 |
DISCUSSION
Synergy Community Development Corporation is a Southern California-based firm with properties primarily in California, Hawaii, and Washington. They specialize in both new construction and acquisition-rehabilitation of historic properties. They are familiar with leveraging both low-income housing tax credits and historic tax credits to maximize subsidy for affordable housing preservation. A link to Synergy’s website can be found here <https://www.synergycdc.org/>, with projects included on their development page. The City’s regulatory agreement requires the City’s approval of a buyer for the Metro Hotel, which prompted staff to perform necessary due diligence of Synergy. Staff contacted a combination of jurisdictions and financial institutions that have worked with Synergy in addition to standard background checks. Synergy’s development experience, financial record, and legal history contained no outstanding issues or concerns.
Synergy is seeking up to $3.115M from the City to complement another loan from Clearinghouse Community Development Financial Institution (Clearinghouse CDFI) to acquire the Metro Hotel property, as described in Synergy’s introduction letter (Attachment 1). The Clearinghouse CDFI loan would be in “senior” position, meaning it would receive repayment before the City’s loan, if funds are limited or inadequate. The City loan will be repaid within fifteen years and would be subject to a tiered interest rate that starts at 0% during year 1 and builds up to 3% by Year 4. Interest-only payments will be funded from residual receipts (net operating income after other debt service) from the project and then ultimately repaid in full if/when the project is refinanced, re-syndicated, or sold. In the near term, staff negotiated for Synergy to use the City’s Launch Local Program Guidelines in leasing the currently vacant space at the Metro Hotel previously occupied by the Wine Vault.
The City has roughly $7.25M in unencumbered affordable housing funding available today in the Commercial Linkage Fee Fund (Fund 823), and the City will receive another $4.5 million as required by Genentech’s Development Agreement with the City in December 2026. The proposed loan of $3.115M is within the range of City-provided funding for other recent affordable housing projects, such as Rotary Gardens, which received $7.8M in 2026, and Baden Station, which received $4M in 2022.
The City’s goal throughout this process, and its continuing highest priority, is preservation of these affordable units and preventing the displacement of tenants. The City’s Municipal Code Chapter 8.100 Local Preferences and Requirements, passed in March 2025, will be incorporated into the regulatory requirements with Synergy as part of extending the affordability of the Metro Hotel. The local preference helps mitigate the potential displacement impacts being faced by many community members and will apply to all units at this property. This action also integrates the City’s most current affordable housing practices and anti-displacement measures.
Synergy has also agreed to reduce the rent of the commercial tenant, Thai Satay Restaurant, and utilize the City’s launch local program to fill the vacancy of a second commercial space on the ground floor of the building. The benefit to a local business and future tenant is an added value to the collaboration between the City and Synergy. Staff recommends appropriating $3.115M to support the acquisition of the Metro Hotel to ensure the immediate extension of affordable housing requirements far beyond what local and state laws would prescribe.
FISCAL IMPACT
There is no fiscal impact to the City’s General Fund associated with adopting the proposed resolutions. Adoption of the resolution and approval of Budget Amendment Number 26.059 will serve as budget authority for appropriating unencumbered affordable housing funds to support Synergy’s acquisition of 220 Linden Avenue, not to exceed $3.115M from the Commercial Linkage Fee Fund (Fund 823). Approval will authorize the City Manager or their authorized designee to execute the loan agreement and accompanying documents. Synergy has indicated it may be competitive for an award of tax credit financing from the State that will recoup the cost of the loan within fifteen years, which would return City funds earlier than other development projects or acquisitions.
RELATIONSHIP TO CITY COUNCIL PRIORITIES ACTION PLAN
The recommended action of this report directly supports a Major Focus Area of the City Council Priority Action Plan for 2026, Housing and Supportive Services. A key strategy identified by City Council within this focus area is to encourage a balanced housing supply, including rental, ownership, and workforce housing. By supporting the acquisition of the Metro Hotel, affordability is extended for the rental units, which serve a vulnerable population of tenants in need of affordable housing options. This acquisition delivers a balanced approach to preserving affordable housing units.
CONCLUSION
Staff recommends that the City Council adopt a resolution approving Budget Amendment Number 26.059 appropriating up to $3,115,000 from the Commercial Linkage Fee Fund to support Synergy’s acquisition of the Metropolitan Hotel at 220 Linden Avenue and authorizing the City Manager or their authorized designee to execute a loan agreement with Synergy Community Development Corporation to preserve affordable housing.
Attachments:
1. Synergy introduction letter dated May 1, 2026, regarding the acquisition and preservation of the Metro Hotel