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HomeMy WebLinkAbout25E - AGMT - NEIGHBORHOOD STABILIZATION PROGRAMREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: APRIL 4, 2011 TITLE: LOAN AGREEMENT WITH GARNSEY, LP - 326 SOUTH GARNSEY z CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Ordinance on 15' Reading ? Ordinance on 2nd Reading ? Implementing Resolution ? Set Public Hearing For_ CONTINUED TO FILE NUMBER Authorize the City Manager, or designee, and Clerk of the Council to execute the attached loan agreement with Garnsey, LP in an amount not to exceed $4,291,188, subject to non-substantive changes approved by the City Manager and City Attorney. DISCUSSION The Neighborhood Stabilization Program (NSP) funds were allocated to localities to stabilize neighborhoods that have been impacted by foreclosed or abandoned properties. These funds may only be used for properties that have been foreclosed or are in the foreclosure process. The City must spend a minumim of 25% or $2,500,000 on activities benefitting very low-income households (50% AMI). On March 1, 2010, the City Council awarded Orange Housing Development Corporation (OHDC), a non-profit 501(c)(3), and C&C Development (C&C), a for-profit developer (Developer), the contract to implement the multi-family rental program funded by the Federal Neighborhood Stabilization Program (NSP2). The approved contract allocated between $2,500,000 to $6,100,000 for the multi-family rental program in order to fulfill the very-low income requirement. Pursuant to the March 1, 2010, contract award, the Developer proposes to use the NSP funds for the acquisition of a multi-family complex at 326 South Garnsey. This activity is in compliance with their contract and NSP regulations. The project consists of 26 two-bedroom units of which twenty- five units will be rented to very low income families (at or below 50% of AMI) and the remaining unit will be for an on-site manager. The maximum monthly rents will be $981. The Developer will be obtaining other financing for the rehabilitation costs. The scope of work will be developed with City staff and will be in accordance with all applicable building codes. The rehabilitation will include sustainable and energy efficient features, if feasible. The loan will have a 0% interest rate and repayments will be based on residual receipts. There will also be 55 year affordability convenants placed on the property. For the financing purposes of this project, the Developer will form a Limited Partnership named Garnsey, LP. 25E-1 Loan Agreement - 326 S. Garnsey April 4, 2011 Page 2 Proceeding with this project will also assist the City in meeting the goals identified in the Consolidated Plan and meet the NSP performance schedule. FISCAL IMPACT Funds are available in the NSP2 account (no.14218761-69152). Nancy T. Ed rds Interim Exec ive Director Community Development Agency NTE/SLB/JP-H/mlr Exhibits: 1. Map 2. Agreement APPROVED AS TO FUNDS AND ACCOUNTS: Francisco Gutierrez Executive Director Finance & Management Services Agency /4-? 25E-2 PINE STREET CHESTNUT w O w H w w cr- H V) STREET w w N z O H cr- w N z Q STREET CAMILE Otkk 326 South Garnsey Street Exhibit 1 w w H AVENUE MYRTLE 25E-3 CAMILE STREET 25E-4 3/30/11 FREE RECORDING REQUESTED PURSUANT TO GOVERNMENT CODE SECTION 27383 When Recorded Mail to: City of Santa Ana 20 Civic Center Plaza, M-37 P.O. Box 1988 Santa Ana, California 92702 Attention: Housing Programs Coordinator NEIGHBORHOOD STABILIZATION PROGRAM RENTAL HOUSING DEVELOPMENT LOAN AGREEMENT THIS LOAN AGREEMENT (the "Agreement") is made and entered as of April 2011, by and between Garnsey, LP , a California limited partnership comprised of Orange Housing Development Corporation, ("OHDC"), a non-profit 501 (c) (3) organization, and C&C Development Co., LLC, a Limited Liability Company (together the "Borrower") and the City of Santa Ana, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California (the "city"). RECITALS A. Borrower has entered into an agreement (the "Purchase Agreement") to purchase property, located at 326 S. Garnsey Ave., Santa Ana, California, as more particularly described in the legal description, Exhibit A attached hereto and incorporated herein (the "Property"). B. This Agreement is made pursuant to the authority of Title XII of Division A of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5 (February 17, 2009)) (Recovery Act) and sections 2301-2304 of the Housing and Economic Recovery Act of 2008 (Public Law 110-289 {July 30, 2008}) (HERA). Section 2301-2304 of HERA is known as the "Neighborhood Stabilization Program" or "NSP" with money funded through the Program as "NSP Funds". The term "NSP2" refers to the second appropriation of NSP Funds provided under the Recovery Act. C. The City was notified that its application under the NSP for NSP2 Funds was approved by the U.S. Department of Housing and Urban Development ("HUD") with funding allocated for acquisition and rehabilitation of the multi-family rental Page 1 of 14 Exhibit 2 25E-5 3/30/11 component of the NSP. The parties hereto have executed the "Neighborhood Stabilization Program (Program 2) Rental Housing Development Agreement" dated March 1, 2010. Borrower must comply with all of the NSP Program requirements as set forth in the Agreement. Pursuant to this Agreement, NSP2 Funds will be used for the acquisition of the Property and related soft costs. D. The City agrees to loan to Borrower and Borrower agrees to borrow from the City, the Purchase Price plus related soft costs, for a total of $4,291,188.00 (the "City Loan") pursuant to the Program, subject to the terms and conditions set forth herein. The City Loan shall be secured by a Deed of Trust in the principal amount of FOUR MILLION TWO HUNDRED NINETY ONE THOUSAND ONE HUNDRED EIGHTY EIGHT DOLLARS ($4,291,188.00). NOW, THEREFORE, for good and valuable consideration, the parties agree as follows: Definitions: Unless otherwise defined, the following capitalized terms shall be defined in this Agreement as follows: "Affordable Rent" means the monthly rents which do not exceed the maximum amount applicable to Very Low Income households, as promulgated by the U.S. Department of Housing and Urban Development (HUD). "Affordabili Period" also referred to as "Term of Affordability", shall be fifty- five (55) years from date of issuance of Certificate of Occupancy. "City Deed of Trust" means the deed of trust securing the City Loan, in the form attached to this Agreement as Exhibit "B" and incorporated herein by reference. "Cites" means the loan to be made by the City to Borrower in the principal amount of FOUR MILLION TWO HUNDRED NINETY ONE THOUSAND ONE HUNDRED EIGHTY EIGHT DOLLARS ($4,291,188.00).in accordance with this Agreement. "City Manai4er" means the City Manager and his/her designee. "City Promissory Note" also referred to as "Note", means the promissory note in favor of the City, evidencing the City Loan, in the form attached to this Agreement as Exhibit "C" and incorporated herein by reference. "Property" means the real property located at 326 S. Garnsey Ave., Santa Ana, CA., described in the legal description attached to this Agreement as Exhibit A and incorporated herein by reference. "Very Low Income" means an adjusted income which does not exceed fifty Page 2 of 14 Exhibit 2 25E-6 3/30/11 percent (50%) of the Orange County, California PMSA median household income, as adjusted for household size and periodically published by HUD, as such qualifying limit is amended from time to time. 1. City Loan. The City agrees to lend to Borrower, and Borrower agrees to borrow from the City, the Note Amount, with interest as provided in Section 4(a) of this Agreement, subject to the conditions and restrictions set forth in this Agreement, in the Promissory Note, the Affordability Covenants and Restrictions, and in the City Deed of Trust. When all conditions to the close of escrow other than payment of the Purchase Price have been satisfied, the City shall deposit the Loan Amount into escrow. The City shall direct the Escrow Agent to apply the proceeds of the City Loan on behalf of Borrower to the Purchase Price of the Property and related soft costs. Borrower shall execute and deliver to the Escrow Agent the Promissory Note, the City Deed of Trust and the Affordability Covenants and Restrictions. 2. Authorized Use of City Loan. The City Loan proceeds may be used for the purchase of the foreclosed Property, as well as pre-approved reasonable soft costs related to such purchase. 3. Loan Repayment. Borrower shall make payments to the City as provided in Sections 5 (Residual Receipts), 6 (Refinancing Proceeds), 7 (Sale Proceeds) and 8 (Accelerated Loan Repayment). 4. Operating Capital Improvement Loan. If the replacement reserve account ("reserves") is depleted due to unforeseen repairs and the General Partner makes a loan to the Partnership, the reserves must be fully funded prior to payment of said loan. Such loan shall be repaid with the Partnership share of the Residual Receipts. The outstanding loan balance will be reflected in the annual report. 5.Annual Loan Repayment/ Residual Receipts. a. The Borrower shall thereafter make a loan payment to the City annually, in the amount of the lesser of the outstanding balance due under this Note or the City's Percentage of the Residual Receipts, as provided in this Section 5. b. Within one hundred fifty (150) days after the close of the initial Calendar Year following the Real Estate Closing and on or before the 150th day of each Calendar Year thereafter, the Borrower shall submit to the City an audited financial statement of Gross Revenues and Operating Expenses attributable to the Property for the applicable Calendar Year, along with a computation of the Residual Receipts due to the City for the Calendar Year. Page 3 of 14 Exhibit 2 25E-7 3/30/11 c. Except as otherwise provided, the Borrower shall pay to the City 50 percent of the Residual Receipts. Fifty percent (50%) of the Residual Receipts shall remain with the Borrower. d. The Residual Receipts payment shall be made not later than one hundred fifty (150) days after the close of the Calendar Year. Such payment shall be applied first to any late fees, then to reduce the principal balance of the loan. 6. Loan Repayment from Refinancing Proceeds. The Borrower shall make a loan payment to the City from every Refinancing that occurs during the term of this Agreement not to exceed the outstanding balance of principal on this Note, to the extent of the City's Percentage of the Refinancing Proceeds (if any), as follows: the cash proceeds from such Refinancing shall be applied first to pay Closing Costs; next, the amount necessary to pay in full the balance remaining on the Senior Loan; next, the Borrower shall pay to the City the City's Percentage of the Refinancing Proceeds to the extent of the outstanding balance on this Note. Fifty percent (50%) of the Refinancing proceeds shall remain with Borrower. Such payment shall be due on the date of such Refinancing, and shall be applied to reduce the principal balance of the Loan. The City shall not be required to reconvey the lien of the Deed of Trust if Sale Proceeds are insufficient to repay the Loan in full. 7. Loan Repayment -from Sale Proceeds. The Borrower shall make a loan payment, not to exceed the outstanding balance of principal on the Note subject to Section 11 herein, to the City from any Sale that occurs during the term of the City Loan, to the extent of the City's Percentage of the Sale Proceeds, as follows: gross sale proceeds are applied first to pay Closing Costs, next to pay in full the balance remaining on the Senior Loan; next the Borrower shall pay to the City the City's Percentage of the total Sale Proceeds, not to exceed the outstanding amount of principal due on this Note. Fifty percent (50%) of the Sale Proceeds shall remain with Borrower. Such payment shall be due on the date of such Sale, and shall be applied to reduce the principal balance of the Loan. The City shall not be required to reconvey the lien of the Deed of Trust if Sale Proceeds are insufficient to repay the Loan in full. 8. Accelerated Loan Payment. The full principal amount outstanding shall be due and payable on the earlier to occur of the following: a. Sale or Refinancing of the Property as provided further in Section 10 hereof, unless: (i) in the case of a Sale in which the Sale Proceeds are insufficient to repay in full the City Loan, the City approves such sale and the purchaser assumes the balance of the City Loan in accordance with the terms of the Note; or (ii) in the case of a Refinancing in which the Refinancing Proceeds are insufficient to repay in full the City Loan, the City approves such Refinancing and the Borrower remains obligated pursuant to the terms of this Note. Page 4 of 14 Exhibit 2 25E-8 3/30/11 b. In event of default (subject to any applicable notice and cure provisions) pursuant to any of the Loan Documents or the Senior Loan Documents. C. Any default (subject to any applicable notice and cure provisions by Borrower as to any other loan or loans by City to Borrower with respect to the Property; or d. The date that is fifty-five (55) years after the date of the certificate of occupancy, as issued by the City of Santa Ana. On that date, the City agrees to review the performance of the Property and consider in good faith any reasonable request by Borrower to modify the terms or extend the Term of this City Loan Note. 9. Prepayment Borrower may prepay the outstanding principal balance under this Note, in whole or in part, at any time without penalty, however the Affordability Covenants and Restrictions still remain for the entire Affordability Period of fifty-five (55) years. 10. Acceleration by Reason of Transfer or Financing. a. In order to induce City to make the loan evidenced hereby, Borrower agrees that in the event of any transfer of the Property without the prior written consent of City (other than a transfer resulting from a foreclosure, or conveyance by deed in lieu of foreclosure, by the holder of the Senior Loan Deed of Trust), City shall have the absolute right at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. City may grant or deny such consent in its sole discretion and, if consent should be given, any such transfer shall be subject to this Section, and any such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein. Such assumption shall not, however, release Borrower from any liability thereunder without the prior written consent of City. b. As used herein, "transfer" includes the Sale, agreement to sell, transfer or conveyance of the Property, or any portion thereof or interest therein, whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment land sale contract or similar instrument affecting all or a portion of the Property, or the lease of all or substantially all of the Property. 'Transfer' shall not include the leasing of individual residential units on the Property, so long as Borrower complies with the provisions of the Loan Agreement and the Affordability Covenants and Restrictions relating to such leasing activity, nor shall it include a conveyance of the Property to a limited partnership in which Borrower is a general partner, or to a corporation or limited liability company that is wholly owned by the Borrower or its affiliates and that is formed for the sole purpose of owning and operating the Property, or the sale back to the Borrower. In the event of any Refinancing or partial Refinancing in an amount in excess of the balance of the Senior Loan, without the prior written consent of City (which consent City may grant Page 5 of 14 Exhibit 2 25E-9 3/30/11 or deny in its sole discretion), then the entire outstanding balance of the City Loan shall be repaid to the City at the time of each Refinancing or partial Refinancing. c. Notwithstanding anything to the contrary contained herein, a "transfer" shall not include (and it shall not be deemed a Sale) (i) a transfer of a general partner's interest in Borrower when made in connection with the exercise by the Borrower's limited partner (the "Limited Partner") of its rights upon a default by a general partner under the Borrower's partnership agreement (the "Partnership Agreement") or upon a general partner's withdrawal in violation of the Partnership Agreement, so long as the removal and substitution of the defaulting general partner is made within thirty (30) days of such default or, if such removal and substitution cannot reasonably be completed within thirty (30) days, so long as the Limited Partner commences to take action to remove and substitute the general partner with a reasonable period and thereafter diligently proceeds to complete such substitution; (ii) any transfer of the Property to the managing general partner of Borrower pursuant to the right of first refusal or to the general partners of Borrower pursuant to the purchase option, as provided for in the Partnership Agreement; (iii) any transfer of the Limited Partner's interest in connection with a default by the Limited Partner under and in accordance with the Partnership Agreement; and (iv) any sale, transfer or other disposition of an interest in a limited partner of the Borrower. 11. Event of Default. Subject to the provisions of Sections 14 hereof, the occurrence of any of the following shall be deemed to be an event of default ("Event of Default") hereunder: (a) failure by Borrower to make any payments provided for herein, and if such default is not made good within five (5) days of the due date; (b) failure by Borrower to perform any covenant or agreement in the City Deed of Trust, this Agreement, or the Affordability Covenants and Restrictions within thirty (30) days after written demand therefor by City (or, in the event that more than thirty (30) days is reasonably required to cure such default, should Borrower fail to promptly commence such cure, and diligently and continuously prosecute same to completion); or (c) a default under the Senior Loan Deed of Trust that remains uncured after the cure period, if any, provided therein. 12. Notice of Default. a. Subject to the applicable cure periods set forth in Section 14 and subject to the further provisions of this Section, failure or delay by the Borrower to perform any term or provision of this Agreement constitutes a default under this Agreement. The Borrower must immediately commence to cure, correct, or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. b. The City shall give written notice of default to the Borrower specifying the default complained of by the City. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default. Page 6 of 14 Exhibit 2 25E-10 3/30/11 C. Except in the case of a monetary event of default, the Borrower shall not be in default so long as it endeavors to complete such cure, correction or remedy with reasonable diligence, provided such cure, correction or remedy is completed within the applicable time period set forth herein after receipt of written notice (or such additional time as may be deemed by the City to be reasonably necessary to correct the default). d. Any failures or delays by the City in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by the City in asserting any of its rights and remedies shall not deprive the City of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce any such rights or remedies. e. If a monetary event of default occurs under the terms of this Agreement, the Note or the City Deed of Trust, prior to exercising any remedies thereunder City shall give Borrower written notice of such default. Borrower shall have a period of seven (7) days after such notice is received within which to cure the default prior to exercise of remedies by City under this Agreement. f. If a non-monetary event of default occurs under the terms of this Agreement or the Note or City Deed of Trust, prior to exercising any remedies thereunder, City shall give Borrower notice of such default. If the default is reasonably capable of being cured within thirty (30) days, Borrower shall have such period to effect a cure prior to exercise of remedies by the City under this Agreement, the Note and the Deed of Trust. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and Borrower (i) initiates corrective action within said period, and (ii) diligently, continually, and in good faith works to effect a cure as soon as possible, then borrower shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by City. In no event shall City be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the first notice of default is given. 13. Remedies. Upon the occurrence of an Event of Default, after any applicable notice has been provided and the expiration of any applicable cure period therefore, City may declare all sums evidenced hereby immediately due and payable by delivery to the Trustee named in the City Deed of Trust securing the Note, and to Borrower, written declaration of default and demand for sale, and written notice of default and of election to cause the Property to be sold, which notice Trustee shall cause to be duly filed for record and City may foreclose on the City Deed of Trust. City shall also deposit with Trustee the Deed of Trust, the Note and all documents evidencing expenditures secured thereby and evidenced hereby. Upon the occurrence of an Event of Default (and so long as such Event of Default shall continue), the entire balance of principal shall bear interest at the Bank of America reference rate on the due date of the delinquent payment plus four percent (4%). Page 7 of 14 Exhibit 2 25E-11 3/30/11 No delay or omission on the part of the City in exercising any right under the Note or this Loan Agreement shall operate as a waiver of such right. 14. Force Maieure. Performance hereunder shall not be deemed to be in default where delays or defaults are due to: war; insurrection; strikes; lock-outs; riots; floods; earthquakes; fires; casualties; acts of God or other deities; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor or supplier; acts of the other party; acts or failure to act of the City or any other public or governmental City or entity (except that any act or failure to act of City shall not excuse performance by City); or any other causes beyond the reasonable control or without the fault of the party claiming an extension of time to perform. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time the party claiming such extension gives notice to the other party, provided notice by the party claiming such extension is given within thirty (30) days after the commencement of the cause. Times of performance under this Agreement may also be extended in writing by the City and the Borrower. 15. Nondiscrimination. A. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, disability, religion, sex, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any part thereof, nor shall Borrower or any person claiming under or through Borrower establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, or vendees of the Property. The foregoing covenants shall run with the land and shall remain in effect in perpetuity. B. Borrower covenants by and for itself, its successors and assigns, and all persons claiming under or through them that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Property, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Properties. Developer shall refrain from restricting the rental, sale or lease of the Property or any portion thereof on the basis of any of the characteristics listed above. Developer shall also comply with the equal opportunity and fair housing requirements set forth in applicable NSP Regulations. The foregoing covenants shall run with the land Page 8 of 14 Exhibit 2 25E-12 3/30/11 and remain in effect in perpetuity. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (i) In Leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." (ii) In Contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (iii) In Affordable Housing Restrictions. The foregoing covenants shall (a) be included in the Affordability Restrictions, '(b) run with the land, and (c) remain effective for the entire Term of Affordability (for not fewer than 55 years). C. The covenants established in this Article 15 shall, without regard to technical classification and designation, run with the land and be binding on Borrower and any successor in interest to the Property, in favor of City and its successors and assigns, and shall remain in effect in perpetuity. 16. Use Covenants and Restrictions. A. Borrower agrees and covenants, which covenants shall run with the land and bind Borrower, its successors, its assign and every successor in interest to the Property that Borrower will make all rental units on the Property available to very low households at rents affordable to such households for fifty- five (55) years from the effective date of the issuance of the Certificate of Compliance. Page 9 of 14 Exhibit 2 25E-13 3/30/11 B. The Project shall consist of twenty six two-bedroom units, of which twenty-five (25) units will be rented to very low income households (at or below 50% of AMI), and the remaining unit will be reserved for the on-site manager. C. Affordable rents shall be governed as provided in the NSP Regulations. Rental increases shall be in conformance with federal and state law. D. Initial rents may be recalculated to allowable rental amounts at the time of initial lease-up following completion of construction in accordance with any changes in allowable rent and income tables as published by HUD. 17. Maintenance of Property. Borrower must maintain the interior and exterior of the improvements and the landscaping on the Property in a manner consistent with community standards which will uphold the value of the Property, in accordance, with this Agreement and the Santa Ana Municipal Code. The maintenance requirements are set forth in specific detail in the recorded Deed of Trust. 18. Handicapped Accessibility. Borrower shall comply with (a) Section 504 of the Rehabilitation Act of 1973, and implementing regulations, and (b) the Americans with Disabilities Act of 1990, and implementing regulations in order to provide handicapped accessibility to the extent readily achievable. 19. Loan Servicing. The City may contract with a private lender to originate and service the City Loan, and any costs associated therewith shall be paid by the Borrower. 20. Indemnification. Borrower shall indemnify, defend and hold harmless the City, the City, and their respective officers, agents, employees, legal counsel, representatives and volunteers, from and against any loss, liability, claim or judgment relating in any manner to the Property or this Agreement. Borrower shall remain fully obligated for the payment of taxes, liens and assessments relating to the Property. There shall be no reduction in taxes for Borrower, nor any transfer or responsibility to the City to make such payments, by virtue of the City Loan. 21. Insurance. Borrower shall maintain, during the term of the City Loan, an all-risk property insurance policy insuring the Property in an amount equal to the full replacement value of the structures on the Property. The policy shall name the City as loss payee and shall contain a statement of obligation on behalf of the insurance carrier to notify the City of any material change, cancellation or termination of coverage at least 30 days in advance of the effective date of such material change, cancellation or termination. Borrower shall deliver a copy of the certificate of insurance and loss payee endorsement to the City at the time of escrow closing, and Borrower shall annually deliver a copy of the certificate of insurance and loss payee endorsement to the City, signed by an authorized agent of the insurance carrier and setting forth the general provisions of coverage. The copy of the certificate of insurance and loss payee endorsement shall be delivered to the City as follows: Page 10 of 14 Exhibit 2 25E-14 3/30/11 City of Santa Ana, Community Development Agency 20 Civic Center Plaza, M37 P.O. Box 1988 Santa Ana, Ca 92702 Attention: Housing Programs Coordinator Any certificate of insurance required by this section must be a in a form, content and with an insurance company that is acceptable to the City in its sole discretion. 22. Non-Waiver. Failure to exercise or delay in exercising any right the City may have or be entitled to, in the event of default hereunder, shall not constitute a waiver of such right or any other right in the event of a subsequent default. 23. Documents. Borrower has reviewed and agrees to execute the following documents in substantially the form as attached to this Agreement prior to receiving the City Loan, and any other documents or instruments reasonably required by City or a participating entity to complete the transaction contemplated herein: (a) Property Legal Description (Exhibit A); (b) Deed of Trust (Exhibit B) and, (c) City Promissory Note (Exhibit C) and, (d) Affordability Covenants and Restrictions (Exhibit D). Borrower agrees and acknowledges that this Agreement and the City Deed of Trust and the Affordability Covenants and Restrictions shall be recorded against the Property with the County Recorder of the County of Orange and shall appear of record with respect to and as an encumbrance against the Property. 24. Further Assurances. Borrower shall execute any further documents consistent with the terms of this Agreement, including documents in recordable form, as the City may from time to time find necessary or appropriate to effectuate its purposes in entering into this Agreement and making the City Loan. 25. Records and Reports. Developer shall maintain and from time to time submit to Agency/City such records, reports and information as the Executive Director may reasonably require in order to permit City to meet the record keeping and reporting requirements required of it pursuant to NSP Regulations. 26. Governing Law. All of the Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the State of California and Federal law, whichever is more stringent. 27. Severability. In the event that any provision or clause of this Agreement conflicts with applicable law, such conflict will not affect other provisions of this Page 11 of 14 Exhibit 2 25E-15 3/30/11 Agreement which can be given effect without the conflicting provision, and to this end the provisions of the Agreement are declared to be severable. 28. Amendment of Agreement. No modification, rescission, waiver, release or amendment of any provision of this Agreement shall be made except by a written agreement executed by Borrower and the duly authorized representative of the City. 29. Assignment by City Permitted. The City may, in its sole and absolute discretion, assign its rights under this Agreement and/or its right to receive repayment of the City Loan without obtaining the consent of Borrower. 30. Assignment of Borrower Prohibited. In no event shall Borrower assign or transfer any portion of this Agreement or any rights herein without the prior express written consent of the City, which consent the City may give or withhold in its sole and absolute discretion. This provision shall not affect or diminish the City's right to assign all or any portion of its rights under this Agreement or to the proceeds of the City Loan hereunder. 31. Relationship of Borrower and City. The relationship of Borrower and City pursuant to this Agreement is that of debtor and creditor and shall not be, or be construed to be a joint venture, equity venture, partnership or other relationship. 32. Notices. (a) Except as otherwise expressly provided in this Agreement, in every case when, under the provisions of this Agreement, it shall be necessary or desirable for one party to serve any notice, request demand, report or other communication on another party, the same shall be in writing and shall not be effective for any purpose unless served (i) personally, (ii) by independent, reputable, overnight commercial courier, or (iii) by deposit in the United States mail, postage and fees fully prepaid, registered or certified mail, with return receipt requested, addresses as follows: To Borrower: Gamsev, LP c/o Orange Housing Development Corporation 414 East Chapman Avenue Orange, California 92866 Attn: Executive Director With a copy to: C&C Development Co., LLC 14211 Yorba St., Ste. 200 Tustin, CA 92781 Ph: 714-288-7600 (x250) 866-570-0728 (fax) To the City City of Santa Ana - Community Development Agency 20 Civic Center Plaza, M37 P.O. Box 1988 Santa Ana, CA 92702 Page 12 of 14 Exhibit 2 25E-16 3/30/11 Attention: Housing and Neighborhood Development Division 33. Attorney's Fees and Costs: In the event that any action is instituted to enforce payment or performance under this Agreement, or otherwise in connection with this Agreement, the parties agree that the prevailing party shall be reimbursed by the other party for all costs and all attorneys fees incurred by the prevailing party in such action. 34. Entire Agreement. This Agreement, together with all attachments hereto and all documents executed pursuant hereto, constitutes the entire understanding and agreement of the parties. This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all prior negotiations, discussions and previous agreements between the City and Borrower concerning all or any part of the subject matter of this Agreement. 35. Conflict of Interest. No member, official or employee of the Agency or City shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official or employee participate in any decision relating to the Agreement which affects his/her personal interests or the interests of any corporation, partnership or association in which he/she is directly or indirectly interested. 36. Nonliability of Agency/City Officials and Employees. No member, official or employee of City shall be personally liable to Developer, or any successor in interest, in the event of any default or breach by City or for any amount which may become, due to Developer or successor, or on any obligation under the terms of this Agreement. 37. Legal Advice. Each party represents and warrants to the other the following: they have carefully read this Agreement, and in signing this Agreement, they do so with full knowledge of any right which they may have; they have received independent legal advice from their; respective legal counsel as to the matters set forth in this Agreement, or have knowingly chosen not to consult legal counsel as to the matters set forth in this Agreement; and, they have freely signed this Agreement without any reliance upon any agreement, promise, statement or representation by or on behalf of the other party, or their respective agents, employees, or attorneys, except as specifically set forth in this Agreement, and without duress or coercion, whether economic or otherwise. 38. Captions. The captions and headings in this Agreement are for convenience only and are not to be used to interpret or define the provisions hereof. Page 13 of 14 Exhibit 2 25E-17 3/30/11 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year written below. CITY OF SANTA ANA DAVID N. REAM City Manager APPROVED AS TO FORM: City Attorney By: LISA E. STORCK Assistant City Attorney BORROWER: Garnsey, LP, a California limited` partnership MANAGING GENERAL PARTNER By: ORANGE HOUSING DEVELOPMENT CORPORATION a California nonprofit public benefit corporation By: Eunice Bobert, its Chief Executive Officer DEVELOPER GENERAL PARTNER C&C Development Co., LLC a California limited liability company By: Todd R. Cottle, its member By: Cottle Family Trust Dated 3/8/87, By: Barry A. Cottle, its Trustee Page 14 of 14 Exhibit 2 25E-18