HomeMy WebLinkAbout55C - RESO - SA ARTS COLLECTIVEREQUEST FOR
COUNCIL ACTION
CITY COUNCIL MEETING DATE:
JULY 5, 2017
TITLE:
APPROVAL OF LOAN AGREEMENTS,
RESOLUTION, AND APPROPRIATION
ADJUSTMENT FOR THE SANTA ANA
ARTS COLLECTIVE
(STRATEGIC PLAN NOS. 5,3A; 5,3C)
c
NTERIM CI MANAGER
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
APPROVED
❑ As Recommended
❑ As Amended
❑ Ordinance on 1s` Reading
❑ Ordinance on 2ntl Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
1. Authorize the City Manager and the Clerk of the Council to execute an amended and restated
Community Development Block Grant and Inclusionary Housing Funds loan agreement with
Santa Ana Arts Collective, L.P. for an additional $2,900,000 in Inclusionary Housing Funds as
approved by City Council on June 20, 2017 for a total loan amount not to exceed $5,275,000,
subject to non -substantive changes approved by the City Manager and City Attorney.
2. Authorize the City Manager and the Clerk of the Council to execute a loan agreement with Santa
Ana Arts Collective, L.P. for $2,219,760 in HOME Investment Partnerships Program funds as
approved by City Council on November 3, 2015, subject to non -substantive changes approved
by the City Manager and City Attorney.
3. Authorize the City Manager and the Clerk of the Council to adopt a resolution authorizing the
City Manager to enter into an agreement with the State of California Department of Housing
and Community Development (HCD) for Affordable Housing and Sustainable Communities
(AHSC) program grant funding, subject to non -substantive changes approved by the City
Manager and City Attorney.
4. Authorize the City Manager and the Clerk of the Council to execute a Subordination Agreement
with Bank of America, N.A. for the amended and restated Inclusionary Housing and Community
Development Block Grant loan agreement and the HOME Investment Partnerships Program
loan agreement, subject to non -substantive changes approved by the City Manager and City
Attorney.
5. Approve an appropriation adjustment recognizing Affordable Housing and Sustainable
Communities Program grant funds in the amount of $1,288,000 in revenue account no.
(41818002-52025) and appropriating same to the Affordable Housing Sustainable
Communities Program expenditure account no. (41818832-66220) for the Bush Street Bicycle
Boulevard project.
55C-1
Approval of Loan Agreements, Resolution, and Appropriation Adjustment
Santa Ana Arts Collective Project
July 5, 2017
Page 2
DISCUSSION
On June 1, 2015, staff issued a Request for Proposals (RFP) soliciting applications for the
development of affordable housing. The RFP indicated that the City would consider proposals for
new construction and/or acquisition and rehabilitation projects. It also indicated that the City had
approximately $1,875,000 in Inclusionary Housing funds; $500,000 in Community Development
Block Grant (CDBG) funds; $830,000 in federal HOME Program funds to be committed by July
31, 2016; $1,430,000 in federal HOME Program funds to be committed by July 31, 2017; and 24
Project -Based Vouchers would be available.
Following the RFP, on November 3, 2015, City Council awarded Meta Housing Corporation
(Developer) a pre -loan commitment of Inclusionary Housing Funds, Community Development
Block Grant (CDBG) and HOME Investment Partnerships Program (HOME) funds, not to exceed
$4,635,000, for an affordable housing project called the Santa Ana Arts Collective (Project)
located at 1666 N. Main Street (Exhibit 1). On February 3, 2016, the loan agreement for the
CDBG and Inclusionary Housing Funds was approved by City Council. On September 6, 2016,
City Council adopted a resolution to approve the Relocation Plan for the Project. On June 20,
2017, City Council directed staff to amend the Inclusionary Housing loan agreement for an
additional amount not to exceed $2,900,000 in Inclusionary Housing funds and provide for City
Council consideration at the July 5, 2017 meeting.
The purpose of the amended and restated Community Development Block Grant and Inclusionary
Housing Funds loan agreement is to provide an additional $2.9 million to the Project which allows
the Project to be feasible following a request submitted by the Developer in December 2016 due to
a financial gap created by lower tax credit equity pricing and rising interest rates (Exhibit 2). The
loan agreement with the Developer for $2,219,760 in HOME Investment Partnerships Program
(HOME) funds follows a pre -commitment of $2,260,000 in HOME funds approved by City Council
on November 3, 2015 (Exhibit 3). Under the federal regulations for the HOME Program, the City is
not able to enter into a HOME loan agreement until the Developer obtains all of their other financing
for the project. If the amended and restated Community Development Block Grant and Inclusionary
Housing Funds loan agreement is approved by City Council, the Developer will have obtained all of
their other financing and therefore the City may now enter into the HOME loan agreement for the
project. Following a review of our total HOME Loan amount and the 2016 HOME maximum per-
unit subsidies published by the Housing and Urban Development Department, the HOME Loan
amount committed to the Project was reduced from $2,260,000 to $2,219,760.
On June 7, 2016, City Council adopted a resolution authorizing submittal of a funding application as
a joint applicant with Meta Housing Corporation for the Affordable Housing and Sustainable
Communities Program (AHSC) in the amount not to exceed $12,028,626. Of that amount,
$7,833,126 was requested as a loan for Affordable Housing Development and $1,288,000 was
requested as a grant for a Sustainable Transportation Infrastructure Project for the Santa Ana Arts
Collective Project, and $22,500 was requested as a grant to support the Southern California
Association of Govemments' (SCAG) Go Human program. The application was submitted and on
55C-2
Approval of Loan Agreements, Resolution, and Appropriation Adjustment
Santa Ana Arts Collective Project
July 5, 2017
Page 3
November 21, 2016, the City and Meta Housing Corporation was awarded $12,028,626 in AHSC
funds, which was later reduced to $9,139,630 in accordance with regulatory restrictions upon
acceptance of competitive 9% low income housing tax credits. In addition, $2,885,000 in housing -
related grant funds were not accepted because the programmatic requirements resulted in an
increased funding gap. The Resolution (Exhibit 4) will allow both Meta Housing Corporation to
receive the funds to develop the Project and the City to construct the public improvements linked to
the Project.
The $1,288,000 Sustainable Transportation Infrastructure Project is a bicycle boulevard treatment
along Bush Street from 17th Street to Civic Center Drive connecting to the existing treatments that
are being installed this summer. The bicycle boulevard treatment includes green shared lane
markings in the roadway with accompanying signage and eight landscaped neighborhood traffic
circles along the corridor, connecting the Project with a low -stress bikeway to Downtown Santa
Ana. The $22,500 funding contribution for SCAG's Go Human program will be paid directly by the
Developer.
Regarding the Subordination Agreement with Bank of America, N.A., the City of Santa Ana's total
loan for this project is approximately 21 % of the total Project cost (Exhibit 5). As a subordinate loan
for a large affordable housing project such as this, it is not uncommon for a more senior lender to
request a subordination agreement for the City's smaller loan agreements that allow the senior
lender to complete their underwriting and commit their private market financing. As such, this
Subordination Agreement will allow Bank of American, N.A. to commit their private market financing
for the Project.
The State of California AHSC Program will be providing a loan to the Developer in the amount of
$4,944,130 for the development of the Project. Under the regulatory requirements for the State, the
State's loan must be repaid through residual receipts similar to the City's loans. As such, the 50%
of the residual receipts due and payable to the City will be pro -rated between the State and the City
based upon the total amount of subsidy provided by each. This is standard for projects such as this
that are receiving public subsidies from multiple sources of public financing.
STRATEGIC PLAN ALIGNMENT
The activities covered by this report allow the City to meet Goal #5 - Community Health,
Livability, Engagement & Sustainability, Objective # 3 (Facilitate diverse housing opportunities
and support efforts to preserve and improve the livability of Santa Ana neighborhoods), Strategy
A (Continue to explore options Citywide regarding the re -use of commercial or industrial buildings
that are currently underutilized or vacant for mixed-use residential projects), and Strategy C
(Provide that Santa Ana residents, employees, artists and veterans receive priority for affordable
housing created under the City's Housing Opportunity Ordinance or with City funding to the
extent allowed under state law).
55C-3
Approval of Loan Agreements, Resolution, and Appropriation Adjustment
Santa Ana Arts Collective Project
July 5, 2017
Page 4
FISCAL IMPACT
Funds for the HOME Program loan were previously identified from prior year grant funds, and the
additional Inclusionary Housing funds were identified as part of the Inclusionary Housing Fund
balance in FY 2016-17. Both program funds for the Santa Ana Arts Collective project loans will
be carried forward to the FY 2017-18 budget for expenditure in FY 2017-18:
Funding Source Account No.
Amount
HOME Program 13018780-69152
$2,219,760
Inclusionary Housing 41718820-69152
$2,900,000
Totals
$5,119,760
Approval of the appropriation adjustment will recognize $1,288,000 in the Affordable Housing
Sustainable Communities Program revenue account (no. 41818002-52025) and increase the
Affordable Housing Sustainable Communities Program expenditure account no. (41818832-
66220) by the same amount in the FY 2017-18 budget for the Bush Street Bicycle Boulevard
project. Expenditure for this project is anticipated to be:
Account No. FY 2017-18
FY 2018-19
1 Total
41818832-66220 $168,000
$1,120,000
$1,288,000
Robert C. Cortez
Acting Executive Director
Community Development Agency
F -
Fred Mousavipour
Executive Director
Public Works Agency
AS TO FUNDS AND ACCOUNTS:
Francisco` wAierrez
Executive Director
Finance and Management Services Agency
Exhibits: 1. Location Map
2. Amended and Restated CDBG and Inclusionary Housing Funds Loan Agreement
3. HOME Investment Partnerships Program Loan Agreement
4. AHSC Resolution
5. Subordination Agreement with Bank of America, N.A.
55C-4
EXHIBIT 1
PROJECT LOCATION
1666 NORTH MAIN STREET
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FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 6103 & 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, California 92702
Attention: Clerk of the Council
SPACE ABOVE THIS LINE FOR RECORDING USE
FREE RECORDING REQUESTED
[Government Code Section 6103]
FIRST AMENDED AND RESTATED
LOAN AGREEMENT
by and between the
CITY OF SANTA ANA,
and
SANTA ANA ARTS COLLECTIVE, L.P.
(1666 N. Main Street, Santa Ana, California)
Dated: July P, 2017
Exhibit 2
55C-7
FIRST AMENDED AND RESTATED LOAN AGREEMENT
INCLUSIONARY HOUSING PROGRAM/CDBG FUNDS
THIS FIRST AMENDED AND RESTATED LOAN AGREEMENT (the
"Agreement") dated, for identification purposes only, as of July 5a', 2017, is made and
entered into by and between the City of Santa Ana, a charter city and municipal
corporation ("City") and Santa Ana Arts Collective, L.P. ("Developer") with reference to
the following:
RECITALS:
A. The City is the recipient of Community Development Block Grant
("CDBG") funds from HUD pursuant to Tile I of the Housing and Community
Development Act of 1974, as amended ("Act") and 24 CFR 570 ("CDBG Regulations"),
Catalog of Federal Domestic Assistance (CFDA) Number 14.218, and Federal Award
Identification Number (FAIN) B -15 -MC -06-0508 in the amount of $5,434,375.
B. The City is authorized by the CDBG Regulations to expend funds to
increase the supply of low- and moderate -income housing available at affordable housing
costs.
C. The Housing Opportunity Ordinance, Santa Ana Ordinance No. NS -2881,
established standards and procedures to encourage the development of housing that is
affordable to a range of households with varying income levels. Pursuant to Santa Ana
Municipal Code ("SAMC") section 41-1904(c), developers may pay an in -lieu fee in
certain instances to satisfy the inclusionary requirements. These funds are deposited into
the Inclusionary Housing Fund, as defined by SAMC section 41-1901, and are to be used
to increase and improve the supply of affordable housing per SAMC section 41-1909.
D. In order to utilize money in the Inclusionary Housing Fund, the City
issued a Request for Proposals on June 1, 2015, seeking affordable housing projects.
After reviewing all applications, the Developer's project was selected and approved for
funding by the Santa Ana City Council on November 3, 2015.
E. Developer is entering into this agreement to acquire and, subject to
entitlement approvals, develop an adaptive reuse project consisting of a fifty-eight (58)
unit multi -family residential housing development, with live/work units and a possible
commercial art studio, as well as a community room (the "Project") located at 1666 N.
Main Street, within the City of Santa Ana, California, and legally described in Exhibit A
attached hereto (the "Property"). The CDBG funds referenced herein shall assist in the
rehabilitation only and the Inclusionary Housing funds will assist in the construction and
soft costs of said Project.
F. In furtherance of the Inclusionary Housing Program and CDBG
guidelines, Developer has applied to the City for a loan with which to:
55C-8
1. provide deeper affordability and construct the improvements to the
Property, and
2. thereafter to maintain, operate and professionally manage the Project
as decent, safe, sanitary and affordable rental housing.
G. The City, on certain terms and conditions, desires to make such loan ("City
Loan") to Developer in order to make possible the rehabilitation and construction of the
Project, thereby expanding the supply of decent, safe, sanitary and affordable housing.
H. If there is any inconsistency between Federal, State, and local guidelines
with regard to any of the terms and conditions contained herein, the more stringent shall
apply.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, City and Developer agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. All capitalized terms used herein, including, without
limitation, in the Recitals above and in all other Project Documents, unless otherwise
expressly defined, are defined where first used in this Agreement and/or as set forth in
this Article 1.
"Affordable Housing" means housing operated in accordance with the
requirements of 24 CFR 570.
"Affordability Restrictions on Transfer of Property" means that
certain documents affecting real property benefiting the City, attached hereto as
Exhibit B.
"Affordable Rent" means the monthly rents which do not exceed the
maximum amount applicable to Extremely Low, Very Low and Low Income
households, as promulgated by the U.S. Department of Housing and Urban
Development (HUD), or by the California Tax Credit Allocation Committee, as
applicable.
"AHSC Loan" means a permanent loan of Affordable Housing and
Sustainable Communities program funds from HCD administered by the
California Strategic Growth Council in the amount of $4,944,130
"AHSC Deed of Trust" means any deed(s) of trust securing the AHSC Loan
encumbering the Property.
"AHSC Documents" means, collectively, the loan agreement governing the
AHSC, the AHSC Note, the AHSC Deed of Trust, and any other agreement,
document or instrument that the Senior Lender requires in connection with the
AHSC Loan.
55C-9
"Building Permit" means the building permit(s) issued by City and
required for the construction, if any.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or
Friday on which Santa Ana City Hall is open to the public for the conduct of City
affairs.
"Calendar Year" means each consecutive twelve (12) month period from
January 1 to December 31.
"CDBG Deed of Trust" means the deed of trust encumbering the
Property, in the form attached hereto as Exhibit E, to be executed by Developer pursuant
to Section 5.13.2 in order to secure the CDBG Promissory Note.
"CDBG Loan" means the CDBG funds that will be awarded to the
Developer under this agreement that must be repaid through residual receipts.
"CDBG Promissory Note" means that certain Promissory Note in the
original principal amount of $500,000 in the form attached hereto as Exhibit F, and to be
executed by Developer in favor of City to evidence the obligation of Developer to repay
the City Loan through residual receipts as further described in the CDBG Promissory
Note.
Loan.
"Certificate of Completion" has the meaning set forth in Article 17.
"City" means the City of Santa Ana, California, a charter city and
municipal corporation.
"City Loan" means, collectively, the CDBG Loan and the Inclusionary
"City Project Manager" shall mean the City Manager and/or his/her
designee.
"Close of Escrow" shall mean the date upon which the Loan Agreement
and City Deed of Trust is recorded in the Official Records of the County.
"Closing Statement" means the final statement of Developer's Escrow
account for the purchase of the Property pursuant to the purchase contract.
"Community Development Block Grant" or "CDBG" has the meaning
set forth in Recital "A" above.
partnership.
"County" means the County of Orange, California.
"Developer" means Santa Ana Arts Collective, L.P., a California limited
55C-10
"Developer's Representative" shall mean an officer of the General
Partner of Developer or his/her designee.
"Extremely Low Income" means an adjusted income which does not
exceed thirty percent (30%) of the area median income for the Orange County,
California PMSA, adjusted for household size, as published by HUD.
"Event of Default" has the meaning set forth in Section 20.1.
"General Partner" means the Santa Ana Arts Collective, LLC, a
California limited liability company, and WCH Affordable XVIII, LLC, a California
limited liability company.
"Governmental Authority" means any governmental or quasi
governmental agency, board, bureau, commission, department, court, administrative
tribunal or other instrumentality or authority, and any public utility.
"Hazardous Materials" means flammable materials, explosives,
radioactive materials, hazardous wastes, toxic substances and similar substances
and materials, including all substances and materials defined as hazardous or toxic
wastes, substances or materials under any applicable law, including without
limitation the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et
seci., and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. §§ 9601, et seq., as amended.
"Housing Opportunity Ordinance" means the Santa Ana Ordinance No.
NS -2881, and as such terms may be amended by the Santa Ana City Council in the
future.
"HUD" means the United States Department of Housing and Urban
Development and any successors or assigns thereof.
"Improvements" means all improvements and fixtures now and hereafter
comprising any portion of the Property, including, without limitation, landscaping, trees
and plant materials; and offsite improvements, as required through the City of Santa Ana
Planning and Building Agency entitlement process.
"Inclusionary Deed of Trust" means the deed of trust encumbering the
Property, in the form attached hereto as Exhibit C, to be executed by Developer pursuant
to Section 5.B.1 in order to secure the Inclusionary Promissory Note.
"Inclusionary Housing Fund" means the fund created by the City of
Santa Ana in which all fees collected in compliance with the Housing Opportunity
Ordinance shall be deposited, as defined by Santa Ana Municipal Code section 41-1901
and applied by Santa Ana Municipal Code section 41-1909.
"Inclusionary Loan" means the Inclusionary Funds that will be awarded
55C-11
to the Developer under this agreement that must be repaid through residual receipts.
"Inclusionary Promissory Note" means that certain Promissory Note for
Inclusionary Funds in the original principal amount of $4,775,000.00 in the form attached
hereto as Exhibit D, and to be executed by Developer in favor of City to evidence the
obligation of Developer to repay the Inclusionary Loan through residual receipts as
further described in the Inclusionary Promissory Note.
"Indebtedness" of a person means (a) all indebtedness for borrowed
money, (b) notes payable and drafts accepted representing extensions of credit,
whether or not representing obligations for borrowed money, (c) any obligation
for the purchase of property or services in excess of $10,000 in the aggregate that
is (i) deferred for more than six (6) months, or (ii) evidenced by a note or similar
instrument, and (d) all recourse and all non-recourse indebtedness secured by any
Lien on any property or asset of such person (whether or not assumed by such
person).
"Indemnitees" has the meaning set forth in Section 14.5.
"Laws" means all statutes, laws, ordinances, regulations, orders, writs,
judgments, injunctions, decrees or awards of the United States or any state, county,
municipality or other Governmental Authority.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any lien or security
interest).
"Loan Documents" means, collectively, this Agreement, the Inclusionary
Promissory Note, the Inclusionary Deed of Trust, CDBG Promissory Note, CDBG Deed
of Trust, Affordability Restrictions on Transfer of Property, Project Budget, Scope of
Work / Schedule of Performance, and any other agreement, document, or instrument that
the City reasonably requires in connection with the execution of this Agreement or from
time to time to effectuate the purposes of this Agreement.
"Low Income" means an adjusted income which does not exceed eighty
percent (80%) of the area median income for the Orange County, California
PMSA, adjusted for household size, as published by HUD.
"Median Income for the Area" means the median income for the Orange
County, California PMSA as most recently determined by HUD. Also may be referred to
interchangeably in the Loan Documents as "Area Median Income" or "AMP'.
"Partnership Agreement" means the Second Amended and Restated
Agreement of Limited Partnership of Santa Ana Arts Collective, L.P., dated as of July
2017.
55C-12
"Permitted Encumbrances for the Affordable Housing Restrictions"
means collectively, the Senior Loan Deed of Trust and AHSC Deed of Trust and all other
title exceptions and limitations with respect to the Property hereafter approved by the
City Project Manager in writing, which shall include all title exceptions set forth on
City's title policy, all documents evidencing the State of California Housing and
Community Development loan to encumber the Property and the TCAC Regulatory
Agreement.
"Permitted Encumbrances for the City Deed of Trust" means the
Senior Loan Deed(s) of Trust and all other title exceptions and limitations with respect to
the Property hereafter approved by the City Project Manager in writing, which shall
include all title exceptions set forth on City's title policy, all documents evidencing the
State of California Housing and Community Development loan to encumber the Property
and the TCAC Regulatory Agreement.
"Project" means the construction of the Improvements upon the Property
by
Developer pursuant to this Agreement.
"Project Budget" means the line -item budget for the Project attached
hereto
as Exhibit G, as modified from time to time in accordance with this Agreement.
"Project Costs" means all costs of any nature incurred in connection with
the Project in accordance with generally accepted accounting principles.
"Property" means the property that is located at 1666 N. Main Street in the
City of Santa Ana, and is more fully described in the "Legal Description" of the Property
attached hereto as Exhibit A and incorporated herein by reference.
"Scope of Work/Schedule of Performance" means the detailed
statement of the work to be performed by Developer on and to the Property pursuant to
this Agreement, along with the Schedule of Performance setting forth timeframes for
certain tasks, which document is attached hereto as Exhibit H.
"Senior Lender" means a commercial financial institution providing the
Senior Loan or any other holder of the Senior Loan Note and its successors and assigns.
The initial Senior Lender will be Bank of America, N.A and California Community
Reinvestment Corporation is projected to become the Senior Lender after conversion of
the loan to permanent status.
"Senior Loan" means a loan from any Senior Lender(s) in a position
superior to the City Loan.
"Senior Loan Deed of Trust" means any deed(s) of trust securing any
Senior Loan by encumbering the Property.
55C-13
"Senior Loan Documents" means, collectively, the loan agreement
governing the Senior Loan, the Senior Loan Note, the Senior Loan Deed of Trust,
and any other agreement, document or instrument that the Senior Lender requires
in connection with the Senior Loan.
"Senior Loan Note" means the promissory note evidencing the Senior
Loan from the Senior Lender.
"Term of Affordability" the terms and conditions contained herein shall
remain in effect for fifty-five (55) years from the date of issuance of the Certificate of
Completion.
"Very Low Income" means an adjusted income which does not exceed
fifty percent (50%) of the area median income for the Orange County, California PMSA,
adjusted for household size, as published by HUD.
1.2 Singular and Plural Terms. Any defined term used in the plural in this
Agreement shall refer to all members of the relevant class and any defined term used in
the singular shall refer to any number of the members of the relevant class.
1.3 References and Other Terms. Any reference to this Agreement shall
include such document both as originally executed and as it may from time to time be
modified. References herein to Articles, Sections and Exhibits shall be construed as
references to this Agreement unless a different document is named. References to
subparagraphs shall be construed as references to the same Section in which the reference
appears. The term "document' is used in its broadest sense and encompasses agreements,
certificates, opinions, consents, instruments and other written material of every kind. The
terms "including" and "include" mean "including (include) without limitation."
1.4 Exhibits Incorporated. All attachments and exhibits to this Agreement,
as now existing and as the same may from time to time be modified, are incorporated
herein by this reference.
2. [RESERVED]
3. SCOPE OF WORK/PROJECT BUDGET
A "Scope of Work" and "Schedule of Performance" for the Property is attached
hereto as Exhibit H. Any material change to the Scope of Work/Schedule of
Performance requested by the Developer shall be subject to the prior written approval of
the City Project Manager. The Scope of Work/Schedule sets forth the construction work
that shall be performed on the Property and timeframes for approvals of such work.
A line -item budget for the Project, including a summary statement of sources and
uses of funds, is incorporated into Exhibit G (the 'Project Budget'). Any material change
to the Project Budget requested by Developer shall be subject to the prior written
approval of the City Project Manager.
55C-14
Notwithstanding the foregoing, the City's approval of a change order shall not be
required unless the approval of the Senior Lender is required with respect to such change
order.
4. [RESERVED]
5. CITY LOAN:
The Inclusionary Loan shall be evidenced by the Inclusionary Promissory Note
and the CDBG Loan shall be evidenced by the CDBG Promissory Note in the forms
attached hereto as Exhibit D and Exhibit E. The Inclusionary Loan and the CDBG Loan
shall be secured by the Inclusionary Deed of Trust and CDBG Deed of Trust,
respectively, in the forms attached hereto as Exhibit C and Exhibit F. The terms and
conditions of the City Loan are as set forth in the Inclusionary Promissory Note and
CDBG Promissory Note. The term of affordability for the Project is fifty-five years from
the receipt of Certificate of Occupancy for the Project, or repayment of the City Loan,
whichever is longer.
A. INCLUSIONARY HOUSING FUNDS:
1. Amount and Purpose. Subject to the terms and conditions of this
Agreement, City agrees to make a loan to Developer from Inclusionary Housing funds in
the principal amount of up to $4,775,000.00 for the construction and other costs of the
Project.
B. CDBG FUNDS:
1. Amount and Purpose. Subject to the terms and conditions of this
Agreement, City agrees to make a loan of CDBG funds to Developer in the principal
amount of up to $500,000.00 solely for the property rehabilitation -related costs of the
Project.
6. CONDITIONS TO DISBURSEMENT OF LOAN PROCEEDS
6.1 Conditions Precedent. City's obligation to disburse the loan is subject to the
satisfaction, or waiver by the City Project Manager, of the following conditions
precedent:
(a) Loan Documents. Developer shall have delivered to the Escrow
Holder, signed by the authorized officer or officers of Developer, with such signature(s)
acknowledged where necessary, each of the following documents:
(i) this Loan Agreement;
(ii) the Inclusionary Promissory Note ($4,775,000);
(iii) the Inclusionary Deed of Trust;
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(iv) CDBG Promissory Note ($500,000);
(v) CDBG Deed of Trust; and
(vi) the Affordability Restrictions on Transfer of Property.
(b) Title Insurance. City shall have received an ALTA Extended (LP -
10) Loan Policy (6-17-06), or evidence of a commitment therefore satisfactory to City,
issued by First American Title Insurance Company and in form and substance
satisfactory to City, together with all endorsements and binders required, naming City as
the insured, in a policy amount of not less than the total City Loan Amount, showing
Developer as the fee owner of the Property and insuring the hiclusionary Deed of Trust
and CDBG Deed of Trust to be valid priority liens on the Property. This Agreement, the
Inclusionary Promissory Note, Inclusionary Deed of Trust, CDBG Promissory Note, and
CDBG Deed of Trust shall all be subordinate to any Senior Loan Note and Senior Loan
Deed of Trust and to the AHSC Loan Documents.
(c) Affordability Restrictions on Transfer of Proyerty. Developer
shall have delivered to the Escrow Holder, in the form attached hereto as Exhibit
B, the Affordability Restrictions on Transfer of Property pursuant to which,
among other things, Developer agrees that the Property shall be used only for
decent, safe, sanitary and affordable rental housing pursuant to the affordability
requirements of Code of Federal Regulations ("CFR") section 92.252 or 92.254
and California Health and Safety Code ("H&S") sections 50052.5 and 33334.3, as
applicable. City's Affordability Restrictions on Transfer of Property shall remain
in first position on title and shall not be subordinated.
(d) Documents Recorded. This Loan Agreement, the Inclusionary
Deed of Trust, CDBG Deed of Trust and the Affordability Restrictions on Transfer of
Property shall have been recorded in the Official Records of the County.
(e) Request for Notice. For the benefit of City, Escrow Holder shall
have recorded a request for notice of default of the Senior Loan (the
"Request for Notice of Default").
(f) Insurance. City shall have received evidence satisfactory to the
City Attorney that all of the policies of insurance required by Section 19 of this
Agreement are in full force and effect.
(g) Representations and Warranties. The representations and
warranties of Developer contained in this Agreement and the other Loan
Documents shall be correct in all material respects as of the Close of Escrow as
though made on and as of that date, and if requested by the City Project Manager,
City shall have received a certificate to that effect signed by Developer's
Representative.
(h) No Default. No Event of Default by Developer shall have
occurred, and no event shall have occurred which, with the giving of
55C-16
notice or the passage of time or both, would constitute an Event of
Default by Developer under this Agreement, and if requested by the
City Project Manager, City shall have received a certificate to that
effect signed by Developer's Representative.
6.2 Disbursement Procedures for Loan(s).
The City Loan proceeds shall be disbursed through Escrow to finance the acquisition and
construction of the Project (as evidenced in Exhibit G). The City Loan proceeds shall not be
used for any purpose other than for acquisition and predevelopment and construction related
costs, including developer fee and soft costs related to the development of the Project (costs
all subject to City's prior review). However, CDBG Funds shall only be used for property
rehabilitation -related costs of the Project.
6.3 First Disbursement. City's obligation to make the first disbursement of the Loan
is subject to satisfaction of the following conditions precedent:
(a) General Contractor. If the City Project Manager has not yet
approved the General Contractor, the City Project Manager shall have
approved the identity and qualifications of the General Contractor.
(b) Contract for construction. The City Project Manager must have reviewed
and approved the contract for construction.
6.4 Termination for Failure of Condition. If (a) any of the conditions set forth
herein are not timely satisfied (subject to applicable notice and cure rights) or waived by
the City Project Manager, and (b) City is not in default under this Agreement, City may
terminate this Agreement without any further liability on its part by giving written notice
of termination to Developer. Upon the giving of such notice, all principal, interest and
other amounts owing under the specified due date.
6.5 Anv Disbursement. City's obligation to make any disbursement of the Loan
(including the first and final disbursements is subject to the satisfaction of the following
conditions precedent:
(a) Satisfactory Progress. The City Project Manager shall be satisfied,
based on his/her own inspections or other reliable information that the construction is
progressing satisfactorily in conformance with all applicable laws and other requirements
(including the City's Inclusionary Housing guidelines and CDBG federal regulations).
(b) Condition of Title. Either (i) the City Project Manager reasonably
believes that no event has occurred since the Close of Escrow that would give rise
to a colorable claim against the Propertye(e., a mechanic's lien) superior to the
claim of City against the Property with respect to the subject disbursement, or if
such claim is made, then City Project Manager shall receive satisfactory evidence
that such claim has been bonded over until its resolution; or (ii) City must have
received, at Developer's expense but payable out of the Loan proceeds from the
title insurer who issued City's LP -10 Title Policy, all endorsements thereto then
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reasonably required by City (including, without limitation, CLTA Form 122 --
priority of advance endorsements).
(c) Representations and Warranties. The representations and
warranties of Developer contained in this Agreement and the other City Loan Documents
shall be correct in all material respects as of the date of the disbursement as though made
on and as of that date.
(d) No Default. No Event of Default by Developer shall remain
uncured
(unless, to the extent permitted under this Agreement, Developer is diligently taking
action to cure such default) and no event shall have occurred which, with the giving of
notice or the passage of time or both, would constitute an Event of Default by Developer.
6.6 Final Disbursement. City's obligation to disburse that portion of the Loan funds
retained pursuant to Section 6.12 is subject to the satisfaction of the following additional
conditions precedent:
(a) Construction Complete. The construction of the Project shall be
complete.
(b) Certificate of Occupancy Issued. Any portion of the construction
work requiring inspection or certification by any Governmental
Authority shall have been inspected and certified as complete.
Developer shall request that the Building Department issue a
Certificate of Occupancy, a copy of which shall be delivered to the
City Project Manager, in order for final disbursement to occur.
(c) Lien Free. At least one of the following shall have occurred:
(i) Thirty-five (35) days shall have passed since the recording of a
valid notice of completion for the construction, and no mechanic's or materialman's lien
shall be outstanding; or
(ii) Ninety-five (95) days shall have passed since actual completion
of the construction, and no mechanic's or materialman's lien shall be
outstanding, or Developer shall have bonded over any such lien to City's
reasonable satisfaction.
6.7 Waiver of Conditions. The conditions set forth pertaining to City's obligation to
make disbursements of the Loan proceeds are for City's benefit only and the City
Project Manager may waive all or any part of such rights by written notice to
Developer.
6.8 Disbursement Requests. The Loan proceeds shall be disbursed on a line -item by
line -item basis in accordance with the Project Budget and subject to the conditions in this
section. In no event shall City have any obligation to disburse any amount for any item in
excess of the amount allocated to such item in the Project Budget. Disbursements shall be
made only upon Developer's written request in the form of a Disbursement Request
55C-18
showing all costs which Developer intends to fund with such disbursement, itemized in
such detail as City may reasonably require, accompanied in each case by (a) invoices and
lien releases satisfactory to City, including in any event partial lien releases executed by
each contractor and subcontractor who has received any payment for work performed,
and (b) all other documents and information reasonably required by City. Disbursement
Requests shall be submitted no less than ten (10) Business Days prior to the date of the
requested disbursement, and shall not be submitted more often than monthly.
Prior to each disbursement by City of proceeds of the loan, Developer shall deliver to
City a draw request ("Draw Request"), and all required supporting information as set
forth in the Loan Documents or as otherwise reasonably required by City in order to
provide information for evaluating the requested disbursement pursuant to customary
construction lending practices of institutional lenders in Southern California.
City shall notify the Developer of approval or disapproval of each Draw Request within
five (5) Business Days after receipt of the Draw Request, using the City's
"Disbursement/Change Order Approval Notice". City shall have the right, but not the
obligation, to discontinue processing Draw Requests unless and until receipt of
notification from the other of approval or disapproval of each outstanding Draw Request.
6.9 Manner of Disbursement. City may make any disbursement by check payable
to Developer; or on a voucher basis; or by check payable jointly to Developer and any
contractor, subcontractor or other claimant; or directly to any such claimant; or by any
other means reasonably selected by City.
6.10 Cost Overruns. In the event that, at any time and for any reason, (a) the actual
cost reasonably estimated by City or Developer to be required to complete all matters
included in any line item in the Project Budget exceeds the amount allocated to that line
item in the Project Budget, (b) Project costs for any matters not covered by a specific
line item have been or will be incurred, or (c) the undisbursed portion of the Loan
proceeds together with any other available construction sources is or may be insufficient
to pay all construction of the Project that may be payable under the City Loan Documents
or otherwise in connection with the construction, Developer shall, within ten (10) days
after it receives written notice thereof from City of any of the foregoing matters, do one
or more of the following:
(a) provide satisfactory evidence to City that Developer has previously
paid such excess or otherwise provided for such insufficiency (collectively, the "Excess
Cost") with funds from a source other than the City Loan;
(b) reallocate sufficient funds to pay the Excess Cost from funds
allocated to "Contingency" in the Project Budget; provided, however, that the
City Project Manager's consent to any such reallocation shall be required; or
(c) deposit an amount equal to the Excess Cost in a non-interest
bearing account (the "Overrun Account") with City or Senior Lender from which
withdrawals may be made only with the consent of the City Project Manager or
Senior Lender but which will be exhausted prior to any further disbursement for
55C-19
any line item, so that any resulting surplus in any line item of the Project Budget
will then be reallocated to the line item(s) in which the Excess Costs are expected
to be incurred.
City shall have no obligation to make further disbursements until Developer has paid or
otherwise provided for the overrun as required above. Amounts deposited by Developer
in the Overrun Account for any Excess Costs shall be disbursed by City or Senior Lender
prior to the disbursement of any remaining Loan proceeds in the manner described in
subsection 9.3(c).
6.11 Cost Savings. Upon completion of and disbursement for all matters covered by
any line items in the Project Budget, any remaining undisbursed amounts allocated to that
line item shall be reallocated to "Contingency" and thereafter be available for
disbursement in accordance with the terms of this Agreement.
6.12 Retainage. City will withhold a Retainage of 10% from each Disbursement
for each of the Hard Cost line items of the Project Cost Breakdown (and other line items
thereof designated for withholding of retainage) until all conditions to the final
Disbursement of Hard Costs have been satisfied. In lieu of City's withholding Retainage,
Developer can by written notice to City elect not to draw any overhead or profit as would
otherwise be permitted under the Construction Contract until such time as Retainage
would otherwise have been released.
City shall not retain funds for building materials purchased by Developer for which
Developer supplies documentation to City proving payment in full or for soft costs.
6.13 Holdback. The retainage otherwise available for disbursement shall be subject to
a holdback of one hundred twenty-five percent (125%) of the estimated cost (as
determined by the City Project Manager) for "punch -list" items. Such holdback will be
released when all punch -list items have been completed to the satisfaction of City.
6.14 Waiver of Disbursement Conditions. Unless City otherwise agrees in writing,
the making by City of any disbursement with knowledge that any condition to such
disbursement is not fulfilled shall constitute a waiver of such condition only with respect
to the particular disbursement made, and such condition shall be condition to all further
disbursements until fulfilled.
6.15 Modification of Disbursement Conditions and Procedures. The City Project
Manager shall have the authority to modify the disbursement conditions and procedures
set forth herein in order to conform them to the payment provisions of the contract for
construction.
6.16 Other Terms and Conditions of Loan.
A. The Note(s) shall become immediately due and payable, in the event of
any of the following:
(1) failure to complete the Project within four (4) years of the
recording date;
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(2) violation of any of the use covenants and restrictions contained in
this Agreement after the expiration of any applicable notice and cure
periods;
(3) an Event of Default by Developer which is not timely cured after
expiration of any applicable notice and cure periods pursuant to the
terms of this Agreement.
6 .17 Closing Costs and Fees. Developer shall pay (a) all escrow fees and charges,
(b) all recording fees and charges on any document recorded pursuant to this Agreement,
and (c) the premium for the title insurance required hereunder.
7. AFFORDABILITY REQUIREMENTS, USE AND MAINTENANCE OF THE
PROJECT
7.1 Use Covenants and Restrictions.
Developer agrees and covenants, which covenants shall run with the land and bind
Developer, its successors, its assign and every successor in interest to the Property that
Developer will make all of the rental units on the Property available to extremely low, very
low and low income households at rents affordable to such households for fifty-five (55)
years (except for one unit for the onsite manager). The Project shall consist of
approximately fifty-eight (58) residential units. Enforceability of restrictions on the fifty-
seven (57) units shall be enforced until the date that is fifty-five (55) years after the date on
which the Certificate of Occupancy is issued.
7.2 Affordability Levels/Unit Mix:
The proposed unit mix, initial rents, and levels of affordability are as follows:
The remaining unit will be a 2 -bedroom unit reserved for the onsite manager.
The affordable rents charged at the Project must comply with the standards set forth by
California Tax Credit Allocation Committee (TCAC). Notwithstanding anything to the
contrary contained in this Agreement, the Affordability Restrictions on Transfer of Property,
and other than HOME assisted units, restricted (as to both income and rent levels) at 30% of
AMI, in the event of a foreclosure, or delivery of deed in lieu of foreclosure, of any Senior
Loan, then the (1) the maximum qualifying tenant household income shall be increased to
60% of Area Median Income adjusted for family size appropriate to the unit, and (2) the
55C-21
30% AMI
35% AMI
40% AMI
60% AMI
Unit Size
No. Rent
Units 1
NO' Rent
Units
NO' Rent
Units
No.
Units
Rent Total
1 Bedroom
14 $587
6 $685
6 $783
26
2 Bedroom
2 $704
--- ---
--- ---
12
$1,408 14
3 Bedroom
4 $813
--- ---
--- ---
13
$1,627 17
Total
20
6
6
25
57
The remaining unit will be a 2 -bedroom unit reserved for the onsite manager.
The affordable rents charged at the Project must comply with the standards set forth by
California Tax Credit Allocation Committee (TCAC). Notwithstanding anything to the
contrary contained in this Agreement, the Affordability Restrictions on Transfer of Property,
and other than HOME assisted units, restricted (as to both income and rent levels) at 30% of
AMI, in the event of a foreclosure, or delivery of deed in lieu of foreclosure, of any Senior
Loan, then the (1) the maximum qualifying tenant household income shall be increased to
60% of Area Median Income adjusted for family size appropriate to the unit, and (2) the
55C-21
maximum annual affordable rent shall be increased to 30% of 60% of Area Median Income,
as adjusted for family size appropriate to the unit.
* Utility allowances must be deducted from the Maximum Gross Monthly Rent. The City
of Santa Ana will provide the utility allowances based on the HUD Utility Schedule Model.
7.3 Rent Increases: On an annual basis, the City shall provide the Developer with the
maximum allowable schedule of rents for the Property that shall be no less than the rents set
forth by TCAC. hr no event can Developer charge any tenant more than such amount.
7.4 Maintenance of the Property. Solely at Developer's expense, Developer agrees to
maintain the Property in a clean and orderly condition and in good condition and repair and
keep the Property free from any accumulation of debris and waste materials. If at any time
Developer fails to maintain, or cause to be maintained, the Property as required by this
section, and said condition is not corrected after the expiration of a reasonable period of time
not to exceed thirty (30) days from the date of written notice from the City, unless such
condition cannot reasonably be cured within thirty (30) days, in which case Developer shall
have such additional time as reasonably necessary to complete such cure, the City may
perform the necessary maintenance and Developer shall pay all reasonable costs incurred for
such maintenance. The City shall inspect the Property annually after the date of issuance of
the Certificate of Completion as described in Section 17 of this Agreement.
7.5 Obligation to Refrain from Discrimination. Developer covenants and agrees for
itself, its successors, its assigns and every successor in interest to the Property or any part
thereof, that there shall be no discrimination against or segregation of any person or group of
persons on account of race, color, creed, disability, religion, sex, marital status, ancestry or
national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of
the Property nor shall Developer itself or any person claiming under or through him
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,
sublessees or vendees of the Property. The foregoing covenants shall run with the land and
shall remain in effect for the term of the Agreement.
8. DEFAULTS AND REMEDIES
8.1 Event of Default. Failure or delay by either party to perforin any term or provision of
this Agreement within the time periods provided herein for such performance constitutes a
default under the Agreement. If any party defaults in performance of its obligations,
covenants or agreements hereunder, the defaulting party shall be entitled to cure the default
in accordance with this section. The injured party shall give written notice of default to the
party in default, specifying the default complained of by the injured party. Delay in giving
such notice shall not constitute a waiver of any default nor shall it change the time of
default. The defaulting party must, within thirty (30) days following service of said written
notice, commence to cure, correct or remedy such failure or delay and shall complete such
cure, correction, or remedy with reasonable diligence. Upon a default by Developer which
is not cured within thirty (30) days following service of said notice, unless such default
cannot reasonably be cured within thirty (3 0) days, in which case Developer shall have such
additional time as reasonably necessary to complete such cure but no more than ninety (90)
55C-22
days, the City shall have the right to terminate this Agreement by delivery of written notice
of termination to Developer.
8.2 Institution of Legal Actions. In addition to any other rights or remedies, either party
may institute legal action to cure, correct or remedy any default to recover damages for any
default, or to obtain any other remedy consistent with the purpose of this Agreement.
8.3 Rights and Remedies are Cumulative. Except with respect to rights and remedies
expressly declared to be exclusive in this Agreement, the rights and remedies of the parties
are cumulative and the exercise by either party of one or more of such rights or remedies
shall not preclude the exercise by it, at the same or different times, of any other rights or
remedies for the same default or any other default by the other party.
8.4 Damages. In the event that the City is liable for damages to Developer, such liability
shall not exceed costs incurred by the Developer in the performance of this Agreement and
shall not extend to compensation for loss of future income, profits or assets; provided,
however, Developer's only remedy for any breach of this Agreement by the City shall be an
action for specific performance of such party's obligations.
8.5 Nonrecourse Liabilitv. Neither Developer, nor any partner of Developer, shall have
any personal liability under this Agreement, or the attached Note and Deed of Trust, and any
judgment, decree or order for the payment of money obtained in any action to enforce the
obligation of Developer to repay the loan evidenced by such documents shall be enforceable
against Developer only to the extent of Developer's interest in the Property.
9. GENERAL PROVISIONS AND WARRANTIES
As a material inducement to City to enter into this Agreement, Developer represents and
warrants as follows:
9.1 Formation, Oualification and Compliance. Santa Ana Arts Collective, L.P. is
a California limited partnership. Developer is in compliance with all laws applicable to
its business and has obtained all approvals, licenses, exemptions and other authorizations
from, and has accomplished all filings, registrations and qualifications with, any
Governmental Authority that are necessary for the transaction of its business.
9.2 Execution and Performance of Loan Documents.
9.2.1 Developer has all requisite authority to execute and perform its
obligations under the Loan Documents.
9.2.2 The execution and delivery by Developer of, and the performance
by Developer of its obligations under, each Loan Document that has been
authorized by all necessary action and does not and will not:
(a) require any consent or approval not heretofore
obtained of any person having any interest in Developer;
55C-23
(b) violate any provision of, or require any consent or
approval not heretofore obtained under, any articles of incorporation, by-laws or other
governing document applicable to Developer;
(c) result in or require the creation of any lien, claim,
charge or other right of others of any kind (other than under the City Loan Documents)
on or with respect to any property now or hereafter owned or leased by Developer;
(d) to best of its knowledge, violate any provision of
any law presently in effect; or
(e) constitute a breach or default under, or permit the
acceleration of obligations owed under, any contract, loan agreement, lease or other
agreement or document to which Developer is a party or by which Developer or any of its
property is bound.
9.2.3 Developer is not in default, in any respect that is materially adverse
to the interests of City under the Loan Documents or that would have any material
adverse effect on the financial condition of Developer or the conduct of its business,
under any law, contract, lease or other agreement or document described in sub-
paragraph (d) or (e) of the previous subsection.
9.2.4 No approval, license, exemption or other authorization from, or
filing, registration or qualification with, any Governmental Authority is required which
has not been previously obtained in connection with:
(a) the execution by Developer of, and the performance by Developer of
its obligations under, the Loan Documents; and
(b) the creation of the liens described in the Loan Documents.
9.3 Financial and Other Information. To the best of Developer's knowledge, all
financial information furnished to City with respect to Developer in connection with the
Loans (a) is complete and correct in all material respects as of the date of preparation
thereof, (b) accurately presents the financial condition of Developer, and (c) has been
prepared in accordance with generally accepted accounting principles consistently
applied or in accordance with such other principles or methods as are reasonably
acceptable to City. To the best of Developer's knowledge, all other documents and
information fumished to City with respect to Developer, in connection with the Loans,
are correct and complete insofar as completeness is necessary to give the City accurate
knowledge of the subject matter. To the best of Developer's knowledge Developer has
no material liability or contingent liability not disclosed to City in writing and there is no
material lien, claim, charge or other right of others of any kinds (including liens or
retained security titles of conditional vendors) on any property of Developer not disclosed
in such financial statements or otherwise disclosed to City in writing.
9.4 No Material Adverse Chance. There has been no material adverse change in
the condition, financial or otherwise, of Developer since the dates of the latest financial
55C-24
statements furnished to City. Since those dates, Developer has not entered into any
material transaction not disclosed in such financial statements or otherwise disclosed to
City in writing.
9.5 Tax Liability. Developer has filed all required federal, state and local tax returns
and has paid all taxes (including interest and penalties, but subject to lawful extensions
disclosed to City in writing) other than taxes being promptly and actively contested in
good faith and by appropriate proceedings. Developer is maintaining adequate reserves
for tax liabilities (including contested liabilities) in accordance with generally accepted
accounting principles or in accordance with such other principles or methods as are
reasonably acceptable to City.
9.6 Governmental Requirements. To best of its knowledge, Developer is in
compliance with all laws relating to the Property and all Governmental Authority
approvals, including zoning, land use, planning requirements, and requirements arising
from or relating to the adoption or amendment of, any applicable general plan,
subdivision and parcel map requirement; environmental requirements, including the
requirements of the California Environmental Quality Act and the National
Environmental Policy Act and the preparation and approval of all required environmental
impact statements and reports; use, occupancy and building permit requirements; and
public utilities requirements.
9.7 Rights of Others. Developer is in compliance with all covenants, conditions,
restrictions, easements, rights of way and other rights of third parties relating to the
Property.
9.8 Litigation. There are no material actions or -proceedings pending or, to the best of
the Developer's knowledge, threatened against or affecting Developer or any property of
Developer before any Governmental Authority, except as disclosed to City in writing
prior to the execution of this Agreement.
9.9 Bankruptcy. To the best of Developer's knowledge, no attachments, execution
proceedings, assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other proceedings are pending or threatened against Developer, nor are
any of such proceedings contemplated by Developer.
9.10 Information Accurate. To the best of Developer's knowledge, all information,
regardless of its form, conveyed by Developer to City, by whatever means, is accurate,
correct and sufficiently complete to give City true and accurate knowledge of its subject
matter, and does not contain any misrepresentation or omission.
9.11 Conflicts of Interest. No member, official or employee of the 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 this Agreement which affects his/her
personal interests or the interests of any corporation, partnership or association in which
he/she has a direct or indirect financial interest. The Developer warrants that it neither has
paid nor given, nor will pay or give, any third party any money or other consideration for
obtaining this Agreement.
55C-25
9.12 Nonliability of City Officials and Emplovees. No member, official or employee of
the City shall be personally liable to the Developer in the event of any default or breach by
the City or for any amount which may become due to Developer or on any obligations under
the terms of this Agreement.
9.13 No Assignment. Developer expressly acknowledges and agrees that the City has
only agreed to assist the Developer as a means by which to induce the
construction/development of the Project. Accordingly, Developer further expressly
acknowledges and agrees that this Agreement is a personal right of Developer that is neither
negotiable, transferable, nor assignable except as set forth herein. Developer may assign
some or all of its rights under the Agreement only with the prior written consent of the City
Project Manager (such consent not to be unreasonably withheld), except that no prior
consent is necessary for an assignment by a limited partner of Developer to an affiliate, or as
otherwise provided in the Note or Deed(s) of Trust.
9.14 Applicable Law. This Agreement shall be interpreted, governed and enforced under
federal and California state law with venue in Orange County, California.
9.15 Third Parties. This Agreement is made for the sole benefit of Developer and the
City and their successors and assigns, and no other person or persons shall have any rights
or remedies under or by reason of this Agreement or any right to the exercise of any right or
power of the City hereunder or arising from any default by Developer, nor shall the City
owe any duty whatsoever to any claimant for labor performed or materials furnished in
connection with the construction of the Property.
9.16 Control of Property. The parties acknowledge that the City has not at anytime
participated in any manner in the management or operation of the Property, and will not so
participate at any time hereafter.
10. CONDITIONS FOR CONSTRUCTION
10.1 Permits and Approvals. Developer shall diligently obtain all permits, including
all building permits, licenses, approvals, exemptions and other authorizations of
Governmental Agencies required in connection with the construction and conversion of
the Property.
10.2 Commencement and Completion of Construction. The construction of the
Project shall be considered complete for purposes of this Agreement only when (a) all
work described has been completed and fully paid for, and (b) all work requiring
inspection or certification by Governmental Authority has been completed and all
requisite certificates, approvals and other necessary authorizations (including required
final certificates of occupancy) have been obtained.
10.3 Change Orders. The contract for construction shall not be modified except
pursuant to change orders which require City consent pursuant to this Agreement. All
change orders:
55C-26
(a) shall be in writing, numbered in sequence, signed by
Developer and submitted to City prior to the proposed
effectiveness thereof and accompanied by any working
drawings and a written narrative of the proposed change.
(b) Shall be subject to the City Project Manager's prior written
approval.
10.4 Entry and Inspection. At all times prior to completion of the construction, upon
reasonable notice, City and its agents shall have (a) the right of free access to the
Property and all sites away from the Property where materials for the construction are
stored, (b) the right to inspect all labor performed and materials furnished for the
construction, and (c) the right to inspect and copy all documents pertaining to the
construction.
10.5 Compliance with Section 3 Clause. Section 3 of the Housing and Urban
Development act of 1968, 12 U.S.C. 1701u, as amended by Section 915 of the Housing
and Community Development Act of 1992 requires that economic opportunities
generated by HUD fmancial assistance for housing and community development
programs be targeted toward low- and very low- income persons. Whenever HUD
assistance generates opportunities for employment or contracting, state and local
grantees, as well as other recipients of HUD housing assistance funds must, to the
greatest extent feasible, provide these opportunities to low- and very low- income persons
and to businesses owned by or employing low- and very low- income persons. Section 3
applies to projects for which HUD's share of project costs exceeds $200,000 and
contracts and subcontracts awarded on projects for which HUD's share or project costs
exceeds $200,000 and the contract or subcontract exceeds $100,000.
For purposes of this Section 3 Clause and compliance thereto, whenever
the word "contractor" is used it shall mean and include, as applicable, the Developer, and
its contractor and subcontractor(s), if any. The particular text to be utilized in any and all
contracts of any contractor doing work covered by Section 3 shall be in substantially the
form of the following, as reasonably determined by the City, or as directed by HUD or its
representative, and shall be executed by the applicable contractor under penalty of
perjury:
"(a) The work to be performed under this contract is subject to the
requirements of Section 3 of the Housing and Urban Development Act of 1968, as
amended, 12 U.S.C. 1701u ("Section 3"). The purpose of Section 3 is to ensure
that employment and other economic opportunities generated by HUD assistance
or HUD -assisted projects covered by Section 3, shall, to the greatest extent
feasible, be directed to low -and very low-income persons [inclusive of Very Low
Income Persons, Very Low Income Households, and Very Low Income Tenants
served by the Project], particularly persons who are recipients of HUD assistance
for housing.
(b) The parties to this contract agree to comply with HUD's
regulations at 24 CFR part 135, which implement Section 3. As evidenced by
55C-27
their execution of this contract, the parties to this contract certify that they are
under no contractual or other impediment that would prevent them from
complying with the part 135 regulations.
(c) The contractor agrees to send to each labor organization or
representative of workers with which the contractor has a collective bargaining
agreement or other understanding, if any, a notice advising the labor organization
or workers' representative of the contractor's commitments under this Section 3
clause, and will post copies of notices in conspicuous places at the work site
where both employees and applicants for training and employment positions can
see the notice. The notice shall describe the Section 3 preference, shall set forth
minimum number of job titles subject to hire, availability of apprenticeship and
training positions, the qualifications for each; and the name and location of
person(s) taking applications for each of the position; and the anticipated date the
work shall begin.
(d) The contractor agrees to include this Section 3 clause in every
subcontract subject to compliance with regulations in 24 CFR part 135, and
agrees to take appropriate action, as provided in an applicable provision of the
subcontract or in this Section 3 clause, upon a finding that the subcontractor is in
violation of the regulations 24 CFR part 135. The contractor will not subcontract
with any subcontractor where the contractor has notice or knowledge that the
subcontractor has been found in violation of the regulations in 24 CFR part 135.
(e) The contractor will certify that any vacant employment positions,
including training positions, that are filled (a) after the contractor is selected but
before the contract is executed, and (b) with persons other than those to whom the
regulations of 24 CFR part 135 require employment opportunities to be directed,
were not filled to circumvent the contractor's obligations under 24 CFR part 135.
(0 Noncompliance with HUD's regulations in 24 CFR part U5 may
result in sanctions, termination of this contract for default, and debarment or
suspension from future HUD assisted contracts."
After the foregoing Section 3 Clause, there shall be a signature block for
the contractor, as applicable, the following text shall be included immediately above the
signature block: "The contractor/provider by his/her signature affixed hereto declares
under penalty of perjury that contractor has read the requirements of the Section 3 Clause
and accepts all its requirements contained therein for all of his/her operations related to
this contract."
To the extent applicable, the Developer shall comply and/or cause
compliance with Section 3 Clause requirements for the Project. For example, when and
if Developer or its contractor(s)/subcontractor(s) hire(s) full time employees, rather than
volunteer labor or materials, Section 3 is applicable and all disclosure and reporting
requirements apply.
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10.6 Construction Information. From time to time during the course of the
construction, within ten (10) Business Days following City's written demand therefore,
Developer shall furnish requested reports of project costs, progress schedules and
contractors' costs breakdowns for the construction, itemized as to trade description and
item, showing the name of the contractor(s) and/or subcontractor(s), and including such
indirect costs as real estate taxes, legal and accounting fees, insurance, architects' and
engineers' fees, loan fees, interest during construction and contractors' overhead.
10.7 Protection Against Liens: Developer shall diligently file a valid Notice of
Completion upon completion of the construction, diligently file a notice of cessation in
the event of a cessation of labor on the construction for a period of thirty (30) days or
more, and take all actions reasonably required to prevent the assertion of claims of lien
against the Property. In the event that any claim of lien is asserted against the property or
any stop notice or claim is asserted against the City by any person furnishing labor or
materials to the Property, Developer shall immediately give written notice of the same to
City and shall, promptly and in any event within ten (10) Business Days after written
demand thereof, (a) pay and discharge the same, (b) effect the release thereof by
delivering to City a surety bond complying with the requirement of applicable laws for
such release, or (c) take such other action as City may require to release City from any
obligation or liability with respect to such stop notice or claim.
11. FEDERAL - CDBG COVENANTS
11.1 Contract Provisions for Non -Federal Entity Contracts Under Federal
Awards. Developer shall comply with the requirements at Appendix II to Part 200.
11.2 Oualification as Affordable Housing. As more particularly provided in
the Affordability Restrictions on Transfer of Property, Developer shall use,
manage and operate the Property in accordance with the requirements of 24
CFR 570, and California Health and Safety Code section 50052.5 so as to
qualify the housing on the Property as Affordable Housing with affordable
rents.
11.3 Tenant and Participant Protection. Developer shall comply with the
requirements of 24 CFR 92.253.
11.4 [Intentionally Omitted]
11.5 Handicapped Accessibility. Developer shall comply with (a) Section
504 of the Rehabilitation Act of 1973, and implementing regulations at 24 CFR 8C
governing accessibility of projects assisted under the CDBG Program; and (b) the
Americans with Disabilities Act of 1990, and implementing regulations at 28 CFR 35-36
in order to make the Project readily accessible to and usable by individuals with
disabilities.
11.6 Use of Debarred, Suspended, or Ineligible Participants. Developer shall
comply with the provisions of 24 CFR 24 relating to the employment, engagement of
55C-29
services, awarding of contracts, or funding of any contractor or subcontractor during any
period of debarment, suspension, or placement in ineligibility status.
11.7 Maintenance of Drug -Free Workplace. Developer shall certify that
Developer will provide a drug-free workplace in accordance with 24 CFR 84.13.
11.8 Lead -Based Paint. Developer shall comply with the requirements, as
applicable of the Lead -Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846),
Lead Safe Housing Rule, and implementing regulations at 24 CFR 35.
11.9 Affirmative Marketing. Developer shall implement and perform such
affirmative marketing procedures and requirements for the Property as required by 24
CFR 92.351 and the City of Santa Ana's adopted affirmative marketing procedures and
minority outreach program.
11.10 Equal Opportunity and Fair Housing. Developer shall carry out the
construction and perform its obligations under this Agreement in compliance with all of
the state and federal laws and regulations regarding equal opportunity and fair housing
described in 24 CFR 92.350. Developer must also follow the requirements of Health and
Safety Code section 33435.
11.11 Property Standards. Developer shall cause the Property to meet the
housing quality standards set forth in 24 CFR 882.109, as well as all applicable local,
state and federal codes and ordinances, including zoning ordinances. Developer shall also
cause the Property to meet the current edition of the Model Energy Code published by the
Council of American Building Officials.
11.12 Displacement and Relocation. Developer acknowledges and agrees that,
pursuant to 24 CFR 92.253 and consistent with the other goals and objectives of this part,
City must ensure that it has taken all reasonable steps to minimize the displacement of
persons as a result of the construction. Furthermore, to the extent feasible, residential
tenants must be provided a reasonable opportunity to lease and occupy a suitable, decent,
safe, sanitary and affordable dwelling unit on the Property upon completion of the
construction. Developer agrees to cooperate fully and completely with City in meeting
the requirements of 24 CFR 92.253 and shall take all actions and measures reasonably
required by the City Project Manager in connection therewith. All applicable state
guidelines must also be followed.
11.13 Other Program Requirements. Developer shall carry out each activity in
compliance with all federal laws and regulations described Subpart K 24 CFR 570,
except that Developer does not assume City's responsibilities for environmental review in
24 CFR 570.604 or the intergovernmental review process in 24 CFR 570.612.
11.14 Request for Disbursements of Funds. Notwithstanding anything
contained in this Agreement to the contrary, Developer may not request disbursements of
funds under this Agreement until the funds are needed for payment of eligible costs (such
funds shall be used solely towards the rehabilitation and soft costs of the Project). The
amount of each request shall be limited to the amount needed.
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11.15 Eligible Costs. Developer shall use CDBG Funds to pay costs defined as
"eligible costs" pursuant to 24 CFR 92.206.
11.16 Records and Reports. Developer shall maintain and from time to time
submit to City such records, reports and information as the City Project Manager may
reasonably require in order to permit City to meet the record keeping and reporting
requirements required of it pursuant to 24 CFR 92.508.
11.17 Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards. Developer shall comply with the requirements and
standards of 2 CFR 200.
11.18 Conflict of Interest. Developer shall comply with and be bound by the
conflict of interest provisions set forth at 24 CFR 570.611, as well as state
regulations pertaining to conflict of interest.
11.19 Monitoring. Developer shall allow the City to conduct periodic
inspections of each of the assisted units on the Property as required by the
Program after the date of construction completion, with reasonable notice.
Developer shall cure any defects or deficiencies found by the City while
conducting such inspections within two weeks of written notice thereof, or
such longer period as is reasonable within the sole discretion of the City.
11.20 Recertification of Tenant Income.
(a) Developer shall take all necessary steps to review the income of all
tenants prior to renting to them, as well as reviewing current tenants on an annual basis.
(b) Developer shall allow the City to conduct periodic reviews of
tenant files and files relating to affirmative marketing and outreach to insure the Project's
compliance with applicable regulations and guidelines.
(c) City assisted units continue to qualify as affordable housing despite a
temporary non-compliance caused by increases in the incomes of existing tenants if
actions satisfactory to HUD are being taken to ensure that all vacancies are filled in
accordance with this section until the non-compliance is corrected.
11.21Other CDBG Program Requirements. Developer shall comply with all
other applicable requirements of the CDBG Program.
11.22 City Requirements.
Developer shall comply with the following:
(a) Onsite Services: The Developer shall provide on-site services
that are available to the residents and shall report to the City
annually the services provided.
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(b) Coordination with the WORK Center: The Developer and the
Property Manager shall coordinate with the City's WORK
Center to provide services and outreach to tenants, as well as
provide information on employment during the construction of
the Project.
(c) Tenant Satisfaction Survey: The Developer shall complete and
submit to the City biennial tenant satisfaction surveys of tenants.
(d) Rental Inclusionary Housing Manual: The Developer shall also
maintain compliance with the City's Inclusionary Housing
Manual for Rental Projects.
11.23 Controlling Covenants. If there is a discrepancy between Local, State and
Federal law with regard to any of the aforementioned covenants, the more stringent shall
apply.
12. MAINTENANCE, MANAGEMENT, OPERATION, PRESERVATION
AND REPAIR OF PROPERTY
12.1 Maintenance. Developer shall maintain the Property (and all abutting grounds,
sidewalks, roads, parking and landscape areas which Developer is otherwise required to
maintain) in good condition and repair; shall operate the Property in a businesslike
manner; shall prudently preserve and protect its own as well as the City's interests in
connection with the Property; shall not commit or permit any waste or deterioration of the
Property (except for normal wear and tear); shall not abandon any portion of the Property
or leave the Property unguarded or unprotected; and shall not otherwise act, or fail to act,
in such a way as to unreasonably increase the risk of any damage to the Property or of
any other impairment of City's interests under the Loan Documents. Without limiting the
generality of the foregoing, and except as otherwise agreed by City in writing from time
to time, Developer shall promptly and faithfully perform and observe the following
provision:
12.1.1 Alterations and Repair. Developer shall not remove, demolish or
materially alter any Improvement without City's prior consent, except to make non-
structural repairs which preserve or increase the Property's value, and shall promptly
restore, in a good and professional manner, any Improvement (or other aspect or portion
of the Property) that is damaged or destroyed from any cause.
12.2 Compliance. Developer shall comply with all laws and requirements of
Governmental Authority (including, without limitation, all requirements relating to the
obtaining of Governmental Authority approvals), all Governmental Authority approvals
and all rights of third parties, relating to Developer, the Property or Developer's business
thereon.
12.3 Taxes and Impositions. Developer shall pay, prior to delinquency, all of the
following (collectively, the "Impositions"): (a) all general and special real property taxes
and assessments imposed on the Property; (b) all other taxes and assessments and charges
of every kind that are assessed upon the Property (or upon the owner and/or operator of
the Property) and that create or may create a lien upon the Property (or upon any personal
55C-32
property or fixtures used in connection with the Property), including, without limitation,
non-governmental levies and assessments pursuant to applicable covenants, conditions or
restrictions; and (c) all license fees, taxes and assessments imposed on City (other than
City's income or franchise taxes) which are measured by or based upon (in whole or in
part) the amount of the obligations secured by the Property. If permitted by law,
Developer may pay any Imposition in installments (together with any accrued interest).
12.3.1 Right to Contest. Developer shall not be required to pay any
Imposition
so long as (a) its validity is being actively contested in good faith and by appropriate
proceedings, (b) Developer has demonstrated to City's reasonable satisfaction that leaving
such Imposition unpaid pending the outcome of such proceedings could not result in
conveyance of the Property in satisfaction of such Imposition or otherwise impair the
City's interests under the Loan Documents, and (c) Developer has furnished City with a
bond or other security satisfactory in an amount not less than 100% of the applicable
claim (including interest and penalties).
12.3.2 Evidence of Payment. Upon demand by City from time to time,
Developer shall deliver to City, within thirty (30) days following the due date of any
Imposition, evidence of payment reasonably satisfactory to City.
12.3.3 Books and Records. Developer shall maintain complete books of
account and other records reflecting its operations (in connection with any other
businesses as well as with respect to the Property), in accordance with generally accepted
accounting principles applied on a consistent basis or in accordance with such other
principles or methods as are reasonably acceptable to City, in accordance with 24 CFR
92.508.
12.4 [Intentionally Omitted]
12.5 Proiect Operating Budget. Developer must promptly deposit all project income
directly into a segregated depository account established exclusively for the Project
("Project Operating Account"). Until the Certificate of Completion is issued,
withdrawals from this account may be made only in accordance with the provisions of
this Agreement and the approved Budget, as it may be revised from time to time with
prior City approval. Developer may make withdrawals from this account solely for the
payment of Project expenses and Project fees. Withdrawals from this account for other
purposes may be made only with the prior written approval of the City.
12.6 Replacement Reserve Account. Developer must establish or cause to be
established a segregated interest-bearing replacement reserve depository account
("Replacement Reserve Account") upon the conversion of the Senior Loan to permanent
status. Developer must make monthly deposits from project income into the
Replacement Reserve in accordance with the Senior Loan Documents, as amended from
time to time. Developer may withdraw funds from the Replacement Reserve Account
solely to fund capital improvements for the Project, such as replacing or repairing
structural elements, furniture, fixtures or equipment of the Project that are reasonably
required to preserve the Project as set forth in the Senior Loan Documents. If no Senior
55C-33
Loan is in effect, Developer may not withdraw funds from the Replacement Reserve
Account for any other purpose without the prior written approval of the City.
13. NONDISCRIMINATION COVENANTS
13.1 Obligation_ to Refrain from Discrimination. Developer covenants and agrees
that:
(a) In Use of Property. There shall be no discrimination against or
segregation of any person, or group of persons, on account of race, color, creed,
disability, religion, sex, marital status, national origin, or ancestry in the sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall
Developer or any person claiming under or through it, 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, sublessees, or vendors
of the Property.
(b) In Affordable Housing Restrictions. The foregoing covenant shall (a)
be included in the Affordability Restrictions on Transfer of Property, (b) run with the
land, and (c) remain effective for the term of the contract (for 55 years).
(c) In Employment. In construction on the Property, Developer shall not
discriminate against any employee or applicant because of race, color, creed, religion,
sex, marital status, disability, national origin, or ancestry. Developer shall take
affirmative action to ensure that applicants are employed, and that employees are treated
during employment, without regard to their race, color, disability, creed, religion, sex,
marital status, disability, national origin, or ancestry.
(d) In all Contracts. Developer shall cause the foregoing covenants to be
inserted in all contracts for any work covered by this Agreement so that such provisions
will be binding upon each contractor for the benefit of City, provided that the foregoing
covenant shall not apply to contracts or subcontracts for standard commercial supplies or
raw materials.
14. ENVIRONMENTAL MATTERS
14.1 Representation and Warranty. Except as disclosed in writing to the City,
Developer has no knowledge (a) of the presence on, under or about the Property, now or
in the past, of any Hazardous Materials, or of the transportation to or from the Property of
any Hazardous Materials, (b) that asbestos or polychlorinated biphenyls (PCBs) are
contained in or stored on the Property, or (c) that there are any underground storage tanks
located in, on or under the Property.
14.2 Compliance with Environmental Laws. Developer shall (a) comply with all
environmental laws and environmental permits applicable to the construction of the
Property, (b) immediately pay or cause to be paid all costs and expenses incurred by
reason of such compliance, (c) keep the Property free and clear of any environmental
55C-34
claims or liens imposed pursuant to any environmental law, and (d) obtain and renew all
environmental permits required for ownership or use of the Property.
14.3 Presence of Hazardous Materials. Developer shall not, and shall not permit
anyone else to, generate, use, treat, store, handle, release, or dispose of Hazardous
Materials on the Property, or transport or permit the transportation of Hazardous
Materials to or from the Property except for de minimis quantities used at the Property in
compliance with all applicable environmental laws and required in connection with the
routine operation and maintenance of the Property.
14.4 Notice of Environmental Matters. Developer shall immediately advise City in
writing of any of the following: (a) any pending or threatened environmental claim
against Developer or the Property, (b) any condition or occurrence that (i) results in
noncompliance with any applicable environmental law, (ii) could reasonably be
anticipated to cause the Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of the Property under any environmental law, or (iii)
could reasonably be anticipated to form the basis of an environmental claim against the
Property or Developer.
14.5 Environmental Indemnification by the Developer. Developer agrees to defend,
indemnify and hold harmless the City and its respective officers, directors, employees
and agents (collectively the "Indemnities ") from and against any and all obligations
(including removal and remediation), losses, claims (including third party claims), suits,
judgments, liabilities, penalties, damages (including consequential and punitive
damages), costs and expenses (including consultants, and attorneys' fees) of whatever
kind or nature whatsoever that may at any time be incurred by, imposed on, or asserted
against the Indemnities directly or indirectly based on, or arising or resulting from the
actual or alleged presence of Hazardous Materials on the Property.
15. OTHER AFFIRMATIVE COVENANTS
While any obligation of Developer under the Inclusionary Promissory Note,
Inclusionary Deed of Trust, CDBG Promissory Note, or CDBG Deed of Trust remain
outstanding, the following provisions shall apply, except to the extent that City Project
Manager otherwise consents in writing:
15.1 Existence. The Developer's managing and administrative general partners shall
maintain its existence in good standing under the laws of the State of California, and
Developer shall provide documentation of such status annually to the City.
15.2 Protection of Lien. Developer shall maintain the lien of the Inclusionary Deed of
Trust and CDBG Deed of Trust as valid deeds of trust to the Senior Deeds of Trust on the
Property and take all actions, and execute and deliver to City all documents, reasonably
required by City from time to time in connection therewith.
15.3 Notice of Certain Matters. Developer shall give notice to City, within ten (10)
days of Developer's learning thereof, of each of the following:
55C-35
(a) any filed litigation or claim affecting or relating to the Property
and involving an amount in excess of $5,000; and any litigation
or claim that might subject Developer or any general partner to
liability in excess of $5,000, whether covered by insurance or
not;
(b) any dispute between Developer and a Governmental Authority
relating to the Property, the adverse determination of which
might materially affect the Property;
(c) any change in Developer's principal place of business;
(d) any aspect of the Improvements that is not in substantial
conformity with the plans or code;
(e) any Event of Default or event which, with the giving of notice or
the passage of time or both, would constitute an Event of
Default;
(f) any material default by Developer or any other party under any
Senior Loan document, or the receipt by Developer of any notice
of default under any Senior Loan document;
(g) the creation or imposition of any mechanics' or materialmans'
lien or other lien against the Property which might materially
affect the Property; and/or
(h) any material adverse change in the financial condition of
Developer.
15.4 Further Assurances. Developer shall execute and acknowledge (or cause to be
executed and acknowledged) and deliver to City all documents, and take all actions,
reasonably required by City from time to time to confirm the rights created or now or
hereafter intended to be created under the Loan Documents; to protect and further the
validity, priority and enforceability of the Inclusionary Deed of Trust and CDBG Deed of
Trust; to subject to the Deed(s) of Trust any property intended by the terms of any Loan
Document(s) to be covered by the Inclusionary Deed of Trust and CDBG Deed of Trust
or otherwise to carry out the purposes of the Loan Documents and the transactions
contemplated thereunder.
15.5 Annual Financial Statements. Developer shall deliver to City, within one
hundred fifty (150) days after the end of each Calendar Year, (a) a certified public
accountant reviewed balance sheet for Developer as of the end of such Calendar Year and
a certified public accountant reviewed statement of profit and loss for Developer and for
Developer's operations in connection with the Property for such Calendar Year, together
with all supporting schedules, (b) a certificate of such certified public accountant that
such documents were reviewed by such certified public accountant in accordance with
generally accepted accounting principles and otherwise comply with generally accepted
accounting principles review requirements, and (c) a certificate of Developer's chief
financial officer that such documents: (i) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis or in accordance with such
other principles or methods as are reasonably acceptable to City, (ii) fairly present
Developer's financial condition, (iii) show all material liabilities, direct and contingent,
and (iv) fairly present the results of Developer's operations. Developer shall also provide
55C-36
the City with any other annual audit reports issued by other monitoring agencies.
Developer shall include in said reports, a document in the "Form of Residual Receipts
Report" attached hereto as Exhibit I and incorporated herein.
15.6 Audits and Access to Records. Developer agrees that City, the U.S. Department
of Housing and Urban Development, the Comptroller General of the United States or any
of their authorized representatives shall have the right of access, upon reasonable notice,
to any books, documents, papers, or other records of Developer which are pertinent to
this Agreement in order to make audits, examinations, abstracts, excerpts or transcripts.
Developer will maintain all books and records pertaining to this Agreement for a period
of not less than five (5) years after all matters pertaining to this Agreement (i.e., audit,
disputes or litigation) are resolved in accordance with applicable federal or state laws,
regulations or policies, and when a period of affordability or recapture applies to
Developer's activities, for a period of not less than five (5) years after the affordability or
recapture period ends.
15.7 Termite Inspection Report. Developer shall deliver a termite report pertaining
to the Property to the City every fifth (5"') year beginning January 2020.
16. OTHER COVENANTS
While any obligation of Developer under the Inclusionary Promissory Note,
Inclusionary Deed of Trust, CDBG Promissory Note, or CDBG Deed of Trust remain
outstanding, the following provisions shall apply, except to the extent that City Project
Manager otherwise consents in writing:
16.1 Default on Senior Loan. Developer shall not default on any of the Senior Loan
documents, provided however, that Developer shall have such period as is provided in the
Senior Loan Documents during which to effectuate a cure.
16.2 Sale or Lease of Property. Unless and until Developer has received a Certificate
of Completion for the construction from City, Developer shall not sell, lease, sublease or
otherwise transfer all or any part of the Property or any interest therein without the prior
written consent of the City Project Manager, which consent may be withheld in the City
Project Manager's reasonable discretion. In connection with the foregoing consent
requirements, Developer acknowledges that City relied upon Developer's particular
expertise in entering into this Agreement and continues to rely on such expertise to
ensure the satisfactory completion of the construction.
Notwithstanding anything to the contrary contained herein, a "transfer" shall not
include (i) a transfer of a General Partner's interest in Developer when made in
connection with the exercise by the Developer's limited partner (the "Limited Partner")
of its rights upon a default by a General Partner under the Developer'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
55C-37
Partner with a reasonable period and thereafter diligently proceeds to complete such
substitution; (ii) any transfer of the Property to the Managing General Partner pursuant to
the right of first refusal or to the General Partners pursuant to the purchase option, as
provided for in the Partnership Agreement; (iii) any transfer of the Limited Partner's
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 Developer.
17. CERTIFICATE OF COMPLETION
Upon satisfactory completion of the construction and upon the request of
Developer, or at its own election, the City of Santa Ana shall issue a Certificate of
Completion. Such Certificate of Completion shall be, and shall so state, conclusive
determination of satisfactory completion of the construction.
If City declines to furnish a Certificate of Completion after written request from
Developer, the City Project Manager shall, within thirty (30) days after receipt of the
request, provide Developer with a written statement of the reasons therefore. The
statement shall contain a description of the action Developer must take to obtain a
Certificate of Completion. If the reason therefore is that the Developer has not completed
a minor portion of the construction, City may, in its sole and absolute discretion, issue the
Certificate of Completion upon the posting with City of a bond or other form of security
acceptable to the City Project Manager in the amount of the fair value of the uncompleted
work.
A Certificate of Completion is not evidence of compliance with or satisfaction of
the Loan Documents or any obligation of Developer to any other party whatsoever,
including any holder of a mortgage or deed of trust. A Certificate of Completion is not
"notice of completion" referred to in Section 3093 of the California Civil Code.
18. INDEMNIFICATION
18.1 Nonliability of City. Developer acknowledges and agrees that:
(a) The relationship between Developer and the City is and shall
remain
solely that of Developer and lender, City neither undertakes nor assumes any
responsibility to review, inspect, supervise, approve (other than for aesthetics) or inform
Developer of any matter in connection with the construction, including matters relating
to: (i) the performance of the construction work, (ii) architects, contractors,
subcontractors and materialmen, or the workmanship of or materials used by any of them,
or (iii) the progress of the construction; and Developer shall rely entirely on its own
judgment with respect to such matters and acknowledges that any review, inspection,
supervision, approval or information supplied to Developer by City in connection with
such matters is solely for the protection of City and that neither Developer nor any third
party is entitled to rely on it;
55C-38
(b) Notwithstanding any other provision of any Loan Document: (i)
the City is not a partner, joint venture, alter -ego, manager, controlling person or other
business associate or participant of any kind of Developer and City does not intend to
ever assume any such status; (ii) City's activities in connection with the Loan shall not be
"outside the scope of the activities of a lender of money" within the meaning of
California Civil Code Section 3434, as modified or recodified from time to time, and City
does not intend to ever assume any responsibility to any person for the quality or safety
of the Property; and (iii) City shall not be deemed responsible for or a participant in any
acts, omissions or decisions of Developer;
(c) City shall not be directly or indirectly liable or responsible for any
loss or injury of any kind to any person or property resulting from any construction on, or
occupancy or use of, the Property, whether arising from: (i) any defect in any building,
grading, landscaping or other onsite or offsite improvement; (ii) any act or omission of
Developer or any of Developer's agents, employees, independent contractors, licensees
or invitees; or (iii) any accident on the Property or any fire or other casualty or hazard
thereon; and
(d) By accepting or approving anything required to be performed or
given to City under the Loan Documents, including any certificate, financial statement,
survey, appraisal or insurance policy, City shall not be deemed to have warranted or
represented the sufficiency or legal effect of the same, and no such acceptance or
approval shall constitute a warranty or representation by City to anyone.
18.2 Indemnity. Developer shall defend (by counsel satisfactory to City), indemnify
and save and hold harmless the Indemnitees from and against all claims, damages,
demands, actions, losses, liabilities, costs and expenses (including, without limitation,
attorneys' fees and court costs) arising from or relating to (i) this Agreement; (ii) the
making of the Loan(s); (iii) a claim, demand or cause of action that any person has or
asserts against Developer; (iv) any act or omission of Developer, any contractor,
subcontractor or material supplier, engineer, architect or other person with respect to the
Property; or (vi) the ownership, occupancy or use of the Property. Notwithstanding the
foregoing, Developer shall not be obligated to indemnify City with respect to the
consequences of any act of gross negligence or willful misconduct of City. Developer's
obligations under this Section shall survive the cancellation of the City Promissory Note,
release and reconveyance of the City Deed of Trust, issuance of the Certificate of
Completion, and termination of this Agreement.
18.2.1 Notwithstanding the foregoing, neither Developer, nor any of its partners,
shall be personally liable for any indemnification obligation hereunder
which would result in the repayment of principal and/or interest under the
Loan.
18.3 Reimbursement of City. Developer shall reimburse City immediately upon
written demand for all costs reasonably incurred by City (including the reasonable fees
and expenses of attorneys, accountants, appraisers and other consultants, whether the
same are independent contractors or employees of City) in connection with the
enforcement of the Loan Documents and all related matters including all claims,
55C-39
demands, causes of action, liabilities, losses, commissions and other costs against which
City is indemnified under the Loan Documents. Such reimbursement obligations shall
bear interest from the date occurring twenty (20) days after City gives written demand to
Developer and shall be secured by the City Deed of Trust. Such reimbursement
obligations shall survive the cancellation of the Loan Note, release and reconveyance of
the City Deed of Trust, issuance of a Certificate of Completion, and termination of this
Agreement
19. INSURANCE, CASUALTY AND CONDEMNATION
19.1 Policies Required. While any obligation of Developer under the Loan
Documents remains outstanding, Developer shall maintain at Developer's sole expense,
with insurers either (i) admitted in California or (ii) are not admitted to California but
have an A.M. Best Rating of "A" or above and reasonably approved by the City, the
following policies of insurance in form and substance reasonably satisfactory to the City
Attorney:
(a) worker's compensation insurance and any other insurance required
by law in connection with the construction;
(b) prior to commencement and following completion of the
construction, fire and hazard "all risk" insurance covering 100% of the
replacement cost of the Improvements in the event of fire, lightning, windstorm,
vandalism, malicious mischief and all other risks normally covered by "all risk"
coverage policies in the area where the Property is located (including loss by
flood if the Property is in an area designated as subject to the danger of flood);
(c) upon commencement of the construction and at all times prior to
completion of the construction, builder's risk -all risk insurance covering 100% of the
replacement cost of all Improvements (including offsite materials) during the course of
construction in the event of fire, lightning, windstorm, vandalism, earthquake, malicious
mischief and all other risks normally covered by "all risk" coverage policies in the area
where the Property is located (including loss by flood if the Property is in an area
designated as subject to the danger of flood);
(d) public liability insurance in amounts reasonably required by City
from time to time, and in no event less than $1,000,000 for "single occurrence;"
(e) property damage insurance in amounts reasonably required by the
City from time to time, and in no event less than $1,000,000; and
(f) any other insurance reasonably required by City.
All such insurance shall provide that it may not be canceled or materially modified
without thirty (30) days prior written notice to City. The policies required under
subparagraphs (b) and (c) shall include a "lender's loss payable endorsement" in form and
substance satisfactory to City, showing the City as encumbrance. The City shall be
55C-40
named as an additional insured in the policies required under subparagraphs (d) and (e).
Certificates of insurance for the above policies (and/or original policies, if required by
City) shall be primary and delivered within ten (10) days after demand therefore, and
prior to start of any construction work. All policies insuring against damage to the
Improvements shall contain an agreed value clause sufficient to eliminate any risk of co-
insurance. No less than thirty (30) days prior to the expiration of each policy, Developer
shall deliver to City evidence of renewal or replacement of such policy reasonably
satisfactory to the City Attorney.
19.2 City Attorney May Modify. The City Attorney may modify the
type and amounts of insurance required pursuant to this Section. Notwithstanding the
foregoing, so long as the Property complies with the Senior Lender's insurance
requirements, the City Attorney will not require additional insurance coverage unless (i)
such additional insurance is required by applicable law or (ii) if not required by additional
law, such additional insurance shall only be required if it is readily available on
commercially reasonable terms and the cost thereof can be borne by the Borrower from
available Borrower revenues without causing the Borrower to default under the Senior
Loan or the Partnership Agreement.
19.3 Claims and Proceedings. Developer shall give City immediate
notice of any material casualty to any portion of the Property, whether
or not covered by insurance, and of the initiation or threatened
initiation of any proceeding for the condemnation or other taking for
public or quasi -public use of any portion of the Property (collectively,
"Condemnation"), and shall provide City with copies of all documents
which pertain to any such casualty or Condemnation. Subject to the
rights of any Senior Lender, Developer shall take all action reasonably
required by City in connection therewith to protect the interests of
Developer and/or City, and City shall be entitled (without regard to
the adequacy of its security) to participate in any action, claim,
adjustment or proceeding and to be represented therein by counsel of
its choice. Developer shall not settle, adjust, or compromise any
claim, action, adjustment or proceeding without prior written approval
of Senior Lender, if any, or if there is not a Senior Lender, the City,
which approval shall not be unreasonably withheld or delayed.
19.4 Delivery of Proceeds to City. In the event that, notwithstanding
the "lender's loss payable endorsement" requirement set forth above, the
proceeds of any casualty insurance policy described herein are paid to
Developer, Developer shall, subject to any superior rights of the Senior
Lender, deliver such proceeds to the City immediately upon receipt.
19.5 Application of Casualty Insurance Proceeds. Any proceeds
collected (the "Proceeds") under any casualty insurance policy described in this
Agreement shall be disbursed to Developer as provided in the Senior Loan
Documents, provided if there is no Senior Loan then as provided below, but only
upon fulfillment of each of the following conditions (the "Restoration
Conditions") within ninety (90) days (unless extended by mutual agreement of
55C-41
Developer and City) following the occurrence of the damage for which the
Proceeds are collected:
(a) Developer shall demonstrate to City's reasonable
satisfaction that the Proceeds (together with amounts
deposited by Developer pursuant to subparagraph (b)) will
be adequate to repair the Improvements and to restore the
fair market value of the Property, within a time period
reasonably determined by City, to at least the value it had
immediately prior to sustaining the damage. Such
demonstration shall include delivery to City of (i) plans and
specifications reasonably satisfactory to City, and (ii) a
construction contract in form and content, and with a
contractor, reasonably satisfactory to City.
(b) To the extent that the Proceeds are insufficient to
accomplish the restoration required above, Developer shall
deliver to City funds (the "Shortfall Funds") in the amount
of such shortfall, which funds shall be assigned to City as
security for Developer's obligation hereunder and held and
disbursed in the same manner as the Proceeds.
(c) Developer shall execute such documents as City requires to
evidence and secure Developer's obligation to use all amounts disbursed for the diligent
restoration of the Property.
(d) No Event of Default shall remain uncured.
19.6 Method of Disbursement and Undisbursed Funds. Any
Proceeds and Shortfall Funds to be disbursed to Developer shall be held by City
and disbursed in accordance with then customary disbursement procedures and
related provisions of the Senior Loan, or the City, as applicable. Any amounts
remaining undisbursed following completion of such restoration shall be returned
to Developer up to the amount of any Shortfall Funds deposited by Developer,
and any other amounts remaining shall either be paid to Developer or applied by
Senior Lender if any or by City against any obligations to Senior Lender or City,
as applicable, that are secured by a lien on the Property, as they elect in their sole
and absolute discretion.
19.7 Failure to Satisfy Conditions. In the event that Developer fails
to fulfill the Restoration Conditions within one hundred eighty (180) days (unless
extended pursuant to Section 19.5) following the date on which the damage
occurs, the Proceeds shall be applied by City against any obligations to City that
are secured by a lien on the Property, and the selection of which such obligations
to apply the Proceeds against shall be made by City in its sole and absolute
discretion.
55C-42
19.8 Restoration. Nothing in this Section 19 shall be construed to
excuse Developer from repairing and restoring all damage to the Property in
accordance with other Loan Document provisions, regardless of whether
insurance proceeds are available or sufficient.
19.9 Condemnation; Treatment of Compensation. Subject to any
superior rights of Senior Lender, Developer hereby assigns to the
City, as security for all obligations to City secured by a lien on the
Property, all amounts payable to Developer in connection with any
Condemnation, and any proceeds of any related settlement
(collectively, "Compensation"). Subject to any superior rights of
Senior Lender, Developer shall deliver such remaining Compensation
to City immediately upon receipt. If the taking results in a loss of the
Property to an extent that, in the reasonable opinion of City, renders
or is likely to render the Property not economically viable or if, in
City's reasonable judgment Developer's security is otherwise
impaired, City may apply the Compensation received due to judgment
or settlement in connection with any condemnation or other taking to
reduce the unpaid obligations secured in such order as City may
determine, and without any adjustment in the amount or due dates of
payments due under the Note. If so applied, any award in excess of
the unpaid balance of the Note and other sums due to City shall be
paid to Developer or Developer's assignee. City shall have no
obligation to take any action in connection with any actual or
threatened condemnation or other proceeding.
19.9.1 Notwithstanding the foregoing, as long as the value of City's liens are not
impaired, any condemnation proceeds may be used by the Developer for repair and/or
restoration of the Project.
19.9.2 Notwithstanding the foregoing, during the tax credit compliance period for
the Project, as determined under Section 42 of the Internal Revenue Code, any
condemnation proceeds may be used by the Developer for repair and/or restoration of the
Project.
19.10 Waiver of Subrogation. Developer hereby waives all rights to
recover against the City (or any officer, employee, agent or
representative of City) for any loss incurred by Developer from any
cause insured against or required by any Loan Document, to be
insured against; provided, however, that this waiver of subrogation
shall not be effective with respect to any insurance policy if the
coverage thereunder would be materially reduced or impaired as a
result. Developer shall use its best efforts to obtain only policies
which permit the foregoing waiver of subrogation.
20. DEFAULTS AND REMEDIES
55C-43
20.1 Events of Default. The occurrence of any of the following, whatever the reason
therefore, shall constitute an Event of Default by Developer:
(a) Developer fails to make any payment of principal or
interest under the City Promissory Note when due, and
such failure is not cured within fifteen (15) Business Days
after Developer's receipt of written notice that such
payment was not received when due;
(b) Developer fails to perform any other obligation for the
payment of money under any Loan Document, and such
failure is not cured within fifteen (15) Business Days after
Developer's receipt of written notice that such obligation
was not performed when due;
(c) Developer fails to perform any obligation (other than the
obligations described in subparagraphs (a) and (b) above) under any Loan Document, and
such failure is not cured within thirty (30) days after Developer's receipt of written notice
that such obligation was not performed; provided that, if cure cannot reasonably be
effected within such thirty (30) -day period, such failure shall not be an Event of Default
so long as Developer (in any event, within ten (10) days after receipt of such notice)
commences to cure, and thereafter diligently (in any event within ninety (90) days after
receipt of such notice) prosecutes such cure to completion;
(d) Any representation or warranty in any Loan Document proves to
have been incorrect in any material respect when made;
(e) The Property is materially damaged or destroyed by fire or other
casualty unless Developer fulfills the Restoration Conditions set forth in
the insurance provisions of this Agreement within one hundred twenty
(120) days (unless extended pursuant to Section 19.5) and thereafter
diligently restores the Property in accordance with this Agreement;
(f) Work on the construction ceases for thirty (30) consecutive days
for any reason (other than governmental orders, decrees or regulations,
acts of God or any other deity, strikes or other causes beyond Developer's
reasonable control), provided that the same do not, in the aggregate and in
the City's reasonable judgment, threaten to delay the completion of the
construction beyond the required completion date set forth in this
Agreement;
(g) Developer is enjoined or otherwise prohibited by any
Governmental Authority from constructing and/or occupying the
improvements and such injunction or prohibition continues unstayed for
sixty (60) days or more for any reason;
(h) Developer is dissolved, liquidated or terminated, or all or
substantially all of the assets of Developer are sold or otherwise
55C-44
transferred without the City Project Manager's prior written
consent;
(i) Developer is the subject of an order for relief by a bankruptcy
court, or is unable or admits its inability to pay its debts as they
mature, or makes an assignment for the benefit of creditors; or
Developer applies for or consents to the appointment of any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer for it or any part of its property; or any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar
officer is appointed without the application or consent of
Developer and the appointment continues undischarged or
unstayed for ninety (90) days; or Developer institutes or consents
to any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, custodianship, conservatorship,
liquidation, construction or similar proceeding relating to it or any
part of its property; or any similar proceeding is instituted without
the consent of Developer and continues undismissed or unstayed
for ninety (90) days; or any judgment, writ, warrant of attachment
or execution, or similar process is issued or levied against any
property of Developer and is not released, vacated or fully bonded
within ninety (90) days after its issue or levy; or
(j) (i) any of the Senior Loan documents is revoked or terminated, in
whole or in part and for any reason (except due to repayment of
such loans), without the City Project Manager's prior written
consent, or (ii) an Event of Default occurs under the Senior Loan
Documents and the Senior Lender declares that a default has
occurred.
In addition, if an Event of Default occurs hereunder, prior to taking
any remedy under this Agreement or any other document
evidencing or securing the Loan, City shall first give notice of the
occurrence of such Event of Default to the Limited Partner and the
Limited Partner shall have not less than 30 days to cure such Event
of Default, provided if in order to cure such Event of Default the
Limited Partner gives notice to the City that Limited Partner must
remove and replace the general partner or general partners of
Developer, Limited Partner shall have until 30 days following the
effective date of such removal and replacement to cure such Event
of Default.
20.2 Remedies Upon Default. Upon the occurrence of any Event of Default, City
may, at its option and in its absolute discretion, do any or all of the following:
(a) By written notice to Developer, declare the principal of all
amounts owing under the Loan Documents, together with all
accrued interest and other amounts owing in connection therewith,
55C-45
to be immediately due and payable, regardless of any other
specified due date; provided that any Event of Default described in
Section 20.1 (e) shall automatically, without notice or other action
on City's part, cause all such amounts to be immediately due and
payable;
(b) In its own right or by a court-appointed receiver, take possession of
the Property, enter into contracts for and otherwise proceed with
the completion of the construction by expenditure of its own funds;
(c) Exercise any of its rights under the Loan Documents and any rights
provided by law, including, without limitation, the right to seek specific performance and
the right to foreclose on any security and exercise any other rights with respect to any
security, all in such order and manner as City elects in its sole and absolute discretion;
and,
(d) Suspend or terminate the award of hiclusionary Housing and
CDBG funds
if Developer fails to comply with any term of such award.
20.3 Cumulative Remedies: No Waiver. City's rights and remedies under the Loan
Documents are cumulative and in addition to all rights and remedies provided by law.
The exercise by City of any right or remedy shall not constitute a cure or waiver of any
default, nor invalidate any notice of default or any act done pursuant to any such notice,
nor prejudice the City in the exercise of any other right or remedy. No waiver of any
default shall be implied from any omission by City to take action on account of such
default if such default persists or is repeated. No waiver of any default shall affect any
default other than the default expressly waived, and any such waiver shall be operative
only for the time and to the extent stated. No waiver of any provision of any Loan
Document shall be construed as a waiver of any subsequent breach of the same provision.
City's consent to or approval of any act by Developer requiring further consent or
approval shall not be deemed to waive or render unnecessary City's consent to or
approval of any subsequent act. The City's acceptance of the late performance of any
obligation shall not constitute a waiver by City of the right to require prompt performance
of all further obligations; City's acceptance of any performance following the sending or
filing of any notice of default shall not constitute a waiver of either party's right to
proceed with the exercise of its remedies for any unfulfilled obligations; and City's
acceptance of any partial performance shall not constitute a waiver by City of any rights.
21. NHSCELLANEOUS
21.1 Obligations Unconditional and Independent. Notwithstanding the existence at
any time of any obligation or liability of City to Developer, or any other claim by
developer against City, in connection with the Loan or otherwise, Developer hereby
waives any right it might otherwise have (a) to offset any such obligation, liability or
claim against Developer's obligations under the Loan Documents, or (b) to claim that the
existence of any such outstanding obligation, liability or claim excuses the
nonperformance by Developer of any of its obligations under the Loan Documents.
55C-46
21.2 Notices. All notices, demands, approvals and other communications provided for
in the Loan Documents shall be in writing and be delivered to the appropriate party by
personal service or U.S. Mail at its address as follows:
If to Developer: Santa Ana Arts Collective, L.P.
c/o Meta Housing Corporation
1640 Sepulveda Blvd, Ste. 425
Los Angeles, CA 90025
Attention: President
With a copy:
Bank of America CDC Special
Holding Company, Inc.
Community Development Banking
MAI -225-02-02
225 Franklin Street
Boston, MA 02110
With a copy to: Bank of America, N.A.
MAI -225-02-02
225 Franklin Street
Boston, MA 02110
Attention: Asset Management
With a copy to: WCH Affordable XVIII, LLC
Attn: Graham Espley-Jones
151 Kalmus Drive, #J5
Costa Mesa, CA 92626
Fax: (714) 597-8320
If to City: City of Santa Ana
Community Development Agency
20 Civic Center Plaza (M-26)
P.O. Box 1988
Santa Ana, California 92702
Attention: Housing Manager
With a copy to: Office of the City Attorney
City of Santa Ana
20 Civic Center Plaza, 7th Floor (M-29)
Santa Ana, California 92702
Addresses for notice may be changed as required by written notice to all other parties.
All notices personally served shall be effective when actually received. All notices
mailed shall be effective three (3) days after deposit in the U.S. Mail, postage prepaid.
The foregoing notwithstanding, the non -receipt of any notice as the result of a change of
55C-47
address of which the sending party was not notified or as the result of a refusal to accept
delivery shall be deemed receipt of such notice.
21.3 Survival of Representations and Warranties. All representations and
warranties in the Loan Documents shall survive the making of the Loan(s) described
herein and have been or will be relied on by City notwithstanding any investigation made
by either party.
21.4 No Third Parties Benefited. This Agreement is made for the purpose of setting
forth rights and obligations of Developer and the City, and no other person shall have any
rights hereunder or by reason hereof.
21.5 Binding Effect; Assignment of Obligations. This Agreement shall bind, and
shall inure to the benefit of, Developer and City and their respective successors and
assigns. Other than as expressly provided to the contrary in this Agreement, Developer
shall not assign any of its rights or obligations under any Loan Document without the
prior written consent of City, which consent may be withheld in City's sole and absolute
discretion. Any such assignment without such consent shall, at City's option, be void.
21.6 Prior Agreements; Amendments; Consents. This Agreement (together with
the other Loan Documents) contains the entire agreement between the City and
Developer with respect to the Loan and the Property, and all prior negotiations,
understandings and agreements are superseded by this Agreement and such other Loan
Documents. No modification of any Loan Document (including waivers of rights and
conditions) shall be effective unless in writing and signed by the party against whom
enforcement of such modification is sought, and then only in the specific instance and for
the specific purpose given.
21.7 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. Developer irrevocably and unconditionally
submits to the jurisdiction of the Superior Court of the State of California for the County
of Orange or the United States District Court of the Central District of California, as City
may deem appropriate, in connection with any legal action or proceeding arising out of or
relating to this Agreement or the Loan Documents. Assuming proper service of process,
Developer also waives any objection regarding personal or in rem jurisdiction or venue.
21.8 Severability of Provisions. No provision of any Loan Document that is held to
be unenforceable or invalid shall affect the remaining provisions, and to this end all
provisions of the Loan Documents are hereby declared to be severable.
21.9 Headings. Article and section headings are included in the Loan Documents for
convenience of reference only and shall not be used in construing the Loan Documents.
21.10 Conflicts. In the event of any conflict between the provisions of this Agreement
and those of any other Loan Document, this Agreement, unless otherwise expressly
provided, shall prevail; provided however that, with respect to any matter addressed in
both such documents, the fact that one document provides for greater, lesser or different
55C-48
rights or obligations than the other shall not be deemed a conflict unless the applicable
provisions are inconsistent and could not be simultaneously enforced or performed.
21.11 Time of the Essence. Time is of the essence under this Agreement and in the
performance of every term, covenant, and obligation contained herein.
21.12 Conflict of Interest. No member, official or employee of the City shall have any
direct or indirect interest in this Agreement, nor participate in any decision relating to the
Agreement which is prohibited by law.
21.13 Warranty Against Payment of Consideration. Developer warrants that it has
not paid or given, and will not pay or give, any third person any money or other
consideration for obtaining this Agreement.
21.14 Nouliability of ON 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.
21.15 Plans and Data. Where Developer does not proceed with the work and
construction of the Project, and when this Agreement is terminated with respect thereto
for any reason, Developer shall deliver to City any and all plans and data concerning the
Property, and City or any person or entity designated by City shall have the right to use
such plans and data without compensation to Developer. Such right of City shall be
subject to any right of the preparer of the plans to their use.
21.16 Authority to Enter Agreement. Each undersigned represents and warrants that its
signature herein below has the power, authority and right to bind their respective parties to
each of the terms of this Agreement, and shall indemnify the City fully, including reasonable
costs and attorney's fees, for any injuries or damages to City in the event that such authority
or power is not, in fact, held by the signatory or is withdrawn.
21.17 Transfer of Developer Limited Partner's Interest. Notwithstanding anything to
the contrary in this Agreement or the Loan Documents, no consent shall be required of
the City (and it shall not be deemed a default or an Event of Default under any of the
Loan Documents), in connection with the transfer and/or the assignment by the
Developer's limited partner.
21.18 Removal of Developer's General Partner. Notwithstanding anything to the
contrary in this Agreement or the Loan Documents, the removal and/or replacement of a
General Partner for cause in accordance with the Partnership Agreement shall not require
the consent of the City and shall not constitute a default or an Event of Default under this
Agreement or the Loan Documents or accelerate the maturity of the City Loan. If the
Developer's limited partner exercises its right to remove a General Partner, City will not
unreasonably withhold its consent to the substitute general partner; provided however, the
consent of either the City shall not be required if the substitute general partner is an
affiliate of the Developer's limited partner. The substitute general partner shall assume
all of the rights and obligations of the removed general partner hereunder.
55C-49
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be
executed on the date set forth at the beginning of this Agreement.
ATTEST:
CITY OF SANTA ANA
Maria D. Huizar Cynthia J. Kurtz
Clerk of the Council Interim City Manager
APPROVED AS TO FORM
Sonia R. Carvalho
FOR APPROVAL:
Robert C. Cortez
Acting Executive Director
Community Development Agency
(Signatures continue 077f01101Vi71gpage)
55C-50
DEVELOPER:
Santa Ana Arts Collective, L.P., a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its administrative general partner
M
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
In
Graham P. Espley-Jones, President
EXHIBITS
A. Legal Description
B. Affordability Restrictions on Transfer of Property
C. Inclusionary Housing Deed of Trust
D. Inclusionary Housing Promissory Note
E. CDBG Deed of Trust
F. CDBG Promissory Note
G. Project Budget
H. Scope of Work / Schedule of Performance
I. Form of Residual Receipts Report
55C-51
Exhibit Ae. Legal
Description
55C-52
EXHIBIT A
PARCEL A
THAT PORTION OF SECTION 12, TOWNSHIP 5 SOUTH, RANGE 10 WEST, IN THE CITY OF
SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, BEING A PORTION OF THE LAND
ALLOCATED TO JACOB ROSS IN DECREE OF PARTITION OF THAT RANCHO SANTIAGO DE
SANTA ANA, RECORDED IN BOOK "B" OF JUDGEMENTS OF 17TH JUDICIAL DISTRICT COURT OF
CALIFORNIA, DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID SECTION 12, BEING ALSO THE
INTERSECTION OF THE CENTER LINES OF SEVENTEENTH STREET AND MAIN STREET AS SAID
INTERSECTION IS SHOWN ON A MAP FILED IN BOOK 11 PAGE 18 OF RECORD OF SURVEYS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID ORANGE COUNTY, CALIFORNIA;
THENCE ALONG THE NORTHERLY LINE OF SAID NORTHEAST QUARTER, NORTH 89° 56' 40"
WEST 289.89 FEET,
THENCE SOUTH 00 16'25" WEST 230.00 FEET;
THENCE PARALLEL WITH THE NORTHERLY LINE OF SAID NORTHEAST QUARTER, SOUTH 89-
56'40"
9°56'40" EAST 289.78 FEET TO THE EASTERLY LINE OF SAID NORTHEAST QUARTER;
THENCE ALONG SAID EASTERLY LINE NORTH 00 16'40" EAST 230.00 FEET TO THE POINT OF
BEGINNING.
EXCEPT THE NORTHERLY 40.00 FEET THEREOF.
ALSO EXCEPT THE EASTERLY 35.00 FEET THEREOF.
PARCEL B:
NON-EXCLUSIVE EASEMENTS FOR VEHICLE INGRESS, EGRESS, PARKING AND INCIDENTAL
PURPOSES, AS MORE PARTICULARLY SET FORTH IN THAT CERTAIN "DECLARATION OF
EASEMENT FOR VEHICLE INGRESS, EGRESS AND PARKING" RECORDED OCTOBER 04, 2005 AS
INSTRUMENT NO. 2005000786645 OF OFFICIAL RECORDS.
APN:
005-153-19 (Affects a portion of said land)
005-153-20 (Affects a portion of said land)
55C-53
Exhibit Be.
Affordability
Restrictions on
Transfer of Property
55C-54
FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, CA 92702-1988
Attention: Clerk of the Council
FIRST AMENDED AND RESTATED
AFFORDABILITY RESTRICTIONS
ON TRANSFER OF PROPERTY
{Address: 1666 N. Main Street, Santa Ana, CA)
THESE AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY (the
"Restrictions") are entered into by and between Santa Ana Arts Collective, LP, a California
limited partnership ("Owner") and the City of Santa Ana, a charter city and municipal
corporation (the "City").
RECITALS:
A. The City is the recipient of Community Development Block Grant ("CDBG")
funds from HUD pursuant to Tile I of the Housing and Community Development Act of 1974, as
amended ("Act") and 24 CFR 570 ("CDBG Regulations") , Catalog of Federal Domestic
Assistance (CFDA) Number 14.218, and Federal Award Identification Number (FAIN) B -15 -
MC -06-0508 in the amount of $5,434,375.
B. The City is authorized by the CDBG Regulations to expend funds to increase the
supply of low- and moderate -income housing available at affordable housing costs.
C. The Housing Opportunity Ordinance, Santa Ana Ordinance No. NS -2881,
established standards and procedures to encourage the development of housing that is affordable
to a range of households with varying income levels. Pursuant to Santa Ana Municipal Code
("SAMC") section 41-1904(c), developers may pay an in -lieu fee in certain instances to satisfy
the inclusionary requirements. These funds are deposited into the Inclusionary Housing Fund, as
defined by SAMC section 41-1901, and are to be used to increase and improve the supply of
affordable housing per SAMC section 41-1909.
D. In order to utilize money in the Inclusionary Housing Fund, the City issued a
Request for Proposals on June 1, 2015, seeking affordable housing projects. After reviewing all
55C-55
applications, the Developer's project was selected and approved for funding by the Santa Ana
City Council on November 3, 2015.
E. Developer is entering into this agreement to acquire and, subject to entitlement
approvals, develop an adaptive reuse project consisting of a fifty-eight (58) unit multi -family
residential housing development, with live/work units and a possible commercial are studio, as
well as a community room (the "Project") located at 1666 N. Main Street, within the City of
Santa Ana, California, and legally described in Exhibit A attached hereto (the "Property"). The
CDBG funds referenced herein shall assist in the rehabilitation only and the Inclusionary
Housing funds will assist in the construction and soft costs of said Project.
F. In furtherance of the Inclusionary Housing Program and CDBG guidelines,
Developer has applied to the City for a loan with which to:
provide deeper affordability and construct the improvements to the Property,
and
2. thereafter to maintain, operate and professionally manage the Project
as decent, safe, sanitary and affordable rental housing.
G. The City, on certain terms and conditions, desires to make such loan ("City Loan")
to Developer in order to make possible the rehabilitation and construction of the Project, thereby
expanding the supply of decent, safe, sanitary and affordable housing.
H. If there is any inconsistency between Federal, State, and local guidelines with
regard to any of the terms and conditions contained herein, the more stringent shall apply.
I. Owner and the City are concurrently entering into that certain CDBG and Inclusionary
Housing Loan Agreement. The Loan Agreement, CDBG Deed of Trust, CDBG Promissory Note,
Inclusionary Deed of Trust, and Inclusionary Promissory Note, dated concurrently herewith
(collectively the "Loan Agreements") are entered into for the purpose of providing for affordable
very low income residential rental units in the City of Santa Ana pursuant to the CDBG and
Inclusionary Funds regulations and guidance.
NOW, THEREFORE, CITY AND OWNER COVENANT AND AGREE AS FOLLOWS:
1. Definitions
"AHSC Loan" means a permanent loan of Affordable Housing and Sustainable
Communities program funds from HCD administered by the California Strategic Growth
Council in the amount of $4,944,130
"AHSC Deed of Trust" means the any deed(s) of trust securing the AHSC Loan
encumbering the Property.
55C-56
"AHSC Loan Documents" means, collectively, the loan agreement governing the
AHSC, the AHSC Note, the AHSC Deed of Trust, and any other agreement, document or
instrument that the Senior Lender requires in connection with the AHSC Loan.
"Affordable Housing" means housing operated in accordance with the requirements of
24 CFR 570.
"Affordable Rent" means the monthly rents which do not exceed the maximum
amount applicable to Extremely Low, Very Low and Low Income households, as promulgated
by the U.S. Department of Housing and Urban Development (HUD), or by the California Tax
Credit Allocation Committee, as applicable.
"Agreement" means this Affordability Restrictions on Transfer of Property between the
City and the Owner affecting real property.
"AHSC Loan" means a permanent loan of Affordable Housing and Sustainable
Communities program funds from HCD, awarded to and the sole responsibility of Borrower,
administered by the California Strategic Growth Council in the amount of $4,944,130
"AHSC Deed of Trust"' means the any deed(s) of trust securing the AHSC Loan
encumbering the Property.
"AHSC Documents" means, collectively, the loan agreement governing the AHSC, the
AHSC Note, the AHSC Deed of Trust, and any other agreement, document or instrument that the
Senior Lender requires in connection with the AHSC Loan.
"Applicable Law" shall mean those federal, state and local laws, ordinances, regulations,
policies and procedures applicable to the CDBG Funds and Inclusionary Funds.
'Building Permit' means the building permit(s) issued by City and required
for the construction, if any.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or Friday on which
Santa Ana City Hall is open to the public for the conduct of City affairs.
"Calendar Year" means each consecutive twelve (12) month period from
January I to December 31.
"Certificate of Completion" has the meaning set forth in Article 17.
"City" means the City of Santa Ana, California, a charter city and municipal
corporation.
"CDBG Deed of Trust' means the deed of trust encumbering the Property, in the
form attached as Exhibit E to the Loan Agreement, to be executed by Owner pursuant to
Section 5.B.2 in order to secure the CDBG Loan Note.
55C-57
"CDBG Loan" means the CDBG funds that will be awarded to the Owner in the
principal amount of Five Hundred Dollars ($500,000.00) in accordance with the Loan
Agreement.
"CDBG Promissory Note" means that certain Promissory Note in the original principal
amount of $500,000 in the form attached as Exhibit F to the Loan Agreement, and to be
executed by Owner in favor of City to evidence the obligation of Owner to repay the CDBG
Loan through residual receipts as further described in the CDBG Promissory Note.
"Close of Escrow" shall mean the date upon which the Loan Agreement and City
Deed of Trust are recorded in the Official Records of the County.
"Closing Statement" means the final statement of Owner's Escrow account
for the purchase of the Property pursuant to the purchase contract.
"County" means the County of Orange, California.
"Owner" means Santa Ana Arts Collective, LP, a California limited partnership.
"Owner's Representative" shall mean the officer of
the General Partner of Owner or his/her designee.
"Extremely Low Income" means an adjusted income which does not exceed
thirty percent (30%) of the area median income for the Orange County, California PMSA,
adjusted for household size, as published by HUD.
"Event of Default" has the meaning set forth in Section 20.1.
"General Partner(s)" means the Santa Ana Arts Collective, LLC, a California limited
liability company and WCH Affordable XVIII, LLC, a California limited liability company.
"Governmental Authority" means any governmental or quasi governmental
agency, board, bureau, commission, department, court, administrative tribunal or other
instrumentality or authority, and any public utility.
"Hazardous Materials" means flammable materials, explosives, radioactive
materials, hazardous wastes, toxic substances and similar substances and materials, including
all substances and materials defined as hazardous or toxic wastes, substances or materials
under any applicable law, including without limitation the Resource Conservation and
Recovery Act, 42 U.S.C. §§ 6901 et sem., and the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601, et seq., as amended.
"HUD" means the United States Department of Housing and Urban Development
and any successors or assigns thereof.
"Improvements" means all improvements and fixtures now and hereafter
4
55C-58
comprising any portion of the Property, including, without limitation, landscaping, trees and
plant materials; and offsite improvements, as required through the City of Santa Ana Planning
and Building Agency entitlement process.
"Inclusionary Deed of Trust" means the deed of trust encumbering the Property, in the
form attached as Exhibit C to the Loan Agreement, to be executed by Owner pursuant to
Section 5.B.2 in order to secure the Inclusionary Loan Note.
"Inclusionary Loan" means the Inclusionary Funds that will be awarded to the Owner
under the Loan Agreement that must be repaid through residual receipts.
"Inclusionary Promissory Note" means that certain Promissory Note for Inclusionary
Funds in the original principal amount of $4,775,000.00 in the form attached as Exhibit D to
the Loan Agreement, and to be executed by Owner in favor of City to evidence the obligation
of Owner to repay the Inclusionary Loan through residual receipts as further described in the
Inclusionary Promissory Note.
"Indebtedness" of a person means (a) all indebtedness for borrowed money,
(b) notes payable and drafts accepted representing extensions of credit, whether or not
representing obligations for borrowed money, (c) any obligation for the purchase of property
or services in excess of $10,000 in the aggregate that is (i) deferred for more than six (6)
months, or (ii) evidenced by a note or similar instrument, and (d) all recourse and all non-
recourse indebtedness secured by any Lien on any property or asset of such person (whether
or not assumed by such person).
"Indemnitees" has the meaning set forth in Section 14.5
"Laws" means all statutes, laws, ordinances, regulations, orders, writs, judgments,
injunctions, decrees or awards of the United States or any state, county,
municipality or other Governmental Authority.
"Lien" means any lien, mortgage, pledge, security interest, charge or encumbrance of any
kind (including any conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any lien or security interest).
"Loan Agreement" means the Loan Agreement regarding the loan of CDBG and
Inclusionary funds between the City and the Owner, and any attachments thereto.
"Loan Documents" means, collectively, the Loan Agreement, the CDBG Promissory
Note, the CDBG Deed of Trust, Inclusionary Promissory Note, Inclusionary Deed of Trust and
this Agreement, and any other agreement, document, or instrument that the City requires in
connection with the execution of this Agreement or from time to time to effectuate the purposes
of this Agreement.
"Low Income" means an adjusted income which does not exceed eighty percent (80%) of
the area median income for the Orange County, California PMSA, adjusted for household size,
as published by HUD.
55C-59
"Median Income for the Area" means the median income for the Orange County,
California PMSA as most recently determined by HUD. Also may be referred to
interchangeably in the Loan Documents as "Area Median Income" or "AMI".
"Partnership Agreement" means the Second Amended and Restated Agreement of
Limited Partnership of Santa Ana Arts Collective, LP., dated in July 2017.
"Permitted Encumbrances for the Affordable Housing Restrictions" means
collectively, the Senior Loan Deed of Trust and AHSC Loan Documents and all other title
exceptions and limitations with respect to the Property hereafter approved by the City Project
Manager in writing.
"Permitted Encumbrances for the City Deed of Trust" means, collectively, the Senior
Loan Deed of Trust and AHSC Loan Documents and all other title exceptions and limitations
with respect to the Property hereafter approved by the City Project Manager in writing.
"Project" means the construction of the Improvements upon the Property by Owner
pursuant to this Agreement.
"Project Budget" means the line -item budget for the Project attached as Exhibit G to the
Loan Agreement, as modified from time to time in accordance with the Loan Agreement.
"Project Costs" means all costs of any nature incurred in connection with the Project in
accordance with generally accepted accounting principles.
"Property" means the property that is located at 1666 N. Main Street in the City of Santa
Ana, and is more fully described in the "Legal Description" of the Property attached hereto as
Exhibit A and incorporated herein by reference.
"Restricted Units" means the units restricted as affordable by the City Documents.
"Scope of Work/Schedule of Performance" means the detailed statement of the work to
be performed by Owner on and to the Property pursuant to this Agreement, along with the
Schedule of Performance setting forth timeframes for certain tasks, which document is attached
as Exhibit H to the Loan Agreement.
"Senior Lender" means a commercial financial institution providing the Senior Loan or
any other holder of the Senior Loan Note and its successors and assigns. The initial Senior
Lender will be Bank of America, N.A and California Community Reinvestment Corporation
is projected to become the Senior Lender after conversion of the loan to permanent status.
"Senior Loan" means a loan from any Senior Lender(s) in a position superior to the City
Loan.
"Senior Loan Deed of Trust" means any deed(s) of trust securing any Senior Loan by
encumbering the Property.
55C-60
"Senior Loan Documents" means, collectively, the loan agreement governing the Senior
Loan, the Senior Loan Note, the Senior Loan Deed of Trust, and any other agreement,
document or instrument that the Senior Lender requires in connection with the Senior Loan.
"Senior Loan Note" means the promissory note evidencing the Senior Loan from the
Senior Lender.
"Term of Affordability" the terms and conditions contained herein shall remain in effect
for fifty-five (55) years from the date of issuance of the Certificate of Completion.
"Very Low Income" means an adjusted income which does not exceed fifty percent (50%)
of the area median income for the Orange County, California PMSA, adjusted for household
size, as published by HUD.
2. Use of the Property. Owner covenants and agrees (for itself, its successors, its assigns,
and every successor in interest to the Property of any part thereof) that Owner, such successors,
and assigns shall use the Property to provide affordable rental housing, for Extremely Low and
Very Low Income households, as provided in the Loan Agreement and these Restrictions.
AFFORDABILITY REQUIREMENTS, USE AND MAINTENANCE OF THE
1471TOWWW4
3.1 Use Covenants and Restrictions.
a. Owner agrees and covenants, which covenants shall run with the land and bind
Owner, its successors, its assign and every successor in interest to the Property that Owner will make
all rental units on the Property available to extremely -low, very low and low income households at
rents affordable to such households for fifty-five (55) years from the effective date of the issuance of
the Certificate of Completion.
b. The Project shall consist of approximately fifty-eight (58) units of which
there will be twenty-six (26) one -bedroom units, fifteen (15) two-bedroom units and seventeen
(17) three-bedroom units. There will be twenty (20) units with incomes at or below 30% AMI,
six (6) units for households with incomes at or below 35% AMI; six (6) units for housholdes
with incomes at or below 40% AMI; twenty-five (25) units for households with incomes at or
below 60% AMI; and the remaining unit will be reserved for the on-site manager.
C. The proposed unit mix, initial rents, and levels of affordability are as
follows:
55C-61
30% AMI
35% AMI
40% AMI
60% AMI
Unit Size
No. Rent
Units
No. Rent
Units
No. Rent
Units
No. Rent
Units
Total
1 Bedroom
14 $587
6 $685
6 $783
26
2 Bedroom
2 $704
--- ---
--- ---
12 $1,408
14
3 Bedroom
4 $813
--- ---
--- ---
13 $1,627
17
Total
20
6
6
25
57
55C-61
The remaining unit will be a 2 -bedroom unit reserved for the onsite manager.
HOME Assisted Units
Unit Type
Level of
# of HOME
HOME Share of
Total # of Units Description/No
No. of BlIs
Affordability
Assisted Units
Unit Type
tes
26 1 Bed
1
30%AMI
5
19.23%
14 2 Bed
2
2
14.29%
17 3 Bed
3
4
23.53%
(1) In no event shall the rent charged to the HOME assisted units be more than that amount of
the low HOME rent as published by HUD, as amended from time to time.
(2) At the time of project completion, the Developer shall provide to the City the address
and/or unit number of each of the HOME floating units.
(3) Annually with the financial statements, the Developer shall provide an annual report of
rents and occupancy of all assisted units, including the HOME -assisted units, to verify
compliance with affordability requirements. For the HOME assisted -units, information on
unit substitution and filling vacancies shall be provided to ensure that the project maintains
the required unit mix.
The affordable rents charged at the Project must comply with the standards set forth by California
Tax Credit Allocation Committee (ICAC). Notwithstanding anything to the contrary contained in
this Agreement, the Affordability Restrictions on Transfer of Property, and other than HOME
assisted units, restricted (as to both income and rent levels) at 30% of AMI, in the event of a
foreclosure, or delivery of deed in lieu of foreclosure, of any Senior Loan, then the (1) the
maximum qualifying tenant household income shall be increased to 60% of Area Median Income
adjusted for family size appropriate to the unit, and (2) the maximum annual affordable rent shall be
increased to 30% of 60% of Area Median Income, as adjusted for family size appropriate to the unit.
* Utility allowances must be deducted from the Maximum Gross Monthly Rent. The City of Santa
Ana will provide the utility allowances based on the HUD Utility Schedule Model.
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.
3.2 Rent Increases:
A. On an annual basis, the City shall provide the Owner with the HUD maximum allowable
schedule of incomes and rents (less utility allowance appropriate for the Restricted Units) for the
Property.
B. Owner, its successors and assigns shall not charge rents for the Restricted Units in excess of
the amounts set forth in the tables as adjusted from time -to -time by HUD. The Housing
55C-62
Manager shall notify Owner in writing of the adjusted allowable maximum incomes and rents.
4. Miscellaneous Provisions:
A. Owner shall adopt and include as part of its Management Plan (described in subsection G
below), written tenant selection policies and criteria for the Units, that meet the following
requirements:
(a) Are consistent with the purpose of providing housing for Extremely Low
and Very Low Income households;
(b) Are reasonably related to program eligibility and the applicants' ability to
perform the obligations of the lease;
(c) Give reasonable consideration to the housing needs of households that
would have a preference under 42 CFR §906.211 (Federal selection preferences for admission to
Public Housing);
(d) Provide for:
(i) The selection of tenants from a written waiting list in the
chronological order of their application, insofar as is practicable; and
(ii) The prompt written notification to any rejected applicant of the
grounds for any rejection;
(e) Provide first priority in the selection of qualified eligible tenants to
households that are referred by the City; and
(f) Carry out the Affirmative Marketing procedures of the City of Santa Ana,
which are designed to provide information and otherwise attract eligible persons from all racial,
ethnic and gender groups in the housing market area to the units. Owner, the City shall
cooperate to effectuate this provision prior to the initial renting, or upon occurrence of a vacancy,
and the re -renting of any Restricted Units (24 CFR 92.351).
B. Owner, its successors and assigns, shall not refuse to lease a unit to a holder of a rental
voucher under 24 CFR part 982 (Housing Choice Voucher Program) or to a holder of a
comparable document evidencing participation in a HOME tenant -based rental assistance
program because of the status of the prospective tenant as a holder of such certificate of family
participation, rental voucher, or comparable HOME tenant -based assistance document.
C. Any lease of any of the Units must be for not less than one year, unless by mutual agreement
between the tenant and the Owner. Should the tenant and Owner agree to a term of less than one
year, said agreement shall be expressed in some type of written form, signed by the tenant, and
maintained in the tenant's rental file held by the Owner. The lease may not contain any of the
following provisions (in which references to "Owner" shall mean the Owner, its successors or
assigns):
55C-63
(a) Agreement by the tenant to be sued, to admit guilt, or to a judgment in
favor of the owner in a lawsuit brought in connection with the lease;
(b) Agreement by the tenant that the owner may take, hold, or sell personal
property of household members without notice to the tenant and a court decision on the rights of
the parties. This prohibition, however, does not apply to an agreement by the tenant concerning
disposition of personal property remaining in the housing Unit after the tenant has moved out of
the Unit. The owner may dispose of this personal property in accordance with state law;
(c) Agreement by the tenant not to hold the owner or the owner's agent legally
responsible for any action or failure to act, whether intentional or negligent;
(d) Agreement of the tenant that the owner may institute a lawsuit without
notice to the tenant;
(e) Agreement by the tenant that the owner may evict the tenant or household
members without instituting a civil court proceeding in which the tenant has the opportunity to
present a defense, or before a court decision on the rights of the parties;
(i) Agreement by the tenant to waive any right to a trial by jury;
(g) Agreement by the tenant to waive the tenant's right to appeal, or to
otherwise challenge in court, a court decision in connection with the lease; and
(h) Agreement by the tenant to pay attorney's fees or other legal costs even if
the tenant wins in a court proceeding by the owner against the tenant. The tenant, however, may
be obligated to pay costs if the tenant loses.
D. Owner, its successors or assigns, must adhere to state law requirements with regard to
termination of tenancy.
E. Owner shall maintain the improvements on the Property in compliance with all applicable
housing quality standards [24CFR 92.504 (c)(6)] and state and local code requirements and shall
keep the Property free from any unreasonable accumulation of debris or waste materials. Owner
shall also maintain in a healthy condition any landscaping planted on the Property.
F. Owner covenants and agrees for itself, its successors, its assigns and every successor in
interest to the Property or any part thereof, there shall be no discrimination against or segregation
of any person, or group of persons, on account of race, color, creed, religion, disability, sex,
marital status, national origin or ancestry in the sale, lease, transfer, use, occupancy, tenure or
enjoyment of the Property nor shall the Owner itself or any person claiming under or through it
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, sublessees or
vendees of the Property, as required by the Title VI of the Civil Rights Act of 1964, the Fair
Housing Act (42 U.S.C. 3601-20) and all implementing regulations, and the Age Discrimination
Act of 1975, and all implementing regulations.
G. Not later than the closing for the construction loan for the Project, Owner shall submit to the
55C-64
Housing Manager a Management Plan in a form that is acceptable including, but not limited to,
the components listed below. Approval of the Management Plan must be obtained from the
Housing Manager not later than the time for the issuance of a certificate of occupancy for the
Project. Owner shall manage the Restricted Units in accordance with the approved Management
Plan, including such amendments as may be approved in writing from time to time by the
Housing Manager, for the term of the income and rent restrictions contained in these
Restrictions. The components of the Management Plan shall include:
(a) Management Agent. Owner shall submit the name and qualifications of
the proposed Management Agent. The City shall approve or disapprove the proposed
Management Agent in writing based on the experience and qualifications of the Management
Agent.
(b) Management Agreement. Owner shall submit a copy of the proposed
management agreement specifying the amount of the management fee, and the relationship and
division of responsibilities between Owner and Management Agent.
(c) Annual Budget and Proiected Cash Flows. Prior to the issuance of a
certificate of occupancy for the Project, and annually thereafter not later than one hundred fifty
(150) days after the close of each calendar year thereafter, Owner shall submit a projected
operating budget and cash flow to the Housing Manager. The budget and cash flow shall be in a
form that is acceptable to the Housing Manager.
(d) Tenant Selection Policies. Owner shall include in the Management Plan
the tenant selection policies in accordance with Section 4, above.
H. If at any time the City determines that the units are not being managed or maintained in
accordance with the approved Management Plan, Owner shall change the management agent or
the practices complained of, upon receipt of written notice from the City Manager. The City
Manager may require Owner to change management practices or to terminate the management
contract and designate and retain a different management agent. The management agreement
shall provide that it is subject to termination by Owner without penalty, upon thirty (30) days
prior written notice, at the direction of the City Manager. Within ten (10) days following a
direction of the City Manager to replace the management agent, the Owner shall select another
management agent or make other arrangements satisfactory to the City Manager or designee for
continuing management of the units.
I. The covenants established in these Restrictions and any amendments hereto approved by the
City, and Owner shall, without regard to technical classification and designation, be binding for
the benefit and in favor of the City and their respective successors and assigns. These
Restrictions shall remain in effect for fifty-five (55) years. In its discretion, the City may defer
repayment of the Loan or the City may agree to such reasonable modifications to the
requirements of these Restrictions, as they may determine are necessary for the continued
maintenance and operation of the Restricted Units. The covenants against discrimination shall
remain in effect for the period of these Restrictions.
J. Owner shall not request disbursement of City funds until the funds are needed to pay eligible
costs. The City shall have the right to disapprove any request if the City determines the request
55C-65
is for an ineligible item or is otherwise not in compliance with or inconsistent with the Loan
Agreements and these Restrictions [24 CFR 92.504 (c)(10)].
K. Owner shall prepare, maintain and submit to the City, as appropriate, the following records
and reports in compliance with 24 CFR 92.504 (c) (12):
a. Annual Reports. Owner shall file with the City an Annual Report (herein referred
to as the "Annual Report") within one hundred fifty (150) days following the end of each
calendar year, commencing the Calendar Year following the issuance of the Certificate of
Completion. The Annual Report shall contain a certification by Owner as to such information as
the City Project Manager may then require, including, but not limited to, the following:
(1) The fiscal condition of the Project, including the Annual Budget and
Project Cash Flow report required by Section 4.G. (c) of the this Agreement which shall include
an audited financial statement for the previous calendar year that includes a balance sheet and a
profit and loss statement indicating any surplus or deficit in operating accounts; a detailed
itemized listing of income and expenses; and the amounts of any fiscal reserves. Such Annual
Budget and audited financial statement shall be prepared in accordance with generally accepted
accounting practices.
(2) Any substantial physical defects in the Project, including a description of
any major repair or maintenance work undertaken or needed in the previous and current years.
Such statement shall describe what steps Owner has taken in order to maintain the Project in a
safe and sanitary condition in accordance with applicable housing and building codes and the
property standards set forth in 24 CFR 92.251.
(3) The occupancy of the units indicating the income of each current resident
and the current rents charged each resident and whether those rents include utilities, including
records that demonstrate that the Project meets the requirements of the CDBG and Inclusionary
Housing Program.
(4) General management performance, including tenant relations and other
relevant information.
(5) Records that demonstrate that the units meet the affordability requirements
of 24 CFR 92.252, for the required period of affordability.
(6) Evidence of a currently paid hazard insurance policy in accordance with
the requirements of Section 6 of the CDBG Deed of Trust and Inclusionary Deed of Trust, with a
loss payable endorsement naming the City as a loss payee together with other approved lenders
(as their interests may appear), with a 'Replacement Cost Endorsement" in amount sufficient to
prevent Owner or City from becoming a co-insurer under the terms of the policy, but in any
event in an amount not less than 100% of the then full replacement cost, to be determined at least
once annually and subject to reasonable approval by the Executive Director.
(7) Evidence of a currently paid liability insurance policy, naming the City as
additional insured and in a form approved by the City Attorney with coverage as described in the
Loan Agreements.
55C-66
(8) Termite reports pertaining to the Property every fifth (5w) year.
(9) Such other information as may be reasonably required by the City Manager or
his/her designee.
b. Records and Audits. Owner shall maintain the following general program
records, and make them available for inspection by the City, the State or HUD:
(1) records which demonstrate that the project meets the property standard
specified in 24 CFR 92.251;
(2) records, for each Restricted Unit, which demonstrates that the project
meets the requirements of 24 CFR 92.252.
(3) records which demonstrate compliance with the tenant and participant
protections, as specified in 24 Section 29.253;
(4) records which demonstrate compliance with the Equal Opportunity and
Fair Housing requirements outlined in these Restrictions, including:
(A) data on the extent to which each racial and ethnic group and single
head of household (by gender of head of household) have applied for, participated in, or
benefited from, any program or activity funded in whole or in part with NSP funds;
(B) documentation of actions undertaken to meet the equal opportunity
requirements of 24 CFR 92.350, which implements Section 3 of the Housing Development Act
of 1968, as amended (12 U.S.C. 1701u);
(C) documentation and data on the steps taken to implement Owner's
outreach programs to minority-owned and women -owned businesses to meet the minority
outreach requirements of 24 CFR 92.350;
(5) documentation of the steps taken to carry out an affirmative marketing
program in accordance with 24 CFR 92.351, if applicable;
(6) if applicable, records which demonstrate compliance with the
requirements relating to relocation of displaced persons, as described in 24 CFR 92.353. At a
minimum, these shall include project occupancy lists identifying the name and address of all
persons occupying the project property up until the date of the date on which Owner obtained
ownership of the Property;
(7) records concerning lead-based paint in accordance with 24 CFR 92.355;
(8) if applicable, records which support any requests for waivers of the
conflict of interest prohibition as stated in 24 CFR 92.356;
55C-67
(9) records of certifications of contractor qualifications as they relate to the
debarment and suspension requirement as stated in 24 CFR 92.357 and 24 CFR Part 24; and
(10) any other reports issued by other monitoring agencies.
C. All records pertaining to each calendar year of NSP funds must be retained
for the most recent five year period, except that for rental housing projects, records may be
retained for five years after the project completion date; except that records of individual tenant
income verifications, project rents and project inspections must be retained for the most recent
five year period, until five years after the affordability period terminates (24 CFR 92.508).
Owner shall cooperate with the City to retain all books and records relevant to the Loan
Agreement for a minimum of five years after the expiration of the Loan Agreement and any and
all amendments hereto, or for five years after the conclusion or resolution of any and all audits or
litigation relevant to the Loan Agreement, whichever is later. The City, the State, the Office of
the Auditor General of HUD, and/or their representatives shall have unrestricted reasonable
access to all locations, books, and records for the purpose of monitoring, auditing, or otherwise
examining said locations, books, and records with or without prior notice.
d. If so directed by the City or HUD upon termination of the Loan Agreement,
Owner shall cause all records, accounts, documentation and all other materials relevant to the
work to be delivered to the City or HUD, as depository.
C. All records, accounts, documentation and other materials relevant to the Project
shall be accessible at any time to the authorized representatives of the City, or HUD, on
reasonable prior notice, for the purpose of examination or audit.
f. Pursuant to 24 CFR Part 44, the City shall perform an annual audit at the close of
each calendar year in which these Restrictions are in effect. Owner shall reasonably cooperate
with City in performing such audit.
g. Owner shall permit the City to perform an Annual Physical Inspection of the
Property with at least seven (7) days notice. Owner shall cooperate with this Inspection and shall
take all steps necessary to quickly correct any code deficiencies identified during the Inspection.
L. The City is the beneficiary of the terms and provisions of these Restrictions and the covenants
herein, both for and in its own right and for the purposes of protecting the interests of the
community and other parties, public or private, for whose benefit these Restrictions and the
covenants running with the land have been provided. The City shall have the right if the
covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits
at law or in equity or other proper proceedings to enforce the curing of such breaches to which
they or any other beneficiaries of these Restrictions and covenants are entitled.
M. The covenants and agreements contained herein shall run with the land and not be personal
obligations of Owner. Upon the sale, conveyance or other transfer of the Property (a "Transfer")
and the assumption of the obligations hereunder by a transferee, Owner's liability for
performance shall be terminated as to any obligation to be performed hereunder after the date of
such Transfer.
55C-68
N. The Loan Agreement and all of its attachments shall be enforceable by the
City in accordance with the terms thereof. Each of the Loan Agreement, the Affordability
Restrictions on Transfer of Property, the City Note and the City Deed of Trust provide a means
of enforcement by the City if Owner is in breach of its obligations hereunder and thereunder,
including liens on the Property, deed restrictions and covenants running with the land [24 CFR
92.504 (c) (13)].
55C-69
IN WITNESS WHEREOF, the parties hereto have executed these Affordability Restrictions on
Transfer of Property as of the date and year fust stated above.
ATTEST:
Maria D. Huizar
Clerk of the Council
APPROVED AS TO FORM
RECOMMENDED FOR APPROVAL:
Robert C. Cortez
Acting Executive Director
Community Development Agency
CITY OF SANTA ANA
Cynthia J. Kurtz
Interim City Manager
55C-70
OWNER:
Santa Ana Arts Collective, LP, a California limited partnership
By: Santa Ana Arts Collective, LLC,
A California limited liability company,
its administrative general partner
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company
its managing general partner
Graham P. Espley-Jones, President
55C-71
Exhibit Co.
Inclusionary Housing
Deed of Trust
55C-72
FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza
P.O. Box 1988 (M-30)
Santa Ana, California 92702
Attn: Clerk of the Council
FIRST AMENDED AND RESTATED
INCLUSIONARY DEED OF TRUST
AND ASSIGNMENT OF RENTS
THIS FIRST AMENDED AND RESTATED INCLUSIONARY DEED OF TRUST AND
ASSIGNMENT OF RENTS (the "Deed of Trust") made this 5"' day of July, 2017, by between
Santa Ana Arts Collective, LP , a California limited partnership (the "Trustor"), AmeriNat, a
Minnesota corporation (the "Trustee"), and the City of Santa Ana, a charter city and municipal
corporation (the 'Beneficiary").
Trustor, in consideration of the promises herein recited and the trust herein created,
irrevocably grants, transfers, conveys and assigns to Trustee, in trust, with power of sale, the
property located in the City of Santa Ana, County of Orange, State of California, described in the
attached Exhibit A and more commonly known as 1666 N. Main Street, Santa Ana, California (the
"Property");
TOGETHER with all the improvements now or hereafter erected on the Property, and all
easements, rights, appurtenances and all fixtures now or hereafter attached to the Property, all of
which, including replacements and additions thereto, shall be deemed to be and remain a part of the
Property covered by this Inclusionary Deed of Trust; provided that so long as Trustor is not in
default hereunder, it shall be permitted to control the Property in accordance with the
requirements of that certain CDBG and Inclusionary Program Loan Agreement entered into
between the Trustor and the Beneficiary, dated concurrently herewith, which Agreements are
both on file with the Beneficiary as a public record;
TOGETHER with the right, power and authority during the continuance of these Trusts, to
collect the rents, issues, and profits of the Property, reserving unto the Trustor the right, prior to any
default by Trustor in payment of the indebtedness secured by this Deed of Trust or in the
performance of any agreement under this Deed of Trust, to collect and retain these rents, issues and
profits as they become due and payable; and,
TOGETHER with all articles of personal property or fixtures now or hereafter attached to or
used in and about the building or buildings now erected, or hereafter to be erected, on the Property
55C-73
which are necessary to the complete and comfortable use and occupancy of such building or
buildings for the purposes for which they were or are to be erected, including all other goods and
chattels and personal property as are ever used or fiunished in operating a building, or the activities
conducted therein, similar to the one herein described and referred to, and all renewals or
replacements thereof or articles in substitution therefor, whether or not the same are, or shall be
attached to said building or buildings in any manner; and all of the foregoing, together with the
Property, is herein referred to as the "Security';
To have and to hold the Security together with acquittances to the Trustee, its successors and
assigns forever;
TO SECURE to the Beneficiary (a) the repayment of the sums evidenced by a Promissory
Note to the Beneficiary executed by Trustor of even date herewith in the principal amount of FOUR
MILLION SEVEN HUNDRED AND SEVENTY FIVE THOUSAND DOLLARS
($4,775,000.00) (the "Inclusionary Promissory Note"); (b) the performance of the covenants and
agreements of Borrower contained in a certain Agreement as hereinafter defined; and (c) the
payment of all other sums, with interest thereon, advanced in accordance herewith to protect the
security of this Deed of Trust; and the performance of the covenants and agreements of Trustor
contained herein.
TRUSTOR AND THE BENEFICIARY COVENANT AND AGREE AS FOLLOWS:
1. The Agreement. This Deed of Trust is executed and delivered, along with the
Inclusionary Promissory Note and the Loan Agreement, to benefit the Property. A copy of said
Loan Agreement is on file as a public record with the Beneficiary and is incorporated herein by
reference (the "Agreement"). Trustor acknowledges that but for the execution of this Deed of Trust,
the Beneficiary would not enter into the Agreement or Inclusionary Promissory Note secured by this
Deed of Trust.
2. Trustor's Estate. Trustor is lawfully seized of the estate hereby conveyed and has the
right to grant and convey the Security; that other than this Deed of Trust, the Security is not
encumbered except for obligations secured by deeds of trust, or any other security agreement, to
secure financing or refinancing for the purchase and rehabilitation of the Property.
3. Repayment of the Loan. Trustor will promptly repay, when due, the principal loan
amount, as required by the City Promissory Note secured by this Deed of Trust.
4. Subordination. This obligation secured by this Deed of Trust shall be subordinated
to the Senior Loan and AHSC Loan, but the City's Affordability Restrictions on Transfer of
Property shall remain in first place with respect to the Senior Loan and subordinate with respect to
the AHSC Loan.
5. Prior Mortgages and Deeds of Trust; Charges; Liens. Trustor shall perform all of
Trustor's obligations under any mortgage, deed of trust or other security agreement with a lien
which has priority over this Instrument, including Trustor's covenants to make payments when due
(subject to an applicable notice and cure provisions). Trustor will pay all taxes, assessments and
other charges, fines and impositions attributable to the Security which may attain a priority over this
Deed of Trust, by Trustor making any payment, when due, directly to the payee thereof. Trustor
55C-74
will promptly furnish to the Beneficiary all notices of amounts due under this paragraph, and in the
event Trustor makes payment directly, Trustor will promptly discharge any lien which has priority
over this Deed of Trust; provided that Trustor will not be required to discharge the lien of the Deed
of Trust securing any senior lender or any other lien described in this paragraph so long as Trustor
will agree in writing to the payment of the obligation secured by such lien in a manner acceptable to
the Beneficiary, or will, in good faith, contest such lien by, or defend enforcement of such lien in,
legal proceedings which operate to prevent the enforcement of the lien or forfeiture of the Security
or any part thereof.
6. Hazard Insurance. Trustor will keep the Security insured by such insurance policies
in such amounts and for such periods as called for in the Agreement. All insurance policies and
renewals thereof will include a standard mortgagee clause with standard lender's endorsement in
favor of the holder of any senior lender and the Beneficiary as their interests may appear and in a
form acceptable to the Beneficiary. The Beneficiary shall have the right to hold, or cause its
designated agent to hold, the policies and renewals thereof, and Trustor shall promptly famish to the
Beneficiary, or its designated agent, the original insurance policies or certificates of insurance, all
renewal notices and all receipts of paid premiums subject to the rights of any senior lender. In the
event of loss, Trustor will give prompt notice to the insurance carrier and the Beneficiary or its
designated agent. The Beneficiary, or its designated agent, may make proof of loss if not made
promptly by Trustor. The Beneficiary shall receive 30 days advance notice of cancellation of any
insurance policies required under this Section.
Unless the Beneficiary and Trustor otherwise agree in writing, insurance proceeds, subject
to the rights of any senior lender, will be applied to restoration or repair of the Security damaged,
provided such restoration or repair is economically feasible and the security of this Deed of Trust is
not thereby impaired. If such restoration or repair is not economically feasible or if the security of
this Deed of Trust would be impaired, again, subject to the rights of any senior lender, the insurance
proceeds will be used to repay the loan secured by this Deed of Trust, with the excess, if any, paid
to Trustor. If the Security is abandoned by Trustor, or if Trustor fails to respond to the Beneficiary,
or its designated agent within 30 days from the date notice is mailed by either of them to Trustor
that the insurance carrier offers to settle a claim for insurance benefits, the Beneficiary, or its
designated agent, is authorized to collect and apply the insurance proceeds at the Beneficiary's
option either to restoration or repair of the Security or to repay the loan.
If the Security is acquired by the Beneficiary, all right, title and interest of Trustor in and to
any insurance policy and in and to the proceeds thereof resulting from damage to the Security prior
to the sale or acquisition will pass to the Beneficiary to the extent of the sums secured by this Deed
of Trust immediately prior to such sale or acquisition subject to the rights of any senior lender.
7. Preservation and Maintenance of Security. Trustor will keep the Security in good
repair and will not commit waste or permit impairment or deterioration of the Security.
8. Protection of the Beneficiary's Security. If Trustor fails to perform the covenants
and agreements contained in this Deed of Trust or if any action or proceeding is commenced which
materially affects the Beneficiary's interest in the Security, including, but not limited to, default
under the Deed of Trust securing any senior lender, eminent domain, insolvency, code enforcement,
or arrangements or proceedings involving a bankrupt or decedent, then the Beneficiary, at the
Beneficiary's option, upon notice to Trustor, may make such appearances, disburse such sums and
55C-75
take such action as it determines necessary to protect the Beneficiary's interest, including, but not
limited to, disbursement of reasonable attomeys' fees and entry upon the Security to make repairs.
Any amounts disbursed by the Beneficiary pursuant to this paragraph, with interest thereon,
will become an indebtedness of Trustor secured by this Deed of Trust. Unless Trustor and the
Beneficiary agree to other terms of payment, such amount will be payable upon notice from the
Beneficiary to Trustor requesting payment thereof, and will bear interest from the date of
disbursement at the rate payable from time to time on outstanding principal under the Inclusionary
Promissory Note unless payment of interest at such rate would be contrary to applicable law, in
which event such amounts will bear interest at the highest rate permissible under applicable law.
Nothing contained in this paragraph will require the Beneficiary to insure any expense or take any
action hereunder.
9. Inspection. The Beneficiary may make, or cause to be made, reasonable entries
upon and inspections of the Security during normal business hours; provided that the Beneficiary
will give Trustor reasonable notice of inspection.
10. Forbearance by the Beneficiary Not a Waiver. Any forbearance by the Beneficiary
in exercising any right or remedy will not be a waiver of the exercise of any such right or remedy.
The procurement of insurance or the payment of taxes or other liens or charges by the Beneficiary
will not be a waiver of the Beneficiary's right to accelerate the maturity of the indebtedness secured
by this Deed of Trust.
11. Remedies Cumulative. All remedies provided in this Deed of Trust are distinct and
cumulative to any other right or remedy under this Deed of Trust or any other document, or afforded
by law or equity, and may be exercised concurrently, independently or successively.
12. Successors and Assigns Bound. The covenants and agreements herein contained
shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the
Beneficiary and Trustor subject to the provisions of this Deed of Trust.
13. Joint and Several Liability. All covenants and agreements of Trustor shall be joint
and several.
14. Notice. Except for any notice required under applicable law to be given in another
manner, (a) any notice to Trustor provided for in this City Deed of Trust will be given by certified
mail, return receipt requested, addressed to Trustor at 1640 Sepulveda Blvd, Suite 425, Los
Angeles, California, 90025 with a copy to Bank of America CDC Special Holding Company, Inc.
Community Development Banking,MAI-225-02-02, 225 Franklin Street, Boston, MA 02110
and WCH Affordable XVIII, LLC Attn: Graham Espley-Jones, 151 Kahnus Drive, #J5, Costa
Mesa, CA 92626, (b) any notice to the Beneficiary will be given by certified mail, return receipt
requested, to the Beneficiary at 20 Civic Center Plaza, P.O. Box 1988, Santa Ana, California 92702,
Attention: Housing Manager, or at such other address as the Beneficiary may designate by notice to
Trustor as provided above, and (c) to Trustee at 8121 E. Florence Avenue, Downey, California
90240. Notice shall be effective as of the date received as shown on the return receipt.
15. Governing Law. This Deed of Trust shall be governed by the laws of the State of
California with venue in Orange County.
4
55C-76
16. Severability. In the event that any provision or clause of this Deed of Trust or the
City Loan Note conflicts with applicable law, such conflict will not affect other provisions of this
Deed of Trust or the Inclusionary Promissory Note which can be given effect without the
conflicting provision, and to this end the provisions of the Deed of Trust and the City Loan Note are
declared to be severable.
17. Cautions. The captions and headings in this Deed of Trust are for convenience only
and are not to be used to interpret or define the provisions hereof.
18. Default in Foreclosure; Remedies. Upon Trustor's breach of any covenant or
agreement of Trustor in this Deed of Trust or the Inclusionary Promissory Note secured by this
Deed of Trust, including, but not limited to, the covenants to pay, when due, any sums secured by
this Deed of Trust, the Beneficiary may declare all sums secured by this Deed of Trust immediately
due and payable by delivering to Trustor notice thereof specifying: (1) The breach; (2) the action
required to cure such breach; (3) a date not less than 30 days from the date the notice is received by
Trustor as shown on the return receipt, by which such breach is to be cured provided, however, that
if such default is not reasonable susceptible to being cured within 30 days, Trustor shall have a
reasonable period to cure the defect so long as Trustor is diligently prosecuting the cure to
completion; and (4) that failure to cure such breach on or before the date specified in the notice may
result in acceleration of the sums secured by this Deed of Trust and sale of the Security. The notice
will also inform Trustor of Trustor's right to reinstate after acceleration and the right to bring a court
action to assert the non-existence of default or any other defense of Trustor to acceleration and sale.
Notwithstanding anything to the contrary contained herein, a "default" shall not include
(i) a transfer of a general partner's interest in Trustor when made in connection with the exercise
by the Trustor's limited partner (the "Limited Partner") of its rights upon a default by a general
partner under the Trustor's Amended and Restated Limited 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 Trustor pursuant to the right of first refusal or to the general partners of Trustor
pursuant to the purchase option, as provided for in the Partnership Agreement; (iii) any transfer
of the Limited Partner's interest under and in accordance with the Partnership Agreement; and
(iv) any sale, transfer or other disposition of a limited partner interest or an interest in a limited
partner of the Trustor, (v) any sale, transfer or other disposition of an interest in a limited partner
of the Borrower.
If the breach is not cured on or before the date specified in the notice or such longer period
as provided above or in the Inclusionary Promissory Note or the Agreement, the Beneficiary, at the
Beneficiary's option, may: (a) declare all of the sums secured by this Deed of Trust to be
immediately due and payable without further demand and may invoke the power of sale and any
other remedies permitted by California law; (b) either in person or by agent, with or without
bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the
adequacy of its security, enter upon the Security and take possession thereof (or any part thereof)
55C-77
and of any of the Security, in its own name or in the name of the Trustee, and do any acts which it
deems necessary or desirable to preserve the value or marketability of the Property, or part thereof
or interest therein, increase the income therefrom or protect the security thereof. The entering upon
and taking possession of the Security shall not cure or waive any breach hereunder or invalidate any
act done in response to such breach and, notwithstanding the continuance in possession of the
Security, the Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust,
or by law upon occurrence of any uncured breach, including the right to exercise the power of sale;
(c) commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or
specifically enforce any of the covenants hereof, (d) deliver to the Trustee a written declaration of
default and demand for sale, pursuant to the provisions for notice of sale found at California Civil
Code Sections 2924, et seMc ., as amended from time to time; or (e) exercise all other rights and
remedies provided herein, in the instruments by which Trustor acquires title to any Security, or in
any other document or agreement now or hereafter evidencing, creating or securing all or any
portion of the obligations secured hereby, or provided by law.
In addition, if an Event of Default occurs hereunder or under the Note, prior to taking any
remedy under this Deed of Trust or any other document evidencing or securing this Note,
Beneficiary shall first give notice of the occurrence of such Event of Default to the Limited Partner
and the Limited Partner shall have not less than 30 days to cure such Event of Default, provided if in
order to cure such Event of Default the Limited Partner gives notice to the Beneficiary that Limited
Partner must remove and replace the general partner or general partners of Trustor, Limited Partner
shall have until 30 days following the effective date of such removal and replacement to cure such
Event of Default.
The Beneficiary shall be entitled to collect all reasonable costs and expenses incurred in
pursuing the remedies provided in this paragraph, including, but not limited to, reasonable attorneys'
fees.
19. Truster's Right to Reinstate. Notwithstanding the Beneficiary's acceleration of the
sums secured by this Deed of Trust, Trustor will have the right to have any proceedings begun by
the Beneficiary to enforce this Deed of Trust discontinued at any time prior to 5 days before sale of
the Security pursuant to the power of sale contained in this Deed of Trust or at any time prior to
entry of a judgment enforcing this Deed of Trust if. (a) Trustor pays the Beneficiary all sums which
would be then due under this Deed of Trust and no acceleration under the Inclusionary Promissory
Note has occurred; (b) Trustor cures all breaches of any other covenants or agreements of Trustor
contained in this Deed of Trust; (c) Trustor pays all reasonable expenses incurred by the Beneficiary
and the Trustee in enforcing the covenants and agreements of Trustor contained in this Deed of
Trust and in enforcing the Beneficiary's and the Trustee's remedies, including, but not limited to,
reasonable attorneys' fees; and (d) Trustor takes such action as the Beneficiary may reasonably
require to assure that the lien of this Deed of Trust, the Beneficiary's interest in the Security and
Truster's obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon
such payment and cure by Trustor, this Deed of Trust and the obligations secured hereby will
remain in full force and effect as if no acceleration had occurred.
20. Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly
executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to
notify any party to this Deed of Trust of pending sale under any other deed of trust or any action or
proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee.
55C-78
21. Reconvevance. Upon payment of all sums secured by this Deed of Trust, the
Beneficiary will request the Trustee to reconvey the Security and will surrender this Deed of Trust
and the Inclusionary Promissory Note to the Trustee. The Trustee will reconvey the Security
without warranty and without charge to the person or persons legally entitled thereto. Such person
or persons will pay all costs of recordation, if any.
22. Substitute Trustee. The Beneficiary, at the Beneficiary's option, may from time to
time remove the Trustee and appoint a successor trustee to any Trustee appointed hereunder. The
successor trustee will succeed to all the title, power and duties conferred upon the Trustee herein
and by applicable law.
23. Request for Notice. Trustor requests that copies of the notice of default and notice
of sale be sent to Trustee at the address set forth in Section 14 above.
24. Nonrecourse Liabilitv. Neither Trustor nor any partner of Trustor shall
have any personal liability under the Agreement, Inclusionary Promissory Note, and this Deed of
Trust and any judgment, decree or order for payment of money obtained in any action to enforce the
obligation of Trustor to repay the loan evidenced by such documents shall be enforceable against
Trustor only to the extent of Trustor's interest in the Property.
(Signatures on Following Page)
55C-79
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the date first written
above.
SANTA ANA ARTS COLLECTIVE, LP,
a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its administrative general partner
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
In
Graham P. Espley-Jones, President
55C-80
Exhibit Do.
Inclusionary Housing
p
romissory Note
55C-81
FIRST AMENDED AND RESTATED
INCLUSIONARY HOUSING FUNDS PROMISSORY NOTE
SECURED BY SUBORDINATED DEED OF TRUST
TO THE CITY OF SANTA ANA, CALIFORNIA
(1666 N. Main Street)
$4,775,000.00 July 5`h, 2017
Santa Ana, California
1. Principal Amount of Loan
FOR VALUE RECEIVED, Santa Ana Arts Collective, LP, a limited partnership
("Borrower"), hereby promises to pay to the CITY OF SANTA ANA, a charter city and
municipal corporation ("City"), or order, a principal amount not to exceed FOUR MIILLION
SEVEN HUNDRED AND SEVENTY FIVE THOUSAND DOLLARS ($4,775,000.00) or so
much thereof as shall be disbursed hereunder, with three percent simple interest (3%)
commencing upon filing of Notice of Completion, pursuant to the CDBG and Inclusionary
Program Loan Agreement (said "Agreement') between Borrower and the City dated
concurrently herewith, which are both incorporated herein by this reference. This loan is made
pursuant to the "Housing Opportunity Ordinance In -Lieu Fee Program" or "In -Lieu Fees" with
money funded through the Program as "Inclusionary Housing Funds". Any capitalized term not
otherwise defined in this Note shall have the meaning ascribed to such term in the Agreement.
The obligation of Borrower to City hereunder is subject to the terms of said Agreement, the
Affordability Restrictions on Transfer of Property, CDBG Deed of Trust, CDBG Promissory
Note, Inclusionary Deed of Trust and this Note. Said documents are public records on file in the
offices of the City, and the provisions of said documents are incorporated herein by this
reference.
This Note, said Agreement, the Affordability Restrictions on Transfer of Property, CDBG
Promissory Note, CDBG Deed of Trust and the Inclusionary Deed of Trust are sometimes
collectively referred to herein as the "Loan Documents." The Loan Documents and the rights and
responsibilities inure to the benefit of the City of Santa Ana. Any capitalized term which is not
otherwise defined herein shall have the meaning ascribed to such term in the Agreement.
This Note evidences the obligation of Borrower to the City for the repayment of the
Inclusionary Loan of Inclusionary Funds attributable to the acquisition, adaptive reuse and
construction of the Property, and related soft costs.
This Note is payable at the principal office of City of Santa Ana — Community
Development Agency, 20 Civic Center Drive, Santa Ana, California 92702, Att: Housing
Division, or at such other place as the holder hereof may inform Borrower in writing, in lawful
money of the United States.
55C-82
2. Definitions.
For the purpose of calculating the payments to be made by Borrower to City pursuant to
this Note, the following terms shall have the following respective meanings:
"Agreement" means the Loan Agreement between the City and the Developer, and any
attachments or amendments thereto.
"AHSC Loan" means a permanent loan of Affordable Housing and Sustainable
Communities program funds from HCD administered by the California Strategic Growth
Council in the amount of $4,944,130
"AHSC Deed of Trust" means the any deed(s) of trust securing athe AHSC Loan
encumbering the Property.
"AHSC Documents" means, collectively, the loan agreement governing the AHSC, the
AHSC Note, the AHSC Deed of Trust, and any other agreement, document or instrument that the
Senior Lender requires in connection with the AHSC Loan.
;"Applicable Law" shall mean those federal, state and local laws, ordinances, regulations,
policies and procedures applicable to the Inclusionary Housing Program, and the Inclusionary
Funds.
"Area Median Income" means the median income figures for Orange County as
published by the U.S. Department of Housing and Urban Development (HUD). Also may be
referred to as "AMI" herein.
"Borrower" means Santa Ana Arts Collective, LP, a California limited partnership.
"Calendar Year" means each consecutive twelve (12) month period from January 1 to
December 30.
"Inclusionary Loan" shall mean the loan evidenced by this Note repayable to the City in
accordance with the terms of this Note and secured by the Inclusionary Deed of Trust.
"City's Percentage" with reference to the Residual Receipts, shall mean aggregate
percentage of thirty point thirteen percent (30.13%) of the total Residual Receipts from the
Property, which shall be applicable to the HOME Loan, CDBG Loan, and Inclusionary Loan, as
further described in Section 5 hereof.
"Closing Costs" shall mean:
(i) In the case of a Sale, reasonable brokerage commissions payable to a broker as a
result of the Sale, which shall not in any event exceed the customary amount charged -for similar
55C-83
transactions in the irmnediate market place, costs of title insurance premiums, documentary
stamp taxes, escrow fees, recording charges, loan repayment charges and other costs reasonably
incurred with respect to the Property, in each case actually paid by Borrower as a condition of
the Sale.
(ii) In the case of a Refmancing, the reasonable and necessary costs of
consumating such Refinancing, including, without limitation, loan fees, loan repayment charges,
costs of title insurance premiums, escrow fees, recording fees and attorneys' fees.
"Inclusionary Housing Program" (Inclusionary) has the meaning set forth in the
Recitals above.
"Gross Revenues" shall mean all revenues and receipts of every kind actually received by
Borrower from operating the Property, and all parts thereof, including, but not limited to, income
from both cash and credit transactions, rental from leased and/or subleased spaces and parking
fees and charges (but not including security deposits and other tenant deposits, except to the
extent such deposits are forfeited to the Borrower under the tenant's lease). Gross Revenues also
includes any casualty insurance proceeds in excess of those used to restore the Property and any
rental interruption insurance proceeds. Borrower shall establish and maintain accounts for the
Gross Revenues (the "'Project Accounts") that are segregated from revenues and income received
by Borrower from all other projects. Gross Revenues shall also include all interest earned on the
Project Accounts. Gross Revenues shall not include capital contribution and loan proceeds
received by borrower from any source.
"Operating Expenses" shall mean the sum of the following:
(i) payments of principal and interest and all other charges relating to the Senior
Loan(s);
(ii) general partner fee and tax credit investor management fees pursuant to the
Borrower's amended and restated partnership agreement ("Partnership Agreement");
(iii) the cost of any supportive services provided to tenants of the Property,
including fees and reimbursements payable to the provider or coordinator of such supportive
services;
(iv) debt service payments (excluding debt service due from residual receipts or
surplus cash of the Property) on senior loan obligations associated with the Property, and
approved by Lender;
(v) tax credit adjustment payments payable to Maker's tax credit investor pursuant
to Borrower's Partnership Agreement;
(vi) payments made on loans advanced by any partner or member of Borrower for
the purpose of paying operating expenses of the Property;
55C-84
(vii) a property management fee equal to 8% of gross rents;
(viii) Owner Administration Fee of 5% of gross rents;
(ix) deposits into required reserves;
(x) any deferred developer fee;
(xi) all other actual, reasonable cash operating costs and expenses, calculated on an
annual basis, that are directly attributable to managing and operating the Property, including,
without limiting the generality of the foregoing, the following: costs and expenses for real and
personal property taxes, special assessments or similar charges; water, fuel, electricity and other
utilities; heating, ventilation and air conditioning expenses; labor; supplies; tools; equipment;
insurance; advertising and marketing; accounting and legal fees; brokerage commissions and
other leasing expenses; reasonable reserves for all anticipated expenses as approved by the City,
and other such items constituting operation, maintenance and repair costs actually paid by the
Borrower, subject to the following conditions:
(a) Depreciation and amortization expenses shall not be considered
Operating Expenses, except as otherwise provided herein.
(b) Any expenses, compensation or fees paid to any affiliate of Borrower
shall only be included as Operating Expenses to the extent they are not in excess of the
reasonable expenses, compensation or fees which would be payable to unrelated third parties in
arms -length transactions for similar services in the Santa Ana, California area.
(vii) Any other expenses necessary to meet senior lender requirements and
requirements of Borrower's limited partner, or its assignee, as set forth in Borrower's Agreement
of Limited Partnership (the "Partnership Agreement").
"Inclusionary Deed of Trust" shall mean the Inclusionary Deed of Trust in favor of the
City, securing the Inclusionary Loan, substantially in the form attached to the Agreement as
Exhibit D, which is incorporated herein by this reference.
"Extremely Low Income" means an adjusted income which does not exceed
thirty percent (30%) of the area median income for the Orange County, California PMSA,
adjusted for household size, as published by HUD.
"Low Income" means an adjusted income which does not exceed eighty percent
(80%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
rd
55C-85
"Inclusionary Assisted Units" shall mean those rental units purchased and rehabilitated
on the Property which are subject to the term of affordability.
"Inclusionary Funds" shall mean the money provided under the Inclusionary Housing
Program for the construction of the rental units hereunder.
"Property" shall mean that property located at 1666 N. Main Street, Santa Ana,
California.
"Refinancing" shall mean changing the then existing financing on the Property by,
without limitation, modifying the interest rate and/or the term of the existing Senior Loan,
increasing or reducing the amount of the existing Senior Loan, paying off the existing Senior
Loan and obtaining new Senior Loan, except for the payoff of the conventional lender's
acquisition loan for the Property. Notwithstanding the projected sale of the senior permanent
loan on the Project to California Community Reinvestment Corporation (`CCRC") and any
subsequent transfer of the loan in whole or in part by CCRC shall not be deemed a Refinancing
for purposes hereof.
"Refinancing Proceeds" shall be disbursed as set forth in Section 6 hereof.
"Residual Receipts" shall mean the Gross Revenues from the Property for each year, less
deductions for Operating Expenses from the same building, applicable to each such year to the
extent not already deducted as an Operating Expense.
"Sale" shall mean any transfer, assignment, or conveyance or lease of the Property or any
portion thereof, or any interest therein by the Borrower, and includes any transfer, assignment or
sale of any partnership interest in the Borrower by an individual or entity which is a general or
limited partner in the Borrower, or any interest by any individual or entity which holds an
interest in any such general or limited partner in the Borrower, which brings the cumulative total
of all such direct and indirect transfers, assignments and sales during the term of this Note to
more than thirty-five percent (35%) of the ownership interests in the Borrower, and any such
transfer, assignment or sale of a direct or indirect partnership interest thereafter. Sale includes a
sale in condemnation or under threat thereof. Sale does not include dedications and grants of
easements to public and private utility companies of the kind customary in real estate
development. Notwithstanding anything to the contrary contained herein, a "Sale" shall not
include any transaction not considered a "transfer' under Section 13.
"Senior Loan" shall mean any senior loans made to Borrower, for payment of acquisition
and/or rehabilitation/construction costs, and shall include any subsequent loan that refinances
said Senior Loan.
"Term" the term for repayment of this Note shall mean fifty-five (55) years from the date
of recording of the loan from the State of California Department of Housing and Community
Development to Borrower, but in no event shall the Term end later than July 1, 2075.
55C-86
"Term of Affordability" the term of affordability shall be fifty-five (55) years.
"Very Low Income" means an adjusted income which does not exceed fifty
percent (50%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
3. Loan Repayment.
Borrower shall make payments to the City as provided in Sections 5 (Residual Receipts),
6 (Refinancing Proceeds), 7 (Sale Proceeds) and 9 (Accelerated Loan Repayment) of the
Agreement.
4. Operating Capital Imnrovement 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. The outstanding loan balance will be reflected in the annual report.
5. Annual Loan Repayment/ Residual Receipts.
a. Commencing on the date one hundred fifty (150) days after the close of the initial
Calendar Year following the issuance of the Certificate of Completion and on or before the 150,'
day of each Calendar Year thereafter 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 Issuance of the Certificate of Completion 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 amount of the Residual Receipts applicable to such
Calendar Year with which to make a City Loan payment then due.
c. Except as otherwise provided, the Borrower shall pay to the City the City's
Percentage of the Residual Receipts as payment of interest and then to principal. At least fifty
percent (50%) of the Residual Receipts shall remain with the Borrower, with all Residual
Receipts remaining with Borrower to the extent the City Loan has been fully repaid.
d. Borrower shall retain fifty percent of the Residual Receipts. The other fifty percent
shall be used to repay the other public agency loans according to the table below:
SOURCE PERCENTAGE
CDBG Loan 2.01%
HOME Loan 8.92%
55C-87
Inclusionary Housing Loan
19.200
State of California Housing and Community
19.87%
Development Affordable Housing Loan
TOTAL
50.00%
e. 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 interest and then the principal balance of the loan.
6. Loan Repayment from Refinancine Proceeds.
The Borrower shall make a loan payment to the City from every Refinancing that occurs
during the term of this Note (other than refinancing of the conventional lender acquisition and
construction loan) 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 and AHSC Loan; next, the amount necessary to
pay any deferred developer fee in full; and 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. At
least fifty percent (50%) of the Refinancing proceeds shall remain with Borrower, with all
remaining Refinancing proceeds remaining with the Borrower to the extent the outstanding
balance of the Note has been fully paid. Such payment shall be due on the date of such
Refinancing, and shall be applied to reduce the interest and then principal balance of the Loan.
The City shall not be required to reconvey the lien of the Deed of Trust if Refinancing 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 this Note subject to Section 14 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 and AHSC Loan; next, the amount necessary to pay any deferred
developer fee in full; and 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. At least
fifty percent (50%) of the Sale Proceeds shall remain with Borrower, with all remaining
Refinancing proceeds remaining with the Borrower to the extent the outstanding balance of the
Note has been fully paid. Such payment shall be due on the date of such Sale, and shall be
applied to reduce the interest and 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.
55C-88
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 13 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 in the exercise of its reasonable discretion and the
purchaser assumes the balance of the City Loan in accordance with the terms of this 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 in the exercise of its reasonable discretion and
the Borrower remains obligated pursuant to the terms of this Note.
b. In event of default (subject to any applicable notice and cure provisions) pursuant
to any of the Loan Documents, AHSC 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 expiration of the Term of this Note. 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 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. Lawful Money.
Principal is payable in lawful money of the United States of America.
11. Application of Payments; Late Charges.
a. Any payments received by the City pursuant to the terms hereof shall be
applied first to sums, other than principal, due the City pursuant to this Note, and the balance, if
any, to the payment of principal.
b. If any payment is not received by the City within fifteen (15) Business Days after
Developer's receipt of written notice that such payment was not received when due;
then in addition to the remedies conferred upon the City pursuant to this Note and the
other Loan Documents, (i) a late charge of four percent (4%) of the amount due and
unpaid will be added to the delinquent amount to compensate the City for the expense
of handling the delinquency and (ii) the amount due and unpaid, excluding the late
charge, shall bear interest at the highest annual rate which may lawfully be charged
and collected under applicable law on the obligation evidenced by this Note,
55C-89
computed from the date on which the amount was due and payable until paid.
Without prejudice to the rights of the City hereunder or under any of the other Loan
Documents, Borrower shall indemnify the City against, and shall pay the City on
demand, any expense or loss which it may sustain or incur as a result of the failure by
Borrower to pay when due any installment of principal, fees, or other amounts
payable to the City under this Note or any other Loan Document, to the extent that
any such expense or loss is not recovered pursuant to such foregoing provisions. A
certificate of the City setting forth the basis for the determination of the amounts
necessary to indemnify the City in respect of such expenses or direct loss, submitted
to Borrower by the City, shall be conclusive and binding for all purposes except as
immediately corrected by Borrower notice to City.
12. Securi
This Note is secured by the recorded Deed of Trust.
13. 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 or the AHSC 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 13, 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 Meta Housing Corporation or a
limited liability wholly owned by Meta Housing Corporation 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 and AHSC Loan, without the prior written consent of City (which
consent City may grant 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.
9
55C-90
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 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.
14. Event of Default.
Subject to the provisions of Section 23 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 fifteen
(15) Business Days after Developer's receipt of written notice that such payment was not
received when due; or (b) failure by Borrower to perform any covenant or agreement in the Deed
of Trust, the 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).
15. 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 and subject to the provisions
of Section 21 hereof, City may declare all sums evidenced hereby immediately due and payable
by delivery to the Trustee named in the Deed of Trust securing this 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 Deed of Trust. City shall also deposit with Trustee the Deed of Trust,
this 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%). No delay or omission on the
part of the City in exercising any right under this Note or under any of the other Loan Documents
shall operate as a waiver of such right.
10
55C-91
16. Attornev Fees.
If this City Promissory Note is not paid when due or if any Event of Default occurs,
Borrower promises to pay all costs of enforcement and collection, including but not limited to,
reasonable attorneys' fees, whether or not any action or proceeding is brought to enforce the
provisions hereof.
17. Severability.
Every provision of this Note is intended to be severable. In the event any term or
provision hereof is declared by a court of competent jurisdiction, to be illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and enforceable.
18. Number and Gender.
In this Note the singular shall include the plural and the masculine shall include the
feminine and neuter gender, and vice versa, if the context so requires.
19. Non-recourse.
The City Loan is a nonrecourse obligation of the Borrower. Neither Borrower, nor its
partners nor any other party shall have any personal liability for repayment of the City Loan or
for any other amounts under any of the documentation evidencing, securing or describing the
City Loan. The sole recourse of City under this Note and the Deed of Trust for repayment of the
City Loan and for such other amounts arising therefrom shall be the exercise of its rights against
the Property and related security thereunder.
20. Subordination.
It is hereby expressly agreed and acknowledged by Borrower and City that the Deed of
Trust is a subordinate deed of trust, and that this Note is subject and subordinate to any Senior
Deed of Trust.
21. Notice of Default.
a. Subject to the applicable cure periods set forth in Section 14 and subject to the further
provisions of this Section 21, failure or delay by the Borrower to perform any term or provision
of this Note constitutes a default under this Note. 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.
11
55C-92
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 Note or the Deed of
Trust, prior to exercising any remedies thereunder City shall give Borrower written notice of
such default. Borrower shall have a period of fifteen (15 Business Days after such notice is
received within which to cure the default prior to exercise of remedies by City under this Note
and the Deed of Trust.
f. If a non -monetary event of default occurs under the terms of this Note or the 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 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 (18 0) days after the first notice of default is given.
g. In addition, if an Event of Default occurs hereunder, prior to taking any remedy under
this Note or any other document evidencing or securing this Note, City shall first give notice of
the occurrence of such Event of Default to the Limited Partner and the Limited Partner shall have
not less than 30 days to cure such Event of Default, provided if in order to cure such Event of
Default the Limited Partner gives notice to the City that Limited Partner must remove and
replace the general partner or general partners of Borrower, Limited Partner shall have until 30
days following the effective date of such removal and replacement to cure such Event of Default.
22. Insurance and Condemnation.
In the event of any fire or other casualty to the Property or eminent domain proceedings
resulting in condemnation of the Property or any part thereof, Borrower shall have the right to
rebuild the Property, and to use all available insurance or condemnation proceeds therefor,
provided that (a) such proceeds are sufficient to keep the City Loan in balance and rebuild the
12
55C-93
Property in a manner that provides adequate security to City for repayment of the City Loan or if
such proceeds are insufficient then Borrower shall have funded any deficiency, (b) City shall
have the right to approve plans and specifications for any major rebuilding and the right to
approve disbursements of insurance or condemnation proceeds for rebuilding under a
construction escrow or similar arrangement, and (c) no material default then exists under this
Note or the Deed of Trust. If the casualty or condemnation affects only part of the Property and
total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial
repayment of the City Loan in a manner that provides adequate security for repayment of the
remaining balance of the City Loan.
23. Force Maieure.
Notwithstanding specific provisions of this Note, 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 Note may also be extended in
writing by the City and the Borrower.
24. Assignments.
The City, and the assignee of the City, shall have the right to assign this Note and the
Deed of Trust securing this Note, without any further act of Borrower. The assignee shall give
notice to Borrower as soon as practicable after such assignment.
13
55C-94
This City Promissory Note is hereby agreed to and executed on the date first set forth above.
:O.CO./
SANTA ANA ARTS COLLECTIVE, LP, a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its administrative general partner
0
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
IM
Graham P. Espley-Jones, President
14
55C-95
Exhibit Ee. CDBG
Deed of Trust
55C-96
FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza
P.O. Box 1988 (M-30)
Santa Ana, California 92702
Attn: Clerk of the Council
FIRST AMENDED AND RESTATED
CDBG DEED OF TRUST
AND ASSIGNMENT OF RENTS
THIS FIRST AMENDED AND RESTATED CDBG DEED OF TRUST AND
ASSIGNMENT OF RENTS (the "Deed of Trust") made this 5t' day of July, 2017 between Santa
Ana Arts Collective, LP , a California limited partnership (the "Trustor"), AmeriNat, a Minnesota
corporation (the "Trustee"), and the City of Santa Ana, a charter city and municipal corporation
(the 'Beneficiary").
Trustor, in consideration of the promises herein recited and the trust herein created,
irrevocably grants, transfers, conveys and assigns to Trustee, in trust, with power of sale, the
property located in the City of Santa Ana, County of Orange, State of California, described in the
attached Exhibit A and more commonly known as 1666 N. Main Street, Santa Ana, California (the
"Property");
TOGETHER with all the improvements now or hereafter erected on the Property, and all
easements, rights, appurtenances and all fixtures now or hereafter attached to the Property, all of
which, including replacements and additions thereto, shall be deemed to be and remain a part of the
Property covered by this CDBG Deed of Trust; provided that so long as Trustor is not in default
hereunder, it shall be permitted to control the Property in accordance with the requirements of
that certain CDBG and Inclusionary Program Loan Agreement entered into between the Trustor
and the Beneficiary, dated concurrently herewith, which Agreements are both on file with the
Beneficiary as a public record;
TOGETHER with the right, power and authority during the continuance of these Trusts, to
collect the rents, issues, and profits of the Property, reserving unto the Trustor the right, prior to any
default by Trustor in payment of the indebtedness secured by this Deed of Trust or in the
performance of any agreement under this Deed of Trust, to collect and retain these rents, issues and
profits as they become due and payable; and,
TOGETHER with all articles of personal property or fixtures now or hereafter attached to or
used in and about the building or buildings now erected, or hereafter to be erected, on the Property
55C-97
which are necessary to the complete and comfortable use and occupancy of such building or
buildings for the purposes for which they were or are to be erected, including all other goods and
chattels and personal property as are ever used or furnished in operating a building, or the activities
conducted therein, similar to the one herein described and referred to, and all renewals or
replacements thereof or articles in substitution therefor, whether or not the same are, or shall be
attached to said building or buildings in any manner; and all of the foregoing, together with the
Property, is herein referred to as the "Security";
To have and to hold the Security together with acquittances to the Trustee, its successors and
assigns forever;
TO SECURE to the Beneficiary (a) the repayment of the sums evidenced by a Promissory
Note to the Beneficiary executed by Trustor of even date herewith in the principal amount of Five
Hundred Thousand Dollars ($500,000.00) (the "CDBG Promissory Note"); (b) the performance of
the covenants and agreements of Borrower contained in a certain Agreement as hereinafter defined;
and (c) the payment of all other sums, with interest thereon, advanced in accordance herewith to
protect the security of this Deed of Trust; and the performance of the covenants and agreements of
Trustor contained herein.
TRUSTOR AND THE BENEFICIARY COVENANT AND AGREE AS FOLLOWS:
1. The Agreement. This Deed of Trust is executed and delivered, along with the
CDBG Promissory Note and the Loan Agreement, to benefit the Property. A copy of said Loan
Agreement is on file as a public record with the Beneficiary and is incorporated herein by reference
(the "Agreement"). Trustor acknowledges that but for the execution of this Deed of Trust, the
Beneficiary would not enter into the Agreement or CDBG Promissory Note secured by this Deed of
Trust.
2. Trustor's Estate. Trustor is lawfully seized of the estate hereby conveyed and has the
right to grant and convey the Security; that other than this Deed of Trust, the Security is not
encumbered except for obligations secured by deeds of trust, or any other security agreement, to
secure financing or refinancing for the purchase and rehabilitation of the Property.
3. Repayment of the Loan. Trustor will promptly repay, when due, the principal loan
amount, as required by the City Promissory Note secured by this Deed of Trust.
4. Subordination. This obligation secured by this Deed of Trust shall be subordinated
to the Senior Loan and AHSC Loan, but the City's Affordability Restrictions on Transfer of
Property shall remain in first place with respect to the Senior Loan and subordinate with respect to
the AHSC Loan.
5. Prior Mortgages and Deeds of Trust; Charges; Liens. Trustor shall perform all of
Trustor's obligations under any mortgage, deed of trust or other security agreement with a lien
which has priority over this Instrument, including Trustor's covenants to make payments when due
(subject to an applicable notice and cure provisions). Trustor will pay all taxes, assessments and
other charges, fines and impositions attributable to the Security which may attain a priority over this
Deed of Trust, by Trustor making any payment, when due, directly to the payee thereof. Trustor
will promptly furnish to the Beneficiary all notices of amounts due under this paragraph, and in the
2
55C-98
event Trustor makes payment directly, Trustor will promptly discharge any lien which has priority
over this Deed of Trust; provided that Trustor will not be required to discharge the lien of the Deed
of Trust securing any senior lender or any other lien described in this paragraph so long as Trustor
will agree in writing to the payment of the obligation secured by such lien in a manner acceptable to
the Beneficiary, or will, in good faith, contest such lien by, or defend enforcement of such lien in,
legal proceedings which operate to prevent the enforcement of the lien or forfeiture of the Security
or any part thereof.
6. Hazard Insurance. Trustor will keep the Security insured by such insurance policies
in such amounts and for such periods as called for in the Agreement. All insurance policies and
renewals thereof will include a standard mortgagee clause with standard lender's endorsement in
favor of the holder of any senior lender and the Beneficiary as their interests may appear and in a
form acceptable to the Beneficiary. The Beneficiary shall have the right to hold, or cause its
designated agent to hold, the policies and renewals thereof, and Trustor shall promptly furnish to the
Beneficiary, or its designated agent, the original insurance policies or certificates of insurance, all
renewal notices and all receipts of paid premiums subject to the rights of any senior lender. In the
event of loss, Trustor will give prompt notice to the insurance carrier and the Beneficiary or its
designated agent. The Beneficiary, or its designated agent, may make proof of loss if not made
promptly by Trustor. The Beneficiary shall receive 30 days advance notice of cancellation of any
insurance policies required under this Section.
Unless the Beneficiary and Trustor otherwise agree in writing, insurance proceeds, subject
to the rights of any senior lender, will be applied to restoration or repair of the Security damaged,
provided such restoration or repair is economically feasible and the security of this Deed of Trust is
not thereby impaired. If such restoration or repair is not economically feasible or if the security of
this Deed of Trust would be impaired, again, subject to the rights of any senior lender, the insurance
proceeds will be used to repay the loan secured by this Deed of Trust, with the excess, if any, paid
to Trustor. If the Security is abandoned by Trustor, or if Trustor fails to respond to the Beneficiary,
or its designated agent within 30 days from the date notice is mailed by either of them to Trustor
that the insurance carrier offers to settle a claim for insurance benefits, the Beneficiary, or its
designated agent, is authorized to collect and apply the insurance proceeds at the Beneficiary's
option either to restoration or repair of the Security or to repay the loan.
If the Security is acquired by the Beneficiary, all right, title and interest of Trustor in and to
any insurance policy and in and to the proceeds thereof resulting from damage to the Security prior
to the sale or acquisition will pass to the Beneficiary to the extent of the sums secured by this Deed
of Trust immediately prior to such sale or acquisition subject to the rights of any senior lender.
7. Preservation and Maintenance of Security. Trustor will keep the Security in good
repair and will not commit waste or permit impairment or deterioration of the Security.
8. Protection of the Beneficiary's Security. If Trustor fails to perform the covenants
and agreements contained in this Deed of Trust or if any action or proceeding is commenced which
materially affects the Beneficiary's interest in the Security, including, but not limited to, default
under the Deed of Trust securing any senior lender, eminent domain, insolvency, code enforcement,
or arrangements or proceedings involving a bankrupt or decedent, then the Beneficiary, at the
Beneficiary's option, upon notice to Trustor, may make such appearances, disburse such sums and
55C-99
take such action as it determines necessary to protect the Beneficiary's interest, including, but not
limited to, disbursement of reasonable attorneys' fees and entry upon the Security to make repairs.
Any amounts disbursed by the Beneficiary pursuant to this paragraph, with interest thereon,
will become an indebtedness of Trustor secured by this Deed of Trust. Unless Trustor and the
Beneficiary agree to other terms of payment, such amount will be payable upon notice from the
Beneficiary to Trustor requesting payment thereof, and will bear interest from the date of
disbursement at the rate payable from time to time on outstanding principal under the CDBG
Promissory Note unless payment of interest at such rate would be contrary to applicable law, in
which event such amounts will bear interest at the highest rate permissible under applicable law.
Nothing contained in this paragraph will require the Beneficiary to insure any expense or take any
action hereunder.
9. Inspection. The Beneficiary may make, or cause to be made, reasonable entries
upon and inspections of the Security during normal business hours; provided that the Beneficiary
will give Trustor reasonable notice of inspection.
10. Forbearance by the Beneficiary Not a Waiver. Any forbearance by the Beneficiary
in exercising any right or remedy will not be a waiver of the exercise of any such right or remedy.
The procurement of insurance or the payment of taxes or other liens or charges by the Beneficiary
will not be a waiver of the Beneficiary's right to accelerate the maturity of the indebtedness secured
by this Deed of Trust.
11. Remedies Cumulative. All remedies provided in this Deed of Trust are distinct and
cumulative to any other right or remedy under this Deed of Trust or any other document, or afforded
by law or equity, and may be exercised concurrently, independently or successively.
12. Successors and Assigns Bound. The covenants and agreements herein contained
shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the
Beneficiary and Trustor subject to the provisions of this Deed of Trust.
13. Joint and Several Liability. All covenants and agreements of Trustor shall be joint
and several.
14. Notice. Except for any notice required under applicable law to be given in another
manner, (a) any notice to Trustor provided for in this City Deed of Trust will be given by certified
mail, return receipt requested, addressed to Trustor at 1640 Sepulveda Blvd, Suite 425, Los Angeles,
California, 90025 with a copy to Bank of America CDC Special Holding Company, Inc.
Community Development Banking,MAI-225-02-02, 225 Franklin Street, Boston, MA 02110 and
WCH Affordable XVIII, LLC Attn: Graham Espley-Jones, 151 Kahnus Drive, 05, Costa Mesa, CA
92626, (b) any notice to the Beneficiary will be given by certified mail, return receipt requested, to
the Beneficiary at 20 Civic Center Plaza, P.O. Box 1988, Santa Ana, California 92702, Attention:
Housing Manager, or at such other address as the Beneficiary may designate by notice to Trustor as
provided above, and (c) to Trustee at 8121 E. Florence Avenue, Downey, California 90240. Notice
shall be effective as of the date received as shown on the return receipt.
15. Governing Law. This Deed of Trust shall be governed by the laws of the State of
California with venue in Orange County.
4
55C-100
16. Severability. In the event that any provision or clause of this Deed of Trust or the
City Loan Note conflicts with applicable law, such conflict will not affect other provisions of this
Deed of Trust or the CDBG Promissory Note which can be given effect without the conflicting
provision, and to this end the provisions of the Deed of Trust and the City Loan Note are declared to
be severable.
17. Captions. The captions and headings in this Deed of Trust are for convenience only
and are not to be used to interpret or define the provisions hereof.
18. Default in Foreclosure; Remedies. Upon Trustor's breach of any covenant or
agreement of Trustor in this Deed of Trust or the CDBG Promissory Note secured by this Deed of
Trust, including, but not limited to, the covenants to pay, when due, any sums secured by this Deed
of Trust, the Beneficiary may declare all sums secured by this Deed of Trust immediately due and
payable by delivering to Trustor notice thereof specifying: (1) The breach; (2) the action required to
cure such breach; (3) a date not less than 30 days from the date the notice is received by Trustor as
shown on the return receipt, by which such breach is to be cured provided, however, that if such
default is not reasonable susceptible to being cured within 30 days, Trustor shall have a reasonable
period to cure the defect so long as Trustor is diligently prosecuting the cure to completion; and (4)
that failure to cure such breach on or before the date specified in the notice may result in
acceleration of the sums secured by this Deed of Trust and sale of the Security. The notice will also
inform Trustor of Trustor's right to reinstate after acceleration and the right to bring a court action to
assert the non-existence of default or any other defense of Trustor to acceleration and sale.
Notwithstanding anything to the contrary contained herein, a "default" shall not include
(i) a transfer of a general partner's interest in Trustor when made in connection with the exercise
by the Trustor's limited partner (the "Limited Partner") of its rights upon a default by a general
partner under the Trustor's Amended and Restated Limited 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 Trustor pursuant to the right of first refusal or to the general partners of Trustor
pursuant to the purchase option, as provided for in the Partnership Agreement; (iii) any transfer
of the Limited Partner's interest under and in accordance with the Partnership Agreement; and
(iv) any sale, transfer or other disposition of a limited partner interest or an interest in a limited
partner of the Trustor, (v) any sale, transfer or other disposition of an interest in a limited partner
of the Borrower.
If the breach is not cured on or before the date specified in the notice or such longer period
as provided above or in the CDBG Promissory Note or the Agreement, the Beneficiary, at the
Beneficiary's option, may: (a) declare all of the sums secured by this Deed of Trust to be
immediately due and payable without further demand and may invoke the power of sale and any
other remedies permitted by California law; (b) either in person or by agent, with or without
bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the
adequacy of its security, enter upon the Security and take possession thereof (or any part thereof)
55C-101
and of any of the Security, in its own name or in the name of the Trustee, and do any acts which it
deems necessary or desirable to preserve the value or marketability of the Property, or part thereof
or interest therein, increase the income therefrom or protect the security thereof. The entering upon
and taking possession of the Security shall not cure or waive any breach hereunder or invalidate any
act done in response to such breach and, notwithstanding the continuance in possession of the
Security, the Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust,
or by law upon occurrence of any uncured breach, including the right to exercise the power of sale;
(c) commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or
specifically enforce any of the covenants hereof, (d) deliver to the Trustee a written declaration of
default and demand for sale, pursuant to the provisions for notice of sale found at California Civil
Code Sections 2924, et sem., as amended from time to time; or (e) exercise all other rights and
remedies provided herein, in the instruments by which Trustor acquires title to any Security, or in
any other document or agreement now or hereafter evidencing, creating or securing all or any
portion of the obligations secured hereby, or provided by law.
In addition, if an Event of Default occurs hereunder or under the Note, prior to taking any
remedy under this Deed of Trust or any other document evidencing or securing this Note,
Beneficiary shall first give notice of the occurrence of such Event of Default to the Limited
Partner and the Limited Partner shall have not less than 30 days to cure such Event of Default,
provided if in order to cure such Event of Default the Limited Partner gives notice to the
Beneficiary that Limited Partner must remove and replace the general partner or general partners
of Trustor, Limited Partner shall have until 30 days following the effective date of such removal
and replacement to cure such Event of Default.
The Beneficiary shall be entitled to collect all reasonable costs and expenses incurred in
pursuing the remedies provided in this paragraph, including, but not limited to, reasonable attorneys'
fees.
19. Trustors Right to Reinstate. Notwithstanding the Beneficiary's acceleration of the
sums secured by this Deed of Trust, Trustor will have the right to have any proceedings begun by
the Beneficiary to enforce this Deed of Trust discontinued at any time prior to 5 days before sale of
the Security pursuant to the power of sale contained in this Deed of Trust or at any time prior to
entry of a judgment enforcing this Deed of Trust if (a) Trustor pays the Beneficiary all sums which
would be then due under this Deed of Trust and no acceleration under the CDBG Promissory Note
has occurred; (b) Trustor cures all breaches of any other covenants or agreements of Trustor
contained in this Deed of Trust; (c) Trustor pays all reasonable expenses incurred by the Beneficiary
and the Trustee in enforcing the covenants and agreements of Trustor contained in this Deed of
Trust and in enforcing the Beneficiary's and the Trustee's remedies, including, but not limited to,
reasonable attorneys' fees; and (d) Trustor takes such action as the Beneficiary may reasonably
require to assure that the lien of this Deed of Trust, the Beneficiary's interest in the Security and
Trustor's obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon
such payment and cure by Trustor, this Deed of Trust and the obligations secured hereby will
remain in full force and effect as if no acceleration had occurred.
20. Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly
executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to
notify any parry to this Deed of Trust of pending sale under any other deed of trust or any action or
proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee.
55C-102
21. Reconveyance. Upon payment of all sums secured by this Deed of Trust, the
Beneficiary will request the Trustee to reconvey the Security and will surrender this Deed of Trust
and the CDBG Promissory Note to the Trustee. The Trustee will reconvey the Security without
warranty and without charge to the person or persons legally entitled thereto. Such person or
persons will pay all costs of recordation, if any.
22. Substitute Trustee. The Beneficiary, at the Beneficiary's option, may from time to
time remove the Trustee and appoint a successor trustee to any Trustee appointed hereunder. The
successor trustee will succeed to all the title, power and duties conferred upon the Trustee herein
and by applicable law.
23. Request for Notice. Trustor requests that copies of the notice of default and notice
of sale be sent to Trustee at the address set forth in Section 14 above.
24. Nonrecourse Liabilitv. Neither Trustor nor any partner of Trustor shall
have any personal liability under the Agreement, CDBG Promissory Note, and this Deed of Trust and
any judgment, decree or order for payment of money obtained in any action to enforce the obligation
of Trustor to repay the loan evidenced by such documents shall be enforceable against Trustor only
to the extent of Trustor's interest in the Property.
(Signatures on Following Page)
55C-103
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the date first written
above.
SANTA ANA ARTS COLLECTIVE, LP,
a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its general partner
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
By:
Graham P. Espley-Jones, President
55C-104
Exhibit F4.p CDBG
Promissory Note
55C-105
FIRST AMENDED AND RESTATED
CDBG FUNDS PROMISSORY NOTE
SECURED BY SUBORDINATED DEED OF TRUST
TO THE CITY OF SANTA ANA, CALIFORNIA
(1666 N. Main Street)
$500,000.00 July 5, 2017
Santa Ana, California
1. Principal Amount of Loan
FOR VALUE RECEIVED, Santa Ana Arts Collective, LP, a limited partnership
("Borrower"), hereby promises to pay to the CITY OF SANTA ANA, a charter city and
municipal corporation ("City"), or order, a principal amount not to exceed FIVE HUNDRED
THOUSAND DOLLARS ($500,000.00) or so much thereof as may be advanced by the City to
the Borrower, due and payable with 3% interest by residual receipts over the fifty-five (55) year
term, pursuant to the CDBG and Inclusionary Program Loan Agreement (said "Agreement')
between Borrower and the City dated concurrently herewith, which are both incorporated herein
by this reference. This loan is made pursuant to the "Housing Opportunity Ordinance In -Lieu
Fee Program" or "In -Lieu Fees" with money funded through the Program as "CDBG Funds".
Any capitalized term not otherwise defined in this Note shall have the meaning ascribed to such
term in the Agreement. The obligation of Borrower to City hereunder is subject to the terms of
said Agreement, the Affordability Restrictions on Transfer of Property, Inclusionary Deed of
Trust, Inclusionary Promissory Note, CDBG Deed of Trust and this Note. Said documents are
public records on file in the offices of the City, and the provisions of said documents are
incorporated herein by this reference.
This Note, said Agreement, the Affordability Restrictions on Transfer of Property,
Inclusionary Promissory Note, CDBG Deed of Trust and the Inclusionary Deed of Trust are
sometimes collectively referred to herein as the "Loan Documents." The Loan Documents and the
rights and responsibilities inure to the benefit of the City of Santa Ana. Any capitalized term which
is not otherwise defined herein shall have the meaning ascribed to such term in the Agreement.
This Note evidences the obligation of Borrower to the City for the repayment of the
CDBG Loan of CDBG Funds attributable to the adaptive reuse and construction of the Property,
and related soft costs.
This Note is payable at the principal office of City of Santa Ana — Community
Development Agency, 20 Civic Center Drive, Santa Ana, California 92702, Art: Housing
Division, or at such other place as the holder hereof may inform Borrower in writing, in lawful
money of the United States.
55C-106
2. Definitions.
For the purpose of calculating the payments to be made by Borrower to City pursuant to
this Note, the following terms shall have the following respective meanings:
"Agreement" means the Loan Agreement between the City and the Developer, and any
attachments or amendments thereto.
"AHSC Loan" means a permanent loan of Affordable Housing and Sustainable
Communities program funds from HCD, awarded to and the sole responsibility of Borrower,
administered by the California Strategic Growth Council in the amount of $4,944,130
"AHSC Deed of Trust" means the any deed(s) of trust securing the AHSC Loan
encumbering the Property.
"AHSC Documents" means, collectively, the loan agreement governing the AHSC, the
AHSC Note, the AHSC Deed of Trust, and any other agreement, document or instrument that the
Senior Lender requires in connection with the AHSC Loan.
"Applicable Law" shall mean those federal, state and local laws, ordinances, regulations,
policies and procedures applicable to the Community Development Block Grant Program, and the
CDBG Funds.
"Area Median Income" means the median income figures for Orange County as published
by the U.S. Department of Housing and Urban Development (HUD). Also may be referred to as
"AMI" herein.
"Borrower" means Santa Ana Arts Collective, LP, a California limited partnership.
"Calendar Year" means each consecutive twelve (12) month period from January 1 to
December 30.
"CDBG Loan" shall mean the loan evidenced by this Note repayable to the City in
accordance with the terms of this Note and secured by the CDBG Deed of Trust.
"City's Percentage" with reference to the Residual Receipts, shall mean aggregate
percentage of thirty point thirteen percent (30.13%) of the total Residual Receipts from the
Property, which shall be applied to the HOME Loan, CDBG Loan, and Inclusionary Loan, as
further described in Section 5 hereof.
"Closing Costs" shall mean:
55C-107
G) In the case of a Sale, reasonable brokerage commissions payable to a broker as a
result of the Sale, which shall not in any event exceed the customary amount charged -for similar
transactions in the immediate market place, costs of title insurance premiums, documentary stamp
taxes, escrow fees, recording charges, loan repayment charges and other costs reasonably incurred
with respect to the Property, in each case actually paid by Borrower as a condition of the Sale.
(ii) In the case of a Refinancing, the reasonable and necessary costs of
consumating such Refinancing, including, without limitation, loan fees, loan repayment charges,
costs of title insurance premiums, escrow fees, recording fees and attorneys' fees.
"CDBG Program" (CDBG) has the meaning set forth in the Recitals above.
"Gross Revenues" shall mean all revenues and receipts of every kind actually received by
Borrower from operating the Property, and all parts thereof, including, but not limited to, income
from both cash and credit transactions, rental from leased and/or subleased spaces and parking fees
and charges (but not including security deposits and other tenant deposits, except to the extent such
deposits are forfeited to the Borrower under the tenant's lease). Gross Revenues also includes any
casualty insurance proceeds in excess of those used to restore the Property and any rental
interruption insurance proceeds. Borrower shall establish and maintain accounts for the Gross
Revenues (the "'Project Accounts") that are segregated from revenues and income received by
Borrower from all other projects. Gross Revenues shall also include all interest earned on the
Project Accounts. Gross Revenues shall not include capital contribution and loan proceeds
received by borrower from any source.
"Operating Expenses" shall mean the sum of the following:
(i) payments of principal and interest and all other charges relating to the Senior
Loan(s);
(ii) general partner fee and tax credit investor management fees pursuant to the
Borrower's amended and restated partnership agreement ("Partnership Agreement");
(iii) the cost of any supportive services provided to tenants of the Property, including
fees and reimbursements payable to the provider or coordinator of such supportive services;
(iv) debt service payments (excluding debt service due from residual receipts or
surplus cash of the Property) on senior loan obligations associated with the Property, and approved
by Lender;
(v) tax credit adjustment payments payable to Maker's tax credit investor pursuant to
Borrower's Partnership Agreement;
(vi) payments made on loans advanced by any partner or member of Borrower for the
purpose of paying operating expenses of the Property;
55C-108
(viii) Owner Administration Fee of 5% of gross rents;
(ix) deposits into required reserves;
(x) any deferred developer fee;
(xi) all other actual, reasonable cash operating costs and expenses, calculated on an
annual basis, that are directly attributable to managing and operating the Property, including,
without limiting the generality of the foregoing, the following: costs and expenses for real and
personal property taxes, special assessments or similar charges; water, fuel, electricity and other
utilities; heating, ventilation and air conditioning expenses; labor; supplies; tools; equipment;
insurance; advertising and marketing; accounting and legal fees; brokerage commissions and other
leasing expenses; reasonable reserves for all anticipated expenses as approved by the City; and
other such items constituting operation, maintenance and repair costs actually paid by the
Borrower, subject to the following conditions:
(a) Depreciation and amortization expenses shall not be considered
Operating Expenses, except as otherwise provided herein.
(b) Any expenses, compensation or fees paid to any affiliate of Borrower shall
only be included as Operating Expenses to the extent they are not in excess of the reasonable
expenses, compensation or fees which would be payable to unrelated third parties in arms -length
transactions for similar services in the Santa Ana, California area.
(vii) Any other expenses necessary to meet senior lender requirements and requirements
of Borrower's limited partner, or its assignee, as set forth in Borrower's Agreement of Limited
Partnership (the "Partnership Agreement").
"CDBG Deed of Trust" shall mean the CDBG Deed of Trust in favor of the City,
securing the CDBG Loan, substantially in the form attached to the Agreement as Exhibit E,
which is incorporated herein by this reference.
"Extremely Low Income" means an adjusted income which does not exceed
thirty percent (30%) of the area median income for the Orange County, California PMSA, adjusted
for household size, as published by HUD.
"Low Income" means an adjusted income which does not exceed eighty percent
(80%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
"CDBG Assisted Units" shall mean those rental units purchased and rehabilitated on
Eligible Properties which are subject to the term of affordability.
55C-109
"CDBG Funds" shall mean the money provided under the CDBG Program for the
rehabilitation of the rental units hereunder.
"Propert 'shall mean that property located at 1666 N. Main Street, Santa Ana, California.
"Refinancing" shall mean changing the then existing financing on the Property by, without
limitation, modifying the interest rate and/or the term of the existing Senior Loan, increasing or
reducing the amount of the existing Senior Loan, paying off the existing Senior Loan and obtaining
new Senior Loan, except for the payoff of the conventional lender's acquisition loan for the
Property. Notwithstanding the projected sale of the senior permanent loan on the Project to
California Community Reinvestment Corporation (`CCRC") and any subsequent transfer of the
loan in whole or in part by CCRC shall not be deemed a Refinancing for purposes hereof.
"Refinancing Proceeds" shall be disbursed as set forth in Section 6 hereof.
"Residual Receipts" shall mean the Gross Revenues from the Property for each year, less
deductions for Operating Expenses from the same building, applicable to each such year to the
extent not already deducted as an Operating Expense.
"Sale" shall mean any transfer, assignment, or conveyance or lease of the Property or any
portion thereof, or any interest therein by the Borrower, and includes any transfer, assignment or
sale of any partnership interest in the Borrower by an individual or entity which is a general or
limited partner in the Borrower, or any interest by any individual or entity which holds an
interest in any such general or limited partner in the Borrower, which brings the cumulative total
of all such direct and indirect transfers, assignments and sales during the term of this Note to
more than thirty-five percent (35%) of the ownership interests in the Borrower, and any such
transfer, assignment or sale of a direct or indirect partnership interest thereafter. Sale includes a
sale in condemnation or under threat thereof. Sale does not include dedications and grants of
easements to public and private utility companies of the kind customary in real estate
development. Notwithstanding anything to the contrary contained herein, a "Sale" shall not
include any transaction not considered a "transfer' under Section 13.
"Senior Loan" shall mean any senior loan made to Borrower, for payment of acquisition
and/or rehabilitation/construction costs, and shall include any subsequent loan that refinances said
Senior Loan.
"Term" the term for repayment of this Note shall mean fifty-five (55) years from the date
of recording of the loan from the State of California Department of Housing and Community
Development to Borrower, but in no event shall the Term end later than July 1, 2075.
"Term of Affordability" the term of affordability shall be fifty-five (55) years.
"Very Low Income" means an adjusted income which does not exceed fifty
percent (50%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
55C-110
3. Loan Repayment.
Borrower shall make payments to the City as provided in Sections 5 (Residual Receipts),
6 (Refinancing Proceeds), 7 (Sale Proceeds) and 9 (Accelerated Loan Repayment) of the
Agreement.
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. The outstanding loan balance will be reflected in the annual report.
5. Annual Loan Repayment/ Residual Receipts.
a. Commencing on the date one hundred fifty (150) days after the close of the initial
Calendar Year following the issuance of the Certificate of Completion and on or before the 1501'
day of each Calendar Year thereafter 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 Issuance of the Certificate of Completion 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 amount of the Residual Receipts applicable to such Calendar
Year with which to make a City Loan payment then due.
c. Except as otherwise provided, the Borrower shall pay to the City the City's
Percentage of the Residual Receipts as payment interest and then to principal. At least fifty
percent (50%) of the Residual Receipts shall remain with the Borrower, with all Residual
Receipts remaining with Borrower to the extent the City Loan has been fully repaid.
d. Borrower shall retain fifty percent of the Residual Receipts. The other fifty percent
shall be divided according to the table below:
SOURCE
PERCENTAGE
CDBG Loan
2.01%
HOME Loan
8.92%
Inclusionary Housing Loan
19.20%
State of California Housing and Community
Development Affordable Housing Loan
19.87%
TOTAL
50.00%
55C-111
As Borrower repays its loans, the payment percentage applied to the remaining loans
shall increase.
e. 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 interest and then 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 tern of this Note (other than refinancing of the conventional lender acquisition and
construction loan) 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 and AHSC Loan; next, the amount necessary to pay
any deferred developer fee in full; and 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. At least fifty
percent (50%) of the Refinancing proceeds shall remain with Borrower, with all remaining
Refinancing proceeds remaining with the Developer to the extent the outstanding balance of the
Note has been fully paid. Such payment shall be due on the date of such Refinancing, and shall be
applied to reduce the interest and then principal balance of the Loan. The City shall not be required
to reconvey the lien of the Deed of Trust if Refinancing 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 this Note subject to Section 14 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 and AHSC Loan; next, the amount necessary to pay any deferred developer
fee in full; and 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. At least fifty percent
(50%) of the Sale Proceeds shall remain with Borrower, with all remaining Refinancing proceeds
remaining with the Developer to the extent the outstanding balance of the Note has been fully paid.
Such payment shall be due on the date of such Sale, and shall be applied to reduce the interest and
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.
S. 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 13 hereof;
55C-112
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 in the exercise of its reasonable discretion and the purchaser
assumes the balance of the City Loan in accordance with the terms of this 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 in the exercise of its reasonable discretion and the Borrower
remains obligated pursuant to the terms of this Note.
b. In event of default (subject to any applicable notice and cure provisions) pursuant
to any of the Loan Documents or the AHSC 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 expiration of the Term of this Note. 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 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. Lawful Money.
Principal is payable in lawful money of the United States of America.
11. Application of Payments; Late Charges.
a. Any payments received by the City pursuant to the terms hereof shall be
applied first to sums, other than principal, due the City pursuant to this Note, and the balance, if
any, to the payment of principal.
b. If any payment is not received by the City within fifteen (15) Business Days after
Developer's receipt of written notice that such payment was not received when due;
then in addition to the remedies conferred upon the City pursuant to this Note and the
other Loan Documents, (i) a late charge of four percent (4%) of the amount due and
unpaid will be added to the delinquent amount to compensate the City for the expense
of handling the delinquency and (ii) the amount due and unpaid, excluding the late
charge, shall bear interest at the highest annual rate which may lawfully be charged and
collected under applicable law on the obligation evidenced by this Note, computed
from the date on which the amount was due and payable until paid. Without prejudice
to the rights of the City hereunder or under any of the other Loan Documents, Borrower
shall indemnify the City against, and shall pay the City on demand, any expense or loss
which it may sustain or incur as a result of the failure by Borrower to pay when due
55C-113
any installment of principal, fees, or other amounts payable to the City under this Note
or any other Loan Document, to the extent that any such expense or loss is not
recovered pursuant to such foregoing provisions. A certificate of the City setting forth
the basis for the determination of the amounts necessary to indemnify the City in
respect of such expenses or direct loss, submitted to Borrower by the City, shall be
conclusive and binding for all purposes except as immediately corrected by Borrower
notice to City.
12. Securitv
This Note is secured by the recorded Deed of Trust.
13. 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 or the AHSC 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 13, 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 and AHSC Loan, without the prior written consent of City (which
consent City may grant 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
9
55C-114
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 (3 0) 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 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.
14. Event of Default.
Subject to the provisions of Section 23 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 fifteen (15)
Business Days after Developer's receipt of written notice that such payment was not received when
due; or (b) failure by Borrower to perform any covenant or agreement in the Deed of Trust, the
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).
15. 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 and subject to the provisions of Section
21 hereof, City may declare all sums evidenced hereby immediately due and payable by delivery
to the Trustee named in the Deed of Trust securing this 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 Deed of Trust. City shall also deposit with Trustee the Deed of Trust, this 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%). No delay or omission on the part of the City in exercising any
right under this Note or under any of the other Loan Documents shall operate as a waiver of such
right.
16. Attorney Fees.
If this City Promissory Note is not paid when due or if any Event of Default occurs,
Borrower promises to pay all costs of enforcement and collection, including but not limited to,
10
55C-115
reasonable attorneys' fees, whether or not any action or proceeding is brought to enforce the
provisions hereof.
17. Severability.
Every provision of this Note is intended to be severable. In the event any term or provision
hereof is declared by a court of competent jurisdiction, to be illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the balance of the terms and provisions
hereof, which terms and provisions shall remain binding and enforceable.
18. Number and Gender.
In this Note the singular shall include the plural and the masculine shall include the
feminine and neuter gender, and vice versa, if the context so requires.
19. Non-recourse.
The City Loan is a nonrecourse obligation of the Borrower. Neither Borrower, nor its
partners nor any other party shall have any personal liability for repayment of the City Loan or for
any other amounts under any of the documentation evidencing, securing or describing the City
Loan. The sole recourse of City under this Note and the Deed of Trust for repayment of the City
Loan and for such other amounts arising therefrom shall be the exercise of its rights against the
Property and related security thereunder.
20. Subordination.
It is hereby expressly agreed and acknowledged by Borrower and City that the Deed of
Trust is a subordinate deed of trust, and that this Note is subject and subordinate to any Senior
Deed of Trust.
21. Notice of Default.
a. Subject to the applicable cure periods set forth in Section 14 and subject to the further
provisions of this Section 21, failure or delay by the Borrower to perform any term or provision of
this Note constitutes a default under this Note. 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.
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
11
55C-116
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 Note or the Deed of Trust,
prior to exercising any remedies thereunder City shall give Borrower written notice of such default.
Borrower shall have a period of fifteen (15 Business Days after such notice is received within
which to cure the default prior to exercise of remedies by City under this Note and the Deed of
Trust.
f. If a non -monetary event of default occurs under the terms of this Note or the 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 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.
g. In addition, if an Event of Default occurs hereunder, prior to taking any remedy under
this Note or any other document evidencing or securing this Note, City shall first give notice of
the occurrence of such Event of Default to the Limited Partner and the Limited Partner shall have
not less than 30 days to cure such Event of Default, provided if in order to cure such Event of
Default the Limited Partner gives notice to the City that Limited Partner must remove and replace
the general partner or general partners of Borrower, Limited Partner shall have until 30 days
following the effective date of such removal and replacement to cure such Event of Default.
22. Insurance and Condemnation.
In the event of any fire or other casualty to the Property or eminent domain proceedings
resulting in condemnation of the Property or any part thereof, Borrower shall have the right to
rebuild the Property, and to use all available insurance or condemnation proceeds therefor,
provided that (a) such proceeds are sufficient to keep the City Loan in balance and rebuild the
Property in a manner that provides adequate security to City for repayment of the City Loan or if
such proceeds are insufficient then Borrower shall have funded any deficiency, (b) City shall have
the right to approve plans and specifications for any major rebuilding and the right to approve
disbursements of insurance or condemnation proceeds for rebuilding under a construction escrow
12
55C-117
or similar arrangement, and (c) no material default then exists under this Note or the Deed of Trust.
If the casualty or condemnation affects only part of the Property and total rebuilding is infeasible,
then proceeds may be used for partial rebuilding and partial repayment of the City Loan in a
manner that provides adequate security for repayment of the remaining balance of the City Loan.
23. Force Mai eure.
Notwithstanding specific provisions of this Note, 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 Note may also be extended in writing by the City and the
Borrower.
24. Assienments.
The City, and the assignee of the City, shall have the right to assign this Note and the Deed
of Trust securing this Note, without any further act of Borrower. The assignee shall give notice to
Borrower as soon as practicable after such assignment.
13
55C-118
This City Promissory Note is hereby agreed to and executed on the date first set forth above.
SANTA ANA ARTS COLLECTIVE, LP, a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its general partner
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
0
Graham P. Espley-Jones, President
14
55C-119
Exhibit Go. Project
Budget
55C-120
EXHIBIT G
Santa Ana Arts Collective Project Budget
55C-121
ReSltlemlel
Re.I
CoCosts t
Coati
COrtvmm2el
Component
C..
Tobl
Devel0pimnt
Cvsb
Stele-HCO
µ3C Pmgm
AHORLOen
FUNDING SOURCES
0%t...ditiLmal PMa[e
CCRC-Penn
Tax OixREqulty ClVd8anlam. Ima1MTm61
De
PtlVab
Qelx�ed'
�ewkyn Fee
$.IHCD
AHSCCrVt
Fund, -M&
Pm.
SOURCES
TOTAL
L.&Iand COmar VSlue
83,095,812
wo.l.
#,135,.
IS M.812
339.108
$3,195.000
LOJa18 Cbsilg Ccsb
$33,229
8421
533.650
IGGS4
5621
831850
C3 Co.
'8203.040
52.50c
$206An
#04,428
8206428
rfable
Yblolel
1 33,3321009
W.1SS
#,375,01e
30
133,220
#,05,812
#6545]
w
SO
51375,070
i55 0.m mvemmb C¢atfr1,2IeCb
853.375
Sa.2]0,0.N
$317,S71.53.896.940
553.5]5
_
$4,2]0.00
ONe[ a
401
1
$0
Total Acquisition
1),548,814
#8.800
3].665.0]e
Sp
1350.Po6.
SS.B06.I0
SNDdiR
$0
#
S).6a9.0]0
RELOCATION
PNTY.n¢l.dOficn
St...
$11612
$1.673,00
814)3.00
31,4]3,000
NEWRebmtlen
if.4.5yse0
sb,4tz
Et,ar3,000
S0
'f0
f0
516]3.000.
50
30
sLdi;WO
CONSTRUCTION
Off -Site lmpmvemems
.S125a.oW
81,225,00
EL203.039
51,200.00
Sile WOM .dm55
540.00
509
moll
$40,50]
$40."00
$500
EW,SW
SWttma i m99
511128."93
5186.106
513.203.20]
$6.961.13]
.$].601.;4]8.
.$S000V9
$168.0]8.
_
519.292 R0]
Om.IR YremBMa
51,9126Po
510018
§1.3ID,229
51,31?809
518.818
$L329,229
Cmlmdar Ove�M1md
-$28B]]I00
IOAV, .1
5282430I
I
#Au`
#0,630
Canl2mor PMRE2w,.
$.1
1
53.859
8292,430
UMMILlabiIK Imunnc0
I #5300
531248253.126
5250."110
I
T.
1, 124
T., NBW COmiNNOn
I 15.S9d"
1191)69
.310.788.906
Sd.W.1J0
$9,BBI,e08
#OO ,
5196,z]J
w
51,200,00
516,700,009
ARCHITECTURAL
Deli n
r $821531
311.753
5940254
$590.169
1
$960.250
$Y ISIOn
1 .5151 ,08
51.011
5152iil020
""
SS2.920.
1152020
T.IAmM1RetlunlCmb
E1,0]9,Sb
S13,W
51.08,86
fit
3530,i5J
W
886.1,011
30
#
$1,00,174
SURVEY & ENGINEERING
E
1 SlI.S.
$12.89
51.031,091
51018,302
512.009
41.031081
Total Soho 8En Inmtln
IRMSS02
S12A09
$1,031,001
RI
SIM8,202
w
$12,O0
IS
IS
$143101
.. .
I 51001064
312,T211
$1017,705
S1.W4806
812121
31.01]]05
.RCOSI COnR ¢
nCOab
$25])12
83302
5200916
_ #57712
CID
#SAT.
Tetel Contin On
CONSTRUCTION
51.282.696
815.807
SI,P0,61D
50
512#,BBB
50
E15,98J
Sv
m
E1,TlBB79
PERIOD EXPENSES
Can 01I,n LOen lnl¢!61
$515.53]
SS.SR
E#2.050.
5515.539
56,520
$522.059
OII ImtivnFm
1 5162.]80
52091
$100.827
$162.786
52.061
PRR4A27
Cm1R EnM1encemmlBA _Faa
#9.025
5315
Sb,W3
#8.825
S115
830.00
Te+v Dull COnSlNppn
,$162.0]]
51.)96
516105
516,07]
81,]85
$149.0)5
Prevail) Wa .Monitor
SO
$0
EO
Imuanm Dun ConsWNon
#12912
5,000
$211000
#12,312
52.808
#15,000
TNeaW Re min Fed
$50253
5750
88000
$59.250
3]50.
&u..
ONC COnslmdbn Lmnl nIiNW POY CNO
8750563
5013)
5355.00"
5350.563
y,,49]
#88."09
Tela)Cenelmdlon Ez n
$1Arz.1z0
$1e,SR
f1.490,re1
50
31."72,128
50
518,05
SO
b
E1,d90A
Imn On Ire11onF
SJ15T
5000
#0.,7]
SJt9]]
5400
$91.98
TgAoI
$iBTO
5250
SID.00.
810.]0
.5250
Per
Tele) Flnancln
nenl
#1731
5850
551 .DIi
50
555.321
50
5550
50
#
851.9P
LEGAL FEES
CoM1.N .n L¢ndttL aI Ex..$lB.WO
51.03
#c.00
$19,00.
$1.00
$60,00
5 mrL IFem
.888]0
$'.240
sloaDV
$98.750
51250
5100030
TOte1 Le el Feae1
CAPITALIZED RESERVES
1177140
#RSO
E1B0p00
f0
8177."50
50
#150
.1
518000
O li Reserve
..5168.084
$14904
8168.06
516806
TObI Ce IbIIIOtl Re98rvOa
f16D.006
30
5149.080
$0
5140.084
$0
S9
$0
$0
S14BRm
REPORTS L STUDIES
A ,
r W.Mll
534
S2.i0
#.666
$94
#170
.II.Stwy
I 521182
5262
S2L450
E2ll02
#60
$21650
Emimnmemal Sludim
#1]0
5300
520.00
$2170
5300
#4,00
Dmc AAvAlt
.$101588
E1,312
810500
582.50
52290
810500
Tot61 Rv !b 65Ndlve
5161139
$1914
$159,150
b
868,540
#
Se3,102
SO
SII,500
5153,150
iCACA .IAlbc./ManilarFm
509658
$N0.090
SWe We
5140,098
LOBI P¢mlll 1.
#32561
$1576
#5511]
#B?541
53.576
$206.11)
AHSC Eligible (mp,dFed:
$9
DRIN 0
518.30
8204
518,546
$10340.
.5206
'$10.566
Pa*s B Rem®tian
S 906
$?001
$232,#5
$229,004
#871
$231535
SUvdYSI nolo
50
EO
G,
W
S0
T2I(CFmY
5289693
E3.)SS
#03,6¢2
#8900
53.)09,
8283.602
Wesle Walm
$253.261
SIRS
#58401
$253.261
W.I.
#3040]
Wetw Fecilil
:558.80
3733
559.3]0
56550
"'
5733
_
888.338
ONttlm dFem NOmAHSC EIi This
".fII11c8
W.I.
$95,204
$1]3,10¢
12,156
ST]S_
FumtNi a
5345.625
STAR
#5000
MaWO
5350,000
Mad¢II
5138250
51.>BO
8160,00
$140.00
510.00
OIFO1 Otili F¢d
8339.110
53027
#62137
$239,110
IGM7
$24213]
O-Reimbursmblm
553:325
SS]5
$84.00
'550.00
55680
TONI O[M1el Costa
S2.zH.411
33e1Y1
#.z55,]B]
EO
81,710,311
W
SSOB.Sz2
30
SO
52353.)83
SUBTOTAL
#3,189,754
H0p32
531508/08
9,904,130
$10.682]00
#.4W.r00
51172607
$O
SLN0.500
SOAN.70.
Dweb DEVELOPER FeNOveeM1mNPm ft
MOR
81.875,00
82100
#.0080
313]100
525.LYYI
Ffi0.00
#00.00
reoeta
32ms,a9d
S2s,am
#,B99,m9
sit
513]s,BBe
sit
sa,ddB
see9.9m
Po
sz,em,B99
TOTAL DEVELOPMENT LO3T
#S.b1.]54
142302
#S I.M."
51941130
3101O42rOB
17,494.70
#.1%,BW
500.000I
iA,RN,0e
55C-121
Exhibit He. Scope of
Work /Schedule of
Performance
55C-122
SCOPE OF WORK & SCHEDULE OF PERFORMANCE
I. SCOPE OF DEVELOPMENT:
The property address of the site subject to this agreement is 1666 North Main Street, at the
signalized intersection of 17th Street and Main Street, in the Midtown Specific Plan Zoning
District (SP -3). The development site consists of two parcels held as one, of 48,399 square feet
total (or 1.11 acres). The development site is currently improved with a five -story office building,
one level of subterranean parking, and approximately 0.5 acre of surface parking. The office
building was built in 1968 and has 62,724 rentable square feet.
In November 2014, the Santa Ana City Council approved an adaptive reuse ordinance, which
provides alternative building and fire standards in order to convert non-residential buildings built
before 1974 into dwelling units, guest rooms or joint living and work quarters. 1666 North Main
Street qualifies for this ordinance because of the building's age, non-residential use, and location in
the Midtown Specific Plan Zoning District.
The development is a fifty-eight (58) unit affordable housing development that would adaptively
reuse the five -story office building as forty-eight (48) residential flats, and newly construct ten (10)
additional residential lofts, townhomes, and flats on the office building's former surface parking
area. A mix of twenty-six (26) 1 -bedroom, fifteen (15) 2 -bedroom, and seventeen (17) 3 -bedroom
units will be spread throughout the adaptively reused office building and ground -level new
construction. Building heights range from two (2) stories in the former surface parking areas to five
(5) stories in the adaptively reused building. An existing subterranean parking garage will be
restriped for 113 parking spaces. Parking will be accessed via the existing drive aisle from North
Sycamore Street to the west.
The 1968 office building is constructed of reinforced concrete panels with tinted window panels, in
the international style of architecture, which has its roots in the modernist design movement of the
twentieth century. The new development would preserve the former office building's clean,
contemporary lines and add new, modem lofts and townhomes to complement the character of the
office building and more broadly Midtown.
To complement and sustain the proposed artist concept, Meta Housing Corporation has included
approximately 5,992 square feet of community space distributed throughout the development. That
space is proposed to be allocated to the following uses: a community art gallery, art garden, maker
spaces, music room, rehearsal room, community room with community kitchen, computer room,
property management office, services office, common laundry facility, a courtyard, and tot lot. The
approximate 1300 square foot community art gallery, art garden, and maker spaces will be located
on North Main Street.
55C-123
II. SCHEDULE OF PERFORMANCE:
IW67010M.11II
1. Insurance. Developer shall furnish or cause to be furnished As a Condition Precedent to
appropriate certificates of insurance and/or endorsements to disbursement of any portion of
City which meet all requirements of the Agreement. the loan, but no later than ten
days after close of escrow.
B. PROJECT FINANCING
Submission of Evidence of Financing. Developer shall submit Not later than thirty (30) days
to City evidence of financing for the Project after allocation of tax credit
financing by CTCAC.
2. Receipt of All Funding Commitments Necessary to Complete Not later than thirty (30) days
Construction of the Improvements. Developer shall use its best before Construction Close.
and good faith efforts to secure irrevocable funding
commitments from TCAC, Senior Lender, and other available
funding sources which when combined with the Loans shall
equal no less than the total cost to construct the Improvements,
as set forth in the approved Project Budget. Developer shall
submit such commitments to City for review.
3. Approval of Developer's Evidence of Financing. City must Not later than twenty (20)
approve Developer's evidence of financing as required by business days after receipt of a
the Agreement. complete submittal from
Developer
C. CONSTRUCTION OF IMPROVEMENTS
1. Design Development Drawings. Developer shall prepare and Within seven (7) months
submit Design Development Drawings to City for review and following the date of the
approval. Loan Agreement.
2. Approval of Design Development Drawings. City Housing Within fourteen (14) days of
staff shall review and approve, approve with conditions, or Developer's complete
disapprove the Design Development Drawings. submittal of the Design
Development Drawings.
55C-124
Revision to Design Development Drawings. Developer shall
revise and resubmit Design Development Drawings to
address conditions or disapproval to the satisfaction of City.
4. Management Plan. Developer shall submit its proposed
Management Plan to City for review and approval.
5. Approval of Management Plan. City shall review and approve,
approve with conditions, or disapprove the Management Plan.
6. Revision to Management Plan. Developer shall revise
Management Plan if conditionally approved or disapproved by
City.
7. Approval of Revised Management Plan. City shall review and
approve, approve with conditions, or disapprove revised
Management Plan.
8. Progress Payments. During construction Developer shall
prepare monthly written progress reports and submit to City
Manager.
Within fourteen (14) days of
conditional approval or
disapproval, subject to
extension based upon extent of
revisions requested.
Not later than twenty (20)
business days after receipt of a
complete submittal from
Developer
Within fourteen (14) days of
receipt of a complete submittal
from Developer.
Within fourteen (14) days of
receipt of disapproved
Management Plan from City.
Within fourteen (14) days of
receipt of a complete submittal
of revised Management Plan
from Developer, but not later
than 120 days prior to project
completion.
Commencing thirty (30) days
after start of the Construction
work through completion.
9. Commencement of Construction of the Improvements.
No later than July 28, 2017
Developer shall cause the Construction of the Improvements to
be commenced by Contractor.
10. Completion of Construction of the Improvements. Developer
On or before November 1,
shall complete all work of the Construction of the
2018 (subject to extension by
Improvements.
City based upon substantial
progress toward completion of
construction by Developer).
11. Release of Construction Covenants. City to furnish Developer Within thirty (30) days of
with a Release of Construction Covenants. receipt of Developer request
and only after Developer's
satisfactory completion of the
Construction of the
Improvements.
55C-125
The Schedule of Performance is subject to revision from time to time as mutually agreed upon in
writing between Developer and the City Manager or his/her designee ("City Manager"), and City
Manager is authorized on behalf of City to agree to make such revisions as he deems reasonably
necessary. The City Manager, in his/her sole discretion, may elect to bring to the City Council for
consideration and action any modifications to this Schedule of Performance. It is understood that the
Schedule of Perfolmance is subject to all of the telcos and conditions set forth in the text of the
Agreement. The summary of the items of perfolmance in the Schedule of Performance is not
intended to supersede or modify the more complete description in the text of the Agreement; in the
event of any inconsistency between the Schedule of Performance and the text of the Agreement, the
text shall govern. In the event the City Manager deems it necessary to bring to City Council for
consideration one or more modifications to this Schedule of Performance, the discretion to do so is
expressly reserved to the City Manager. The time periods set fol lh herein for City approval of plans
and drawings and other submittals that are submitted to City by Developer shall only apply and
commence upon Developer' s complete submittal of all the required information. In no event shall an
incomplete submittal by Developer trigger any City obligations of review and/or approval hereunder;
provided, however, that City shall notify Developer of an incomplete submittal as soon as is
practicable and in no event later than the applicable time set forth for City action on the particular
item in question. If any of the foregoing performance measurements are not met then it will be
deemed a default as defined in Section 20 and any remedies shall be cured according to said Section
of the Agreement.
55C-126
Exhibit I: Form of
Residual Receipts
Report
55C-127
EXHIBIT I
FORM OF RESIDUAL RECEIPTS REPORT
Community Development Agency of the City of Santa Ana
Residual Receipts Report
for the Year Ending,
Date Prepared
Please complete the following information and execute the certification at the bottom of this form.
Please report Annual Project Revenue for the year ending on the following lines:
Rent Payments (including Section 8 tenant assistance payments, if any)
Interest Income (do n2linclude interest income from replacement and operating
reserves nor interest income on tenant security deposits)
Additional Income (for example, vending machine income, tenant forfeited
deposits, laundry income not paid to the residents' association)
Total Annual Project Revenue (Add lines 1, 2, and 3)
Operatine Expenses'
Please report Operating Expenses incurred for the year ending
on the following lines:
Operating and Maintenance Expenses
Utilities
Property Management Expenses and On -Site Staff Payroll
Administrative Expenses
Property Taxes
Insurance
55C-128
(1)
(2)
(5)
(6)
$
(7)
$
(8)
$
(9)
$
(10)
$
Other Expenses
Please list these expenses:
Total Annual Operating Expenses for the Housing Project
(12) $
(Add lines 5, 6, 7, 8, 9, 10, and 11)
Net Operating Income (Subtract Line 12 from Line 4)
(13) $
Do not include expense unrelated to the operation ofthe Rental Portion of the
Project, such as depreciation, amortization, accrued principal and interest
expense on deferred payment debt, or capital expenditures.
Additional Cash Flow Payments
Obligated First Mortgage Debt Service Payments (as approved by the Agency and
(14) $
other parties that may have such approval rights) and Obligated Secondary
Subordinate Debt Service Payments (as approved by the Agency and other parties
that may have such approval rights)
Scheduled Deposits to Reserves (as approved by the Agency)
(15) $
Additional Payment Obligations (such as partnership management fees, deferred
(16) $
developer fees, or repayments on loans to partners, as approved by the Agency to
have priority over Residual Receipt Payment to the Agency)
Total Additional Cash Flow Payments (Add lines 14, 15, and 16)
(17) $
Residual Receipts for Year Ending
(18) $
(Subtract Line 17 from Line 13)
Percentage of Residual Receipts to be Paid to the Agency (as shown in the
(19)
Promissory Note by and between the Agency and Borrower dated
Amount Payable to the Agency (Multiply Line 18 by Line 19) (20)
The amount payable to the Agency listed on Line 20 is subject to payment according to the terms of the
Promissory Note by and between the Agency and Borrower dated . If Line 20 is
$0.00 or negative, you owe nothing to the Agency this year. If Line 20 is a positive number, remit check
payable to and attach to this report.
55C-129
55C-130
FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 6103 & 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, California 92702
Attention: Clerk of the Council
SPACE ABOVE THIS LINE FOR RECORDING USE
FREE RECORDING REQUESTED
[Government Code Section 6103]
• 1
UOTRONFET4161=3l L 1
by and between the
•INU. .►:
and
SANTA ANA ARTS COLLECTIVE, L.P., a California limited partnership
(1666 N. Main Street, Santa Ana, California)
Dated: July 5, 2017
Exhibit 3
55C-131
HOME LOAN AGREEMENT
THIS HOME LOAN AGREEMENT (the "Agreement") dated, for identification
purposes only, as of July 5, 2017, is made and entered into by and between the CITY OF
SANTA ANA, a charter city and municipal corporation ("City") and SANTA ANA ARTS
COLLECTIVE, L.P., a California limited partnership ("Developer"), with reference to the
following:
RECITALS:
A. The City has received an allocation of funds from the United States Department
of Housing and Urban Development ("HUD") under the HOME Investment Partnerships
Program ("HOME Program") (42 U.S.C. § 12701, et seq.) to be used in accordance with
applicable statutory requirements and regulations ("HOME Regulations")(24 CFR 92);
B. Among the purposes of the HOME Program are (1) to expand the supply of
decent, safe, sanitary, and affordable housing, with primary attention to rental housing, for very
low-income and low-income Americans; and (2) to provide participating jurisdictions, on a
coordinated basis, with the various forms of federal housing assistance, including capital
investment, mortgage insurance, rental assistance, and other federal assistance, needed (a) to
promote the development of partnerships among the federal government, states and units of
general local government, private industry, and nonprofit organizations able to utilize all
available resources to provide more of such housing, and (b) to expand the capacity of nonprofit
community housing development organizations to develop and manage decent, safe, sanitary and
affordable housing;
C. The City is authorized by the HOME Regulations to expend funds to increase the
supply of very low and low-income housing available at affordable housing costs.
D. The City issued a Request for Proposals on June 1, 2015, seeking affordable
housing projects. After reviewing all applications, the Developer's project was selected and
approved for funding by the Santa Ana City Council on November 3, 2015.
E. Developer is entering into this Agreement to acquire and, subject to entitlement
approvals, develop an adaptive reuse project consisting of a fifty-eight (58) unit multi -family
residential housing development, with live/work units and a possible commercial art studio, as
well as a community room (the "Project") located at 1666 N. Main Street, within the City of
Santa Ana, California, and legally described in Exhibit A attached hereto (the "Property"). The
HOME funds referenced herein shall assist in the acquisition, rehabilitation, construction, and
soft costs of said Project.
F. In furtherance of the HOME Program, Developer has applied to the City for a
loan with which to:
55C-132
provide deeper affordability and construct the improvements to the
Property; and,
2. thereafter to maintain, operate and professionally manage the Project as
decent, safe, sanitary and affordable rental housing.
G. The City, on certain terms and conditions, desires to make such loan ("HOME
Loan") to Developer in order to make possible the rehabilitation and construction of the Project,
thereby expanding the supply of decent, safe, sanitary and affordable housing.
H. If there is any inconsistency between Federal, State, and local guidelines with
regard to any of the terms and conditions contained herein, the more stringent shall apply.
NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
herein contained, City and Developer agree as follows:
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. All capitalized terms used herein, including, without limitation,
in the Recitals above and in all other Project Documents, unless otherwise expressly defined, are
defined where first used in this Agreement and/or as set forth in this Article 1.
"Affordable Housing" means housing operated in accordance with the
requirements of 24 CFR 92.252 and the rents governed by California Health and Safety Code
Section 50052.5.
"Affordability Restrictions on Transfer of Property" means that certain
document affecting real property benefiting the City, attached hereto as Exhibit B.
"Affordable Rent" means the monthly rents which do not exceed the maximum
amount applicable to Extremely Low, Very Low and Low Income households, as promulgated
by the U.S. Department of Housing and Urban Development (HUD), or by the California Tax
Credit Allocation Committee, as applicable.
"AHSC Loan" means a permanent loan of Affordable Housing and Sustainable
Communities program funds from HCD administered by the California Strategic Growth
Council in the amount of $4,944,130
"AHSC Deed of Trust" means the any deed(s) of trust securing athe AHSC
Loan encumbering the Property.
"AHSC Documents" means, collectively, the loan agreement governing the
AHSC, the AHSC Note, the AHSC Deed of Trust, and any other agreement, document or
instrument that the Senior Lender requires in connection with the AHSC Loan.
55C-133
"Building Permit" means the building permit(s) issued by City and required for
the Construction, if any.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or Friday
on which Santa Ana City Hall is open to the public for the conduct of City affairs.
"Calendar Year" means each consecutive twelve (12) month period from
January 1 to December 30.
"Certificate of Completion" has the meaning set forth in Article 17.
"City" means the City of Santa Ana, California, a charter city and municipal
corporation.
"Close of Escrow" shall mean the date upon which the HOME Loan Deed of
Trust is recorded in the Official Records of the County.
"Closing Statement" means the final statement of Developer's Escrow account
for the purchase and sale of the Property pursuant to the Purchase Contract.
"Construction" means the demolition and construction activities required to
construct, until Certificate of Completion, the Project.
"County" means the County of Orange, California.
"Developer" means Santa Ana Arts Collective, L.P., a California limited
partnership.
"Developer's Representative" shall mean an officer of the General Partner of
Developer or his/her designee.
"Event of Default" has the meaning set forth in Section 20.1.
"Extremely Low Income" means an adjusted income which does not exceed
thirty percent (30%) of the area median income for the Orange County, California PMSA,
adjusted for household size, as published by HUD.
"General Partner(s)" means the Santa Ana Arts Collective, LLC, a California
limited liability company, and WCH Affordable XVIII, LLC, a California limited liability
company.
"Governmental Authority" means any governmental or quasi -governmental
agency, board, bureau, commission, department, court, administrative tribunal or other
instrumentality or authority, and any public utility.
55C-134
"Hazardous Materials" means flammable materials, explosives, radioactive
materials, hazardous wastes, toxic substances and similar substances and materials, including all
substances and materials defined as hazardous or toxic wastes, substances or materials under any
applicable law, including without limitation the Resource Conservation and Recovery Act, 42
U.S.C. §§ 6901 et seq., and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. §§ 9601, et seq., as amended.
"HOME Compliance Period" means twenty (20) years from the issuance of the
Certificate of Completion or until payment of principal and all accrued interest on the HOME
Loan, whichever comes last.
"HOME Loan" means the loan with principal amount of TWO MILLION, TWO
HUNDRED AND NINETEEN THOUSAND, SEVEN HUNDRED AND SIXTY DOLLARS
($2,219,760.00) to be made to Developer by City from HOME funds pursuant to Article 5 of this
Agreement.
"HOME Loan Deed of Trust" means the deed of trust encumbering the
Property, in the form attached hereto as Exhibit C, to be executed by Developer pursuant to
Section 5.13.2 in order to secure the HOME Loan Promissory Note.
"HOME Loan Promissory Note" means that certain promissory note in the
original principal amount of TWO MILLION, TWO HUNDRED AND NINETEEN
THOUSAND, SEVEN HUNDRED AND SIXTY DOLLARS ($2,219,760.00) in the form
attached hereto as Exhibit D, and to be executed by Developer in favor of City to evidence the
obligation of Developer to repay the HOME Loan.
"HOME Program" has the meaning set forth in Recital "A" above
"HOME Regulations" has the meaning set forth in Recital "A" above.
"HOME Units" means the eleven (11) affordable units assisted with HOME
funds.
"HUD" means the United States Department of Housing and Urban Development
and any successors or assigns thereof.
"Improvements" means all improvements and fixtures now and hereafter
comprising any portion of the Property, including, without limitation, landscaping, trees and
plant materials; and offsite improvements, as required through the City of Santa Ana Planning
and Building Agency entitlement process.
"Indebtedness" of a person means (a) all indebtedness for borrowed money, (b)
notes payable and drafts accepted representing extensions of credit, whether or not representing
obligations for borrowed money, (c) any obligation for the purchase of property or services in
excess of $10,000 in the aggregate that is (i) deferred for more than six (6) months, or (ii)
evidenced by a note or similar instrument, and ( d) all recourse and all non-recourse indebtedness
55C-135
secured by any Lien on any property or asset of such person (whether or not assumed by such
person).
"Indemnitees" has the meaning set forth in Section 14.5.
"Laws" means all statutes, laws, ordinances, regulations, orders, writs,
judgments, injunctions, decrees or awards of the United States or any state, county, municipality
or other Governmental Authority.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any lien or security interest).
"Limited Partner" means the Limited Partners of Developer, and their
successors and assigns.
"Loan Documents" means, collectively, this Agreement, the HOME Loan Note,
the HOME Deed of Trust, the Affordability Restrictions on Transfer of Property, and any other
agreement, document, or instrument that the City requires in connection with the execution of
this Agreement or from time to time to effectuate the purposes of this Agreement.
"Low Income" means an adjusted income which does not exceed eighty percent
(80%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
"Median Income for the Area" means the median income for the Orange
County, California PMSA as most recently determined by HUD. Also may be referred to
interchangeably in the Loan Documents as "Area Median Income" or "AMI".
"Partnership Agreement" means the Second Amended and Restated Agreement
of Limited Partnership of Santa Ana Arts Collective, L.P., dated in July 2017.
"Permitted Encumbrances for the Affordable Housing Restrictions" means,
collectively, the Senior Loan Deed of Trust and AHSC Deed of Trust and all other title exceptions
and limitations with respect to the Property hereafter approved by the Executive Director in
writing, which shall include all title exceptions set forth on City's title policy, all documents
evidencing the State of California Housing and Community Development loan to encumber the
Property and the TCAC Regulatory Agreement.
"Permitted Encumbrances for the HOME Loan Deed of Trust" means,
collectively, the Senior Loan Deed of Trust and all other title exceptions and limitations with
respect to the Property hereafter approved by the Executive Director in writing which shall
include all title exceptions set forth on City's title policy, all documents evidencing the State of
California Housing and Community Development loan to encumber the Property and the TCAC
Regulatory Agreement.
55C-136
"Project" means the construction of the Improvements upon the Property by
Developer pursuant to this Agreement.
"Project Budget" means the line -item budget for the Project attached hereto as
Exhibit E, as modified from time to time in accordance with this Agreement.
"Project Costs" means all costs of any nature incurred in connection with the
Project in accordance with generally accepted accounting principles.
"Property" means the property that is located at 1666 N. Main Street in the City of
Santa Ana, and is more fully described in the "Legal Description" of the Property attached hereto as
Exhibit A and incorporated herein by reference.
"Scope of Work/Schedule of Performance" means the detailed statement of the
work to be performed by Developer on and to the Property pursuant to this Agreement, along
with the Schedule of Performance setting forth timeframes for certain tasks, which document is
attached hereto as Exhibit F.
"Section 504" means section 504 of the federal Rehabilitation Act of 1973, codified
at 29 U.S.C. § 701 et seq., and its implementing regulations located at 24 CFR 8.
"Senior Lender" means a commercial financial institution providing the Senior
Loan or any other holder of the Senior Loan Note and its successors and assigns. The initial
Senior Lender will be Bank of America, N.A and California Community Reinvestment
Corporation is projected to become the Senior Lender after conversion of the loan to permanent
status.
"Senior Loan" means a loan from any Senior Lender(s) in a position superior to
the HOME Loan.
"Senior Loan Deed of Trust" means any deed(s) of trust securing any Senior
Loan(s) by encumbering the Property.
"Senior Loan Documents" means, collectively, the loan agreement governing
the Senior Loan, the Senior Loan Note, the Senior Loan Deed of Trust, and any other agreement,
document or instrument that the Senior Lender requires in connection with the Senior Loan.
"Senior Loan Note" means the promissory note evidencing the Senior Loan from
the Senior Lender.
"Term of Affordability" the terms and conditions contained herein shall remain
in effect for fifty-five (55) years from the date of issuance of the Certificate of Completion.
"Very Low Income" means an adjusted income which does not exceed fifty
percent (50%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
55C-137
1.2 Singular and Plural Terms. Any defined term used in the plural in this
Agreement or any other Loan Document shall refer to all members of the relevant class and any
defined term used in the singular shall refer to any number of the members of the relevant class.
1.3 References and Other Terms. Any reference to this Agreement or any Loan
Document shall include such document both as originally executed and as it may from time to
time be modified. References herein to Articles, Sections and Exhibits shall be construed as
references to this Agreement unless a different document is named. References to subparagraphs
shall be construed as references to the same Section in which the reference appears. The term
"document" is used in its broadest sense and encompasses agreements, certificates, opinions,
consents, instruments and other written material of every kind. The terms "including" and
"include" mean "including (include) without limitation."
1.4 Exhibits Incorporated. All attachments and exhibits to this Agreement, as now
existing and as the same may from time to time be modified, are incorporated herein by this
reference.
2. [RESERVED]
SCOPE OF WORK/ PROJECT BUDGET
A Scope of Work and Budget for the Project is attached hereto as Exhibit F. Any
material change to the Scope of Work/Budget requested by the Developer shall be subject to the
prior written approval of the Executive Director.
A line -item budget for the Project, including a summary statement of sources and uses of
funds, is incorporated into Exhibit E (the "Project Budget"). Any material change to the Project
Budget requested by Developer shall be subject to the prior written approval of the Executive
Director.
Notwithstanding the foregoing, the City's approval of a change order shall not be
required unless the approval of the Senior Lender is required with respect to such change order.
4. COMPLIANCE WITH REHABILITATION ACT OF 1973
The design and construction of the Project shall at all times comply with Section 504.
A. Amount and Purpose. Subject to the terms and conditions of this Agreement,
City agrees to make a loan of HOME funds to Developer in the principal amount of up to TWO
MILLION, TWO HUNDRED AND NINETEEN THOUSAND, SEVEN HUNDRED AND
SIXTY DOLLARS ($2,219,760.00) (the "HOME Loan") for the acquisition, rehabilitation,
construction, and soft costs of said Project.
55C-138
B. HOME Promissory Note and Deed of Trust. The HOME Loan shall be
evidenced by the HOME Loan Promissory Note in the form attached hereto as Exhibit D. The
HOME Loan shall be secured by the HOME Loan Deed of Trust in the form attached hereto as
Exhibit C. The HOME Deed of Trust shall be a deed of trust encumbering the Property,
subordinate to the Senior Loan(s) made to Developer.
C. HOME Loan Terms. The terms and conditions of the HOME Loan are as set
forth in the HOME Loan Promissory Note which is a residual receipts note. The HOME Loan
Promissory Note shall be subordinate to the Senior Loan, and shall continue in full force and
effect for the entire HOME Compliance Period.
6. CONDITIONS TO DISBURSEMENT OF LOAN PROCEEDS
6.1 Conditions Precedent. City's obligation to disburse the Loan Amount(s) is subject to the
satisfaction, or waiver by the Executive Director, of the following conditions precedent:
(a) Loan Documents. Developer shall have delivered to the Escrow
Holder, signed by the authorized officer or officers of Developer, with such signature(s)
acknowledged where necessary, each of the following documents:
(i) this Loan Agreement;
(ii) the HOME Loan Promissory Note;
(iii) the HOME Deed of Trust;
(iv) the Affordability Restrictions on Transfer of Property, and;
(v) the Notice of Affordability.
(b) Title Insurance. City shall have received an ALTA Extended (LP -10)
Loan Policy (6-17-06), or evidence of a commitment therefore satisfactory to City, issued by
First American Title Insurance Company and in form and substance satisfactory to City, together
with all endorsements and binders required, naming City as the insured, in a policy amount of
not less than the total HOME Loan Amount, showing Developer as the fee owner of the Property
and insuring the HOME Deed of Trust to be valid priority liens on the Property. This Agreement,
the HOME Promissory Note, and the HOME Deed of Trust, shall all be subordinate to any
Senior Loan Note and Senior Loan Deed of Trust and to the AHSC Loan Documents.
(c) Affordability Restrictions on Transfer of Pronertv. Developer shall have
delivered to the Escrow Holder, in the form attached hereto as Exhibit B, the Affordability
Restrictions on Transfer of Property pursuant to which, among other things, Developer agrees
that the Property shall be used only for decent, safe, sanitary and affordable rental housing
pursuant to the affordability requirements of Code of Federal Regulations ("CFR") section
92.252 or 92.254 and California Health and Safety Code ("H&S") sections 50052.5 and 33334.3,
as applicable. Except as may be required in connection with the AHSC Loan, the City's
55C-139
Affordability Restrictions on Transfer of Property shall remain in first position on title and shall
not be subordinated.
(d) Documents Recorded. This Loan Agreement, the HOME Loan Deed of
Trust, the Notice of Affordability and the Affordability Restrictions on Transfer of Property shall
have been recorded in the Official Records of the County.
(e) Request for Notice. For the benefit of City, Escrow Holder shall have
recorded a request for notice of default of the Senior Loan (the "Request for Notice of Default").
(f) Insurance. City shall have received evidence satisfactory to the City Attorney
that all of the policies of insurance required by Section 19 of this Agreement are in full force and
effect.
(g) Representations and Warranties. The representations and warranties of
Developer contained in this Agreement and the other Loan Documents shall be correct in all
material respects as of the Close of Escrow as though made on and as of that date, and if
requested by the Executive Director, City shall have received a certificate to that effect signed by
Developer's Representative.
(h) No Default. No Event of Default by Developer shall have occurred, and no
event shall have occurred which, with the giving of notice or the passage of time or both, would
constitute an Event of Default by Developer under this Agreement, and if requested by the
Executive Director, City shall have received a certificate to that effect signed by Developer's
Representative.
6.2 Disbursement Procedures for Loan. The HOME Loan proceeds shall be disbursed through
Escrow to finance the acquisition and construction of the Project (as evidenced in Exhibit E). The
HOME Loan proceeds shall not be used for any purpose other than for acquisition and
predevelopment and construction related costs, including developer fee and soft costs related to the
development of the Project (costs all subject to City's prior review).
6.3 First Disbursement. City's obligation to make the first disbursement of the Construction
Portion is subject to satisfaction of the following conditions precedent:
(a) General Contractor. If the Executive Director has not yet approved the General
Contractor, the Executive Director shall have approved the identity and
qualifications of the General Contractor.
(b) Construction Contract. If the Executive Director has not yet approved the
Construction Contract, the Executive Director shall have approved the
Construction Contract.
6.4 Termination for Failure of Condition. If (a) any of the conditions set forth herein are
not timely satisfied or waived by the Executive Director, and (b) City is not in default under this
Agreement, City may terminate this Agreement without any further liability on its part by giving
55C-140
written notice of termination to Developer. Upon the giving of such notice, all principal, interest
and other amounts owing under the HOME Loan Promissory Note shall be immediately due and
payable, regardless of any other specified due date.
6.5 Any Disbursement. City's obligation to make any disbursement of the Loan (including
the first and final disbursements) is subject to the satisfaction of the following conditions
precedent:
(a) Satisfactory Progress. The Executive Director shall be satisfied, based on his/her
own inspections or other reliable information that the Construction is progressing
satisfactorily in conformance with all applicable laws and other requirements
(including HOME regulations).
(b) Condition of Title. Either (i) the Executive Director reasonably believes that no
event has occurred since the Close of Escrow that would give rise to a colorable
claim against the Property (e.g., a mechanic's lien) superior to the claim of City
against the Property with respect to the subject disbursement, or (ii) City must
have received, at Developer's expense but payable out of the Constriction
Proceeds, from the title insurer who issued City's LP -10 Title Policy, all
endorsements thereto then reasonably required by City (including, without
limitation, CLTA Form 122 — priority of advance endorsements).
(c) Representations and Warranties. The representations and warranties of Developer
contained in this Agreement and the other HOME Loan Documents shall be
correct in all material respects as of the date of the disbursement as though made
on and as of that date.
(d) No Default. No Event of Default by Developer shall remain uncured (unless, to
the extent permitted under this Agreement, Developer is diligently taking action
to cure such default) and no event shall have occurred which, with the giving of
notice or the passage of time or both, would constitute an Event of Default by
Developer.
6.6 Final Disbursement. City's obligation to disburse that portion of the Loan funds retained
pursuant to Section 6.12 is subject to the satisfaction of the following additional conditions
precedent:
(a) Construction Complete. The construction of the Project shall be complete.
(b) Certificate of Occupancy Issued. Any portion of the construction requiring
inspection or certification by any Governmental Authority shall have been
inspected and certified as complete. Developer shall request that the Building
Department issue a Certificate of Occupancy, a copy of which shall be delivered
to the Executive Director, in order for final disbursement to occur.
(c) Lien Free. At least one of the following shall have occurred:
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(i) Thirty-five (35) days shall have passed since the recording of a valid
notice of completion for the construction, and no mechanic's or material
man's lien shall be outstanding; or
(ii) Ninety-five (95) days shall have passed since actual completion of the
construction, and no mechanic's or materialman's lien shall be
outstanding, or Developer shall have bonded over any such lien to City's
reasonable satisfaction.
6.7 Waiver of Conditions. The conditions set forth pertaining to City's obligation to make
disbursements of the Loan proceeds are for City's benefit only and the Executive Director may
waive all or any part of such rights by written notice to Developer.
6.8 Disbursement Requests. The Loan proceeds shall be disbursed on a line -item by line -
item basis in accordance with the Project Budget and subject to the conditions in this section. In
no event shall City have any obligation to disburse any amount for any item in excess of the
amount allocated to such item in the Project Budget. Disbursements shall be made only upon
Developer's written request in the form of a Disbursement Request showing all costs which
Developer intends to fund with such disbursement, itemized in such detail as City may
reasonably require, accompanied in each case by (a) invoices and lien releases satisfactory to
City, including in any event partial lien releases executed by each contractor and subcontractor
who has received any payment for work performed, and (b ) all other documents and information
reasonably required by City. Disbursement Requests shall be submitted no less than ten (10)
Business Days prior to the date of the requested disbursement, and shall not be submitted more
often than monthly.
Prior to each disbursement by City of proceeds of the Loan, Borrower shall deliver to City a
draw request ("Draw Request"), and all required supporting information as set forth in the Loan
Documents or as otherwise reasonably required by City in order to provide information for
evaluating the requested disbursement pursuant to customary construction lending practices of
institutional lenders in Southern California.
City shall notify the Developer of approval or disapproval of each Draw Request within five (5)
Business Days after receipt of the Draw Request, using the City's "Disbursement/Change Order
Approval Notice". City shall have the right, but not the obligation, to discontinue processing
Draw Requests unless and until receipt of notification from the other of approval or disapproval
of each outstanding Draw Request.
6.9 Manner of Disbursement. City may make any disbursement by check payable to
Developer; or on a voucher basis; or by check payable jointly to Developer and any contractor,
subcontractor or other claimant; or directly to any such claimant; or by any other means
reasonably selected by City.
6.10 Cost Overruns. In the event that, at any time and for any reason, (a) the actual cost
reasonably estimated by City or Developer to be required to complete all matters included in any
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line item in the Project Budget exceeds the amount allocated to that line item in the Project
Budget, (b) Project Costs for any matters not covered by a specific line item have been or will be
incurred, or (c) the undisbursed portion of the Loan proceeds together with any other available
construction sources is or may be insufficient to pay all construction of the Project that may be
payable under the Loan Documents or otherwise in connection with the construction, Developer
shall, within ten (10) days after it receives written notice thereof from City of any of the
foregoing matters, do one or more of the following:
(a) provide satisfactory evidence to City that Developer has previously paid such
excess or otherwise provided for such insufficiency (collectively, the "Excess
Cost") with funds from a source other than the HOME Loan;
(b) reallocate sufficient funds to pay the Excess Cost from funds allocated to
"Contingency" in the Project Budget; provided, however, that the Executive
Director's consent to any such reallocation shall be required; or
(c) deposit an amount equal to the Excess Cost in a non-interest bearing account (the
"Overrun Account") with City or Senior Lender from which withdrawals may be
made only with the consent of the Executive Director or Senior Lender but which
will be exhausted prior to any further disbursement for any line item, so that any
resulting surplus in any line item of the Project Budget will then be reallocated to
the line item(s) in which the Excess Costs are expected to be incurred.
City shall have no obligation to make further disbursements until Developer has paid or
otherwise provided for the overrun as required above. Amounts deposited by Developer in the
Overrun Account for any Excess Costs shall be disbursed by City or Senior Lender prior to the
disbursement of any remaining Loan proceeds in the manner described in subsection 9.3(c).
6.11 Cost Savings. Upon completion of and disbursement for all matters covered by any line
items in the Project Budget, any remaining undisbursed amounts allocated to that line item shall
be reallocated to "Contingency" and thereafter be available for disbursement in accordance with
the terms of this Agreement.
6.12 Retainage City will withhold a Retainage of 10% from each Disbursement for each
of the Hard Cost line items of the Project Cost Breakdown (and other line items thereof
designated for withholding of retainage) until all conditions to the final Disbursement of Hard
Costs have been satisfied. In lieu of City's withholding Retainage, Developer can by written
notice to City elect not to draw any overhead or profit as would otherwise be permitted under the
Construction Contract until such time as Retainage would otherwise have been released.
6.13 Holdback. The retainage otherwise available for disbursement shall be subject to a
holdback of one hundred twenty-five percent (125%) of the estimated cost (as determined by the
Executive Director) for "punch -list" items. Such holdback will be released when all punch -list
items have been completed to the satisfaction of City.
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6.14 Waiver of Disbursement Conditions. Unless City otherwise agrees in writing, the
making by City of any disbursement with knowledge that any condition to such disbursement is
not fulfilled shall constitute a waiver of such condition only with respect to the particular
disbursement made, and such condition shall be a condition to all further disbursements until
fulfilled.
6.15 Modification of Disbursement Conditions and Procedures. The Executive Director
shall have the authority to modify the disbursement conditions and procedures set forth herein in
order to conform them to the payment provisions of the Construction Contract.
6.16 Other Terms and Conditions of Loan.
A. The Promissory Note shall become immediately due and payable, in the event of any
of the following:
(1) failure to complete the Project within four (4) years of the recording date;
(2) violation of any of the use covenants and restrictions contained in this
Agreement after the expiration of any applicable notice and cure periods;
(3) an Event of Default by Developer which is not timely cured after expiration
of any applicable notice and cure periods pursuant to the terms of this
Agreement.
6.17 Closing Costs and Fees. Developer shall pay (a) all escrow fees and charges, (b) all
recording fees and charges on any document recorded pursuant to this Agreement, and (c) the
premium for the title insurance required hereunder.
7. AFFORDABILITY REQUIREMENTS, USE AND MAINTENANCE OF THE
PROPERTY
7.1 Use Covenants and Restrictions.
A. The HOME restrictions for the eleven (11) HOME assisted units shall be enforced until the
date that is fifteen (15) years after the date on which the Certificate of Completion is issued or until
payment of principal and all accrued interest on the HOME Loan, whichever comes last.
B. Upon expiration of the HOME Compliance Period, the City will enforce affordability of said
units with the same income and rent restrictions as the other units, pursuant to California Health and
Safety Code.
C. The Project shall consist of fifty-seven (57) income restricted units. There shall be
eleven (11) HOME assisted units. The HOME assisted units will be floating units and shall be
distributed throughout the complex with comparable amenities to the other units.
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D. The maximum incomes of residential tenants eligible to rent the Units shall be
determined on the basis of the Area Median Income ("AMP') for the Orange County, California
PMSA, published approximately annually by the United States Department of Housing and
Urban Development ("HUD").
E. Affordable rents charged to tenants shall be governed by the HOME Regulations 24 CFR
section 92.2.
7.2 Affordability Levels/Unit Mix:
The proposed unit mix, initial rents, and levels of affordability are as follows:
The remaining unit will be a 2 -bedroom unit reserved for the onsite manager.
HOME Assisted Units
Unit Type
30% AMI
35% AMI
40% AMI
60% AMI
Total # of Units Description/No
Unit Size
No. Rent
Units
NO' Rent
Units
No. Rent
Units
No. Rent
Units
Total
1 Bedroom
14 $587
6 $685
6 $783
26
2 Bedroom
2 $704
---
--- ---
12 $1,408
14
3 Bedroom
4 $813
---
--- ---
13 $1,627
17
Total
20
6
6
25
57
The remaining unit will be a 2 -bedroom unit reserved for the onsite manager.
HOME Assisted Units
Unit Type
Total # of Units Description/No
No. of BRs
Level of
# of HOME
HOME Share of
Affordability
Assisted Units
Unit Type
tes
26 1 Bed
1
30% AMI
5
19.23%
14 2 Bed
2
2
14.29%
17 3 Bed
3
4
23.53%
(1) In no event shall the rent charged to the HOME assisted units be more than that amount of the
low HOME rent as published by HUD, as amended from time to time.
(2) At the time of project completion, the Developer shall provide to the City the address and/or
unit number of each of the HOME floating units.
(3) Annually with the financial statements, the Developer shall provide an annual report of rents
and occupancy of all assisted units, including the HOME -assisted units, to verify compliance
with affordability requirements. For the HOME assisted -units, information on unit substitution
and filling vacancies shall be provided to ensure that the project maintains the required unit
mix.
The affordable rents charged at the Project must comply with the standards set forth by California
Tax Credit Allocation Committee (TCAC). Notwithstanding anything to the contrary contained in
this Agreement, the Affordability Restrictions on Transfer of Property, and other than HOME
assisted units, restricted (as to both income and rent levels) at 30% of AMI, in the event of a
foreclosure, or delivery of deed in lieu of foreclosure, of any Senior Loan, then the (1) the
maximum qualifying tenant household income shall be increased to 60% of Area Median Income
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adjusted for family size appropriate to the unit, and (2) the maximum annual affordable rent shall be
increased to 30% of 60% of Area Median Income, as adjusted for family size appropriate to the unit.
* Utility allowances must be deducted from the Maximum Gross Monthly Rent. The City of Santa
Ana will provide the utility allowances based on the HUD Utility Schedule Model.
7.3 Rent Increases: On an annual basis, the City shall provide Developer with the maximum
allowable schedule of rents for the Property in accordance with changes in allowable rent and
income tables published by HUD and the California Tax Credit Allocation Committee, provided
however that the rent for the HOME units shall in no event be higher than the rent for the equivalent
non -HOME assisted unit within the Project. In no event can Developer charge any tenant more than
such amount.
7.4 Maintenance of the Proyerty. Solely at Developer's expense, Developer agrees to maintain
the Property in a clean and orderly condition and in good condition and repair and keep the Property
free from any accumulation of debris and waste materials. If at any time Developer fails to
maintain, or cause to be maintained, the Property as required by this section, and said condition is
not corrected after the expiration of a reasonable period of time not to exceed thirty (30) days from
the date of written notice from the City, unless such condition cannot reasonably be cured within
thirty (30) days, in which case Developer shall have such additional time as reasonably necessary to
complete such cure, the City may perform the necessary maintenance and Developer shall pay all
reasonable costs incurred for such maintenance. The City shall inspect the Property annually after
the date of issuance of the Certificate of Completion as described in Article 17 of this Agreement.
7.5 Obligation to Refrain from Discrimination. Developer covenants and agrees for itself, its
successors, its assigns and every successor in interest to the Property or any part thereof, that there
shall be no discrimination against or segregation of any person or group of persons on account of
race, color, creed, religion, disability, sex, marital status, ancestry or national origin in the sale,
lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property nor shall Developer
itself or any person claiming under or through him 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, sublessees or vendees of the Property. The foregoing covenants shall
run with the land and shall remain in effect for the term of the Agreement.
8. DEFAULTS AND REMEDIES
8.1 Event of Default. Failure or delay by either party to perform any term of provision of this
Agreement within the time periods provided herein for such performance constitutes a default under
the Agreement. If any party defaults in performance of its obligations, covenants or agreements
hereunder, the defaulting party shall be entitled to cure the default in accordance with this section.
The injured party shall give written notice of default to the party in default, specifying the default
complained of by the injure party. Delay in giving such notice shall not constitute a waiver of any
default nor shall it change the time of default. The defaulting party must, within thirty (30) days
following service of said written notice, commence to cure, correct or remedy such failure or delay
and shall complete such cure, correction, or remedy with reasonable diligence. Upon a default by
Developer which is not cured within thirty (30) days following service of said notice, unless such
55C-146
default cannot reasonably be cured within thirty (30) days, in which case Developer shall have such
additional time as reasonably necessary to complete such cure but no more than ninety (90) days,
the City shall have the right to terminate this Agreement by delivery of written notice of termination
to Developer.
8.2 Institution of Legal Actions. In addition to any other rights or remedies, either party may
institute legal action to cure, correct or remedy any default to recover damages for any default, or to
obtain any other remedy consistent with the purpose of this Agreement.
8.3 Rights and Remedies are Cumulative. Except with respect to rights and remedies
expressly declared to be exclusive in this Agreement, the right and remedies of the parties are
cumulative and the exercise by either party of one or more of such rights or remedies shall not
preclude the exercise by it, at the same or different times, of any other rights or remedies for the
same default or any other default by the other party.
8.4 Damages. In the event that the City is liable for damages to Developer, such liability shall
not exceed costs incurred by the Developer in the performance of this Agreement and shall not
extend to compensation for loss of future income, profits or assets; provided, however, Developer's
only remedy for any breach of this Agreement by the City shall be an action for specific
performance of such party's obligations.
8.5 Nonrecourse Liability. Neither Developer, nor any partner of Developer, shall have any
personal liability under this Agreement, or the attached Note(s) and Deed(s) of Trust, and any
judgment, decree or order for the payment of money obtained in any action to enforce the obligation
of Developer to repay the loan evidenced by such documents shall be enforceable against Developer
only to the extent of Developer's interest in the Property.
9. GENERAL PROVISIONS AND WARRANTIES
As a material inducement to City to enter into this Agreement, Developer represents and
warrants as follows:
9.1 Formation, Oualification and Compliance. Developer (a) is a limited partnership,
validly existing and in good standing under the laws of the State of California, (b) has all
requisite authority to conduct its business and own and lease its properties, and (c) is qualified
and in good standing in every jurisdiction in which the nature of its business makes qualification
necessary or where failure to qualify could have a material adverse effect on its financial
condition or the performance of its obligations under the Loan Documents. Developer is in
compliance with all laws applicable to its business and has obtained all approvals, licenses,
exemptions and other authorizations from, and has accomplished all filings, registrations and
qualifications with, any Governmental Authority that are necessary for the transaction of its
business.
9.2 Execution and Performance of Loan Documents.
55C-147
9.2.1 Developer has all requisite authority to execute and perform its obligations under
the Loan Documents.
9.2.2 The execution and delivery of Developer of, and the performance by Developer of
its obligations under, each Loan Document has been authorized by all necessary
action and does not and will not:
(a) require any consent or approval not heretofore obtained of any person
having any interest in Developer;
(b) violate any provision of, or require any consent or approval not heretofore
obtained under, any articles of incorporation, by-laws or other governing
document applicable to Developer;
(c) result in or require the creation of any lien, claim, charge or other right of
others of any kind (other than under the HOME Loan Documents) on or
with respect to any property now or hereafter owned or leased by
Developer;
(d) violate any provision of any law presently in effect; or
(e) constitute a breach or default under, or permit the acceleration of
obligations owed under, any contract, loan agreement, lease or other
agreement or document to which Developer is a party or by which
Developer or any of its property is bound.
9.2.3 Developer is not in default, in any respect that is materially adverse to the
interests of City under the Loan Documents or that would have any material
adverse effect on the financial condition of Developer or the conduct of its
business, under any law, contract, lease or other agreement or document described
in sub -paragraph (d) or (e) of the previous subsection.
9.2.4 No approval, license, exemption or other authorization from, or filing, registration
or qualification with, any Governmental Authority is required which has not been
previously obtained in connection with:
(a) the execution of Developer of, and the performance by Developer of its
obligations under, the Loan Documents; and
(b) the creation of the liens described in the Loan Documents.
9.3 Financial and Other Information. To the best of Developer's knowledge, all financial
information furnished to City with respect to Developer in connection with the Loans (a) is
complete and correct in all material respects as of the date of preparation thereof, (b) accurately
presents the financial condition of Developer, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied or in accordance with such other
55C-148
principles or methods as are reasonably acceptable to City. To the best of Developer's
knowledge, all other documents and information furnished to City with respect to Developer, in
connection with the Loans, are correct and complete insofar as completeness is necessary to give
the City accurate knowledge of the subject matter. To the best of Developer's knowledge
Developer has no material liability or contingent liability not disclosed to City in writing and
there is no material lien, claim, charge or other right of others of any kinds (including liens or
retained security titles of conditional vendors) on any property of Developer not disclosed in
such financial statements or otherwise disclosed to City in writing.
9.4 No Material Adverse Change. There has been no material adverse change in the
condition, financial or otherwise, of Developer since the dates of the latest financial statements
furnished to City. Since those dates, Developer has not entered into any material transaction not
disclosed in such financial statements or otherwise disclosed to City in writing.
9.5 Tax Liability. Developer has filed all required federal, state and local tax returns and
has paid all taxes (including interest and penalties, but subject to lawful extensions disclosed to
City in writing) other than taxes being promptly and actively contested in good faith and by
appropriate proceedings. Developer is maintaining adequate reserves for tax liabilities
(including contested liabilities) in accordance with generally accepted accounting principles or in
accordance with such other principles or methods as are reasonably acceptable to City.
9.6 Governmental Requirements. To best of its knowledge, Developer is in compliance
with all laws relating to the Property and all Governmental Authority approvals, including
zoning, land use, planning requirements, and requirements arising from or relating to the
adoption or amendment of, any applicable general plan, subdivision and parcel map requirement;
environmental requirements, including the requirements of the California Environmental Quality
Act and the National Environmental Policy Act and the preparation and approval of all required
environmental impact statements and reports; use, occupancy and building permit requirements;
and public utilities requirements.
9.7 Rights of Others. Developer is in compliance with all covenants, conditions, restrictions,
easements, rights of way and other rights of third parties relating to the Property.
9.8 Litigation. There are no material actions or proceedings pending or, to the best of
Developer's knowledge, threatened against or affecting Developer or any property of Developer
before any Governmental Authority, except as disclosed to City in writing prior to the execution
of this Agreement.
9.9 Bankruptcy. To the best of Developer's knowledge, no attachments, execution
proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or
other proceedings are pending or threatened against Developer, nor are any of such proceedings
contemplated by Developer.
9.10 Information Accurate. To the best of Developer's knowledge, all information,
regardless of its form, conveyed by Developer to City, by whatever means, is accurate, correct
55C-149
and sufficiently complete to give City true and accurate knowledge of its subject matter, and
does not contain any misrepresentation or omission.
9.11 Conflicts of Interest. No member, official or employee of the 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 this Agreement which affects his/her personal interests or the
interests of any corporation, partnership or association in which he/she has a direct or indirect
financial interest. The Developer warrants that it neither has paid nor given, nor will pay or give,
any third party any money or other consideration for obtaining this Agreement.
9.12 Nonliiability of City Officials and Employees. No member, official or employee of the City
shall be personally liable to the Developer in the event of any default or breach by the City or for
any amount which may become due to Developer or on any obligations under the terms of this
Agreement.
9.13 No Assignment. Developer expressly acknowledges and agrees that the City has only
agreed to assist the Developer as a means by which to induce the construction and development of
the Project. Accordingly, Developer further expressly acknowledges and agrees that this Agreement
is a personal right of Developer that is neither negotiable, transferable, nor assignable except as set
forth herein. Developer may assign some or all of its rights under the Agreement only with the prior
written consent of the Executive Director (such consent not to be unreasonably withheld), except
that no prior consent is necessary for an assignment by an investor limited partner of Developer to
an affiliate, or as otherwise provided in the Note or Deed(s) of Trust.
9.14 Applicable Law. This Agreement shall be interpreted, governed and enforced under federal
and California state laws with venue in Orange County, California.
9.15 Third Parties. This Agreement is made for the sole benefit of Developer and the City and
their successors and assigns, and no other person or persons shall have any rights or remedies under
or by reason of this Agreement or any right to the exercise of any right or power of the City
hereunder or arising from any default by Developer, nor shall the City owe any duty whatsoever to
any claimant for labor performed or materials furnished in connection with the Construction of the
Property.
9.16 Control of Property. The parties acknowledge that the City has not at anytime participated
in any manner in the management or operation of the Property, and will not so participate at any
time hereafter.
10. CONDITIONS FOR CONSTRUCTION
10.1 Permits and Approvals. Developer shall diligently obtain all permits, including all
building permits, licenses, approvals, exemptions and other authorizations of Governmental
Agencies required in connection with the construction and development of the Property.
10.2 Commencement and Completion of Construction. The construction of the Project shall
be considered complete for purposes of this Agreement only when (a) all work described has
55C-150
been completed and fully paid for, and (b) all work requiring inspection or certification by
Governmental Authority has been completed and all requisite certificates, approvals and other
necessary authorizations (including required final certificates of occupancy) have been obtained.
10.3 Change Orders. The contract for construction shall not be modified except pursuant
to change orders which require City consent pursuant to this Agreement. All change orders:
(a) shall be in writing, numbered in sequence, signed by Developer and submitted to
City prior to the proposed effectiveness thereof and accompanied by any working
drawings and a written narrative of the proposed change.
(b) Shall be subject to the Executive Director's prior written approval.
10.4 Entry and Inspection. At all times prior to completion of the construction, upon
reasonable notice, City and its agents shall have (a) the right of free access to the Property and all
sites away from the Property where materials for the construction are stored, (b) the right to
inspect all labor performed and materials furnished for the construction, and (c) the right to
inspect and copy all documents pertaining to the construction.
10.5 Compliance with Section 3 Clause. Section 3 of the Housing and Urban Development
act of 1968, 12 U.S.C. 1701 u, as amended by Section 915 of the Housing and Community
Development Act of 1992, requires that economic opportunities generated by HUD financial
assistance for housing and community development programs be targeted toward low- and very
low- income persons. Whenever HUD assistance generates opportunities for employment or
contracting, state and local grantees, as well as other recipients of HUD housing assistance funds
must, to the greatest extent feasible, provide these opportunities to low- and very low- income
persons and to businesses owned by or employing low- and very low- income persons. Section 3
applies to projects for which HUD's share of project costs exceeds $200,000 and contracts and
subcontracts awarded on projects for which HUD's share or project costs exceeds $200,000 and
the contract or subcontract exceeds $100,000.
For purposes of this Section 3 Clause and compliance thereto, whenever the word
"contractor" is used it shall mean and include, as applicable, the Developer, and its contractor
and subcontractor(s), if any. The particular text to be utilized in any and all contracts of any
contractor doing work covered by Section 3 shall be in substantially the form of the following, as
reasonably determined by the City, or as directed by HUD or its representative, and shall be
executed by the applicable contractor under penalty of perjury:
"(a) The work to be performed under this contract is subject to the
requirements of Section 3 of the Housing and Urban Development Act of 1968, as
amended, 12 U.S.C. 1701u ("Section 3"). The purpose of Section 3 is to ensure that
employment and other economic opportunities generated by HUD assistance or HUD -
assisted projects covered by Section 3, shall, to the greatest extent feasible, be directed to
low -and very low-income persons [inclusive of Very Low Income Persons, Very Low
Income Households, and Very Low Income Tenants served by the Project], particularly
persons who are recipients of HUD assistance for housing.
55C-151
(b) The parties to this contract agree to comply with HUD's regulations in 24
CFR 135, which implement Section 3. As evidenced by their execution of this contract,
the parties to this contract certify that they are under no contractual or other impediment
that would prevent them from complying with the Part 135 regulations.
(c) The contractor agrees to send to each labor organization or representative
of workers with which the contractor has a collective bargaining agreement or other
understanding, if any, a notice advising the labor organization or workers' representative
of the contractor's commitments under this Section 3 clause, and will post copies of
notices in conspicuous places at the work site where both employees and applicants for
training and employment positions can see the notice. The notice shall describe the
Section 3 preference, shall set forth minimum number of job titles subject to hire,
availability of apprenticeship and training positions, the qualifications for each; and the
name and location of person(s) taking applications for each of the position; and the
anticipated date the work shall begin.
(d) The contractor agrees to include this Section 3 clause in every subcontract
subject to compliance with regulations in 24 CFR 135, and agrees to take appropriate
action, as provided in an applicable provision of the subcontract or in this Section 3
clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR
135. The contractor will not subcontract with any subcontractor where the contractor has
notice or knowledge that the subcontractor has been found in violation of the regulations
in 24 CFR 135.
(e) The contractor will certify that any vacant employment positions,
including training positions, that are filled (a) after the contractor is selected but before
the contract is executed, and (b) with persons other than those to whom the regulations of
24 CFR 135 require employment opportunities to be directed, were not filled to
circumvent the contractor's obligations under 24 CFR 135.
(f) Noncompliance with HUD's regulations in 24 CFR 135 may result in
sanctions, termination of this contract for default, and debarment or suspension from
future HUD assisted contracts."
After the foregoing Section 3 Clause, there shall be a signature block for the
contractor, as applicable, the following text shall be included immediately above the signature
block: "The contractor/provider by his/her signature affixed hereto declares under penalty of
perjury that contractor has read the requirements of the Section 3 Clause and accepts all its
requirements contained therein for all of his/her operations related to this contract."
To the extent applicable, Developer shall comply and/or cause compliance with
Section 3 Clause requirements for the Project. For example, when and if Developer or its
contractor(s)/subcontractor(s) hire(s) full time employees, rather than volunteer labor or
materials, Section 3 is applicable and all disclosure and reporting requirements apply.
10.6 Construction Information. From time to time during the course of the construction, but
in no event more often than monthly, within ten (10) Business Days following City's written
55C-152
demand therefore, Developer shall furnish requested reports of project costs, progress schedules
and contractors' costs breakdowns for the construction, itemized as to trade description and item,
showing the name of the contractor(s) and/or subcontractor(s), and including such indirect costs
as real estate taxes, legal and accounting fees, insurance, architects' and engineers' fees, loan
fees, interest during construction and contractors' overhead.
10.7 Protection Against Liens: Developer shall diligently file a valid Notice of Completion
upon completion of the construction, diligently file a notice of cessation in the event of a
cessation of labor on the construction for a period of thirty (30) days or more, and take all actions
reasonably required to prevent the assertion of claims of lien against the Property. In the event
that any claim of lien is asserted against the property or any stop notice or claim is asserted
against the City by any person furnishing labor or materials to the Property, Developer shall
immediately give written notice of the same to City and shall, promptly and in any event within
ten (10) Business Days after written demand therefor, (a) pay and discharge the same, (b) effect
the release thereof by delivering to City a surety bond complying with the requirement of
applicable laws for such release, or (c) take such other action as City may require to release City
from any obligation or liability with respect to such stop notice or claim.
11. FEDERAL (HOME PROGRAM) COVENANTS
11.1 Contract Provisions for Non -Federal Entity Contracts Under Federal
Awards. Developer shall comply with the requirements at Appendix 11 to Part 200.
11.2 Oualification as Affordable Housing. As more particularly provided in the
Affordability Restrictions on Transfer of Property, Developer shall use, manage and operate the
Property in accordance with the requirements of 24 CFR 92.252 and California Health and
Safety Code section 50052.5 so as to qualify the housing on the Property as Affordable Housing
with affordable rents.
11.3 Tenant and Participant Protection. Developer shall comply with the
requirements of 24 CFR 92.253.
11.4 [Intentionally Omitted]
11.5 Handicapped Accessibility. Developer shall comply with (a) Section 504 of the
Construction Act of 1973, and implementing regulations at 24 CFR 8C governing accessibility of
projects assisted under the HOME Program; and (b) the Americans with Disabilities Act of 1990,
and implementing regulations at 28 CFR 35-36 in order to provide handicapped accessibility to
the extent readily achievable.
11.6 Use of Debarred, Suspended, or Ineligible Participants. Developer shall
comply with the provisions of 24 CFR 24 relating to the employment, engagement of services,
awarding of contracts, or funding of any contractor or subcontractor during any period of
debarment, suspension, or placement in ineligibility status.
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11.7 Maintenance of Drug -Free Workplace. Developer shall certify that Developer
will provide a drug-free workplace in accordance with 24 CFR 84.13.
11.8 Lead -Based Paint. Developer shall comply with the requirements, as applicable
of the Lead -Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), Lead Safe Housing
Rule, and implementing regulations at 24 CFR 35.
11.9 Affirmative Marketing. Developer shall implement and perform such
affirmative marketing procedures and requirements for the Property as required by 24 CFR
92.351 and the City of Santa Ana's adopted affirmative marketing procedures and minority
outreach program.
11.10 Equal Opportunity and Fair Housing. Developer shall carry out the
Construction and perform its obligations under this Agreement in compliance with all of the state
and federal laws and regulations regarding equal opportunity and fair housing described in 24
CFR 92.350.
11.11 Property Standards. Developer shall cause the Property to meet the housing
quality standards set forth in 24 CFR 882.109, as well as all applicable local, state and federal
codes and ordinances, including zoning ordinances. Developer shall also cause the Property to
meet the current edition of the Model Energy Code published by the Council of American
Building Officials.
11.12 Displacement and Relocation. Developer acknowledges and agrees that,
pursuant to 24 CFR 92.353 and consistent with the other goals and objectives of this part, City
must ensure that it has taken all reasonable steps to minimize the displacement of persons as a
result of the construction. Furthermore, to the extent feasible, residential tenants must be
provided a reasonable opportunity to lease and occupy a suitable, decent, safe, sanitary and
affordable dwelling unit on the Property upon completion of the construction. Developer agrees
to cooperate fully and completely with City in meeting the requirements of 24 CFR 92.353 and
shall take all actions and measures reasonably required by the City Project Manager in
connection therewith. All applicable state guidelines must also be followed.
11.13 Other Program Requirements. Developer shall carry out each activity in
compliance with all federal laws and regulations described in subpart H of 24 CFR 92, except
that Developer does not assume City's responsibilities for environmental review in 24 CFR
92.352 or the intergovernmental review process in 24 CFR 52.
11.14 Request for Disbursements of Funds. Notwithstanding anything contained in
this Agreement to the contrary, Developer may not request disbursements of funds under this
Agreement until the funds are needed for payment of eligible costs. The amount of each request
shall be limited to the amount needed.
11.15 Eligible Costs. Developer shall use HOME Funds only to pay costs defined as
"eligible costs" pursuant to 24 CFR 92.206.
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11.16 Records and Reports. Developer shall maintain and from time to time submit
to 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 24 CFR 92.508.
11.17 Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards. Developer shall comply with the requirements and
standards of 2 CFR 200.
11.18 Conflict of Interest. Developer shall comply with and be bound by the conflict of
interest provisions set forth at 24 CFR 570.611, as well as State regulations pertaining to conflict
of interest.
11.19 Monitoring. Developer shall allow the City to conduct annual inspections of
the HOME assisted units on the Property as required by the Program after the date of
construction completion, with reasonable notice. Developer shall cure any defects or
deficiencies found by the City while conducting such inspections within thirty (30) days of
written notice thereof, or such longer period as is reasonable within the sole discretion of the
City. The City shall monitor, on an ongoing basis, any affordable housing.
11.20 Recertification of Tenant Income.
(A) Developer shall take all necessary steps to review the income of all tenants prior
to renting to them, as well as reviewing current tenants on an annual basis, in
accordance with HOME regulations and guidelines. Every fifth (5a') year,
Developer shall require new original income documents to be submitted by
tenants. Tenants in HOME assisted units whose incomes no longer comply with
federal income guidelines shall have their rents adjusted in accordance with
federal HOME guidelines (24 CFR 92.252-92.253).
(B) HOME assisted units continue to qualify as affordable housing despite a
temporary non-compliance caused by increases in the incomes of existing tenants
if actions satisfactory to HUD are being taken to ensure that all vacancies are
filled in accordance with this section until the non-compliance is corrected.
11.21 Other HOME Program Requirements. Developer shall comply with all other
applicable requirements of the HOME Program.
11.22 City Requirements.
Developer shall comply with the following:
(a) Onsite Services: The Developer shall provide on-site services that are available to
the residents and shall report to the City annually the services provided.
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(b) Coordination with the WORK Center: The Developer and the Property Manager
shall coordinate with the City's WORK Center to provide services and outreach to
tenants, as well as provide information on employment during the construction of
the Project.
(c) Tenant Satisfaction Survey: The Developer shall complete and submit to the City
biennial tenant satisfaction surveys of tenants.
(d) Rental Inclusionary Housing Manual: The Developer shall also maintain
compliance with the City's Inclusionary Housing Manual for Rental Projects.
11.23 Controlling Covenants. If there is a discrepancy between State and Federal law
with regard to any of the aforementioned covenants, the more stringent shall apply.
12. MAINTENANCE, MANAGEMENT, OPERATION, PRESERVATION AND
REPAIR OF PROPERTY
12.1 Maintenance. Developer shall maintain the Property (and all abutting grounds,
sidewalks, roads, parking and landscape areas which Developer is otherwise required to
maintain) in good condition and repair; shall operate the Property in a businesslike manner; shall
prudently preserve and protect its own as well as the City's interests in connection with the
Property; shall not commit or permit any waste or deterioration of the Property (except for
normal wear and tear); shall not abandon any portion of the Property or leave the Property
unguarded or unprotected; and shall not otherwise act, or fail to act, in such a way as to
unreasonably increase the risk of any damage to the Property or of any other impairment of
City's interests under the Loan Documents. Without limiting the generality of the foregoing, and
except as otherwise agreed by City in writing from time to time, Developer shall promptly and
faithfully perform and observe each of the following provisions:
12. 1.1 Alterations and Repair. Developer shall not remove, demolish or
materially alter any Improvement without City's prior consent, except to make non-structural
repairs which preserve or increase the Property's value, and shall promptly restore, in a good and
professional manner, any Improvement (or other aspect or portion of the Property) that is
damaged or destroyed from any cause.
12.2 Complianee. Developer shall comply with all laws and requirements of
Governmental Authority (including, without limitation, all requirements relating to the obtaining
of Governmental Authority approvals), all Governmental Authority approvals and all rights of
third parties, relating to Developer, the Property or Developer's business thereon.
12.3 Taxes and Impositions. Developer shall pay, prior to delinquency, all of the
following (collectively, the "Impositions"): (a) all general and special real property taxes and
assessments imposed on the Property; (b) all other taxes and assessments and charges of every
kind that are assessed upon the Property (or upon the owner and/or operator of the Property) and
that create or may create a lien upon the Property (or upon any personal property or fixtures used
in connection with the Property), including, without limitation, non-governmental levies and
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assessments pursuant to applicable covenants, conditions or restrictions; and (c) all license fees,
taxes and assessments imposed on City (other than City's income or franchise taxes) which are
measured by or based upon (in whole or in part) the amount of the obligations secured by the
Property. If permitted by law, Developer may pay any Imposition in installments (together with
any accrued interest).
12.3.1 Right to Contest. Developer shall not be required to pay any Imposition
so long as (a) its validity is being actively contested in good faith and by appropriate
proceedings, (b) Developer has demonstrated to City's reasonable satisfaction that leaving such
Imposition unpaid pending the outcome of such proceedings could not result in conveyance of
the Property in satisfaction of such Imposition or otherwise impair City's interests under the
Loan Documents, and (c) Developer has furnished City with a bond or other security satisfactory
in an amount not less than 100% of the applicable claim (including interest and penalties).
12.1.3.1.1 Evidence of Payment. Upon demand by City from time to time,
Developer shall deliver to City, within thirty (30) days following the due date of any Imposition,
evidence of payment reasonably satisfactory to City.
12.1.3.3 Books and Records. Developer shall maintain complete books of
account and other records reflecting its operations (in connection with any other businesses as
well as with respect to the Property), in accordance with generally accepted accounting
principles applied on a consistent basis or in accordance with such other principles or methods as
are reasonably acceptable to City, in accordance with 24 CFR 92.508.
12.4 [Intentionally Omitted]
12.5 Proiect Operating Budget. Developer must promptly deposit all project income
directly into a segregated depository account established exclusively for the Project ("Project
Operating Account"). Until the Certificate of Completion is issued, withdrawals from this
account may be made only in accordance with the provisions of this Agreement and the
approved Budget, as it may be revised from time to time with City approval. Developer may
make withdrawals from this account solely for the payment of Project expenses and Project fees.
Withdrawals from this account for other purposes may be made only with the prior written
approval of the City.
12.6 Replacement Reserve Account. Developer must establish or cause to be
established a segregated interest-bearing replacement reserve depository account ("Replacement
Reserve Account") upon the conversion of the Senior Loan to permanent status. Developer must
make monthly deposits from project income into the Replacement Reserve in accordance with
the Senior Loan Documents, as amended from time to time. Developer may withdraw funds
from the Replacement Reserve Account solely to fund capital improvements for the Project, such
as replacing or repairing structural elements, furniture, fixtures or equipment of the Project that
are reasonably required to preserve the Project as set forth in the Senior Loan Documents. If no
Senior Loan is in effect, Developer may not withdraw funds from the Replacement Reserve
Account for any other purpose without the prior written approval of the City.
55C-157
13. NONDISCRIMINATION COVENANTS
13.1 Obligation to Refrain from Discrimination. Developer covenants and agrees that:
A. In Use of Property. There shall be no discrimination against or segregation of
any person, or group of persons, on account of race, color, creed, religion,
disability, sex, marital status, national origin, or ancestry in the sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall
Developer or any person claiming under or through it, 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,
sublessees, or vendors of the Property.
B. In Affordable Housing Restrictions. The foregoing covenant shall (a) be
included in the Affordability Restrictions on Transfer of Property ("Restrictions"),
(b) run with the land, and (c) remain effective for the term of the Restrictions (for
55 years).
C. In Employment. In construction on the Property, Developer shall not
discriminate against any employee or applicant because of race, color, creed,
religion, disability, sex, marital status, national origin, or ancestry. Developer
shall take affirmative action to ensure that applicants are employed, and that
employees are treated during employment, without regard to their race, color,
creed, religion, sex, marital status, national origin, or ancestry.
D. In all Contracts. Developer shall cause the foregoing covenants to be inserted in
all contracts for any work covered by this Agreement so that such provisions will
be binding upon each contractor for the benefit of City, provided that the
foregoing covenant shall not apply to contracts or subcontracts for standard
commercial supplies or raw materials.
14. ENVIRONMENTAL MATTERS
14.1 Representation and Warranty. Except as disclosed in writing to the City, Developer
has no knowledge (a) of the presence on, under or about the Property, now or in the past, of any
Hazardous Materials, or of the transportation to or from the Property of any Hazardous
Materials, (b) that asbestos or polychlorinated biphenyls (PCBs) are contained in or stored on the
Property, or (c) that there are any underground storage tanks located in, on or under the Property.
14.2 Compliance with Environmental Laws. Developer shall (a) comply with all
environmental laws and environmental permits applicable to the Construction of the Property,
(b) immediately pay or cause to be paid all costs and expenses incurred by reason of such
compliance, (c) keep the Property free and clear of any environmental claims or liens imposed
pursuant to any environmental law, and (d) obtain and renew all environmental permits required
for ownership or use of the Property.
55C-158
14.3 Presence of Hazardous Materials. Developer shall not, and shall not permit anyone else
to, generate, use, treat, store, handle, release, or dispose of Hazardous Materials on the Property,
or transport or permit the transportation of Hazardous Materials to or from the Property except
for de minimis quantities used at the Property in compliance with all applicable environmental
laws and required in connection with the routine operation and maintenance of the Property.
14.4 Notice of Environmental Matters. Developer shall immediately advise City in writing
of any of the following: (a) any pending or threatened environmental claim against Developer or
the Property, (b) any condition or occurrence that (i) results in noncompliance with any
applicable environmental law, (ii) could reasonably be anticipated to cause the Property to be
subject to any restrictions on the ownership, occupancy, use or transferability of the Property
under any environmental Law, or (iii) could reasonably be anticipated to form the basis of an
environmental claim against the Property or Developer.
14.5 Environmental Indemnification by the Developer. Developer agrees to defend,
indemnify and hold harmless the City and its respective officers, directors, employees and agents
(collectively the "Indemnitees ") from and against any and all obligations (including removal and
remediation), losses, claims (including third party claims), suits, judgments, liabilities, penalties,
damages (including consequential and punitive damages), costs and expenses (including
consultants, and attorneys' fees' of whatever kind or nature whatsoever that may at any time be
incurred by, imposed on, or asserted against the Indemnitees directly or indirectly based on, or
arising or resulting from the actual or alleged presence of Hazardous Materials on the Property.
15. OTHER AFFIRMATIVE COVENANTS
While any obligation of Developer under the HOME Loan Promissory Note or Deed of
Trust remain outstanding, the following provisions shall apply, except to the extent that
Executive Director otherwise consents in writing:
15.1 Existence. Developer's managing and administrative general partners shall maintain its
existence in good standing under the laws of the State of California, and Developer shall provide
documentation of such status annually to the City.
15.2 Protection of Lien. Developer shall maintain the lien of the HOME Deed of Trust as a
valid subordinate deed of trust to the Senior Deed(s) of Trust on the Property and take all actions,
and execute and deliver to City all documents, reasonably required by City from time to time in
connection therewith.
15.3 Notice of Certain Matters. Developer shall give notice to City, within ten (10) days of
Developer's learning thereof, of each of the following:
(a) any filed litigation or claim affecting or relating to the Project or Property and
involving an amount in excess of $5,000; and any litigation or claim that might
subject Developer or any general partner to liability in excess of $5,000, whether
covered by insurance or not;
55C-159
(b) any dispute between Developer and a Governmental Authority relating to the
Property/Project, the adverse determination of which might materially affect the
Property/Project;
(c) any change in Developer's principal place of business;
(d) any aspect of the Improvements that is not in substantial conformity with the
plans or code;
(e) any Event of Default or event which, with the giving of notice or the passage of
time or both, would constitute an Event of Default;
(f) any material default by Developer or any other party under any Senior Loan
document, or the receipt by Developer of any notice of default under any Senior
Loan document;
(g) the creation or imposition of any mechanics' or materialmans' lien or other lien
against the Property which might materially affect the Property; and/or
(h) any material adverse change in the financial condition of Developer and/or the
Project.
15.4 Further Assurances. Developer shall execute and acknowledge (or cause to be executed
and acknowledged) and deliver to City all documents, and take all actions, reasonably required
by City from time to time to confirm the rights created or now or hereafter intended to be created
under the Loan Documents; to protect and further the validity, priority and enforceability of the
HOME Deed of Trust; to subject to the Deed of Trust any property intended by the terms of any
Loan Document(s) to be covered by the HOME Deed of Trust or otherwise to carry out the
purposes of the Loan Documents and the transactions contemplated thereunder.
15.5 Annual Financial Statements. Developer shall deliver to City, within one hundred fifty
(15 0) days after the end of each Calendar Year, (a) a certified public accountant reviewed
balance sheet for Developer as of the end of such Calendar Year and a certified public
accountant reviewed statement of profit and loss for Developer and for Developer's operations in
connection with the Property/Project for such Calendar Year, together with all supporting
schedules, (b) a certificate of such certified public accountant that such documents were
reviewed by such certified public accountant in accordance with generally accepted accounting
principles and otherwise comply with generally accepted accounting principles review
requirements, and (c) a certificate of Developer's chief financial officer that such documents: (i)
were prepared in accordance with generally accepted accounting principles applied on a
consistent basis or in accordance with such other principles or methods as are reasonably
acceptable to City, (ii) fairly represent Developer's financial condition, (iii) show all material
liabilities, direct and contingent, and, (iv) fairly represent the results of Developer's operations.
Developer shall also provide the City with any other annual audit reports issued by other
55C-160
monitoring agencies. Developer shall include in said reports, a document in the "Form of
Residual Receipts Report" attached hereto as Exhibit G and incorporated herein.
15.6 Audits and Access to Records. Developer agrees that City, the U.S. Department of
Housing and Urban Development, the Comptroller General of the United States or any of their
authorized representatives shall have the right of access, upon reasonable notice, to any books,
documents, papers, or other records of Developer which are pertinent to this Agreement in order
to make audits, examinations, abstracts, excerpts or transcripts. Developer will maintain all
books and records pertaining to this Agreement for a period of not less than five (5) years after
all matters pertaining to this Agreement (i.e., audit, disputes or litigation) are resolved in
accordance with applicable federal or state laws, regulations or policies, and when a period of
affordability or recapture applies to Developer's activities, for a period of not less than five (5)
years after the affordability or recapture period ends.
15.7 Termite Inspection Report. Developer shall deliver a termite report pertaining to the
Property to the City every fifth (5's) year beginning January 2020.
16. OTHER COVENANTS
While any obligation of Developer under the HOME Promissory Note or Deed of Trust
remain outstanding, the following provisions shall apply, except to the extent that Executive
Director otherwise consents in writing:
16.1 Default on Senior Loan. Developer shall not default on any of the Senior Loan
documents, provided however, that Developer shall have such period as is provided in the Senior
Loan Documents during which to effectuate a cure.
16.2 Sale or Lease of Property. Unless and until Developer has received a Certificate of
Completion for the construction from City, Developer shall not sell, lease, sublease or otherwise
transfer all or any part of the Property or any interest therein without the prior written consent of
the Executive Director, which consent may be withheld in the Executive Director's reasonable
discretion. In connection with the foregoing consent requirements, Developer acknowledges that
City relied upon Developer's particular expertise in entering into this Agreement and continues to
rely on such expertise to ensure the satisfactory completion of the Construction.
Notwithstanding anything to the contrary contained herein, a "transfer" shall not include
(i) a transfer of a General Partner's interest in Developer when made in connection with the
exercise by the Developer's limited partner (the "Limited Partner") of"its rights upon a default
by a General Partner under the Developer'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 (3 0) 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
pursuant to the right of first refusal or to the General Partners pursuant to the purchase option, as
55C-161
provided for in the Partnership Agreement; (iii) Any Transfer of the Limited Partner's under and
in accordance with the Partnership Agreement; and (iv) any sale, transfer or other disposition of
an interest in a limited partner of Developer.
17. CERTIFICATE OF COMPLETION
Upon satisfactory completion of the construction and upon the request of Developer, or at
its own election, the City of Santa Ana shall issue a Certificate of Completion. Such Certificate
of Completion shall be, and shall so state, conclusive determination of satisfactory completion of
the Construction.
If City declines to furnish a Certificate of Completion after written request from
Developer, the Executive Director shall, within thirty (30) days after receipt of the request,
provide Developer with a written statement of the reasons therefore. The statement shall contain
a description of the action Developer must take to obtain a Certificate of Completion. If the
reason therefore is that the Developer has not completed a minor portion of the construction, City
may, in its sole and absolute discretion, issue the Certificate of Completion upon the posting with
City of a bond or other form of security acceptable to the Executive Director in the amount of the
estimated fair value of the uncompleted work.
A Certificate of Completion is not evidence of compliance with or satisfaction of the
Loan Documents or any obligation of Developer to any other party whatsoever, including any
holder of a mortgage or deed of trust. A Certificate of Completion is not "notice of completion"
referred to in Section 3093 of the California Civil Code.
18. INDEMNIFICATION
18.1 Nonliability of City. Developer acknowledges and agrees that:
(a) The relationship between Developer and the City is and shall remain
solely that of Developer and lender, City neither undertakes nor assumes any responsibility to
review, inspect, supervise, approve (other than for aesthetics) or inform Developer of any matter
in connection with the construction, including matters relating to: (i) the performance of the
construction work, (ii) architects, contractors, subcontractors and materialmen, or the
workmanship of or materials used by any of them, or (iii) the progress of the construction; and
Developer shall rely entirely on its own judgment with respect to such matters and acknowledges
that any review, inspection, supervision, approval or information supplied to Developer by City
in connection with such matters is solely for the protection of City and that neither Developer nor
any third party is entitled to rely on it;
(b) Notwithstanding any other provision of any Loan Document: (i) the City
is not a partner, joint venture, alter -ego, manager, controlling person or other business associate
or participant of any kind of Developer and City does not intend to ever assume any such status;
(ii) City's activities in connection with the Loan shall not be "outside the scope of the activities
of a lender of money" within the meaning of California Civil Code Section 3434, as modified or
recodified from time to time, and City does not intend to ever assume any responsibility to any
55C-162
person for the quality or safety of the Property; and (iii) City shall not be deemed responsible for
or a participant in any acts, omissions or decisions of Developer;
(c) City shall not be directly or indirectly liable or responsible for any loss or
injury of any kind to any person or property resulting from any construction on, or occupancy or
use of, the Property, whether arising from: (i) any defect in any building, grading, landscaping or
other onsite or offsite improvement; (ii) any act or omission of Developer or any of Developer's
agents, employees, independent contractors, licensees or invitees; or (iii) any accident on the
Property or any fire or other casualty or hazard thereon; and
(d) By accepting or approving anything required to be performed or given
to City under the Loan Documents, including any certificate, financial statement, survey,
appraisal or insurance policy, City shall not be deemed to have warranted or represented the
sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a
warranty or representation by City to anyone.
18.2 Indemnity. Developer shall defend (by counsel satisfactory to City), indemnify
and save and hold harmless the Indemnitees from and against all claims, damages, demands,
actions, losses, liabilities, costs and expenses (including, without limitation, attorneys' fees and
court costs) arising from or relating to (i) this Agreement; (ii) the making of the Loan(s); (iii) a
claim, demand or cause of action that any person has or asserts against Developer; (iv) any act or
omission of Developer, any contractor, subcontractor or material supplier, engineer, architect or
other person with respect to the Property; or (vi) the ownership, occupancy or use of the
Property. Notwithstanding the foregoing, Developer shall not be obligated to indemnify City
with respect to the consequences of any act of gross negligence or willful misconduct of City.
Developer's obligations under this Section shall survive the cancellation of the HOME
Promissory Note, release and reconveyance of the HOME Deed of Trust, issuance of the
Certificate of Completion, and termination of this Agreement.
18.2.1.1 Notwithstanding the foregoing, neither Developer, nor any of its
partners, shall be personally liable for any indemnification obligation
hereunder which would result as the repayment of principal and/or interest
under the Loan.
18.3 Reimbursement of City. Developer shall reimburse City immediately upon
written demand for all costs reasonably incurred by City (including the reasonable fees and
expenses of attorneys, accountants, appraisers and other consultants, whether the same are
independent contractors or employees of City) in connection with the enforcement of the Loan
Documents and all related matters including all claims, demands, causes of action, liabilities,
losses, commissions and other costs against which City is indemnified under the Loan
Documents. Such reimbursement obligations shall bear interest from the date occurring twenty
(20) days after City gives written demand to Developer and shall be secured by the HOME
Deed(s) of Trust. Such reimbursement obligations shall survive the cancellation of the Loan
Promissory Note, release and reconveyance of the HOME Deed of Trust, issuance of a
Certificate of Completion, and termination of this Agreement.
55C-163
19. INSURANCE, CASUALTY AND CONDEMNATION
19.1 Policies Required. While any obligation of Developer under the Loan Documents
remains outstanding, Developer shall maintain at Developer's sole expense, with insurers either
(i) admitted in California or (ii) are not admitted to California but have an A.M. Best Raring of
"A" or above and reasonably approved by the City, the following policies of insurance in form
and substance reasonably satisfactory to the City Attorney:
(a) worker's compensation insurance and any other insurance required by law in
connection with the construction;
(b) prior to commencement until following completion of the construction, fire and
hazard "all risk" insurance covering 100% of the replacement cost of the
Improvements in the event of fire, lightning, windstorm, vandalism, malicious
mischief and all other risks normally covered by "all risk" coverage policies in the
area where the Property is located; which said insurance shall expressly include
damage or loss by flood or storm;
(c) upon commencement of the construction and at all times prior to completion of
the construction, builder's risk/all risk insurance covering 100% of the
replacement cost of all Improvements (including offsite materials) during the
course of construction in the event of fire, lightning, windstorm, vandalism,
earthquake, malicious mischief and all other risks normally covered by all risk
coverage policies in the area where the Property is located; which said insurance
shall expressly include damage or loss by flood or storm;
(d) public liability insurance in amounts reasonably required by City from time to
time, and in no event less than $1,000,000 for "single" occurrence;
(e) property damage insurance in amounts reasonable required by City from time to
time, and in no event less than $1,000,000; and,
(1) any other insurance reasonably required by City.
All such insurance shall provide that it may not be canceled or materially modified without thirty
(30) days prior written notice to City. The policies required under subparagraphs (b) and (c) shall
include a "lender's loss payable endorsement" (Form 438BFU) in form and substance
satisfactory to City, showing the City as encumbrance. The City shall be named as additional
insured(s) in the policies required under subparagraphs (d) and (e). Certificates of insurance for
the above policies (and/or original policies, if required by City) shall be delivered within ten (10)
days after demand therefore, and prior to start of any construction work. All policies insuring
against damage to the Improvements shall contain an agreed value clause sufficient to eliminate
any risk of co-insurance. No less than thirty (30) days prior to the expiration of each policy,
Developer shall deliver to City evidence of renewal or replacement of such policy reasonably
satisfactory to City Attorney.
55C-164
19.2 City Attorney May Modify. The City Attorney may modify the type and amounts of
insurance required pursuant to this Section. Notwithstanding the foregoing, so long as the
Property complies with the Senior Lender's insurance requirements, the City Attorney will not
require additional insurance coverage unless (i) such additional insurance is required by
applicable law or (ii) if not required by additional law, such additional insurance shall only be
required if it is readily available on commercially reasonable terms and the cost thereof can be
home by the Borrower from available Borrower revenues without causing the Borrower to
default under the Senior Loan or the Partnership Agreement.
19.3 Claims and Proceedings. Developer shall give City immediate notice of
any material casualty to any portion of the Property/Project, whether or not covered by
insurance, and of the initiation or threatened initiation of any proceeding for the condemnation or
other taking for public or quasi -public use of any portion of the Property (collectively,
"Condemnation"), and shall provide City with copies of all documents which pertain to any such
casualty or Condemnation. Subject to the rights of any Senior Lender, Developer shall take all
action reasonably required by City in connection therewith to protect the interests of Developer
and/or City, and City shall be entitled (without regard to the adequacy of its security) to
participate in any action, claim, adjustment or proceeding and to be represented therein by
counsel of its choice. Developer shall not settle, adjust, or compromise any claim, action,
adjustment or proceeding without prior written approval of Senior Lender, if any, or if there is
not a Senior Lender, the City, which approval shall not be unreasonably withheld or delayed.
19.4 Delivery of Proceeds to City. In the event that, notwithstanding the "lender's
loss payable endorsement" requirement set forth above, the proceeds of any casualty insurance
policy described herein are paid to Developer, Developer shall, subject to any superior rights of
the Senior Lender, deliver such proceeds to the City immediately upon receipt.
19.5 Application of Casualty Insurance Proceeds. Any proceeds collected (the "Proceeds")
under any casualty insurance policy described in this Agreement shall be disbursed to Developer
as provided in the Senior Loan Documents, provided if there is no Senior Loan then as provided
below, but only upon fulfillment of each of the following conditions (the "Restoration
Conditions") within ninety (90) days (unless extended by mutual agreement of Developer and
City) following the occurrence of the damage for which the Proceeds are collected:
(a) Developer shall demonstrate to City's reasonable satisfaction that the Proceeds
(together with amounts deposited by Developer pursuant to subparagraph (b)) will
be adequate to repair the Improvements and to restore the fair market value of the
Property, within a time period reasonably determined by City, to at least the value
it had immediately prior to sustaining the damage. Such demonstration shall
include delivery to City of (i) plans and specifications reasonably satisfactory to
City, and (ii) a construction contract in form and content, and with a contractor,
reasonably satisfactory to City.
(b) To the extent that the Proceeds are insufficient to accomplish the restoration
required above, Developer shall deliver to City funds (the "Shortfall Funds") in
the amount of such shortfall, which funds shall be assigned to City as security for
55C-165
Developer's obligation hereunder and held and disbursed in the same manner as
the Proceeds.
(c) Developer shall execute such documents as City requires to evidence and secure
Developer's obligation to use all amounts disbursed for the diligent restoration of
the Property.
(d) No Event of Default shall remain uncured.
19.6 Method of Disbursement and Undisbursed Funds. Any Proceeds and Shortfall
Funds to be disbursed to Developer shall be held by City and disbursed in accordance with the
then customary disbursement procedures and related provisions of the Senior Loan, or the City,
as applicable. Any amounts remaining undisbursed following completion of such restoration
shall be returned to Developer up to the amount of any Shortfall Funds deposited by Developer,
and any other amounts remaining shall either be paid to Developer or applied by Senior Lender if
any or by City against any obligations to Senior Lender or City, as applicable, that are secured by
a lien on the Property, as they elect in their sole and absolute discretion.
19.7 Failure to Satisfy Conditions. In the event that Developer fails to fulfill
the Restoration Conditions within ninety (90) days (unless extended pursuant to Section 19.5)
following the date on which the damage occurs, the Proceeds shall be applied by City against
any obligations to City that are secured by a lien on the Property, and the selection of which such
obligations to apply the Proceeds against shall be made by City in their sole and absolute
discretion.
19.8 Restoration. Nothing in this Article 19 shall be construed to excuse Developer from
repairing and restoring all damage to the Property in accordance with other Loan Document
provisions, regardless of whether insurance proceeds are available or sufficient.
19.9 Condemnation; Treatment of Compensation. Subject to any superior rights of Senior
Lender, Developer hereby assigns to the City, as security for all obligations to City secured by a
lien on the Property, all amounts payable to Developer in connection with any Condemnation,
and any proceeds of any related settlement (collectively, "Compensation"). Subject to any
superior rights of Senior Lender, Developer shall deliver such remaining Compensation to City
immediately upon receipt. If the taking results in a loss of the Property to an extent that, in the
reasonable opinion of City, renders or is likely to render the Property not economically viable or
if, in City's reasonable judgment Developer's security is otherwise impaired, City may apply the
Compensation received due to judgment or settlement in connection with any condemnation or
other taking to reduce the unpaid obligations secured in such order as City may determine, and
without any adjustment in the amount or due dates of payments due under the Note. If so
applied, any award in excess of the unpaid balance of the Note and other sums due to City shall
be paid to Developer or Developer's assignee. City shall have no obligation to take any action in
connection with any actual or threatened condemnation or other proceeding.
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19.9.1 Notwithstanding the foregoing, as long as the value of City's liens are not
impaired, any condemnation proceeds may be used by the Borrower for repair and/or restoration
of the project.
19.9 Waiver of Subrogation. Developer hereby waives all rights to recover against the City
(or any officer, employee, agent or representative of City) for any loss incurred by Developer
from any cause insured against or required by any Loan Document, to be insured against;
provided, however, that this waiver of subrogation shall not be effective with respect to any
insurance policy if the coverage thereunder would be materially reduced or impaired as a result.
Developer shall use its best efforts to obtain only policies which permit the foregoing waiver of
subrogation.
20. DEFAULTS AND REMEDIES
20.1 Events of Default. The occurrence of any of the following, whatever the reason
therefore, shall constitute an Event of Default by Developer:
(a) Developer fails to make any payment of principal or interest under the HOME
Loan Note(s) when due, and such failure is not cured within fifteen (15) Business
Days after Developer's receipt of written notice that such payment was not
received when due;
(b) Developer fails to perform any other obligation for the payment of money under
any Loan Document, and such failure is not cured within fifteen (15) Business
Days after Developer's receipt of written notice that such obligation was not
performed when due;
(c) Developer fails to perform any obligation (other than the obligations described in
subparagraphs (a) and (b) above) under any Loan Document, and such failure is
not cured within thirty (30) days after Developer's receipt of written notice that
such obligation was not performed; provided that, if cure cannot reasonably be
effected within such thirty (30) day period, such failure shall not be an Event of
Default so long as Developer (in any event, within ten (10) days after receipt of
such notice) commences to cure, and thereafter diligently (in any event within
ninety (90) days after receipt of such notice) prosecutes such cure to completion;
(d) Any representation or warranty in any Loan Document proves to have been
incorrect in any material respect when made;
(e) The Property is materially damaged or destroyed by fire or other casualty unless
Developer fulfills the Restoration Conditions set forth in the insurance provisions
of this Agreement within ninety (90) days (unless extended pursuant to Section
19.5) and thereafter diligently restores the Property in accordance with this
Agreement;
(f) Work on the construction ceases for thirty (3 0) consecutive days for any reason
(other than governmental orders, decrees or regulations, acts of God or any other
55C-167
deity, strikes or other causes beyond Developer's reasonable control), provided
that the same do not, in the aggregate and in the City's reasonable judgment,
threaten to delay the completion of the construction beyond the required
completion date set forth in this Agreement and the Schedule of Performance;
(g) Developer is enjoined or otherwise prohibited by any Governmental Authority
from constructing and/or occupying the improvements and such injunction or
prohibition continues unstayed for sixty (60) days or more for any reason;
(h) Developer is dissolved, liquidated or terminated, or all or substantially all of the
assets of Developer are sold or otherwise transferred without the Executive
Director's prior written consent;
(i) Developer is the subject of an order for relief by a bankruptcy court, or is unable
or admits its inability to pay its debts as they mature, or makes an assignment for
the benefit of creditors; or Developer applies for or consents to the appointment of
any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar
officer for it or any part of its property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed without the
application or consent of Developer and the appointment continues undischarged
or unstayed for ninety (90) days; or Developer institutes or consents to any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, custodianship, conservatorship, liquidation, Construction or similar
proceeding relating to it or any part of its property; or any similar proceeding is
instituted without the consent of Developer and continues undismissed or
unstayed for ninety (90) days; or any judgment, writ, warrant of attachment or
execution, or similar process is issued or levied against any property of Developer
and is not released, vacated or fully bonded within ninety (90) days after its issue
or levy; or
(j) Any of the Senior Loan documents is revoked or terminated, in whole or in part
and for any reason (except due to repayment of such loans), without the Executive
Director's prior written consent, or (ii) an Event of Default occurs under the
Senior Loan Documents and the Senior Lender declares that a default has
occurred.
In addition, if an Event of Default occurs hereunder, prior to taking any remedy
under this Agreement or any other document evidencing or securing the Loan,
City shall first give notice of the occurrence of such Event of Default to the
Limited Partner and the Limited Partner shall have not less than 30 days to cure
such Event of Default, provided if in order to cure such Event of Default the
Limited Partner gives notice to the City that Limited Partner must remove and
replace the general partner or general partners of Developer, Limited Partner shall
have until 30 days following the effective date of such removal and replacement
to cure such Event of Default.
55C-168
20.2 Remedies Upon Default. Upon the occurrence of any Event of Default, City may, at its
option and in its absolute discretion, do any or all of the following:
(a) By written notice to Developer, declare the principal of all amounts owing under
the Loan Documents, together with all accrued interest and other amounts owing
in connection therewith, to be immediately due and payable, regardless of any
other specified due date; provided that any Event of Default described in Section
20.1 (e) shall automatically, without notice or other action on City's part, cause all
such amounts to be immediately due and payable;
(b) In its own right or by a court-appointed receiver, take possession of the
Property/Project, enter into contracts for and otherwise proceed with the
completion of the construction by expenditure of its own funds;
(c) Exercise any of its rights under the Loan Documents and any rights provided by
law, including, without limitation, the right to seek specific performance and the
right to foreclose on any security and exercise any other rights with respect to any
security, all in such order and manner as City elects in its sole and absolute
discretion; and,
(d) Suspend or terminate the award of HOME funds if Developer fails to comply with
any term or condition of such award.
20.3 Cumulative Remedies: No Waiver. City's rights and remedies under the Loan
Documents are cumulative and in addition to all rights and remedies provided by law. The
exercise by City of any right or remedy shall not constitute a cure or waiver of any default, nor
invalidate any notice of default or any act done pursuant to any such notice, nor prejudice the
City in the exercise of any other right or remedy. No waiver of any default shall be implied from
any omission by City to take action on account of such default if such default persists or is
repeated. No waiver of any default shall affect any default other than the default expressly
waived, and any such waiver shall be operative only for the time and to the extent stated. No
waiver of any provision of any Loan Document shall be construed as a waiver of any subsequent
breach of the same provision. City's consent to or approval of any act by Developer requiring
further consent or approval shall not be deemed to waive or render unnecessary City's consent to
or approval of any subsequent act. The City's acceptance of the late performance of any
obligation shall not constitute a waiver by City of the right to require prompt performance of all
further obligations; City's acceptance of any performance following the sending or filing of any
notice of default shall not constitute a waiver of either party's right to proceed with the exercise
of its remedies for any unfulfilled obligations; and City's acceptance of any partial performance
shall not constitute a waiver by City of any rights.
55C-169
21. MISCELLANEOUS
21.1 Obligations Unconditional and Independent. Notwithstanding the existence at any
time of any obligation or liability of City to Developer, or any other claim by Developer against
City, in connection with the Loan or otherwise, Developer hereby waives any right it might
otherwise have (a) to offset any such obligation, liability or claim against Developer's obligations
under the Loan Documents, or (b) to claim that the existence of any such outstanding obligation,
liability or claim excuses the nonperformance by Developer of any of its obligations under the
Loan Documents.
21.2 Notices. All notices, demands, approvals and other communications provided for in the
Loan Documents shall be in writing and be delivered to the appropriate party by personal service
or U.S. Mail at its address as follows:
If to Developer: Santa Ana Arts Collective, L.P.
c/o Meta Housing Corporation
1640 Sepulveda Blvd, Ste. 425
Los Angeles, CA 90025
Attention: President
With a copy to: Bank of America CDC Special
Holding Company, Inc.
Community Development Banking
MAI -225-02-02
225 Franklin Street
Boston, MA 02110
Bank of America, N.A.
MAI -225-02-02
225 Franklin Street
Boston, MA 02110
Attention: Asset Management
WCH Affordable XVIII, LLC
Attn: Graham Espley-Jones
151 Kalmus Drive, 05
Costa Mesa, CA 92626
Fax: (714) 597-8320
If to City: City of Santa Ana
Community Development Agency
20 Civic Center Plaza (M-26)
P.O. Box 1988
Santa Ana, California 92702
Attention: Housing Manager
55C-170
With a copy to: Office of the City Attorney
City of Santa Ana
20 Civic Center Plaza, 7th Floor (M-29)
Santa Ana, California 92702
Addresses for notice may be changed as required by written notice to all other parties. All
notices personally served shall be effective when actually received. All notices mailed shall be
effective three (3) days after deposit in the U.S. Mail, postage prepaid. The foregoing
notwithstanding, the non -receipt of any notice as the result of a change of address of which the
sending party was not notified or as the result of a refusal to accept delivery shall be deemed
receipt of such notice.
21.3 Survival of Representations and Warranties. All representations and warranties in the
Loan Documents shall survive the making of the Loan(s) described herein and have been or will
be relied on by City notwithstanding any investigation made by either party.
21.4 No Third Parties Benefited. This Agreement is made for the purpose of setting forth
rights and obligations of Developer and the City, and no other person shall have any rights
hereunder or by reason hereof.
21.5 Binding Effect; Assignment of Obligations. This Agreement shall bind, and shall inure
to the benefit of, Developer and City and their respective successors and assigns. Other than as
expressly provided to the contrary in this Agreement, Developer shall not assign any of its rights
or obligations under any Loan Document without the prior written consent of City, which
consent may be withheld in City's sole and absolute discretion. Any such assignment without
such consent shall, at City's option, be void.
21.6 Prior Agreements; Amendments; Consents. This Agreement (together with the other
Loan Documents) contains the entire agreement between the City and Developer with respect to
the Loan(s) and the Property, and all prior negotiations, understandings and agreements are
superseded by this Agreement and such other Loan Documents. No modification of any Loan
Document (including waivers of rights and conditions) shall be effective unless in writing and
signed by the party against whom enforcement of such modification is sought, and then only in
the specific instance and for the specific purpose given.
21.7 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. Developer irrevocably and unconditionally submits to the jurisdiction of the
Superior Court of the State of California for the County of Orange or the United States District
Court of the Central District of California, as City may deem appropriate, in connection with any
legal action or proceeding arising out of or relating to this Agreement or the Loan Documents.
Assuming proper service of process, Developer also waives any objection regarding personal or
in rem jurisdiction or venue.
55C-171
21.8 Severability of Provisions. No provision of any Loan Document that is held to be
unenforceable or invalid shall affect the remaining provisions, and to this end all provisions of
the Loan Documents are hereby declared to be severable.
21.9 Headings. Article and section headings are included in the Loan Documents for
convenience of reference only and shall not be used in construing the Loan Documents.
21.10 Conflicts. In the event of any conflict between the provisions of this Agreement and
those of any other Loan Document, this Agreement, unless otherwise expressly provided, shall
prevail; provided however that, with respect to any matter addressed in both such documents, the
fact that one document provides for greater, lesser or different rights or obligations than the other
shall not be deemed a conflict unless the applicable provisions are inconsistent and could not be
simultaneously enforced or performed.
21.11 Time of the Essence. Time is of the essence under this Agreement and in the performance
of every term, covenant, and obligation contained herein.
21.12 Conflict of Interest. No member, official or employee of the City shall have any direct
or indirect interest in this Agreement, nor participate in any decision relating to the Agreement
which is prohibited by law.
21.13 Warranty Against Payment of Consideration. Developer warrants that it has not paid
or given, and will not pay or give, any third person any money or other consideration for
obtaining this Agreement.
21.14 Nonliabilitv of 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.
21.15 Plans and Data. Should Developer not proceed with the work and construction of the
Property, and upon termination of this Agreement for any reason, Developer shall deliver to City
any and all plans and data concerning the Property/Project, and City or any person or entity
designated by City shall have the right to use such plans and data without compensation to
Developer. Such right of City shall be subject to any right of the preparer of the plans to their
use.
21.16 Authority to Enter Agreement. Each undersigned represents and warrants that its
signature hereinbelow has the power, authority and right to bind their respective parties to each of
the terms of this Agreement, and shall indemnify the City fully, including reasonable costs and
attorney's fees, for any injuries or damages to City in the event that such authority or power is not,
in fact, held by the signatory or is withdrawn.
21.17 Transfer of Developer Limited Partner's Interest. Notwithstanding anything to the
contrary in this Agreement or the Loan Documents, no consent shall be required of the City (and
55C-172
it shall not be deemed a default or an Event of Default under any of the Loan Documents), in
connection with the transfer and/or the assignment by the Developer's limited partner.
21.18 Removal of Developer's General Partner. Notwithstanding anything to the contrary in
this Agreement or the Loan Documents, the removal and/or replacement of a General Partner for
cause in accordance with the Partnership Agreement shall not require the consent of the City and
shall not constitute a default or an Event of Default under this Agreement or the Loan Documents
or accelerate the maturity of the HOME Loan. If the Developer's limited partner exercises its right
to remove a General Partner, City will not unreasonably withhold its consent to the substitute
general partner; provided however, the consent of either the City shall not be required if the
substitute general partner is an affiliate of the Developer's limited partner. The substitute general
partner shall assume all of the rights and obligations of the removed general partner hereunder.
21.19 Subsequent Approvals. Except where otherwise indicated, all subsequent approvals
identified in this Agreement, other than approvals by the City Council of the City of Santa Ana,
shall not be unreasonably withheld, delayed or conditioned.
55C-173
IN WITNESS WIIEREOF, the parties hereto have caused this Loan Agreement to be executed
on the date set forth at the beginning of this Agreement.
ATTEST:
Maria D. Huizar
Clerk of the Council
APPROVED AS TO FORM
RECOMMENDED FOR APPROVAL:
Robert C. Cortez
Acting Executive Director
Community Development Agency
(Signatures continue on followingpage)
CITY OF SANTA ANA
Cynthia J. Kurtz
Interim City Manager
55C-174
DEVELOPER:
Santa Ana Arts Collective, L.P., a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its general partner
0
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
0
Graham P. Espley-Jones, President
EXHIBITS
A. Legal Description
B. Affordability Restrictions on Transfer of Property
C. HOME Deed of Trust
D. HOME Promissory Note
E. Project Budget
F. Scope of Work / Schedule of Performance
G. Form of Residual Receipts Report
55C-175
Exhibit A: Legal
Description
55C-176
EXHIBIT A
PARCEL A:
THAT PORTION OF SECTION 12, TOWNSHIP 5 SOUTH, RANGE 10 WEST, IN THE CITY OF
SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, BEING A PORTION OF THE LAND
ALLOCATED TO JACOB ROSS IN DECREE OF PARTITION OF THAT RANCHO SANTIAGO DE
SANTA ANA, RECORDED IN BOOK "B" OF JUDGEMENTS OF 17TH JUDICIAL DISTRICT COURT OF
CALIFORNIA, DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID SECTION 12, BEING ALSO THE
INTERSECTION OF THE CENTER LINES OF SEVENTEENTH STREET AND MAIN STREET AS SAID
INTERSECTION IS SHOWN ON A MAP FILED IN BOOK 11 PAGE 18 OF RECORD OF SURVEYS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID ORANGE COUNTY, CALIFORNIA;
THENCE ALONG THE NORTHERLY LINE OF SAID NORTHEAST QUARTER, NORTH 89° 56' 40"
WEST 289.89 FEET;
THENCE SOUTH 00 1625" WEST 230.00 FEET;
THENCE PARALLEL WITH THE NORTHERLY LINE OF SAID NORTHEAST QUARTER, SOUTH 89-
56'40"
9°56'40" EAST 289.78 FEET TO THE EASTERLY LINE OF SAID NORTHEAST QUARTER;
THENCE ALONG SAID EASTERLY LINE NORTH 00 1640" EAST 230.00 FEET TO THE POINT OF
BEGINNING.
EXCEPT THE NORTHERLY 40.00 FEET THEREOF.
ALSO EXCEPT THE EASTERLY 35.00 FEET THEREOF.
PARCEL B:
NON-EXCLUSIVE EASEMENTS FOR VEHICLE INGRESS, EGRESS, PARKING AND INCIDENTAL
PURPOSES, AS MORE PARTICULARLY SET FORTH IN THAT CERTAIN "DECLARATION OF
EASEMENT FOR VEHICLE INGRESS, EGRESS AND PARKING" RECORDED OCTOBER 04, 2005 AS
INSTRUMENT NO. 2005000786645 OF OFFICIAL RECORDS.
APN:
005-153-19 (Affects a portion of said land)
005-153-20 (Affects a portion of said land)
55C-177
Exhibit Be.
Affordability
Restrictions on
Transfer of Property
55C-178
FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, CA 92702-1988
Attention: Clerk of the Council
AFFORDABILITY RESTRICTIONS
ON TRANSFER OF PROPERTY
(Address: 1666 N. Main Street, Santa Ana, CA)
THESE AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY (the
"Restrictions") are entered into by and between Santa Ana Arts Collective, LP, a California
limited partnership ("Owner") and the City of Santa Ana, a charter city and municipal
corporation (the "City").
RECITALS:
A. The City has received an allocation of funds from the United States Department
of Housing and Urban Development ("HUD") under the HOME Investment Partnerships
Program ("HOME Program") (42 U.S.C. § 12701, et seq.) to be used in accordance with
applicable statutory requirements and regulations ("HOME Regulations")(24 CFR 92);
B. Among the purposes of the HOME Program are (1) to expand the supply of
decent, safe, sanitary, and affordable housing, with primary attention to rental housing, for very
low-income and low-income Americans; and (2) to provide participating jurisdictions, on a
coordinated basis, with the various forms of federal housing assistance, including capital
investment, mortgage insurance, rental assistance, and other federal assistance, needed (a) to
promote the development of partnerships among the federal government, states and units of
general local government, private industry, and nonprofit organizations able to utilize all
available resources to provide more of such housing, and (b) to expand the capacity of nonprofit
community housing development organizations to develop and manage decent, safe, sanitary and
affordable housing;
C. The City is authorized by the HOME Regulations to expend funds to increase the
supply of very low and low-income housing available at affordable housing costs.
55C-179
D. The City issued a Request for Proposals on June 1, 2015, seeking affordable
housing projects. After reviewing all applications, the Owner's project was selected and
approved for funding by the Santa Ana City Council on November 3, 2015.
E. Owner is entering into this Agreement to acquire and, subject to entitlement
approvals, develop an adaptive reuse project consisting of a fifty-eight (58) unit multi -family
residential housing development, with live/work units and a possible commercial art studio, as
well as a community room (the "Project") located at 1666 N. Main Street, within the City of
Santa Ana, California, and legally described in Exhibit A attached hereto (the "Property"). The
HOME funds referenced herein shall assist in the acquisition, rehabilitation, construction, and
soft costs of said Project.
F. In furtherance of the HOME Program, Owner has applied to the City for a loan
with which to:
provide deeper affordability and construct the improvements to the
Property; and,
2. thereafter to maintain, operate and professionally manage the Project as
decent, safe, sanitary and affordable rental housing.
G. The City, on certain terms and conditions, desires to make such loan ("HOME
Loan") to Owner in order to make possible the rehabilitation and construction of the Project,
thereby expanding the supply of decent, safe, sanitary and affordable housing.
H. If there is any inconsistency between Federal, State, and local guidelines with regard
to any of the terms and conditions contained herein, the more stringent shall apply.
I. Owner and the City are concurrently entering into that certain HOME Loan
Agreement. The Loan Agreement, HOME Deed of Trust, and HOME Promissory Note, dated
concurrently herewith (collectively the "Loan Agreements") are entered into for the purpose of
providing for affordable extremely low and very low income residential rental units in the City
of Santa Ana pursuant to the HOME Program regulations and guidance.
NOW, THEREFORE, CITY AND OWNER COVENANT AND AGREE AS FOLLOWS:
Definitions
"AHSC Loan" means a permanent loan of Affordable Housing and Sustainable
Communities program funds from HCD administered by the California Strategic Growth
Council in the amount of $4,944,130
"AHSC Deed of Trust" means the any deed(s) of trust securing the AHSC Loan
encumbering the Property.
55C-180
"AHSC Loan Documents" means, collectively, the loan agreement governing the
AHSC, the AHSC Note, the AHSC Deed of Trust, and any other agreement, document or
instrument that the Senior Lender requires in connection with the AHSC Loan.
"Affordable Housing" means housing operated in accordance with the requirements of
24 CFR 92.252 and the rents governed by California Health and Safety Code Section 50052.5.
"Affordable Rent" means the monthly rents which do not exceed the maximum amount
applicable to Extremely Low, Very Low and Low Income households, as promulgated by the
U.S. Department of Housing and Urban Development (HUD), or by the California Tax Credit
Allocation Committee, as applicable.
"Building Permit" means the building permit(s) issued by City and required for the
Construction, if any.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or Friday on
which Santa Ana City Hall is open to the public for the conduct of City affairs.
"Calendar Year" means each consecutive twelve (12) month period from January 1 to
December 30.
"Certificate of Completion" has the meaning set forth in Article 17.
"City" means the City of Santa Ana, California, a charter city and municipal corporation.
"Close of Escrow" shall mean the date upon which the HOME Loan Deed of Trust is
recorded in the Official Records of the County.
"Closing Statement" means the final statement of Owner's Escrow account for the
purchase and sale of the Property pursuant to the Purchase Contract.
"Construction" means the demolition and construction activities required to construct,
until Certificate of Completion, the Project.
"County" means the County of Orange, California.
"Event of Default" has the meaning set forth in Section 20.1.
"Extremely Low Income" means an adjusted income which does not exceed thirty
percent (30%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
"General Partner(s)" means the Santa Ana Arts Collective, LLC, a California limited
liability company and WCH Affordable XVIII, LLC, a California limited liability company.
"Governmental Authority" means any governmental or quasi -governmental agency,
board, bureau, commission, department, court, administrative tribunal or other instrumentality or
authority, and any public utility.
55C-181
"Hazardous Materials" means flammable materials, explosives, radioactive materials,
hazardous wastes, toxic substances and similar substances and materials, including all substances
and materials defined as hazardous or toxic wastes, substances or materials under any applicable
law, including without limitation the Resource Conservation and Recovery Act, 42 U.S.C. §§
6901 et seq., and the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. §§ 9601, et seq., as amended.
"HOME Compliance Period" means twenty (20) years from the issuance of the
Certificate of Completion or until payment of principal and all accrued interest on the HOME
Loan, whichever comes last.
"HOME Loan" means the loan with principal amount of TWO MILLION, TWO
HUNDRED AND NINETEEN THOUSAND, SEVEN HUNDRED AND SIXTY DOLLARS
($2,219,760.00) to be made to Owner by City from HOME funds pursuant to Article 5 of this
Agreement.
"HOME Loan Deed of Trust" means the deed of trust encumbering the Property, in the
form attached as Exhibit C to the Loan Agreement, to be executed by Owner pursuant to Section
5.13.2 in order to secure the HOME Loan Promissory Note.
"HOME Loan Promissory Note" means that certain promissory note in the original
principal amount of TWO MILLION, TWO HUNDRED AND NINETEEN THOUSAND,
SEVEN HUNDRED AND SIXTY DOLLARS ($2,219,760.00) in the form attached hereto as
Exhibit D, and to be executed by Owner in favor of City to evidence the obligation of Owner to
repay the HOME Loan.
"HOME Program" has the meaning set forth in Recital "A" above
"HOME Regulations" has the meaning set forth in Recital "A" above.
"HOME Units" means the eleven (11) affordable units assisted with HOME funds.
"HUD" means the United States Department of Housing and Urban Development and
any successors or assigns thereof.
"Improvements" means all improvements and fixtures now and hereafter comprising
any portion of the Property, including, without limitation, landscaping, trees and plant materials;
and offsite improvements, as required through the City of Santa Ana Planning and Building
Agency entitlement process.
"Indebtedness" of a person means (a) all indebtedness for borrowed money, (b) notes
payable and drafts accepted representing extensions of credit, whether or not representing
obligations for borrowed money, (c) any obligation for the purchase of property or services in
excess of $10,000 in the aggregate that is (i) deferred for more than six (6) months, or (ii)
evidenced by a note or similar instrument, and ( d) all recourse and all non-recourse indebtedness
secured by any Lien on any property or asset of such person (whether or not assumed by such
person).
55C-182
"Indemnitees" has the meaning set forth in Section 14.5.
"Laws" means all statutes, laws, ordinances, regulations, orders, writs, judgments,
injunctions, decrees or awards of the United States or any state, county, municipality or other
Governmental Authority.
"Lien" means any lien, mortgage, pledge, security interest, charge or encumbrance of
any kind (including any conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any lien or security interest).
"Limited Partner" means the Limited Partners of Owner, and their successors and
assigns.
"Loan Documents" means, collectively, this Agreement, the HOME Loan Note, the
HOME Deed of Trust, the Affordability Restrictions on Transfer of Property, and any other
agreement, document, or instrument that the City requires in connection with the execution of
this Agreement or from time to time to effectuate the purposes of this Agreement.
"Low Income" means an adjusted income which does not exceed eighty percent (80%)
of the area median income for the Orange County, California PMSA, adjusted for household
size, as published by HUD.
"Median Income for the Area" means the median income for the Orange County,
California PMSA as most recently determined by HUD. Also may be referred to
interchangeably in the Loan Documents as "Area Median Income" or "AMI".
"Owner" means Santa Ana Arts Collective, L.P., a California limited partnership.
"Owner's Representative" shall mean an officer of the General Partner of Owner or
his/her designee.
"Partnership Agreement" means the Second Amended and Restated Agreement of
Limited Partnership of Santa Ana Arts Collective, L.P., dated in July 2017.
"Permitted Encumbrances for the Affordable Housing Restrictions" means,
collectively, the Senior Loan Deed of Trust and AHSC Loan Documents and all other title
exceptions and limitations with respect to the Property hereafter approved by the Executive
Director in writing.
"Permitted Encumbrances for the HOME Loan Deed of Trust" means, collectively,
the Senior Loan Deed of Trust and AHSC Loan Documents and all other title exceptions and
limitations with respect to the Property hereafter approved by the Executive Director in writing.
"Project" means the construction of the Improvements upon the Property by Owner
pursuant to this Agreement.
55C-183
"Project Budget" means the line -item budget for the Project attached as Exhibit E to the
Loan Agreement, as modified from time to time in accordance with this Agreement.
"Project Costs" means all costs of any nature incurred in connection with the Project in
accordance with generally accepted accounting principles.
"Property" means the property that is located at 1666 N. Main Street in the City of Santa
Ana, and is more fully described in the "Legal Description" of the Property attached hereto as
Exhibit A and incorporated herein by reference.
"Scope of Work/Schedule of Performance" means the detailed statement of the work
to be performed by Owner on and to the Property pursuant to this Agreement, along with the
Schedule of Performance setting forth timeframes for certain tasks, which document is attached
as Exhibit F to the Loan Agreement.
"Section 504" means section 504 of the federal Rehabilitation Act of 1973, codified at 29
U.S.C. § 701 et seq., and its implementing regulations located at 24 CFR 8.
"Senior Lender" means a commercial financial institution providing the Senior Loan or
any other holder of the Senior Loan Note.
"Senior Loan" means a loan from any Senior Lender(s) in a position superior to the
HOME Loan.
"Senior Loan Deed of Trust" means any deed(s) of trust securing any Senior Loan by
encumbering the Property.
"Senior Loan Documents" means, collectively, the loan agreement governing the Senior
Loan, the Senior Loan Note, the Senior Loan Deed of Trust, and any other agreement, document
or instrument that the Senior Lender requires in connection with the Senior Loan.
"Senior Loan Note" means the promissory note evidencing the Senior Loan from the
Senior Lender.
"Term of Affordability" the terms and conditions contained herein shall remain in effect
for fifty-five (55) years from the date of issuance of the Certificate of Completion.
"Very Low Income" means an adjusted income which does not exceed fifty percent
(50%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
2. Use of the Property. Owner covenants and agrees (for itself, its successors, its
assigns, and every successor in interest to the Property of any part thereof) that Owner, such
successors, and assigns shall use the Property to provide affordable rental housing, for Extremely
Low and Very Low Income households, as provided in the Loan Agreement and these
Restrictions
55C-184
3. AFFORDABILITY REQUIREMENTS, USE AND MAINTENANCE OF THE
PROPERTY
3.1 Use Covenants and Restrictions.
a. Owner agrees and covenants, which covenants shall run with the land and bind
Owner, its successors, its assign and every successor in interest to the Property that Owner will make
all rental units on the Property available to extremely -low, very low and low income households at
rents affordable to such households for fifty- five (55) years from the effective date of the issuance of
the Certificate of Completion.
b. The eleven (11) HOME assisted units shall be enforced until the date that is
twenty (20) years after the date on which the City reports the Project as complete to HUD. Upon
expiration of the twenty (20) year HOME compliance period, the City will enforce affordability of the
eleven (11) units with the same income and rent restrictions as the other forty-six (46) units operated
on the Property, pursuant to the California Health and Safety Code.
C. The Project shall consist of approximately fifty-eight (58) units of which
there will be twenty-six (26) one -bedroom units, fifteen (15) two-bedroom units and seventeen
(17) three-bedroom units. There will be twenty (20) units for households with incomes at or
below 30% AMI, six (6) units for households with incomes at or below 35% AMI, six (6) units
for households with incomes at or below 40% AMI, twenty-five (25) units for households with
incomes at or below 60% AMI; and the remaining unit will be reserved for the on-site manager.
d. The proposed unit mix, initial rents, and levels of affordability are as
follows:
The remaining unit will be a 2 -bedroom unit reserved for the onsite manager.
HOME Assisted Units
30% AMI
35% AMI
40% AMI
60% AMI
Unit Size
No. Rent
Units
No. Rent
Units
No.
Units
Rent
No. Rent Total
Units
1 Bedroom
14 $587
6 $685
6
$783
26
2 Bedroom
2 $704
--- ---
------
1 Bed 1
12 $1,408 14
3 Bedroom
4 $813
---
---
---
13 $1,627 17
Total
20
6
6
1 25 57
The remaining unit will be a 2 -bedroom unit reserved for the onsite manager.
HOME Assisted Units
55C-185
Unit Type
Level of
# of HOME
HOME Share of
Total # of Units
Description/No No. of BRs
Affordability
Assisted Units
Unit Type
tes
26
1 Bed 1
30% AMI
5
19.23%
14
2 Bed 2
2
14.29%
17
3 Bed 3
4
23.53%
55C-185
(1) In no event shall the rent charged to the HOME assisted units be more than that amount of
the low HOME rent as published by HUD, as amended from time to time.
(2) At the time of project completion, the Developer shall provide to the City the address and/or
unit number of each of the HOME floating units.
(3) Annually with the financial statements, the Developer shall provide an annual report of rents
and occupancy of all assisted units, including the HOME -assisted units, to verify
compliance with affordability requirements. For the HOME assisted -units, information on
unit substitution and filling vacancies shall be provided to ensure that the project maintains
the required unit mix.
The affordable rents charged at the Project must comply with the standards set forth by California
Tax Credit Allocation Committee (TCAC). Notwithstanding anything to the contrary contained in
this Agreement, the Affordability Restrictions on Transfer of Property, and other than HOME
assisted units, restricted (as to both income and rent levels) at 30% of AMI, in the event of a
foreclosure, or delivery of deed in lieu of foreclosure, of any Senior Loan, then the (1) the
maximum qualifying tenant household income shall be increased to 60% of Area Median Income
adjusted for family size appropriate to the unit, and (2) the maximum annual affordable rent shall be
increased to 30% of 60% of Area Median Income, as adjusted for family size appropriate to the unit.
* Utility allowances must be deducted from the Maximum Gross Monthly Rent. The City of Santa
Ana will provide the utility allowances based on the HUD Utility Schedule Model.
e. 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.
3.2 Rent Increases:
A. On an annual basis, the City shall provide the Owner with the maximum allowable schedule of
incomes and rents (less utility allowance appropriate for the Restricted Units) for the Property.
B. Owner, its successors and assigns shall not charge rents for the Restricted Units in excess of
the amounts set forth in the tables as adjusted from time -to -time by HUD. The Housing
Manager shall notify Owner in writing of the adjusted allowable maximum incomes and rents.
4. Miscellaneous Provisions
A. Owner shall adopt and include as part of its Management Plan (described in subsection G
below), written tenant selection policies and criteria for the Units, that meet the following
requirements:
(a) Are consistent with the purpose of providing housing for Extremely Low
and Very Low Income households;
(b) Are reasonably related to program eligibility and the applicants' ability to
perform the obligations of the lease;
55C-186
(c) Give reasonable consideration to the housing needs of households that
would have a preference under 42 CFR §906.211 (Federal selection preferences for admission to
Public Housing);
(d) Provide for:
(i) The selection of tenants from a written waiting list in the
chronological order of their application, insofar as is practicable; and
(ii) The prompt written notification to any rejected applicant of the
grounds for any rejection;
(e) Provide first priority in the selection of qualified eligible tenants to
households that are referred by the City; and
(1) Carry out the Affirmative Marketing procedures of the City of Santa Ana,
which are designed to provide information and otherwise attract eligible persons from all racial,
ethnic and gender groups in the housing market area to the units. Owner, the City shall
cooperate to effectuate this provision prior to the initial renting, or upon occurrence of a vacancy,
and the re -renting of any Restricted Units (24 CFR 92.351).
B. Owner, its successors and assigns, shall not refuse to lease a unit to a holder of a rental
voucher under 24 CFR part 982 (Housing Choice Voucher Program) or to a holder of a
comparable document evidencing participation in a HOME tenant -based rental assistance
program because of the status of the prospective tenant as a holder of such certificate of family
participation, rental voucher, or comparable HOME tenant -based assistance document.
C. Any lease of any of the Units must be for not less than one year, unless by mutual agreement
between the tenant and the Owner. Should the tenant and Owner agree to a term of less than one
year, said agreement shall be expressed in some type of written form, signed by the tenant, and
maintained in the tenant's rental file held by the Owner. The lease may not contain any of the
following provisions (in which references to "Owner" shall mean the Owner, its successors or
assigns):
(a) Agreement by the tenant to be sued, to admit guilt, or to a judgment in
favor of the owner in a lawsuit brought in connection with the lease;
(b) Agreement by the tenant that the owner may take, hold, or sell personal
property of household members without notice to the tenant and a court decision on the rights of
the parties. This prohibition, however, does not apply to an agreement by the tenant concerning
disposition of personal property remaining in the housing Unit after the tenant has moved out of
the Unit. The owner may dispose of this personal property in accordance with state law;
(c) Agreement by the tenant not to hold the owner or the owner's agent legally
responsible for any action or failure to act, whether intentional or negligent;
(d) Agreement of the tenant that the owner may institute a lawsuit without
55C-187
notice to the tenant;
(e) Agreement by the tenant that the owner may evict the tenant or household
members without instituting a civil court proceeding in which the tenant has the opportunity to
present a defense, or before a court decision on the rights of the parties;
(f) Agreement by the tenant to waive any right to a trial by jury;
(g) Agreement by the tenant to waive the tenant's right to appeal, or to
otherwise challenge in court, a court decision in connection with the lease; and
(h) Agreement by the tenant to pay attorney's fees or other legal costs even if
the tenant wins in a court proceeding by the owner against the tenant. The tenant, however, may
be obligated to pay costs if the tenant loses.
D. Owner, its successors or assigns, must adhere to state law requirements with regard to
termination of tenancy.
E. Owner shall maintain the improvements on the Property in compliance with all applicable
housing quality standards [24CFR 92.504 (c)(6)] and state and local code requirements and shall
keep the Property free from any unreasonable accumulation of debris or waste materials. Owner
shall also maintain in a healthy condition any landscaping planted on the Property.
F. Owner covenants and agrees for itself, its successors, its assigns and every successor in
interest to the Property or any part thereof, there shall be no discrimination against or segregation
of any person, or group of persons, on account of race, color, creed, religion, disability, sex,
marital status, national origin or ancestry in the sale, lease, transfer, use, occupancy, tenure or
enjoyment of the Property nor shall the Owner itself or any person claiming under or through it
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, sublessees or
vendees of the Property, as required by the Title VI of the Civil Rights Act of 1964, the Fair
Housing Act (42 U.S.C. 3601-20) and all implementing regulations, and the Age Discrimination
Act of 1975, and all implementing regulations.
G. Not later than the closing for the construction loan for the Project, Owner shall submit to the
Housing Manager a Management Plan in a form that is acceptable including, but not limited to,
the components listed below. Approval of the Management Plan must be obtained from the
Housing Manager not later than the time for the issuance of a certificate of occupancy for the
Project. Owner shall manage the Restricted Units in accordance with the approved Management
Plan, including such amendments as may be approved in writing from time to time by the
Housing Manager, for the term of the income and rent restrictions contained in these
Restrictions. The components of the Management Plan shall include:
(a) Management Agent. Owner shall submit the name and qualifications of
the proposed Management Agent. The City shall approve or disapprove the proposed
Management Agent in writing based on the experience and qualifications of the Management
Agent.
55C-188
(b) Management Agreement. Owner shall submit a copy of the proposed
management agreement specifying the amount of the management fee, and the relationship and
division of responsibilities between Owner and Management Agent.
(c) Annual Budget and Projected Cash Flows. Prior to the issuance of a
certificate of occupancy for the Project, and annually thereafter not later than one hundred fifty
(150) days after the close of each calendar year thereafter, Owner shall submit a projected
operating budget and cash flow to the Housing Manager. The budget and cash flow shall be in a
form that is acceptable to the Housing Manager.
(d) Tenant Selection Policies. Owner shall include in the Management Plan
the tenant selection policies in accordance with Section 4, above.
H. If at any time the City determines that the units are not being managed or maintained in
accordance with the approved Management Plan, Owner shall change the management agent or
the practices complained of, upon receipt of written notice from the City Manager. The City
Manager may require Owner to change management practices or to terminate the management
contract and designate and retain a different management agent. The management agreement
shall provide that it is subject to termination by Owner without penalty, upon thirty (30) days
prior written notice, at the direction of the City Manager. Within ten (10) days following a
direction of the City Manager to replace the management agent, the Owner shall select another
management agent or make other arrangements satisfactory to the City Manager or designee for
continuing management of the units.
I. The covenants established in these Restrictions and any amendments hereto approved by the
City, and Owner shall, without regard to technical classification and designation, be binding for
the benefit and in favor of the City and their respective successors and assigns. These
Restrictions shall remain in effect for fifty-five (55) years. In its discretion, the City may defer
repayment of the Loan or the City may agree to such reasonable modifications to the
requirements of these Restrictions, as they may determine are necessary for the continued
maintenance and operation of the Restricted Units. The covenants against discrimination shall
remain in effect for the period of these Restrictions.
J. Owner shall not request disbursement of HOME funds until the funds are needed to pay
eligible costs. The City shall have the right to disapprove any request if the City determines the
request is for an ineligible item or is otherwise not in compliance with or inconsistent with the
Loan Agreements and these Restrictions [24 CFR 92.504 (c)(10)].
K. Owner shall prepare, maintain and submit to the City, as appropriate, the following records
and reports in compliance with 24 CFR 92.504 (c) (12):
a. Annual Reports. Owner shall file with the City an Annual Report (herein referred
to as the "Annual Report") within one hundred fifty (150) days following the end of each
calendar year, commencing the Calendar Year following the issuance of the Certificate of
Completion. The Annual Report shall contain a certification by Owner as to such information as
the City Project Manager may then require, including, but not limited to, the following:
(1) The fiscal condition of the Project, including the Annual Budget and
55C-189
Project Cash Flow report required by Section 4.G. (c) of this Agreement which shall include an
audited financial statement for the previous calendar year that includes a balance sheet and a
profit and loss statement indicating any surplus or deficit in operating accounts; a detailed
itemized listing of income and expenses; and the amounts of any fiscal reserves. Such Annual
Budget and audited financial statement shall be prepared in accordance with generally accepted
accounting practices.
(2) Any substantial physical defects in the Project, including a description of
any major repair or maintenance work undertaken or needed in the previous and current years.
Such statement shall describe what steps Owner has taken in order to maintain the Project in a
safe and sanitary condition in accordance with applicable housing and building codes and the
property standards set forth in 24 CFR 92.251.
(3) The occupancy of the units indicating the income of each current resident
and the current rents charged each resident and whether those rents include utilities, including
records that demonstrate that the Project meets the requirements of 24 CFR 92.253 for tenant and
participant protection under the HOME Program.
(4) General management performance, including tenant relations and other
relevant information.
(5) Records that demonstrate that the units meet the affordability requirements
of 24 CFR 92.252, for the required period of affordability.
(6) Evidence of a currently paid hazard insurance policy in accordance with
the requirements of Section 6 of the HOME Deed of Trust, with a loss payable endorsement
naming the City as a loss payee together with other approved lenders (as their interests may
appear), with a "Replacement Cost Endorsement" in amount sufficient to prevent Owner or City
from becoming a co-insurer under the terms of the policy, but in any event in an amount not less
than 100% of the then full replacement cost, to be determined at least once annually and subject
to reasonable approval by the Executive Director.
(7) Evidence of a currently paid liability insurance policy, naming the City as
additional insured and in a form approved by the City Attorney with coverage as described in the
Loan Agreements.
(8) Termite reports pertaining to the Property every fifth (5h) year.
(9) Such other information as may be reasonably required by the City Manager or
his/her designee.
b. Records and Audits. Owner shall maintain the following general program
records, and make them available for inspection by the City, the State or HUD:
(1) records which demonstrate that the project meets the property standard
specified in 24 CFR 92.251;
(2) records, for each HOME Assisted Unit, which demonstrates that the
55C-190
project meets the requirements of 24 CFR 92.252.
(3) records which demonstrate compliance with the tenant and participant
protections, as specified in 24 Section 29.253;
(4) records which demonstrate compliance with the Equal Opportunity and
Fair Housing requirements outlined in these Restrictions, including:
(A) data on the extent to which each racial and ethnic group and single
head of household (by gender of head of household) have applied for, participated in, or
benefited from, any program or activity funded in whole or in part with HOME funds;
(B) documentation of actions undertaken to meet the equal opportunity
requirements of 24 CFR 92.350, which implements Section 3 of the Housing Development Act
of 1968, as amended (12 U.S.C. 1701u);
(C) documentation and data on the steps taken to implement Owner's
outreach programs to minority-owned and women -owned businesses to meet the minority
outreach requirements of 24 CFR 92.350;
(5) documentation of the steps taken to carry out an affirmative marketing
program in accordance with 24 CFR 92.351, if applicable;
(6) if applicable, records which demonstrate compliance with the
requirements relating to relocation of displaced persons, as described in 24 CFR 92.353. At a
minimum, these shall include project occupancy lists identifying the name and address of all
persons occupying the project property up until the date of the date on which Owner obtained
ownership of the Property;
(7) records concerning lead-based paint in accordance with 24 CFR 92.355;
(8) if applicable, records which support any requests for waivers of the
conflict of interest prohibition as stated in 24 CFR 92.356;
(9) records of certifications of contractor qualifications as they relate to the
debarment and suspension requirement as stated in 24 CFR 92.357 and 24 CFR Part 24; and
(10) any other reports issued by other monitoring agencies.
C. All records pertaining to each calendar year of HOME funds must be retained
for the most recent five year period, except that for rental housing projects, records may be
retained for five years after the project completion date; except that records of individual tenant
income verifications, project rents and project inspections must be retained for the most recent
five year period, until five years after the affordability period terminates (24 CFR 92.508).
Owner shall cooperate with the City to retain all books and records relevant to the Loan
Agreement for a minimum of five years after the expiration of the Loan Agreement and any and
all amendments hereto, or for five years after the conclusion or resolution of any and all audits or
litigation relevant to the Loan Agreement, whichever is later. The City, the State, the Office of
55C-191
the Inspector General of HUD, and/or their representatives shall have unrestricted reasonable
access to all locations, books, and records for the purpose of monitoring, auditing, or otherwise
examining said locations, books, and records with or without prior notice.
d. If so directed by the City or HUD upon termination of the Loan Agreement,
Owner shall cause all records, accounts, documentation and all other materials relevant to the
work to be delivered to the City or HUD, as depository.
e. All records, accounts, documentation and other materials relevant to the Project
shall be accessible at any time to the authorized representatives of the City, or HUD, on
reasonable prior notice, for the purpose of examination or audit.
f. Pursuant to 24 CFR Part 44, the City shall perform an annual audit at the close of
each calendar year in which these Restrictions are in effect. Owner shall reasonably cooperate
with City in performing such audit.
g. Owner shall permit the City to perform an Annual Physical Inspection of the
Property with at least seven (7) days notice. Owner shall cooperate with this Inspection and shall
take all steps necessary to quickly correct any code deficiencies identified during the Inspection.
L. The City is the beneficiary of the terms and provisions of these Restrictions and the covenants
herein, both for and in its own right and for the purposes of protecting the interests of the
community and other parties, public or private, for whose benefit these Restrictions and the
covenants running with the land have been provided. The City shall have the right if the
covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits
at law or in equity or other proper proceedings to enforce the curing of such breaches to which
they or any other beneficiaries of these Restrictions and covenants are entitled.
M. The covenants and agreements contained herein shall run with the land and not be personal
obligations of Owner. Upon the sale, conveyance or other transfer of the Property (a "Transfer")
and the assumption of the obligations hereunder by a transferee, Owner's liability for
performance shall be terminated as to any obligation to be performed hereunder after the date of
such Transfer.
N. The Loan Agreement and all of its attachments shall be enforceable by the City in
accordance with the terms thereof. Each of the Loan Agreement, the Affordability Restrictions
on Transfer of Property, the HOME Note and the HOME Deed of Trust provide a means of
enforcement by the City if Owner is in breach of its obligations hereunder and thereunder,
including liens on the Property, deed restrictions and covenants running with the land [24 CFR
92.504 (c) (13)].
55C-192
IN WITNESS WHEREOF, the parties hereto have executed these Affordability Restrictions on
Transfer of Property as of the date and year first stated above.
ATTEST:
CITY OF SANTA ANA
Maria D. Huizar Cynthia J. Kurtz
Clerk of the Council Interim City Manager
APPROVED AS TO FORM
Sonia R—Carvalho
0
City
FOR APPROVAL:
Robert C. Cortez
Acting Executive Director
Community Development Agency
55C-193
OWNER:
Santa Ana Arts Collective, LP, a California limited partnership
By: Santa Ana Arts Collective, LLC,
A California limited liability company,
its administrative general partner
0
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company
its managing general partner
I�
Graham P. Espley-Jones, President
55C-194
Exhibit Co. HOME
Deed of Trust
55C-195
FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza
P.O. Box 1988 (M-30)
Santa Ana, California 92702
Attn: Clerk of the Council
HOME DEED OF TRUST
AND ASSIGNMENT OF RENTS
THIS HOME DEED OF TRUST AND ASSIGNMENT OF RENTS (the "Deed of Trust")
made this 50' day of July, 2017, by and between Santa Ana Arts Collective, LP, a California
limited partnership (the "Trustor"), AmeriNat, a Minnesota corporation (the "Trustee"), and the
City of Santa Ana, a charter city and municipal corporation (the "Beneficiary").
Trustor, in consideration of the promises herein recited and the trust herein created,
irrevocably grants, transfers, conveys and assigns to Trustee, in trust, with power of sale, the
property located in the City of Santa Ana, County of Orange, State of California, described in the
attached Exhibit A and more commonly known as 1666 N. Main Street, Santa Ana, California (the
"Property");
TOGETHER with all the improvements now or hereafter erected on the Property, and all
easements, rights, appurtenances and all fixtures now or hereafter attached to the Property, all of
which, including replacements and additions thereto, shall be deemed to be and remain a part of the
Property covered by this HOME Deed of Trust; provided that so long as Trustor is not in default
hereunder, it shall be permitted to control the Property in accordance with the requirements of
that certain HOME Loan Agreement entered into between the Trustor and the Beneficiary, dated
concurrently herewith (the "Agreement"), which Agreement is on file with the Beneficiary as a
public record;
TOGETHER with the right, power and authority during the continuance of these Trusts, to
collect the rents, issues, and profits of the Property, reserving unto the Trustor the right, prior to any
default by Trustor in payment of the indebtedness secured by this Deed of Trust or in the
performance of any agreement under this Deed of Trust, to collect and retain these rents, issues and
profits as they become due and payable; and,
TOGETHER with all articles of personal property or fixtures now or hereafter attached to or
used in and about the building or buildings now erected, or hereafter to be erected, on the Property
which are necessary to the complete and comfortable use and occupancy of such building or
buildings for the purposes for which they were or are to be erected, including all other goods and
chattels and personal property as are ever used or furnished in operating a building, or the activities
55C-196
conducted therein, similar to the one herein described and referred to, and all renewals or
replacements thereof or articles in substitution therefor, whether or not the same are, or shall be
attached to said building or buildings in any manner; and all of the foregoing, together with the
Property, is herein referred to as the "Security';
To have and to hold the Security together with acquittances to the Trustee, its successors and
assigns forever;
TO SECURE to the Beneficiary (a) the repayment of the sums evidenced by a Promissory
Note to the Beneficiary executed by Trustor of even date herewith in the principal amount of TWO
MILLION, TWO HUNDRED AND NINETEEN THOUSAND, SEVEN HUNDRED AND
SIXTY DOLLARS ($2,219,760.00) (the "HOME Promissory Note"); (b) the performance of the
covenants and agreements of Borrower contained in a certain Agreement as hereinafter defined; and
(c) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect
the security of this Deed of Trust; and the performance of the covenants and agreements of Trustor
contained herein.
TRUSTOR AND THE BENEFICIARY COVENANT AND AGREE AS FOLLOWS:
1. The Agreement. This Deed of Trust is executed and delivered, along with the
HOME Promissory Note and the Agreement, to benefit the Property. A copy of the Agreement is
on file as a public record with the Beneficiary and is incorporated herein by reference. Trustor
acknowledges that but for the execution of this Deed of Trust, the Beneficiary would not enter into
the Agreement or HOME Promissory Note secured by this Deed of Trust.
2. Trustor's Estate. Trustor is lawfully seized of the estate hereby conveyed and has the
right to grant and convey the Security; that other than this Deed of Trust, the Security is not
encumbered except for obligations secured by deeds of trust, or any other security agreement, to
secure financing or refinancing for the purchase and rehabilitation of the Property.
3. Repayment of the Loan. Trustor will promptly repay, when due, the principal loan
amount, as required by the HOME Promissory Note secured by this Deed of Trust.
4. Subordination. This obligation secured by this Deed of Trust shall be subordinated
to the Senior Loan and AHSC Loan, but the City's Affordability Restrictions on Transfer of
Property shall remain in first place with respect to the Senior Loan and subordinate with respect to
the AHSC Loan.
5. Prior Mortgages and Deeds of Trust; Charges; Liens. Trustor shall perform all of
Trustor's obligations under any mortgage, deed of trust or other security agreement with a lien
which has priority over this Instrument, including Trustor's covenants to make payments when due
(subject to an applicable notice and cure provisions). Trustor will pay all taxes, assessments and
other charges, fines and impositions attributable to the Security which may attain a priority over this
Deed of Trust, by Trustor making any payment, when due, directly to the payee thereof. Trustor
will promptly furnish to the Beneficiary all notices of amounts due under this paragraph, and in the
event Trustor makes payment directly, Trustor will promptly discharge any lien which has priority
over this Deed of Trust; provided that Trustor will not be required to discharge the lien of the Deed
of Trust securing any senior lender or any other lien described in this paragraph so long as Trustor
55C-197
will agree in writing to the payment of the obligation secured by such lien in a manner acceptable to
the Beneficiary, or will, in good faith, contest such lien by, or defend enforcement of such lien in,
legal proceedings which operate to prevent the enforcement of the lien or forfeiture of the Security
or any part thereof.
6. Hazard Insurance. Trustor will keep the Security insured by such insurance policies
in such amounts and for such periods as called for in the Agreement. All insurance policies and
renewals thereof will include a standard mortgagee clause with standard lender's endorsement in
favor of the holder of any senior lender and the Beneficiary as their interests may appear and in a
form acceptable to the Beneficiary. The Beneficiary shall have the right to hold, or cause its
designated agent to hold, the policies and renewals thereof, and Trustor shall promptly fiunish to the
Beneficiary, or its designated agent, the original insurance policies or certificates of insurance, all
renewal notices and all receipts of paid premiums subject to the rights of any senior lender. In the
event of loss, Trustor will give prompt notice to the insurance carrier and the Beneficiary or its
designated agent. The Beneficiary, or its designated agent, may make proof of loss if not made
promptly by Trustor. The Beneficiary shall receive 30 days advance notice of cancellation of any
insurance policies required under this Section.
Unless the Beneficiary and Trustor otherwise agree in writing, insurance proceeds, subject
to the rights of any senior lender, will be applied to restoration or repair of the Security damaged,
provided such restoration or repair is economically feasible and the security of this Deed of Trust is
not thereby impaired. If such restoration or repair is not economically feasible or if the security of
this Deed of Trust would be impaired, again, subject to the rights of any senior lender, the insurance
proceeds will be used to repay the loan secured by this Deed of Trust, with the excess, if any, paid
to Trustor. If the Security is abandoned by Trustor, or if Trustor fails to respond to the Beneficiary,
or its designated agent within 30 days from the date notice is mailed by either of them to Trustor
that the insurance carrier offers to settle a claim for insurance benefits, the Beneficiary, or its
designated agent, is authorized to collect and apply the insurance proceeds at the Beneficiary's
option either to restoration or repair of the Security or to repay the loan.
If the Security is acquired by the Beneficiary, all right, title and interest of Trustor in and to
any insurance policy and in and to the proceeds thereof resulting from damage to the Security prior
to the sale or acquisition will pass to the Beneficiary to the extent of the sums secured by this Deed
of Trust immediately prior to such sale or acquisition subject to the rights of any senior lender.
7. Preservation and Maintenance of Security. Trustor will keep the Security in good
repair and will not commit waste or permit impairment or deterioration of the Security.
8. Protection of the Beneficiary's Security. If Trustor fails to perform the covenants
and agreements contained in this Deed of Trust or if any action or proceeding is commenced which
materially affects the Beneficiary's interest in the Security, including, but not limited to, default
under the Deed of Trust securing any senior lender, eminent domain, insolvency, code enforcement,
or arrangements or proceedings involving a bankrupt or decedent, then the Beneficiary, at the
Beneficiary's option, upon notice to Trustor, may make such appearances, disburse such sums and
take such action as it determines necessary to protect the Beneficiary's interest, including, but not
limited to, disbursement of reasonable attorneys' fees and entry upon the Security to make repairs.
55C-198
Any amounts disbursed by the Beneficiary pursuant to this paragraph, with interest thereon,
will become an indebtedness of Trustor secured by this Deed of Trust. Unless Trustor and the
Beneficiary agree to other terms of payment, such amount will be payable upon notice from the
Beneficiary to Trustor requesting payment thereof, and will bear interest from the date of
disbursement at the rate payable from time to time on outstanding principal under the HOME
Promissory Note unless payment of interest at such rate would be contrary to applicable law, in
which event such amounts will bear interest at the highest rate permissible under applicable law.
Nothing contained in this paragraph will require the Beneficiary to insure any expense or take any
action hereunder.
9. Inspection. The Beneficiary may make, or cause to be made, reasonable entries
upon and inspections of the Security during normal business hours; provided that the Beneficiary
will give Trustor reasonable notice of inspection.
10. Forbearance by the Beneficiary Not a Waiver. Any forbearance by the Beneficiary
in exercising any right or remedy will not be a waiver of the exercise of any such right or remedy.
The procurement of insurance or the payment of taxes or other liens or charges by the Beneficiary
will not be a waiver of the Beneficiary's right to accelerate the maturity of the indebtedness secured
by this Deed of Trust.
11. Remedies Cumulative. All remedies provided in this Deed of Trust are distinct and
cumulative to any other right or remedy under this Deed of Trust or any other document, or afforded
by law or equity, and may be exercised concurrently, independently or successively.
12. Successors and Assims Bound. The covenants and agreements herein contained
shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the
Beneficiary and Trustor subject to the provisions of this Deed of Trust.
13. Joint and Several Liability. All covenants and agreements of Trustor shall be joint
and several.
14. Notice. Except for any notice required under applicable law to be given in another
manner, (a) any notice to Trustor provided for in this HOME Deed of Trust will be given by
certified mail, return receipt requested, addressed to Trustor at 1640 Sepulveda Blvd, Suite 425, Los
Angeles, California, 90025 with a copy to Bank of America CDC Special Holding Company, Inc.
Community Development Banking, MAI -225-02-02, 225 Franklin Street, Boston, MA 02110
and WCH Affordable XVIII, LLC Attn: Graham Espley-Jones, 151 Kalmus Drive, #J5, Costa
Mesa, CA 92626, (b) any notice to the Beneficiary will be given by certified mail, return receipt
requested, to the Beneficiary at 20 Civic Center Plaza, P.O. Box 1988, Santa Ana, California 92702,
Attention: Housing Manager, or at such other address as the Beneficiary may designate by notice to
Trustor as provided above, and (c) to Trustee at 8121 E. Florence Avenue, Downey, California
90240. Notice shall be effective as of the date received as shown on the return receipt.
15. Governing Law. This Deed of Trust shall be governed by the laws of the State of
California with venue in Orange County.
16. Severability. In the event that any provision or clause of this Deed of Trust or the
HOME Loan Note conflicts with applicable law, such conflict will not affect other provisions of this
4
55C-199
Deed of Trust or the HOME Promissory Note which can be given effect without the conflicting
provision, and to this end the provisions of the Deed of Trust and the HOME Loan Note are
declared to be severable.
17. Captions. The captions and headings in this Deed of Trust are for convenience only
and are not to be used to interpret or define the provisions hereof.
18. Default in Foreclosure: Remedies. Upon Trustees breach of any covenant or
agreement of Trustor in this Deed of Trust or the HOME Promissory Note secured by this Deed of
Trust, including, but not limited to, the covenants to pay, when due, any sums secured by this Deed
of Trust, the Beneficiary may declare all sums secured by this Deed of Trust immediately due and
payable by delivering to Trustor notice thereof specifying: (1) The breach; (2) the action required to
cure such breach; (3) a date not less than 30 days from the date the notice is received by Trustor as
shown on the return receipt, by which such breach is to be cured provided, however, that if such
default is not reasonable susceptible to being cured within 30 days, Trustor shall have a reasonable
period to cure the defect so long as Trustor is diligently prosecuting the cure to completion; and (4)
that failure to cure such breach on or before the date specified in the notice may result in
acceleration of the sums secured by this Deed of Trust and sale of the Security. The notice will also
inform Trustor of Trustor's right to reinstate after acceleration and the right to bring a court action to
assert the non-existence of default or any other defense of Trustor to acceleration and sale.
Notwithstanding anything to the contrary contained herein, a "default" shall not include
(i) a transfer of a general partner's interest in Trustor when made in connection with the exercise
by the Trustor's limited partner (the "Limited Partner") of its rights upon a default by a general
partner tinder the Trusters Amended and Restated Limited 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 Trustor pursuant to the right of first refusal or to the general partners of Trustor
pursuant to the purchase option, as provided for in the Partnership Agreement; (iii) any transfer
of the Limited Partner's interest under and in accordance with the Partnership Agreement; and
(iv) any sale, transfer or other disposition of a limited partner interest or an interest in a limited
partner of the Trustor, (v) any sale, transfer or other disposition of an interest in a limited partner
of the Borrower.
If the breach is not cured on or before the date specified in the notice or such longer period
as provided above or in the HOME Promissory Note or the Agreement, the Beneficiary, at the
Beneficiary's option, may: (a) declare all of the sums secured by this Deed of Trust to be
immediately due and payable without further demand and may invoke the power of sale and any
other remedies permitted by California law; (b) either in person or by agent, with or without
bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the
adequacy of its security, enter upon the Security and take possession thereof (or any part thereof)
and of any of the Security, in its own name or in the name of the Trustee, and do any acts which it
deems necessary or desirable to preserve the value or marketability of the Property, or part thereof
or interest therein, increase the income therefrom or protect the security thereof. The entering upon
55C-200
and taking possession of the Security shall not cure or waive any breach hereunder or invalidate any
act done in response to such breach and, notwithstanding the continuance in possession of the
Security, the Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust,
or by law upon occurrence of any uncured breach, including the right to exercise the power of sale;
(c) commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or
specifically enforce any of the covenants hereof; (d) deliver to the Trustee a written declaration of
default and demand for sale, pursuant to the provisions for notice of sale found at California Civil
Code Sections 2924, et sem., as amended from time to time; or (e) exercise all other rights and
remedies provided herein, in the instruments by which Trustor acquires title to any Security, or in
any other document or agreement now or hereafter evidencing, creating or securing all or any
portion of the obligations secured hereby, or provided by law.
In addition, if an Event of Default occurs hereunder or under the Note, prior to taking any
remedy under this Deed of Trust or any other document evidencing or securing this Note,
Beneficiary shall fust give notice of the occurrence of such Event of Default to the Limited Partner
and the Limited Partner shall have not less than 30 days to cure such Event of Default, provided if in
order to cure such Event of Default the Limited Partner gives notice to the Beneficiary that Limited
Partner must remove and replace the general partner or general partners of Trustor, Limited Partner
shall have until 30 days following the effective date of such removal and replacement to cure such
Event of Default,..
The Beneficiary shall be entitled to collect all reasonable costs and expenses incurred in
pursuing the remedies provided in this paragraph, including, but not limited to, reasonable attorneys'
fees.
19. Trustor's Right to Reinstate. Notwithstanding the Beneficiary's acceleration of the
sums secured by this Deed of Trust, Trustor will have the right to have any proceedings begun by
the Beneficiary to enforce this Deed of Trust discontinued at any time prior to 5 days before sale of
the Security pursuant to the power of sale contained in this Deed of Trust or at any time prior to
entry of a judgment enforcing this Deed of Trust if. (a) Trustor pays the Beneficiary all sums which
would be then due under this Deed of Trust and no acceleration under the HOME Promissory Note
has occurred; (b) Trustor cures all breaches of any other covenants or agreements of Trustor
contained in this Deed of Trust; (c) Trustor pays all reasonable expenses incurred by the Beneficiary
and the Trustee in enforcing the covenants and agreements of Trustor contained in this Deed of
Trust and in enforcing the Beneficiary's and the Trustee's remedies, including, but not limited to,
reasonable attorneys' fees; and (d) Trustor takes such action as the Beneficiary may reasonably
require to assure that the lien of this Deed of Trust, the Beneficiary's interest in the Security and
Trustor's obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon
such payment and cure by Trustor, this Deed of Trust and the obligations secured hereby will
remain in full force and effect as if no acceleration had occurred.
20. Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly
executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to
notify any party to this Deed of Trust of pending sale under any other deed of trust or any action or
proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee.
21. Reconveyance. Upon payment of all sums secured by this Deed of Trust, the
Beneficiary will request the Trustee to reconvey the Security and will surrender this Deed of Trust
6
55C-201
and the HOME Promissory Note to the Trustee. The Trustee will reconvey the Security without
warranty and without charge to the person or persons legally entitled thereto. Such person or
persons will pay all costs of recordation, if any.
22. Substitute Trustee. The Beneficiary, at the Beneficiary's option, may from time to
time remove the Trustee and appoint a successor trustee to any Trustee appointed hereunder. The
successor trustee will succeed to all the title, power and duties conferred upon the Trustee herein
and by applicable law.
23. Request for Notice. Trustor requests that copies of the notice of default and notice
of sale be sent to Trustee at the address set forth in Section 14 above.
24. Nonrecourse Liability. Neither Trustor nor any partner of Trustor shall have any
personal liability under the Agreement, HOME Promissory Note, and this Deed of Trust and any
judgment, decree or order for payment of money obtained in any action to enforce the obligation of
Trustor to repay the loan evidenced by such documents shall be enforceable against Trustor only to
the extent of Trustor's interest in the Property.
(Signatures on Following Page)
55C-202
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the date first written
above.
SANTA ANA ARTS COLLECTIVE, LP,
a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its administrative general partner
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
Graham P. Espley-Jones, President
55C-203
Exhibit Do. HOME
p
romissory Note
55C-204
HOME FUNDS PROMISSORY NOTE
SECURED BY SUBORDINATED DEED OF TRUST
TO THE CITY OF SANTA ANA, CALIFORNIA
(1666 N. Main Street)
$2.219.760.00 July 5, 2017
Santa Ana, California
1. Principal Amount of Loan
FOR VALUE RECEIVED, Santa Ana Arts Collective, LP, a California limited
partnership ("Borrower"), hereby promises to pay to the CITY OF SANTA ANA, a charter city
and municipal corporation ("City"), or order, a principal amount not to exceed TWO MILLION,
TWO HUNDRED AND NINETEEN THOUSAND, SEVEN HUNDRED AND SIXTY
DOLLARS ($2,219,760.00) or so much thereof as shall be disbursed hereunder, with three
percent simple interest ( 3%) commencing upon filing of Notice of Completion, pursuant to the
HOME Loan Agreement (said "Agreement") between Borrower and the City dated concurrently
herewith, which is incorporated herein by this reference. This loan is made pursuant to the
HOME Investment Partnerships Program with money funded through the Program as "HOME
Funds". Any capitalized term not otherwise defined in this Note shall have the meaning ascribed
to such term in the Agreement. The obligation of Borrower to City hereunder is subject to the
terms of said Agreement, the Affordability Restrictions on Transfer of Property, HOME Deed of
Trust, and this Note. Said documents are public records on file in the offices of the City, and the
provisions of said documents are incorporated herein by this reference.
This Note, said Agreement, the Affordability Restrictions on Transfer of Property, and
the HOME Deed of Trust are sometimes collectively referred to herein as the "Loan
Documents." The Loan Documents and the rights and responsibilities inure to the benefit of the
City of Santa Ana. Any capitalized term which is not otherwise defined herein shall have the
meaning ascribed to such term in the Agreement.
This Note evidences the obligation of Borrower to the City for the repayment of the
HOME Loan of HOME Funds attributable to the adaptive reuse and construction of the Property,
and related soft costs.
This Note is payable at the principal office of City of Santa Ana — Community
Development Agency, 20 Civic Center Drive, Santa Ana, California 92702, Art: Housing
Division, or at such other place as the holder hereof may inform Borrower in writing, in lawful
money of the United States.
LEGAL_US_W N 90423673.1
55C-205
2. Definitions.
For the purpose of calculating the payments to be made by Borrower to City pursuant to
this Note, the following terms shall have the following respective meanings:
"Agreement" means the HOME Loan Agreement between the City and the Developer,
and any attachments or amendments thereto.
"AHSC Loan" means a permanent loan of Affordable Housing and Sustainable
Communities program funds from HCD administered by the California Strategic Growth
Council in the amount of $4,944,130
"AHSC Deed of Trust" means the any deed(s) of trust securing athe AHSC Loan
encumbering the Property.
"AHSC Documents" means, collectively, the loan agreement governing the AHSC, the
AHSC Note, the AHSC Deed of Trust, and any other agreement, document or instrument that the
Senior Lender requires in connection with the AHSC Loan.
"Applicable Law" shall mean those federal, state and local laws, ordinances, regulations,
policies and procedures applicable to the HOME Investment Partnerships Program, and the
HOME Funds.
"Area Median Income" means the median income figures for Orange County as
published by the U.S. Department of Housing and Urban Development (HUD). Also may be
referred to as "AMI" herein.
"Borrower" means Santa Ana Arts Collective, LP, a California limited partnership.
"Calendar Year" means each consecutive twelve (12) month period from January 1 to
December 30.
"City's Percentage" with reference to the Residual Receipts, shall mean thirty point
thirteen percent (30.13%) of the total Residual Receipts from the Property, which shall be
applicable to the HOME Loan, CDBG Loan, and Inclusionary Loan, as further described in
Section 5 hereof.
"Closing Costs" shall mean:
(i) In the case of a Sale, reasonable brokerage commissions payable to a broker as a
result of the Sale, which shall not in any event exceed the customary amount charged -for similar
transactions in the immediate market place, costs of title insurance premiums, documentary
stamp taxes, escrow fees, recording charges, loan repayment charges and other costs reasonably
incurred with respect to the Property, in each case actually paid by Borrower as a condition of
the Sale.
LEGAL -US -W # 90423673.1
55C-206
(ii) In the case of a Refinancing, the reasonable and necessary costs of
consumating such Refinancing, including, without limitation, loan fees, loan repayment charges,
costs of title insurance premiums, escrow fees, recording fees and attorneys' fees.
"Extremely Low Income" means an adjusted income which does not exceed thirty
percent (30%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
"Gross Revenues" shall mean all revenues and receipts of every kind actually received by
Borrower from operating the Property, and all parts thereof, including, but not limited to, income
from both cash and credit transactions, rental from leased and/or subleased spaces and parking
fees and charges (but not including security deposits and other tenant deposits, except to the
extent such deposits are forfeited to the Borrower under the tenant's lease). Gross Revenues also
includes any casualty insurance proceeds in excess of those used to restore the Property and any
rental interruption insurance proceeds. Borrower shall establish and maintain accounts for the
Gross Revenues (the "'Project Accounts") that are segregated from revenues and income received
by Borrower from all other projects. Gross Revenues shall also include all interest earned on the
Project Accounts. Gross Revenues shall not include capital contribution and loan proceeds
received by borrower from any source.
"HOME Assisted Units" shall mean those rental units purchased and rehabilitated on the
Property which are subject to the term of affordability.
"HOME Deed of Trust" shall mean the HOME Deed of Trust in favor of the City,
securing the HOME Loan, substantially in the form attached to the Agreement as Exhibit C,
which is incorporated herein by this reference.
"HOME Funds" shall mean the money provided under the HOME Program for the
rehabilitation of the rental units hereunder.
"HOME Loan" shall mean the loan evidenced by this Note repayable to the City in
accordance with the terms of this Note and secured by the HOME Deed of Trust.
"HOME Investment Partnerships Program" (HOME) has the meaning set forth in the
Recitals above.
"Low Income" means an adjusted income which does not exceed eighty percent (80%) of
the area median income for the Orange County, California PMSA, adjusted for household size,
as published by HUD.
"Operating Expenses" shall mean the sum of the following:
(i) payments of principal and interest and all other charges relating to the Senior
Loan(s);
LEGAL_US_W 9 90423673.1
55C-207
(ii) general partner fee and tax credit investor management fees pursuant to the
Borrower's amended and restated partnership agreement ("Partnership Agreement");
(iii) the cost of any supportive services provided to tenants of the Property,
including fees and reimbursements payable to the provider or coordinator of such supportive
services;
(iv) debt service payments (excluding debt service due from residual receipts or
surplus cash of the Property) on senior loan obligations associated with the Property, and
approved by Lender;
(v) tax credit adjustment payments payable to Maker's tax credit investor pursuant
to Borrower's Partnership Agreement;
(vi) payments made on loans advanced by any partner or member of Borrower for
the purpose of paying operating expenses of the Property;
(vii) a property management fee equal to 8% of gross rents;
(viii) Owner Administration Fee of 5% of gross rents;
(ix) deposits into required reserves;
(x) any deferred developer fee;
(xi) all other actual, reasonable cash operating costs and expenses, calculated on an
annual basis, that are directly attributable to managing and operating the Property, including,
without limiting the generality of the foregoing, the following: costs and expenses for real and
personal property taxes, special assessments or similar charges; water, fuel, electricity and other
utilities; heating, ventilation and air conditioning expenses; labor; supplies; tools; equipment;
insurance; advertising and marketing; accounting and legal fees; brokerage commissions and
other leasing expenses; reasonable reserves for all anticipated expenses as approved by the City;
and other such items constituting operation, maintenance and repair costs actually paid by the
Borrower, subject to the following conditions:
(a) Depreciation and amortization expenses shall not be considered
Operating Expenses, except as otherwise provided herein.
(b) Any expenses, compensation or fees paid to any affiliate of Borrower
shall only be included as Operating Expenses to the extent they are not in excess of the
reasonable expenses, compensation or fees which would be payable to unrelated third parties in
arms -length transactions for similar services in the Santa Ana, California area.
LEGAL_US_W # 90423673.1 4
55C-208
(vii) Any other expenses necessary to meet senior lender requirements and
requirements of Borrower's limited partner, or its assignee, as set forth in Borrower's Agreement
of Limited Partnership (the "Partnership Agreement").
"Provert ' shall mean that property located at 1666 N. Main Street, Santa Ana,
California.
"Refinancing" shall mean changing the then existing financing on the Property by,
without limitation, modifying the interest rate and/or the term of the existing Senior Loan,
increasing or reducing the amount of the existing Senior Loan, paying off the existing Senior
Loan and obtaining new Senior Loan, except for the payoff of the conventional lender's
acquisition loan for the Property. Notwithstanding the projected sale of the senior permanent
loan on the Project to California Community Reinvestment Corporation (`CCRC") and any
subsequent transfer of the loan in whole or in part by CCRC shall not be deemed a Refinancing
for purposes hereof.
"Refinancing Proceeds" shall be disbursed as set forth in Section 6 hereof.
"Residual Receipts" shall mean the Gross Revenues from the Property for each year, less
deductions for Operating Expenses from the same building, applicable to each such year to the
extent not already deducted as an Operating Expense.
"Sale" shall mean any transfer, assignment, or conveyance or lease of the Property or any
portion thereof, or any interest therein by the Borrower, and includes any transfer, assignment or
sale of any partnership interest in the Borrower by an individual or entity which is a general or
limited partner in the Borrower, or any interest by any individual or entity which holds an
interest in any such general or limited partner in the Borrower, which brings the cumulative total
of all such direct and indirect transfers, assignments and sales during the term of this Note to
more than thirty-five percent (35%) of the ownership interests in the Borrower, and any such
transfer, assignment or sale of a direct or indirect partnership interest thereafter. Sale includes a
sale in condemnation or under threat thereof. Sale does not include dedications and grants of
easements to public and private utility companies of the kind customary in real estate
development. Notwithstanding anything to the contrary contained herein, a "Sale" shall not
include any transaction not considered a "transfer' under Section 13.
"Senior Loan" shall mean any senior loans made to Borrower, for payment of acquisition
and/or rehabilitation/construction costs, and shall include any subsequent loan that refinances
said Senior Loan.
"Term" the term for repayment of this Note shall mean fifty-five (55) years from the date
of recording of the loan from the State of California Department of Housing and Community
Development to Borrower, but in no event shall the Term end later than July 1, 2075.
"Term of Affordability" the term of affordability shall be fifty-five (55) years.
LEGAL_US_W # 90423673.1
55C-209
"Very Low Income" means an adjusted income which does not exceed fifty percent
(50%) of the area median income for the Orange County, California PMSA, adjusted for
household size, as published by HUD.
3. Loan Repavment.
Borrower shall make payments to the City as provided in Sections 5 (Residual Receipts),
6 (Refinancing Proceeds), 7 (Sale Proceeds) and 9 (Accelerated Loan Repayment) of the
Agreement.
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. The outstanding loan balance will be reflected in the annual report.
5. Annual Loan Repavment/ Residual Receipts.
a. Commencing on the date one hundred fifty (150) days after the close of the initial
Calendar Year following the issuance of the Certificate of Completion and on or before the 150'h
day of each Calendar Year thereafter 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 Issuance of the Certificate of Completion 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 amount of the Residual Receipts applicable to such
Calendar Year with which to make a HOME Loan payment then due.
c. Except as otherwise provided, the Borrower shall pay to the City the City's
Percentage of the Residual Receipts as payment of interest and then to principal. At least fifty
percent (50%) of the Residual Receipts shall remain with the Borrower, with all Residual
Receipts remaining with Borrower to the extent the HOME Loan has been fully repaid.
d. Borrower shall retain fifty percent of the Residual Receipts. The other fifty percent
shall be divided according to the table below:
SOURCE
PERCENTAGE
CDBG Loan
2.01%
HOME Loan
8.92%
Inclusionary Housing Loan
19.20%
State of California Housing and Community
19.87%
LEGAL_US_W # 90423673.1
55C-210
Development Affordable Housing Loan
TOTAL
1 50.00%
As Borrower repays its loans, the payment percentage applied to the remaining loans
shall increase.
e. 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 interest and then to 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 Note (other than refinancing of the conventional lender acquisition and
construction loan) 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 and AHSC Loan; next, the amount necessary to
pay any deferred developer fee in full; and 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. At
least fifty percent (50%) of the Refinancing proceeds shall remain with Borrower, with all
remaining Refinancing proceeds remaining with the Borrower to the extent the outstanding
balance of the Note has been fully paid. Such payment shall be due on the date of such
Refinancing, and shall be applied to reduce the interest and then principal balance of the Loan.
The City shall not be required to reconvey the lien of the Deed of Trust if Refinancing Proceeds
are insufficient to repay the Loan in full.
Loan Repayment from Sale Proceeds.
The Borrower shall make a loan payment, not to exceed the outstanding balance of
principal on this Note subject to Section 14 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 and AHSC Loan; next, the amount necessary to pay any deferred
developer fee in full; and 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. At least
fifty percent (50%) of the Sale Proceeds shall remain with Borrower, with all remaining
Refinancing proceeds remaining with the Borrower to the extent the outstanding balance of the
Note has been fully paid. Such payment shall be due on the date of such Sale, and shall be
applied to reduce the interest and 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.
LEGAL_US_W # 90423673.1
55C-211
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 13 hereof;
unless: (i) in the case of a Sale in which the Sale Proceeds are insufficient to repay
in full the HOME Loan, the City approves such sale in the exercise of its
reasonable discretion and the purchaser assumes the balance of the HOME Loan
in accordance with the terms of this Note; or (ii) in the case of a Refinancing in
which the Refinancing Proceeds are insufficient to repay in full the HOME Loan,
the City approves such Refinancing in the exercise of its reasonable discretion and
the Borrower remains obligated pursuant to the terms of this Note.
b. In event of default (subject to any applicable notice and cure provisions) pursuant
to any of the Loan Documents and AHSC 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 expiration of the Term of this Note. 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 HOME 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. Lawful Money.
Principal is payable in lawful money of the United States of America.
11. Application of Payments; Late Charges.
a. Any payments received by the City pursuant to the terms hereof shall be applied
first to sums, other than principal, due the City pursuant to this Note, and the
balance, if any, to the payment of principal.
b. If any payment is not received by the City within fifteen (15) Business Days after
Developer's receipt of written notice that such payment was not received when
due; then in addition to the remedies conferred upon the City pursuant to this Note
and the other Loan Documents, (i) a late charge of four percent (4%) of the
amount due and unpaid will be added to the delinquent amount to compensate the
City for the expense of handling the delinquency and (ii) the amount due and
unpaid, excluding the late charge, shall bear interest at the highest annual rate
LEGAL_US_W H 90423673.1
55C-212
which may lawfully be charged and collected under applicable law on the
obligation evidenced by this Note, computed from the date on which the amount
was due and payable until paid. Without prejudice to the rights of the City
hereunder or under any of the other Loan Documents, Borrower shall indemnify
the City against, and shall pay the City on demand, any expense or loss which it
may sustain or incur as a result of the failure by Borrower to pay when due any
installment of principal, fees, or other amounts payable to the City under this Note
or any other Loan Document, to the extent that any such expense or loss is not
recovered pursuant to such foregoing provisions. A certificate of the City setting
forth the basis for the determination of the amounts necessary to indemnify the
City in respect of such expenses or direct loss, submitted to Borrower by the City,
shall be conclusive and binding for all purposes except as immediately corrected
by Borrower notice to City.
12. Securi
This Note is secured by the recorded Deed of Trust.
13. 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 or the AHSC
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 13, 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
Meta Housing Corporation or a limited liability wholly owned by Meta Housing
Corporation is a general partner, or to a corporation or limited liability company
LEGAL_US_W # 90423673.1
55C-213
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 and AHSC Loan, without the prior
written consent of City (which consent City may grant or deny in its sole
discretion), then the entire outstanding balance of the HOME 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 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.
14. Event of Default.
Subject to the provisions of Section23 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 fifteen
(15) Business Days after Developer's receipt of written notice that such payment was not
received when due; or (b) failure by Borrower to perform any covenant or agreement in the Deed
of Trust, the 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).
15. 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 and subject to the provisions
of Section 21 hereof, City may declare all sums evidenced hereby immediately due and payable
by delivery to the Trustee named in the Deed of Trust securing this Note, and to Borrower,
written declaration of default and demand for sale, and written notice of default and of election
LEGAL -US -W # 90423673.1 10
55C-214
to cause the Property to be sold, which notice Trustee shall cause to be duly filed for record and
City may foreclose on the Deed of Trust. City shall also deposit with Trustee the Deed of Trust,
this 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%). No delay or omission on the
part of the City in exercising any right under this Note or under any of the other Loan Documents
shall operate as a waiver of such right.
16. Attorney Fees.
If this HOME Promissory Note is not paid when due or if any Event of Default occurs,
Borrower promises to pay all costs of enforcement and collection, including but not limited to,
reasonable attorneys' fees, whether or not any action or proceeding is brought to enforce the
provisions hereof.
17. Severability.
Every provision of this Note is intended to be severable. In the event any term or
provision hereof is declared by a court of competent jurisdiction, to be illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and enforceable.
18. Number and Gender.
In this Note the singular shall include the plural and the masculine shall include the
feminine and neuter gender, and vice versa, if the context so requires.
19. Non-recourse.
The HOME Loan is a nonrecourse obligation of the Borrower. Neither Borrower, nor its
partners nor any other party shall have any personal liability for repayment of the HOME Loan
or for any other amounts under any of the documentation evidencing, securing or describing the
HOME Loan. The sole recourse of City under this Note and the Deed of Trust for repayment of
the HOME Loan and for such other amounts arising therefrom shall be the exercise of its rights
against the Property and related security thereunder.
20. Subordination.
It is hereby expressly agreed and acknowledged by Borrower and City that the Deed of
Trust is a subordinate deed of trust, and that this Note is subject and subordinate to any Senior
Deed of Trust.
21. Notice of Default.
LEGAL -US -W # 90423673.1 11
55C-215
a. Subject to the applicable cure periods set forth in Section 14 and subject to the further
provisions of this Section 21, failure or delay by the Borrower to perform any term or provision
of this Note constitutes a default under this Note. 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.
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 Note or the Deed of
Trust, prior to exercising any remedies thereunder City shall give Borrower written notice of
such default. Borrower shall have a period of fifteen (15) Business Days after such notice is
received within which to cure the default prior to exercise of remedies by City under this Note
and the Deed of Trust.
f. If a non -monetary event of default occurs under the terms of this Note or the 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 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 (18 0) days after the first notice of default is given.
g. In addition, if an Event of Default occurs hereunder, prior to taking any remedy under
this Note or any other document evidencing or securing this Note, City shall first give notice of
the occurrence of such Event of Default to the Limited Partner and the Limited Partner shall have
not less than 30 days to cure such Event of Default, provided if in order to cure such Event of
Default the Limited Partner gives notice to the City that Limited Partner must remove and
LEGAL_US_W # 90423673.1 12
55C-216
replace the general partner or general partners of Borrower, Limited Partner shall have until 30
days following the effective date of such removal and replacement to cure such Event of
Default,.
22. Insurance and Condemnation.
In the event of any fire or other casualty to the Property or eminent domain proceedings
resulting in condemnation of the Property or any part thereof, Borrower shall have the right to
rebuild the Property, and to use all available insurance or condemnation proceeds therefor,
provided that (a) such proceeds are sufficient to keep the HOME Loan in balance and rebuild the
Property in a manner that provides adequate security to City for repayment of the HOME Loan
or if such proceeds are insufficient then Borrower shall have funded any deficiency, (b) City
shall have the right to approve plans and specifications for any major rebuilding and the right to
approve disbursements of insurance or condemnation proceeds for rebuilding under a
construction escrow or similar arrangement, and (c) no material default then exists under this
Note or the Deed of Trust. If the casualty or condemnation affects only part of the Property and
total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial
repayment of the HOME Loan in a manner that provides adequate security for repayment of the
remaining balance of the HOME Loan.
23. Force Mai cure.
Notwithstanding specific provisions of this Note, 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 Note may also be extended in
writing by the City and the Borrower.
24. Assignments.
The City, and the assignee of the City, shall have the right to assign this Note and the
Deed of Trust securing this Note, without any further act of Borrower. The assignee shall give
notice to Borrower as soon as practicable after such assignment.
LEGAL_US_W # 90423673.1 13
55C-217
This City Promissory Note is hereby agreed to and executed on the date first set forth above.
SANTA ANA ARTS COLLECTIVE, LP, a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its administrative general partner
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
Un
Graham P. Espley-Jones, President
LEGAL_US_W # 90423673.1 14
55C-218
Exhibit Ee:Project
Budget
55C-219
EXHIBIT E
Santa Ana Arts Collective Project Budget
ACQUISITION
Lessn of laM CDoor Value
753,085.812
830]88
FUNDING SOURCES
9,.5,812
533,180'
StMVbHCp
9%bacmdite Labl I PPNOo
vebale
Stab,HCO
Resltlon[bl
U21
$33650
$33.229
3421
Rental
Conemwlol
TONT
"NO PP,
C[0.0-pemf
pefam0d
AIISL GIN,
$OORCES
Component
Cangwnml
D.Velopmont
AHD,RLwn
T.C,6CIEeulE1 C11,MSaaYAne lwntelTrve!
0.1,afee
Pon11C."M
TOTAL
COeb
Cot
C.M.
"'moo.
Da
41,37&028
Pham
ACQUISITION
Lessn of laM CDoor Value
753,085.812
830]88
53,135000
9,.5,812
533,180'
53,135,000
Lagar a Clwing Cosa
$33220
U21
$33650
$33.229
3421
533.060
Venable Ca in Cmts
$2031M
52580
$2VSQ.
$2..28
$20&428
5ubleNl
1
"'moo.
Si
41,37&028
30
55)0228
53,.5.012
526&OS
$9
Sp
53,3]6.78
E1191 m amallb CaN
$4:21&625
$533]5
E4,2]B4O%,
5317,817
,53.893,848
553,3]5
$4P0.000
ONeY, aebilV
EO
$0
TOLOACOUI.G.n
f1.s49.514
595,684
5],80.9,."
SB
Si
E&%4.180
MIA12
$0
$0
S].615AT8
Pafman[M ftdoolbn
$,.454588.
51&412
$t,q3 [00
g1A13.C.
S1,W30W
TWO Relowtlon
NEW CONSTRUCTION
K'Slo80
$18,412
51,473,000
30
SO
f0
51.473..0
50
f9
51,413.000
OH�SBe Im m-
SL288..
$1,280.0
51:4...3
51,28
IT
Sita Wafk naN msa
Sao.00a
5500
540.500
$x0.800
5500
IN
S4o,500
Slwden M1 io msle
519.12&033
5700,10,
E13.2PG181
'$4.9,$1311
$7.681.470
5500,030
$188,878
$13,292.28]
GelILRIR Yr.meonb
9,31z,6W
518.619
$1,329.229
$1.312.809
$18.619
$1,320,229
COIfI2L10r OV[1M1PO
520&]7,.00
E3658W
$282.430
$28&774
So AN
$282.430
Comacmr Pmft
U...774
$3,058
$202,30
$289714
SCONE
$282430
Gmmdl Liability InwmPt,s
'.5250,000
n..124
$253.124
VOSON)
MI.
5253+24
Total NOW Constwd[on
570,594290
$183.]4.
$18,788,000
$a.".
Kiio,m0
5S.=
$+04,233
To
$14MON0
-
SIB.7So ON
Dain
I
5928501
811153
SBM254
_85ISPG _
..
$41¢001
$940.254
51.911
$152820
_
5152.020
$152620
TBbl Mchltadurel Owb
SURVEY & ENGINEERING
$1.019,510
S13,664
S1,W3,1]4
SO
S9g103
SO
55431111
S0
So
S1,W3174
E Inmtl513069
s10Jt,C9+
51,01&202
54.889
51.031.081
TONI Sury &Englneetlng
E1.M8,202
$12,669
51.031.x1
SO
51.0+&202
f0
SII.ew
50
b
510.1,00+
CONTINGENCY COSTS
Mata CaSl Conlln en
$1..4,184
512II1
$t.a.45$1.2
SdICnl Cumin en
_
$251.]12.
53.282
E200..d
$257;712.
.$3,282
5289..4
Cefb
51,282..8
515.983
51.7]0,870
59
51383,.0
SO
S1s.903
50
b
51,27x..9
CONSTRUCTION
STRUCO
COnSWdiOR Lmnl nittal
.. $515.533
$8.528
$522.0
$4+3.533
38,628
$s22As9
On i.SNFea
I
5182786MW7.
$184,.1
$162,700
$2.1
$104.027
Credit Enhancemml&A .Fm
.828,825
$.0,,
$20828
5315
SNOW
Tixn OW LonsWdbn
Et42.W]
EV38>5
g+42,.]
SL]08
$143.0]5
P -Tin Wa aMoat.,
So
50
w
In. POOL, CMSINNM
$212312
$215.0
!
$212312
CIA.
$215,9Oo
TNeenoRmaNi Fea
.559.250
EN
539350
$]W
EB0.0.
ONCG .G.n teaa lme4 P. CofO
.$350.583
5355.0
&150583.
3,,437
S35i.0
TONT Con9WNOn Ex n
51.472.120
51,490.101
5o
SIA]3,138
f8
51&835
f0
$0
$1,4Po,]81
PERMANENT FINANCING EXPENSES
L8]n Ori I.IbnF
531b71
$400
$31.0]]
g3L5>]
5400
$31,9)7
M
TNeaRanNin
$19.750.
_R50
E20,.p
X.,IO
$250
E2OA.
TONI Pamenenl Flnancln
551,321
..I
V,0P
SO
$51331
fe
5850
50
$9
$51,0]7
LEGAL FEES
Con GJNOTLeNuLeOXbxmoas
$TDON
ol,
SPU,.O
gr9..0
510.3
US ON
5 nmrL al Fan
SLb.]50
$1.250
$100.0
$.50,7
$+,2`A
5100.000
Tew Le al Fees
CAPITALIZED RE SERVES
51]].150
52,350
6160.00
f0
5111.150
f0
52850
f0
SO
5180,000
O p
E14B.d
$f 99.093
$140,.4
5140.084
es
1&
5110,88,
f0
$148.080
50
5110.00,
f0
50
50
59
51,8.00,
REPORT STUDIES
AppRowl3
r
52.fifi8
334
g2. ]00
9.8x5
$3,
$2.IW
NaMH stwV
I521.182
g2Be
$21 A50
$21,102
g?e8
$21.450
Emimnmmlel Sludlbo
323.].
53.
524030
RJ).
Sl.
524.0.
OfM1C Aft,oI
I
$82.500
5225.
5105000
TeNIRs OHs&SNtllea
5+5198
51,014
5133150
S0
HI,%0
SO
563102
50
SILO.
5153.1.
TCACA /AlbcrMonito7Fina
s14APo0
$140688
s149,S0Ol
51,9,588
Inbl Permit F[n
3252.1
$3,518
S30A 117
IA..'
33578
$285.117
AHBCEII iblalm ,Fan:
f
SO
ma
51&3x0
U04
516544
$10.340
5204
$,..A.
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55C-220
Exhibit Fee Scope of
Work /Schedule of
Performance
55C-221
F*IWIrI_I_.TM
SCOPE OF WORK & SCHEDULE OF PERFORMANCE
I. SCOPE OF DEVELOPMENT:
The property address of the site subject to this agreement is 1666 North Main Street, at the
signalized intersection of 17th Street and Main Street, in the Midtown Specific Plan Zoning
District (SP -3). The development site consists of two parcels held as one, of 48,399 square feet
total (or 1.11 acres). The development site is currently improved with a five -story office building,
one level of subterranean parking, and approximately 0.5 acre of surface parking. The office
building was built in 1968 and has 62,724 rentable square feet.
In November 2014, the Santa Ana City Council approved an adaptive reuse ordinance, which
provides alternative building and fire standards in order to convert non-residential buildings built
before 1974 into dwelling units, guest rooms or joint living and work quarters. 1666 North Main
Street qualifies for this ordinance because of the building's age, non-residential use, and location in
the Midtown Specific Plan Zoning District.
The development is a fifty-eight (58) unit affordable housing development that would adaptively
reuse the five -story office building as forty-eight (48) residential flats, and newly construct ten (10)
additional residential lofts, townhomes, and flats on the office building's former surface parking
area. A mix of twenty-six (26) 1 -bedroom, fifteen (15) 2 -bedroom, and seventeen (17) 3 -bedroom
units will be spread throughout the adaptively reused office building and ground -level new
construction. Building heights range from two (2) stories in the former surface parking areas to five
(5) stories in the adaptively reused building. An existing subterranean parking garage will be
restriped for 113 parking spaces. Parking will be accessed via the existing drive aisle from North
Sycamore Street to the west.
The 1968 office building is constructed of reinforced concrete panels with tinted window panels, in
the international style of architecture, which has its roots in the modernist design movement of the
twentieth century. The new development would preserve the former office building's clean,
contemporary lines and add new, modern lofts and townhomes to complement the character of the
office building and more broadly Midtown.
To complement and sustain the proposed artist concept, Meta Housing Corporation has included
approximately 5,992 square feet of community space distributed throughout the development. That
space is proposed to be allocated to the following uses: a community art gallery, art garden, maker
spaces, music room, rehearsal room, community room with community kitchen, computer room,
property management office, services office, common laundry facility, a courtyard, and tot lot. The
approximate 1300 square foot community art gallery, art garden, and maker spaces will be located
on North Main Street.
55C-222
II. SCHEDULE OF PERFORMANCE:
A. GENERAL
1. Insurance. Developer shall furnish or cause to be furnished
appropriate certificates of insurance and/or endorsements to
City which meet all requirements of the Agreement.
B. PROJECT FINANCING
Submission of Evidence of Financine. Developer shall submit
to City evidence of financing for the Project
As a Condition Precedent to
disbursement of any portion of
the loan, but no later than ten
days after close of escrow.
Not later than thirty (30) days
after allocation of tax credit
financing by CTCAC.
2. Receipt of All Funding Commitments Necessary to Complete Not later than thirty (3 0) days
Construction of the Improvements. Developer shall use its best before Construction Close.
and good faith efforts to secure irrevocable funding
commitments from TCAC, Senior Lender, and other available
funding sources which when combined with the Loans shall
equal no less than the total cost to construct the Improvements,
as set forth in the approved Project Budget. Developer shall
submit such commitments to City for review.
3. Approval of Developer's Evidence of Financing. City must Not later than twenty (20)
approve Developer's evidence of financing as required by business days after receipt of a
the Agreement. complete submittal from
Developer
C. CONSTRUCTION OF IMPROVEMENTS
1. Design Development Drawings. Developer shall prepare and Within seven (7) months
submit Design Development Drawings to City for review and following the date of the
approval. Loan Agreement.
2. Approval of Design Development Drawings. City Housing Within fourteen (14) days of
staff shall review and approve, approve with conditions, or Developer' s complete
disapprove the Design Development Drawings. submittal of the Design
Development Drawings.
55C-223
3. Revision to Design Development Drawings. Developer shall
Within fourteen (14) days of
revise and resubmit Design Development Drawings to
conditional approval or
address conditions or disapproval to the satisfaction of City.
disapproval, subject to
extension based upon extent of
revisions requested.
4. Management Plan. Developer shall submit its proposed
Not later than twenty (20)
Management Plan to City for review and approval.
business days after receipt of a
complete submittal from
Developer
5. Anoroval of Management Plan. City shall review and approve,
Within fourteen (14) days of
approve with conditions, or disapprove the Management Plan.
receipt of a complete submittal
from Developer.
6. Revision to Management Plan. Developer shall revise Within fourteen (14) days of
Management Plan if conditionally approved or disapproved by receipt of disapproved
City. Management Plan from City.
7. Approval of Revised Management Plan. City shall review and Within fourteen (14) days of
approve, approve with conditions, or disapprove revised receipt of a complete submittal
Management Plan. of revised Management Plan
from Developer, but not later
than 120 days prior to project
completion.
8. Progress Payments. During construction Developer shall Commencing thirty (30) days
prepare monthly written progress reports and submit to City after start of the Construction
Manager. work through completion.
9. Commencement of Construction of the Improvements. No later than July 28, 2017
Developer shall cause the Construction of the Improvements to
be commenced by Contractor.
10. Completion of Construction of the Improvements. Developer On or before November 1,
shall complete all work of the Construction of the 2018 (subject to extension by
Improvements.
City based upon substantial
progress toward completion of
construction by Developer).
11. Release of Construction Covenants. City to furnish Developer Within thirty (30) days of
with a Release of Construction Covenants. receipt of Developer request
and only after Developer' s
satisfactory completion of the
Construction of the
Improvements.
55C-224
The Schedule of Performance is subject to revision from time to time as mutually agreed upon in
writing between Developer and the City Manager or his/her designee ("City Manager"), and City
Manager is authorized on behalf of City to agree to make such revisions as he deems reasonably
necessary. The City Manager, in his/her sole discretion, may elect to bring to the City Council for
consideration and action any modifications to this Schedule of Performance. It is understood that the
Schedule of Perfolmance is subject to all of the telms and conditions set forth in the text of the
Agreement. The summary of the items of perfolmance in the Schedule of Performance is not
intended to supersede or modify the more complete description in the text of the Agreement; in the
event of any inconsistency between the Schedule of Performance and the text of the Agreement, the
text shall govern. In the event the City Manager deems it necessary to bring to City Council for
consideration one or more modifications to this Schedule of Performance, the discretion to do so is
expressly reserved to the City Manager. The time periods set fol lh herein for City approval of plans
and drawings and other submittals that are submitted to City by Developer shall only apply and
commence upon Developer' s complete submittal of all the required information. In no event shall an
incomplete submittal by Developer trigger any City obligations of review and/or approval hereunder;
provided, however, that City shall notify Developer of an incomplete submittal as soon as is
practicable and in no event later than the applicable time set forth for City action on the particular
item in question. If any of the foregoing performance measurements are not met then it will be
deemed a default as defined in Section 20 and any remedies shall be cured according to said Section
of the Agreement.
55C-225
Exhibit Go. Form of
Residual Receipts
Report
55C-226
EXHIBIT G
FORM OF RESIDUAL RECEIPTS REPORT
Community Development Agency of the City of Santa Ana
Residual Receipts Report
for the Year Ending,
Date Prepared
Please complete the following information and execute the certification at the bottom of this form.
Please report Annual Project Revenue for the year ending on the following lines:
Rent Payments (including Section 8 tenant assistance payments, if any)
Interest Income (do include interest income from replacement and operating
reserves nor interest income on tenant security deposits)
Additional Income (for example, vending machine income, tenant forfeited
deposits, laundry income not paid to the residents' association)
Total Annual Project Revenue (Add lines 1, 2, and 3)
Operating Expenses'
Please report Operating Expenses incurred for the year ending
on the following lines:
Operating and Maintenance Expenses
Utilities
Property Management Expenses and On -Site Staff Payroll
Administrative Expenses
Property Taxes
Insurance
55C-227
(5)
$
(6)
$
(7)
$
(8)
$
(9)
$
(10)
$
Other Expenses
Please list these expenses:
Total Annual Operating Expenses for the Housing Project
(12) $
(Add lines 5, 6, 7, 8, 9, 10, and 11)
Net Operating Income (Subtract Line 12 from Line 4)
(13) $
Do not include expense unrelated to the operation ofthe Rental Portion of the
Project, such as depreciation, amortization, accrued principal and interest
expense on deferred payment debt, or capital expenditures.
Additional Cash Flow Payments
Obligated First Mortgage Debt Service Payments (as approved by the Agency and
(14) $
other parties that may have such approval rights) and Obligated Secondary
Subordinate Debt Service Payments (as approved by the Agency and other parties
that may have such approval rights)
Scheduled Deposits to Reserves (as approved by the Agency)
(15) $
Additional Payment Obligations (such as partnership management fees, deferred
(16) $
developer fees, or repayments on loans to partners, as approved by the Agency to
have priority over Residual Receipt Payment to the Agency)
Total Additional Cash Flow Payments (Add lines 14,15, and 16)
(17) $
Residual Receipts for Year Ending
(18) $
(Subtract Line 17 from Line 13)
Percentage of Residual Receipts to be Paid to the Agency (as shown in the
(19) %
Promissory Note by and between the Agency and Borrower dated
Amount Payable to the Agency (Multiply Line 18 by Line 19) (20)
The amount payable to the Agency listed on Line 20 is subject to payment according to the terms of the
Promissory Note by and between the Agency and Borrower dated . If Line 20 is
$0.00 or negative, you owe nothing to the Agency this year. If Line 20 is a positive number, remit check
payable to and attach to this report.
55C-228
ROH — 07/05/17
RESOLUTION NO. 2017 -XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA ANA AUTHORIZING THE CITY MANAGER TO
ENTER INTO AGREEMENTS WITH THE STATE OF
CALIFORNIA DEPARTMENT OF HOUSING AND
COMMUNITY DEVELOPMENT (HCD) FOR AFFORDABLE
HOUSING AND SUSTAINABLE COMMUNITIES (AHSC)
PROGRAM GRANT FUNDING
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA ANA AS
FOLLOWS:
Section 1. The City Council of the City of Santa Ana hereby finds, determines
and declares as follows:
A. The Strategic Growth Council ("SGC") and the State of California
Department of Housing and Community Development ("HCD") issued a
Notice of Funding Availability dated January 29, 2016 ("NOFA") under the
Affordable Housing and Sustainable Communities ("AHSC") Program.
B. On June 7, 2016, The City Council of the City of Santa Ana adopted a
resolution authorizing submittal of a funding application as a joint applicant
with Meta Housing Corporation for AHSC Program funds in an amount not
to exceed $12,028,626, of which $7,833,126 was requested as a loan with
Meta Housing Corporation for Affordable Housing Development,
$1,288,000 was requested for a grant to the City for a Sustainable
Transportation Infrastructure Project for the Santa Ana Arts Collective
Project, and $22,500 was requested for a grant to Meta Housing
Corporation to support the Southern California Association of Governments'
Go Human program.
C. On November 21, 2016, the City and Meta Housing Corporation were
awarded $12,028,626 in AHSC funds, which included $1,288,000 in grant
funds to the City. The total award was reduced to $9,139,630 in accordance
with regulatory restrictions upon Meta Housing Corporation's acceptance of
competitive 9% low income housing tax credits. Additionally, Meta Housing
Corporation did not accept $2,885,000 in housing -related grant funds
because their programmatic requirements resulted in an increased funding
gap rather than in a reduction.
Exhibit L!
Resolution No. 2017 -XXX
55C-229 Page 1 of 3
D. Meta Housing Corporation and the City of Santa Ana are Eligible
Applicants/Sponsors under the AHSC Program and were awarded an
AHSC Program loan in an amount not to exceed $4,944,130 ("AHSC Loan")
and an AHSC Program grant in an amount not to exceed $1,310,500
("AHSC Grant") under the above described NOFA for an aggregate amount
not to exceed $6,254,630 under the above described NOFA.
Section 2. The City Council of the City of Santa Ana hereby authorizes and
directs the City to incur an obligation for the AHSC Loan and AHSC Grant. That in
connection with the AHSC Loan and AHSC Grant, the City Manager, or his/her
designee(s), is authorized and directed to enter into, execute, and deliver, subject to
approval by the City Attorney's Office, the AHSC Loan Standard Agreement in an amount
not to exceed $4,944,130, the AHCS Grant Standard Agreement in an amount not to
exceed $1,310,500, and any and all other documents required or deemed necessary or
appropriate to carry into effect the full intent and purpose of the above resolution, in order
to evidence the AHSC Loan and AHSC Grant, the City's obligations related thereto, and
HCD's security therefore; including, but not limited to, a subordination agreement, a
disbursement agreement, a covenant and certain other documents required by HCD as
security for, evidence of or pertaining to the AHSC Loan and AHSC Grant, and all
amendments thereto (collectively, the "AHSC Documents").
Section 3. The City shall be subject to the terms and conditions as specified in
the Standard Agreements. Funds are to be used for allowable capital asset project
expenditures to be identified in Exhibit A of the Standard Agreements. The application in
full is incorporated as part of the Standard Agreements. Any and all activities funded,
information provided, and timelines represented in the application are enforceable
through the Standard Agreement. The City hereby agrees to use the funds for eligible
capital asset(s) in the manner presented in the application as approved by HCD and in
accordance with the NOFA, Program Guidelines and application package.
Section 4. This Resolution shall take effect immediately upon its adoption by
the City Council and the Clerk of the Council shall attest to and certify the vote adopting
this Resolution.
Resolution No. 2017 -XXX
55C-230 Page 2 of 3
ADOPTED this 5w day of July, 2017.
APPROVED AS TO FORM:
SONIA R.Sy4RVALHO, City Attorney
AYES: Councilmembers
NOES
��
NOT PRESENT:
Councilmembers
Councilmembers
Councilmembers
Miguel A. Pulido
Mayor
CERTIFICATE OF ATTESTATION AND ORIGINALITY
I, MARIA D. HUIZAR, Clerk of the Council, do hereby attest to and certify the attached
Resolution No. 2017 -XXX to be the original resolution adopted by the City Council of the
City of Santa Ana on
Date:
Clerk of the Council
City of Santa Ana
55C-231
Resolution No. 2017 -XXX
Page 3 of 3
55C-232
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Paul Hastings LLP
515 South Flower Street
Twenty -Fifth Floor
Los Angeles, CA 90071
Attn: Kenneth Krug, Esq.
SUBORDINATION AGREEMENT
(City of Santa Ana)
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into as of July 5,
2017 by and among (i) BANK OF AMERICA, N.A. (the "Senior Lender"), (ii) the CITY OF
SANTA ANA, a charter city and municipal corporation ("Subordinate Lender"), and (iii) SANTA
ANA ARTS COLLECTIVE, a California limited partnership (the `Borrower").
Recitals
A. The Senior Lender has made or is making a loan (the "First Mortgage Loan") to the
Borrower in the original principal amount of $[ j. The First Mortgage Loan is or will be
secured by a first mortgage lien (the "First Mortgage") on certain real property more fully described
in Exhibit A attached hereto and the multifamily housing project to be constructed thereon
(collectively, the "Property"). The Borrower's obligation to repay the First Mortgage Loan is
evidenced by a Note dated as of July jam, 2017 (the "First Mortgage Note").
B. Subordinate Lender is making (i) a subordinate loan of Inclusionary Housing funds
to Borrower in the amount of $4,775,000 (the "Inclusionary Loan"), (ii) a subordinate loan of
Community Development Block Grant funds to Borrower in the amount of $500,000 (the "CDBG
Loan") and (iii) a subordinate loan of HOME Investment Partnerships Program funds to Borrower
in the amount of $2,219,760 (the "HOME Loan", and together with the Inclusionary Loan and the
CDBG Loan, the "Subordinate Loan"). Subordinate Lender is securing the Subordinate Loan by,
among other things, recording the Subordinate Mortgage (as hereinafter defined) in the Official
Records of Orange County, California (the "Official Records") substantially concurrently herewith.
C. Subordinate Lender has agreed to specifically and unconditionally subordinate the
Subordinate Loan and the Subordinate Loan Documents (specifically excluding the Regulatory
Agreement, as defined below) to the liens and charges of the First Mortgage Loan and First
Mortgage Loan Documents and shall at all times and in all respects be wholly subordinate and
inferior in claim and right to the First Mortgage Loan and First Mortgage Loan Documents.
(Page -1)
LEGAL -US -W# 90345775.4 Exhibit 5
55C-233
E. If Borrower satisfies the "Conversion Conditions" contained in that certain Loan
Purchase Agreement of even date herewith by and among Borrower, Senior Lender and
California Community Reinvestment Corporation, a California nonprofit public benefit
corporation ("CCRC"), CCRC will purchase a portion of the Loan, and the First Mortgage Loan
will convert to a term loan ("Conversion").
NOW, THEREFORE, in order to induce the Senior Lender to permit the Subordinate
Lender to make the Subordinate Loan to the Borrower and to place a subordinate mortgage lien
against the Property, and in consideration thereof, the Senior Lender, the Subordinate Lender and
the Borrower agree as follows:
1. Defmitions.
In addition to the terms defined in the Recitals to this Agreement, for purposes of this
Agreement the following terms have the respective meanings set forth below:
"Affiliate" means, when used with respect to a Person, any corporation, partnership,
joint venture, limited liability company, limited liability partnership, trust or individual
controlled by, under common control with, or which controls such Person (the term
"control" for these purposes shall mean the ability, whether by the ownership of shares or
other equity interests, by contract or otherwise, to elect a majority of the directors of a
corporation, to make management decisions on behalf of, or independently to select the
managing partner of, a partnership, or otherwise to have the power independently to remove
and then select a majority of those individuals exercising managerial authority over an
entity, and control shall be conclusively presumed in the case of the ownership of 50% or
more of the equity interests).
"Borrower" means the Person named as such in the first paragraph of this
Agreement and any other Person (other than the Senior Lender) who acquires Borrower's
interest in the Property after the date of this Agreement.
"Business Day" means any day other than Saturday, Sunday or a day on which the
Senior Lender or Subordinate Lender is not open for business.
"Default Notice" means: (a) a copy of the written notice from the Senior Lender to
the Borrower stating that a First Mortgage Loan Default has occurred under the First
Mortgage Loan; or (b) a copy of the written notice from the Subordinate Lender to the
Borrower stating that a Subordinate Loan Default has occurred under the Subordinate Loan
or the Regulatory Agreement. Each Default Notice shall specify the default upon which
such Default Notice is based.
LEGAL_US W # 90345775.4
(Page -2)
55C-234
"First Mortgage Loan" means the senior loan described in Recital A hereof, and
following Conversion, the Permanent Loan.
"First Mortgage Loan Default" means the occurrence of an "Event of Default" as
that term is defined in the First Mortgage Loan Documents.
"First Mortgage Loan Documents" means (i) the First Mortgage Note and all other
documents evidencing, securing or otherwise executed and delivered in connection with the
First Mortgage Loan; and (ii) following Conversion, the Permanent Loan Documents.
"Permanent Loan" means the First Mortgage Loan after Conversion.
"Permanent Loan Documents" means the Permanent Note, the First Mortgage and
all other documents evidencing, securing, purchased for, or otherwise executed and
delivered in connection with, the Permanent Loan.
"Permanent Note" means the First Mortgage Note, as it may be modified in
connection with Conversion.
"Person" means an individual, estate, trust, partnership, corporation, limited liability
company, limited liability partnership, governmental department or agency or any other
entity which has the legal capacity to own property.
"Regulatory Agreement" means, collectively, that certain Affordability Restrictions
on Transfer of Property executed by and between the Subordinate Lender and Borrower in
connection with the CDBG Loan, that certain Affordability Restrictions on Transfer of
Property executed by and between the Subordinate Lender and Borrower in connection with
the HOME Loan, and that certain that certain Affordability Restrictions on Transfer of
Property executed by and between the Subordinate Lender and Borrower in connection with
the Inclusionary Loan, each encumbering the Property and to be recorded in the Official
Records substantially concurrently herewith.
"Senior Lender" means the Person named as such in the first paragraph on page I of
this Agreement. When any other Person becomes the legal holder of the First Mortgage
Note or of the Permanent Loan Documents, such other Person shall automatically become
the Senior Lender. Upon purchase of the First Mortgage at Conversion and Borrower's
satisfaction of the Conversion Conditions, CCRC shall become Senior Lender hereunder.
"Subordinate Lender" means the Subordinate Lender and any other Person who
becomes the legal holder of the Subordinate Note after the date of this Agreement.
"Subordinate Loan Agreement" means, collectively, that certain First Amended and
Restated Loan Agreement dated as of July 5, 2017, by and between Subordinate Lender and
LEGAL -US _W#90345775.4
(Page -3)
55C-235
Borrower in connection with the Inclusionary Loan, that certain HOME Investment
Partnerships Program Loan Agreement dated as of July 5, 2017, by and between the
Subordinate Lender and Borrower in connection with the HOME Loan, and that certain
First Amended and Restated Loan Agreement dated as of July 5, 2017, by and between the
Subordinate Lender and Borrower in connection with the CDBG Loan.
"Subordinate Loan Default" means a default by the Borrower in performing or
observing any of the terms, covenants or conditions in the Subordinate Loan Documents or
Regulatory Agreement to be performed or observed by it, which continues beyond any
applicable period provided in the Subordinate Loan Documents or Regulatory Agreement
for curing the default.
"Subordinate Loan Documents" means the Subordinate Loan Agreement,
Subordinate Note, and all other documents evidencing, securing or otherwise executed and
delivered in connection with the Subordinate Loan, but excluding the Regulatory
Agreement.
"Subordinate Mortgage" means, collectively, that certain Inclusionary Deed of Trust
and Assignment of Rents executed by Borrower for the benefit of Subordinate Lender
encumbering the Property and to be recorded in the Official Records substantially
concurrently herewith to secure the Inclusionary Loan, that certain CDBG Deed of Trust
and Assignment of Rents executed by Borrower for the benefit of Subordinate Lender
encumbering the Property and to be recorded in the Official Records substantially
concurrently herewith to secure the CDBG Loan, and that certain Deed of Trust executed by
Borrower for the benefit of Subordinate Lender encumbering the Property and to be
recorded in the Official Records substantially concurrently herewith to secure the HOME
Loan.
"Subordinate Note" means, collectively, that certain Inclusionary Housing Funds
Promissory Note Secured by Subordinated First Amended and Restated Deed of Trust dated
as of July 5, 2017, made by Borrower in favor of the Subordinate Lender to evidence the
Inclusionary Loan, that certain CDBG Funds Promissory Note Secured by Subordinated
Deed of Trust dated as of May 1, 2016, made by Borrower in favor of the Subordinate
Lender to evidence the CDBG Loan, and that certain Promissory Note Secured by
Subordinated Deed of Trust dated as of July 5, 2017, made by Borrower in favor of the
Subordinate Lender to evidence the HOME Loan.
2. Permission to Place Mortgage Lien Against Property.
The Senior Lender agrees, notwithstanding the prohibition against inferior liens on the
Property contained in the First Mortgage Loan Documents or the Permanent Loan Documents, and
subject to the provisions of this Agreement, to permit the Subordinate Lender to record or retain the
Regulatory Agreement, the Subordinate Mortgage and other recordable Subordinate Loan
LEGAL_US_W # 90345775.4
(Page -4)
55C-236
Documents against the Property (which, with the exception of the Regulatory Agreement, shall be
subordinate in all respects to the lien of the First Mortgage) to secure the Borrower's obligation to
repay the Subordinate Note and all other obligations, indebtedness and liabilities of the Borrower to
the Subordinate Lender under and in connection with the Subordinate Loan. Such permission is
subject to the condition that each of the representations and warranties made by the Borrower and
the Subordinate Lender in Section 3 is true and correct on the date of this Agreement. If any of the
representations and warranties made by the Borrower and the Subordinate Lender in Section 3 is not
true and correct on the date of this Agreement, the provisions of the First Mortgage Loan
Documents and/or the Permanent Loan Documents applicable to unpermitted liens on the Property
shall apply.
3. Borrower's and Subordinate Lender's Representations and Warranties.
The Borrower and Subordinate Lender (except with respect to Section 3(e), which is only
made by Borrower) each makes the following representations and warranties to the Senior Lender:
(a) Relationship of Borrower to Subordinate Lender and Senior Lender.
The Subordinate Lender is not an Affiliate of the Borrower and is not in possession of any
facts which would lead it to believe that the Senior Lender is an Affiliate of the Borrower.
(b) Term. The term of the Subordinate Note does not end before the term of the
First Mortgage Note or the Permanent Note.
(c) Subordinate Loan Documents. The executed Subordinate Loan
Documents are substantially in the same forms as those reviewed by Senior Lender prior to
the date of this Agreement. Upon execution and delivery of the Subordinate Loan
Documents, Borrower shall deliver to Senior Lender an executed copy of each of the
Subordinate Loan Documents, certified to be true, correct and complete.
(d) First Mortgage Loan Documents. The executed First Mortgage Loan
Documents will be substantially in the same forms as those reviewed by Subordinate Lender
prior to the date of this Agreement. Upon execution and delivery of the First Mortgage
Loan Documents, Borrower shall deliver to Subordinate Lender an executed copy of each of
the First Mortgage Loan Documents, certified to be true, correct and complete.
4. Terms of Subordination.
(a) Agreement to Subordinate. The Senior Lender and the Subordinate
Lender agree that: (i) the indebtedness evidenced by the Subordinate Loan Documents is
and shall be subordinated in right of payment, to the extent and in the manner provided in
this Agreement to the prior payment in full of the indebtedness evidenced by the First
Mortgage Loan Documents, and (ii) the Subordinate Mortgage and the other Subordinate
Loan Documents are and shall be subject and subordinate in all respects to the liens, terms,
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covenants and conditions of the First Mortgage and the other First Mortgage Loan
Documents and to all advances heretofore made or which may hereafter be made pursuant to
the First Mortgage and the other First Mortgage Loan Documents (including but not limited
to, all sums advanced for the purposes of (1) protecting or further securing the lien of the
First Mortgage, curing defaults by the Borrower under the First Mortgage Loan Documents
or for any other purpose expressly permitted by the First Mortgage, or (2) constructing,
renovating, repairing, funrishing, fixturing or equipping the Property).
(b) Subordination of Subrogation Rights. The Subordinate Lender agrees that
if, by reason of its payment of real estate taxes or other monetary obligations of the
Borrower, or by reason of its exercise of any other right or remedy under the Subordinate
Loan Documents, it acquires by right of subrogation or otherwise a lien on the Property
which (but for this subsection) would be senior to the lien of the First Mortgage, then, in that
event, such lien shall be subject and subordinate to the lien of the First Mortgage.
(c) Payments Before First Mortgage Loan Default. Until the Subordinate
Lender receives a Default Notice of a First Mortgage Loan Default from the Senior Lender,
the Subordinate Lender shall be entitled to retain for its own account all payments made
under or pursuant to the Subordinate Loan Documents.
(d) Payments After First Mortgage Loan Default. The Borrower agrees that,
after it receives notice (or otherwise acquires knowledge) of a First Mortgage Loan Default,
it will not make any payments under or pursuant to the Subordinate Loan Documents
(including but not limited to principal, interest, additional interest, late payment charges,
default interest, attorney's fees, or any other sums secured by the Subordinate Mortgage)
without the Senior Lender's prior written consent. The Subordinate Lender agrees that, after
it receives a Default Notice from the Senior Lender with written instructions directing the
Subordinate Lender not to accept payments from the Borrower on account of the
Subordinate Loan, it will not accept any payments under or pursuant to the Subordinate
Loan Documents (including but not limited to principal, interest, additional interest, late
payment charges, default interest, attorney's fees, or any other sums secured by the
Subordinate Mortgage) without the Senior Lender's prior written consent. If the
Subordinate Lender receives written notice from the Senior Lender that the First Mortgage
Loan Default which gave rise to the Subordinate Lender's obligation not to accept payments
has been cured, waived, or otherwise suspended by the Senior Lender, the restrictions on
payment to the Subordinate Lender in this Section 4 shall terminate, and the Senior Lender
shall have no right to any subsequent payments made to the Subordinate Lender by the
Borrower prior to the Subordinate Lender's receipt of a new Default Notice from the Senior
Lender in accordance with the provisions of this Section 4(d).
(e) Remitting Subordinate Loan Payments to Senior Lender. If, after the
Subordinate Lender receives a Default Notice from the Senior Lender in accordance with
subsection (d) above, the Subordinate Lender receives any payments under the Subordinate
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Loan Documents, the Subordinate Lender agrees that such payment or other distribution
will be received and held in trust for the Senior Lender and unless the Senior Lender
otherwise notifies the Subordinate Lender in writing, will be promptly remitted, in kind to
the Senior Lender, properly endorsed to the Senior Lender, to be applied to the principal of,
interest on and other amounts due under the First Mortgage Loan Documents in accordance
with the provisions of the First Mortgage Loan Documents. By executing this Agreement,
the Borrower specifically authorizes the Subordinate Lender to endorse and remit any such
payments to the Senior Lender, and specifically waives any and all rights to have such
payments returned to the Borrower or credited against the Subordinate Loan. Borrower and
Senior Lender acknowledge and agree that payments received by the Subordinate Lender,
and remitted to the Senior Lender under this Section 4, shall not be applied or otherwise
credited against the Subordinate Loan, nor shall the tender of such payment to the Senior
Lender waive any Subordinate Loan Default which may arise from the inability of the
Subordinate Lender to retain such payment or apply such payment to the Subordinate Loan.
(f) Intentionally Omitted.
(g) Affordability Restrictions Following Foreclosure of First Mortgage.
Subordinate Lender agrees that, although the Regulatory Agreement remains senior to the
lien of the First Mortgage Loan Documents, in the event title to the Property is transferred as
a result of a foreclosure, a deed in lieu of foreclosure or other realization upon the Property
under the First Mortgage Loan Documents, notwithstanding anything to the contrary
contained in the Regulatory Agreement, fifty-seven (57) of the units subject to restriction
under the Regulatory Agreement shall be restricted for rental to and occupancy by
households whose income does not exceed 60% of the area median income for the Orange
County, California PMSA, adjusted for household size, as published by the U.S. Department
of Housing and Urban Development, and rent in such units shall be restricted to the product
of thirty percent (30%) of sixty percent (60%) of the area median income adjusted for family
size appropriate for the unit.
5. Default Under Subordinate Loan Documents.
(a) Notice of Default and Cure Rights. The Subordinate Lender shall deliver
to the Senior Lender a Default Notice within five (5) Business Days in each case where the
Subordinate Lender has given a Default Notice to the Borrower. Failure of the Subordinate
Lender to send a Default Notice to the Senior Lender shall not prevent the exercise of the
Subordinate Lender's rights and remedies under the Subordinate Loan Documents, subject
to the provisions of tins Agreement. The Senior Lender shall have the right, but not the
obligation, to cure any Subordinate Loan Default within ninety (90) days following the date
of such notice; provided, however that the Subordinate Lender shall be entitled, during such
90 -day period, to continue to pursue its rights and remedies under the Subordinate Loan
Documents to the extent permitted under Section 5(b). All amounts paid by the Senior
Lender in accordance with the First Mortgage Loan Documents to cure a Subordinate Loan
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Default shall be deemed to have been advanced by the Senior Lender pursuant to, and shall
be secured by the lien of, the First Mortgage.
(b) Subordinate Lender's Agreement to Standstill. If a Subordinate Loan
Default occurs and is continuing, the Subordinate Lender agrees that it will not accelerate
the Subordinate Loan, commence foreclosure proceedings with respect to the Property,
collect rents, appoint (or seek the appointment of) a receiver or institute any other collection
or enforcement action specifically related to the enforcement of any terms of the
Subordinate Loan Documents or the Regulatory Agreement without first giving at least
ninety (90) days' notice of a default under the Subordinate Loan and Subordinate Lender's
intent to exercise one of the preceding actions; provided, however, that such limitation on
the remedies of Subordinate Lender shall not derogate or otherwise limit Subordinate
Lender's rights, following an event of default under the Subordinate Loan Documents to (a)
compute interest on all amounts due and payable under the Subordinate Loan at the default
rate described in the Subordinate Loan Documents, (b) compute prepayment premiums and
late charges, (c) enforce against any person, other than Borrower and any guarantors or
indemnitors under the Senior Loan Documents, any guaranty of the obligations of Borrower
under the Subordinate Loan, and (d) seek specific performance to enforce covenants and
agreements of Borrower relating to income, rent, or affordability restrictions contained in
the Regulatory Agreement, and (e) appear in, defend or bring an action in connection with
the Property in Subordinate Lender's capacity as a municipal authority to the extent required
by law.
(c) Cross Default. The Borrower and the Subordinate Lender agree that a
Subordinate Loan Default shall constitute a First Mortgage Loan Default under the First
Mortgage Loan Documents and the Senior Lender shall have the right to exercise all rights
or remedies under the First Mortgage Loan Documents in the same manner. as in the case of
any other First Mortgage Loan Default. If the Subordinate Lender notifies the Senior
Lender in writing that any Subordinate Loan Default of which the Senior Lender has
received a Default Notice has been cured or waived, as determined by the Subordinate
Lender in its sole discretion, then provided that Senior Lender has not conducted a sale of
the Property pursuant to its rights under the First Mortgage Loan Documents, any First
Mortgage Loan Default under the First Mortgage Loan Documents arising solely from such
Subordinate Loan Default shall be deemed cured, and the First Mortgage Loan shall be
reinstated, provided, however, that the Senior Lender shall not be required to return or
otherwise credit for the benefit of the Borrower any default rate interest or other default
related charges or payments received by the Senior Lender during such First Mortgage Loan
Default.
6. Default Under First Mortgage Loan Documents.
(a) Notice of Default and Cure Rights. The Senior Lender shall deliver to the
Subordinate Lender a Default Notice within five (5) Business Days in each case where the
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Senior Lender has given a Default Notice to the Borrower. Failure of the Senior Lender to
send a Default Notice to the Subordinate Lender shall not prevent the exercise of the Senior
Lender's rights and remedies under the First Mortgage Loan Documents, subject to the
provisions of this Agreement. The Subordinate Lender shall have the right, but not the
obligation, to cure any such First Mortgage Loan Default as provided below. Subordinate
Lender may have up to thirty (30) days from the date of the Default Notice to cure any
monetary default under the First Mortgage Loan Documents; provided, however, that the
Senior Lender shall be entitled during such 30 -day period to continue to pursue its remedies
with respect to the Property. Subordinate Lender may have up to sixty (60) days from the
date of the Default Notice to cure a non -monetary default if during such 60 -day period
Subordinate Lender keeps current all payments required by the First Mortgage Loan
Documents. In the event that such a non -monetary default creates an unacceptable level of
risk relative to the Property, or Senior Lender's secured position relative to the Property, as
determined by Senior Lender in its sole discretion, then Senior Lender may exercise during
such 60 -day period all available rights and remedies to protect and preserve the Property and
the rents, revenues and other proceeds from the Property. All amounts paid by the
Subordinate Lender to the Senior Lender to cure a First Mortgage Loan Default shall be
deemed to have been advanced by the Subordinate Lender pursuant to, and shall be secured
by the lien of, the Subordinate Mortgage.
(b) Cross Default. The Subordinate Lender agrees that, notwithstanding any
contrary provision contained in the Subordinate Loan Documents, a First Mortgage Loan
Default shall not constitute a default under the Subordinate Loan Documents if no other
default occurred under the Subordinate Loan Documents until either (i) the Senior Lender
has accelerated the maturity of the First Mortgage Loan, or (ii) the Senior Lender has taken
affirmative action to exercise its rights under the First Mortgage to collect rent, to appoint
(or seek the appointment of) a receiver or to foreclose on (or to exercise a power of sale
contained in) the First Mortgage. At any time after a First Mortgage Loan Default is
determined to constitute a default under the Subordinate Loan Documents, the Subordinate
Lender shall be permitted to pursue its remedies for default under the Subordinate Loan
Documents, subject to the restrictions and limitations of this Agreement. If at any time the
Borrower cures any First Mortgage Loan Default to the satisfaction of the Senior Lender, as
evidenced by written notice from the Senior lender to the Subordinate Lender, any default
under the Subordinate Loan Documents arising solely from such First Mortgage Loan
Default shall be deemed cured and the Subordinate Loan shall be retroactively reinstated as
if such First Mortgage Loan Default had never occurred.
7. Conflict.
The Borrower, the Senior Lender and the Subordinate Lender each agrees that, in the event
of any conflict or inconsistency between the terms of the First Mortgage Loan Documents, the
Subordinate Loan Documents and the terns of this Agreement, the terms of this Agreement shall
govern and control solely as to the following: (a) the relative priority of the security interests of the
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Senior Lender and the Subordinate Lender in the Property; (b) the timing of the exercise of
remedies by the Senior Lender and the Subordinate Lender under the First Mortgage and the
Subordinate Mortgage, respectively; and (c) solely as between the Senior Lender and the
Subordinate Lender, the notice requirements, cure rights, and the other rights and obligations which
the Senior Lender and the Subordinate Lender have agreed to as expressly provided in this
Agreement. Borrower acknowledges that the terms and provisions of this Agreement shall not, and
shall not be deemed to: extend Borrower's time to cure any First Mortgage Loan Default or
Subordinate Loan Default, as the case may be; give the Borrower the right to notice of any First
Mortgage Loan Default or Subordinate Loan Default, as the case may be other than that, if any,
provided, respectively under the First Mortgage Loan Documents or the Subordinate Loan
Documents; or create any other right or benefit for Borrower as against Senior Lender or
Subordinate Lender.
S. Rights and Obligations of the Subordinate Lender Under the Subordinate
Loan Documents and of the Senior Lender under the First Mortgage Loan Documents.
Subject to each of the other terms of this Agreement, all of the following provisions shall
supersede any provisions of the Subordinate Loan Documents covering the same subject matter:
(a) Protection of Security Interest. The Subordinate Lender shall not, without
the prior written consent of the Senior Lender in each instance, take any action which has
the effect of increasing the indebtedness outstanding under, or secured by, the Subordinate
Loan Documents, except that the Subordinate Lender shall have the right to advance funds
to cure First Mortgage Loan Defaults pursuant to Section 6(a) above and advance funds
pursuant to the Subordinate Mortgage for the purpose of paying real estate taxes and
insurance premiums, making necessary repairs to the Property and curing other defaults by
the Borrower under the Subordinate Loan Documents.
(b) Condemnation or Casualty. In the event of: a taking or threatened taking
by condemnation or other exercise of eminent domain of all or a portion of the Property
(collectively, a "Taking"); or the occurrence of a fire or other casualty resulting in damage
to all or a portion of the Property (collectively, a "Casualty"), at any time or tunes when the
First Mortgage remains a lien on the Property the following provisions shall apply:
(1) The Subordinate Lender hereby agrees that its rights (under the
Subordinate Loan Documents or otherwise) to participate in any proceeding or
action relating to a Taking and/or a Casualty, or to participate or join in any
settlement of, or to adjust, any claims resulting from a Taking or a Casualty shall be
and remain subordinate in all respects to the Senior Lender's rights under the First
Mortgage Loan Documents with respect thereto, and the Subordinate Lender shall
be bound by any settlement or adjustment of a claim resulting from a Taking or a
Casualty made by the Senior Lender; provided, however, this subsection and/or
anything contained in this Agreement shall not limit the rights of the Subordinate
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Lender to file any pleadings, documents, claims or notices with the appropriate court
with jurisdiction over the proposed Taking and/or Casualty, and
(2) all proceeds received or to be received on account of a Taking or a
Casualty, or both, shall be applied (either to payment of the costs and expenses of
repair and restoration or to payment of the First Mortgage Loan) in the manner
determined by the Senior Lender in its sole discretion; provided, however, that if the
Senior Lender elects to apply such proceeds to payment of the principal of, interest
on and other amounts payable under the First Mortgage Loan, any proceeds
remaining after the satisfaction in full of the principal of, interest on and other
amounts payable under the First Mortgage Loan shall be paid to, and may be applied
by, the Subordinate Lender in accordance with the applicable provisions of the
Subordinate Loan Documents, provided however, the Senior Lender agrees to
consult with the Subordinate Lender in determining the application of Casualty
proceeds, provided further however that in the event of any disagreement between
the Senior Lender and -the Subordinate Lender over the application of Casualty
proceeds, the decision of the Senior Lender, in its sole discretion, shall prevail.
(c) No Modification of Subordinate Loan Documents. The Borrower and the
Subordinate Lender each agrees that, until the principal of, interest on and all other amounts
payable under the First Mortgage Loan Documents have been paid in full, it will not,
without the prior written consent of the Senior Lender in each instance, increase the amount
of the Subordinate Loan, increase the required payments due under the Subordinate Loan,
decrease the term of the Subordinate Loan, increase the interest rate on the Subordinate
Loan, or otherwise amend the Subordinate Loan terms in a manner that creates an adverse
effect upon the Senior Lender under the First Mortgage Loan Documents. Any
unauthorized amendment of the Subordinate Loan Documents or assignment of the
Subordinate Lender's interest in the Subordinate Loan without the Senior Lender's consent
shall be void ab initio and of no effect whatsoever and Subordinate Lender agrees that it
shall not transfer or assign the Subordinate Loan or the Subordinate Loan Documents
without the prior written consent of the Senior Lender.
9. Conversion, Modification or Refinancing of First Mortgage Loan.
The Subordinate Lender consents to any agreement or arrangement in which the Senior
Lender waives, postpones, extends, reduces or modifies any provisions of the First Mortgage Loan
Documents, including any provision requiring the payment of money. Subordinate Lender further
agrees that its agreement to subordinate hereunder shall extend to the Permanent Loan Documents,
as well as to any new mortgage debt which is for the purpose of refinancing all or any part of the
First Mortgage Loan (including reasonable and necessary costs associated with the closing and/or
the refinancing) so long as the new mortgage debt does not increase the maximum principal amount
of the First Mortgage Loan and, in the event of new mortgage debt, Subordinate Lender shall
execute and deliver to Senior Lender a new subordination agreement on the same terns and
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conditions as this Subordination Agreement. Notwithstanding anything to the contrary in this
Section 9, or in Section 4(a) above, the Senior Lender shall not, without the prior written consent of
the Subordinate Lender in each instance, which shall not be unreasonably withheld, take any action
which has the effect of increasing the indebtedness outstanding under, or secured by, the First
Mortgage Loan Documents, increasing the required payments due under the First Mortgage Loan,
decreasing the term of the First Mortgage Loan, or increasing the interest rate on the First Mortgage
Loan, except that the Senior Lender shall have the right to advance funds to cure Subordinate Loan
Defaults pursuant to Section 5(a) above and advance funds pursuant to the First Mortgage for the
purpose of paying real estate taxes and insurance premiums, making necessary repairs to the
Property and curing other defaults by the Borrower under the First Mortgage Loan Documents.
Following Conversion, all the terms and covenants of this Agreement shall inure to the benefit of
any holder of the Permanent Loan; and all references to the First Mortgage Loan, the First Mortgage
Note and the First Mortgage Loan Documents shall mean, respectively, the Permanent Loan, the
Permanent Note and the Permanent Loan Documents.
10. Default by the Subordinate Lender or Senior Lender.
If the Subordinate Lender or Senior Lender defaults in performing or observing any of the
terms, covenants or conditions to be performed or observed by it under this Agreement, the other,
non -defaulting lender shall have the right to all available legal and equitable relief.
11. Notices.
Each notice, request, demand, consent, approval or other communication (hereinafter in this
Section referred to collectively as "notices" and referred to singly as a "notice") which the Senior
Lender or the Subordinate Lender is required or permitted to give to the other party pursuant to this
Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if.
(a) personally delivered with proof of delivery thereof (any notice so delivered shall be deemed to
have been received at the time so delivered); or (b) sent by Federal Express (or other similar
national overnight courier) designating early morning delivery (any notice so delivered shall be
deemed to have been received on the next Business Day following receipt by the courier); or
(c) sent by United States registered or certified mail, return receipt requested, postage prepaid, at a
post office regularly maintained by the United States Postal Service (any notice so sent shall be
deemed to have been received two days after mailing in the United States), addressed to the
respective parties as follows:
SENIOR LENDER (Prior to Conversion):
Bank of America, N.A.
Community Development Banking
CA4-702-02-29
2001 Clayton Road, 2nd Floor
Concord, CA 94520
LEGAL -US W # 90345775.4
0i7t. WGIVAR)
Santa Ana Arts Collective, L.P.
c/o Meta Housing Corporation
1640 S. Sepulveda Blvd., Suite 425
Los Angeles, CA 90011
Attention: President
(Page -12)
55C-244
Attention: Loan Administration Manager
SENIOR LENDER (After Conversion):
California Community Reinvestment Corp.
100 West Broadway, Suite 1000
Glendale, California 91210
Attention: President
With a copy to:
WCH Affordable XIX, LLC
151 Kalmus Drive, Suite J-5
Costa Mesa, California 92626
Attention: President
SUBORDINATE LENDER:
City of Santa Ana
Community Development Agency
20 Civic Center Plaza (M-26)
P.O. Box 1988
Santa Ana, CA 92702
Attention: Housing Manager
Either party may, by notice given pursuant to this Section, change the person or persons and/or
address or addresses, or designate an additional person or persons or an additional address or
addresses for its notices, but notice of a change of address shall only be effective upon receipt.
12. General.
(a) Assignment/Successors. This Agreement shall be binding upon the
Borrower, the Senior Lender and the Subordinate Lender and shall inure to the benefit of the
respective legal successors and assigns of the Senior Lender and the Subordinate Lender.
(b) No Partnership or Joint Venture. The Senior Lender's permission for the
placement of the Subordinate Loan Documents does not constitute the Senior Lender as a
joint venturer or partner of the Subordinate Lender. Neither party hereto shall hold itself out
as a partner, agent or Affiliate of the other party hereto.
(c) Senior Lender's and Subordinate Lender's Consent. Wherever the
Senior Lender's consent or approval is required by any provision of this Agreement, such
consent or approval may be granted or denied by the Senior Lender in its sole and absolute
discretion, unless otherwise expressly provided in this Agreement. Wherever the
Subordinate Lender's consent or approval is required by any provision of this Agreement,
such consent or approval may be granted or denied by the Subordinate Lender in its sole and
absolute discretion, unless otherwise expressly provided in this Agreement.
(d) Further Assurances. The Subordinate Lender, the Senior Lender and the
Borrower each agree, at the Borrower's expense, to execute and deliver all additional
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instruments and/or documents reasonably required by any other party to this Agreement in
order to evidence that the Subordinate Mortgage is subordinate to the lien, covenants and
conditions of the First Mortgage, or to further evidence the intent of this Agreement.
(e) Amendment. This Agreement shall not be amended except by written
instrument signed by all parties hereto.
(f) Governing Law. This Agreement shall be governed by the laws of the State
in which the Property is located.
(g) Severable Provisions. If any provision of this Agreement shall be invalid or
unenforceable to any extent, then the other provisions of this Agreement, shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
(h) Term. The tern of this Agreement shall commence on the date hereof and
shall continue until the earliest to occur of the following events: (i) the payment of all of the
principal of, interest on and other amounts payable under the First Mortgage Loan
Documents; (ii) the payment of all of the principal of, interest on and other amounts payable
under the Subordinate Loan Documents, other than by reason of payments which the
Subordinate Lender is obligated to remit to the Senior Lender pursuant to Section 4 hereof;
(iii) the acquisition by the Senior Lender of title to the Property pursuant to a foreclosure or
a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the First
Mortgage; or (iv) the acquisition by the Subordinate Lender of title to the Property pursuant
to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale
contained in, the Subordinate Mortgage, but only if such acquisition of title does not violate
any of the terms of this Agreement.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original for all purposes; provided,
however, that all such counterparts shall together constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first written above.
SENIOR LENDER:
BANK OF AMERICA, N.A.
By:
Name:
Title:
LEGAL -US W # 90345775.4
(Signature Page -1)
55C-247
SUBORDINATE LENDER:
ATTEST:
Maria D. Huizar
Clerk of the Council
APPROVED AS TO FORM
Sonia R_ Carvalho
By: R rk 0.1
AssistV#t City
RECOMMENDED FOR APPROVAL:
Robert C. Cortez
Acting Executive Director
Community Development Agency
LEGAL -US -W # 90345775.4
CITY OF SANTA ANA
Cynthia J. Kurtz
Interim City Manager
(Signature Page -2)
55C-248
BORROWER:
SANTA ANA ARTS COLLECTIVE, L.P.,
a California limited partnership
By:
Name:
Title:
LEGAL -US -W # 90345775.4
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55C-249
LEGAL—US—W # 90345775.4
EXHIBIT A
Legal Description
(Exhibit A)
55C-250