City Council and Successor Agency
to the Brea Redevelopment
Agency Agenda
Study Session - 6:30 p.m.
General Session - 7:00 p.m.
Zoom/Teleconference
TownePlace Suites 3920 E. Highway 66
Gallup, New Mexico 87301
Tuesday, May 21, 2024, 7:00 PM
COUNCIL CHAMBERS
1 Civic Center Circle
Brea, California 92821
** Revised **
Christine Marick, Mayor Blair Stewart, Mayor Pro Tem Cecilia Hupp, Council Member Marty Simonoff, Council Member Steven Vargas, Council Member This agenda contains a brief general description of each item Council will consider. The City Clerk has on file copies of written documentation relating to each item of business on this Agenda available for public inspection. Contact the City Clerk’s Office at (714) 990-7756 or view the Agenda and related materials on the City’s website at www.cityofbrea.net. Materials related to an item on this agenda submitted to the Council after distribution of the agenda packet are available for public inspection in the City Clerk’s Office at 1 Civic Center Circle, Brea, CA during normal business hours. Such documents may also be available on the City’s website subject to staff’s ability to post documents before the meeting.
Procedures for Addressing the Council
The Council encourages interested people to address this legislative body by making a brief presentation on a public hearing item when the Mayor calls the item or address other items under Matters from the Audience. State law generally prohibits the City Council from responding to or acting upon matters not listed on this agenda.
The Council encourages free expression of all points of view. To allow all persons the opportunity to speak, please keep your remarks brief. If others have already expressed your position, you may simply indicate that you agree with a previous speaker. If appropriate, a spokesperson may present the views of your entire group. Council rules prohibit clapping, booing or shouts of approval or disagreement from the audience. Please silence all cell phones and other electronic equipment while the Council is in session. Thank you.
Written comments may be submitted in advance of the meeting by emailing [email protected]. Written comments received by 3 p.m. on the day of the meeting will be provided to the Council, will be made available to the public at the meeting, and will be included in the official record of the meeting.
Special Accommodations
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk’s Office at (714) 990-7757. Notification 48 hours prior to the meeting will enable City staff to make reasonable arrangements to ensure accessibility. (28 CFR 35.102.35.104 ADA Title II) Important Notice
The City of Brea shows both live broadcasts and replays of City Council Meetings on Brea Cable Channel 3 and over the Internet at www.cityofbrea.net. Your attendance at this public meeting may result in the recording and broadcast of your image and/or voice as previously described.
1: STUDY SESSION - EXECUTIVE CONFERENCE ROOM 3RD FLOOR - 6:30 P.M. 1A. Call to Order/Roll Call
1B. Public Comment
1C. Clarify Regular Meeting Topics
1D. Wildland Urban Interface Presentation
1E. Council Member Reports/Requests
2: GENERAL SESSION - COUNCIL CHAMBERS PLAZA LEVEL - 7:00 P.M. 2A. Call to Order/Roll Call
2B. Pledge of Allegiance: Brea Girl Scouts
2C. Invocation: Pastor Dan Crane, Formation Church
2D. Presentation - Brea Students Trip to Sister City of Anseong Gyeonggi-do Republic of Korea and Friendship City of Namyangju, Gyeonggi-do Republic of Korea
2E. Proclamation - National Public Works Week
2F. Presentation - Cal Domestic Annual Update
2G. Report - Prior Study Session
2H. Community Announcements
2I. Matters from the Audience
2J. Response to Public Inquiries
3: PUBLIC HEARING
This portion of the meeting is for matters that legally require an opportunity for public input. Audience participation is encouraged and is limited to 5 minutes per speaker.
3A. Conduit Financing for the Rancho Brea Project
— 1. Conduct the public hearing under the requirements of the Tax and Equity Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended (the “Code”), in connection with the proposed issuance of revenue bonds by the California Municipal Finance Authority (the “CMFA”), a joint exercise of powers authority and public entity of the State of California, in an amount not to exceed $166,000,000, (the “Bonds”), to (a) pay costs of the 2024 New Money Project (as defined below) and (b) refund all or a portion of the Authority’s outstanding Mobile Home Park Senior Revenue Bonds (Caritas Affordable Housing, Inc. Projects), Series 2014A (the “2014A Bonds”), and Mobile Home Park Subordinate Revenue Bonds (Caritas Affordable Housing, Inc.
Projects), Series 2014B (the “2014B Bonds” and, together with the 2014A Bonds, the “2014 Bonds”), which 2014 Bonds were issued to finance and refinance the 2014 Project (as defined below, and as referred to herein collectively with the 2024 New Money Project, the “Project”) — 2. Adopt Resolution No. 2024-032 approving the issuance of the Bonds by the CMFA for the benefit of Caritas Affordable Housing, Inc. (the “Corporation” and, together with the LLCs, the “Borrowers”), to provide for the financing of the Project, such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code and the California Government Code Section 6500 (and following). 3B. Disposition, Development, and Loan Agreement, and Ground Lease for a Permanent Supportive Affordable Housing Project at 323 North Brea Boulevard
— 1. Approve a Disposition, Development, and Loan Agreement ("DDLA") (Attachment A) regarding 323 North Brea Boulevard, which includes the terms and conditions for a 99-year ground lease to JHC-Acquisitions LLC ("Jamboree");
— 2. Authorize the City Manager and City Clerk to execute the DDLA; — 3. Authorize the City Manager and City Attorney to administratively make non-monetary revisions to the DDLA and related documents as necessary or appropriate; and — 4. Adopt a Resolution approving the DDLA (and its exhibits) and making findings California Health and Safety Code Section 33433 (Attachment B).
4: CONSENT CALENDAR
The City Council/Successor Agency approves all Consent Calendar matters with one motion unless Council/Agency or Staff requests further discussion of a particular item. Items of concern regarding Consent Calendar matters should be presented during “Matters from the Audience."
4A. May 7, 2024 City Council Regular Meeting Minutes
— 1. Approve.
4B. Accept a one-time $100,000 Community Development Block Grant under the Coronavirus Aid, Relief and Economic Security (CARES) Act for ADA Improvements at the Arovista Park Upper Parking Lot — 1. Accept a one-time grant for the Community Development Block Grant (CDBG) Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, H.R. 748. with the County of Orange in the amount of $100,000 for ADA improvements at the Arovista Park Upper Parking Lot Project (CIP 7948). — 2. Adopt Resolution No. 2024-033 authorizing the Mayor or his/her designee to execute, for an on behalf of the City of Brea, the necessary agreement(s) and/or any other documents or actions required by the grant. 4C. November 5, 2024 General Municipal Election Authorization and Consolidation Request — 1. Adopt Resolution No. 2024-034 calling and giving notice of the holding of a General Municipal Election on Tuesday, November 5, 2024 for the election of certain officers as required by provisions of the laws of the State of California relating to General Law cities; and
— 2. Adopt Resolution No. 2024-035 requesting the Board of Supervisors of the County of Orange to consolidate a General Municipal Election held on Tuesday, November 5, 2024 with the Statewide General Election to be held on that date pursuant to Section 10403 of the California Elections Code. Funding for the 2024 General Municipal Election has been allocated into the Fiscal Year 2024-2025 adopted budget. There is no fiscal impact on the General Fund.
4D. Personnel Budgeting Software Purchase
— 1. Authorize the City Manager or designee to approve the Software as a Service Agreement between the City of Brea and ClearGov, Inc. for a Personnel Budgeting software solution in the amount of $127,141 for a five-year term.
4E. Second Reading and Adoption of Ordinance No. 1250, An Ordinance of the City Council of the Brea Amending the Brea City Code by Adopting Zoning Ordinance Text Amendment (ZOTA) No. 2023-03 and approving a CEQA Exemption Determination
— 1. Waive full reading and adopt Ordinance No. 1250 titled “An Ordinance of the City Council of the City of Brea Amending the Brea City Code by Adopting Zoning Ordinance Text Amendment No. 2023-03 and approving a CEQA Exemption Determination” ; and
— 2. Approve a California Environmental Quality Act (CEQA) Exemption Determination 4F. Amended Contract with Emergency Ambulance Services Inc, for Emergency Ambulance Transport — 1. Approve the First Amendment to limit EAS’ scope of service to performance of ambulance transport services in an amount not to exceed $993,165.12 until January 18, 2025 unless earlier terminated as provided in the Agreement; and
— 2. Amend the City’s Fiscal Year 2023-25 Operating Budget to appropriate $993,165.12 from the City’s Paramedic Services Fund (174) for Ambulance Transport Services and appropriate $993,165.12 in revenues for ambulance billing services. the ambulance transport billing revenue will offset the cost of this agreement and will be accounted for in the City’s Paramedic Services Fund (174). 4G. Adoption of a new job description and salary table for Ambulance Operator, amend the position allocation list for FY 2024/25 to reflect the changes and place the classification in the Part-Time Employment and Benefits Policy, adopt compensation and benefits plan for full-time equivalent position. — 1. Adoption Resolution No. 2024-036 of a new job description and salary table for Ambulance Operator; and — 2. Amend the position allocation list for FY 2024/25 to reflect the changes and place the classification in the Part-Time Employment and Benefits Policy; and
— 3. Adopt Resolution No. 2024-037 compensation and benefits plan for full-time equivalent position. 4H. Monthly Report of Investments for the City of Brea for Period Ended April 30, 2024 — 1. Receive and file.
4I. May 3 and 10, 2024 City Disbursement Registers
— 1. Receive and file.
5: CITY/SUCCESSOR AGENCY - CONSENT
5A. Monthly Report of Investments for the Successor Agency to the Brea Redevelopment Agency for Period Ended April 30, 2024
— 1. Receive and file.
6: ADMINISTRATIVE ANNOUNCEMENTS
6A. City Manager
6B. City Attorney
6C. Council Requests
7: COUNCIL ANNOUNCEMENTS
7A. Council Announcements
8: ADJOURNMENT
8A. Meeting Adjournment
Date Posted: May 16, 2024
City of Brea
City Council Regular Meeting Communication
Wildland Urban Interface Presentation
Meeting
Tuesday, May 21, 2024, 7:00 PM
Agenda Group
STUDY SESSION - EXECUTIVE CONFERENCE ROOM 3RD FLOOR
- 6:30 P.M.
Item:
1D
FROM
Lisa Keyworth, Emergency Preparedness Coordinator
RESPECTFULLY SUBMITTED:
William Gallardo, City Manager
Prepared by: Lisa Keyworth, Emergency Preparedness Coordinator Concurrence: Mark Terrill, Fire Chief
Attachments
WUl Presentation for Council.pdf
Wildland Urban Interface
May 21, 2024 1
• Carbon Canyon Fire Safe Council: Fire Chief Mark Terrill • SOLAR: Deputy Fire Chief Dan Mielke
• Hazard Mitigation Plan: Emergency Preparedness Coordinator Lisa Keyworth May 21, 2024 2
• Purpose:
• Established in 2001 as a 501c(3) in an effort to educate and encourage Carbon Canyon residents to prepare for wildfires in their community.
• Priorities- Community Risk Reduction through:
• Education
• Informational guides on their website www.carboncanyonfsc.org • Outreach
• Newsletters, meetings every first Wednesday of the month • Community Interaction
• Trunk-or-Treat, door to door
• Community Wildfire Preparedness Plan
Carbon Canyon Fire Safe Council
May 21, 2024 3
• Plan Includes:
• Demographics
• History of Fire Activity
• Hazard Risk Assessment
• Priorities
• Projects/Goals
• Past and future with outcomes
Community Wildfire Preparedness Plan
May 21, 2024 4
May 21, 2024
5 SOLAR
Who?
What?
When?
Where?
Why?
May 21, 2024 6
The SOLAR Plan
The Concept
May 21, 2024 7
• Partnership with surrounding
agencies.
• Agreement:
• To all communicate on the same
frequencies
• One central place to order
resources
• Pre-set Operating Plan
• We all train together quarterly
Elements of the SOLAR Plan
May 21, 2024 8
• Pre-Flighted Communications Plan
• Predetermined Dispatch
Procedures
• Common Maps with
Predetermined Facilities
• Zone Reference Page – Fire
Behavior, Structure, Access
• Safety Information
Brea’s MTZ
May 21, 2024 9
SOLAR Area
May 21, 2024 10
South of 60 fwy
North of 91 fwy
East of 57 fwy
West of 71 fwy
The Freeway Complex Fire
May 21, 2024 11
November 15 – 19, 2008
The Freeway Complex Facts
May 21, 2024 12
• The Fire consumed over 10,000 Acres in the First 12 Hours – 14 Acres Per Minute
• 650 Engines, 3,800 Firefighters, 17 Helicopters, 12 Air Tankers • Total of 30,305 Acres Burned
• 90% of Chino Hills State Park Burned
• 315 Structures Destroyed
• 40,000 Residents Evacuated
• $16,000,000 Firefighting Costs
• $150,000,000 Dollar Loss
• Watershed Damage
Scope of the Freeway Complex
May 21, 2024 13
Cities Affected
• Corona
• Chino Hills
• Yorba Linda
• Brea
• Anaheim
• Diamond Bar
Counties Affected
• San Bernardino
• Orange
• Los Angeles
• Riverside
May 21, 2024 14
Who’s Coming?
What’s Coming?
May 21, 2024 15
• (3) Fixed Wing Aircraft
• (2) Super Scoopers
• (8) Helicopters
• (3) Dozers
• (4) Type 3 Engines
• (14) Type 1 Engines
• (6) Hand Crews
• (3) Water Tenders
• (10) Chief Officers
Roughly 180 personnel
May 21, 2024 16
Questions?
Local Hazard Mitigation Plan
May 21, 2024 17
• The Robert T. Stafford Disaster Relief and Emergency Assistance Act authorizes the president to declare a “major disaster declaration” or “emergency declaration” in response to an incident or threatened incident that overwhelms the response capability of state or local governments. Both declaration types authorize the President to provide Federal disaster assistance.
• Brea applied for the Local Hazard Mitigation Grant Program under a Northern California Wildfire declaration DR-4558 on March 4, 2021. Brea was awarded $75,000 on June 14, 2022.
• Although this declaration focused on Lake, Napa, San Mateo, Santa Cruz, Solano, Sonoma, and Yolo counties, all areas within the State of California were eligible for assistance under the Hazard Mitigation Grant Program.
Background
May 21, 2024 18
• The Local Hazard Mitigation Plan identifies and assesses the hazards to which the City is most vulnerable and develops mitigation strategies to reduce its vulnerability to the risks inherent in natural and human-made hazards. • An approved and adopted LHMP will make the City eligible to apply for grant funding to reduce vulnerability to disasters within the community and help break the disaster cycle to ensure a sustainable future.
What is it?
May 21, 2024 19
• RFP issued January 10, 2023. Atlas Planning Solutions was awarded the contract on April 4, 2023.
• A Hazard Mitigation Planning Committee was established which consisted of city staff from Fire, Police, Public Works, Community Development, Communications and Marketing and IT (GIS).
The Process
May 21, 2024 20
The Committee
May 21, 2024 21
• The Committee held 3 meetings - reviewed
hazards of concern in Brea, the City’s critical
facilities, and identified our stakeholders.
• They discussed hazard profiles, mapping, an
overview of risk for each hazard and then focused
on creating and prioritizing mitigation strategies
and determining cost categories for each.
• The committee also reviewed project goals.
• Development of the Plan was introduced to Council on September 19, 2023. • Community survey was sent out via social media and was also accessible on the city website on the same day.
• Community meeting held on November 9.
• Draft of plan distributed to Committee on April 24, 2024.
Outreach
May 21, 2024 22
• Plan is being updated to address comments from Committee • It will be distributed to:
• Stakeholders and the community
• Cal OES
• FEMA
• Brea City Council for adoption
What’s Next
May 21, 2024 23
City of Brea
City Council Regular Meeting Communication
Presentation - Cal Domestic Annual Update
Meeting
Tuesday, May 21, 2024, 7:00 PM
Agenda Group
GENERAL SESSION - COUNCIL CHAMBERS PLAZA LEVEL - 7:00
P.M.
Item:
2F
FROM
Bill Gallardo, City Manager
Attachments
Presentation
Presented By:
Lynda Noriega, President
• California Domestic Water Company
• 2020 Strategic Plan – Update on Strategic Initiatives • Water Supply
• Main San Gabriel Basin – Groundwater Hydrologic Conditions • City of Brea
• California Domestic Water Company Operations
• Projected Water Purchases
• Projected Cost of Water Purchases
Understand and take advantage of opportunities to recruit for key positions that may assist the Company with succession planning efforts. • September 2022 – Water Utility Service Worker II separated from the Company. • July 2023 – Developed plan for conducting proactive and focused recruitment. • October – November 2023 – Developed recruitment brochure and organized the State Water Resources Control Board certified operator list to identify potential candidates. • December 2023 – Recorded interviews with management and shot clips of the employees for a recruitment video to be placed on the Company’s website. • February 2024 – Launched Senior Water Utility Worker recruitment and mailed brochures to targeted operators.
• April 2024 – Conducted interviews of qualified applicants. • May 2024 – Extended an offer of employment and hired Senior Water Utility Worker. • July 2023 – Developed and mailed the “Simplifying Service for Retail Shareholders” informational flier with the
monthly utility bill. The flier also included an individual rate comparison for the service address.
• December 2023 – Developed a door hanger summarizing
the “Simplifying Service for Retail Shareholders” campaign and delivered them to the service address.
• February 2023 – Resent the informational flier with the monthly utility bill.
• May 2023 – Delivered another door hanger to the service address.
These efforts resulted in the Company purchasing 19 shares of common stock from retail shareholders and transferring 24 customers to their appropriate water utility provider. There are 151 remaining retail shareholder accounts.
• January 2024 – Presented proposed amendments to the Bylaws to the Company’s Administrative Committee.
Opened the shareholder administrative review period on January 29, 2024. • March 2024 – Closed shareholder administrative review period and received comments and suggested revisions. • April 2024 – Met with shareholder management teams to discuss and obtain feedback on the proposed amendments.
• May 2024 – Distributed final draft of the Bylaws to shareholders. Presented final drafts to the Company’s Administrative Committee on Friday, May 17, 2024.
• June 2024 – Scheduled presentation of the Bylaws final draft to the Board of Directors to consider adoption.
PROJECT DETAILS:
• Treats 3,000 gallons per minute
• Total Capital Investment: $4,600,000
• Grant Funding Received: $2,600,000
• Projected Annual O&M Expense: $450,000
Well 8 Ion Exchange Treatment Facility
Construction Completed: March 2024
NATIONWIDE MULTI-DISTRICT PFAS LITIGATION:
• November 2023 – Company opted to participate in the class action settlements. • Ongoing – Management team working with legal counsel to prepare and file the necessary claim forms and supporting documentation.
Basin Groundwater Elevation – Baldwin Park Key Well
HIGH: 07/20/83 – 295.3 ft | LOW: 11/21/18 – 169.4 ft | CURRENT: 05/03/24 – 239.3 ft Annual Average 07/01 – 06/30
18.10 inches
Annual Average 07/01 – 06/30
110,000 acre-feet (AF)
07/01/22 – 06/30/23 28.06 inches 155% of avg
07/01/23 – 04/23/24 23.87 inches 136% of avg
07/01/22 – 06/30/23 281,500 AF 256% of avg
07/01/23 – 04/30/24* 65,700 AF 60% of avg
Preliminary projections show total replenishment will exceed 100,000 AF. 2023/2024
Projected Water Sales
20,600 Acre-Feet
(6,700,000,000 Gallons)
2023/2024
Projected Water Sales
Revenues
$14,120,300
Proudly Serving the
Communities of:
• Common Stock Entitlement Water (1.45 AF/Share) 3,649.65 AF • Preferred A Stock Entitlement Water 522.06 AF
• Main San Gabriel Basin Pumping Rights 1,140.43 AF
• Excess Entitlement Water 3,097.90 AF
2023/2024 Projected Water Purchases 8,410.14 AF
ANNUAL COMPARATIVES
2022/2023 Actual Water Purchases 8,529.72 AF
2021/2022 Actual Water Purchases 9,859.36 AF
California Domestic Water Company
• Projected Purchase (AF) 8,410
• Projected Purchase Cost $6,645,511
• Projected Cost / AF $790
MWDOC
• Projected Purchase (AF) 8,410
• Projected Purchase Cost $10,334,447
• Projected Cost / AF* $1,229
* Average Cost / AF does not include other fixed
costs assessed by MWDOC for water deliveries.
2023/2024 Benefits and Savings to City of Brea = $439/AF or $3,688,936
City of Brea
City Council Regular Meeting Communication
Conduit Financing for the Rancho Brea Project
Meeting
Tuesday, May 21, 2024, 7:00 PM
Agenda Group
PUBLIC HEARING Item: 3A
TO
Honorable Mayor and City Council Members
FROM
Bill Gallardo, City Manager
RECOMMENDATION
Staff Recommends that the City Council take the following actions:
1) Conduct the public hearing under the requirements of the Tax and Equity Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended (the “Code”), in connection with the proposed issuance of revenue bonds by the California Municipal Finance Authority (the “CMFA”), a joint exercise of powers authority and public entity of the State of California, in an amount not to exceed $166,000,000, (the “Bonds”), to (a) pay costs of the 2024 New Money Project (as defined below) and (b) refund all or a portion of the Authority’s outstanding Mobile Home Park Senior Revenue Bonds (Caritas Affordable Housing, Inc. Projects), Series 2014A (the “2014A Bonds”), and Mobile Home Park Subordinate Revenue Bonds (Caritas Affordable Housing, Inc. Projects), Series 2014B (the “2014B Bonds” and, together with the 2014A Bonds, the “2014 Bonds”), which 2014 Bonds were issued to finance and refinance the 2014 Project (as defined below, and as referred to herein collectively with the 2024 New Money Project, the “Project”) 2) Adopt the resolution approving the issuance of the Bonds by the CMFA for the benefit of Caritas Affordable Housing, Inc. (the “Corporation” and, together with the LLCs, the “Borrowers”), to provide for the financing of the Project, such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code and the California Government Code Section 6500 (and following).
BACKGROUND/DISCUSSION
The Borrower requested that the CMFA serve as the municipal issuer of the Bonds in an aggregate principal amount not to exceed $166,000,000 of tax-exempt revenue bonds. The proceeds of the Bonds will be used for (a) pay costs of the 2024 New Money Project (as defined below) and (b) refund all or a portion of the Authority’s outstanding Mobile Home Park Senior Revenue Bonds (Caritas Affordable Housing, Inc. Projects), Series 2014A (the “2014A Bonds”), and Mobile Home Park Subordinate Revenue Bonds (Caritas Affordable Housing, Inc. Projects), Series 2014B (the “2014B Bonds” and, together with the 2014A Bonds, the “2014 Bonds”), which 2014 Bonds were issued to finance and refinance the 2014 Project (as defined below, and as referred to herein collectively with the 2024 New Money Project, the “Project”).
The term “2024 New Money Project” means all or a portion of the costs of: (a) the acquisition, construction, improvement and equipping of property located at 220 Camino Corto, Vista, California 92083 (the “Estrella Apartment Project”) and at 2441 South El Camino Real, San Clemente, California 92672 (the “San Clemente Project”); (b) certain capital expenditures for the properties comprising the 2014 Project, including, but not limited to, the replacement of asphalt surfaces in and about such properties (the “Improvement Project”); and (c) certain working capital expenditures as permitted by the Code and the Treasury Regulations promulgated thereunder.
The term “2014 Project” means financing and refinancing all or a portion of the costs of the acquisition, construction, improvement and equipping of: (a) a 285-space mobile home park known as Valley Village Mobile Home Park, located at 6401 Country Club Drive, Rohnert Park, California 94928 (the “2014 Valley Village Project” and, together with the portion of the Improvement Project at the 2014 Valley Village Project, the “Valley Village Project”); (b) a 67-space mobile home park known as Sterling Shores Estates Manufactured Housing Community, located at 5830 Robin Hill Drive Lakeport California 95453 (the “2014 Sterling Shores Project” and together with the portion of the Improvement Attachments
TEFRA Resolution.pdf
Drive, Lakeport, California 95453 (the 2014 Sterling Shores Project and, together with the portion of the Improvement Project at the 2014 Sterling Shores Project, the “Sterling Shores Project”); (c) a 123-space mobile home park known as Desert Sands Estates Mobile Home Park, located at 4511 25th Street East, Lancaster, California 93535 (the “2014 Desert Sands Project” and, together with the portion of the Improvement Project at the 2014 Desert Sands Project, the “Desert Sands Project”); (d) a 164-space mobile home park known as Aztec Mobile Home Estates, located at 7425 Church Street, Yucca Valley, California 92284 (the “2014 Aztec Project” and, together with the portion of the Improvement Project at the 2014 Aztec Project, the “Aztec Project”); (e) a 100-space mobile home park known as Rancho Brea Mobile Home Estates, located at 1414 West Central Avenue, Brea, California 92821 (the “2014 Rancho Brea Project” and, together with the portion of the Improvement Project at the 2014 Rancho Brea Project, the “Rancho Brea Project”); (f) a 465-space mobile home park known as Friendly Village Mobile Home Park, located at 1301 East Avenue 1, Lancaster, California 93535 (the “2014 Friendly Village Project” and, together with the portion of the Improvement Project at the 2014 Friendly Village Project, the “Friendly Village Project”); (g) a 264-space mobile home park known as Hacienda Mobile Estates, located at 2330 East Avenue J 8, Lancaster, California 93535 (the “2014 Hacienda Project” and, together with the portion of the Improvement Project at the 2014 Hacienda Project, the “Hacienda Project”); (h) a 107-space mobile home park known as Estrella De Oro, located at 220 Camino Corto, Vista, California 92083 (the “2014 Estrella Project” and, collectively with the portion of the Improvement Project at the 2014 Estrella Project and the Estrella Apartment Project, the “Estrella Project”); and (i) a 159-space mobile home park known as Vista Manor Mobile Home Park, located at 200 Olive Avenue, Vista, California 92083 (the “2014 Vista Manor Project” and, together with the portion of the Improvement Project at the 2014 Vista Manor Project, the “Vista Project”).
In order for all or a portion of the Bonds to qualify as tax-exempt bonds, the City of Brea must conduct a public hearing (the “TEFRA Hearing”) providing for the members of the community an opportunity to speak in favor of or against the use of tax-exempt bonds for the financing of the Project. Prior to such TEFRA Hearing, reasonable notice must be provided to the members of the community. Following the close of the TEFRA Hearing, an “applicable elected representative” of the governmental unit hosting the Project must provide its approval of the issuance of the Bonds for the financing of the Project.
CALIFORNIA MUNICIPAL FINANCE AUTHORITY:
The CMFA was created on January 1, 2004 pursuant to a joint exercise of powers agreement to promote economic, cultural and community development, through the financing of economic development and charitable activities throughout California. To date, over 350 municipalities have become members of CMFA.
The CMFA was formed to assist local governments, non-profit organizations and businesses with the issuance of taxable and tax-exempt bonds aimed at improving the standard of living in California. The CMFA’s representatives and its Board of Directors have considerable experience in bond financings.
FISCAL IMPACT/SUMMARY
The Bonds to be issued by the CMFA for the Project will be the sole responsibility of the Borrower, and the City will have no financial, legal, moral obligation, liability or responsibility for the Project or the repayment of the Bonds for the 1 May 21, 2024
RESO. 20XX-XX
(DRAFT) RESOLUTION NO. PC 2024-XX
RESOLUTION OF THE BREA CITY COUNCIL APPROVING THE
ISSUANCE OF TAX EXEMPT REVENUE BONDS PURUSANT TO A
PLAN OF FINANCE IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $166,000,000 BY THE CALIFORNIA MUNICIPAL FINANCE
AUTHORITY FOR THE PURPOSE OF FINANCING AND REFINANCING
THE ACQUISITION AND IMPROVEMENT OF THE ACQUISITION,
CONSTRUCTION, IMPROVEMENT AND EQUIPPING OF CERTAIN
PROPERTIES CONSISTING OF MOBILE HOME PARKS AND AN
APARTMENT COMPLEX BY ONE OR MORE CALIFORNIA LIMITED
LIABILITY COMPANIES WHOSE SOLE MEMBER WILL BE CARITAS
AFFORDABLE HOUSING, INC., AND CERTAIN OTHER MATTERS
RELATING THERETO
A. RECITALS:
WHEREAS, one or more California limited liability companies (“LLCs”), whose sole member is or will be Caritas Affordable Housing, Inc. (the “Corporation” and, together with the LLCs, the “Borrowers”), a California nonprofit public benefit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), have requested that the California Municipal Finance Authority (the “Authority”) participate in the issuance of one or more series of tax exempt revenue bonds in a maximum aggregate principal amount not to exceed 2 May 21, 2024
RESO. 20XX-XX
$166,000,000 (the “Bonds”), pursuant to a plan of financing, to: (a) pay costs of the 2024 New Money Project (as defined below) and (b) refund all or a portion of the Authority’s outstanding Mobile Home Park Senior Revenue Bonds (Caritas Affordable Housing, Inc. Projects), Series 2014A (the “2014A Bonds”), and Mobile Home Park Subordinate Revenue Bonds (Caritas Affordable Housing, Inc. Projects), Series 2014B (the “2014B Bonds” and, together with the 2014A Bonds, the “2014 Bonds”), which 2014 Bonds were issued to finance and refinance the 2014 Project (as defined below, and as referred to herein collectively with the 2024 New Money Project, the “Project”); and
WHEREAS, the term “2024 New Money Project” means all or a portion of the costs of: (a) the acquisition, construction, improvement and equipping of property located at 220 Camino Corto, Vista, California 92083 (the “Estrella Apartment Project”) and at 2441 South El Camino Real, San Clemente, California 92672 (the “San Clemente Project”); (b) certain capital expenditures for the properties comprising the 2014 Project, including, but not limited to, the replacement of asphalt surfaces in and about such properties (the “Improvement Project”); and (c) certain working capital expenditures as permitted by the Code and the Treasury Regulations promulgated thereunder; and
WHEREAS, the term “2014 Project” means financing and refinancing all or a portion of the costs of the acquisition, construction, improvement and equipping of: (a) a 285-space mobile home park known as Valley Village Mobile Home Park, located at 6401 Country Club Drive, Rohnert Park, California 94928 (the “2014 Valley Village 3 May 21, 2024
RESO. 20XX-XX
Project” and, together with the portion of the Improvement Project at the 2014 Valley Village Project, the “Valley Village Project”); (b) a 67-space mobile home park known as Sterling Shores Estates Manufactured Housing Community, located at 5830 Robin Hill Drive, Lakeport, California 95453 (the “2014 Sterling Shores Project” and, together with the portion of the Improvement Project at the 2014 Sterling Shores Project, the “Sterling Shores Project”); (c) a 123-space mobile home park known as Desert Sands Estates Mobile Home Park, located at 4511 25th Street East, Lancaster, California 93535 (the “2014 Desert Sands Project” and, together with the portion of the Improvement Project at the 2014 Desert Sands Project, the “Desert Sands Project”); (d) a 164-space mobile home park known as Aztec Mobile Home Estates, located at 7425 Church Street, Yucca Valley, California 92284 (the “2014 Aztec Project” and, together with the portion of the Improvement Project at the 2014 Aztec Project, the “Aztec Project”); (e) a 100-space mobile home park known as Rancho Brea Mobile Home Estates, located at 1414 West Central Avenue, Brea, California 92821 (the “2014 Rancho Brea Project” and, together with the portion of the Improvement Project at the 2014 Rancho Brea Project, the “Rancho Brea Project”); (f) a 465-space mobile home park known as Friendly Village Mobile Home Park, located at 1301 East Avenue 1, Lancaster, California 93535 (the “2014 Friendly Village Project” and, together with the portion of the Improvement Project at the 2014 Friendly Village Project, the “Friendly Village Project”); (g) a 264-space mobile home park known as Hacienda Mobile Estates, located at 2330 East Avenue J 8, Lancaster, California 93535 (the “2014 Hacienda Project” and, together with the portion of the Improvement Project at the 2014 Hacienda Project, the “Hacienda Project”); (h) a 107-space mobile home park known as Estrella De Oro, located at 220 Camino Corto, 4 May 21, 2024
RESO. 20XX-XX
Vista, California 92083 (the “2014 Estrella Project” and, collectively with the portion of the Improvement Project at the 2014 Estrella Project and the Estrella Apartment Project, the “Estrella Project”); and (i) a 159-space mobile home park known as Vista Manor Mobile Home Park, located at 200 Olive Avenue, Vista, California 92083 (the “2014 Vista Manor Project” and, together with the portion of the Improvement Project at the 2014 Vista Manor Project, the “Vista Project”); and
WHEREAS, the maximum aggregate principal amount of Bonds to be issued for:
(a) the Vista Project will not to exceed $12,900,000; (b) the San Clemente Project will not to exceed $16,800,000; (c) the Valley Village Project will not to exceed $33,000,000; (d) the Sterling Shores Project will not to exceed $11,500,000; (e) the Desert Sands Project will not to exceed $10,150,000; (f) the Aztec Project will not to exceed $16,300,000; (g) the Rancho Brea Project will not to exceed $12,350,000; (h) the Friendly Village Project will not to exceed $13,150,000; (i) the Hacienda Project will not to exceed $12,900,000; and (j) the Estrella Project will not to exceed $26,950,000 (but in no event will the combined principal amount of Bonds issued for the Project exceed $166,000,000); and
WHEREAS, the Rancho Brea Project is or will be located within the territorial limits of the City of Brea, California (the “City”), a member of the Authority; and WHEREAS, the Rancho Brea Project is, or will be when acquired, owned and operated by one or more of the Borrowers; and
5 May 21, 2024
RESO. 20XX-XX
WHEREAS, not less than twenty percent (20%) of the residential units of the Rancho Brea Project shall be occupied by individuals whose income is fifty percent (50%) or less of area median gross income; and
WHEREAS, pursuant to Section 147(f) of the Code and the Treasury Regulations promulgated thereunder, the issuance of the Bonds by the Authority and the related plan of financing must be approved by the City because the Rancho Brea Project is located within the territorial limits of the City; and
WHEREAS, the City Council of the City (the “City Council”) is the elected legislative body of the City and is one of the applicable elected representatives required to approve the issuance of the Bonds by the Authority under Section 147(f) of the Code and the Treasury Regulations promulgated thereunder; and WHEREAS, the Authority has requested that the City Council approve the issuance of the Bonds by the Authority in order to satisfy the public approval requirement of Section 147(f) of the Code and the Treasury Regulations promulgated thereunder, and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (as amended from time to time, the “Agreement”), among certain program participants, including the City; and
WHEREAS, on or before May 09, 2024, the Authority’s bond counsel caused a notice to appear in The Brea Star Progress, which is a newspaper of general circulation in the City, stating that a public hearing with respect to the issuance of the Bonds by the Authority for the Rancho Brea Project would be held by the City’s City Council on May 21, 2024; and
6 May 21, 2024
RESO. 20XX-XX
WHEREAS, pursuant to Section 147(f) of the Code, the City has, following notice duly given, held a public hearing on May 21, 2024 regarding the issuance of the Bonds by the Authority, and an opportunity was provided for persons to comment on the matter of the Bonds and of the Rancho Brea Project; and
WHEREAS, it is in the public interest and for the public benefit that the City Council approve the issuance of the Bonds by the Authority for the aforesaid purposes; B. RESOLUTION:
NOW, THEREFORE, BE IT FOUND, DETERMINED AND RESOLVED by the City Council of the City of Brea as follows:
1. The foregoing recitals with respect to the Project, the Bonds and the use of the proceeds of the Bonds for the Rancho Brea Project are true and correct.
2. The City Council hereby approves the issuance of the Bonds by the Authority and the related plan of financing related to the Rancho Brea Project. It is the purpose and intent of the City Council that this resolution constitutes approval of the issuance of the Bonds by the Authority (a) by the “applicable elected representative” of the governmental unit having geographic jurisdiction of the area which contains the Rancho Brea Project in accordance with Section 147(f) of the Code and the Treasury Regulations promulgated thereunder, and (b) by the City Council in accordance with Section 4 of the Agreement.
3. . The issuance of the Bonds shall be subject to the approval of the Authority of all financing documents relating thereto to which the Authority is a party. The approval by the City of the issuance of the Bonds by the Authority relating to the Rancho Brea Project is neither an approval of the underlying credit issues of the 7 May 21, 2024
RESO. 20XX-XX
proposed Rancho Brea Project nor an approval of the financial structure of the Bonds. Neither the City nor any department, official or officer thereof shall have any responsibility or liability whatsoever with respect to the Bonds or any portion of the Project. The Bonds shall not constitute an obligation or indebtedness of the City, and the assets and revenues of the City are not being pledged as security for the payment of principal or interest on the Bonds.
4. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby.
5. The adoption of this Resolution shall not obligate the City or any department thereof to (i) provide any financing to acquire, rehabilitate or construct the Project or any refinancing of the Project or any portion thereof; (ii) approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary for the acquisition, rehabilitation or operation of the Project or any portion thereof; (iii) make any contribution or advance any funds whatsoever to the Authority or the Borrowers; or (iv) take any further action with respect to the Authority or the City’s membership therein.
6. This resolution shall take effect immediately upon its adoption.
APPROVED AND ADOPTED by the Council of the City of Brea, California, this 21st day of May 2024.
8 May 21, 2024
RESO. 20XX-XX
____________________________________
Christine Marick, Mayor
ATTEST: _________________________________
Lillian Harris-Neal, City Clerk
I, Lillian Harris-Neal, City Clerk of the City of Brea, California, do hereby certify that the foregoing resolution was adopted by the City Council of the City of Brea, California, at its regular meeting held on the 21st day of May 2024, by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
ABSTAINED:COUNCIL MEMBERS:
DATED: May 21, 2024
City of Brea
City Council Regular Meeting Communication
Disposition, Development, and Loan Agreement, and Ground Lease for a Permanent Supportive Affordable Housing Project at 323 North Brea Boulevard
Meeting
Tuesday, May 21, 2024, 7:00 PM
Agenda Group
PUBLIC HEARING Item: 3B
TO
Honorable Mayor and City Council Members
FROM
Bill Gallardo, City Manager
RECOMMENDATION
Staff recommends that the City Council take the following actions:
1. Approve a Disposition, Development, and Loan Agreement (“DDLA”) (Attachment A) regarding 323 North Brea Boulevard, which includes the terms and conditions for a 99-year ground lease to JHC-Acquisitions LLC (“Jamboree”);
2. Authorize the City Manager and City Clerk to execute the DDLA;
3. Authorize the City Manager and City Attorney to administratively make non-monetary revisions to the DDLA and related documents as necessary or appropriate; and
4. Adopt a Resolution approving the DDLA (and its exhibits) and making findings California Health and Safety Code Section 33433 (Attachment B).
BACKGROUND/DISCUSSION
In a continuation of efforts to produce more affordable housing in the City of Brea, on May 7, 2024, a draft DDLA between the City and Jamboree was presented to the City Council for review and comments, as well as staff’s recommendation to bring the item back for a Public Hearing and formal approval at the May 21, 2024 City Council Meeting. The May 7, 2024 City Council Staff Report is included as Attachment C, which contains additional background information on the project. At that meeting, the City Council approved the following:
Appropriation of $8,028,491.51 from the City’s Affordable Housing Trust Fund (which includes funding from a CalOptima Health grant) and $2,457,483.00 from the City’s Housing Successor Fund for the project; Authorization for the City Manager to authorize a wire transfer of the funds to Jamboree; Authorization for waiver of Development Impact Fees and In-Kind Fees; and Adoption of Resolution Number 2024-030, making an exempt Surplus Land Act determination for the City-owned site at 323 North Brea Boulevard (“Project Site”) and approving a California Environmental Quality Act exemption determination.
Since the May 7th City Council Meeting, the draft DDLA has been revised for clarity and to incorporate comments from Jamboree, which includes one key revision:
Increase the lease term from 55 years to 99 years in the Ground Lease. This revision was necessary for Jamboree to demonstrate control over the project, beyond the 55-year affordability covenants, for tax purposes.
Additionally, based on feedback from the City Council, parking impacts for the project will be addressed with Jamboree in the Property Management Plan.
City staff and Jamboree are still finalizing certain non-monetary language in the DDLA; however, the major terms are expected to remain unchanged. Should a significant term be proposed for revision, staff will bring the item back to the City Council for approval. Staff recommends the following major terms for the DDLA, which includes a Ground Lease and funding contributions:
Ground Lease for 323 North Brea Boulevard
Term 99-years
Fee/Repayment $1.00 annually
Additional Requirements Only to be used for affordable housing CalOptima Health Grant Award
Amount $6,028,491.51
Term 55-years
Interest 0%
Repayment None; Forgivable grant
Additional Requirements
Funding must serve and support CalOptima Medi-Cal
members
City of Brea Affordable Housing Trust Funds (Fund 270)
Amount $2,000,000.00
Term 55-years
Interest 0-3%
Repayment
Optional annual Residual Receipts (annual project revenue after expenses, such as operations or other payment
obligations)
Additional Requirements
Funding must be allocated toward the production of
affordable housing.
City of Brea Housing Successor Funds (Fund 280)
Amount $2,457,483.00
Term 55-years
Interest 0-3%
Repayment
Optional annual Residual Receipts (annual project revenue after expenses, such as operations or other payment
obligations)
Additional Requirements
Funding must be allocated toward the production of
affordable housing.
Resolution No. 2024-030, declaring the Project Site exempt from the Surplus Land Act, has been submitted to the California Department of Housing and Community Development (“HCD”) for review. HCD has 30 days to respond to the submission. Should no objection be received from HCD, the DDLA may be executed. The DDLA shall solidify the City’s commitment to utilizing the excess surplus of $2,457,483.00 from the City of Brea’s Housing Successor Fund for the development of affordable housing.
Attachments
ATTACHMENT A - Disposition Development and Loan Agreement.pdf ATTACHMENT B - Resolution.pdf
ATTACHMENT C - May 7, 2024 City Council Staff Report-compressed.pdf ATTACHMENT D - Legal Ad Notices May 2, 2024 and May 9, 2024.pdf ATTACHMENT E - Public Comments.pdf
ATTACHMENT F - Presentation.pdf
Section 33433 of the California Health and Safety Code requires the City to hold a Public Hearing prior to formal approval of the proposed DDLA, which includes a Ground Lease of the Project Site. Public notices were published in the Brea Star-Progress on May 2, 2024 and May 9, 2024. The public hearing notices are provided as Attachment D. As further required by Section 33433, the City also made available to the public a report regarding the DDLA, including a copy of the agreement, as of the date that the first public notice was published.
At the time of the submittal of this report, staff has received two public comments, which are included as Attachment E.
Staff recommends the City Council approve, after a Public Hearing, the DDLA, which includes a 99-year Ground Lease with Jamboree as well as use of the CalOptima Health Grant and a portion of the City’s Housing funds, and adopt the attached Resolution to allow the Project Site to be leased for production of new affordable housing units. Staff is currently seeking additional funding opportunities for this project and, if awarded, the funds will be brought to the City Council for authorization of use.
COMMISSION/COMMITTEE RECOMMENDATION
The Finance Committee reviewed staff's recommendation at their March 26, 2024 meeting and recommended to proceed to City Council for approval.
FISCAL IMPACT/SUMMARY
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Brea
1 Civic Center Circle
Brea, CA 92821
Attn: City Clerk
This document is exempt from recording fees pursuant
to Government Code § 27383.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
DISPOSITION, DEVELOPMENT, AND LOAN AGREEMENT
By and between
THE CITY OF BREA
and
JHC-ACQUISITIONS LLC
May 21, 2024
[Page Intentionally Blank]
1 THIS DISPOSITION, DEVELOPMENT, AND LOAN AGREEMENT (“Agreement”) is dated May 21, 2024 (“Effective Date”) for reference purposes and is executed by the CITY OF BREA, a California municipal corporation (“City”), and JHC-ACQUISITIONS LLC, a California limited liability company (“Developer”). City and Developer are collectively referred to herein as the “Parties.”
RECITALS
A. City is the owner of property located at 323 N. Brea Boulevard (APN 296-301-02) described in the attached Exhibit A (“Property”). City intends to ground lease the Property to Developer and make a secured loan to Developer, and Developer intends to ground lease the Property from City and accept such loan, upon and subject to the terms and conditions set forth herein.
B. The Property was acquired by the former Brea Redevelopment Agency using its housing set aside funds, and the funds for the City loan are also derived from such housing set aside funds. City is the successor to the housing assets of the former Brea Redevelopment Agency, including the Property and such funds. A copy of this Agreement, and a report summarizing the same, have been made available to the public as required by Health and Safety Code Section 33433.
C. City has determined that the Property is “exempt surplus land” within the meaning of Government Code Section 54221(f)(1)(B) because it is less than one-half acre in area and is not contiguous to land owned by a state or local agency that is used for open-space or low- and moderate-income housing purposes. Confirmation of City’s determination by the California Department of Housing and Community Development is a condition precedent to closing.
D. Developer has proposed to develop and operate on the Property a 39-unit multi-family rental housing development (consisting of 38 apartments that will be affordable to extremely low income households and one manager’s unit) and other amenities (collectively, “Project”).
E. Upon satisfaction of the conditions precedent to closing, and subject to the terms and conditions set forth herein, City will: (i) lease the Property to Developer for 99 years pursuant to a lease substantially in the form set forth in the attached Exhibit G (“Ground Lease”); and (ii) assist in financing the Project by providing Developer a secured loan of $4,457,483 (“City Loan”) pursuant to a promissory note substantially in the form set forth in the attached Exhibit C (“City Loan Note”).
F. As conditions to the closing, among other documents, Developer will execute and deliver to escrow for recording (or in the case of the nonrecordable documents, including the Ground Lease and the City Loan Note, Developer will deliver directly to City) the following: the Ground Lease; the City Loan Note; a deed of trust, substantially in the form set forth in the attached Exhibit D (“Deed of Trust”), that will provide City with a security interest in Developer’s leasehold interest in the Property to secure the City Loan; an assignment of architect and engineer contracts and plans, substantially in the form of the 2 attached Exhibit E (“Assignment”), that will provide City with a security interest to secure the City Loan; a memorandum of ground lease; and an affordable housing restrictive covenant substantially in the form set forth in the attached Exhibit F (“Affordable Housing Agreement”) .
G. A material inducement to City to enter into this Agreement and close the transactions described herein is the agreement by Developer to comply with the Ground Lease and the Affordable Housing Agreement, including the obligation to develop the Project in accordance with and within the time periods specified in the Ground Lease. City would be unwilling to close this transaction in the absence of an enforceable commitment by Developer to take such actions and complete such work in accordance with such provisions and within such time periods.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows.
ARTICLE I
DEFINITIONS; EXHIBITS
Section 1.1 Incorporation of Recitals. The Parties acknowledge the truth of the foregoing recitals which are hereby incorporated into this Agreement by this reference.
Section 1.2 Definitions. The following terms shall have the meanings set forth below whenever used in this Agreement and the attached Exhibits. Additional terms are defined in the Recitals and text of this Agreement.
“Affordable Housing Agreement” means an affordable housing restrictive covenant substantially in the form set forth in the attached Exhibit F. “Assignment” means a collateral assignment of architect and engineer contracts and plans substantially in the form attached as Exhibit E.
“City” means the City of Brea, California.
“City Council” means the Brea City Council.
“City Documents” means collectively, this Agreement, the City Loan Note, the Deed of Trust, the Affordable Housing Agreement, the Notice, the Assignment, and the Ground Lease.
“City Loan” is defined in Recital E and further described in Section 4.1. “City Loan Note” means a secured promissory note substantially in the form set forth in the attached Exhibit C.
3 “City Manager” means the Brea City Manager or such official’s designee. “Closing,” “Closing Date” and “Close of Escrow” each shall mean the date that escrow closes for the City Loan and shall be the date upon which the term of the Ground Lease commences and the Memorandum of Lease is recorded.
“Commencement Date” means the date that the term of the Ground Lease commences, which shall be the Closing Date.
“Conditions of Approval” means all governmental conditions imposed on any governmental approvals or permits granted for the Project. “Construction Plans” is defined in Section 5.4.
“County” means the County of Orange, California.
“CTCAC” means the California Tax Credit Allocation Committee. “Deed of Trust” means a leasehold deed of trust substantially in the form set forth in the attached Exhibit D.
“Developer” means JHC-Acquisitions LLC, and its successors and assigns. “Developer Parties” means Developer and Developer’s agents, employees, consultants, contractors, and subcontractors, and any person acting on behalf of, or as the invitee of, any of the foregoing.
“Developer’s Permitted Exceptions” is defined in Section 3.1. “Effective Date” is the date specified in the preamble to this Agreement. “Environmental Laws” is defined in Section 6.3.2.
“Escrow Agent” is defined in Section 3.4.
“Ground Lease” means a ground lease substantially in the form set forth in the attached Exhibit G.
“Hazardous Material” is defined in Section 6.3.1.
“Improvements” means the improvements to be developed on the Property pursuant to this Agreement and the Ground Lease.
“Indemnitees” means City and its elected and appointed officials, officers, employees, and agents.
“Lender’s Title Policy” is defined in Section 3.8.5.
“Loan Proceeds” means the proceeds of the City Loan.
4 “Memorandum of Lease” is defined in Section 3.8.4, and the form of it is attached as an exhibit to the Ground Lease.
“Notice” means a Notice of Affordability Restrictions on Transfer of Property, and the form of it is attached as an exhibit to the Affordable Housing Agreement. “Official Records” means the Official Records of Orange County. “Owner’s Title Policy” is defined in Section 3.9.3.
“Preliminary Title Report” is defined in Section 3.1.
“Project” is defined in Recital D and more particularly described in the Ground Lease. “Property” is defined in Recital A and described in the Ground Lease. “Property Management Plan” is defined in Section 5.7
“Residential Marketing Plan” is defined in Section 5.6. “Title Company” is defined in Section 3.4.
“Updated Financing Plan” is defined in Section 2.4.2.
Section 1.3 Exhibits. The following Exhibits are attached and incorporated into this Agreement by this reference:
Exhibit A Legal Description of the Property
Exhibit B Pre-Closing Schedule
Exhibit C Form of City Loan Note
Exhibit D Form of Leasehold Deed of Trust (which includes the post-closing schedule and Memorandum of Lease)
Exhibit E Form of Assignment
Exhibit F Forms of Affordable Housing Agreement
Exhibit G Form of Ground Lease
Exhibit H Preliminary Financing Plan (Project Budget; Sources and Uses of Funds; Pro-forma/projected Operating Income/Expense Statement) 5 ARTICLE II
REPRESENTATIONS; EFFECTIVE DATE; PROJECT SCOPE; FINANCING PLAN Section 2.1 Developer’s Representations.. Developer covenants that until the expiration or earlier termination of this Agreement, upon learning of any fact or condition that would cause any of the warranties and representations in this Section 2.1 to be untrue, Developer shall promptly give written notice of such fact or condition to City. Developer acknowledges that City shall rely upon Developer’s representations made herein notwithstanding any investigation made by or on behalf of City. Developer represents, warrants, and covenants that the following are true and correct in all material respects as of the Effective Date, and shall be true and correct in all material respects as of the Closing Date.
2.1.1 Organization. Developer is a limited liability company, duly organized and in good standing under the laws of the State of California.
2.1.2 Authority of Developer. Developer has full power and authority to execute and deliver this Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with this Agreement, and to perform and observe the terms and provisions of all of the foregoing.
2.1.3 Authority of Persons Executing Documents. This Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with to this Agreement, have been executed and delivered, or will be executed and delivered, by persons who are duly authorized to execute and deliver the same for and on behalf of Developer, and all actions required under Developer’s organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with this Agreement, have been duly taken or will have been duly taken (to the extent such actions are required) as of the date of execution and delivery of such documents.
2.1.4 Valid and Binding Agreements. This Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with this Agreement constitute, or if not yet executed or delivered, will when so executed and delivered, constitute, legal, valid and binding obligations of Developer, enforceable in accordance with their respective terms, subject to laws affecting creditors’ rights and principles of equity.
2.1.5 No Breach of Law or Agreement. Neither the execution nor delivery of this Agreement, the other City Documents, or any other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court, board, commission or agency binding on Developer, or any provision of the organizational documents of Developer, or will conflict with or constitute a breach of or a default 6 under any agreement to which Developer is a party, or will result in the creation or imposition of any lien upon any assets or property of Developer, other than liens established pursuant hereto.
2.1.6 Pending Proceedings. Except as disclosed in writing to City prior to execution of this Agreement, to Developer’s knowledge, (i) Developer is not in default under or in violation of any law or regulation or under any order of any court, board, commission or agency whatsoever, and, (ii) there are no claims, actions, suits or proceedings pending or threatened against or affecting Developer, at law or in equity, before or by any court, board, commission or agency. Developer is not the subject of a bankruptcy or insolvency proceeding, and no general assignment or general arrangement for the benefit of creditors or the appointment of a trustee or receiver to take possession of all or substantially all of Developer’s assets has been made. As used in this Section 2.1, the phrase “to Developer’s knowledge” shall mean and refer to the actual knowledge of Michael Massie, without duty of inquiry or investigation.
Section 2.2 City’s Representations. City covenants that until the expiration or earlier termination of this Agreement, upon learning of any fact or condition that would cause any of the warranties and representations in this Section 2.2 to be untrue, City shall promptly give written notice of such fact or condition to Developer. City acknowledges that Developer shall rely upon City’s representations made herein notwithstanding any investigation made by or on behalf of Developer. City represents, warrants, and covenants that the following are true and correct in all material respects as of the Effective Date, and shall be true and correct in all material respects as of the Closing Date.
2.2.1 Organization. City is a California municipal corporation, duly formed and operating under the laws of the State of California.
2.2.2 Authority of City. City has full power and authority to execute and deliver this Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with this Agreement, and to perform and observe the terms and provisions of all of the foregoing.
2.2.3 Authority of Persons Executing Documents. This Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with to this Agreement, have been executed and delivered, or will be executed and delivered, by persons who are duly authorized to execute and deliver the same for and on behalf of City, and all actions required by City and under applicable governing law for the authorization, execution, delivery and performance of this Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with this Agreement, have been duly taken or will have been duly taken (to the extent such actions are required) as of the date of execution and delivery of such documents.
2.2.4 Valid and Binding Agreements. This Agreement, the other City documents, and all other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with this Agreement constitute, or if not yet executed or delivered, will when so executed and delivered, constitute, legal, valid and binding obligations of 7 City, enforceable in accordance with their respective terms, subject to laws affecting creditors’ rights and principles of equity.
2.2.5 No Breach of Law or Agreement. Neither the execution nor delivery of this Agreement, the other City Documents, or any other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court, board, commission or agency binding on City, or will conflict with or constitute a breach of or a default under any agreement to which City is a party, or will result in the creation or imposition of any lien upon any assets or property of City, other than liens established pursuant hereto.
2.2.6 Legal Parcel The Property is a legally formed parcel in the approximate size of .437 acres.
2.2.7 City is Fee Owner. City is the owner of the entire right, title, and interest in and to the Property.
2.2.8 No Litigation. There are no pending or, to City’s knowledge, threatened claims, allegations or lawsuits of any kind that could materially and adversely affect the value of the Property or prohibit the conveyance of a leasehold interest therein, nor to the best of City’s knowledge, is there any governmental investigation of any type or nature pending or threatened against or relating to the Property or the transactions contemplated hereby. As used in this Section
2.2, the phrase “to City’s knowledge” shall mean and refer to the actual knowledge of Bill Gallardo, without duty of inquiry or investigation.
2.2.9 Due Diligence Materials. City has provided to Developer full and complete copies of all studies reports and other due diligence documents and information pertaining to the Property that are in City’s possession or control.
2.2.10 No Property Agreements. No portion of the Property is subject to any lease, license, option, or use agreement (any such agreement a “Property Agreement”) and no person or entity other than City has any right to occupy or use the Property or any portion thereof.
Section 2.3 Project Scope; Design and Development Standards. The contemplated Project is described in Recital D and in the Ground Lease.
Section 2.4 Financing Plan; Project Schedule.
2.4.1 Preliminary Financing Plan. As set forth in the Preliminary Financing Plan set forth in the attached Exhibit H, Developer has preliminarily proposed financing the Project with a combination of a conventional construction loan that will convert to a permanent loan upon completion of construction, equity contributions from federal low-income housing tax credit investors, the City Loan, a loan from the County of Orange, a Cal Optima Health Grant Award.
2.4.2 Updated Financing Plan. Developer shall submit for City approval (such approval not to be unreasonably withheld, conditioned or delayed) Developer’s updated plans for construction and permanent financing of the Project (the “Updated Financing Plan”) and such 8 submission and approval shall be a condition to Closing. The Updated Financing Plan shall indicate all sources of funds necessary to pay, when due, and the estimated costs of the Project (including the hard and soft construction costs), and shall be accompanied by evidence that all such funds are subject to binding commitments, from Developer, equity investors, and lenders, subject only to commercially reasonable conditions. The Updated Financing Plan shall include development and operating pro-formas which set out in detail Developer’s plan for financing the costs of leasing the Property, and constructing and operating the Project. In addition, if applicable, the Updated Financing Plan shall be accompanied by an updated project schedule for approval by City and, if approved, the post-closing construction schedule attached to the form of Ground Lease shall be revised accordingly.
2.4.3 City Review/Approval of Updated Financing Plan.
(a) City shall use good faith efforts to review the proposed Updated Financing Plan as soon as reasonably possible. Within 15 days after Developer’s submittal, the City Manager shall approve or disapprove the Updated Financing Plan in writing, and in the event, of disapproval, shall set forth the objections. If the City Manager disapproves the Updated Financing Plan, Developer shall submit revisions that address the reasons for disapproval. The City Manager’s failure to timely approve or disapprove the proposed Updated Financing Plan shall be deemed to be an approval by City.
(b) If Developer proposes to modify the Updated Financing Plan after it has been approved by City, Developer shall submit proposed modifications to City for review and approval (such approval not to be unreasonably withheld, conditioned or delayed). The same review and notice and amendment provisions set forth in the preceding paragraph shall apply to City’s review of proposed modifications.
2.4.4 Tax Credit Funds and Other Financing Sources; Timing. (a) Developer will submit applications to CTCAC, and other funding sources in accordance with the pre-closing schedule set forth in the attached Exhibit B in order to secure allocations of federal low-income housing tax credits, and if applicable, state tax credits, and other financing for the Project to enable construction to commence by the date that is 30 days after the Close of Escrow. Upon award of a preliminary reservation from CTCAC, Developer shall exercise diligent good faith efforts to obtain a funding commitment from a reputable equity investor. Developer’s procurement of a CTCAC allocation and receipt of commitments from an equity investor, and the actual closing of loans from construction and permanent lenders sufficient to fully finance development of the Project are conditions precedent to the Closing (including City’s obligation to lease the Property to Developer and provide the City Loan). (b) The Closing must occur by the deadline in Exhibit B, and shall not be subject to delays for Force Majeure. However, provided Developer is in compliance with this Agreement, including diligently pursuing the financing required to develop the Project, as contemplated pursuant to subparagraph (a) above, the City Manager may grant two one-year written extensions to such deadline.
9 (c) If the Closing does not occur by the Closing deadline set forth in Exhibit B (as such deadline may be extended pursuant to subparagraph (b) above), either Developer or City shall have the right, by delivery of written notice to the other party, to terminate this Agreement, subject to any provisions and obligations which state that they survive termination.
ARTICLE III
LEASE OF THE PROPERTY; CONDITIONS PRECEDENT TO CLOSING
Section 3.1 Lease of Property; Review of Title. Within five days after the Effective Date, Developer shall obtain from Title Company a preliminary title report describing the state of title of the Property (“Preliminary Title Report”). Developer shall notify City in writing (“Developer’s Objection Notice”) of any objections Developer may have to title exceptions contained in the Preliminary Title Report not later than 30 days following the Effective Date (“Title Review Period”). In the event Developer fails to deliver Developer’s Objection Notice prior to the expiration of the Title Review Period, Developer shall conclusively be deemed to have approved the state of title of the Property. City shall have a period of five business days after receipt of Developer’s Objection Notice in which to deliver written notice to Developer (“City’s Notice”) of City’s election to either: (i) remove the objectionable items prior to the Close of Escrow; or (ii) decline to remove any such title exceptions and terminate the escrow and this Agreement. If City fails to deliver City’s Notice within such period, City shall be deemed to have elected to decline to remove such title exceptions and terminate the escrow and this Agreement. If City notifies or is deemed to have notified Developer of its election to terminate the escrow rather than remove the objectionable items, Developer shall have the right, by written notice delivered to City not later than 60 days following the Effective Date, to agree to accept the Property subject to the objectionable items. In such event City’s election to terminate the escrow shall be of no effect, and Developer shall acquire its leasehold interest in the Property at the Close of Escrow subject to such objectionable items. Notwithstanding the foregoing, City shall, on or before the Close of Escrow, remove all deeds of trust and financing statements as an encumbrance to title, without the necessity for an objection by Developer. Upon the issuance of any amendment or supplement to the Preliminary Title Report which has additional exceptions for matters not shown on the original Preliminary Title Report, the foregoing right of review and approval shall also apply to such amendment or supplement (provided that the period for Developer to review such amendment or supplement shall be the later of the expiration of the Title Review Period or five days from receipt of the amendment or supplement). If Developer properly notifies City of its disapproval of the state of title to the Property on or before the expiration of the Title Review Period (or such longer period as may be provided in the immediately sentence), this Agreement and the escrow shall terminate.
Section 3.2 Ground Lease/Possession at Closing. On the Closing Date, City shall deliver possession of the Property to the Developer pursuant to the Ground Lease.
Section 3.3 Ground Lease/Prepayment of Rent. At the Closing, Developer shall pay the sum of $99 to City as prepaid rent under the Ground Lease (through escrow or outside of escrow).
10 Section 3.4 Escrow. City and Developer shall open escrow at the office of Commonwealth Land Title Company or such other title company as the Parties may agree upon (“Escrow Agent” or “Title Company”) in order to consummate the lease of the Property to Developer and the Close of Escrow.
Section 3.5 Costs of Closing and Escrow; Legal Fees. Developer shall pay all title insurance premiums for title policies Developer elects to purchase in connection with the lease of the Property and the financing of the Project, and Developer shall pay all recording fees, transfer taxes, escrow fees, and closing costs incurred in connection with the lease of the Property and the financing of the Project. Developer shall pay for the cost of the lender’s policy of title insurance that must be issued to City insuring City’s deed of trust which secures the City Loan. Property taxes and assessments shall be prorated as of the Closing Date. City and Developer shall provide Escrow Agent with a copy of this Agreement, which together with such supplemental instructions as City or Developer may provide and which are consistent with this Agreement, or which are otherwise mutually agreed upon by City and Developer, shall serve as escrow instructions for the Close of Escrow.
Section 3.6 Closing Deadline. The Closing Date shall occur on or before the deadline set forth in Exhibit B as such deadline may be extended pursuant to Section 2.4.4(b) above), or if earlier, within 30 days following the satisfaction or waiver of all conditions precedent to the Close of Escrow as set forth in Sections 3.8 and 3.9.
Section 3.7 Closing Deliveries; Recording. Prior to the Close of Escrow, Developer shall deliver the executed City Loan Note, Ground Lease, and Assignment to City, and shall deposit into escrow the recordable City Documents to which Developer is a party, executed and acknowledged as applicable, Developer’s share of closing costs, and funds in the amount required to pay all rent due under the Ground Lease (i.e., $99), and all other costs and expenses payable by Developer pursuant to this Agreement and the City Documents. Provided that all conditions precedent to Close of Escrow have been satisfied or waived, City shall deposit into escrow executed copies of the recordable City Documents to which City is a party. On the Closing Date, the Escrow Agent shall cause the Memorandum of Lease, the Affordable Housing Agreement, the Notice, and then the Deed of Trust, in that order, without intervening recordings, to be recorded in the Official Records (it being understood that any subordination of the City’s Deed of Trust must be evidenced by a reasonable, recorded subordination agreement approved and signed by the City Manager).
Section 3.8 City’s Conditions to Closing. City’s obligations to lease the Property to Developer and close the City Loan (i.e., the “Closing”) are conditioned upon the satisfaction of the terms and conditions set forth in this Section 3.8, unless any such condition is waived in writing by the City Manager, which may be given or withheld in the City Manager’s sole and absolute discretion.
3.8.1 No Default. There shall exist no condition, event or act which would constitute a breach or default by Developer under this Agreement or any other City Document, or which, upon the giving of notice or the passage of time, or both, would constitute such a breach or default.
11 3.8.2 Representations. All representations and warranties of Developer contained herein or in any other City Document or certificate delivered in connection with the transactions contemplated by this Agreement shall be true and correct in all material respects as of the Close of Escrow.
3.8.3 Due Authorization and Good Standing; Organizational Documents.
Developer shall have delivered to City copies of all of the following, including updated versions of any of the following that have been amended or modified since the date of any prior delivery of such documents to City: (i) Developer’s good standing certificate and articles of incorporation, each certified by the Secretary of State; and (ii) Developer’s bylaws/operating agreement, and resolutions authorizing Developer’s execution of and performance under this Agreement and the other City Documents, each certified by an officer or other authorized party as accurate, complete, and in full force and effect.
3.8.4 Execution, Delivery and Recordation of Documents. Developer shall have executed, acknowledged as applicable, and delivered all documents required in connection with the contemplated transactions, including the City Note, the Deed of Trust, the Assignment, the Affordable Housing Agreement, the Notice, the Ground Lease, and a Memorandum of Lease substantially in the form attached as an exhibit to the Ground Lease (“Memorandum of Lease”).
3.8.5 Lender’s Title Policy. The Title Company shall, upon payment of the premium therefor, be ready to issue an ALTA Lender’s Policy of Title Insurance for the benefit and protection of City (“Lender’s Title Policy”) in the amount of the City Loan, insuring that the Deed of Trust is recorded against Developer’s leasehold interest in the Property, subject only to senior liens, title exceptions and such other defects, liens, conditions, encumbrances, restrictions, easements and exceptions as City may approve in writing and containing such endorsements as City may reasonably require, with the cost of such Lender’s Title Policy to be paid by Developer.
3.8.6 Financing Plan. City shall have approved (with such approval not to be unreasonably withheld, conditioned or delayed) the Updated Financing Plan, including the sources of construction and permanent financing, and the construction and operating budgets for the Project.
3.8.7 Commitment/Closing of all Other Loans and Equity Funds. All loans and commitments of equity for the construction of the Project shall have closed or shall close concurrently with the closing of the City Loan and the leasing of the Property (i.e., the delivery of Ground Lease and recording of Memorandum of Lease), and Developer shall have provided City with reasonable evidence of committed equity funds necessary for the Project.
3.8.8 Construction Contract, Plans. City shall have approved (with such approval not to be unreasonably withheld, conditioned or delayed) the final Construction Plans and specifications for the Project. Developer shall have delivered an executed copy of the construction contract for the Project to the City, which must be consistent with the Updated Project Budget approved by City.
3.8.9 Completion Guaranty. Developer shall have provided to City a completion guaranty in a form reasonably acceptable to City executed by Developer. 12 3.8.10 Settlement Statement. City shall have approved (with such approval not to be unreasonably withheld, conditioned or delayed) the final settlement statement for the Close of Escrow.
3.8.11 Insurance. Developer shall have provided to City the evidence of the insurance required of Developer under the Ground Lease.
3.8.12 Marketing and Management Plans. Developer shall have submitted initial drafts of the Residential Marketing Plan and the Property Management Plan.
3.8.13 Other Documents. Developer’s delivery to City, and City approval (with such approval not to be unreasonably withheld, conditioned or delayed) of such other documents related to the development and financing of the Project as City may reasonably request.
3.8.14 Surplus Land Act. City’s determination that the Property is “exempt surplus land” shall have been confirmed by the California Department of Housing and Community Development.
Section 3.9 Developer’s Conditions to Closing. Developer’s obligation to proceed with the leasing of the Property is subject to the satisfaction or Developer’s waiver, which may be given or withheld in Developer’s sole and absolute discretion, of the following conditions:
3.9.1 No Default. City shall not be in default under the terms of this Agreement, and all representations and warranties of City contained in this Agreement shall be true and correct;
3.9.2 Execution of Documents. City shall have executed and acknowledged the Memorandum of Lease, the Affordable Housing Agreement, the Notice, and all other City Documents to which the City is a party, and shall have delivered such documents into escrow, and City shall have executed the Ground Lease and shall have delivered the Ground Lease to Developer; and
3.9.3 Owner’s Title Policy. The Title Company shall, upon payment of the premium therefor, be ready to issue an Owner’s Title Insurance Policy for the benefit and protection of Developer (“Owner’s Title Policy”) showing a leasehold interest in the Property vested in Developer, subject only to the exceptions approved by Developer pursuant to Section 3.1 above and containing such endorsements as Developer may reasonably require, with the cost of such Owner’s Title Policy to be paid by Developer.
3.9.4 Financing Plan. Developer shall have approved the Updated Financing Plan, including the sources of construction and permanent financing, and the construction and operating budgets for the Project, and all construction financing shall be ready to close as of the Close of Escrow.
3.9.5 Settlement Statement. Developer shall have approved (with such approval not to be unreasonably withheld, conditioned or delayed) the final settlement statement for the Close of Escrow.
13 3.9.6 Permits and Land Use Approvals. Developer shall have obtained all rezoning and other land use approvals and all permits (or permit ready letters) required to construct the Project (or with respect to permits, they are capable of being issued subject only to payment of fees that will be paid through escrow at the Close of Escrow).
Section 3.10 City Covenants Prior to Closing Date.
3.10.1 City to Maintain Insurance. City shall maintain its current property insurance in effect as of the Effective Date throughout and until the Closing Date.
3.10.2 No New Property Agreements. City shall not, without Developer’s prior written consent, which consent may be given or withheld in Developer’s sole and absolute discretion, enter into any Property Agreement or any other agreement affecting in any way the Property or any portion thereof.
ARTICLE IV
CITY LOAN
Section 4.1 City Loan. Upon satisfaction of the conditions precedent set forth in Sections 3.8 and 3.8, City agrees to provide the City Loan to Developer upon the terms and conditions, and for the purposes set forth in, this Agreement and the City Loan Note.
Section 4.2 Loan Terms.
4.2.1 Disbursements; Use of Proceeds. City shall disburse proceeds of the City Loan to Developer on a draw-down basis, to pay Project costs (both hard and soft costs). Developer shall submit requests for disbursement in writing, on a form reasonably acceptable to City, along with reasonable documentation evidencing the costs to be paid by such requested funds. City shall disburse requested funds to Developer within 15 days following City’s receipt of a disbursement request submitted by Developer pursuant to this Section 4.2.
4.2.2 Determination of Interest Rate. The principal balance of the City Loan outstanding from time to time will bear interest at a rate to be determined by City based upon Project feasibility and ability to meet the “true debt” test, but which shall be not more than 3% simple annual interest, except during such periods that the default rate of interest specified in the City Loan Note applies. If Developer requests a reduction in interest rate to less than 3% simple annual interest, Developer shall be required to demonstrate to City’s reasonable satisfaction that:
(i) such lower interest rate is necessary to achieve Project feasibility or satisfy the “true debt” test; (ii) Developer has engaged in good faith negotiations with other public agency lenders and has obtained interest rate concessions from such lenders comparable in scope to the requested reduction in the interest rate for the City Loan Note; and (iii) no loan provided by any sponsor or general partner of Developer will bear interest at a rate higher than the rate requested for the City Loan Note.
14 4.2.3 Other Terms of City Loan. The other terms of the City Loan are set forth in the City Loan Note (and the Deed of Trust and Assignment).
Section 4.3 Security; Subordination Agreements. Repayment of the City Loan Note shall be secured by the Deed of Trust which shall be executed by Developer and recorded against Developer’s leasehold interest in the Property at the Close of Escrow, and the Assignment which shall be executed by Developer and delivered directly to City as a condition to Closing. The City Manager may execute and deliver reasonable recordable subordination agreements (with respect to the City Deed of Trust) required by other secured lenders described in the City-approved final Financing Plan as a condition to their loans.
Section 4.4 No Obligation to Close Escrow After Default. Notwithstanding any other provision of this Agreement, City shall have no obligation to authorize the Close of Escrow or the disbursement of Loan Proceeds following: (i) the knowing or intentional failure of any of Developer’s representations and warranties made in this Agreement or in connection with this Agreement to be true and correct in all material respects; (ii) the termination of this Agreement; or (iii) the occurrence of a default under any City Document which remains uncured following written notice and beyond any applicable cure period, or the existence of any condition, event or act which upon the giving of notice or the passage of time or both would constitute a default under any City Document.
ARTICLE V
DEVELOPMENT AND USE OF THE PROPERTY
Section 5.1 Development Schedule; Development/Construction. The terms of the Ground Lease shall govern the Developer’s post-Closing construction of the Project. The schedule for construction of the Project is set forth as an exhibit to the Ground Lease.
Section 5.2 Costs of Leasing and Construction. With the exception of the City Loan, Developer shall be solely responsible for all direct and indirect costs and expenses incurred in connection with the construction and development of the Project, the acquisition of its ground leasehold interest and space leasing of the Property (including appraisal fees, title reports and any environmental assessments), and compliance with the Conditions of Approval, including all offsite and on-site improvements required by City. All such costs shall be borne solely by Developer and shall not be an obligation of City.
Section 5.3 Permits and Approvals; Payment of Fees. Developer acknowledges that the execution of this Agreement by City does not constitute City approval for the purpose of the issuance of building permits, does not limit in any manner the discretion of City in such approval process, and does not relieve Developer from the obligation to apply for and to obtain from City and all other agencies with jurisdiction over the Property, all necessary approvals, entitlements, and permits for the construction of the Project (including the approval of architectural plans, the issuance of any certificates regarding historic resources required in connection with the development of the Property (if any), and the approval of the Project in compliance with CEQA if applicable, and if applicable, NEPA), nor does it limit in any manner the discretion of City in the 15 approval process. Prior to the Close of Escrow, Developer shall have obtained all entitlements, permits, licenses and approvals required for the construction of the Project, including any fire safety permits required by the fire department, building permits, and use permits or shall provide evidence satisfactory to City that receipt of such permits and approvals is subject only to such conditions as City may approve. Developer shall pay when due all customary and usual fees and charges in connection with the processing of all applicable permits and approvals, but in any event all such fees and charges must be paid as a condition to the Closing (though they may be paid through escrow upon the Closing). Developer shall not commence construction work on the Project prior to issuance of building permits required for such work.
Section 5.4 Construction Plans. Developer shall submit to City’s Building Department a complete building permit application, including detailed construction plans for the Project (“Construction Plans”). As used herein “Construction Plans” means all construction documents upon which Developer and Developer’s contractors shall rely in constructing the Project (including the landscaping, parking, and common areas) and shall include the on-site development plan, the construction management plan, final architectural drawings, landscaping, exterior lighting and signage plans and specifications, materials specifications, final elevations, building plans and specifications, plans for all off-site improvements necessary to develop and operate the Project as required by the Conditions of Approval, including utilities, curbs, gutters, sidewalks, and driveways along the Project frontages, and all items the City requires to be submitted in connection with applications for building permits. The Construction Plans shall be based upon the scope of development and development standards set forth in the Ground Lease and upon the approvals issued by City for the Project, and shall not materially deviate therefrom without the express written consent of City, which consent shall not be unreasonably withheld, conditioned or delayed.
Section 5.5 Equal Opportunity. There shall be no discrimination on the basis of race, color, religion, creed, sex, sexual orientation, marital status, ancestry or national origin in the hiring, firing, promoting or demoting of any person engaged in construction work on the Property, and Developer shall direct its contractors and subcontractors to refrain from discrimination on such basis.
Section 5.6 City Approval of Residential Marketing Plan. Developer shall submit to City Manager for review and approval an initial residential marketing plan (“Residential Marketing Plan”), in a form reasonably acceptable to City and consistent with the provisions of the Affordable Housing Agreement. The City Manager’s approval shall not be unreasonably withheld, conditioned or delayed. If the City Manager disapproves the Residential Marketing Plan, the City Manager shall do so by written notice to Developer stating the reasons for such disapproval. Once approved, any material changes to the Residential Market Plan shall be submitted to the City Manager for approval, which approval shall not be unreasonably withheld, conditioned or delayed.
Section 5.7 City Approval of Property Management Plan. Within the time established in the Schedule of Performance, Developer shall submit to the City Manager for review and approval an initial property management plan that provides for management of the Property, including maintenance, inspection, and repair of the Improvements and landscaping on the Property (“Property Management Plan”). The City Manager’s approval shall not be 16 unreasonably withheld, conditioned, or delayed. If the City Manager disapproves the Property Management Plan, the City Manager shall do so by written notice to Developer stating the reasons for such disapproval. Once approved, any material changes to the Property Management Plan shall be submitted to the City Manager for approval, which approval shall not be unreasonably withheld, conditioned or delayed.
ARTICLE VI
CONDITION OF THE SITE; ENVIRONMENTAL MATTERS
Section 6.1 Access to Site; Inspections. Prior to the Close of Escrow, Developer Parties may enter upon and conduct reviews and assessments of the physical and environmental condition of the Property and the condition of the existing improvements, and perform an ALTA survey. Developer shall provide City with the names of such authorized representatives, and proof of liability insurance reasonably acceptable to City, naming City as additional insured, prior to any such entry. Developer’s inspection, examination, survey and review of the Property shall be at its sole expense. Developer shall provide to City solely as an accommodation and without any representation or warranty regarding the information contained therein, copies of all reports and test results promptly following completion of such reports and testing; provided that City acknowledges and agrees that City shall be solely responsible to obtain any approvals necessary to rely on any of said reports and/or test results. Twenty-four hours in advance of its intention to enter the Property, Developer shall notify City and provide workplans, drawings, and descriptions of any intrusive sampling it intends to do. Developer shall keep the Property in a safe condition during its entry. Developer shall repair, and to the extent reasonably practicable, restore and return the Property to its condition immediately preceding Developer’s entry thereon at Developer’s sole expense Developer shall not permit any mechanics liens, stop notices, or other liens or encumbrances to be placed against the Property prior to Close of Escrow. Without limiting any other indemnity provisions set forth in this Agreement, Developer shall indemnify, defend (with counsel reasonably acceptable to City) and hold the Indemnitees harmless from and against all liabilities, losses, costs, expenses (including without limitation attorneys’ fees and costs of litigation), claims, demands, actions, suits, judicial or administrative proceedings, penalties, deficiencies, fines, orders, and damages (all of the foregoing, collectively, “Entry Claims”) resulting from or arising in connection with entry upon the Property pursuant to this Section 6.1 except to the extent arising from the gross negligence or willful misconduct of any of the Indemnitees. Developer’s indemnification obligations set forth in this Section 6.1 shall not apply to Entry Claims relating to the diminution in value of the Property solely resulting from Developer’s mere discovery of Hazardous Materials or other conditions of the Property that existed prior to Developer’s entry onto the Property, provided that no such condition is exacerbated due to the activities of any Developer Parties. Developer’s indemnification obligations set forth in this Section 6.1 shall survive the Close of Escrow and the termination of this Agreement and shall be subject to the provisions of Section 10.2.
Section 6.2 Condition of Property.
6.2.1 City’s lease of the Property to Developer shall be made “AS IS,” with no warranties or representations by City concerning the condition of the Property, including the 17 presence or absence of any Hazardous Materials, except for such express representations and warranties made by City in the Ground Lease and this Agreement, including in Section 2.2.
6.2.2 Developer agrees and acknowledges that: (i) neither City, nor anyone acting for or on behalf of City, has made, and Developer has not relied on, any representation, statement, warranty or promise to Developer concerning the development potential or condition of the Property, except for such express representations and warranties made by City in the Ground Lease and this Agreement, including in Section 2.2; (ii) Developer has or will have independently verified all matters concerning the Property and that Developer shall lease the Property on its own prior examination thereof; and (iv) IN ENTERING INTO THE GROUND LEASE DEVELOPER SHALL BE LEASING THE PROPERTY, IN AN “AS IS” PHYSICAL CONDITION AND IN AN “AS IS” STATE OF REPAIR.
Section 6.3 Definitions.
6.3.1 “Hazardous Material” means any chemical, compound, material, mixture, or substance that is now or may in the future be defined or listed in, or otherwise classified pursuant to any Environmental Laws (defined below) as a “hazardous substance”, “hazardous material”, “hazardous waste”, “extremely hazardous waste”, infectious waste”, toxic substance”, toxic pollutant”, or any other formulation intended to define, list or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, or toxicity. The term “hazardous material” shall also include asbestos or asbestos-containing materials, radon, chrome and/or chromium, polychlorinated biphenyls, petroleum, petroleum products or byproducts, petroleum components, oil, mineral spirits, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable as fuel, perchlorate, and methyl tert butyl ether, whether or not defined as a hazardous waste or hazardous substance in the Environmental Laws.
6.3.2 “Environmental Laws” means any and all federal, state and local statutes, ordinances, orders, rules, regulations, governmental directives, or any other requirements of governmental authorities with jurisdiction over the Property or Project, as may presently exist, or as may be amended or supplemented, or hereafter enacted, relating to the presence, release, generation, use, handling, treatment, storage, transportation or disposal of Hazardous Material, or the protection of the environment or human, plant or animal health, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C. § 9601), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Oil Pollution Act (33 U.S.C. § 2701 et seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C. § 11001 et seq.), the Porter-Cologne Water Quality Control Act (Cal. Water Code § 13000 et seq.), the Toxic Mold Protection Act (Cal.
Health & Safety Code § 26100, et seq.), the Safe Drinking Water and Toxic Enforcement Act of 1986 (Cal. Health & Safety Code § 25249.5 et seq.), the Hazardous Waste Control Act (Cal. Health & Safety Code § 25100 et seq.), the Hazardous Materials Release Response Plans & Inventory Act (Cal. Health & Safety Code § 25500 et seq.), and the Carpenter-Presley-Tanner Hazardous Substances Account Act (Cal. Health and Safety Code, Section 25300 et seq.). 18 ARTICLE VII
LIMITATIONS ON CHANGE IN OWNERSHIP, MANAGEMENT AND CONTROL OF
DEVELOPER
Section 7.1 Identity of Developer; Changes Only Pursuant to this Agreement.
Developer and its principals have represented that they possess the necessary expertise, skill and ability to carry out the development of the Project pursuant to this Agreement. The qualifications, experience, financial capacity and expertise of Developer and its principals are of particular concern to City. It is because of these qualifications, experience, financial capacity and expertise that City has entered into this Agreement with Developer. No voluntary or involuntary successor, assignee or transferee of Developer shall acquire any rights or powers under this Agreement, except as expressly provided herein. In addition, notwithstanding anything in this Agreement to the contrary, the following transfers shall be permitted without the prior consent of City:
7.1.1 Any transfer to a lender pursuant to a deed of trust or other security instrument as collateral for: (i) bona fide construction financing to pay all or any part of the Project costs; or (ii) a bona fide permanent loan.
7.1.2 Any transfer directly resulting from the foreclosure or deed in lieu of foreclosure of a deed of trust or other security instrument for a loan from a lender to the Project (and the first transfer by such lender or its nominee following such foreclosure or deed in lieu of foreclosure so long as such transferee assumes the obligations of Developer hereunder in connection with such first Transfer).
7.1.3 Any transfer of stock or equity in the Party that does not change management or operational control of the Project, with no material change in beneficial ownership (with the exception of any conveyance to member(s) of the immediate family(ies) of the transferor(s) or trusts for their benefit) and which constitutes a tax-free transaction under Federal income tax law and California real estate transfer tax.
7.1.4 The lease of residential units in the Project consistent with the Affordable Housing Agreement.
Section 7.2 Effect of Transfer without City Consent.
7.2.1 With the exception of any transfers for which City consent is not required pursuant to Section 7.1, in the absence of specific written agreement by City, no transfer by Developer shall be deemed to relieve Developer or any other party from any obligation under this Agreement.
7.2.2 It shall be an Event of Developer Default hereunder entitling City to pursue remedies including termination of this Agreement if Developer violates this Article 7. 19 ARTICLE VIII
SECURITY FINANCING AND SUBORDINATION OF CITY DEED OF TRUST Section 8.1 Mortgages and Deeds of Trust for Development. Mortgages and deeds of trust, or any other reasonable security instrument are permitted to be placed upon the Improvements and Developer’s leasehold interest in the Property only for the purpose of securing loans for the purpose of financing the design and construction of the Improvements, and other expenditures reasonably necessary for the development of the Project pursuant to this Agreement.
No such instruments shall be recorded against City’s fee interest in the Property. Developer shall not enter into any conveyance for such financing that is not contemplated in the applicable Financing Plan as it may be updated with City approval, without the prior written approval of the City Manager (with all of such approvals not to be unreasonably withheld, conditioned or delayed).
As used herein, the terms “mortgage” and “deed of trust” shall mean any security instrument used in financing real estate acquisition, construction or land development.
Section 8.2 Subordination. City agrees that it will not withhold consent to reasonable requests for subordination of the Deed of Trust to deeds of trust provided for the benefit of lenders providing construction and/or permanent financing for the Project that are identified in the approved final Financing Plan as it may be updated with City approval, provided that the instruments effecting such subordination include reasonable protections for City in the event of default, including the provisions set forth in this Section. The Deed of Trust may only be subordinated to deeds of trust recorded to secure repayment of financing provided by state or federally chartered financial institutions, public agencies, and nonprofit corporations or other entities that are unaffiliated with Developer or any of its partners or their affiliated entities. Any subordination agreement must provide the following: (i) City shall be provided with a copy of any notice of default concurrently with the lender’s provision of such notice to Developer; (ii) City shall have the right to cure any default of Developer; (iii) City shall be provided a 30-day period to cure any monetary default and a 60 day or longer period to cure any non-monetary default; (iv) the subordination will be effective only during the original term of the senior loan and any extension of the term approved by City in writing (such approval not to be unreasonably withheld, conditioned or delayed); (v) absent City’s prior written consent (such consent not to be unreasonably withheld, conditioned of delayed), the senior loan documents will not be amended to increase the amount, extend the maturity date, increase the interest rate, or increase the payment amounts due under the senior loan documents; and (vi) the subordination shall not limit the effect of the Deed of Trust prior to a senior lender’s declaration of default and commencement of its remedies, nor require City to obtain the senior lender’s consent prior to the City’s exercise of remedies under the City Loan Note (other than City’s commencement of foreclosure proceedings, for which the senior lender’s consent may be required) or the Ground Lease (but the Ground Lease shall have reasonable mortgagability provisions, including lender cure rights).
Section 8.3 Holder Not Obligated to Construct. The holder of any mortgage or deed of trust authorized by this Agreement shall not be obligated to complete construction of the Project (except that if such holder succeeds to the lessee’s interest under the Ground Lease, the failure to timely cure a default under the terms of the Ground Lease relating to construction of the Project shall entitle City, as landlord, to terminate the Ground Lease), or to guarantee such completion. Nothing in this Agreement shall be deemed to permit or authorize any such holder to 20 devote the Property or any portion thereof to any uses, or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement.
Section 8.4 Modifications to Ground Lease. City shall not unreasonably withhold its consent to modifications of the Ground Lease form requested by Project lenders or investors provided such modifications do not materially adversely affect City’s substantive rights or increase City’s obligations under this Agreement or the form of Ground Lease attached hereto.
Section 8.5 Estoppel Certificates. Either Party shall, at any time, and from time to time, within 15 days after receipt of written request from the other Party, execute and deliver to such Party a written statement certifying that, to the actual knowledge of the certifying Party:
(i) this Agreement is in full force and effect and a binding obligation of the Parties (if such be the case); (ii) this Agreement has not been amended or modified, or if so amended, identifying the amendments; and (iii) the requesting Party is not in default in the performance of its obligations under this Agreement, or if in default, describing the nature of any such defaults.
ARTICLE IX
DEFAULTS, REMEDIES AND TERMINATION
Section 9.1 Event of Developer Default. The following events shall constitute an event of default on the part of Developer hereunder (“Developer Event of Default”):
9.1.1 A transfer occurs, either voluntarily or involuntarily, in violation of Article VII, and Developer fails to undo such transfer within 30 days after written notice thereof from City to Developer;
9.1.2 Developer breaches any obligation of Developer herein, and fails to cure such obligation within 30 days after written notice thereof from City to Developer; provided, however, that if such cure cannot reasonably be completed within 30 days, Developer shall not be in default if it commences to cure such obligation within such 30 day period and diligently prosecute such cure to completion;
9.1.3 Developer fails to timely close the transaction described in this Agreement for any reason other than: (i) a default by City; (ii) the failure of a condition in favor of Developer pursuant to Section 3.10 to have been satisfied, or waived by Developer; or (iii) the failure of a condition in favor of Developer pursuant to Section 3.9 to have been satisfied, or waived by City;
9.1.4 Any representation or warranty contained in this Agreement or in any application, financial statement, certificate or report submitted to City in connection with this Agreement proves to have been knowingly or intentionally incorrect in any material respect;
9.1.5 If, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors (“Bankruptcy Law”), Developer or any general partner thereof: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against Developer or any general partner thereof in an 21 involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Developer or any general partner thereof; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due;
9.1.6 A court of competent jurisdiction shall have made or entered any decree or order (1) adjudging the Developer to be bankrupt or insolvent, (2) approving as properly filed a petition seeking reorganization of the Developer or seeking any arrangement for Developer under bankruptcy law or any other applicable debtor’s relief law or statute of the United States or any state or other jurisdiction, (3) appointing a receiver, trustee, liquidator, or assignee of the Developer in bankruptcy or insolvency or for any of its properties, or (4) directing the winding up or liquidation of the Developer, in each case if such decree, order, petition, or appointment is not removed or rescinded within 120 days;
9.1.7 Developer shall have assigned its assets for the benefit of its creditors (other than pursuant to a mortgage loan) or suffered a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon shall have been returned or released within 90 days after such event (unless a lesser time period is permitted for cure pursuant to any other mortgage on the Property, in which event such lesser time period shall apply under this subsection as well) or prior to any sooner sale pursuant to such sequestration, attachment, or execution;
9.1.8 Developer shall have voluntarily suspended its business or Developer shall have been dissolved or terminated.
Section 9.2 City Default. An event of default on the part of City (“City Event of Default”) shall arise hereunder if City fails to keep, observe, or perform any of its covenants, duties, or obligations under this Agreement, and the default continues for a period of 30 days after written notice thereof from Developer to City.
Section 9.3 City’s Right to Terminate Agreement. If a Developer Event of Default shall occur and be continuing beyond any applicable cure period, then City shall, in addition to other rights available to it under law or this Agreement, have the right to terminate this Agreement.
If City makes such election, City shall give written notice to Developer specifying the nature of the default and stating that this Agreement shall expire and terminate on the date specified in such notice, and upon the date specified in the notice, this Agreement and all rights of Developer under this Agreement, shall expire and terminate.
Section 9.4 City’s Remedies and Rights Upon an Event of Developer Default.
Upon the occurrence of a Developer Event of Default, City shall have all remedies available to it under this Agreement or under law or equity.
Section 9.5 Developer’s Remedies Upon a City Event of Default. Upon the occurrence of a City Event of Default, Developer shall have all remedies available to it under this Agreement or under law or equity, including bringing an action for equitable relief seeking the specific performance of the terms and conditions of this Agreement, and/or enjoining, abating, or preventing any violation of such terms and conditions. Notwithstanding the preceding, each Party covenants not to sue for damages, or claim any damages, for any default. 22 Section 9.6 Remedies Cumulative. Except as otherwise expressly stated 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 time, of any other rights or remedies for the same or any other default by the other Party.
Section 9.7 Inaction Not a Waiver of Default. No failure or delay by either Party in asserting any of its rights and remedies as to any default shall operate as a waiver of such default or of any such rights or remedies, nor deprive either Party of its rights to institute and maintain any action or proceeding which it may deem necessary to protect, assert or enforce any such rights or remedies in the same or any subsequent default.
Section 9.8 Construction Plans. If this Agreement is terminated by mutual agreement of the Parties or by City as a result of a Developer Event of Default, pursuant to, and in accordance with the Assignment securing the Predevelopment Loan, Developer, at no cost to the City, shall deliver to City copies of all construction plans and studies in Developer’s possession or in the possession of the Developer' s consultants related to development of the Project on the Property, including without limitation, the Construction Plans.
ARTICLE X
INDEMNITY AND INSURANCE
Section 10.1 Indemnity. To the greatest extent allowed by law, Developer shall indemnify, defend (with counsel reasonably acceptable to City) and hold the Indemnitees harmless from and against any and all Claims (including without limitation, Claims arising from any injury, death, property damage, or loss of property) arising directly or indirectly, in whole or in part, as a result of or in connection with Developer’s performance or failure to perform under this Agreement, including without limitation, Claims arising in connection with any violation of Applicable Laws by Developer. Developer’s indemnification obligations under this Section 10.1 shall not extend to Claims to the extent arising from the gross negligence or willful misconduct of any of the Indemnitees. Developer’s obligations under this Section 10.1 shall survive the expiration or earlier termination of this Agreement and are subject to the provisions of Section 10.2.
Section 10.2 Terms Applicable to Indemnity Provisions. The terms set forth in this Section 10.2 shall apply to all provisions of this Agreement that pertain to Developer’s obligations to indemnify City and the other Indemnitees, including Sections 6.1,10.1, 10.2, and 11.1. In connection with each such provision, all of the following shall apply:
10.2.1 City does not and shall not waive any rights against Developer that it may have by reason of any indemnity and hold harmless provision set forth in this Agreement because of the acceptance by City, or the deposit with City by Developer, of any of the insurance policies described in this Agreement.
10.2.2 Developer’s obligation to indemnify the Indemnitees shall not be limited or impaired by any of the following: (i) any amendment or modification of any City Document; (ii) any extensions of time for performance required by any City Document; (iii) any provision in any 23 of the City Documents limiting City’s recourse to property securing the City Loan, or limiting the personal liability of Developer, or any other party for payment of all or any part of the City Loan; (iv) the accuracy or inaccuracy of any representation and warranty made by Developer under this Agreement or by Developer or any other party under any City Document (but not including any representations and warranties made by City under this Agreement), (v) the release of Developer or any other person, by City or by operation of law, from performance of any obligation under any City Document; (vi) the release or substitution in whole or in part of any security for repayment of the City Loan; and (vii) City’s failure to properly perfect any lien or security interest given as security for repayment of the City Loan.
10.2.3 The obligation of Developer to indemnify the Indemnitees shall survive any repayment or discharge of the indebtedness evidenced by the City Loan Note, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, any release of record of the lien of the Deed of Trust, and the expiration or earlier termination of this Agreement and the Ground Lease.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 No Brokers. Each Party warrants and represents to the other that no person or entity can properly claim a right to a real estate commission, brokerage fee, finder’s fee, or other compensation with respect to the transactions contemplated by this Agreement. Each Party agrees to defend, indemnify and hold harmless the other Party from any claims, expenses, costs or liabilities arising in connection with a breach of this warranty and representation. The terms of this Section shall survive the close of escrow and the expiration or earlier termination of this Agreement.
Section 11.2 Notices. Except as otherwise specified in this Agreement, all notices to be sent pursuant to this Agreement shall be made in writing, and sent to the Parties at their respective addresses specified below or to such other address as a Party may designate by written notice delivered to the other Parties in accordance with this Section. All such notices shall be sent by: (i) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered on receipt if delivery is confirmed by a return receipt; or (ii) reputable overnight courier that provides a receipt with the date and time of delivery, with charges prepaid or charged to the sender’s account, in which case notice is effective on delivery if delivery is confirmed by the delivery service.
If to City: City of Brea
1 Civic Center Circle
Brea, CA 92821
Attention: City Manager
24 If to Developer: Prior to completion of construction:
JHC-Acquisitions LLC
c/o Jamboree Housing Corporation
17701 Cowan Avenue, Suite 200
Irvine, CA 92614
Attention: Chief Development Officer
Following completion of construction:
JHC-Acquisitions LLC
c/o Jamboree Housing Corporation
17701 Cowan Avenue, Suite 200
Irvine, CA 92614
Attention: Asset Management
Section 11.3 Attorneys’ Fees. If either Party fails to perform any of its obligations under this Agreement, or if any dispute arises between the Parties concerning the meaning or interpretation of any provision hereof, then the prevailing Party in any proceeding in connection with such dispute shall be entitled to the costs and expenses it incurs on account thereof and in enforcing or establishing its rights hereunder.
Section 11.4 Waivers; Modification. No waiver of any breach of any covenant or provision of this Agreement shall be deemed a waiver of any other covenant or provision hereof, and no waiver shall be valid unless in writing and executed by the waiving Party. An extension of time for performance of any obligation or act shall not be deemed an extension of the time for performance of any other obligation or act, and no extension shall be valid unless in writing and executed by the Party granting the extension. This Agreement may be amended or modified only by a written instrument executed by the Parties.
Section 11.5 Binding on Successors. Subject to the restrictions on transfers set forth in Article VII, this Agreement shall bind and inure to the benefit of the Parties and their respective permitted successors and assigns. Any reference in this Agreement to a specifically named Party shall be deemed to apply to any permitted successor and assign of such Party who has acquired an interest in compliance with this Agreement or under law.
Section 11.6 Survival. All representations made by Developer hereunder shall survive until the earlier of the Close of Escrow or the termination of this Agreement. Developer’s indemnity and defense obligations hereunder, and all other provisions that expressly so state, shall survive the expiration or termination of this Agreement.
Section 11.7 Interpretation; Statutory References. The Parties acknowledge that this Agreement is the product of negotiation and compromise on the part of both Parties, and the Parties agree, that since both Parties have participated in the negotiation and drafting of this Agreement, this Agreement shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it. All references in the City Documents to particular statutes, regulations, ordinances or resolutions of the United States, the State of California, or the City of Brea shall be deemed to include the same statute, regulation, 25 ordinance or resolution as hereafter amended or renumbered, or if repealed, to such other provisions as may thereafter govern the same subject. Unless otherwise indicated, references to “Section __” shall refer to provisions of this Agreement. The terms “include,” “includes” and “including” are non-exhaustive. The term “shall” is mandatory and the term “may” is permissive.
Section 11.8 Action or Approval. Whenever action and/or approval by City is required under this Agreement, the City Manager or his or her designee may act on and/or approve such matter unless specifically provided otherwise, or unless the City Manager determines in his or her discretion that such action or approval requires referral to the City Council for consideration.
Section 11.9 City Attorney Authority. Prior to execution by City, without further review and approval by the City Council, the City Attorney may make non-monetary revisions to the City Documents as necessary or appropriate to protect City’s interests and facilitate the contemplated transactions. For purpose of this Section, “non-monetary” means a revision that does not have a financial impact on City.
Section 11.10 Entire Agreement. This Agreement (including the attached Exhibits), together with the other City Documents, contain the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all prior written or oral agreements, understandings, representations or statements between the Parties with respect to the subject matter hereof. If the Exhibits to this Agreement are inconsistent with this Agreement, the more restrictive requirements shall control, as reasonably determined by the City Manager. In the event of a conflict between this Agreement and the other City Documents, the more restrictive requirements shall control, as reasonably determined by the City Manager.
Section 11.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which taken together shall constitute one instrument. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto having additional signature pages executed by the other Party. Any executed counterpart of this Agreement may be delivered to the other Party by facsimile or electronic mail and shall be deemed as binding as if an originally signed counterpart was delivered.
Section 11.12 Severability. If any term, provision, or condition of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall continue in full force and effect unless an essential purpose of this Agreement is defeated by such invalidity or unenforceability.
Section 11.13 No Third-Party Beneficiaries. Nothing contained in this Agreement is intended to or shall be deemed to confer upon any person, other than the Parties and their respective successors and assigns, any rights or remedies hereunder.
Section 11.14 Parties Not Co-Venturers; Independent Contractor; No Agency Relationship. Nothing in this Agreement is intended to or shall establish the Parties as partners, co-venturers, or principal and agent with one another. The relationship of Developer and City is and shall remain solely that of a debtor and a creditor (or landlord and tenant, under the Ground Lease), and shall not be construed as a joint venture, equity venture, partnership or any other 26 relationship. City neither undertakes nor assumes any responsibility or duty to Developer (except as expressly provided in this Agreement) or to any third party with respect to the Project or the City financing described herein. Developer and its employees are not employees of City but rather are, and shall always be, considered independent contractors. Furthermore, Developer and its employees shall at no time hold themselves out as employees or agents of City. Developer shall not have any authority to act as an agent of City or to bind City to any obligation.
Section 11.15 Time of the Essence; Calculation of Time Periods. Time is of the essence for each condition, term, obligation and provision of this Agreement. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is not a business day, in which event the period shall run until the next business day. The final day of any such period shall be deemed to end at 5:00 p.m., local time at the Property. For purposes of this Agreement, a “business day” means a day that is not a Saturday, Sunday, a federal holiday or a state holiday under the laws of the State of California.
Section 11.16 Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to principles of conflicts of laws. Any action to enforce or interpret this Agreement shall be filed and heard in the Superior Court of Orange County, California or in the Federal District Court for the Southern District of California.
Section 11.17 Political Activity. None of the funds, materials, property or services contributed by City to Developer under this Agreement shall be used for any partisan political activity or the election or defeat of any candidate for public office.
Section 11.18 Non-Liability of City Officials, Employees and Agents. No member, official, employee or agent of the City shall be personally liable to Developer in the event of any default or breach by the City or for any amount which may become due to the Developer or its successor or on any obligation under the terms of this Agreement.
Section 11.19 Conflict of Interest.
11.19.1 Except for approved eligible administrative or personnel costs, no person described in subsection 11.19.2 below who exercises or has exercised any functions or responsibilities with respect to the activities funded pursuant to this Agreement or who is in a position to participate in a decision-making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from the activity, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during, or at any time after, such person’s tenure. Developer shall exercise due diligence to ensure that the prohibition in this Section is followed.
11.19.2 In accordance with Government Code Section 1090 and the Political Reform Act (Government Code Section 81000 et seq.), no person who is a director, officer, employee or consultant of the City or a City board, commission or committee, or immediate family 27 member of any of the preceding, shall make or participate in a decision, made by any of such entities, if it is reasonably foreseeable that the decision will have a material effect on any source of income, investment or interest in real property of that person.
IN WITNESS WHEREOF, the Parties have entered into this Agreement effective as of the date first written above.
CITY:
CITY OF BREA,
a municipal corporation
By:_________________________________
Bill Gallardo, City Manager
Attest:
_________________________________
Lillian Harris-Neal, City Clerk
APPROVED AS TO FORM:
_________________________________
Terence Boga, City Attorney
DEVELOPER:
JHC-ACQUISITIONS LLC,
a California limited liability company
By:Jamboree Housing Corporation,
a California nonprofit public benefit
corporation
By: __________________________________
Michael Massie, Chief Development
Officer
28 [Page intentionally blank]
Exhibit A-1
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
(Attached)
Exhibit A-2
[Page Intentionally Blank]
Exhibit B-1
EXHIBIT B
PRE-CLOSING SCHEDULE
(INCLUDING CLOSING DEADLINE)
Opening Escrow 30 days after tax credits are awarded
Delivery of Draft Property
Management Plan and Draft
Residential Marketing &
Leasing Plan
Prior to Closing
Execution and Delivery of
Construction Contract, and
delivery to City of all other
Developer deliverables
required as a condition to
Closing
Prior to Closing
Evidence of Financing Developer shall use its commercially reasonable efforts to obtain, by the earliest reasonable date, financing for the Project and shall apply for federal Tax Credits with the California Tax Credit Allocation Committee (“CTCAC") in successive rounds through and including, as necessary, each round prior to the Closing Deadline
Entitlements/Permits Prior to Closing (fees may be paid through escrow at Closing) Closing Deadline Three (3) years following the Effective Date.
Exhibit B-2
[Page Intentionally Blank]
Exhibit C-1
EXHIBIT C
FORM OF CITY PROMISSORY NOTE
(Attached)
Exhibit C-2
[Page Intentionally Blank]
Exhibit C-3
SECURED PROMISSORY NOTE
(City Loan)
________________, 2024
$$4,457,483.00 Brea, California
FOR VALUE RECEIVED, _______________, L.P., a California limited partnership (the “Maker”), having an address of 17701 Cowan Avenue, Suite 200, Irvine, CA 92614, promises to pay the CITY OF BREA, or order (“Holder”), the initial principal sum of FOUR MILLION FOUR HUNDRED FIFTY-SEVEN__________________THOUSAND FOUR HUNDRED EIGHTYTHREE DOLLARS AND NO/100 ($4,457,483.00), which has already been disbursed to Maker, with simple interest at the rate of _____ Percent (_%) per annum on all principal from and after the date it is disbursed. As of the date of this Note, the outstanding principal balance hereof is $_______________.00.
1. DDLA; Construction Loan; Disbursements of Principal. a. This Note is made pursuant to Section 4.1 of that Disposition, Development and Loan Agreement dated as of _____________, 2024 (the “DDLA”) between Holder and Maker.
All capitalized terms not otherwise defined herein shall have the meaning set forth in the DDLA. b. Disbursements of the principal of this Note shall be made in accordance with and subject to Section 4.2.1 of the DDLA.
c. Pursuant to the DDLA, Maker and Holder have entered into a ground lease (“Ground Lease”) under which Maker has acquired a ground leasehold interest in that certain real property defined in the DDLA as the “Property”, and will construct on the Property a multi-family residential project (the “Project”) consisting of thirty-nine (39) residential units (the “Units”), as described in the Ground Lease.
2. Security for Note.
The obligations of Maker under this Note to pay principal and interest are secured by a leasehold deed of trust, assignment of rents, security agreement and fixture filing (the “Deed of Trust”) from Maker to Holder encumbering Maker’s interest under the Ground Lease and, among other things, Maker’s interest in the improvements and fixtures now existing or hereafter constructed upon the Property. Payment of this Note is also secured by an Assignment of Architects/Engineers Agreements and Plans and Specifications, with Consents executed by Maker in favor of Holder (“Assignment”).
3. Payments; Mandatory Prepayment; Maturity Date.
a. Payment shall be made in lawful money of the United States to Holder at 1 Civic Center Circle, Brea, CA 92821, Attention: City Manager. The place of payment may be changed from time to time as the Holder may from time to time designate in writing.
Exhibit C-4
b. Within 10 business days after Maker’s limited partner pays its capital contribution following issuance of the IRS Form 8609 for the Project, Maker shall pay to Holder as a prepayment and reduction of the outstanding principal balance of this Note, a one-time payment in the amount of 50% of the Excess Proceeds; provided, however, that if other public agency construction lenders require payment of Excess Proceeds, then Excess Proceeds shall be payable to Holder and such other public agencies pro rata in proportion to their initial maximum loan amounts for the Project.
c. As used in the preceding paragraph, the term “Excess Proceeds” shall mean the sum of all sources of funding received by Maker to finance the operation of the Property or the construction of the Project, less the sum of actual uses of such funding for the Project, as shown by reasonable evidence delivered to Holder. For the purpose of calculating Excess Proceeds, Project sources of funding shall include any net rental income received prior to the date that the Project’s conventional construction loan (excluding the City Loan) converts to a permanent loan, and any deferred developer fee, and shall take into consideration any reduction or increase in equity contributions by the limited partner.
d. Additionally, periodic payments of interest and principal shall be made to Holder from “Holder’s Pro-Rata Share” of “Surplus Cash”, defined in Section 4 below, except as otherwise provided in the last two paragraphs of Section 4 below with respect to “Excess Proceeds”.
e. To the extent there is Surplus Cash available from the Project, Maker shall pay to Holder, on an annual basis, payments of Holder’s Pro-Rata Share of all such Surplus Cash (as defined below). The first payment under this Note shall be due on the first August 1 after the earlier of (i) six months after the issuance of a certificate of occupancy for any portion of the Project or (ii) closing of permanent financing for the Project as determined in good faith by Holder. Each subsequent payment shall be due on August 1 of each calendar year thereafter. f. Any unpaid principal amount owing from year to year shall continue to accrue interest. All payments made hereunder shall be credited first to any accrued but unpaid interest, then to current interest due and owing and lastly to principal. Interest not paid current shall accrue and shall not be compounded.
g. Notwithstanding the foregoing, the entire outstanding balance of principal and interest owing under this Note shall be due and payable on the date that is fifty-five (55) years from the date hereof.
4. Definitions of Holder’s Pro-Rata Share; Surplus Cash; and Excess Refinancing Proceeds.
a. The term “Holder’s Pro-Rata Share” shall mean ______________ percent (__%). [This percentage is fifty percent (50%), divided by (ii) a fraction, the numerator of which is the maximum principal amount of the loan evidenced by this Note, and the denominator of which is the sum of the maximum principal amounts of all loans to Maker by governmental entities that are secured by Maker’s interest in the Project and which are construction loans Exhibit C-5
for the Project, and on which are to be made by payments from a percentage of “Surplus Cash” (calculated the same way as the percentage payable to Holder)].
b. The term “Surplus Cash” shall mean the sum of money computed on a 12 month basis based on the Maker’s fiscal year (which is January 1 to December 31) as follows:
All rents, revenues, consideration or income (of any form) derived by Maker in connection with or relating to the ownership or operation of the Project, including any Excess Refinancing Proceeds (hereinafter defined) derived from any refinancing of the Project but excluding initial loan proceeds, insurance proceeds and partner capital contributions and also excluding all of the following: (i) all customary and reasonable costs and expenses in connection with the operation and maintenance of the Project; (ii) a property management fee in the amount of $_____________, adjusted annually by
3.5%, beginning on the first anniversary date of this Note; (iii) principal and interest paid by Maker on account of any loan(s) or other obligations approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed) (but not payments based on Surplus Cash, residual receipts, net cash flow or similar payments on loans); (iv) amounts (previously approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed)) expended to restore the Project after a casualty loss or condemnation; (v) reasonable and customary cost for accounting and auditing the books and records of the Project; (vi) an administrative or asset management fee charged by a tax credit investment partner not to exceed $__________ adjusted annually by 3%; (vii) any deferred developer fee (where such deferred developer fee was previously approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed)); (viii) a management fee (“Partnership Management Fee”) not to exceed $___________ (which amount may be adjusted annually by 3%, beginning on the first anniversary date of this Note and on each anniversary thereafter) ; such Partnership Management Fee is paid to the general partner for performing its general partnership duties, including but not limited to reviewing the monthly operating budget; overseeing the performance of the property manager; meetings, coordination and conflict resolution with the adjacent property owner; review and approval of the annual operating budget; prepare, review and approval of annual partnership reports; review and approval of tax returns; coordination with the investor limited partner; and resolution of miscellaneous issues normally associated with the ownership and operation of multi-family housing; (ix) salary and benefit costs for the social services staff personnel accounted for in the annual operating budget, to serve the residents and tenants of the Project, in an amount of $__________, adjusted annually by 3%, beginning on the first anniversary date of this Note; (x) amounts (previously approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed), or as required by any senior lender or the investor limited partner)) reserved by Maker as an Exhibit C-6
operating contingency reserve account and a replacement reserve account (and deposited in an account approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed)) and any other reserves required by the tax credit investment partner or other senior financing secured for the Project, or included in the annual operating budget approved by Holder; (xi) any adjuster payments to the investor limited partner required under Maker’s partnership agreement; (xii) payment of principal or interest on any indebtedness of Maker to any affiliate of Maker (individual or entity) or partner of Maker to repay completion and/or operating deficit loans relating to the Project; (xiii) reasonable and customary professional fees for legal and similar customary administrative expenses; (xiv) taxes; and (xv) franchise tax filing fees. c. The following shall not be deductions in the calculation of Surplus Cash, and will be payable from Maker’s share of residual receipts: (i) any incentive management fee, (ii) any amount in excess of the permitted partnership management fee and asset management fee, (iii) contributions to reserve accounts in excess of the amounts specified above unless required by any senior lender or the investor limited partner, (iv) expenses paid with withdrawals from reserve accounts, (v) distributions to partners, and (vi) depreciation, amortization, depletion, and other non-cash expenses.
d. The term “Excess Refinancing Proceeds” used in the definition of Surplus Cash above shall mean refinancing proceeds less (a) the amount of the repayment of the refinanced debt, (b) all reasonable out-of-pocket costs and expenses paid by Maker to third parties in obtaining such refinancing, (c) all costs and expenses paid by Maker for all capital improvements to the completed Project completed by Maker in accordance with the terms of any senior loan documents or consented to in writing by Holder for which Maker’s funds and not loan or grant funds are used (and for purposes of this clause (c), such costs may include, without limitation, reasonable architects’ and engineers’ fees and other reasonable “soft” costs relating to the making of such permitted capital improvements), (d) any amounts required to be paid to any senior lender in connection with such refinancing, and (e) the amount by which the Maker’s increases its reserves for the Project as a condition imposed by the refinancing lender.
5. Reporting; Annual Statements; Annual Budget; Audit Rights. a. Maker shall deliver annual income/expense statements showing all revenues and expenses of the Project, on a line item basis. An audited income statement shall be delivered by August 1 following each calendar year along with payment of the Surplus Cash. Holder shall have the right to inspect and audit Maker’s books and records concerning the calculation of Surplus Cash. If Holder does object, Holder shall specify the reasons for disapproval. Maker shall have 30 days to reconcile any disapproved item. If Maker and Holder cannot agree on the amount of the Surplus Cash, an independent auditor mutually selected by Holder and Maker shall resolve any disputed items, If the independent auditor determines that Maker’s statement underreported the amount of the Residual Receipts by more than 3%, the cost of the auditor shall be paid solely by Maker. If the independent auditor determines that Maker’s statement did not underreport the amount of the Residual Receipts, the cost of the auditor shall be paid solely by Holder. Except in Exhibit C-7
the event that Maker or Holder are solely responsible for the costs of the auditor pursuant to one of the foregoing sentences, the cost of the auditor shall be shared equally by Maker and Holder. b. Maker shall prepare and submit to Holder a proposed annual operating budget for the management and operation of the Project for the following calendar year by no later than December 1 of each year until this Note is paid in full. The proposed budget shall include a line item showing the projected Surplus Cash from the Project for the year. Holder will review the proposed budget and, if reasonably acceptable, approve it in writing, which approval shall not be unreasonably withheld, conditioned or delayed. If the budget is not acceptable, Holder shall specify the reasons for disapproval. The intent of this paragraph is to provide Holder an opportunity to disapprove any unreasonable expenses which would diminish the Surplus Cash from the Project.
Once approved, any changes to any budget line item relating to discretionary items which exceed ten percent (10%) Of the line item shall require Holder’s prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed.
6. Holder Rights to Accelerate Maturity Date.
Notwithstanding anything to the contrary provided herein, Holder may elect that the entire unpaid principal of this Note and accrued interest thereon shall be due and payable if: (i) an Event of Default (as defined in the Ground Lease) by Maker (as the tenant under the Ground Lease) occurs under the Ground Lease; or (ii) Maker or any successor-in-interest or assignee is in default under this Note, or the Deed of Trust securing this Note, or under the Affordable Housing Covenant, and such default is not cured within 30 days after written notice from Holder to Maker (provided that if Maker promptly commences the cure of a non-monetary default, then Maker shall not be in default so long as Maker diligently prosecutes it to completion).
7. Limited Partner Cure Rights.
Holder shall also deliver a copy of all default notices under this Note to Maker’s limited partner __________________at ______________________. Any partner of Maker shall have the right to cure any default within the applicable cure periods set forth above, whether in its own capacity or on behalf of Maker, and Holder shall accept such cure as if tendered by Maker.
However, failure by Holder to deliver such notice to Maker’s limited partner shall not be a default by Holder.
8. Maker Covenants to Comply with Affordable Housing Covenant and Ground Lease.
Maker hereby covenants and agrees that it shall comply with the Ground Lease and the Affordable Housing Covenant, including the provisions of the ground lease relating to maintenance and repair of the Project, subject to any applicable notice of default and any applicable cure period thereunder.
9. No Waiver by Holder; Remedies Cumulative.
Holder’s failure or delay in the exercise of any right or remedy hereunder or under any the Deed of Trust, Assignment, Ground Lease or Affordable Housing Agreement shall not waive or otherwise affect any right or remedy, and all remedies shall be cumulative to the extent permitted by law.
Exhibit C-8
10. Default Interest Rate.
At all times when Maker is in default hereunder by reason of Maker’s failure to pay principal due under this Note or any amounts due under any loan documents securing this Note, the interest rate on the sums as to which Maker is in default (including principal, if Holder has elected to declare it immediately due and payable), shall be the lower of: (i) the highest rate then allowed by law or (ii) 2% over the prime interest rate announced by Wells Fargo Bank, N.A., as of the date of the default.
11. Maker Waivers.
Maker and any endorsers hereof and all others who may become liable for all or any part of this obligation, severally waive presentment for payment, demand and protest and notice of protest, and of dishonor and nonpayment of this Note, and expressly consent to any extension of the time of payment hereof or of any installment hereof, to the release of any party liable for this obligation, and any such extension or release may be made without notice to any of said parties and without any way affecting or discharging this liability.
12. Holder Costs, Expenses.
Maker agrees to pay immediately upon demand all costs and expenses of Holder including reasonable attorneys’ fees, (i) if after default (following Holder’s written notice of such default and expiration of the applicable cure period) this Note be placed in the hands of an attorney or attorneys for collection, or (ii) if after a default hereunder or under the Deed of Trust, the Assignment, the Ground Lease, or the Affordable Housing Agreement (following Holder’s written notice of such default and expiration of the applicable cure period), Holder finds it necessary or desirable to secure the services or advice of one or more attorneys with regard to collection of this Note against Maker, any guarantor or any other party liable therefor or to the protection of its rights under this Note, the Deed of Trust, Assignment, the Ground Lease or other loan document.
13. Notices.
Any notices provided for in this Note shall be given in accordance with the notices provision of the Ground Lease.
14. Applicable Law.
This Note shall be construed in accordance with and be governed by the laws of the State of California.
15. Severability.
If any provision of this Note shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby.
Exhibit C-9
16. Nonrecourse.
This Note is a nonrecourse obligation of Maker and Maker’s partners, and the Holder must resort only to the Project or Maker’s leasehold interest in the Property, or both, for repayment should Maker fail to repay the sums evidenced hereby. Neither Maker nor any of its general and limited partners shall have any personal liability for repayment of the City Loan and no deficiency judgment may be obtained against Maker or any of its general and limited partners except for actual or constructive fraud or intentional material misrepresentation.
MAKER:
Exhibit C-10
[Page Intentionally Blank]
Exhibit D-1
11222-0116\2935138v9.doc
EXHIBIT D
FORM OF DEED OF TRUST
(Attached)
Exhibit D-2
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit D-3
11222-0116\2935138v9.doc
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Brea
1 Civic Center Circle
Brea, CA 92821
Attn: City Clerk
This document is exempt from recording fees pursuant
to Government Code § 27383.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
LEASEHOLD DEED OF TRUST, ASSIGNMENT OF
RENTS, SECURITY AGREEMENT AND FIXTURE FILING
(CITY LOAN)
This LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING, together with the Addendum to Leasehold Deed of Trust attached hereto as Exhibit “B” and made a part hereof (the “Leasehold Deed of Trust”), is dated as of _____________, and is executed and delivered by _________ , L.P., a California limited partnership, whose address is 17701 Cowan Avenue, Suite 200, Irvine, CA 92614 (“Trustor”), to and in favor of the CITY OF BREA, whose address is 1 Civic Center Circle, Brea, CA 92821 (“Trustee”) and for the benefit of CITY OF BREA, whose address is 1 Civic Center Circle, Brea, CA 92821 (“Beneficiary”).
Trustor, as tenant, and Beneficiary, as landlord, have entered into a Ground Lease dated substantially concurrently herewith (including any future amendments, the “Ground Lease”) evidenced by a Memorandum of Ground Lease recorded in the Official Records of Orange County, California, substantially concurrently herewith, under which Trustor has acquired a leasehold estate in real property on which Trustor is constructing a low income affordable housing development. The loan from Beneficiary to Trustor secured by this Deed of Trust is a construction and development loan (which in effect becomes a long term permanent loan upon completion of the improvements). Other lenders may obtain security interests (by virtue of leasehold deeds of trust) in the Trustor’s interest under the Ground Lease, and this Deed of Trust may be subordinated to one or more of such other deeds of trust by virtue of recorded subordination agreements executed by Beneficiary and such other lender(s).
Trustor irrevocably grants, conveys, transfers and assigns to Trustee in trust, with power of sale and right of entry and possession, all of Trustor’s estate, right, title and interest in, to and under the Ground Lease, the following property (collectively, the “Property”): (a) the land in Orange County, California described on Exhibit “A” attached hereto, together with all existing and future easements and rights affording access to it (the “Land”), (b) together with all buildings, structures and improvements now existing or hereafter constructed thereon (the “Improvements”), (c) together with all articles of personal property now or hereafter attached to, placed upon for an indefinite term, or used in connection with the Land and/or Improvements, Exhibit D-4
11222-0116\2935138v9.doc
together with all goods and other property, including such personal property that is, or at any time becomes, so related to or installed on or attached to the Property that an interest in them arises under real estate law, or they are otherwise adjudged to be a “fixture” under applicable law (each a “Fixture,” collectively “Fixtures”), (d) together with all other property and interests of any kind or character which may be reasonably necessary or desirable to promote the present and future beneficial use and enjoyment of such real property and improvements.
1. Secured Obligations. Trustor makes the grant, conveyance, transfer and assignment herein for the purpose of securing the following obligations (the “Secured Obligations”): (a) payment of the sum of $4,457,483, which is evidenced by a promissory note (the “Note”) of substantially even date herewith in such amount, executed by Trustor in favor of Beneficiary or order and any extension or other modifications thereof; (b) payment of such further sums as the then record owner of the Property may borrow from Beneficiary, when evidenced by a promissory note or notes reciting that they are secured by this Leasehold Deed of Trust; and (c) performance by Trustor of the terms of this Leasehold Deed of Trust.
2. Maintenance and Repair. Trustor shall maintain and repair the Property in accordance with the terms of the Ground Lease.
3. Insurance. Trustor shall maintain the insurance required by Ground Lease.
4. Defense of Security. Trustor shall appear in and defend any action or proceeding purporting to affect the security or the rights or powers of Beneficiary or Trustee. Trustor shall pay all costs and expenses, including costs of evidence of title and attorneys’ fees, in any such action or proceeding in which Trustee or Beneficiary may appear, and in any suit brought by Beneficiary to foreclose this Leasehold Deed of Trust.
5. Payment of Taxes and Liens. Trustor shall pay all property taxes (including possessory interest taxes) and assessments affecting the Property in accordance with the Ground Lease.
Trustor shall pay, when due, all encumbrances, charges and liens, with interest, on the Property, which are or appear to be prior or superior to this Leasehold Deed of Trust, and upon demand all costs, fees and expenses of this Leasehold Deed of Trust. If Trustor fails to make any payment or to do any act provided for in this Leasehold Deed of Trust, then Beneficiary or Trustee may, without obligation to do so, and with or without notice to or demand upon Trustor, and without releasing Trustor from any obligation under this Leasehold Deed of Trust: (a) make or do the same in such manner and to such extent as either may deem necessary to protect the security, Beneficiary or Trustee being authorized to enter upon the Property for such purposes; (b) appear in or commence any action or proceeding purporting to affect the security, or the rights or powers of Beneficiary or Trustee; (c) pay, purchase, contest or settle any encumbrance, charge or lien which in the judgment of either appears to be senior to this Leasehold Deed of Trust; and (d) in exercising any such powers, pay allowable expenses, including attorneys’ fees.
6. Reimbursement of Costs. Trustor shall pay upon demand all sums expended by Beneficiary or Trustee provided for in this Leasehold Deed of Trust or allowed by law, with interest from date of expenditure at the default interest rate provided in the Note.
Exhibit D-5
11222-0116\2935138v9.doc
7. No Waiver. By accepting payment of any sum after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums or declare a default for failure to pay.
8. Reconveyance. That upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Leasehold Deed of Trust and said note or notes to Trustee for cancellation and retention or other disposition as Trustee in its sole discretion may choose and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals of such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as “the person or persons legally entitled thereto.”
9. Assignment of Rents. Trustor hereby absolutely and unconditionally assigns to Beneficiary all of the rents, issues, profits, royalties, revenues, income and other benefits (collectively, the “Rents”) derived from the Property, whether now due, past due or to become due, and hereby gives to and confers upon Beneficiary, either directly or through a receiver, the right, power and authority, but not the obligation, to collect the Rents, and to sue, either in the name of Trustor or Beneficiary, for all such Rents and to apply the same to the indebtedness secured hereby in such order as Beneficiary may determine in its sole discretion. This assignment of Rents is intended to create and shall be construed to create an absolute assignment to Beneficiary of all of Trustor’s right, title and interest in the Rents; provided that notwithstanding the foregoing, so long as no default exists by Trustor in the payment of any indebtedness secured hereby, or in any other covenant contained herein, or in said note or notes or in any other document evidencing or securing such indebtedness, Trustor shall have the right to collect all Rents from the Property and to retain, use and enjoy the same. Upon the occurrence of such a default (following written notice by Beneficiary and expiration of any applicable cure period), without the necessity of demand or further notice to Trustor or any other act to enforce Beneficiary’s interest pursuant to this assignment, Trustor shall have no interest whatsoever in the Rents that are received by Trustor after a default, and all such Rents shall be received and held by Trustor in constructive trust for Beneficiary and delivered promptly to Beneficiary, or to a court appointed receiver for the Property, without the necessity for further notice to, or demand upon, Trustor. Upon the occurrence of such a default and at any time thereafter during the continuance thereof, Beneficiary may, at its option, send any tenant of the Property a notice to the effect that: (a) a default has occurred; (b) Beneficiary has elected to exercise its rights under this assignment; and (c) such tenant is thereby directed to thereafter make all payments of Rents to or for the benefit of Beneficiary or as Beneficiary shall direct. Any such tenant shall be entitled to rely upon any notice from Beneficiary and shall be protected with respect to any payment of Rents made pursuant to such notice, irrespective of whether a dispute exists between Trustor and Beneficiary with respect to the existence of a default or the rights of Beneficiary hereunder. Any such tenant shall not be required to investigate or determine the validity or accuracy of such notice or the validity or enforceability of this assignment. Trustor hereby agrees to indemnify, defend and hold any such tenant harmless from and against any and all losses, claims, damages or liabilities arising from or related to any payment of Rents by such tenant made in reliance on and pursuant to such notice.
10. Default and Foreclosure. Upon default by Trustor in payment or performance of any Secured Obligation, following written notice by Beneficiary and subject to any applicable cure period, Beneficiary may declare all sums secured immediately due and payable by delivery to Exhibit D-6
11222-0116\2935138v9.doc
Trustee of a declaration of default and demand for sale and of a notice of default and of a notice of sale, which notice Trustee shall cause to be filed for record. Beneficiary also shall deposit with Trustee this Leasehold Deed of Trust, said note or notes and all documents evidencing expenditures secured by this Leasehold Deed of Trust. Upon default of any obligation secured by this Leasehold Deed of Trust and acceleration of all sums due, Beneficiary may instruct Trustee to proceed with a sale of the Property under the power of sale granted in this Leasehold Deed of Trust, noticed and held in accordance with California Civil Code Sections 2924, et seq., as such statutes may be amended from time to time. Trustor waives all rights it may have to require marshaling of assets or to require sales of assets in any particular order, including any rights under California Civil Code Sections 2899 and 3455.
11. Substitution of Trustee. Beneficiary, or any successor in ownership of any indebtedness secured hereby, may from time to time, by instrument in writing, substitute a successor or successors to any Trustee named herein or acting hereunder, which instrument executed by the Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Property is situated, shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the Trustee predecessor, succeed to all its title, estate, rights, powers and duties. Said instrument must contain the name of the original Trustor, Trustee and Beneficiary hereunder, the book and page where this Leasehold Deed of Trust is recorded and the name and address of the new Trustee.
12. Successors and Assigns. This Leasehold Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. The term “Beneficiary” shall mean the owner and holder, including pledgees, of the secured note or notes, whether or not named as Beneficiary herein.
13. Trustee Acceptance. Trustee accepts this trust when this Leasehold Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other Leasehold Deed of Trust or of any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party unless brought by Trustee.
14. Further Assurances. Trustor shall, at its own cost and expense, do, execute, acknowledge, and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignments, transfers, and assurances as Trustee or Beneficiary shall from time to time reasonably require, for better assuring, conveying, assigning, transferring, and confirming unto Trustee the Property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which Trustor may be or may hereafter become bound to convey or assign to Trustee, or for carrying out the intention or facilitating the performance of the terms of this Leasehold Deed of Trust, or for filing, registering, or recording this Leasehold Deed of Trust. Trustor shall, on demand, execute and deliver, one or more financing statements, chattel mortgages, or comparable security instruments, to evidence more effectively the lien hereof. Immediately upon the execution and delivery of this Leasehold Deed of Trust, and thereafter from time to time, Trustor shall cause this Leasehold Deed of Trust, and any security instruments creating a lien or evidencing the lien hereof upon any personal property and each instrument of further assurance, to be filed, registered, or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien hereof upon, and the title of Trustee to, the Property encumbered hereby.
Exhibit D-7
11222-0116\2935138v9.doc
15. Condemnation and Insurance Proceeds. Trustor shall comply with the Ground Lease with respect to condemnation and insurance proceeds.
16. Severability. If any one or more of the provisions contained in this Leasehold Deed of Trust shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Leasehold Deed of Trust, but this Leasehold Deed of Trust shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein or therein, but only to the extent of such invalidity.
17. Estoppel Certificates. Trustor shall, within 10 days of a written request from Beneficiary from time to time, furnish Beneficiary with a written statement, duly acknowledged, setting forth the sums secured by this Leasehold Deed of Trust and any right of set off, counterclaim or other defense which exists against such sums and the obligations of this Leasehold Deed of Trust.
18. California Uniform Commercial Code Security Agreement; Fixture Filing. Trustor hereby grants Beneficiary a security interest in all personal property of Trustor located on the Property and wherever located and used in any way in connection with or in any way relating to the Property, and whether now owned or hereafter in existence, acquired or created (including equipment, inventory, goods, documents, instruments, general intangibles, chattel paper, accounts, accounts receivable, deposit accounts and contract rights), and all fixtures of Trustor now owned or hereafter in existence, acquired or created on, of or relating to the Property, and all substitutions, replacements, additions, accessions and proceeds (including insurance proceeds) of all of the foregoing (collectively, the “Personal Property”). Beneficiary may file this Leasehold Deed of Trust, or a reproduction hereof, in the real estate records or other appropriate index, as a financing statement for the Personal Property. Any reproduction of this Leasehold Deed of Trust or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Trustor shall execute and deliver to Beneficiary, upon Beneficiary’s request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Leasehold Deed of Trust in such form as Beneficiary may reasonably require to perfect a security interest with respect to the Personal Property. Trustor shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Beneficiary may reasonably require. With the exception of security interests created to finance the development and/or operation of the Property, without the prior written consent of Beneficiary, Trustor shall not create or suffer to be created pursuant to the California Uniform Commercial Code any other security interest in the Personal Property. Upon Trustor’s material breach of any covenant or agreement of Trustor contained in this Leasehold Deed of Trust that materially and adversely impacts Beneficiary, including the covenants to pay when due all sums secured by this Leasehold Deed of Trust, Beneficiary shall have the remedies of a secured party under the California Uniform Commercial Code and, at Beneficiary’s option, may also invoke any remedies provided in this Leasehold Deed of Trust as to the Personal Property. In exercising any of such remedies, Beneficiary may proceed against the Property and any of the Personal Property separately or together and in any order whatsoever, without in any way affecting the availability of Beneficiary’s remedies under the California Uniform Commercial Code or the remedies provided in the Leasehold Deed of Trust. This Leasehold Deed of Trust also covers goods which Exhibit D-8
11222-0116\2935138v9.doc
are or which are to become fixtures on the Property and constitutes and is filed as a fixture filing under the California Uniform Commercial Code.
19. Due On Sale or Encumbrance. If all or any part of the Property, or any interest therein, or any interest in Trustor (if Trustor is not a natural person or persons but is a corporation, partnership, trust, limited liability company or other legal entity), is sold, transferred, mortgaged, assigned, pledged, or further encumbered, whether directly or indirectly, whether voluntarily or involuntarily or by operation of law, except as expressly permitted by the Ground Lease, Beneficiary may, at Beneficiary’s option, declare all of the sums secured by this Leasehold Deed of Trust to be immediately due and payable, and Beneficiary may invoke any remedies permitted by this Leasehold Deed of Trust.
The undersigned Trustor requests that a copy of any Notice of Default and of any Notice of Sale hereunder be mailed to Trustor at Trustor’s address hereinbefore set forth.
TRUSTOR:
Exhibit D-9
11222-0116\2935138v9.doc
State of California )
County of ______________ )
On ____________________________, before me, ______________________________, (insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature____________________________ (Seal)
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
Exhibit D-10
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit D-11
11222-0116\2935138v9.doc
Exhibit “A” to Deed of Trust
LEGAL DESCRIPTION
(Attached)
Exhibit D-12
11222-0116\2935138v9.doc
[Page intentionally Blank]
Exhibit D-13
11222-0116\2935138v9.doc
Exhibit “B” to Deed of Trust
ADDENDUM TO LEASEHOLD DEED OF TRUST
(Attached)
Exhibit D-14
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit D-15
11222-0116\2935138v9.doc
ADDENDUM TO LEASEHOLD DEED OF TRUST
This Addendum to the Leasehold Deed of Trust is part of the Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (“Leasehold Deed of Trust”) dated as of ________________, 2024, between _________ , L.P., as Trustor, and the CITY OF BREA, as Beneficiary. The following provisions are made a part of the Leasehold Deed of Trust:
1. No Discrimination.
a. The Trustor covenants by and for itself, its heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the California Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the California Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the premises herein conveyed, nor shall the Trustor himself or herself, or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed.
b. Notwithstanding the immediately preceding paragraph, with respect to familial status, said paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the California Government Code. With respect to familial status, nothing in said paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the California Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the California Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the California Government Code shall apply to said paragraph. c. All deeds, leases or contracts made relative to the Property, the improvements thereon or any part thereof, shall contain or be subject to the nondiscrimination clauses set forth in California Health and Safety Code Section 33436.
2. Hazardous Substances.
a. As used in this Section, the following terms shall have the following meanings:
i. Environmental Laws” means all federal, state and local statutes, ordinances, orders, rules, regulations, or governmental directives and any other requirements of governmental authorities with jurisdiction over the Property or Project now or hereafter in effect relating to (A) Hazardous Substance Activity or Hazardous Substances; (B) the generation, use, storage, transportation or disposal of Hazardous Substances, or solid waste; or (C) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health, safety or welfare, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.) (“CERCLA”); the Hazardous Material Transportation Act (49 U.S.C. Section 180 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.); the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.); the Clean Air Act (42 U.S.C. Section 740 et seq.); Exhibit D-16
11222-0116\2935138v9.doc
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.); the Occupational Safety and health Act (29 U.S.C. Section 651 et seq.); the Safe Drinking Water Act (42 U.S.C. Section 300f etseq.); the Porter-Cologne Water Quality Control Act (California Water Code Section 13020 et seq.); the Safe Drinking Water and Toxic Enforcement Act of 1986 (California Health & Safety Code Section 25249.5 et seq.); the Hazardous Substance Account Act (California Health & Safety Code Section 25300 et seq.); the Hazardous Waste Control Act (California Health & Safety Code Section 25100 et seq.); The California Environmental Quality Act (California Public Resources Code Section 2100 et seq.); and the rules, regulations and ordinances of the City of Mill Valley or any applicable federal, state and local agencies or bureaus, as amended from time to time. ii. “Foreclosure Transfer” means the transfer of title to all or any part of the Property or the Trust Estate at a foreclosure sale under the Leasehold Deed of Trust, either pursuant to judicial decree or the power of sale contained in the Leasehold Deed of Trust, or by deed in lieu of such foreclosure.
iii. “Hazardous Substances” means:
(1) any chemical, compound, material, mixture or substance that is now or hereafter defined or listed in, or otherwise classified pursuant to, any Environmental Laws as a “hazardous substance,” “hazardous material,” “hazardous waste,” “extremely hazardous waste,” “acutely hazardous waste,” “radioactive waste,” “infectious waste,” “biohazardous waste,” “toxic substance,” “pollutant,” “toxic pollutant,” “contaminant” as well as any other formulation not mentioned herein intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, “EP toxicity” or “TCLP toxicity”;
(2) petroleum, natural gas, natural gas liquids, liquefied natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas) and ash produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas, or geothermal resources;
(3) “hazardous substance” as defined in Section 2782.6(d) of the California Civil Code;
(4) “waste” as defined in Section 13050(d) of the California Water Code; (E) asbestos in any form;
(5) urea formaldehyde foam insulation;
(6) polychlorinated biphenyls (PCBs);
(7) radon; and
(8) any other chemical, material, or substance that, because of its quantity, concentration, or physical or chemical characteristics, exposure to which is limited or regulated for health and safety reasons by any governmental authority, or which poses a significant Exhibit D-17
11222-0116\2935138v9.doc
present or potential hazard to human health and safety or to the environment if released into the workplace or the environment.
iv. “Hazardous Substance Activity” means any actual, proposed, or threatened use, storage, holding, existence, location, release (including, without limitation, any spilling, leaking, leaching, pumping, pouring, emitting, emptying, dumping, disposing into the environment, and the continuing migration into or through soil, surface water, groundwater or any body of water or the air), discharge, deposit, placement, generation, processing, construction, treatment, abatement, removal, disposal, disposition, handling, or transportation of any Hazardous Substance from, under, in, into, or on the Property, including without limitation, the movement or migration of any Hazardous Substances from surrounding property, surface water, groundwater or any body of water, or the air under, in, into or onto the Property and any residual Hazardous Substances contamination in, on, or under the Property. v. “Losses” means all charges, losses, liabilities, damages (whether actual, consequential, punitive, or otherwise denominated), costs, fees, demands, claims, actions, administrative proceedings (including informal proceedings), judgments, causes of action, assessments, fines, penalties, costs, and expenses of any kind or character, foreseeable and unforeseeable, including, without limitation, the following: (A) the reasonable fees and expenses of outside legal counsel retained by Beneficiary; (B) the reasonable fees and expenses of accountants, third-party consultants, and other independent contractors retained by Beneficiary; (C) costs, including capital, operating and maintenance costs, incurred in connection with any investigation or monitoring of site conditions or any clean-up, remedial, removal or restoration work performed by any federal, state or local governmental agency or political subdivision or by any non-governmental entity or person that is required by applicable Environmental Laws or by a governmental agency with jurisdiction over the Property or Project because of the presence, suspected presence, release or suspected release of Hazardous Substances in violation of applicable Environmental Laws in the air, soil, surface water or groundwater at the Property; and (D) reasonable costs and expenses of enforcing this Section. vi. “Environmental Losses” means Losses arising out of or occurring as a result of: (A) the occurrence of any Hazardous Substance Activity that first occurred on or after the date of this Leasehold Deed of Trust; (B) any violation of any applicable Environmental laws relating to the Property or to the ownership, use, occupancy or operation thereof occurring on or after the date of this Leasehold Deed of Trust; (C) any investigation, inquiry, order, hearing, action, or other proceeding by or before any governmental agency in connection with any Hazardous Substance Activity occurring on or after the date of this Leasehold Deed of Trust; or (D) any claim, demand or cause of action, or any action or other proceeding, whether meritorious or not, brought or asserted against any Indemnitee which directly or indirectly relates to, arises from or is based on any of the matters described in clauses (A), (B), or (C). b. Trustor represents and warrants to Beneficiary that to the best of Trustor’s knowledge, no portion of the Property will be used by Trustor for the disposal, storage, treatment, processing or other handling of Hazardous Substances, and Trustor’s intended use of the Property will not result in the disposal or release by Trustor or Trustor’s agents or representatives of any Hazardous Substances on, under, about or to the Property or the migration of any Hazardous Substances from the Property. The foregoing representations and warranties shall be continuing Exhibit D-18
11222-0116\2935138v9.doc
and shall be true and correct for the period from the date hereof to the release of this Leasehold Deed of Trust (whether by payment of the indebtedness secured hereby or foreclosure or action in lieu thereof), and these representations and warranties shall survive such release. As used herein, the phrase “to the best of Trustor’s knowledge shall mean and refer to the actual knowledge of Michael Massie, the Executive Vice President and Chief Development Officer of Trustor, without duty of inquiry or investigation.
c. Trustor represents and warrants to Beneficiary that Trustor will comply with all requirements of any governmental agency with jurisdiction over the Property or Project . d. On and after the date hereof, Trustor shall not (a) allow any Hazardous Substances to be installed, used, introduced, stored, treated, disposed of, generated, manufactured, discharged, dumped, transported or brought in, upon or over the Property in violation of applicable law; (b) allow any soil or ground water contamination or pollution with any Hazardous Substances on the Property in violation of applicable law; (c) allow any Hazardous Substances to migrate from the Property in violation of applicable law; (d) allow any Hazardous Substances to migrate onto the Property from any adjacent properties in violation of applicable law; or (e) allow or cause the Property to be in violation of, or to trigger a duly initiated and prosecuted investigation of the Property by any governmental authority under applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules or timetables contained in any local, state and/or federal laws, regulations, codes, ordinances, plans, administrative or judicial orders, decrees, judgments, notices or demand letters issued, entered, promulgated or approved thereunder relating to the environment, land use, water and air quality and Hazardous Substances (“Environmental Requirements”).
e. If the presence of any Hazardous Substances on the Property caused or permitted by Trustor results in any contamination of the Property in violation of applicable laws, Trustor shall promptly take all actions, at its sole expense, as are required by applicable law to return the Property to the condition existing prior to the introduction of any such Hazardous Substances to the Property; provided that Beneficiary’s approval of such actions shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term effect on the Property.
f. At any time after the occurrence and during the continuance of any default under this Section (subject to any applicable notice and cure provisions in Ground Lease), Beneficiary shall have the following rights and remedies, in addition to any other rights and remedies Beneficiary has under this Leasehold Deed of Trust:
i. As provided in California Code of Civil Procedure Section 564, Beneficiary or its employees, acting by themselves or through a court appointed receiver may do any of the following: (1) enter upon, possess, manage, operate, dispose of, and contract to dispose of the Property or any part thereof; (2) take custody of all accounts; (3) negotiate with governmental authorities with respect to the Property’s environmental compliance and remedial measures; (4) take any action necessary to enforce compliance with environmental provisions, including spending Rent Payments to abate any environmental problem; (5) make, terminate, enforce or modify leases of part or all of the Property; (6) contract for goods and services, hire agents, employees, and counsel, make repairs, alterations, and improvements to the Property necessary in Exhibit D-19
11222-0116\2935138v9.doc
Beneficiary’s reasonable judgment to protect or enhance the security hereof; and/or (7) take any and all other actions it reasonably deems to be necessary or appropriate to comply with Trustor’s obligations hereunder and under the Loan Documents. All sums realized by the receiver or Beneficiary under this subparagraph, less all costs and expenses incurred by either of them under this subparagraph, including attorneys’ fees, and less such sums as Beneficiary or the receiver reasonably deems appropriate as a reserve to meet future expenses under this subparagraph, shall be applied on any indebtedness secured hereby in such order as Beneficiary shall determine in its reasonable discretion. Neither application of said sums to said indebtedness, nor any other action taken by Beneficiary or the receiver under this subparagraph shall cure or waive any default or notice of default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to the adequacy of the security for the indebtedness secured hereunder, the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or the filing of a notice of default. ii. With or without notice, and without releasing Trustor from any obligation hereunder, to cure any default of Trustor or in connection with any such default, Beneficiary or its agents, acting by themselves or through a court-appointed receiver, may enter upon the Property or any part thereof and perform such acts and things as Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security hereof, including of any of Beneficiary’s other rights: (1) to obtain a court order to enforce Beneficiary’s right to enter and inspect the Property under California Civil Code Section 2929.5 (in respect of which the decision of Beneficiary as to whether there exists a release or threatened release of hazardous substance, as defined therein, onto the Property shall be deemed reasonable and conclusive as between the parties hereto); and (2) to have a receiver appointed under California Code of Civil Procedure Section 564 to enforce Beneficiary’s right to enter and inspect the Property for hazardous substances as defined therein. All costs and expenses incurred by Beneficiary with respect to the audits, tests, inspections, and examinations which Beneficiary or its agents or employees may conduct, including the fees of engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Trustor. All costs and expenses incurred by Trustee and Beneficiary pursuant to this subparagraph (including court costs, consultant fees and attorney fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Note Rate, from the date they are incurred until said sums have been paid. iii. Beneficiary may seek a judgment that Trustor has breached its covenants, representations and/or warranties with respect to the environmental matters set forth above in this Section, by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract pursuant to California Code of Civil Procedure Section 736, whether commenced prior to foreclosure of the Property or after foreclosure of the Property, and to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments, indemnification payments to third parties, and other out-of-pocket costs or expenses actually incurred by Beneficiary or advanced by Beneficiary (collectively, the “Environmental Costs”) relating to the cleanup, remediation or other response action required by applicable law. All Environmental Costs incurred by Beneficiary under this subparagraph (including court costs, consultant fees and attorney fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Note Rate, from the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at any sale of the Property held hereunder, the Exhibit D-20
11222-0116\2935138v9.doc
amount of said costs, expenses and interest in addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of cash. iv. As provided in California Code of Civil Procedure Section 726.5, Beneficiary may waive its lien against the Property or any portion thereof, to the extent such property is found to be environmentally impaired as defined therein, and to exercise any and all rights and remedies of an unsecured creditor against Trustor and all of Trustor’s assets and property for the recovery of any deficiency and Environmental Costs, including seeking an attachment order under California Code of Civil Procedure Section 483.010. Beneficiary and Trustor each represents and warrants for itself that it has no actual knowledge of any release of any Hazardous Substance (as defined in Section 726.5) on, to or under the Property. As between Beneficiary and Trustor, for purposes of California Code of Civil Procedure Section 726.5, Trustor shall have the burden of proving that Trustor or any related party (or any affiliate or agent of Trustor or any related party) did not cause or contribute to, and was not in any way negligent in permitting, any release or threatened release of the Hazardous Substance. v. Trustor acknowledges and agrees that notwithstanding any term or provision contained herein or in any promissory note or other loan documents, the Environmental Costs and all judgments and awards entered against Trustor pursuant to Section 6(f)(iv) above shall be exceptions to any nonrecourse or exculpatory provision of the loan documents, and Trustor shall be fully and personally liable for the Environmental Costs and such judgments and awards and such liability shall not be limited to the original principal amount of the obligations secured by this Leasehold Deed of Trust, and Trustor’s obligations shall survive the foreclosure, deed in lieu of foreclosure, release, conveyance, or any other transfer of the Property or this Leasehold Deed of Trust.
g. Trustor hereby agrees to indemnify, defend and hold harmless Beneficiary from and against any and all Environmental Losses.
TRUSTOR:
Exhibit D-21
11222-0116\2935138v9.doc
State of California )
County of ______________ )
On ____________________________, before me, ______________________________, (insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature____________________________ (Seal)
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
Exhibit D-22
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit E-1
11222-0116\2935138v9.doc
EXHIBIT E
FORM OF ASSIGNMENT
(Attached)
Exhibit E-2
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit E-3
11222-0116\2935138v9.doc
ASSIGNMENT OF ARCHITECT’S/ENGINEER’S CONTRACTS AND PLANS (CITY LOAN)
[NOTE: IF CITY LOAN IS DISBURSED FIRST, PROCEEDS
WILL BE APPLIED TO COSTS OF PLANS OR TO
REIMBURSE DEVELOPER FOR COSTS OF PLANS]
THIS ASSIGNMENT OF ARCHITECT’S/ENGINEER’S CONTRACTS AND PLANS (this “Assignment”) is made as of _______________, 202__, and is executed by _______________ (“Assignor”), in favor of the CITY OF BREA (“Assignee”), pursuant to that certain Disposition, Development and Loan Agreement dated _______________, 2024 by and between Assignor and Assignee (the “DDLA”).
RECITALS
A. As contemplated by the DDLA, Assignee made a construction and permanent loan in the amount of $4,457,483 to Assignor for construction costs relating to a low income housing project on property at 323 North Brea Boulevard in Brea, California (“Project”). The loan is evidenced by a secured promissory note (including any modifications thereof, the “City Loan Note”).
B. Pursuant to the DDLA, _______________, L.P., as tenant, and Assignee, as landlord, entered into a Ground Lease which provides, among other things, that upon termination of the Ground Lease after an Event of Default thereunder by the tenant, subject to the rights of and any prior assignment to senior lenders, Assignee shall be entitled to enforce the architects and engineers agreement relating to the Project, and shall be entitled to ownership and use of plans and specifications for the project, without any representation or warranty regarding said plans and specifications.
C. Additionally, the DDLA also requires Assignor to assign to Assignee, as security for the City Loan, subject to the rights of and any prior assignments to senior lenders and without any representation or warranty, all of Assignor’s right, title and interest in and to all architects and engineers (“Engineers/Architects”) contracts, plans and specifications for the Project, which include: (i) that certain _______________ dated _______________, executed by _______________ and _______________ [which has been assigned by _______________ to _______________, L.P.][?]; (ii) that certain dated ____________, executed by __________ and ___________________ [which have been assigned by _______________ to _______________, L.P.][?]; and (iii) all plans and specifications created under or pursuant to such contracts[, which have been assigned by _______________ to _______________, L.P.][?] (collectively, the “Contracts”).
NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt whereof is hereby acknowledged, subject to the rights of and any prior assignments to senior lenders and without any representation or warranty, Assignor hereby assigns, transfers and conveys to Assignee, effective upon the occurrence of a default under the Note which has not been timely cured following written notice of such default to Assignor and expiration of any applicable cure period, all of Assignor’s right, title and interest in and to the Contracts for the purposes of Exhibit E-4
11222-0116\2935138v9.doc
securing payment of the principal and interest evidenced by the Note, proceeds of which have been used by Assignor to pay costs payable by Assignor under the Contracts, and for purposes of enforcement, ownership and use upon a termination of the Ground Lease prior to completion of the Project, based on an Event of Default thereunder by the ground tenant.
Subject to the rights of and any prior assignments to senior lenders and without any representation or warranty, Assignor’s assignment includes the ability to receive, demand and enforce any and all of Assignor’s rights, and receive, demand and enforce the obligations of the Engineers/Architects under the Contracts, and use all plans and specifications (or assign the same to a subsequent developer), and to perform any and all acts in the name of Assignor or at the option of Assignee, in the name of Assignee.
Assignor hereby represents and warrants to Assignee that: Assignor is not in default under the Contracts as of the date hereof.
Other than the assignments to other Project lenders, Assignor agrees not to assign, sell, pledge or otherwise transfer or encumber in any manner Assignor’s interest in and to or rights under the Contracts, or to amend the Contracts, without the prior written consent of Assignee (such consent not to be unreasonably withheld, conditioned or delayed) so long as this Assignment remains in effect.
Upon the completion of the Project in accordance with the Ground Lease, and repayment of all principal and interest under the City Loan, this Assignment shall terminate.
If any one or more of the provisions contained in this Assignment shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Assignment, but this Assignment shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
This Assignment shall be governed by and construed according to the laws of the State of California.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as of the date first above written.
Exhibit E-5
11222-0116\2935138v9.doc
ASSIGNEE:
CITY OF BREA,
a municipal corporation
By:
Bill Gallardo, City Manager
Attest:
__________________________
Lillian Harris-Neal, City Clerk
APPROVED AS TO FORM:
Terence Boga, City Attorney
ASSIGNOR:
___________________________________
a _________________________________
By: ________________________________
Print Name: _________________________
Title: ______________________________
CONSENT
The undersigned hereby consents to the assignment described in the Assignment to which this Consent is attached.
The undersigned hereby agrees that subject to the rights of senior lenders to the Project, upon the Assignee or its assigns giving the undersigned written notice of Assignee’s exercise of its rights under the Assignment, the undersigned will recognize and attorn to Assignee (or such assigns) in accordance with the Assignment, and will have no recourse against Assignee for any sums due under the Contract with the undersigned at the time of such notice (but shall have all of its rights and remedies against Assignor for such sums).
The address for notices of the undersigned for such purpose is:
______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Notices may be sent by certified mail or reputable overnight delivery service.
The undersigned represents that:
(i) The undersigned has not assigned its interest under its Contract to any other person or entity;
(ii) The Assignor is not in default under the Contract.
Exhibit E-6
11222-0116\2935138v9.doc
The undersigned agrees that no change, modification or amendment to the Contract from and after the date hereof shall be valid without the prior written consent of Assignee.
Dated as of: __________________, 202_
_______________________________________
a ____________________________________
By:____________________________________
Print Name: ___________________________
Title: _________________________________
Exhibit E-7
11222-0116\2935138v9.doc
CONSENT
The undersigned hereby consents to the assignment described in the Assignment to which this Consent is attached.
The undersigned hereby agrees that subject to the rights of senior lenders to the Project, upon the Assignee or its assigns giving the undersigned written notice of Assignee’s exercise of its rights under the Assignment, the undersigned will recognize and attorn to Assignee (or such assigns) in accordance with the Assignment, and will have no recourse against Assignee for any sums due under the Contract with the undersigned at the time of such notice (but shall have all of its rights and remedies against Assignor for such sums).
The address for notices of the undersigned for such purpose is:
______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Notices may be sent by certified mail or reputable overnight delivery service.
The undersigned represents that:
(i) The undersigned has not assigned its interest under its Contract to any other person or entity;
(ii) The Assignor is not in default under the Contract.
The undersigned agrees that no change, modification or amendment to the Contract from and after the date hereof shall be valid without the prior written consent of Assignee.
Dated as of: __________________, 202_
_______________________________________
a ____________________________________
By:____________________________________
Print Name: ___________________________
Title: _________________________________
Exhibit E-8
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit F-1
11222-0116\2935138v9.doc
EXHIBIT F
FORM OF AFFORDABLE HOUSING
AGREEMENT
AND
FORM OF NOTICE
(Attached)
Exhibit F-2
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit F-3
11222-0116\2935138v9.doc
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL
TO:
City of Brea
1 Civic Center Circle
Brea, CA 92821
This document is exempt from
recording fees pursuant to
Government Code § 27383.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
AFFORDABLE HOUSING AGREEMENT
This AFFORDABLE HOUSING AGREEMENT (“Agreement”) is executed by JHCACQUISITIONS LLC, a California limited partnership (“Developer”), and the CITY OF BREA (“City”), a California municipal corporation, and is dated _______________, 2024 for reference purposes. For purposes of the grantor-grantee index, Developer is the grantor and City is the grantee.
RECITALS
A. Developer has a leasehold interest in the real property legally described on Exhibit A (“Site”) by virtue of a _______________, 2024 Ground Lease (“Lease”) executed by City, as landlord, and Developer, as tenant. The Lease requires Developer to construct a 39-unit multifamily residential rental development (“Project”) on the Site, and City is providing a loan to Developer to facilitate such construction.
B. To receive financial assistance from City for the Project, Developer intends to restrict __ of the residential units in the Project to extremely low income households at an affordable rent, and will reserve one residential unit in the Project as an unrestricted onsite manager’s unit.
C. This Agreement is the affordable housing agreement required by Brea City Code Section
20.40.090(B) and the regulatory agreement required by Government Code Section 37364(d).
NOW, THEREFORE, City and Developer agree as follows:
1. DEFINITIONS
In addition to the terms defined above, the following definitions shall apply for purposes of this Agreement:
A. “Affordability Period” means the 55-year period commencing on the date of the Certificate of Occupancy.
Exhibit F-4
11222-0116\2935138v9.doc
B. “Affordable Rent” means rent, including a reasonable utility allowance that does not exceed the product of 30% times 30% of the Area Median Income adjusted for family size appropriate to the unit.
C. “Affordable Units” means _____ of the _____ residential units in the Project.
D. “Area Median Income” means the median income for households in Orange County, California as annually established by HUD pursuant to Section 8 of the United States Housing Act of 1937 and as defined in 25 C.C.R. Section 6932. In the event that such income determinations are no longer published by HUD, or are not updated for a period of at least 18 months, City shall provide Developer with other income determinations that are reasonably similar with respect to methods of calculation to those previously published by HUD.
E. “Adjusted for family size appropriate to the unit” means for a household of two persons in the case of a one-bedroom unit, and means for a household of three persons in the case of a two-bedroom unit.
F. “Certificate of Occupancy” means the certificate of occupancy issued by City for the Project (the final certificate of occupancy if a temporary certificate of occupancy is, or if multiple certificates of occupancy are, issued).
G. “Eligible Household” means a person or family whose income does not exceed 30% of the Area Median Income adjusted for family size.
H. “HUD” means the United States Department of Housing and Urban Development.
2. RENTER ELIGIBILITY
A. During the Affordability Period, Developer shall rent the Affordable Units to Eligible Households at an Affordable Rent.
B. Income of all persons residing in an Affordable Unit shall be considered for purposes of calculating the applicable income.
C. Developer shall not allow any Affordable Unit to be subleased and shall include in each lease or rental agreement with an Affordable Unit tenant a prohibition against subletting.
3. UNIT MONITORING
A. Prior to each rental of an Affordable Unit, Developer shall require that each prospective tenant execute an income certification form that is either supplied by City or utilized by Developer and reasonably acceptable to City. Developer shall then verify that each prospective tenant’s income certification form is truthful by obtaining any of the following:
i. Paycheck stubs from the prospective tenant’s two most recent pay periods. ii. A true copy of an income tax return from the prospective tenant for the most recent tax year in which a return was filed.
Exhibit F-5
11222-0116\2935138v9.doc
iii. An income verification certification from the prospective tenant’s employer.
iv. An income verification certification from the Social Security Administration or the California Department of Social Services. v. An alternate form of income verification reasonably available.
B. On an annual basis, Developer shall require each Affordable Unit tenant to execute an income recertification form that is either supplied by City or utilized by Developer and reasonably acceptable to City, and shall verify that such form is truthful in accordance with Paragraph A above. If upon income recertification it is determined that an Affordable Unit tenant has a gross income exceeding 140% of the qualifying limit, then subject to applicable law (including California Tax Credit Allocation Committee regulations and policies), such tenant shall be permitted to continue occupying the unit for 12 months or until lease expiration, whichever is longer, unless the tenant again becomes an Eligible Household upon recertification prior to the expiration of its lease.
4. TENANCY REPORTS
A. Developer shall submit to City annual tenancy reports, and annual income certifications or re-certifications, in form and content approved by City (such approval not to be unreasonably withheld, conditioned or delayed) from time to time. In addition to any other information specified by City, such reports shall include:
i. The number of persons per unit.
ii. Tenant name.
iii. Initial occupancy date.
iv. Rent paid per month.
v. Gross income per year.
vi. Copies of documents used to certify or recertify the tenant as an Eligible Household.
B. The first annual report and annual income certification, with copies of all of the signed leases (including any addenda and amendments), shall be submitted to City within 30 days after the date of the initial rental of all of the Affordable Units or as otherwise agreed to in writing by City. Subsequent annual reports and annual income certifications or re-certifications shall be submitted to City on the anniversary date of the first submittal.
C. Developer shall maintain all necessary books and records, including property, personal and financial records, in accordance with requirements of this Agreement. Developer, at such time and in such forms as are reasonably acceptable to City, shall furnish to City statements, records, reports, data and information pertaining to matters covered by this Agreement. Upon Exhibit F-6
11222-0116\2935138v9.doc
request for examination by City, Developer, at any time during normal business hours following not less than two business days’ written notice, shall make available all of its records with respect to all matters covered by this Agreement. Developer shall permit City and its representatives to audit, examine and make excerpts or transcripts from these records.
5. OCCUPANCY LIMIT
Except as otherwise required by law, no less than one person per bedroom shall be allowed; no more than three persons shall be permitted to occupy a one bedroom Affordable Unit.
6. MANAGEMENT PLAN
Prior to Certificate of Occupancy issuance, Developer shall obtain City approval of a management plan for the Affordable Units. The management plan shall include: the proposed management company’s name and qualifications; the proposed policies and procedures for management, tenant selection, and occupancy of the Affordable Units; and the proposed lease or rental agreement to be used for the Affordable Units. The management plan, and any amendments thereto, shall be subject to the City Manager’s approval, which approval shall not be unreasonably withheld, conditioned, or delayed. The management of the Affordable Units shall be compliance with the City-approved management plan. City hereby approves Quality Management Group, Inc. as the initial property manager.
7. LOSS OF SUBSIDY
A. It is anticipated that the Property will be supported by Project-Based Section 8 rental subsidy payments (the “Rental Subsidy”). If, during the Affordability Term, there is a reduction, termination, or nonrenewal of the Rental Subsidy through no fault of Developer, such that the Rental Subsidy as it exists as of the date of this Agreement is no longer available (or available in a lesser amount), Developer may request City, in its sole discretion, to approve:
(i) allowing households with adjusted incomes that do not exceed 60% of then current AMI adjusted for household size, as published by the California Tax Credit Allocation Committee annually (“60% AMI Households”), to occupy the Affordable Units, and (ii) increasing the rent on one or more of the Affordable Units, to rents that are affordable to 60% AMI Households, as outlined herein.
B. The income limit and rent increases described in paragraph (A) above are subject to the following requirements. Concurrently with the request, Developer shall provide City with:
(a) evidence of the anticipated reduction, termination, or nonrenewal of the Rental Subsidy; (b) a management plan for the Project for City’s approval (such approval not to be unreasonably withheld, conditioned or delayed), showing the impact of the loss or reduction of the Rental Subsidy; (c) a proposed operating budget reflecting the rent increases (“Operating Budget”); and (d) a description of Developer’s efforts to obtain alternate sources of rental subsidies, and, if the foregoing requirements are completed to City’s reasonable satisfaction, subject to the limitations set forth in the immediately succeeding sentence, City shall approve Developer’s request to increase the income limits and rent restrictions applicable to the Affordable Units. The number of Affordable Units subject to the rent increase and the amount of the proposed increase may not be greater than: (i) the number or amount required to ensure that the Project generates sufficient Exhibit F-7
11222-0116\2935138v9.doc
income to cover its operating costs, required deposits to replacement reserves, and debt service payments on approved financing as shown on the Operating Budget (together, the “Minimum Liabilities”); and (ii) such amount as is necessary for the Project to maintain a debt service coverage ratio of at least 1.15 (“Debt Service Coverage Ratio”). As used herein, “Debt Service Coverage Ratio” means, for any period, the ratio of (a) net operating income for such period to (b) all principal and interest payments due and payable during such period, regardless of whether the Project is generating sufficient cash flow. In addition, upon a reduction, termination, or nonrenewal of the Rental Subsidy as described above:
i. Developer shall use good faith commercially reasonable efforts to obtain alternative sources of rental subsidies and shall provide City with quarterly progress reports on efforts to obtain alternative sources of rental subsidies that would allow the rents to be reduced.
Upon receipt of any alternative rental subsidies, Developer shall reduce the rents as much as possible with the goal of reverting the rents to their original levels as set forth herein to the extent that the alternative rental subsidies provide sufficient income to cover the Minimum Liabilities of the Project as shown on the Operating Budget and to maintain a Debt Service Coverage Ratio of 1:15 to 1.00;
ii. Developer shall provide tenants in the Affordable Units with at least 60 days’ written notice of any rent increase and shall notify each tenant that if they have received a tenant-based voucher from the Orange County Housing Authority or any other governmental entity they may use such voucher to pay the rent for their Affordable Unit; iii. All rent increases are subject to City approval pursuant to the terms herein.
No later than 60 days prior to the proposed implementation of any rent increase, Developer shall submit to the City a schedule of any proposed increase in the rent. City shall approve a rent increase if it complies with the restrictions set forth herein.
iv. Developer shall give tenants of all Affordable Units written notice at least 60 days prior to any rent increase.
With respect to any Affordable Units for which City has authorized Developer to increase rents pursuant to this Section, all special and/or target population preferences and requirements shall automatically terminate.
8. PROPERTY MAINTENANCE
Developer shall maintain the Property in the same aesthetic and sound condition as existing at the date of the Certificate of Occupancy, reasonable wear and tear excepted. Representative items of maintenance shall include: graffiti abatement; repainting, repair, or replacement of damaged or deteriorated surfaces, fencing, walls, equipment, etc.; emptying of trash receptacles and removal of litter; sweeping of public sidewalks adjacent to the Property; sweeping or washing down of on-site walks and paved areas; trimming, fertilization, and replacement of landscaping; cleaning windows; maintaining the roof in a leak-free and weather-tight condition; and maintaining any security devices in good working order.
Exhibit F-8
11222-0116\2935138v9.doc
9. NONDISCRIMINATION / NONSEGREGATION
A. Developer covenants that there shall be no discrimination against or segregation of any person, or group of persons, on account of any basis listed in subdivision (a) or (d) of Government Code Section 12955 in connection with the rental, sale, lease, sublease, transfer, use, or occupancy of the Project. Neither Developer nor any person claiming under or through Developer shall establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, or sublessees of the Project.
B. All deeds, leases or contracts entered into with respect to the Property shall contain or be subject to substantially the following nondiscrimination/nonsegregation clauses (but no such lease shall permit subletting):
1. (a) In deeds: “The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the California Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the California Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the premises herein conveyed, nor shall the Grantee himself or herself, or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the premises herein conveyed. The foregoing Agreements shall run with the land.
(b) Notwithstanding the immediately preceding paragraph, with respect to familial status, said paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the California Government Code. With respect to familial status, nothing in said paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the California Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the California Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the California Government Code shall apply to said paragraph.”
2. (a) In contracts: “The contracting party or parties hereby covenant by and for himself or herself and their respective successors and assigns, that there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the California Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the California Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the premises, nor shall the contracting party or parties, any subcontracting party or parties, or their respective assigns or transferees, establish or permit any such practice or practices of discrimination or segregation. (b) Notwithstanding the immediately preceding paragraph, with respect to familial status, said paragraph shall not be construed to apply to housing for older persons, as Exhibit F-9
11222-0116\2935138v9.doc
defined in Section 12955.9 of the California Government Code. With respect to familial status, nothing in said paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the California Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the California Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the California Government Code shall apply to said paragraph.”
10. ASSIGNMENT
A. The identity and qualifications of Developer as an experienced and successful Developer and operator of affordable rental housing developments are of particular concern to the City; it is because of this identity and these qualifications that City has entered into this Agreement with Developer. Except with respect to transfers permitted under the Lease, no voluntary or involuntary successor in interest of Developer shall acquire any rights or powers under this Agreement by assignment or otherwise. Except as permitted under the Lease, Developer shall not make any total or partial sale, transfer, conveyance, encumbrance to secure financing, assignment or lease of the whole or any part of the Lease or the Project without City’s prior written approval.
B. City approval shall not be required for the lease or rental of Affordable Units to Eligible Households in accordance with this Agreement.
11. BINDING EFFECT
A. The obligations established in this Agreement attach to and run with the Property, and shall be binding on Developer and any successor in interest to the Property or any part thereof for the benefit and in favor of City and City’s successors and assigns.
B. This Agreement shall be recorded prior to any deeds of trust or other liens on the Developer’s leasehold interest (except for the liens for property taxes and assessments), and this Agreement shall not be subordinated to any such deeds of trust or other liens.
C. No violation or breach of this Agreement shall defeat or render invalid or in any way impair the lien or charge of any mortgage, deed of trust or other financing or security instrument; provided, however, that any successor of Developer shall be bound by this Agreement whether such successor’s title was acquired by foreclosure, deed in lieu of foreclosure, trustee’s sale or otherwise.
12. NOTICES
Notices under this Agreement shall be given in writing and shall be given in accordance with the terms of the notices provision in the Lease.
13. REMEDIES
Upon a default by Developer, City shall have all rights and remedies at law or in equity, and all rights and remedies in Brea City Code Section 20.40.100, and such remedies shall be cumulative to the extent permitted by law. Subject to the rights of senior lenders to the Project, City shall have the right to obtain from Developer any overcharged rent if Developer is unable to locate the overcharged tenant for purposes of reimbursing such tenant the overcharged amount.
Exhibit F-10
11222-0116\2935138v9.doc
14. TIME OF THE ESSENCE
Time is of the essence of each provision of this Agreement in which time is a factor.
15. EXPIRATION
This Agreement shall remain in effect until expiration of the Affordability Period.
16. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute a single instrument.
17. INCORPORATION OF MANDATORY LANGUAGE
Each and every provision required by law to be inserted in this Agreement shall be deemed to be inserted and this Agreement shall be read and enforced as though such provision were included. If through mistake or otherwise any such provision is not inserted, or is not correctly inserted, then upon request of either party this Agreement shall promptly be amended to make such insertion or correction.
18. AMENDMENTS
This Agreement may not be amended, nor any provision or breach waived, except in a writing that is signed by the parties and that expressly refers to this Agreement.
IN WITNESS WHEREOF, City and Developer have caused this Agreement to be signed, acknowledged and attest on their behalf by their duly authorized representatives.
CITY:
CITY OF BREA,
a municipal corporation
By:
Bill Gallardo, City Manager
DEVELOPER:
JAMBOREE HOUSING CORPORATION,
a nonprofit corporation
By:
Exhibit F-11
11222-0116\2935138v9.doc
State of California )
County of ______________ )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
Exhibit F-12
11222-0116\2935138v9.doc
State of California )
County of ______________ )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
Exhibit F-1
11222-0116\2935138v9.doc
EXHIBIT A
TO AFFORDABLE HOUSING AGREEMENT
Legal Description
(Attached)
Exhibit F-2
11222-0116\2935138v9.doc
[This Page Intentionally Blank]
Exhibit F-3
11222-0116\2935138v9.doc
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL
TO:
City of Brea
1 Civic Center Circle
Brea, CA 92821
This document is exempt from
recording fees pursuant to
Government Code § 27383.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
NOTICE OF AFFORDABILITY RESTRICTIONS
ON TRANSFER OF PROPERTY
Important notice to owners, purchasers, tenants, lenders, brokers, escrow and title companies, and other persons, regarding affordable housing restrictions on the real property described in this Notice. Restrictions have been recorded with respect to the property described below which restrict the price and terms at which the property may be sold or rented. These restrictions may limit the sales price or rents of the property to an amount which is less than fair market value.
These restrictions limit the income of persons and households who are permitted to purchase and rent the property.
This NOTICE OF AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY (the “Notice”), is executed by ______________________________ ("Developer"), whose address is 17701 Cowan Avenue, Suite 200, Irvine, CA 92614 and by the City of (the “City”) in connection with that certain Regulatory Agreement (Housing Set Aside Funds) dated ___________, 202__ between Developer and the City, as successor to the housing assets of the former Brea Redevelopment Agency (the “Regulatory Agreement”) between Developer and the Agency.
RECITALS
1. Developer owns the land described on Exhibit “A” with an address of 323 N.
Brea Boulevard, in the City of Brea, State of California bearing Assessor’s Parcel Number 296- 301-02 (the “Land”).
2. Developer and Agency are entering into and recording the Regulatory Agreement substantially concurrently herewith.
3. Capitalized terms used herein but not defined shall have the meaning set forth as described in the Regulatory Agreement.
Exhibit F-4
11222-0116\2935138v9.doc
TERMS OF NOTICE
1. Requirement for Recorded Notice. This Notice is being executed and recorded pursuant to California Health and Safety Code Section 33334.3(f)(3)(B).
2. Regulatory Agreement. This Notice is being recorded substantially concurrently with the recordation of the Regulatory Agreement, which is incorporated herein by reference.
3. Recitation of Affordability Restrictions. The Regulatory Agreement restricts the occupancy of ___________ multifamily dwelling units on the Land to occupancy by __________ Income Households at an Affordable Rent (as defined in the Regulatory Agreement) for a term commencing on the completion of the rental project (as evidenced by a final Certificate of Occupancy) and ending on _______________, 20__. [55 YEARS] IN WITNESS WHEREOF, this Notice has been executed and made effective on the day and year first above written.
_____________________________
By:
Print Name:
Title:
CITY OF BREA
By:
Bill Gallardo, City Manager
Attest:
___________________________
Lillian Harris-Neal, City Clerk
APPROVED AS TO FORM:
__________________________
Terence Boga, City Attorney
Exhibit G-1
11222-0116\2935138v9.doc
EXHIBIT G
FORM OF GROUND LEASE
(Attached)
Exhibit G-2
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit G-3
11222-0116\2935138v9.doc
GROUND LEASE
by and between
CITY OF BREA
and
JHC-ACQUISITIONS LLC,
Exhibit G-4
11222-0116\2935138v9.doc
THIS GROUND LEASE (“Lease” or “Agreement”) is dated ______, 202__ (“Effective Date”) for reference purposes and is executed by the City of Brea, a California municipal corporation (“Landlord”) and JHC-Acquisitions LLC, a California limited liability company (“Tenant”). Landlord and Tenant are hereafter collectively referred to as the “Parties.”
RECITALS
A. Landlord is the owner of the land described on Exhibit A (“Property”).
B. Landlord and Tenant entered into that certain Disposition, Development and Loan Agreement dated _______, 2024 (“DDLA”) which provides for the ground lease of the Property by Landlord to Tenant for the development of the project described in Recital C, below.
Capitalized terms used but not defined herein shall have the meaning set forth in the DDLA.
C. Tenant has agreed to construct a 39-unit multifamily rental housing development on the Property (consisting of 38 apartments that will be affordable to extremely low-income households and one manager’s unit) and other amenities (collectively, “Project”).
D. Landlord desires to lease to Tenant, and Tenant desires to lease from Landlord the Property, upon and subject to the terms and conditions hereinafter set forth.
E. The DDLA contemplates that this Lease shall be executed and delivered, and a Memorandum of Lease, a deed of trust in favor of Landlord, and an Affordable Housing Agreement, executed, acknowledged and recorded, at the Closing under the DDLA.
NOW, THEREFORE, for and in consideration of the covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows.
ARTICLE 1.
DEFINITIONS
1.1. Definitions. The following terms shall have the meanings set forth in the Sections referenced below whenever used in this Agreement and the Exhibits attached hereto. Additional terms are defined in the Recitals and text of this Agreement.
1.2. “Applicable Laws” is defined in Section 6.3.
1.3. “City” means the City of Brea, a municipal corporation, in its regulatory capacity as opposed to its proprietary interest in the Property as Landlord hereunder.
1.4. “City Council” means the City Council of the City of Brea.
1.5. “Claims” is defined in Article 10..
1.6. “Conditions of Approval” is defined in Section 6.12.
Exhibit G-5
11222-0116\2935138v9.doc
1.7. “Construction Plans” is defined in Section 6.14.
1.8. “CPI” means the Consumer Price Index—Urban Consumers (Los Angeles-RiversideOrange County, CA, area; Base 1982-84 = 100), as published by the United States Department of Labor, Bureau of Labor Statistics or any successor index or agency reasonably acceptable to the parties.
1.9. “Environmental Laws” is defined in Section 7.6.4(ii).
1.10. “Hazardous Material” is defined in Section 7.6.4(i).
1.11. “Improvements” means all buildings, structures, fixtures, fences, walls, paving, parking improvements, driveways, walkways, plazas, landscaping, permanently affixed utility systems and equipment, and other improvements located on the Property, including, without limitation, the Project and all replacements of the foregoing.
1.12. “Indemnitees” is defined in Article 10.
1.13. “Lease Conclusion” is defined in Section 8.2.1.
1.14. “Leasehold Mortgage” means a deed of trust on the leasehold estate created by this Lease and held by a Leasehold Mortgagee.
1.15. “Leasehold Mortgagee” means the mortgagee or beneficiary of any Leasehold Mortgage and in the event of a transfer of such Leasehold Mortgage, the successor Leasehold Mortgagee, upon delivery of written notice of the transfer to Landlord.
1.16. “Official Records” means the Official Records of Orange County, California.
1.17. “Prevailing Wage Laws” is defined in Section 6.3.
1.18. “Project” means the residential rental project and related improvements as described in Recital C as they may be modified pursuant to the terms of this Lease, subject to compliance with applicable law.
1.19. “Property” is defined in Recital A
1.20. “Term” is defined in Section 3.1.
1.21. “Transfer” is defined in Section 16.1.
ARTICLE 2.
DEMISE OF PREMISES
2.1. Demise. Upon the Effective Date (which is the date of this Lease, and the date of the Closing under the DDLA), Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Property for the Term and on the terms and conditions set forth in this Lease.
Exhibit G-6
11222-0116\2935138v9.doc
2.2. Condition of Title. Landlord leases the Property to Tenant subject to all easements, covenants, conditions, restrictions and other title matters of record existing as of the Effective Date, and all matters that would be apparent from an inspection of the Property on the Effective Date.
2.3. Condition of Property. Tenant specifically acknowledges that except for the representations and warranties made by Landlord pursuant to the DDLA, including, without limitation, in Section 2.2 of the DDLA, Landlord is leasing the Property to Tenant on an “AS IS”, “WHERE IS” and “WITH ALL FAULTS" basis and that Tenant is not relying on any representations or warranties of any kind whatsoever, express or implied, from Landlord, its employees, board members, or agents as to any matters concerning the Property. Except for the representations and warranties made by Landlord pursuant to the DDLA, Landlord makes no representations or warranties as to any matters concerning the Property including: (i) matters relating to soils, subsoils, geology, the presence or absence of fill, groundwater, drainage, and flood zone designation; (ii) the existence, quality, nature, adequacy and physical condition of utilities serving the Property; (iii) the development potential of the Property, and the Property's use, habitability, merchantability, or fitness, suitability, value or adequacy of the Property for any particular purpose; (iv) the zoning or other legal status of the Property or any other public or private restrictions on use of the Property; (v) the compliance of the Property with Environmental Laws, covenants, conditions and restrictions of any governmental or quasi-governmental entity or of any other person or entity; (vi) the presence or removal of Hazardous Material, substances or wastes on, under or about the Property or the adjoining or neighboring property; and (vii) the condition of title to the Property.
2.4. Tenant to Rely on Own Experts. Tenant acknowledges that notwithstanding the delivery by Landlord to Tenant of any materials, including, without limitation, third party reports, Tenant will rely entirely on Tenant’s own experts and consultants and its own independent investigation and judgment as to all matters relating to the Property.
2.5. Environmental Disclosure. To the extent the Landlord has copies of reports regarding the environmental condition of the Property, it has provided copies to Tenant of those reports known to exist; but the Parties acknowledge that Landlord will not be conducting a public records search of any regulatory agency files—although the Landlord urges Tenant to do so to satisfy itself regarding the environmental condition of the Property. By execution of this Agreement, Tenant:
(i) acknowledges its receipt of the foregoing notice respecting the environmental condition of the Property; (ii) acknowledges that it has had an opportunity to conduct its own independent review and investigation of the Property; (iii) except for the representations and warranties made by Landlord pursuant to the DDLA, agrees to rely solely on its own experts in assessing the environmental condition of the Property and its sufficiency for its intended use; and (iv) waives any and all rights Tenant may have to assert that the Landlord failed to disclose information about the environmental condition of the Property.
2.6. Release by Tenant. Effective upon the Effective Date, Tenant WAIVES, RELEASES, REMISES, ACQUITS AND FOREVER DISCHARGES the Indemnitees and any person acting on behalf of the Landlord, from any and all Claims, direct or indirect, known or unknown, foreseen or unforeseen, which Tenant now has or which may arise in the future on account of or in any way arising out of or in connection with the physical condition of the Property, the presence of Exhibit G-7
11222-0116\2935138v9.doc
Hazardous Material in, on, under or about the Property other than any Claims related to Hazardous Material that was present in, on, under or about the Property prior to the Effective Date, or any law or regulation applicable thereto including, without limiting the generality of the foregoing, all Environmental Laws. The provisions of this Section 2.6 shall survive the expiration or termination of this Agreement.
TENANT ACKNOWLEDGES THAT TENANT IS FAMILIAR WITH CIVIL
CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR OR RELEASING PARTY DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT
THE TIME OF EXECUTING THE RELEASE AND THAT, IF
KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR
OR RELEASED PARTY.
BY INITIALING BELOW, TENANT EXPRESSLY WAIVES THE BENEFITS OF CIVIL CODE SECTION 1542 WITH RESPECT TO THE FOREGOING RELEASE:
Tenant’s initials: _____________
ARTICLE 3.
TERM OF LEASE
3.1. Term. The term of this Lease (“Term”) shall commence on the date hereof (i.e., the Effective Date), and it is intended that the Memorandum of Lease be recorded on such date (“Commencement Date”). Unless sooner terminated under the provisions hereof, the Term of this Lease shall expire 99 years after the completion of the Project (as evidenced by a final Certificate of Occupancy) (“Expiration Date”). The expiration or sooner termination of the Term shall be referred to as “Lease Conclusion.”
3.2. Lease Year. For purposes of this Lease, “Lease Year” shall mean each calendar year, or partial calendar year during the Term. If the Commencement Date does not occur on January 1, then any amounts required to be paid under this Lease on a Lease Year basis shall be prorated on a per diem basis for the partial Lease Years that commence with the Commencement Date and end on the Expiration Date.
ARTICLE 4.
RENT
4.1. Rent. Tenant has prepaid rent (in the amount of $99) to Landlord through the escrow under the DDLA at the Closing under the DDLA.
Exhibit G-8
11222-0116\2935138v9.doc
4.2. Additional Rent. Tenant also agrees to pay as rent all sums, Impositions (as defined in Section 5.1 below), costs, expenses, and other payments which Tenant in any of the provisions of this Lease assumes or agrees to pay (collectively, “Additional Rent”). If Tenant fails to pay timely any Additional Rent following written notice of such failure and expiration of any applicable cure period, Landlord shall have (in addition to all other rights and remedies) all the rights and remedies provided for herein or by law in the case of non-payment of rent, subject to the terms and conditions of this Lease.
4.3. Payment of Rent. The Base Rent and Additional Rent shall be collectively referred to as “Rent” under this Lease. All Rent shall be paid to Landlord in lawful money of the United States at the place to which notices are to be delivered to Landlord, unless Landlord designates a different address for the payment of Rent in writing to Tenant. Rent shall be payable on each anniversary of the Effective Date during the term hereof.
ARTICLE 5.
TAXES, ASSESSMENTS AND OTHER CHARGES
5.1. Impositions. Tenant covenants and agrees to pay prior to delinquency, all real property taxes, possessory interest taxes, license and permit fees, sales, use or occupancy taxes, assessments whether general or special, ordinary or extraordinary, unforeseen, as well as foreseen, of any kind or nature whatsoever, pertaining to this Lease, the Property or the Improvements or part thereof, including: (i) any assessment, levy, imposition or charge, in lieu of or substitution for real estate taxes; and (ii) any assessment for public improvements or benefits which is assessed, levied, or imposed upon or which becomes due and payable and a lien upon: (a) the Property or the Improvements or any part thereof or any personal property, equipment or other facility used in the operation thereof; (b) the rent or income received by Tenant from subtenants or licensees; (c) any use or occupancy of the Property or Improvements or part thereof; or (d) this transaction or, subject to the exclusions specified below, any document to which Tenant is a party creating or transferring an estate or interest in the Property or part thereof. All of the foregoing are hereinafter referred to as “Impositions.”
5.1.1. Exclusions. Impositions specifically shall exclude: (i) any income, franchise, gross receipts, estate, inheritance, transfer or gift tax imposed on Landlord; and (ii) any transfer tax imposed on any document to which Landlord is a party creating or transferring an estate or interest in the Property.
5.1.2. Installments. If, by law, any Imposition is payable, or may at the option of the taxpayer be paid, in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Tenant may pay the same together with any accrued interest on the unpaid balance of such Imposition in installments as the same respectively become due and before any fine or penalty may be added thereto for the nonpayment of any such installment and interest. Any Impositions relating to tax years that are only partially included in the Term shall be prorated between Tenant and Landlord.
Exhibit G-9
11222-0116\2935138v9.doc
5.1.3. Evidence of Payment. Upon request by Landlord, Tenant shall furnish, in form satisfactory to Landlord, evidence of payment prior to delinquency of all Impositions payable by Tenant.
5.2. Tenant Right to Contest. Tenant shall have the right before any delinquency occurs to contest or object to the amount or validity of any Imposition by appropriate legal proceedings, but such right shall not be deemed or construed in any way as relieving, modifying or extending Tenant’s covenant to pay any such Imposition at the time and in the manner required by law. Any such contest shall be conducted in accordance with and subject to the requirements of Applicable Laws and otherwise in a manner that does not subject Landlord’s title to the Property to foreclosure or forfeiture. Tenant shall indemnify, defend, protect and hold Landlord harmless from and against all claims, damages, losses, liabilities, costs and expenses (including attorneys’ fees) incurred by Landlord as a result of any such contest brought by Tenant. During any contest of an Imposition, Tenant shall (by payment of disputed sums, if necessary) prevent any advertisement of tax sale, foreclosure of, or any divesting of Landlord’s title, reversion or other interest in the Property or the Improvements.
5.3. Tenant Duty to File. Tenant shall have the duty of making or filing any exemption application, declaration, statement or report which may be necessary or advisable in connection with property tax exemption or the determination, equalization, reduction or payment of any Imposition which is or which may become payable by Tenant under the provisions of this Article V, and Landlord shall not be responsible for the contents of any such declaration, statement or report.
5.4. Utilities. Tenant agrees to pay, or cause to be paid, all charges which are incurred by Tenant or which are otherwise a charge or lien against the Property or part thereof during the Term, for gas, water, electricity, light, heat or power, telephone or other communication service use, or other utility use, rendered or supplied upon or in connection with the Property. Tenant shall also obtain, or cause to be obtained, without cost to Landlord, any and all necessary permits, licenses or other authorizations required for the lawful and proper installation and maintenance upon the Property of wires, pipes, conduits and other equipment for the supply of utilities to the Project. In no event shall Landlord have any liability to Tenant, and Tenant releases Landlord, from any and all claims (including consequential damages, lost profits and similar damages) that Tenant may incur as a result of any interruption, curtailment or diminishment of such utilities, other than for the active negligence or willful misconduct of Landlord. Notwithstanding the foregoing, Tenant shall have the right to challenge the amount or validity of the foregoing charges, provided that doing so does not result in the Property being subjected to any lien or other encumbrance that is not itself adequately released, insured over or otherwise satisfied by Tenant after Tenant has exhausted its efforts to contest the same in accordance with all Applicable Laws.
ARTICLE 6.
DEVELOPMENT OF THE PROPERTY
6.1. Construction of Improvements; Description of Project. Tenant agrees to construct on the Property a 39-unit multi-family residential rental project, together with related Improvements Exhibit G-10
11222-0116\2935138v9.doc
in accordance with the DDLA, plans and specifications, entitlements and permits and approvals issued or approved by the City, including all governmental conditions of approval.
6.2. Construction Schedule/Deadlines. Subject to force majeure delays (meaning delays that delay the applicable construction, excluding defaults on financing), Tenant shall materially commence construction of the Project within 30 days following the Effective Date, and shall diligently prosecute to completion the construction of the Project sufficient to allow City to issue a final certificate of occupancy within three years following commencement of construction, subject to any such force majeure delays. Tenant’s failure to commence or complete the Project in accordance with the time periods specified in this Section 6.2 shall be an Event of Default.
6.3. Construction Standards. Tenant shall carry out and shall cause its contractors to carry out the construction of the Project and all subsequent Improvements, alterations and replacements, in a high quality and workmanlike fashion in accordance with City’s governmental conditions of approval and the construction plans approved by Landlord and City, and the permits issued by City, and in compliance with all applicable state, federal, and local laws, rules, ordinances, codes, and regulations, including, to the extent applicable, Labor Code Section 1720 et seq. and the regulations adopted pursuant thereto (“Prevailing Wage Laws”), and all other applicable federal and state labor laws and standards, applicable provisions of the Public Contracts Code (if any), the City zoning and development standards, building, plumbing, mechanical and electrical codes, all other applicable provisions of the Brea City Code, and all applicable disabled and handicapped access requirements, including the Americans with Disabilities Act, 42 U.S.C. Section 12101 et seq., Government Code Section 4450 et seq., Government Code Section 11135 et seq., and the Unruh Civil Rights Act, Civil Code Section 51 et seq. (all of the foregoing, collectively “Applicable Laws”).
6.4. Prevailing Wages.
6.4.1. To the extent required by applicable law, Tenant shall comply and shall cause its contractors, subcontractors and agents to comply with Prevailing Wage Laws and shall be responsible for carrying out the requirements of such provisions.
6.4.2. Without limiting the generality of the preceding paragraph, to the extent required by applicable law, Tenant shall:
(i) Pay, and shall cause all consultants and contractors to pay, prevailing wages in the construction of the Improvements as those wages are determined pursuant to Labor Code Section 1720 et seq.;
(ii) Cause all consultants and contractors to employ apprentices as required by Labor Code Section 1777.5 et seq., and the implementing regulations of the Department of Industrial Relations (“DIR”), and to comply with the other applicable provisions of Prevailing Wage Laws;
(iii) Keep and retain, and shall cause all consultants and contractors to keep and retain, such records as are necessary to determine if such prevailing wages have been paid as required pursuant to Labor Code Section 1720 et seq., and apprentices have been employed as required by Labor Code Section 1777.5 et seq.;
Exhibit G-11
11222-0116\2935138v9.doc
(iv) Post at the Property, or cause the contractor to post at the Property, the applicable prevailing rates of per diem wages. Copies of the currently applicable current per diem prevailing wages are available from DIR;
(v) Cause contractors and subcontractors constructing the Improvements to be registered as set forth in Labor Code Section 1725.5;
(vi) Cause its contractors and subcontractors, in all calls for bids, bidding materials and the construction contract documents for the construction of the Improvements to specify that: (a) no contractor or subcontractor may be listed on a bid proposal nor be awarded a contract for the construction of the Improvements unless registered with the DIR pursuant to Labor Code Section 1725.5; and (b) the construction of the Improvements is subject to compliance monitoring and enforcement by the DIR.
(vii) Provide the City all information required by Labor Code Section 1773.3 as set forth in the DIR's online form PWC-100 within 2 days of the award of any contract (https://www.dir.ca.gov/pwc100ext/);
(viii) Cause its contractors to post job site notices, as prescribed by regulation by the DIR; and
(ix) Cause its contractors to furnish payroll records required by California Labor Code Section 1776 directly to the Labor Commissioner, at least monthly in the electronic format prescribed by the Labor Commissioner.
6.4.3. Tenant shall indemnify, defend (with counsel reasonably acceptable to City) and hold harmless the Indemnitees from and against all Claims arising directly or indirectly, in whole or in part, from the failure or alleged failure by Tenant, or any other person, including without limitation, Tenant’s contractor and subcontractors to comply with all applicable provisions of Prevailing Wage Laws in connection with construction of the Project, including without limitation, all Claims that may be made by contractors, subcontractors or other third party claimants pursuant to Labor Code Sections 1726 and 1781, all Claims relating to any failure to pay prevailing wages, employ apprentices, or comply with all applicable State or federal labor laws, regulations or standards in connection with this Agreement, including but not limited to the Prevailing Wage Laws. The provisions of this Section shall survive the expiration or earlier termination of this Agreement and the issuance of a Certificate of Completion and final Certificate of Occupancy for the Project.
6.5. Easements; Reciprocal Easement/Joint Use Agreement. From time to time at Tenant’s request, Landlord shall, in its capacity as fee title owner to the Property, join in the grant of reasonable easements to adjoining landowners and/or to public or private utility companies for utility service reasonably required to and for the benefit of the Project. Landlord agrees to join in granting or dedicating such public or private utility or other easements and making such other dedications as may be reasonably required for the development, maintenance, use, operation or enjoyment of the Property in accordance with this Lease.
6.6. Protection of Landlord. Nothing in this Lease shall be construed as constituting the consent of the Landlord, express or implied, to the performance of any labor or services, or the Exhibit G-12
11222-0116\2935138v9.doc
furnishing of any materials or any specific improvements, alterations of or repairs to the Property or any part thereof, by any contractor, subcontractor, laborer or materialman such as to give rise to any right of any such contractor, subcontractor, laborer or materialman to file a mechanic’s lien or other claim against the fee title to the Property. Landlord shall have the right at all reasonable times to post, and keep posted, on the Property any notices which Landlord may deem necessary for the protection of Landlord and the Property from mechanic’s liens or other claims. Tenant shall give Landlord 10 days’ prior written notice of the commencement of any work to be done on the Property to enable Landlord to post such notices. In addition, Tenant shall make, or cause to be made, timely payment of all monies due and legally owing to all persons doing any work or furnishing any materials or supplies to Tenant or any of its contractors or subcontractors in connection with the Property (subject to Tenant’s right to contest the same in accordance with all Applicable Laws).
6.7. Mechanic’s Liens and Stop Notices. Tenant shall not allow to be placed on the Property or any part thereof any lien or stop notice on account of materials supplied to or labor performed on behalf of Tenant. If a claim of a lien or stop notice is given or recorded affecting the Project or the Property, then within 30 days of such recording or service Tenant shall either: (a) pay and discharge (or cause to be paid and discharged) the same; (b) effect the release thereof by recording and delivering (or causing to be recorded and delivered) to the party entitled thereto a surety bond in sufficient form and amount; or (c) provide other assurance satisfactory to Landlord that the claim of lien or stop notice will be paid or discharged. Tenant shall indemnify, defend and hold Landlord harmless from and against liability, loss, damages, costs and expenses (including reasonable attorneys’ fees) incurred by or brought against Landlord for claims of lien of laborers or materialmen or others for work performed or materials or supplies furnished to Tenant or persons claiming under it.
6.8. Right of Landlord to Satisfy Liens on the Property. If Tenant fails to satisfy or discharge any lien or stop notice on the Property pursuant to and within the time period set forth in Section
6.7 above, upon not less than 10 days’ prior written notice to Tenant, the Landlord shall have the right, but not the obligation, to satisfy any such liens or stop notices at Tenant’s expense and without further notice to Tenant, and all sums advanced by Landlord for such purpose shall be payable to Landlord as Additional Rent. In such event Tenant shall be liable for and shall immediately reimburse Landlord for such paid lien or stop notice. Alternatively, the Landlord may require Tenant to immediately deposit with Landlord the amount necessary to satisfy such lien or claim pending resolution thereof. The Landlord may use such deposit to satisfy any claim or lien that is adversely determined against Tenant. Tenant shall file a valid notice of cessation or notice of completion upon cessation of construction work on the Property for a continuous period of 30 days or more, and shall take all other reasonable steps to forestall the assertion of claims or liens against the Property. Landlord may (but has no obligation to) record any notices of completion or cessation of labor, or any other notice that Landlord deems necessary or desirable to protect its interest in the Property.
6.9. Use of Plans. The contracts relating to design and construction of the Improvements executed by and between Tenant (or an affiliate of Tenant) and any architect, other design professional or any general contractor shall provide in the contracts, or in a consent to assignment, in form and substance reasonably satisfactory to Landlord, for the assignment thereof, subject to the rights of and any prior assignments to Leasehold Mortgagees and without any representation Exhibit G-13
11222-0116\2935138v9.doc
or warranty regarding such contracts, to Landlord as security to Landlord for Tenant’s performance hereunder, and Landlord shall be furnished with any such contract, and, subject to the rights of and any prior assignments to Leasehold Mortgagees and without any representation or warranty regarding such contracts, Tenant hereby conditionally assigns such contracts and plans and for the Project to Landlord and in connection therewith, agrees that if this Lease is terminated due to Tenant’s default, subject to the rights of and any prior assignments to Leasehold Mortgagees and without any representation or warranty regarding such contracts, Landlord may, at its election, use any plans and specifications to which Tenant is then entitled pursuant to any such contract upon the payment of any sums due to any party thereto and the obtainment of any approvals required from such architect, other design professional or general contractor.
6.10. Cost of Construction. Tenant shall be solely responsible for all direct and indirect costs and expenses incurred in connection with the development of the Property and the construction of the Improvements. Except for the City Loan provided to Tenant pursuant to the DDLA and as otherwise expressly set forth herein, all costs of designing, developing and constructing the Improvements and the Project and compliance with the Project approvals (including all off-site and on-site improvements required by City in connection therewith) shall be borne solely by Tenant and shall not be an obligation of Landlord. If any Applicable Laws subsequently are changed so as to require during the Term any alteration of the Improvements, or the reinforcement or any other physical modification of the Improvements, Tenant shall be solely responsible for such cost and expense.
6.11. Project Approvals. Tenant acknowledges and agrees that execution of this Agreement by Landlord does not constitute approval for the purpose of the issuance of building permits for the Project, does not limit in any manner the discretion of City in such approval process, and does not relieve Tenant from the obligation to apply for and obtain all necessary entitlements, approvals, and permits for the development of the Property, including the approval of architectural plans, the issuance of any certificates regarding historic resources required in connection with the Project (if any), and the completion of any required environmental review. Tenant covenants that it shall obtain all necessary permits and approvals required by City, or any other governmental agency having jurisdiction over the Property, and shall not commence construction work on the Project prior to issuance of building permits required for such work. Landlord shall work cooperatively with Tenant to assist in coordinating the expeditious processing and consideration of all permits, entitlements and approvals necessary for development of the Project on the Property.
6.12. Conditions of Approval. Tenant shall develop the Property in accordance with the terms and conditions of this Agreement and in compliance with the terms and conditions of all approvals, entitlements and permits issued by City or any other governmental body or agency with jurisdiction over the Project or the Property whether already granted or issued as of the Effective Date or as may subsequently be granted or issued in connection with development of the Project, including without limitation, all mitigation measures imposed in connection with environmental review of the Project and all conditions of approval imposed in connection with any entitlements, approvals or permits (all of the foregoing approvals, entitlements, permits, mitigation measures and conditions of approval are hereafter collectively referred to as the “Conditions of Approval”).
6.13. Fees and Permits. Tenant shall have the sole responsibility for obtaining all necessary governmental permits and approvals for the construction of the Improvements, at Tenant’s sole Exhibit G-14
11222-0116\2935138v9.doc
cost and expense. Landlord shall cooperate with Tenant in connection with obtaining any such governmental permits and approvals. Unless and except otherwise agreed by the Parties in writing, Tenant shall be solely responsible for, and shall promptly pay when due, all customary and usual fees and charges of City and all other agencies with jurisdiction over development of the Property in connection with obtaining building permits and other approvals for the Project, including those related to the processing and consideration of amendments, if any, to the current entitlements, any related approvals and permits, environmental review, architectural review, historic review, and any subsequent approvals for the Project.
6.14. Construction Plans. Tenant has submitted, and as of the Effective Date, City’s Building Department has approved, detailed construction plans for the Project (the “Construction Plans”).
As used herein “Construction Plans” means all construction documents upon which Tenant and Tenant’s contractors shall rely in developing the Project (including the landscaping, parking, and common areas) and shall include, without limitation, the site development plan, final architectural drawings, landscaping, exterior lighting and signage plans and specifications, materials specifications, final elevations, and building plans and specifications.
6.15. Construction Pursuant to Plans. Tenant shall develop the Project in accordance with the approved Construction Plans, the Conditions of Approval, and all other permits and approvals granted by the City pertaining to the Project. Tenant shall comply with all directions, rules and regulations of any fire marshal, health officer, building inspector or other officer of every governmental agency having jurisdiction over the Property or the Project. Each element of the work shall proceed only after procurement of each permit, license or other authorization that may be required for such element by any governmental agency having jurisdiction. All design and construction work on the Project shall be performed by licensed contractors, engineers or architects, as applicable.
6.16. Change in Construction Plans. Tenant shall notify Landlord in a timely manner of any material changes to the approved Construction Plans, including any material additions, changes, or deletions thereto. Written authorization from Landlord must be obtained before any of the following material changes, additions, or deletions in work for the Improvements may be performed: (i) any change in the work the cost of which exceeds Two Hundred Thousand Dollars ($200,000); or (ii) any set of changes in the work the cost of which cumulatively exceeds Four Hundred Thousand Dollars ($400,000); or (iii) any material change in building materials or equipment, specifications, or the structural or architectural design of the Improvements as provided for in the Construction Plans. Notwithstanding the foregoing, however, any change in the Construction Plans required in order to comply with applicable codes shall be deemed approved.
Nothing in this Section is intended to or shall be deemed to modify the City’s standard plan review procedures.
6.17. Rights of Access. For the purpose of ensuring that the construction of the Project is completed in compliance with this Agreement, Tenant shall permit representatives of the Landlord and the City to enter upon the Property following two business days’ written notice (except in the case of emergency in which case such notice as may be practical under the circumstances shall be provided).
Exhibit G-15
11222-0116\2935138v9.doc
6.18. Landlord Disclaimer. Tenant acknowledges that Landlord is under no obligation, and Landlord does not undertake or assume any responsibility or duty to Tenant or to any third party, to in any manner review, supervise, or inspect the progress of construction or the operation of the Project. Tenant and all third parties shall rely entirely upon its or their own supervision and inspection in determining the quality and suitability of the materials and work, the performance of architects, subcontractors, and material suppliers, and all other matters relating to the construction and operation of the Project. Any review or inspection undertaken by the Landlord is solely for the purpose of determining whether Tenant is properly discharging its obligations under this Agreement, and shall not be relied upon by Tenant or any third party as a warranty or representation by the Landlord as to the quality of the design or construction of the Improvements or otherwise.
6.19. Defects in Plans. Landlord shall not be responsible to Tenant or to any third party for any defect in the Construction Plans or for any structural or other defect in any work done pursuant to the Construction Plans. Tenant shall indemnify, defend (with counsel reasonably acceptable to Landlord) and hold harmless the Indemnitees from and against all Claims arising out of, or relating to, or alleged to arise from or relate to defects in the Construction Plans or defects in any work done pursuant to the Construction Plans whether or not any insurance policies shall have been determined to be applicable to any such Claims. Tenant’s indemnification obligations set forth in this Section shall survive the expiration or earlier termination of this Agreement. It is further agreed that Landlord does not, and shall not, waive any rights against Tenant which they may have by reason of this indemnity and hold harmless agreement because of the acceptance by Landlord, or Tenant’s deposit with Landlord of any of the insurance policies described in this Agreement.
Tenant’s indemnification obligations pursuant to this Section shall not extend to Claims arising due to the gross negligence or willful misconduct of the Indemnitees.
6.20. Equal Opportunity. There shall be no discrimination on the basis of race, color, religion, creed, sex, sexual orientation, gender identity, marital status, ancestry, national origin, age or disability in the hiring, firing, promoting, or demoting of any person engaged in construction work on the Property, and Tenant shall direct its contractors and subcontractors to refrain from discrimination on such basis.
6.21. Insurance Requirements. Tenant shall maintain and shall cause its contractors to maintain all applicable insurance coverage specified in Article IX.
ARTICLE 7.
USE OF THE PROPERTY
7.1. Permitted Uses. Tenant may use the Property for the construction and operation of the Project and for no other purpose without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Tenant shall not do or permit any activity on or about the Property that constitutes a public or private nuisance. At Tenant’s sole expense, Tenant shall procure and maintain all governmental licenses or permits required for the proper and lawful conduct of Tenant’s activities conducted on the Property.
Exhibit G-16
11222-0116\2935138v9.doc
7.2. Affordable Housing Agreement. Tenant shall comply with the Affordable Housing Agreement.
7.3. No Condominium Conversion. Tenant shall not convert the Project to condominium or cooperative ownership or sell condominium or cooperative conversion rights to the Project during the Term of this Lease.
7.4. Management and Operation of the Project; Compliance with Laws. Tenant shall operate, maintain and manage the Property in a good condition and repair, subject to incidental wear and tear. Tenant, at its sole cost and expense, shall comply with all Applicable Laws pertaining to the use, operation, occupancy, and management of the Property. Tenant shall not itself, and shall not permit any subtenant to use the Property or the Improvements for any unlawful purpose and shall not itself, and shall not permit any subtenant to, perform, permit or suffer any act of omission or commission upon or about the Property or the Improvements which would result in a nuisance or a violation of Applicable Law. Landlord shall have the right to review and approve (such approval not to be unreasonably withheld, conditioned or delayed) the qualifications of any management entity proposed by Tenant for the Project. Landlord hereby approves Quality Management Group, Inc. as the initial management entity for the Project. Any contracting of management services by Tenant shall not relieve Tenant of its primary responsibility for proper performance of management duties.
7.5. Tenant Right to Contest. Tenant shall have the right to contest by appropriate proceedings, in the name of Tenant, and without cost or expense to Landlord, the validity or application of any Applicable Law. If compliance with any Applicable Law may legally be delayed pending the prosecution of any such proceeding without the incurrence of any lien, charge or liability against the Property or Tenant’s interest therein, and without subjecting Tenant or Landlord to any liability, civil or criminal, for failure so to comply therewith, Tenant may delay compliance therewith until the final determination of such proceeding. Tenant shall indemnify, defend, protect and hold Landlord harmless from and against all claims, damages, losses, liabilities, costs and expenses (including without limitation reasonable attorneys’ fees) incurred by Landlord as a result of any such contest brought by Tenant.
7.6. Hazardous Materials.
7.6.1. Obligations of Tenant. Tenant hereby covenants and agrees that:
(i) Tenant shall not cause or permit the Property or any portion thereof to be a site for the use, generation, treatment, manufacture, storage, disposal or transportation of Hazardous Material in violation of Environmental Laws or otherwise knowingly permit the presence or release of Hazardous Material in, on, under, about or from the Property or the Project in violation of Environmental Laws with the exception of limited amounts of cleaning supplies and other materials customarily used in construction, use or maintenance of residential/mixed-use properties similar in nature to the Project and used, stored and disposed of in compliance with Environmental Laws.
Exhibit G-17
11222-0116\2935138v9.doc
(ii) Tenant shall keep and maintain the Property and each portion thereof in compliance with, and shall not cause or permit the Project or the Property or any portion of either to be in violation of, any Environmental Laws.
(iii) Promptly after receiving actual knowledge of the same, Tenant shall advise Landlord in writing of: (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against the Tenant, or the Property pursuant to any applicable Laws; (ii) any and all claims made or threatened by any third party against the Tenant or the Property relating to damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Material; or (iii) the presence or release of any Hazardous Material in, on, under, about or from the Property . The matters set forth in the foregoing clauses (i) through (iii) are hereinafter referred to as “Hazardous Materials Claims”. The Landlord shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claim.
(iv) Tenant shall promptly take all actions at its sole expense as are necessary to remediate the Property as required by law; provided that Landlord’s approval of such actions shall first be obtained, which approval shall not be unreasonably withheld, conditioned or delayed.
Without the Landlord’s prior written consent, Tenant shall not enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Materials Claim.
7.6.2. Environmental Indemnity:
(i) Environmental Indemnity by Tenant. From and after the Commencement Date, Tenant shall indemnify, defend and hold Landlord and Indemnitees harmless from and against any demand, lawsuit, liability, obligation, claim, damage, fine, penalty, expense, cost, or cause of action, whether at law or in equity, or any Hazardous Materials Claims resulting from, arising out of, or based upon the release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Site in violation, or alleged violation, of any Environmental Laws, that first occurred on or after the Effective Date, except that the foregoing indemnity obligation shall not apply to any matters that arise out of the active negligence or willful misconduct of Landlord and Indemnitees. This indemnity shall include any damage, liability, fine, penalty, parallel indemnity, cost or expense arising from or out of any claim, action, suit or proceeding for bodily injury (including sickness, disease or death). Tenant’s indemnification obligations set forth in this Section shall survive the expiration or earlier termination of this Agreement. (ii) Environmental Indemnity by Landlord. From and after the Commencement Date, Landlord shall indemnify, defend and hold Tenant and Tenant’s officers, directors, partners, employees, agent, and representatives harmless from and against any demand, lawsuit, liability, obligation, claim, damage, fine, penalty, expense, cost, or cause of action, whether at law or in equity, or any Hazardous Materials Claims resulting from, arising out of, or based upon the release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Site in violation, or alleged violation, of any Environmental Laws, that first occurred prior to the Commencement Date, except that the foregoing indemnity obligation shall not apply to any matters that arise out of the active negligence or willful misconduct of Tenant. This indemnity shall include any damage, liability, Exhibit G-18
11222-0116\2935138v9.doc
fine, penalty, parallel indemnity, cost or expense arising from or out of any claim, action, suit or proceeding for bodily injury (including sickness, disease or death). Landlord’s indemnification obligations set forth in this Section shall survive the expiration or earlier termination of this Agreement.
7.6.3. No Limitation. Tenant hereby acknowledges and agrees that Tenant’s duties, obligations and liabilities under this Agreement are in no way limited or otherwise affected by any information the Landlord may have concerning the Property and/or the presence in, on, under or about the Property of any Hazardous Material, whether the Landlord obtained such information from the Tenant or from its own investigations, unless such information was known to the Landlord at the time of execution of this Agreement but not disclosed to Tenant and not known to Tenant at the time of execution of this Agreement.
7.6.4. Definitions.
(i) “Hazardous Materials” means any substance, material, or waste which is or becomes regulated by any local governmental authority, the State of California, or the United States Government, including any material or substance which is: (i) defined as a “hazardous waste,” “extremely hazardous waste,” or “restricted hazardous waste” under sections 25115, 25117 or 25122.7, or listed pursuant to section 25140 of the Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law); (ii) defined as a “hazardous substance” under section 25316 of the Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act); (iii) defined as a “hazardous material,” “hazardous substance,” or “hazardous waste” under section 25501 of the Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory); (iv) defined as a “hazardous substance” under section 25281 of the Health and Safety Code, Division 20, Chapter
6.7 (Underground Storage of Hazardous Substances); (v) petroleum, or any fraction thereof; (vi) friable asbestos; (vii) polychlorinated biphenyls; (viii) listed under Article 9 or defined as “hazardous” or “extremely hazardous” pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20; (ix) designated as “hazardous substances” pursuant to section 311 of the Clean Water Act (33 U.S.C. § 1317); (x) defined as a “hazardous waste” pursuant to section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. § 6901, (42 U.S.C. § 6903); or (xi) defined as “hazardous substances” pursuant to section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601, et seq., as the foregoing statutes and regulations now exist or may hereafter be amended. (ii) “Environmental Laws” means all laws, ordinances, statutes, codes, rules, regulations, orders and decrees, of the United States, the State of California, the County of Orange, City, any other political subdivision in which the Site is located, and of any other political subdivision, agency or instrumentality exercising jurisdiction over City, Tenant, the Site, the Improvements or Hazardous Materials.
Exhibit G-19
11222-0116\2935138v9.doc
ARTICLE 8.
SURRENDER AND RIGHT TO REMOVE
8.1. Ownership During Term.
8.1.1. Improvements. During the Term of this Lease the Improvements shall, subject to the terms of this Lease, be and remain the property of Tenant.
8.1.2. Personal Property. All personal property, furnishings, fixtures and equipment installed by Tenant in, on or around the Property which (i) are not attached to the Property so as to cause substantial damage upon removal, and (ii) are not necessary for the construction or the normal operation and occupancy of the Project, shall be the personal property of Tenant (“Personal Property”). At any time during the Term, Tenant shall have the right to remove the Personal Property provided Tenant shall repair any damage caused by the removal of such Personal Property. Personal Property shall not include any portion or part of building components or fixtures necessary for the completion of the Project or the operation of the basic building systems (such as elevators, escalators, chillers, boilers, plumbing, electrical systems, lighting, sanitary fixtures and HVAC systems) which shall be deemed a part of the Improvements.
8.2. Ownership at Lease Conclusion.
8.2.1. Improvements. Upon the expiration or termination of this Lease (“Lease Conclusion”) the Improvements and all stoves, refrigerators and dishwashers installed in the residential units (“Appliances”) shall unconditionally be and become the property solely of Landlord, and no compensation therefor shall be due or paid by Landlord to Tenant for any part thereof, and this Lease shall operate as a conveyance and assignment thereof. Upon Lease Conclusion, Tenant shall surrender to Landlord the Property, the Improvements and the Appliances in good order, condition and repair, reasonable wear and tear excepted, free and clear of all liens, claims and encumbrances other than those matters existing prior to the Effective Date or matters subsequently created or consented to by Landlord (such consent not to be unreasonably withheld or delayed). Upon Lease Conclusion, at Landlord’s request Tenant agrees to execute, acknowledge and deliver to Landlord such recordable instruments (including a Termination of Memorandum of Lease) as are required by a reputable title company to confirm the termination of the Lease and all Tenant’s rights hereunder and to perfect Landlord’s right, title and interest in and to the Property, the Improvements and the Appliances.
8.2.2. Personal Property. With the exception of the Appliances, any Personal Property may be removed prior to Lease Conclusion by Tenant; provided, however, the removal shall be with due diligence, and without expense to Landlord, and any part of the Property damaged by such removal shall be promptly repaired by Tenant. Any Personal Property which remains on the Property for 30 days after Lease Conclusion may, at the option of Landlord, be deemed to have been abandoned and either may be retained by Landlord as its property AND TENANT HEREBY WAIVES ANY STATUES AND OTHER LAWS TO THE CONTRARY. If requested by Landlord within a reasonable time but not less than six months prior to the termination of this Lease, upon Lease Conclusion Tenant shall, at Tenant’s sole cost and expense, remove all Personal Property, or portions thereof designated by Landlord.
Exhibit G-20
11222-0116\2935138v9.doc
8.3. Condition of Improvements at Lease Conclusion. Landlord has entered this Lease in reliance on the fact that, at Lease Conclusion, subject to any casualty and/or condemnation, Landlord will receive from Tenant the Improvements and Appliances in good condition and repair, reasonable wear and tear excepted and reflecting the age of the Improvements and Appliances at such time and Landlord’s willingness during the Term of this Lease to consent to the encumbrance of Tenant’s interest in the Property for construction financing. At any time during the Term, upon not less than two business days’ written notice and during normal business hours, Landlord may inspect the Property and Improvements and Appliances to confirm that they are being properly maintained as required herein. Following its inspection, Landlord may deliver to Tenant written notification of any portions of the Property or Improvements or Appliances which Landlord has determined are not being properly maintained and Tenant shall promptly comply with the provisions of this Lease regarding such items; provided, the failure of Landlord to inspect or to notify Tenant of any default hereunder shall not be a waiver of Landlord’s right to enforce Tenant’s maintenance and repair obligations hereunder.
8.4. Survival. The provisions of this Article 8 shall survive Lease Conclusion.
ARTICLE 9.
INSURANCE
9.1. Insurance. Tenant, at its sole cost and expense, commencing upon the Effective Date and continuing throughout the Term (except as otherwise specified below) shall keep and maintain in full force and effect policies of insurance pursuant to and in accordance with the requirements set forth in this Article IX. Landlord shall review and update the insurance requirements no more often the every five years during the term of this Lease and shall provide to Tenant written notice of the updated insurance requirements; provided, however, that any changes to the limits hereunder shall not exceed the increase in the CPI since the Commencement Date, with respect to the first such increase, and thereafter since the last increase pursuant to this Section 9.1.
9.1.1. Tenant and all contractors working on behalf of Tenant on the Project shall maintain a commercial general liability policy in the amount of One Million Dollars ($1,000,000) each occurrence, Two Million Dollars ($2,000,000) annual aggregate, together with Three Million Dollars ($3,000,000) excess liability coverage, including coverage for bodily injury, property damage, products, completed operations and contractual liability coverage. Such policy or policies shall be written on an occurrence basis and shall name the Indemnitees as additional insureds.
9.1.2. Tenant (if Tenant has employees) and all contractors working on behalf of Tenant shall maintain a comprehensive automobile liability coverage in the amount of One Million Dollars ($1,000,000), combined single limit including coverage for owned and non-owned vehicles and shall furnish or cause to be furnished to Landlord evidence satisfactory to Landlord that Tenant and any contractor with whom Tenant has contracted for the performance of work on the Property or otherwise pursuant to this Agreement carries workers’ compensation insurance as required by law. Automobile liability policies shall name the Indemnitees as additional insureds.
9.1.3. Upon commencement of construction work and continuing until issuance of the final certificate of occupancy or equivalent for the Project, Tenant and all contractors working on Exhibit G-21
11222-0116\2935138v9.doc
behalf of Tenant shall maintain a policy of builder's all-risk insurance in an amount not less than the full insurable cost of the Project on a replacement cost basis naming Landlord as loss payee.
9.1.4. Tenant (if Tenant has employees) and any contractor or subcontractor with whom Tenant or the general contractor has contracted for the performance of work on the Property or otherwise pursuant to this Agreement, shall carry statutory Workers’ Compensation insurance and Employer’s Liability insurance in a minimum amount of One Million Dollars ($1,000,000) per accident.
9.1.5. Tenant shall require the Project architect, and engineer to maintain Professional Liability/Errors and Omissions insurance with limits not less than One Million Dollars ($1,000,000) each claim. The City’s Risk Manager may consider requests for lower limits for professionals that will provide a limited scope of services for the Project. Certificates evidencing this coverage must reference both the Tenant and the Indemnitees. If the professional liability/errors and omissions insurance is written on a claims made form: (i) the retroactive date must be shown and must be before the Effective Date, (ii) insurance must be maintained and evidence of insurance must be provided for at least three years after completion of Project construction, and (iii) if coverage is cancelled or non-renewed and not replaced with another claims made policy form with a retroactive date prior to the Effective Date, Tenant must purchase, or require the provision of, extended period coverage for a minimum of three years after completion of construction.
9.1.6. Tenant shall maintain property insurance covering all risks of loss (other than earthquake), including flood (if required) for 100% of the replacement value of the Project with deductible, if any, in an amount reasonably acceptable to Landlord, naming Landlord as loss payee.
9.1.7. Companies writing the insurance required hereunder shall be licensed to do business in the State of California. Insurance shall be placed with insurers with a current A.M.
Best's rating of no less than A: VII. The Commercial General Liability and comprehensive automobile policies required hereunder shall name the Indemnitees as additional insureds.
Builder’s Risk and property insurance shall name Landlord as loss payee as its interest may appear pursuant to this Lease.
9.1.8. Tenant is obligated to have previously delivered to Landlord, as a condition to Closing under the DDLA reasonable evidence of all such insurance. If Tenant has neglected to so, then prior to commencement of construction work, Tenant shall furnish Landlord with certificates of insurance in form reasonably acceptable to Landlord evidencing the required insurance coverage and duly executed endorsements evidencing such additional insured status. The certificates shall contain a statement of obligation on the part of the carrier to notify Landlord of any material adverse change, cancellation, termination or non-renewal of the coverage at least 30 days in advance of the effective date of any such material adverse change, cancellation, termination or non-renewal.
9.1.9. If any insurance policy or coverage required hereunder is canceled or reduced, Tenant shall, within 15 days after receipt of notice of such cancellation or reduction in coverage, but in no event later than the effective date of cancellation or reduction, file with Landlord a certificate showing that the required insurance has been reinstated or provided through another Exhibit G-22
11222-0116\2935138v9.doc
insurance company or companies. Upon failure to so file such certificate, Landlord may, without further notice and at its option, procure such insurance coverage at Tenant’s expense, and Tenant shall promptly reimburse Landlord for such expense upon receipt of billing from Landlord. Failure to file such certificate shall also constitute an event of default.
9.1.10. Coverage provided by Tenant shall be primary insurance and shall not be contributing with any insurance, or self-insurance maintained by Landlord, and the policies shall so provide. The Tenant's full insurance limit, including limits that exceed the requirements of this Lease shall be available to cover claims against the Landlord. The insurance policies shall contain a waiver of subrogation for the benefit of the Landlord. Tenant shall furnish the required certificates and endorsements to Landlord prior to the commencement of construction of the Project, and shall provide Landlord with certified copies of the required insurance policies upon request of Landlord.
9.1.11. Tenant shall obtain and deliver to Landlord additional insured endorsements for the general liability coverage, and shall use Insurance Services Office (ISO) Form No. CG 20 09 11 85 or CG 20 10 11 85, or equivalent, including (if used together) CG 2010 10 01 and CG 2037 10 01; but shall not use the following forms: CG 20 10 10 93 or 03 94.
ARTICLE 10.
INDEMNIFICATION BY TENANT
Tenant shall indemnify, defend (with counsel reasonably acceptable to Landlord), protect and save Landlord and the City of Brea and its elected and appointed officials, officers, employees, and agents (all of the foregoing, collectively the “Indemnitees”) harmless from and against any and all claims, liabilities, losses, damages, fines, penalties, claims, demands, suits, actions, causes of action, judgments, judicial or administrative proceeding, deficiency, order, costs and expenses (including without limitation reasonable attorneys’ fees and court costs) (all of the foregoing, collectively “Claims”) which directly or indirectly, in whole or in part, are caused by, arise in connection with, result from, relate to, or are alleged to be caused by, arise in connection with, or relate to: the construction, renovation, use, operation, or management of, the Property or the Improvements by Tenant; any breach or default on the part of Tenant in the performance of any covenant or agreement to be performed by Tenant pursuant to this Lease that has not been cured following written notice of such breach or default by Landlord and expiration of any applicable cure period; any negligence of Tenant or any of its agents, contractors, employees, sublessees, or licensees; any accident, injury or damage caused to any person in or on the Property or Improvements; the furnishing of labor or materials by Tenant; or the failure of Tenant to comply with Applicable Laws; whether or not any insurance policies shall have been determined to be applicable to any such Claims. It is further agreed that Landlord does not and shall not waive any rights against Tenant which they may have by reason of this indemnity and hold harmless agreement because of the acceptance by Landlord, or Tenant’s deposit with Landlord of any of the insurance policies described in this Agreement. Tenant’s indemnification obligations set forth in this Section shall not apply to Claims to the extent such Claims arise from the gross negligence or willful misconduct of the Indemnitees. Tenant’s obligations under this Article shall survive Lease Conclusion
Exhibit G-23
11222-0116\2935138v9.doc
ARTICLE 11.
DAMAGE AND DESTRUCTION
11.1. Damage or Destruction.
11.1.1. In the event of any damage to or destruction of the Improvements during the Term for which insurance coverage is required under this Lease, Tenant shall restore and rebuild the Improvements as nearly as possible to their condition immediately prior to such damage or destruction, subject to any restrictions imposed by changes in Applicable Law and the availability of insurance proceeds for such purpose. Tenant shall commence diligently and continuously to carry out such rebuilding to full completion as soon as possible. Unless Landlord agrees otherwise in writing, Tenant shall commence reconstruction of the Improvements within 180 days following the date upon which insurance proceeds are made available for such work. Tenant shall be deemed to have commenced reconstruction when Tenant engages an architect for such work. Upon the occurrence of damage or destruction, all insurance proceeds paid in respect of such damage or destruction shall be applied to the payment of the costs of the restoration and rebuilding required to be performed by Tenant pursuant to this Lease. The insurance proceeds shall be held in trust by the senior Leasehold Mortgagee, or if none, a financial institution agreed upon by Landlord and Tenant (collectively, “Insurance Trustee”), with the costs of such trust to be a first charge against the insurance proceeds. After the completion of the restoration and rebuilding of the Improvements, any remaining insurance proceeds shall be paid to Tenant and Tenant shall be entitled to retain the same.
11.1.2. Notwithstanding the foregoing or any other provision to the contrary in this Article, if a Leasehold Mortgagee requires insurance proceeds payable with respect to a casualty to be paid to it or its successors or assigns pursuant to the terms of its Leasehold Mortgage, the insurance proceeds shall be delivered to such Leasehold Mortgagee to be applied by such Leasehold Mortgagee in accordance with such Leasehold Mortgage. No settlement with the issuer of any insurance policy purchased by the Tenant shall be made without the mutual agreement of the Landlord and Tenant and any Leasehold Mortgagee. Landlord and Tenant each agree to execute, acknowledge and deliver to the other any instruments that may be reasonably required to effectuate or facilitate this provision.
11.2. Rebuilding by Tenant. The funds held by the Insurance Trustee shall be held in trust and shall be applied to the cost of rebuilding. Subject to the rights of any Leasehold Mortgagee, any funds held by the Insurance Trustee following final completion of rebuilding and payment of all costs and expenses thereof and removal of any liens related thereto, shall be paid to Tenant.
11.3. Disbursement of Funds. If a Leasehold Mortgagee is the Insurance Trustee, then funds will be disbursed in accordance with the Leasehold Mortgage. If the Leasehold Mortgagee is not the Insurance Trustee, then the Insurance Trustee shall disburse funds only on a periodic basis approved by Landlord (such approval not to be unreasonably withheld, conditioned or delayed) and Tenant and only upon receipt of invoices and other documentation, certified as correct by Tenant’s architect, if an architect is required for the repair, evidencing satisfactory completion of the work for which payment is requested (“Payment Request”). Further, the Insurance Trustee shall not disburse any funds unless the payment request is accompanied by (a) an executed conditional lien release in form complying with California law relating to all labor and materials Exhibit G-24
11222-0116\2935138v9.doc
described in the Payment Request and (b) an executed final lien release in form complying with California law releasing all claims for labor and materials described in the immediately preceding Payment Request.
11.4. Notice Required. In the event of material damage to or destruction of the Improvements, or any part thereof, Tenant shall promptly give Landlord and Leasehold Mortgagee notice of such occurrence and take all actions reasonably required to protect against hazards caused by such damage or destruction. For purposes of this Article damage or destruction shall be deemed to be material if the estimated cost to repair equals or exceeds One Hundred Thousand Dollars ($100,000), increased annually by the CPI.
11.5. Removal of Debris. If this Lease shall terminate following the occurrence of damage to or destruction of the Improvements and at a time when Tenant shall not have restored and rebuilt the Improvements, then Tenant shall, at its cost and expense after the use of any insurance proceeds released for such purpose, remove the debris and damaged portion of Improvements (including without limitation all foundations) and restore the Property and Improvements or the applicable portion thereof to a neat, clean and safe condition.
11.6. Tenant’s Right to Terminate. Notwithstanding any contrary provision of this Article, Tenant shall have the option to terminate this Lease and be relieved of the obligation to restore the Improvements where all or substantially all of the Improvements are substantially damaged or destroyed and such damage or destruction resulted from a cause not insured against by Tenant nor required to be insured against by Tenant under this Lease (“Uninsured Loss”), and where all of the following occur:
(i) No more than 120 days following the Uninsured Loss, Tenant shall notify Landlord of its election to terminate this Lease. To be effective, such notice must include the written consent of all Leasehold Mortgagees and partners of Tenant to Tenant’s exercise of the option to terminate set forth in this Section 11.6. Landlord shall be entitled to rely upon the foregoing notice and certification as conclusive evidence that Tenant has obtained the consent of all Leasehold Mortgagees to Tenant’s exercise of its option to terminate this Lease. (ii) No more than 60 days following the giving of the notice required by the preceding paragraph (i) or such longer time as may be reasonable under the circumstances, Tenant shall, at Tenant’s expense after the use of any insurance proceeds released for such purpose, remove all debris and other rubble from the Property, secure the Property against trespassers, and at Landlord’s election, remove all remaining Improvements on the Property. (iii) No more than 30 days following Tenant’s termination notice, Tenant shall deliver to Landlord a quitclaim deed to the Property and Improvements in recordable form, in form and content reasonably satisfactory to Landlord and/or with such other documentation as may be reasonably requested by Landlord or any title company on behalf of Landlord, terminating Tenant’s interest in the Property and Improvements.
Exhibit G-25
11222-0116\2935138v9.doc
ARTICLE 12.
LANDLORD’S RIGHT TO PERFORM TENANT’S COVENANTS
12.1. If Tenant shall at any time fail to pay any Imposition or other charge payable by Tenant to a third party as required by this Lease within the time permitted (which shall be deemed to include any time to contest the same that is permitted by Applicable Laws), or to pay for or maintain any of the insurance policies required pursuant to Article 9 within the time therein permitted, or to make any other payment or perform any other act on its part to be made or performed hereunder within the time permitted by this Lease, then after 30 days’ written notice to Tenant and after satisfying all other notice requirements set forth in this Lease respecting Leasehold Mortgagees and partners of Tenant and such parties’ failure to timely cure (or as applicable, commence to cure) the same, and without waiving or releasing Tenant from any obligation of Tenant hereunder, Landlord may (but shall not be required to): (i) pay such Imposition or other charge payable by Tenant; (ii) pay for and maintain such insurance policies required pursuant to Article 9; or (iii) make such other payment or perform such other act on Tenant’s part to be made or performed under this Lease; and Landlord may enter upon the Property and Improvements for such purpose and take all such action thereon as may be reasonably necessary therefor.
12.2. All sums paid by Landlord and all costs and expense incurred by Landlord in connection with the performance of any such act (together with interest thereon at the Default Rate from the respective dates of Landlord’s making of each such payment) shall constitute additional Rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord on demand. The “Default Rate” shall mean interest calculated at an annual rate equal to the rate of interest most recently announced by Bank of America N.A. (or its successor bank) at its San Francisco office as its “reference rate” but in no event more than the maximum rate of interest permitted by law. If Bank of America or its successor no longer issues a “reference rate,” the most comparable rate of the largest bank with its corporate headquarters in California shall be used. If there is no such bank or comparable rate, then the Default Rate shall be the highest legal rate of interest that may be charged at that time.
ARTICLE 13.
REPAIRS, CHANGES, ALTERATIONS AND NEW CONSTRUCTION
13.1. Repairs and Maintenance. Tenant covenants and agrees, throughout the Term, without cost to Landlord, to take good care of the Property and to keep the same in good order and condition, reasonable wear and tear excepted. Tenant shall promptly, at Tenant’s own cost and expense, make all necessary repairs, interior and exterior, structural and nonstructural, ordinary as well as extraordinary, whether contemplated or not contemplated at the time of execution of this Lease, and shall keep the Property in a well maintained, clean and sanitary condition, reasonable wear and tear excepted. The term “repairs” shall include replacements or renewals when necessary, and all such repairs made by Tenant shall be at least equal in quality and class to the original work, but reflecting the age of the Improvements. Tenant waives any rights created under any law now or hereafter in force to make repairs to the Improvements at Landlord’s expense. Tenant shall keep and maintain all portions of the Property and the sidewalks adjoining the same in a clean and Exhibit G-26
11222-0116\2935138v9.doc
orderly condition, free of accumulation of dirt, rubbish, and graffiti. From time to time during the Term, upon not less than two business days’ prior written notice from Landlord, Landlord may enter the Property, or portions thereof, to determine if Tenant is properly maintaining the Property.
If, following any such inspection by Landlord, Landlord delivers notice of any deficiency to Tenant, Tenant shall promptly prepare and deliver to Landlord Tenant’s proposed plan for remedying the indicated deficiencies. Tenant’s failure to deliver a remedial plan and to complete, within a reasonable time, remedial work shall be a default under this Lease (subject to all applicable notice and cure rights of Tenant, Leasehold Mortgagees, and partners of Tenant).
Landlord’s failure to deliver, following any Landlord’s inspection, any notice of deficiency to Tenant, shall not be a waiver of any default by Tenant under this Article. Tenant shall defend, indemnify, and hold Landlord harmless from and against any claim, loss, expense, cost, or liability incurred by Landlord arising out of Tenant’s failure to fully and timely fulfill its obligations to maintain and repair the Property as required.
13.2. Changes and Alterations. Subject to Section 13.3 below, Tenant shall not during the Term make any changes or alterations in, to or of the Improvements without the prior written consent of Landlord, which Landlord shall not unreasonably withhold, so long as Tenant complies with all of the following at Tenant’s sole cost and expense:
(i) The change or alteration shall be in harmony with neighboring buildings and shall not materially impair the value or structural integrity of the Improvements. (ii) The change or alteration shall be for a use which is permitted hereunder. (iii) No change, alteration or addition shall be undertaken until Tenant shall have obtained and paid for, to the extent the same is required from time to time, all permits and authorizations of any federal, state or municipal government or departments or subdivisions of any of them, having jurisdiction. Landlord shall join in the application for such permits or authorizations whenever such action is necessary; provided, however, that Landlord shall incur no liability or expense in connection therewith.
(iv) Any change, alteration or addition shall be made in a good and workmanlike manner and in accordance with all applicable permits and all Applicable Laws. (v) During the period of initial renovation of, or of construction of any change, alteration or addition in, to or of, the Improvements or of any permitted demolition or new construction or of any restoration, Tenant shall maintain or cause to be maintained property and other applicable insurance described in Article 9, which policy or policies by endorsement thereto, if not then covered, shall also insure any change, alteration or addition or new construction, including all materials and equipment incorporated in, on or about the Improvements (including excavations, foundations and footings) under a broad form all risks builders’ risk form or equivalent thereof.
(vi) At Landlord’s request, Tenant shall provide Landlord with a copy of asbuilt drawings for the Improvements within 60 days following the completion of the Improvements.
Exhibit G-27
11222-0116\2935138v9.doc
13.3. Exceptions to Requirement for Consent.
13.3.1. The foregoing notwithstanding, following Landlord’s issuance of a Certificate of Completion as provided by the DDLA, Tenant shall not be required to obtain Landlord’s prior written consent to any changes, alterations or Improvements so long as all the following requirements are met:
(i) The change, alteration, or Improvement is nonstructural; (ii) The change, alteration or Improvement has a cost of less than Five Hundred Thousand Dollars ($500,000), increased annually by the CPI; and (iii) The provisions of Article VI are satisfied.
13.3.2. Notwithstanding the foregoing, except in response to emergency situations for which it would not be reasonably practicable or possible to provide such advance notice, Tenant shall deliver to Landlord not later than 10 days prior to commencement of any construction, change, alteration or repair, written notice of the proposed work, a general description of the proposed work and sufficient information to permit Landlord to post a notice of non-responsibility on the Property.
13.4. No Right to Demolish. Subject to Section 13.3.1, Tenant shall have no right to demolish any Improvement, once built, unless Tenant shall have received the prior written consent of Landlord which shall not be unreasonably withheld if the age and condition of the Improvements makes repair or reconstruction impractical or financially infeasible.
ARTICLE 14.
EMINENT DOMAIN
14.1. Definitions. The following definitions shall apply in construing the provisions of this Article XIV:
(i) “Award” means all compensation, damages or interest, or any combination thereof, paid or awarded for the taking, whether pursuant to judgment, by agreement, or otherwise. (ii) “Notice of intended taking” means any notice or notification on which a reasonably prudent person would rely and would interpret as expressing an existing intention of taking as distinguished from a mere preliminary inquiry or proposal. It includes the service of a condemnation summons and complaint on a party to this Lease. The notice is considered to have been received when a party to this Lease receives from the condemning agency or entity a written notice of intent to take.
(iii) “Partial taking” means any taking that is not a total taking, a substantial taking, or a temporary taking.
Exhibit G-28
11222-0116\2935138v9.doc
(iv) “Substantial taking” means the taking of so much of the Property that the remaining portion thereof would not be economically and feasibly usable by Tenant for the then existing uses and purposes of the Property, in Tenant’s reasonable judgment, but shall exclude a temporary taking.
(v) “Taking” means any taking of or damage, including severance damage, to all or any part of the Property or any interest therein by the exercise of the power of eminent domain, or by inverse condemnation, or a voluntary sale, transfer or conveyance under threat of condemnation in avoidance of the exercise of the power of eminent domain or while condemnation proceedings are pending.
(vi) “Temporary taking” means the taking of any interest in the Property for a period of less than one (1) year.
(vii) “Total taking” means the taking of all or substantially all of the Property, but shall exclude a temporary taking.
14.2. Notice. The party receiving any notice of the kind specified below shall promptly give the other party and all Leasehold Mortgagees written notice of the receipt, contents and date of the notice received:
(i) Notice of intended taking;
(ii) Service of any legal process relating to condemnation of all or any portion of the Property;
(iii) Notice in connection with any proceedings or negotiations with respect to such a condemnation; or
(iv) Notice of intent or willingness to make or negotiate a private purchase, sale or transfer in lieu of condemnation.
14.3. Respective Interests. Landlord and Tenant, and any Leasehold Mortgagee, each shall have the right to represent its respective interest in each proceeding or negotiation with respect to a taking or intended taking and to make full proof of their respective claims. No agreement, settlement, sale or transfer to or with the condemning authority shall be made without the mutual agreement of Landlord and Tenant and any Leasehold Mortgagee. Landlord and Tenant each agree to execute, acknowledge and deliver to the other any instruments that may be reasonably required to effectuate or facilitate the provisions of this Lease relating to condemnation.
14.4. Total or Substantial Taking.
14.4.1. Effect. In the event of a total or substantial taking of fee title to the Property, Tenant’s interest in this Lease and all obligations of Tenant subsequently accruing shall cease as of the date of the vesting of title in the condemning authority; provided, however, that if actual physical possession of all or part of the Property is taken by the condemning authority prior to such date of vesting of title, Tenant’s obligations to pay Rent and other sums under this Lease shall terminate as of such earlier date. In the event of a total or substantial taking of an interest in the Exhibit G-29
11222-0116\2935138v9.doc
Property other than fee title, at Tenant’s option (exercisable by written notice to Landlord), Tenant’s interest in this Lease and all obligations of Tenant subsequently accruing hereunder shall cease as aforesaid.
14.4.2. Award on Total or Substantial Taking. In the event of a total or substantial taking, the Award shall be apportioned as follows, in the following order:
(i) To Leasehold Mortgagee in an amount equal to the amount owing on the Leasehold Mortgage.
(ii) To Landlord that portion of the Award equal to the fair market value of Landlord’s reversionary interest in the Property and the Improvements. (iii) To Tenant, that portion of the Award equal to the fair market value of Tenant’s leasehold estate in the Property and fee interest in the Improvements (subject to Landlord’s reversionary interest), less the amount paid to the Leasehold Mortgagee pursuant to (a) above.
14.5. Temporary Taking. In the event of a temporary taking, Tenant shall be entitled to the whole Award, and this Lease shall remain in full force and effect.
14.6. Partial Taking.
14.6.1. Effect. In the event of a partial taking, this Lease shall remain in full force and effect, covering the remainder of the Property, and Tenant shall repair and restore any damage to the Improvements caused by such partial taking consistent with and subject to the provisions applicable to a restoration in the event of an insured casualty under Article 9, so that after completion of the restoration the Improvements shall be, as nearly as possible, in a condition as good as the condition immediately preceding the partial taking. The Award for any partial taking shall be deposited and disbursed in the same manner as insurance proceeds are disbursed for restoration pursuant to Article 9, and upon completion of the restoration, any remaining portion of the Award shall be allocated as set forth in Section 14.6.2.
14.6.2. Award on Partial Taking. In the event of a partial taking, after application of the Award for restoration pursuant to Section 14.6.1, any remaining portion of such Award shall be apportioned as follows, in the following order:
(i) To Leasehold Mortgagee in an amount equal to the amount owing on the Leasehold Mortgage.
(ii) To Landlord, that portion of the Award attributable to the fair market value of Landlord’s reversionary interest in the portion of the Property and Improvements taken. (iii) To Tenant, that portion of the Award equal to the fair market value of the portion of the Improvements taken (subject to Landlord’s reversionary interest), less the amount paid to the Leasehold Mortgagee pursuant to (a) above, but only to the extent that the proceeds of the Award are not used for restoration of the Improvements.
Exhibit G-30
11222-0116\2935138v9.doc
(iv) The balance, if any, shall be allocated between Landlord and Tenant respectively in that proportion in which (i) the fair market value of the Property bears to (ii) the fair market value of the Improvements exclusive of the reversionary interest of Landlord. Any “bonus value” attributable to this Lease shall be paid to Landlord. (v) Any severance damages awarded or payable because only a portion of the Property is taken by eminent domain shall be paid to Tenant.
14.6.3. Tenant in Default. No payments shall be made to Tenant pursuant to this Section if any default by Tenant hereunder has occurred and is continuing unless and until such default is cured; provided, however, that during the continuation of any such default, the amounts owed to Tenant pursuant to this Section shall be used to offset any damages owed by Tenant under this Lease in connection with any such default.
14.6.4. Partial Taking in Last Fifteen Years. If a partial taking occurs during the last 15 years of Term and the reasonably estimated cost of reconstruction work exceeds, for each such remaining year of the Term, the same percent of the replacement value of the Improvements as the number of years remaining, Tenant shall have the right and option to treat the same as a substantial taking by giving written notice thereof to Landlord no later than 60 days following the earlier of:
(a) the date of vesting of title in the condemning authority of the portion of the Property taken; or (b) the date upon which the condemning authority takes physical possession of such portion of the Property. If Tenant does give such notice the partial taking shall be considered as a substantial taking and the taking shall be subject to the provisions of Section 14.4. For example, if there are 14 years remaining, then the applicable percentage of the replacement value that would permit Tenant to treat the taking as a substantial taking is 14%.
ARTICLE 15.
MORTGAGES
15.1. Leasehold Mortgages. Tenant shall have the right, at any time and from time to time during the Term, to encumber its leasehold interest hereunder with a Leasehold Mortgage or Mortgages provided that (a) no Leasehold Mortgage shall in any way impair (except as otherwise stated herein or as provided by law) the enforcement of Landlord’s right and remedies herein and by law provided, (b) any such Leasehold Mortgage shall at all times be subject and subordinate to, and shall not affect or become a lien upon Landlord’s right, title or estate in the Property or in this Lease, and (c) Tenant shall give Landlord prior written notice of any such Leasehold Mortgage, accompanied by a true and correct copy of any such Leasehold Mortgage. Any Leasehold Mortgage shall be subject to the terms and conditions set forth in this Article.
15.2. Rights of Leasehold Mortgagee.
15.2.1. Notices. If Tenant shall have provided Landlord with written notice of the address of any Leasehold Mortgagee, Landlord shall mail to such Leasehold Mortgagee a copy of any notice under this Lease at the time of giving such notice to Tenant, and no such notice shall be effective against such Leasehold Mortgagee, and no termination of this Lease or termination of Tenant’s right of possession of the Property or reletting of the Property by Landlord predicated on Exhibit G-31
11222-0116\2935138v9.doc
the giving by Landlord of any notice shall be effective, unless Landlord gives to such Leasehold Mortgagee written notice or a copy of its notice to Tenant of such default or termination, as the case may be.
15.2.2. Right to Cure.
(i) In the event of any default by Tenant under the provisions of this Lease, the Leasehold Mortgagee shall have the right, but not the obligation, to remedy or cause to be remedied such default (including the right to enter the Property and to take possession of the Property if necessary to cure the default) within the same cure period as afforded Tenant hereunder, extended by an additional 60 days, which cure period shall commence as against the Leasehold Mortgagee upon the delivery to the Leasehold Mortgagee of the notice of default. Landlord shall accept such performance by the Leasehold Mortgagee as if the same had been done by Tenant. (ii) The term “incurable default” as used herein means any default which cannot be reasonably cured by a Leasehold Mortgagee, such as a bankruptcy by Tenant. The term “curable default” means any default under this Lease which is not an incurable default. Any failure to pay monetary sums shall at all times be deemed a curable default. Any failure to comply with the requirements of Section 7.2 shall at all times be deemed a curable default, and as to Leasehold Mortgagees or any entity acquiring the interest of Tenant in the Property and in this Lease as a result of the foreclosure of a Leasehold Mortgage (or an assignment or deed in lieu thereof), Landlord shall not terminate this Lease provided such party is diligently and in good faith proceeding to cure any such default. In the event of any curable default under this Lease, and if prior to the expiration of the applicable grace period specified in Section 15.2.2 (a) the Leasehold Mortgagee shall give Landlord written notice that it intends to undertake the curing of such default, or to cause the same to be cured, or to exercise its rights to acquire the leasehold interest of Tenant or possession of the Property by foreclosure or otherwise, and shall promptly commence and then proceed with reasonable diligence to do so, whether by performance on behalf of Tenant of its obligations under this Lease, by foreclosure or otherwise, then Landlord will not terminate or take any action to effect a termination of this Lease or re-enter, take possession of or relet the Property, appoint a receiver, exercise any other remedy under this Lease, or similarly enforce performance of this Lease so long as the Leasehold Mortgagee is diligently and in good faith engaged in the curing of such default or effecting such foreclosure, and upon completion of a foreclosure (or assignment or deed in lieu thereof) and obtaining of possession by the Leasehold Mortgagee, the Leasehold Mortgagee shall have a reasonable time to cure the default. The foregoing sentence shall not be deemed to extend the time period within which a default in the payment of money must be cured under Section 15.2.2 (a). The Leasehold Mortgagee shall not be required to continue such possession or continue such foreclosure proceedings. Nothing herein shall preclude Landlord from terminating this Lease with respect to any additional default which shall occur during any period of forbearance and not be remedied within the cure period, if any, applicable to any such additional default, except that Leasehold Mortgagee shall have the same rights specified in this Article XV with respect to any additional defaults.
(iii) In the event of any incurable default under this Lease, and if prior to the expiration of the applicable grace period specified in Section 15.2.2 (a) of this Lease, the Leasehold Mortgagee shall give Landlord written notice that it intends to exercise its rights to acquire the leasehold interest of Tenant by foreclosure or otherwise, and shall promptly commence and then Exhibit G-32
11222-0116\2935138v9.doc
proceed with reasonable diligence to do so, whether by foreclosure or otherwise, then Landlord will not terminate or take any action to effect a termination of this Lease or re-enter, take possession of or relet the Property or similarly enforce performance of this Lease so long as the Leasehold Mortgagee is diligently and in good faith engaged in effecting such foreclosure and such incurable default shall be deemed cured upon the foreclosure of the Leasehold Mortgage (or assignment or deed in lieu thereof).
(iv) If the default by Tenant pertains to the failure of Tenant to complete construction of the Project within the time period required under Section 6.2, and if prior to the expiration of the applicable grace period specified in Section 15.2.2 (a), the Leasehold Mortgagee shall give Landlord written notice that it intends to undertake to exercise its rights to acquire the leasehold interest of Tenant or possession of the Property by foreclosure or otherwise, and shall promptly commence and then proceed with reasonable diligence to do so, whether by foreclosure or otherwise, then Landlord will not terminate or take any action to effect a termination of this Lease or re-enter, take possession of or relet the Property or similarly enforce performance of this Lease so long as the Leasehold Mortgagee is diligently and in good faith engaged in the completion of the construction of the Project or effecting such foreclosure or acquisition of possession. (v) If a Leasehold Mortgagee is prohibited, stayed or enjoined by any bankruptcy, insolvency or other judicial proceedings involving Tenant from commencing or prosecuting foreclosure or other appropriate proceedings, the times specified for commencing or prosecuting such foreclosure or other proceedings for Leasehold Mortgagee shall be extended for the period of such prohibition.
15.2.3. Execution of New Lease.
(i) If this Lease is terminated for any reason, including by Tenant’s trustee in bankruptcy, receiver, liquidator or other similar person on account of a default or if Tenant’s interest under this Lease shall be sold, assigned or transferred pursuant to the exercise of any remedy of the Leasehold Mortgagee, or pursuant to judicial proceedings, and if:
(a) All monetary defaults of Tenant have been cured, and (b) The Leasehold Mortgagee shall have arranged to the reasonable satisfaction of Landlord to cure any other curable default of Tenant under this Lease, then Landlord, within 30 days (or such period as may reasonably be necessary to enable Landlord to comply with statutory requirements applicable to Landlord’s lease of real property) after receiving a written request therefor, which shall be given within 60 days after such termination or transfer and upon payment to it of all reasonable out-of-pocket expenses, including attorneys’ fees, incident thereto, will execute and deliver a new lease of the Property to the Leasehold Mortgagee or its affiliate or other nominee or to the purchaser, assignee or transferee, as the case may be, for the remainder of the Term, containing the same covenants, agreements, terms, provisions, priority, and limitations. The tenant under such new lease shall be personally obligated only for the performance of obligations under the Lease commencing as of the date of such foreclosure or assumption, and ending as of the date of any assignment of the Lease to a successor tenant.
Exhibit G-33
11222-0116\2935138v9.doc
(ii) Upon the execution and delivery of a new lease, the new tenant, in its own name or in the name of Landlord may take all appropriate steps as shall be necessary to remove Tenant from the Property, but Landlord shall not be subject to any liability for the payment of fees, including attorneys’ fees, costs or expenses in connection therewith, and the new tenant shall pay all such fees, including attorneys’ fees, costs and expenses, on demand, and shall make reimbursement to Landlord of all such fees, including attorneys’ fees, costs and expenses, incurred by Landlord. Tenant acknowledges and agrees that Landlord shall have no liability whatsoever to Tenant in connection with any such action, and releases Landlord from any claim Tenant may have with respect thereto.
(iii) Following foreclosure or enforcement of a Leasehold Mortgage, or assignment in lieu thereof, Landlord will recognize the purchaser or assignee of the leasehold estate as the Tenant under the Lease.
(iv) After such termination and cancellation of the Lease and prior to the expiration of the period within which the Leasehold Mortgagee may elect to obtain a new lease from Landlord, Landlord shall refrain from terminating any existing sublease or otherwise encumbering the Property or the Improvements without the prior written consent of the Leasehold Mortgagee. Any new lease shall vest in the new lessee all right, title, interest, power and privileges of Tenant hereunder in and to the Property and the Improvements, including the assignment of Tenant’s interest in and to all then existing subleases and sublease rentals and the automatic vesting of title to all Improvements, fixtures and personal property of Tenant. Such new lease shall provide, with respect to each and every permitted sublease which immediately prior to the termination of the Lease was superior to the lien of the Leasehold Mortgage that the new lessee shall be deemed to have recognized the sublessee under the sublease, pursuant to the terms of the sublease as though the sublease had never terminated but had continued in full force and effect after the termination of the Lease, and to have assumed all the obligations of the sublessor under the sublease accruing from and after the termination of the Lease, except that the obligation of the new lessee, as sublessor, under any covenant of quiet enjoyment, expressed or implied, contained in any such sublease shall be limited to the acts of such new lessee and those claiming by, under or through such new lessee. If more than one entity claims to be the Leasehold Mortgagee that is entitled to a new lease pursuant to this subsection, Landlord shall enter into such new lease with the lender whose mortgage or deed of trust is prior in lien. Landlord, without liability to Tenant or any lender with an adverse claim, may rely upon a lender title insurance policy issued by a responsible title insurance company doing business in the state of California as the basis for determining the appropriate Leasehold Mortgagee who is entitled to such new lease.
15.2.4. Tenant Default Under Leasehold Mortgage. If Tenant defaults under a Leasehold Mortgage, the Leasehold Mortgagee may exercise with respect to Tenant’s interest in the Property and the Improvements any right, power or remedy under the Leasehold Mortgage which is not in conflict with the provisions of this Lease, including without limitation, judicial or nonjudicial foreclosure of the Leasehold Mortgage (or deed or assignment in lieu thereof), appointment of a receiver, and/or revocation of Tenant’s license to collect rents.
15.2.5. No Merger. There shall be no merger of this Lease or any interest in this Lease, nor of the leasehold estate created hereby, with the fee estate in the Property, by reason of the fact that this Lease or such interest therein, or such leasehold estate may be directly or indirectly held by or Exhibit G-34
11222-0116\2935138v9.doc
for the account of any person who shall hold the fee estate in the Property, or any interest in such fee estate, nor shall there be such a merger by reason of the fact that all or any part of the leasehold estate created hereby may be conveyed or mortgaged in a Leasehold Mortgage to a Leasehold Mortgagee who shall hold the fee estate in the Property or any interest of the Landlord under this Lease.
15.2.6. Assumption of Obligations. For the purpose of this Article, the making of a Leasehold Mortgage shall not be deemed to constitute an assignment or Transfer of this Lease or of the leasehold estate hereby created, nor shall any Leasehold Mortgagee, as such, be deemed an assignee or transferee of this Lease or of the leasehold estate hereby created so as to require such Leasehold Mortgagee, as such, to assume the performance of any of the terms, covenants or conditions on the part of Tenant. The purchaser at any sale of this Lease and of the leasehold estate hereby created in any proceedings for the foreclosure of any Leasehold Mortgage, or the assignee or transferee of this Lease and of the leasehold estate hereby created under any instrument or assignment or transfer in lieu of the foreclosure of any Leasehold Mortgage, in order to be deemed to be an assignee or transferee and before the same shall be binding on Landlord, must assume in writing the performance of all of the terms, covenants, and conditions on the part of Tenant during the period such party holds a leasehold interest in the Property by an instrument, in recordable form, reasonably satisfactory to Landlord; provided however, that nothing contained herein shall be construed to require the purchaser, assignee or transferee as described above to be obligated to cure any default by Tenant.
15.2.7. Limitation of Leasehold Mortgagee Liability for Tenant Defaults. Notwithstanding any contrary provision hereof: (i) no Leasehold Mortgagee shall be required to pay any liens or charges that are extinguished by the foreclosure of its Leasehold Mortgage; (ii) any incurable default shall be, and shall be deemed to have been waived by Landlord upon completion of foreclosure proceedings or acquisition of Tenant’s interest in this Lease by any purchaser at a foreclosure sale, or any entity who otherwise acquires Tenant’s interest from the Leasehold Mortgagee by deed in lieu of foreclosure; and (iii) the liability of a Leasehold Mortgagee and any entity acquiring the interest of Tenant in the Property and in this Lease as a result of the foreclosure of a Leasehold Mortgage (or an assignment or deed in lieu thereof shall be limited to its leasehold interest in this Lease and shall extent to any other assets of such Leasehold Mortgagee or entity.
Any entity acquiring the interest of Tenant in the Property and in this Lease as a result of the foreclosure of a Leasehold Mortgage (or an assignment or deed in lieu thereof) acquires an interest in the leasehold only, and shall be liable to perform the obligations of Tenant under this Lease only during the period such entity retains ownership of the interest of Tenant in the Property and in this Lease.
15.3. Non-Subordination of Fee. Nothing in this Lease shall be construed as an agreement by Landlord to subordinate its fee interest in the Property or its right to rent payments hereunder or any other right of Landlord herein. Except as expressly set forth in this Article, no Leasehold Mortgage shall impair Landlord’s ability to enforce its rights and remedies under this Lease or provided by law. Landlord shall have no obligation to encumber or otherwise subordinate its fee interest in the Property or in this Lease to the interest of any Leasehold Mortgagee in this Lease or in Tenant’s leasehold estate.
Exhibit G-35
11222-0116\2935138v9.doc
15.4. Subsequent Transfers. With the exception of the first transfer following a foreclosure or deed in lieu of foreclosure, which such first transfer shall not require consent of Landlord, in the event any person or entity becomes the lessee under the Lease by means of foreclosure or deed in lieu of foreclosure or pursuant to any new lease obtained under Section 15.2.7, such person or entity may assign or Transfer the Lease or such new lease in compliance with the terms of Article XVI.
15.5. Landlord’s Rights Under Leasehold Mortgages.
15.5.1. Notice of Tenant’s Default. Tenant shall use commercially reasonable efforts to ensure that every Leasehold Mortgage secured by a deed of trust on Tenant’s leasehold estate in the Property shall expressly provide that:
(i) The Leasehold Mortgagee shall endeavor to give Landlord contemporaneous notice of any default by Tenant thereunder, if the failure to cure such default could reasonably be expected to result in acceleration of the maturity of the debt secured by the Leasehold Mortgage; provided however, that the Leasehold Mortgagee’s giving or failure to give notice shall not affect the Leasehold Mortgagee’s rights or ability to timely pursue all applicable remedies, including, but not limited to, filing a notice of default or notice of sale, instituting judicial foreclosure proceedings, or seeking the appointment of a receiver. In addition, within three business days following Tenant’s receipt of any notice of default under any financing document affecting the Property, Tenant shall provide Landlord with a copy of such notice. (ii) Landlord shall have the right to cure any curable default by Tenant (but without obligation to do so) upon the same terms and conditions and within the time period for Tenant to cure; and
(iii) If Landlord shall tender payment in full of all sums required to be paid under the Leasehold Mortgage or the note secured thereby (disregarding any acceleration of maturity thereunder, but including any costs or expenses arising as a result of such default) on or before 60 calendar days from the date of such notice of default from the Leasehold Mortgagee to Landlord or the date of recordation of such notice of default, then the lender shall accept such payment and rescind the acceleration, if any. Any sums paid by Landlord pursuant to this Section 15.5.1 shall become immediately due and payable from Tenant to Landlord as Rent due under this Lease; provided however, that no Leasehold Mortgagee shall be obligated to cure a failure by Tenant to pay such amount pursuant to the rights granted to Leasehold Mortgagees under this Lease and Landlord shall have no right to terminate this Lease as a result of Tenant’s failure to pay such amounts.
15.5.2. Landlord shall have the right and option (but not the obligation), during the period described in the last sentence of this paragraph, by notice in writing to the Leasehold Mortgagee, to purchase any Leasehold Mortgage, the note secured thereby, and any other instruments securing or guaranteeing such note or otherwise evidencing any obligation secured by the Leasehold Mortgage. The purchase price therefor shall be the full amount due and owing to the Leasehold Mortgagee, including interest (including default interest), and any costs, expenses, swap termination fees, and penalties (including prepayment penalties) payable in accordance with the terms thereof, and any swap contract entered into in connection with such loan. The sale and Exhibit G-36
11222-0116\2935138v9.doc
assignment by the Leasehold Mortgagee shall be without recourse or warranty by the Leasehold Mortgagee except that such Leasehold Mortgagee has good title to the note (or is authorized to obtain payment or acceptance on behalf of one who has good title) and has the authority to transfer the loan to the Landlord. The right granted by this paragraph may be exercised by Landlord at any time after the Leasehold Mortgagee has declared the entire sum secured by any Leasehold Mortgage to be due and payable or has recorded a notice of default or filed an action for judicial foreclosure, and such right shall terminate 60 days following receipt by Landlord of the notice described above.
15.6. No Voluntary Surrender/Modification. Notwithstanding anything to the contrary set forth herein, Landlord will not voluntarily surrender the Lease or accept a voluntary surrender of the Tenant’s leasehold estate, and Landlord will not amend or modify the Lease without the prior written consent of (i) all holders of any Leasehold Mortgage then in effect (which such party may withhold in such party’s sole discretion), and (ii) the limited partners of Tenant. Landlord will not enforce against any Leasehold Mortgagee any waiver or election made by Tenant under the Lease which has a material adverse effect on the value of Tenant’s leasehold estate or the rights of Tenant under the Lease without the prior written consent of such Leasehold Mortgagee (which may be withheld in its sole discretion).
15.7. Leasehold Mortgagee Right to Pay Landlord Obligations. Leasehold Mortgagees identified by written notice by Tenant to Landlord shall have the right, but not the obligation, upon not less than five business days’ prior written notice to Landlord, to pay any taxes payable by Landlord with respect to the Property, and to cure any monetary or nonmonetary default by Landlord under any encumbrance on the Property which has priority over this Lease; and if any Leasehold Mortgagee does so pay or cure any such encumbrance (not including any property taxes or assessments, which are to be paid by Tenant), Landlord shall reimburse such Leasehold Mortgagee for the amount thereof promptly following Landlord’s receipt of Leasehold Mortgagee’s written request therefor.
15.8. Amendments for the Benefit of Leasehold Mortgagees. Landlord and Tenant shall cooperate to include in this Lease by reasonable amendment from time to time, reasonable provisions which may reasonably be requested by any proposed Leasehold Mortgagee for the purpose of implementing the mortgagee protection provisions contained in this Lease and allowing such Leasehold Mortgagee reasonable means to protect or preserve the lien of the Leasehold Mortgage upon the occurrence of a default under the Lease. Landlord and Tenant each agree to execute and deliver (and acknowledge, if necessary for recording purposes) any agreement reasonably necessary to effect any such amendment; provided however, that any such amendment shall not in any way affect the Term, the Rent payable hereunder, nor otherwise in any material respect adversely affect any rights or materially increase the obligations of Landlord under this Lease.
15.9. No Encumbrance to Fee Estate. Landlord hereby represents and warrants to Tenant that there are no mortgages or deeds of trust encumbering Landlord’s fee interest in the Property and that during the Term of this Lease Landlord will not secure any loan or other obligation by its fee estate in the Property. Each Leasehold Mortgagee is an intended third party beneficiary of the foregoing representation and warranty.
Exhibit G-37
11222-0116\2935138v9.doc
ARTICLE 16.
ASSIGNMENT, TRANSFER, SUBLETTING
16.1. Restrictions on Transfer or Assignment by Tenant.
16.1.1. Prior to the issuance of a Certificate of Completion for the Project as provided by the DDLA, any sale, transfer, assignment, conveyance, or other disposition of all or any portion of Tenant’s interest in the Property, the Improvements, or this Lease shall be prohibited without the prior written consent of Landlord. Upon issuance and recordation of the Certificate of Completion for the Project as provided by the DDLA, except as permitted pursuant to Article XV and this Article, Tenant shall not sell, transfer, assign, convey, or otherwise dispose (“Transfer”) all or any portion of its interest in the Property, the Improvements or this Lease voluntarily, involuntarily, by operation of law, or otherwise, without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Each Transfer shall comply with all requirements therefor set forth elsewhere in this Lease and Tenant shall have no right to hypothecate or encumber its interest in this Lease or sublet or assign all or any portion of the Property and/or the Improvements except as expressly provided under the terms of this Lease. No voluntary or involuntary assignee, sublessee, or successor in interest of Tenant shall acquire any rights or powers under this Lease except as expressly set forth herein.
16.1.2. Exceptions. Notwithstanding any contrary provision of this Lease, Landlord’s consent shall not be required, and the provisions of Section 16.2 shall not be applicable, with respect to the following Transfers: (A) the renting or leasing of residential units to tenants in the ordinary course of business in accordance with the Affordable Housing Covenant; (B) the granting of a Leasehold Mortgage in accordance with Section 15.1 or the foreclosure of a Leasehold Mortgage or the acquisition of Tenant’s interest in this Lease by an assignment or deed in lieu of foreclosure; and (C) the first Transfer and/or any new lease following any event described in clause (B) of this sentence. In addition, Landlord’s consent shall not be required for any Transfer of Tenant’s interest in the Property or any portion thereof, to an entity in which Jamboree Housing Corporation (“JHC”), retains 50% or more of the equity or beneficial interest in such entity and controls such entity, or to a limited partnership in which JHC or its affiliate acts as the general partner, provided Landlord is given the applicable entity organizational documents. None of the transfer of limited partner interests in Tenant, the admission of an investor limited partner to Tenant’s partnership, or the removal of a general partner by the investor limited partner pursuant to the limited partnership agreement pursuant to the terms of Section 16.7 shall be considered a Transfer for purposes of this Article.
16.2. Procedure for Obtaining Landlord’s Consent.
16.2.1. Transfer Request. With respect to each Transfer requiring the Landlord’s consent under Section 16.1, Tenant shall send to Landlord written request for Landlord’s approval of the Transfer (a “Transfer Consent Request”) specifying the name and address of the proposed transferee and its legal composition (if applicable). Each Transfer Request shall be accompanied by all of the following:
(i) An audited or certified financial statement of the proposed transferee for the three most recent calendar or fiscal years (or shorter period that such entity has been in existence) Exhibit G-38
11222-0116\2935138v9.doc
prepared in accordance with generally accepted accounting procedures by a certified public accounting firm sufficiently current and detailed to evaluate the proposed transferee’s assets, liabilities and net worth and certified as true and correct by the proposed transferee; (ii) A description of the nature of the interest proposed to be transferred, the portion or portions of the Property affected by the Transfer, and the proposed effective date of such Transfer;
(iii) A true and complete copy of the proposed assumption agreement described in Section 16.6 and any other documents relating to the assignment and assumption (including any documents that include payment for the assignment);
(iv) A complete history of the proposed transferee describing its background, its current real estate projects and location thereof, and the background of the principals or personnel to be involved in the development or operation of the portion of the Property subject to the Transfer and stating whether the proposed transferee ever filed for bankruptcy or had projects that were foreclosed;
(v) A description of all projects of the proposed transferee which during the past five years have been the subject of substantial litigation; and (vi) Any such other information as reasonably requested by Landlord within 15 days following the receipt of the above information, in order to make an informed decision whether or not to approve or disapprove the Transfer.
16.2.2. Approval of Landlord. Within 30 days following receipt of all the information referred to in Section 16.3(a), Landlord shall approve or disapprove a proposed transferee with respect to the information supplied which approval shall not be unreasonably withheld. If Landlord fails to give Tenant written notice of its disapproval of the transferee or request additional information in writing within such period, it shall be deemed to have approved the transferee.
16.3. Subleases; Nondisturbance, and Attornment. Tenant shall not permit its space tenants to sublease their apartment units. Tenant agrees for the benefit of Landlord that each sublease, rental agreement, and any other agreement for occupancy of any part of the Improvements (each an “Occupancy Agreement”): (a) shall state that it is subject to the terms and provisions of this Lease, and (b) shall require that the subtenant under the Occupancy Agreement shall attorn to and accept Landlord as the sublessor or other party under the Occupancy Agreement in the event this Lease is terminated. Landlord agrees that as long as each Occupancy Agreement complies with the requirements of the preceding clauses (a) and (b), then upon the expiration or termination of this Lease, Landlord shall recognize the subtenant or occupant under the Occupancy Agreement as the direct tenant of Landlord under the terms and conditions contained in the Occupancy Agreement and for a term equal to the then unexpired term of the Occupancy Agreement; provided however, that: (i) at the time of the expiration or termination of this Lease no uncured default shall exist under the Occupancy Agreement which at such time would permit the termination of the Occupancy Agreement or the exercise of any dispossession remedy provided for therein; and (ii) Landlord shall not be (x) liable for any prior act or omission of Tenant under the Occupancy Agreement; (y) liable for the return of any security deposit under the Occupancy Agreement not Exhibit G-39
11222-0116\2935138v9.doc
actually received by Landlord; or (z) subject to any offsets or defenses that the subtenant or occupant may have against Tenant. The provisions of this Section shall survive the expiration or termination of this Lease.
16.3.1. No Relief from Liability; Release of Transferor. No Transfer will limit, diminish, or otherwise relieve Tenant or a successor in interest/assignee of any liability described herein arising during its ownership of the leasehold estate evidenced by this Lease. Landlord shall release the transferor following a Transfer only upon Landlord’s receipt transferee’s written assumption of such liability and only if such Transfer is in violation of the terms of this Section.
16.3.2. No Consent If Bankruptcy. In no event shall Landlord be required to consent or be deemed to consent to a Transfer to a party then subject to any proceedings under any insolvency, bankruptcy or similar laws.
16.3.3. Criteria for Transfer. Among other valid reasons for withholding consent, Landlord shall be deemed to be reasonable in withholding its consent to a proposed Transfer if, among other requirements, the proposed transferee does not have demonstrated experience operating and managing affordable residential projects similar to the Project.
16.4. Involuntary and Other Transfers.
16.4.1. Without limiting any other restrictions on transfer contained in this Lease, no interest of Tenant in this Lease, the Property or part thereof shall be assignable in the following manner:
(i) Under an order of relief filed, or a plan of reorganization confirmed, for or concerning Tenant by a bankruptcy court of competent jurisdiction under the federal bankruptcy act or the laws of the State of California, whereby any interest in this Lease, the Property or part thereof is assigned to any party which does not qualify as an approved transferee pursuant to this Lease unless such order is filed or such plan is confirmed in connection with an involuntary proceeding brought against Tenant and Tenant reacquires such transferred interest within 120 days after the date such order is filed or such plan is confirmed; (ii) If Tenant assigns substantially all of its assets for the benefit of its creditors; or
(iii) If an order of attachment is issued by a court of competent jurisdiction, whereby any interest in this Lease, the Property or part thereof or substantially all of Tenant’s assets are attached by its creditors and such order of attachment is not stayed within 120 days after the date it is issued.
16.4.2. The transfers described in this Section shall constitute a breach under this Lease by Tenant and Landlord shall have the right to terminate this Lease as a result of any such transfer taking place, in which case this Lease shall not be treated as an asset of Tenant. In such event, a Leasehold Mortgagee or Limited Partner may request a new lease in accordance with Section
15.2.3. Exhibit G-40
11222-0116\2935138v9.doc
16.5. Assumption Agreement and Release. No permitted Transfer shall be effective until any curable default hereunder shall have been cured and there shall have been delivered to Landlord an assumption agreement, executed by the transferor and the proposed transferee, whereby such transferee expressly assumes liability for such Lease obligations as arise and accrue during the period in which the transferee retains ownership of the interest of Tenant in the Property and in this Lease. The parties agree that as a condition to any Transfer taking place the transferee shall deliver to Landlord representations and warranties confirming the accuracy of the information delivered to Landlord concerning its current financial condition and its outstanding or pending liabilities.
16.6. Change in General Partner of Tenant. In addition to the restrictions on Transfers as set forth in this Article, Landlord shall have the right to approve any change in the identity of the general partner of Tenant, including without limitation, any admission of any new general partner or withdrawal of any existing general partner. Such approval right of Landlord shall also apply to the transfer of a majority of the ownership interest in a general partner of Tenant. Notwithstanding any contrary provision of this Section, Landlord’s approval shall not be required with respect to any change in the identity or ownership of the general partner of Tenant as long as following such change the general partner of Tenant continues to be an entity which controls, is controlled by, or is under common control with JHC. For purposes of this Article, “control” shall mean the right to direct the management and affairs of an entity, whether by virtue of the ownership of ownership interests, by contract, by appointment of directors or by common or overlapping boards.
16.7. Sale by Landlord. Nothing contained in this Lease shall be deemed in any way to limit, restrict or otherwise affect the right of Landlord to sell, transfer, assign or convey all or any portion of the right, title and estate of Landlord in the Property and in this Lease; provided, however, that in each such instance any such sale, transfer, assignment or conveyance shall be subject to this Lease, and Tenant’s other rights arising out of this Lease shall not be affected or disturbed in any way by any such sale, transfer, assignment or conveyance. Any other provision of this Lease to the contrary notwithstanding, each covenant, agreement or obligation of Landlord under this Lease relating to the ownership or use of the Property is intended to and shall constitute a covenant running with the title to the Property and shall be binding upon the owner from time to time of the Property. At such time as Landlord shall sell, transfer, assign or convey the entire right, title and estate of Landlord in the Property and in this Lease, all obligations and liability on the part of Landlord arising under this Lease after the effective date of such sale, transfer, assignment or conveyance shall terminate as to Landlord, and thereupon all such liabilities and obligations shall be binding upon the transferee. Tenant shall have a right of first refusal to purchase the Property from Landlord on the same terms on which Landlord is willing to sell the Property.
Exhibit G-41
11222-0116\2935138v9.doc
ARTICLE 17.
BREACHES, REMEDIES AND TERMINATION
17.1. Event of Default. Tenant shall be in default under this Lease upon the occurrence of any of the following (each, an “Event of Default”):
17.1.1. Monetary Obligation. Tenant at any time is in default hereunder as to any monetary obligation (including without limitation, Tenant’s obligation to pay taxes and assessments due on the Property or part thereof, subject to Tenant’s rights to contest such charges pursuant to Section
5.2), and such default continues for 30 days after a written notice of default is delivered by Landlord to Tenant;
17.1.2. Insurance. Tenant fails to obtain and maintain any policy of insurance required pursuant to this Lease, and such failure continues for 30 days after a written notice of default is delivered by Landlord to Tenant;
17.1.3. Abandonment. Tenant abandons the Property in accordance with Civil Code Section 1951 et. seq.;
17.1.4. Bankruptcy. Tenant or any general partner of Tenant files a voluntary petition in bankruptcy or files any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors; or seeks or consents to or acquiesces in the appointment of any trustee, receiver or liquidator of Tenant (or any general partner of Tenant) or of all or any substantial part of its property, or of any or all of the royalties, revenues, rents, issues or profits thereof, or makes any general assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due;
17.1.5. Reorganization. A court of competent jurisdiction enters an order, judgment or decree approving a petition filed against Tenant seeking any reorganization, dissolution or similar relief under any present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors, and such order, judgment or decree remains unvacated and unstayed for an aggregate of 120 days from the first date of entry thereof, or any trustee receiver or liquidator of Tenant of all or any substantial part of its property, or of any or all of the royalties, revenues, rents, issues or profits thereof is appointed without the consent or acquiescence of Tenant and such appointment remains unvacated and unstayed for an aggregate of 120 days, such period to be extended in all cases during any period of a bona fide appeal diligently pursued by Tenant;
17.1.6. Attachment. Subject to Tenant’s right to contest the following charges pursuant to Sections 5.2 and 6.6, Tenant fails to pay prior to delinquency taxes or assessments due on the Property or the Improvements or fails to pay when due any other charge that may result in a lien on the Property or the Improvements, and Tenant fails to cure such default within 90 days of the date of delinquency, but in all events prior to the date upon which the holder of any lien has the right to pursue foreclosure thereof;
Exhibit G-42
11222-0116\2935138v9.doc
17.1.7. Transfer. Tenant Transfers all or any portion of Tenant’s interest in this Lease, the Property, the Improvements or part thereof in violation of the provisions of Article XVI and fails to rescind such Transfer within 30 days after written notice from Landlord
17.1.8. Other Obligations. Tenant defaults in the performance of any term, provision, covenant or agreement contained in this Agreement other than an obligation enumerated in this Section and unless a shorter cure period is specified for such default, the default continues for 30 days after the date upon which Landlord shall have given written notice of the default to Tenant; provided however, if the default is of a nature that it cannot be cured within 30 days, an Event of Default shall not arise hereunder if Tenant commences to cure the default within 30 days and thereafter prosecutes the curing of such default with due diligence and in good faith to completion.
17.2. Notice and Opportunity to Cure.
17.2.1. Notice of Breach. Unless expressly provided otherwise in this Lease, no breach by a party shall be deemed to have occurred under this Lease unless another party first delivers to the nonperforming party a written request to perform or remedy (“Notice of Breach”), stating clearly the nature of the obligation which such nonperforming party has failed to perform, and stating the applicable period of time, if any, permitted to cure the default.
17.2.2. Failure to Give Notice of Breach. Failure to give, or delay in giving, Notice of Breach shall not constitute a waiver of any obligation, requirement or covenant required to be performed. Except as otherwise expressly provided in this Lease, any failure or delay by either party in asserting any rights and remedies as to any breach shall not operate as a waiver of any breach or of any such rights or remedies. Delay by either party in asserting any of its rights and remedies shall not deprive such party of the right to institute and maintain any action or proceeding which it may deem appropriate to protect, assert or enforce any such rights or remedies.
17.3. Remedies Upon Default.
17.3.1. Landlord’s Remedies. Upon the occurrence and during the continuation of any Event of Default and in addition to any and all other rights or remedies of Landlord hereunder and/or provided by law, but subject in all events to the rights and remedies of Leasehold Mortgagees under Article XV, Landlord shall have the right to terminate this Lease and/or Tenant’s possessory rights hereunder, in accordance with applicable law to re-enter the Property and take possession thereof and of the Improvements, and except as otherwise provided herein, to remove all persons and property therefrom, and to store such property at Tenant’s risk and for Tenant’s account, and Tenant shall have no further claim thereon or hereunder.
17.3.2. Remedies Upon Abandonment. If Tenant should breach this Lease and abandon the Property, Landlord may, at its option, but subject in all events to the rights and remedies of Leasehold Mortgagees under Article XV, enforce all of its rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder. Additionally, Landlord shall be entitled to recover from Tenant all costs of maintenance and preservation of the Property, and all costs, including attorneys’ and receiver’s fees incurred in connection with the appointment of and performance by a receiver to protect the Property and Landlord’s interest under this Lease.
Exhibit G-43
11222-0116\2935138v9.doc
17.3.3. Landlord Right to Continue Lease. In the event of any default under this Lease by Tenant (and regardless of whether or not Tenant has abandoned the Property), this Lease shall not terminate (except by an exercise of Landlord’s right to terminate under Section 17.3.1) unless Landlord, at Landlord’s option, elects to terminate Tenant’s right to possession or, at Landlord’s further option, by the giving of any notice (including, without limitation, any notice preliminary or prerequisite to the bringing of legal proceedings in unlawful detainer) to terminate Tenant’s right to possession. For so long as this Lease continues in effect, Landlord may enforce all of Landlord’s rights and remedies under this Lease, including the right to recover all rent and other monetary payments as they become due. For the purposes of this Lease, the following shall not constitute termination of Tenant’s right to possession: (a) acts of maintenance or preservation or efforts to relet the Property; or (b) the appointment of a receiver upon initiative of Landlord to protect Landlord’s interest under this Lease.
17.3.4. Right to Injunction; Specific Performance. In the event of a default by Tenant under this Lease that remains uncured beyond any applicable grace periods permitted hereunder, Landlord shall have the right to commence an action against Tenant for injunction, and/or specific performance. Tenant’s failure, for any reason, to comply with a court-ordered injunction or order for specific performance shall constitute a breach under this Lease.
17.3.5. Damages Upon Termination. Should Landlord elect to re-enter the Property, or should Landlord take possession pursuant to legal proceedings or to any notice provided by law, this Lease shall thereupon terminate, and Landlord may recover from Tenant all amounts necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things are likely to result therefrom, including all costs (including attorneys’ fees) of repossession, removing persons or property from the Property, repairs, reletting, and reasonable alterations of the Improvements in connection with reletting, if any.
17.4. Right to Receiver. Following the occurrence of an Event of Default, if Tenant (and all Leasehold Mortgagees and Limited Partners) fails after delivery of a notice of default or Notice of Breach to cure the default within the time period set forth in this Lease, Landlord, at its option, may have a receiver appointed to take possession of Tenant’s interest in the Property with power in the receiver (a) to administer Tenant’s interest in the Property, (b) to collect all funds available in connection with the operation of the Property, and (c) to perform all other acts consistent with Tenant’s obligations under this Lease, as the court deems proper. Landlord’s rights under this Section 17 shall be subject and subordinate to the rights of all Leasehold Mortgagees and Limited Partners.
17.5. Remedies Cumulative. No remedy in this Article shall be considered exclusive of any other remedy, but the same shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute, and every power and remedy given by this Lease may be exercised from time to time and as often as occasion may arise or as may be deemed expedient.
17.6. No Election of Remedies. The rights given in this Article to receive, collect or sue for any rent or rents, moneys or payments, or to enforce the terms, provisions and conditions of this Lease, or to prevent the breach or nonobservance thereof, or the exercise of any such right or of Exhibit G-44
11222-0116\2935138v9.doc
any other right or remedy hereunder or otherwise granted or arising, shall not in any way affect or impair or toll the right or power of Landlord upon the conditions and subject to the provisions in this Lease to terminate Tenant’s right of possession because of any default in or breach of any of the covenants, provisions or conditions of this Lease beyond the applicable cure period.
17.7. Survival of Obligations. Nothing herein shall be deemed to affect the right of Landlord to indemnification for liability arising prior to the termination of the Lease for personal injuries or property damage or in connection with any other Claim, nor shall anything herein be deemed to affect the right of Landlord to equitable relief where such relief is appropriate. No expiration or termination of the Lease by operation of law, or otherwise, and no repossession of the Property or any part thereof shall relieve Tenant of its previously accrued liabilities and obligations hereunder, all of which shall survive such expiration, termination or repossession.
17.8. No Waiver. Except to the extent that Landlord may have agreed in writing, no waiver by Landlord of any breach by Tenant of any of its obligations, agreements or covenants hereunder shall be deemed to be a waiver of any subsequent breach of the same or any other covenant, agreement or obligation, nor shall any forbearance by Landlord to seek a remedy for any breach by Tenant be deemed a waiver by Landlord of its rights or remedies with respect to such breach.
ARTICLE 18.
GENERAL PROVISIONS
18.1. Estoppel Certificates. At any time and from time to time, Landlord and Tenant, shall for the benefit of each other and any Limited Partner or Leasehold Mortgagee, on at least 15 days’ prior written request by the requesting party, deliver to the party requesting same a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there shall have been modifications that the same is in full force and effect as modified and stating the modifications) and stating whether or not, to the best knowledge of the certifying party, the other party is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default of which the certifying party may have knowledge and such other statements or certifications reasonably requested. A prospective purchaser, or mortgagee shall be entitled to request such a statement and rely on a statement delivered hereunder.
18.2. Quiet Enjoyment. Landlord covenants and agrees that Tenant (and pursuant to the provision of Articles XV and XVII, respectively, any Leasehold Mortgagee and Limited Partner, as applicable), upon paying the Rent and all other charges herein provided for and observing and keeping all covenants, agreements and conditions of this Lease on its part to be observed and kept, shall quietly have and enjoy the Property during the Term of this Lease without hindrance or molestation by anyone claiming by or through Landlord, subject, however, to the exceptions, reservations and conditions of this Lease.
18.3. Landlord’s Right to Enter the Property. Landlord and its agents may enter the Property or the Improvements from time to time with not less than two business days’ written notice (and, upon Tenant’s request, when accompanied by representative(s) of Tenant), except for emergencies in which case no notice shall be required, to inspect the same, to post notices of nonresponsibility Exhibit G-45
11222-0116\2935138v9.doc
and similar notices, and to discharge Tenant’s obligations hereunder when Tenant has failed to do so within a reasonable time after written notice from Landlord.
18.4. Severability. If any term or provision of this Lease or the application thereof to any person or circumstance shall, to any extent, be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
18.5. Notices. Except as otherwise specified herein, all notices to be sent pursuant to this Lease shall be made in writing, and sent to the Parties at their respective addresses specified below or to such other address as a Party may designate by written notice delivered to the other parties in accordance with this Section. All such notices shall be sent by either (i) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered on receipt if delivery is confirmed by a return receipt; or (ii) nationally recognized overnight courier, with charges prepaid or charged to the sender’s account, in which case notice is effective on delivery if delivery is confirmed by the delivery service.
Landlord: City of Brea
1 Civic Center Circle
Brea, CA 92821
Attention: City Manager
Tenant:
With copies to: [TBD Tax Credit Investor]
Leasehold Mortgagees: [TBD]
18.6. Construction. The language in all parts of this Lease shall be construed as a whole, according to its fair meaning and not strictly for or against Landlord or Tenant. Unless otherwise indicated, references to “Section __” shall refer to provisions of this Agreement. The terms “include,” “includes” and “including” are non-exhaustive. The term “shall” is mandatory and the term “may” is permissive.
18.7. Tenant's Rights. Landlord acknowledges that, subject to Tenant’s obligations to pay rent pursuant to the terms of this Lease, Tenant shall have the exclusive right to deduct, claim, retain and enjoy any and all income, appreciation gain, depreciation, amortization and tax credits for federal and state tax purposes relating to the Property and Landlord shall treat Tenant as the tax owner of the Property for federal income tax purposes and shall not file any tax returns inconsistent with this treatment.
18.8. Binding on Successors. Subject to the restrictions on Transfers set forth in Article XVI, this Agreement shall bind and inure to the benefit of the Parties and their respective permitted successors and assigns. Any reference in this Agreement to a specifically named Party shall be deemed to apply to any permitted successor and assign of such Party who has acquired an interest in compliance with this Agreement or under law.
Exhibit G-46
11222-0116\2935138v9.doc
18.9. Short Form of Lease. A memorandum of lease substantially in the form set forth in the attached Exhibit B shall be executed by Landlord and Tenant and recorded in the Office of the Orange County Recorder.
18.10. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to principles of conflicts of laws.
Any action to enforce or interpret this Agreement shall be filed and heard in the Superior Court for Orange County, California or in the Federal District Court for the Southern District of California.
18.11. Attorneys’ Fees. If either Party fails to perform any of its obligations under this Agreement, or if any dispute arises between the Parties concerning the meaning or interpretation of any provision hereof, then the prevailing Party in any proceeding in connection with such dispute shall be entitled to the costs and expenses it incurs on account thereof and in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys’ fees and disbursements.
18.12. Indemnity Includes Defense Costs. In any case where either party is obligated under an express provision of this Lease, to indemnify and to save the other party harmless from any damage or liability, the same shall be deemed to include defense of the indemnitee by the indemnitor, such defense to be through legal counsel reasonably acceptable to the indemnitee.
18.13. No Brokers; No Third-Party Beneficiaries. Landlord represents that it has not engaged any broker or agent to represent Landlord in this transaction. Tenant represents that it has not engaged any broker or agent to represent Tenant in this transaction. Each party agrees to indemnify and hold the other harmless from and against any and all liabilities or expenses, including attorneys’ fees and costs, arising out of, or in connection with claims made by any broker or individual for commissions or fees as a result of the acts of the indemnifying party. There shall be no third-party beneficiaries to this Lease other than the Leasehold Mortgagees.
18.14. Disclaimer of Partnership, Lender/Borrower Relationship. The relationship of the parties under this Lease is solely that of landlord and tenant, and it is expressly understood and agreed that Landlord does not as a result of this Lease in any way nor for any purpose become a partner of Tenant or a joint venturer with Tenant in the conduct of Tenant’s business or otherwise.
This Lease is not intended to, and shall not be construed to, create the relationship of principal and agent, partnership, joint venture, association, or seller and buyer as between Landlord and Tenant.
It is further expressly understood and agreed that this Lease is not intended to, and shall not be construed to create the relationship of lender and borrower, and Landlord does not, solely as a result of this Lease, become a lender to Tenant.
18.15. Entire Agreement; Amendments. This Lease together with the DDLA, the Affordable Housing Covenant and the other documents executed in connection with the DDLA contains the entire agreement between the parties relative to the subject matter hereof. All previous correspondence, communications, discussions, agreements, understandings or proposals and acceptances thereof between the parties or their representatives, whether oral or written, are deemed to have been integrated into and superseded by this Lease and are of no further force and Exhibit G-47
11222-0116\2935138v9.doc
effect except as expressly provided in this Lease. No amendment or modification hereof shall be effective for any purpose unless in writing signed by Landlord and Tenant.
18.16. Time is of the Essence; Calculation of Time Periods. Time is of the essence for each condition, term, obligation, and provision of this Agreement. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is not a business day, in which event the period shall run until the next business day. The final day of any such period shall be deemed to end at 5:00 p.m., local time at the Property. For purposes of this Agreement, a “business day” means a day that is not a Saturday, Sunday, a federal holiday or a state holiday under the laws of California.
18.17. Survival. The following provisions shall survive the expiration or termination of this Lease: all representations made by Tenant hereunder, Tenant’s release of Landlord pursuant to Section 2.6, Tenant’s indemnification and defense obligations and all other provisions of this Lease which state that they shall survive the expiration or termination of this Lease.
18.18. Counterparts. This Lease may be executed in one or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.
18.19. Action by the Landlord. Except as may be otherwise specifically provided herein, whenever any approval, notice, direction, consent or request by the Landlord is required or permitted under this Lease, such action shall be in writing, and such action may be given, made or taken by the City Manager or by any person who shall have been designated by the City Manager, without further approval by the governing board of the Landlord. The City Manager shall not unreasonably withhold, condition or delay the giving, making or taking of any such action.
18.20. Books and Records; Inspection of Books and Records. Tenant shall keep and maintain at the Project, or elsewhere with City’s written consent, full, complete, and accurate books, records, and accounts relating to the Project, including such books, records, and accounts necessary to document Tenant’s compliance with this Lease and prevailing wage laws. Upon request, Tenant shall permit the Landlord to inspect those books, records and all other documents of Tenant necessary to determine Tenant’s compliance with the terms of this Agreement.
18.21. No Termination During Compliance Period; No Termination for Default Under Regulatory Agreement. Notwithstanding anything in this Lease to the contrary, (i) during the 15 year tax credit compliance period under Section 42 of the Internal Revenue Code, Landlord shall have no right to terminate this Lease; provided, however, that Landlord can exercise all other remedies available hereunder, and (ii) Landlord shall have no right to terminate this Lease for a default under the Regulatory Agreement, and shall be limited to the remedies contained therein.
SIGNATURES ON FOLLOWING PAGE
Exhibit G-48
11222-0116\2935138v9.doc
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of the Effective Date.
LANDLORD:
CITY OF BREA,
a municipal corporation
By: ________________________
Bill Gallardo, City Manager
ATTEST:
______________________________
Lillian Harris-Neal, City Clerk
APPROVED AS TO FORM:
______________________________
Terence Boga, City Attorney
TENANT:
By: ________________________
Signature
________________________
Print Name
________________________
Print Title
By: ________________________
Signature
________________________
Print Name
________________________
Print Title
Exhibit G-49
11222-0116\2935138v9.doc
EXHIBIT A
TO GROUND LEASE
Legal Description of the Property
(Attached)
Exhibit G-50
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit G-51
11222-0116\2935138v9.doc
EXHIBIT B
TO GROUND LEASE
FORM OF MEMORANDUM OF LEASE
(Attached)
Exhibit G-52
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit G-53
11222-0116\2935138v9.doc
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL
TO:
City of Brea
1 Civic Center Circle
Brea, CA 92821
This document is exempt from
recording fees pursuant to
Government Code § 27383.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
MEMORANDUM OF GROUND LEASE
THE UNDERSIGNED DECLARE:
Documentary Transfer Tax is $0.00; City Transfer Tax is $0.00.
Conveyance for no consideration (long term lease with no rent).
THIS MEMORANDUM OF GROUND LEASE (“Memorandum”), dated for identification purposes as of , 20__, is entered into by and between the CITY OF BREA, a municipal corporation (“City”), and ________, L.P., a California limited partnership (“Tenant”).
Pursuant to that certain Ground Lease dated _______________, 202_ (the "Lease"), Landlord hereby leases to Tenant and Tenant leases from Landlord certain real property situated in the City of Brea, California, more specifically described on Exhibit A attached hereto (the "Site").
City has determined and found that the Site is in excess of its foreseeable needs.
The term of the Lease commences as of the date of the Lease, and shall continue until the date that is ninety-nine (99) years after the completion of the housing project described in the Lease (as evidenced by a final Certificate of Occupancy), unless sooner terminated pursuant to the terms of the Lease.
All of the terms of the Lease are hereby incorporated herein by reference.
This Memorandum is solely for recording purposes and shall not be construed to alter, modify, amend, or supplement the Lease, of which this is a memorandum.
Exhibit G-54
11222-0116\2935138v9.doc
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum as of date set forth above.
LANDLORD:
CITY OF BREA,
a municipal corporation
By: ________________________
Bill Gallardo, City Manager
ATTEST:
______________________________
Lillian Harris-Neal, City Clerk
APPROVED AS TO FORM:
______________________________
Terence Boga, City Attorney
TENANT:
By: ________________________
Signature
________________________
Print Name
________________________
Print Title
By: ________________________
Signature
________________________
Print Name
________________________
Print Title
Exhibit G-55
11222-0116\2935138v9.doc
EXHIBIT A
To Memorandum of Lease
LEGAL DESCRIPTION
(Attached)
Exhibit G-56
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit H-1
11222-0116\2935138v9.doc
EXHIBIT H
PRELIMINARY FINANCING PLAN
(Attached)
Exhibit H-2
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit H
-3
11222-0116\2935138v9.doc
1 RESOLUTION NO. _____
A RESOLUTION OF THE BREA CITY COUNCIL APPROVING A
DISPOSITION, DEVELOPMENT, AND LOAN AGREEMENT BETWEEN
THE CITY AND JHC-ACQUISITIONS, LLC, REGARDING THE CITYOWNED PARCEL AT 323 NORTH BREA BOULEVARD (APN 296-301- 02), MAKING CERTAIN FINDINGS PURSUANT HEALTH AND SAFETY CODE SECTION 33433, AND APPROVING A CEQA EXEMPTION
DETERMINATION
A. RECITALS.
(i) The City of Brea, in its capacity as the successor to the housing assets and funds of the former Brea Redevelopment Agency, is the owner in fee simple of that certain real property located in the City at 323 North Brea Boulevard (the “Property”), which is also designated as Assessor’s Parcel Number 296-301-02. (ii) The Property is vacant, undeveloped, and not currently being used by the City. The Property was identified as an opportunity site for affordable housing units in City’s 5th Cycle Housing Element and again in the 6th Cycle Housing Element (“Housing Element”). The current Housing Element was certified by the State on September 8, 2022. (iii) The Housing Element also discusses permanent supportive housing as a form of affordable housing with on-site management for services that help residents transition into more stable, productive lives. Services may include childcare, after-school tutoring, career counseling, etc. Permanent supportive housing is treated as a multi-family residential land use where rent is paid and typically does not impose a defined limit on length of residency. Permanent supportive housing is a separate and different use than transitional housing.
(iv) On May 11, 2023, the City of Brea issued a Notice of Funding Availability (“NOFA”) for an affordable housing development, soliciting proposals from developers for an affordable multi-family residential project. Jamboree Housing Corporation (the “Developer”) was the sole respondent to the NOFA and proposed a multi-family project serving low and extremely low-income households. (v) The City and the Developer subsequently worked together to identify additional funding opportunities for an affordable housing development on the Property.
This included submittal of an application for a CalOptima Health (“CalOptima”) grant for permanent supportive housing production on May 17, 2023. The City was ultimately awarded a grant for $6,028,491.51 on October 20, 2023.
(vi) On March 11, 2024, the Developer submitted a preliminary plan review application for a permanent supportive affordable housing project (“Project”) on the Property. The Project would include fewer than 40 apartment units for households earning at or below 30% of the Area Median Income ("AMI"), an onsite manager, and resident and case management services. As part of their application, the Developer has requested 2 financial contributions and other considerations for the Project, which can help leverage other funding sources.
(vii) The City and the Developer subsequently negotiated the terms of the Disposition, Development, and Loan Agreement (“Agreement”) that is the subject of this this Resolution. The Agreement establishes the terms and conditions under which the City and the Developer would enter into a ground lease for a term of 99 years and develop the Project. The City would lease the Property to the Developer for $1.00 per year and provide other financial assistance, as stated in the Agreement and in the Report described in Recital (ix) below. In exchange, the Developer would develop the Project as required by the Agreement; including operating requirements and affordable housing covenants.
The Agreement is intended to effectuate the objectives of the City in complying with its obligation to assist in providing low and moderate income housing pursuant to the Health and Safety Code and the Housing Element of the City’s General Plan. A copy of the Agreement is attached as Exhibit A to this Resolution and hereby incorporated by this reference.
(viii) On May 7, 2024, the City Council adopted Resolution No. 2024-030, declaring and determining that the Property is exempt surplus land and not necessary for the City’s use pursuant to Government Code Section 54221(f)(1)(B). (ix) The City has prepared a comprehensive report summarizing and analyzing the proposed Agreement pursuant to Health and Safety Code Section 33433 (the “Report”). The report specifically contains the information required by Section 33433, has been prepared within the time limit set forth therein and, along with the proposed Agreement, were made available for public review as of the date of the first publication of the notice of the public hearing concerning the Agreement. (x) The City is specifically authorized by Health and Safety Code Sections 33430, 33431 and 33433, and other applicable law, to enter into the Agreement. (xi) Pursuant to the provisions of Health and Safety Code Sections 33430, 33431 and 33433, on May 21, 2023 the City Council held a duly noticed public hearing concerning the approval of the Agreement, during which it received and considered all evidence and testimony presented prior to adoption of this Resolution. (xii) All legal prerequisites to adoption of this Resolution have occurred.
B. RESOLUTION.
NOW, THEREFORE, the City Council of the City of Brea does hereby find, determine, and resolve as follows:
SECTION 1. All facts set forth above in Part A, Recitals, are true and correct. 3 SECTION 2. This Resolution is based on facts set forth above, the Report, the entirety of the administrative record in this matter, and the independent judgment of the City Council.
SECTION 3. The City Council finds in accordance with the authority of Health and Safety Code Section 33433 that: (i) the consideration the City will receive under the Agreement is not less than the fair reuse value of the Property, as conveyed to Developer and with the covenants, conditions, and development constraints required by the Agreement; and (ii) development of the Property pursuant to the Agreement will assist in the elimination of blight in the area because it will encourage and provide for development of vacant properties in accordance with the Housing Element and the City’s General Plan and improve and expand housing opportunities for low income residents.
SECTION 4. The City Council finds that development of the Project pursuant to the Agreement will be consistent with the City’s General Plan, and each element thereof, including the Housing Element.
SECTION 5. The City Council finds that the Agreement is in the best interests of the City and the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of applicable state and local law requirements.
SECTION 6. The City Council finds that the Agreement pertains to and affects the ability of the parties to finance and carry out their statutory purposes and is intended to be a contract within the meaning of Government Code Section 53511.
SECTION 7. This Resolution has been reviewed with respect to the applicability of the California Environmental Quality Act (Public Resources Code Section 21000 et seq.) (“CEQA”). Staff has determined that approval of the Agreement is exempt from environmental review under CEQA pursuant to State CEQA Guidelines Section 15194. The Project: (i) meets the threshold criteria set forth in in State CEQA Guidelines Section 15192, (ii) is located in an urbanized area, adjacent to parcels developed with urban uses along at least 75% of the Property’s perimeter; (iii) will be served by existing utilities; (iv) neither contains any environmentally sensitive resources such as wetlands, endangered species, hazardous sites, historical resources, fire hazards, or open spaces, nor is likely to have any impact with respect to such matters; (v) is consistent with the City’s Zoning Ordinance and the City’s General Plan, for which a community wide environmental review was completed when the City’s General Plan was last adopted; and (vi) is subject to legal commitments to ensure the continued availability and use affordable housing units that will exceed 30 years.
SECTION 8. Based on the foregoing findings and all facts an evidence in the administrative record concerning the Agreement, the City Council hereby approves the Agreement. The officers and staff of the City, jointly and severally, are authorized and directed to take any and all actions they may deem necessary or proper to effectuate the purposes of this Resolution including making any non-monetary (i.e. no financial impact on the City) revisions to the Agreement and associated documents. 4 SECTION 9. The City Clerk shall certify to the adoption of this Resolution.
ADOPTED this 21st day of May, 2024, by the following votes:
__________________________
Christine Marick
Mayor
ATTEST: __________________________
Lillian Harris-Neal
City Clerk
I, Lillian Harris-Neal, City Clerk of the City of Brea, do hereby certify that the foregoing Resolution was adopted at a regular meeting of the City Council of the City of Brea, held on the ____ day of ________________, 2024 by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
ABSTAINED: COUNCIL MEMBERS:
Dated:_____________________
__________________________
Lillian Harris-Neal
City Clerk
5 Exhibit A
to Resolution No. _____
Disposition, Development, and Loan Agreement
By and between
The City of Brea
and
JHC-Acquisitions, LLC
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Brea
1 Civic Center Circle
Brea, CA 92821
Attn: City Clerk
This document is exempt from recording fees pursuant
to Government Code § 27383.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
DISPOSITION, DEVELOPMENT, AND LOAN AGREEMENT
By and between
THE CITY OF BREA
and
JHC-ACQUISITIONS LLC
May 21, 2024
[Page Intentionally Blank]
1 THIS DISPOSITION, DEVELOPMENT, AND LOAN AGREEMENT (“Agreement”) is dated May 21, 2024 (“Effective Date”) for reference purposes and is executed by the CITY OF BREA, a California municipal corporation (“City”), and JHC-ACQUISITIONS LLC, a California limited liability company (“Developer”). City and Developer are collectively referred to herein as the “Parties.”
RECITALS
A. City is the owner of property located at 323 N. Brea Boulevard (APN 296-301-02) described in the attached Exhibit A (“Property”). City intends to ground lease the Property to Developer and make a secured loan to Developer, and Developer intends to ground lease the Property from City and accept such loan, upon and subject to the terms and conditions set forth herein.
B. The Property was acquired by the former Brea Redevelopment Agency using its housing set aside funds, and the funds for the City loan are also derived from such housing set aside funds. City is the successor to the housing assets of the former Brea Redevelopment Agency, including the Property and such funds. A copy of this Agreement, and a report summarizing the same, have been made available to the public as required by Health and Safety Code Section 33433.
C. City has determined that the Property is “exempt surplus land” within the meaning of Government Code Section 54221(f)(1)(B) because it is less than one-half acre in area and is not contiguous to land owned by a state or local agency that is used for open-space or low- and moderate-income housing purposes. Confirmation of City’s determination by the California Department of Housing and Community Development is a condition precedent to closing.
D. Developer has proposed to develop and operate on the Property a 39-unit multi-family rental housing development (consisting of 38 apartments that will be affordable to extremely low income households and one manager’s unit) and other amenities (collectively, “Project”).
E. Upon satisfaction of the conditions precedent to closing, and subject to the terms and conditions set forth herein, City will: (i) lease the Property to Developer for 99 years pursuant to a lease substantially in the form set forth in the attached Exhibit G (“Ground Lease”); and (ii) assist in financing the Project by providing Developer a secured loan of $4,457,483 (“City Loan”) pursuant to a promissory note substantially in the form set forth in the attached Exhibit C (“City Loan Note”).
F. As conditions to the closing, among other documents, Developer will execute and deliver to escrow for recording (or in the case of the nonrecordable documents, including the Ground Lease and the City Loan Note, Developer will deliver directly to City) the following: the Ground Lease; the City Loan Note; a deed of trust, substantially in the form set forth in the attached Exhibit D (“Deed of Trust”), that will provide City with a security interest in Developer’s leasehold interest in the Property to secure the City Loan; an assignment of architect and engineer contracts and plans, substantially in the form of the 2 attached Exhibit E (“Assignment”), that will provide City with a security interest to secure the City Loan; a memorandum of ground lease; and an affordable housing restrictive covenant substantially in the form set forth in the attached Exhibit F (“Affordable Housing Agreement”) .
G. A material inducement to City to enter into this Agreement and close the transactions described herein is the agreement by Developer to comply with the Ground Lease and the Affordable Housing Agreement, including the obligation to develop the Project in accordance with and within the time periods specified in the Ground Lease. City would be unwilling to close this transaction in the absence of an enforceable commitment by Developer to take such actions and complete such work in accordance with such provisions and within such time periods.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows.
ARTICLE I
DEFINITIONS; EXHIBITS
Section 1.1 Incorporation of Recitals. The Parties acknowledge the truth of the foregoing recitals which are hereby incorporated into this Agreement by this reference.
Section 1.2 Definitions. The following terms shall have the meanings set forth below whenever used in this Agreement and the attached Exhibits. Additional terms are defined in the Recitals and text of this Agreement.
“Affordable Housing Agreement” means an affordable housing restrictive covenant substantially in the form set forth in the attached Exhibit F. “Assignment” means a collateral assignment of architect and engineer contracts and plans substantially in the form attached as Exhibit E.
“City” means the City of Brea, California.
“City Council” means the Brea City Council.
“City Documents” means collectively, this Agreement, the City Loan Note, the Deed of Trust, the Affordable Housing Agreement, the Notice, the Assignment, and the Ground Lease.
“City Loan” is defined in Recital E and further described in Section 4.1. “City Loan Note” means a secured promissory note substantially in the form set forth in the attached Exhibit C.
3 “City Manager” means the Brea City Manager or such official’s designee. “Closing,” “Closing Date” and “Close of Escrow” each shall mean the date that escrow closes for the City Loan and shall be the date upon which the term of the Ground Lease commences and the Memorandum of Lease is recorded.
“Commencement Date” means the date that the term of the Ground Lease commences, which shall be the Closing Date.
“Conditions of Approval” means all governmental conditions imposed on any governmental approvals or permits granted for the Project. “Construction Plans” is defined in Section 5.4.
“County” means the County of Orange, California.
“CTCAC” means the California Tax Credit Allocation Committee. “Deed of Trust” means a leasehold deed of trust substantially in the form set forth in the attached Exhibit D.
“Developer” means JHC-Acquisitions LLC, and its successors and assigns. “Developer Parties” means Developer and Developer’s agents, employees, consultants, contractors, and subcontractors, and any person acting on behalf of, or as the invitee of, any of the foregoing.
“Developer’s Permitted Exceptions” is defined in Section 3.1. “Effective Date” is the date specified in the preamble to this Agreement. “Environmental Laws” is defined in Section 6.3.2.
“Escrow Agent” is defined in Section 3.4.
“Ground Lease” means a ground lease substantially in the form set forth in the attached Exhibit G.
“Hazardous Material” is defined in Section 6.3.1.
“Improvements” means the improvements to be developed on the Property pursuant to this Agreement and the Ground Lease.
“Indemnitees” means City and its elected and appointed officials, officers, employees, and agents.
“Lender’s Title Policy” is defined in Section 3.8.5.
“Loan Proceeds” means the proceeds of the City Loan.
4 “Memorandum of Lease” is defined in Section 3.8.4, and the form of it is attached as an exhibit to the Ground Lease.
“Notice” means a Notice of Affordability Restrictions on Transfer of Property, and the form of it is attached as an exhibit to the Affordable Housing Agreement. “Official Records” means the Official Records of Orange County. “Owner’s Title Policy” is defined in Section 3.9.3.
“Preliminary Title Report” is defined in Section 3.1.
“Project” is defined in Recital D and more particularly described in the Ground Lease. “Property” is defined in Recital A and described in the Ground Lease. “Property Management Plan” is defined in Section 5.7
“Residential Marketing Plan” is defined in Section 5.6. “Title Company” is defined in Section 3.4.
“Updated Financing Plan” is defined in Section 2.4.2.
Section 1.3 Exhibits. The following Exhibits are attached and incorporated into this Agreement by this reference:
Exhibit A Legal Description of the Property
Exhibit B Pre-Closing Schedule
Exhibit C Form of City Loan Note
Exhibit D Form of Leasehold Deed of Trust (which includes the post-closing schedule and Memorandum of Lease)
Exhibit E Form of Assignment
Exhibit F Forms of Affordable Housing Agreement
Exhibit G Form of Ground Lease
Exhibit H Preliminary Financing Plan (Project Budget; Sources and Uses of Funds; Pro-forma/projected Operating Income/Expense Statement) 5 ARTICLE II
REPRESENTATIONS; EFFECTIVE DATE; PROJECT SCOPE; FINANCING PLAN Section 2.1 Developer’s Representations.. Developer covenants that until the expiration or earlier termination of this Agreement, upon learning of any fact or condition that would cause any of the warranties and representations in this Section 2.1 to be untrue, Developer shall promptly give written notice of such fact or condition to City. Developer acknowledges that City shall rely upon Developer’s representations made herein notwithstanding any investigation made by or on behalf of City. Developer represents, warrants, and covenants that the following are true and correct in all material respects as of the Effective Date, and shall be true and correct in all material respects as of the Closing Date.
2.1.1 Organization. Developer is a limited liability company, duly organized and in good standing under the laws of the State of California.
2.1.2 Authority of Developer. Developer has full power and authority to execute and deliver this Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with this Agreement, and to perform and observe the terms and provisions of all of the foregoing.
2.1.3 Authority of Persons Executing Documents. This Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with to this Agreement, have been executed and delivered, or will be executed and delivered, by persons who are duly authorized to execute and deliver the same for and on behalf of Developer, and all actions required under Developer’s organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with this Agreement, have been duly taken or will have been duly taken (to the extent such actions are required) as of the date of execution and delivery of such documents.
2.1.4 Valid and Binding Agreements. This Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with this Agreement constitute, or if not yet executed or delivered, will when so executed and delivered, constitute, legal, valid and binding obligations of Developer, enforceable in accordance with their respective terms, subject to laws affecting creditors’ rights and principles of equity.
2.1.5 No Breach of Law or Agreement. Neither the execution nor delivery of this Agreement, the other City Documents, or any other documents or instruments that have been or that will be executed and delivered by Developer pursuant to or in connection with this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court, board, commission or agency binding on Developer, or any provision of the organizational documents of Developer, or will conflict with or constitute a breach of or a default 6 under any agreement to which Developer is a party, or will result in the creation or imposition of any lien upon any assets or property of Developer, other than liens established pursuant hereto.
2.1.6 Pending Proceedings. Except as disclosed in writing to City prior to execution of this Agreement, to Developer’s knowledge, (i) Developer is not in default under or in violation of any law or regulation or under any order of any court, board, commission or agency whatsoever, and, (ii) there are no claims, actions, suits or proceedings pending or threatened against or affecting Developer, at law or in equity, before or by any court, board, commission or agency. Developer is not the subject of a bankruptcy or insolvency proceeding, and no general assignment or general arrangement for the benefit of creditors or the appointment of a trustee or receiver to take possession of all or substantially all of Developer’s assets has been made. As used in this Section 2.1, the phrase “to Developer’s knowledge” shall mean and refer to the actual knowledge of Michael Massie, without duty of inquiry or investigation.
Section 2.2 City’s Representations. City covenants that until the expiration or earlier termination of this Agreement, upon learning of any fact or condition that would cause any of the warranties and representations in this Section 2.2 to be untrue, City shall promptly give written notice of such fact or condition to Developer. City acknowledges that Developer shall rely upon City’s representations made herein notwithstanding any investigation made by or on behalf of Developer. City represents, warrants, and covenants that the following are true and correct in all material respects as of the Effective Date, and shall be true and correct in all material respects as of the Closing Date.
2.2.1 Organization. City is a California municipal corporation, duly formed and operating under the laws of the State of California.
2.2.2 Authority of City. City has full power and authority to execute and deliver this Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with this Agreement, and to perform and observe the terms and provisions of all of the foregoing.
2.2.3 Authority of Persons Executing Documents. This Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with to this Agreement, have been executed and delivered, or will be executed and delivered, by persons who are duly authorized to execute and deliver the same for and on behalf of City, and all actions required by City and under applicable governing law for the authorization, execution, delivery and performance of this Agreement, the other City Documents, and all other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with this Agreement, have been duly taken or will have been duly taken (to the extent such actions are required) as of the date of execution and delivery of such documents.
2.2.4 Valid and Binding Agreements. This Agreement, the other City documents, and all other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with this Agreement constitute, or if not yet executed or delivered, will when so executed and delivered, constitute, legal, valid and binding obligations of 7 City, enforceable in accordance with their respective terms, subject to laws affecting creditors’ rights and principles of equity.
2.2.5 No Breach of Law or Agreement. Neither the execution nor delivery of this Agreement, the other City Documents, or any other documents or instruments that have been or that will be executed and delivered by City pursuant to or in connection with this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court, board, commission or agency binding on City, or will conflict with or constitute a breach of or a default under any agreement to which City is a party, or will result in the creation or imposition of any lien upon any assets or property of City, other than liens established pursuant hereto.
2.2.6 Legal Parcel The Property is a legally formed parcel in the approximate size of .437 acres.
2.2.7 City is Fee Owner. City is the owner of the entire right, title, and interest in and to the Property.
2.2.8 No Litigation. There are no pending or, to City’s knowledge, threatened claims, allegations or lawsuits of any kind that could materially and adversely affect the value of the Property or prohibit the conveyance of a leasehold interest therein, nor to the best of City’s knowledge, is there any governmental investigation of any type or nature pending or threatened against or relating to the Property or the transactions contemplated hereby. As used in this Section
2.2, the phrase “to City’s knowledge” shall mean and refer to the actual knowledge of Bill Gallardo, without duty of inquiry or investigation.
2.2.9 Due Diligence Materials. City has provided to Developer full and complete copies of all studies reports and other due diligence documents and information pertaining to the Property that are in City’s possession or control.
2.2.10 No Property Agreements. No portion of the Property is subject to any lease, license, option, or use agreement (any such agreement a “Property Agreement”) and no person or entity other than City has any right to occupy or use the Property or any portion thereof.
Section 2.3 Project Scope; Design and Development Standards. The contemplated Project is described in Recital D and in the Ground Lease.
Section 2.4 Financing Plan; Project Schedule.
2.4.1 Preliminary Financing Plan. As set forth in the Preliminary Financing Plan set forth in the attached Exhibit H, Developer has preliminarily proposed financing the Project with a combination of a conventional construction loan that will convert to a permanent loan upon completion of construction, equity contributions from federal low-income housing tax credit investors, the City Loan, a loan from the County of Orange, a Cal Optima Health Grant Award.
2.4.2 Updated Financing Plan. Developer shall submit for City approval (such approval not to be unreasonably withheld, conditioned or delayed) Developer’s updated plans for construction and permanent financing of the Project (the “Updated Financing Plan”) and such 8 submission and approval shall be a condition to Closing. The Updated Financing Plan shall indicate all sources of funds necessary to pay, when due, and the estimated costs of the Project (including the hard and soft construction costs), and shall be accompanied by evidence that all such funds are subject to binding commitments, from Developer, equity investors, and lenders, subject only to commercially reasonable conditions. The Updated Financing Plan shall include development and operating pro-formas which set out in detail Developer’s plan for financing the costs of leasing the Property, and constructing and operating the Project. In addition, if applicable, the Updated Financing Plan shall be accompanied by an updated project schedule for approval by City and, if approved, the post-closing construction schedule attached to the form of Ground Lease shall be revised accordingly.
2.4.3 City Review/Approval of Updated Financing Plan.
(a) City shall use good faith efforts to review the proposed Updated Financing Plan as soon as reasonably possible. Within 15 days after Developer’s submittal, the City Manager shall approve or disapprove the Updated Financing Plan in writing, and in the event, of disapproval, shall set forth the objections. If the City Manager disapproves the Updated Financing Plan, Developer shall submit revisions that address the reasons for disapproval. The City Manager’s failure to timely approve or disapprove the proposed Updated Financing Plan shall be deemed to be an approval by City.
(b) If Developer proposes to modify the Updated Financing Plan after it has been approved by City, Developer shall submit proposed modifications to City for review and approval (such approval not to be unreasonably withheld, conditioned or delayed). The same review and notice and amendment provisions set forth in the preceding paragraph shall apply to City’s review of proposed modifications.
2.4.4 Tax Credit Funds and Other Financing Sources; Timing. (a) Developer will submit applications to CTCAC, and other funding sources in accordance with the pre-closing schedule set forth in the attached Exhibit B in order to secure allocations of federal low-income housing tax credits, and if applicable, state tax credits, and other financing for the Project to enable construction to commence by the date that is 30 days after the Close of Escrow. Upon award of a preliminary reservation from CTCAC, Developer shall exercise diligent good faith efforts to obtain a funding commitment from a reputable equity investor. Developer’s procurement of a CTCAC allocation and receipt of commitments from an equity investor, and the actual closing of loans from construction and permanent lenders sufficient to fully finance development of the Project are conditions precedent to the Closing (including City’s obligation to lease the Property to Developer and provide the City Loan). (b) The Closing must occur by the deadline in Exhibit B, and shall not be subject to delays for Force Majeure. However, provided Developer is in compliance with this Agreement, including diligently pursuing the financing required to develop the Project, as contemplated pursuant to subparagraph (a) above, the City Manager may grant two one-year written extensions to such deadline.
9 (c) If the Closing does not occur by the Closing deadline set forth in Exhibit B (as such deadline may be extended pursuant to subparagraph (b) above), either Developer or City shall have the right, by delivery of written notice to the other party, to terminate this Agreement, subject to any provisions and obligations which state that they survive termination.
ARTICLE III
LEASE OF THE PROPERTY; CONDITIONS PRECEDENT TO CLOSING
Section 3.1 Lease of Property; Review of Title. Within five days after the Effective Date, Developer shall obtain from Title Company a preliminary title report describing the state of title of the Property (“Preliminary Title Report”). Developer shall notify City in writing (“Developer’s Objection Notice”) of any objections Developer may have to title exceptions contained in the Preliminary Title Report not later than 30 days following the Effective Date (“Title Review Period”). In the event Developer fails to deliver Developer’s Objection Notice prior to the expiration of the Title Review Period, Developer shall conclusively be deemed to have approved the state of title of the Property. City shall have a period of five business days after receipt of Developer’s Objection Notice in which to deliver written notice to Developer (“City’s Notice”) of City’s election to either: (i) remove the objectionable items prior to the Close of Escrow; or (ii) decline to remove any such title exceptions and terminate the escrow and this Agreement. If City fails to deliver City’s Notice within such period, City shall be deemed to have elected to decline to remove such title exceptions and terminate the escrow and this Agreement. If City notifies or is deemed to have notified Developer of its election to terminate the escrow rather than remove the objectionable items, Developer shall have the right, by written notice delivered to City not later than 60 days following the Effective Date, to agree to accept the Property subject to the objectionable items. In such event City’s election to terminate the escrow shall be of no effect, and Developer shall acquire its leasehold interest in the Property at the Close of Escrow subject to such objectionable items. Notwithstanding the foregoing, City shall, on or before the Close of Escrow, remove all deeds of trust and financing statements as an encumbrance to title, without the necessity for an objection by Developer. Upon the issuance of any amendment or supplement to the Preliminary Title Report which has additional exceptions for matters not shown on the original Preliminary Title Report, the foregoing right of review and approval shall also apply to such amendment or supplement (provided that the period for Developer to review such amendment or supplement shall be the later of the expiration of the Title Review Period or five days from receipt of the amendment or supplement). If Developer properly notifies City of its disapproval of the state of title to the Property on or before the expiration of the Title Review Period (or such longer period as may be provided in the immediately sentence), this Agreement and the escrow shall terminate.
Section 3.2 Ground Lease/Possession at Closing. On the Closing Date, City shall deliver possession of the Property to the Developer pursuant to the Ground Lease.
Section 3.3 Ground Lease/Prepayment of Rent. At the Closing, Developer shall pay the sum of $99 to City as prepaid rent under the Ground Lease (through escrow or outside of escrow).
10 Section 3.4 Escrow. City and Developer shall open escrow at the office of Commonwealth Land Title Company or such other title company as the Parties may agree upon (“Escrow Agent” or “Title Company”) in order to consummate the lease of the Property to Developer and the Close of Escrow.
Section 3.5 Costs of Closing and Escrow; Legal Fees. Developer shall pay all title insurance premiums for title policies Developer elects to purchase in connection with the lease of the Property and the financing of the Project, and Developer shall pay all recording fees, transfer taxes, escrow fees, and closing costs incurred in connection with the lease of the Property and the financing of the Project. Developer shall pay for the cost of the lender’s policy of title insurance that must be issued to City insuring City’s deed of trust which secures the City Loan. Property taxes and assessments shall be prorated as of the Closing Date. City and Developer shall provide Escrow Agent with a copy of this Agreement, which together with such supplemental instructions as City or Developer may provide and which are consistent with this Agreement, or which are otherwise mutually agreed upon by City and Developer, shall serve as escrow instructions for the Close of Escrow.
Section 3.6 Closing Deadline. The Closing Date shall occur on or before the deadline set forth in Exhibit B as such deadline may be extended pursuant to Section 2.4.4(b) above), or if earlier, within 30 days following the satisfaction or waiver of all conditions precedent to the Close of Escrow as set forth in Sections 3.8 and 3.9.
Section 3.7 Closing Deliveries; Recording. Prior to the Close of Escrow, Developer shall deliver the executed City Loan Note, Ground Lease, and Assignment to City, and shall deposit into escrow the recordable City Documents to which Developer is a party, executed and acknowledged as applicable, Developer’s share of closing costs, and funds in the amount required to pay all rent due under the Ground Lease (i.e., $99), and all other costs and expenses payable by Developer pursuant to this Agreement and the City Documents. Provided that all conditions precedent to Close of Escrow have been satisfied or waived, City shall deposit into escrow executed copies of the recordable City Documents to which City is a party. On the Closing Date, the Escrow Agent shall cause the Memorandum of Lease, the Affordable Housing Agreement, the Notice, and then the Deed of Trust, in that order, without intervening recordings, to be recorded in the Official Records (it being understood that any subordination of the City’s Deed of Trust must be evidenced by a reasonable, recorded subordination agreement approved and signed by the City Manager).
Section 3.8 City’s Conditions to Closing. City’s obligations to lease the Property to Developer and close the City Loan (i.e., the “Closing”) are conditioned upon the satisfaction of the terms and conditions set forth in this Section 3.8, unless any such condition is waived in writing by the City Manager, which may be given or withheld in the City Manager’s sole and absolute discretion.
3.8.1 No Default. There shall exist no condition, event or act which would constitute a breach or default by Developer under this Agreement or any other City Document, or which, upon the giving of notice or the passage of time, or both, would constitute such a breach or default.
11 3.8.2 Representations. All representations and warranties of Developer contained herein or in any other City Document or certificate delivered in connection with the transactions contemplated by this Agreement shall be true and correct in all material respects as of the Close of Escrow.
3.8.3 Due Authorization and Good Standing; Organizational Documents.
Developer shall have delivered to City copies of all of the following, including updated versions of any of the following that have been amended or modified since the date of any prior delivery of such documents to City: (i) Developer’s good standing certificate and articles of incorporation, each certified by the Secretary of State; and (ii) Developer’s bylaws/operating agreement, and resolutions authorizing Developer’s execution of and performance under this Agreement and the other City Documents, each certified by an officer or other authorized party as accurate, complete, and in full force and effect.
3.8.4 Execution, Delivery and Recordation of Documents. Developer shall have executed, acknowledged as applicable, and delivered all documents required in connection with the contemplated transactions, including the City Note, the Deed of Trust, the Assignment, the Affordable Housing Agreement, the Notice, the Ground Lease, and a Memorandum of Lease substantially in the form attached as an exhibit to the Ground Lease (“Memorandum of Lease”).
3.8.5 Lender’s Title Policy. The Title Company shall, upon payment of the premium therefor, be ready to issue an ALTA Lender’s Policy of Title Insurance for the benefit and protection of City (“Lender’s Title Policy”) in the amount of the City Loan, insuring that the Deed of Trust is recorded against Developer’s leasehold interest in the Property, subject only to senior liens, title exceptions and such other defects, liens, conditions, encumbrances, restrictions, easements and exceptions as City may approve in writing and containing such endorsements as City may reasonably require, with the cost of such Lender’s Title Policy to be paid by Developer.
3.8.6 Financing Plan. City shall have approved (with such approval not to be unreasonably withheld, conditioned or delayed) the Updated Financing Plan, including the sources of construction and permanent financing, and the construction and operating budgets for the Project.
3.8.7 Commitment/Closing of all Other Loans and Equity Funds. All loans and commitments of equity for the construction of the Project shall have closed or shall close concurrently with the closing of the City Loan and the leasing of the Property (i.e., the delivery of Ground Lease and recording of Memorandum of Lease), and Developer shall have provided City with reasonable evidence of committed equity funds necessary for the Project.
3.8.8 Construction Contract, Plans. City shall have approved (with such approval not to be unreasonably withheld, conditioned or delayed) the final Construction Plans and specifications for the Project. Developer shall have delivered an executed copy of the construction contract for the Project to the City, which must be consistent with the Updated Project Budget approved by City.
3.8.9 Completion Guaranty. Developer shall have provided to City a completion guaranty in a form reasonably acceptable to City executed by Developer. 12 3.8.10 Settlement Statement. City shall have approved (with such approval not to be unreasonably withheld, conditioned or delayed) the final settlement statement for the Close of Escrow.
3.8.11 Insurance. Developer shall have provided to City the evidence of the insurance required of Developer under the Ground Lease.
3.8.12 Marketing and Management Plans. Developer shall have submitted initial drafts of the Residential Marketing Plan and the Property Management Plan.
3.8.13 Other Documents. Developer’s delivery to City, and City approval (with such approval not to be unreasonably withheld, conditioned or delayed) of such other documents related to the development and financing of the Project as City may reasonably request.
3.8.14 Surplus Land Act. City’s determination that the Property is “exempt surplus land” shall have been confirmed by the California Department of Housing and Community Development.
Section 3.9 Developer’s Conditions to Closing. Developer’s obligation to proceed with the leasing of the Property is subject to the satisfaction or Developer’s waiver, which may be given or withheld in Developer’s sole and absolute discretion, of the following conditions:
3.9.1 No Default. City shall not be in default under the terms of this Agreement, and all representations and warranties of City contained in this Agreement shall be true and correct;
3.9.2 Execution of Documents. City shall have executed and acknowledged the Memorandum of Lease, the Affordable Housing Agreement, the Notice, and all other City Documents to which the City is a party, and shall have delivered such documents into escrow, and City shall have executed the Ground Lease and shall have delivered the Ground Lease to Developer; and
3.9.3 Owner’s Title Policy. The Title Company shall, upon payment of the premium therefor, be ready to issue an Owner’s Title Insurance Policy for the benefit and protection of Developer (“Owner’s Title Policy”) showing a leasehold interest in the Property vested in Developer, subject only to the exceptions approved by Developer pursuant to Section 3.1 above and containing such endorsements as Developer may reasonably require, with the cost of such Owner’s Title Policy to be paid by Developer.
3.9.4 Financing Plan. Developer shall have approved the Updated Financing Plan, including the sources of construction and permanent financing, and the construction and operating budgets for the Project, and all construction financing shall be ready to close as of the Close of Escrow.
3.9.5 Settlement Statement. Developer shall have approved (with such approval not to be unreasonably withheld, conditioned or delayed) the final settlement statement for the Close of Escrow.
13 3.9.6 Permits and Land Use Approvals. Developer shall have obtained all rezoning and other land use approvals and all permits (or permit ready letters) required to construct the Project (or with respect to permits, they are capable of being issued subject only to payment of fees that will be paid through escrow at the Close of Escrow).
Section 3.10 City Covenants Prior to Closing Date.
3.10.1 City to Maintain Insurance. City shall maintain its current property insurance in effect as of the Effective Date throughout and until the Closing Date.
3.10.2 No New Property Agreements. City shall not, without Developer’s prior written consent, which consent may be given or withheld in Developer’s sole and absolute discretion, enter into any Property Agreement or any other agreement affecting in any way the Property or any portion thereof.
ARTICLE IV
CITY LOAN
Section 4.1 City Loan. Upon satisfaction of the conditions precedent set forth in Sections 3.8 and 3.8, City agrees to provide the City Loan to Developer upon the terms and conditions, and for the purposes set forth in, this Agreement and the City Loan Note.
Section 4.2 Loan Terms.
4.2.1 Disbursements; Use of Proceeds. City shall disburse proceeds of the City Loan to Developer on a draw-down basis, to pay Project costs (both hard and soft costs). Developer shall submit requests for disbursement in writing, on a form reasonably acceptable to City, along with reasonable documentation evidencing the costs to be paid by such requested funds. City shall disburse requested funds to Developer within 15 days following City’s receipt of a disbursement request submitted by Developer pursuant to this Section 4.2.
4.2.2 Determination of Interest Rate. The principal balance of the City Loan outstanding from time to time will bear interest at a rate to be determined by City based upon Project feasibility and ability to meet the “true debt” test, but which shall be not more than 3% simple annual interest, except during such periods that the default rate of interest specified in the City Loan Note applies. If Developer requests a reduction in interest rate to less than 3% simple annual interest, Developer shall be required to demonstrate to City’s reasonable satisfaction that:
(i) such lower interest rate is necessary to achieve Project feasibility or satisfy the “true debt” test; (ii) Developer has engaged in good faith negotiations with other public agency lenders and has obtained interest rate concessions from such lenders comparable in scope to the requested reduction in the interest rate for the City Loan Note; and (iii) no loan provided by any sponsor or general partner of Developer will bear interest at a rate higher than the rate requested for the City Loan Note.
14 4.2.3 Other Terms of City Loan. The other terms of the City Loan are set forth in the City Loan Note (and the Deed of Trust and Assignment).
Section 4.3 Security; Subordination Agreements. Repayment of the City Loan Note shall be secured by the Deed of Trust which shall be executed by Developer and recorded against Developer’s leasehold interest in the Property at the Close of Escrow, and the Assignment which shall be executed by Developer and delivered directly to City as a condition to Closing. The City Manager may execute and deliver reasonable recordable subordination agreements (with respect to the City Deed of Trust) required by other secured lenders described in the City-approved final Financing Plan as a condition to their loans.
Section 4.4 No Obligation to Close Escrow After Default. Notwithstanding any other provision of this Agreement, City shall have no obligation to authorize the Close of Escrow or the disbursement of Loan Proceeds following: (i) the knowing or intentional failure of any of Developer’s representations and warranties made in this Agreement or in connection with this Agreement to be true and correct in all material respects; (ii) the termination of this Agreement; or (iii) the occurrence of a default under any City Document which remains uncured following written notice and beyond any applicable cure period, or the existence of any condition, event or act which upon the giving of notice or the passage of time or both would constitute a default under any City Document.
ARTICLE V
DEVELOPMENT AND USE OF THE PROPERTY
Section 5.1 Development Schedule; Development/Construction. The terms of the Ground Lease shall govern the Developer’s post-Closing construction of the Project. The schedule for construction of the Project is set forth as an exhibit to the Ground Lease.
Section 5.2 Costs of Leasing and Construction. With the exception of the City Loan, Developer shall be solely responsible for all direct and indirect costs and expenses incurred in connection with the construction and development of the Project, the acquisition of its ground leasehold interest and space leasing of the Property (including appraisal fees, title reports and any environmental assessments), and compliance with the Conditions of Approval, including all offsite and on-site improvements required by City. All such costs shall be borne solely by Developer and shall not be an obligation of City.
Section 5.3 Permits and Approvals; Payment of Fees. Developer acknowledges that the execution of this Agreement by City does not constitute City approval for the purpose of the issuance of building permits, does not limit in any manner the discretion of City in such approval process, and does not relieve Developer from the obligation to apply for and to obtain from City and all other agencies with jurisdiction over the Property, all necessary approvals, entitlements, and permits for the construction of the Project (including the approval of architectural plans, the issuance of any certificates regarding historic resources required in connection with the development of the Property (if any), and the approval of the Project in compliance with CEQA if applicable, and if applicable, NEPA), nor does it limit in any manner the discretion of City in the 15 approval process. Prior to the Close of Escrow, Developer shall have obtained all entitlements, permits, licenses and approvals required for the construction of the Project, including any fire safety permits required by the fire department, building permits, and use permits or shall provide evidence satisfactory to City that receipt of such permits and approvals is subject only to such conditions as City may approve. Developer shall pay when due all customary and usual fees and charges in connection with the processing of all applicable permits and approvals, but in any event all such fees and charges must be paid as a condition to the Closing (though they may be paid through escrow upon the Closing). Developer shall not commence construction work on the Project prior to issuance of building permits required for such work.
Section 5.4 Construction Plans. Developer shall submit to City’s Building Department a complete building permit application, including detailed construction plans for the Project (“Construction Plans”). As used herein “Construction Plans” means all construction documents upon which Developer and Developer’s contractors shall rely in constructing the Project (including the landscaping, parking, and common areas) and shall include the on-site development plan, the construction management plan, final architectural drawings, landscaping, exterior lighting and signage plans and specifications, materials specifications, final elevations, building plans and specifications, plans for all off-site improvements necessary to develop and operate the Project as required by the Conditions of Approval, including utilities, curbs, gutters, sidewalks, and driveways along the Project frontages, and all items the City requires to be submitted in connection with applications for building permits. The Construction Plans shall be based upon the scope of development and development standards set forth in the Ground Lease and upon the approvals issued by City for the Project, and shall not materially deviate therefrom without the express written consent of City, which consent shall not be unreasonably withheld, conditioned or delayed.
Section 5.5 Equal Opportunity. There shall be no discrimination on the basis of race, color, religion, creed, sex, sexual orientation, marital status, ancestry or national origin in the hiring, firing, promoting or demoting of any person engaged in construction work on the Property, and Developer shall direct its contractors and subcontractors to refrain from discrimination on such basis.
Section 5.6 City Approval of Residential Marketing Plan. Developer shall submit to City Manager for review and approval an initial residential marketing plan (“Residential Marketing Plan”), in a form reasonably acceptable to City and consistent with the provisions of the Affordable Housing Agreement. The City Manager’s approval shall not be unreasonably withheld, conditioned or delayed. If the City Manager disapproves the Residential Marketing Plan, the City Manager shall do so by written notice to Developer stating the reasons for such disapproval. Once approved, any material changes to the Residential Market Plan shall be submitted to the City Manager for approval, which approval shall not be unreasonably withheld, conditioned or delayed.
Section 5.7 City Approval of Property Management Plan. Within the time established in the Schedule of Performance, Developer shall submit to the City Manager for review and approval an initial property management plan that provides for management of the Property, including maintenance, inspection, and repair of the Improvements and landscaping on the Property (“Property Management Plan”). The City Manager’s approval shall not be 16 unreasonably withheld, conditioned, or delayed. If the City Manager disapproves the Property Management Plan, the City Manager shall do so by written notice to Developer stating the reasons for such disapproval. Once approved, any material changes to the Property Management Plan shall be submitted to the City Manager for approval, which approval shall not be unreasonably withheld, conditioned or delayed.
ARTICLE VI
CONDITION OF THE SITE; ENVIRONMENTAL MATTERS
Section 6.1 Access to Site; Inspections. Prior to the Close of Escrow, Developer Parties may enter upon and conduct reviews and assessments of the physical and environmental condition of the Property and the condition of the existing improvements, and perform an ALTA survey. Developer shall provide City with the names of such authorized representatives, and proof of liability insurance reasonably acceptable to City, naming City as additional insured, prior to any such entry. Developer’s inspection, examination, survey and review of the Property shall be at its sole expense. Developer shall provide to City solely as an accommodation and without any representation or warranty regarding the information contained therein, copies of all reports and test results promptly following completion of such reports and testing; provided that City acknowledges and agrees that City shall be solely responsible to obtain any approvals necessary to rely on any of said reports and/or test results. Twenty-four hours in advance of its intention to enter the Property, Developer shall notify City and provide workplans, drawings, and descriptions of any intrusive sampling it intends to do. Developer shall keep the Property in a safe condition during its entry. Developer shall repair, and to the extent reasonably practicable, restore and return the Property to its condition immediately preceding Developer’s entry thereon at Developer’s sole expense Developer shall not permit any mechanics liens, stop notices, or other liens or encumbrances to be placed against the Property prior to Close of Escrow. Without limiting any other indemnity provisions set forth in this Agreement, Developer shall indemnify, defend (with counsel reasonably acceptable to City) and hold the Indemnitees harmless from and against all liabilities, losses, costs, expenses (including without limitation attorneys’ fees and costs of litigation), claims, demands, actions, suits, judicial or administrative proceedings, penalties, deficiencies, fines, orders, and damages (all of the foregoing, collectively, “Entry Claims”) resulting from or arising in connection with entry upon the Property pursuant to this Section 6.1 except to the extent arising from the gross negligence or willful misconduct of any of the Indemnitees. Developer’s indemnification obligations set forth in this Section 6.1 shall not apply to Entry Claims relating to the diminution in value of the Property solely resulting from Developer’s mere discovery of Hazardous Materials or other conditions of the Property that existed prior to Developer’s entry onto the Property, provided that no such condition is exacerbated due to the activities of any Developer Parties. Developer’s indemnification obligations set forth in this Section 6.1 shall survive the Close of Escrow and the termination of this Agreement and shall be subject to the provisions of Section 10.2.
Section 6.2 Condition of Property.
6.2.1 City’s lease of the Property to Developer shall be made “AS IS,” with no warranties or representations by City concerning the condition of the Property, including the 17 presence or absence of any Hazardous Materials, except for such express representations and warranties made by City in the Ground Lease and this Agreement, including in Section 2.2.
6.2.2 Developer agrees and acknowledges that: (i) neither City, nor anyone acting for or on behalf of City, has made, and Developer has not relied on, any representation, statement, warranty or promise to Developer concerning the development potential or condition of the Property, except for such express representations and warranties made by City in the Ground Lease and this Agreement, including in Section 2.2; (ii) Developer has or will have independently verified all matters concerning the Property and that Developer shall lease the Property on its own prior examination thereof; and (iv) IN ENTERING INTO THE GROUND LEASE DEVELOPER SHALL BE LEASING THE PROPERTY, IN AN “AS IS” PHYSICAL CONDITION AND IN AN “AS IS” STATE OF REPAIR.
Section 6.3 Definitions.
6.3.1 “Hazardous Material” means any chemical, compound, material, mixture, or substance that is now or may in the future be defined or listed in, or otherwise classified pursuant to any Environmental Laws (defined below) as a “hazardous substance”, “hazardous material”, “hazardous waste”, “extremely hazardous waste”, infectious waste”, toxic substance”, toxic pollutant”, or any other formulation intended to define, list or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, or toxicity. The term “hazardous material” shall also include asbestos or asbestos-containing materials, radon, chrome and/or chromium, polychlorinated biphenyls, petroleum, petroleum products or byproducts, petroleum components, oil, mineral spirits, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable as fuel, perchlorate, and methyl tert butyl ether, whether or not defined as a hazardous waste or hazardous substance in the Environmental Laws.
6.3.2 “Environmental Laws” means any and all federal, state and local statutes, ordinances, orders, rules, regulations, governmental directives, or any other requirements of governmental authorities with jurisdiction over the Property or Project, as may presently exist, or as may be amended or supplemented, or hereafter enacted, relating to the presence, release, generation, use, handling, treatment, storage, transportation or disposal of Hazardous Material, or the protection of the environment or human, plant or animal health, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C. § 9601), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Oil Pollution Act (33 U.S.C. § 2701 et seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C. § 11001 et seq.), the Porter-Cologne Water Quality Control Act (Cal. Water Code § 13000 et seq.), the Toxic Mold Protection Act (Cal.
Health & Safety Code § 26100, et seq.), the Safe Drinking Water and Toxic Enforcement Act of 1986 (Cal. Health & Safety Code § 25249.5 et seq.), the Hazardous Waste Control Act (Cal. Health & Safety Code § 25100 et seq.), the Hazardous Materials Release Response Plans & Inventory Act (Cal. Health & Safety Code § 25500 et seq.), and the Carpenter-Presley-Tanner Hazardous Substances Account Act (Cal. Health and Safety Code, Section 25300 et seq.). 18 ARTICLE VII
LIMITATIONS ON CHANGE IN OWNERSHIP, MANAGEMENT AND CONTROL OF
DEVELOPER
Section 7.1 Identity of Developer; Changes Only Pursuant to this Agreement.
Developer and its principals have represented that they possess the necessary expertise, skill and ability to carry out the development of the Project pursuant to this Agreement. The qualifications, experience, financial capacity and expertise of Developer and its principals are of particular concern to City. It is because of these qualifications, experience, financial capacity and expertise that City has entered into this Agreement with Developer. No voluntary or involuntary successor, assignee or transferee of Developer shall acquire any rights or powers under this Agreement, except as expressly provided herein. In addition, notwithstanding anything in this Agreement to the contrary, the following transfers shall be permitted without the prior consent of City:
7.1.1 Any transfer to a lender pursuant to a deed of trust or other security instrument as collateral for: (i) bona fide construction financing to pay all or any part of the Project costs; or (ii) a bona fide permanent loan.
7.1.2 Any transfer directly resulting from the foreclosure or deed in lieu of foreclosure of a deed of trust or other security instrument for a loan from a lender to the Project (and the first transfer by such lender or its nominee following such foreclosure or deed in lieu of foreclosure so long as such transferee assumes the obligations of Developer hereunder in connection with such first Transfer).
7.1.3 Any transfer of stock or equity in the Party that does not change management or operational control of the Project, with no material change in beneficial ownership (with the exception of any conveyance to member(s) of the immediate family(ies) of the transferor(s) or trusts for their benefit) and which constitutes a tax-free transaction under Federal income tax law and California real estate transfer tax.
7.1.4 The lease of residential units in the Project consistent with the Affordable Housing Agreement.
Section 7.2 Effect of Transfer without City Consent.
7.2.1 With the exception of any transfers for which City consent is not required pursuant to Section 7.1, in the absence of specific written agreement by City, no transfer by Developer shall be deemed to relieve Developer or any other party from any obligation under this Agreement.
7.2.2 It shall be an Event of Developer Default hereunder entitling City to pursue remedies including termination of this Agreement if Developer violates this Article 7. 19 ARTICLE VIII
SECURITY FINANCING AND SUBORDINATION OF CITY DEED OF TRUST Section 8.1 Mortgages and Deeds of Trust for Development. Mortgages and deeds of trust, or any other reasonable security instrument are permitted to be placed upon the Improvements and Developer’s leasehold interest in the Property only for the purpose of securing loans for the purpose of financing the design and construction of the Improvements, and other expenditures reasonably necessary for the development of the Project pursuant to this Agreement.
No such instruments shall be recorded against City’s fee interest in the Property. Developer shall not enter into any conveyance for such financing that is not contemplated in the applicable Financing Plan as it may be updated with City approval, without the prior written approval of the City Manager (with all of such approvals not to be unreasonably withheld, conditioned or delayed).
As used herein, the terms “mortgage” and “deed of trust” shall mean any security instrument used in financing real estate acquisition, construction or land development.
Section 8.2 Subordination. City agrees that it will not withhold consent to reasonable requests for subordination of the Deed of Trust to deeds of trust provided for the benefit of lenders providing construction and/or permanent financing for the Project that are identified in the approved final Financing Plan as it may be updated with City approval, provided that the instruments effecting such subordination include reasonable protections for City in the event of default, including the provisions set forth in this Section. The Deed of Trust may only be subordinated to deeds of trust recorded to secure repayment of financing provided by state or federally chartered financial institutions, public agencies, and nonprofit corporations or other entities that are unaffiliated with Developer or any of its partners or their affiliated entities. Any subordination agreement must provide the following: (i) City shall be provided with a copy of any notice of default concurrently with the lender’s provision of such notice to Developer; (ii) City shall have the right to cure any default of Developer; (iii) City shall be provided a 30-day period to cure any monetary default and a 60 day or longer period to cure any non-monetary default; (iv) the subordination will be effective only during the original term of the senior loan and any extension of the term approved by City in writing (such approval not to be unreasonably withheld, conditioned or delayed); (v) absent City’s prior written consent (such consent not to be unreasonably withheld, conditioned of delayed), the senior loan documents will not be amended to increase the amount, extend the maturity date, increase the interest rate, or increase the payment amounts due under the senior loan documents; and (vi) the subordination shall not limit the effect of the Deed of Trust prior to a senior lender’s declaration of default and commencement of its remedies, nor require City to obtain the senior lender’s consent prior to the City’s exercise of remedies under the City Loan Note (other than City’s commencement of foreclosure proceedings, for which the senior lender’s consent may be required) or the Ground Lease (but the Ground Lease shall have reasonable mortgagability provisions, including lender cure rights).
Section 8.3 Holder Not Obligated to Construct. The holder of any mortgage or deed of trust authorized by this Agreement shall not be obligated to complete construction of the Project (except that if such holder succeeds to the lessee’s interest under the Ground Lease, the failure to timely cure a default under the terms of the Ground Lease relating to construction of the Project shall entitle City, as landlord, to terminate the Ground Lease), or to guarantee such completion. Nothing in this Agreement shall be deemed to permit or authorize any such holder to 20 devote the Property or any portion thereof to any uses, or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement.
Section 8.4 Modifications to Ground Lease. City shall not unreasonably withhold its consent to modifications of the Ground Lease form requested by Project lenders or investors provided such modifications do not materially adversely affect City’s substantive rights or increase City’s obligations under this Agreement or the form of Ground Lease attached hereto.
Section 8.5 Estoppel Certificates. Either Party shall, at any time, and from time to time, within 15 days after receipt of written request from the other Party, execute and deliver to such Party a written statement certifying that, to the actual knowledge of the certifying Party:
(i) this Agreement is in full force and effect and a binding obligation of the Parties (if such be the case); (ii) this Agreement has not been amended or modified, or if so amended, identifying the amendments; and (iii) the requesting Party is not in default in the performance of its obligations under this Agreement, or if in default, describing the nature of any such defaults.
ARTICLE IX
DEFAULTS, REMEDIES AND TERMINATION
Section 9.1 Event of Developer Default. The following events shall constitute an event of default on the part of Developer hereunder (“Developer Event of Default”):
9.1.1 A transfer occurs, either voluntarily or involuntarily, in violation of Article VII, and Developer fails to undo such transfer within 30 days after written notice thereof from City to Developer;
9.1.2 Developer breaches any obligation of Developer herein, and fails to cure such obligation within 30 days after written notice thereof from City to Developer; provided, however, that if such cure cannot reasonably be completed within 30 days, Developer shall not be in default if it commences to cure such obligation within such 30 day period and diligently prosecute such cure to completion;
9.1.3 Developer fails to timely close the transaction described in this Agreement for any reason other than: (i) a default by City; (ii) the failure of a condition in favor of Developer pursuant to Section 3.10 to have been satisfied, or waived by Developer; or (iii) the failure of a condition in favor of Developer pursuant to Section 3.9 to have been satisfied, or waived by City;
9.1.4 Any representation or warranty contained in this Agreement or in any application, financial statement, certificate or report submitted to City in connection with this Agreement proves to have been knowingly or intentionally incorrect in any material respect;
9.1.5 If, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors (“Bankruptcy Law”), Developer or any general partner thereof: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against Developer or any general partner thereof in an 21 involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Developer or any general partner thereof; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due;
9.1.6 A court of competent jurisdiction shall have made or entered any decree or order (1) adjudging the Developer to be bankrupt or insolvent, (2) approving as properly filed a petition seeking reorganization of the Developer or seeking any arrangement for Developer under bankruptcy law or any other applicable debtor’s relief law or statute of the United States or any state or other jurisdiction, (3) appointing a receiver, trustee, liquidator, or assignee of the Developer in bankruptcy or insolvency or for any of its properties, or (4) directing the winding up or liquidation of the Developer, in each case if such decree, order, petition, or appointment is not removed or rescinded within 120 days;
9.1.7 Developer shall have assigned its assets for the benefit of its creditors (other than pursuant to a mortgage loan) or suffered a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon shall have been returned or released within 90 days after such event (unless a lesser time period is permitted for cure pursuant to any other mortgage on the Property, in which event such lesser time period shall apply under this subsection as well) or prior to any sooner sale pursuant to such sequestration, attachment, or execution;
9.1.8 Developer shall have voluntarily suspended its business or Developer shall have been dissolved or terminated.
Section 9.2 City Default. An event of default on the part of City (“City Event of Default”) shall arise hereunder if City fails to keep, observe, or perform any of its covenants, duties, or obligations under this Agreement, and the default continues for a period of 30 days after written notice thereof from Developer to City.
Section 9.3 City’s Right to Terminate Agreement. If a Developer Event of Default shall occur and be continuing beyond any applicable cure period, then City shall, in addition to other rights available to it under law or this Agreement, have the right to terminate this Agreement.
If City makes such election, City shall give written notice to Developer specifying the nature of the default and stating that this Agreement shall expire and terminate on the date specified in such notice, and upon the date specified in the notice, this Agreement and all rights of Developer under this Agreement, shall expire and terminate.
Section 9.4 City’s Remedies and Rights Upon an Event of Developer Default.
Upon the occurrence of a Developer Event of Default, City shall have all remedies available to it under this Agreement or under law or equity.
Section 9.5 Developer’s Remedies Upon a City Event of Default. Upon the occurrence of a City Event of Default, Developer shall have all remedies available to it under this Agreement or under law or equity, including bringing an action for equitable relief seeking the specific performance of the terms and conditions of this Agreement, and/or enjoining, abating, or preventing any violation of such terms and conditions. Notwithstanding the preceding, each Party covenants not to sue for damages, or claim any damages, for any default. 22 Section 9.6 Remedies Cumulative. Except as otherwise expressly stated 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 time, of any other rights or remedies for the same or any other default by the other Party.
Section 9.7 Inaction Not a Waiver of Default. No failure or delay by either Party in asserting any of its rights and remedies as to any default shall operate as a waiver of such default or of any such rights or remedies, nor deprive either Party of its rights to institute and maintain any action or proceeding which it may deem necessary to protect, assert or enforce any such rights or remedies in the same or any subsequent default.
Section 9.8 Construction Plans. If this Agreement is terminated by mutual agreement of the Parties or by City as a result of a Developer Event of Default, pursuant to, and in accordance with the Assignment securing the Predevelopment Loan, Developer, at no cost to the City, shall deliver to City copies of all construction plans and studies in Developer’s possession or in the possession of the Developer' s consultants related to development of the Project on the Property, including without limitation, the Construction Plans.
ARTICLE X
INDEMNITY AND INSURANCE
Section 10.1 Indemnity. To the greatest extent allowed by law, Developer shall indemnify, defend (with counsel reasonably acceptable to City) and hold the Indemnitees harmless from and against any and all Claims (including without limitation, Claims arising from any injury, death, property damage, or loss of property) arising directly or indirectly, in whole or in part, as a result of or in connection with Developer’s performance or failure to perform under this Agreement, including without limitation, Claims arising in connection with any violation of Applicable Laws by Developer. Developer’s indemnification obligations under this Section 10.1 shall not extend to Claims to the extent arising from the gross negligence or willful misconduct of any of the Indemnitees. Developer’s obligations under this Section 10.1 shall survive the expiration or earlier termination of this Agreement and are subject to the provisions of Section 10.2.
Section 10.2 Terms Applicable to Indemnity Provisions. The terms set forth in this Section 10.2 shall apply to all provisions of this Agreement that pertain to Developer’s obligations to indemnify City and the other Indemnitees, including Sections 6.1,10.1, 10.2, and 11.1. In connection with each such provision, all of the following shall apply:
10.2.1 City does not and shall not waive any rights against Developer that it may have by reason of any indemnity and hold harmless provision set forth in this Agreement because of the acceptance by City, or the deposit with City by Developer, of any of the insurance policies described in this Agreement.
10.2.2 Developer’s obligation to indemnify the Indemnitees shall not be limited or impaired by any of the following: (i) any amendment or modification of any City Document; (ii) any extensions of time for performance required by any City Document; (iii) any provision in any 23 of the City Documents limiting City’s recourse to property securing the City Loan, or limiting the personal liability of Developer, or any other party for payment of all or any part of the City Loan; (iv) the accuracy or inaccuracy of any representation and warranty made by Developer under this Agreement or by Developer or any other party under any City Document (but not including any representations and warranties made by City under this Agreement), (v) the release of Developer or any other person, by City or by operation of law, from performance of any obligation under any City Document; (vi) the release or substitution in whole or in part of any security for repayment of the City Loan; and (vii) City’s failure to properly perfect any lien or security interest given as security for repayment of the City Loan.
10.2.3 The obligation of Developer to indemnify the Indemnitees shall survive any repayment or discharge of the indebtedness evidenced by the City Loan Note, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, any release of record of the lien of the Deed of Trust, and the expiration or earlier termination of this Agreement and the Ground Lease.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 No Brokers. Each Party warrants and represents to the other that no person or entity can properly claim a right to a real estate commission, brokerage fee, finder’s fee, or other compensation with respect to the transactions contemplated by this Agreement. Each Party agrees to defend, indemnify and hold harmless the other Party from any claims, expenses, costs or liabilities arising in connection with a breach of this warranty and representation. The terms of this Section shall survive the close of escrow and the expiration or earlier termination of this Agreement.
Section 11.2 Notices. Except as otherwise specified in this Agreement, all notices to be sent pursuant to this Agreement shall be made in writing, and sent to the Parties at their respective addresses specified below or to such other address as a Party may designate by written notice delivered to the other Parties in accordance with this Section. All such notices shall be sent by: (i) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered on receipt if delivery is confirmed by a return receipt; or (ii) reputable overnight courier that provides a receipt with the date and time of delivery, with charges prepaid or charged to the sender’s account, in which case notice is effective on delivery if delivery is confirmed by the delivery service.
If to City: City of Brea
1 Civic Center Circle
Brea, CA 92821
Attention: City Manager
24 If to Developer: Prior to completion of construction:
JHC-Acquisitions LLC
c/o Jamboree Housing Corporation
17701 Cowan Avenue, Suite 200
Irvine, CA 92614
Attention: Chief Development Officer
Following completion of construction:
JHC-Acquisitions LLC
c/o Jamboree Housing Corporation
17701 Cowan Avenue, Suite 200
Irvine, CA 92614
Attention: Asset Management
Section 11.3 Attorneys’ Fees. If either Party fails to perform any of its obligations under this Agreement, or if any dispute arises between the Parties concerning the meaning or interpretation of any provision hereof, then the prevailing Party in any proceeding in connection with such dispute shall be entitled to the costs and expenses it incurs on account thereof and in enforcing or establishing its rights hereunder.
Section 11.4 Waivers; Modification. No waiver of any breach of any covenant or provision of this Agreement shall be deemed a waiver of any other covenant or provision hereof, and no waiver shall be valid unless in writing and executed by the waiving Party. An extension of time for performance of any obligation or act shall not be deemed an extension of the time for performance of any other obligation or act, and no extension shall be valid unless in writing and executed by the Party granting the extension. This Agreement may be amended or modified only by a written instrument executed by the Parties.
Section 11.5 Binding on Successors. Subject to the restrictions on transfers set forth in Article VII, this Agreement shall bind and inure to the benefit of the Parties and their respective permitted successors and assigns. Any reference in this Agreement to a specifically named Party shall be deemed to apply to any permitted successor and assign of such Party who has acquired an interest in compliance with this Agreement or under law.
Section 11.6 Survival. All representations made by Developer hereunder shall survive until the earlier of the Close of Escrow or the termination of this Agreement. Developer’s indemnity and defense obligations hereunder, and all other provisions that expressly so state, shall survive the expiration or termination of this Agreement.
Section 11.7 Interpretation; Statutory References. The Parties acknowledge that this Agreement is the product of negotiation and compromise on the part of both Parties, and the Parties agree, that since both Parties have participated in the negotiation and drafting of this Agreement, this Agreement shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it. All references in the City Documents to particular statutes, regulations, ordinances or resolutions of the United States, the State of California, or the City of Brea shall be deemed to include the same statute, regulation, 25 ordinance or resolution as hereafter amended or renumbered, or if repealed, to such other provisions as may thereafter govern the same subject. Unless otherwise indicated, references to “Section __” shall refer to provisions of this Agreement. The terms “include,” “includes” and “including” are non-exhaustive. The term “shall” is mandatory and the term “may” is permissive.
Section 11.8 Action or Approval. Whenever action and/or approval by City is required under this Agreement, the City Manager or his or her designee may act on and/or approve such matter unless specifically provided otherwise, or unless the City Manager determines in his or her discretion that such action or approval requires referral to the City Council for consideration.
Section 11.9 City Attorney Authority. Prior to execution by City, without further review and approval by the City Council, the City Attorney may make non-monetary revisions to the City Documents as necessary or appropriate to protect City’s interests and facilitate the contemplated transactions. For purpose of this Section, “non-monetary” means a revision that does not have a financial impact on City.
Section 11.10 Entire Agreement. This Agreement (including the attached Exhibits), together with the other City Documents, contain the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all prior written or oral agreements, understandings, representations or statements between the Parties with respect to the subject matter hereof. If the Exhibits to this Agreement are inconsistent with this Agreement, the more restrictive requirements shall control, as reasonably determined by the City Manager. In the event of a conflict between this Agreement and the other City Documents, the more restrictive requirements shall control, as reasonably determined by the City Manager.
Section 11.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which taken together shall constitute one instrument. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto having additional signature pages executed by the other Party. Any executed counterpart of this Agreement may be delivered to the other Party by facsimile or electronic mail and shall be deemed as binding as if an originally signed counterpart was delivered.
Section 11.12 Severability. If any term, provision, or condition of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall continue in full force and effect unless an essential purpose of this Agreement is defeated by such invalidity or unenforceability.
Section 11.13 No Third-Party Beneficiaries. Nothing contained in this Agreement is intended to or shall be deemed to confer upon any person, other than the Parties and their respective successors and assigns, any rights or remedies hereunder.
Section 11.14 Parties Not Co-Venturers; Independent Contractor; No Agency Relationship. Nothing in this Agreement is intended to or shall establish the Parties as partners, co-venturers, or principal and agent with one another. The relationship of Developer and City is and shall remain solely that of a debtor and a creditor (or landlord and tenant, under the Ground Lease), and shall not be construed as a joint venture, equity venture, partnership or any other 26 relationship. City neither undertakes nor assumes any responsibility or duty to Developer (except as expressly provided in this Agreement) or to any third party with respect to the Project or the City financing described herein. Developer and its employees are not employees of City but rather are, and shall always be, considered independent contractors. Furthermore, Developer and its employees shall at no time hold themselves out as employees or agents of City. Developer shall not have any authority to act as an agent of City or to bind City to any obligation.
Section 11.15 Time of the Essence; Calculation of Time Periods. Time is of the essence for each condition, term, obligation and provision of this Agreement. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is not a business day, in which event the period shall run until the next business day. The final day of any such period shall be deemed to end at 5:00 p.m., local time at the Property. For purposes of this Agreement, a “business day” means a day that is not a Saturday, Sunday, a federal holiday or a state holiday under the laws of the State of California.
Section 11.16 Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to principles of conflicts of laws. Any action to enforce or interpret this Agreement shall be filed and heard in the Superior Court of Orange County, California or in the Federal District Court for the Southern District of California.
Section 11.17 Political Activity. None of the funds, materials, property or services contributed by City to Developer under this Agreement shall be used for any partisan political activity or the election or defeat of any candidate for public office.
Section 11.18 Non-Liability of City Officials, Employees and Agents. No member, official, employee or agent of the City shall be personally liable to Developer in the event of any default or breach by the City or for any amount which may become due to the Developer or its successor or on any obligation under the terms of this Agreement.
Section 11.19 Conflict of Interest.
11.19.1 Except for approved eligible administrative or personnel costs, no person described in subsection 11.19.2 below who exercises or has exercised any functions or responsibilities with respect to the activities funded pursuant to this Agreement or who is in a position to participate in a decision-making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from the activity, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during, or at any time after, such person’s tenure. Developer shall exercise due diligence to ensure that the prohibition in this Section is followed.
11.19.2 In accordance with Government Code Section 1090 and the Political Reform Act (Government Code Section 81000 et seq.), no person who is a director, officer, employee or consultant of the City or a City board, commission or committee, or immediate family 27 member of any of the preceding, shall make or participate in a decision, made by any of such entities, if it is reasonably foreseeable that the decision will have a material effect on any source of income, investment or interest in real property of that person.
IN WITNESS WHEREOF, the Parties have entered into this Agreement effective as of the date first written above.
CITY:
CITY OF BREA,
a municipal corporation
By:_________________________________
Bill Gallardo, City Manager
Attest:
_________________________________
Lillian Harris-Neal, City Clerk
APPROVED AS TO FORM:
_________________________________
Terence Boga, City Attorney
DEVELOPER:
JHC-ACQUISITIONS LLC,
a California limited liability company
By:Jamboree Housing Corporation,
a California nonprofit public benefit
corporation
By: __________________________________
Michael Massie, Chief Development
Officer
28 [Page intentionally blank]
Exhibit A-1
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
(Attached)
Exhibit A-2
[Page Intentionally Blank]
Exhibit B-1
EXHIBIT B
PRE-CLOSING SCHEDULE
(INCLUDING CLOSING DEADLINE)
Opening Escrow 30 days after tax credits are awarded
Delivery of Draft Property
Management Plan and Draft
Residential Marketing &
Leasing Plan
Prior to Closing
Execution and Delivery of
Construction Contract, and
delivery to City of all other
Developer deliverables
required as a condition to
Closing
Prior to Closing
Evidence of Financing Developer shall use its commercially reasonable efforts to obtain, by the earliest reasonable date, financing for the Project and shall apply for federal Tax Credits with the California Tax Credit Allocation Committee (“CTCAC") in successive rounds through and including, as necessary, each round prior to the Closing Deadline
Entitlements/Permits Prior to Closing (fees may be paid through escrow at Closing) Closing Deadline Three (3) years following the Effective Date.
Exhibit B-2
[Page Intentionally Blank]
Exhibit C-1
EXHIBIT C
FORM OF CITY PROMISSORY NOTE
(Attached)
Exhibit C-2
[Page Intentionally Blank]
Exhibit C-3
SECURED PROMISSORY NOTE
(City Loan)
________________, 2024
$$4,457,483.00 Brea, California
FOR VALUE RECEIVED, _______________, L.P., a California limited partnership (the “Maker”), having an address of 17701 Cowan Avenue, Suite 200, Irvine, CA 92614, promises to pay the CITY OF BREA, or order (“Holder”), the initial principal sum of FOUR MILLION FOUR HUNDRED FIFTY-SEVEN__________________THOUSAND FOUR HUNDRED EIGHTYTHREE DOLLARS AND NO/100 ($4,457,483.00), which has already been disbursed to Maker, with simple interest at the rate of _____ Percent (_%) per annum on all principal from and after the date it is disbursed. As of the date of this Note, the outstanding principal balance hereof is $_______________.00.
1. DDLA; Construction Loan; Disbursements of Principal. a. This Note is made pursuant to Section 4.1 of that Disposition, Development and Loan Agreement dated as of _____________, 2024 (the “DDLA”) between Holder and Maker.
All capitalized terms not otherwise defined herein shall have the meaning set forth in the DDLA. b. Disbursements of the principal of this Note shall be made in accordance with and subject to Section 4.2.1 of the DDLA.
c. Pursuant to the DDLA, Maker and Holder have entered into a ground lease (“Ground Lease”) under which Maker has acquired a ground leasehold interest in that certain real property defined in the DDLA as the “Property”, and will construct on the Property a multi-family residential project (the “Project”) consisting of thirty-nine (39) residential units (the “Units”), as described in the Ground Lease.
2. Security for Note.
The obligations of Maker under this Note to pay principal and interest are secured by a leasehold deed of trust, assignment of rents, security agreement and fixture filing (the “Deed of Trust”) from Maker to Holder encumbering Maker’s interest under the Ground Lease and, among other things, Maker’s interest in the improvements and fixtures now existing or hereafter constructed upon the Property. Payment of this Note is also secured by an Assignment of Architects/Engineers Agreements and Plans and Specifications, with Consents executed by Maker in favor of Holder (“Assignment”).
3. Payments; Mandatory Prepayment; Maturity Date.
a. Payment shall be made in lawful money of the United States to Holder at 1 Civic Center Circle, Brea, CA 92821, Attention: City Manager. The place of payment may be changed from time to time as the Holder may from time to time designate in writing.
Exhibit C-4
b. Within 10 business days after Maker’s limited partner pays its capital contribution following issuance of the IRS Form 8609 for the Project, Maker shall pay to Holder as a prepayment and reduction of the outstanding principal balance of this Note, a one-time payment in the amount of 50% of the Excess Proceeds; provided, however, that if other public agency construction lenders require payment of Excess Proceeds, then Excess Proceeds shall be payable to Holder and such other public agencies pro rata in proportion to their initial maximum loan amounts for the Project.
c. As used in the preceding paragraph, the term “Excess Proceeds” shall mean the sum of all sources of funding received by Maker to finance the operation of the Property or the construction of the Project, less the sum of actual uses of such funding for the Project, as shown by reasonable evidence delivered to Holder. For the purpose of calculating Excess Proceeds, Project sources of funding shall include any net rental income received prior to the date that the Project’s conventional construction loan (excluding the City Loan) converts to a permanent loan, and any deferred developer fee, and shall take into consideration any reduction or increase in equity contributions by the limited partner.
d. Additionally, periodic payments of interest and principal shall be made to Holder from “Holder’s Pro-Rata Share” of “Surplus Cash”, defined in Section 4 below, except as otherwise provided in the last two paragraphs of Section 4 below with respect to “Excess Proceeds”.
e. To the extent there is Surplus Cash available from the Project, Maker shall pay to Holder, on an annual basis, payments of Holder’s Pro-Rata Share of all such Surplus Cash (as defined below). The first payment under this Note shall be due on the first August 1 after the earlier of (i) six months after the issuance of a certificate of occupancy for any portion of the Project or (ii) closing of permanent financing for the Project as determined in good faith by Holder. Each subsequent payment shall be due on August 1 of each calendar year thereafter. f. Any unpaid principal amount owing from year to year shall continue to accrue interest. All payments made hereunder shall be credited first to any accrued but unpaid interest, then to current interest due and owing and lastly to principal. Interest not paid current shall accrue and shall not be compounded.
g. Notwithstanding the foregoing, the entire outstanding balance of principal and interest owing under this Note shall be due and payable on the date that is fifty-five (55) years from the date hereof.
4. Definitions of Holder’s Pro-Rata Share; Surplus Cash; and Excess Refinancing Proceeds.
a. The term “Holder’s Pro-Rata Share” shall mean ______________ percent (__%). [This percentage is fifty percent (50%), divided by (ii) a fraction, the numerator of which is the maximum principal amount of the loan evidenced by this Note, and the denominator of which is the sum of the maximum principal amounts of all loans to Maker by governmental entities that are secured by Maker’s interest in the Project and which are construction loans Exhibit C-5
for the Project, and on which are to be made by payments from a percentage of “Surplus Cash” (calculated the same way as the percentage payable to Holder)].
b. The term “Surplus Cash” shall mean the sum of money computed on a 12 month basis based on the Maker’s fiscal year (which is January 1 to December 31) as follows:
All rents, revenues, consideration or income (of any form) derived by Maker in connection with or relating to the ownership or operation of the Project, including any Excess Refinancing Proceeds (hereinafter defined) derived from any refinancing of the Project but excluding initial loan proceeds, insurance proceeds and partner capital contributions and also excluding all of the following: (i) all customary and reasonable costs and expenses in connection with the operation and maintenance of the Project; (ii) a property management fee in the amount of $_____________, adjusted annually by
3.5%, beginning on the first anniversary date of this Note; (iii) principal and interest paid by Maker on account of any loan(s) or other obligations approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed) (but not payments based on Surplus Cash, residual receipts, net cash flow or similar payments on loans); (iv) amounts (previously approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed)) expended to restore the Project after a casualty loss or condemnation; (v) reasonable and customary cost for accounting and auditing the books and records of the Project; (vi) an administrative or asset management fee charged by a tax credit investment partner not to exceed $__________ adjusted annually by 3%; (vii) any deferred developer fee (where such deferred developer fee was previously approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed)); (viii) a management fee (“Partnership Management Fee”) not to exceed $___________ (which amount may be adjusted annually by 3%, beginning on the first anniversary date of this Note and on each anniversary thereafter) ; such Partnership Management Fee is paid to the general partner for performing its general partnership duties, including but not limited to reviewing the monthly operating budget; overseeing the performance of the property manager; meetings, coordination and conflict resolution with the adjacent property owner; review and approval of the annual operating budget; prepare, review and approval of annual partnership reports; review and approval of tax returns; coordination with the investor limited partner; and resolution of miscellaneous issues normally associated with the ownership and operation of multi-family housing; (ix) salary and benefit costs for the social services staff personnel accounted for in the annual operating budget, to serve the residents and tenants of the Project, in an amount of $__________, adjusted annually by 3%, beginning on the first anniversary date of this Note; (x) amounts (previously approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed), or as required by any senior lender or the investor limited partner)) reserved by Maker as an Exhibit C-6
operating contingency reserve account and a replacement reserve account (and deposited in an account approved by Holder (such approval not to be unreasonably withheld, conditioned or delayed)) and any other reserves required by the tax credit investment partner or other senior financing secured for the Project, or included in the annual operating budget approved by Holder; (xi) any adjuster payments to the investor limited partner required under Maker’s partnership agreement; (xii) payment of principal or interest on any indebtedness of Maker to any affiliate of Maker (individual or entity) or partner of Maker to repay completion and/or operating deficit loans relating to the Project; (xiii) reasonable and customary professional fees for legal and similar customary administrative expenses; (xiv) taxes; and (xv) franchise tax filing fees. c. The following shall not be deductions in the calculation of Surplus Cash, and will be payable from Maker’s share of residual receipts: (i) any incentive management fee, (ii) any amount in excess of the permitted partnership management fee and asset management fee, (iii) contributions to reserve accounts in excess of the amounts specified above unless required by any senior lender or the investor limited partner, (iv) expenses paid with withdrawals from reserve accounts, (v) distributions to partners, and (vi) depreciation, amortization, depletion, and other non-cash expenses.
d. The term “Excess Refinancing Proceeds” used in the definition of Surplus Cash above shall mean refinancing proceeds less (a) the amount of the repayment of the refinanced debt, (b) all reasonable out-of-pocket costs and expenses paid by Maker to third parties in obtaining such refinancing, (c) all costs and expenses paid by Maker for all capital improvements to the completed Project completed by Maker in accordance with the terms of any senior loan documents or consented to in writing by Holder for which Maker’s funds and not loan or grant funds are used (and for purposes of this clause (c), such costs may include, without limitation, reasonable architects’ and engineers’ fees and other reasonable “soft” costs relating to the making of such permitted capital improvements), (d) any amounts required to be paid to any senior lender in connection with such refinancing, and (e) the amount by which the Maker’s increases its reserves for the Project as a condition imposed by the refinancing lender.
5. Reporting; Annual Statements; Annual Budget; Audit Rights. a. Maker shall deliver annual income/expense statements showing all revenues and expenses of the Project, on a line item basis. An audited income statement shall be delivered by August 1 following each calendar year along with payment of the Surplus Cash. Holder shall have the right to inspect and audit Maker’s books and records concerning the calculation of Surplus Cash. If Holder does object, Holder shall specify the reasons for disapproval. Maker shall have 30 days to reconcile any disapproved item. If Maker and Holder cannot agree on the amount of the Surplus Cash, an independent auditor mutually selected by Holder and Maker shall resolve any disputed items, If the independent auditor determines that Maker’s statement underreported the amount of the Residual Receipts by more than 3%, the cost of the auditor shall be paid solely by Maker. If the independent auditor determines that Maker’s statement did not underreport the amount of the Residual Receipts, the cost of the auditor shall be paid solely by Holder. Except in Exhibit C-7
the event that Maker or Holder are solely responsible for the costs of the auditor pursuant to one of the foregoing sentences, the cost of the auditor shall be shared equally by Maker and Holder. b. Maker shall prepare and submit to Holder a proposed annual operating budget for the management and operation of the Project for the following calendar year by no later than December 1 of each year until this Note is paid in full. The proposed budget shall include a line item showing the projected Surplus Cash from the Project for the year. Holder will review the proposed budget and, if reasonably acceptable, approve it in writing, which approval shall not be unreasonably withheld, conditioned or delayed. If the budget is not acceptable, Holder shall specify the reasons for disapproval. The intent of this paragraph is to provide Holder an opportunity to disapprove any unreasonable expenses which would diminish the Surplus Cash from the Project.
Once approved, any changes to any budget line item relating to discretionary items which exceed ten percent (10%) Of the line item shall require Holder’s prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed.
6. Holder Rights to Accelerate Maturity Date.
Notwithstanding anything to the contrary provided herein, Holder may elect that the entire unpaid principal of this Note and accrued interest thereon shall be due and payable if: (i) an Event of Default (as defined in the Ground Lease) by Maker (as the tenant under the Ground Lease) occurs under the Ground Lease; or (ii) Maker or any successor-in-interest or assignee is in default under this Note, or the Deed of Trust securing this Note, or under the Affordable Housing Covenant, and such default is not cured within 30 days after written notice from Holder to Maker (provided that if Maker promptly commences the cure of a non-monetary default, then Maker shall not be in default so long as Maker diligently prosecutes it to completion).
7. Limited Partner Cure Rights.
Holder shall also deliver a copy of all default notices under this Note to Maker’s limited partner __________________at ______________________. Any partner of Maker shall have the right to cure any default within the applicable cure periods set forth above, whether in its own capacity or on behalf of Maker, and Holder shall accept such cure as if tendered by Maker.
However, failure by Holder to deliver such notice to Maker’s limited partner shall not be a default by Holder.
8. Maker Covenants to Comply with Affordable Housing Covenant and Ground Lease.
Maker hereby covenants and agrees that it shall comply with the Ground Lease and the Affordable Housing Covenant, including the provisions of the ground lease relating to maintenance and repair of the Project, subject to any applicable notice of default and any applicable cure period thereunder.
9. No Waiver by Holder; Remedies Cumulative.
Holder’s failure or delay in the exercise of any right or remedy hereunder or under any the Deed of Trust, Assignment, Ground Lease or Affordable Housing Agreement shall not waive or otherwise affect any right or remedy, and all remedies shall be cumulative to the extent permitted by law.
Exhibit C-8
10. Default Interest Rate.
At all times when Maker is in default hereunder by reason of Maker’s failure to pay principal due under this Note or any amounts due under any loan documents securing this Note, the interest rate on the sums as to which Maker is in default (including principal, if Holder has elected to declare it immediately due and payable), shall be the lower of: (i) the highest rate then allowed by law or (ii) 2% over the prime interest rate announced by Wells Fargo Bank, N.A., as of the date of the default.
11. Maker Waivers.
Maker and any endorsers hereof and all others who may become liable for all or any part of this obligation, severally waive presentment for payment, demand and protest and notice of protest, and of dishonor and nonpayment of this Note, and expressly consent to any extension of the time of payment hereof or of any installment hereof, to the release of any party liable for this obligation, and any such extension or release may be made without notice to any of said parties and without any way affecting or discharging this liability.
12. Holder Costs, Expenses.
Maker agrees to pay immediately upon demand all costs and expenses of Holder including reasonable attorneys’ fees, (i) if after default (following Holder’s written notice of such default and expiration of the applicable cure period) this Note be placed in the hands of an attorney or attorneys for collection, or (ii) if after a default hereunder or under the Deed of Trust, the Assignment, the Ground Lease, or the Affordable Housing Agreement (following Holder’s written notice of such default and expiration of the applicable cure period), Holder finds it necessary or desirable to secure the services or advice of one or more attorneys with regard to collection of this Note against Maker, any guarantor or any other party liable therefor or to the protection of its rights under this Note, the Deed of Trust, Assignment, the Ground Lease or other loan document.
13. Notices.
Any notices provided for in this Note shall be given in accordance with the notices provision of the Ground Lease.
14. Applicable Law.
This Note shall be construed in accordance with and be governed by the laws of the State of California.
15. Severability.
If any provision of this Note shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby.
Exhibit C-9
16. Nonrecourse.
This Note is a nonrecourse obligation of Maker and Maker’s partners, and the Holder must resort only to the Project or Maker’s leasehold interest in the Property, or both, for repayment should Maker fail to repay the sums evidenced hereby. Neither Maker nor any of its general and limited partners shall have any personal liability for repayment of the City Loan and no deficiency judgment may be obtained against Maker or any of its general and limited partners except for actual or constructive fraud or intentional material misrepresentation.
MAKER:
Exhibit C-10
[Page Intentionally Blank]
Exhibit D-1
11222-0116\2935138v9.doc
EXHIBIT D
FORM OF DEED OF TRUST
(Attached)
Exhibit D-2
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit D-3
11222-0116\2935138v9.doc
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Brea
1 Civic Center Circle
Brea, CA 92821
Attn: City Clerk
This document is exempt from recording fees pursuant
to Government Code § 27383.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
LEASEHOLD DEED OF TRUST, ASSIGNMENT OF
RENTS, SECURITY AGREEMENT AND FIXTURE FILING
(CITY LOAN)
This LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING, together with the Addendum to Leasehold Deed of Trust attached hereto as Exhibit “B” and made a part hereof (the “Leasehold Deed of Trust”), is dated as of _____________, and is executed and delivered by _________ , L.P., a California limited partnership, whose address is 17701 Cowan Avenue, Suite 200, Irvine, CA 92614 (“Trustor”), to and in favor of the CITY OF BREA, whose address is 1 Civic Center Circle, Brea, CA 92821 (“Trustee”) and for the benefit of CITY OF BREA, whose address is 1 Civic Center Circle, Brea, CA 92821 (“Beneficiary”).
Trustor, as tenant, and Beneficiary, as landlord, have entered into a Ground Lease dated substantially concurrently herewith (including any future amendments, the “Ground Lease”) evidenced by a Memorandum of Ground Lease recorded in the Official Records of Orange County, California, substantially concurrently herewith, under which Trustor has acquired a leasehold estate in real property on which Trustor is constructing a low income affordable housing development. The loan from Beneficiary to Trustor secured by this Deed of Trust is a construction and development loan (which in effect becomes a long term permanent loan upon completion of the improvements). Other lenders may obtain security interests (by virtue of leasehold deeds of trust) in the Trustor’s interest under the Ground Lease, and this Deed of Trust may be subordinated to one or more of such other deeds of trust by virtue of recorded subordination agreements executed by Beneficiary and such other lender(s).
Trustor irrevocably grants, conveys, transfers and assigns to Trustee in trust, with power of sale and right of entry and possession, all of Trustor’s estate, right, title and interest in, to and under the Ground Lease, the following property (collectively, the “Property”): (a) the land in Orange County, California described on Exhibit “A” attached hereto, together with all existing and future easements and rights affording access to it (the “Land”), (b) together with all buildings, structures and improvements now existing or hereafter constructed thereon (the “Improvements”), (c) together with all articles of personal property now or hereafter attached to, placed upon for an indefinite term, or used in connection with the Land and/or Improvements, Exhibit D-4
11222-0116\2935138v9.doc
together with all goods and other property, including such personal property that is, or at any time becomes, so related to or installed on or attached to the Property that an interest in them arises under real estate law, or they are otherwise adjudged to be a “fixture” under applicable law (each a “Fixture,” collectively “Fixtures”), (d) together with all other property and interests of any kind or character which may be reasonably necessary or desirable to promote the present and future beneficial use and enjoyment of such real property and improvements.
1. Secured Obligations. Trustor makes the grant, conveyance, transfer and assignment herein for the purpose of securing the following obligations (the “Secured Obligations”): (a) payment of the sum of $4,457,483, which is evidenced by a promissory note (the “Note”) of substantially even date herewith in such amount, executed by Trustor in favor of Beneficiary or order and any extension or other modifications thereof; (b) payment of such further sums as the then record owner of the Property may borrow from Beneficiary, when evidenced by a promissory note or notes reciting that they are secured by this Leasehold Deed of Trust; and (c) performance by Trustor of the terms of this Leasehold Deed of Trust.
2. Maintenance and Repair. Trustor shall maintain and repair the Property in accordance with the terms of the Ground Lease.
3. Insurance. Trustor shall maintain the insurance required by Ground Lease.
4. Defense of Security. Trustor shall appear in and defend any action or proceeding purporting to affect the security or the rights or powers of Beneficiary or Trustee. Trustor shall pay all costs and expenses, including costs of evidence of title and attorneys’ fees, in any such action or proceeding in which Trustee or Beneficiary may appear, and in any suit brought by Beneficiary to foreclose this Leasehold Deed of Trust.
5. Payment of Taxes and Liens. Trustor shall pay all property taxes (including possessory interest taxes) and assessments affecting the Property in accordance with the Ground Lease.
Trustor shall pay, when due, all encumbrances, charges and liens, with interest, on the Property, which are or appear to be prior or superior to this Leasehold Deed of Trust, and upon demand all costs, fees and expenses of this Leasehold Deed of Trust. If Trustor fails to make any payment or to do any act provided for in this Leasehold Deed of Trust, then Beneficiary or Trustee may, without obligation to do so, and with or without notice to or demand upon Trustor, and without releasing Trustor from any obligation under this Leasehold Deed of Trust: (a) make or do the same in such manner and to such extent as either may deem necessary to protect the security, Beneficiary or Trustee being authorized to enter upon the Property for such purposes; (b) appear in or commence any action or proceeding purporting to affect the security, or the rights or powers of Beneficiary or Trustee; (c) pay, purchase, contest or settle any encumbrance, charge or lien which in the judgment of either appears to be senior to this Leasehold Deed of Trust; and (d) in exercising any such powers, pay allowable expenses, including attorneys’ fees.
6. Reimbursement of Costs. Trustor shall pay upon demand all sums expended by Beneficiary or Trustee provided for in this Leasehold Deed of Trust or allowed by law, with interest from date of expenditure at the default interest rate provided in the Note.
Exhibit D-5
11222-0116\2935138v9.doc
7. No Waiver. By accepting payment of any sum after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums or declare a default for failure to pay.
8. Reconveyance. That upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Leasehold Deed of Trust and said note or notes to Trustee for cancellation and retention or other disposition as Trustee in its sole discretion may choose and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals of such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as “the person or persons legally entitled thereto.”
9. Assignment of Rents. Trustor hereby absolutely and unconditionally assigns to Beneficiary all of the rents, issues, profits, royalties, revenues, income and other benefits (collectively, the “Rents”) derived from the Property, whether now due, past due or to become due, and hereby gives to and confers upon Beneficiary, either directly or through a receiver, the right, power and authority, but not the obligation, to collect the Rents, and to sue, either in the name of Trustor or Beneficiary, for all such Rents and to apply the same to the indebtedness secured hereby in such order as Beneficiary may determine in its sole discretion. This assignment of Rents is intended to create and shall be construed to create an absolute assignment to Beneficiary of all of Trustor’s right, title and interest in the Rents; provided that notwithstanding the foregoing, so long as no default exists by Trustor in the payment of any indebtedness secured hereby, or in any other covenant contained herein, or in said note or notes or in any other document evidencing or securing such indebtedness, Trustor shall have the right to collect all Rents from the Property and to retain, use and enjoy the same. Upon the occurrence of such a default (following written notice by Beneficiary and expiration of any applicable cure period), without the necessity of demand or further notice to Trustor or any other act to enforce Beneficiary’s interest pursuant to this assignment, Trustor shall have no interest whatsoever in the Rents that are received by Trustor after a default, and all such Rents shall be received and held by Trustor in constructive trust for Beneficiary and delivered promptly to Beneficiary, or to a court appointed receiver for the Property, without the necessity for further notice to, or demand upon, Trustor. Upon the occurrence of such a default and at any time thereafter during the continuance thereof, Beneficiary may, at its option, send any tenant of the Property a notice to the effect that: (a) a default has occurred; (b) Beneficiary has elected to exercise its rights under this assignment; and (c) such tenant is thereby directed to thereafter make all payments of Rents to or for the benefit of Beneficiary or as Beneficiary shall direct. Any such tenant shall be entitled to rely upon any notice from Beneficiary and shall be protected with respect to any payment of Rents made pursuant to such notice, irrespective of whether a dispute exists between Trustor and Beneficiary with respect to the existence of a default or the rights of Beneficiary hereunder. Any such tenant shall not be required to investigate or determine the validity or accuracy of such notice or the validity or enforceability of this assignment. Trustor hereby agrees to indemnify, defend and hold any such tenant harmless from and against any and all losses, claims, damages or liabilities arising from or related to any payment of Rents by such tenant made in reliance on and pursuant to such notice.
10. Default and Foreclosure. Upon default by Trustor in payment or performance of any Secured Obligation, following written notice by Beneficiary and subject to any applicable cure period, Beneficiary may declare all sums secured immediately due and payable by delivery to Exhibit D-6
11222-0116\2935138v9.doc
Trustee of a declaration of default and demand for sale and of a notice of default and of a notice of sale, which notice Trustee shall cause to be filed for record. Beneficiary also shall deposit with Trustee this Leasehold Deed of Trust, said note or notes and all documents evidencing expenditures secured by this Leasehold Deed of Trust. Upon default of any obligation secured by this Leasehold Deed of Trust and acceleration of all sums due, Beneficiary may instruct Trustee to proceed with a sale of the Property under the power of sale granted in this Leasehold Deed of Trust, noticed and held in accordance with California Civil Code Sections 2924, et seq., as such statutes may be amended from time to time. Trustor waives all rights it may have to require marshaling of assets or to require sales of assets in any particular order, including any rights under California Civil Code Sections 2899 and 3455.
11. Substitution of Trustee. Beneficiary, or any successor in ownership of any indebtedness secured hereby, may from time to time, by instrument in writing, substitute a successor or successors to any Trustee named herein or acting hereunder, which instrument executed by the Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Property is situated, shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the Trustee predecessor, succeed to all its title, estate, rights, powers and duties. Said instrument must contain the name of the original Trustor, Trustee and Beneficiary hereunder, the book and page where this Leasehold Deed of Trust is recorded and the name and address of the new Trustee.
12. Successors and Assigns. This Leasehold Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. The term “Beneficiary” shall mean the owner and holder, including pledgees, of the secured note or notes, whether or not named as Beneficiary herein.
13. Trustee Acceptance. Trustee accepts this trust when this Leasehold Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other Leasehold Deed of Trust or of any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party unless brought by Trustee.
14. Further Assurances. Trustor shall, at its own cost and expense, do, execute, acknowledge, and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignments, transfers, and assurances as Trustee or Beneficiary shall from time to time reasonably require, for better assuring, conveying, assigning, transferring, and confirming unto Trustee the Property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which Trustor may be or may hereafter become bound to convey or assign to Trustee, or for carrying out the intention or facilitating the performance of the terms of this Leasehold Deed of Trust, or for filing, registering, or recording this Leasehold Deed of Trust. Trustor shall, on demand, execute and deliver, one or more financing statements, chattel mortgages, or comparable security instruments, to evidence more effectively the lien hereof. Immediately upon the execution and delivery of this Leasehold Deed of Trust, and thereafter from time to time, Trustor shall cause this Leasehold Deed of Trust, and any security instruments creating a lien or evidencing the lien hereof upon any personal property and each instrument of further assurance, to be filed, registered, or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien hereof upon, and the title of Trustee to, the Property encumbered hereby.
Exhibit D-7
11222-0116\2935138v9.doc
15. Condemnation and Insurance Proceeds. Trustor shall comply with the Ground Lease with respect to condemnation and insurance proceeds.
16. Severability. If any one or more of the provisions contained in this Leasehold Deed of Trust shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Leasehold Deed of Trust, but this Leasehold Deed of Trust shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein or therein, but only to the extent of such invalidity.
17. Estoppel Certificates. Trustor shall, within 10 days of a written request from Beneficiary from time to time, furnish Beneficiary with a written statement, duly acknowledged, setting forth the sums secured by this Leasehold Deed of Trust and any right of set off, counterclaim or other defense which exists against such sums and the obligations of this Leasehold Deed of Trust.
18. California Uniform Commercial Code Security Agreement; Fixture Filing. Trustor hereby grants Beneficiary a security interest in all personal property of Trustor located on the Property and wherever located and used in any way in connection with or in any way relating to the Property, and whether now owned or hereafter in existence, acquired or created (including equipment, inventory, goods, documents, instruments, general intangibles, chattel paper, accounts, accounts receivable, deposit accounts and contract rights), and all fixtures of Trustor now owned or hereafter in existence, acquired or created on, of or relating to the Property, and all substitutions, replacements, additions, accessions and proceeds (including insurance proceeds) of all of the foregoing (collectively, the “Personal Property”). Beneficiary may file this Leasehold Deed of Trust, or a reproduction hereof, in the real estate records or other appropriate index, as a financing statement for the Personal Property. Any reproduction of this Leasehold Deed of Trust or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Trustor shall execute and deliver to Beneficiary, upon Beneficiary’s request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Leasehold Deed of Trust in such form as Beneficiary may reasonably require to perfect a security interest with respect to the Personal Property. Trustor shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Beneficiary may reasonably require. With the exception of security interests created to finance the development and/or operation of the Property, without the prior written consent of Beneficiary, Trustor shall not create or suffer to be created pursuant to the California Uniform Commercial Code any other security interest in the Personal Property. Upon Trustor’s material breach of any covenant or agreement of Trustor contained in this Leasehold Deed of Trust that materially and adversely impacts Beneficiary, including the covenants to pay when due all sums secured by this Leasehold Deed of Trust, Beneficiary shall have the remedies of a secured party under the California Uniform Commercial Code and, at Beneficiary’s option, may also invoke any remedies provided in this Leasehold Deed of Trust as to the Personal Property. In exercising any of such remedies, Beneficiary may proceed against the Property and any of the Personal Property separately or together and in any order whatsoever, without in any way affecting the availability of Beneficiary’s remedies under the California Uniform Commercial Code or the remedies provided in the Leasehold Deed of Trust. This Leasehold Deed of Trust also covers goods which Exhibit D-8
11222-0116\2935138v9.doc
are or which are to become fixtures on the Property and constitutes and is filed as a fixture filing under the California Uniform Commercial Code.
19. Due On Sale or Encumbrance. If all or any part of the Property, or any interest therein, or any interest in Trustor (if Trustor is not a natural person or persons but is a corporation, partnership, trust, limited liability company or other legal entity), is sold, transferred, mortgaged, assigned, pledged, or further encumbered, whether directly or indirectly, whether voluntarily or involuntarily or by operation of law, except as expressly permitted by the Ground Lease, Beneficiary may, at Beneficiary’s option, declare all of the sums secured by this Leasehold Deed of Trust to be immediately due and payable, and Beneficiary may invoke any remedies permitted by this Leasehold Deed of Trust.
The undersigned Trustor requests that a copy of any Notice of Default and of any Notice of Sale hereunder be mailed to Trustor at Trustor’s address hereinbefore set forth.
TRUSTOR:
Exhibit D-9
11222-0116\2935138v9.doc
State of California )
County of ______________ )
On ____________________________, before me, ______________________________, (insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature____________________________ (Seal)
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
Exhibit D-10
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit D-11
11222-0116\2935138v9.doc
Exhibit “A” to Deed of Trust
LEGAL DESCRIPTION
(Attached)
Exhibit D-12
11222-0116\2935138v9.doc
[Page intentionally Blank]
Exhibit D-13
11222-0116\2935138v9.doc
Exhibit “B” to Deed of Trust
ADDENDUM TO LEASEHOLD DEED OF TRUST
(Attached)
Exhibit D-14
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit D-15
11222-0116\2935138v9.doc
ADDENDUM TO LEASEHOLD DEED OF TRUST
This Addendum to the Leasehold Deed of Trust is part of the Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (“Leasehold Deed of Trust”) dated as of ________________, 2024, between _________ , L.P., as Trustor, and the CITY OF BREA, as Beneficiary. The following provisions are made a part of the Leasehold Deed of Trust:
1. No Discrimination.
a. The Trustor covenants by and for itself, its heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the California Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the California Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the premises herein conveyed, nor shall the Trustor himself or herself, or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed.
b. Notwithstanding the immediately preceding paragraph, with respect to familial status, said paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the California Government Code. With respect to familial status, nothing in said paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the California Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the California Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the California Government Code shall apply to said paragraph. c. All deeds, leases or contracts made relative to the Property, the improvements thereon or any part thereof, shall contain or be subject to the nondiscrimination clauses set forth in California Health and Safety Code Section 33436.
2. Hazardous Substances.
a. As used in this Section, the following terms shall have the following meanings:
i. Environmental Laws” means all federal, state and local statutes, ordinances, orders, rules, regulations, or governmental directives and any other requirements of governmental authorities with jurisdiction over the Property or Project now or hereafter in effect relating to (A) Hazardous Substance Activity or Hazardous Substances; (B) the generation, use, storage, transportation or disposal of Hazardous Substances, or solid waste; or (C) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health, safety or welfare, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.) (“CERCLA”); the Hazardous Material Transportation Act (49 U.S.C. Section 180 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.); the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.); the Clean Air Act (42 U.S.C. Section 740 et seq.); Exhibit D-16
11222-0116\2935138v9.doc
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.); the Occupational Safety and health Act (29 U.S.C. Section 651 et seq.); the Safe Drinking Water Act (42 U.S.C. Section 300f etseq.); the Porter-Cologne Water Quality Control Act (California Water Code Section 13020 et seq.); the Safe Drinking Water and Toxic Enforcement Act of 1986 (California Health & Safety Code Section 25249.5 et seq.); the Hazardous Substance Account Act (California Health & Safety Code Section 25300 et seq.); the Hazardous Waste Control Act (California Health & Safety Code Section 25100 et seq.); The California Environmental Quality Act (California Public Resources Code Section 2100 et seq.); and the rules, regulations and ordinances of the City of Mill Valley or any applicable federal, state and local agencies or bureaus, as amended from time to time. ii. “Foreclosure Transfer” means the transfer of title to all or any part of the Property or the Trust Estate at a foreclosure sale under the Leasehold Deed of Trust, either pursuant to judicial decree or the power of sale contained in the Leasehold Deed of Trust, or by deed in lieu of such foreclosure.
iii. “Hazardous Substances” means:
(1) any chemical, compound, material, mixture or substance that is now or hereafter defined or listed in, or otherwise classified pursuant to, any Environmental Laws as a “hazardous substance,” “hazardous material,” “hazardous waste,” “extremely hazardous waste,” “acutely hazardous waste,” “radioactive waste,” “infectious waste,” “biohazardous waste,” “toxic substance,” “pollutant,” “toxic pollutant,” “contaminant” as well as any other formulation not mentioned herein intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, “EP toxicity” or “TCLP toxicity”;
(2) petroleum, natural gas, natural gas liquids, liquefied natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas) and ash produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas, or geothermal resources;
(3) “hazardous substance” as defined in Section 2782.6(d) of the California Civil Code;
(4) “waste” as defined in Section 13050(d) of the California Water Code; (E) asbestos in any form;
(5) urea formaldehyde foam insulation;
(6) polychlorinated biphenyls (PCBs);
(7) radon; and
(8) any other chemical, material, or substance that, because of its quantity, concentration, or physical or chemical characteristics, exposure to which is limited or regulated for health and safety reasons by any governmental authority, or which poses a significant Exhibit D-17
11222-0116\2935138v9.doc
present or potential hazard to human health and safety or to the environment if released into the workplace or the environment.
iv. “Hazardous Substance Activity” means any actual, proposed, or threatened use, storage, holding, existence, location, release (including, without limitation, any spilling, leaking, leaching, pumping, pouring, emitting, emptying, dumping, disposing into the environment, and the continuing migration into or through soil, surface water, groundwater or any body of water or the air), discharge, deposit, placement, generation, processing, construction, treatment, abatement, removal, disposal, disposition, handling, or transportation of any Hazardous Substance from, under, in, into, or on the Property, including without limitation, the movement or migration of any Hazardous Substances from surrounding property, surface water, groundwater or any body of water, or the air under, in, into or onto the Property and any residual Hazardous Substances contamination in, on, or under the Property. v. “Losses” means all charges, losses, liabilities, damages (whether actual, consequential, punitive, or otherwise denominated), costs, fees, demands, claims, actions, administrative proceedings (including informal proceedings), judgments, causes of action, assessments, fines, penalties, costs, and expenses of any kind or character, foreseeable and unforeseeable, including, without limitation, the following: (A) the reasonable fees and expenses of outside legal counsel retained by Beneficiary; (B) the reasonable fees and expenses of accountants, third-party consultants, and other independent contractors retained by Beneficiary; (C) costs, including capital, operating and maintenance costs, incurred in connection with any investigation or monitoring of site conditions or any clean-up, remedial, removal or restoration work performed by any federal, state or local governmental agency or political subdivision or by any non-governmental entity or person that is required by applicable Environmental Laws or by a governmental agency with jurisdiction over the Property or Project because of the presence, suspected presence, release or suspected release of Hazardous Substances in violation of applicable Environmental Laws in the air, soil, surface water or groundwater at the Property; and (D) reasonable costs and expenses of enforcing this Section. vi. “Environmental Losses” means Losses arising out of or occurring as a result of: (A) the occurrence of any Hazardous Substance Activity that first occurred on or after the date of this Leasehold Deed of Trust; (B) any violation of any applicable Environmental laws relating to the Property or to the ownership, use, occupancy or operation thereof occurring on or after the date of this Leasehold Deed of Trust; (C) any investigation, inquiry, order, hearing, action, or other proceeding by or before any governmental agency in connection with any Hazardous Substance Activity occurring on or after the date of this Leasehold Deed of Trust; or (D) any claim, demand or cause of action, or any action or other proceeding, whether meritorious or not, brought or asserted against any Indemnitee which directly or indirectly relates to, arises from or is based on any of the matters described in clauses (A), (B), or (C). b. Trustor represents and warrants to Beneficiary that to the best of Trustor’s knowledge, no portion of the Property will be used by Trustor for the disposal, storage, treatment, processing or other handling of Hazardous Substances, and Trustor’s intended use of the Property will not result in the disposal or release by Trustor or Trustor’s agents or representatives of any Hazardous Substances on, under, about or to the Property or the migration of any Hazardous Substances from the Property. The foregoing representations and warranties shall be continuing Exhibit D-18
11222-0116\2935138v9.doc
and shall be true and correct for the period from the date hereof to the release of this Leasehold Deed of Trust (whether by payment of the indebtedness secured hereby or foreclosure or action in lieu thereof), and these representations and warranties shall survive such release. As used herein, the phrase “to the best of Trustor’s knowledge shall mean and refer to the actual knowledge of Michael Massie, the Executive Vice President and Chief Development Officer of Trustor, without duty of inquiry or investigation.
c. Trustor represents and warrants to Beneficiary that Trustor will comply with all requirements of any governmental agency with jurisdiction over the Property or Project . d. On and after the date hereof, Trustor shall not (a) allow any Hazardous Substances to be installed, used, introduced, stored, treated, disposed of, generated, manufactured, discharged, dumped, transported or brought in, upon or over the Property in violation of applicable law; (b) allow any soil or ground water contamination or pollution with any Hazardous Substances on the Property in violation of applicable law; (c) allow any Hazardous Substances to migrate from the Property in violation of applicable law; (d) allow any Hazardous Substances to migrate onto the Property from any adjacent properties in violation of applicable law; or (e) allow or cause the Property to be in violation of, or to trigger a duly initiated and prosecuted investigation of the Property by any governmental authority under applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules or timetables contained in any local, state and/or federal laws, regulations, codes, ordinances, plans, administrative or judicial orders, decrees, judgments, notices or demand letters issued, entered, promulgated or approved thereunder relating to the environment, land use, water and air quality and Hazardous Substances (“Environmental Requirements”).
e. If the presence of any Hazardous Substances on the Property caused or permitted by Trustor results in any contamination of the Property in violation of applicable laws, Trustor shall promptly take all actions, at its sole expense, as are required by applicable law to return the Property to the condition existing prior to the introduction of any such Hazardous Substances to the Property; provided that Beneficiary’s approval of such actions shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term effect on the Property.
f. At any time after the occurrence and during the continuance of any default under this Section (subject to any applicable notice and cure provisions in Ground Lease), Beneficiary shall have the following rights and remedies, in addition to any other rights and remedies Beneficiary has under this Leasehold Deed of Trust:
i. As provided in California Code of Civil Procedure Section 564, Beneficiary or its employees, acting by themselves or through a court appointed receiver may do any of the following: (1) enter upon, possess, manage, operate, dispose of, and contract to dispose of the Property or any part thereof; (2) take custody of all accounts; (3) negotiate with governmental authorities with respect to the Property’s environmental compliance and remedial measures; (4) take any action necessary to enforce compliance with environmental provisions, including spending Rent Payments to abate any environmental problem; (5) make, terminate, enforce or modify leases of part or all of the Property; (6) contract for goods and services, hire agents, employees, and counsel, make repairs, alterations, and improvements to the Property necessary in Exhibit D-19
11222-0116\2935138v9.doc
Beneficiary’s reasonable judgment to protect or enhance the security hereof; and/or (7) take any and all other actions it reasonably deems to be necessary or appropriate to comply with Trustor’s obligations hereunder and under the Loan Documents. All sums realized by the receiver or Beneficiary under this subparagraph, less all costs and expenses incurred by either of them under this subparagraph, including attorneys’ fees, and less such sums as Beneficiary or the receiver reasonably deems appropriate as a reserve to meet future expenses under this subparagraph, shall be applied on any indebtedness secured hereby in such order as Beneficiary shall determine in its reasonable discretion. Neither application of said sums to said indebtedness, nor any other action taken by Beneficiary or the receiver under this subparagraph shall cure or waive any default or notice of default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to the adequacy of the security for the indebtedness secured hereunder, the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or the filing of a notice of default. ii. With or without notice, and without releasing Trustor from any obligation hereunder, to cure any default of Trustor or in connection with any such default, Beneficiary or its agents, acting by themselves or through a court-appointed receiver, may enter upon the Property or any part thereof and perform such acts and things as Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security hereof, including of any of Beneficiary’s other rights: (1) to obtain a court order to enforce Beneficiary’s right to enter and inspect the Property under California Civil Code Section 2929.5 (in respect of which the decision of Beneficiary as to whether there exists a release or threatened release of hazardous substance, as defined therein, onto the Property shall be deemed reasonable and conclusive as between the parties hereto); and (2) to have a receiver appointed under California Code of Civil Procedure Section 564 to enforce Beneficiary’s right to enter and inspect the Property for hazardous substances as defined therein. All costs and expenses incurred by Beneficiary with respect to the audits, tests, inspections, and examinations which Beneficiary or its agents or employees may conduct, including the fees of engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Trustor. All costs and expenses incurred by Trustee and Beneficiary pursuant to this subparagraph (including court costs, consultant fees and attorney fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Note Rate, from the date they are incurred until said sums have been paid. iii. Beneficiary may seek a judgment that Trustor has breached its covenants, representations and/or warranties with respect to the environmental matters set forth above in this Section, by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract pursuant to California Code of Civil Procedure Section 736, whether commenced prior to foreclosure of the Property or after foreclosure of the Property, and to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments, indemnification payments to third parties, and other out-of-pocket costs or expenses actually incurred by Beneficiary or advanced by Beneficiary (collectively, the “Environmental Costs”) relating to the cleanup, remediation or other response action required by applicable law. All Environmental Costs incurred by Beneficiary under this subparagraph (including court costs, consultant fees and attorney fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Note Rate, from the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at any sale of the Property held hereunder, the Exhibit D-20
11222-0116\2935138v9.doc
amount of said costs, expenses and interest in addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of cash. iv. As provided in California Code of Civil Procedure Section 726.5, Beneficiary may waive its lien against the Property or any portion thereof, to the extent such property is found to be environmentally impaired as defined therein, and to exercise any and all rights and remedies of an unsecured creditor against Trustor and all of Trustor’s assets and property for the recovery of any deficiency and Environmental Costs, including seeking an attachment order under California Code of Civil Procedure Section 483.010. Beneficiary and Trustor each represents and warrants for itself that it has no actual knowledge of any release of any Hazardous Substance (as defined in Section 726.5) on, to or under the Property. As between Beneficiary and Trustor, for purposes of California Code of Civil Procedure Section 726.5, Trustor shall have the burden of proving that Trustor or any related party (or any affiliate or agent of Trustor or any related party) did not cause or contribute to, and was not in any way negligent in permitting, any release or threatened release of the Hazardous Substance. v. Trustor acknowledges and agrees that notwithstanding any term or provision contained herein or in any promissory note or other loan documents, the Environmental Costs and all judgments and awards entered against Trustor pursuant to Section 6(f)(iv) above shall be exceptions to any nonrecourse or exculpatory provision of the loan documents, and Trustor shall be fully and personally liable for the Environmental Costs and such judgments and awards and such liability shall not be limited to the original principal amount of the obligations secured by this Leasehold Deed of Trust, and Trustor’s obligations shall survive the foreclosure, deed in lieu of foreclosure, release, conveyance, or any other transfer of the Property or this Leasehold Deed of Trust.
g. Trustor hereby agrees to indemnify, defend and hold harmless Beneficiary from and against any and all Environmental Losses.
TRUSTOR:
Exhibit D-21
11222-0116\2935138v9.doc
State of California )
County of ______________ )
On ____________________________, before me, ______________________________, (insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature____________________________ (Seal)
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
Exhibit D-22
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit E-1
11222-0116\2935138v9.doc
EXHIBIT E
FORM OF ASSIGNMENT
(Attached)
Exhibit E-2
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit E-3
11222-0116\2935138v9.doc
ASSIGNMENT OF ARCHITECT’S/ENGINEER’S CONTRACTS AND PLANS (CITY LOAN)
[NOTE: IF CITY LOAN IS DISBURSED FIRST, PROCEEDS
WILL BE APPLIED TO COSTS OF PLANS OR TO
REIMBURSE DEVELOPER FOR COSTS OF PLANS]
THIS ASSIGNMENT OF ARCHITECT’S/ENGINEER’S CONTRACTS AND PLANS (this “Assignment”) is made as of _______________, 202__, and is executed by _______________ (“Assignor”), in favor of the CITY OF BREA (“Assignee”), pursuant to that certain Disposition, Development and Loan Agreement dated _______________, 2024 by and between Assignor and Assignee (the “DDLA”).
RECITALS
A. As contemplated by the DDLA, Assignee made a construction and permanent loan in the amount of $4,457,483 to Assignor for construction costs relating to a low income housing project on property at 323 North Brea Boulevard in Brea, California (“Project”). The loan is evidenced by a secured promissory note (including any modifications thereof, the “City Loan Note”).
B. Pursuant to the DDLA, _______________, L.P., as tenant, and Assignee, as landlord, entered into a Ground Lease which provides, among other things, that upon termination of the Ground Lease after an Event of Default thereunder by the tenant, subject to the rights of and any prior assignment to senior lenders, Assignee shall be entitled to enforce the architects and engineers agreement relating to the Project, and shall be entitled to ownership and use of plans and specifications for the project, without any representation or warranty regarding said plans and specifications.
C. Additionally, the DDLA also requires Assignor to assign to Assignee, as security for the City Loan, subject to the rights of and any prior assignments to senior lenders and without any representation or warranty, all of Assignor’s right, title and interest in and to all architects and engineers (“Engineers/Architects”) contracts, plans and specifications for the Project, which include: (i) that certain _______________ dated _______________, executed by _______________ and _______________ [which has been assigned by _______________ to _______________, L.P.][?]; (ii) that certain dated ____________, executed by __________ and ___________________ [which have been assigned by _______________ to _______________, L.P.][?]; and (iii) all plans and specifications created under or pursuant to such contracts[, which have been assigned by _______________ to _______________, L.P.][?] (collectively, the “Contracts”).
NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt whereof is hereby acknowledged, subject to the rights of and any prior assignments to senior lenders and without any representation or warranty, Assignor hereby assigns, transfers and conveys to Assignee, effective upon the occurrence of a default under the Note which has not been timely cured following written notice of such default to Assignor and expiration of any applicable cure period, all of Assignor’s right, title and interest in and to the Contracts for the purposes of Exhibit E-4
11222-0116\2935138v9.doc
securing payment of the principal and interest evidenced by the Note, proceeds of which have been used by Assignor to pay costs payable by Assignor under the Contracts, and for purposes of enforcement, ownership and use upon a termination of the Ground Lease prior to completion of the Project, based on an Event of Default thereunder by the ground tenant.
Subject to the rights of and any prior assignments to senior lenders and without any representation or warranty, Assignor’s assignment includes the ability to receive, demand and enforce any and all of Assignor’s rights, and receive, demand and enforce the obligations of the Engineers/Architects under the Contracts, and use all plans and specifications (or assign the same to a subsequent developer), and to perform any and all acts in the name of Assignor or at the option of Assignee, in the name of Assignee.
Assignor hereby represents and warrants to Assignee that: Assignor is not in default under the Contracts as of the date hereof.
Other than the assignments to other Project lenders, Assignor agrees not to assign, sell, pledge or otherwise transfer or encumber in any manner Assignor’s interest in and to or rights under the Contracts, or to amend the Contracts, without the prior written consent of Assignee (such consent not to be unreasonably withheld, conditioned or delayed) so long as this Assignment remains in effect.
Upon the completion of the Project in accordance with the Ground Lease, and repayment of all principal and interest under the City Loan, this Assignment shall terminate.
If any one or more of the provisions contained in this Assignment shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Assignment, but this Assignment shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
This Assignment shall be governed by and construed according to the laws of the State of California.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as of the date first above written.
Exhibit E-5
11222-0116\2935138v9.doc
ASSIGNEE:
CITY OF BREA,
a municipal corporation
By:
Bill Gallardo, City Manager
Attest:
__________________________
Lillian Harris-Neal, City Clerk
APPROVED AS TO FORM:
Terence Boga, City Attorney
ASSIGNOR:
___________________________________
a _________________________________
By: ________________________________
Print Name: _________________________
Title: ______________________________
CONSENT
The undersigned hereby consents to the assignment described in the Assignment to which this Consent is attached.
The undersigned hereby agrees that subject to the rights of senior lenders to the Project, upon the Assignee or its assigns giving the undersigned written notice of Assignee’s exercise of its rights under the Assignment, the undersigned will recognize and attorn to Assignee (or such assigns) in accordance with the Assignment, and will have no recourse against Assignee for any sums due under the Contract with the undersigned at the time of such notice (but shall have all of its rights and remedies against Assignor for such sums).
The address for notices of the undersigned for such purpose is:
______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Notices may be sent by certified mail or reputable overnight delivery service.
The undersigned represents that:
(i) The undersigned has not assigned its interest under its Contract to any other person or entity;
(ii) The Assignor is not in default under the Contract.
Exhibit E-6
11222-0116\2935138v9.doc
The undersigned agrees that no change, modification or amendment to the Contract from and after the date hereof shall be valid without the prior written consent of Assignee.
Dated as of: __________________, 202_
_______________________________________
a ____________________________________
By:____________________________________
Print Name: ___________________________
Title: _________________________________
Exhibit E-7
11222-0116\2935138v9.doc
CONSENT
The undersigned hereby consents to the assignment described in the Assignment to which this Consent is attached.
The undersigned hereby agrees that subject to the rights of senior lenders to the Project, upon the Assignee or its assigns giving the undersigned written notice of Assignee’s exercise of its rights under the Assignment, the undersigned will recognize and attorn to Assignee (or such assigns) in accordance with the Assignment, and will have no recourse against Assignee for any sums due under the Contract with the undersigned at the time of such notice (but shall have all of its rights and remedies against Assignor for such sums).
The address for notices of the undersigned for such purpose is:
______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Notices may be sent by certified mail or reputable overnight delivery service.
The undersigned represents that:
(i) The undersigned has not assigned its interest under its Contract to any other person or entity;
(ii) The Assignor is not in default under the Contract.
The undersigned agrees that no change, modification or amendment to the Contract from and after the date hereof shall be valid without the prior written consent of Assignee.
Dated as of: __________________, 202_
_______________________________________
a ____________________________________
By:____________________________________
Print Name: ___________________________
Title: _________________________________
Exhibit E-8
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit F-1
11222-0116\2935138v9.doc
EXHIBIT F
FORM OF AFFORDABLE HOUSING
AGREEMENT
AND
FORM OF NOTICE
(Attached)
Exhibit F-2
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit F-3
11222-0116\2935138v9.doc
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL
TO:
City of Brea
1 Civic Center Circle
Brea, CA 92821
This document is exempt from
recording fees pursuant to
Government Code § 27383.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
AFFORDABLE HOUSING AGREEMENT
This AFFORDABLE HOUSING AGREEMENT (“Agreement”) is executed by JHCACQUISITIONS LLC, a California limited partnership (“Developer”), and the CITY OF BREA (“City”), a California municipal corporation, and is dated _______________, 2024 for reference purposes. For purposes of the grantor-grantee index, Developer is the grantor and City is the grantee.
RECITALS
A. Developer has a leasehold interest in the real property legally described on Exhibit A (“Site”) by virtue of a _______________, 2024 Ground Lease (“Lease”) executed by City, as landlord, and Developer, as tenant. The Lease requires Developer to construct a 39-unit multifamily residential rental development (“Project”) on the Site, and City is providing a loan to Developer to facilitate such construction.
B. To receive financial assistance from City for the Project, Developer intends to restrict __ of the residential units in the Project to extremely low income households at an affordable rent, and will reserve one residential unit in the Project as an unrestricted onsite manager’s unit.
C. This Agreement is the affordable housing agreement required by Brea City Code Section
20.40.090(B) and the regulatory agreement required by Government Code Section 37364(d).
NOW, THEREFORE, City and Developer agree as follows:
1. DEFINITIONS
In addition to the terms defined above, the following definitions shall apply for purposes of this Agreement:
A. “Affordability Period” means the 55-year period commencing on the date of the Certificate of Occupancy.
Exhibit F-4
11222-0116\2935138v9.doc
B. “Affordable Rent” means rent, including a reasonable utility allowance that does not exceed the product of 30% times 30% of the Area Median Income adjusted for family size appropriate to the unit.
C. “Affordable Units” means _____ of the _____ residential units in the Project.
D. “Area Median Income” means the median income for households in Orange County, California as annually established by HUD pursuant to Section 8 of the United States Housing Act of 1937 and as defined in 25 C.C.R. Section 6932. In the event that such income determinations are no longer published by HUD, or are not updated for a period of at least 18 months, City shall provide Developer with other income determinations that are reasonably similar with respect to methods of calculation to those previously published by HUD.
E. “Adjusted for family size appropriate to the unit” means for a household of two persons in the case of a one-bedroom unit, and means for a household of three persons in the case of a two-bedroom unit.
F. “Certificate of Occupancy” means the certificate of occupancy issued by City for the Project (the final certificate of occupancy if a temporary certificate of occupancy is, or if multiple certificates of occupancy are, issued).
G. “Eligible Household” means a person or family whose income does not exceed 30% of the Area Median Income adjusted for family size.
H. “HUD” means the United States Department of Housing and Urban Development.
2. RENTER ELIGIBILITY
A. During the Affordability Period, Developer shall rent the Affordable Units to Eligible Households at an Affordable Rent.
B. Income of all persons residing in an Affordable Unit shall be considered for purposes of calculating the applicable income.
C. Developer shall not allow any Affordable Unit to be subleased and shall include in each lease or rental agreement with an Affordable Unit tenant a prohibition against subletting.
3. UNIT MONITORING
A. Prior to each rental of an Affordable Unit, Developer shall require that each prospective tenant execute an income certification form that is either supplied by City or utilized by Developer and reasonably acceptable to City. Developer shall then verify that each prospective tenant’s income certification form is truthful by obtaining any of the following:
i. Paycheck stubs from the prospective tenant’s two most recent pay periods. ii. A true copy of an income tax return from the prospective tenant for the most recent tax year in which a return was filed.
Exhibit F-5
11222-0116\2935138v9.doc
iii. An income verification certification from the prospective tenant’s employer.
iv. An income verification certification from the Social Security Administration or the California Department of Social Services. v. An alternate form of income verification reasonably available.
B. On an annual basis, Developer shall require each Affordable Unit tenant to execute an income recertification form that is either supplied by City or utilized by Developer and reasonably acceptable to City, and shall verify that such form is truthful in accordance with Paragraph A above. If upon income recertification it is determined that an Affordable Unit tenant has a gross income exceeding 140% of the qualifying limit, then subject to applicable law (including California Tax Credit Allocation Committee regulations and policies), such tenant shall be permitted to continue occupying the unit for 12 months or until lease expiration, whichever is longer, unless the tenant again becomes an Eligible Household upon recertification prior to the expiration of its lease.
4. TENANCY REPORTS
A. Developer shall submit to City annual tenancy reports, and annual income certifications or re-certifications, in form and content approved by City (such approval not to be unreasonably withheld, conditioned or delayed) from time to time. In addition to any other information specified by City, such reports shall include:
i. The number of persons per unit.
ii. Tenant name.
iii. Initial occupancy date.
iv. Rent paid per month.
v. Gross income per year.
vi. Copies of documents used to certify or recertify the tenant as an Eligible Household.
B. The first annual report and annual income certification, with copies of all of the signed leases (including any addenda and amendments), shall be submitted to City within 30 days after the date of the initial rental of all of the Affordable Units or as otherwise agreed to in writing by City. Subsequent annual reports and annual income certifications or re-certifications shall be submitted to City on the anniversary date of the first submittal.
C. Developer shall maintain all necessary books and records, including property, personal and financial records, in accordance with requirements of this Agreement. Developer, at such time and in such forms as are reasonably acceptable to City, shall furnish to City statements, records, reports, data and information pertaining to matters covered by this Agreement. Upon Exhibit F-6
11222-0116\2935138v9.doc
request for examination by City, Developer, at any time during normal business hours following not less than two business days’ written notice, shall make available all of its records with respect to all matters covered by this Agreement. Developer shall permit City and its representatives to audit, examine and make excerpts or transcripts from these records.
5. OCCUPANCY LIMIT
Except as otherwise required by law, no less than one person per bedroom shall be allowed; no more than three persons shall be permitted to occupy a one bedroom Affordable Unit.
6. MANAGEMENT PLAN
Prior to Certificate of Occupancy issuance, Developer shall obtain City approval of a management plan for the Affordable Units. The management plan shall include: the proposed management company’s name and qualifications; the proposed policies and procedures for management, tenant selection, and occupancy of the Affordable Units; and the proposed lease or rental agreement to be used for the Affordable Units. The management plan, and any amendments thereto, shall be subject to the City Manager’s approval, which approval shall not be unreasonably withheld, conditioned, or delayed. The management of the Affordable Units shall be compliance with the City-approved management plan. City hereby approves Quality Management Group, Inc. as the initial property manager.
7. LOSS OF SUBSIDY
A. It is anticipated that the Property will be supported by Project-Based Section 8 rental subsidy payments (the “Rental Subsidy”). If, during the Affordability Term, there is a reduction, termination, or nonrenewal of the Rental Subsidy through no fault of Developer, such that the Rental Subsidy as it exists as of the date of this Agreement is no longer available (or available in a lesser amount), Developer may request City, in its sole discretion, to approve:
(i) allowing households with adjusted incomes that do not exceed 60% of then current AMI adjusted for household size, as published by the California Tax Credit Allocation Committee annually (“60% AMI Households”), to occupy the Affordable Units, and (ii) increasing the rent on one or more of the Affordable Units, to rents that are affordable to 60% AMI Households, as outlined herein.
B. The income limit and rent increases described in paragraph (A) above are subject to the following requirements. Concurrently with the request, Developer shall provide City with:
(a) evidence of the anticipated reduction, termination, or nonrenewal of the Rental Subsidy; (b) a management plan for the Project for City’s approval (such approval not to be unreasonably withheld, conditioned or delayed), showing the impact of the loss or reduction of the Rental Subsidy; (c) a proposed operating budget reflecting the rent increases (“Operating Budget”); and (d) a description of Developer’s efforts to obtain alternate sources of rental subsidies, and, if the foregoing requirements are completed to City’s reasonable satisfaction, subject to the limitations set forth in the immediately succeeding sentence, City shall approve Developer’s request to increase the income limits and rent restrictions applicable to the Affordable Units. The number of Affordable Units subject to the rent increase and the amount of the proposed increase may not be greater than: (i) the number or amount required to ensure that the Project generates sufficient Exhibit F-7
11222-0116\2935138v9.doc
income to cover its operating costs, required deposits to replacement reserves, and debt service payments on approved financing as shown on the Operating Budget (together, the “Minimum Liabilities”); and (ii) such amount as is necessary for the Project to maintain a debt service coverage ratio of at least 1.15 (“Debt Service Coverage Ratio”). As used herein, “Debt Service Coverage Ratio” means, for any period, the ratio of (a) net operating income for such period to (b) all principal and interest payments due and payable during such period, regardless of whether the Project is generating sufficient cash flow. In addition, upon a reduction, termination, or nonrenewal of the Rental Subsidy as described above:
i. Developer shall use good faith commercially reasonable efforts to obtain alternative sources of rental subsidies and shall provide City with quarterly progress reports on efforts to obtain alternative sources of rental subsidies that would allow the rents to be reduced.
Upon receipt of any alternative rental subsidies, Developer shall reduce the rents as much as possible with the goal of reverting the rents to their original levels as set forth herein to the extent that the alternative rental subsidies provide sufficient income to cover the Minimum Liabilities of the Project as shown on the Operating Budget and to maintain a Debt Service Coverage Ratio of 1:15 to 1.00;
ii. Developer shall provide tenants in the Affordable Units with at least 60 days’ written notice of any rent increase and shall notify each tenant that if they have received a tenant-based voucher from the Orange County Housing Authority or any other governmental entity they may use such voucher to pay the rent for their Affordable Unit; iii. All rent increases are subject to City approval pursuant to the terms herein.
No later than 60 days prior to the proposed implementation of any rent increase, Developer shall submit to the City a schedule of any proposed increase in the rent. City shall approve a rent increase if it complies with the restrictions set forth herein.
iv. Developer shall give tenants of all Affordable Units written notice at least 60 days prior to any rent increase.
With respect to any Affordable Units for which City has authorized Developer to increase rents pursuant to this Section, all special and/or target population preferences and requirements shall automatically terminate.
8. PROPERTY MAINTENANCE
Developer shall maintain the Property in the same aesthetic and sound condition as existing at the date of the Certificate of Occupancy, reasonable wear and tear excepted. Representative items of maintenance shall include: graffiti abatement; repainting, repair, or replacement of damaged or deteriorated surfaces, fencing, walls, equipment, etc.; emptying of trash receptacles and removal of litter; sweeping of public sidewalks adjacent to the Property; sweeping or washing down of on-site walks and paved areas; trimming, fertilization, and replacement of landscaping; cleaning windows; maintaining the roof in a leak-free and weather-tight condition; and maintaining any security devices in good working order.
Exhibit F-8
11222-0116\2935138v9.doc
9. NONDISCRIMINATION / NONSEGREGATION
A. Developer covenants that there shall be no discrimination against or segregation of any person, or group of persons, on account of any basis listed in subdivision (a) or (d) of Government Code Section 12955 in connection with the rental, sale, lease, sublease, transfer, use, or occupancy of the Project. Neither Developer nor any person claiming under or through Developer shall establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, or sublessees of the Project.
B. All deeds, leases or contracts entered into with respect to the Property shall contain or be subject to substantially the following nondiscrimination/nonsegregation clauses (but no such lease shall permit subletting):
1. (a) In deeds: “The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the California Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the California Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the premises herein conveyed, nor shall the Grantee himself or herself, or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the premises herein conveyed. The foregoing Agreements shall run with the land.
(b) Notwithstanding the immediately preceding paragraph, with respect to familial status, said paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the California Government Code. With respect to familial status, nothing in said paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the California Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the California Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the California Government Code shall apply to said paragraph.”
2. (a) In contracts: “The contracting party or parties hereby covenant by and for himself or herself and their respective successors and assigns, that there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the California Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the California Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the premises, nor shall the contracting party or parties, any subcontracting party or parties, or their respective assigns or transferees, establish or permit any such practice or practices of discrimination or segregation. (b) Notwithstanding the immediately preceding paragraph, with respect to familial status, said paragraph shall not be construed to apply to housing for older persons, as Exhibit F-9
11222-0116\2935138v9.doc
defined in Section 12955.9 of the California Government Code. With respect to familial status, nothing in said paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the California Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the California Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the California Government Code shall apply to said paragraph.”
10. ASSIGNMENT
A. The identity and qualifications of Developer as an experienced and successful Developer and operator of affordable rental housing developments are of particular concern to the City; it is because of this identity and these qualifications that City has entered into this Agreement with Developer. Except with respect to transfers permitted under the Lease, no voluntary or involuntary successor in interest of Developer shall acquire any rights or powers under this Agreement by assignment or otherwise. Except as permitted under the Lease, Developer shall not make any total or partial sale, transfer, conveyance, encumbrance to secure financing, assignment or lease of the whole or any part of the Lease or the Project without City’s prior written approval.
B. City approval shall not be required for the lease or rental of Affordable Units to Eligible Households in accordance with this Agreement.
11. BINDING EFFECT
A. The obligations established in this Agreement attach to and run with the Property, and shall be binding on Developer and any successor in interest to the Property or any part thereof for the benefit and in favor of City and City’s successors and assigns.
B. This Agreement shall be recorded prior to any deeds of trust or other liens on the Developer’s leasehold interest (except for the liens for property taxes and assessments), and this Agreement shall not be subordinated to any such deeds of trust or other liens.
C. No violation or breach of this Agreement shall defeat or render invalid or in any way impair the lien or charge of any mortgage, deed of trust or other financing or security instrument; provided, however, that any successor of Developer shall be bound by this Agreement whether such successor’s title was acquired by foreclosure, deed in lieu of foreclosure, trustee’s sale or otherwise.
12. NOTICES
Notices under this Agreement shall be given in writing and shall be given in accordance with the terms of the notices provision in the Lease.
13. REMEDIES
Upon a default by Developer, City shall have all rights and remedies at law or in equity, and all rights and remedies in Brea City Code Section 20.40.100, and such remedies shall be cumulative to the extent permitted by law. Subject to the rights of senior lenders to the Project, City shall have the right to obtain from Developer any overcharged rent if Developer is unable to locate the overcharged tenant for purposes of reimbursing such tenant the overcharged amount.
Exhibit F-10
11222-0116\2935138v9.doc
14. TIME OF THE ESSENCE
Time is of the essence of each provision of this Agreement in which time is a factor.
15. EXPIRATION
This Agreement shall remain in effect until expiration of the Affordability Period.
16. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute a single instrument.
17. INCORPORATION OF MANDATORY LANGUAGE
Each and every provision required by law to be inserted in this Agreement shall be deemed to be inserted and this Agreement shall be read and enforced as though such provision were included. If through mistake or otherwise any such provision is not inserted, or is not correctly inserted, then upon request of either party this Agreement shall promptly be amended to make such insertion or correction.
18. AMENDMENTS
This Agreement may not be amended, nor any provision or breach waived, except in a writing that is signed by the parties and that expressly refers to this Agreement.
IN WITNESS WHEREOF, City and Developer have caused this Agreement to be signed, acknowledged and attest on their behalf by their duly authorized representatives.
CITY:
CITY OF BREA,
a municipal corporation
By:
Bill Gallardo, City Manager
DEVELOPER:
JAMBOREE HOUSING CORPORATION,
a nonprofit corporation
By:
Exhibit F-11
11222-0116\2935138v9.doc
State of California )
County of ______________ )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
Exhibit F-12
11222-0116\2935138v9.doc
State of California )
County of ______________ )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
Exhibit F-1
11222-0116\2935138v9.doc
EXHIBIT A
TO AFFORDABLE HOUSING AGREEMENT
Legal Description
(Attached)
Exhibit F-2
11222-0116\2935138v9.doc
[This Page Intentionally Blank]
Exhibit F-3
11222-0116\2935138v9.doc
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL
TO:
City of Brea
1 Civic Center Circle
Brea, CA 92821
This document is exempt from
recording fees pursuant to
Government Code § 27383.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
NOTICE OF AFFORDABILITY RESTRICTIONS
ON TRANSFER OF PROPERTY
Important notice to owners, purchasers, tenants, lenders, brokers, escrow and title companies, and other persons, regarding affordable housing restrictions on the real property described in this Notice. Restrictions have been recorded with respect to the property described below which restrict the price and terms at which the property may be sold or rented. These restrictions may limit the sales price or rents of the property to an amount which is less than fair market value.
These restrictions limit the income of persons and households who are permitted to purchase and rent the property.
This NOTICE OF AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY (the “Notice”), is executed by ______________________________ ("Developer"), whose address is 17701 Cowan Avenue, Suite 200, Irvine, CA 92614 and by the City of (the “City”) in connection with that certain Regulatory Agreement (Housing Set Aside Funds) dated ___________, 202__ between Developer and the City, as successor to the housing assets of the former Brea Redevelopment Agency (the “Regulatory Agreement”) between Developer and the Agency.
RECITALS
1. Developer owns the land described on Exhibit “A” with an address of 323 N.
Brea Boulevard, in the City of Brea, State of California bearing Assessor’s Parcel Number 296- 301-02 (the “Land”).
2. Developer and Agency are entering into and recording the Regulatory Agreement substantially concurrently herewith.
3. Capitalized terms used herein but not defined shall have the meaning set forth as described in the Regulatory Agreement.
Exhibit F-4
11222-0116\2935138v9.doc
TERMS OF NOTICE
1. Requirement for Recorded Notice. This Notice is being executed and recorded pursuant to California Health and Safety Code Section 33334.3(f)(3)(B).
2. Regulatory Agreement. This Notice is being recorded substantially concurrently with the recordation of the Regulatory Agreement, which is incorporated herein by reference.
3. Recitation of Affordability Restrictions. The Regulatory Agreement restricts the occupancy of ___________ multifamily dwelling units on the Land to occupancy by __________ Income Households at an Affordable Rent (as defined in the Regulatory Agreement) for a term commencing on the completion of the rental project (as evidenced by a final Certificate of Occupancy) and ending on _______________, 20__. [55 YEARS] IN WITNESS WHEREOF, this Notice has been executed and made effective on the day and year first above written.
_____________________________
By:
Print Name:
Title:
CITY OF BREA
By:
Bill Gallardo, City Manager
Attest:
___________________________
Lillian Harris-Neal, City Clerk
APPROVED AS TO FORM:
__________________________
Terence Boga, City Attorney
Exhibit G-1
11222-0116\2935138v9.doc
EXHIBIT G
FORM OF GROUND LEASE
(Attached)
Exhibit G-2
11222-0116\2935138v9.doc
[Page Intentionally Blank]
Exhibit G-3
11222-0116\2935138v9.doc
GROUND LEASE
by and between
CITY OF BREA
and
JHC-ACQUISITIONS LLC,
Exhibit G-4
11222-0116\2935138v9.doc
THIS GROUND LEASE (“Lease” or “Agreement”) is dated ______, 202__ (“Effective Date”) for reference purposes and is executed by the City of Brea, a California municipal corporation (“Landlord”) and JHC-Acquisitions LLC, a California limited liability company (“Tenant”). Landlord and Tenant are hereafter collectively referred to as the “Parties.”
RECITALS
A. Landlord is the owner of the land described on Exhibit A (“Property”).
B. Landlord and Tenant entered into that certain Disposition, Development and Loan Agreement dated _______, 2024 (“DDLA”) which provides for the ground lease of the Property by Landlord to Tenant for the development of the project described in Recital C, below.
Capitalized terms used but not defined herein shall have the meaning set forth in the DDLA.
C. Tenant has agreed to construct a 39-unit multifamily rental housing development on the Property (consisting of 38 apartments that will be affordable to extremely low-income households and one manager’s unit) and other amenities (collectively, “Project”).
D. Landlord desires to lease to Tenant, and Tenant desires to lease from Landlord the Property, upon and subject to the terms and conditions hereinafter set forth.
E. The DDLA contemplates that this Lease shall be executed and delivered, and a Memorandum of Lease, a deed of trust in favor of Landlord, and an Affordable Housing Agreement, executed, acknowledged and recorded, at the Closing under the DDLA.
NOW, THEREFORE, for and in consideration of the covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows.
ARTICLE 1.
DEFINITIONS
1.1. Definitions. The following terms shall have the meanings set forth in the Sections referenced below whenever used in this Agreement and the Exhibits attached hereto. Additional terms are defined in the Recitals and text of this Agreement.
1.2. “Applicable Laws” is defined in Section 6.3.
1.3. “City” means the City of Brea, a municipal corporation, in its regulatory capacity as opposed to its proprietary interest in the Property as Landlord hereunder.
1.4. “City Council” means the City Council of the City of Brea.
1.5. “Claims” is defined in Article 10..
1.6. “Conditions of Approval” is defined in Section 6.12.
Exhibit G-5
11222-0116\2935138v9.doc
1.7. “Construction Plans” is defined in Section 6.14.
1.8. “CPI” means the Consumer Price Index—Urban Consumers (Los Angeles-RiversideOrange County, CA, area; Base 1982-84 = 100), as published by the United States Department of Labor, Bureau of Labor Statistics or any successor index or agency reasonably acceptable to the parties.
1.9. “Environmental Laws” is defined in Section 7.6.4(ii).
1.10. “Hazardous Material” is defined in Section 7.6.4(i).
1.11. “Improvements” means all buildings, structures, fixtures, fences, walls, paving, parking improvements, driveways, walkways, plazas, landscaping, permanently affixed utility systems and equipment, and other improvements located on the Property, including, without limitation, the Project and all replacements of the foregoing.
1.12. “Indemnitees” is defined in Article 10.
1.13. “Lease Conclusion” is defined in Section 8.2.1.
1.14. “Leasehold Mortgage” means a deed of trust on the leasehold estate created by this Lease and held by a Leasehold Mortgagee.
1.15. “Leasehold Mortgagee” means the mortgagee or beneficiary of any Leasehold Mortgage and in the event of a transfer of such Leasehold Mortgage, the successor Leasehold Mortgagee, upon delivery of written notice of the transfer to Landlord.
1.16. “Official Records” means the Official Records of Orange County, California.
1.17. “Prevailing Wage Laws” is defined in Section 6.3.
1.18. “Project” means the residential rental project and related improvements as described in Recital C as they may be modified pursuant to the terms of this Lease, subject to compliance with applicable law.
1.19. “Property” is defined in Recital A
1.20. “Term” is defined in Section 3.1.
1.21. “Transfer” is defined in Section 16.1.
ARTICLE 2.
DEMISE OF PREMISES
2.1. Demise. Upon the Effective Date (which is the date of this Lease, and the date of the Closing under the DDLA), Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Property for the Term and on the terms and conditions set forth in this Lease.
Exhibit G-6
11222-0116\2935138v9.doc
2.2. Condition of Title. Landlord leases the Property to Tenant subject to all easements, covenants, conditions, restrictions and other title matters of record existing as of the Effective Date, and all matters that would be apparent from an inspection of the Property on the Effective Date.
2.3. Condition of Property. Tenant specifically acknowledges that except for the representations and warranties made by Landlord pursuant to the DDLA, including, without limitation, in Section 2.2 of the DDLA, Landlord is leasing the Property to Tenant on an “AS IS”, “WHERE IS” and “WITH ALL FAULTS" basis and that Tenant is not relying on any representations or warranties of any kind whatsoever, express or implied, from Landlord, its employees, board members, or agents as to any matters concerning the Property. Except for the representations and warranties made by Landlord pursuant to the DDLA, Landlord makes no representations or warranties as to any matters concerning the Property including: (i) matters relating to soils, subsoils, geology, the presence or absence of fill, groundwater, drainage, and flood zone designation; (ii) the existence, quality, nature, adequacy and physical condition of utilities serving the Property; (iii) the development potential of the Property, and the Property's use, habitability, merchantability, or fitness, suitability, value or adequacy of the Property for any particular purpose; (iv) the zoning or other legal status of the Property or any other public or private restrictions on use of the Property; (v) the compliance of the Property with Environmental Laws, covenants, conditions and restrictions of any governmental or quasi-governmental entity or of any other person or entity; (vi) the presence or removal of Hazardous Material, substances or wastes on, under or about the Property or the adjoining or neighboring property; and (vii) the condition of title to the Property.
2.4. Tenant to Rely on Own Experts. Tenant acknowledges that notwithstanding the delivery by Landlord to Tenant of any materials, including, without limitation, third party reports, Tenant will rely entirely on Tenant’s own experts and consultants and its own independent investigation and judgment as to all matters relating to the Property.
2.5. Environmental Disclosure. To the extent the Landlord has copies of reports regarding the environmental condition of the Property, it has provided copies to Tenant of those reports known to exist; but the Parties acknowledge that Landlord will not be conducting a public records search of any regulatory agency files—although the Landlord urges Tenant to do so to satisfy itself regarding the environmental condition of the Property. By execution of this Agreement, Tenant:
(i) acknowledges its receipt of the foregoing notice respecting the environmental condition of the Property; (ii) acknowledges that it has had an opportunity to conduct its own independent review and investigation of the Property; (iii) except for the representations and warranties made by Landlord pursuant to the DDLA, agrees to rely solely on its own experts in assessing the environmental condition of the Property and its sufficiency for its intended use; and (iv) waives any and all rights Tenant may have to assert that the Landlord failed to disclose information about the environmental condition of the Property.
2.6. Release by Tenant. Effective upon the Effective Date, Tenant WAIVES, RELEASES, REMISES, ACQUITS AND FOREVER DISCHARGES the Indemnitees and any person acting on behalf of the Landlord, from any and all Claims, direct or indirect, known or unknown, foreseen or unforeseen, which Tenant now has or which may arise in the future on account of or in any way arising out of or in connection with the physical condition of the Property, the presence of Exhibit G-7
11222-0116\2935138v9.doc
Hazardous Material in, on, under or about the Property other than any Claims related to Hazardous Material that was present in, on, under or about the Property prior to the Effective Date, or any law or regulation applicable thereto including, without limiting the generality of the foregoing, all Environmental Laws. The provisions of this Section 2.6 shall survive the expiration or termination of this Agreement.
TENANT ACKNOWLEDGES THAT TENANT IS FAMILIAR WITH CIVIL
CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR OR RELEASING PARTY DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT
THE TIME OF EXECUTING THE RELEASE AND THAT, IF
KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR
OR RELEASED PARTY.
BY INITIALING BELOW, TENANT EXPRESSLY WAIVES THE BENEFITS OF CIVIL CODE SECTION 1542 WITH RESPECT TO THE FOREGOING RELEASE:
Tenant’s initials: _____________
ARTICLE 3.
TERM OF LEASE
3.1. Term. The term of this Lease (“Term”) shall commence on the date hereof (i.e., the Effective Date), and it is intended that the Memorandum of Lease be recorded on such date (“Commencement Date”). Unless sooner terminated under the provisions hereof, the Term of this Lease shall expire 99 years after the completion of the Project (as evidenced by a final Certificate of Occupancy) (“Expiration Date”). The expiration or sooner termination of the Term shall be referred to as “Lease Conclusion.”
3.2. Lease Year. For purposes of this Lease, “Lease Year” shall mean each calendar year, or partial calendar year during the Term. If the Commencement Date does not occur on January 1, then any amounts required to be paid under this Lease on a Lease Year basis shall be prorated on a per diem basis for the partial Lease Years that commence with the Commencement Date and end on the Expiration Date.
ARTICLE 4.
RENT
4.1. Rent. Tenant has prepaid rent (in the amount of $99) to Landlord through the escrow under the DDLA at the Closing under the DDLA.
Exhibit G-8
11222-0116\2935138v9.doc
4.2. Additional Rent. Tenant also agrees to pay as rent all sums, Impositions (as defined in Section 5.1 below), costs, expenses, and other payments which Tenant in any of the provisions of this Lease assumes or agrees to pay (collectively, “Additional Rent”). If Tenant fails to pay timely any Additional Rent following written notice of such failure and expiration of any applicable cure period, Landlord shall have (in addition to all other rights and remedies) all the rights and remedies provided for herein or by law in the case of non-payment of rent, subject to the terms and conditions of this Lease.
4.3. Payment of Rent. The Base Rent and Additional Rent shall be collectively referred to as “Rent” under this Lease. All Rent shall be paid to Landlord in lawful money of the United States at the place to which notices are to be delivered to Landlord, unless Landlord designates a different address for the payment of Rent in writing to Tenant. Rent shall be payable on each anniversary of the Effective Date during the term hereof.
ARTICLE 5.
TAXES, ASSESSMENTS AND OTHER CHARGES
5.1. Impositions. Tenant covenants and agrees to pay prior to delinquency, all real property taxes, possessory interest taxes, license and permit fees, sales, use or occupancy taxes, assessments whether general or special, ordinary or extraordinary, unforeseen, as well as foreseen, of any kind or nature whatsoever, pertaining to this Lease, the Property or the Improvements or part thereof, including: (i) any assessment, levy, imposition or charge, in lieu of or substitution for real estate taxes; and (ii) any assessment for public improvements or benefits which is assessed, levied, or imposed upon or which becomes due and payable and a lien upon: (a) the Property or the Improvements or any part thereof or any personal property, equipment or other facility used in the operation thereof; (b) the rent or income received by Tenant from subtenants or licensees; (c) any use or occupancy of the Property or Improvements or part thereof; or (d) this transaction or, subject to the exclusions specified below, any document to which Tenant is a party creating or transferring an estate or interest in the Property or part thereof. All of the foregoing are hereinafter referred to as “Impositions.”
5.1.1. Exclusions. Impositions specifically shall exclude: (i) any income, franchise, gross receipts, estate, inheritance, transfer or gift tax imposed on Landlord; and (ii) any transfer tax imposed on any document to which Landlord is a party creating or transferring an estate or interest in the Property.
5.1.2. Installments. If, by law, any Imposition is payable, or may at the option of the taxpayer be paid, in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Tenant may pay the same together with any accrued interest on the unpaid balance of such Imposition in installments as the same respectively become due and before any fine or penalty may be added thereto for the nonpayment of any such installment and interest. Any Impositions relating to tax years that are only partially included in the Term shall be prorated between Tenant and Landlord.
Exhibit G-9
11222-0116\2935138v9.doc
5.1.3. Evidence of Payment. Upon request by Landlord, Tenant shall furnish, in form satisfactory to Landlord, evidence of payment prior to delinquency of all Impositions payable by Tenant.
5.2. Tenant Right to Contest. Tenant shall have the right before any delinquency occurs to contest or object to the amount or validity of any Imposition by appropriate legal proceedings, but such right shall not be deemed or construed in any way as relieving, modifying or extending Tenant’s covenant to pay any such Imposition at the time and in the manner required by law. Any such contest shall be conducted in accordance with and subject to the requirements of Applicable Laws and otherwise in a manner that does not subject Landlord’s title to the Property to foreclosure or forfeiture. Tenant shall indemnify, defend, protect and hold Landlord harmless from and against all claims, damages, losses, liabilities, costs and expenses (including attorneys’ fees) incurred by Landlord as a result of any such contest brought by Tenant. During any contest of an Imposition, Tenant shall (by payment of disputed sums, if necessary) prevent any advertisement of tax sale, foreclosure of, or any divesting of Landlord’s title, reversion or other interest in the Property or the Improvements.
5.3. Tenant Duty to File. Tenant shall have the duty of making or filing any exemption application, declaration, statement or report which may be necessary or advisable in connection with property tax exemption or the determination, equalization, reduction or payment of any Imposition which is or which may become payable by Tenant under the provisions of this Article V, and Landlord shall not be responsible for the contents of any such declaration, statement or report.
5.4. Utilities. Tenant agrees to pay, or cause to be paid, all charges which are incurred by Tenant or which are otherwise a charge or lien against the Property or part thereof during the Term, for gas, water, electricity, light, heat or power, telephone or other communication service use, or other utility use, rendered or supplied upon or in connection with the Property. Tenant shall also obtain, or cause to be obtained, without cost to Landlord, any and all necessary permits, licenses or other authorizations required for the lawful and proper installation and maintenance upon the Property of wires, pipes, conduits and other equipment for the supply of utilities to the Project. In no event shall Landlord have any liability to Tenant, and Tenant releases Landlord, from any and all claims (including consequential damages, lost profits and similar damages) that Tenant may incur as a result of any interruption, curtailment or diminishment of such utilities, other than for the active negligence or willful misconduct of Landlord. Notwithstanding the foregoing, Tenant shall have the right to challenge the amount or validity of the foregoing charges, provided that doing so does not result in the Property being subjected to any lien or other encumbrance that is not itself adequately released, insured over or otherwise satisfied by Tenant after Tenant has exhausted its efforts to contest the same in accordance with all Applicable Laws.
ARTICLE 6.
DEVELOPMENT OF THE PROPERTY
6.1. Construction of Improvements; Description of Project. Tenant agrees to construct on the Property a 39-unit multi-family residential rental project, together with related Improvements Exhibit G-10
11222-0116\2935138v9.doc
in accordance with the DDLA, plans and specifications, entitlements and permits and approvals issued or approved by the City, including all governmental conditions of approval.
6.2. Construction Schedule/Deadlines. Subject to force majeure delays (meaning delays that delay the applicable construction, excluding defaults on financing), Tenant shall materially commence construction of the Project within 30 days following the Effective Date, and shall diligently prosecute to completion the construction of the Project sufficient to allow City to issue a final certificate of occupancy within three years following commencement of construction, subject to any such force majeure delays. Tenant’s failure to commence or complete the Project in accordance with the time periods specified in this Section 6.2 shall be an Event of Default.
6.3. Construction Standards. Tenant shall carry out and shall cause its contractors to carry out the construction of the Project and all subsequent Improvements, alterations and replacements, in a high quality and workmanlike fashion in accordance with City’s governmental conditions of approval and the construction plans approved by Landlord and City, and the permits issued by City, and in compliance with all applicable state, federal, and local laws, rules, ordinances, codes, and regulations, including, to the extent applicable, Labor Code Section 1720 et seq. and the regulations adopted pursuant thereto (“Prevailing Wage Laws”), and all other applicable federal and state labor laws and standards, applicable provisions of the Public Contracts Code (if any), the City zoning and development standards, building, plumbing, mechanical and electrical codes, all other applicable provisions of the Brea City Code, and all applicable disabled and handicapped access requirements, including the Americans with Disabilities Act, 42 U.S.C. Section 12101 et seq., Government Code Section 4450 et seq., Government Code Section 11135 et seq., and the Unruh Civil Rights Act, Civil Code Section 51 et seq. (all of the foregoing, collectively “Applicable Laws”).