Meeting Date: May 21, 2024
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Mandy Mills, Housing & Homeless Services Director [email protected], 442-339-2907
Subject: Acquisition of real property at 945 Chestnut Avenue from Solutions for Change, consideration of a request for proposals to identify a new owner for the continued use of the property as an affordable housing project and declaration of the property to be exempt surplus land District: 1
Recommend
ed Actions
Adopt resolutions:
1. Authorizing the City Manager to execute all documents necessary to complete the acquisition of 945 Chestnut Avenue from Solutions for Change, and authorizing the City Clerk to execute the certificate of acceptance and consent to the recording of the grant deed to complete the property transfer; and
2. Authorizing the City Manager to release a request for proposals with the intent to identify a new owner for the 100 percent affordable housing project at 945 Chestnut Avenue; and
3. Declaring the property located at 945 Chestnut Avenue as exempt surplus land in accordance with California Government Code Sections 54221(f)(1)(A) and 37364.
Executive Summary
In 2014, the city provided a $3.1 million loan to Solutions Chestnut, LLC, a subsidiary of Solutions for Change, Inc. (collectively Solutions for Change) to acquire the Chestnut Apartments, a 16-unit apartment complex at 945 Chestnut Ave., to provide affordable housing for homeless families.
The project was to include the relocation of the existing tenants and minor renovation of the units, to be accomplished in the first year, with permanent financing to be obtained by Solutions for Change within the first three years to fund a major rehabilitation of the entire development. The loan documents recorded against the property required the developer to obtain that permanent financing.
Solutions for Change has been unable to secure funding to complete the project because of a significant change in the operational requirements associated with governmental funding.
Solutions for Change is now looking to end its ownership of the property and is proposing to May 21, 2024
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transfer the property to the City of Carlsbad in exchange for having the loan forgiven so that the project can continue to provide affordable housing.
City staff intend to issue a request for proposals to identify a new owner to either acquire and rehabilitate the existing affordable units or demolish and rebuild a new 100% affordable housing project with potentially more units. City staff will evaluate the proposals and then present the City Council with recommendations for the future use of the property for the City Council’s approval.
City staff are also recommending that the City Council adopt a resolution declaring the property exempt surplus land consistent with the provisions of the state Surplus Land Act, for the reasons detailed below.
The City Council’s approval is required because city staff do not have existing authority to forgive the outstanding Housing Trust Fund loan in exchange for the receipt of real property, market and sell the real property after its receipt, or declare the real property to be exempt surplus land to allow its disposition.
Explanation & Analysis
Background
The $3.1 million loan to Solutions for
Change that the City Council approved
in 2014 was funded with $2,646,000
from the city’s Housing Trust Fund and
$454,000 from Community
Development Block Grant funds.
Solutions for Change was to use the
loan funds to acquire the 16 units on
Chestnut Avenue to provide permanent
affordable housing for homeless
families who had graduated from the
Solutions Academy.
The agreement with the city required
Solutions for Change to obtain the
additional financing to initiate work to
plan, design and obtain permits for the substantial rehabilitation of the apartment project by Dec. 31, 2019. (The 2014 City Council agenda report on the loan is provided as Exhibit 4.) Since Solutions for Change bought the Chestnut Avenue property in 2014, the funding climate for its program model changed significantly. Funds for homeless programs that come from the federal or state level now require homeless programs to incorporate the Housing First 1 approach. Solutions for Change does not wish to implement the Housing First approach into their projects and programs. Because Solutions for Change requires sobriety and participation 1 Housing First quickly connects individuals experiencing homelessness to permanent housing without preconditions and barriers to entry, such as sobriety, treatment or service participation requirements. Supportive services are offered to maximize housing stability and prevent returns to homelessness as opposed to addressing predetermined treatment goals before permanent housing is provided.
The property at 945 Chestnut Ave.
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in the workforce training as a condition of housing, the project is not eligible to receive the federal or state level Housing First public funds that are traditionally used for transitional or supportive housing.
City staff have worked with Solutions for Change since November 2019 and granted three extensions to the Dec. 31, 2019, deadline due to its difficulties in obtaining financing and delays during the COVID-19 pandemic.
The Solutions for Change Board of Directors ultimately decided to move completely away from this project and all government-funded residential projects and programs. Solutions for Change has decided to voluntarily turn the property over to the City of Carlsbad in exchange for having its loan forgiven because it cannot fulfill the obligations identified in the 2014 loan documents recorded against the property.
The property will continue to include at least 15 affordable units, with the 16 th unit serving as
an on-site manager’s unit. City staff intend to issue a request for proposals (Exhibit 2, Attachment A) to identify a new owner to acquire the property and either rehabilitate the 16 existing affordable apartment units or demolish the project and develop a new 100% affordable housing project with potentially more units.
City staff will present the City Council with recommendations for the future owner and use of the property for the City Council’s approval after the proposals are evaluated. Staff are pursuing this approach with the intent for the city to not own the property, but to instead assign the city’s purchasing authority to the new owner identified through from the request for proposals process.
Purchase and sale
Staff are recommending that the City Council authorize the City Manager to enter into a purchase and sale agreement (Exhibit 1, Attachment A) between the City of Carlsbad and Solutions for Change for acquisition of the real property at 945 Chestnut Ave. (APN 204-191- 2200) and execute any necessary documents for the property transfer.
Solutions for Change is to transfer ownership of the property to the city in lieu of repayment of the loan, therefore the sales price is the loan balance. This action cancels the loan and removes the existing deed of trust from the title for the property. No additional payments by Solutions for Change against the loan balance will be required. The City of Carlsbad will receive the property in exchange for loan forgiveness.
The $454,000 Community Development Block Grant loan was a five-year forgivable loan.
Solutions for Change maintained the affordable units for the minimum five-year period, so that loan has been forgiven. This leaves the outstanding loan amount for the Housing Trust Fund loan, which is approximately $2,977,776. This includes principal and outstanding interest payments anticipated as of Dec. 31, 2024.
The original sales price in 2014 was $3.1 million with an appraisal completed at that time to support that sales price. The most recent appraisal conducted in 2019 listed the appraised value May 21, 2024
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of the property at $3.79 million based on the income approach.2 It has been four years since the last appraisal, so the value is at least $3.79 million or likely higher.
The final step of the purchase and sale process is for the city to accept the grant deed for the property, while concurrently transferring the ownership of the property to a new owner selected through the request for proposals process. It is anticipated that this will occur in late December 2024. This extended escrow period will allow city staff adequate time to solicit proposals and identify a new owner for the 100% affordable housing project. Solutions for Change is willing to maintain the property until the end of calendar year 2024.
City staff recommend the city forfeit outstanding loan payments from Solutions for Change through 2024 as consideration for the extended escrow period. The extended escrow period allows the time needed to identify a new owner, which is more valuable to the city than the amount of potential revenue the Housing Trust Fund would receive and limits the time the city would have the responsibility and associated liability for owning and maintaining the property.
Along with the sale of the property to the new owner the city will be recording a new 55-year regulatory agreement against the property that will include the minimum affordability requirements consistent with the provisions of the Surplus Land Act, as detailed below, and restricting the property to these requirements for 55 years.
The sale of the property will likely also require the recording of a new loan agreement against the property
Request for proposals
Staff are also recommending that the City Council adopt a resolution authorizing the City Manager to release a request for proposals from qualified affordable housing developers with the intent to identify a new owner for the property at 945 Chestnut Avenue. The draft request for proposals is provided as Attachment A to Exhibit 2.
The request for proposals submittal period will close this summer and city staff will present the City Council with recommendations for the future owner and use of the property for the City Council’s approval after proposals are evaluated. Before the property can be transferred to a new future owner, the City Council will need to review and approve the terms of the sale agreement, along with a new 55-year regulatory agreement and an anticipated new loan agreement.
In the interim period, the property will continue to be used as an 100% affordable housing project. A regulatory agreement was recorded against the property restricting the income and rent level of 15 units, with one unrestricted manager’s unit. At least 15 affordable units must be maintained on the property because of housing replacement and relocation requirements.
Regulatory agreeme nt
The property received financial assistance from the city’s Housing Trust Fund and, in turn, has a regulatory agreement recorded against the property that restricts the use of the property as a 100% affordable project for 55 years. The property is restricted to provide seven of the 16 units in the project to low-income households, eight of the 16 2 The income approach is a real estate appraisal method that estimates a property's market value based on its income. This approach is most often used for properties with tenants because it relies on rental income.
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units in the project to moderate income households, and one unrestricted manager's unit. The City of Carlsbad could choose to remove this restriction, but the property will still be bound by the state replacement and relocation requirements identified below.
Replacement housing
The state’s Housing Crisis Act prohibits the approval of developments that require the demolition of residential units unless the project will replace all existing or previously demolished income restricted affordable units on the site and it will include at least as many units as existed on the site within the previous five years.
Tenant relocation
The Housing Crisis Act regulates development approvals that request residential unit demolition. All existing residents are allowed to remain in place until six months before construction begins, and displaced low-income residents are provided relocation benefits and a right of first refusal for a comparable unit in the new project at an affordable rent. Complete tenant relocation can add significant cost to a project.
The draft request for proposals identifies the city’s priority is to provide affordable housing for the current low- and moderate-income tenants. Any additional affordable units in a new project shall be prioritized for low- and moderate-income households with a preference for those from Carlsbad to the extent allowed by law.
Surplus Land Act
Finally, staff are recommending that the City Council adopt a resolution declaring the property as exempt surplus land consistent with the provisions of the state Surplus Land Act.
One of the purposes of the Surplus Land Act is to promote affordable housing development on unused or underutilized public land throughout the state to respond to the existing affordable housing crisis. A local agency that determines that property is exempt from the Surplus Land Act must support the determination with written findings and must provide a copy of the written determination to the California Department of Housing and Community Development at least 30 days prior to disposition of the property. A copy of the resolution declaring the property as exempt surplus land (Exhibit 3) has already been reviewed by Housing and Community Development and was considered sufficient documentation to meet this requirement.
The draft request for proposals identifies the following minimum affordability requirements that will allow the city to declare the property as exempt surplus land, consistent with the provisions of the Surplus Land Act:
• Not less than 80% of the property area shall be used for the development of housing • At least 20% of the units will be affordable to very low-income households (50% of the area median income)
• At least 20% of the units will be affordable to low-income households (60% of area median income)
• The remaining units will be affordable to at least moderate income households (90% of area median income)
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• The low and moderate income units must be restricted by a regulatory agreement recorded against the property and remain affordable for a period of not less than 55 years
In addition, the city will be recording a new 55-year regulatory agreement against the property concurrent with the transfer of the property to a new owner. The new regulatory agreement will include the minimum affordability requirements. The new owner will have to maintain the affordability levels specified in the new regulatory agreement.
Fiscal Analysis
The city approved loans of $3.1 million for the project in 2014 to acquire the property at 945 Chestnut Ave. A portion of the funds, $454,000, were Community Development Block Grant funds provided as a grant. The grant agreement required compliance with a Community Development Block Grant-eligible use for a minimum of five years. That compliance period has been met, so that $454,000 does not need to be repaid.
The remaining $2,646,000 was a loan from the city's Housing Trust Fund. The city’s loan is secured by a deed of trust recorded against the property. Because it was anticipated that Solutions for Change would secure permanent financing to complete the project, interest did not start accruing in the first five years. A payment against interest was paid through residual receipts for 2020 in the amount of $66,863.62. Interest payments have not been received for the years 2021-2023 and 2024 to date. It is estimated that the principal and interest loan balance through the end of December 2024 will be $2,977,776.
Description Amount
Initial city contribution $3,100,000
CDBG amount forgiven -$454,000
Remaining city loan $2,646,000
Estimated interest accrued (12/25/19-12/31/24) $398,640 Interest payment received -$66,864
Outstanding amount owed $ 2,977,776
There
is no fiscal impact to the General Fund to acquire the property in exchange for loan forgiveness. Forgiveness of the Housing Trust Fund loan will reduce interest income to the Housing Trust Fund. In exchange for loan forgiveness, ownership of the property is being conveyed to the city, and the value of the property will be credited as an asset to the Housing Trust Fund. The value of the property is expected to be higher than the loan balance. An appraisal will be completed to establish the value of the property prior to the transfer of the property to a new owner.
City staff previously contracted for a capital needs assessment that cost $3,000 to determine the potential financial need to bring to property to appropriate housing quality standards.
Additionally, there will be minor costs associated with the property transfer, including escrow and title, totaling approximately $7,500, and an appraisal will cost about $5,000. These outstanding costs will be funded from the Housing Trust Fund.
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Next Steps
Escrow will be opened upon the execution of the purchase and sale agreement. The City Manager is authorized to execute any documents related to the loan reconveyance and property transfer process from Solutions for Change to the City of Carlsbad.
Staff will issue a request for proposals from qualified affordable housing developers and present the City Council with recommendations for the future owner and use of the property for the City Council’s approval after the proposals are evaluated.
The resolution declaring the property exempt surplus land will be provided to the California Department of Housing and Community Development in keeping with the requirements of the Surplus Land Act.
Environmental Evaluati on
The City Planner, through the process outlined in Carlsbad Municipal Code Section 19.04.060, has determined that this action is categorically exempt from the California Environmental Quality Act under CEQA Guidelines Section 15326 – Acquisition of Housing for Housing Assistance Programs. Any future change to the property will be evaluated for any necessary environmental review and approval. No appeals of this determination were received in accordance with Carlsbad Municipal Code Section 21.54.140.
General Plan Conformity
California Government Code Section 65402(a) requires the acquisition and disposition of property by the city to conform with the city’s General Plan. Acquisition and disposition of the property located at 945 Chestnut Avenue meets this requirement in that the acquisition and disposition will maintain affordable housing on the site. The property is designated for residential use by the General Plan Land Use map, and the city's acquisition and disposition of the property will not change its intended residential use. Furthermore, the intended use of the property is consistent with General Plan goals and programs, including:
a. Land Use and Community Design Element Goal 10-G.3, "Promote infill development that makes efficient use of limited land supply, while ensuring compatibility and integration with existing uses. Ensure that infill properties develop with uses and development intensities supportive a cohesive development pattern."
b. Housing Element Goal 10-G.2, "Sufficient new affordable housing opportunities in all quadrants of the city to meet the needs of current lower and moderate-income households and those with special needs, and a fair share proportion of future lower and moderate-income households."
c. Housing Element Program 2.4 City-initiated Development, "The city, through the Housing and Homeless Services Department, will continue to work with private developers (both for-profit and non-profit) to create housing opportunities for low, very low, and extremely low-income households."
Exhibits
1. City Council resolution – Purchase and sale agreement
2. City Council resolution – Request for proposals
3. City Council resolution – Declaration of exempt surplus land
4. City Council Agenda Bill, dated Oct. 21, 2014 (on file in the Office of the City Clerk) May 21, 2024
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Exhibit 1
RESOLUTION NO. 2024-111
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE ALL DOCUMENTS NECESSARY TO COMPLETE THE ACQUISITION OF 945
CHESTNUT AVENUE FROM SOLUTIONS FOR CHANGE, AND AUTHORIZING
THE CITY CLERK TO EXECUTE THE CERTIFICATE OF ACCEPTANCE AND
CONSENT TO THE RECORDING OF THE GRANT DEED TO COMPLETE THE
PROPERTY TRANSFER
WHEREAS, on Dec. 24, 2014, the City of Carlsbad executed a loan of $2,646,000 from the city's Housing Trust Fund to Solutions Chestnut, LLC, a subsidiary of Solutions for Change, Inc. (collectively Solutions for Change), to acquire Chestnut Apartments, a 16-unit apartment complex at 945 Chestnut Ave., to provide affordable housing for homeless families; and WHEREAS, Solutions for Change was to obtain the additional financing to initiate work to plan, design and obtain permits for the substantial rehabilitation of the apartment project by Dec. 31, 2019; and
WHEREAS, Solutions for Change has decided to turn the property over to the City of Carlsbad in lieu of loan repayment since it cannot fulfill the obligations identified in the 2014 loan documents recorded against the property; and
WHEREAS, on Nov. 14, 2023, the City Council authorized the Deputy City Manager, Community Services, the Housing & Homeless Services Director and the Real Estate Manager to negotiate the acquisition of 945 Chestnut Avenue, Carlsbad, CA; and
WHEREAS, city staff has considered and evaluated the property at 945 Chestnut Avenue, Carlsbad, CA for a potential acquisition by the city; and WHEREAS, the property is 0.77 acres and is a located at 945 Chestnut Avenue, Carlsbad, CA 92011 (APN 204-191-2200) and is zoned Barrio Perimeter (BP); and WHEREAS, in a closed session on April 23, 2024, the City Council provided direction to the city negotiators on the price and terms for acquiring the property; and WHEREAS, the city and Solutions for Change hav e agreed to the purchase price of $2,977,776, which is the principal and outstanding interest anticipated to be owed on the loan as of Dec. 31, 2024; and
WHEREAS, no additional payment by Solutions for Change against the loan balance will be required and the city will receive the property in exchange for loan forgiveness; and WHEREAS, the City Planner, through the process outlined in Carlsbad Municipal Code Section
19.04.060, has determined that this action is categorically exempt from the California Environmental Quality Act pursuant to CEQA Guidelines Section 15326 (Acquisition of Housing for Housing Assistance Programs). Any future change to the property will be evaluated for any necessary environmental review and approval. No appeals of this determination were received in accordance with Carlsbad Municipal Code Section 21.54.140.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
2. That the city's acquisition of property located at 945 Chestnut Avenue is in conformance with the Carlsbad General Plan in that the acquisition will maintain affordable housing on the site. The property is designated for residential use by the General Plan Land Use map, and the city's purchase of the property will not change its intended residential use.
Furthermore, the intended use of the property is consistent with General Plan goals and programs, including:
a. Land Use and Community Design Element Goal 10-G.3, "Promote infill development that makes efficient use of limited land supply, while ensuring compatibility and integration with existing uses. Ensure that infill properties develop with uses and development intensities supportive a cohesive development pattern." b. Housing Element Goal 10-G.2, "Sufficient new affordable housing opportunities in all quadrants of the city to meet the needs of current lower and moderate -income May 21, 2024
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households and those with special needs, and a fair share proportion of future lower and moderate-income households."
c. Housing Element Program 2.4 City- initiated Development, "The city, through the Housing and Homeless Services Department , will continue to work with private developers (both for-profit and non-profit) to create housing opportunities for low, very low, and extremely low-income households."
3. That Proposition H, or Carlsbad Municipal Code Chapter 1.24, does not apply to the acquisition of the property because the acquisition does not involve the expenditure of “city funds” within the meaning of Carlsbad Municipal Code Section 1.24.020.
4. That the City Council approves the acquisition of the property located at 945 Chestnut Avenue, Carlsbad, CA 92011, APN 204-191-2200 from Solutions for Change in an amount of two million, nine hundred seventy -seven thousand, seven hundred seventy-six dollars ($2,977,776).
5. That the purchase and sale agreement in Attachment A is approved, and the City Manager is authorized and directed to execute the agreement.
6. That the City Manager or a designee is authorized to act on behalf of the City of Carlsbad in all future actions necessary to implement the purchase and sale agreement with Solutions for Change for the property located at APN 204-191-2200, and to do so in full compliance with the terms and conditions expressed in the agreement , subject to its approval as to form by the City Attorney.
7. That the City Clerk is authorized to execute the Certificate of Acceptance and consent to the recording of the grant deed conveying the property to the city.
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PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 21st day of May, 2024, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
BLACKBURN, BHAT-PATEL, ACOSTA, BURKHOLDER, LUNA.
NONE.
NONE.
NONE.
l
KEITH BLACKBURN, Mayor
SHERRY FREISINGER, City Clerk
(SEAL)
May 21, 2024
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Attachment A
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
(Chestnut Apartments-945 Chestnut Avenue, Carlsbad, CA)
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS ("Agreement") is dated as of the23..~ ay of ~ , 2024, by and between Solutions Chestnut, LLC, a California limited liability companyfeUer "), and the City of Carlsbad, a chartered city ("Purchaser"). This Ag~eement shall also constitute the joint escrow instructions of Purchaser and Seller to Chicago Title Company ("Escrow Holder" or "Title Company").
RECITALS
A. The Seller owns that certain real property improved with a 16-unit multifamily apartment building generally located at 945 Chestnut Avenue, Carlsbad, California 92008 (APN:
204-191-22-00), which is legally described on Exhibit A attached hereto and made a part hereof ("Real Property").
B. The Purchaser previously made a loan to the Seller (see the definition of Existing Debt set forth in Section 2, below). The Existing Debt is secured by the Existing Security (as defined below) which encumbers the Real Property. The Seller acknowledges it has not been able to adhere to the loan conditions outlined in loan documents with respect to the Existing Debt.
Without admitting liability or fault and provided the various conditions to Closing (as defined below) set forth in this Agreement are timely satisfied, the Seller agrees to sell the Property (as defined below) to the Purchaser and the Purchaser agrees to purchase the Property from the Seller as set forth in this Agreement to extinguish the Existing Debt.
AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are acknowledged, the Seller and the Purchaser hereby agree as follows:
1. Purchase and Sale. In consideration of the mutual covenants set forth in this Agreement, the Seller wil1 convey all of the Property to the Purchaser, on the terms and conditions set forth herein, provided the various conditions to Closing set forth in this Agreement are satisfied or waived as provided herein.
(a) Sale. The Seller agrees to sell the Property to the Purchaser, and the Purchaser agrees to purchase the Property from Seller, on the terms and conditions set forth herein. At Closing, the Seller shall convey the fee interest in the Real Property to the Purchaser by recordation of the Grant Deed (as defined below). The Escrow Holder shall issue the Title Policy (as defined below) to the Purchaser at Closing.
(b) Possession. The Seller shall deliver possession of the Property to Purchaser at Closing. Possession of the Property shall be delivered to Purchaser subject only to the Property Documents, Tenant Agreements and the Permitted Exceptions. 1 2
2. Definitions. As used in this Agreement, the following terms shall have the following meanings:
“Agreement” means this Purchase and Sale Agreement and Joint Escrow Instructions between the Seller and the Purchaser.
“Appurtenant Rights and Interests ” means collectively: (i) all rights, privileges and easements appurtenant to the Real Property, including, without limitation, all minerals, oil, gas and other hydrocarbon substances on or under the Real Property, if any; (ii) all development rights, air rights, and water rights relating to the Real Property , if any; (iii) all easements, rights -of-way or appurtenances which run with the Real Property , if any; (iv) all of the Seller ’s right, title and interest in and to the name “Chestnut Apartments ;” and (v) any agreements, maps, permits, certificates, approvals, awards, deposits, licenses, utilities, government entitlements and other rights and privileges relating to or appurtenant to the Property, if any. “Assignment” means the Assignment of Personal Property and Assignment and Assumption of Leases and Contracts substantially in the form attached hereto as Exhibit B and made a part hereof.
“Business Day” means any day other than a Saturday, Sunday or any other day on which Purchaser or Escrow Holder is not open for business. In the event any date, deadline or due date set forth in this Agreement falls on a day that is not a Business Day, then such deadline or due date shall automatically be extended to the next Business Day. “Close” or “Closing” means recordation of the Grant Deed. “Closing Date” shall be the earlier of: (i) the date of expiration of the Due Diligence Period; or (ii) a date set by the Purchaser providing five (5) business days’ notice of such date of Closing to the Seller.
“Conditions Precedent for the Benefit of the Seller” shall have the meaning set forth in Section 5 of this Agreement.
“Conditions Precedent for the Benefit of the Purchaser” shall have the meaning set forth in Section 6 of this Agreement.
“Contracts” means the agreements and instruments listed on Exhibit D attached hereto and made a part hereof.
“Due Diligence Period” means the period of time commencing on the date of execution and delivery of this Agreement and ending at 5:00 p.m. Pacific time on December 31, 2024.
Notwithstanding the foregoing, if prior to December 31, 2024 , the Purchaser provides written notice to the Seller of the Purchaser’s extension of the Due Diligence Period , then the Due Diligence Period shall be extended to June 30, 2025.
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3 “Escrow” means the escrow depository and disbursement services to be performed by Escrow Holder pursuant to the provisions of this Agreement. “Escrow Holder” means Fidelity National Title Company whose mailing address is 7565 Mission Valley Road, Ste 100, San Diego, CA 92108, Attention: Jasmine Corado, in its capacity as escrow agent. Use of the term “Escrow Holder” does not create a general agency and does not confer on Escrow Holder any right or authority to act for Purchaser or Seller without express instructions, whether as set forth in this Agreement or otherwise. “Excluded Property” means, collectively, (i) any unearned insurance premiums, (ii) any insurance policies or insurance contracts owned or held by Seller or its affiliates in connection with the Property, (iii) any property tax refunds for the period prior to the Closing, and (iv) to the extent owned by Seller’s property manager, any computers, computer operating systems, and computer software programs, social media accounts or other proprietary or intellectual property used or maintained in connection with its management of the Property. Notwithstanding anything to the contrary contained herein, Seller acknowledges that all of the Seller’s right, title and interest in and to the name “Chestnut Apartments” is being transferred to the Purchaser. Prior to or concurrently with Closing, Seller shall remove “Chestnut Apartments” from all social media accounts, websites and similar advertising and outreach materials. “Existing Debt” means that certain promissory note secured by the Existing Security which was made by Seller in favor of Purchaser dated as of December 24, 2014, in the original principal amount of $2,646,000.00, including all principal, interest, fees and charges thereon. “Existing Security” means that certain deed of trust with assignment of rents and security agreement made by Seller for the benefit of Purchaser dated as of December 24, 2014, which was recorded in the Office of the Recorder of the County of San Diego, Sta te of California on December 26, 2014, as Instrument No. 2014-0570838.
“Grant Deed” means a duly executed and acknowledged grant deed conveying fee simple title to the Real Property from the Seller to the Purchaser. “Hazardous Materials” means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United States Government. Provided, however, the term “Hazardous Materials ” shall not include substances typically used in the ordinary course of developing, operating and maintaining apartment complexes in California or small amounts of chemicals, cleaning agents and the like commonly employed in routine household uses in a manner typical of tenants in other similar properties, provided that such substances are used in compliance with applicable laws. “Immediately Available Funds” means a bank wire transfer. “Improvements” means collectively any and all buildings, structures and improvements, of any kinds whatsoever, located at or affixed to the Real Property.
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4 “Permitted Exceptions” means (i) the printed exceptions and exclusions in the Title Policy; (ii) the exceptions to title set forth in the Title Report which are approved by Purchaser in writing; (iii) real property taxes and assessments which are a lien but not yet payable; and (iv) any title exceptions caused, consented to or preapproved by Purchaser. “Personal Property” means all tangible personal property owned by the Seller and located at and used in connection with , the Real Property and the Improvements , including , without limitation and all furniture fixtures and equipment at the Real Property, but specifically excluding the Excluded Property.
“Property” means collectively, the Tenant Deposits, Real Property, Improvements , Appurtenant Rights and Interests and Personal Property, but specifically excluding the Excluded Property.
“Property Documents” means the documents and agreements listed on Exhibit C attached hereto and made a part hereof.
“Purchase Consideration ” shall have the meaning set forth in Section 3 (a) of this Agreement.
“Purchaser” means the City of Carlsbad; provided, however, if the City of Carlsbad assigns its interest in this Agreement pursuant to Section 10 of this Agreement, then the term “Purchaser” shall mean such assignee.
“Real Property” means that certain real property improved with a 16-unit multifamily apartment building generally located at 945 Chestnut Avenue, Carlsbad, California 92008 (APN:
204-191-22-00), which is legally described on Exhibit A. “Rent Roll” means the rent roll and security deposit report for the Project. “Seller” means Solutions Chestnut, LLC, a California limited liability company. “Tenant Agreements” means all leases and all other rental or occupancy agreements with tenants of the Real Property.
“Tenant Deposits” means all security deposits made by tenants, occupants or renters of all or any portion of the Real Property plus any other security, deposits or funds held by the Seller on behalf of tenants, occupants or renters of all or any portion of the Real Property. “Title Company” means Fidelity National Title whose mailing address is 7565 Mission Valley Rd. #100, San Diego, CA 92108, Attention: Kevin McCalley. “Title Policy” means a CLTA Owner ’s Policy of Title Insurance in the amount of Three Million One Hundred Thousand and No/100 Dollars ($3,100,000.00), insuring that title to the fee interest in the Real Property is vested in the Purchaser , subject only to the Permitted Exceptions, which Title Policy shall be obtained through the Title Company. Seller shall pay the cost of the May 21, 2024
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5 CLTA Owner’s Policy of Title Insurance. Purchaser shall pay the cost of any endorsements it desires. Purchaser may obtain an ALTA Owner ’s Policy of Title Insurance in which event Purchaser shall pay the difference between the cost of the ALTA Owner’s Policy of Title Insurance and the cost of a CLTA Owner’s Policy of Title Insurance.
3. Purchase Consideration.
(a) Total Purchase Consideration. The Property shall be conveyed by the Seller to the Purchaser in exchange for the Existing Debt. Conveyance of the Property from the Seller to the Purchaser shall be deemed payment in full of the Existing Debt (“Purchase Consideration”). (b) Independent Consideration. Purchaser shall deposit the sum of One Hundred and No/100 Dollars ($ 100.00) (“Independent Consideration”) into Escrow within five (5) Business Days of the Effective Date as independent consideration for the rights extended to Purchaser under this Agreement. The Independent Consideration shall be non-refundable to Purchaser under any circumstances and shall be released to Seller immediately following Purchaser’s deposit of the Independent Consideration into Escrow.
(c) No Deposit . No earnest money deposit shall be made by Purchaser under this Agreement.
4. Due Diligence Period. During the Due Diligence Period, the Purchaser may determine, in the Purchaser ’s sole and absolute discretion, whether to proceed with the acquisition of the Property. During the Due Diligence Period, the Purchaser may terminate this Agreement for any reason or for no reason at all by delivering written notice of such termination to Seller and Escrow Holder. After expiration of the Due Diligence Period, this Agreement shall terminate if Closing has not occurred. If this Agreement is terminated, then: (i) all rights and liabilities of the Purchaser and the Seller with respect to this Agreement shall immediately terminate, except for rights and liabilities that specifically survive such termination ; (ii) Escrow Holder shall return to the Purchaser all funds or other things deposited in Escrow by the Purchaser , less any fees and costs charged by the Escrow Holder; and (iii) Escrow Holder shall return to the Seller all funds or other things deposited in Escrow by the Seller.
(a) Access and Cooperation. During the Due Diligence Period, the Purchaser and its representatives, consultants and attorneys shall have access to the Real Property and the Improvements, subject to the rights of tenants. Purchaser and Seller shall cooperate in order to allow for and ensure the minimum disturbance to tenants. Seller shall provide Purchaser with access to all units. Purchaser shall indemnify and defend the Seller, and shall hold the Seller, the Seller’s agents and employees and the Real Property harmless from, any actions, losses, costs, damages, claims and/or liabilities, including but not limited to, mechanics’ and materialmen’s liens and attorney fees, proximately caused by the actions of Purchaser and/or its contractors or agents (including Purchaser ’s Consultants) upon the Property. The Purchaser shall not permit any mechanic’s, materialman’s, contractor’s, subcontractor’s or other lien arising from any work done by the Purchaser or its agents pursuant to this Agreement to stand against the Property. If any such lien shall be filed against the Property, the Purchaser shall cause the same to be discharged or bonded by payment, deposit, bond or otherwise within thirty (30) days after actual notice of such May 21, 2024
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6 filing. The Purchaser ’s obligations under this Section 4(a) shall survive the termination or expiration of this Agreement. If Purchaser desires to do any invasive testing at the Property, the Purchaser may do so only after obtaining Seller’s prior written consent to the same, which consent may be withheld or granted on conditions in Seller ’s reasonable discretion. The Purchaser shall promptly restore the Property to the condition the Property was in immediately prior to any tests or inspections conducted pursuant to this Section 4(a) , at the Purchaser ’s sole cost and expense.
The Purchaser shall provide the Seller with a complete set of plans, drawings and specifications (“Invasive Testing Plans”) that define to the sole satisfaction of the Seller the invasive testing to be performed on the Property and the names of all environmental and other consultants, contractors and subcontractors who will be performing such invasive testing (collectively “Purchaser’s Consultants”). The Purchaser shall deliver the names of the Purchaser ’s Consultants and the Invasive Testing Plans to the Seller concurrently with its request to the Seller that the Purchaser desires to perform invasive testing (unless the names of Purchaser ’s Consultants have previously been provided to the Seller).
(b) Due Diligence Deliveries . Not later than five (5) Business Days after execution and delivery of this Agreement to the Escrow Holder, the Seller shall provide, to the extent in Seller’s possession or control, the Purchaser with physical copies or digital copies (e.g., pdf, tif or jpg file) of the Rent Roll, Tenant Agreements and Property Documents by physical delivery, “dropbox” or similar on-line data site, email or on a memory medium. (c) Tenant Noticing. Certain State and Federal relocation laws may be applicable to the Purchaser, as a public agency, which would require the Purchaser to provide certain notices to the tenants of the Property. Within five (5) Business Days after the Effective Date, the Seller shall provide the names and addresses of all tenants of the Property, if any, to the Purchaser. The Seller agrees to allow the Purchaser to provide any and all notices to tenants of the Property that are required or advisable in order for the Purchaser to comply with any applicable laws; provided, however, prior to delivering notices to any tenants of the Property, the Purchaser shall submit a sample of the notice to the Seller for the Seller’s review and approval, which approval shall not be unreasonably withheld, conditioned or delayed.
(d) Public Record. Notwithstanding anything to the contrary set forth herein, Seller acknowledges that Purchaser is a public agency and is bound by the terms of the California Public Records Act (Government Code Section 7920.000, et seq.). Nothing set forth in this Agreement shall impose liability on Purchaser with respect to any disclosures required by any applicable laws or otherwise be interpreted to require Purchaser to violate the terms of any applicable law concerning the disclosure of records.
(e) Title. Closing is contingent upon Purchaser’s approval of all matters affecting title to or use of the Real Property (collectively, “Title Matters”). Seller shall cause the Title Company to deliver to Purchaser within five (5) Business Days of the Effective Date, a current preliminary title report for the Real Property and legible copies of all documents referred to therein (“Title Report”). Seller shall cause all Title Matters which are mechanics’ liens or deeds of trust other than the Existing Security to be eliminated as exceptions to title at Seller’s sole expense prior to the close of Escrow, and shall not be party to and record any documents against the Property from and after the Effective Date without Purchaser’s prior written consent.
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7 (f) Maintenance of Property During Due Diligence Period. Until the Closing, Seller shall maintain the Property and the Improvements in a decent, safe and sanitary condition, and in good repair . The Seller shall promptly make all repairs reasonably necessary to maintain the Property and the Improvements in a decent, safe and sanitary condition, and in good repair , and shall promptly make all repairs requested by the Purchaser. To the extent the cost of any necessary repairs to or maintenance of the Property or the Improvements exceeds the income derived from the Property, the Seller shall immediately notify the Purchaser and the parties shall meet and confer in good faith to determine which maintenance and repairs shall be completed and the deadlines for completion of the same. On or before Aug. 31, 2024, the Seller shall cause all balconies at the Property to be inspected in accordance with the California Balcony Inspection Law and inspected by a licensed architect, licensed civil or structural engineer , a building contractor holding any or all of the “A,” “B,” or “C-5” license classifications issued by the Contractors’ State License Board, with a minimum of five years’ experience , or an individual certified as a building inspector or building official from a recognized state, national, or international association . A copy of the written inspection report performed in compliance with the California Balcony Inspection Law shall be provided by the Seller to the Purchaser within three (3) business days of the inspector’s completion of such report. The Seller shall cause all deficiencies and damage disclosed by such report shall be repaired and rectified on or before Nov. 30, 2024.
5. Conditions Precedent for the Benefit of the Seller. The Seller’s obligation to Close shall be conditioned upon the satisfaction or emailed or written waiver by the Seller of all of the conditions precedent (“Conditions Precedent for the Benefit of the Seller”) set forth in this Section
5. Any of the Conditions Precedent for the Benefit of the Seller may be waived by the Seller unilaterally; and if so waived, such conditions shall be of no further effect hereunder. Any such waiver shall be effective only if the same is expressly waived (i) by email from the Seller to the Purchaser and Escrow Holder ; or (ii) in a writing signed by the Seller and delivered to the Purchaser and Escrow Holder. If the Conditions Precedent for the Benefit of the Seller are not satisfied by the deadlines set forth in this Section 5 or expressly waived, the Seller (provided the Seller is not in default hereunder) may provide emailed or written notice of the Seller’s conditional termination of this Agreement to the Purchaser and Escrow Holder. After receipt of such notice of conditional termin ation, the Purchaser shall have ten (10 ) Business Days to cure any non - satisfaction of a condition or other default specified in the notice of conditional termination. If such matter remains unsatisfied or the default remains uncured after the expiration of such ten (10) Business Day period, then this Agreement shall terminate at the close of business on such tenth (10th) Business Day. In the event of termination of this Agreement (and by operation of law the Escrow) pursuant to this Section 5, then: (x) all rights and liabilities of the Purchaser and the Seller with respect to this Agreement shall immediately terminate except those which specifically survive such termination; (y) Escrow Holder shall return to the Seller all funds or other things deposited in Escrow by the Seller; and (z) Escrow Holder shall return to the Purchaser all funds or other things deposited in Escrow by the Purchaser, less all fees and costs charged by the Escrow Holder.
Notwithstanding the preceding clause (x) of this Section 5, in the event of termination of this Agreement pursuant to this Section 5, the Seller and the Purchaser shall cooperate with one another, execute all documents reasonably necessary and take all reasonable steps as maybe required by Escrow Holder in order to accomplish the purposes of this Section 5. The Conditions Precedent for the Benefit of the Seller are:
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8 (a) The delivery by the Purchaser into Escrow , at least one (1) Business Day prior to Closing, of Immediately Available Funds in the amount required by this Agreement. (b) The delivery by the Purchaser into Escrow, at least one (1) Business Day prior to Closing, of all other documents and instruments required by this Agreement or reasonably required by Escrow Holder to complete the Closing.
(c) As of the Closing Date, Purchaser is not in default of any of its representations or warranties or covenants under this Agreement, or any other material terms or conditions related to Purchaser, and all of the Purchaser’s representations and warranties under this Agreement are true and correct as of the Closing Date.
(d) As of the Closing Date, the Purchaser has not made an assignment for the benefit of creditors, filed a bankruptcy petition, been adjudicated insolvent or bankrupt, petitioned a court for the appointment of any receiver of, or trustee for, the Purchaser, or commenced any proceeding relating to the Purchaser under any reorganization, arrangement, readjustment of debt, dissolution, or liquidation law or statute of any jurisdiction, whether now or later in effect.
6. Conditions Precedent for the Benefit of the Purchaser. The Seller shall cause the satisfaction, and the Closing shall be conditioned upon the satisfaction or emailed or written waiver by the Purchaser, of all of the conditions precedent ( “Conditions Precedent for the Benefit of the Purchaser”) set forth in this Section 6. Any of the Conditions Precedent for the Benefit of the Purchaser may be waived by the Purchaser unilaterally; and if so waived, such conditions shall be of no further effect hereunder. Any such waiver shall be effective only if the same is (i) expressly waived by email from the Purchaser to the Seller and Escrow Holder; or (ii) or in writing signed by the Purchaser and delivered to th e Seller and Escrow Holder. If the Conditions Precedent for the Benefit of the Purchaser are not satisfied by the deadlines set forth in this Section 6 or expressly waived, the Purchaser (provided the Purchaser is not in default hereunder) may provide emailed or written notice of the Purchaser ’s conditional termination of this Agreement to the Seller and Escrow Holder. After receipt of such notice of conditional termination, the Seller shall have ten (10) Business Days to cure any non -satisfaction of a co ndition or other default specified in the notice of conditional termination. If such matter remains unsatisfied or the default remains uncured after the expiration of such ten (10 ) Business Day period, then this Agreement shall terminate at the close of business on such tenth (10th) Business Day. In the event of termination of this Agreement (and by operation of law the Escrow) pursuant to this Section 6, then: (y) the same shall be a default by the Seller entitling the Purchaser to all rights and remedies available at law or in equity including, without limitation, obtaining a judgment for damages, as well as the right to specific performance of this Agreement; and (z) all fees and costs charged by the Escrow Holder shall be paid by the Seller. Purchaser is not waiving any default by the Seller and nothing contained in this Section 6, including, without limitation, the immediately foregoing sentence shall be a waiver of any right of Purchaser to recover damages from the Seller for any default by Seller hereunder. The Conditions Precedent for the Benefit of Purchaser are:
(a) The deposit by the Seller into Escrow , at least one (1) Business Day prior to Closing, of the Grant Deed duly executed and acknowledged by the Seller, conveying fee simple title to the Real Property to the Purchaser.
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9 (b) The deposit by the Seller into Escrow , at least one (1) Business Day prior to Closing, of the Assignment, duly executed, conveying title to the Personal Property to the Purchaser.
(c) The deposit by the Seller into Escrow , at least one (1) Business Day prior to Closing, of a duly executed affidavit in the form prescribed by federal regulations that Seller is not a foreign person and is a “United States Person” as such term is defined in Section 7761(a)(30) of the Internal Revenue Code of 1986, as amended.
(d) The deposit by the Seller into Escrow , at least one (1) Business Day prior to Closing, of a duly executed California Form 593(c) or other evidence that withholding of any amounts is not required by the Revenue and Taxation Code of California.
(e) The deposit by the Seller into Escrow , at least one (1) Business Day prior to Closing, of all additional documents and instruments as are reasonably required by the Escrow Holder to complete the Closing.
(f) As of the Closing Date, no lease, tenancy or occupancy agreement exists which affects the Property, except for the Tenant Agreements, Property Documents and the Permitted Exceptions.
(g) As of the Closing Date, there is no pending, or threatened to be pending, action or proceeding by any person or before any government authority, the outcome of which could prohibit the use of the Property as intended by the Purchaser.
(h) The Escrow Holder is prepared and obligated to issue the Title Policy in Purchaser’s favor, upon the recordation of the Grant Deed and there are no exceptions to the Title Policy, except for the Permitted Exceptions.
(i) As of the Closing Date, Seller is not in default of any of its representations or warranties under this Agreement, or any other material terms or conditions related to Seller, and all of Seller’s representations and warranties under this Agreement are true and correct as of the Closing Date.
7. Representations, Warranties and Covenants; Waivers and Releases; Seller Default. When making the representations and warranties set forth in this Section 7, each party making a representation and/or warranty represents that the same are true, correct and complete as of the date hereof and shall be and are true, correct and complete as of the Closing Date. The representations and warranties shall survive the Closing.
(a) Representations and Warranties Regarding Authority. The Seller and the Purchaser each hereby represent s and warrant s to the other that this Agreement and all documents or instruments executed by them which are to be delivered at or prior to the Closing are, or on the Closing Date will be, duly authorized, executed and delivered by the Seller or the Purchaser, as applicable.
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10 (b) Representations and Warranties Regarding Enforceability of Agreement. The Seller and the Purchaser each hereby represents and warrants to the other that this Agreement and all documents required hereby to be executed by them shall be valid, legally binding obligations of, and enforceable against, the Seller or the Purchaser, as applicable , in accordance with their terms.
(c) Seller Representations and Warranties Pertaining to Legal Matters . The Seller hereby represents and warrants to the Purchaser that:
(1) The Seller is the sole owner of title to the Property; and (2) There is no pending or threatened proceeding in eminent domain or otherwise, which would affect the Property, or any portion s thereof, nor any facts which might give rise to such action or proceeding.
(d) Seller Representations and Warranties Pertaining to Options. As of the Effective Date, the Seller hereby represents and warrants to the Purchaser that no person has any option or right of first refusal to purchase the Property or any parts thereof. (e) Seller Representation and Warranty Pertaining to the Rent Roll. The Seller hereby represents and warrants to the Purchaser that to the best of Seller’s knowledge, the Rent Roll and all other documents required to be delivered to Purchaser are true, complete and correct in all material respects as of the dates set forth thereon.
(f) Seller Representation and Warranty Pertaining to Tenant Agreements . The Seller hereby represents and warrants to the Purchaser that to the best of Seller’s knowledge, the Tenant Agreements constitute all of the oral and written agreements or understandings concerning the leasing or occupancy of the Property by which the Purchaser would be bound following the Closing.
(g) Seller Representation and Warranty Regarding Operation of the Property . The Seller hereby represents and warrants to the Purchaser that to the current actual knowledge of Seller, the Property Documents and the Permitted Exceptions constitute all of the oral and written agreements or understandings concerning the Property by which the Purchaser would be bound following the Closing other than the Tenant Agreements. (h) Seller Representations and Warranties Regarding Discovery of New Information .
The Seller hereby represents and warrants to the Purchaser that if the Seller discovers any information or facts prior to Closing that would materially change any of the for egoing representations and warranties or cause any of the foregoing representations and warranties to be untrue or misleading in any respect, the Seller will promptly give the Purchaser notice of those facts and information.
8. Condemnation.
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11 (a) Condemnation. If between the Effective Date and the Closing Date, any condemnation or eminent domain proceeding is commenced by any party other than the Purchaser that will result in the taking of the entire Property or any part of the Property, Purchaser may, at Purchaser’s election, either:
(1) Terminate this Agreement by giving written or emailed notice to the Seller and the Escrow Holder, in which event all remaining funds or other things deposited in Escrow by Purchaser shall be returned to the Purchaser immediately from Escrow, together with any interest earned thereon and all fees and costs charged by the Escrow Holder shall be paid one-half (1/2) by the Purchaser and one-half (1/2) by the Seller; or
(2) Give written or emailed notice to the Seller and the Escrow Holder that Purchaser will proceed with the Closing, in which event the Seller shall assign to the Purchaser all of the Seller’s rights, title s and interests to any award made for the condemnation or eminent domain action.
(b) Notice. If the Seller obtains notice of the commencement of or the threatened commencement of eminent domain or condemnation proceedings with respect to all of any portion of the Property, the Seller shall notify the Purchaser in writing.
9. Broker’s Commission. The Purchaser and the Seller each represents to the other that it does not have any contact or binding agreement with respect to any real estate broker or other person who can claim a right to a commission or finder ’s fee. The Purchaser and the Seller each agree that to the extent any real estate commission, brokerage commission or finder’s fee shall be earned or claimed in connection with this Agreement or the Closing, the payment of such fee or commission, and the defense of any action in connection therewith, shall be the sole and exclusive obligation of the party who requested (or is alleged to have requested) the services of the broker or finder. In the event that any claim, demand or cause of action for any such commission or finder’s fee is asserted against the party to this Agreement who did not request such services (or is not alleged to have requested such services), the party through whom the broker or finder is making the claim shall indemnify, defend (with an attorney of the indemnitee’s choice) and hold harmless the other from and against any and all such claims, demands and causes of action and expenses related thereto, including , without limitation, attorneys’ fees and costs. The provisions of this Section 9 shall survive the Closing or termination of this Agreement.
10. Assignment. The Seller acknowledges that during the Due Diligence Period, the Purchaser intends to issue a request for proposals seeking a third -party to acquire and operate the Property.
The Purchaser may assign this Agreement without the prior written consent of the Seller to any entity selected by Purchaser via the request for proposal process.
11. Notices. All notices under this Agreement shall be in writing and sent (a) overnight by a nationally recognized overnight courier such as UPS Overnight, or FedEx, ( b) by personal delivery, or (c) by email. All notices shall be effective upon receipt (or refusal to accept delivery).
All notices shall be delivered to the following addresses or such other addresses as changed by any party from time to time by written notice to the other parties hereto:
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12 If to Seller: Solutions Chestnut, LLC
Attn: President/CEO
722 West California Avenue
Vista, CA 92083
Email: [email protected]
If to Purchaser: City of Carlsbad
Attn: City Manager
1200 Carlsbad Village Drive
Carlsbad, California 92008
Email: [email protected]
Copy to: City of Carlsbad
Attn: City Attorney
1200 Carlsbad Village Drive
Carlsbad, California 92008
Email: [email protected]
Christensen & Spath LLP
Attn: Walter F. Spath III, Esq.
401 West A Street, Suite 2250
San Diego, CA 92101
Email: [email protected]
If to Escrow Holder: Fidelity National Title Company
Attn: Jasmine Corado
7565 Mission Valley Road, Ste 100
San Diego, CA 92108
Email: [email protected]
12. Risk of Loss.
(a) Subject to the provisions of this Section 12(a), the risk of loss or damage to the Property until the Closing will be borne by Seller. Upon the occurrence of any damage to or destruction of the Property, Seller shall within five (5) days after the occurrence of such damage or destruction give written notice to Purchaser ( “Damage Notice”) specifying the estimated cost to repair or restore the Property and an estimate of the insurance proceeds, if any, that will be available with respect to such damage or destruction. The Closing shall be appropriately delayed to provide adequate time for Seller to give the Damage Notice and Purchaser to make its election provided for below.
(b) If prior to the Closing there is damage to or destruction of the Property that will cost in excess of One Hundred Thousand Dollars ($100,000.00) to repair or restore, Purchaser shall have the right by written notice given to Seller within ten (10) days of Purchaser receiving the Damage Notice, to elect to: (i) close Escrow in such damaged condition, in which event the Purchase Consideration shall not be reduced and Seller shall not be obligated to repair or restore the Property and all insurance proceeds shall be assigned and pay able to Purchaser, and if Seller May 21, 2024
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13 receives any such insurance proceeds, they shall be immediately remitted by Seller to Purchaser at Closing or, if received by Seller after Closing, promptly after receipt; or (ii) terminate this Agreement, and neither party shall have any further rights or obligations to the other party, except neither party shall be relieved of any obligations provided for in this Agreement which expressly survive its termination.
(c) If prior to the Closing there is damage to or destruction of the Property that will cost One Hundred Thousand Dollars ($100,000.00) or less , to repair or restore, Purchaser shall nevertheless close Escrow with the Property in such damaged condition and Seller shall not be obligated to repair or restore the Property, and all insurance proceeds shall be assigned and payable to Purchaser, and if Seller should receive any such insurance proceeds, they shall be immediately remitted to Purchaser.
13. Water Heaters. Seller hereby certifies and warrants that all water heaters in or on the Property are braced, anchored or strapped to prevent falling or horizontal displacement due to earthquake motions as required by State and applicable local codes.
14. Security Deposits, No Prorations; Closing Costs. Seller shall deliver to the Escrow Holder Immediately Available Funds in a n amount equal to the amount of all Tenant Deposits. Such amounts shall be disbursed by Escrow Holder to Purchaser at Closing. No prorations shall be made by the Escrow Holder. The Seller and the Purchaser shall pay the costs of the Title Policy in accordance with Section 2, above. The Purchaser and the Seller shall each pay one -half (1/2) of the costs of the City transfer taxes and County transfer taxes to be paid with r eference to the Grant Deed, if any, and all other stamps, intangible, documentary, recording and surtax imposed by law with reference to any other documents delivered in connection with this Agreement, if any.
The Purchaser and the Seller shall equally sha re the Escrow Holder ’s escrow fees. All other closing costs shall be allocated in accordance with custom in San Diego County, California.
15. General Provisions.
(a) Governing Law. This Agreement shall be interpreted and construed in accordance with California law, without regard to any choice of law principles. (b) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(c) Captions. The captions in this Agreement are inserted for convenience of reference and in no way define, describe or limit the scope or intent of this Agreement or any of the provisions of this Agreement.
(d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, successors, heirs and permitted assigns.
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14 (e) Modifications; Waiver. No waiver, modification, amendment, discharge or change of this Agreement shall be valid unless it is in writing and signed by the party against which the enforcement of the modification, waiver, amendment, discharge or change is sought. (f) Entire Agreement. This Agreement contains the entire agreement between the parties relating to Purchaser’s acquisition of the Property from the Seller and all prior or contemporaneous agreements, understandings, representations or statements, oral or written, are superseded.
(g) Partial Invalidity. Any provision of this Agreement which is unenforceable, invalid, or the inclusion of which would adversely affect the validity, legality, or enforcement of this Agreement shall have no effect, but all the remaining provisions of this Agreement shall remain in full effect.
(h) Survival; No Merger . This Agreement, including, without limitation, all representations, warranties, covenants, agreements, indemnities and other obligations of the Purchaser and the Seller in this Agreement, shall survive the Closing as provided for in this Agreement and will not be merged into the Grant Deed or any other document. (i) No Third-Party Rights. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties to this Agreement and their respective successors and assigns, any rights or remedies.
(j) Time of Essence. Time is of the essence in this Agreement. (k) Relationship. Nothing contained in this Agreement shall be deemed or construed by the parties or by any third person to create a relationship of principal and agent or partnership or a joint venture between the Purchaser and the Seller or between any of them and any third party. (l) Recording. This Agreement shall not be recorded.
(m) Purchaser Approval. Where this Agreement refers to an action or approval of the Purchaser, it shall mean the approval of the City Manager, or designee. (n) Exhibits and Recitals Incorporated. All exhibits referred to in this Agreement are hereby incorporated in this Agreement by this reference, regardless of whether or not the exhibits are actually attached to this Agreement. The Recitals to this Agreement are hereby incorporated in this Agreement by this reference.
(o) Independent Counsel. Seller and Purchaser each acknowledge that: (a) they have been given the opportunity to be represented by independent counsel in connection with this Agreement; (b) they have executed this Agreement with the advice of such counsel, if such counsel was retained; and (c) this Agreement is the result of negotiations between the parties hereto and the advice and assistance of their respective counsel, if such counsel was retained. The fact that this Agreement was prepared or negotiated by Purchaser ’s or Sell er’s counsel as a matter of convenience shall have no import or significance. Any uncertainty or ambiguity in this Agreement May 21, 2024
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15 shall not be construed against either party due to the fact that Purchaser ’s or Seller ’s counsel prepared or negotiated this Agreement in its final form. (p) Capacity and Authority. All individuals signing this Agreement for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, represent and warrant to one another party that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing.
IN WITNESS WHEREOF, the parties have executed this Purchase and Sale Agreement as of the date first above written.
SELLER:
Solutions Chestnut, LLC, a California limited liability company By: Solutions for Change, Inc., a California corporation Its: Member
By:____________________________
Michael Christopher Megison, CEO
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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PURCHASER:
City of Carlsbad
APPROVED AS TO FORM:
City of Carlsbad
Office of the City Attorney
By: ~/L ~
Cindie K. McMahon
City Attorney
16 17
Exhibit A
Real Property Legal Description
Real property in the City of Carlsbad, County of San Diego, State of California, described as follows:
PARCEL 1 AS SHOWN ON PARCEL MAP FILED IN BOOK OF PARCEL MAPS AT PAGE 4185, IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, ON OCTOBER 30, 1975, BEING A PORTION OF LOTS 10 AND 11 IN BLOCK C OF ALLES
AVOCADO ACRES, IN THE CITY OF CARLSBAD, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 2027 FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MAY 17, 1927.
APN: 204-191-22-00
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18 Exhibit B
ASSIGNMENT OF PERSONAL PROPERTY AND
ASSIGNMENT AND ASSUMPTION OF LEASES AND CONTRACTS
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby expressly acknowledged, Solutions Chestnut, LLC, a California limited liability company (“Assignor”), hereby grants, conveys, transfers and assigns to the City of Carlsbad, a chartered city (“Assignee”), all of Assignor’s right, title and interest in and to:
(a) all leases (“Leases”) of space in the real property more particularly described in Exhibit “1” attached hereto and by this reference made a part hereof (“Real Property”), together with all prepaid rents from tenants under the leases; (b) the Contracts, as defined in that certain Purchase and Sale Agreement between the parties dated as of _________, 2024 (the “PSA”), attached as Exhibit D to the PSA; and
(c) the Personal Property , Tenant Deposits and Appurtenant Rights and Interests, as defined in the PSA.
The Personal Property is being transferred to Assignee without any representation or warranty of any kind or nature whatsoever, including, without limitation, as to any representations or warranties as to merchantability or fitness for a particular purpose.
Assignee agrees to perform or cause to be performed Assignor’s obligations, if any, under the Leases and the Contracts from and after the date of this instrument.
Each of Assignor and Assignee hereby covenants that they will, at any time and from time to time upon written request therefor, execute and deliver to the other, its nominees, successors and/or assigns, any new or confirmatory instruments and do and perform any other acts which the other, its successors and/or assigns, may reasonably request in order to fully assign and transfer to and vest in Assignee, its nominees, successors and/or assigns, and protect its and/or their rights, title and interest in and enjoyment of, all of the assets of Assignor intended to be transferred and assigned hereby, or to enable Assignee, its successors and/or assigns, to realize upon or otherwise enjoy any such assets, or to effect the allocation of responsibility for performance under the Leases and the Contracts.
The provisions of this Assignment of Personal Property and Assignment and Assumption of Leases and Contracts shall be binding upon and inure to the benefit of Assignor, Assignee an d their successors and assigns.
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IN WITNESS WHEREOF , the undersigned have executed this Assiinment of Personal Property and Assignment and Assumption of Leases and Contracts as of the z..:1/~ day of~ , 2024.
ASSIGNOR:
Solutions Chestnut, LLC, a California limited liability company By: Solutions for Change, Inc., a California corporation Its: Member
711dad C J1,w~M~ By: _______ ~-""---- -
Michael Christopher Megison , CEO
ASSIGN
APPROVED AS TO FORM:
City of Carlsbad
Office of the City Attorney
By: ~/L ~
Cindie K. McMahon
City Attorney
19 20
Exhibit C
Property Documents
Rent Roll
Operating Statements:
• Year Ending 2023
• Year Ending 2022
• Year Ending 2021
Year-to-Date Operating Statements
Natural Hazard Zone Disclosure Report
Property Tax Bill History (2021-Present)
Major Capital Contracts (2021-Present)
Site Map and Floorplans
HVAC Count
Insurance Loss Reports
Current Salary Schedule (Monthly)
Business License and Permits
Certificate of Occupancy
All active Contracts, including Service Contracts, management contracts, franchise contracts, and all contracts for which payments are owed, will be owed at or after the Closing.
Gas and Electric Utility History (2021-Present)
Utility Bills (2021-Present)
Capital Expenditures (2021-Present) – General Ledger Detail Drawings, Plans and Specifications, including as-builts May 21, 2024
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21 Exhibit D
Contracts
PROVIDER SERVICE
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May 21, 2024
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Exhibit 2
RESOLUTION NO. 2024-112
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING THE CITY MANAGER TO RELEASE A REQUEST
FOR PROPOSALS WITH THE INTENT TO IDENTIFY A NEW OWNER FOR THE 100 PERCENT AFFORDABLE HOUSING PROJECT AT 945 CHESTNUT AVENUE WHEREAS, on Dec. 24, 2014, the City of Carlsbad executed a loan of $2,646,000 from the city's Housing Trust Fund to Solutions Chestnut, LLC, a subsidiary of Solutions for Change, Inc. (collectively Solutions for Change), to acquire Chestnut Apartments, a 16-unit apartment complex at 945 Chestnut Ave., to provide affordable housing for homeless familie s; and WHEREAS, Solution s for Change was to obtain the additional financing to initiate work to plan, design and obtain permit s for the substantial rehabi litation of the apartment project by Dec. 31, 2019; and WHEREAS, Solutions for Change has decided to turn the property over to the city for the continued use of affordable housing; and
WHEREAS, on May 21, 2024, the City Council considered entering into a Purchase and Sale Agreement with Solutions for Change for the acquisition of 945 Chestnut Avenue, Carlsbad, CA; and WHEREAS, the city is prepared to issue a Request for Proposals from qualified affordable housin g developer s to identify a new owner for the affordab le housing proj ect; and WHEREAS, the Request for Proposals identifie s minimum affordability requirement s for the property and will require a new 55-year regulatory agreement to be recorded against the property restricting income and rents at levels at least in accordance with the minimum proportions identified in the Surplus Land Act, and as set forth in California Government Code Section 37364; and WHEREAS, city staff will present the City Council with recommendation s for the future owner and use of the property for the City Council's approva l after proposals are received and evaluated.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follow s:
1. That the above recitation s are true and correct.
2. That the city' s disposition of property located at 945 Chestnut Avenue is in conformance with the Carlsbad General Plan in that the disposition will maintain affordable hou sing on the site . The property is designated for residential use by the General Plan Land Use map, and the city's disposition of the property will not change its intended residential May 21, 2024
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use. Furthermore, the intended use of the property is consistent with General Plan goals and program s, including :
a. Land Use and Community Design Element Goal 10-G.3, "Promote infill development that makes efficient use of limited land supply, while ensuring compatibility and integration with existing uses. Ensure that infill properties develop with uses and development inten sitie s supportive a cohesive development pattern ." b. Housing Element Goal 10-G.2, "Sufficient new affordable housing opportunities in all quadrant s of the city to meet the needs of current lower and moderate -income household s and those with special needs, and a fair share proportion of future lower and moderate-income households."
c. Housing Element Program 2.4 City-initiated Development , "The city, through the Housing and Homeless Services Department, will continue to work with private developer s (both for-profit and non-profit) to create housing opportunities for low, very low, and extremely low-income household s."
3. That City Manager or a designee is authorized to release a request for propo sals with the intent to identify a new owner for the 100% affordable housing proje ct at 945 Chestnut Avenue (Attachment A).
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 21st day of May, 2024, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
BLACKBURN, BHAT-PATEL, ACOSTA, BURKHOLDER, LUNA.
NONE.
NONE.
NONE.
SHERRY FREISINGER,illy Clerk
(SEAL)
Request for Proposals RFP 24-XX
Acquisition, Rehabilitation, or Redevelopment of Real
Property, 945 Chestnut Avenue, Carlsbad, CA 92008
May 23, 2024
PROPOSAL RESPONSE DEADLINE:
July 15, 2024, at 12:00 p.m.
CITY OF CARLSBAD
Housing and Homeless Services Department
1200 Carlsbad Village Drive
Carlsbad, CA 92008
THE CITY OF CARLSBAD ENCOURAGES THE PARTICIPATION OF MINORITY- AND
WOMEN-OWNED BUSINESSES
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Attachment A
{city of
Carlsbad
, ' - Bidding
Table of Contents
General
Information and Background .......................................................................................................... 3 Invitation to Respond ................................................................................................................................... 5 Timeline for Submission and Award ............................................................................................................. 5 General Terms and Conditions ..................................................................................................................... 5 Scope of Project ............................................................................................................................................ 5 Proposal Content .......................................................................................................................................... 7 Evaluation Process and Criteria .................................................................................................................... 8 Offer to Exclusively Negotiate & Award Process ......................................................................................... 9 Disclaimer ................................................................................................................................................... 10 Conflict of Interest ...................................................................................................................................... 10 Prohibited Contracts ................................................................................................................................... 10 Technical Assistance, Clarification, and Addenda ...................................................................................... 11 Submittal Process........................................................................................................................................ 11 Appendix A – Site Map ...................................................................................................................................
Appendix B – Capital Needs Assessment .......................................................................................................
Appendix C – Template Purchase and Sale Agreement ................................................................................
Appendix D – Affordable Housing Agreement ...............................................................................................
Appendix E – Preliminary Title Report ............................................................................................................
Appendix F – Property Condition Report
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General Information and Background
Pursua
nt to California Government Code §54220 et seq., the City of Carlsbad (the “city”) is exploring the potential sale of the real property owned by the city located on 945 Chestnut Avenue, Carlsbad, CA 92008 in the City of Carlsbad, County of San Diego, State of California and commonly known as the Chestnut Apartments property (the “Subject Property”). The purpose of this RFP is to explain the requirements and procedures for the submission of formal proposals from parties interested in the acquisition, rehabilitation, and possible redevelopment of the Subject Property.
The property is currently in a temporary contingent owne rship status, with the current owner, Solutions Chestnut, LLC, a subsidiary of Solutions for Change, Inc. (collectively “Solutions for Change”), and the City of Carlsbad in escrow. The contingent ownership status will continue during this RFP period and conclude upon closing of a concurrent escrow with the successful proposer. During the RFP period, the city will be the sole decision-making authority of the purchase assignment of the property.
The Subject Property
The property was built in 1975 and consists of three separate apartment buildings along with an attached laundry building and a small storage room. The apartment buildings are typical slab -on- grade, two-story, wood-framed structures. The exteriors of the buildings are stucco with a small amount of wood-shingle siding. The roofs are flat with a hot mop (asphalt) application with gravel on top.
The property consists of a 16-unit, two-story apartment project in three buildings with walk-up access for residents. The building was originally constructed in 1975 of wood- frame construction with a stucco and wood facia and trim exterior. Within the apartment building s, there are four one - bedroom, one bath units (636 square feet each) and 12 two -bedroom, one-bath units (851 square feet each). Development amenities include a laundry facility. There are a total of 26 open parking spaces resulting in a parking ratio of 1.62 spaces per unit.
All measurements are approximations and must be field verified by Respondents. The Subject Pro
perty will be sold in an “as is” condition. A recent Capital Needs Assessment (CNA) detailing the existing condition of the property can help inform decision making regarding the scope and extent of necessary renovations or redevelopment efforts (Appendix B). Prospective Respondent(s) will be required to undertake their own independent inspection and investigation of the Subject Property to verify information provided.
Site Map
For an aerial view of the parcel, please see the attached site map (Appendix A).
Adjacent Uses
1. The Subject Property is located within minutes to Highway 76 and 78, and Interstate 5.
2. The Subject Property is located near recreational, commercial, and retail amenities.
3. Carlsbad has a proximity to the major markets of San Diego (38 miles south), Orange County (15 miles north) and Los Angeles (80 miles north).
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Property Information
Below is an outline of information applicable to the Subject Property. This outline provides general information and does not contain all applicable information. For more information, please contact the City of Carlsbad Planning Division at [email protected].
ADDRESS: 945 Chestnut Avenue, Carlsbad, CA 92008
APN: 204-191-2200
LOT SIZE: 0.77 Acres
ZONING: Village Barrio
Village and Barrio Master Plan
Village and Barrio Objective Design Standards
Village and Barrio Objective Design Standards Processing Guide Village and Barrio Objective Design Standards Checklist UTILITIES: Carlsbad Municipal Water District, Republic Services, and Encin a Wastewater Authority
NUMBER OF BUILDINGS: Three (3) apartment buildings, and one (1) attached laundry building Building #1 is approximately 7,417 square feet
Building #2 is approximately 3,648 square feet
Building #3 is approximately 3,116 square feet
The total building square footage is approximately 14,181 square feet NUMBER OF UNITS: Currently sixteen (16) units:
- Twelve (12) 2-bedroom 1-bathroom units.
- Four (4) 1 bedroom 1-bathroom units.
The property consists of 15 affordable units, occupied by households at or below 60% and 90% of the San Diego County Area median income (AMI). One unit is reserved for an on-site manager.
Upon transfer the new owner will be subject to a new 55-year regulatory agreement recorded against the property to at least restrict the units to the following affordability levels as identified in California Government Code Section 37364:
• Not less than 80% of the property area shall be used for the development of housing • At least 20% of the units will be affordable to very low-income households (50% of Area Median Income)
• At least 20% of the units will be affordable to low-income households (60% of Area Median Income)
• The remaining units affordable to at least moderate-income households (90% of Area Median Income)
PARKING SPACES: Fifteen (15) covered spaces and Eleven (11) open spaces.
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Invitation to Respond
The
City of Carlsbad is seeking proposals from qualified developers for the Chestnut Apartments affordable housing development located at 945 Chestnut Avenue, Carlsbad, CA 92008. The project site presents an opportunity for the acquisition and rehabilitation and/or re -development of high - quality, 100% affordable housing project that will contribute to the overall benefit and stability of the community. The city’s intent is to provide affordable housing for the current low- and moderate- income residents. Any increase in the number of affordable units in a new project shall provide a priority for low- and moderate-income households with a local preference to the extent allowed by law.
Timeline for Submission and Award
Activity Date
Public Notice announcing Request for Proposal May 23, 2024 Final Date for Submissions of Questions Jun. 14, 2024
Responses to Questions Via Addendum on City e-Bidding Site Jun. 21, 2024 Proposal Submission Deadline Jul. 15, 2024
Interviews (if needed) Week of Jul. 29, 2024
City Council Approval Sept. 2024
Close of escrow No later than Dec. 31, 2024
*Dates are tentative and subject to change.
General Terms and Conditions
The successful proposer will be required to sign a Purchase and Sale Agreement with the City of Carlsbad (template is located in Appendix C). All terms and conditions will be non-negotiable. Failure to execute the Purchase and Sale Agreement within the required time period shall be just cause for the rescission of the contract award. If a selected proposer refuses or fails to execute the Purchase and Sale Agreement, the City of Carlsbad may award the contract to the next qualified proposer.
Scope of Project
The scope of work for the Chestnut Apartments affordable housing development encompasses a comprehensive approach to addressing the housing needs of low- and moderate-income households in Carlsbad, CA. The following tasks and objectives will guide the development process:
Capital Needs Assessment (CNA): Prio r to commencing rehabilitation or demolition and development activities, respondents are required to review and analyze the findings of the attached capital needs assessment (Appendix B ). The CNA will provide valuable insights into the existing condition of the property and inform decision- making regarding the scope and extent of necessary renovations or redevelopment efforts.
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Rehabilitation and/or New Development: Respondents are required to undertake a thorough rehabilitation of the existing site to address all identified deficiencies and improve the overall quality, safety, sustainability, and functionality of the housing units. This comprehensive rehabilitation effort will entail a professional examination of existing structures, systems, and amenities, followed by strategic improvements to significantly improve the property's condition, and extend the useful life.
By focusing on issues ranging from structural integrity to energy efficiency, the desired process will aim to rehabilitate the property and create a living environment that meets the needs of residents and the community at large.
In addition to rehabilitation, respondents are welcome to explore , and the city is supportive of options for expanding the density and unit count to further increase the availability of affordable housing in the community. This may involve repurposing existing structures, optimizing building layouts, incorporating additional housing units within the development plan, or complete demolition and rebuild of a new 100% affordable housing project. Any proposed unit expansion must align with local zoning regulations and affordability requirements outlined in the RFP. Selection of respondent Developer does not represent approval of a proposed project. Any change to the existing structures must be reviewed by the city’s Community Development department for any necessary environmental, planning or building permit approvals.
Relocation Plan: The City’s priority is to provide affordable housing for the current low - and
moderate-income residents. Any proposal that requires current residents to be temporarily or permanently relocated, must include an appropriate relocation plan. This relocation plan must not only meet all applicable Federal, State , and local regulations, but must strongly focus on resident well-being and community consideration.
Compliance with Affordability and Occupancy Requirements: Thro ugh provisions of the Surplus Land Act, the City Council determined the proposed minimum affordability requirements meet eligibility as “exempt surplus land”. Therefore, regardless of the chosen approach (rehabilitation or re-development), respondents must adhere to the minimum affordability and occupancy covenants outlined in the RFP (existing affordability restrictions found in Appendix D will be amended in a new 55-year regulatory agreement to levels identified in California Government Code Section 37364). This includes maintaining affordable levels, complying with occupancy restrictions, and providing housing opportunities for low - and moderate-income households as specified in a new 55-year regulatory agreement to be recorded against the property.
Financing: All pro
posals should identify all of the financing sources anticipated to be used in the acquisition and rehabilitation and/or re -development of Subject Property. Respondents should clearly identify which funding sources are anticipated, secured and which are contingent. The City of Carlsbad will have to consent to any and all financing secured against the property. Any financial assistance being requested and associated occupancy or housing cost restrictions must be described in detail.
Timeline and Milestones: Res pondents should provide a detailed timeline and milestones for the implementation of the proposed rehabilitation or re-development plan. Key milestones may include relocation plan approval, development or building permit approvals, any necessary May 21, 2024
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environmental permit approvals, site preparation, design development, construction commencement, and project completion. The timeline should be realistic and achievable, taking into consideration the complexity of the project and any regulatory approval processes that may be required.
Proposal Content
Propo
sals shall provide a straightforward, concise delineation of capabilities to satisfy the requirements of this RFP. Emphasis should be placed on completeness and clarity of content for the proposal.
Proposals shall adhere to the following format for organization and content. Proposals must be typed and arranged/divided into the following sequence to facilitate evaluation:
1. Cover Letter
The cover letter shall: 1) confirm that all elements of the RFP have been reviewed and understood; 2) include a statement of intent to perform the services as outlined; 3) express the proposer’s willingness to enter into an Agreement under the terms and conditions prescribed by this RFP and in the Sample Agreement; 4) include a brief summary of the proposer’s qualifications; and 5) identify a single person and contact information for possible contact during the RFP review process. The cover letter shal l be limited to two (2) pages.
2. Detailed Proposal
This section should demonstrate in detail an understanding of the scope of work.
Respondents should describe the approach to rehabilitation and/or re -development, including preliminary design concepts, relocation plans, construction plans, and timeline.
3. Financial Proposal
This section should include total estimated project costs including any developer fees , funding sources and uses , operating and replacement reserve structure, 30-year cash flow projection, proposed affordable price levels and any requested financial assistance.
4. Qualifications and Experience
The proposer shall provide details on at least three (3) similar affordable housing developments they have completed that would demonstrate developer capacity to successfully complete the scope of work in this proposal.
Evaluation Process and Criteria
In accordance with the Carlsbad Municipal Code, the city will select a proposal based on a “best value” evaluation. Under the city’s best value evaluation method, the proposal with the lowest rates may not be selected. The award is based on the proposal that is most advantageous to the May 21, 2024
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city, taking into consideration price and the criteria that are set forth here. Responsive proposers may be asked to attend an interview to help the city in its evaluation. The RFP response will be evaluated by City of Carlsbad representatives from relevant departments.
The proposals with the top average scores from the written proposal review process might be asked to participate in a panel interview to evaluate the proposer’s plan of work, qualifications, experience and fit with the organizational values for the City of Carlsbad.
Proposals will be evaluated based on the following criteria:
1. Project approach and feasibility.
2. Community benefit.
3. Developer experience and capacity.
1. Project Approach and Feasibility (35%)
- D emonstrated developer ability to successfully carry out similar projects , particularly in the region
- P roposal’s financial feasibility and underwriting
- Leveraged project financing plan that includes a variety of public and private capital funding sources
- Overall project proforma, including transparency of project underwriting and feasibility of proforma assumptions
- Cash flow projections demonstrating that the proposed project, once operational, will meet all debt service or other operational expense obligations for a minimum period of 20 years
- Project readiness and timeline
2. Community Benefit (35%)
- Ability of proposal to support affordable price levels - Level of aesthetic improvement to the neighborhood
- Provide accessibility enhancements to residents
- Ability to provide additional affordable units is highly desirable - E ngages existing community and stakeholders affected by relocation - Ensures neighboring residents and community stakeholders are consulted in the design, permitting and construction phases of the project
3. Developer Experience and Capacity (30%)
- Demonstrated developer capacity to perform administrative, managerial, and operational functions, and to oversee the work necessary for successful completion of the proposed project
- At least one member of the developer team must have completed at least on e affordable housing project within the City of Carlsbad or a comparative locality - Exhibit prior work resulting in successful development of affordable housing Successful development may include operation, construction, acquisition, May 21, 2024
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acquisition with rehabilitation or any combination of accomplishments that created or preserved affordable housing
- Development team’s experience and ability to deliver high quality services to the resident population
Right to Negotiate
The city reserves the right to negotiate with Respondent subsequent to receipt of the Respondent’s proposal. The city reserves the right to request from Respondent a last best and final proposal, whereby the city may ask either all proposers or the top proposers to submit their last best and final proposal. If the city is not satisfied with any of the proposals after asking for last best and final proposals, the city may in good faith choose any party to negotiate terms for an agreement.
Offer to Exclusively Negotiate & Award Process
Upon completion of the proposal review period, city staff will bring recommendations to the City Council to select a proposal. Upon approval of the City Council, the city will negotiate a purchase and sale agreement (template in Appendix C) exclusively with the selected Proposer for a period of up to 30 days. The selected Proposer must provide a non-refundable deposit of $1,000 for the right to negotiate exclusively with the city.
By submitting a proposal and qual ifications to the city, the prospective buyer is also agreeing that the city retains the right to modify or suspend all aspects of the selection and exclusive negotiating process, and to waive any defects as to form or content of the offering or any responses that are received. By submitting a proposal, prospective buyer acknowledges and accepts the terms of the city’s Purchase and Sale Agreement. Further, city shall have the right to reject any and all proposals.
Please do not sign the agreement at this time. Proposer will also be required to execute other docum
ents appropriate to this project, including insurance requirements. No proposal shall be binding upon the city until after the agreement is signed by duly authorized representatives of both the service provider and the city. After the Purchase and Sale Agreement has been executed, more detailed property information will be provided to the Purchaser, including tenant rent, and income information.
Please note that a sec ond phase of city approvals will be necessary after the close of escrow for any requested city financial assistance and for the development entitlement process.
Public Record
All proposals submitted in response to this RFP become the property of the city and are public records and, as such, may be subject to public review. Financial capacity statements, however, are provided on a confidential basis to the extent allowed by law.
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Right to Cancel
The city reserves the right to revise or cancel, for any reason, in part or in its entirety, this RFP, including but not limited to: selection schedule, submittal date, and submittal requirements. If the city cancels or revises this RFP, all Respondents will be notified in writing by the city.
Disclaimer
The city reserves the right to: 1) accept or reject any or all proposals received; 2) waive any non - substantive deficiency or irregularity; 3) negotiate with any qualified proposer; 4) award a contract in what it believes to be the best interest of the city; 5) cancel this request, in part or its entirety, if it is deemed to be in the best interest of the city; 6) reject the proposal of any proposer who has previously failed to perform properly; 7) reject the proposal of any proposer who has failed to complete a contract within the specified timeframe; and/or 8) reject the proposal of any proposer that is not in a position to fulfill a resulting contractual obligation. This Request for Proposals (RFP) does not commit the city to award any contract, pay any pre -award expenses, or pay any costs incurred in the preparation of a proposal.
Conflict of Interest
No person performing services for the city, in connection with the establishment of any agreements or any projects resulting from this solicitation, shall have a financial or other personal interest other than employment or retention by the city, in any contract or subcontract in connection with this solicitation or any resulting project.
Prohibited Contracts
The city shall not contract with and shall reject any RFP's submitted by the persons or entities specified below unless the City Council finds that Special Circumstances exist which justify the approval of such a contract.
• Persons employed by the city or public age
ncies for which the City Council are the
governing body;
• Profit-making firms or businesses in which city employees described in this solicitation serve as officers, principals, partners or major shareholders; • Persons who, within the immediately preceding twelve (12) months, came within the provisions this solicitation and who (1) were employed by the city in positions of substantial responsibility in the area of service to be performed by the contract, or (2) participated in any way in developing the contract or its service specifications; • Profit-making firms or businesses in which the former city employees described in this solicitation serve as officers, principals, partners, or major shareholders; and • A person who currently serve s on a city board or commission per CMC 2.15.030. The submitter certifies that the consultant firm has complied with the above provisions and that any ensuing contract will be valid.
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Technical Assistance, Clarification, and Addenda
Requests for clarifications regarding this RFP should be emailed to Christian Gutierrez at [email protected] by June 14, 2024, by 5 p.m. Clarifications and substantive changes in the submittal requirements, if any, will be posted on the city’s e-bidding site no later than June 21, 2024, by 5 p.m.
Submittal Process
The Request for Proposal is available on the city’s website through PlanetBids only. You must register as a document holder to receive updates and notices:
https://www.planetbids.com/portal/portal.cfm?CompanyID=27970 City of Carlsbad website: https://www.carlsbadca.gov/departments/finance/contracting- purchasing/bids
If you have questions regarding PlanetBids, please contact Shea Sainz, Senior Contract Administrator, at [email protected] or 442-339-2467.
ELECTRONIC FORMAT RECEIPT AND OPENING OF RFPs: Submittals will be received in electronic format (eBids) at the City of Carlsbad’s electronic bidding (eBidding) site at City of Carlsbad - Contracting & Purchasing and are due by the date and time specified on the cover of the solicitation.
BIDS MUST BE SUBMITTED BY DUE DATE AND TIME. Once the deadline is reached, no further submissions are accepted.
BIDDERS MUST BE PRE -REGISTERED with the city’s bidding system and possess a system -assigned Digital ID in order to submit and electronic bid
The city’s bid/electronic bidding (eBidding) system will automatically track information submitted to the site including IP addresses, browsers being used and the URLs from which information was submitted. In addition, the city’s bidding system will keep a history of every login instance including the time of login, and other information about the user's computer configuration such as the operating system, browser type, version, and more. Because of these security features, Proposers who disable their browsers’ cookies will not be able to log in and use the city’s bidding system.
Upon entry of their proposal, the system will ensure that all required fields are entered. The system will not accept a proposal for which any required information is missing. This includes all essential documentation and supporting materials and forms requested or contained in these solicitation documents.
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- Bidding
Proposals remained sealed until the due date and time. E-Bids and eProposal’s are transmitted into the city’s bidding system via hypertext transfer protocol secure (https) mechanism using SSL 128-256- bit security certificates issued from Verisign/Thawte which encrypts data being transferred from client to server. Proposals submitted prior to the due date and time are not available for review by anyone other than the submitter, who will have until the due date and time to change, rescind or retrieve its proposal should they desire to do so.
Proposals must be submitted by due date and time. Once the deadline is reached, no further submissions are accepted into the system. Once the due date and time has passed, bidders, proposers, the general public, and city staff are able to immediately see the results online. City staff may then begin reviewing the submissions for responsiveness, compliance and other issues.
Proposals may be withdrawn by the proposer prior to, but not after, the time set as due date and time.
Important note: Submission of the electronic proposal into the system may not be instantaneous.
Due to the speed and capabilities of the user’s internet service provider, bandwidth, computer hardware and other variables, it may take time for the proposer’s submission to upload and be received by the city’s eBidding system. It is the proposer’s sole responsibility to ensure their proposals are received on time by the city’s eBidding system. The City of Carlsbad is not responsible for proposals that do not arrive by the due date and time.
Electronic submissions carry full force and effect. The proposer, by submitting their electronic proposal, agrees to and certifies under penalty of perjury under the laws of the State of California, that the certification, forms and affidavits submitted as part of this proposal are true and correct.
Proposals are public records. Upon receipt by the city, proposals shall become public records subject to public disclosure. It is the responsibility of the Proposer to clearly identify any confidential, proprietary, trade secret or otherwise legally privileged information contained within the proposal s.
General references to sections of the California Public Records Act will not suffice. If the proposer does not provide applicable statutory or case law that clearly establishes that the requested information is exempt from the disclosure requirements of the Public Records Act, the city shall be free to release the information when required in accordance with the Public Records Act, pursuant to any other applicable law, or by order of any court or government agency, and the proposer agrees to hold the city harmless for any such release of this information.
Thank you for your interest, and we look forward to reviewing your proposal.
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Exhibit 3
RESOLUTION NO. 2024 -113
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, DECLARING THE PROPERTY LOCATED AT 945 CHESTNUT
AVENUE AS EXEMPT SURPLUS LAND IN ACCORDANCE WITH CALIFORNIA GOVERNMENT CODE SECTIONS 54221(F}(l)(A) AND 37364
WHEREAS, in 2014, the City of Carlsbad provided a $2.6 million loan to Solutions for Change, LLC, which is a subsidiary of Solutions for Change, Inc. (collectively Solutions for Change) to acquire the
0.77 acre, 16-unit property at 945 Chestnut Avenue in Carlsbad (Property) to provide permanent affordable housing for homeless families; and
WHEREAS, Solutions for Change has been unable to secure funding to complete the project, is looking to end its ownership of the Property and is proposing to transfer the Property to the city for continued use as an affordable housing project in exchange for loan forgiveness; and WHEREAS, the city intends to acquire the Property and continue to provide housing affordable to households of low or moderate income; and
WHEREAS, city staff intend to issue a Request for Proposals to identify a new owner to acquire the property and either rehabilitate the existing affordable units or demolish and rebuild a new affordable housing project with potentially more units .
WHEREAS, the Request for Proposals identifies minimum affordability requirements for the Property and will require a new regulatory agreement be recorded against the Property restricting income and rents at levels with at least 20% of the units affordable to low-income households, at least 20% of the units affordable to very low-income households, and 50% of the units affordable to at least moderate-income households; and
WHEREAS, the Surplus Land Act (SLA, or the Act), as set forth in Government Code Section 54220 and following, was amended to promote affordable housing development on unused or underutilized public land throughout the state to respond to the affordable housing crisis and now requires public agencies to follow certain procedures to purchase or dispose of "surplus land" or to declare land to be "exempt surplus land" at a regular public meeting prior to disposition.
WHEREAS, under California Government Code Section 54221(f}(l}(A), "exempt surplus land" includes land that is transferred pursuant to California Government Code Section 37364, which authorizes a city to, subject to certain conditions, purchase, sell, lease, exchange, quitclaim, convey, or otherwise dispose of real property to provide housing affordable to persons and families of low or moderate income; and
WHEREAS, the exemption in California Government Code Section 54221(f)(1)(A) applies to property that is transferred for affordable housing and satisfies the requirements of California Government Code Section 37364; and
WHEREAS, the City Council has reviewed the Request for Proposals and its proposed minimum affordability requirements for the Property in compliance of California Government Code Section s 54221(f)(1)(A) and 37364; and
WHEREAS, the city is not required to provide written notice of the property’s availability for open space purposes because the property is not within a coastal zone, adjacent to a historical unit of the State Parks System, listed on, or determined by the State Office of Historic Preservation to be eligible for, the National Register of Historic Places, or within the Lake Tahoe region; and WHEREAS, the City Council has considered the acquisition of the Property for affordable housing, and the testimony of all persons desiring to be heard on the matter at their regular meeting on May 21, 2024; and
WHEREAS, the City Planner, through the process outlined in Carlsbad Municipal Code Section
19.04.060, has determined that this action is categorically exempt from the California Environmental Quality Act pursuant to CEQA Guidelines Section 15326 (Acquisition of Housing for Housing Assistance Programs). Any future change to the Property will be evaluated for any necessary environmental review and approval. No appeals of this determination were received in accordance with Carlsbad Municipal Code Section 21.54.140.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
2. The City Council makes the following findings under California Government Code Sections 54221(f)(1)(A) and 37364:
a. Not less than 80% of the area of the Property to be disposed will be used for the development of housing, because the Property will only be used for housing as identified in the Request for Proposals.
May 21, 2024
Item #6 Page 48 of 51
May 21, 2024
Item #6 Page 49 of 51
b. Not less than 40% of the total number of those housing units developed on the Property shall be affordable to households whose incomes are equal to, or less than , 75% of the maximum income of lower income households, and at least half of which shall be affordable to very low income households, because at least 20% of the units on the Property will be restricted to use by low income households and at least 20% of the units will be restricted to use by very low income households as identified in the Request for Proposals and a 55-year city regulatory agreement to be recorded on the property.
c. The dwelling units produced at the Property will be restricted by a city regulatory agreement to remain continually affordable to those persons and families for not less than 55 years; such covenants and conditions of the agreement will be binding upon successors in interest of the housing sponsor; and such agreement will be recorded by the San Diego County Recorder in the granter-grantee index.
3. Based upon the evidence presented, the City Council declares the Property to be exempt surplus land pursuant to California Government Code Section 54221(f)(l)(A) as property planned to be purchased and transferred pursuant to California Government Code Section 37364.
4. That the City Manager or a designee is authorized to act on behalf of the City of Carlsbad in all future actions necessary to be compliant with the Surplus Land Act for the Property.
May 21, 2024
Item #6 Page 50 of 51
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Counci l of the City of Carlsbad on the 21st day of May, 2024, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
BLACKBURN, BHAT-PATEL, ACOSTA, BURKHOLDER, LUNA.
NONE.
NONE.
NONE.
KEITH BLACKBURN, Mayor
SHERRY FREISINGER, City Clerk
(SEAL)
Exhibit 4
City Council Agenda Bill Dated Oct. 21, 2014
(on file in the Office of the City Clerk)
May 21, 2024
Item #6 Page 51 of 51
Tammy Cloud~McMinn
From:
Sent:
To:
Council Internet Email
Tuesday, May 21 , 2024 8:47 AM
City Clerk
All Receive • Agenda Item # IJJ
For the Information of the:
CITI COUNCIL
DateS/JJ/J.t./CA _LCC ~
CM ✓ ACM ✓ DCM (3) ✓
Subject: FW: Concerns Regarding Affordable Housing Proposal (Item 6) From: Bradford Robbins <[email protected]>
Sent: Monday, May 20, 2024 5:15 PM
To: Council Internet Email <[email protected]>
Cc: Scott Chadwick <[email protected]>
Subject: Concerns Re.garding Affordable Housing Proposal {Item 6) Dear Council members,
I am Brad Robbins, a Carlsbad resident with a strong interest in ensuring our city offers successful affordable housing options.
The City Council on Tuesday May 21st will be asl<ed to approve Item 6 on the agenda. There are several problems with the proposal, and I believe Council should not approve this recommendation.
The affordable housing at 945 Chestnut has been run by a company, Solutions for Change, since 2014, when Council provided them a $3.1 M loan to buy the property. The 15 affordable units appear to be well r•un and have not generated community issues.
The primary reason for item 6 is Solutions for Change has been unable to meet their commitment to increase the housing density at the site. They have been unable to raise the capital needed because Solutions for Change is unwilling to adopt "housing first" principles, so they cannot get State or County funding. Solutions for Change believes the 'housing first' approach does not treat the residents well nor is it compatible with the surrounding community.
In Carlsbad, the Windsor Pointe situation has highlighted the challenges of implementing 'housing first' principles without proper on site services and compatible tenant selection.
However, the City needs the site density increased to achieve the important affordable housing goals, the item 6 proposal has the City tal<e back the property in exchange for forgiving the loan and then the City will find a new developer.
This proposal has several problems.
First, the city should not be bailing out businesses that get in trouble. Solutions for Change is struggling but the city should not become the interim owner/operators of yet another affordable housing unit. Why would we spend money on building up city staffing to run affordable housing?
Second, if the only sources of funding for a developer require adopting 'housing first' principles, how do we avoid creating another Windsor Pointe?
Third, the proposal has the land declared 'surplus'. This means that a streamlihed bidding process without public involvement can be used to sell the land. After what has happened with Windsor Pointe, why exclude the public from involvement in these important affordable housing decisions? 1 We can do better; Carlsbad needs affordable housing. Let's find a path to success not another problem.
Perhaps Carlsbad could fund more of the capital required for higher density. That would give us more control over our own destiny.
Perhaps an alternative source of funding could be found that does not require housing first principles. Or perhaps the density could be increased in stages lowering the initial capital outlay.
Item 6 as it written today, moves the problems of the site from the current owner to the city. This will increase spending.
Any math that shows we are getting the land at a bargain price is fgnoringthe incentives we will need to give a new developer and the interim operating costs.
Item 6 as written today, short cuts important bidding and public reviews. That will generate negative public sentiment.
Item 6 as written today, proposes selling the property to 'a yet to be picked' developer, who will likely need 'housing first' funding, so we very likely end up with another Windsor Pointe.
I urge the Council to direct Staff to work with Solutions for Change on alternative funding options and community engagement strategies that ensure a successful outcome forth is important affordable housing project.
Sincerely,
Brad Robbins
CAUTION: Do not open attachments or clicl< on links unless ou reco nize the sender and know the content i safe,
2 CHESTNUT APARTMENTS
AFFORDABLE HOUSING
Mandy Mills, Director
Housing & Homeless Services
May 21, 2024
1 TONIGHT’S PRESENTATION
• Background
• Purchase & Sale Agreement
• Request for Proposals
• Exempt Surplus Land
2 CHESTNUT AFFORDABLE APTS
CHESTNUT AFFORDABLE APTS
3 BACKGROUND
CHESTNUT AFFORDABLE APTS
• $3.1M City loan from Housing Trust Fund and CDBG
• Loan agreement gave 5 years to obtain remaining financing • Unable to see original intended project through, has been o
perating with affordable rents
• Solutions for Change is looking to end its ownership of the pr
operty and transfer the property to the City of Carlsbad in exchange for having the loan forgiven
4 PURCHASE & SALE AGREEMENT
• Sales price=loan balance
• City of Carlsbad will receive the property in exchange f
or loan forgiveness
• Solutions for Change willing to maintain the property u
ntil the end of 2024
• Extended escrow period allows time to solicit proposals t
o identify a new owner
CHESTNUT AFFORDABLE APTS
5 REQUEST FOR PROPOSALS
CHESTNUT AFFORDABLE APTS
• Identify a new owner to either acquire and rehabilitate the e
xisting affordable units or demolish and rebuild a new 100% affordable housing project with potentially more units
• City Council will review and approve the terms of the sale a
greement, along with a new 55-year regulatory agreement and loan agreement
• Will continue to be used as an 100% affordable housing project 6 EXEMPT SURPLUS LAND
CHESTNUT AFFORDABLE APTS
• Surplus Land Act promotes affordable housing development on unus
ed or underutilized public land.
• Existing or planned use as affordable housing with the following m
inimum affordability requirements allow the city to declare the property as exempt surplus land:
80%+ of the property for housing
20%+ very low-i ncome households (50% area median income) 20%+ low-i ncome households (60% area median income)
Remaining moderate income households (90% area median i
ncome)
• Declaration with written findings that property is exempt from the S
urplus Land Act
7 CHESTNUT AFFORDABLE APTS
TIMELINE
May
City Council
authorize RFP
July
Proposals due
Sept
Negotiate loan terms
Sept
City Council
approve developer
Dec
City Council
approve loan terms
8 Oct/Nov
Housing Commission
review loan terms
Aug
Staff committee
review and rank
Sept/Oct
Housing Policy
Team review loan
terms
Dec
Property transfer
FISCAL ANALYSIS
• There is no fiscal impact to the General Fund
• The value of the property will be credited as an asset to the H
ousing Trust Fund
• Minor costs associated with the property transfer will be f
unded from the Housing Trust Fund
CHESTNUT AFFORDABLE APTS
9 RECOMMENDED ACTIONS
• Authorizing the City Manager to execute all documents necessary t
o complete the acquisition of 945 Chestnut Avenue from
Solutions for Change, and authorizing the City Clerk to execute the certificate of acceptance and consent to the recording of the grant deed to complete the property transfer;
• Authorizing the City Manager to release a request for proposals wi
th the intent to identify a new owner for the 100 percent affordable housing project at 945 Chestnut Avenue;
• Declaring the property located at 945 Chestnut Avenue as exempt s
urplus land in accordance with California Government Code Sections 54221(f)(1)(A) and 37364.
10 CHESTNUT AFFORDABLE APTS
QUESTIONS
CHESTNUT AFFORDABLE APTS
11