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 have 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 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 .
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)
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. 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 b tween 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, ce1tificates, 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.
" onditions Precedent for the Benefit of the Purchaser" shall have the meaning et 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 deliv ry 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.
2 "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 ce1tain 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, State 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. 3 "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 meanmg set forth m 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 repo1t for the Project. "Seller" means Solutions Chestnut, LLC, a California limited liability company. "Tenant Agreement s" 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 CL TA 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 4 CL TA 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 CL TA 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 5 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 Prope1iy 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. 6 (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 structmal engineer, a building contractor holding any or all of the "A," "B," or "C-5" license c1assifications 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 tern1ination of this Agreement to the Purchaser and Escrow Holder. After receipt of such notice of conditional termination, the Purchaser shall have ten (10) Business Days to cme 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 tenninate except those which specifically survive such termination; (y) Escrow Holder shall retmn 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:
7 (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 the 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 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 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.
8 (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 represents and warrants 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.
9 (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 portions 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 wan-ants 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 cunent 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 foregoing 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.
(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, titles 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 tlu-ough 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:
11 If to Seller:
If to Purchaser:
Copy to:
If to Escrow Holder:
12. Risk of Loss.
Solutions Chestnut, LLC
Attn: President/CEO
722 West California Avenue
Vista, CA 92083
Email: [email protected]
City of Carlsbad
Attn: City Manager
1200 Carlsbad Village Drive
Carlsbad, California 92008
Email: [email protected]
City of Carlsbad
Attn: City Attorney
1200 Carlsbad Village Drive
Carlsbad, California 92008
Email: attorney@carls badca. gov
Christensen & Spath LLP
Attn: Walter F. Spath III, Esq.
401 West A Street, Suite 2250
San Diego, CA 92101
Email: wfs@candslaw .net
Fidelity National Title Company
Attn: Jasmine Corado
7565 Mission Valley Road, Ste 100
San Diego, CA 92108
Email: [email protected]
(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 shalJ 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 wilJ 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 payable to Purchaser, and if Seller 12 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 an 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 reference 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 share 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. 13 (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, an1endment, 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 prov1S1on 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. (1) 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 Seller's counsel as a matter of convenience shall have no import or significance. Any uncertainty or ambiguity in this Agreement 14 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
~ C J,;,t;LlllLb)f,,, By: _ ______ ·_. - -_rJ -_- -_ _
Michael Christopher Megison, CEO
(SIGNATURES CONTINUED ON FOLLOWING PAGE]
15 PURCHASER:
City of Carlsbad
APPROVED AS TO FORM:
City of Carlsbad
Office of the City Attorney
By: ~/L ~
Cindie K. McMahon
City Attorney
16 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
17 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 ~d 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 and their successors and assigns.
18 IN WITNESS WHEREOF , the undersigned have executed this Assiinment of Personal Property and Assignment and Assumption of Leases and Contracts as of the z;,v-'1\ day of ~ ' 2024.
ASSIGNOR:
Solutions Chestnut, LLC, a California limited liability company By: Solutions for Change, Inc., a California corporation Its: Member
~ c ~LUM. )t,
By: ,. -If--- ·
- ------~----Mich a el Christopher Megison , CEO
ASSIGN
APPROVED AS TO FORM:
City of Carlsbad
Office of the City Attorney
By: ~ /L -
Cindie K. McMahon
City Attorney
19 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 20 PROVIDER
Exhibit D
Contracts
21 SERVICE