DEPARTMENT Real Estate Services AGENDA NO. 8
MEETING DATE May 9, 2023
APPROVAL:
COMMISSION
SECRETARY Donna Hood
AGENDA ITEM
Public Utilities Commission
City and County of San Francisco
Real Estate Loan Amendment: Regular Calendar
Deputy General Manager: Ronald P. Flynn
Approve Balboa Reservoir Loan Amendment
Summary of
Proposed
Commission Action:
Approve the terms and conditions and recommend to the Board of Supervisors the authorization of the General Manager to sign the First Amendment to Secured Carry -Back Promissory Note and the First Amendment to Deed of Trust , Assignment of Rents, Security Agreement and Fixture Filing securing payment of the Balboa Reservoir purchase price.
Background: On December 20 , 2022, u nder an Agreement for the Sale of Real Estate (PSA), the San Francisco Public Utilities Commission (SFPUC) sold the approximately 17.6- acre Balboa Reservoir (Property) located near Ocean Avenue an d Fr ida Kahlo Way in Sa n Francisco to BHC Balboa Builders, LLC , a California limited liability company (BHC), for the sales price of $11,400,000 (Purchase Price) . Bridge Housing Corporation is the master developer and manager of BHC, and Avalon Bay Balboa, LLC (Avalon Bay) is BHC’s partner in the project.
BHC purchased t he Property to develop it in accordance with a Development Agreement with the City. The Property will be developed with approximately 1,100 units of much- needed housing including fifty perce nt (50%), or 550 homes, as affordable housing units. The developme nt project includes approximately 1,000 units of multi-family rental residential housing, approximately 100 for- sale residential units, ground -floor community space, approximately four acres of privately owned and publicly accessible open space, parking garages, and a child-care facility (Project).
The Project includes affordable housing exceeding the Planning Code requirements for inclusionary affordable housing. It also includes extensive investments in public i nfrastructure, including new water distribution, auxiliary water supply facilities, stormwater management improvements, sanitary sewer systems, power facilities, and street lighting that the City will accept, at no cost to the City, upon Approved Balboa Reservoir Loan Amendment
Commission Meeting Date: May 9, 2023
completion.
Under the PSA, BHC elected to have the Cit y pro vide carryback financing for the Property in the principal sum of $11,006,965 ( Loan) to BHC. The Loan is evidenced by the following documents: (1) that certain Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated December 20, 2 022 (Deed of Trust) and recorded as Document No. 2022112690 in the Official Records of the City and County of San Francisco on December 20, 2022, which Deed of Trust secures the Loan; and ( 2) a Secured Carry -Back P
romissory Note
made by BHC to the order of the City (Original Note) dated December 20, 2022. The Deed of Trust and the Original Note are together referred to as the Loan Documents.
The Loan Documents currently require BHC to pay to the SFPUC: (i) post-closing annual payments under the Ori ginal Note until December 31, 2028 (Maturity Date); (ii) a partial balloon payment in 2026; (iii) a final balloon payment on the Maturity Date; and (i v) annual interest at the rate of three percent on the unpaid balance of the Original Note.
Once BHC paid the principal balance of the Original Note down to $5,700,000, the City would release the lien of its Deed of Trust from the Phase 1 portion of the Property and would retain the lien of the Deed of Trust on the Phase 2 portion of the Property. BHC could pre- pay the Loan in its entirety at any time without penalty.
To date, BHC reports that the development partners have spent over $24 million in predevelopment costs to advance the Project.
Infrastructure costs for the Project are estimated to exceed $69 m illion and must be substantially installed prior to construction of any housing. The Project’s initial design and phasing was established to ensure that the affordable housing and market rate h ousing were constructed proportionally throughout development of th e project and to enable revenue derived from the market rate rental and for sale housing to support the affordable housing in each phase . Due to the disruptions to the housing market since 2020, the economics of market rate housing have been substanti ally eroded and it is not currently financially feasible to build the market rate components of the Project.
BHC, in partnership with the City, has been successful in obtaining a number of affo rdable housing grant awar ds from the State. As such, BHC, in consultation with the City, has revised its phasing plan for the Project and is pursuing the construction of two affordable buildings first, with approximately 290 affordable housing units in a s maller Phase 1 that will require a more limited infrastructure investment.
BHC has secured $26 million in state infrastructure funds, in addition to $29 million in Affordable Housing and Sustainable Communities Funds (AHSC funds), a portion of which will be used for the construction of infrastructure. On April 4, 2023, B HC applied for an additional $45 million in AHSC funds. All of these state funds will go towards funding the construction of the infrastructure and two Approved Balboa Reservoir Loan Amendment
Commission Meeting Date: May 9, 2023
affordable housing buildings.
BHC is also working with the May or’s Office of Housing and Community Development to adjust the timing of previously committed predevelopment funds to assist with the design and construction costs of Phase 1 of the Project.
Due to market conditions and the Project’s revised phasing plan, BHC and the City seek to amend the Loan Documents to revise the payment schedule to align with the new Project phasing and allow for earlier prepayment and release of the Deed of Trust on a more flexible parcel- by-parcel basis. In terest would remain at th ree percent per annum, BHC could still pre-pay the Loan at any time, and the Maturity Date of December 31, 2028 would remain unchanged. The corresponding release price for the Deed of Trust per housing unit also remains unchanged.
As amended, the Loan Doc uments would require BHC to pay $2,871,817, plus accrued and unpaid interest on such amount (the Initial Payment) on or before December 31, 2026 and any remaining amounts due under the Loan by the Maturity Date. Upon receipt of the Initial Payment, the Cit y would release the lien of the Dee d of Trust from the affordable buildings that will be constructed in the revised Phase 1 and from the streets that will be constructed for the Project.
The amended Loan Documents do not require BHC to
make any
payments other than the Initial Payment until the Maturity Date ; however, if BHC does make additional payments, it can obtain partial releases of the Deed of Trust according to the following release payment schedule:
Building Sites Release Price
Building A site $1,591,007
Building B site $1,040,659
Building C & D site 2,501,582
Building E site $1,280,810
Building F site $1,591,007
Building G site) $2,111,336
Townhouse 1 and
Townhouse 2 sites
$890,564
Total $11,006,965
SFPUC staff recommends that this Commission approve the amended Loan Documents to advance the proposed construction schedule for 290 units of affordable hou sing on the Property. The SFPUC will receive the full purchase price for the Property by the same Maturity Date, but on an altered payment schedule.
Environmental
Review:
On December 4 , 2008, the San Francisco Planning Commission certified the Final [Program] Environmental Impact Report (PEIR) for Approved Balboa Reservoir Loan Amendment
Commission Meeting Date: May 9, 2023
the Balboa Park Station Area Plan (Case Number 2004.1059E. The PEIR is a program EIR under the CEQA Guidelines section 15168.
On July 10, 2015, the San Francisco Planning Department issued an Addendum to the PEIR for the rezoning of 19 parcels to O cean Avenue Neighborhood Commercial Transit (NCT).
In 2018, t he San Francisco Planning D epartment determined that a subsequent environmental impact report ( the SEIR) was warranted for the proposed project pursuant to the CEQA Guidelines section 15162, due in part to the fact that the proposed project would re sult in new significant impacts and substan tially more severe significant impacts than previously identified in the PEIR.
On May 28, 2020, the Planning Commission certified the Final Subsequent Environm ental Impact Report (S EIR) for the Balboa Reservoir Project (Case No 2018-007883ENV), which is comprised of a Draft Supplemental Environmental Impact Report and Response to Comments document. On that same date, in Mot ion No. 20731, the Planning Commission adopted the California Environmental Quality Act (CEQA) Findings, a Statement of Overriding Considerations, and a Mitigation, Monitoring, and Reporting Program (MMRP). The Balboa Reservoir Project is a su bsequent activity under the Ba lboa Park Station Area Plan.
On June 23, 2020, by Resolution 20-0135, t his Commission consented to the Development A greement, and adopted the CEQA Findings and an MMRP.
The Draft Supplemental Environmental Impact Report and Re sponse to Comments document (comprising the SEIR ), the CEQA Findings and MMRP (Motion No. 20731), PEIR, and Addendum to the PEIR can be found here:
https://sfpuc.sharefile.com/d-sc85fb1fea8d44547b74c1da00639d905
Result of Inaction: A delay in approving this agenda item will delay revision of the Loan Documents and the construction of 290 affordable housing units.
Parties to First
Amendment to the
Secured Carry-Back
Promissory Note and
First Amendment to
Deed of Trust:
City, acting through the SFPUC, and BHC Balboa Builders, LLC Approved Balboa Reservoir Loan Amendment
Commission Meeting Date: May 9, 2023
Purpose: Amend loan documents to facilitate the production of housing Interest Rate Three-percent annual interest on the unpaid balance of the Loan (unchanged)
Loan Maturity Date: December 31, 2028 (unchanged)
Recommendation: SFPUC staff recommends that the Commission adopt the attached resolution.
Attachments: 1. Original Note
2. Deed of Trust
3. First Amendment to Secured Promissory Note
4. First Amendment to Deed of Trust
5. Project Map
6. Project Site Map
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO.
WHEREAS, On December 20, 2022, the City and County of San Francisco (City) sold, the approximately 17.6 -acre Balboa Reservoir ( Property) under the jurisdiction of the San Francisco Public Utilities Commission (SFPUC), located nea r Ocean Avenue an d Frida Kahlo Way in San F rancisco to BHC Balboa Builder s, LLC , a California limited liability company (BHC), pursuant to a n Agreement f or the Sale of Real Estate (PSA), for the sales price of $11,400,000 (Purchase Price); and
WHEREAS, BHC purchased the Property to develop it with approximately 1,100 units of much-needed housing including fifty percent (50%), or 550 homes, a s affordable housing units pursuant to a Development Agreement with City. The development project includes approximately 1,000 units of multi- family rental residential housing, approximately 100 for-sale residential units, ground -floor community space, approximately four acres of privately owned and publicly accessible open space, parking garages, and a child-care facility (Project); and WHEREAS, Th e Project inc ludes affordable housing exceeding the Planning Code requirements for inclusionary affordable housing. It also includes extensive investments in public infrastructure, including new water distribution, auxiliary w ater supply facil ities, stormw ater management improvements, sanitary sewer systems, power facilities, and street lighting that the City will accept, at no cost to the City, upon completion; and WHEREAS, Under the PSA, BHC elected to have the City provide c arryback financing for the Property in the principal sum of $11,006,965 (Loan) to BHC. The Loan is evidenced by the following document s: ( 1) that certa in Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated December 20, 2022 (De ed of Trust) and recorded as Document No. 2022112690 in the Official Reco rds of the City and County of San Francisco on December 20, 2022, w hich Deed of Trust secures the Loan; and (2) a Secured Carry -Back Promissory Note made by BHC to the order of the Ci ty (Original Note ) dated Decem ber 20, 2022. The Deed of Trust and the Original Note are together referred to as the Loan Documents ; and
WHEREAS, In light of the decline in economic conditions for construction of housing since 2020, BHC, in consultation with the City, has revised its phasing plan for the Project and is pursuing the construction of two affordable buildings first, with approxi mately 290 af fordable housing units in a smaller Phase 1 that will require a more limited infrastructure investment.
BHC and the City now seek to amend the Loan Documents to revise the payme nt schedule to align with the new Project phasing and allow for ear lier prepayment and release of the Deed of Trust on a more flexible parcel -by-parcel basis . Interest would remain a t three percent p er annum, BHC could still pre-pay the Loan at any time, and the Maturity Date of December 31, 2028 would remain unchanged. The corresp onding release price for the Deed of Trust per housing unit also remains unchanged; and
WHEREAS, As amended, t he Loan Documents would require B HC to pa y $2,871,817, plus accrued and unpaid interest on such amount (the Initial Payment) on or before December 31, 2026 and any remaining amounts due under the Loan by the Maturity Date. Upon receipt of the Initial Payment, th e City would release the l ien of the Deed of Trust from the affordable buildings that will be constructed in the revis ed Phase 1 and f rom the streets that will be constructed for the Project. The amended Loan Documents do not require BHC to make any payments other tha n the Initial Payment until the Maturity Da te; however, if BHC does make additional payments, it can obta in pa rtial relea ses of the Deed of Trust according to a release payment schedule specified in the amended Loan Documents; and WHEREAS, SFPUC staff recommends that t his Commission approve the amended Loan Documents to advance the proposed construction schedule for 290 units of affordable housing on the Property. The SFPUC will receive the full purchase price for the Property by the same Maturity Date, but on an altered payment schedule; and
W HEREAS, On December 4, 2008, the San Francisco Planning Commission certified the Final [Program] Environmental Impact Report (P EIR) for the Balboa Park Station Area Plan (Case Number 2004.1059E); and
WHEREAS, On J uly 10, 2015, the San Francisco Planning Department issued an Addendum to the PEIR for the rezon ing of 19 parcels to Ocean Avenue Neighborhood Commercial Transit (NCT); and
WHEREAS, The Balboa Reservoir Project is a subsequent activity under the Balboa Park Station Area Plan; and
WHEREAS, On May 28, 2020, the Planning Commission certified the Final Subsequent Environmental Impact Report (SEIR) for the Balboa Reservoir Project (Case No 2018 - 007883ENV), approved the project, and adopted the California Environmental Quality Act (CEQA) Findings, a Statement of Overriding Considerations, and a Mitigation, Monitoring, and Reporting Program (MMRP); and
WHEREAS, on June 23, 2020, by Resolution 20-0135, this Commission consented to the Development Agreement, and adopted the CEQA Findings and an MMRP; and WHEREAS, The San Francisco Planning Department is the c ustodian of records, located in the files for Case Numbers 2018-007883ENV and 2004.1059E at 49 South Van Ness Avenue, Suite 1400, San Francisco, California, 94103, which have been made available for review by this Commission and the public, and those files are part of the record before this Commission; and WHEREAS, This Commission has reviewed and considered the information contained in the SEIR, the CEQA Findi ngs and MMRP , PEIR, and Addendum to the PEIR , and all written and oral information provi ded by the San Francisco Planning Department, the public, relevant public agenc ies, San Francisco Public Utilities Commission staff and other experts, and the administrative files for the Project; now, therefore, be it
RESOLVED, This Commission finds that the record as a whole is adequate for its use as the decision –making body for t he Project and incorporates the CEQA Findings and MMRP contained in Planning Commission M otion 20731 this ref erence ther eto as though set forth in this Resolution; and be it
FURTHER RESOLVED, This Commission further finds that since the SEIR was finalized, there have been no substantial Project changes and no substantial changes in Project circumstances that would require major revisions to these CEQA documents due to the involvement of new significant environmental effects or an increase in the severity of previously identified significant impacts, and there is no new information of substant ial importance th at would change the conclusions set forth in the CEQA documents; and be it FURTHER RESOLVED, That this Commission approves the terms and conditions of the First Amendment to Secured Promissory Carry-Back Note and the First Amendment to the Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing as presented to t his commission (the Amended Loan Documents); and, be it
FURTHER RESOLVED, That this Commission authorizes the General Manage r of the SFPUC to seek approval from the Board of Supervisors of Amended Loan Documents; and be it FURTHER RESOLVED, That subject to a nd upon approval by City’s Board of Supervisors and the Mayor, the General Manager is autho rized to exec ute the Amended L oan Documents in substantially the same forms presented to this Commission, if any; and, be it FURTHER RESOLVED, That this Commission hereby ratifies, approves, and authorizes all actions heretofore taken by any City official in connection with the Amende d Loan Documents; and, be it
FURTHER RESOLVED, That this Commission hereby authorizes the SFPUC General Manager to enter into any amendments or modifications to each of the Amended Loan Documents, including without limitation , the exhibit s to such documents, that the SFPUC’s General Manager determines, in consultation with the City Attorney, are in the best interest of City; do not m aterially increase the obligations or liabilities of City; do not materially decrease the benefits to City; are necessary or advisable to effectuate the purpose s and intent of each of the documents or this Resolution; and are in compliance with law; and be it FURTHER RESOLVED, That upon approval by City's Board of Supervisors and the Mayor, this Commission auth orizes the SFPUC General Manager to take any and all other steps they, in consultation with the City Attorney, deem necessary or advisable to effectuate the purpose and intent of this Resolution.
I hereby certify that the foregoing resolution was adopted by the Public Utilities Commission at its meeting of May 9, 2023.
Secretary, Public Utilities Commission
SECURED PROMISSORY CARRY-BACK NOTE
(Balboa Reservoir)
Principal Amount: $11,006,965 San Francisco, California Date: December ZD , 2022
FOR VALUE RECEIVED, the undersigned, BHC BALBOA BUILDERS, LLC, a California limited liability company ("Maker"), hereby promises to pay to the order of the CITY AND COUNTY OF SAN FRANCISCO, a municipal corporation ("City"), acting by and through its Public Utilities Commission, or holder (as the case may be, "Holder"), the principal sum of Eleven Million Six Thousand Nine Hundred Sixty-Five and No/100 Dollars ($11,006,965) ("Funding Amount"), together with simple interest on the unpaid principal balance of this Secured Promissory Carry Back Note ("Note") outstanding from time to time, from the date of this Note until fully repaid at the rates hereinafter set forth, as provided in this Note.
1. Security. Maker's obligations under this Note are secured by that certain Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Deed of Trust") dated as of even date with this Note, identifying this Note as an obligation secured thereby and encumbering the property described in the Deed of Trust ("Property"), which Property was sold to Maker as of the date of this Note by City pursuant to an Agreement for Sale of Real Estate dated as of February 18, 2021, by and between City and Reservoir Community Partners, LLC, a Delaware limited liability company ("RHC") as buyer, and assigned to Maker by RHC pursuant to an Assignment and Assumption Agreement Relative to Agreement for Sale of Real Estate dated as of November 30, 2021. Definitions and rules of interpretation set forth in the Deed of Trust apply to this Note. In the event of any inconsistency between the Deed of Trust and this Note, the Deed of Trust will control.
2. Interest. Interest will accrue on the principal balance outstanding under this Note from time to time at the rate of three percent (3%) per annum, simple interest, from the date of the close of escrow through the date of full payment of all amounts owing under the Note and the Deed of Trust (together, the "Loan Documents"). Interest will be calculated on the basis of actual days elapsed and a 360-day year, which will result in higher interest charges than if a 365-day year were used.
3. Default Interest Rate. Upon the occurrence of an Event of Default (defined in Section 7 [Event of Default] below) under any Loan Document, interest will be deemed to have accrued on the outstanding principal balance of the Loan at a compounded annual rate equal to the lesser of:
(a) four percent (4%) plus the base interest rate of three percent (3%); or (b) the maximum lawful rate of interest, commencing on the date the Funding Amount is disbursed through the earlier of:
(i) the date on which the Event of Default is cured; or (ii) the date on which all amounts due under the Loan Documents are paid to Holder. Maker acknowledges and agrees that the default interest that must be paid in the event of an Event of Default pursuant to this Section represents a reasonable sum considering all the circumstances existing on the date of this Note and represents a fair and reasonable estimate of the costs that will be sustained by Holder if Maker defaults.
Maker further agrees that proof of actual damages would be costly and inconvenient, and that 1 default interest will be paid without prejudice to Holder's right to collect any other amounts to be paid or to exercise any of its other rights or remedies under any Loan Document.
4. Repayment of Funding Amount.
4.1 Maker shall make payments of principal and interest (each, a "Payment") on the dates (each, a "Payment Date") and in the amounts set forth on the attached Schedule A. All Payments will be applied to the following in the following order: (i) costs and fees incurred by Holder in accordance with the Loan Documents and unpaid by Maker as of the Payment Date; (ii) accrued and unpaid interest; and (iii) reduction of the principal balance of the Loan.
4.2 The entire principal balance of the Loan, together with all accrued and unpaid default interest (if any) and other unpaid fees and costs incurred will be due and payable on December 31, 2028 (the "Maturity Date"). If the Maturity Date falls on a weekend or holiday, it will be deemed to fall on the next succeeding business day.
5. Reconveyances
5.1 Provided no Event of Default shall have occurred and be continuing, from and after the date on which Maker has made the Closing Payment Phase 1 as set forth on Schedule A, Maker shall have the right to obtain the release (the "Phase 1 Release") of the Phase 1 Property (as generally described on the attached Schedule B) from the lien of the Deed of Trust and the release of Maker's obligations under the Loan Documents with respect to the Phase I Property (other than those expressly stated to survive in the Loan Documents), by providing Holder with thirty (30) days prior written notice of the requested Phase 1 Release, upon which Holder shall require and instruct Trustee (as defined in the Deed of Trust) to reconvey the Phase 1 Property (subject to the Phase 1 Property being a legal parcel) pursuant to Section 11 of the Deed of Trust on the date set forth in such notice.
5.2 Provided no Event of Default shall have occurred and be continuing from and after the date on which Maker has repaid the Loan in full, Maker shall have the right to obtain the release (the "Full Release") of the Property (or such portions of the Property not previously so released) from the lien of the Deed of Trust and the release of Maker's obligations under the Loan Documents with respect to the Property (other than those expressly stated to survive in the Loan Documents), by providing Holder with thirty (30) days prior written notice of the requested Full Release, upon which Elolder shall require and instruct Trustee to reconvey the Property pursuant to Section 5(c) of the Deed of Trust on the date set forth in such notice.
6. Terms of Payment.
6.1 All Payments must be made in the currency of the United States of America then lawful for payment of public and private debts.
6.2 All Payments must be made payable to Holder and mailed or delivered in person to Holder's office at the San Francisco Public Utilities Commission, Real Estate Services Division, 525 Golden Gate Avenue, 10th Floor, San Francisco, California 94102, Attention: Real Estate Director, or to any other place Holder from time to time designates. Payments may also be sent by wire using current wire instructions as provided by Holder upon request for such instructions. 2 6.3 In no event will Maker be obligated under the terms of this Note to pay interest exceeding the lawful rate. Accordingly, if the payment of any sum by Maker pursuant to the terms of this Note would result in the payment of interest exceeding the amount that Holder may charge legally under applicable state and/or federal law, the amount by which the payment exceeds the amount payable at the lawful interest rate will be applied so as to automatically reduce the principal balance owing under this Note.
6.4 Maker waives the right to designate how Payments will be applied pursuant to California Civil Code Sections 1479 and 2822. Holder will have the right in its sole discretion to determine the order and method of application of Payments to obligations under this Note, subject to Section 4.1 above.
6.5 Except as provided in this Section 6.5, Holder will not seek or obtain a judgment against Maker for the payment of any amounts due under this Note following a judicial or nonjudicial foreclosure of the Deed of Trust, and Holder's sole recourse against Maker for any default under this Note will be limited to the Property as the sole collateral for the Loan, provided, however, that this Section will be deemed void and of no effect if Maker challenges Holder's right to foreclose, or acceptance of a deed-in-lieu, following an Event of Default in any legal proceeding on the grounds that the Loan Documents are not valid and enforceable under California law. In addition, Holder shall be made a co-obligee of any bond security provided under any Public Improvement Agreement or Infrastructure Permitting Agreement between City and Maker relating to the Project, which bond security shall be sufficient for the restoration of the Property or the completion of improvements on the Property. This provision does not limit in any way Holder's right to recover sums arising under any obligation of Maker to indemnify Holder of sums incurred by Holder as a result of Maker's fraud, willful misrepresentation, or misapplication of funds (including Rents (as defined in the Deed of Trust)); Maker's failure to obtain and maintain the required insurance under the Deed of Trust; or failure of Maker to pay charges for labor or other materials that create a lien on the Property (subject to notice and cure provisions and Maker's right to contest the same under the Deed of Trust).
6.6 The Loan may be prepaid in whole or in part at any time without the imposition of a prepayment charge or premium.
6.7 Notwithstanding anything to the contrary in this Note or the Deed of Trust, at any time prior to delivering the Closing Payment Phase I indicated on Schedule A, so long as no Event of Default is continuing under the Loan Documents, Maker shall have the option, to be exercised in Maker's sole discretion, to convey the Property without warranty to Holder in full satisfaction of this Note. Maker shall pay all escrow and recording costs arising from the conveyance of the Property to Holder under this Section 6.7 and shall reimburse Holder for its actual and reasonable costs incurred by Holder in performing its obligations under this Section 6.7, including reasonable attorneys' fees and costs, and at Holder's election Maker shall cause any construction, equipment, or services contracts entered into in connection with Maker's development of the Property to be terminated at Maker's sole cost and expense as of the date of conveyance of the Property to Holder pursuant to this Section 6.7. Upon recordation of a quitclaim deed conveying the Property to Holder, which conveyance is conditioned on Maker providing title to Property that is reasonably acceptable to Holder (i.e., the Property may be conveyed subject to the Permitted Exceptions in existence at the time Maker acquired title and any amendments thereto, to any encumbrances 3 permitted by the Deed of Trust or previously approved by the Holder, and to exceptions on title that are otherwise reasonably acceptable to Holder), the Loan shall automatically be deemed paid in full, Holder shall mark this Note as "Cancelled," Holder shall fully and unconditionally release Maker from any and all obligations under this Note, and Maker shall have no further rights or obligations under the Loan Documents; provided, however, that Holder shall have access, as a co- obligee, to any bond security provided under any Public Improvement Agreement or Infrastructure Permitting Agreement between City and Maker relating to the Project as necessary for the restoration of the Property or the completion of improvements on the Property.
7. Event of Default.
7.1 Any of the following will constitute an Event of Default under this Note:
Maker fails to make any Payment required under this Note within when due, and such failure continues uncured for five (5) business days after receipt of written notice thereof from Holder to Maker; or
(a) the occurrence of any other Event of Default following the expiration of any applicable notice and cure periods under the Deed of Trust or other instrument securing the obligations of Maker under this Note.
7.2 Upon the occurrence of any Event of Default, without notice to or demand upon Maker, which are expressly waived by Maker (except for notices or demands otherwise required by applicable laws to the extent not effectively waived by Maker and any notices or demands specified in the Loan Documents), Holder may exercise all rights and remedies available under this Note and the Deed of Trust. Maker acknowledges and agrees that Holder's remedies include judicial or nonjudicial foreclosure of the Deed of Trust and the right to accelerate the Maturity Date by declaring the outstanding principal balance of the Loan, together with all accrued and unpaid interest and unpaid fees and costs incurred, due and payable immediately, in which case, the Maturity Date will be superseded and replaced by the date established by Holder.
8. Waivers.
8.1 Maker expressly agrees that the term of this Note or the date of any payment due under this Note may be extended from time to time with Holder's consent, and that Holder may accept further security or release any security for this Note, all without in any way affecting the liability of Maker.
8.2 No extension of time for any Payment made by agreement by Holder with any person now or hereafter liable for the payment of this Note will operate to release, discharge, modify, change, or affect the original liability of Maker under this Note, either in whole or in part.
8.3 The obligations of Maker under this Note are absolute, and Maker waives any and all rights to offset, deduct, or withhold any Payments or charges due under this Note for any reason whatsoever.
4 9. Miscellaneous Provisions.
9.1 All notices to Holder or Maker must be given in the manner and at the addresses set forth in the Deed of Trust, or to the addresses Holder and/or Maker hereafter designate in accordance with the Deed of Trust.
9.2 In the event of any legal proceedings arising from the enforcement of or a default under this Note or in any bankruptcy proceeding of Maker, the non-prevailing party promises to pay all reasonable costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party in the proceeding, as provided in the Deed of Trust.
9.3 This Note may be amended only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought.
9.4 This Note is governed by and must be construed in accordance with the laws of the State of California, without regard to the choice of law or rules of the State.
9.5 Time is of the essence in the performance of any obligations hereunder. [SIGNATURE ON FOLLOWING PAGE]
5 "IVIAKER"
BHC BALBOA BUILDERS, LLC,
a California limited liability company
By: BRIDGE Housing Corporation,
a California nonprofit public benefit corporation
its manager
By:
Name:
Title:
.1 410
uts1
[Signature page for Secured Promissory Carry Back Note]
SCHEDULE A
Payment Schedule
Payments and interest at the rate of three percent (3%) per annum will be due as follows:
1. Between the Closing and December 31, 2026:
a. Annual Payments of $400,000 on each anniversary of February 18, 2021 applicable to the loan balance;
b. A balloon payment representing 50% of the Funding Amount, minus post-
Closing loan payments, plus accrued interest, by December 31, 2026. c. City will release the Phase 1 portion of the Property from the Deed of Trust after the balloon payment described in Section (1)(b) is made.
2. Between January 1, 2027 and December 31, 2028:
a. An Annual Payment of $600,000 on February 18, 2027, applicable to the loan balance; and
b. A balloon payment representing the remaining unpaid Funding Amount, plus accrued interest, by December 31, 2028.
Initial Deposit Effective Date $500,000
a Pre-Closin g
Payments*
February 18, 2021
Annual
Payment 1 February 18, 2022 $400,000
Annual
Payment 2 February 18, 2023 $400,000
Annual
Payment 3 February 18, 2024 $400,000
Annual
Payment 4 February 18, 2025 $400,000
Loan Payments Annual
Payment 5 February 18, 2026 $400,000
Balloon
Payment December 31, 2026 $5,160,943
Phase 1 **
Annual
Payment 6 February 18, 2027 $600,000
Schedule A
Balloon
Payment
Phase 2 ***
December 16, 2028 $5,166,314
The Funding Amount of $11,006,965 is calculated as $11,400,000 minus $900,000 in pre-Closing payments (Initial Deposit and Annual Payment 1 as shown above), minus $100,000 in Exclusive Negotiating Agreement extension fees paid to City, plus $606,965 in pre-Closing accrued interest, calculated at three percent (3%) per annum as per the terms of the Agreement for Sale of Real Estate.
A balloon payment of $3,903,482 in principal, plus an estimated $1,257,460 in accrued interest, calculated at three percent (3%) per annum as per the terms of the Note.
A balloon payment of $4,903,482 in principal, plus an estimated $262,831 in accrued interest calculated at three percent (3%) per annum as per the terms of the Note.
**
***
Schedule A
SCHEDULE B
Illustrative Diagram of Phase 1 Property and Phase 2 Property [See attached]
01757.00018/1276089v3
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Phase 1
Phase 2
PHASING DIAGRAM
I
0 50 100 200ft
01757.0001 8/1 276089v3
01757.00018/1298137v2
FIRST AMENDMENT TO
SECURED PROMISSORY CARRY-BACK NOTE
This First Amendment to Secured Promissory Carry-Back Note (“First Amendment to Note”) is made as of ______________, 2023, by and between the CITY AND COUNTY OF SAN FRANCISCO, a municipal corporation (“City”), acting by and through its Public Utilities Commission, or holder (as the case may be, “Holder”), and BHC BALBOA BUILDERS, LLC, a California limited liability company (“Maker”).
RECITALS
A. The City previously loaned the principal sum of Eleven Million Six Thousand Nine Hundred Sixty- Five and No/100 Dollars ($11,006,965) (“ Loan”) to Maker in connection with Maker’s acquisition of certain real property from the City located in San Francisco, California , more particularly described in the Deed of Trust (as defined below). The Loan is evidenced by the following documents: (1) that certain Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (“ Original Deed of Trust ”) dated as of December 20, 2022, and recorded as Document No. 2022112690 in the Official Records of the City and County of San Francisco on December 20, 2022, together with a First Amendment to Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing to be recorded substantially concurrently with this First Amendment to Note (the “First Amendment to Deed of Trust,” and together with the Original Deed of Trust, the “ Deed of Trust”); and (2) a Promissory Note made by Maker to the order of the City (the “ Note”), dated December 20, 2022. The Deed of Trust and the Note together shall be referred to as the Loan Documents. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Deed of trust.
B. Due to adjustments in the proposed devel opment schedule, Maker and City desire to amend certain provisions in the Original Deed of Trust and Note.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth in the City Documents, City and Maker agree as follows:
1. Amendments to Note:
(a) Section 4.1 is hereby deleted in its entirety and replaced with the following:
“4.1 Payments.
(a) Maker shall make a payment of principal in the amount of Two Million Eight Hundred Seventy- One Thousand Eight Hundred Seven teen and No/100 Dollars ($2,871,817.00) plus accrued and unpaid interest on such amount and costs and fees incurred by Holder in accordance with the Loan Documents and unpaid by Maker as of the Initial Payment Date (the “ Initial Payment”). As used herein, “ Initial Payment Date” means the date the Initial Payment is made to Holder, which shall be on or before December 31, 2026.
01757.00018/1298137v2 2
(b) All payments made under this Note (each, a “Payment ”) will be applied to the following in the following order: (i) costs an d fees incurred by Holder in accordance with the Loan Documents and unpaid by Maker as of the date of any such Payment (each, a “Payment Date”); (ii) accrued and unpaid interest; and (iii) reduction of the principal balance of the Loan.”
(b) Section 5.1 is hereby deleted in its entirety and replaced with the following:
“5.1.1 P rovided no Event of Default shall have occurred and be continuing, Maker shall have the right upon making the Initial Payment to obtain the release from the lien of the Deed of T rust and the release of Maker’s obligations under the Loan Documents (other than those expressly stated to survive in the Loan Documents) with respect to the following portions of the P roperty as generally described on the attached Schedule B: (a) the Building E site, (b) either the Building A site or the Building F site, at Maker’s sole election, and (c) the street segment s, paseos, and open spaces, by providing Holder with thirty (30) days prior written notice of the requested release.
Holder shall require and instruct Trustee (as defined in the Deed of Trust) to reconvey the applicable portions of the Property (subject to such portions of the Property being legal parcel s) pursuant to Section 11 of the Deed of Trust on the date set forth in Maker’s notice to Holder.
5.1.2 After the Initial Payment is made, and p rovided no Event of Default shall have occurred and be continuing, Maker shall have the right at any time to obtain the release (each, a “Partial Release”) of any or all of the portions of the Pr operty (if not previously released in connection with the Initial Payment) as generally described on the attached Schedule B from the lien of the Deed of Trust and the release of Maker’s obligations under the Loan Documents with respect to such portions of the Property (other than those expressly stated to survive in the Loan Documents), upon the satisfaction of the following conditions precedent, upon which Holder shall require and instruct Trustee (as defined in the Deed of Trust) to reconvey the applicable portions of the Property (subject to such portions of the Property being legal parcel s) pursuant to Section 11 of the Deed of Trust on the date set forth in Maker’s notice to Holder.
(a) Maker shall provide Holder with thirty (30) days prior written n otice of the requested Partial Release; and
(b) Maker shall pay to Holder the release price allocated to the subject portion(s) of the P roperty on Schedule A, plus accrued and unpaid interest on such amount and costs and fees incurred by Holder in accordance with the Loan Documents and unpaid by Maker as of the Payment Date, which shall be applied by Holder as a prepayment of the Loan.”
(c) Section 5.2 is deleted in its entirety and replaced with the following:
01757.00018/1298137v2 3
“5.2 Provided no Event of Default shall have occurred and be continuing, Maker shall have the right upon repaying the Loan in full to obtain the release (the “Full Release”) of the Property (or such portions of the Property not previously so released) from the lien of the Deed of Trust and the release of Maker’s obligations under the Loan Documents with respect to the Property (other than those expressly stated to survive in the Loan Documents), by providing Holder with thirty (30) days prior written notice of the requested Full Release, upon which Holder shall require and instruct Trustee to reconvey the Property pursuant to Section 5(c) of the Deed of Trust on the date set forth in such Maker’s notice to Holder.”
(d) Schedule A is hereby deleted in its entirety and replaced with the new Sch edule A attached hereto as Attachment 1.
(f) Schedule B is deleted in its entirety and replaced with the new Schedule B attached hereto as Attachment 2.
2. Representations and Warranties.
(a) All of the representations and warranties made by Maker to the City in the Note and other City Documents continue to be true and complete as of the date of this First Amendment to Note.
3. Miscellaneous.
(a) References. No reference to this First Amendment to Note is necessary in any instrument or document at any time referring to the Note or any other City Document.
Any reference to such documents shall be deemed a reference to such documents as amended by this First Amendment to Note.
(b) No Other Amendments. Except as amended by this First Amendment to Note , the Note shall remain unmodified and in full force and effect. In the event of any conflict or inconsistency between the terms and provisions of this First Amendment to Note and the terms and provisions of the Note, the terms and provisions of this First Amendment to Note shall control.
(c) Counterparts . This First Amendment to Note may be executed in two or more counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.
(d) Successors and Assigns. The terms, covenants and conditions contained in this First Amendment to Note shall bind and inure to the benefit of the Maker and the City and, except as otherwise provided herein, their personal representatives and successors and assigns.
01757.00018/1298137v2 4
(e) Further Instruments. The parties hereto agree to execute such further instruments and to take such further actions as may be reasonably required to carry out the intent of this First Amendment to Note.
4. Affixation; Governing Law. An executed copy of this Amendment shall be affixed to the Note. This First Amendment to Note shall be governed and interpreted in accordance with the laws of the State of California.
[signatures on following page]
01757.00018/1298137v2 5
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Note as of the date first written above.
THE CITY:
CITY AND COUNTY OF SAN
FRANCISCO, a municipal corporation
By:
Dennis J. Herrera
General Manager
San Francisco Public Utilities
Commission
Authority Pursuant to SFPUC Resolution
No. _______ and Board of Supervisors
Resolution No. _______
APPROVED AS TO FORM:
DAVID CHIU,
City Attorney
By:
Elizabeth A. Dietrich
Deputy City Attorney
MAKER:
BHC BALBOA BUILDERS, LLC,
a California limited liability company
By: BRIDGE Housing Corporation,
a California nonprofit public benefit
corporation,
Its Manager
By: _______________________
Name: _______________________
Title: _______________________
01757.00018/1298137v2 6
Attachment 1
Schedule A
Allocation Table
Building Sites as depicted
on Schedule B
Release Price
Building A site $1,591,007*
Building B site $1,040,659
Building C & D site $2,501,582
Building E site $1,280,810*
Building F site $1,591,007*
Building G site $2,111,336
Townhouse 1 and
Townhouse 2 sites
$890,564
Total $11,006,965
* May be encompassed in Initial Payment per Section 5.1.1.
01757.00018/1298137v2 7
Attachment 2
Schedule B
Illustrative Diagram of Property Development Sites
01757.00018/1298136v2 1
Free Recording Requested Pursuant to
Government Code Section 27383
San Francisco Public Utilities Commission
Real Estate Services Division
525 Golden Gate Avenue, 10th Floor
San Francisco, California 94102
Attn: Real Estate Director
With a copy to:
Real Estate Division
City and County of San Francisco
25 Van Ness Avenue, Suite 400
San Francisco, California 94102
Attn: Director of Property
---------------------Space Above This Line for Recorder's Use---------------------
APNs: Parcel A: 3180-198; Parcel C: 3180-200;
Parcel D: 3180-201; Parcel E: 3180-202;
and Parcel F: 3180-203 (all formerly
portions of Block 3180, Lot 190)
11 Frida Kahlo Way
FIRST AMENDMENT TO DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
(Balboa Reservoir)
This First Amendment to Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (“First Amendment to Deed of Trust”) dated as of ___________, 2023, is attached to and made a part of that certain deed of trust dated December 20, 2022, and recorded on December 20, 2022, as Document Number 2022112690 (the “Deed of Trust”). The Deed of Trust secures a loan in the amount of Eleven Million Six Thousand Nine Hundred Sixty-Five and No/100 Dollars ($11,006,965.00) (the “Loan”) made by the CITY AND COUNTY OF SAN FRANCISCO, a municipal corporation acting by and through its Public Utilities Commission (“Beneficiary” or “City”), to BHC BALBOA BUILDERS, LLC, a California limited liability company (“Trustor”), in connection with the acquisition of the Property as defined in the Deed of Trust.
The Loan is evidenced by a Secured Promissory Carry-Back Note made by Trustor to the order of the City (the “Original Note”), dated December 20, 2022, which Original Note is being amended concurrently herewith by a First Amendment to Secured Promissory Carry-Back Note (the Original Note as amended, the “Note”). The Deed of Trust as amended by this First Amendment to Deed of Trust and the Note are hereinafter referred to as the “Loan Documents”.
Trustor agrees that the following covenants, terms, and conditions shall be part of and shall modify or supplement the Deed of Trust and that in the event of any inconsistency or conflict between the covenants, terms, and conditions of the Deed of Trust, as amended by this 01757.00018/1298136v2 2
First Amendment to Deed of Trust, the following covenants, terms, and conditions shall control and prevail:
1. Amendment to Section 11(a). Section 11(a) is hereby deleted in its entirety and replaced with the following
“(a) Upon satisfaction of the conditions precedent for a release of any portion of the Property pursuant to Section 5.1 of the Note, Beneficiary will instruct Trustee to reconvey such portion of the Property, and Trustee shall within five (5) business days after receipt of such instructions reconvey without warranty such portion of the Property to Trustor.”
2. No Other Change. Except as specifically modified or amended by this First Amendment to Deed of Trust, all other terms and conditions of the Deed of Trust remain the same.
[signatures on following page]
01757.00018/1298136v2 3
TRUSTOR:
BHC BALBOA BUILDERS, LLC,
a California limited liability company
By: BRIDGE Housing Corporation,
a California nonprofit public benefit corporation,
I ts Manager
By: ____________________________
Name: ____________________________
Title: ____________________________
SIGNATURES MUST BE NOTARIZED
SIGNATURES CONTINUE ON NEXT PAGE
01757.00018/1298136v2 4
BENEFICIARY:
CITY AND COUNTY OF SAN
FRANCISCO, a municipal corporation
By:
Dennis J. Herrera
General Manager
San Francisco Public Utilities
Commission
Authority Pursuant to SFPUC Resolution
No. _________ and Board of Supervisors
Resolution No. ____________
APPROVED AS TO FORM:
DAVID CHIU,
City Attorney
By:
Elizabeth A. Dietrich
Deputy City Attorney
01757.00018/1298136v2 5
A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document, to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA )
)ss.
COUNTY OF ___________ )
On _______________, before me,
personally appeared , who
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
01757.00018/1298136v2 6
A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document, to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA )
)ss.
COUNTY OF ___________ )
On _______________, before me,
personally appeared , who
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
DIEGO LANE
LOQUAT LANE
WISTERIA LANE
EDWIN M. LEE AVENUE
MEYER LANE
PUC Retained Fee
Shared
Public Way
San Ramon
Paseo
Shared
Public Way
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Mayor ED 13-01 Priority Permit
Balboa Reservoir - Phase 1 Development Application
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Multi-Use Building
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Submitted April 22, 2021 Rev 1 DRAFT Sept 28, 2021 12