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FIRST AMENDMENT TO DISPOSITION DEVELOPMENT AND LOAN AGREEMENT
BETWEEN THE CITY OF EAST PALO ALTO
AND
MP 965 WEEKS STREET ASSOCIATES, LP
REGARDING 965 WEEKS STREET AFFORDABLE HOUSING SITE
This First Amendment to Disposition, Development, and Loan Agreement ("Agreement") is entered into as of ______, 2023 ("Effective Date"), by and between the City of East Palo Alto, a California municipal corporation ("City") and MP 965 Weeks Street Associates, L.P., a California limited partnership (the "Developer"). The City and Developer are sometimes individually referred to herein as a "Party" and collectively as the "Parties."
RECITALS
A. The City and the Developer entered into that certain Disposition, Development, and Loan Agreement dated December 15, 2020 (“DDLA”) whereby the City agreed to ground lease to the Developer that certain Property located at 965 Weeks Street in the City of East Palo Alto, California, identified as Assessor's Parcel Numbers 063-232- 210,063-232-220, and 063-232-230, as described in the legal description attached hereto to the DDLA (“Property”).
B. In accordance with the terms of the DDLA, the City also agreed to loan to the Developer the amount of Seven Hundred Fourteen Thousand Dollars ($714,000) to be used for costs associated with the Development which consists of a one hundred and thirty-six (136) unit multifamily rental housing development and parking garage on the Property with long-term affordability requirements including one (1) manager’s unit that is not subject to affordability requirements.
C. Pursuant to the 2022-2023 California Budget Bill (Chapter 249, Statutes of 2022, AB 179), Section 19.56, the State allocated to the City $8,000,000 for the Development (“State Funds”).
D. The City has determined that it is in the best interest of the City to increase the amount of the City Loan to add Six Million Five Hundred Thousand ($6,500,000) of the State Funds (“State Funds Loan”) and to amend the DDLA to provide for the State Funds Loan in accordance with terms of this Agreement.
E. Defined terms not otherwise defined in this Agreement shall have the meaning set forth in the DDLA.
THEREFORE, the City and the Developer agree as follows:
1. City Loan. Section 1.1(g) of the DDLA is amended in its entirety to read as follows:
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“City Loan” means collectively the loans from the City to the Developer consisting of the (i) the Housing Fund Loan in the amount of Seven Hundred Fourteen Thousand Dollars ($714,000) and (ii) the State Fund Loan in the amount of Six Million Five Hundred Thousand Dollars ($6,500,000), both on the terms set forth in Article 4 of the Agreement.
2. Ground Lease Value. Section 1.1(y) of the DDLA is amended in its entirety to read as follows:
“Ground Lease Value” means the full appraised value of the Property of Seventeen Million Two Hundred Thirty Thousand Dollars ($17,230,000) to the extent allowed by HCD or permitted by applicable law, or if the full appraised value of the Property is not allowed by HCD the amount spent by the City to acquire the Property.
3. City Financing. Section 4.2 of the DDLA is amended in its entirety to read as follows:
City Financing. The City agrees to provide Developer a commitment for construction and permanent loans in the following amounts:
(a) A loan from the City’s Low and Moderate Income Housing Asset Fund in the amount of Seven Hundred Fourteen Thousand Dollars ($714,000) (“Housing Fund Loan”); and
(b) A loan of the State Funds in the amount of Six Million Five Hundred Thousand Dollars ($6,500,000) (“State Fund Loan”), both conditioned on Developer securing all other financing for the Development as set forth in the Final Financing Plan approved in writing by the City.
4. Interest. Section 4.3 of the DDLA is amended in its entirety to read as follows:
Interest. Simple interest will accrue on the outstanding principal balance of the Housing Fund Loan at a per annum rate of interest equal to three percent (3%), commencing on the Closing. Notwithstanding the foregoing, prior to the Closing, the City Manager shall have the right, in his or her reasonable discretion, to adjust the interest rate, including reducing the interest rate to as low as zero percent (0%) upon receipt of adequate documentation establishing that the Project is not financially feasible without such interest rate decrease.
The State Funds Loan shall be interest free.
5. Annual Payments. Section 4.5(a) of the DDLA is amended in its entirety to read as follows:
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Annual Payments. The Developer shall make payments of principal and interest to the City in the amount of the City Prorata Percentage (as defined below) of Residual Receipts. Such annual payments shall be due and payable in arrears no later than June 1 of each year with respect to the previous calendar year, commencing on June 1 of the first year after the permanent conversion date of the Development financing and the City's issuance of a certificate of occupancy for the Improvements. The Developer shall provide the City with any documentation reasonably requested by the City to substantiate the Developer's determination of Residual Receipts. Repayments shall be credited first to the principal of the State Fund Loan, second to interest on the Housing Fund Loan and third to principal on the Housing Fund Loan. The Developer may retain the remaining fifty percent (50%) of Residual Receipts, provided, however, Developer shall use its share of Residual Receipts to benefit affordable housing development or to provide resident services to affordable housing developments. The City approval of use of Developer's share of Residual Receipts for any purposes other than affordable housing development or to provide resident services to affordable housing developments shall be required.
6. Exhibits. The following exhibits attached to the DDLA are replaced in their entirety with the Exhibits attached to this Agreement:
Exhibit D – Ground Lease
Exhibit F – Promissory Note
Exhibit G – Deed of Trust
Exhibit H – Regulatory Agreement.
7. Effect of Amendment. Except as amended herein, all provisions of the DDLA shall remain in full force and effect. To the extent that there is a conflict between this Agreement and the DDLA, this Agreement shall govern. This Agreement shall take effect on the Effective Date set forth above. This Agreement sets forth the Parties entire understanding regarding this matter and may only be modified by another written agreement.
IN WITNESS WHEREOF, the Parties have signed this Agreement on the dates indicated below. 551\01\3553230.1
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DEVELOPER:
MP 965 Weeks Street Associates, L.P.,
a California limited partnership
By: MP CANDO Weeks Street, LLC,
a California limited liability company,
its general partner
By: MidPen Housing Corporation,
a California nonprofit public benefit
corporation, its manager
By: ____________________________
Name: __________________________
Its: _____________________________
By: East Palo Alto Community Alliance and
Neighborhood Development Organization, a
California nonprofit public benefit corporation,
its member
By: ____________________________
Name: __________________________
Its: _____________________________
CITY:
CITY OF EAST PALO ALTO
By: _______________________________
Melvin E. Gaines, City Manager
Approved as to form:
By: _________________________________
John D. Lê, City Attorney