551\01\2717447.7
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GROUND LEASE
by and between
City of East Palo Alto, as Lessor
and
MP 965 Weeks Street Associates, L.P., as Lessee
Dated as of ______________________, ______
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ARTICLE 1. Definitions..................................................................................................................1 Section 1.1 Definitions.........................................................................................................1 Section 1.2 Exhibits. ............................................................................................................5 ARTICLE 2. Lease of the LAND....................................................................................................6 Section 2.1 Lease of Land....................................................................................................6 Section 2.2 Term..................................................................................................................6 Section 2.3 Use. ...................................................................................................................6 Section 2.4 Possession. ........................................................................................................7 Section 2.5 Memorandum of Lease. ....................................................................................7 Section 2.6 No Right to Encumber Fee. ..............................................................................7 Section 2.7 Publicly Accessible Pedestrian and Bike Pathway. ..........................................7 Section 2.8 Community Room.............................................................................................8 ARTICLE 3. The Improvements .....................................................................................................8 Section 3.1 Construction......................................................................................................8 Section 3.2 Liens..................................................................................................................8 Section 3.3 Permits, Licenses and Easements. ..................................................................10 Section 3.4 Title to Improvements.....................................................................................10 Section 3.5 Benefits of Improvement During Term. .........................................................11 Section 3.6 No Abandonment............................................................................................11 ARTICLE 4. Rents.........................................................................................................................11 Section 4.1 Ground Rent....................................................................................................11 Section 4.2 Payments.........................................................................................................12 ARTICLE 5. Taxes and Other Impositions; Utilities ....................................................................12 Section 5.1 Payment of Impositions. .................................................................................12
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Section 5.2 Possessory Interest Taxes. ..............................................................................12 Section 5.3 Contested Taxes and Other Impositions. ........................................................12 Section 5.4 Valuation Assessment/Property Tax Exemption. ...........................................13 Section 5.5 Failure to Pay Impositions. .............................................................................13 Section 5.6 Utilities............................................................................................................13 ARTICLE 6. Insurance ..................................................................................................................13 Section 6.1 Required Insurance Coverage.........................................................................13 Section 6.2 Insurance Policies and Premiums. ..................................................................14 Section 6.3 Proceeds of Insurance. ....................................................................................16 Section 6.4 Limitation of Liability.....................................................................................16 ARTICLE 7. MAINTENANCE, ALTERATIONS, REPAIRS AND REPLACEMENTS ..........16 Section 7.1 Maintenance of Leased Premises; Landscaping. ............................................16 Section 7.2 Landscaping Maintenance. .............................................................................17 Section 7.3 Alterations to Leased Premises.......................................................................17 Section 7.4 Indemnifications. ............................................................................................18 Section 7.5 Capital Replacement Reserve Account...........................................................18 Section 7.6 Operating Reserve Account. ...........................................................................19 ARTICLE 8. MORTGAGE LOANS.............................................................................................19 Section 8.1 Liens and Encumbrances Against the Leasehold Estate.................................19 Section 8.2 Cost of Approved Loans to be Paid by Lessee. ..............................................22 Section 8.3 Proceeds of Approved Loans. .........................................................................22 Section 8.4 Notice and Right to Cure Defaults Under Approved Loans...........................22 Section 8.5 Rights of Investor............................................................................................22
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ARTICLE 9. REPRESENTATIONS, WARRANTIES AND COVENANTS .............................22 Section 9.1 Representations, Warranties and Covenants of Lessor...................................22 Section 9.2 Representations, Warranties and Covenants of Lessee...................................23 Section 9.3 Hazardous Materials. ......................................................................................24 Section 9.4 Hazardous Materials Indemnification.............................................................24 Section 9.5 Prevailing Wage Requirements.......................................................................25 Section 9.6 Compliance with Laws. ..................................................................................26 Section 9.7 Affordability and Use Restrictions. ................................................................26 Section 9.8 Non-Discrimination; Compliance with Fair Housing Laws. ..........................26 Section 9.9 Fair Housing....................................................................................................27 Section 9.10 Management Entity.......................................................................................27 Section 9.11 Subleases.......................................................................................................27 ARTICLE 10. EMINENT DOMAIN ............................................................................................27 Section 10.1 Termination of Lease. ...................................................................................28 Section 10.2 Continuation of Lease and Presumption of Restoration. ..............................28 Section 10.3 Temporary Taking. .......................................................................................28 Section 10.4 Apportionment of Award..............................................................................28 Section 10.5 Joinder...........................................................................................................29 Section 10.6 City Reservation of Rights............................................................................29 ARTICLE 11. DAMAGE OR DESTRUCTION...........................................................................29 Section 11.1 Damage or Destruction to Leased Premises. ................................................30 Section 11.2 Damage or Destruction Near End of Term. ..................................................30 Section 11.3 Distribution of Insurance Proceeds...............................................................30 Section 11.4 Insurance Requirements................................................................................30
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ARTICLE 12. EVENTS OF DEFAULT.......................................................................................31 Section 12.1 Events of Default. .........................................................................................31 Section 12.2 Rights and Remedies.....................................................................................32 Section 12.3 Default by Lessor..........................................................................................34 Section 12.4 Notices. .........................................................................................................34 ARTICLE 13. QUIET ENJOYMENT AND POSSESSION; INSPECTIONS.............................34 Section 13.1 Quiet Enjoyment. ..........................................................................................34 Section 13.2 Lessor's Right of Inspection..........................................................................34 ARTICLE 14. VACATION OF LEASED PREMISES ................................................................35 Section 14.1 Vacation Upon Termination. ........................................................................35 ARTICLE 15. NON-MERGER.....................................................................................................35 Section 15.1 Non-Merger...................................................................................................35 ARTICLE 16. TRANSFERS.........................................................................................................35 Section 16.1 Permitted Transfer by Lessee........................................................................35 ARTICLE 17. MISCELLANEOUS PROVISIONS......................................................................36 Section 17.1 Consents........................................................................................................36 Section 17.2 Enforced Delay; Extension of Times of Performance. .................................36 Section 17.3 Interpretation.................................................................................................37 Section 17.4 Entire Agreement: Modifications. ................................................................37 Section 17.5 Governing Law. ............................................................................................37 Section 17.6 Binding Effect...............................................................................................37 Section 17.7 Severability. ..................................................................................................37 Section 17.8 Further Assurances........................................................................................37 Section 17.9 Authority to Execute Agreement. .................................................................38
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Section 17.10 Lease Administration and Approvals..........................................................38 Section 17.11 Captions. .....................................................................................................38 Section 17.12 Gender.........................................................................................................38 Section 17.13 Exhibits. ......................................................................................................38 Section 17.14 References...................................................................................................38 Section 17.15 Cumulative..................................................................................................38 Section 17.16 Notices ........................................................................................................38 Section 17.17 Counterparts................................................................................................40 Section 17.18 Time of Essence..........................................................................................40 Section 17.19 No Third Party Beneficiaries. .....................................................................40 Section 17.20 Parties Not Co-Venturers; Independent Contractor; No Agency Relationship. ..........................................................................................................40 Section 17.21 No Personal Liability. .................................................................................40 Exhibit A: Legal Description of the Leased Premises
Exhibit B: Site Map of the Leased Premises
Exhibit C: Memorandum of Lease
Exhibit D: Scope of Development
Exhibit E: Financing Plan
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GROUND LEASE
(965 Weeks Street Project)
This Ground Lease (the "Lease") is entered into as of __________, 20__, by and between the City of East Palo Alto, a California municipal corporation ("Lessor"), and MP 965 Weeks Street Associates, L.P, a California limited partnership ("Lessee").
RECITALS
A. Lessee and Lessor entered into that certain Disposition, Development and Loan Agreement for the 965 Weeks Street Project dated December 15, 2020, as amended by the First Amendment to the Disposition and Development Agreement dated ______, 2023 (the "DDLA").
B. Lessor is the owner of that certain real property in the City of East Palo Alto, County of San Mateo, State of California, more particularly described in the legal description attached hereto as Exhibit A and depicted on the map attached as Exhibit B (the "Land"). Under the DDLA, the City agreed to ground lease the Land to Lessee for ninety-nine (99) years, and Lessee has agreed to develop and operate thereon a one-hundred and thirty-six (136) unit multifamily rental housing development with long term affordability requirements including one (1) manager's unit that is not subject to affordability requirements (the "Improvements").
C. Lessor desires to lease the Land to Lessee for a period of ninety-nine (99) years pursuant to the terms of this Lease.
D. Capitalized terms which are referred to and utilized throughout this Lease are defined in Article 1 of this Lease.
NOW, THEREFORE, for and in consideration of the foregoing premises, the covenants, representations, warranties and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1 Definitions. For the purposes of this Lease, the following defined terms shall have the meanings ascribed thereto in this Article 1:
(a) Applicable Laws: As defined in Section 9.6.
(b) Approved Loans: All loans, including without limitation, the City Loan, obtained from time to time by Lessee for the construction and permanent financing of the Improvements in compliance with the Financing Plan attached hereto as Exhibit E, as such Financing Plan may be revised from time to time by written consent of the Parties. (c) Casualty: As defined in Article 11 hereof.
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(d) City: The City of East Palo Alto, California.
(e) City Loan: means collectively the loans from the City to the Developer pursuant to the terms of set forth in the DDLA consisting of (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). (f) Claims: means collectively: claims, demands, actions, causes of action, suits, judicial or administrative proceedings, damages, losses, liabilities, costs, expenses (including without limitation reasonable attorneys' fees), damages, penalties, deficiencies, fines, orders, charges, judgments, remedial action requirements, and enforcement actions of any kind. (g) Commencement Date: The date set forth in the first paragraph of this Lease.
(h) County: The County of San Mateo, California.
(i) Development: Development shall have the same meaning set forth in the DDLA.
(j) DDLA: As defined in Recital A.
(k) Environmental Laws: All federal, state or local statutes, ordinances, rules, regulations, orders, decrees, judgments or common law doctrines, and provisions and conditions of permits, licenses and other operating authorizations regulating, or relating to, or imposing liability or standards of conduct concerning (i) pollution or protection of the environment, including natural resources; (ii) exposure of persons, including employees and agents, to Hazardous Materials or other products, raw materials, chemicals or other substances; (iii) protection of the public health or welfare from the effects of by-products, wastes, emissions, discharges or releases of chemical substances from industrial or commercial activities; (iv) the manufacture, use or introduction into commerce of Hazardous Materials, including without limitation, their manufacture, formulation, labeling, distribution, transportation, handling, storage and disposal; or (iv) the use, release or disposal of Hazardous Materials or the remediation of air, surface waters, groundwater or soil, as now or may at any later time be in effect, together with any regulations promulgated thereunder.
(l) Event of Default: As described in Article 12 of this Lease. (m) Governmental Authorities: Any applicable federal, State or local governmental or quasi-governmental entities, subdivisions, agencies, authorities or instrumentalities having jurisdiction over the Leased Premises, the Improvements, Lessor or Lessee.
(n) Hazardous Materials: means: (i) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos-containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas, radon, or a pesticide, herbicide, or any other agricultural chemical, and (ii) any waste, substance or material defined as or included in the definition of "hazardous substances," "hazardous wastes," 3 551\01\2717447.7
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"hazardous materials," "toxic materials", "toxic waste", "toxic substances," or words of similar import under any Hazardous Materials Law (1) which poses a hazard to the Leased Premises, to adjacent properties, or to persons on or about the Leased Premises, (2) which causes the Leased Premises to be in violation of any of the aforementioned laws or regulations, or (3) the presence of which on or in the Leased Premises requires investigation, reporting or remediation under any such laws or regulations. Hazardous Materials shall exclude hazardous materials customarily used in construction or operation of a multi-family residential development, provided that such materials and substances are used in accordance with all applicable laws (o) "Hazardous Materials Law" means any federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, health, industrial hygiene, environmental conditions, or the regulation or protection of the environment, and all amendments thereto as of this date and to be added in the future and any successor statute or rule or regulation promulgated thereto.
(p) Impositions: All taxes, including without limitation, possessory interest taxes, assessments, water and sewer charges, charges for public utilities, excises, levies, license and permit fees and other charges that shall or may be assessed, levied or imposed during the Term by any Governmental Authorities upon the Leased Premises or any part thereof, including the buildings or improvements now or hereafter located thereon, trade fixtures, furnishings, equipment, and all other personal property of Lessee contained in the Leased Premises. "Impositions" shall not include any income tax, capital levy, estate, succession, inheritance, or similar taxes of Lessor. Except for a tax, assessment, or charge resulting from Lessee's use of the Leased Premises pursuant to this Lease, "Impositions" shall not include any franchise tax imposed upon any owner of the fee of the Leased Premises, or any income, profits or revenue tax, assessment or charge imposed upon the rent or other benefit received by Lessor under this Lease by any Governmental Authorities.
(q) Improvements: The one hundred and thirty-six (136) units of affordable housing for income-eligible households, including one (1) manager's unit which will not be restricted with affordability covenants, to be constructed in accordance with this Lease and the DDLA, related onsite improvements related onsite improvements, parking garage, office space for property management and resident services staff, community amenities, including a community room with kitchen, outdoor play areas, and space for an after school program for resident children, landscaping and other improvements located or to be located on the Land. The Improvements are also referred to in this Lease as the "Project". (r) Indemnitees: Lessor and its elected and appointed officials, officers, employees, agents, contractors, representatives and volunteers. (s) Insurance Requirements: The requirements, whether now or hereafter in force, of any insurer or insurance carrier, any board of fire underwriters or any other company, bureau, organization or entity performing the same or similar functions, applicable to the Leased Premises and/or the Improvements, or any portion thereof, to the extent so applicable. (t) Investor: The low income housing tax credit investor that will provide equity to the Project
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(u) Land: As defined in Recital A above.
(v) Lease Year: A calendar year.
(w) Leased Premises: The Land, together with the Improvements and any other improvements now or hereafter located thereon, and together with all and singular rights, easements, licenses, privileges and appurtenances thereunto attaching or in any way belonging thereto.
(x) Leasehold Mortgage: Any mortgage, deed of trust, security agreement or collateral assignment pursuant to an Approved Loan encumbering Lessee's Estate as a leasehold mortgage lien.
(y) Legal Requirements: All laws, statutes, codes, ordinances, orders, rules, regulations and requirements of all Governmental Authorities and the appropriate agencies, officers, departments, boards and commissions thereof, whether now or hereafter in force applicable to Lessor, Lessee, the Leased Premises, the Improvements, or any portion thereof, to the extent so applicable.
(z) Lender: The holder, mortgagee, grantee or secured party under any Leasehold Mortgage.
(aa) Lessee's Estate or Leasehold Estate: During the Term of this Lease, Lessee's leasehold interest in the Land and Lessee's fee ownership interest in the Improvements. (bb) Lessor's Estate: Lessor's fee estate in the Land and reversionary interest in the Improvements pursuant to this Lease.
(cc) Loan Documents. All documents executed by Lessee evidencing or securing a Leasehold Mortgage.
(dd) Management Agent: The Person designated from time to time as "Management Agent" of all or any portion of the Improvements under any management agreement entered into from time to time with Lessee. The initial Management Agent will be MidPen Property Management Corporation.
(ee) Net Condemnation Award: The net amounts owed or paid to the Parties or to which either of the Parties may be or become entitled by reason of any Taking or pursuant to any agreement with any condemning authority which has been made in settlement of any proceeding relating to a Taking, less any costs and expenses incurred by the Parties in collecting such award or payment.
(ff) Partnership: The limited partnership that is the Lessee. (gg) Party: Lessor or Lessee, as applicable. Lessor and Lessee shall be referred to collectively as the "Parties."
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(hh) Person: An individual, partnership, corporation, public benefit corporation, trust, unincorporated association, or other entity or association. (ii) Plans and Specifications: Those plans and specifications approved by the Lessor, for the construction of the Improvements, as they may be amended from time to time and as approved by Lessor.
(jj) Project: The Improvements as defined above.
(kk) Rent: As described in Section 4.1 hereof.
(ll) Taking: A taking during the Term hereof of all or any part of the Leased Premises and/or the Improvements, or any interest therein or right accruing thereto, as a result of the exercise of the right of condemnation or eminent domain materially affecting the Leased Premises or any part thereof. A conveyance in lieu of or in anticipation of the exercise of any such right of condemnation or eminent domain shall be considered a Taking. Any such Taking shall be deemed to have occurred upon the earlier to occur of (a) the date on which the property, right or interest so taken must be surrendered to the condemning authority, or (b) the date title vested in a condemning authority or other party pursuant to any Taking. (mm) Tax Credit Eligible Household: A household that is eligible to rent and occupy a qualified low income dwelling unit under Section 42 of the Internal Revenue Code and applicable TCAC and State of California Legal Requirements relating to low income housing tax credits including but not limited to California Revenue and Taxation Code Sections 17057.5, 17058, 23610.4, and 23610.5 and California Health and Safety Code Section 50199, et seq. (nn) Tax Credit Restrictive Covenant: The agreement with TCAC to be executed by Lessee and properly recorded against the Lessee's Estate in the land records of the County, setting forth certain terms and conditions under which one hundred and thirty-five (135) of the residential units in the Improvements will be operated (oo) TCAC: means the California Tax Credit Allocation Committee. (pp) Tenant(s): Any subtenant, sublessee or licensee of Lessee under any Resident Sublease(s).
(qq) Resident Sublease(s): Any sublease or license agreement entered into by Lessee with residents of the residential units to be developed on the Land. (rr) Term: The period of time described in Section 2.2 hereof. (ss) Transfer: Any sale, assignment, transfer, conveyance, lease, sublease, encumbrance, mortgage, or hypothecation, in any manner or form or any agreement to do any of the foregoing.
Section 1.2 Exhibits. The Exhibits referred to in this Lease and attached hereto are:
Exhibit A: Legal Description of the Land
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Exhibit B: Site Map of the Land
Exhibit C: Memorandum of Lease
Exhibit D: Scope of Development
Exhibit E: Financing Plan
ARTICLE 2.
LEASE OF THE LAND
Section 2.1 Lease of Land. Subject to the terms hereof and in consideration of the covenants of payment and performance stipulated herein, Lessor leases the Land to Lessee, and in consideration thereof, Lessee takes, hires and leases the Land from the Lessor, pursuant to the terms of this Lease. This Lease, the interests of Lessor and Lessee hereunder, and the Leased Premises, are in all respects subject to and bound by all of the covenants, conditions, restrictions, reservations, rights, rights-of-way, and easements of record prior to the date of this Lease.
Lessee hereby accepts the Leased Premises and acknowledges that the Leased Premises is in the condition required by the DDLA and this Lease.
Section 2.2 Term. Unless sooner terminated pursuant to the provisions hereof, this Lease shall continue in full force and effect for a term ("Term"), commencing on the Commencement Date and expiring on midnight the day immediately preceding the ninety-ninth (99th) anniversary thereof.
Section 2.3 Use. Subject to the provisions hereof, Lessee shall use the Leased Premises for the construction and operation of the Project, which includes the construction, development and operation of the Improvements on the Land in accordance with the restrictions and requirements set forth in Article 2 hereof. Further, Lessee agrees:
(a) that all uses conducted on the Leased Premises, including, without limitation, all activities undertaken by Lessee pursuant to this Lease, shall conform to all applicable provisions of the City of East Palo Alto Municipal Code, the DDLA and the Regulatory Agreement;
(b) not to use the Leased Premises for any disorderly or unlawful purpose; (c) to use its best efforts to prevent any Tenant from committing or maintaining any nuisance or unlawful conduct on or about the Leased Premises; (d) to use its best efforts to prevent any action by any Tenant that would cause Lessee to violate any of the covenants and conditions of this Lease with respect to the Improvements;
(e) to take reasonable action, if necessary, to abate any action by any Tenant that violates, or that would cause Lessee to violate this Lease; and (f) subject to the laws of the State of California and the rights of Tenants, to permit Lessor and its agents to inspect the Leased Premises or any part thereof at any reasonable time during the Term.
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Section 2.4 Possession. Lessor agrees to and shall provide possession of the Leased Premises to Lessee upon close of construction financing, free and clear of all rights to possession or use by any tenants or other individuals or entities other than Lessee (except as disclosed to Lessee or apparent from Lessee's inspection), and free and clear of any encumbrances except as expressly approved by Lessee in writing.
Section 2.5 Memorandum of Lease. The Parties shall execute and acknowledge a Memorandum of Ground Lease, substantially in the form attached hereto as Exhibit C, which shall be recorded at Lessee's expense.
Section 2.6 No Right to Encumber Fee. Lessee acknowledges and agrees that Lessee shall not have the right to encumber or mortgage Lessor's fee interest in the Property.
Section 2.7 Publicly Accessible Pedestrian and Bike Pathway. During the term of the Ground Lease, and in conjunction with completion of construction of the Project, Lessee shall create and maintain a Public Access Area (defined below) that shall be made available, on a nonexclusive basis, to the general public for their ingress, egress and use as a pedestrian and bicycle pathway. The Public Access Area is depicted as the area of the Property shown in Exhibit B.
Lessee at its own cost and expense, shall be responsible for maintenance and repairs in the Public Access Area and shall maintain the Public Access Area in good condition at all times, including, without limitation, all landscaping, walkways, and other improvements located within the Public Access Area in good repair at all times. Use of the Public Access Area will be subject to reasonable rules proposed by Lessee and approved by the City prior to the issuance of a certificate of occupancy for the Development, which approval shall not be unreasonably withheld or delayed, provided such rules are consistent with the City's rules for use of the City bike path that connects with the Public Access Area.
Lessor acknowledges that the use of the Public Access Area by the general public is nonexclusive. Lessee, its successors, assigns, grantees and licensees, shall have the right to use and occupy the Public Access Area in any manner that does not unreasonably interfere with the with the use of the Public Access Area by the general public. Lessor acknowledges and agrees that temporary obstruction, blockage, encroachments or limitations in the Public Access Area reasonably necessary for development, construction, installation, maintenance, repair, replacement, reconstruction or removal of improvements within and outside the Public Access Area shall not constitute unreasonable interference with the Public Access Area, provided such obstruction, blockage, encroachment or limitations are limited to the time periods necessary for Lessee to complete any necessary work. The Parties acknowledge and agree that regardless of the provisions of this section the Public Access Area shall remain private property and that the granting of access to the Public Access Area does not convert the Property or the Public Access Area into public property. The Parties further acknowledge and agree that the uses of the Public Access Area by the general public are intended to be and shall be construed as recreational purposes as defined by California Civil Code Section 846 and that the Parties shall be entitled to the protections and provisions of California Civil Code Section 846.
Lessee shall indemnify and save harmless Lessor, its officials, agents, employees, successors and assigns, from and against any and all loss, damage, liability, expense, claim or demand of whatsoever character, direct or consequential, including, but without limiting thereby 8 551\01\2717447.7
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the generality of the foregoing, injury to or death of persons and damage to or loss of property to the extent arising out of the breach by Lessee of any of its rights or obligations herein, except those arising by reason of the negligence or willful misconduct of Lessor or its agents, contractors or employees. Lessor shall indemnify and save harmless Lessee, its trustees, officers, agents, employees, successors and assigns, from and against any and all loss, damage, liability, expense, claim or demand of whatsoever character, direct or consequential, including, but without limiting thereby the generality of the foregoing, injury to or death of persons and damage to or loss of property to the extent arising out of the exercise by Lessor or its agents, employees or contractors (but not including the exercise by any member of the public who is not an agent, employee or contractor of Lessor) of any right expressly or impliedly granted herein, except those arising by reason of the negligence or willful misconduct of Lessee, including its agents, contractors or employees.
Section 2.8 Community Room. Lessor and Lessee acknowledge that the Project's surrounding community generally lacks access to functional, quality meeting space for publicly accessible community meetings and agree that providing the larger surrounding community with access to the Project's community room will help improve the quality of life for community residents. Accordingly, Lessee shall allow community groups access to and use of the community room in accordance with a reservation system administered by the Lessee to be approved by the Lessor and at charges approved by the Lessor, provided, however, Lessee shall not be obligated to allow use of the community room or other common areas of the project by groups other than Tenants at any time that the community room is reserved by a Tenant of Lessee for such Tenant's exclusive use or at any time that the Lessee has a planned event in the community room.
ARTICLE 3.
THE IMPROVEMENTS
Section 3.1 Construction. Lessee shall cause the Improvements to be constructed in substantial compliance with the Construction Plans (as defined in the DDLA) approved by City and the terms and conditions of the land use permits and approvals and building permits, including any variances granted for the Improvements to be approved by Lessor, within the time periods set forth in the Schedule of Performance (as defined in the DDLA). Any and all Improvements constructed by or on behalf of Lessee shall be constructed in a good, skillful and professional manner, in compliance with all applicable Legal Requirements, and in accordance with all of the requirements of the DDLA. Except as may be specified in the DDLA and any City financing for the Project that may be approved by the City in its sole discretion, Lessee shall bear the entire and sole cost of planning, designing, engineering, financing, constructing, supervising, and inspecting the Improvements, including all fees and mitigation measures.
Lessee shall comply with the City of East Palo Alto's First Source Hiring Policy during construction of the Improvements and shall include in all construction contracts a requirement that the contractor comply with the First Source Hiring Policy.
Section 3.2 Liens. Lessee shall not have any right, authority or power to bind Lessor, Lessor's Estate, or any interest of Lessor in the Land or the Leased Premises, for any claim for labor or material, or for any other charge or expense, lien or security interest incurred in 9 551\01\2717447.7
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connection with Lessee's use of the Land, or the development, construction or operation of the Improvements, or any change, alteration of addition thereto. Lessee shall have the right to encumber Lessee's Estate with security instruments required in connection with the Approved Loans. Prior to entering into an Approved Loan, Lessee shall submit a copy of proposed loan documents to Lessor and shall obtain written confirmation from Lessor that the Approved Loan is in conformance with the Financing Plan then in effect. Lessee shall have the right to enter into utility easements and other customary easements necessary and incidental to the development, construction and operation of the Improvements, provided that such easements are subject to the approval of Lessor, which shall not be unreasonably withheld, conditioned or delayed and which consent may be provided by the City's Director of Public Works or his or her designee without further approval of the City Council ("Permitted Easements").
The Lessee shall not create or permit or suffer to be created or to remain upon the Lessor's Estate or any interest of Lessor in the Land or the Leased Premises, or upon the Leased Premises, or any part thereof, and will discharge, any lien, including, but not limited to, the liens of mechanics, laborers, materialmen, suppliers or vendors for work or materials alleged to be done or furnished in connection with the Leased Premises or the Project, or any part thereof. If any claim of lien is filed against the Lessor's Estate or any interest of Lessor in the Land or the Leased Premises, or a stop notice is served on any other lender or other third party in connection with the Leased Premises or the Improvements, or upon the Leased Premises, or any part thereof, then the Lessee shall, within twenty (20) days after such filing or service, either pay or contest such claim diligently and in good faith, provided that Lessee fully discharges the lien or stop notice, effects the release of such lien or stop notice by delivering to the Lessor a surety bond in sufficient form and amount, or provides the Lessor with other assurance satisfactory to the Lessor that the claim of lien or stop notice will be paid or discharged. If the Lessee fails to discharge any lien, encumbrance, charge, or claim in the manner required in this Lease, then in addition to any other right or remedy, the Lessor may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at the Lessee's expense. Any expense incurred by Lessor pursuant to this Section shall be immediately due and payable by Lessee to Lessor as Additional Rent under this Lease. The Lessee shall have the right to contest in good faith and by appropriate legal proceedings the validity or amount of any mechanics', laborers', materialmen's, suppliers' or vendors' lien or claimed lien; provided that the Lessee shall utilize all reasonable means (including the posting of adequate security for payment) to protect the Leasehold Estate, the Lessor's Estate and any other interest of Lessor in the Land or the Leased Premises against foreclosure. In addition to any other indemnities provided in this Lease or the DDLA, Lessee shall indemnify, protect, defend (with counsel of Lessor's choosing), and hold harmless the Indemnitees from any and all alleged or actual Claims arising by reason of a mechanic's lien or work, labor, services, or materials supplied or claimed to have been supplied to Lessee or anyone holding the Leased Premises or Development, or any part thereof, through or under Lessee.
Nothing in this Lease shall be construed as constituting the consent of the Lessor, expressed or implied, to the performance of any labor or the furnishing of any materials or any specific improvements, alterations of or repairs to the Leased Premises or the Project, or any part thereof, by any contractor, subcontractor, laborer or materialman, nor as giving the Lessee or any other person any right, power or authority to act as agent of or to contract for, or permit the rendering of, any services or the furnishing of any materials in such manner as would give rise to 10 551\01\2717447.7
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the filing of mechanics' liens or other claims against the Lessor's Estate or any other interest of Lessor in the Land or the Leased Premises. The Lessor shall have the right at all reasonable times to post and keep posted on the Leased Premises any notices which the Lessor may deem necessary for the protection of the Lessor and of Lessor's Estate or any other interest of Lessor in the Land or the Leased Premises from mechanics' liens or other claims. In addition, but subject to the paragraph above, the Lessee shall make, or cause to be made, prompt payment of all monies due and legally owing to all persons doing any work or furnishing any materials or supplies to the Lessee, or any of its respective contractors or subcontractors in connection with the Leased Premises and the Project. The provisions of this Section shall survive the expiration or termination of this Lease.
Notwithstanding any other provision of this Lease, including, but not limited to, this Section 3.2, Lessor acknowledges and agrees to recordation of the TCAC lease rider and, if applicable, a lease rider as required by the California Department of Housing and Community Development, each in a form reasonably approved by City, against Lessor’s Estate.
Lessor’s fee interest in the Leased Premises shall be senior to, and not be subordinated to, any financing obtained by Lessee in connection with the Leased Premises.
Section 3.3 Permits, Licenses and Easements. Lessor agrees to use Lessor's best reasonable efforts to assist Lessee in obtaining any and all permits, licenses, easements and other authorizations required by any Governmental Authority with respect to any construction or other work to be performed on the Leased Premises and to grant, or to assist Lessee in obtaining, as applicable, all permits, licenses, easements and other governmental authorizations that are necessary or helpful for electric, telephone, gas, cable television, water, sewer, drainage, access and such other public or private utilities or facilities as may be reasonably necessary or desirable in connection with the construction or operation of the Improvements. Payment of all fees, costs and expenses associated with any of the foregoing shall be the responsibility of Lessee, and Lessor shall have no responsibility to pay any such fees, costs or expenses.
Section 3.4 Title to Improvements.
(a) During the Term. Lessor hereby grants to Lessee, without warranty express or implied, any right, title, or interest that Lessor may have in the Improvements now or hereafter located on the Leased Premises. Notwithstanding any provision in this Lease to the contrary, the Improvements and all alterations, additions, equipment, and fixtures built, made or installed by Lessee in, on, under or to the Leased Premises or Improvements shall be the sole property of Lessee until the expiration of the Term or other termination of this Lease; provided, however, that Lessee shall have no right to destroy, demolish or remove the Improvements except as specifically provided for in this Lease or as approved in writing by Lessor. It is the intent of the parties hereto that this Lease shall create a constructive notice of severance of the Improvements from the Leased Premises without the necessity of a deed from Lessor after the Improvements have been constructed.
(b) After the Term. Upon the expiration of the Term or other termination of the Lease, the Improvements and all alterations, additions, equipment and fixtures shall be deemed to be and shall automatically become the property of Lessor, without cost or charge to 11 551\01\2717447.7
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Lessor. At such time, Lessee shall peaceably and quietly leave and surrender the Leased Premises and the Improvements to Lessor in good order, condition, and repair, reasonable wear and tear and obsolescence excepted. Lessee shall leave in place and in good order, condition, and repair, all fixtures and machinery; except Lessee shall have the right to remove only Lesseeowned appliances, other unattached equipment, furniture and merchandise that Lessee shall have installed, which removal must be done without damage to the Leased Premises or Improvements.
Lessor agrees that Lessee, at any time prior to the expiration or other termination of this Lease, may remove from the Leased Premises any and all equipment which Lessee has furnished for maintenance purposes or for the use of the Management Agent, provided that Lessee shall repair any physical damage to the Leased Premises caused by the removal of such equipment and property. Lessee agrees to execute, at the request of Lessor at the end of the Term, a confirmatory quitclaim deed of the Improvements and/or Leased Premises to Lessor to be recorded at Lessor's option and expense and any other documents that may be reasonably required by Lessor or Lessor's title company to provide Lessor title to the Leased Premises and the Improvements free and clear of all monetary liens and monetary encumbrances not caused or agreed to by Lessor. Without limiting the foregoing, upon the expiration or sooner termination of this Lease, Lessee shall deliver the Leased Premises and the Improvements to Lessor free of all monetary liens and encumbrances unless otherwise consented to in writing by Lessor. Any equipment or other personal property not removed from the Leased Premises by the expiration of the Term shall become the property of Lessor, and Lessor shall have the right to dispose of such equipment and property in the manner of Lessor's choosing.
Section 3.5 Benefits of Improvement During Term. Lessor acknowledges and agrees that any and all depreciation, amortization and tax credits for federal or state tax purposes relating to the Improvements located on the Leased Premises and any and all additions thereto, substitutions therefor, fixtures therein and other property relating thereto shall be deducted or credited exclusively by Lessee during the Term.
Section 3.6 No Abandonment. Lessee shall not abandon or vacate the Leased Premises or the Improvements at any time during the Term. If Lessee shall abandon, vacate, or otherwise surrender the Leased Premises or the Improvements, or be dispossessed thereof by process of law or otherwise, the same shall constitute a default under this Lease on the part of Lessee and, in addition to any other remedy available on the part of Lessor, any of Lessee’s property left in, upon or about the Leased Premises or the Improvements (except for underground storage tanks) shall, at Lessor’s option, be deemed to be abandoned and shall become the property of Lessor. The appointment of a receiver pursuant to a Lender’s exercise of its rights under a Leasehold Mortgage, or the foreclosure of a Leasehold Mortgage, shall not be a default under this Section.
ARTICLE 4.
RENTS
Section 4.1 Ground Rent. For each Lease Year during the Term, Lessee shall pay to Lessor on the Commencement Date of this Lease and on each succeeding anniversary thereof rent in advance for the next succeeding Lease Year ("Rent") in the amount of One Dollar ($1.00) per Lease Year or partial Lease Year.
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Section 4.2 Payments. All Rent, Additional Rent, and other sums, if any, due Lessor hereunder shall be paid by Lessee to Lessor at the address of Lessor set forth hereinafter for notices, or to such other person and/or at such other address as Lessor may direct by written notice to Lessee, without notice or demand, and without abatement, deduction or set off. Lessee may pay all Rent due at the rate set forth in Section 4.1 for the entire Term of this Lease in advance.
ARTICLE 5.
TAXES AND OTHER IMPOSITIONS; UTILITIES
Section 5.1 Payment of Impositions. As and when the same shall become due, Lessee will pay all of the Impositions, except that if any Imposition that Lessee is obligated to pay in whole or in part is permitted by law to be paid in installments, Lessee may pay or cause to be paid such Imposition (or its proportionate part thereof) in installments as and when such installments become due. Upon the written request of Lessor, Lessee shall provide to Lessor evidence satisfactory to Lessor of payment of all Impositions. During the first and last years of the Term, all Impositions shall become payable during each calendar, fiscal, tax or Lease Year, as applicable, shall be ratably adjusted on a per diem basis between Lessor and Lessee in accordance with the respective portions of such calendar, fiscal, tax, assessment or Lease Year during the Term. If any special assessments are payable in installments, Lessee shall pay only those installments that are due and payable during the Term.
Section 5.2 Possessory Interest Taxes. In accordance with California Revenue and Taxation Code Section 107.6(a), Lessor notices Lessee that by entering into this Lease, a possessory interest subject to assessment and collection of property taxes may be created.
Lessee or other party in whom the possessory interest is vested may be subject to the payment of property taxes levied on such interest. If possessory interest taxes are assessed, Lessee agrees it is responsible for payment thereof and Lessor has no obligation or liability of any kind or nature relating to payment of property taxes. Lessee shall, at its sole cost and expense, seek exemption from, or contest the payment of, assessments and the collection of property taxes pursuant to Revenue and Taxation Code Section 214, or a successor statute. During the pendency of such contest or request, Lessee’s non-payment of assessments or taxes when due shall not constitute a default hereunder if (i) the validity of such assessments and taxes is actively contested in good faith and by appropriate proceedings, (ii) Lessee has demonstrated to Lessor’s reasonable satisfaction that leaving such assessments or taxes unpaid pending the outcome of such proceedings could not result in conveyance of the Leased Premises in satisfaction of such assessments or taxes or otherwise impair Lessor’s estate in the Leased Premises, (iii) Lessee has furnished Lessor with a bond or other security satisfactory to Lessor in an amount not less than 100% of the applicable claim (including interest and penalties) and (iv) upon the final disposition of such proceedings, Lessee shall promptly pay all taxes and assessments then due, inclusive of any unpaid accrued penalties and interest. Lessor is a public agency and no property taxes will be or are legally assessable against its fee interest.
Section 5.3 Contested Taxes and Other Impositions.
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(a) Lessee, in its own name or in the name of Lessor if prior written consent of Lessor is obtained by Lessee, may contest the validity or amount of any Imposition relating to all or any portion of the Leased Premises, in which event the payment thereof, if authorized by applicable law, may be deferred during the pendency of such contest and for which adequate reserves have been provided in accordance with generally accepted accounting principles, if diligently prosecuted. If applicable law is silent on or expressly disallows deferring payment pending the contest of validity, Lessee shall timely pay any Imposition that is subject to dispute under protest, reserving any and all rights for repayment from the applicable taxing entity if resolution of such contest results in a decision or judgment in Lessee's favor. (b) As may be necessary or desirable, Lessor or Lessee, as applicable, upon the request of the other Party, shall use its best reasonable efforts to assist in any such proceeding to contest the validity or amount of any Imposition.
Section 5.4 Valuation Assessment/Property Tax Exemption. If applicable, Lessee may attempt to obtain a lowering of the assessed valuation of the Leased Premises for any year or obtain a property tax exemption for the purpose of reducing taxes thereon.
Section 5.5 Failure to Pay Impositions. If Lessee shall fail to pay any Impositions before the same become delinquent, except if Lessee is in good faith contesting such Impositions pursuant to Section 5.5 hereof, Lessor, at its election, may pay such Impositions (but shall not be obligated to pay same), together with any interest and penalties due thereon, and the amount so paid by Lessor shall be repayable to Lessor by Lessee, within thirty (30) days as Additional Rent hereunder.
Section 5.6 Utilities. Lessee shall pay all charges for all utilities used, rendered or supplied upon or in connection with the Improvements and the operation or construction thereof including, but not limited to, all charges for gas, electricity, light, heat or power, all telephone and other communications services, all water rents and sewer service charges, and all sanitation fees or charges (all of the foregoing, collectively "Utility Charges") levied or charged against the Leased Premises during the Term; provided, however, that Lessee shall have no responsibility hereunder for the payment of Utility Charges for utilities supplied by the respective providers directly to Tenants for such Tenants' use in connection with the occupancy of their respective residential units unless otherwise provide in the applicable Resident Sublease. Notwithstanding any contrary provision of this Lease, Lessor shall have no responsibility for payment of any Utility Charges.
ARTICLE 6.
INSURANCE
Section 6.1 Required Insurance Coverage.Standard "All Risk" Casualty and Fire and Extended Coverage Endorsement. Lessee shall during the Lease Term keep the Leased Premises insured against loss or damage by a standard all risk policy in amounts such that the proceeds of such insurance shall not be less than the full replacement value of the Leased Premises unless otherwise consented to in writing by Lessor and the other Lenders. 14 551\01\2717447.7
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(a) Liability and Property Damage Insurance. During the Lease Term, Lessee shall keep in full force and effect a policy or policies of comprehensive general liability and property damage insurance against liability for bodily injury to or death of any person or property damage arising out of an occurrence on or about the Leased Premises. The limits of such insurance shall be not less than Two Million Dollars ($2,000,000) combined single limit each occurrence, Two Million Dollars ($2,000,000) annual aggregate, together with Three Million Dollars ($3,000,000) excess liability coverage, or such other policy limits as Lessor may require in its reasonable discretion, including coverage for bodily injury, property damage, products, completed operations and contractual liability coverage. Such policy or policies shall be written on an occurrence basis and shall name the Indemnitees as additional insureds. (b) Workers' Compensation Insurance. Lessee shall carry or cause to be carried workers' compensation insurance covering all persons employed in connection with the Leased Premises and with respect to whom death, bodily injury, or sickness insurance claims could be asserted against Lessor and/or Lessee. Lessee shall furnish or cause to be furnished to Lessor evidence satisfactory to Lessor that Lessee and any contractor that has contracted for the performance of work on the Land or otherwise pursuant to this Lease carries statutory Workers' Compensation insurance and Employer's Liability insurance in a minimum amount of One Million Dollars ($1,000,000) per accident.
(c) Builders' Risk Insurance. Upon commencement of construction and continuing until issuance of a temporary certificate of occupancy, or equivalent for the Improvements, Lessee and all contractors working on behalf of Lessee shall maintain a policy of builder's all-risk insurance in an amount not less than the full insurable cost of the Project on a replacement cost basis naming Lessor as loss payee as its interests may appear. During the course of any alteration, construction or reconstruction, the cost of which exceeds Two Hundred Fifty Thousand Dollars ($250,000), Lessee shall require any contractor to provide builders' risk insurance for the full insurable cost of the work and liability insurance in an amount not less than One Million Dollars ($1,000,000) combined single limit for bodily injury or property damage insuring the interests of Lessor, Lessee and any contractors and subcontractors. (d) Property Insurance. During the Lease Term, Lessee shall keep in full force and effect a policy or policies of insurance against fire, extended coverage, vandalism, and malicious mischief, and such other additional perils, hazards, and risks as now are or may be included in the standard “all risk” form in general use in the County of San Mateo, California, with the standard form fire insurance coverage in an amount equal to full actual replacement cost thereof, as the same may change from time to time. The above insurance policy or policies shall include coverage for earthquakes to the extent generally and commercially available at commercially reasonable rates, if such insurance is generally obtained for affordable multifamily housing projects in the County of San Mateo. Lessor shall be a loss payee under such policy or policies and such insurance shall contain a replacement cost endorsement.
Section 6.2 Insurance Policies and Premiums.
(a) All liability policies required by this Lease or any of the Lenders shall be written on an occurrence basis, and shall name the Indemnitees as additional insureds. Duplicate copies of such policies or certificates of such insurance shall be promptly furnished to Lessor. 15 551\01\2717447.7
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(b) All policies of insurance shall include an endorsement that provides that notice of any change or cancellation of said policy must be made in writing and sent to Lessee and Lessor at their respective principal offices at least thirty (30) days before the effective date of change or cancellation.
(c) The rights of Lessor to receipt of any insurance proceeds will be subject and subordinate to the rights of any Lender pursuant to and in accordance with applicable Loan Documents.
(d) Companies writing the insurance required hereunder shall be approved to do business in the State of California. Insurance shall be placed with insurers with a current A.M. Best’s rating of no less than A: VII. The Commercial General Liability policies required hereunder shall name the Indemnitees as additional insureds. Builder’s Risk and property insurance shall name City as loss payee.
(e) If any insurance policy or coverage required hereunder is canceled or reduced, Lessee shall, within thirty (30) days after receipt of notice of such cancellation or reduction in coverage, but in no event later than the effective date of cancellation or reduction, file with Lessor a certificate showing that the required insurance has been reinstated or provided through another insurance company or companies. Upon failure to so file such certificate, Lessor may, with notice and at its option, procure such insurance coverage at Lessee's expense, and Lessee shall promptly reimburse Lessor for such expense upon receipt of billing from Lessor.
(f) Coverage provided by Lessee shall be primary insurance and shall not be contributing with any insurance, or self-insurance maintained by Lessor, and the policies shall so provide. The insurance policies shall contain a waiver of subrogation for the benefit of the Lessor. Lessee shall furnish the required certificates and endorsements to Lessor prior to the commencement of rehabilitation or construction work on the Project, and shall provide Lessor with certified copies of the required insurance policies upon request of Lessor. (g) Deductibles/Retentions. Any deductibles or self-insured retentions shall be declared to, and be subject to approval by, City's Risk Manager. At the option of and upon request by City's Risk Manager if the Risk Manager determines that such deductibles or retentions are unreasonably high, either the insurer shall reduce or eliminate such deductibles or self-insurance retentions as respects the Indemnitees or Lessee shall procure a bond guaranteeing payment of losses and related investigations, claims administration and defense expenses. (h) Adjustments. The limits of the liability coverage and, if necessary, the terms and conditions of insurance, shall be reasonably adjusted from time to time (not less than every five (5) years after the Commencement Date nor more than once in every three (3) year period) to address changes in circumstances, including, but not limited to, changes in the purchasing power of the dollar and the litigation climate in California. Within thirty (30) days following Lessor's delivery of written notice of any such adjustments, Lessee shall provide Lessor with amended or new insurance certificates and endorsements evidencing compliance with such adjustments.
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Section 6.3 Proceeds of Insurance.
(a) For so long as any Leasehold Mortgage on the Leased Premises is outstanding: All fire and standard risk or extended coverage (casualty) insurance proceeds shall be applied to the payment of the costs of repairing or rebuilding that part of the Leased Premises damaged or destroyed if (i) Lessee agrees in writing within ninety (90) days after payment of the proceeds of insurance that such repair or rebuilding is economically feasible, and (ii) each Lender permits such repair or rebuilding, provided that the extent of the Lessee's obligation to restore the Leased Premises shall be limited to the amount of the insurance proceeds. (b) If the Improvements are not repaired or rebuilt, all such proceeds shall be applied in a manner consistent with the terms of the Leasehold Mortgages. (c) In the event that no Leasehold Mortgage is outstanding, all insurance proceeds received under the policies set forth in this Article 6 shall be paid to Lessee, provided that Lessee agrees that it shall apply such proceeds for reconstruction or repair of the Improvements unless such repair or reconstruction is not economically feasible. (d) To the extent any of the above provisions are inconsistent with the provisions of any of the Loan Documents, the Loan Documents shall be controlling.
Section 6.4 Limitation of Liability.
(a) In addition to any other indemnities provided in this Lease or the DDLA, Lessee shall indemnify, protect, defend (with counsel reasonably acceptable to Lessor), and hold harmless the Indemnitees from and against all Claims arising out of, attributable to or otherwise occasioned, in whole or in part, by any act or omission of Lessee, its agents, contractors, servants, employees, or invitees, arising from or relating to breach of Lessee's representations and warranties or the operation of the Leased Premises, except to the extent any such Claim arises from the active negligence or willful misconduct of Lessor or the Indemnitees. (b) The provisions of this Section 6.4 shall survive the expiration or termination of this Lease.
ARTICLE 7.
MAINTENANCE, ALTERATIONS, REPAIRS AND REPLACEMENTS
Section 7.1 Maintenance of Leased Premises; Landscaping. During the Term, at Lessee's sole cost and expense, Lessee shall keep and maintain the Leased Premises, all Improvements hereafter developed, and all appurtenances thereunto belonging, in good and safe order, condition and repair, free of debris, waste, and graffiti, in compliance with the terms of all applicable provisions of the City of East Palo Alto Municipal Code, and in accordance with the standard of maintenance of high quality apartment projects within the San Mato County region.
To accomplish the maintenance, Lessee shall either staff or contract with and hire licensed and qualified personnel to perform the maintenance work, including the provision of labor, equipment, materials, support facilities, and any and all other items necessary to comply with the requirements of this Lease. All such maintenance and repair shall conform to and comply with 17 551\01\2717447.7
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all Legal Requirements affecting the Leased Premises. Lessee agrees that Lessor shall not be required to perform any maintenance, repairs or services or to assume any expense in connection with the Improvements and the Leased Premises. Lessee hereby waives all rights to make repairs or to cause any work to be performed at the expense of Lessor as may be provided for in Section 1941 and 1942 of the California Civil Code, if applicable.
Section 7.2 Landscaping Maintenance.
(a) Lessee, at no expense to the Lessor, shall maintain in healthful, attractive and reasonably weed-free manner all the landscaped areas related to the Project as shown in the landscaping plan approved by the City. "Landscaped areas" as used in this Lease shall mean plantings and irrigation systems which have been installed, or are proposed to be installed, pursuant to the City-approved landscaped plan for the Project including those in City rights-ofway. All plantings shall be maintained using generally accepted methods of cultivation to ensure reasonably normal, healthy plant growth. Maintenance shall include replacement of plantings, when necessary, and all ordinary and usual care, including, but not limited to, irrigation, fertilization, pest and disease control, weeding, rotation of plantings and the removal of trimmings, rubbish, debris, and other solid waste. Lessee shall, at no expense to the Lessor, install, maintain, repair, and replace, where necessary, such irrigation systems as are required to provide adequate irrigation in compliance with water conservation practices. (b) If, in the reasonable judgment of the Lessor, Lessee has failed to maintain properly any landscaping as required by this Lease, the Lessor may perform such maintenance, at its option, after thirty (30) days' prior written notice to Lessee of such failure to maintain. In such event, the Lessor's performance of such maintenance shall be at the Lessee's sole expense and Lessee, upon demand by the Lessor, shall pay to the Lessor all reasonable expenses incurred by the Lessor in the performance of such maintenance.
(c) If any maintenance, repair, or replacement of landscaping needs immediate correction as a result of a public safety or health hazard, as reasonably determined by the Lessor, and such maintenance is not performed, or cannot be performed, by Lessee within twenty-four (24) hours of receipt of such notice thereof, the Lessor may perform or cause to be performed such maintenance at Lessee's expense, and Lessee, upon demand by the Lessor, shall pay to the Lessor all reasonable expenses incurred by the Lessor in the performance of such maintenance.
Section 7.3 Alterations to Leased Premises. Lessee may make any additions, alterations or changes (sometimes collectively referred to herein as "Alterations") in or to the Improvements without the prior written approval of Lessor subject to the following conditions:
(a) No Alterations shall be made that would tend to impair the structural soundness of the Improvements;
(b) No Alterations shall be undertaken that are prohibited by, or would cause the Leased Premises, the Improvements, Lessee, or Lessor to be in breach or violation of any Legal Requirements;
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(c) No Alterations shall be undertaken until Lessee shall have procured, to the extent the same may be required from time to time, all permits and authorizations of all applicable Governmental Authorities, all required consents of any Lender, and the written consent of Lessor;
(d) Any Alterations shall be performed in good, skillful and professional manner and in compliance with all applicable Legal Requirements and all applicable Insurance Requirements;
(e) Any and all Alterations shall be consistent with the use of the Leased Premises as authorized under this Lease; and
(f) Any Alteration that (i) will exceed the sum of Fifty Thousand Dollars ($50,000) in cost and either was not included in the annual budget approved by the City or exceeds the cost allocated in the approved annual budget by twenty percent (20%) or more shall require Lessor's advance written consent. In the event the Lessor fails to approve or disapprove any such Alteration within thirty (30) days of receipt of written request from Lessee, such Alteration shall be deemed approved. Any Alteration made pursuant to an emergency shall not require the Lessor's prior consent, but Lessee shall inform Lessor of such work and costs in writing within thirty (30) days of commencing such work.
Section 7.4 Indemnifications. Notwithstanding any other provision of this Lease to the contrary, and in addition to any other indemnities provided in this Lease, to the fullest extent permitted by law, Lessee hereby agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to Lessor) the Indemnitees from and against any and all Claims, arising from or relating to Lessee's obligations under this Lease or the construction or operation of the Improvements or any Alterations except to the extent any such Claim arises from the active negligence or willful misconduct of the Indemnitees. In addition, if any contractor or subcontractor which performed any construction work for Lessee or Lessee's affiliates on the Improvements or Alterations shall assert any claim against Lessor on account of any damage alleged to have been caused by reason of acts of negligence of Lessee or Lessee's affiliates, members, partners, officers, directors, affiliates, agents, employees or construction contractors, Lessee shall defend at its own expense any suit based upon such claim; and if any judgment or claim against Lessor shall be allowed, Lessee shall pay or cause to be paid or satisfied such judgment of claim and pay all costs and expenses in connection therewith. The provisions of this Section shall survive the expiration or termination of this Lease.
Section 7.5 Capital Replacement Reserve Account. Lessee shall establish and maintain a capital reserve account at all times during the Term of this Lease (“Capital Reserve Account”). The funds to be placed and maintained in the Capital Reserve Account shall be not less than Sixty-Eight Thousand Dollars ($68,000). The funds in the Capital Reserve Account shall be expended only for capital repairs, improvements, and replacements to the Development fixtures and equipment with a long useful life and which are normally capitalized under generally accepted accounting principles. Capital repairs to and replacement of the Development shall include, without limitation, the following: carpet and drape replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air 19 551\01\2717447.7
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conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line pipe replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting. The non-availability of funds in the Capital Reserve Account does not in any manner relieve or lessen Lessee’s obligation to undertake any and all necessary capital repairs, improvements, or replacements and to continue to maintain the Development in the manner prescribed herein. Not less than once per year, Lessee shall submit to Lessor an accounting for the Capital Reserve Account.
Section 7.6 Operating Reserve Account. Commencing upon the conversion of the financing for the Development to permanent financing, Lessee shall establish an operating reserve account (the “Operating Reserve Account”). The funds to be placed and maintained in the Operating Reserve Account shall be not less than three (3) months of operating costs. The Operating Reserve Account shall be used to cover shortfalls between annual Development revenue and actual operating expenses, but shall in no event be used to pay for capital items or capital costs properly payable from the Capital Reserve Account. Lessee shall, not less than once per year, submit to Lessor an accounting for the Operating Reserve Account.
ARTICLE 8.
MORTGAGE LOANS
Section 8.1 Liens and Encumbrances Against the Leasehold Estate. The Lessee shall have the right to encumber the Leasehold Estate and the Improvements with leasehold deeds of trust, mortgages, and regulatory and affordability agreements related to the Approved Loans without Lessor's consent (collectively, "Liens") provided that all documents evidencing such Liens are consistent with the terms and conditions of this Lease and the DDLA and executed attachments thereto.
(a) For as long as there is any Lien securing any Approved Loan:
(1) Lessor shall not agree to any mutual termination or accept any surrender of this Lease, nor shall Lessor consent to any material amendment or modification of this Lease without the prior written consent of the Lenders that have outstanding Approved Loans, if and to the extent required by any such Lenders. In the event that Lessor receives competing or conflicting offers to cure any default under this Lease, Lessor shall accept the offers to cure in the following order: first, Lessee or the limited partner (or members, as applicable) therein, then each Lender in the same relative priority as their respective Liens. (2) Notwithstanding any default by Lessee under this Lease, Lessor shall have no right to terminate this Lease unless Lessor shall have given the Lenders that have outstanding Approved Loans written notice of such default and such Lenders shall have failed to remedy such default or acquire the Leasehold Estate or commence foreclosure or other appropriate proceedings as set forth in, and within the time specified by, this Section 8.1. 20 551\01\2717447.7
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(3) Any Lender that has an outstanding Approved Loan shall have the right, but not the obligation, at any time to pay any or all of the Rent or Additional Rent due pursuant to the terms of this Lease, and do any other act or thing required of Lessee by the terms of this Lease, to prevent termination of this Lease. Each Lender shall have sixty (60) days after receipt of notice from Lessor describing such default to cure the default, which notice shall include, with respect to any monetary default, a detailed statement identifying the amounts due and the obligations to which amounts relate and with respect to any non-monetary default, a detailed statement identifying the obligations breached and the cure expected by Lessor; provided, however, that if the default is not susceptible to cure within such period, the Lender shall have such longer period, not to exceed an additional ninety (90) days, as may be necessary to cure the default, so long as such Lender is diligently prosecuting such cure to completion (the "Initial Cure Period"). All payments so made and all things so done shall be as effective to prevent a termination of this Lease as the same would have been if made and performed by Lessee instead of by the Lender(s).
(4) Lessor shall provide estoppel certificates reasonably requested by lenders or investors which estoppel certificates shall be approved as to form by Lessor. (5) If the Lenders are prohibited, stayed or enjoined by any bankruptcy or insolvency proceeding of any court, including without limitation a court having jurisdiction over Lessee in such proceeding, from commencing or prosecuting foreclosure proceedings, the times specified for commencing or prosecuting such foreclosure or other proceedings shall be extended for the period of such prohibition; provided that any Lender shall have fully cured any default in the payment of any monetary obligations of Lessee under this Lease, including without limitation any monetary obligations to third parties which have become, or threaten to become, liens against the Leased Premises or any portion thereof, and shall continue to pay currently such monetary obligations when the same fall due; provided, further, that, subject to subsection (1) of this Section 8.1(a), such Lender shall not interfere with Lessor's efforts to seek compliance by Lessee with any non-monetary obligation under this Lease. (6) Lessor shall mail or deliver to any Lenders that have any outstanding Approved Loans a duplicate copy of any notice of default which Lessor may deliver to Lessee pursuant to this Lease, provided, the City shall have no liability to such Lenders for its failure to do so. Lessee shall deliver to Lessor the name and contact information for all Lenders that have outstanding Approved Loans, including successors in interest to Approved Loans. (7) The foreclosure of an Approved Loan, any sale thereunder, whether by judicial proceedings or by virtue of any power contained in the leasehold mortgage securing the Approved Loan, or any conveyance of the Leasehold Estate created hereby from Lessee to a Lender through or in lieu of foreclosure (a "Foreclosure Event"), shall not require the consent of Lessor or constitute a breach of any provision of this Lease. In the event any Lender or its Nominee (as defined herein) becomes Lessee under this Lease by such means or pursuant to any new lease obtained under paragraph (9) of this Section 8.1(a) below, Lessor shall recognize the Lender or its Nominee as Lessee hereunder or under such new lease and the Lender shall be personally liable under this Lease or such new lease only for the period of time that the Lender or its Nominee remains Lessee thereunder, provided that the Lender or its Nominee attorns to Lessor and agrees to be subject to the restrictions of this Lease. If a Lender 21 551\01\2717447.7
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or its Nominee becomes the lessee under this Lease or any such new lease, any assignment or sublease of this Lease or such new lease, shall require the prior written consent of the Lessor.
Nothing in this Section shall be construed to obligate any Lender to remedy any default of Lessee, and any failure of any Lender to complete any such cure after commencing the same shall not give rise to any liability of any Lender to Lessor or Lessee. (8) In the event (A) a Lender becomes the legal owner of the Leasehold Estate, (B) Lessor terminates this Lease by reason of any Event of Default (as defined herein) or if (C) this Lease shall otherwise terminate, then, upon written request by Lender given within sixty (60) days after such transfer or receipt of notice of such termination of the Leasehold Estate, Lessor shall execute and deliver a new lease of the Leased Premises to such Lender (the "Nominee"), provided that, if such Nominee is not wholly owned by one or more Lenders, such Nominee is approved by Lessor in its reasonable discretion. Such new lease shall be substantially in the same form as this Lease, shall have a term equal to the remainder of the Lease Term with the same agreements, covenants, reversionary interests and conditions (except for any requirements which have been fulfilled by Lessee prior to termination) as are contained in this Lease and with priority equal to this Lease with respect to encumbrances of Lessor's interest in the Land or the Leased Premises or encumbrances of Lessee's interest in the Leased Premises permitted or caused by Lessor, together with any provisions legally required in the event the Nominee is a governmental entity; provided, however, that any defaults by Lessee susceptible to cure by the Lender have been cured or reasonable assurance has been provided to Lessor that such defaults shall be cured. Upon execution and delivery of such new lease by Lessor and the Nominee, the Nominee shall have acquired all the right, title and interest of Lessee under this Lease prior to its termination. Lessor shall cooperate in taking such action as shall be necessary to cancel and discharge this Lease and to remove Lessee from the Leased Premises.
(9) If a Lender subsequently transfers its interest under this Lease after acquiring such interest by foreclosure or deed in lieu of foreclosure which transfer has been approved by Lessor in writing and, in connection with any such transfer, the Lender takes a mortgage or deed of trust encumbering such leasehold interest to secure all or any portion of the purchase price given to the Lender for such transfer, then such mortgage or deed of trust shall be considered an Approved Loan hereunder provided that Lessor has been provided an opportunity to review and approve the documents evidencing and securing such mortgage or deed of trust and the obligations secured thereby, and the Lender shall be entitled to receive the benefit of and to enforce the provisions of this Lease or the new lease approved pursuant to paragraph (9) of this Section 8.1(a).
(10) Unless the Lenders otherwise consent in writing, Lessor and Lessee each hereby waives, and agrees not to assert or otherwise take the benefit of, that portion of Section 365(d)4, or any other applicable provisions, of the United States Bankruptcy Code (11 U.S.C. Section 101 et seq.), which provides for the deemed rejection of a lease in certain circumstances, so long as the trustee is paying the rent due under the Lease and performs, or causes the performance of, the uses of the Leased Premises for the Project pursuant to this Lease. (11) Subject to the rights of the Lenders, which shall have priority over all persons or entities given rights under this clause (11), any Investor limited partners (or 22 551\01\2717447.7
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members, as applicable) of Lessee shall have the same rights as any Lender authorized under paragraphs (2), (3) and (7) of this Section 8.1(a) of this Lease and any reference to a Lender in paragraphs 2), (3) and (7) of this Section 8.1(a) shall be deemed to include such limited partners (or members, as applicable).
(b) Any Leasehold Mortgage shall be subject to the provisions of this Lease and all rights of Lessor under this Lease. Notwithstanding any contrary provision of this Lease, in no event may any mortgage or other security instrument, including without limitation any Leasehold Mortgage, be recorded against Lessor's fee interest in the Land or reversionary interest in the Improvements without Lessor's prior written consent, which Lessor may grant or withhold in the exercise of Lessor's sole discretion.
Section 8.2 Cost of Approved Loans to be Paid by Lessee. Lessee affirms that it shall bear all of the costs and expenses in connection with (a) the preparation and securing of the Approved Loans, (b) the delivery of any instruments and documents and their filing and recording, if required, and (c) all taxes and charges payable in connection with the Approved Loans.
Section 8.3 Proceeds of Approved Loans. It is expressly understood and agreed that all Approved Loan proceeds shall be paid to and become the property of Lessee, and that Lessor shall have no right to receive any such Approved Loan proceeds.
Section 8.4 Notice and Right to Cure Defaults Under Approved Loans. Upon the recording of a memorandum of this Lease, Lessor may record in the Official Records of the County of San Mateo a request for notice of any default under each Approved Loan. In the event of default by Lessee under an Approved Loan, Lessee or Lessor shall have the right, but not the obligation, to cure the default in accordance with the Loan Documents. Any payments made by Lessor to cure a default shall be treated as Additional Rent due from Lessee hereunder, which shall be paid within thirty (30) days of the date on which the payment was made by Lessor.
Section 8.5 Rights of Investor. The Investor shall have the same notice and cure rights as any Lender for so long as it is a limited partner of Lessee.
ARTICLE 9.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 9.1 Representations, Warranties and Covenants of Lessor. As an inducement to Lessee to enter into and proceed under this Lease, Lessor warrants and represents to Lessee as follows, which warranties, representations and covenants are true and correct as of the date of this Lease, to the actual knowledge of Lessor:
(a) Lessor has the right, power and authority to enter into this Lease and to lease the Leased Premises to Lessee in accordance with the terms, provisions and conditions contained in this Lease, and no other party has any right or option to lease the Leased Premises; 23 551\01\2717447.7
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(b) Lessor has received no written notice and has no actual knowledge of any litigation or action, pending or threatened, materially and adversely affecting the Leased Premises;
(c) Lessor has received no written notice and has no actual knowledge of any pending or threatened Taking relating to all or any part of the Leased Premises; (d) the entry by Lessor into this Lease with Lessee and the performance of all of the terms, provisions and conditions contained herein will not, or with the giving of notice or the passage of time, or both, would not, violate or cause a breach or default under any other agreement relating to the Leased Premises to which Lessor is a party or by which it is bound; (e) except as disclosed to Lessee or as is apparent from Lessee's inspection, there is no tenant, lessee or other occupant of the Leased Premises having any right or claim to possession or use of the Leased Premises;
(f) there are no unpaid special assessments of which Lessor has received notice for sewer, sidewalk, water, paving, gas, electrical or utility improvements or other capital expenditures affecting the Leased Premises;
(g) Lessor has received no written notice and has no actual knowledge of any violations of any Legal Requirements affecting any portion of the Leased Premises that materially affect the development of the Improvements;
(h) Lessor makes no representation or warranty with respect to the condition of the Leased Premises or its fitness or availability for any particular use, and Lessor shall not be liable for any latent or patent defect therein.
Section 9.2 Representations, Warranties and Covenants of Lessee. As an inducement to Lessor to enter into and to proceed under this Lease, Lessee warrants and represents to Lessor as follows, which warranties, representations and covenants are true and correct as of the date of this Lease:
(a) Authority. Lessee has the right, power and authority to enter into this Lease and the right, power and authority to comply with the terms, obligations, provisions and conditions contained in this Lease;
(b) No Breach of Obligations. The entry by Lessee into this Lease and the performance of all of the terms, provisions and conditions contained herein will not, or with the giving of notice or the passage of time, or both, would not, violate or cause a breach or default under any other agreements to which Lessee is a party or by which it is bound; (c) Litigation. Lessee has received no written notice and has no actual knowledge of any litigation or action, pending or threatened, materially and adversely affecting Lessee’s ability to carry out its obligations hereunder; and (d) Bankruptcy. Lessee is not the subject of a pending or to its knowledge, threatened bankruptcy proceeding.
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Section 9.3 Hazardous Materials. Lessee (i) shall not cause or permit any Hazardous Materials to be placed, held, located or disposed of on, under or at the Leased Premises or any part thereof, except in commercially reasonable amounts used in the construction and operation of the Improvements and in accordance with Legal Requirements, or as may be authorized by an environmental agency of applicable jurisdiction (e.g., San Francisco Regional Water Quality Control Board), and (ii) shall not cause or permit any Hazardous Materials contamination of the Leased Premises or any part thereof, except as may be authorized by an environmental agency of applicable jurisdiction (e.g., San Francisco Regional Water Quality Control Board.) Lessee shall take commercially reasonable action to prevent the release of any Hazardous Materials into the environment from the Leased Premises. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Lessee shall install and utilize such equipment and implement and adhere to such procedures as are consistent with the standards generally applied by apartment complexes in the County of San Mateo, California, as respects the disclosure, storage, use, removal, and disposal of Hazardous Materials.
Notwithstanding the obligation of Lessee to indemnify Lessor, the City, and their respective officers, officials, members, employees, agents, and representatives pursuant to this section, and provided no Hazardous Materials came to be located on the Leased Premises during Lessor's ownership prior to the Effective Date or as a result of Lessor’s action, Lessee shall, at its sole cost and expense, promptly take (i) all actions required by any federal, state, regional, or local governmental agency or political subdivision or any Governmental Requirements and (ii) all actions necessary to make full economic use of the Leased Premises for the purposes contemplated by the Regulatory Agreement, the DDLA and this Lease, which requirements or necessity arise from the presence upon, about, or beneath the Leased Premises, of any Hazardous Materials. Such actions shall include, but not be limited to, the investigation of the environmental condition of the Leased Premises, the preparation of any feasibility studies or reports, and the performance of any cleanup, remedial, removal, or restoration work.
In the event of a release of any Hazardous Materials into the environment other than those authorized by an environmental agency of applicable jurisdiction, Lessee shall, as soon as possible after it becomes aware of the release, furnish to the Lessor a copy of any and all final reports relating thereto and copies of all correspondence with governmental agencies relating to the release. Upon request of the Lessor, Lessee shall furnish to the Lessor a copy or copies of any and all other environmental entitlements or inquiries relating to or affecting the Leased Premises including, but not limited to, all permit applications, permits, and reports, including, without limitation, those final reports and other matters which may be characterized as confidential, excepting those which are characterized as attorney work product or privileged.
Section 9.4 Hazardous Materials Indemnification. From and after the Commencement Date, Lessee hereby agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to Lessor) the Indemnitees from and against any and all Claims arising directly or indirectly, in whole or in part, out of (i) any activity by Lessee, its affiliates or its agents or contractors carried on or undertaken on or off the Leased Premises in connection with the handling, treatment, removal, storage, decontamination, cleanup, transport or disposal of any Hazardous Materials located or present in, on, under or about the Leased Premises; or (ii) the 25 551\01\2717447.7
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failure of Lessee to comply with any Environmental Laws relating to the handling, treatment, presence, removal, storage, decontamination, cleanup, transportation, or disposal of Hazardous Materials into, on, under or from the Leased Premises, except to the extent any such Claim arises from the active negligence or willful misconduct of the Indemnitees. Provided, under no condition shall Lessee have any obligation under this Section 9.4 for Claims arising from or related to negligent or intentional actions of the Lessor or the presences of Hazardous Materials first arising at the Premises during Lessor's ownership and prior to the Effective Date. The provisions of this Section shall survive the expiration or termination of this Lease.
Section 9.5 Prevailing Wage Requirements.
(a) To the extent applicable, the Lessee shall and shall cause its contractors and subcontractors to pay prevailing wages in the construction of the Improvements as those wages are determined pursuant to Labor Code Sections 1720 et seq., and the implementing regulations of the Department of Industrial Relations (the "DIR"), to employ apprentices as required by Labor Code Sections 1777.5 et seq., and the implementing regulations of the DIR and comply with the other applicable provisions of Labor Code Sections 1720 et seq., 1777.5 et seq., 1810-1815 and implementing regulations of the DIR. (b) All calls for bids, bidding materials and the construction contract documents for the construction of the Improvements must specify that:
(1) No contractor or subcontractor may be listed on a bid proposal nor be awarded a contract for the construction of the Improvements unless registered with the DIR pursuant to Labor Code Section 1725.5.
(2) The Development is subject to compliance monitoring and enforcement by the DIR.
(c) The Lessee, as the "awarding body", shall register the construction of the Improvements as required by Labor Code Section 1773.3 as set forth in the DIR's online form PWC-100 within two (2) days after entering into the construction contract and provide evidence of such registration to the Lessor within two (2) days of such registration and any additional registration reporting to the DIR.
(d) In accordance with Labor Code Sections 1725.5 and 1771.1, The Lessee shall require that its contractors and subcontractors be registered with the DIR, and maintain such registration as required by the DIR.
(e) Pursuant to Labor Code Section 1771.4, the construction of the Improvements is subject to compliance monitoring and enforcement by the DIR. The Lessee shall and shall require its contractors and subcontractors to submit payroll and other records electronically to the DIR pursuant to Labor Code Sections 1771.4 and 1776 et seq., or in such other format as required by the DIR.
(f) The Lessee shall and shall cause its contractors and subcontractors to keep and retain such records as are necessary to determine if prevailing wages have been paid as required pursuant to Labor Code Sections 1720 et seq., and that apprentices have been employed 26 551\01\2717447.7
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as required by Labor Code Section 1777.5 et seq., and shall, from time to time upon the request of the Lessor provide to the Lessor such records and other documentation reasonably requested by the Lessor.
(g) The Lessee shall and shall cause its respective contractors and subcontractors to comply with all other applicable provisions of Labor Code, including without limitation, Labor Code Sections 1720 et seq., 1725.5, 1771, 1771.1, 1771.4, 1776, 1777.5 et seq., 1810-1815 and implementing regulations of the DIR in connection with construction of the Improvements or any other work undertaken or in connection with the Land or the Leased Premises.
(h) Copies of the currently applicable current per diem prevailing wages are available from the DIR website, www.dir.ca.gov. The Lessee shall cause its respective contractors to post the applicable prevailing rates of per diem wages at the Development site and to post job site notices, in compliance with Title 8 California Code of Regulations 16451(d) or as otherwise as required by the DIR.
Section 9.6 Compliance with Laws. Lessee shall carry out and shall cause its contractors and subcontractors to carry out the construction of the Project, and shall operate the Project in conformity with all applicable federal, state and local laws, rules, ordinances and regulations ("Applicable Laws"), including without limitation, all applicable federal and state labor laws and standards, the City's zoning and development standards, building, plumbing, mechanical and electrical codes, all other provisions of the City's Municipal Code, and all applicable disabled and handicapped access requirements. To the greatest extent allowed by law, Lessee shall indemnify, defend (with counsel approved by Lessor) and hold harmless the Indemnitees from and against any and all Claims arising in connection with the breach of Lessee's obligations set forth in this Section whether or not any insurance policies shall have been determined to be applicable to any such Claims. This Section shall survive the expiration or termination of this Lease.
Section 9.7 Affordability and Use Restrictions. Lessee hereby covenants and agrees that the Leased Premises shall be used solely for the operation of a multifamily rental housing development in compliance with the requirements set forth in that certain DDLA, Regulatory Agreement and Notice of Affordability Restrictions recorded against the Lessee’s Estate.
Section 9.8 Non-Discrimination; Compliance with Fair Housing Laws. Lessee shall not restrict the rental, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Leased Premises, or any portion thereof, on the basis of race, color, religion, creed, sex, sexual orientation, disability, marital status, ancestry, or national origin of any person. Lessee covenants for itself and all persons claiming under or through it, and this Lease is made and accepted upon and subject to the condition that there shall be no discrimination against or segregation of any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Leased Premises or part thereof, nor shall Lessee or any person claiming under or through Lessee establish or permit any such practice or practices of discrimination or 27 551\01\2717447.7
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segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in, of, or for the Leased Premises or part thereof.
Lessee shall include such provision in all leases and rental agreements affecting the Leased Premises or part thereof, and shall enforce the same diligently and in good faith.
Section 9.9 Fair Housing. Lessee shall comply with state and federal fair housing laws in the marketing and rental of the units in the Project. Lessee shall accept as tenants, on the same basis as all other prospective tenants, persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing Section 8 program or any successor thereto.
Section 9.10 Management Entity. Lessor approves MidPen Property Management Corporation as the initial property manager. In recognition of Lessor's significant financial contribution to the Project, Lessor shall have the right to review and approve any replacement of the management entity proposed by Lessee for the Project, and shall have the right to review and approve any agreement executed between Lessee and the management entity, which approval of agreement shall not be unreasonably withheld. The contracting of management services to a management entity shall not relieve Lessee of its primary responsibility for proper performance of management duties. Upon Lessor determination and delivery of written notice to Lessee that Lessee has failed to operate the Project in accordance with this Lease, Lessor may, subject to any applicable cure period, require Lessee to contract with a qualified management agent selected by Lessor subject to approval of the Investor and Lenders, if required, to operate the Project, or to make such other arrangements as Lessor deems necessary to ensure performance of the required functions.
Section 9.11 Subleases. All subleases made by Lessee to residents of the individual residential units in the Project (“Resident Subleases”) shall be in compliance with the applicable regulations of the California Tax Credit Allocation Committee and the applicable requirements of the Tax Credit Regulatory Agreement, and shall be subject to the following provisions and restrictions: Each Resident Sublease shall contain a provision, satisfactory to Lessor, requiring the Subtenant to attorn to Lessor upon (a) an Event of Default by Lessee under this Lease, and (b) receipt by such Subtenant of written notice of such Event of Default and instructions to make such Subtenant’s rental payments to Lessor. On any termination of this Lease prior to the expiration of the Term, all of Lessee’s interest as sublessor under any and all existing valid and enforceable Resident Subleases for which Lessor has issued a non-disturbance agreement shall be deemed automatically assigned, transferred, and conveyed to Lessor and subtenants under such Resident Subleases shall be deemed to have attorned to Lessor. Lessor shall thereafter be bound on such Resident Subleases to the same extent Lessee, as sublessor, was bound thereunder and Lessor shall have all the rights under such Resident Subleases that Lessee, as sublessor, had under such Resident Subleases; provided, however, that any amendments to any such Resident Sublease made after the issuance of a non-disturbance agreement to a subtenant shall not be binding on Lessor. Each Resident Sublease shall expressly provide that it is subject to each and all of the covenants, conditions, restrictions, and provisions of this Lease.
ARTICLE 10.
EMINENT DOMAIN
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Section 10.1 Termination of Lease. Lessor and Lessee agree that, in the event of a Taking such that Lessee reasonably determines that the Leased Premises cannot continue to be operated, at reasonable cost, for its then-current use, then, subject to the rights of Lenders, this Lease shall, at Lessee's sole option, terminate as of the date of the Taking.
Section 10.2 Continuation of Lease and Presumption of Restoration. Lessor and Lessee agree that, in the event of a Taking that does not result in the termination of this Lease pursuant to Section 10.1 above, this Lease shall continue in effect as to the remainder of the Leased Premises, and the Net Condemnation Award will be disbursed in accordance with Section 10.4 below to Lessor and Lessee and/or any Lender, if the terms of the applicable Leasehold Mortgage so require, and shall be used so as to make the same a complete, unified and efficient operating unit as nearly as reasonably possible to the condition existing prior to the Taking, subject to any applicable requirements of the Lender.
Section 10.3 Temporary Taking. If there shall be a temporary Taking with respect to all or any part of the Leased Premises or of Lessee's interest in this Lease, then the Term shall not be reduced and Lessee shall continue to pay in full all Rents, Impositions and other charges required herein, without reduction or abatement thereof at the times herein specified; provided, however, that Lessee shall not be required to perform such obligations that Lessee is prevented from performing by reason of such temporary Taking.
Section 10.4 Apportionment of Award. If there is a Taking, whether whole or partial, Lessor and Lessee shall be entitled to receive and retain such separate awards and portions of lump sum awards as may be allocated to their respective interests in any condemnation proceedings, or as may be otherwise agreed, taking into consideration Lessor's fee interest in the Land (as encumbered by this Lease) and reversionary interest in the Improvements upon the expiration of the Term or termination of this Lease. If the Leased Premises are restored as in contemplated in Section 10.2 above, Lessee shall be entitled to recover the costs and expenses reasonably incurred in such restoration out of any Net Condemnation Award payable to Lessee.
Thereafter, if the condemning authority does not make separate awards, the Parties agree that any Net Condemnation Award will be allocated as follows on a proportionate basis reflecting the Parties' respective interests in the Land and Improvements and the remaining duration of the Term as follows:
(A) Award on Total or Substantial Taking. In the event of a total or substantial taking, the award shall be apportioned as follows, in the following order:
(a) To the Lenders in an amount equal to the amounts owing on the Leasehold Mortgages.
(b) To Lessor that portion of the award equal to the fair market value of the Land. Any "bonus value" attributable to this Lease shall be paid to Lessor. (c) To Lessee, that portion of the award equal to the fair market value of the Improvements (subject to Lessor's reversionary interest), less the amount paid to the Lenders pursuant to (a) above.
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(d) The balance, if any, shall be allocated between Lessor and Lessee respectively in that proportion in which (i) the fair market value of the Land bears to (ii) the fair market value of the Improvements, exclusive of Lessor's reversionary interest. (B) Award on Partial Taking. In the event of a partial taking, after application of the Award for restoration, any remaining portion of such award shall be apportioned as follows, in the following order:
(a) To the Lenders in an amount equal to the amounts owing on the Leasehold Mortgages.
(b) To Lessor, that portion of the award attributable to the fair market value of the portion of the Land taken.
(c) To Lessee, that portion of the award equal to the fair market value of the portion of the Improvements taken (subject to Lessor's reversionary interest), less the amount paid to the Lenders pursuant to (a) above, but only to the extent that the proceeds of the award are not used for restoration of the Improvements. (d) The balance, if any, shall be allocated between Lessor and Lessee respectively in that proportion in which (i) the fair market value of the Land bears to (ii) the fair market value of the Improvements exclusive of the reversionary interest of Lessor. Any "bonus value" attributable to this Lease shall be paid to Lessor. (e) Any severance damages awarded or payable because only a portion of the Land and Improvements are taken by eminent domain shall be (a) paid to Lessee during the first
27.5 years of this Lease and (b) equally divided between Lessee and Lessor during the next 27.5 years of this Lease (except to the extent needed to replace any Improvements taken by eminent domain with equivalent Improvements on the remainder of the Land).
Section 10.5 Joinder. If a Leasehold Mortgage exists, the Lenders, to the extent permitted by law, shall be made a party to any Taking proceeding.
Section 10.6 City Reservation of Rights. Notwithstanding any provisions in this Lease to the contrary, nothing herein does or shall be construed to limit or require the City to exercise its ability to condemn any property, including the Leased Premises, in accordance with applicable law. Nothing in this Lease does or shall be construed as requiring the City to pay to Lessee, any Lender, or any other third party with an interest in the Leased Premises, any amount of money, as compensation for alleged condemnation or otherwise, if City (or its successor) seeks to enforce any of the rights and obligations under this Lease and the DDLA and any executed attachments thereto. Except when City exercises its ability to condemn the Leased Premises by adoption of a resolution of necessity and pursuant to other provisions of applicable law, City shall not be a construed as pursuing or effectuating a Taking or acting as a "condemning authority" under this Lease.
ARTICLE 11.
DAMAGE OR DESTRUCTION
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Section 11.1 Damage or Destruction to Leased Premises. Lessee shall give prompt written notice to Lessor after the occurrence of any fire, earthquake, act of God or other casualty to or in connection with the Leased Premises, the Improvements or any portion thereof (hereinafter sometimes referred to as "Casualty"). Subject to Section 11.2 below, if during the Term the Improvements shall be damaged or destroyed by Casualty, Lessee shall repair or restore the Improvements, so long as Lessee and Lessor determine, that it is feasible to do so and in such event Lessee provides or causes to be provided sufficient additional funds which, when added to such insurance proceeds, will fully effect such repair or restoration. Upon the occurrence of any such Casualty, Lessee, promptly and with all due diligence, shall apply for and collect all applicable insurance proceeds recoverable with respect to such Casualty, for the benefit of the Lenders. In the event that Lessee and Lessor shall determine, subject to the rights of the Lenders, by notice to Lessor given within thirty (30) days after receipt by Lessee of any such insurance proceeds, that it is not economically practical to restore the Improvements and/or the Leased Premises to substantially the same condition in which they existed prior to the occurrence of such Casualty, then Lessee may terminate this Lease as of a date that is not fewer than thirty (30) days after the date of such notice. If Lessee terminates this Lease pursuant to this Section 11.1, Lessee shall surrender possession of the Leased Premises to Lessor immediately and assign to Lessor (or, if same has already been received by Lessee, pay to Lessor) all of its right, title and interest in and to the proceeds from Lessee's insurance upon the Leased Premises, subject to the prior rights of any Lender therein, as referenced in Section 11.3 below.
Section 11.2 Damage or Destruction Near End of Term. If, during the last seven (7) years of the Term, the Improvements shall be damaged by Casualty, then Lessee shall have the option, to be exercised within one hundred twenty (120) days after such Casualty:
(a) to repair or restore the Improvements as hereinabove provided in this Article 11; or
(b) subject to the rights of Lenders, to terminate this Lease by notice to Lessor, which termination shall be deemed to be effective as of the date of Casualty. If Lessee terminates this Lease pursuant to this Section 11.2, Lessee shall surrender possession of the Leased Premises to Lessor immediately and assign to Lessor (or, if same has already been received by Lessee, pay to Lessor) all of its right, title and interest in and to the proceeds from Lessee's insurance upon the Leased Premises, subject to the prior rights of any Lender therein, as referenced in Section 11.3 below.
Section 11.3 Distribution of Insurance Proceeds. In the event that this Lease is terminated pursuant to Sections 11.1 or 11.2 hereof, the insurance proceeds received as the result of such Casualty shall be distributed as follows: (a) first, if Leasehold Mortgage(s) are in place, to the Lenders to the extent of any indebtedness then owed to such Lender in order of the Lien priority of the Leasehold Mortgages; (b) second, the balance, if any, of such insurance proceeds shall be paid to Lessee or, as applicable pursuant to Sections 11.1 and 11.2 above, assigned or paid over to Lessor.
Section 11.4 Insurance Requirements. Nothing in this Article 11 does or shall be construed as permitting Lessee to maintain less than the minimum insurance requirements set forth in this Lease.
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ARTICLE 12.
EVENTS OF DEFAULT
Section 12.1 Events of Default. Each of the following shall be an "Event of Default" by Lessee hereunder:
(a) failure by Lessee to pay any Rent or Additional Rent when due if such failure shall continue for a period of thirty (30) days after notice thereof has been given by Lessor to Lessee;
(b) Lessee's default in the performance of any term, provision or covenant under this Lease (other than an obligation enumerated in this Section 12.1), and unless such provision specifies a shorter cure period for such default, the continuation of such default for thirty (30) days in the event of a monetary default or sixty (60) days in the event of a nonmonetary default following the date upon which Lessor shall have given written notice of the default to Lessee, or if the non-monetary default cannot be cured within sixty (60) days, Lessee shall not be in breach so long as Lessee is diligently undertaking to cure such breach and such breach is cured within one hundred twenty (120) days;
(c) Lessee's failure to maintain insurance on the Leased Premises and the Improvements as required hereunder, and the failure of Lessee to cure such default within thirty (30) days;
(d) Subject to Lessee's right to contest the following charges, Lessee's failure to pay taxes or assessments due on the Leased Premises or the Improvements or failure to pay any other charge that may result in a lien on the Leased Premises or the Improvements, and Lessee's failure to cure such default within thirty (30) days of delinquency; (e) Lessee abandons, vacates, or otherwise surrenders the Leased Premises or the Improvements, or is dispossessed (other than dispossession as the result of a Taking subject to Section 10 hereof by process of law or otherwise);
(f) A Transfer occurs, either voluntarily or involuntarily, in violation of this Lease;
(g) The subjection of any right or interest of Lessee in this Lease to attachment, execution, or other levy, or to seizure under legal process, if not released within sixty (60) days;
(h) Lessee shall have voluntarily or involuntarily suspended its business for a period in excess of thirty (30) days for reasons other than Force Majeure, or Lessee shall have been dissolved or terminated;
(i) The appointment of a receiver, to take possession of Lessee's Estate or of Lessee's operations on the Leased Premises for any reason, if such receivership is not terminated, dismissed or vacated within ninety (90) days after the appointment of the receiver; 32 551\01\2717447.7
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(j) Pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors ("Bankruptcy Law"), Lessee or any general partner thereof (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against Lessee or any general partner thereof in an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Lessee or any general partner thereof or for the Leased Premises; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due;
(k) The filing against Lessee of any involuntary proceedings under such Bankruptcy Code or similar law, if such proceedings have not been vacated or stayed within ninety (90) days of filing;
(l) The appointment of a trustee or receiver for Lessee or for all or the major part of Lessee's property or the Leased Premises, in any involuntary proceeding, or the taking of jurisdiction by any court over all or the major part of Lessee's property or the Leased Premises in any involuntary proceeding for the reorganization, dissolution, liquidation or winding up of Lessee, if such trustee or receiver shall not be discharged or such jurisdiction relinquished or vacated or stayed on appeal or otherwise stayed within ninety (90) days; (m) Any of Lessee's representations or warranties contained in this Lease or in any financial statement, certificate or report submitted to Lessor in connection with this Lease proves to have been incorrect in any material and adverse respect when made and continues to be materially adverse to Lessor.
Section 12.2 Rights and Remedies.
(a) At any time after the occurrence of an Event of Default hereunder, subject in all respects to the provisions of this Lease with respect to Lessor's rights to cure defaults by Lessee and with respect to the rights of any Lenders, Lessor may, in addition to any other rights and remedies available at law or in equity, terminate this Lease by giving Lessee written notice thereof (with a copy of such notice to the Lenders), setting forth in such notice an effective date for termination which is not less than thirty (30) days after the date of such notice, in which event this Lease and Lessee's Estate created hereby and all interest of Lessee and all parties claiming by, through or under Lessee shall automatically terminate upon the effective date for termination as set forth in such notice, with the same force and effect and to the same extent as if the effective date of such notice had been the date originally fixed in Article 2 hereof for the expiration of the Term. In such event, Lessor, its agents or representatives, shall have the right, without further demand or notice, to re-enter and take possession of the Leased Premises (including all buildings and other Improvements comprising any part thereof) at any time from and after the effective termination date without being deemed guilty of any manner of trespass and without prejudice to any remedies for arrears of Rent or existing breaches of covenants; provided that Lessor shall not be entitled to disturb possession of any Tenants or others in 33 551\01\2717447.7
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possession pursuant to Resident Subleases with Lessee so long as such Tenant or others are not in default thereunder and attorn to Lessor as their lessor. (b) Upon the exercise of Lessor's remedies pursuant to this Section 12.2, Lessee shall execute such releases, deeds and other instruments in recordable form as Lessor shall reasonably request in order to accurately set forth of record the then current status of Lessee's Estate and Lessee's rights hereunder.
(c) If Lessee shall have failed to cure a default by Lessee after expiration of the applicable time for cure of a particular default, Lessor, at its election, but without obligation therefor (i) may seek specific performance of any obligation of Lessee, after which Lessor shall retain, and may exercise and enforce, any and all rights that Lessor may have against Lessee as a result of such default, (ii) from time to time without releasing Lessee in whole or in part from the obligations to be performed by Lessee hereunder, may cure the default at Lessee's cost, (iii) may terminate this Lease, (iv) subject to the rights of Lenders, may have a receiver appointed to take possession of Lessee's interest in the Leasehold Estate with power in the receiver (a) to administer Lessee's interest in the Leasehold Estate, (b) to collect all funds available in connection with the operation of the Project, and (c) to perform all other acts consistent with Lessee's obligations under this Lease, as the court deems proper, and/or (v) may exercise any other remedy given hereunder or now or hereafter existing at law or in equity. Any reasonable cost incurred by Lessor in order to cure such a default by Lessee shall be due immediately from Lessee, together with interest, and may be offset against any amounts due from Lessor to Lessee. (d) Remedies Cumulative. No remedy provided in this Section shall be considered exclusive of any other remedy, but the same shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute, and every power and remedy given by this Lease may be exercised from time to time and as often as occasion may arise or as may be deemed expedient. (e) No Election of Remedies. The rights given in this Section to receive, collect or sue for any rent or rents, moneys or payments, or to enforce the terms, provisions and conditions of this Lease, or to prevent the breach or nonobservance thereof, or the exercise of any such right or of any other right or remedy hereunder or otherwise granted or arising, shall not in any way affect or impair or toll the right or power of Lessor upon the conditions and subject to the provisions in this Lease to terminate Lessee's right of possession because of any default in or breach of any of the covenants, provisions or conditions of this Lease beyond the applicable cure period.
(f) Survival of Obligations. Nothing herein shall be deemed to affect the right of Lessor to indemnification for liability arising prior to the termination of the Lease for personal injuries or property damage or in connection with any other Claim, nor shall anything herein be deemed to affect the right of Lessor to equitable relief where such relief is appropriate.
No expiration or termination of this Lease by operation of law or otherwise, and no repossession of the Leased Premises or any part thereof, shall relieve Lessee of any of its obligations to indemnify and defend the Indemnitees pursuant to the provisions of this Lease, and all such provisions, and all of Lessee's accrued liabilities and obligations hereunder, shall survive such expiration, termination or repossession.
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(g) (g) No Waiver. No waiver by Lessor of any breach by Lessee of any of its obligations, agreements or covenants hereunder shall be deemed to be a waiver of any subsequent breach of the same or any other covenant, agreement or obligation, nor shall any forbearance by Lessor to seek a remedy for any breach by Lessee be deemed a waiver by Lessor of its rights or remedies with respect to such breach.
Section 12.3 Default by Lessor.
(a) Events of Default. Lessor shall be in default of this Lease if it fails to perform any provision of this Lease that is obligated to perform or if any Lessor's representations or warranties is untrue or becomes untrue in any material respect, and if the failure to perform or the failure of such representation or warranty is not cured within sixty (60) days after written notice of the default has been given to Lessor. If the default cannot reasonably be cured within sixty (60) days, Lessor shall not be in default of this Lease if Lessor commences to cure the default within one hundred twenty (120) days and diligently and in good faith continues to cure the default until completion.
(b) Right to Cure; Lessee's Remedies. If Lessor shall have failed to cure a default by Lessor after expiration of the applicable time for cure of a particular default, Lessee, at its election, but without obligation therefor (i) may seek specific performance of any obligation of Lessor, after which Lessee shall retain, and may exercise and enforce, any and all rights that Lessee may have against Lessor as a result of such default, (ii) from time to time without releasing Lessor in whole or in part from the obligation to be performed by Lessor hereunder, may cure the default at Lessor's cost provided that Lessor has been given thirty (30) days advance written notice of Lessee's election to do so and Lessor has not within such time notified Lessee that Lessor will cure the default, and/or (iii) may terminate this Lease.
Section 12.4 Notices. Notices given by Lessor under Section 12.1 or by Lessee under Section 12.4 shall specify the alleged default and the applicable Lease provisions, and shall demand that Lessee or Lessor, as applicable, perform the appropriate provisions of this Lease within the applicable period of time for cure. No such notice shall be deemed a forfeiture or termination of this Lease unless expressly set forth in such notice.
ARTICLE 13.
QUIET ENJOYMENT AND POSSESSION; INSPECTIONS
Section 13.1 Quiet Enjoyment. Lessor covenants and warrants that Lessee, upon payment of all sums herein provided and upon performance and observance of all its covenants herein contained, shall peaceably and quietly have, hold, occupy, use and enjoy, and shall have the full, exclusive and unrestricted use and enjoyment of, all of the Leased Premises during the Term, subject only to the provisions of this Lease and all applicable Legal Requirements.
Section 13.2 Lessor's Right of Inspection. Notwithstanding Section 13.1 above, Lessor, in person or through its agents, upon reasonable prior notice to Lessee, shall have the right, subject to the rights of Tenants, to enter upon the Leased Premises for purpose of reasonable inspections performed during reasonable business hours in order to assure compliance by Lessee 35 551\01\2717447.7
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with its obligations under this Lease, except in the event of an emergency or health and safety related matter, in which case no prior notice is required.
ARTICLE 14.
VACATION OF LEASED PREMISES
Section 14.1 Vacation Upon Termination. Lessee covenants that upon any termination of this Lease, whether by lapse of time or because of any of the conditions or provisions contained herein, Lessee will peaceably and quietly yield and surrender possession of the Leased Premises to Lessor. The foregoing, however, will be subject to the rights of Tenants or others in possession pursuant to Resident Subleases with Lessee, provided that such Tenants are not in default thereunder and attorn to Lessor as their lessor. An action of forcible detainer shall lie if Lessee holds over after a demand for possession is made by Lessor.
ARTICLE 15.
NON-MERGER
Section 15.1 Non-Merger. Except upon expiration of the Term or upon termination of this Lease, there shall be no merger of either this Lease or Lessee's Estate created hereunder with Lessor's fee interest in the Land or Lessee's fee interest in the Improvements by reason of the fact that the same person may acquire, own or hold, directly or indirectly, (a) this Lease, Lessee's Estate created hereunder or any interest in this Lease or the Improvements, and (b) a fee interest in the Land or the Improvements, unless and until the City and all persons, including any assignee of Lessor, having an interest in (i) this Lease or Lessee's Estate created hereunder, and (ii) the fee estate in the Leased Premises or any part thereof, shall join in a written instrument effecting such merger and shall duly record the same.
ARTICLE 16.
TRANSFERS
Section 16.1 Permitted Transfer by Lessee.
(a) Except as provided in this Article 16, Lessee shall have no right to Transfer, assign or sublease any legal or beneficial interest in Lessee's Estate hereunder without Lessor's prior written consent which shall not be unreasonably withheld. Notwithstanding the foregoing, by its execution of this Lease, Lessor is deemed to have consented to the following ("Permitted Transfers"):
(1) Approved Loans and Leasehold Mortgages;
(2) a conveyance of the leasehold interest in the Lessee's Estate resulting from the foreclosure of a Leasehold Mortgage (or an assignment, new lease or deed-inlieu of such a foreclosure) to a Lender; 36 551\01\2717447.7
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(3) any transfer of partnership interests in the Lessee that does not change management or operational control of Lessee or the Project other than to permit the admittance of an affiliate of MidPen Housing Corporation, a California nonprofit public benefit corporation ("MidPen"), or East Palo Alto Community Alliance and Neighborhood Development Organization, Inc., a California nonprofit public benefit corporation ("EPACANDO"), as the managing general partner of Lessee;
(4) the lease of the residential units consistent with the Tax Credit Restrictive Covenant and the Regulatory Agreement;
(5) the transfer of limited partnership interests in Lessee; and (6) in the event that any general partner of Lessee is removed by the Investor for cause following default under Lessee's partnership agreement, the transfer of the general partner interest to an affiliate of the Investor or to a 501(c)(3) tax-exempt nonprofit corporation selected by the Investor and approved by Lessor, in its reasonable discretion, provided that the successor nonprofit corporation has the same or substantially similar experience, assets and access to capital and private funding as Developer (as defined in the DDLA) did as of the Commencement Date; and
(7) a transfer of the Leased Premises or partnership interest from the Lessee to a limited liability company or limited partnership, the managing member or partner of which is MidPen, EPACANDO, or a nonprofit public benefit corporation controlled by MidPen, EPACANDO, or any combination thereof.
(b) Upon the granting of any consent (deemed or otherwise) by Lessor with respect to a Transfer by Lessee, this Lease shall be binding upon and shall inure to the benefit of Lessor and Lessee and their respective heirs, successors, assigns, legal representatives, Lenders, Tenants and other transferees.
ARTICLE 17.
MISCELLANEOUS PROVISIONS
Section 17.1 Consents. Lessor agrees not to unreasonably withhold or delay its consent to matters requiring Lessor's consent hereunder unless the applicable provision of this Lease permits Lessor to exercise Lessor's sole discretion with respect to a particular matter.
Section 17.2 Enforced Delay; Extension of Times of Performance.Time is of the essence in the performance of each of the Parties' respective obligations set forth in this Lease.
Except as expressly set forth in this Section 17.2, performance by any Party hereunder shall not be deemed to be in default and such Party shall be entitled to an extension of time to perform its obligations hereunder where delays in performance are due to causes beyond the reasonable control and without the fault of such Party, including as applicable: war; acts of terrorism, insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God, acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; governmental restrictions or priority; litigation (including suits filed by third parties concerning or arising out of this Agreement), unusually severe weather; inability to secure necessary labor, materials or tools; 37 551\01\2717447.7
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acts of the other Parties; acts or the failure to act of any public or governmental agency or entity (except that acts or the failure to act of the City shall not excuse performance of the City); or other causes beyond the control or without the fault of the Party claiming an extension of time to perform ("Force Majeure"). An extension of time for any cause permitted under this Section
17.2 shall be limited to the period of the enforced delay, which period shall commence to run from the time of the commencement of the cause, if notice by the Party claiming such extension is sent to the other Party within fifteen (15) days of knowledge of the commencement of the cause. If no written notice is sent within fifteen (15) days, for purposes of measuring the extension period for performance of the obligation in question, the period of the enforced delay shall commence to run from the date written notice is sent to the other Party. Times of performance under this Lease may be extended by mutual written agreement of the Parties.
Section 17.3 Interpretation.The terms of this Lease shall be construed in accordance with the meaning of the language used and shall not be construed for or against any Party by reason of the authorship of this Lease or any other rule of construction which might otherwise apply. The Section headings are for purposes of convenience only, and shall not be construed to limit or extend the meaning of this Lease.
Section 17.4 Entire Agreement: Modifications.This Lease supersedes all prior discussions and agreements between the Parties with respect to the leasing of the Leased Premises. This Lease and the DDLA and executed attachments thereto contain the sole and entire understanding between the parties with respect to the leasing of the Leased Premises. This Lease shall not be modified or amended in any respect, except by written instrument specifically referencing such modification or amendment which is executed by or on behalf of the Parties in the same manner as this Lease is executed and, to which each Lender has consented in writing (if required by the applicable Loan Documents).
Section 17.5 Governing Law. This Lease, and the rights and obligations of the Parties hereunder, shall be governed by and construed in accordance with the substantive laws of the State of California without regard to conflict of law principles. Venue for any dispute hereunder shall be in the County of San Mateo, California.
Section 17.6 Binding Effect. This Lease shall inure to the benefit of and be binding upon the Parties hereto, their successors, administrators, executors and permitted assigns.
Section 17.7 Severability. In the event any provision or portion of this Lease is held by any court of competent jurisdiction to be invalid or unenforceable, such holdings shall not affect the remainder hereof, and the remaining provisions shall continue in full force and effect to the same extent as would have been the case had such invalid or unenforceable provision or portion never been a part hereof, except to the extent the rights and obligations of the parties have been materially altered by such unenforceability.
Section 17.8 Further Assurances. From and after the date of this Lease, Lessor and Lessee, at the request of the other Party, shall make, execute and deliver or obtain and deliver all such affidavits, deeds, certificates, resolutions and other instruments and documents, and shall do or cause to be done all such other things that either Party may reasonably require in order to effectuate the provisions and the intention of this Lease. 38 551\01\2717447.7
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Section 17.9 Authority to Execute Agreement. Each Party represents and warrants to the other Party that by proper action the persons executing this Lease on behalf of such Party have been duly authorized to execute and deliver this Lease.
Section 17.10 Lease Administration and Approvals. The City Manager of the City of East Palo Alto, or his or her designee, shall be the person designated by Lessor to administer this Lease on behalf of Lessor. The City Manager of the City of East Palo Alto shall have the authority to consent to any matter requiring Lessor approval or consent as provided in this Lease, and to perform and carry out any activities concerning this Lease, including but not limited to, the execution of any additional agreements, addenda or amendments so long as such actions do not substantially affect the rights and obligations of Lessor as specified herein.
Section 17.11 Captions. All captions, headings, paragraphs, subparagraphs, letters and other reference captions are solely for the purpose of facilitating convenient reference to this Lease, shall not supplement, limit or otherwise vary the text of this Lease in any respect, and shall be wholly disregarded when interpreting the meaning of any terms or provisions hereof.
All references to particular articles, sections, subsections, paragraphs and subparagraphs by number refer to the text of such items as so numbered in this Lease.
Section 17.12 Gender. Words of any gender used in this Lease shall be held and construed to include any other gender, and words of a singular number shall be held to include the plural, and vice-versa, unless the context requires otherwise.
Section 17.13 Exhibits. Each and every exhibit referred to or otherwise mentioned in this Lease is attached to this Lease and is and shall be construed to be made a part of this Lease by such reference or other mention at each point at which such reference or other mention occurs, in the same manner and with the same effect as if each exhibit were set forth in full at length every time it is referred to and otherwise mentioned.
Section 17.14 References. All references to paragraphs or subparagraphs shall be deemed to refer to the appropriate paragraph or subparagraph of this Lease. Unless otherwise specified in this Lease, the terms "herein," "hereof," "hereinafter," "hereunder" and other terms of like similar import, shall be deemed to refer to this Lease as a whole, and not to any particular paragraph or subparagraph hereof.
Section 17.15 Cumulative. Except as expressly limited by the terms of this Lease, all rights, powers and privileges conferred hereunder shall be cumulative and not restrictive of those provided at law or in equity.
Section 17.16 Notices. All notices, requests, demands, or other communications required or permitted to be given hereunder shall be in writing and shall be addressed and delivered by certified mail, return receipt requested; by reputable commercial delivery service; or by hand delivery by a reputable courier, to each Party at the addresses set forth below. Any such notice, request, demand or other communication shall be considered given or delivered, as the case may be, on the date shown on the delivery receipt as the date of delivery, the date delivery was refused or the date the item was returned as undeliverable. By giving prior written notice thereof, any Party, from time to time, may change its address for notices under this Lease. 39 551\01\2717447.7
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To Lessor: City of East Palo Alto
2415 University Avenue
East Palo Alto, CA 94303
Attn: City Manager
With copies to:
City of East Palo Alto
1960 Tate Street
East Palo Alto, CA 94303
Attn: Community & Economic Development Director
and
Goldfarb & Lipman LLP
1300 Clay Street, 11th Floor
Oakland, CA 94612
Attention: Karen Tiedemann
To Lessee: MP 965 Weeks Street Associates, L.P.
c/o MidPen Housing Corporation, Inc.
303 Vintage Park Drive, Suite 250
Foster City, CA 94404
Attention: Chief Real Estate Development Officer
and
c/o East Palo Alto Community Alliance and Neighborhood
Development Organization
2369 University Avenue
East Palo Alto, California 94303
Attn: Executive Director
With copies to:
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Section 17.17 Counterparts. This Lease may be executed in several counterparts, each of which shall be deemed an original, and all such counterparts together shall constitute one and the same agreement.
Section 17.18 Time of Essence. Time is and shall be of the essence in this Lease.
Section 17.19 No Third Party Beneficiaries. Except as expressly set forth herein, nothing contained in this Lease is intended to or shall be deemed to confer upon any person, other than the Parties and their respective successors and assigns, any rights or remedies hereunder.
Section 17.20 Parties Not Co-Venturers; Independent Contractor; No Agency Relationship. Nothing in this Lease is intended to or shall establish the Parties as partners, coventurers, or principal and agent with one another. The relationship of Lessee and Lessor is and shall remain solely that of a tenant and landlord, and shall not be construed as a joint venture, equity venture, partnership or any other relationship. Lessor neither undertakes nor assumes any responsibility or duty to Lessee (except as expressly provided in this Lease) or to any third party with respect to the Project.
Section 17.21 No Personal Liability. Notwithstanding anything contained in this Lease to the contrary, the obligations of Lessor under this Lease (including any actual or alleged breach or default by Lessor) do not constitute personal obligations of the individual officers or employees of Lessor, and Lessee shall not seek recourse against the individual officers or employees of Landlord, or against any of their personal assets for satisfaction of any liability with respect to this Lease.
SIGNATURES ON FOLLOWING PAGE
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IN WITNESS WHEREOF, this Lease is made and entered into in multiple original counterparts on the day and year first above written.
LESSOR:
CITY OF EAST PALO ALTO, a California municipal
corporation
By:
Melvin E. Gaines, City Manager
Attest:
_______________________
City Clerk
Approved as to Form:
By: ______________________
John D. Lê, City Attorney
LESSEE:
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: _____________________________
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By: East Palo Alto Community Alliance and
Neighborhood Development Organization,
a California nonprofit public benefit
corporation, its member
By: ____________________________
Name: __________________________
Its: _____________________________
A-1
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EXHIBIT A
Legal Description of Leased Premises
B-1
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EXHIBIT B
Site Plan of Leased Premises
(Attached)
B
-2
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C-1
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EXHIBIT C
Form of Memorandum of Lease
RECORDING REQUESTED BY AND WHEN
RECORDED RETURN TO:
WHEN RECORDED RETURN TO:
____________________
____________________
____________________
____________________
Attention: ___________
_____________________________________________________________________________ (SPACE ABOVE THIS LINE FOR RECORDER'S USE)
Tax not shown: R&T code 11932 – See attached Declaration
MEMORANDUM OF GROUND LEASE
(965 Weeks Street Project)
THIS MEMORANDUM OF GROUND LEASE (the "Memorandum") is entered into as of __________________, 20__, by and between the City of East Palo Alto, a California municipal corporation (the "Lessor") and ______________________, L.P., a California limited partnership (the "Lessee"), with respect to that certain Ground Lease dated _____________, 20__ (the "Lease"), between the Lessor and the Lessee. All capitalized terms used in this Memorandum and not defined shall have the meaning set forth in the Lease.
1. Documentary Transfer Tax is not shown pursuant to Revenue and Taxation Code Section 11932. See that certain Statement of Documentary Transfer Tax Due, which shall be affixed to this Memorandum in the Official Records of the County of San Mateo after record of this Memorandum is made and before the original is returned as specified in Government Code Section 27321.
2. Pursuant to the Lease, Lessor leases to Lessee and Lessee leases from Lessor that certain real property, more particularly described in Exhibit A, attached hereto and incorporated herein (the "Leased Premises"). The Lease shall commence on _______________, 20__, and shall remain in effect for the ninety-nine (99) year term of the Lease, unless sooner terminated pursuant to the terms and conditions of the Lease.
3. As more particularly set forth in the Lease, certain development, affordability and occupancy restrictions apply to the use of the Leased Premises.
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4. This Memorandum shall incorporate herein all of the terms and provisions of the Lease as though fully set forth herein.
5. This Memorandum is solely for recording purposes and shall not be construed to alter, modify, amend or supplement the Lease, of which this is a memorandum. In the event of any inconsistency between the terms and conditions of this Memorandum and the terms and conditions of the Lease, the terms and conditions of the Lease shall control.
6. This Memorandum may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts so executed shall together constitute but one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this Memorandum to be duly executed as of the date first above written.
LESSOR:
CITY OF EAST PALO ALTO, a California municipal
corporation
By: __________________________________
Its: __________________________________
LESSEE:
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: _______________________________
Its: _______________________________
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[SIGNATURES MUST BE NOTARIZED]
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EXHIBIT D
SCOPE OF DEVELOPMENT
The following describes the 965 Weeks Street Apartments Project (“Project”) proposed by MidPen Housing Corporation, a California nonprofit public benefit corporation ("Midpen") and East Palo Alto Community Alliance and Neighborhood Development Organization, Inc., a California nonprofit public benefit corporation ("EPACANDO" and together with Midpen, the "Developer"). While this summary presents the program currently envisioned for the proposed development, it is understood that modifications may be made with mutual agreement between Developer and City of East Palo Alto (“City”).
1. Proposed Onsite & Offsite Improvements
The 965 Weeks Street Apartments Project site is a 2.52 acre vacant site, currently owned by the City, and the project site is bordered by the Bay Trail pedestrian/bike path, multi-family residences, a commercial business, and vacant land to the north, light industrial uses to the east, Weeks Street and a single-family neighborhood to the south, and commercial uses and a wellness center along Clark Avenue to the west. On this vacant site, MidPen shall construct a the onehundred and thirty-six (136) units of affordable housing for income-eligible households, including one (1) manager's unit that is not subject to affordability or occupancy restrictions, and related onsite improvements, parking garage, office space for property management and resident services staff, community am amenities, including a community room with kitchen, outdoor play areas, and space for an after school program for resident children, landscaping and other improvements.
The Project shall include 136 units, subject to City’s approval. If necessary, Developer shall apply for and obtain City approval of a General Plan Amendment for the project site and a density bonus. The Project will include 8 studio units, 19 one-bedroom units, 75 two-bedroom units, and 27 three-bedroom units, and 7 four-bedroom units, subject to City approval. Due to funding source requirements, the proposed development will be required to have a certain percentage of larger bedroom types, including the two and three-bedroom units, which may be revised with mutual approval of the Parties. The unit mix shall be as follows:
Overall Unit Mix
Studio 8 units
1 bedroom 19 units
2 bedroom 75 units
3 bedroom 27 units
4 bedroom 7 units
TOTAL UNITS 136
The approximate parking ratio will be an average of 1.5 spaces per unit as adjusted by unit size.
Developer shall underground all existing overhead utilities within or along the perimeter of the Property. Developer shall comply with the requirements of local utility agencies, such as D–2
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_____________________and _____________________, with respect to offsite improvement work to service the Project.
2. Resident Amenities and Open Space
The Project shall include various indoor and outdoor amenities available to residents living at the Property, including a community room, playground, after-school program room, computer lounge, and outdoor seating with a BBQ area. The Project will include an office for Developer Property Management and Services for staff working at the property and to meet with residents.
3. Tentative and Final Parcel Map
Developer will prepare a tentative and final parcel map for the Project for the approval of the City, to merge the existing multiple parcels.
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EXHIBIT E
FINANCING PLAN