4868-5186-3267v5/022627-0008
AMENDMENT NO. 1 TO ADDITIONAL AUTHORITY LOAN NOTE
PROMISSORY NOTE SECURED BY DEED OF TRUST
This AMENDMENT NO. 1 TO ADDITIONAL AUTHORITY LOAN NOTE
PROMISSORY NOTE SECURED BY DEED OF TRUST (“ Amendment No. 1”) is made and entered into as of November 12, 2024 (“ Effective Date”) by and between GARDEN GROVE HOUSING PARTNERS LP , a California limited partnership (“ Developer”), and GARDEN GROVE HOUSING AUTHORITY, a public body, corporate and politic (“Authority”).
R E C I T A L S:
A. On or about June 23, 2015, Developer, Authority, and City entered into that certain HOME Funds Commitment and Agreement (Garden Grove United Methodist Church Senior/Multi - Family Apartments Project) (“Original HOME Agreement”), pursuant to which Garden Grove agreed to provide to Developer certain financial assistance, and Developer agreed to lease from the United Methodist Church certain real property located in the City of Garden Grove, County of Orange, State of California, and to develop and operate thereon (i) a forty -seven (47) unit multi -family, mixed use affordable housing project, with a phase and component developed and operated for qualified Senior Households, and a phase and component developed and operated for qualified Non-Senior/Family Households, (ii) a new preschool center, and (iii) ancillary commercial/retail space, all as further set forth therein (“Wesley Village Project”).
B. On or about September 1, 2015 Developer and Authority entered into that certain Regulatory Agreement with Right of First Offer (“Original Regulatory Agreement”), which was recorded on September 11, 2015, in the Official Records, County of Orange, State of California (“Official Records”) as Instrument No. 2015-000471001.
C. On or about November 1, 2016, Developer, Authority, and City entered into that certain Amendment No. 1 to HOME Funds Commitment and Agreement (“Amendment No. 1 to HOME Agreement”), for purposes of simplifying and clarifying the tenant selection process under the Original HOME Agreement.
D. On or about November 1, 2016, Developer and Authority entered into that certain Amendment No. 1 to Regulatory Agreement with Right of First Offer (“Amendment No. 1 to Regulatory Agreement”), also to simplify and clarify the tenant selection process under the Original HOME Agreement and Regulatory Agreement, which was recorded on November 10, 2016 in the Official Records as Instrument No. 2016000570868.
E. The Original HOME Agreement, as modified by Amendment No. 1 to HOME Agreement, is referred to hereinafter as the “HOME Agreement.” F. The Original Regulatory Agreement, as modified by Amendment No. 1 to Regulatory Agreement, is referred to hereinafter as the “Regulatory Agreement.” G. Copies of the fully executed HOME Agreement and the Regulatory Agreement, both as amended, are on file with the City Clerk’s office at Garden Grove City Hall.
H. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the HOME Agreement and Regulatory Agreement. 2 4868-5186-3267v5/022627-0008
I. Pursuant to the HOME Agreement and in connection with the original Closing, Developer received three Garden Grove loans, including the HOME Loan and Additional Authority Loan issued by the Authority, and the City DA Fee Deferral Loan issued by the City (collectively, “Garden Grove Loans”). Each of the Garden Grove Loans w as evidenced by a promissory note (together, “Notes”), which Notes were and remain secured by deeds of trust recorded against the Site.
J. Developer completed construction of the Project i n 2017 as evidenced by the final Certificate of Occupancy issued by the City’s Building Official dated as of June 29, 2017. As the Project was converting to permanent financing with CCRC, as Developer’s Primary Lender, the Project encountered a capital st ructure issue. To address the capital structure issue, Developer, Jamboree Housing Corporation, a California nonprofit corporation (“JHC”), and ELOM LLC, a California limited liability company (“ELOM”), entered into that certain Operating Agreement dated as of March 13, 2018 (“JHC/ELOM Operating Agreement”) that formed a new entity, WV Fund LLC, a California limited liability company (“WV Fund”). WV Fund is organized and operates to further the charitable purposes of JHC, as the initial managing member of WV Fund, by assisting in providing low or moderate income housing to poor and distressed persons.
K. JHC is the managing member of JHC -Garden Grove LLC, and JHC-Garden Grove LLC is the managing general partner of the Developer limited partnership entity.
L. Pursuant to the JHC/ELOM Operating Agreement and implementing instruments thereto, in particular Sections 2.1(a) and 3.4 therein: (i) WV Fund, as Lender, made a residual receipts loan to Developer, as Borrower (“WV Fund Gap Loan”), in an original principal amount of One Million Four Hundred Thousand Dollars ($1,400,000). The WV Fund Gap Loan is evidenced by that certain Subordinate Promissory Note Secured by Deed of Trust (“WV Fund Gap Loan Note”).
M. Subsequent to executing the JHC/ELOM Operating Agreement, it was determined that for tax purposes the WV Fund Gap Loan would need to be a nonrecourse, secured loan. As a result, while the JHC/ELOM Operating Agreement, Sections 2.1(a) and 3.4 expressly provide for the “unsecured” WV Fund Gap Loan by Lender to Borrower, nonetheless that certain Subordinated Deed of Trust dated as of March 28, 2018 was executed by Developer and caused to be recorded against the Site in the Official Records as Instrument No. 2018-000113787 (“WV Fund Gap Loan DoT”), which instrument secures the WV Fund Gap Loan Note.
N. Contrary to the provisions of the HOME Agreement and Regulatory Agreement, the Developer obtained the WV Fund Gap Loan and executed the WV Fund Gap Loan Note and WV Fund Gap Loan DoT without prior notice to or the consent of Garden Grove as required by the HOME Agreement.
O. By a letter dated April 23, 2018, after Developer obtained the WV Fund Gap Loan, JHC on behalf of Developer submitted a letter to Garden Grove with its first written “ Request for Amendments to HOME Funds Agreement and Notes” (“JHC/Developer Letter”).
P. Among other provisions, the JHC/Developer Letter asked Garden Grove to amend the HOME Agreement, the Notes, and as and if necessary the Regulatory Agreement and other related loan documents (together, “HOME Agr eement and Loan Documents”) to change various financial terms, including certain loan and repayment terms, including this Amendment No. 1 to the Additional Authority Loan Note.
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Q. On May 3, 2021 Scott Stiles, then serving as Garden Grove City Manager and Authority Director, sent a letter to JHC, attention Michael Massie, on behalf of Garden Grove that responded to Developer’s then most recent request for proposed amendments to the HOME Agreement and Loan Documents (“Garden Grove Response Letter”). The Garden Grove Response Letter summarized the proposed terms for the amendments.
R. During the period between April 23, 2018 to the date of the Garden Grove Response Letter, the parties had various communications and have negotiated that certain Amendment No. 2 to HOME Funds Commitment and Agreement (“Amendment No. 2 to HOME Agreement”) and related and respective amendments to the Garden Grove Loan Documents, which will be entered into and executed concurrently herewith and in the manner set forth therein.
S. Garden Grove, Developer, and their respective counsels and consultants have negotiated the terms of the necessary amendments to the HOME Agreement and Loan Documents, which conform to the Garden Grove Response letter described above.
T. Pursuant to the HOME Agreement, on November 12, 2024 Garden Grove staff presented such amendments for consideration and action by the City Council and Housing Authority board. That certain “ Amendment No. 2 to HOME Agreement ” and related amendments thereto, including this Amendment No. 1, were duly considered and approved at an open public joint meeting of the City Council and Housing Authority on November 12, 2024 in the exercise of their sole discretion, respectively.
U. Garden Grove and Developer now wish to amend the HOME Agreement by that certain Amendment No. 2 to HOME Agreement and by separate instruments amend the Notes evidencing the (i) HOME Loan, (ii) Additional Authority Loan, and (iii) City DA Fee Deferral Loan (together, “Amendments”), the terms and conditions of which are consistent with the Garden Grove Response Letter and set forth in such Amendments.
V. Therefore, Developer and Authority hereby intend by this Amendment No. 1 to and do amend the Additional Authority Loan Note (“Additional Loan Note ”) to make conforming changes thereto as were made pursuant to Amendment No 2 to HOME Agreement as such affects the Additional Authority Loan.
W. The Housing Units in the Wesley Village Project resulted in the new construction of certain replacement housing units required by the certain Limon Judgment as defined and described in the HOME Agreement. The Amendments will further implement and preserve such replacement housing units during the 55- year Affordability Period by facilitating and amending the terms and conditions of the Garden Grove Loans issued to Developer, and consenting to the WV Fund Gap Loan as an additional permanent funding source obtained by Developer, and thereby maintaining the overall financial feasibility and continued successful operation of the Wesley Village Project in compliance with the Limon Judgment and the HOME Agreement, as amended.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by this reference, and for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
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Section 1. Changes to Definitions. Section 3a of the Additional Loan Note is hereby amended as follows:
1.1 Amend the definition of “Authority’s Share of Residual Receipts” to reduce the share to forty percent (40%) (a reduction from 50%) to repay the Additional Loan Note but only while the WV Fund Gap Loan is outstanding, and then after repayment of such WV Fund Gap Loan Authority’s Share of Residual Receipts shall be increased back to a fifty percent (50%) share thereof;
1.2 Amend the definition of “Deferred Developer Fee” to “the portion of the Developer Fee to be paid from Project cash flow, as approved by Authority pursuant to Section 209 of the HOME Agreement in the amount described in Se ction 209.1(d) thereof, which amount is $1,400,000.” This change results in (a) an increase of the Tax Credit Equity to $7,356,085 (an increase from $6,250,000 under the Original HOME Agreement); and (b) corresponding increase in the amount of the Deferred Developer Fee to $1,400,000 (an increase from $501,730 under the Original HOME Agreement).
1.3 Amend the definition of “Developer’s Share of Residual Receipts” to sixty percent (60%) of the Residual Receipts, which is a 10% increase that shall remain at 60% only while the WV Fund Gap Loan is outstanding, and then after repayment of such WV Fund Gap Loan, the Developer’s Share of Residual Receipts shall be decreased back to a 50% share thereof. (a) In this regard and for such limited period, Developer’s Share of Residual Receipts is increased to 60% (an increase from 50%) from which share Developer shall allocate toward repayment as follows:
(i) 40% of the Developer’s 60% share of Residual Receipts (or 24%) will be used for ground lease payments to UMC;
(ii) 60% of the Developer’s 60% share of Residual Receipts (or 36%) will be used to pay the following (A), (B) and (C ) below, and after repayment of the WV Fund Gap Loan Developer’s Share of Residual Receipts shall be decreased back to a 50% share thereof; (A) First to repay the City DA Fee Deferral Loan Note;
(B) Second, upon full repayment of the City DA Fee Deferral Loan Note, to pay the accrued and current Annual Monitoring Fee; and (C) Third, upon payment of the accrued Annual Monitoring Fee, to repay the WV Fund Gap Loan.
(b) After repayment of the City DA Fee Deferral Loan Note, the Accrued Annual Monitoring Fee, and the WV Fund Gap Loan, the Developer’s Share of Residual Receipts shall be reduced back to a 50% share thereof, which share shall be allocated as follows:
(i) 60% of the Developer’s 50% share of Residual Receipts (or 30%) will be retained by Developer; and
(ii) 40% of the Developer’s 50% share of Residual Receipts (20%) shall be expended by Developer to continue to make ground lease payments to UMC. 5 4868-5186-3267v5/022627-0008
1.4 The definition of “Operating Expenses” is amended to omit therefrom “the cost of social services in an amount equal to $25,000 (subject to annual increases of 3%)”.
1.5 The definition of “Residual Receipts” is amended to add, as a new clause (ix) (renumbering current clause (ix) to (x)), “payment of the cost of social services to the tenant households of the Senior Citizen H ousing Units and Non-Senior/Family Housing Units in an amount equal to $25,000, including interest at the Applicable Federal Rate (‘Social Services Fee’).” (a) In this regard and as supplemental to the change in Section 1.5 above, the definition of Residual Receipts shall allow and add the payment of the Social Services Fee after the payment of the amended Deferred Developer Fee as set forth in Section 1.3 above.
Section 2. Changes to Additional Authority Loan Payment Terms. Section 3 of the Additional Loan Note is hereby amended to provide that until such time as the WV Fund Gap Loan has been fully repaid in accordance with the terms of the WV Fund Gap Loan Note, the percentage of Refinancing Net Proceeds and/or Transfer Net Proceeds (as applicable) that are payable towards the Additional Authority Loan shall be reduced from seventy-five percent (75%) of the Refinancing Net Proceeds or Transfer Net Proceeds (as applicable) t o fifty percent (50%) of the Refinancing Net Proceeds or Transfer Net Proceeds (as applicable). At such time as the WV Fund Gap Loan has been fully repaid in accordance with the terms of the WV Fund Gap Loan Note, the percentage of Refinancing Net Proceeds or Transfer Net Proceeds (as applicable) that are payable towards the Additional Authority Loan shall be changed back and increase to seventy -five percent (75%) of the Refinancing Net Proceeds or Transfer Net Proceeds (as applicable).
Section 3. Effect of Amendment No. 1. Except as otherwise expressly provided in this Amendment No. 1, all of the terms and conditions of the Additional Loan Note shall remain in full force and effect.
Section 4. Attorney’s Fees. In the event of any action between Authority and Developer seeking enforcement of any of the terms and conditions to this Amendment No. 1, the prevailing party in such action shall be awarded, in addition to damages, injunctive or other relief, its reasonable costs and expenses, including without limitation its expert witness fees and reasonable attorney’s fees.
Section 5. Governing Law; Venue. This Amendment No. 1 shall be governed by the internal laws of the State of California and any question arising hereunder shall be construed or determined according to such law. The Superior Court of the State of California in and for the County of Orange, or such other appropriate court in such county, shall have exclusive jurisdiction of any litigation between the parties concerning this Amendment No. 1.
Section 6. Counterparts. This Amendment No. 1 may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which when taken together, shall constitute one and the same instrument. Signatures of the parties transmitted by electronic mail or facsimile shall be deemed binding as originals. However, each party agrees to submit their original signature to the other party within five (5) business days after execution hereof [End – Signature Page Follows]
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IN WITNESS WHEREOF, Authority and Developer each hereby represents that it has read this Amendment No. 1, understands it, and hereby executes this Amendment No. 1 to be effective as of the day and year first written above.
DEVELOPER:
GARDEN GROVE HOUSING PARTNERS LP,
a California limited partnership
By: JHC-GARDEN GROVE LLC,
a California limited liability company
Its General Partner
By: Jamboree Housing Corporation,
a California nonprofit public benefit
corporation, its Manager Member
By:
Michael Massie
Executive Vice President and
Chief Development Officer
AUTHORITY:
GARDEN GROVE HOUSING AUTHORITY,
a public body, corporate and politic
By:
Lisa L. Kim, Authority Director
or Authorized Designee
ATTEST:
_______________________________
Teresa Pomeroy, CMC
Authority Secretary
or Authorized Designee