16 determine if a vendor or consultant meets the definition of “local business.” G Enforcement.
1. The information furnished by each bidder requesting a local business preference shall be under penalty of perjury.
2. No person or business shall knowingly and with intent to defraud, fraudulently obtain, retain, attempt to obtain or retain, or aid another in fraudulently obtaining or retaining or attempting to obtain or retain certification as a local business for the purpose of this section.
3. No person or business shall willfully and knowingly make a false statement with the intent to defraud, whether by affidavit, report, or other representation, to a city official or employee for the purpose of influencing the certification or denial of certification of any entity as a local business.
4. A business which has obtained city certification as a local business by reason of having furnished incorrect supporting information or by reason of having withheld information, and which knew or should have known the information furnished was incorrect or the information withheld was relevant to its request for certification, and which by reason of such certification has been awarded a contract to which it would not otherwise have been entitled, shall:
a. Pay to the city any difference between the contract amount and what the city’s costs would have been if the contract had been properly awarded; b. In addition to the amount described in subsection (G)(4)(a), be assessed a penalty in an amount of not more than ten percent of the amount of the contract involved; and
c. Be subject to debarment from future award of contracts from the city.
5. The penalties identified in subsection (G)(4) shall also apply to any business that has previously obtained proper certification and, as a result of a change in its status would no longer be eligible for certification, fails to notify the purchasing officer of this information prior to responding to a solicitation or accepting a contract award.
3.30.190 Preference for recycled content.
A Environmentally Preferable Practices. The city will act to make resource conservation an integral part of its waste reduction and recycling programs. The practice of discarding materials used in the city facilities is wasteful of natural resources, energy, and money.
1. The city will integrate the concept of resource conservation, including waste reduction and recycling, into its environmental programs.
2. The city will decrease the amount of waste of consumable materials by:
a. Reducing the consumption of consumable material wherever possible. b. Fully utilizing all material prior to disposal.
c. Minimizing the use of nonbiodegradable products wherever possible.
3. The city will cooperate with, and participate in, recycling efforts being made
17 by the city and county. As systems for recovering waste and recycling develop within the city limits, the city will participate by appropriately separating and allowing recovery of recyclable waste products.
4. All vendors providing paper products and printing and writing paper shall:
a. Provide recycled-content paper products and recycled-content printing and writing paper that consists of at least thirty percent, by fiber weight, postconsumer fiber, if fitness and quality are equal, and available at equal or lesser price. b. Provide paper products and printing and writing paper that meet Federal Trade Commission recyclability standard as defined in 16 Code of Federal Regulations (CFR) Section 260.12.
c. Certify in writing, under penalty of perjury, the minimum percentage of postconsumer material in the paper products and printing and writing paper offered or sold to the city. This certification requirement may be waived if the percentage of postconsumer material in the paper products, printing and writing paper, or both can be verified by a product label, catalog, invoice, or a manufacturer or vendor internet website. d. Certify in writing, on invoices or receipts provided, that the paper products and printing and writing paper offered or sold to the city is eligible to be labeled with an unqualified recyclable label as defined in 16 Code of Federal Regulations (CFR) Section 260.12.
B Representatives of the city will actively advocate, where appropriate, for resource conservation practices to be adopted at the local, regional, and national levels.
C City employees shall refer to the adopted recovered organic waste product procurement policy for proper purchasing and recordkeeping procedures related to recovered organic waste products and recycled-content paper products and recycled-content printing and writing paper.
3.30.200 Nondiscrimination in contracting.
A. Statement of Policy.
1. It is the policy of the city to promote the principles of equal opportunity in its contracting activities by assuring that those seeking to do business with the city will treat contractors, subcontractors, and employees equally and will not engage in discrimination against their contractors, subcontractors, or employees because of their actual or perceived race, color, religion, ancestry, national origin, disability, medical condition, marital status, domestic partner status, sex, gender, gender identity, gender expression, or sexual orientation or as a member of any other protected class.
2. It is also the policy of the city to ensure that work performed on behalf of the city is done in a cost effective and high quality manner
B. Basic Contract Requirement Prohibiting Discrimination. The city shall not enter into any contract valued at more than $10,000 with any contractor, unless such contractor agrees to be bound by contract to provisions prohibiting discrimination in employment and the provision of
18 employment benefits on the basis of actual or perceived race, color, religion, ancestry, national origin, disability, medical condition, marital status, domestic partner status, sex, gender, gender identity, gender expression, or sexual orientation as these terms are defined by California law, or association with members of classes protected under this Section or in retaliation for opposition to any practices forbidden under this Section, against any person seeking accommodations, advantages, facilities, privileges, services, or membership in all business, social, or other establishments or organizations, operated by that contractor, and shall require such contractor to include a similar provision in all subcontracts.
C. Certification. Every contractor certify compliance with the City’s nondiscrimination policy prior to contract award in a form acceptable to the city manager. No contract shall be awarded until the contractor has submitted to the city such certification. The certification shall contain the following:
1. Contractor certifies and represents that, during the performance of the contract, the contractor and any other parties with whom it may subcontract shall adhere to the city’s nondiscrimination policy as provided in the Section.
2. Contractor shall, in all solicitations or advertisements for applicants for employment placed by or on behalf of this contract, state that it is an “equal opportunity employer” or that all qualified applicants will receive consideration for employment without regard to their actual or perceived race, color, religion, ancestry, national origin, disability, medical condition, marital status, domestic partner status, sex, gender, gender identity, gender expression, or sexual orientation.
3. If requested to do so by the purchasing officer, contractor shall provide the city with access to copies of relevant records pertaining or relating to its employment practices, except to the extent such records or portions of such records are confidential or privileged under state or federal law.
4. Nothing contained in this contract shall be construed in any manner so as to require or permit any act which is prohibited by law.
5. The contractor shall include the provisions set forth in paragraphs (1)—(4) of this Subsection (C) of this Section, inclusive, in each of its subcontracts.
D. Investigation and Monitoring. All contracts shall include appropriate provisions that will allow the purchasing officer to review, monitor, and investigate compliance with this Section and to require each contractor to allow and provide full access to all applicable records, rules, regulations, documents, and other pertinent data necessary for the qualitative and quantitative evaluation of each contractor’s compliance with the provisions of this Section.
E. Enforcement.
1. In the event the purchasing officer determines the contractor is not in substantial compliance with the provisions of this Section, the purchasing officer may recommend to the city manager, the initiation of one or more of the following rights and remedies described in this subsection, in addition to any rights and remedies otherwise provided in the applicable contract or by law or equity:
a. Termination of the contract and bar the contractor from bidding on future contracts with the city for two (2) years from the effective date of the contract termination;
19 b. Assess liquidated damages in the amounts specified in the contract where it is found the contractor willfully violated the requirements of this Section; and c. Seek recovery of reasonable attorneys’ fees and costs incurred for enforcement of this Section.
2. The purchasing officer shall issue written findings and mail a copy of the findings to the contractor by first class mail and by any other means provided in the contract.
F. Appeals.
1. Within five (5) business days of the notice of the purchasing officer’s findings, the contractor may file a written appeal of the purchasing officer’s determinations to the city clerk.
2. The city clerk shall set the matter for hearing and shall cause a Notice of Hearing to be given to the contractor and to such other persons as may have identified themselves as interested in the decision.
3. The hearing shall be conducted as an independent reexamination of the matter before an independent hearing officer. The contractor shall have the burden of proof in all cases, and if the contractor fails to appear either in person or by counsel, or fails to present or offer any evidence, the hearing officer may adopt the decision of the purchasing officer or may decide the matter upon the record with or without taking any additional evidence. Any oral or documentary evidence may be received, but the hearing officer shall exclude irrelevant, immaterial or unduly repetitious evidence.
The hearing officer’s decision shall be made upon substantial evidence. In other words, if an essential finding is based upon hearsay or secondary evidence, such evidence must be of the type which would be admissible in a court of law as proof of such finding.
4. Upon the hearing of the appeal the hearing officer may refer the matter back to the purchasing officer with directions for further consideration, or the hearing officer may reverse, affirm, or modify the decision as may appear just and reasonable in light of the evidence presented. The decision of the hearing officer shall be supported by written findings and shall include the reasons for the ruling. Notice of the hearing officer’s decision shall be served on the contractor, the purchasing officer, and the city clerk. The hearing officer’s decision shall be final.
G. Exceptions and Waivers.
1. The city manager may waive the requirements of this Section under the following circumstances:
a. Whenever the city manager finds that there is only one prospective contractor willing to enter into a real property agreement with the city for use of city property on the terms and conditions established by the city, or that the needed goods, services, construction services for a public work or improvement, or interest in or right to use real property are available only from a sole source, and the prospective contractor is not currently disqualified from doing business with the city, or from doing business with any governmental agency based on any contract compliance requirements;
b. Where the city manager determines that the contract or real property agreement is necessary to respond to an emergency which endangers the public health or safety and no entity which complies with the requirements of this Section capable of responding to the emergency is immediately available; provided that such certification must be made prior to or within five (5) business days of execution of the contract or real property
20 agreement on behalf of the city;
c. Where the city attorney certifies in writing to the city council that the contract involves specialized litigation requirements such that it would be in the best interests of the city to waive the requirements of this Section; provided such certification is made prior to execution of the contract on behalf of the city.
2. This Section shall not apply where the prospective contractor is a public entity and the city manager finds that supplies, services, construction for a public project or improvement or interest in or right to use real property of comparable quality or accessibility as are available under the proposed contract or property contract are not available from another source, or that the proposed contract or property contract is necessary to serve a substantial public interest.
3. This Section shall not apply where the city manager finds that the requirements of this Section will violate or are inconsistent with the terms or conditions of a grant, subvention or agreement with a public agency or the instructions of an authorized representative of any such agency with respect to any such grant, subvention or agreement, provided that the contracting officer has made a good faith attempt to change the terms or conditions of any such grant, subvention or agreement to authorize application of this Section.
4. Upon the request of a potential contractor or upon the purchasing officer’s own initiative, after taking all reasonable measures to find an entity that complies with the law, the city manager may waive any or all of the requirements of this Section for any contract, real property agreement, or bid package advertised and made available to the public, or any competitive or sealed bids received by the city under the following circumstances:
a. Where the city manager determines that there are no qualified responsive bidders or prospective contractors who could be certified as being in compliance with the requirements of this Section and that the contract or real property agreement is for supplies, services, or a public project that is essential to the city or city residents; or b. Where the city manager determines that transactions entered into pursuant to bulk purchasing arrangements through federal, State, or regional entities which actually reduce the city’s purchasing costs would be in the best interests of the city; or c. Where the city manager determines that the requirements of this Section would result in the city’s entering into a contract with an entity that was set up, or is being used, for the purpose of evading the intent of this Section, which is to prohibit the city from entering into contracts with entities that discriminate based on the criteria set forth in this Section.
5. The waiver authority granted to the city manager in this Subsection shall be subject to the requirements that:
a. All proposed waivers must set forth the reasons the city manager is requesting the waiver, what steps were taken to find an entity that complies with this Subsection and why the waiver does not defeat the intent of this Section, which is to prohibit the city from entering into contracts with entities that discriminate based on the criteria set forth in this Chapter.
Such waivers shall be filed with the city clerk and a notice of such waiver shall be presented to the city council on the next available city council agenda; and b. For any contract or real property agreement subject to approval by the city council, the city manager shall include a statement in the approving resolution and related staff report whether any waiver under this Section is proposed for that contract.”
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CITY OF PALM DESERT AND PALM DESERT HOUSING AUTHORITY
STAFF REPORT
MEETING DATE: April 11, 2024
PREPARED BY: Jessica Gonzales, Housing Manager
REQUEST: SECOND AMENDED AND RESTATED DDLA, RELATED RESOLUTIONS, LOANS IN THE AMOUNT OF $1,965,539 AND $4,789,461 FROM THE
AUTHORITY, AND ACTIONS RELATED TO THE CONVEYANCE OF THE PARCELS IDENTIFIED AS APN 694-120-028 AND A PORTION OF 694-120- 029 FOR AFFORDABLE HOUS
RECOMMENDATION:
1. City Council: Adopt a Resolution entitled “A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT, CALIFORNIA, APPROVING A SECOND “AMENDED AND RESTATED DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT” REGARDING “PALM VILLAS AT MILLENIUM” AMONG THE CITY, AS SELLER, THE PALM DESERT
HOUSING AUTHORITY, AS LENDER, AND PALM COMMUNITIES, A CALIFORNIA
LIMITED COMPANY, AS PURCHASER/ BORROWER/ DEVELOPER, IN CONNECTION WITH APPROXIMATELY 10.49 ACRES OF PROPERTY OWNED BY THE CITY, AND TAKING RELATED ACTIONS.”
2. Housing Authority: Adopt a Resolution entitled, “A RESOLUTION OF THE PALM DESERT HOUSING AUTHORITY APPROVING A SECOND “AMENDED AND RESTATED DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT” REGARDING “PALM VILLAS AT MILLENIUM” AMONG THE AUTHORITY, AS LENDER, THE CITY OF PALM DESERT, AS
SELLER, AND PALM COMMUNITIES, A CALIFORNIA LIMITED COMPANY, AS PURCHASER/ BORROWER/ DEVELOPER, IN CONNECTION WITH APPROXIMATELY 10.49 ACRES OF
PROPERTY OWNED BY THE CITY, APPROPRIATING FUNDS IN CONNECTION THEREWITH, AND TAKING RELATED ACTIONS.”
3. Authorize the Authority to make two loans to the Developer for the purchase of the Property and construction of the Project ($1,965,539 for Phase I and $4,789,461 for Phase II), to be repaid from a percentage of residual receipts (i.e., net income) from the Project over the term of the loans, with any accrued interest and unpaid principal coming due 55 years from the completion of the Project, with such loans being secured by a subordinate deed of trust on the Project.
4. Authorize the Director of Finance to appropriate $6,755,000 from Unobligated Housing Asset Fund balance to the appropriate budget line item.
5. Authorize the Director of Finance to designate the proceeds of the sale of the City-owned property for the purpose of future affordable housing.
6. Authorize Mayor/Chairman, staff, and legal counsel to negotiate, execute and record agreements and necessary documents to effectuate the resolutions, including the conveyance of the Property, the funding commitments, and related actions for the Project as set forth in the Second Amended and Restated DDLA.
City of Palm Desert and Housing Authority
Second Amended and Restated DDLA - Palm Communities
BACKGROUND/ANALYSIS:
On October 13, 2022, City Council approved the conveyance of a City owned 10-acre parcel identified as APN 694-120-028 and a 0.49-acre parcel identified as a portion of APN 694-120- 029 (the "Property") to Palm Communities, Inc. ("Developer") and the Authority Board approved two loans from the Authority’s Low and Moderate Income Housing Asset Fund (“Housing Fund”) in the total amount of $6,755,000 to the Developer pursuant to a Disposition, Development and Loan Agreement, dated November 23, 2022 ("DDLA"), for the purchase of the Property and construction of 239 affordable housing units and two manager units in two phases ("Project").
As part of the approval, the Developer was authorized to submit applications to the various financial funding sources identified for the Project. The application submitted to the California Debt Limit Allocation Committee ("CDLAC") did not score sufficient points for an allocation of tax-exempt bonds ("Tax-Exempt Bonds") and federal and state tax credits ("Tax Credits").
However, the Project did receive a $6,700,000 loan from the County of Riverside ("County") as well as 45 project-based vouchers ("PBVs").
The Developer requested an amendment to the DDLA to extend the escrow closing to June 2026, extend the Project completion date to June 30, 2028, modify the Project to consist of only one phase, modify the City and Authority's affordability restrictions, require the City to provide a land carry-back loan in the amount of $3,425,000 (fair market purchase price), and decrease the Authority's loans from $6,755,000 to $3,330,000. The purpose of this amendment was to allow the Project to receive additional points in the MHP Loan application, an additional funding source the Developer was seeking. On June 14, 2023, the City Council and Authority approved an Amended and Restated Disposition and Development Agreement, dated June 22, 2023 (the “First Amended and Restated DDLA”) in accordance with their request.
Developer was not successful in the MHP Loan application and is now requesting amendments to the First Amended and Restated DDLA pursuant to the proposed Second Amended and Restated DDLA. However, the Project did receive an additional 75 PBVs from the County.
Attached is the proposed Second Amended and Restated DDLA among the City, Authority and Developer. Adoption of the resolutions will approve the Second Amended and Restated DDLA with the Developer.
The Second Amended and Restated DDLA stipulates that the City convey the Property to the Developer in two phases and provides two loan commitments from the Authority in the amounts of $1,965,539 and $4,789,461. The second Amended and Restated DDLA requires the City to sell the Property to the Developer for a total of $3,425,000. The Second Amended and Restated DDLA also increases the Authority Loan from $3,330,000 to two loans totaling $6,755,000 from the Housing Fund. The affordability restrictions will remain unchanged from the First Amended and Restated DDLA. Finally, the resolutions approving the Second Amended and Restated DDLA authorize the City/Authority's staff and legal counsel to proceed to execute and record any agreements and documents deemed necessary for the conveyance of the Property and the financing and construction of the Project, and the Second Amended and Restated DDLA includes the City Manager's right to terminate agreement if the Developer fails to obtain an award of Tax Credits by the end of 2024.
City of Palm Desert and Housing Authority
Second Amended and Restated DDLA - Palm Communities
If the required funding sources are awarded to the Project, the Property owned by the City will be sold, subject to satisfaction of the conditions to closing for a two-phased Project, which are typical closing conditions for a DDLA. Conditions to the closing of the sale of the two parcels include the recording of a parcel map, payment of grading permit fees and all final parcel map fees and recording of certain easements (which may occur at the close of escrow) for access over a portion of adjacent property owned by the City (providing access to remove sand adjacent to a future boundary wall).
The attached City and Authority resolutions approve the Second Amended and Restated DDLA, including the exhibits attached thereto, substantially in the form presented to the City Council and Authority Board at this meeting ("Second Amended and Restated DDLA Documents") and authorize staff and officers of the City and Authority to finalize, execute and record the Second Amended and Restated DDLA Documents, as applicable, and any other agreements and documents necessary to implement the Second Amended and Restated DDLA Documents at the closing of escrow.
Project: The Project will be operated for a period of fifty-five (55) years following the date of Certificate of Occupancy ("COO") for each phase of the Project to provide rental housing affordable to persons and families of low and extremely low income in accordance with the affordability restrictions contained in the Second Amended and Restated DDLA and the TaxExempt Bonds, 4% Federal Tax Credits, State Tax Credits, County Loan and PBVs being used to finance the two phases of the Project. To the extent necessary, the Authority will subordinate the deed of trust securing the two Loans (as described below) to the liens and encumbrances of the Project's construction and permanent lenders. However, the City and Authority will not subordinate their interests in the Density Bonus Housing Agreements (described below) or the Authority Housing Agreements (described below) to such liens or encumbrances.
Contractor. The Project contractor will be an affiliate of the Developer. In lieu of requiring multiple bids from third party contractors, City staff has confirmed that the contract price is reasonable given the requirement of State and Federal prevailing wages, increasing interest rates and construction costs. However, the Second Amended and Restated DDLA requires, as a condition to closing, that the Developer provide to the Authority the primary construction lender's cost analysis, or, alternatively, that the Developer pay for a City obtained cost review.
Density Bonus Housing Agreements. In order to develop the 241-unit Project (121 units in Phase I and 120 units in Phase II), the approved entitlements include the use of the City's Density Bonus Ordinance, which also allows for fewer parking spaces to be included in the Project than required by the City's Municipal Code. The Density Bonus provision was able to be used by the Project because at least 20% of the units will be restricted to very-low Income households. The two Density Bonus Housing Agreements have a term of fifty-five (55) years from COO and restricts 12 units in each phase to very-low income households, for a total of 24 Density Bonus units.
Authority Loan Terms. The Authority Loans shall be in the principal amount of $1,965,539 (Phase I) and $4,789,461 (Phase II) and be made from the Authority's Housing Fund, and commence as of the effective date of the Loan Agreements and have a term of fifty-five (55) years from the COO, bear simple interest at three percent (3%) per annum and will be repaid
City of Palm Desert and Housing Authority
Second Amended and Restated DDLA - Palm Communities
from a proportional share (50%) of the Project's residual receipts and the Authority Loans will be due and payable at the end of the loan term. The Phase I Authority Loan will be used to acquire the Phase I parcel and the Phase II Authority Loan will be used to acquire the Phase II parcel and for some of the Phase II costs of construction.
Authority Housing Agreements. The Housing Agreements for the Project will restrict all units in the Project to households that have incomes that do not exceed the following percentages of the Riverside County area median (AMI) income:
• Phase I: 36 units restricted to 30% of the AMI or less (approximately 30% of the units), 61 units restricted to 59% of the AMI or less (approximately 50% of the units), and 23 units restricted to 80% of the AMI or less (approximately 20% of the units). One three-bedroom unit will be set-aside for the onsite manager.
• Phase II: 36 units restricted to 30% of the AMI or less (approximately 30% of the units), 60 units restricted to 59% of the AMI or less (approximately 50% of the units), and 23 units restricted to 80% of the AMI or less (approximately 20% of the units). One two-bedroom unit will be set-aside for the onsite manager.
Total development costs for the Project, including land costs, are estimated at $153,839,000 ($82,160,000 (Phase I) and $71,679,000 (Phase II)). The Project is intended to be funded by leveraging multiple funding sources including: Tax-Exempt Bond proceeds, 4% Federal Tax Credits, State Tax Credits, a $6,700,000 County Loan, an aggregate of one-hundred and twenty (120) PBVs provided by the County, deferred developer fee, and the Authority Loans.
In order to evaluate the Developer's funding request, the Authority engaged the services of Keyser Marston Associates, Inc. ("KMA"), a state-wide provider of affordable housing consulting services, to provide technical assistance related to determining whether or not the Project's updated pro forma projections, feasibility and the request for the Loans were reasonable.
In evaluating the Developer's request for the Authority Loans to assist with the purchase of the Property and construction of the Project in two phases, KMA conducted a detailed review of the Developer's proforma. The Project's assumptions, methodologies, and calculations were reviewed and evaluated for reasonableness and accuracy. KMA presented its analysis in a financial gap analysis memorandum, dated March 27, 2024, which is attached to this staff report.
KMA's analysis concluded that the Project still has a $6,755,000 financial gap, or $28,000 per unit, thus the Developer's request for financial assistance is still warranted. In comparison, the Authority agreed to provide $22,400 per unit in assistance to the Vitalia project in August 2021 and $41,100 per unit to the Urban Housing Community ("UHC") project in July 2022 .
KMA concludes in their financial gap analysis memorandum:
1. The $638,300 per unit estimate for total development costs are reasonable given the Project scope of work, federal and state prevailing wage requirements, increasing interest rates and current inflationary market conditions.
2. The total development costs decreased by 1% since the last KMA analysis in June 2023 due to the Developer removing the TUMF and SCE fees as they will be waived or refunded.
3. While the financial gap remains at $6,755,000, the Authority will be providing the land purchase price ($3,425,000) from the Housing Fund. Therefore, the City will receive an
City of Palm Desert and Housing Authority
Second Amended and Restated DDLA - Palm Communities
upfront payment for the Site (in two payments as each parcel is conveyed).
4. For RHNA purposes, the City will be able to add 120 extremely-low income units to the City's housing inventory as well as 119 low income units (59% AMI and 80% AMI) and two above moderate units.
5. The Project meets the State law requirements for use of monies in the Housing Fund because at least 30% of the Housing Fund monies are being spent on extremely-low income households and no more than 20% of the Housing Funds monies are being used to benefit households earning 60% to 80% AMI.
By making the Authority Loans to the Developer, the City and Authority will benefit from 239 units restricted to extremely-low and low income households for a term of 55-years.
Therefore, staff requests approval of the actions described herein in order to allow the Developer to meet the deadline to submit an application to the CDLAC/TCAC. If the City Council and Authority Board approve such request and the Developer is awarded the proposed funding sources, staff and legal counsel will finalize the Second Amended and Restated DDLA, including the exhibits thereto, which were provided in substantial form at this meeting, and any other documents deemed necessary or proper for the conveyance of the Property and the financing and construction of the Project.
Legal Review:
This report and resolutions have been reviewed by the Special Legal Counsel.
Strategic Plan:
One of the priorities of the City's Envision Palm Desert Strategic Plan, as part of Land, Use, Housing and Open Space, is to facilitate development of high-quality housing for people of all income levels. This request meets that objective by diversifying the City's housing stock for lower income households.
FINANCIAL IMPACT:
An appropriation from the Authority's Housing Asset Fund will be necessary in an amount not to exceed $6,755,000, or $28,800 per unit. Funds are available from the Authority's Housing Asset Fund unobligated fund balance. The above- identified funding will only be provided upon the Developer's satisfaction of the Second Amended and Restated DDLA terms and conditions contained therein, including, but not limited to, providing proof, satisfactory to the Authority, that the Developer has financing commitments from all other sources of financing necessary to fund the Project as permit ready.
The financial impact to the City is that the Second Amended and Restated DDLA provides the City with upfront cash payments for the Site as each parcel is conveyed. As such, the City will convey the Site to the Developer and receive $3,425,000. Staff recommend designating the proceeds of the sale of the Property for future affordable housing purposes.
City of Palm Desert and Housing Authority
Second Amended and Restated DDLA - Palm Communities
ATTACHMENTS:
1. City Resolution - Palm Communities Second Amended and Restated DDLA
2. Authority Resolution - Palm Communities Second Amended and Restated DDLA
3. Second Amended and Restated DDLA – Palm Communities
4. Second Amended and Restated DDLA – Exhibits - Palm Communities
5. KMA Memorandum, (Palm Villas - Updated Financial Gap Analysis, dated 3/27/2024)
RESOLUTION NO. ____
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM
DESERT APPROVING A SECOND “AMENDED AND RESTATED
DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT”
REGARDING “PALM VILLAS AT MILLENIUM” AMONG THE CITY, AS
SELLER, THE PALM DESERT HOUSING AUTHORITY, AS LENDER,
AND PALM COMMUNITIES, A CALIFORNIA LIMITED COMPANY, AS
PURCHASER/BORROWER/DEVELOPER, IN CONNECTION WITH
APPROXIMATELY 10.49 ACRES OF PROPERTY OWNED BY THE CITY,
AND TAKING RELATED ACTIONS
RECITALS:
A. The City of Palm Desert (“City”) owns that approximately ten and one-half (10.49) acre site located in the City of Palm Desert, identified as APN 694-120-028 and a portion of APN 694-120-029, as more particularly described in Exhibit A to the form of the Amended and Restated Disposition, Development and Loan Agreement, dated as of April 11, 2024 (“Second Amended and Restated DDLA”) by and among the City, the Palm Desert Housing Authority (“Authority”) and Palm Communities (“Developer”) attached hereto as Exhibit “A” (“Property”).
B. The City, Authority and Developer previously entered into a Disposition, Development and Loan Agreement, dated November 23, 2022, and the Amended and Restated Disposition and Development Agreement, dated June 22, 2023 (the “First Amended and Restated DDLA”), to provide for the conveyance of the Property to the Developer and the construction by the Developer of 239 affordable housing units, which shall be made available to and occupied by low and extremely low income households, and two on-site manager units (“Project”).
C. The City Council previously declared the Property exempt surplus land pursuant to Government Code Section 54221(f)(1)(A) on the basis that the Project meets the affordability and design requirements of Government Code Section 37364, and the California Department of Housing and Community Development confirmed such exemption in writing.
D. The Developer has applied for and received a density bonus (including reduced parking and increased density) for the Project pursuant to City Resolution No. 2022-
24. E. The City Council has determined in City Resolution No. 2022-24 that the Project does not require additional review under the California Environmental Quality Act.
F. The City Council, Authority Board and Developer desire to enter into the Second Amended and Restated DDLA to replace the First Amended and Restated DDLA and provide, subject to the terms and conditions of the Second Amended and Restated DDLA, for: (i) the City to process a Parcel Map to divide the Property into the Phase I Parcel (consisting of approximately 6.02 acres) and Phase II Parcel (consisting of
RESOLUTION NO.
-2-
12812-0001\2942047v1.doc
approximately 4.47 acres) and to convey the Property to the Developer in two phases; (ii) the Developer to construct 121 units on the Phase I Parcel and 120 units on the Phase II Parcel; (iii) the Authority to make a purchase money/ acquisition loan to the Developer in the amount of $1,965,539 to purchase the Phase I Parcel and a purchase money/ acquisition loan to the Developer in the amount of $4,789,461 to purchase the Phase II Parcel; (iv) concurrently with the conveyance of the Phase I Parcel to the Developer, the City and Developer to grant to each other reciprocal easements over the Phase I and Phase II Parcel for ingress and egress; and (v) concurrently with the conveyance of the Phase I Parcel to the Developer, the City to grant an easement over Parcel 9, an adjacent City-owned parcel, to allow ingress and egress to the Phase I Parcel through the Phase II Parcel, and an access easement over Parcel 9 to allow the Developer to clear any accumulated sand against the Phase I and Phase II boundary wall.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT DOES HEREBY RESOLVE, DETERMINE, AND ORDER AS FOLLOWS:
SECTION 1. The above recitals are true and correct and are a substantive part of this Resolution.
SECTION 2. In accordance with Government Code Section 37364, the City Council previously found that the Property can be used to provide housing affordable to persons and families of low or moderate income and that this use is in the City’s best interests. The City Council hereby confirms such finding and finds that the use of moneys in the Authority’s Low and Moderate Income Housing Fund in accordance with the Second Amended and Restated DDLA is of benefit to the project areas of the former Palm Desert Redevelopment Agency.
SECTION 3. In accordance with Government Code Section 54221(f)(1)(A), the City Council previously declared the Property exempt surplus land on the basis that the Project meets the affordability and design requirements of Government Code Section 37364. The City Council hereby confirms such finding.
Section 4. [CEQA]
SECTION 5. The Second Amended and Restated DDLA, in the form attached hereto as Exhibit “A”, is hereby approved. The City Manager of the City is hereby authorized to execute and deliver the Second Amended and Restated DDLA, for and in the name of the City, in substantially such form, with changes thereto as the City Manager may deem appropriate or necessary and consistent with the purposes of this Resolution (such approval to be conclusively evidenced by the execution and delivery thereof).
SECTION 6. The members of the City Council and the officers and staff of the City are hereby authorized, jointly and severally, to take any other such actions as they deem necessary or proper to effectuate the purposes of this Resolution and the Second Amended and Restated DDLA including the exhibits thereto. Such actions include negotiating and preparing agreements and documents, and any such actions previously
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taken are hereby ratified and confirmed. The City Manager of the City is authorized to execute, deliver and record, on behalf of the City, all documents contemplated by the Second Amended and Restated DDLA.
SECTION 6. The City Clerk shall certify to the adoption of this Resolution and the same shall take effect and be in force.
PASSED, APPROVED, AND ADOPTED this ____ day of April, 2024.
AYES:
NOES:
ABSENT:
ABSTAIN:
KARINA QUINTANILLA
MAYOR
ATTEST:
ANTHONY J. MEJIA, CITY CLERK
EXHIBIT “A”
Form of Second Amended and Restated DDLA
(Attached.)
RESOLUTION NO. HA-________
A RESOLUTION OF THE PALM DESERT HOUSING AUTHORITY
APPROVING A SECOND “AMENDED AND RESTATED DISPOSITION,
DEVELOPMENT AND LOAN AGREEMENT” REGARDING “PALM
VILLAS AT MILLENIUM” AMONG THE AUTHORITY, AS LENDER, THE
CITY OF PALM DESERT, AS SELLER, AND PALM COMMUNITIES, A
CALIFORNIA LIMITED COMPANY, AS
PURCHASER/BORROWER/DEVELOPER, IN CONNECTION WITH
APPROXIMATELY 10.49 ACRES OF PROPERTY OWNED BY THE CITY,
APPROPRIATING FUNDS IN CONNECTION THEREWITH, AND TAKING
RELATED ACTIONS
RECITALS:
A. Pursuant to AB X1 26 (enacted in June 2011) and the California Supreme Court’s decision in California Redevelopment Association, et al. v. Ana Matosantos, et al., 53 Cal. 4th 231 (2011), the former Palm Desert Redevelopment Agency (“Former Agency”) was dissolved as of February 1, 2012.
B. Pursuant to Health and Safety Code Section 34176(b), the City Council of the City of Palm Desert (“City”) adopted Resolution No. 2012-07, electing for the City to not retain the responsibility for performing housing functions previously performed by the Former Agency, and determining that all of the assets, as allowed by law, and all rights, powers, liabilities, duties, and obligations associated with the housing activities of the Former Agency be transferred to the Palm Desert Housing Authority (“Authority”).
C. The City owns that approximately ten and one-half (10.49) acre site located in the City, identified as APN 694-120-028 and a portion of APN 694-120-029, as more particularly described in Exhibit A to the form of the Amended and Restated Disposition, Development and Loan Agreement, dated as of April 11, 2024 (“Second Amended and Restated DDLA”) by and among the City, the Authority and Palm Communities (“Developer”) attached hereto as Exhibit “A” (“Property”).
D. The City, Authority and Developer previously entered into a Disposition, Development and Loan Agreement, dated November 23, 2022, and the Amended and Restated Disposition and Development Agreement, dated June 22, 2023 (the “First Amended and Restated DDLA”), to provide for the conveyance of the Property to the Developer and the construction by the Developer of 239 affordable housing units, which shall be made available to and occupied by low and extremely low income households, and two on-site manager units (“Project”).
E. The City Council, Authority Board and Developer desire to enter into the Second Amended and Restated DDLA to replace the First Amended and Restated DDLA and provide, subject to the terms and conditions of the Second Amended and Restated DDLA, for: (i) the City to process a Parcel Map to divide the Property into the Phase I Parcel (consisting of approximately 6.02 acres) and Phase II Parcel (consisting of
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approximately 4.47 acres) and to convey the Property to the Developer in two phases; (ii) the Developer to construct 121 units on the Phase I Parcel and 120 units on the Phase II Parcel; (iii) the Authority to make a purchase money/ acquisition loan to the Developer in the amount of $1,965,539 to purchase the Phase I Parcel and a purchase money/ acquisition loan to the Developer in the amount of $4,789,461 to purchase the Phase II Parcel; (iv) concurrently with the conveyance of the Phase I Parcel to the Developer, the City and Developer to grant to each other reciprocal easements over the Phase I and Phase II Parcel for ingress and egress; and (v) concurrently with the conveyance of the Phase I Parcel to the Developer, the City to grant an easement over Parcel 9, an adjacent City-owned parcel, to allow ingress and egress to the Phase I Parcel through the Phase II Parcel, and an access easement over Parcel 9 to allow the Developer to clear any accumulated sand against the Phase I and Phase II boundary wall.
NOW, THEREFORE, THE PALM DESERT HOUSING AUTHORITY DOES
HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS:
Section 1. The above recitals are true and correct and are a substantive part of this Resolution.
Section 2. The Second Amended and Restated DDLA, in the form attached hereto as Exhibit “A”, is hereby approved. The Executive Director of the Authority is hereby authorized to execute and deliver the Second Amended and Restated DDLA, for and in the name of the Authority, in substantially such form, with such changes thereto as the Executive Director may deem appropriate or necessary and consistent with the purposes of this Resolution (such approval to be conclusively evidenced by the execution and delivery thereof).
Section 3. The Developer is hereby authorized to submit an application, including the Second Amended and Restated DDLA, to the California Tax Credit Allocation Committee for tax credits as contemplated by the Second Amended and Restated DDLA.
Section 4. The Director of Finance is hereby authorized to appropriate $6,755,000 from the Unobligated Housing Asset Fund Balance to the appropriate budget line item(s). The Board hereby finds that the use of the Housing Fund moneys in accordance with the Second Amended and Restated DDLA is of benefit to the project areas of the Former Agency.
Section 5. The Second Amended and Restated DDLA does not bind the Authority to make the Authority loans unless the applicable tax credits and other debt and equity necessary to complete the Project shall have been awarded/committed, and all other conditions described in the Second Amended and Restated DDLA to the closing shall have been satisfied.
Section 6. The members of this Board and the officers and staff of the Authority are hereby authorized, jointly and severally, to take any other such actions as they deem necessary or proper to effectuate the purposes of this Resolution and the Second Amended and Restated DDLA, including the exhibits thereto. Such actions include
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negotiating and preparing agreements and documents, and any such actions previously taken are hereby ratified and confirmed. The Executive Director of the Authority is authorized to execute, deliver and record, on behalf of the Authority, all documents contemplated by the Second Amended and Restated DDLA.
Section 7. The Secretary shall certify to the adoption of this Resolution and the same shall take effect and be in force.
PASSED, APPROVED and ADOPTED ON THIS __ day of April 2024, by the following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
KARINA QUINTANILLA, CHAIRMAN
ATTEST:
ANTHONY J. MEJIA, SECRETARY
PALM DESERT HOUSING AUTHORITY
EXHIBIT “A”
FORM OF SECOND AMENDED AND RESTATED DDLA
(Attached.)
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AMENDED AND RESTATED DISPOSITION, DEVELOPMENT AND LOAN
AGREEMENT
AMONG
CITY OF PALM DESERT
PALM DESERT HOUSING AUTHORITY
AND
PALM COMMUNITIES
(PALM VILLAS AT MILLENNIUM)
TABLE OF CONTENTS
PAGE
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Section 1.1 Definitions................................................................................................................... 3 Section 1.2 Exhibits........................................................................................................................ 8 ARTICLE 2. PREDISPOSITION CONDITIONS FOR CONVEYANCE OF
EACH PHASE 9
Section 2.1 City Right to Terminate for Failure to Timely Obtain Tax Credits.......................................................................................................................... 9 Section 2.2 City Approvals........................................................................................................... 9 Section 2.3 Parcel Map .................................................................................................................. 9 Section 2.4 Financing..................................................................................................................... 9 Section 2.5 Permits.......................................................................................................................... 9 Section 2.6 Tax Credits.................................................................................................................. 9 Section 2.7 Loan Closings............................................................................................................ 9 Section 2.8 Construction Plans..................................................................................................10 Section 2.9 Construction Contract............................................................................................10 Section 2.10 Cost Estimate............................................................................................................10 Section 2.11 Construction Bonds................................................................................................10 Section 2.12 Developer Organizational Documents..............................................................11 Section 2.13 Authority Loan.........................................................................................................11 Section 2.14 Tax Credit Equity....................................................................................................11 Section 2.15 City Easements........................................................................................................11 Section 2.16 Phase II Conveyance..............................................................................................11 Section 2.17 HCD Confirmation of Exemption......................................................................11 Section 2.18 AHAP.........................................................................................................................11 Section 2.19 Title Report...............................................................................................................11
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ARTICLE 3. DISPOSITION OF PROPERTY......................................................................................11 Section 3.1 Conveyance of Phase I Parcel and Phase II Parcel .......................................11 Section 3.2 Purchase Prices........................................................................................................11 Section 3.3 Deposit .......................................................................................................................11 Section 3.4 Opening Escrow ......................................................................................................12 Section 3.5 Close of Escrow.......................................................................................................13 Section 3.6 Costs of Escrow and Closing...............................................................................14 Section 3.7 Condition of Title....................................................................................................14 Section 3.8 Condition of Property ............................................................................................14 ARTICLE 4. CONSTRUCTION OF DEVELOPMENT....................................................................17 Section 4.1 Construction and Operation Consistent with Agreements..........................17 Section 4.2 Commencement of Development.......................................................................17 Section 4.3 Completion of the Development.........................................................................17 Section 4.4 Equal Opportunity...................................................................................................17 Section 4.5 Construction Under Laws.....................................................................................17 Section 4.6 Progress Reports......................................................................................................18 Section 4.7 Construction Responsibilities..............................................................................18 Section 4.8 Mechanics Liens, Stop Notices, and Notices of Completion.....................18 Section 4.9 Inspections................................................................................................................19 Section 4.10 Records ......................................................................................................................19 Section 4.11 Certificate of Completion .....................................................................................19 ARTICLE 5. AUTHORITY LOAN PROVISIONS.............................................................................19 Section 5.1 Authority Loans.......................................................................................................19 Section 5.2 Use of Authority Loan...........................................................................................20
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Section 5.3 Delivery of Promissory Notes.............................................................................20 Section 5.4 Term of the Authority Loan.................................................................................20 Section 5.5 Interest........................................................................................................................20 Section 5.6 Disbursement of Authority Loans......................................................................20 Section 5.7 Repayment Schedule..............................................................................................21 Section 5.8 Reports and Accounting of Residual Receipts...............................................21 Section 5.9 Non-Recourse...........................................................................................................22 ARTICLE 6. ONGOING DEVELOPER OBLIGATIONS................................................................22 Section 6.1 Applicability.............................................................................................................22 Section 6.2 Use of Development...............................................................................................22 Section 6.3 Maintenance..............................................................................................................23 Section 6.4 Taxes and Assessments.........................................................................................23 Section 6.5 Mandatory Language in All Subsequent Deeds, Leases and Contracts....................................................................................................................23 Section 6.6 Management Agent ................................................................................................25 Section 6.7 Insurance Requirements........................................................................................26 Section 6.8 Audits.........................................................................................................................29 ARTICLE 7. ASSIGNMENTS AND TRANSFERS ...........................................................................29 Section 7.1 Definitions.................................................................................................................29 Section 7.2 Purpose of Restrictions on Transfer ..................................................................29 Section 7.3 Prohibited Transfers...............................................................................................30 Section 7.4 Permitted Transfers................................................................................................30 Section 7.5 Other Transfers with City Consent ....................................................................31 Section 7.6 Termination of Limitations on Transfers.........................................................31 ARTICLE 8. DEFAULT AND REMEDIES ..........................................................................................31
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Section 8.1 General Applicability.............................................................................................31 Section 8.2 Fault of City..............................................................................................................31 Section 8.3 Fault of Authority ...................................................................................................31 Section 8.4 Fault of Developer..................................................................................................31 Section 8.5 Notice and Cure Period Regarding City/Authority Defaults......................33 Section 8.6 Remedies...................................................................................................................33 Section 8.7 Rights of Mortgagees.............................................................................................34 Section 8.8 Remedies Cumulative............................................................................................34 ARTICLE 9. SECURITY FINANCING AND RIGHTS OF HOLDERS .....................................34 Section 9.1 No Encumbrances Except for Development Purposes.................................34 Section 9.2 Holder Not Obligated to Construct....................................................................34 Section 9.3 Notice of Default and Right to Cure..................................................................34 Section 9.4 Failure of Holder to Complete Development..................................................35 Section 9.5 Right of Cure............................................................................................................35 Section 9.6 Right of City to Satisfy Other Liens..................................................................35 Section 9.7 Holder to be Notified .............................................................................................36 Section 9.8 Estoppel Certificates..............................................................................................36 ARTICLE 10 GENERAL PROVISIONS.................................................................................................36 Section 10.1 Notices, Demands and Communications.........................................................36 Section 10.2 Non-Liability of Officials, Employees and Agents.......................................36 Section 10.3 Forced Delay ............................................................................................................37 Section 10.4 Inspection of Books and Records.......................................................................37 Section 10.5 Title of Parts and Sections....................................................................................37 Section 10.6 No Third-Party Beneficiaries...............................................................................37
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Section 10.7 Applicable Law........................................................................................................37 Section 10.8 No Brokers................................................................................................................37 Section 10.9 Legal Actions...........................................................................................................37 Section 10.10 Severability...............................................................................................................38 Section 10.11 Binding Upon Successors.....................................................................................38 Section 10.12 Parties Not Co-Venturers......................................................................................38 Section 10.13 Discretion Retained by City.................................................................................38 Section 10.14 Time of the Essence ...............................................................................................38 Section 10.15 Representation and Warranties of Developer.................................................38 Section 10.16 Entire Understanding of the Parties...................................................................39 Section 10.17 Amendments.............................................................................................................39 Section 10.18 Approvals..................................................................................................................39 Section 10.19 Counterparts .............................................................................................................39
AMENDED AND RESTATED DISPOSITION, DEVELOPMENT, AND LOAN
AGREEMENT
(Palm Villas at Millennium)
This AMENDED AND RESTATED DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT (the “Agreement”) is dated as of April 11, 2024, and is entered into by and among the CITY OF PALM DESERT, a municipal corporation (the “City”), the PALM DESERT HOUSING AUTHORITY, a public body corporate and politic (the “Authority”) and PALM COMMUNITIES, a California corporation (the “Developer”), each individually a “Party” and collectively the “Parties,” with reference to the following facts, understandings and intentions of the Parties:
RECITALS
A. Defined terms used but not defined in these recitals are as defined in Article 1 of this Agreement.
B. The City owns that approximately ten and one-half (10.49) acre site located in the City of Palm Desert as more particularly described in Exhibit A (the “Property”). The City intends to process a Parcel Map to divide the Property into the Phase I Parcel (consisting of approximately
6.02 acres) and Parcel II Parcel (consisting of approximately 4.47 acres); the Phase I Parcel and Phase II Parcel are described on Exhibits A-1 and A-2.
C. The Property has been declared exempt surplus land by the City Council of the City under Government Code Section 54221(f)(1)(A) and has concluded based on the Developer’s site plan and proposed affordability that proposed Development meets the affordability and design requirements of Government Code Section 37364. The California Department of Housing and Community Development has confirmed such exemption in writing.
D. The City, the Authority and the Developer previously entered into that certain Disposition, Development and Loan Agreement dated November 23, 2022, as amended by that certain Amended and Restated Disposition, Development and Loan Agreement dated June 22, 2023 (the “Existing DDLA”); this Agreement replaces the Existing DDLA.
E. The Developer intends to construct in two phases at least two hundred forty-one (241) units of housing, two hundred thirty-nine (239) of which shall be made available to and occupied by low-income households, very low-income households, and extremely low-income households, and two (2) of which shall be on-site manager’s units.
F. The Developer intends to construct one hundred twenty-one (121) units on the Phase I Parcel, with one hundred twenty (120) of the units restricted to Extremely-Low Households, Very-Low Income Households and Low Income Households, at affordable rents, and the other unit used as an on-site manager’s unit. The Phase I Development will be composed of one, two and three bedroom units.
G. The Developer intends to construct one hundred twenty (120) units on the Phase II Parcel, with one hundred nineteen (119) of the units restricted to Extremely-Low Households,
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Very-Low Income Households and Low Income Households, at affordable rents, and the other unit used as an on-site manager’s unit. The Phase II Development will also be composed of one, two and three bedroom units.
H. To effectuate this purpose, the City will convey the Property to the Developer in two phases, subject to the terms and conditions of this Agreement.
I. To assist the Developer in acquiring the Phase I Parcel from the City, the Authority intends to make a purchase money/acquisition loan to the Developer in the amount of $1,965,539.00, subject to the terms and conditions of this Agreement. To assist the Developer in acquiring the Phase II Parcel from the City and developing/construction the Phase II Development, the Authority intends to make a purchase money and construction loan to the Developer in the amount of $4,789,461, subject to the terms and conditions of this Agreement.
J. The Authority shall disburse the construction loan portion of the Phase II loan by Authority itself, but upon request of Developer, will consider entering into an agreement with the Developer’s construction lender for the Phase II Development providing that the construction lender will disburse the remaining proceeds of the Authority’s loan following the Close of Escrow to the construction lender for the payment of construction costs of the Phase II Development. The agreement will provide that the Authority Loan funds will be disbursed pari-passu with the construction lender’s loan. The construction lender shall not have a security interest in such Authority funds.
K. Concurrently with the conveyance of the Phase I Parcel to the Developer, the Developer and City intend to grant to each other reciprocal easements over the Phase I and Phase II Parcel for ingress and egress. The Developer also intends to grant the Phase II Parcel owner reasonable rights to use the Phase I Development’s common area facilities upon the completion of the Phase II Development (the “Phase I and Phase II Access Easement”). The Parties intend that the Phase I and Phase II Access Easement will include a provision that the Phase I and Phase II Access Easement may be amended by the Parties if the City intends to convey the Phase II Parcel to a party that is not affiliated with the Developer.
L. Concurrently with the conveyance of the Phase I Parcel to the Developer, the City intends to grant (i) an easement over the Parcel 9, an adjacent City-owned parcel, to allow ingress and egress to the Phase I Parcel through the Phase II Parcel (the “Parcel 9 Easement”); and (ii) an access easement over Parcel 9 to allow the Developer and the Phase II Parcel owner to clear any accumulated sand against the Phase I and the Phase II boundary wall (the “Maintenance Easement”).
M. The City has determined that the Developer has the necessary expertise, skill and ability to carry out the commitments set forth in this Agreement and that this Agreement is in the best interests of, and will materially contribute to the implementation of, the City’s affordable housing goals through the development of the Property.
N. Developer has applied for and received a density bonus (including reduced parking and increased density) for both the Phase I Development and the Phase II Development.
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In consideration of the foregoing, and the mutual terms and conditions herein, the Parties agree as follows:
AGREEMENT
The foregoing recitals are hereby incorporated by reference and made part of this Agreement.
ARTICLE 1
DEFINITIONS AND
EXHIBITS
Section 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following definitions apply throughout this Agreement. “Affordable Units” means the Two Hundred Thirty-Nine (239) Units restricted by the Housing Agreements to be developed on the Property to be occupied by Extremely-Low, Very-Low and Low-Income Households and to be available at affordable rent as defined in accordance with Health & Safety Code Section 50053.
“Annual Financial Statement” means for any calendar year: (i) the financial statement of operating expenses and revenues for a Phase, prepared at the Developer’s expense, by an independent certified accountant reasonably acceptable to the Authority, and showing the Residual Receipts for the applicable calendar year; (ii) sufficient back-up data to support the revenues and expenses claimed on the statement; and (iii) such additional information reasonably requested by the Authority, all of which shall form the basis for determining Residual Receipts. “Approved Financing” means the loans, equity, and other financing obtained by the Developer for the purpose of financing the costs of the Development that are approved by the City and consistent with the Financing Proposal.
“Approved Plans” means all designs for the Development approved by the City in conjunction with the City Approvals prior to or concurrent with the Effective Date. “Authority” is defined in the introductory paragraph of this Agreement. “Authority Loans” or “Authority Loan”, as applicable, mean loans by the Palm Desert Housing Authority to the Developer in the amount of: (i) $1,965,539 to pay the purchase price for the Phase I Parcel and (ii) $4,789,461 to pay the purchase price for the Phase II Parcel and construction costs for the Phase II Development.
“Building Permit” means the building permit and all other ministerial construction permits required from the City to construct the Development.
“Certificate of Completion” is defined in Section 4.11. “Certificate of Occupancy” means a final certificate of occupancy issued by the City for the Development, or equivalent final inspection.
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“City” is defined in the introductory paragraph of this Agreement. “City/Authority Documents” means, collectively, this Agreement, the Promissory Notes, the Deed of Trusts, the Housing Agreements, the Notice of Restrictions for each phase of the Development and any other documents executed by the City and/or the Authority and Developer. “City Approvals” means the permits and entitlements issued by the City to allow for the commencement of construction for the respective Phase.
“City Event of Default” is defined in Section 8.3.
“Close of Escrow” means the date on which a fee interest in each of the Phase I Parcel and the Phase II Parcel is conveyed to the Developer, as appropriate. “Construction Plans” means the final construction plans for the construction of the Development as approved by the City in accordance with Section 2.5. “Control” means the power to direct the day-to-day management responsibilities for the activities of Developer, and, with respect to a limited liability company, means the: (1) managing member or members; or (2) the right to exercise, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the limited liability company. “Declaration of Default” is defined in Section 8.5.
“Deeds of Trust” shall mean the deeds of trust, assignment of rents, and security agreement placed on the Developer’s interest in the Phase I Parcel and Phase II Parcel, as security for the Authority Loans by the Developer as trustor with the Authority as beneficiary, as well as any amendments to, modifications of, and restatements of said deed of trusts, in the forms attached hereto as Exhibit F.
“Defaulting Party” is defined in Section 8.5.
“Density Bonus Agreement” shall mean the Density Bonus Agreement for each Phase in the form attached hereto as Exhibits D-1 and D-2
“Deposit” is defined in Section 3.3.
“Developer” has the meaning in the introductory paragraph of this Agreement. “Developer Event of Default” is defined in Section 8.4. “Development” means the development of two hundred forty-one (241) apartment units to be developed on the Property.
“Effective Date” shall mean the later of: (i) the date the Developer has executed this Agreement; (ii) the date the Authority has executed this Agreement and (iii) the date the City has executed this Agreement.
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“Escrow” means the escrow opened with the Title Company to accomplish the transfer of Phase I and Phase II, respectively, from the City to the Developer. “Extremely Low Income” means a household with an income that does not exceed the qualifying limits for extremely low-income households, adjusted for actual household size, for Riverside County, as published and periodically updated by HCD under Section 50106 of the California Health and Safety Code, or successor provision. “Financing Proposal” means the Developer’s initial proposal for financing the acquisition of the Property and the construction of the Development, including an estimate of the sources and uses of funds, which is attached hereto as Exhibit K.
“Grading Permit” means the permit to commence grading on the Phase I Parcel and the permit for the Phase II Parcel.
“Hazardous Materials” means any substance, material, or waste which is: (1) defined as a “hazardous waste”, “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted hazardous waste,” “pollutant” or any other terms comparable to the foregoing terms under any provision of California law or federal law; (2) petroleum; (3) asbestos; (4) polychlorinated biphenyls; (5) radioactive materials; (6) MTBE; or (7) determined by California, federal or local government authority to be capable of posing a risk of injury to health, safety or property. Without limiting the foregoing, Hazardous Materials means and includes any substance or material defined or designated as hazardous or toxic waste, hazardous or toxic material, a hazardous, toxic or radioactive substance, or other similar term, by any Hazardous Materials Laws including any federal, state or local environmental statute, regulation or ordinance presently in effect that may be promulgated in the future, as such statutes, regulations and ordinances may be amended from time to time.
The term “Hazardous Materials” does not include: (1) construction materials, gardening materials, household products, office supply products or janitorial supply products customarily used in the construction or maintenance, of residential developments, or typically used in office or residential activities; or (2) certain substances which may contain chemicals listed by the State of California under California Health and Safety Code Sections 25249.8 et seq., which substances are commonly used by a significant portion of the population living within the region of the Development, including, but not limited to, alcoholic beverages, aspirin, tobacco products, nutrasweet and saccharine, so long as such materials and substances are stored, used and disposed of in compliance with all applicable Hazardous Materials Laws. “Hazardous Materials Laws” means all federal, state, and local laws, ordinances, regulations, orders and directives pertaining to Hazardous Materials in, on or under the Development or any portion thereof.
“Housing Agreements” or “Housing Agreement”, as applicable, means the Housing Agreements between the Developer and the Authority in the form of Exhibit H that will be recorded against the Developer’s fee interest in the Phase I Parcel and Phase II Parcel and all improvements thereon, and will restrict the household income levels for occupancy of the Units
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thereon to Extremely Low, Very-Low and Low Income Households and will restrict the rent to affordable rent.
“Low Income Household” means a household with an income that does not exceed the qualifying limits for lower income households, adjusted for actual household size, for Riverside County, as published and periodically updated by HCD under Section 50079.5 of the California Health and Safety Code, or successor provision.
“Maintenance Easement” means an easement over Parcel 9 prepared by the Developer and approved by the City granting the Developer and the Phase II Parcel owner the right of access to clear sand from the outside of the Phase I Wall and the Phase II Wall abutting the Maintenance Easement area, substantially in the form of Exhibit B-3. “Notices of Restrictions” or “Notice of Restrictions”, as applicable, shall mean the Notices of Affordability Restrictions in the form attached hereto as Exhibit G, which are to be recorded against the Phase I Parcel and the Phase II Parcel upon the closing of the sales thereof. “Notice of Default” is defined in Section 8.5.
“Official Records” means the official land records of Riverside County. “Parcel” means either the Phase I Parcel or the Phase II Parcel, as the context requires. “Parcel Map” means the Parcel Map prepared by the Developer and approved by the City subdividing the Property into the two Phases and recorded in the Official Records of the County of Riverside with any recording costs paid by the Developer. “Parcel 9” means the City-owned parcel abutting the Phase I Parcel and the Phase II Parcel described in Exhibit A-3.
“Parcel 9 Easement” means the easement for ingress and egress of over a portion of Parcel 9 prepared by the Developer and approved by the City benefiting Parcel I and granting the right to the Developer to improve the easement with street improvements, substantially in the form of Exhibit B-2.
“Parties” means collectively the City, the Authority and the Developer and the term Party refers to each of them individually.
“Phase” shall mean the Phase I Development or the Phase II Development, as the context requires.
“Phase I Development” means the development of at least one hundred twenty-one (121) units of housing, required offsite infrastructure improvements and parking constructed on the Phase I Parcel, all as more fully set forth in the Scope of Development. “Phase II Development” means the development of at least one hundred twenty (120) units of housing, required offsite infrastructure improvements and parking constructed on the Phase II Parcel, all as more fully set forth in the Scope of Development.
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“Parcel I and Parcel II Access Easement” means the reciprocal easement prepared by the Developer and approved by the City for ingress and egress of over Parcel I and Parcel II and granting the Phase II Parcel owner the right of reasonable access to the Phase I Development common facilities, substantially in the form of Exhibit B-1. “Phase I Parcel” means the property generally described in Exhibit A-1. “Phase II Parcel” means the property generally described in Exhibit A-2. “Promissory Notes” or “Promissory Note”, as applicable, shall mean the promissory notes that will evidence the Developer’s obligation to repay the applicable Authority Loan for a Phase as set forth in this Agreement, and shall be in the form of Exhibit E. Each Phase of the Development will have its own Promissory Note and shall not be cross-collateralized. “Property” means the property generally described in the legal description attached as Exhibit A, consisting of the Phase I Parcel and the Phase II Parcel. “Residual Receipts” in a particular calendar year for a Phase shall mean the cash (without regard to the source) derived from the operation of such Phase of the Development minus the following for that Phase, determined on a cash basis: (i) all real estate and personal property taxes and assessments, insurance premiums and reasonable costs of maintenance, operation and management incurred by the Developer in connection with the operation and maintenance, (ii) property management fees not to exceed four and one-half percent (4.5%) of the gross revenue of the Phase, (iii) the costs of servicing the senior construction loan/financing (and any approved refinancing thereof) and other sources of permitted financing; (iv) amounts necessary to maintain a guaranty or other form of security or bond for an operation reserve account, (v) amounts deposited into a replacement initially capitalized reserve account in the minimum sum of Three Hundred Twenty-Five Dollars ($325.00) per unit per annum, (vi) the repayment of any amounts loaned by the Developer for material development costs which costs were not reasonably foreseeable, (vii) deferred developer fees (viii) a limited partner monitoring fee in the annual amount of Five Thousand Dollars ($5,000.00) per year unless fully paid a permanent loan conversion; (ix) a managing general partner fee in the annual amount of Fifteen Thousand Dollars ($15,000.00), increasing three percent (3%) annually; and (xi) an administrative general partner fee in the annual amount of Ten Thousand Dollars ($10,000.00), increasing three percent (3%) annually. In no event shall depreciation/amortization be deducted from cash revenues. Residual Receipts shall be determined by Developer and Authority on a cash basis without regard to any carry-over profit or loss from any prior calendar year, and shall be determined annually, on or before June 1st for the preceding calendar year. Any deferred developer fee, limited partner monitoring fee, managing general partner fee, and administrative general partner fee may not accrue interest.
“Schedule of Performance” means the schedule attached as Exhibit C setting forth the schedule for the Developer’s acquisition and development of the Phase I Parcel and the acquisition and development of the Phase II Parcel and the construction of the Phase I Development and the Phase II Development and other deadlines.
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“Scope of Development” shall mean the description of the Development, including a basic site plan, which will serve as a basis for the Developer’s application for the City Approvals. The Scope of Development is attached to this Agreement as Exhibit I. “Security Financing Interest” means a mortgage, deed of trust, or other reasonable method of security encumbering the Developer’s fee interest in the Phase I Parcel and the Phase II Parcel that: (i) meets the requirements of this Agreement; and (ii) secures any construction or permanent loan shown on the Financing Proposal, or any refinancing approved by the Authority. “TCAC” means the California Tax Credit Allocation Committee. “TCAC Regulatory Agreement” means the regulatory agreement entered into between the Developer and TCAC regulating the affordability of each Phase to be recorded as an encumbrance on the Property.
“Title Company” means First American Title Company, or such other title company as the Parties may mutually select.
“Title Report” is defined in Section 2.19.
“Transfer” has the meaning set forth in Section 7.1.
“Unit” means one of the residential units to be constructed on the Property. “Very Low Income Household” means a household with an income that does not exceed the qualifying limits for very low income households, adjusted for actual household size, for Riverside County, as published and periodically updated by HCD under Section 50105 of the California Health and Safety Code, or successor provision.
Exhibits. The following exhibits are attached to and incorporated in this Agreement:
Exhibit A: Legal Description of the Property
Exhibit A-1: Legal Description of Phase I Parcel
Exhibit A-2: Legal Description of Phase II Parcel
Exhibit A-3: Depiction of Parcel 9
Exhibit B-1: Phase I and Phase II Access Easement
Exhibit B-2: Parcel 9 Easement
Exhibit B-3: Maintenance Easement
Exhibit C: Form of Grant Deed
Exhibit D-1: Form of Phase I Density Bonus Agreement
Exhibit D-2: Form of Phase II Density Bonus Agreement
Exhibit E: Form of Promissory Note
Exhibit F: Form of Deed of Trust
Exhibit G-1: Form of Phase I Notice of Affordability Restrictions Exhibit G-2: Form of Phase II Notice of Affordability Restrictions Exhibit H-1: Form of Phase I Housing Agreement
Exhibit H-2: Form of Phase II Housing Agreement
Exhibit I: Scope of Development (Phase I and Phase II)
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Exhibit J: Schedule(s) of Performance (Phase I and Phase II) Exhibit K-1: Financing Plan – Phase I
Exhibit K-2: Financing Plan – Phase II
ARTICLE 2
CONDITIONS FOR
CONVEYANCE OF EACH PHASE
Section 2.1 City Right to Terminate for Failure to Timely Obtain Tax Credits; Other City Conditions Precedent to Conveyance. The City Manager may terminate this Agreement on behalf of the City in his or her sole and absolute discretion if Developer fails to obtain by December 31, 2024 an award of tax credits that is materially consistent with the Financing Proposal. The requirements set forth in this Article 2 are conditions precedent to the City’s obligation to convey a Phase to the Developer. The City has no obligation to convey a Phase to the Developer unless the conditions precedent set forth in this Article 2 have been satisfied in the manner set forth below and within the timeframe set forth in the Schedule of Performance. The closing of the conveyance of the Phase I Parcel must occur on or before March 1, 2025 (or either party who is not in default may terminate this Agreement by written notice to the other). The closing of the conveyance of the Phase II Parcel must occur on or before March 1, 2026 (or either party who is not in default may terminate this Agreement by written notice to the other).
Section 2.2 City Approvals. Prior to or concurrently with the conveyance of a Phase, the Developer must have obtained the City Approvals for the Phase and the Developer must have paid the required fees to the City and must have provided letters from the applicable bonding company(s) agreeing to issue the required improvement bonds upon the Close of Escrow.
Section 2.3 Parcel Map. The Parcel Map subdividing the Property into the Phase I Parcel and the Phase II Parcel must be approved by the City, in its sole and absolute discretion, and the Developer; the Parcel Map must be been recorded prior to the Close of Escrow for the conveyance of Phase I; and the Developer must have paid the costs related to recording the Parcel Map. All applicable subdivision improvement agreements and “CC&Rs” and the like that are conditions of approval of the Parcel Map must be executed and delivered/recorded prior to or concurrently with the applicable Close of Escrow.
Section 2.4 Financing. The financing listed in the Financing Proposal shown in Exhibit C for the appropriate Phase must close concurrently with the Close of Escrow for the Phase.
Section 2.5 Permits. The City must have issued a “Ready to Issue” letter regarding the Building Permit, and the Developer must have paid the Building Permit fees prior to or concurrently with the applicable Close of Escrow, and must have executed and delivered all agreements and other documents required in connection with the Building Permit (such as a grading agreement).
Section 2.6 Tax Credits. The tax credits necessary to help finance the applicable development must have been awarded, and Developer shall have provided evidence thereof to
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City, together with reasonable evidence that tax credit investors shall have legally committed to provide equity funds sufficient to pay all development costs not being paid with loans/debt.
Section 2.7 Loan Closings. All loans necessary to finance costs in the Cityapproved revised Financing Proposal/Plan shall have closed (or shall close concurrently with the applicable Close of Escrow) such that the lenders are conditionally obligated to disburse their loan funds (so that the applicable development can be completed), and copies of the applicable loan documents (or drafts that are final in all material respects) shall have been provided to City.
Section 2.8 Construction Plans. The Developer shall prepare construction plans for the construction of the development of each Phase. The final construction plans for the development of each submitted by the Developer for City approval shall consist of all construction documentation upon which the Developer and its contractors shall rely in building the Phase I Development and the Phase II Development. Such construction plans shall include (without limitation) final architectural drawings, landscaping plans and specifications, final elevations, building plans and specifications (also known as “working drawings”). The construction plans shall be based upon the Approved Plans and shall not materially deviate from them without the written consent of the City. As set forth in Section 10.14, the Developer acknowledges that execution of this Agreement by the City does not constitute approval by the City of any required permits and in no way limits the discretion of the City in the permit approval process.
As part of the Developer’s application for a Building Permit, the City shall also have the right to review and approve the proposed construction plans for conformance with the Approved Plans and the other commitments made by the Developer to the City. The Developer acknowledges that the City’s right to review and approve the proposed construction plans as allowed by this paragraph is in addition to, and shall not be limited by, the City’s obligation to review the Developer’s proposed construction plans for consistency with applicable building and construction code requirements.
As approved, these construction plans for the applicable component of the Development shall be referred to as the “Construction Plans”.
Section 2.9 Construction Contract. Developer shall have delivered to City a copy of an executed Guaranteed Maximum Price or Stipulated Sum construction contract for the applicable Phase, which shows a development cost consistent with the revised Financing Proposal/Plan and equity and debt funds committed to the applicable development.
Section 2.10 Cost Estimate. The Developer’s construction lender must have shared its construction cost estimate with the City or, in the alternative, if the construction lender is unwilling to share its cost estimate, the City has obtained an independent cost estimate at the Developer’s cost to confirm the reasonableness of the construction costs.
Section 2.11 Construction Bonds. At least seven (7) days prior to Close of Escrow, the Developer shall deliver to the City forms of one (1) labor and material bond and one (1) performance bond for the Development issued by a reputable insurance company licensed to do business in California, and named in the current list of “Surety Companies Acceptable on Federal Bonds” as published in the Federal Register by the Audit Staff Bureau of Accounts, U.S.
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Treasury Department, and reasonably acceptable to the City, each in a penal sum of not less than one hundred percent (100%) of the scheduled cost of construction of the Phase for the City’s review and approval. The bonds shall name the City as co-obligee. Upon receipt by the City of the proposed payment and performance bonds, the City shall promptly review such bonds and approve them if they satisfy the criteria set forth above and include any other modification reasonably requested by the City. If the payment and performance bonds are not approved by the City, the City shall set forth in writing and notify the Developer of the City’s reasons for withholding such approval. The Developer shall thereafter submit revised payment and performance bonds for City approval, which approval shall be granted or denied in five (5) business days in accordance with the criteria and procedures set forth above.
Section 2.12 Developer Organizational Documents. The Developer has provided the Developer organizational documents to the City for its review and the City has approved the documents.
Section 2.13 Authority Loans. The Authority must be ready to make the applicable Authority Loan in the amount necessary to acquire the Phase I Parcel or Phase II Parcel, as appropriate, and the Developer shall have delivered the applicable City/Authority Documents, duly executed, to the Authority.
Section 2.14 Tax Credit Equity. The City has approved the Developer’s proposed uses of any tax credit equity paid as of the Close of Escrow to the Developer.
Section 2.15 City Easements. The Developer and City have agreed upon the final forms of the Phase I and Phase II Access Easement, the Parcel 9 Easement and the Maintenance Easement.
Section 2.16 Phase II Conveyance. As a condition to the Close of Escrow for the Phase II Parcel only, the Close of Escrow for the Phase I Parcel shall have occurred, and Developer shall not be in default under this DDLA or under the Authority loan relating to the Phase I Parcel.
Section 2.17 AHAP. The Developer and the Housing Authority of the County of Riverside have entered into an Agreement to Enter into a Housing Assistance Payments Contract.
Section 2.18 Title Report Approved. The Developer has approved the following preliminary report and the title exceptions therein (the “Title Report”) from the Title Company:
Amended Preliminary Report issued on August 22, 2022 under Order Number 997-30064151-ATC1. City shall not further encumber the Property after the date hereof without the prior written consent of Developer.
ARTICLE 3
DISPOSITION OF PROPERTY
Section 3.1 Conveyances of Phase I Parcel and Phase II Parcel. Subject to the satisfaction of the conditions to closing set forth above (which apply to each Phase, except as noted in Section 2.15), the City will sell to the Developer, and the Developer will purchase from the City, the Property under the terms, covenants, and conditions of this Agreement.
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Section 3.2 Purchase Prices. The Purchase Price for the Phase I Parcel shall be One Million Nine Hundred Sixty-Five Thousand Five Hundred Thirty-Nine Dollars ($1,965,539.00). The Purchase Price for the Phase II Parcel shall be One Million Four Hundred Fifty-Nine Thousand Four Hundred Sixty-One Dollars ($1,459,461.00).
Section 3.3 Deposits. Within thirty (30) days following the Effective Date, Developer shall deposit $58,966.00 into Escrow as a good faith deposit for the acquisition of the Phase I Parcel (the “Phase I Deposit”). Upon the Close of Escrow for Phase I, the Phase I Deposit shall not be applied to the purchase price for the Phase II Parcel, but shall be returned to Developer, as the Purchase Price is being paid by the loan from the Authority. If this Agreement is terminated prior to the Close of Escrow for the Phase I Parcel for any reason other than a default by the Developer, the Phase I Deposit shall be immediately refunded to the Developer upon the date the Agreement is terminated.
Within thirty days after the Close of Escrow for Phase I Parcel, the Developer shall deposit $43,784 into a Phase II Escrow as a good faith deposit for the acquisition of the Phase II Parcel (the “Phase II Deposit”). Upon the Close of Escrow for Phase II, the Phase I Deposit shall not be applied to the purchase price for the Phase II Parcel, but shall be returned to Developer, as the Purchase Price is being paid by the loan from the Authority. If this Agreement is terminated as to Phase II, and the termination is not due to a default by the Developer, the Phase II Deposit shall be immediately refunded to the Developer upon the date the Agreement is terminated. The Phase I Deposit and the Phase II Deposit shall each constitute liquidated damages to the City upon a termination of this Agreement as to the applicable Phase/parcel due to a default by Developer.
BUYER ACKNOWLEDGES THAT BY ENTERING INTO THIS AGREEMENT,
SELLER MAY REMOVE THE PROPERTY FROM THE ACTIVE REAL ESTATE MARKET
AND THUS SUSTAIN MISSED OPPORTUNITIES AND EXTENDED CARRYING COSTS, AS WELL AS OTHER DAMAGES. IN THE EVENT THAT THE ESCROW AND THIS
TRANSACTION FAIL TO CLOSE AS A RESULT OF THE DEFAULT OF BUYER IN THE
PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, BUYER AND
SELLER AGREE THAT SELLER WILL SUSTAIN THESE AND OTHER DAMAGES, AND THAT SELLER’S ACTUAL DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO DETERMINE. THE PARTIES THEREFORE AGREE THAT IN THE EVENT
THAT ESCROW AND THIS TRANSACTION FAIL TO CLOSE AS A RESULT OF A
MATERIAL DEFAULT OF BUYER, AND SELLER IS READY, WILLING AND ABLE TO PERFORM ITS OBLIGATIONS HEREUNDER, SELLER, AS SELLER’S SOLE AND
EXCLUSIVE REMEDY, IS ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF THE INITIAL DEPOSIT THERETOFORE MADE. IN THE EVENT ESCROW FAILS TO CLOSE SOLELY AS A RESULT OF BUYER’S DEFAULT AND SELLER IS READY,
WILLING AND ABLE TO PERFORM ITS OBLIGATIONS HEREUNDER, THEN (A) THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF BUYER AND SELLER
HEREUNDER AND THE ESCROW CREATED HEREBY SHALL TERMINATE, AND (B)
ESCROW AGENT SHALL, AND IS HEREBY AUTHORIZED AND INSTRUCTED TO,
RETURN PROMPTLY TO BUYER AND SELLER ALL DOCUMENTS AND INSTRUMENTS TO THE PARTIES WHO DEPOSITED THE SAME. THE PAYMENT OF SUCH AMOUNT
AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369 BUT IS
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INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. SELLER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. SELLER AND BUYER
ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS SECTION 3.3(b), AND BY THEIR INITIALS IMMEDIATELY BELOW, AGREE TO BE BOUND BY ITS TERMS.
SELLERS’ INITIALS:
__________________________
BUYER’S INITIALS
_________________
Section 3.4 Opening Escrow. To accomplish the transfer of the Phase I Parcel and the Phase II Parcel from the City to the Developer, the Parties will promptly establish an escrow for each transfer with the Title Company after the Effective Date. The Parties will execute and deliver reasonable written instructions to the Title Company to accomplish the terms hereof, which instructions must be consistent with this Agreement.
Section 3.5 Close of Escrow. The Close of Escrow shall occur within thirty (30) days after the Developer has met all of the closing conditions as set forth in Article 2 above for a particular Parcel, but in no event shall the Close of Escrow occur later than March 1, 2025 for the Phase I Parcel, and in no event shall the Close of Escrow occur later than March 1, 2026 for the Phase II Parcel. At the applicable Close of Escrow, the City shall convey a fee interest in the applicable Parcel to the Developer by the delivery of a Grant Deed to Escrow in the form set forth in the attached Exhibit C for recording at the Close of Escrow.
At the Close of Escrow for Phase I, the Developer shall execute and deliver to Escrow for recording at the Close of Escrow, the Phase I and Phase II Access Easement, the Parcel 9 Easement and the Maintenance Easement.
Developer’s obligation to proceed with the acquisition of the Property from the City pursuant to the terms of this Agreement is subject to the fulfillment or waiver by Developer of each and all of the conditions precedent described below (“Developer Conditions Precedent”). The Developer Conditions Precedent are solely for the benefit of the Developer and shall be fulfilled or waived within the time periods provided for herein, and in any event, no later than the date specified in the Schedule of Performance.
There exists no condition, event or act which would constitute a breach or default under this Agreement, the City Documents, the Development Approvals, or under any other project financing agreements or contracts related to the Development, or which, upon the giving of notice or the passage of time, or both, would constitute such a breach or default by the City.
Subject to payment of the applicable fees, City shall be ready to issue the building permit(s) necessary for the Developer to Commence Construction of the Development.
The Title Company shall, upon payment of Title Company’s regularly scheduled premium, be irrevocably committed to issue an owner’s title policy upon recordation of the applicable Grant Deed insuring Developer’s interest in the Property, subject only to the exceptions in Section 3.7 below.
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The Parcel Map has been approved by the City and the Developer and has been recorded or is ready to be recorded currently with the Close of Escrow in the Official Records of Riverside County.
There shall be an absence of any condemnation, environmental or other pending governmental or any type of administrative or legal proceedings with respect to the Property which would materially and adversely affect Developer’s intended uses of the Property or the value of the Property.
The City has executed and delivered to Escrow (x) the Phase I and Phase II Access Easement, (y) the Parcel 9 Easement and (z) the Maintenance Easement.
The City has executed and delivered to Escrow applicable Housing Agreement and Notice of Affordability Restrictions, duly executed and acknowledged.
There shall not have occurred between the Effective Date and the Closing a material adverse change to the physical condition of the Property.
There is no existing, pending or threatened litigation, suit, action or proceeding before any court or administrative agency affecting the City or the Developer or the Property that would, if adversely determined, materially adversely affect the Development or the Developer’s or the City’s ability to perform their obligations under this Agreement or the Developers’ ability to develop and operate the Development.
Section 3.6 Costs of Escrow and Closing. The Developer must pay all of the City’s and Authority’s legal fees and costs, the cost of title insurance, transfer tax, Title Company document preparation, recordation fees, and the escrow fees of the Title Company, if any, and any additional costs to close the applicable escrow. The costs borne by the Developer are in addition to the Purchase Prices of the Parcels.
Section 3.7 Condition of Title. Upon the Close of Escrow for each Phase, the Developer will take title subject to all title exceptions in the Title Report and all other liens, encumbrances, clouds and conditions, rights of occupancy or possession, except, applicable building and zoning laws and regulations;
(a) The conditions and easements on the Parcel Map;
(b) the Phase I and Phase II Access Easement;
(c) the applicable Housing Agreement;
(d) the applicable Density Bonus Agreement;
(e) the applicable Deed of Trust and Notice of Restrictions; (f) any lien for current taxes and assessments or taxes and assessments accruing subsequent to Close of Escrow;
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(g) the liens of any Approved Financing (approved by the City); (h) any other matters created by or with the consent of Developer.
Section 3.8 Condition of Property; City Information. In fulfillment of the purposes of Health and Safety Code Section 25359.7(a), to the City’s Current Actual Knowledge, no release of Hazardous Materials has come to be located on or beneath the Property except as previously disclosed by the City to the Developer. The Developer has completed all due diligence activities, including but not limited to a physical adequacy determination of the Property, and may not terminate this Agreement as a result of the purported physical unsuitability of the Property. As used in this Agreement, the phrase “to the City’s Current Actual Knowledge” and words of similar import shall mean the actual knowledge of the City Manager (the “City Representative”), on behalf of the City, as of the Effective Date, without any duty of separate inquiry and investigation. The City represents and warrants that the City Representative is that person affiliated with the City most knowledgeable regarding the ownership and operation of the Property. Developer hereby agrees that the foregoing person shall not have or incur any personal liability for the breach of any representation or warranty in this Agreement, and that Developer’s sole remedy for any such breach shall be against the City.
Section 3.9 “As is” Conveyance. Prior to the effective date, the Developer was provided the opportunity to investigate the Property and has approved the physical condition of the Property. The Developer specifically acknowledges and agrees that the City is selling each Phase of the Property to the Developer and the Developer is buying each Phase of the Property from the City (and all thereon) on an “as is with all faults” basis and that the Developer is not relying on any representations or warranties of any kind whatsoever, express (except as expressly set forth in this agreement) or implied, from the City as to any matters concerning the Property, including without limitation: (1) the quality, nature, adequacy and physical condition of the Property (including, without limitation, topography, climate, air, water rights, water, gas, electricity, utility services, grading, drainage, sewers, access to public roads and related conditions); (2) the quality, nature, adequacy, and physical condition of soils, geology, and groundwater; (3) the existence, quality, nature, adequacy and physical condition of utilities serving the Property; (4) the development potential of the Property, and the Property’s use, habitability, merchantability, or fitness, suitability, value or adequacy of the Property for any particular purpose; (5) public or private restrictions on the use of the Property; (6) the compliance of the Property or its operation with any applicable codes, laws, regulations, statutes, ordinances, covenants, conditions and restrictions of any governmental or quasi-governmental entity or of any other person or entity; (7) the presence or absence of hazardous materials on, under or about the Property or the adjoining or neighboring property; and (8) the condition of title to the Property.
The Developer affirms that the Developer has not relied on the skill or judgment of the City or any of its agents, employees or contractors to select or furnish the Property for any particular purpose, and that the City makes no warranty that the Property is fit for any particular purpose. The Developer acknowledges that it shall use its independent judgment and make its own determination as to the scope and breadth of its due diligence investigation which it shall make relative to the Property and shall rely upon its own investigation of the physical, environmental, economic, and legal condition of the Property (including, without limitation, whether the Property is located in any area which is designated as a special flood hazard area, dam failure inundation area, earthquake fault zone, seismic hazard zone, high fire severity area or wildland fire area, by any federal, state
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or local agency). The Developer undertakes and assumes all risks associated with all matters pertaining to the Property’s location in any area designated as a special flood hazard area, dam failure inundation area, earthquake fault zone, seismic hazard zone, high fire severity area or wildland fire area by any federal, state or local agency.
Section 3.10 Survival. The terms and conditions of this Section expressly survive the Close of Escrow. The City is not liable or bound in any manner by any oral or written statements, representations, or information pertaining to the Property furnished by any contractor, agent, employee, servant, or other person. The Developer acknowledges that the lease price will reflect the “as is” nature of this sale and any faults, liabilities, defects, or other adverse matters that may be associated with the Property. The Developer has fully reviewed the disclaimers and waivers set forth in this Agreement with the Developer’s counsel and understands the significance and effect thereof.
Section 3.11 Acknowledgment. The Developer acknowledges and agrees that:
(1) to the extent required to be operative, the disclaimers of warranties contained in this Section are “conspicuous” disclaimers for purposes of all applicable laws and other legal requirements; and (2) the disclaimers and other agreements set forth in such sections are an integral part of this Agreement, that the lease price will be adjusted to reflect the same and that the City would not have agreed to lease the Property to the Developer without the disclaimers and other agreements set forth in this Section.
Section 3.12 Developer’s Release. The Developer, on behalf of itself and anyone claiming by, through or under the Developer hereby waives its right to recover from and fully and irrevocably releases the City and the Authority, and City Council members, Authority board members and the officers, directors, representatives, consultants, employees and agents of City and/or Authority (the “Released Parties”) from any and all claims, responsibility, and/or liability that the Developer may have or hereafter acquire against any of the Released Parties for any costs, loss, liability, damage, expenses, demand, action or cause of action arising from or related to:
(1) the condition (including any construction defects, errors, omissions or other conditions, latent or otherwise), valuation, salability or utility of the Property, or its suitability for any purpose whatsoever; (2) any presence of Hazardous Materials; and (3) any information furnished by the Released Parties under or in connection with this Agreement.
Section 3.13 Scope of Release. The release set forth in Section 3.7(e) above includes claims of which the Developer is presently unaware or which the Developer does not presently suspect to exist which, if known by the Developer, would materially affect the Developer’s release of the Released Parties. The Developer specifically waives the provision of any statute or principle of law that provides otherwise. In this connection and to the extent permitted by law, the Developer agrees, represents and warrants that the Developer realizes and acknowledges that factual matters now unknown to the Developer may have given or may hereafter give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses which are presently unknown, unanticipated and unsuspected, and the Developer further agrees, represents and warrants that the waivers and releases herein have been negotiated and agreed upon in light of that realization and that the Developer nevertheless hereby intends to release, discharge and acquit the Released Parties from any such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses. Accordingly, the Developer,
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on behalf of itself and anyone claiming by, through or under the Developer, hereby assumes the above-mentioned risks and hereby expressly waives any right the Developer and anyone claiming by, through or under the Developer, may have under Section 1542 of the California Civil Code, which reads as follows:
“A general release does not extend to claims which the creditor or released party does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor or released party.”
Developer’s Initials: __________
Notwithstanding the foregoing, this release does not apply to, nor will the City be released from, the City’s actual fraud or misrepresentation.
ARTICLE 4
CONSTRUCTION OF DEVELOPMENT
Section 4.1 Construction and Operation Consistent with Agreements. Unless modified by operation of Section 4.2, the Development must be constructed in accordance with the Scope of Development, the Construction Plans and the terms and conditions of the Approved Plans and the City Approvals. The Developer shall comply with all standards and requirements for construction, use, operation, maintenance, management and encumbrance of the Development which are set forth in this Agreement and the City Approvals. As between the City and the Developer, the Developer shall be solely responsible for all costs necessary for the construction and operation of the Development, including, but not limited to, any construction cost overruns.
Developer shall defend, indemnify and hold City harmless from and against any and all claims, liabilities, damages, losses, costs and expenses arising directly or indirectly from or relating to any allegations that City is liable for failure by Developer to pay prevailing wages and/or comply with California Labor Code Sections 1720 et seq. (The foregoing is not an admission by Developer or City that prevailing wages are required in connection with any development on either Phase.) Section 4.2 Commencement of Developments; Interim Deadlines. The Developer must commence construction of the Phase I Development no later than May 30, 2025.
The Developer must commence construction of the Phase II Development no later than May 30, 2026. For purposes of this Section 4.2, commencement of construction means the material commencement of grading of the Phase.
Section 4.3 Completion of the Developments. Subject to Section 10.3 below, the Developer must diligently prosecute to completion the construction of each Phase, and the Phase I Development must be completed no later than May 30, 2027, and the Phase II Development must be completed no later than May 30, 2028.
Section 4.4 Equal Opportunity. During the construction of the Development, the Developer, and its successors, assigns, and subcontractors must not discriminate against any employee or applicant for employment in connection with the construction of the Development on
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any basis listed in Section 12940 of the Government Code. Each of the following activities must be conducted in a non-discriminatory manner: hiring; upgrading; demotion and transfers; recruitment and recruitment advertising; layoff and termination; rate of pay and other forms of compensation; and selection for training including apprenticeship.
Section 4.5 Construction Under Laws.
(a) Compliance with Project Documents. Developer shall construct the Development in conformance with the Approved Plans, Approved Financing, and Financing Proposal and consistent with the City Approvals. Developer shall notify the City in a timely manner of any changes in the work required to be performed under this Agreement, including any additions, changes, or deletions to the plans and specifications approved by the City. (b) Compliance with Laws. Developer shall cause all construction work to be performed in compliance with, without limitation: (1) all applicable laws, ordinances, rules and regulations of federal, state, county or municipal governments or agencies now in force or that may be enacted hereafter, including without limitation state prevailing wages pursuant to Labor Code Sections 1770 et seq., and the regulations pursuant thereto; (2) all applicable federal and state accessibility requirements; and (3) all directions, rules and regulations of any fire marshal, health officer, building inspector, or other officer of every governmental agency now having or hereafter acquiring jurisdiction. The work shall proceed only after procurement of each permit, license, or other authorization that may be required by any governmental agency having jurisdiction, and Developer shall be responsible to the City for the procurement and maintenance thereof, as may be required of Developer and all entities engaged in work on the construction. (c) Prevailing Wage Laws. The Project is a work of public improvement such that Developer shall pay prevailing wages under California Labor Code Sections 1770 et seq. and shall comply with the other requirements of such statutes. Developer shall defend, indemnify and hold City and Authority harmless from and against any and all claims, liabilities, losses, damages, costs and expenses arising from or relating to any failure by Developer to do so.
Section 4.6 Progress Reports. Until such time as the Developer has completed construction of the Development, as evidenced by the Certificate of Completion, the Developer must provide the City with quarterly progress reports regarding the status of the construction of the Development.
Section 4.7 Construction Responsibilities. The Developer shall comply with the Schedule of Performance.
(a) The Developer is solely responsible for all aspects of the Developer’s conduct in connection with the Development, including but not limited to the quality and suitability of the Construction Plans, the supervision of construction work, and the qualifications, financial condition, and performance of all architects, engineers, contractors, subcontractors, suppliers, consultants, and property managers. Any review or inspection undertaken by the City with reference to the Development is solely for the purpose of determining whether the Developer is properly discharging its obligations to the City and should not be relied upon by the Developer or by any third parties as a warranty or representation by the City as to the quality of the design or construction of the Development.
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Section 4.8 Mechanics Liens, Stop Notices, and Notices of Completion. If any claim of lien is filed against the Property or the Development or a stop notice is served on any lender or other third party in connection with the Development, then the Developer must, within twenty (20) days after such filing or service, either pay and fully discharge or cause the Developer’s contractor to pay and fully discharge, the lien or stop notice, effect the release of such lien or stop notice by delivering to the City a surety bond from a surety reasonably acceptable to the City in sufficient form and amount, or provide the City with other assurance reasonably satisfactory to the City that the claim of lien or stop notice will be paid or discharged. (a) If the Developer fails to discharge any lien, encumbrance, charge, or claim in the manner required in this Section or obtain a surety bond, then in addition to any other right or remedy, the City may (but is under no obligation to) discharge such lien, encumbrance, charge, or claim at the Developer’s expense. Alternatively, the City may require the Developer to immediately deposit with the City the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. The City may use such deposit to satisfy any claim or lien that is adversely determined against the Developer. (b) The Developer must file a valid notice of cessation or notice of completion upon cessation of construction of the Development for a continuous period of thirty (30) days or more and take all other reasonable steps to forestall the assertion of claims of lien against the Property or the Development. The Developer authorizes the City, but without any obligation, to record any notices of completion or cessation of labor, or any other notice that the City deems necessary or desirable to protect its interest in the Development and Property.
Section 4.9 Inspections. The Developer must permit and facilitate, and require its contractors to permit and facilitate, observation and inspection at the Development by the City and the Authority during business hours with reasonable notice.
Section 4.10 Records. The Developer must maintain complete, accurate, and current records pertaining to the Development for a period of seven (7) years after the creation of such records, and permit any duly authorized representative of the City to inspect and copy records during regular business days/hours. Records must be kept accurate and current, and shall be kept at Developer’s corporate office at 100 Pacifica, Suite 203, Irvine, California. Upon reasonable written notice from the City requesting to review specified Developer records, the Developer shall deliver the records to the City’s offices within fifteen (15) days following the City’s request. (a) The City will notify the Developer of any records it deems insufficient. The Developer will have thirty (30) days after delivery of such a notice to correct any deficiency in the records specified by the City in such notice, or if a period longer than thirty (30) days is reasonably necessary to correct the deficiency, then the Developer must begin to correct the deficiency within thirty (30) days and complete the correction of the deficiency as soon as reasonably possible.
Section 4.11 Certificate of Completion. Promptly after completing the Development on a Parcel (Phase I or II) in accordance with those provisions of this Agreement that relate solely to the obligations of Developer to construct the Development (including the dates for beginning and completion thereof), the City will provide a Certificate of Completion so
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certifying (the “Certificate of Completion”). The Certificate of Completion will be the conclusive determination that certain covenants in this Agreement with respect to the obligations of the Developer to construct the Development (excluding the Developer’s compliance with Section 4.6) and the dates for the beginning and completion thereof have been met. The Certificate of Completion shall be in such form as will enable such certificate to be recorded in the Official Records. The Certificate of Completion will not constitute evidence of compliance with or satisfaction of any obligation of the Developer to: (a) any holder of a Security Financing Interest.
The Certificate of Completion may not be deemed a notice of completion under the California Civil Code.
ARTICLE 5
AUTHORITY LOAN PROVISIONS
Section 5.1 Authority Loans. Subject to the terms and conditions set forth in this Agreement, the Authority shall make a loan to the Developer for the Phase I Development in the original principal amount of $1,965,539 and a loan for the Phase II Development in the original principal amount of not less than $4,789,461. The Authority Loan shall be evidenced by two promissory notes: (a) a Promissory Note for the Phase I Development executed by Developer in favor of City in the amount of $1,965,539 secured by the Deed of Trust executed by the Developer as trustor in favor of the City as beneficiary and recorded against the Developer’s fee interest in the Phase I Parcel. and (b) a Promissory Note for the Phase II Development executed by Developer in favor of City in the amount not less than $4,789,461 secured by the Deed of Trust executed by the Developer as trustor in favor of the City as beneficiary and recorded against the Developer’s fee interest in the Phase II Parcel.
Section 5.2 Use of Authority Loan. The proceeds of the Authority Loans shall be used to fund the acquisition (pay the purchase prices) of the Parcels, and the remainder of the Authority Loan for the Phase II Development shall be used for construction costs of the Phase II Development.
Section 5.3 Delivery of Promissory Notes; Recording of Housing Agreements; Deeds of Trust; Notices of Restrictions. Prior to the Close of Escrow and in accordance with the Schedule of Performance, the City shall cause escrow holder to first record the Subdivision Map.
Upon and as a condition to the Close of Escrow for a Parcel, the escrow holder shall first record the applicable grant deed, and then the applicable Housing Agreement and Density Bonus Agreement for that Phase, the applicable Notice of Restrictions and then the applicable Deed of Trust for the applicable Agency Loan (with no intervening recordings). The Housing Agreement and Notice of Restrictions shall remain in full force and effect for fifty-five (55) years after the issuance of the final Certificate of Occupancy for the Development on the applicable Phase, regardless of any repayment of the applicable Authority Loan following a Developer Event of Default or otherwise. The Executive Director of the Authority shall have the authority to execute reasonable subordination agreements subordinating the Authority Deed of Trust for a Phase to the deeds of trust securing other construction and permanent financing, provided copies of the senior loan documents shall have been provided for the City’s reasonable review.
Section 5.4 Term of the Authority Loan. Unless sooner due under the terms of the applicable Note, all principal and interest on the applicable Authority Loan shall be due upon
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the earliest of: a Transfer of any portion of the applicable collateral Property or the Developer’s interest in such Property other than a Transfer permitted or approved by the Authority as provided in Section 10.6;
(a) the occurrence of a Developer Event of Default for which the Authority exercises its right to cause the Authority Loan indebtedness to become immediately due and payable, or
(b) a default under the Housing Agreement which has not been cured within the time periods specified therein.
(c) Fifty-five (55) years from the date of the applicable final Certificate of Occupancy.
Section 5.5 Interest; Payments. Simple interest at three percent (3%) per annum shall accrue on the outstanding principal amount of the applicable Authority Loan except in a Developer Event of Default, whereupon interest shall accrue from and after the date of the applicable Promissory Note until paid at the rate of ten percent (10%) or the highest rate permitted by law. Payments shall be structured as residual receipts payments over the course of the applicable Authority Loan and shall first be applied to interest then to principal.
Section 5.6 Disbursement of Authority Loans; Disbursement of Authority Loan for Phase I. The Authority shall deposit into Escrow the Phase I loan. The Phase I funds shall be disbursed by escrow holder to pay the Phase I Purchase Price.
Section 5.7 Disbursement of Authority Loan for Phase II. The Authority shall deposit into Escrow the Phase II loan in the amount of the Phase II Parcel purchase price. The Authority shall also deposit into Escrow the remainder of such loan together with a counterpart of the agreement with the primary construction lender governing that lender’s holding and disbursement of the City’s construction loan funds, with instructions to deliver such funds to such lender provided Escrow has an executed counterpart of such agreement from such lender that is to be delivered to the Authority. If no such agreement is reached or executed and delivered, then Authority shall disburse the construction loan portion of its Phase II loan, not more often that once every thirty (30) days, pursuant to normal and reasonable construction loan disbursement conditions, including that Developer not be in default under the applicable loan documents, that Developer shall have submitted a draw request certifying that the Authority loan is “in balance” (enough undisbursed funds from committed loans exist to pay all Project construction costs) and specifying the costs to be paid (by line item in the budget) with reasonable evidence of such costs, conditional partial mechanics lien releases from payees of the current draw and unconditional partial mechanics lien releases for the costs/work paid with the previous draw of construction loan funds.
Section 5.8 Repayment Schedule. The Authority Loans shall be repaid as follows:
(a) Payments. Commencing on the first June 1st following the completion of the Phase, and on each June 1st thereafter until the applicable Promissory Note is paid in full, the Developer shall make repayments of the applicable Authority Loan from fifty
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percent (50%) of Residual Receipts. The Authority will share the fifty percent (50%) of Residual Receipts payment with the other public entities providing loans to the Developer for the respective Phase. The Authority’s percentage share of fifty percent (50%) of Residual Receipts shall be equal to the percentage derived by dividing the Authority loan amount by the combined total of the Authority Loan and the other public entity loans committed to the Developer. The Developer shall provide the Authority, within one hundred eighty (180) days following the end of each calendar year, an Annual Financial Statement showing the actual income and expenditures with respect to the Development for the immediately preceding calendar year. Payments made shall be credited first against accrued interest and then against outstanding principal. (b) Payment in Full. All principal and interest, if any, on the applicable Authority Loan shall, at the option of the Authority, be due and payable upon the earliest of: (1) a Transfer other than a Transfer permitted or approved by the Authority as provided in Article 7 below; (2) the occurrence of an Event of Default for which the Authority exercises its right to cause the applicable Authority Loan indebtedness to become immediately due and payable; or (3) the maturity date of the applicable Promissory Note.
(c) Prepayment. The Developer shall have the right to prepay the Authority Loans at any time.
Section 5.9 Reports and Accounting of Residual Receipts; Audited Financial Statement. In connection with the annual repayment of the Authority Loans, the Developer shall furnish to the Authority an Annual Financial Statement.
Section 5.10 Books and Records. The Developer shall keep and maintain full, complete and appropriate books, record and accounts relating to the Development, including all such books, records and accounts necessary or prudent to evidence and substantiate in full detail the Developer’s calculation of the applicable Residual Receipts, at the Developer’s corporate office currently at 100 Pacifica, Suite 203 in the City of Irvine. Books, records and accounts relating to the Developer’s compliance with the terms, provisions, covenants and conditions of this Agreement shall be kept and maintained in accordance with generally accepted accounting principles consistently applied and shall be consistent with requirements of this Agreement which provide for the calculation of Residual Receipts on a cash basis. All such books, records, and accounts shall be open to and available for inspection by the Authority, its auditors or other authorized representatives at reasonable intervals during normal business hours on reasonable prior notice to the Developer. Copies of all tax returns and other reports that the Developer may be required to furnish any governmental agency shall at all reasonable times be open for inspection by the Authority at the place that the books, records and accounts of the Developer are kept. The Developer shall preserve records on which any statement of Residual Receipts is based for a period of not less than five (5) years after such statement is rendered.
Section 5.11 Non-Recourse. Following recordation of the applicable Deed of Trust, and except as provided below, the Developer shall not have any direct or indirect personal liability for payment of the principal of, or interest on, the applicable Authority Loan or the performance of the covenants of the Developer under the applicable Deed of Trust. The sole recourse of the Authority with respect to the principal of, or interest on, the applicable Promissory Note and defaults by the Developer in the performance of its covenants under the applicable Deed
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of Trust shall be to the property described in such Deed of Trust; provided, however, that nothing contained in the foregoing limitation of liability shall: (a) limit or impair the enforcement against all such security for the applicable Promissory Note of all the rights and remedies of the Authority thereunder; or (b) be deemed in any way to impair the right of the Authority to assert the unpaid principal amount of the applicable Promissory Note as demand for money within the meaning and intendment of Section 431.70 of the California Code of Civil Procedure or any successor provision thereto.
The foregoing limitation of liability is intended to apply only to the obligation for the repayment of the principal of, and payment of interest on the applicable Promissory Note, except as hereafter set forth; nothing contained herein is intended to relieve the Developer of personal liability for (1) fraud or willful misrepresentation; (2) the failure to pay taxes, assessments or other charges (which are not contested by Developer in good faith) which may create liens on the Property or Phase that are payable or applicable prior to any foreclosure under the applicable Deed of Trust (to the full extent of such taxes, assessments or other charges); (3) the Developer’s indemnification obligations under this Agreement; (4) misappropriation of any rents, security deposits, insurance proceeds, condemnation awards or any other proceeds derived from the collateral security and (5) payment to the Authority of any rental income or other income arising with respect to the Property received by the Developer after the Authority has given notice to the Developer of the occurrence of an Event of Default, subject to the rights of any lender providing a loan secured by the Property to which Authority has subordinated the Deed of Trust.
ARTICLE 6
ONGOING DEVELOPER OBLIGATIONS
Section 6.1 Applicability. The conditions and obligations set forth in this Article 6 apply throughout the term of the Regulatory Agreement, unless a different period of applicability is specified for a particular condition or obligation.
Section 6.2 Use of Development. The Developer hereby agrees that, for the entire Term, the Development will be used and continuously operated only as affordable housing in accordance with all applicable requirements of the California Community Redevelopment Law (the “Law”), including, but not limited to, the requirement that such housing be provided to households described in Section 50079.5 of the Law, at rents not exceeding the amounts set forth in Section 50053(b)(3). In the event of any conflict between the terms of this Agreement and the Regulatory Agreement, the Developer shall comply with the stricter requirement. In addition, the Developer shall comply with the TCAC Regulatory Agreement (each while they are in effect) all other applicable laws, statutes, and regulations governing the Development, including, but not limited to affordability restrictions of all other public entities encumbering the Phase and the applicable requirements of Code Section 42, and all TCAC regulations, for such time that the Development is subject to such regulations.
Section 6.3 Maintenance. The Developer agrees to maintain all interior and exterior portions of the Development, including landscaping, of the Development in first-class condition and repair and in a sanitary condition (and, as to landscaping, in a healthy condition, subject to any restrictions on water use) and all applicable laws, rules, ordinances, orders, and
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regulations of all federal, state, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials. (a) The Developer acknowledges the great emphasis the City places on quality maintenance to protect its investment and to provide quality affordable and market-rate housing for area residents. In addition, the Developer must keep the Development free from all graffiti, and any accumulation of shopping carts, debris or waste material. The Developer must promptly make all repairs and replacements necessary to keep the Development in first-class condition and repair and promptly eliminate all graffiti and replace dead and diseased plants and landscaping with comparable approved materials.
(b) In the event that the Developer breaches any of the covenants contained in this Section and such default continues for a period of seven (7) days after written notice from the City with respect to graffiti, debris, waste material, and general maintenance or thirty (30) days after written notice from the City with respect to landscaping and building maintenance, then the City, in addition to whatever other remedy it may have at law or in equity, will have the right to enter upon the Property and perform or cause to be performed all such acts and work necessary to cure the default. Under such right of entry, the City will be permitted (but is not required) to enter upon the Property and perform all acts and work necessary to protect, maintain, and preserve the Development and landscaped areas on the Property, and Developer shall reimburse City for the costs thereof and a ten percent (10%) administrative charge within ten (10) days after written demand with evidence of the costs.
Section 6.4 Taxes and Assessments. The Developer must pay all real and personal property taxes, assessments and charges and all franchise, income, employment, social security benefit, withholding, sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property; provided, however, that the Developer has the right to contest in good faith, any such taxes, assessments, or charges. In the event the Developer exercises its right to contest any tax, assessment, or charge against it, the Developer, on final determination of the proceeding or contest, must immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest.
Section 6.5 Mandatory Language in All Subsequent Deeds, Leases and Contracts; Basic Requirement. The Developer may not restrict the rental, sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Development on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code. Developer or any person claiming under or through the Developer may not establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Development. The foregoing covenant runs with the land.
Section 6.6 Provisions in Conveyance Documents. All deeds, leases or contracts made or entered into by Developer, and its successor and assigns permitted under this Agreement, as to any portion of the Property must contain therein the following language:
(1) In Deeds:
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“(1) Grantee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, 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) and (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 property herein conveyed, nor shall the grantee or any person claiming under or through the grantee, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the property herein conveyed. The foregoing covenant shall run with the land.
(2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1).”
(2) In Leases:
“(1) Lessee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, 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) and (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 leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the premises herein leased nor shall the lessee or any person claiming under or through the lessee, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1).”
(3) In Contracts:
“(1) There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) and (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
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Code in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1).”
Section 6.7 Management Agent. The Developer shall manage or cause the Development to be managed in a prudent and business-like manner, consistent with good property management standards for other comparable high quality, well-managed affordable rental housing projects in the City of Palm Desert. The Developer shall be responsible for all repair and maintenance functions of the Development, including ordinary maintenance and replacement of capital items. The Developer shall ensure maintenance of units and common areas in accordance with local health, building and housing codes. Developer may contract with an experienced property management company or property manager, to operate and maintain the Development (“Property Manager”). The Property Management contract shall be subject to prior written approval by the City and shall contain a provision allowing the Developer, with the approval of the lenders and the California Tax Allocation Committee, to terminate the contract without penalty upon no more than thirty (30) days’ notice.
(a) The Developer will develop a management plan and deliver a copy thereof to City as a condition to the closing of each Phase (a “Property Management Plan”). The Property Management Plan shall include the following:
(1) The role and responsibility of the Developer and its delegation of authority, if any, to the Property Manager; (2) Personnel policy and staffing arrangements, including ongoing training of staff in best practices for serving the Project tenants; (3) Plans and procedures for publicizing and achieving early and continued occupancy;
(4) Procedures for determining tenant eligibility, and selecting tenants, and for certifying and annually recertifying household status, income and size; (5) Plans for carrying out an effective maintenance and repair program;
(6) Rent collection policies and procedures;
(7) Plans for enhancing tenant-management relations;
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(8) Appeal and grievance procedures;
(9) Description of how service staff and property management staff will work together to prevent evictions and to facilitate the implementation of reasonable accommodation policies.
(b) Upon a determination by the City that the Property Manager has failed to operate the Development in accordance with the Management Plan, the City shall provide written notice to the Developer specifying the Property Manager’s breach of the Management Plan and providing the Developer at least thirty (30) days to cure the specified breach. Within thirty (30) days the Developer must either use good faith efforts to cure the breach or, if such cure is of the nature to take longer than thirty (30) days, the Developer shall commence the cure during the thirty (30) day period and complete the cure by the conclusion of one hundred eighty (180) days the Developer’s receipt of the City’s notice, or in such other time period as the parties may mutually agree. If the Developer has failed to cure the breach of the Management Plan by the expiration of the relevant cure period, the City may immediately provide a written notice to the Developer requiring that the Developer promptly terminate the existing Property Manager and contract with an alternative qualified management agent to operate the Project, each with the approval of the lenders and the California Tax Allocation Committee, or to make such other arrangements as the City deems reasonably necessary to ensure performance of the functions and obligations set forth in the applicable Property Management Plan.
Section 6.8 Insurance Requirements; Required Coverage. The Developer must maintain and keep in force, at the Developer’s sole cost and expense, the following insurance applicable to the Development:
(a) Workers’ Compensation insurance, as required by the State of California and consistent with statutory limits, and Employers’ Liability coverage, with limits not less than One Million Dollars ($1,000,000) each accident for bodily injury or disease. (b) Commercial General Liability insurance with limits not less than One Million Dollars ($1,000,000) each occurrence and Five Million Dollars ($5,000,000) aggregate combined single limit for Bodily Injury and Property Damage, including coverages for Contractual Liability, Personal Injury, Broad form Property Damage, Products and Completed Operations. Products and Completed Operations coverage must be obtained no later than completion of construction of the Development. The Developer shall cause the Developer’s general contractor to maintain Commercial General Liability insurance with limits not less than Two Million Dollars ($2,000,000) each occurrence and Four Million Dollars ($4,000,000) aggregate combined single limit for Bodily Injury and Property Damage, including coverages for Contractual Liability, Personal Injury, Broad form Property Damage, Products and Completed Operations.
(c) Commercial Automobile Liability insurance with limits not less than One Million Dollars ($1,000,000) each occurrence combined single limit for Bodily Injury and Property Damage, including coverages for owned, non-owned and hired vehicles, as applicable; provided, however, that if the Developer does not own or lease vehicles, or operate any
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non-owned vehicles for purposes of this Agreement, then no automobile liability insurance will be required and both Parties to this Agreement must initial this provision signifying same. (d) Professional liability insurance in an amount not less than One Million Dollars ($1,000,000) each occurrence and Two Million Dollars ($2,000,000) aggregate policy limit. Developer may meet this requirement by requiring any design professional retained by the Developer or general contractor to maintain professional liability insurance in the minimum amounts specified in this subsection.
(e) Builders’ risk insurance during the course of construction (and upon completion of construction, property insurance) covering the Development and covering all risks of loss, excluding earthquake and including flood (if required), for one hundred percent (100%) of the replacement value, with deductible, if any, acceptable to the City.
Section 6.9 Subcontractor’s Insurance. Developer must require and verify that all subcontractors and agents working on the Development maintain Workers’ Compensation insurance meeting all the requirements stated in this Section, and Developer must ensure that City and the Authority are both additional insureds on insurance required from subcontractors as described in subsection (c)(2) of this Section.
(a) General Requirements.
(1) Except for professional liability, the required insurance must be provided under an occurrence form, and the Developer must maintain such coverage continuously throughout the Term. Should any of the required insurance be provided under a form of coverage that includes an annual aggregate limit or provides that claims investigation or legal defense costs be included in such annual aggregate limit, such annual aggregate limit must be three (3) times the occurrence limits specified above.
(2) All Commercial General Liability, Commercial Automobile Liability and Property insurance policies (including builders’ risk) must be endorsed to name as additional insureds the City, the Authority and their elected officials, officers, directors, representatives, consultants, employees, and agents. The endorsement must include liability arising out of work or operations performed by or on behalf of Developer including materials, parts, or equipment furnished in connection with such work or operations and automobiles owned, leased, hired or borrowed by or on behalf of Developer. For commercial general liability, the policy must be endorsed with a form at least as broad as ISO form CG 20 10 11 85 or both CG 20 10 and CG 20 37 forms if later revisions used.
(3) Developer’s insurance must be primary to any other
insurance (including self-insurance) available to the City or the Authority (including elected officials, officers, directors, representatives, consultants, employees, and agents) with respect to any claim arising out of this Agreement. Any insurance maintained by the City or Authority shall be excess of the Developer’s insurance and shall not contribute with it. (4) No policy shall be canceled, limited, or allowed to expire without renewal until after thirty (30) days written notice has been given to the City and Authority by first class mail.
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(5) Insurance is to be placed with insurers with a current A.M.
Best’s rating of no less than A:VII, unless otherwise acceptable to the Entity. Exception may be made for the State Compensation Insurance Fund when not specifically rated. (b) Deductibles. Any deductibles or self-insured retentions must be declared to and approved by City. At the option of City, either:
(1) Developer must reduce or eliminate such deductibles or selfinsured retentions as respects the City and its elected officials, officers, directors, representatives, consultants, employees, and agents; or,
(2) Developer must provide a financial guarantee satisfactory to City guaranteeing payment of losses and related investigations, claim administration, and defense expenses.
(c) Subrogation Waiver. Developer hereby grants to City and the Authority a waiver of any right to subrogation which any insurer of Developer may acquire against the City by virtue of the payment of any loss under such insurance. Developer agrees to obtain any endorsement that may be necessary to effect this waiver of subrogation. The Workers’ Compensation policy must be endorsed with a waiver of subrogation in favor of City for all work performed by Developer, its employees, agents, and subcontractors. This provision applies regardless of whether or not the City or Authority has requested or received a waiver of subrogation endorsement from the insurer.
Section 6.10 Certificates of Insurance. As a condition to the Close of Escrow for each Phase, the Developer must provide certificates of insurance, in form and with insurers reasonably acceptable to the City, evidencing compliance with the requirements of this Section, and must provide complete copies of such insurance policies, including endorsements as required by this Section. However, failure to obtain the required documents before the work beginning shall not waive Developer’s obligation to provide them. City reserves the right to require complete, certified copies of all required insurance policies, including endorsements, required by these specifications, at any time.
Section 6.11 Additional Coverage. Developer may carry, at its own expense, any additional insurance it deems necessary or prudent. If Developer maintains higher levels than the minimums shown above, City requires and shall be entitled to coverage for the higher limits maintained by Developer. Any available insurance proceeds in excess of the specified minimum levels of insurance and coverage shall be available to the City.
Section 6.12 Audits. The Developer must make available for examination at reasonable intervals and during normal business hours to the Authority and the City all books, accounts, reports, files, and other papers or property with respect to all matters covered by this Agreement, and permit the Authority and the City to audit, examine, and make excerpts or transcripts from such records, and such records shall be kept at 100 Pacifica, Suite 203 in the City of Irvine. The Authority and the City may make audits of such records.
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ARTICLE 7
ASSIGNMENTS AND TRANSFERS
Section 7.1 Definitions. As used in this Article 7, the term “Transfer” means:
Any total or partial sale, assignment or conveyance, or any trust or power, or any transfer in any other mode or form, of or with respect to this Agreement or of the Development or any part thereof or any interest therein or any contract or agreement to do any of the same; (a) Any total or partial sale, assignment or conveyance, or any trust or power, or any transfer in any other mode or form, of or with respect to any ownership interest in Developer or any contract or agreement to do any of the same; (b) Any merger, consolidation, sale or lease of all or substantially all of the assets of the Developer; or
(c) The leasing of part or all of the Development thereon; provided, however, that leasing of the Units included within the Development to tenant occupants in accordance with the Regulatory Agreement or the leasing of the Commercial Space in the Development in accordance with this Agreement shall not be deemed a Transfer for purposes of this Article 7.
Section 7.2 Purpose of Restrictions on Transfer. This Agreement is entered into solely for the purpose of the development and operation of the Development and its subsequent use in accordance with the terms hereof. The Developer recognizes that the qualifications and identity of Developer are of particular concern to the City, in view of:
(a) The importance of the redevelopment of the Property to the general welfare of the community;
(b) The land acquisition assistance and other public aids that have been made available by law and by the government for the purpose of making such redevelopment possible;
(c) The reliance by the City upon the unique qualifications and ability of the Developer to serve as the catalyst for development of the Property; (d) The fact that a change in ownership or Control of the Developer, or of a substantial part thereof, or any other act or transaction involving or resulting in a significant change in ownership or with respect to the identity of the parties in Control of the Developer is for practical purposes a transfer or disposition of the Property; (e) The fact that the Property is not to be acquired or used for speculation, but only for development and operation by the Developer in accordance with this Agreement and the Regulatory Agreement; and
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(f) The Developer further recognizes that it is because of such qualifications and identity that the City is entering into this Agreement with the Developer and that Transfers are permitted only as provided in this Agreement.
Section 7.3 Prohibited Transfers. Any Transfer made in contravention of this Section and is void and are deemed to be a Developer Event of Default under this Agreement whether or not the Developer knew of or participated in such Transfer. Except for permitted Transfers described in Section 7.4, no Transfer shall be permitted in the absence of specific written agreement by the City, and, unless approved by the City in writing, no Transfer or assignment will be deemed to relieve the Developer or any other party from any obligations under this Agreement.
Section 7.4 Permitted Transfers. Notwithstanding the provisions of Section 7.3, the following Transfers are permitted and are hereby approved by the City without further review.
Any consent by the City under this Section 7.4 shall constitute the consent of the Authority:
(a) Notwithstanding the provisions of Section 7.3, the following Transfers shall be permitted and are hereby approved by the City:
(1) Any Transfer creating a Security Financing Interest permitted pursuant to the approved Financing Proposal;
(2) Any Transfer of an entire Phase to a limited partnership in which the Developer or an entity Controlled by the Developer is the administrative general partner of such limited partnership (provided City shall have been given a copy of the limited partnership, and copies of the organizational documents of the general partner). (3) The Transfer of an entire Phase to a nonprofit managing general partner pursuant to a right of first refusal agreement given by a limited partnership owner of the Phase.
(4) The Transfer of an entire Phase to the administrative general partner pursuant to an option agreement given by a limited partnership owner of the Phase. (5) The admission of a tax credit investor limited partner to Developer, and any subsequent transfer of investor limited partner interest thereafter. (6) Any Transfer directly resulting from the foreclosure of a Security Financing Interest or the granting of a deed in lieu of foreclosure of a Security Financing Interest or as otherwise permitted under Article;
(7) The leasing of residential units within the Development in accordance with the applicable Housing Agreement;
(8) The granting of reasonable easements or permits to facilitate the Development of the Property.
Section 7.5 Other Transfers with City Consent. Any Transfers not permitted under Section 7.4 shall require the prior written approval of the City Manager.
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(a) No Transfer of this Agreement permitted under this Section will be effective unless, at the time of the Transfer, the transferor and transferee enter into and records an assignment and assumption agreement in a form reasonably approved by the City Manager.
Section 7.6 Termination of Limitations on Transfers. The limitations on Transfers set forth in this Article 7 shall apply with respect to the Property or a Phase until issuance by the City of a Certificate of Completion for the Phase.
ARTICLE 8
DEFAULT
AND REMEDIES
Section 8.1 General Applicability. The provisions of this Article 8 govern the Parties’ remedies for breach or failure of this Agreement. If a closing condition does not occur, then either Party shall not be obligated to convey or accept the applicable parcel, may terminate the obligation to convey/accept and the Deposit shall be returned to the Developer; however, the foregoing does not relieve a party from the implied covenant of good faith and fair dealing (with the understanding that such implied covenant does not apply to the City acting in its governmental capacity).
Section 8.2 Fault of City. Each of the following events, if uncured after expiration of the applicable cure period in constitutes a “City Event of Default”. The City, without good cause, fails to sell the Property to the Developer in the manner set forth in Article 3 and the Developer is otherwise entitled by this Agreement to such conveyance; or (a) The City breaches any other material provision of this Agreement which is materially adverse to Developer.
Section 8.3 Fault of Authority. Each of the following events, if uncured after expiration of the applicable cure period, constitutes an “Authority Event of Default”:
(a) The Authority, without good cause, fails to disburse the Authority Loan to the Developer in the manner set forth in Article 5 and the Developer is otherwise entitled by this Agreement to the disbursement; or
(b) The Authority breaches any other material provision of this Agreement which is materially adverse to Developer.
Section 8.4 Fault of Developer. Each of the following events, if uncured after expiration of the applicable cure period, constitutes a “Developer Event of Default”:
(a) The Developer fails to exercise good faith and diligent efforts to satisfy, within the time and in the manner set forth in Article 3, one or more of the conditions precedent to the City’s obligation to convey the Property to the Developer;
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(b) The Developer refuses to accept conveyance from the City of the Property within the time periods and under the terms set forth in Article 3 and fails to cure the default within thirty (30) days after notice of default from City or Authority; (c) The Developer fails to construct the Development in violation of Article 4 cure the default within thirty (30) days after notice of default from City or Authority; (d) The Developer fails to comply with any construction deadlines in the Schedule of Performance.
(e) Any default by the Developer under the Housing Agreement shall also be a Developer Event of Default under this Agreement and the Authority Loan Documents, subject to any required notice and cure period under the Housing Agreement; (f) A Transfer occurs, either voluntarily or involuntarily, in violation of Article 7;
(g) Any representation or warranty contained in this Agreement or in any application, financial statement, certificate, or report submitted to the City in connection with this Agreement proves to have been incorrect in any material and adverse respect when made; (h) A court having jurisdiction makes or enters any decree or order:
(1) adjudging the Developer to be bankrupt or insolvent; (2) approving as properly filed a petition seeking reorganization of the Developer, or seeking any arrangement for the Developer, under the bankruptcy law or any other applicable debtor’s relief law or statute of the United States or any state or other jurisdiction; (3) appointing a receiver, trustee, liquidator, or assignee of the Developer, in bankruptcy or insolvency or for any of their properties; or (4) directing the winding up or liquidation of the Developer, if any such decree or order described in clauses (1) to (4), inclusive, continued unstayed or undischarged for a period of ninety (90) days unless a lesser time period is permitted for cure under any other mortgage on the Property, in which event such lesser time period will apply under this subsection (i) as well; or the Developer, admits in writing its inability to pay its debts as they fall due or voluntarily submits to or files a petition seeking any decree or order of the nature described in clauses (1) to (4), inclusive; (i) The Developer assigns its assets for the benefit of its creditors or suffered a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon have been returned or released within ninety (90) days after such event (unless a lesser time period is permitted for cure under any other mortgage on the Property, in which event such lesser time period will apply under this subsection as well) or prior to sooner sale under such sequestration, attachment, or execution; (j) The Developer voluntarily suspends its business or, the Developer is dissolved or terminated;
(k) There occurs any default declared by any entity under any loan document to which City or Authority is not a party/beneficiary, and which is related to any loans secured by a deed of trust on the Development or any such deed of trust or any regulatory
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agreement recorded against the Property (other than the Housing Agreement), after the expiration of applicable cure periods in the applicable documents; or (l) The Developer breaches any other provision of this Agreement and fails to cure the default within thirty (30) days after notice of default from City or Authority, or the Developer breaches any other provision of any Authority Loan Documents and fails to cure the same within: (a) the cure period in the Authority Loan Documents, if any applicable to the default; or (b) if no cure period applies, and the default is not included/described in the preceding subsections, then Developer fails to cure the default within thirty (30) days after written notice from Authority.
Section 8.5 Notice and Cure Period Regarding City/Authority Defaults. Before initiating any action for relief against City or Authority for an alleged breach of this Agreement, Developer must deliver to City or Authority, as applicable, a written notice of breach specifying all of the reasons for the allegation of default with reasonable particularity. Within thirty (30) days, City or Authority (as applicable) must either: (1) use good faith efforts to cure the breach or, if such cure is of the nature to take longer than thirty (30) days, to follow the procedures specified in subsection (b) below; or (2) if in the determination of the City or Authority, the event does not constitute a breach of this Agreement, the City or Authority, as applicable, within thirty (30) days of receipt of the Notice of Default, must deliver to Developer a notice which sets forth with reasonable particularity the reasons that a default has not occurred. Failure to respond within the thirty (30) day period may not be deemed an admission of the default. (a) If the City or Authority, as applicable, believes that the Default cannot practically be cured within the thirty (30)-day period, it shall not be in Default provided that: (1) the cure is commenced during the thirty (30) day period after receipt of the Notice of Default; (2) within the thirty (30) day period, the Defaulting Party provides a schedule to Developer for cure, ; and (3) the cure is thereafter diligently prosecuted to completion, and City or Authority as applicable uses good faith efforts to comply with the schedule.
Section 8.6 Remedies; City Remedies. With respect to an uncured Developer Event of Default, the City shall be entitled to take any or all of the following remedies:
(a) Terminating this Agreement by giving written notice to the Developer; provided, however, that the City’s remedies under this Article 8 and the indemnification provisions of this Agreement survive such termination. If the City elects to terminate this Agreement, the provisions of this Agreement that are specified to survive such termination shall remain in full force and effect.
(b) Prosecuting an action for damages (excluding specific performance, punitive damages and indirect consequential damages); or seeking any other remedy available at law or in equity (excluding punitive damages and indirect consequential damages).
Section 8.7 Developer Remedies. With respect to an uncured City Event of Default or Authority Event of Default, the Developer shall be entitled to take any or all of the following remedies:
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(a) Terminating this Agreement by giving written notice to the Developer; provided, however, that the Developer’s remedies under this Article 8 and the indemnification provisions of this Agreement survive such termination. If the Developer elects to terminate this Agreement, the provisions of this Agreement that are specified to survive such termination shall remain in full force and effect.
(b) Prosecuting an action for damages (excluding specific performance, punitive damages, lost profits and indirect consequential damages); or seeking any other remedy available at law or in equity (excluding punitive damages and indirect consequential damages).
Section 8.8 Authority Remedies. With respect to an uncured Developer Event of Default as to a Phase, the Authority shall be entitled to exercise any or all remedies permitted at law or in equity, and any remedies under the Promissory Note and Deed of Trust for that Phase (including acceleration of the applicable loan).
Section 8.9 Rights of Mortgagees. Any rights of the City or Authority under this Article 8 will not defeat, limit or render invalid any Security Financing Interest permitted by this Agreement or any rights provided for in this Agreement for the protection of holders of Security Financing Interests.
Section 8.10 Remedies Cumulative. No right, power, or remedy given to the City by the terms of this Agreement is intended to be exclusive of any other right, power, or remedy; and each and every such right, power, or remedy will be cumulative and in addition to every other right, power, or remedy given by the terms of any such instrument, or by any statute or otherwise.
Neither the failure nor any delay to exercise any such rights and remedies will operate as a waiver thereof, nor will any single or partial exercise of any such right or remedy preclude any other or further exercise of such right or remedy, or any other right or remedy.
ARTICLE 9
SECURITY FINANCING AND RIGHTS OF HOLDERS
Section 9.1 No Encumbrances Except for Development Purposes.
Notwithstanding any other provision of this Agreement, mortgages and deeds of trust, or any other reasonable method of security are permitted to be placed upon the Developer’s fee interest in the Property, but only for the purpose of securing loans approved by the City under the approved Financing Proposal. Mortgages, deeds of trust, or other reasonable security instruments securing loans approved by the City under the approved Financing Proposal are each referred to as a “Security Financing Interest.” The words “mortgage” and “deed of trust” as used in this Agreement include all other appropriate modes of financing real estate acquisition, construction, and land development.
Section 9.2 Holder Not Obligated to Construct. The holder of any Security Financing Interest authorized by this Agreement is not obligated to construct or complete any Development or to guarantee such construction or completion; nor will any covenant or any other provision in conveyances from the City to the Developer evidencing the realty comprising the Property or any part thereof be construed so to obligate such holder. However, no such holder
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shall devote the Property or any portion thereof to any uses, or to construct any Development thereon, other than the Development provided for or authorized by this Agreement and the Housing Agreement.
Section 9.3 Notice of Default and Right to Cure. Whenever the City under its rights set forth in Article 8 of this Agreement delivers any notice or demand to the Developer with respect to the commencement, completion, or cessation of the construction of the Development, the City will at the same time deliver to each holder of record of any Security Financing Interest creating a lien upon the Developer’s fee interest in the Property or any portion thereof, and the Investor, a copy of such notice or demand provided City shall have been given written notice of its address for notice by the Developer. Each such holder (insofar as the rights of the City are concerned) has the right, but not the obligation, at its option, within ninety (90) days after the delivery of the notice, to cure or remedy or commence to cure or remedy any such default or breach affecting the Property which is subject to the lien of the Security Financing Interest held by such holder and to add the cost thereof to the security interest debt and the lien on its security interest.
Nothing contained in this Agreement is deemed to permit or authorize such holder to undertake or continue the construction or completion of the Development (beyond the extent necessary to conserve or protect such Development or construction already made) without first having expressly assumed in writing the Developer’s obligations to the City relating to such Development under this Agreement under an assignment and assumption agreement prepared by the City and recordable among the Official Records (the “Security Financing Interest Assignment”). The holder in that event must agree to complete, in the manner provided in this Agreement (or as may be amended by the Security Financing Interest Assignment; provided, however, the City is under no obligation to extend the dates for performance set forth in this Agreement), the Development to which the lien or title of such holder relates. Any such holder properly completing such Development under this paragraph must assume all rights and obligations of Developer under this Agreement and will be entitled, upon completion and written request made to the City, to a Certificate of Completion from the City.
Section 9.4 Failure of Holder to Complete Development. In any case where six (6) months after default by the Developer in completion of construction of the Development under this Agreement, the holder of record of any Security Financing Interest, having first exercised its option to construct under the Security Financing Interest Assignment, has not proceeded diligently with construction (as reasonably determined by the City), the City and Authority must be afforded those rights against such holder it would otherwise have against Developer under this Agreement.
Section 9.5 Right of Cure. In the event of a default or breach by the Developer of a Security Financing Interest prior to the completion of the Development, and the holder has not exercised its option to complete the Development on the Property, the City or Authority may cure the default, prior to the completion of any foreclosure. In such event the City or Authority as applicable will be entitled to reimbursement from the Developer of all costs and expenses incurred bin curing the default. The City will also be entitled to a lien upon the Property or any portion thereof to the extent of such costs and disbursements, or in the case of the Authority, the Developer’s obligation to reimburse for costs and disbursements shall be included in the obligations secured by the applicable Deed of Trust. The City agrees that such lien will be subordinate to any Security Financing Interest, and the City will execute from time to time any and all documentation reasonably requested by Developer to effect such subordination.
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Section 9.6 Right of City to Satisfy Other Liens. After the conveyance of title to the Property or any portion thereof and after the Developer has had a reasonable time to challenge, cure or satisfy any liens or encumbrances on the Property or any portion thereof, the City will have the right to satisfy any such lien or encumbrances; provided, however, that nothing in this Agreement will require the Developer to pay or make provision for the payment of any tax, assessment, lien or charge so long as the Developer in good faith may contest the validity or amount therein and so long as such delay in payment is not subject the Property or any portion thereof to forfeiture or sale.
Section 9.7 Holder to be Notified. The Developer will insert each term contained in this Article 9 into each Security Financing Interest or will procure acknowledgement of such terms by each prospective holder of a Security Financing Interest prior to its coming into any security right or interest in the Property or portion thereof.
Section 9.8 Estoppel Certificates. Any Party may at any time, and from time to time, deliver written notice to another Party requesting such other party to certify in writing that, to the knowledge of the certifying Party: (a) this Agreement is in full force and effect and a binding obligation of the Parties; (b) this Agreement has not been amended or modified either orally or in writing, or if so amended, identifying the amendments; and (c) the requesting Party is not in default in the performance of its obligations under this Agreement, or if in default, the notice shall describe the nature and amount of any such default. A Party receiving a request shall execute and return such certificate within fifteen (15) days following receipt of the request. The City Manager is authorized to execute any estoppel certificate requested by the Developer on behalf of the City.
The Authority’s Executive Director is authorized to execute any estoppel certificate requested by the Developer on behalf of the Authority.
ARTICLE 10
GENERAL PROVISIONS
Section 10.1 Notices, Demands and Communications. Formal notices, demands, and communications between the City and the Developer will be sufficiently given if, and not be deemed given unless, dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered by reputable overnight delivery service, to the principal office of the City and the Developer as follows:
City and Authority: City of Palm Desert/Palm Desert Housing Authority 73-510 Fred Waring Drive
Palm Desert, CA 92260
Attn: Housing Division
Developer: Palm Communities
100 Pacifica, Suite 203
Irvine, CA 92618
Attn: President
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Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected Party may from time to time designate by notice as provided in this Section.
Section 10.2 Non-Liability of Officials, Employees and Agents. No City Council members, or Authority board members, or any of the officers, directors, representatives, consultants, employees and agents of the City or Authority may be personally liable to the Developer, or any successor in interest, in the event of any default or breach by the City or Authority or for any amount which may become due to the Developer or successor or on any obligation under the terms of this Agreement. Absent fraud or willful misconduct by the responsible party, no members, officers, directors, representatives, consultants, employees and agents of the Developer may be personally liable to the City or Authority, or any successor in interest, in the event of any default or breach by the Developer or for any amount which may become due to the City or Authority or successor or on any obligation under the terms of this Agreement.
Section 10.3 Forced Delay. In addition to specific provisions of this Agreement, any Party hereunder shall not be deemed to be in default with respect to a construction obligation/deadline where delays or defaults are due to war; insurrection; strikes; lock-outs; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority (except for restrictions or priorities established by the Party required to perform the action required under this Agreement); unusually severe weather; inability to secure necessary labor, materials or tools; acts or the failure to act of any public or governmental agency or entity (except that acts or the failure to act of a Party shall not excuse performance by such Party, including without limitation the Developer’s inability to obtain financing for the Development or the economic infeasibility of the Development) (“Force Majeure”). An extension of time for Force Majeure shall only be for the period of the enforced delay, which period shall commence to run from the time of the notification of the delay by the Party requesting the extension to the other Party. The Party requesting an extension of time under this Section 10.3 shall give notice promptly following knowledge of the delay to the other Party. If, however, notice by the Party claiming such extension is sent to the other Party more than thirty (30) days after knowledge of the commencement of the delay, the period shall commence to run upon the earlier of (i) thirty (30) days prior to the giving of such notice or (ii) the date that the other Party received knowledge of the events giving rise to the delay.
Section 10.4 Inspection of Books and Records. Upon request, the Developer must permit the City and Authority to inspect at reasonable times and on a confidential basis those books, records and all other documents of the Developer necessary to determine Developer’s compliance with the terms of this Agreement. Title of Parts and Sections. Any titles of the articles, sections or subsections of this Agreement are inserted for convenience of reference only and should be disregarded in construing or interpreting any part of its provision.
Section 10.5 No Third-Party Beneficiaries. There are no third party beneficiaries to this Agreement.
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Section 10.6 Applicable Law. This Agreement must be interpreted under and under the laws of the State of California. Venue shall be Riverside County.
Section 10.7 No Brokers. Each Party represents to the other that it has not had any contact or dealings regarding the Property, or any communication in connection with the subject matter of this transaction, through any real estate broker or other person who can claim a right to a commission or finder’s fee. If any broker or finder makes a claim for a commission or finder’s fee based upon a contact, dealings, or communications, the Party through whom the broker or finder makes this claim must indemnify, defend with counsel of the indemnified Party’s choice, and hold the indemnified Party harmless from all expense, loss, damage and claims, including the indemnified Party’s reasonable attorneys’ fees, if necessary, arising out of the broker’s or finder’s claim. The provisions of this Section survive expiration of the Term or other termination of this Agreement and will remain in full force and effect.
Section 10.8 Legal Actions. In the event any legal action is commenced to interpret or to enforce the terms of this Agreement or to collect damages as a result of any breach thereof, each Party shall bear their own attorneys’ fees and no attorneys’ fees may be awarded to the Party prevailing in the action.
Section 10.9 Severability. If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions will continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding or unenforceability.
Section 10.10 Binding Upon Successors. This Agreement is binding upon and inures to the benefit of the heirs, administrators, executors, successors in interest and assigns of each of the Parties hereto, except that there may be no Transfer of any interest by any of the Parties hereto except under the terms of this Agreement. Any reference in this Agreement to a specifically named Party is deemed to apply to any successor, heir, administrator, executor or assignee of such Party who has acquired an interest in compliance with the terms of this Agreement, or under law.
Section 10.11 Parties Not Co-Venturers. Nothing in this Agreement is intended to or does establish the Parties as partners, co-venturers, or principal and agent with one another.
Section 10.12 Discretion Retained by City. The City’s execution of this Agreement does not constitute approval by the City and in no way limits the discretion or any governmental rights or powers of the City in the permit and approval process in connection with construction of the Development.
Section 10.13 Time of the Essence. In all matters under this Agreement, the Parties agree that time is of the essence.
Section 10.14 Representation and Warranties of Developer. The Developer hereby represents and warrants to the City and Authority as follows:
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(a) Organization. The Developer is a duly organized, validly existing corporation, is in good standing under the laws of the State of California and has the power and authority to own its property and carry on its business as now being conducted. (b) Authority of Developer. The Developer has full power and authority to execute and deliver this Agreement and to perform and observe the terms and provisions of all of the above.
(c) Authority of Persons Executing Documents. This Agreement and all other documents or instruments executed and delivered, or to be executed and delivered, under this Agreement have been executed and delivered by persons who are duly authorized to execute and deliver the same for and on behalf of Developer, and all actions required under the Developer’s organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement and all other documents or instruments executed and delivered, or to be executed and delivered, under this Agreement, have been duly taken. (d) Valid Binding Agreements. This Agreement and all other documents or instruments which have been executed and delivered under or in connection with this Agreement constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal, valid and binding obligations of the Developer enforceable against it in accordance with their respective terms.
(e) No Breach of Law or Agreement. Neither the execution nor delivery of this Agreement or of any other documents or instruments executed and delivered, or to be executed or delivered, under this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court, City Council, commission or agency whatsoever binding on the Developer, or any provision of the organizational documents of the Developer, or will conflict with or constitute a breach of or a default under any agreement to which the Developer is a party.
Section 10.15 Entire Understanding of the Parties. This Agreement constitutes the entire understanding and agreement of the Parties. All prior discussions, understandings and written agreements are superseded by this Agreement.
Section 10.16 Amendments. The Parties can amend this Agreement only by means of a writing executed by the Developer, the Authority and the City.
Section 10.17 Approvals. Whenever this Agreement permits City approval, consent, or waiver, to be authorized by the City Manager, the City Manager’s signature shall constitute the approval, consent, or waiver of the City, without further authorization required from the City Council unless required by law or the terms of this Agreement. Whenever this Agreement permits Authority approval, consent, or waiver, to be authorized by the Authority’s Executive Director, the Authority’s Executive Director signature shall constitute the approval, consent, or waiver of the Authority, without further authorization required from the Authority’s governing board unless required by law or the terms of this Agreement.
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Section 10.18 Counterparts; Multiple Originals. This Agreement may be executed in counterparts, each of which is deemed to be an original.
The City, the Authority and the Developer are signing this Agreement as of the Effective Date.
CITY:
CITY OF PALM DESERT,
a municipal corporation
By:
L. Todd Hileman
City Manager
DEVELOPER:
PALM COMMUNITIES,
a California corporation
By:
Danavon L. Horn
President
APPROVED AS TO FORM:
Richard, Watson & Gerson
By:
Special Counsel
AUTHORITY:
PALM DESERT HOUSING AUTHORITY
By: ___
L. Todd Hileman
Executive Director
APPROVED AS TO FORM:
Richard, Watson & Gerson
By:
Special Counsel
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
The land referred to is situated in the City of Palm Desert, State of California, and is described as follows:
THOSE PORTIONS OF PARCEL 8 AND PARCEL 9 OF PARCEL MAP NO. 36792, IN THE.
CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AS SHOWN BY MAP ON FILE IN BOOK 239 OF PARCEL MAPS, PAGES 9 THROUGH 15,
INCLUSIVE, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHWEST CORNER OF SAID PARCEL 8; THENCE ALONG THE SOUTH LINE OF SAID PARCEL 9, SOUTH 89°56’08” WEST 72.55 FEET TO A LINE THAT IS PARALLEL WITH AND DISTANT EASTERLY 138.45 FEET, MEASURED AT RIGHT
ANGLES, FROM THE EAST RIGHT OF WAY LINE OF DINAH SHORE DRIVE, AS SHOWN ON SAID PARCEL MAP NO. 36792; THENCE LEAVING SAID SOUTH LINE AND ALONG SAID PARALLEL LINE, NORTH 0°00’00” EAST 31711 FEET; THENCE NORTH 90°00’00” EAST 65.55 FEET TO A LINE THAT IS PARALLEL WITH AND DISTANT WESTERLY 7.00 FEET, MEASURED AT RIGHT ANGLES FROM THE WEST LINE OF SAID PARCEL 8; THENCE NORTH 0°00’00” EAST 102.00 FEET ALONG LAST SAID PARALLEL LINE TO A LINE THAT IS PARALLEL WITH AND DISTANT NORTHERLY 1,00 FEET; MEASURED AT RIGHT ANGLES, FROM THE NORTH LINE OF SAID PARCEL 8; THENCE NORTH 90°00’00” EAST 275.69 FEET ALONG LAST SAID PARALLEL LINE TO AN
INTERSECTION WITH THE NORTHWESTERLY PROLONGATION OF THE NORTHEASTERLY LINE OF SAID PARCEL 8; THENCE SOUTH 68°15’29” EAST 409,78
FEET ALONG SAID NORTHWESTERLY PROLONGATION AND SAID
NORTHEASTERLY LINE OF PARCEL 8 TO A TANGENT CURVE, CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 1445.00 FEET; THENCE SOUTHEASTERLY ALONG SAID CURVE AND SAID NORTHEASTERLY LINE OF PARCEL 8 AN ARC LENGTH OF 535.73 FEET, THROUGH A CENTRAL ANGLE OF 21°14’32” TO A NONTANGENT LINE, SAID NON- TANGENT LINE BEING PARALLEL WITH AND DISTANT WESTERLY 36.00 FEET, MEASURED AT RIGHT ANGLES, FROM THE MOST EASTERLY LINE OF SAID PARCEL 8; THENCE LEAVING SAID NORTHEASTERLY LINE OF PARCEL 8, ALONG LAST SAID PARALLEL LINE, SOUTH 07°03’09” EAST 105.97 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF SAID PARCEL 8, BEING A NONTANGENT CURVE, CONCAVE SOUTHEASTERLY HAVING A RADIUS OF 73.00 FEET, A RADIAL LINE TO SAID POINT BEARS NORTH 36°36’07” WEST; THENCE ALONG THE SOUTHEASTERLY LINE OF SAID PARCEL 8 THE FOLLOWING FIVE (5) COURSES,.
SOUTHERLY ALONG SAID NON-TANGENT CURVE AN ARC LENGTH OF 28.61 FEET, THROUGH A CENTRAL ANGLE OF 22°27’11” TO THE BEGINNING OF A REVERSE CURVE, CONCAVE NORTHWESTERLY HAVING A RADIUS OF 60.00 FEET; A LINE RADIAL TO SAID BEGINNING OF CURVE BEARS SOUTH 59°03’18” EAST; THENCE SOUTHWESTERLY LONG LAST SAID CURVE AN ARC LENGTH OF 38.39 FEET THROUGH A CENTRAL ANGLE OF 36°39’18” TO THE BEGINNING OF A REVERSE CURVE, CONCAVE SOUTHEASTERLY, HAVING A RADIUS OF 336.00 FEET; A LINE
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RADIAL TO LAST SAID BEGINNING OF CURVE BEARS NORTH 22°24’00” WEST; THENCE SOUTHEASTERLY ALONG LAST SAID CURVE AN ARC LENGTH OF 120.80 FEET; THROUGH A CENTRAL ANGLE OF 20°36’00”; THENCE SOUTH 47°00’00” WEST 102.69 FEET; THENCE NORTH 89°13’34” WEST 25.84 FEET TO THE BEGINNING OF A NON-TANGENT CURVE, CONCAVE SOUTHEASTERLY, HAVING A RADIUS OF 1075.00 FEET, A LINE RADIAL TO SAID BE-GINNING OF CURVE BEARS NORTH 44°07’38” EAST; THENCE ALONG THE SOUTHERLY LINE OF SAID PARCEL 8 THE FOLLOWING TWO (2) COURSES NORTHWESTERLY ALONG LAST SAID CURVE AN ARC LENGTH OF 829.14 FEET; THROUGH A CENTRAL ANGLE OF 44°11’30”; THENCE SOUTH 89°56’08” WEST 112.85 FEET TO SAID SOUTHWEST CORNER OF PARCEL 8 AND THE POINT OF BEGINNING.
EXHIBIT A-1
LEGAL DESCRIPTION OF PHASE I PARCEL
EXHIBIT A-2
LEGAL DESCRIPTION OF PHASE II PARCEL
EXHIBIT A-3
LEGAL DESCRIPTION OF PARCEL 9
EXHIBIT B-1
PHASE II EASEMENT
B
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B
-1-9
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B
-1-10
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B
-1-11
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B
-1-12
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B
-1-13
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B
-1-14
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B
-1-15
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B
-1-16
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B
-1-17
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B
-1-18
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B
-1-19
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B
-1-20
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EXHIBIT B-2
PARCEL 9 EASEMENT
B
-2-22
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B
-2-23
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B
-2-24
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B
-2-25
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B
-2-26
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B
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B
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B
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B
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EXHIBIT B-3
MAINTENANCE EASEMENT
B
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B
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B
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B
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B
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B
-3-37
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B
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B
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EXHIBIT C
FORM OF GRANT DEED
Recording Requested By:
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260
Attention: Housing Division
AFTER RECORDATION MAIL TO AND
MAIL TAX STATEMENTS TO:
_____________________________
100 Pacifica, Suite 203
Irvine, CA 92618
Attn: President
_______________ _______________________________________________________ SPACE ABOVE THIS LINE FOR RECORDER’S USE
APN# ________________
THE UNDERSIGNED GRANTOR(S) DECLARE(S):
Documentary Transfer Tax is $___________City Transfer Tax is $0 computed on full value of property conveyed, or
computed on full value less value of liens and/or encumbrances remaining at time of sale, Unincorporated Area [___], County of Riverside
EXEMPT FROM BUILDING HOMES AND JOBS ACTS FEE PER GOVERNMENT CODE 27388.1(a)(2)
GRANT DEED
For valuable consideration, the receipt of which is hereby acknowledged, City of Palm Desert, a municipal corporation (herein called “Grantor”) grants to ________________________, a California limited partnership (herein called “Grantee”), the real property located at __________________________ in the City of Palm Desert, CA (the “Property”), as legally described in the document attached hereto, labeled Exhibit A, and incorporated herein by this reference, together with all of Grantor’s right, title and interest in and to all easements, privileges and rights appurtenant to the Property, subject to (a) all non-delinquent real property taxes, (b) all non-delinquent special assessments, if any, (c) all other liens, leases, easements, encumbrances, covenants, conditions, restrictions and other matters of record, and (d) all matters affecting the status of title that would be revealed by an accurate survey of the
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subject property. Grantor disclaims any and all express or implied warranties regarding the Property other than the implied warranties stated in Section 1113 of the California Civil Code.
1. The Property is conveyed subject to the Amended and Restated Disposition, Development and Loan Agreement dated in April, 2024, by and between Grantor and Palm Communities, predecessor in interest to Grantee, (the “Agreement”). The Agreement shall apply to this Grant Deed only until the termination of the Agreement by its terms and thereafter shall have no further force or effect by reference in this Grant Deed.
2. Grantee herein covenants by and for itself, its successors and assigns that there shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, religion, creed, national origin, ancestry, disability (actual or perceived), medical condition, age, source of income, familial status, marital status, domestic partner status, sex, sexual preference/orientation, Acquired Immune Deficiency Syndrome (AIDS) – acquired or perceived, or any additional 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, as such provisions may be amended from time to time, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property herein conveyed nor shall the Grantee or any person claiming under or through the Grantee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, vendees, or employees in the Property herein conveyed. The foregoing covenant shall run with the land.
All deeds, leases or other real property conveyance contracts entered into by the Grantee on or after the date of this Grant Deed as to any portion of the Property shall contain the following language:
(a) In Deeds:
“Grantee herein covenants by and for itself, its successors and assigns that there shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, religion, creed, national origin, ancestry, disability (actual or perceived), medical condition, age, source of income, familial status, marital status, domestic partner status, sex, sexual preference/orientation, Acquired Immune Deficiency Syndrome (AIDS) – acquired or perceived, or any additional 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, as such provisions may be amended from time to time, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property herein conveyed nor shall the grantee or any person claiming under or through the grantee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, vendees, or employees in the property herein conveyed. The foregoing covenant shall run with the land.”
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(b) In Leases:
“The lessee herein covenants by and for the lessee and lessee’s heirs, personal representatives and assigns and all persons claiming under or through the lessee that his lease is made subject to the condition that there shall be no discrimination against or segregation of any person or of a group of persons on account of race, color, religion, creed, national origin, ancestry, disability (actual or perceived), medical condition, age, source of income, familial status, marital status, domestic partner status, sex, sexual preference/orientation, Acquired Immune Deficiency Syndrome (AIDS) – acquired or perceived, or any additional 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, as such provisions may be amended from time to time, in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased nor shall the lessee or any person claiming under or through the lessee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants, vendees, or employees in the land herein leased.” (c) In Contracts:
“There shall be no discrimination against or segregation of any person or group of persons on account of race, color, religion, creed, national origin, ancestry, disability (actual or perceived), medical condition, age, source of income, familial status, marital status, domestic partner status, sex, sexual preference/orientation, Acquired Immune Deficiency Syndrome (AIDS) – acquired or perceived, or any additional 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, as such provisions may be amended from time to time, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, vendees, or employees of the land.”
3. The covenants contained in this Grant Deed shall be construed as covenants running with the land.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Grantor has caused this Grant Deed to be executed by its duly authorized representative.
Executed as of the __ day of _______________, 202_
CITY
CITY OF PALM DESERT
a municipal corporation
By: __________________________
Mayor
ATTEST:
By: __________________________
_____________, City Clerk
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EXHIBIT A
LEGAL DESCRIPTION OF LAND
THE LAND IN THE CITY OF PALM DESERT, IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
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A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
State of
County of
On before me, , notary public personally appeared
, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct
WITNESS my hand and official seal.
(Seal)
EXHIBIT D
FORMS OF DENSITY BONUS AGREEMENTS
Exhibit D-1
Form of Density Bonus Agreement for Phase I
RECORDING REQUESTED BY, AND
WHEN RECORDED RETURN TO:
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260-2578
Attn: _________________
SPACE ABOVE THIS LINE FOR RECORDER’S USE ONLY
This Document is recorded for the benefit of the City of Palm Desert and is exempt from recording fees pursuant to Sections 6103, 27383 and 27388.1 of the California Government Code.
HOUSING AGREEMENT
(Density Bonus Agreement; Phase I)
by and between
the CITY OF PALM DESERT,
and
__________________________
DATED AS OF _________ ____, 202__
HOUSING AGREEMENT
THIS HOUSING AGREEMENT (the “Agreement”) is dated as of ______________ ___, 202__, and is by and between the CITY OF PALM DESERT, a municipal corporation (the “City”), and ____________________________ (the “Owner”). City and Owner are sometimes referred to herein individually as a “Party” and collectively as “Parties”.
RECITALS
This Agreement is predicated upon the following facts:
A. The Owner is the owner of the land described in “Exhibit A” attached hereto (the “Property”).
B. The City, the Palm Desert Housing Authority (“Authority”) and Owner have entered into that certain Amended and Restated Disposition, Development and Loan Agreement dated in April, 2024 (“DDLA”), pursuant to which the City conveyed the Property to the Owner for the development described in the DDLA (“Development” or “Apartment Community”) and the Authority made a loan to Owner for the purchase price of the Property (“Authority Loan”).
Capitalized terms used but not defined herein shall have the meaning set forth in the DDLA.
C. Pursuant to the DDLA, the Owner executed a Promissory Note in favor of Authority and a deed of trust in favor of Authority securing such Promissory Note and the Authority is obligated to make disbursements of loan proceeds subject to and in accordance with the DDLA.
D. Additionally, Owner has applied for and obtained a density bonus from the City for the Development which permits greater density and less parking that would otherwise be required, and in exchange, City also requires that the apartment units be so restricted of record, and that such restrictions not be subordinate or subordinated to any deeds of trust or other consensual liens.
E. This Agreement is that density bonus restrictions agreement.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the City and the Owner hereby agree as follows:
ARTICLE 1. DEFINITIONS AND INTERPRETATION.
1.1 Definitions.
Capitalized terms used herein shall have the following meanings unless the context in which they are used clearly requires otherwise.
“Affordable Units” shall mean twelve (12) of the units in the Apartment Community available to and occupied by, or held vacant for occupancy only by, Very Low Income Households
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and rented at an Affordable Rent. The Affordable Units will include the number of bedrooms shown on the following table:
Bedroom
Size
Very Low
Income
Household
Units
One 2
Two 7
Three 3
Total: 12
“Affordable Rent” shall mean rent for an Affordable Unit, including a Reasonable Utility Allowance, determined pursuant to California Health and Safety Code Section 50053(b) and the state regulations adopted by the California Department of Housing and Community Development (“HCD”) pursuant thereto, as amended from time to time, based upon the AMI adjusted for a Household Size Appropriate to the Affordable Unit. More specifically, the maximum monthly Affordable Rent, including a Reasonable Utility Allowance, may not exceed thirty percent (30%) of fifty percent (50%) of the AMI, adjusted for a Household Size Appropriate to the Affordable Unit, divided by twelve.
“AMI” shall mean the area median income for Riverside County as published by the California Department of Housing and Community Development pursuant to Health and Safety Code Section 50052.5, or successor statute, as adjusted for family size in accordance with the state regulations adopted pursuant to California Health and Safety Code Section 50052.5. “Household Size Appropriate to the Affordable Unit” in the absence of pertinent federal statutes or regulations applicable to the Apartment Community, shall have the meaning set forth in California Health and Safety Code Section 50052.5(h), as amended from time to time. “Reasonable Utility Allowance” shall mean a utility allowance for utilities paid by a tenant (not including telephone, internet or cable service) utilizing the utility allowance schedule published annually by the Housing Authority of the County of Riverside. “Required Covenant Period” shall mean the period commencing on the date all units in the Apartment Community have been completed as evidenced by the City’s issuance of a final Certificate of Occupancy for the Apartment Community, and ending as of the fifty-fifth (55th) anniversary thereof.
“Very Low Income Household” shall mean persons and families who meet the fifty percent (50%) or less of AMI income qualification limits set forth in California Health and Safety Code Section 50105 and Title 25 of the California Code of Regulations, including Section 6910, as such statute and regulations are amended from time to time.
1.2 Rules of Construction.
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1.2.1 The singular form of any word used herein, including the terms defined herein shall include the plural and vice versa. The use herein of a word of any gender shall include correlative words of all genders.
1.2.2 Unless otherwise specified, references to articles, sections, and other subdivisions of this Agreement are to the designated articles, sections, and other subdivisions of this Agreement as originally executed. The words “hereof,” “herein,” “hereunder,” and words of similar import shall refer to this Agreement as a whole.
1.2.3 All of the terms and provisions hereof shall be construed to effectuate the purposes set forth in this Agreement and to sustain the validity hereof.
1.2.4 Headings or titles of the several articles and sections hereof and the table of contents appended to copies hereof shall be solely for convenience of reference and shall not affect the meaning, construction, or effect of the provisions hereof.
ARTICLE 2. ONGOING APARTMENT COMMUNITY OBLIGATIONS.
2.1 Apartment Community and Affordable Units.
The Owner shall develop and construct the Apartment Community on the Property in conformity with the DDLA. Thereafter, during the Required Covenant Period, the Owner agrees that not less than twelve (12) units in the Apartment Community shall be Affordable Units under this Agreement, meaning that such units shall be continually available to and occupied by, or held vacant for occupancy only by, Very Low Income Households. All of the rental units in the Apartment Community shall be similarly constructed and all of the Affordable Units shall be generally constructed at the same time as those units which are available to other tenants, and distributed in terms of location throughout the Apartment Community. The Affordable Units shall be of comparable quality to those rental units in the Apartment Community which are available to other tenants. The Owner agrees that, to the extent commercially reasonable, Affordable Units will not be underutilized. No persons shall be permitted to occupy any Affordable Unit in excess of applicable limit of maximum occupancy set by the City’s Municipal Code and the laws of the State of California.
2.2 Residential Rental Property.
The Owner covenants to operate the Apartment Community as residential rental property. During the Required Covenant Period, the Affordable Units will be held and used for the purpose of providing residential living, and the Owner shall own, manage and operate, or cause the management and operation of, the Apartment Community to provide such affordable rental housing. All of the rental units in the Apartment Community with the exception of one (1) manager unit will be available for rental on a continuous basis to members of the general public and the Owner will not give preference to any particular class or group in renting the units in the Apartment Community, except as required under this Agreement. The Owner shall not convert any Affordable Unit(s) to condominiums or cooperative ownership or sell condominium or cooperative conversion rights to any Affordable Unit(s) during the term of this Agreement.
2.3 Very Low Income Households.
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2.3.1 Income Qualification; Initial Certification. Subject to the applicable provisions hereof, throughout the Required Covenant Period, the Affordable Units restricted by this Agreement will be exclusively occupied by, or available for occupancy only by Very Low Income Households on a continuous basis. Prior to the rental or lease of an Affordable Unit and in accordance with Section 2.6 hereof, the Owner will obtain and maintain on file a Household Income Certification (“Income Certification”) substantially in the form attached hereto as Exhibit “B” and incorporated herein by this reference for each Very Low Income Household, and shall provide copies of same to the City at such times as the City may, from time to time, reasonably require. In addition, the Owner will provide such further information as may reasonably be required in the future by the City. The Income Certification shall be dated immediately prior to the applicable household’s initial occupancy of an Affordable Unit. The Owner shall make a good faith effort to verify that the income provided by an applicant in an Income Certification is accurate by taking any one or more of the following steps as part of the verification process for all household members over the age of eighteen (18) as appropriate:
(i) Obtain two (2) pay stubs for the two (2) most recent pay periods; • Obtain a true copy of an income tax return for the most recent tax year in which a return was filed;
(ii) Obtain an income verification form from the household member’s current employer;
(iii) Obtain an income verification form from the Social Security Administration and/or the State Department of Social Services, or its equivalent, if the household member receives assistance from either of those agencies;
(iv) If the household member is unemployed and has no tax return, obtain another form of independent verification; or
(v) Obtain such other documentation as may be reasonably acceptable pursuant to Title 25 of the California Code of Regulations, as amended from time to time, to verify income.
2.3.2 Certificate of Continuing Program Compliance; Annual Report. Throughout the Required Covenant Period, the Owner will prepare and submit to the City, at such periodic frequency as the City might reasonably require, but not more than once annually, a Certificate of Continuing Compliance in substantially the form attached hereto as Exhibit “C” and incorporated herein by this reference, and executed by the Owner. The Owner will also prepare and submit to the City on or before each anniversary date of the commencement of the Required Covenant Period, and for the preceding calendar year, a report in form and substance reasonably satisfactory to the City summarizing the vacancy rate of the Apartment Community, including the number of Affordable Units held vacant for occupancy by Very Low Income Households for such calendar year.
2.4 Affordable Rent. Throughout the Required Covenant Period, an Affordable Rent shall be charged to the Very Low Income Household occupants of Affordable Units, as more specifically described above.
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2.5 Rent Increases. Rents for Affordable Units may be increased not more than once per year and twelve (12) months must have elapsed since the date of the tenant’s initial occupancy or the last rent increase. The rents charged following such an increase, or upon a vacancy and new occupancy by a Very Low Income Household shall not exceed an Affordable Rent. The Owner shall, consistent with applicable law, give proper written notice to tenants of all rent increases, and upon written request, provide the City with reasonable detail concerning the amount of and rationale for such rent increases.
2.6 Income Recertification of Affordable Units. Annually, on the anniversary date of occupancy of an Affordable Unit by a Very Income Household, the Owner shall obtain and maintain on file an annual income certification, in form and substance reasonably satisfactory to the City, from each household occupying an Affordable Unit, based upon the current income of each household member over the age of eighteen (18). The Owner shall make a good faith effort to verify that the income provided by the household is accurate in accordance with Section 2.3.1, above.
2.6.1 A rental unit occupied by a household that qualifies as a Very Low Income Household at the time the household first occupies an Affordable Unit shall be deemed to continue to be so occupied until a recertification of such household’s income demonstrates that such household no longer qualifies as a Very Low Income Household. At such time as a household ceases to qualify as a Very Low Income Household based on income recertification, the Owner shall designate the next available unit (one that is not occupied by a tenant) with the same number of bedrooms as the occupied Affordable Unit and it shall be leased to a Very Low Income Household, so that the number of Affordable Units occupied by or reserved for occupancy by Very Low Income Households will remain constant. For purposes of this Agreement, such designated unit will be considered an Affordable Unit if it is held vacant and available solely for occupancy by a Very Low Income Household and, upon occupancy, the income eligibility of the household as a Very Low Income Household is verified and the unit is rented at Affordable Rent.
2.7 Lease or Occupancy Agreement. Prior to the rental or lease of an Affordable Unit to a Very Low Income Household, the Owner shall require the tenant to execute a written lease or occupancy agreement. The Owner shall maintain on file throughout the Required Covenant Period and for a four (4) year period thereafter, the executed lease or occupancy agreement of each tenant occupying an Affordable Unit. The form of lease or occupancy agreement used by the Owner for the lease or rental of Affordable Units shall be that which is reasonable and customary in residential leasing. In addition, each lease or occupancy agreement for an Affordable Unit shall (i) provide that the tenants of such Affordable Unit shall be subject to annual recertification of income and subject to rental increases in accordance with Sections 2.5 and 2.6 of this Agreement, and (ii) contain a provision to the effect that the Owner has relied on the income certification and supporting information supplied by the tenant in determining qualification for occupancy of the Affordable Unit, and that any material misstatement in such certification (whether or not intentional) may be cause for immediate termination of such lease or occupancy agreement.
2.7.1 The Owner shall refrain from restricting the rental or lease of Affordable Units on the basis of race, color, religion, sex, marital status, disability, ancestry or national origin of any person.
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2.7.2 The covenants established herein shall, without regard to technical classification and designation, be binding for the benefit and in favor of the City, and its successors and assigns, and shall burden and run with the Property.
2.7.3 The City is deemed to be the beneficiary of the terms and provisions of the covenants herein, both for and in its own right and for the purposes of protecting the interests of the community and other parties, public or private, for whose benefit these covenants running with the land have been provided.
2.8 Security Deposits. The Owner may require security deposits on Affordable Units in amounts which are consistent with applicable law.
2.9 Additional Information; Books and Records. The Owner shall provide any additional information concerning the Affordable Units reasonably requested by the City. The Owner will maintain complete and accurate records pertaining to the Affordable Units throughout the Covenant Period and for a four (4) year period thereafter. The City shall have the right upon written notice of no less than two (2) business days to the Owner, at any time during normal business hours of 9:00 am to 5:00 pm, to examine of all books, records or other documents maintained by the Owner or by any of the Owner’s agents which pertain to any Affordable Unit, including all executed leases or occupancy agreements and all Income Certifications, and obtain copies of any requested executed leases, occupancy agreements and Income Certifications within ten (10) business days following such examination and the City’s written request.
2.10 Specific Performance. The Owner hereby agrees that specific enforcement of the Owner’s agreement to comply with the allowable rent and occupancy restrictions and covenants contained herein is one of the reasons and consideration for the City having granted a density bonus and that, in the event of the Owner’s breach of such requirements, potential monetary damages to the City, as well as to existing and prospective Very Low Income Households, would be difficult, if not impossible, to evaluate and quantify. Therefore, in addition to any other relief to which the City may be entitled as a consequence of the breach hereof, the Owner agrees to the imposition of the remedy of specific performance against it in the case of any event of default by the Owner in complying with any provision of this Agreement beyond any applicable notice and cure period.
2.11 Audit. The City shall have the right to perform an audit of the Apartment Community to determine compliance with the provisions of this Agreement. Such audit shall not be undertaken more often than once each calendar year. All costs and expenses associated with the audit shall be paid by the Owner.
2.12 Management. The Owner and/or the management agent (if not the Owner) shall operate the Apartment Community in a manner that will provide decent, safe and sanitary residential facilities to the occupants thereof, and will comply with provisions of this Agreement. Upon the written request of the City, the Owner shall cooperate with the City in the periodic review (but not more than once each calendar year) of the management practices and financial status of the Affordable Units. The purpose of each periodic review will be to enable the City to determine if the Affordable Units are being operated and managed in accordance with the requirements and standards of this Agreement. Results of such City review shall be provided to the Owner, and the
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City shall have the authority to require the Owner to make modifications that are reasonably necessary to ensure the objectives of this Agreement are met.
2.13 Binding for Term. It is intended by the Parties that except as may be otherwise expressly provided herein, the provisions of this Agreement shall apply to the Apartment Community throughout the entire term hereof, as established in Section 3.1 below.
ARTICLE 3. TERM AND RECORDATION.
3.1 Term of Agreement. This Agreement shall remain in full force and effect for the Required Covenant Period, unless the Owner and the City agree, in writing, to terminate this Agreement prior to the expiration of the Required Covenant Period. Unless terminated earlier pursuant to the prior sentence of this Section 3.1, or Section 3.3 below, the Parties intend that the provisions and effect of this Agreement and specifically of Article 2 hereof, shall remain in full force and effect for the entire Required Covenant Period.
3.2 Agreement to Record. The Owner represents, warrants, and covenants that this Agreement will be recorded in the real property records of Riverside County.
3.2 Suspension of Restrictions. Notwithstanding the generality of the foregoing provisions of this Article 3 or any other provisions hereof, this Agreement and all of the terms and restrictions contained herein shall be suspended for any period of involuntary noncompliance as a result of unforeseen events such as fire or act of God which leaves the entire Apartment Community uninhabitable (and the proceeds of insurance available to the Owner as a result thereof are insufficient to reconstruct the Apartment Community), or a change in a federal or state law or an action by the federal government, the State or a court of competent jurisdiction, after the date of recordation hereof, that prevents the City from enforcing the provisions of this Agreement, or a condemnation or a similar event.
ARTICLE 4. DEFAULT; REMEDIES.
4.1 An Event of Default. Each of the following shall constitute an “Event of Default” by the Owner under this Agreement:
4.1.1 Failure by the Owner to duly perform, comply with and observe any of the conditions, terms, or covenants of any agreement with the City concerning the Apartment Community, or of this Agreement, if such failure remains uncured thirty (30) days after written notice of such failure from the City to the Owner in the manner provided herein or, with respect to a default that cannot be cured within thirty (30) days, if the Owner fails to commence such cure within such thirty (30) day period or thereafter fails to diligently and continuously proceed with such cure to completion. However, if a different period or notice requirement is specified under any other section of this Agreement, then the specific provision shall control.
4.1.2 Any representation or warranty contained in this Agreement or in any application, financial statement, certificate, or report submitted by the Owner to the City proves to have been incorrect in any material respect when made.
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4.1.3 A court having jurisdiction shall have made or rendered a decree or order: (i) adjudging the Owner to be bankrupt or insolvent; (ii) approving as properly filed a petition seeking reorganization of the Owner or seeking any arrangement on behalf of the Owner under the bankruptcy laws or any other applicable debtor’s relief law or statute of the United States or of any state or other jurisdiction; (iii) appointing a receiver, trustee, liquidator, or assignee of the Owner in bankruptcy or insolvency or for any of its properties; or (iv) directing the winding up or liquidation of the Owner, providing, however, that any such decree or order described in any of the foregoing subsections shall have continued unstayed or undischarged for a period of ninety (90) days.
4.1.4 The Owner shall have assigned its assets for the benefit of its creditors or suffered a sequestration or attachment or execution on any substantial part of its property, unless the property so assigned, sequestered, attached, or executed upon shall have been returned or released within ninety (90) days after such event (unless a lesser time period is permitted for cure hereunder) or prior to sale pursuant to such sequestration, attachment, or execution. If the Owner is diligently working to obtain a return or release of the property and the City’s interests hereunder are not imminently threatened in its reasonable business judgment, then the City shall not declare a default under this subsection.
4.1.5 The Owner shall have voluntarily suspended its business or dissolved.
4.1.6 The seizure or appropriation of all or, in the reasonable opinion of the City, a substantial part of the Apartment Community, except for condemnation initiated by the City or any governmental agency or authority.
4.1.7 There should occur any default declared by any lender under any loan document or deed of trust relating to any loan made in connection with the Apartment Community, which loan is secured by a deed of trust or other instrument affecting the Apartment Community, and such default remains uncured following the expiration of any applicable cure period.
4.2 City’s Option to Lease. [INTENTIONALLY OMITTED}
4.3 City Remedies. The City shall have the right to mandamus or other suit, action or proceeding at law or in equity to require the Owner to perform its obligations and covenants under this Agreement or to enjoin acts or things which may be unlawful or in violation of the provisions hereof, provided that in any such case the City has first provided the required notice of any alleged default and the Owner has had the requisite opportunity to cure pursuant to Section 4.1.1, above.
4.4 Action at Law; No Remedy Exclusive. The City may take whatever action at law or in equity as may be necessary to enforce performance and observance of any obligation, agreement or covenant of the Owner under this Agreement. No remedy herein conferred upon or reserved by the City is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law, in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of such right or power, but any such right or power may be exercised from time to time and as often as the City may deem expedient. In order to entitle the City to
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exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be herein otherwise expressly required or required by law to be given.
ARTICLE 5. GENERAL PROVISIONS.
5.1 Limitations on Recourse. Notwithstanding anything to the contrary contained in this Agreement, except in the event of fraud, waste, or illegal acts, or with regard to any indemnity obligations imposed upon the Owner under the terms of this Agreement, (i) no partner, member, officer or director, as applicable, of the Owner (each, an “Owner Affiliate”) shall have any direct, indirect or derivative personal liability for the obligations of the Owner under this Agreement, and (ii) the City shall not exercise any rights or institute any action against any Owner Affiliate directly, indirectly or derivatively for the payment of any sum of money that is or may become payable hereunder.
5.2 Maintenance, Repair, Alterations. The Owner shall maintain and preserve the Apartment Community in good condition and repair in accordance with the Ground Lease, and shall otherwise comply with the Ground Lease and all laws, ordinances, rules, regulations, covenants, conditions, restrictions, and orders of any governmental authority now or hereafter affecting the conduct or operation of the Apartment Community or any part thereof or requiring any alteration or improvement to be made thereon. The Owner shall not commit, suffer, or permit any act to be done in, upon, or to the Apartment Community or any part thereof in violation of any such laws, ordinances, rules, regulations, or orders. The Owner hereby agrees that the City may conduct from time to time through representatives, upon reasonable notice of no less than twenty-four (24) hours, on-site inspections and observation of: (i) the maintenance and repair of the Apartment Community, including a review of all maintenance and repair programs and practices and all reports and records pertaining thereto, including records of expenditures relating thereto; and (ii) such other facilities, practices, and records of the Owner relating to the Affordable Units as the City reasonably deems to be necessary or appropriate in order to monitor the Owner’s compliance with the provisions of this Agreement.
5.3 Notices. All notices (other than telephone notices), certificates or other communications (other than telephone communications) required or permitted hereunder shall be sufficiently given and should be deemed given when sent by certified mail, postage prepaid, or twenty-four (24) hours following delivery of such notice to Federal Express or similar commercial carrier for next business day or overnight delivery, addressed as follows:
If to the City:
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260-2578
Attn: Housing Division
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If to the Owner
100 Pacifica, Suite 203
Irvine, CA 92618
Attn: President
5.4 Relationship of Parties. Nothing contained in this Agreement shall be interpreted or understood by any of the Parties, or by any third persons, as creating the relationship of employer and employee, principal and agent, limited or general partnership, or joint venture between the City and the Owner or the Owner’s agents, employees or contractors, and the Owner shall at all times be deemed an independent contractor and shall be wholly responsible for the manner in which it or its agents, or both, perform the services required of it by the terms of this Agreement for the operation of the Apartment Community. The Owner has and hereby retains the right to exercise full control of employment, direction, compensation and discharge of all persons assisting in the performance of services hereunder. In regards to the on-site operation of the Apartment Community, the Owner shall be solely responsible for all matters relating to payment of its employees, including compliance with Social Security, withholding and all other laws and regulations governing such matters. The Owner agrees to be solely responsible for its own acts and those of its agents and employees.
5.5 No Claims. Nothing contained in this Agreement shall create or justify any claim against the City by any person the Owner may have employed or with whom the Owner may have contracted relative to the purchase of materials, supplies or equipment, or the furnishing or the performance of any work or services with respect to the operation of the Affordable Units.
5.6 Conflict of Interests. No member, official or employee of the City shall make any decision relating to this Agreement which affects his or her personal interests or the interests of any corporation, partnership or association in which he or she is directly or indirectly interested. No officer or employee of the Owner shall acquire any interest in conflict with or inimical to the interests of the City.
5.7 Non-Liability of City Officials, Employees and Agents. No member, official, employee or agent of the City shall be personally liable to the Owner, or any successor in interest, in the event of any default or breach by the City or for any amount which may become due to the Owner or successor in connection with this Agreement or on any obligation of the City under the terms of this Agreement.
5.8 Unavoidable Delay; Extension of Time of Performance. In addition to specific provisions of this Agreement, performance by either Party hereunder that relates to a construction obligation shall not be deemed to be in default where it is due to an “Unavoidable Delay.” “Unavoidable Delay” means a delay due to the elements (including unseasonable weather), fire, earthquakes or other acts of God, strikes, pandemics, labor disputes, lockouts, shortages of construction materials experienced generally in the construction industry in the local area, acts of the public enemy, riots, insurrections or governmental regulation of the sale or transportation of materials, supply or labor; provided, however, that to the extent a delay is caused by any other reason that the Owner reasonably believes is beyond its control, the Owner may request, on a case-by-case basis, that the
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City excuse any such delay as an Unavoidable Delay and the City shall make its determination as to whether such delay constitutes an Unavoidable Delay using its reasonable judgment.
5.9 Indemnity. The Owner shall indemnify, defend and hold harmless the City and all officials, employees and agents of City (with counsel reasonably satisfactory to the City) against any costs, liabilities, damages or judgments arising from claims or litigation of any nature whatsoever brought by third parties and directly or indirectly arising from the Owner’s ownership or operation of the Apartment Community, or the Owner’s performance of its obligations under this Agreement, and in the event of settlement, compromise or judgment hold the City free and harmless therefrom.
Notwithstanding the foregoing, the indemnity provisions contained in this Section 5.9 shall not apply with respect to any costs, liabilities, damages or judgments arising directly or indirectly from the City’s rental of units within the Apartment Community as described in Section 4.2 hereof. The provisions of this Section 5.9 shall survive the term of this Agreement.
5.10 Rights and Remedies Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the Parties are cumulative, and the exercise or failure to exercise one or more of such rights or remedies by either Party shall not preclude the exercise by it, at the same time or different times, of any right or remedy for the same default or any other default by the other Party. No waiver of any default or breach by the Owner hereunder shall be implied from any omission by the City to take action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the waiver, and such wavier shall be operative only for the time and to the extent therein stated.
Waivers of any covenant, term, or condition contained herein shall not be construed as a waiver of any subsequent breach of the same covenant, term or condition. The consent or approval by the City to or of any act by the Owner requiring further consent or approval shall not be deemed to waive or render unnecessary the consent or approval to or of any subsequent similar act. The exercise of any right, power, or remedy shall in no event constitute a cure or a waiver of any default under this Agreement, nor shall it invalidate any act done pursuant to notice of default, or prejudice the City in the exercise of any right, power, or remedy hereunder or under any agreements ancillary or related hereto.
5.11 Applicable Law. This Agreement shall be interpreted under and pursuant to the laws of the State of California.
5.12 Severability. If any term, provision, covenant or condition of this Agreement is held in a final disposition by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding or unenforceability.
5.13 Legal Actions. In the event any legal action is commenced to interpret or to enforce the terms of this Agreement or to collect damages as a result of any breach thereof, the Party prevailing in any such action shall be entitled to recover against the Party not prevailing all reasonable attorneys’ fees and costs incurred in such action (including all legal fees incurred in any appeal or in any action to enforce any resulting judgment), as awarded by a court of competent jurisdiction.
5.14 Binding Upon Successors. This Agreement shall be binding upon and inure to the benefit of the permitted heirs, administrators, executors, successors in interest and assigns of each of the
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Parties. Any reference in this Agreement to a specifically named Party shall be deemed to apply to any successor, heir, administrator, executor or assign of such Party who has acquired an interest in compliance with the terms hereof or under law.
5.15 Time of the Essence. In all matters under this Agreement, time is of the essence.
5.16 Approvals by the City. Any approvals required under this Agreement shall be made by the City Manager or his or her designee, and shall not be unreasonably withheld, conditioned, delayed or made, except where it is specifically provided herein that another standard applies, in which case the specified standard shall apply.
5.17 Complete Understanding of the Parties. This Agreement and the attached Exhibits constitute the entire understanding and agreement of the Parties with respect to the matters described herein.
5.18 Covenants to Run With the Land. The Owner hereby subjects the Apartment Community to the covenants, reservations, and restrictions set forth in this Agreement. The City and the Owner hereby declare their express intent that the covenants, reservations, and restrictions set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Owner’s successors in title to the Apartment Community; provided, however, that on the termination of this Agreement said covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Apartment Community or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instruments. No breach of any of the provisions of this Agreement shall defeat or render invalid the lien of a mortgage or deed of trust made in good faith and for value encumbering the Property or any interest of the Owner therein.
5.19 Burden and Benefit. The City and the Owner hereby declare their understanding and intent that: (i) the burden of the covenants, reservations, restrictions, and agreements set forth herein touch and concern the Property and the Apartment Community, in that Owner’s legal interest in the Apartment Community is rendered less valuable thereby, (ii) the covenants, reservations, restrictions, and agreements set forth herein directly benefit the Property and the Apartment Community (a) by enhancing and increasing the enjoyment and use of the Apartment Community by certain Very Low Income Households, the intended beneficiaries of such covenants, reservations, restrictions, and agreements, (b) by making possible the obtaining of advantageous financing for the Property and the Apartment Community, and (c) by furthering the public purposes advanced by the City, and (iii) the covenants, reservations, restrictions and agreements set forth herein shall run with the Property and shall be binding for the benefit of and enforceable by the City and its successors and assigns for the entire Term of this Agreement.
5.20 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.
5.21 Amendments. This Agreement may be amended only by the written agreement of the City and the Owner.
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WHEREFORE, the undersigned has executed this Agreement as of the date first-above written.
OWNER:
_____________________________
CITY:
CITY OF PALM DESERT
By: ________________________
Print Name: ___________________
Title: ________________________
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
State of California )
County of )
On ____________, 2022, before me, ________________________________________________, (insert name and title of the officer)
Notary Public, personally appeared ________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
P6401-0001\2940764v2.doc
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
State of California )
County of )
On ____________, 2022, before me, ________________________________________________, (insert name and title of the officer)
Notary Public, personally appeared ________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
P6401-0001\2940764v2.doc
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
State of California )
County of )
On ____________, 2022, before me, ________________________________________________, (insert name and title of the officer)
Notary Public, personally appeared ________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
EXHIBIT “A”
LEGAL DESCRIPTION OF THE PROPERTY
Real property in the City of Palm Desert, County of Riverside, State of California, described as follows:
EXHIBIT “B”
HOUSEHOLD INCOME CERTIFICATION
(Attached)
B
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B
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B
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EXHIBIT “C”
CERTIFICATE OF CONTINUING COMPLIANCE
(Attached)
C
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C
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C
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C
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Exhibit D-1
Form of Density Bonus Agreement for Phase II
RECORDING REQUESTED BY, AND
WHEN RECORDED RETURN TO:
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260-2578
Attn: _________________
SPACE ABOVE THIS LINE FOR RECORDER’S USE ONLY
This Document is recorded for the benefit of the City of Palm Desert and is exempt from recording fees pursuant to Sections 6103, 27383 and 27388.1 of the California Government Code.
HOUSING AGREEMENT
(Density Bonus Agreement; Phase II)
by and between
the CITY OF PALM DESERT,
and
__________________________
DATED AS OF _________ ____, 202__
HOUSING AGREEMENT
THIS HOUSING AGREEMENT (the “Agreement”) is dated as of ______________ ___, 202__, and is by and between the CITY OF PALM DESERT, a municipal corporation (the “City”), and ____________________________ (the “Owner”). City and Owner are sometimes referred to herein individually as a “Party” and collectively as “Parties”.
RECITALS
This Agreement is predicated upon the following facts:
A. The Owner is the owner of the land described in “Exhibit A” attached hereto (the “Property”).
B. The City, the Palm Desert Housing Authority (“Authority”) and Owner have entered into that certain Amended and Restated Disposition, Development and Loan Agreement dated in April, 2024 (“DDLA”), pursuant to which the City conveyed the Property to the Owner for the development described in the DDLA (“Development” or “Apartment Community”) and the Authority made a loan to Owner for the purchase price of the Property and for construction costs (“Authority Loan”). Capitalized terms used but not defined herein shall have the meaning set forth in the DDLA.
C. Pursuant to the DDLA, the Owner executed a Promissory Note in favor of Authority and a deed of trust in favor of Authority securing such Promissory Note and the Authority is obligated to make disbursements of loan proceeds subject to and in accordance with the DDLA.
D. Additionally, Owner has applied for and obtained a density bonus from the City for the Development which permits greater density and less parking that would otherwise be required, and in exchange, City also requires that the apartment units be so restricted of record, and that such restrictions not be subordinate or subordinated to any deeds of trust or other consensual liens.
E. This Agreement is that density bonus restrictions agreement.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the City and the Owner hereby agree as follows:
ARTICLE 1. DEFINITIONS AND INTERPRETATION.
1.1 Definitions.
Capitalized terms used herein shall have the following meanings unless the context in which they are used clearly requires otherwise.
“Affordable Units” shall mean twelve (12) of the units in the Apartment Community available to and occupied by, or held vacant for occupancy only by, Very Low Income Households
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and rented at an Affordable Rent. The Affordable Units will include the number of bedrooms shown on the following table:
Bedroom
Size
Very Low
Income
Household
Units
One 2
Two 7
Three 3
Total: 12
“Affordable Rent” shall mean rent for an Affordable Unit, including a Reasonable Utility Allowance, determined pursuant to California Health and Safety Code Section 50053(b) and the state regulations adopted by the California Department of Housing and Community Development (“HCD”) pursuant thereto, as amended from time to time, based upon the AMI adjusted for a Household Size Appropriate to the Affordable Unit. More specifically, the maximum monthly Affordable Rent, including a Reasonable Utility Allowance, may not exceed thirty percent (30%) of fifty percent (50%) of the AMI, adjusted for a Household Size Appropriate to the Affordable Unit, divided by twelve.
“AMI” shall mean the area median income for Riverside County as published by the California Department of Housing and Community Development pursuant to Health and Safety Code Section 50052.5, or successor statute, as adjusted for family size in accordance with the state regulations adopted pursuant to California Health and Safety Code Section 50052.5. “Household Size Appropriate to the Affordable Unit” in the absence of pertinent federal statutes or regulations applicable to the Apartment Community, shall have the meaning set forth in California Health and Safety Code Section 50052.5(h), as amended from time to time. “Reasonable Utility Allowance” shall mean a utility allowance for utilities paid by a tenant (not including telephone, internet or cable service) utilizing the utility allowance schedule published annually by the Housing Authority of the County of Riverside. “Required Covenant Period” shall mean the period commencing on the date all units in the Apartment Community have been completed as evidenced by the City’s issuance of a final Certificate of Occupancy for the Apartment Community, and ending as of the fifty-fifth (55th) anniversary thereof.
“Very Low Income Household” shall mean persons and families who meet the fifty percent (50%) or less of AMI income qualification limits set forth in California Health and Safety Code Section 50105 and Title 25 of the California Code of Regulations, including Section 6910, as such statute and regulations are amended from time to time.
1.2 Rules of Construction.
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1.2.1 The singular form of any word used herein, including the terms defined herein shall include the plural and vice versa. The use herein of a word of any gender shall include correlative words of all genders.
1.2.2 Unless otherwise specified, references to articles, sections, and other subdivisions of this Agreement are to the designated articles, sections, and other subdivisions of this Agreement as originally executed. The words “hereof,” “herein,” “hereunder,” and words of similar import shall refer to this Agreement as a whole.
1.2.3 All of the terms and provisions hereof shall be construed to effectuate the purposes set forth in this Agreement and to sustain the validity hereof.
1.2.4 Headings or titles of the several articles and sections hereof and the table of contents appended to copies hereof shall be solely for convenience of reference and shall not affect the meaning, construction, or effect of the provisions hereof.
ARTICLE 2. ONGOING APARTMENT COMMUNITY OBLIGATIONS.
2.1 Apartment Community and Affordable Units.
The Owner shall develop and construct the Apartment Community on the Property in conformity with the DDLA. Thereafter, during the Required Covenant Period, the Owner agrees that not less than twelve (12) units in the Apartment Community shall be Affordable Units under this Agreement, meaning that such units shall be continually available to and occupied by, or held vacant for occupancy only by, Very Low Income Households. All of the rental units in the Apartment Community shall be similarly constructed and all of the Affordable Units shall be generally constructed at the same time as those units which are available to other tenants, and distributed in terms of location throughout the Apartment Community. The Affordable Units shall be of comparable quality to those rental units in the Apartment Community which are available to other tenants. The Owner agrees that, to the extent commercially reasonable, Affordable Units will not be underutilized. No persons shall be permitted to occupy any Affordable Unit in excess of applicable limit of maximum occupancy set by the City’s Municipal Code and the laws of the State of California.
2.2 Residential Rental Property.
The Owner covenants to operate the Apartment Community as residential rental property.
During the Required Covenant Period, the Affordable Units will be held and used for the purpose of providing residential living, and the Owner shall own, manage and operate, or cause the management and operation of, the Apartment Community to provide such affordable rental housing. All of the rental units in the Apartment Community with the exception of one (1) manager unit will be available for rental on a continuous basis to members of the general public and the Owner will not give preference to any particular class or group in renting the units in the Apartment Community, except as required under this Agreement. The Owner shall not convert any Affordable Unit(s) to condominiums or cooperative ownership or sell condominium or cooperative conversion rights to any Affordable Unit(s) during the term of this Agreement.
2.3 Very Low Income Households.
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2.3.1 Income Qualification; Initial Certification. Subject to the applicable provisions hereof, throughout the Required Covenant Period, the Affordable Units restricted by this Agreement will be exclusively occupied by, or available for occupancy only by Very Low Income Households on a continuous basis. Prior to the rental or lease of an Affordable Unit and in accordance with Section 2.6 hereof, the Owner will obtain and maintain on file a Household Income Certification (“Income Certification”) substantially in the form attached hereto as Exhibit “B” and incorporated herein by this reference for each Very Low Income Household, and shall provide copies of same to the City at such times as the City may, from time to time, reasonably require. In addition, the Owner will provide such further information as may reasonably be required in the future by the City. The Income Certification shall be dated immediately prior to the applicable household’s initial occupancy of an Affordable Unit. The Owner shall make a good faith effort to verify that the income provided by an applicant in an Income Certification is accurate by taking any one or more of the following steps as part of the verification process for all household members over the age of eighteen (18) as appropriate:
(i) Obtain two (2) pay stubs for the two (2) most recent pay periods; • Obtain a true copy of an income tax return for the most recent tax year in which a return was filed;
(ii) Obtain an income verification form from the household member’s current employer;
(iii) Obtain an income verification form from the Social Security Administration and/or the State Department of Social Services, or its equivalent, if the household member receives assistance from either of those agencies;
(iv) If the household member is unemployed and has no tax return, obtain another form of independent verification; or
(v) Obtain such other documentation as may be reasonably acceptable pursuant to Title 25 of the California Code of Regulations, as amended from time to time, to verify income.
2.3.2 Certificate of Continuing Program Compliance; Annual Report. Throughout the Required Covenant Period, the Owner will prepare and submit to the City, at such periodic frequency as the City might reasonably require, but not more than once annually, a Certificate of Continuing Compliance in substantially the form attached hereto as Exhibit “C” and incorporated herein by this reference, and executed by the Owner. The Owner will also prepare and submit to the City on or before each anniversary date of the commencement of the Required Covenant Period, and for the preceding calendar year, a report in form and substance reasonably satisfactory to the City summarizing the vacancy rate of the Apartment Community, including the number of Affordable Units held vacant for occupancy by Very Low Income Households for such calendar year.
2.4 Affordable Rent. Throughout the Required Covenant Period, an Affordable Rent shall be charged to the Very Low Income Household occupants of Affordable Units, as more specifically described above.
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2.5 Rent Increases. Rents for Affordable Units may be increased not more than once per year and twelve (12) months must have elapsed since the date of the tenant’s initial occupancy or the last rent increase. The rents charged following such an increase, or upon a vacancy and new occupancy by a Very Low Income Household shall not exceed an Affordable Rent. The Owner shall, consistent with applicable law, give proper written notice to tenants of all rent increases, and upon written request, provide the City with reasonable detail concerning the amount of and rationale for such rent increases.
2.6 Income Recertification of Affordable Units. Annually, on the anniversary date of occupancy of an Affordable Unit by a Very Income Household, the Owner shall obtain and maintain on file an annual income certification, in form and substance reasonably satisfactory to the City, from each household occupying an Affordable Unit, based upon the current income of each household member over the age of eighteen (18). The Owner shall make a good faith effort to verify that the income provided by the household is accurate in accordance with Section 2.3.1, above.
2.6.1 A rental unit occupied by a household that qualifies as a Very Low Income Household at the time the household first occupies an Affordable Unit shall be deemed to continue to be so occupied until a recertification of such household’s income demonstrates that such household no longer qualifies as a Very Low Income Household. At such time as a household ceases to qualify as a Very Low Income Household based on income recertification, the Owner shall designate the next available unit (one that is not occupied by a tenant) with the same number of bedrooms as the occupied Affordable Unit and it shall be leased to a Very Low Income Household, so that the number of Affordable Units occupied by or reserved for occupancy by Very Low Income Households will remain constant. For purposes of this Agreement, such designated unit will be considered an Affordable Unit if it is held vacant and available solely for occupancy by a Very Low Income Household and, upon occupancy, the income eligibility of the household as a Very Low Income Household is verified and the unit is rented at Affordable Rent.
2.7 Lease or Occupancy Agreement. Prior to the rental or lease of an Affordable Unit to a Very Low Income Household, the Owner shall require the tenant to execute a written lease or occupancy agreement. The Owner shall maintain on file throughout the Required Covenant Period and for a four (4) year period thereafter, the executed lease or occupancy agreement of each tenant occupying an Affordable Unit. The form of lease or occupancy agreement used by the Owner for the lease or rental of Affordable Units shall be that which is reasonable and customary in residential leasing. In addition, each lease or occupancy agreement for an Affordable Unit shall (i) provide that the tenants of such Affordable Unit shall be subject to annual recertification of income and subject to rental increases in accordance with Sections 2.5 and 2.6 of this Agreement, and (ii) contain a provision to the effect that the Owner has relied on the income certification and supporting information supplied by the tenant in determining qualification for occupancy of the Affordable Unit, and that any material misstatement in such certification (whether or not intentional) may be cause for immediate termination of such lease or occupancy agreement.
2.7.1 The Owner shall refrain from restricting the rental or lease of Affordable Units on the basis of race, color, religion, sex, marital status, disability, ancestry or national origin of any person.
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2.7.2 The covenants established herein shall, without regard to technical classification and designation, be binding for the benefit and in favor of the City, and its successors and assigns, and shall burden and run with the Property.
2.7.3 The City is deemed to be the beneficiary of the terms and provisions of the covenants herein, both for and in its own right and for the purposes of protecting the interests of the community and other parties, public or private, for whose benefit these covenants running with the land have been provided.
2.8 Security Deposits. The Owner may require security deposits on Affordable Units in amounts which are consistent with applicable law.
2.9 Additional Information; Books and Records. The Owner shall provide any additional information concerning the Affordable Units reasonably requested by the City. The Owner will maintain complete and accurate records pertaining to the Affordable Units throughout the Covenant Period and for a four (4) year period thereafter. The City shall have the right upon written notice of no less than two (2) business days to the Owner, at any time during normal business hours of 9:00 am to 5:00 pm, to examine of all books, records or other documents maintained by the Owner or by any of the Owner’s agents which pertain to any Affordable Unit, including all executed leases or occupancy agreements and all Income Certifications, and obtain copies of any requested executed leases, occupancy agreements and Income Certifications within ten (10) business days following such examination and the City’s written request.
2.10 Specific Performance. The Owner hereby agrees that specific enforcement of the Owner’s agreement to comply with the allowable rent and occupancy restrictions and covenants contained herein is one of the reasons and consideration for the City having granted a density bonus and that, in the event of the Owner’s breach of such requirements, potential monetary damages to the City, as well as to existing and prospective Very Low Income Households, would be difficult, if not impossible, to evaluate and quantify. Therefore, in addition to any other relief to which the City may be entitled as a consequence of the breach hereof, the Owner agrees to the imposition of the remedy of specific performance against it in the case of any event of default by the Owner in complying with any provision of this Agreement beyond any applicable notice and cure period.
2.11 Audit. The City shall have the right to perform an audit of the Apartment Community to determine compliance with the provisions of this Agreement. Such audit shall not be undertaken more often than once each calendar year. All costs and expenses associated with the audit shall be paid by the Owner.
2.12 Management. The Owner and/or the management agent (if not the Owner) shall operate the Apartment Community in a manner that will provide decent, safe and sanitary residential facilities to the occupants thereof, and will comply with provisions of this Agreement. Upon the written request of the City, the Owner shall cooperate with the City in the periodic review (but not more than once each calendar year) of the management practices and financial status of the Affordable Units. The purpose of each periodic review will be to enable the City to determine if the Affordable Units are being operated and managed in accordance with the requirements and standards of this Agreement. Results of such City review shall be provided to the Owner, and the
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City shall have the authority to require the Owner to make modifications that are reasonably necessary to ensure the objectives of this Agreement are met.
2.13 Binding for Term. It is intended by the Parties that except as may be otherwise expressly provided herein, the provisions of this Agreement shall apply to the Apartment Community throughout the entire term hereof, as established in Section 3.1 below.
ARTICLE 3. TERM AND RECORDATION.
3.1 Term of Agreement. This Agreement shall remain in full force and effect for the Required Covenant Period, unless the Owner and the City agree, in writing, to terminate this Agreement prior to the expiration of the Required Covenant Period. Unless terminated earlier pursuant to the prior sentence of this Section 3.1, or Section 3.3 below, the Parties intend that the provisions and effect of this Agreement and specifically of Article 2 hereof, shall remain in full force and effect for the entire Required Covenant Period.
3.2 Agreement to Record. The Owner represents, warrants, and covenants that this Agreement will be recorded in the real property records of Riverside County.
3.2 Suspension of Restrictions. Notwithstanding the generality of the foregoing provisions of this Article 3 or any other provisions hereof, this Agreement and all of the terms and restrictions contained herein shall be suspended for any period of involuntary noncompliance as a result of unforeseen events such as fire or act of God which leaves the entire Apartment Community uninhabitable (and the proceeds of insurance available to the Owner as a result thereof are insufficient to reconstruct the Apartment Community), or a change in a federal or state law or an action by the federal government, the State or a court of competent jurisdiction, after the date of recordation hereof, that prevents the City from enforcing the provisions of this Agreement, or a condemnation or a similar event.
ARTICLE 4. DEFAULT; REMEDIES.
4.1 An Event of Default. Each of the following shall constitute an “Event of Default” by the Owner under this Agreement:
4.1.1 Failure by the Owner to duly perform, comply with and observe any of the conditions, terms, or covenants of any agreement with the City concerning the Apartment Community, or of this Agreement, if such failure remains uncured thirty (30) days after written notice of such failure from the City to the Owner in the manner provided herein or, with respect to a default that cannot be cured within thirty (30) days, if the Owner fails to commence such cure within such thirty (30) day period or thereafter fails to diligently and continuously proceed with such cure to completion. However, if a different period or notice requirement is specified under any other section of this Agreement, then the specific provision shall control.
4.1.2 Any representation or warranty contained in this Agreement or in any application, financial statement, certificate, or report submitted by the Owner to the City proves to have been incorrect in any material respect when made.
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4.1.3 A court having jurisdiction shall have made or rendered a decree or order: (i) adjudging the Owner to be bankrupt or insolvent; (ii) approving as properly filed a petition seeking reorganization of the Owner or seeking any arrangement on behalf of the Owner under the bankruptcy laws or any other applicable debtor’s relief law or statute of the United States or of any state or other jurisdiction; (iii) appointing a receiver, trustee, liquidator, or assignee of the Owner in bankruptcy or insolvency or for any of its properties; or (iv) directing the winding up or liquidation of the Owner, providing, however, that any such decree or order described in any of the foregoing subsections shall have continued unstayed or undischarged for a period of ninety (90) days.
4.1.4 The Owner shall have assigned its assets for the benefit of its creditors or suffered a sequestration or attachment or execution on any substantial part of its property, unless the property so assigned, sequestered, attached, or executed upon shall have been returned or released within ninety (90) days after such event (unless a lesser time period is permitted for cure hereunder) or prior to sale pursuant to such sequestration, attachment, or execution. If the Owner is diligently working to obtain a return or release of the property and the City’s interests hereunder are not imminently threatened in its reasonable business judgment, then the City shall not declare a default under this subsection.
4.1.5 The Owner shall have voluntarily suspended its business or dissolved.
4.1.6 The seizure or appropriation of all or, in the reasonable opinion of the City, a substantial part of the Apartment Community, except for condemnation initiated by the City or any governmental agency or authority.
4.1.7 There should occur any default declared by any lender under any loan document or deed of trust relating to any loan made in connection with the Apartment Community, which loan is secured by a deed of trust or other instrument affecting the Apartment Community, and such default remains uncured following the expiration of any applicable cure period.
4.2 City’s Option to Lease. [INTENTIONALLY OMITTED}
4.3 City Remedies. The City shall have the right to mandamus or other suit, action or proceeding at law or in equity to require the Owner to perform its obligations and covenants under this Agreement or to enjoin acts or things which may be unlawful or in violation of the provisions hereof, provided that in any such case the City has first provided the required notice of any alleged default and the Owner has had the requisite opportunity to cure pursuant to Section 4.1.1, above.
4.4 Action at Law; No Remedy Exclusive. The City may take whatever action at law or in equity as may be necessary to enforce performance and observance of any obligation, agreement or covenant of the Owner under this Agreement. No remedy herein conferred upon or reserved by the City is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law, in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of such right or power, but any such right or power may be exercised from time to time and as often as the City may deem expedient. In order to entitle the City to
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exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be herein otherwise expressly required or required by law to be given.
ARTICLE 5. GENERAL PROVISIONS.
5.1 Limitations on Recourse. Notwithstanding anything to the contrary contained in this Agreement, except in the event of fraud, waste, or illegal acts, or with regard to any indemnity obligations imposed upon the Owner under the terms of this Agreement, (i) no partner, member, officer or director, as applicable, of the Owner (each, an “Owner Affiliate”) shall have any direct, indirect or derivative personal liability for the obligations of the Owner under this Agreement, and (ii) the City shall not exercise any rights or institute any action against any Owner Affiliate directly, indirectly or derivatively for the payment of any sum of money that is or may become payable hereunder.
5.2 Maintenance, Repair, Alterations. The Owner shall maintain and preserve the Apartment Community in good condition and repair in accordance with the Ground Lease, and shall otherwise comply with the Ground Lease and all laws, ordinances, rules, regulations, covenants, conditions, restrictions, and orders of any governmental authority now or hereafter affecting the conduct or operation of the Apartment Community or any part thereof or requiring any alteration or improvement to be made thereon. The Owner shall not commit, suffer, or permit any act to be done in, upon, or to the Apartment Community or any part thereof in violation of any such laws, ordinances, rules, regulations, or orders. The Owner hereby agrees that the City may conduct from time to time through representatives, upon reasonable notice of no less than twenty-four (24) hours, on-site inspections and observation of: (i) the maintenance and repair of the Apartment Community, including a review of all maintenance and repair programs and practices and all reports and records pertaining thereto, including records of expenditures relating thereto; and (ii) such other facilities, practices, and records of the Owner relating to the Affordable Units as the City reasonably deems to be necessary or appropriate in order to monitor the Owner’s compliance with the provisions of this Agreement.
5.3 Notices. All notices (other than telephone notices), certificates or other communications (other than telephone communications) required or permitted hereunder shall be sufficiently given and should be deemed given when sent by certified mail, postage prepaid, or twenty-four (24) hours following delivery of such notice to Federal Express or similar commercial carrier for next business day or overnight delivery, addressed as follows:
If to the City:
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260-2578
Attn: Housing Division
If to the Owner:
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_________________________
100 Pacifica, Suite 203
Irvine, CA 92618
Attn: President
5.4 Relationship of Parties. Nothing contained in this Agreement shall be interpreted or understood by any of the Parties, or by any third persons, as creating the relationship of employer and employee, principal and agent, limited or general partnership, or joint venture between the City and the Owner or the Owner’s agents, employees or contractors, and the Owner shall at all times be deemed an independent contractor and shall be wholly responsible for the manner in which it or its agents, or both, perform the services required of it by the terms of this Agreement for the operation of the Apartment Community. The Owner has and hereby retains the right to exercise full control of employment, direction, compensation and discharge of all persons assisting in the performance of services hereunder. In regards to the on-site operation of the Apartment Community, the Owner shall be solely responsible for all matters relating to payment of its employees, including compliance with Social Security, withholding and all other laws and regulations governing such matters. The Owner agrees to be solely responsible for its own acts and those of its agents and employees.
5.5 No Claims. Nothing contained in this Agreement shall create or justify any claim against the City by any person the Owner may have employed or with whom the Owner may have contracted relative to the purchase of materials, supplies or equipment, or the furnishing or the performance of any work or services with respect to the operation of the Affordable Units.
5.6 Conflict of Interests. No member, official or employee of the City shall make any decision relating to this Agreement which affects his or her personal interests or the interests of any corporation, partnership or association in which he or she is directly or indirectly interested. No officer or employee of the Owner shall acquire any interest in conflict with or inimical to the interests of the City.
5.7 Non-Liability of City Officials, Employees and Agents. No member, official, employee or agent of the City shall be personally liable to the Owner, or any successor in interest, in the event of any default or breach by the City or for any amount which may become due to the Owner or successor in connection with this Agreement or on any obligation of the City under the terms of this Agreement.
5.8 Unavoidable Delay; Extension of Time of Performance. In addition to specific provisions of this Agreement, performance by either Party hereunder that relates to a construction obligation shall not be deemed to be in default where it is due to an “Unavoidable Delay.” “Unavoidable Delay” means a delay due to the elements (including unseasonable weather), fire, earthquakes or other acts of God, strikes, pandemics, labor disputes, lockouts, shortages of construction materials experienced generally in the construction industry in the local area, acts of the public enemy, riots, insurrections or governmental regulation of the sale or transportation of materials, supply or labor; provided, however, that to the extent a delay is caused by any other reason that the Owner reasonably believes is beyond its control, the Owner may request, on a case-by-case basis, that the City excuse any such delay as an Unavoidable Delay and the City shall make its determination as to whether such delay constitutes an Unavoidable Delay using its reasonable judgment.
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5.9 Indemnity. The Owner shall indemnify, defend and hold harmless the City and all officials, employees and agents of City (with counsel reasonably satisfactory to the City) against any costs, liabilities, damages or judgments arising from claims or litigation of any nature whatsoever brought by third parties and directly or indirectly arising from the Owner’s ownership or operation of the Apartment Community, or the Owner’s performance of its obligations under this Agreement, and in the event of settlement, compromise or judgment hold the City free and harmless therefrom.
Notwithstanding the foregoing, the indemnity provisions contained in this Section 5.9 shall not apply with respect to any costs, liabilities, damages or judgments arising directly or indirectly from the City’s rental of units within the Apartment Community as described in Section 4.2 hereof. The provisions of this Section 5.9 shall survive the term of this Agreement.
5.10 Rights and Remedies Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the Parties are cumulative, and the exercise or failure to exercise one or more of such rights or remedies by either Party shall not preclude the exercise by it, at the same time or different times, of any right or remedy for the same default or any other default by the other Party. No waiver of any default or breach by the Owner hereunder shall be implied from any omission by the City to take action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the waiver, and such wavier shall be operative only for the time and to the extent therein stated.
Waivers of any covenant, term, or condition contained herein shall not be construed as a waiver of any subsequent breach of the same covenant, term or condition. The consent or approval by the City to or of any act by the Owner requiring further consent or approval shall not be deemed to waive or render unnecessary the consent or approval to or of any subsequent similar act. The exercise of any right, power, or remedy shall in no event constitute a cure or a waiver of any default under this Agreement, nor shall it invalidate any act done pursuant to notice of default, or prejudice the City in the exercise of any right, power, or remedy hereunder or under any agreements ancillary or related hereto.
5.11 Applicable Law. This Agreement shall be interpreted under and pursuant to the laws of the State of California.
5.12 Severability. If any term, provision, covenant or condition of this Agreement is held in a final disposition by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding or unenforceability.
5.13 Legal Actions. In the event any legal action is commenced to interpret or to enforce the terms of this Agreement or to collect damages as a result of any breach thereof, the Party prevailing in any such action shall be entitled to recover against the Party not prevailing all reasonable attorneys’ fees and costs incurred in such action (including all legal fees incurred in any appeal or in any action to enforce any resulting judgment), as awarded by a court of competent jurisdiction.
5.14 Binding Upon Successors. This Agreement shall be binding upon and inure to the benefit of the permitted heirs, administrators, executors, successors in interest and assigns of each of the Parties. Any reference in this Agreement to a specifically named Party shall be deemed to apply to any successor, heir, administrator, executor or assign of such Party who has acquired an interest in compliance with the terms hereof or under law.
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5.15 Time of the Essence. In all matters under this Agreement, time is of the essence.
5.16 Approvals by the City. Any approvals required under this Agreement shall be made by the City Manager or his or her designee, and shall not be unreasonably withheld, conditioned, delayed or made, except where it is specifically provided herein that another standard applies, in which case the specified standard shall apply.
5.17 Complete Understanding of the Parties. This Agreement and the attached Exhibits constitute the entire understanding and agreement of the Parties with respect to the matters described herein.
5.18 Covenants to Run With the Land. The Owner hereby subjects the Apartment Community to the covenants, reservations, and restrictions set forth in this Agreement. The City and the Owner hereby declare their express intent that the covenants, reservations, and restrictions set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Owner’s successors in title to the Apartment Community; provided, however, that on the termination of this Agreement said covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Apartment Community or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instruments. No breach of any of the provisions of this Agreement shall defeat or render invalid the lien of a mortgage or deed of trust made in good faith and for value encumbering the Property or any interest of the Owner therein.
5.19 Burden and Benefit. The City and the Owner hereby declare their understanding and intent that: (i) the burden of the covenants, reservations, restrictions, and agreements set forth herein touch and concern the Property and the Apartment Community, in that Owner’s legal interest in the Apartment Community is rendered less valuable thereby, (ii) the covenants, reservations, restrictions, and agreements set forth herein directly benefit the Property and the Apartment Community (a) by enhancing and increasing the enjoyment and use of the Apartment Community by certain Very Low Income Households, the intended beneficiaries of such covenants, reservations, restrictions, and agreements, (b) by making possible the obtaining of advantageous financing for the Property and the Apartment Community, and (c) by furthering the public purposes advanced by the City, and (iii) the covenants, reservations, restrictions and agreements set forth herein shall run with the Property and shall be binding for the benefit of and enforceable by the City and its successors and assigns for the entire Term of this Agreement.
5.20 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.
5.21 Amendments. This Agreement may be amended only by the written agreement of the City and the Owner.
WHEREFORE, the undersigned has executed this Agreement as of the date first-above written.
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OWNER:
_____________________________
CITY:
CITY OF PALM DESERT
By: ________________________
Print Name: ___________________
Title: ________________________
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
State of California )
County of )
On ____________, 2022, before me, ________________________________________________, (insert name and title of the officer)
Notary Public, personally appeared ________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)