Palm Desert City Council
June 13, 2024

CITY OF PALM DESERT

AND PALM DESERT HOUSING AUTHORITY

STAFF REPORT
MEETING DATE: June 13, 2024
PREPARED BY: Jessica Gonzales, Housing Manager
REQUEST: APPROVE A DDLA, RELATED RESOLUTIONS, LOAN FROM THE

HOUSING AUTHORITY, AND ACTIONS RELATED TO THE
CONVEYANCE OF ASSESSOR’S PARCEL NUMBER 622-370-014 BY
AND BETWEEN THE AUTHORITY and CHELSEA INVESTMENTS
CORPORATION OR IT’S DESIGNEE PURSUANT TO H&S SECTION
33433
RECOMMENDATION:

1. Adopt Housing Authority Resolution entitled “A RESOLUTION OF THE PALM DESERT HOUSING

AUTHORITY APPROVING A DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT

BETWEEN THE AUTHORITY AND CHELSEA INVESTMENTS, CORPORATION, OR ITS DESIGNEE (“Parties”) PURSUANT TO HEALTH AND SAFETY CODE SECTION 33433”.

2. Approve Disposition Development and Loan Agreement (“DDLA:) between Parties, including the exhibits in substantial form, for the donation of the Authority-owned vacant property located off of Country Club known as APN 622-370-014 to Chelsea Investments Corporation, or its designee, (the “Developer”, or “Chelsea”) for the construction of 39 units for rental to extremely low, very low and low income qualified households and one manager unit (the “Project”), pursuant to Health and Safety Code Section 33433.

3. Authorize Authority Loan to the Developer for the construction of the Project in the amount of $3,000,000, pursuant to terms of DDLA with loan being secured by a subordinate deed of trust on the Project.

4. Authorize appropriation of $3,000,000 from the Authority’s Unobligated Low- and ModerateIncome Housing Asset Fund balance to Account No. 8734195-4663900.

5. Authorize Chelsea to submit an application, including the DDLA, to the California Tax Credit Allocation Committee (“TCAC”) for an allocation of 9% Federal Tax Credits (“Federal Tax Credits”).

6. Authorize the Executive Director to finalize and execute the DDLA and documents deemed necessary to effectuate the DDLA, the donation of the property and conditions of approval, with such changes thereto as the Executive Director, in consultation with legal counsel, may deem necessary and consistent with the purpose of the DDLA and conditions of approval.

7. Authorize the Chairman to execute documents necessary to effectuate the transfer.

8. Adopt a City Resolution entitled “A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM

DESERT MAKING FINDINGS PURSUANT TO THE HEALTH AND SAFETY CODE SECTION 33433 IN CONNECTION WITH A PROPOSED DISPOSITION, DEVELOPMENT AND LOAN

AGREEMENT BETWEEN THE PALM DESERT HOUSING AUTHORITY AND CHELSEA INVESTMENT CORPORATION OR ITS DESIGNEE”.
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City of Palm Desert and Palm Desert Housing Authority
DDLA for Arc Village Project at APN 622-370-014 with Chelsea Investment Corporation

BACKGROUND/ANALYSIS:

The proposed apartment project known as “Arc Village Apartments” was approved on May 21, 2024, by the Planning Commission by adoption of Resolution No. 2868.

As part of the Planning Commission’s approval, the Developer intends to develop a two-story multifamily residential apartment building containing up to 40 dwelling units, and site improvements including, but not limited to, outdoor recreation areas, landscaping, off-street parking, and other related off-site improvements (the “Project”) on the vacant 1.84-acre site owned by the Authority and located off of County Club Drive identified as APN 622-370-014 (“Property” or “Project Site”). In addition, 10 of the units will be designated for use by individuals with developmental and/or intellectual disabilities and/or Desert Arc participants.

Approval of staff’s request would conditionally approve the land transfer of the Property and the loan from the Authority to the Developer for the Project, as well as authorize the Developer to apply to TCAC for an allocation of nine percent (9%) Federal Tax Credits and seek other funding sources.

The Project has already obtained funding awards from Inland Regional Center ($1,500,000), and eight (8) Project Based Vouchers from the Riverside County Housing Authority. The approval of staff’s request would also authorize the Authority’s staff and legal counsel to proceed to negotiate and prepare the agreements and documentation necessary for the donation of the Property, the financing, and the construction of the Project.

If the proposed funding sources are awarded to the Project, then staff and legal counsel will negotiate and finalize the DDLA and related documents (collectively, the “Loan Documents”).

The Loan Documents will generally require the following:

DDLA. The DDLA authorizes the Authority to donate the Project Site to the Developer for the development of the Project. By donating land for the Project Site, the TCAC tie-breaker score will be increased and will enable the Project to be more competitive in the TCAC allocation rounds.

Authority Loan Terms. The Authority Loan shall be in the principal amount of $3,000,000 and be made from the Authority’s Low and Moderate Income Housing Asset Fund, and have a term of fiftyfive (55) years from the date of the issuance of the Certificate of Occupancy, bear interest at three percent (3%) per annum compounded monthly prior to the issuance of the Certificate of Occupancy and simple interest at three percent (3%) per annum thereafter, and principal will be repaid from a proportional share of (50%) of the Projects residual receipts. The Authority Loan will be due and payable at the end of the loan term. The loan will be used to provide developer impact fee assistance and a portion of the costs of construction.

Authority Housing Agreement. The Housing Agreement for the Project will restrict all units in the Project, except for one (1) manager’s unit, to households that have incomes that do not exceed the following percentages of the Riverside County area median income (AMI):
3 0 % A M I 5 0 % A M I 5 9 % A M I T o t a l s
1-Bedroom Units 2 10 8 20
2-Bedroom Units 1 5 3 9
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City of Palm Desert and Palm Desert Housing Authority
DDLA for Arc Village Project at APN 622-370-014 with Chelsea Investment Corporation

3-Bedroom Units 1 5 4 10
Total Units 4 20 15 39
Total development costs for the Project are estimated at $22,204,000 or $555,100 per unit. The Project is intended to be funded by leveraging multiple funding sources including conventional loan proceeds, 9% Federal Tax Credits, Solar Tax Credits, a $1,500,000 IRC Loan, an aggregate of eight (8) PBVs provided by the County, deferred developer fee, the Authority land donation and the Authority Loan.

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 to determine if the Developer’s updated pro forma projections, feasibility and the request for the Loan were reasonable.

KMA’s evaluation included a detailed review of the Developer’s proforma. The Project’s assumptions, methodologies, and calculations were reviewed for reasonableness and accuracy. A financial gap analysis memorandum was provided by KMA on May 24, 2024, and is attached to this report. Their analysis concluded that the $3,000,000 loan from the Authority allows the Project to request less Tax Credit proceeds and achieve an approximate tie-breaker score of 63%. Based on historical awards, it is likely that the Project will receive an allocation in the July 2024 TCAC round and be able to start construction in early 2025.

The Authority provided $22,400 per unit to the Vitalia project in 2022 and $41,100 per unit to the UHC project in 2023, which were both funded with tax-exempt bonds and 4% Tax Credits. While the Authority’s proposed $75,000 per unit loan is higher than what the Authority has historically provided, a 40-unit project is much less efficient than projects with 269 (Vitalia) and 176 (UHC) units.

Also, the proposed Project will only include 8 PBVs compared to 87 PBVs (UHC) and an average affordability of 54% (Vitalia). KMA concluded that in the current environment of high interest rates and construction costs and less federal and state funding sources available to affordable housing projects, the Developer’s request is reasonable to allow the Project to be developed in a timely manner.

A Notice of a public hearing on the proposed conveyance of the Property was published once a week for two successive weeks in the Desert Sun.

Staff believes that based on the proximity to Desert Arc and its clients, the Property’s location to public transit, accessibility to health services, and other community, this is the best use for the Property. Access to the Property will be coordinated through Desert Arc with secondary (fire access) through the shared wall with Las Serenas. Staff therefore recommends that the Housing Authority Board, hold a public hearing on the proposed donation of the Property and approve the draft DDLA and other Loan Documents, and authorize the Executive Director and legal counsel to finalize and sign all other necessary documents.

Legal Review:

This report and resolutions have been reviewed by the Special Legal Counsel.

Strategic Plan:
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City of Palm Desert and Palm Desert Housing Authority
DDLA for Arc Village Project at APN 622-370-014 with Chelsea Investment Corporation

One of the priorities of the City of Palm Deserts (the “City”) 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 moderate- and lower-income households.

Environment Review:

Via Resolution No. 2868, the Arc Village Apartments Project was approved by the Planning Commission on May 21, 2024, pursuant to California Environmental Quality Act (“CEQA”) Guidelines Section 15332, for In-fill Development Projects (Class 32). The proposed DDLA, parcel conveyance and related approvals are approvals of the Arc Village Apartments project and thus exempt from CEQA pursuant to CEQA Guidelines section 15332.

FINANCIAL IMPACT:

An appropriation from the Authority’s Low- and Moderate-Income Housing Asset Fund is necessary to fund the requested Loan in an amount not to exceed $3,000,000. Funds are available from the Housing Asset Fund’s unobligated fund balance. The Property will be donated to the Developer and the above-identified funding will only be provided upon entering the DDLA and other Loan documents, satisfactory proof of all financing necessary to fund the entire Project, and the Project must be permit ready. There is no fiscal impact to the City’s General Fund.

ATTACHMENTS:

1. Notice of Public Hearing H&S 33433

2. Summary Report H&S 33433 (dated 05.29.24)

3. Housing Authority Resolution

4. Draft DDLA and Exhibits with Chelsea for Arc Village Apartments

5. City Council Resolution – H&S 33433

6. KMA Fair Reuse Analysis (dated 05.29.24)

7. City Planning Commission Resolution No. 2868
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PALM DESERT HOUSING AUTHORITY

OTICE OF PUBLIC HEARING
NOTICE IS HEREBY GIVEN that a public hearing will be held before the Palm Desert Housing Authority (the "Authority") pursuant to Health and Safety Code Section 33433 concerning the proposed conveyance of an approximately 1.84 acre vacant property owned by the Authority, located off Country Club Drive in the City of Palm Desert, California and described as APN 622-370-014, by the Authority, to Chelsea Investment, Inc. (or its designee) ("Chelsea") for the purpose of constructing a forty (40) unit affordable multi-family community the reon to be made available for rental to qualified households of low, very low and extremely low-income, ten ( 10) of which will be designated for households with household members that have intellectual or developmental disabilities, and one (1) of which wilJ be used for on-site management; and the approval of a Disposition, Development and Loan Agreement ("DDLA") between the Authority and Chelsea in connection with such conveyance.

Said PUBLIC HEARING will be held on Thursday, June 13, 2024, before the Authority at 4:00 p.m. in the Council Chamber in the Palm Desert City Hall, 73-510 Fred Waring Drive, Palm Desert, California, at which time and place all interested persons are invited to attend and be heard.

Written comments concerning all items covered by this public hearing notice shall be accepted up to the date of the hearing. Information pertaining to the proposed conveyance is available for review in the Authority office at the above address between the hours of 8:00 a.m. and 5:00 p.m.

Monday through Friday (as of the date first published). If you challenge the proposed actions in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence delivered to the Authority at, or prior to, the public heari ng.

In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a Palm Desert City Council or Authority Board meeting or other services offered by the City of Palm Desert, please contact the City Clerk's Office at (760) 346-06 11. Notification at least 48 hours prior to the meeting or time when services are needed will assist the City and Authority staff in assuring that reasonable arrangements can be made to provide accessibility to the meeting or service.

Signed this day, the 24th day of May 2024.

P6401-000 I \2962852v2.doc
Palm Desert Housing Authority
73-5 10 Fred Waring Drive
Palm Desert, CA 92260
(760) 346-0622
-1-
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17166.018.001

SUMMARY REPORT PURSUANT TO
CALIFORNIA HEALTH AND SAFETY CODE SECTION 33433
ON A

DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT BY AND BETWEEN

PALM DESERT HOUSING AUTHORITY,
AND

CHELSEA INVESTMENT CORPORATION

A CALIFORNIA CORPORATION
(OR ITS DESIGNEE)
The following Summary Report has been prepared pursuant to California Health and Safety Code Section 33433 (“Section 33433”). The Summary Report sets forth certain details of the proposed Disposition, Development and Loan Agreement (“Agreement”) between the Palm Desert Housing Authority (“Authority”), in its capacity as the Palm Desert Housing Successor, and Chelsea Investment Corporation, or its designee (“Developer”). The Agreement requires the Authority to convey the parcel located off of Country Club Drive (“Site”) totaling 1.84-acres to the Developer for the development of an apartment project including 40 apartment units, including 39 income restricted units, 10 of which will be designated for use by individuals with special needs, and one unit to be used for on-site management (“Project”).

In 2012, the City of Palm Desert (“City”) designated the Authority as the Housing Successor for the former Palm Desert Redevelopment Agency (“Agency”). The Agency used low income housing set-aside funds to purchase the Site in July 2011. The Site was transferred to the Authority in 2012 per the Housing Asset Transfer list as was approved by the State of California’s Department of Finance. The Authority also proposes to provide financial assistance to the Project from the Low and Moderate Income Housing Asset Fund (“LMIHAF”). The Project was approved by the Planning Commission on May 21, 2024.

The purpose of the Agreement is to implement the Authority’s objective of improving and increasing the supply of affordable housing in the City of Palm Desert. Due to the funding source used to purchase and develop the Site, the proposed conveyance of the Site to the Developer is subject to the reporting requirements imposed by Section 33433. Specifically, Section 33433 requires the conveying entity to prepare a report that summarizes the financial terms associated with the disposition transaction for the Site.

The following Summary Report is based upon the information contained within the Agreement, and is organized into the following seven sections:

I. Salient Points of the Agreement: This Section summarizes the major responsibilities imposed on the Developer and the Authority by the Agreement.

II. Cost of the Agreement to the Authority: This section details the costs previously incurred by the Agency and Authority, and the additional costs that must be incurred by the Authority to implement the Agreement.
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III. Estimated Value of the Interests to be Conveyed Determined at the Highest Uses Permitted under the Redevelopment Plan: This section estimates the value of the interests to be conveyed determined at the highest use permitted under the Redevelopment Plan.

IV. Estimated Reuse Value of the Interests to be Conveyed: This section summarizes the valuation estimate for the Site based on the required scope of development, and the other conditions and covenants required by the Agreement.

V. Consideration Received and Comparison with the Established Value: This section describes the compensation to be received by the Authority and explains any difference between the compensation to be received and the established value of the Site.

VI. Blight Elimination: This section explains how the Agreement will assist in alleviating blight in the former Project Area.

VII. Conformance with the AB1290 Implementation Plan: This section describes how the Agreement achieves goals identified in the adopted AB1290 Implementation Plan.

This Summary Report and the Agreement are to be made available for public inspection prior to the approval of the Agreement.

I. SALIENT POINTS OF THE AGREEMENT
Scope of Development
The proposed scope of development can be described as follows:

1. The Site is comprised of approximately 1.84-acres of vacant land that has P (Public Facility/Institution) zoning that allows for multifamily housing with a Conditional Use Permit (“CUP”). The Site has no visibility or direct access from Country Club Drive and will require an easement from Desert Arc to provide access.

2. The Project will have a total gross building area (“GBA”), as follows:

Gross Building Area (Sf)
Gross Living Area 29,830
Community Room / Leasing Area 2,500
Common Area / Circulation 4,850
Total Gross Building Area 37,180

3. The building will be two stories and 49 surface parking spaces will be provided. A total of 40 parking spaces will be covered.
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4. The Project will include the following unit mix:

Number
of Units
Unit Size
(Sf)
One-bedroom Units 20 585
Two-bedroom Units 10 786
Three-bedroom Units 10 1,027
Totals / Averages 40 746

5. The Developer is proposing to allocate the units to the following income categories:1 1-Bdrm
Units
2-Bdrm
Units
3-Bdrm
Units
Total
Units
Extremely-Low Income 2 1 1 4
Very-Low Income 10 5 5 20
Low Income (59% AMI) 8 3 4 15
Total Units 20 9 10 39

6. A total of 10 of the income restricted units will be designated for individuals with developmental and/or intellectual disabilities and/or Desert Arc participants.

7. The Project amenities will include a community lounge with office space and a communal kitchen, BBQ gathering spaces, laundry facilities, and enclosed tot-lot with play structure, shade structure and benches.

8. The onsite tenant services are to be provided by Desert Arc, a third party service provider. The tenant services will include a variety of services for their clients living at Arc Village and will likely include cooking classes, budgeting, living independently, etc.

All residents will be able to attend these classes, at no cost, as well.

Developer Responsibilities
The Agreement requires the Developer to accept the following responsibilities:

1. Developer will acquire the Site from the Authority, in an “As-Is” condition, at no cost.

2. Developer will be solely responsible for constructing and operating the Project and developing the Site in accordance with the Scope of Development and the Schedule of Performance. Developer will also be responsible for all costs and expenses associated with the Project.

3. Developer must enter into either a Guaranteed Maximum Price or Stipulated Sum construction contract.

4. Developer shall design, construct, and maintain the Project in accordance with all environmental mitigation measures and requirements, if any, of the City’s General Plan and Zoning Ordinance, and all permits and entitlements granted to the Developer.

5. At completion, 39 of the 40 units will be restricted to Extremely-Low, Very-Low and Low Income households at Extremely-Low, Very-Low and Low Income rents, as defined by the 1 One two-bedroom unit will be unrestricted and reserved for the on-site manager. 1047
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California Health and Safety Code, and defined in the Housing Agreement, for a period of 55 years from the date of issuance of the final Certificate of Occupancy for the Project.

6. Prior to close of escrow, Developer must provide the Authority with the following:
a. Demonstration that Developer has secured a bona fide award of Tax Credits and Senior Financing in amounts sufficient to provide for development of the Project and in accordance with the amounts and timing provided in the Project Budget/Proforma.
b. Developer shall have obtained approval from the City for the requested entitlements for all improvements to be constructed on the Site. c. Deposited into Escrow the executed Promissory Note, Deed of Trust, Housing Agreement, Access Easement and Notice of Affordability Restrictions. d. Shall provide an AHAP contract.
e. Shall not be in material Default in any of its obligations. f. Shall have obtained approval by the Authority of the affirmative fair housing Marketing Plan.

7. Developer will satisfy all conditions necessary to ensure that the Project conforms to all applicable CEQA and, if applicable, NEPA requirements.

8. Developer must have secured all funding sources, and the land must be conveyed to the Developer by December 31, 2025, or the Authority can terminate the Agreement.

Construction must commence by March 1, 2026, grading must be completed by June 1, 2026, and the final Certificate of Occupancy must be issued by September 1, 2026.

9. The Developer must enter into a Facilities and Services Agreement with Desert Arc.

10. The following are limitations placed on fees and expenses during the term of the Authority Loan when calculating the residual receipts loan payments:
a. The Limited Partner asset management fee shall be capped at $7,500.00 per year, increasing at 3.00% escalations annually;
b. The Managing General Partner asset management fee shall be capped at $5,000.00 per year, increasing at 3.00% escalations annually; c. The Administrative General Partner asset management fee shall be capped at $5,000.00 per year, increasing at 3.00% escalations annually; d. Property Management fees shall not exceed 4.5% of gross revenues; e. Minimum Capital Reserves must be annually set-aside at $250.00 per unit; and f. The City Monitoring Fee is set at $5,000.00 per year, increasing at 3.00% escalations annually.

11. Developer will comply with all applicable federal state and local laws pertaining to the construction of the Project, including, without limitation, prevailing wage and environmental laws and regulations.
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12. Developer must procure and maintain, at its sole cost and expense, satisfactory to the Authority, during the entire term of entry or construction, the following policies of insurance:
a. Construction Bonds;
b. Commercial General Liability Insurance;
c. Worker Compensation Insurance;
d. Automobile Liability Insurance;
e. Builder’s Risk Insurance;
f. Professional Liability (Errors and Omissions) Insurance; g. Fire and Extended Coverage Insurance, excluding Earthquake coverage.

Authority Responsibilities
The Agreement imposes the following responsibilities on the Authority:

1. Authority agrees to donate the Site to the Developer at no cost to the Developer.

2. Authority agrees to provide a $3,000,000.00 loan to the Developer with the following loan terms:
a. Unless accelerated due to a default by the Developer, the loan will mature 55 years from the date on which the final Certificate of Occupancy is issued; b. A 3.00% compounded interest rate during the construction period and a 3.00% simple interest rate once the final Certificate of Occupancy is issued; c. Annual debt service payments from 50% of residual receipts (prorated between the other soft financing sources);
d. Any outstanding balance will be due and payable at the end of the term; and e. Subordinated to the conventional permanent loan.

3. Authority may terminate the Agreement if Developer fails to obtain an award of Tax Credits that is not materially consistent with the Financing Proposal and the closing of the land conveyance by December 31, 2025.

4. Prior to close of escrow, Authority must provide the Developer with the following:
a. Deposited into escrow the executed Housing Agreement and Notice of Affordability Restrictions.
b. Shall not be in Material Default in any of its obligations. c. Provided a written approval to the Developer for the Marketing Plan.

5. Authority is to approve any Property Manager that is not the Developer. Authority will also have the ability to require the Developer to hire a third-party management company acceptable to the Authority if there are problems with the management company. 1049
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6. The Authority will have the ability to remove the property manager if there are property management issues.

7. The Authority Housing Agreement placed on the Property shall terminate 55 years from the date of issuance of the final Certificate of Occupancy and will be unsubordinated. The Authority Housing Agreement will restrict the units as follows:
a. Not less than two (2) of the 1-bedroom units, one (1) of the 2-bedroom units, and one (1) of the 3-bedroom units are to be restricted to Extremely-Low Income Households;
b. Not less than 10 of the 1-bedroom units, five (5) of the 2-bedroom units, and five (5) of the three-bedroom units are to be restricted to Very-Low Income Households; and
c. Not less than eight (8) of the 1-bedroom units, three (3) of the 2-bedroom units, and four (4) of the 3-bedroom units are to be restricted to Low Income Households up to 59% of the Riverside area median income (“AMI”).

II. COST OF THE AGREEMENT TO THE AUTHORITY
The Authority has incurred costs associated with assembling and maintaining the Site. The Authority will be required to incur additional costs to implement the proposed Agreement. These costs are detailed in this section of the analysis.

Costs Previously
Incurred by
Agency /
Authority
Costs to be
Incurred by
Authority due
to Agreement
Total Costs
Incurred by
Authority due
to Agreement
Land Acquisition Costs $1,000,000 $0 $1,000,000
Authority Loan 0 3,000,000 3,000,000
(Less) Land Payment (0) (0) (0)
(Less) Authority Loan Payments 2 (0) (7,950,000) (7,950,000) Total Net Incurred Costs / (Revenues) $1,000,000 ($4,950,000) ($3,950,000) *Note: The acquisition cost has been rounded from $1,000,200.

The total net revenues to the Authority are estimated to equal approximately $3,950,000. It is anticipated that the Note, totaling $3,000,000.00, will be fully repaid by the end of the loan term.

However, given that the debt service on the Note is completely dependent on the cash flow produced by the Project over time, it is too speculative to predict the net present value of the debt service payments that will be made over the term of the Note.

III. ESTIMATED VALUE OF THE INTERESTS TO BE CONVEYED DETERMINED AT THE

HIGHEST USE PERMITTED UNDER THE REDEVELOPMENT PLAN
California Health and Safety Code Section 33433 requires the Authority to identify the value of the interests being conveyed at the highest use permitted under the zoning in place on the Site. 2 Based on projected nominal loan payment over the 55-year loan period. 1050
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The valuation must be based on the assumption that the property is vacant, and that near-term development is required. The valuation does not take into consideration any extraordinary use, quality and/or income restrictions being imposed on the development by the Authority.

The currently vacant Site is zoned P (Public Facilities/Institutional) by the City’s Planning Department. The P district is specifically reserved for public, institutional and open space.

Multifamily development in this zone may be allowed with a Conditional Use Permit. In an appraisal by CBRE dated September 26, 2023, with a June 28, 2023, date of value, the highest and best use is determined to be multifamily residential, and the value of the Site is $1,600,000.00, or $19.96 per square foot of land area.

IV. ESTIMATED REUSE VALUE OF THE INTERESTS TO BE CONVEYED Keyser Marston Associates, Inc. (KMA), the Authority’s financial consultant, prepared a reuse valuation analysis in January 2020 of the Site based on the financial terms and conditions imposed by the Agreement. The KMA analysis concluded that the fair reuse value of the Site is $0.00. This means that the Site would need to be conveyed to the Developer at no cost to make the scope of development required by the Agreement financially feasible. This valuation also assumes that the Authority will provide a $3,000,000.00 loan to the Project and enable it to be successful when competing for 9% Tax Credits in July 2024.

It is important to note that the amount of the Authority assistance package identified in the Agreement is predicated on the assumption that the Project will receive competitively awarded 9% Tax Credits. If this source is not received by the Project, the fair reuse valuation conclusion will need to be re-evaluated.

V. CONSIDERATION RECEIVED AND COMPARISON WITH THE ESTABLISHED VALUE The Agreement imposes extraordinary controls on the Property. The impacts created by these requirements reduce the value of the Property from $1,600,000.00 at the highest use permitted under the Property zoning, to the established fair reuse value of $0.00.

The Agreement states that the Authority will donate the Site to the Developer at no cost. Given that the proceeds received by the Authority for the Site ($0.00) will be equal to the established fair reuse value of $0.00, it can be concluded that the Authority is receiving fair consideration for the interests being conveyed to the Developer.

VI. BLIGHT ELIMINATION
The Agreement includes placing affordability restrictions on the units for 55 years. In accordance with California Redevelopment Law, as portrayed in the California Health and Safety Code Section 33433, the conveyance of property that results in the provision of housing for low or moderate income persons satisfies the blight elimination criteria imposed by Section 33433.

Thus, the scope of development required by the Agreement fulfills the blight elimination requirement.
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VII. CONFORMANCE WITH THE AB1290 IMPLEMENTATION PLAN
The Project will meet the affordable housing goals and objectives identified in the most recent Five Year Implementation Plan for the former Agency. In addition, the Site is listed in the City’s Housing Element as a potential affordable housing site. 1052
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RESOLUTION NO. HA-_____

A RESOLUTION OF THE PALM DESERT HOUSING

AUTHORITY APPROVING A DISPOSITION, DEVELOPMENT

AND LOAN AGREEMENT BETWEEN THE AUTHORITY AND
CHELSEA INVESTMENT CORPORATION, (OR IT’S

DESIGNEE) PURSUANT TO HEALTH AND SAFETY CODE
SECTION 33433
RECITALS:

A. Pursuant to Health and Safety Code Section 34175(b) and the California Supreme Court’s decision in California Redevelopment Association, et al. v. Ana Matosantos, et al. (53 Cal. 4th 231 (2011), on February 1, 2012, all assets, properties, contracts, leases, books and records, buildings, and equipment of the former Palm Desert Redevelopment Agency transferred to the control of the Successor Agency to the former Agency (the “Successor Agency”).

B. By its Resolution No. 2012-07 the City Council of the City of Palm Desert elected that all assets, rights, powers, liabilities, duties, and obligations associated with housing activities of the former Agency be transferred from the Successor Agency to the Palm Desert Housing Authority (the “Authority”).

C. By its Resolution No. HA-47, the Housing Authority accepted the housing functions and assets of the former Agency.

THE PALM DESERT HOUSING AUTHORITY HEREBY FINDS, DETERMINES, RESOLVES AND ORDERS AS FOLLOWS:

Section 1. The Authority owns an approximately 1.84 acre lot located off Country Club Drive in the City of Palm Desert, California described as APN No. 622-370-014 (the “Property”). The Authority proposes to convey the Property to Chelsea Investment Corporation (or its designee) (“Chelsea”) for the purpose of Chelsea constructing forty (40) units of housing, thirty-nine (39) of which will be made available for rental to qualified households of low-income, very-low income and extremely low-income, (10) of which shall be designated for use by individuals with developmental disabilities and one (1) of which shall be used for on-site management pursuant to the Disposition and Development and Loan Agreement (the “Agreement”) attached hereto.

Section 2. Following notice duly given, the Authority has held a full and fair public hearing on the conveyance by the Authority of the Property to Chelsea pursuant to Health and Safety Code Section 33433. The Authority has made available to the public through the offices of the Authority Secretary and City Clerk a copy of the Agreement, and a Summary Report (the “Report”) describing, among other matters, the cost of the Agreement to the Authority prior to the public hearing as required by Health and Safety Code Section 33433.

Section 3. Health and Safety Code Section 33433(a) and (b) generally provide that before any property of the former Agency, acquired in whole or in part, directly or indirectly, with tax increment moneys is sold for development pursuant to the redevelopment plan, the sale must first be approved by the legislative body by resolution after a public hearing and the resolution must contain certain findings. Pursuant to its Resolution No. 2013-11, the City Council authorized the Authority, as housing successor to the former redevelopment agency, to convey property for the development of housing projects pursuant to Health and Safety Code Section 33433.
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Resolution No. HA-_______
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Section 4. On the basis of the Report and other information received by the Authority at the hearing, the Authority hereby finds and determines (i) that the consideration received by the Authority pursuant to the Agreement for the conveyance of the Property is not less than the fair reuse value of the Property at the use and with the covenants and conditions and development costs authorized by the conveyance of the Property as described in the Agreement, and (ii) that the conveyance of the Property pursuant to the Agreement will provide housing for low-income persons consistent with the implementation plan adopted by the former Palm Desert Redevelopment Agency pursuant to California Health and Safety Code Section 33490.

Section 5. The Authority hereby approves the Agreement and the Executive Director is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver any and all necessary documents and instruments and to do all things which he deems necessary or proper in order to effectuate the purposes of this Resolution and the transactions contemplated hereby; including the Agreement on file with the Authority Secretary and the City Clerk, with such additions thereto or changes or insertions therein as may be approved by the Executive Director (such approval to be conclusively evidenced by such execution and delivery).

Section 6. The officers of the Authority are hereby authorized and directed, jointly and severally, to execute and deliver any and all necessary documents and instruments and to do all things which they may deem necessary or proper in order to effectuate the purposes of this Resolution and the transactions contemplated hereby; and any such actions previously taken by such officers are hereby ratified, confirmed and approved.

PASSED, APPROVED and ADOPTED ON THIS __ day of June 2024, by the following vote, to wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

KARINA QUINTANILLA, CHAIRMAN
ATTEST:

ANTHONY J. MEJIA, SECRETARY

PALM DESERT HOUSING AUTHORITY
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DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT

BETWEEN

PALM DESERT HOUSING AUTHORITY,

A PUBLIC BODY
AND

CHELSEA INVESTMENT CORPORATION,

A CALIFORNIA CORPORATION
(ARC VILLAGE)
DATED: JUNE ____, 2024
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS AND EXHIBITS.........................................................................2 Section 1.1 Definitions.....................................................................................2 ARTICLE 2 CONDITIONS FOR CONVEYANCE OF THE PROPERTY ............................6 Section 2.1 Authority Right to Terminate for Failure to Timely Obtain Tax Credits; Other Conditions Precedent to
Conveyance...................................................................................6 Section 2.2 City Approvals..............................................................................7 Section 2.3 Financing.......................................................................................7 Section 2.4 Permits..........................................................................................7 Section 2.5 Tax Credits....................................................................................7 Section 2.6 Loan Closings...............................................................................7 Section 2.7 Construction Plans........................................................................7 Section 2.8 Construction Contract ...................................................................8 Section 2.9 Cost Estimate ................................................................................8 Section 2.10 Construction Bonds.......................................................................8 Section 2.11 Developer Organizational Documents..........................................8 Section 2.12 Authority Loan..............................................................................8 Section 2.13 Tax Credit Equity..........................................................................8 Section 2.14 AHAP............................................................................................8 Section 2.15 Facilities and Services Agreement................................................8 Section 2.16 Access Easement...........................................................................9 Section 2.17 Title Report Approved ..................................................................9 Section 2.18 Density Bonus Agreement ............................................................9 ARTICLE 3 DISPOSITION OF PROPERTY ..........................................................................9 Section 3.1 Property Donation.........................................................................9 1056
TABLE OF CONTENTS (cont’d)
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Section 3.2 Deposit ..........................................................................................9 Section 3.3 Opening of Escrow .....................................................................10 Section 3.4 Close of Escrow ..........................................................................10 Section 3.5 Costs of Escrow and Closing ......................................................11 Section 3.6 Condition of Title........................................................................11 Section 3.7 Condition of Property; Authority’s Information.........................12 Section 3.8 “As is” Conveyance ....................................................................12 Section 3.9 Survival.......................................................................................13 Section 3.10 Acknowledgment ........................................................................13 Section 3.11 Developer’s Release....................................................................13 Section 3.12 Scope of Release .........................................................................13 ARTICLE 4 CONSTRUCTION OF PROJECT......................................................................14 Section 4.1 Construction and Operation Consistent with
Agreements.................................................................................14 Section 4.2 Commencement of Project; Interim Deadlines...........................14 Section 4.3 Completion of the Project ...........................................................14 Section 4.4 Equal Opportunity.......................................................................14 Section 4.5 Construction Under Laws...........................................................15 Section 4.6 Progress Reports .........................................................................15 Section 4.7 Construction Responsibilities.....................................................15 Section 4.8 Mechanics Liens, Stop Notices, and Notices of Completion..................................................................................15 Section 4.9 Inspections ..................................................................................16 Section 4.10 Records .......................................................................................16 Section 4.11 Certificate of Completion ...........................................................16 1057
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ARTICLE 5 AUTHORITY LOAN PROVISIONS.................................................................17 Section 5.1 Authority Loan............................................................................17 Section 5.2 Use of Authority Loan ................................................................17 Section 5.3 Delivery of Promissory Note; Recording of Housing Agreement; Deed of Trust; Notice of Restrictions.....................17 Section 5.4 Term of the Authority Loan........................................................17 Section 5.5 Interest; Payments.......................................................................17 Section 5.6 Disbursement of Authority Loan ................................................18 Section 5.7 Repayment Schedule...................................................................18 Section 5.8 Reports and Accounting of Residual Receipts; Audited Financial Statement.......................................................18 Section 5.9 Books and Records .....................................................................18 Section 5.10 Non-Recourse .............................................................................19 ARTICLE 6 ONGOING DEVELOPER OBLIGATIONS......................................................19 Section 6.1 Applicability ...............................................................................19 Section 6.2 Use of Project..............................................................................19 Section 6.3 Maintenance................................................................................19 Section 6.4 Taxes and Assessments...............................................................20 Section 6.5 Mandatory Language in All Subsequent Deeds, Leases and Contracts; Basic Requirement..................................20 Section 6.6 Provisions in Conveyance Documents........................................21 Section 6.7 Management Agent.....................................................................22 Section 6.8 Insurance Requirements; Required Coverage.............................23 Section 6.9 General Insurance Requirements................................................24 Section 6.10 Subrogation Waiver ....................................................................25 Section 6.11 Certificates of Insurance .............................................................25 1058
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Section 6.12 Additional Coverage ...................................................................25 Section 6.13 Audits..........................................................................................25 ARTICLE 7 ASSIGNMENTS AND TRANSFERS ...............................................................26 Section 7.1 Definitions...................................................................................26 Section 7.2 Purpose of Restrictions on Transfer............................................26 Section 7.3 Prohibited Transfers....................................................................27 Section 7.4 Permitted Transfers.....................................................................27 Section 7.5 Other Transfers with Authority Consent.....................................27 Section 7.6 Termination of Limitations on Transfers....................................27 ARTICLE 8 DEFAULT AND REMEDIES............................................................................28 Section 8.1 General Applicability..................................................................28 Section 8.2 Fault of Authority .......................................................................28 Section 8.3 Fault of Developer/Notice and Cure Period................................28 Section 8.4 Notice and Cure Period Regarding Authority
Defaults.......................................................................................30 Section 8.5 Authority Remedies....................................................................30 Section 8.6 Developer Remedies...................................................................30 Section 8.7 Rights of Mortgagees..................................................................30 Section 8.8 Remedies Cumulative .................................................................31 ARTICLE 9 SECURITY FINANCING AND RIGHTS OF HOLDERS ...............................31 Section 9.1 No Encumbrances Except for Development Purposes .....................................................................................................31 Section 9.2 Holder Not Obligated to Construct.............................................31 Section 9.3 Notice of Default and Right to Cure...........................................31 Section 9.4 Right of Cure...............................................................................32 1059
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Section 9.5 Estoppel Certificates...................................................................32 ARTICLE 10 GENERAL PROVISIONS .................................................................................32 Section 10.1 Notices, Demands and Communications....................................32 Section 10.2 Non-Liability of Officials, Employees and Agents ....................33 Section 10.3 Forced Delay...............................................................................33 Section 10.4 Inspection of Books and Records ...............................................34 Section 10.5 Title of Parts and Sections..........................................................34 Section 10.6 Third-Party Beneficiaries............................................................34 Section 10.7 Applicable Law...........................................................................34 Section 10.8 No Brokers..................................................................................34 Section 10.9 Legal Actions..............................................................................34 Section 10.10 Severability .................................................................................34 Section 10.11 Binding Upon Successors...........................................................34 Section 10.12 Parties Not Co-Venturers............................................................35 Section 10.13 Time of the Essence ....................................................................35 Section 10.14 Representation and Warranties of Developer .............................35 Section 10.15 Entire Understanding of the Parties............................................35 Section 10.16 Amendments...............................................................................36 Section 10.17 Approvals....................................................................................36 Section 10.18 Counterparts; Multiple Originals................................................36 1060
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DISPOSITION, DEVELOPMENT, AND LOAN AGREEMENT
(Arc Village)
This DISPOSITION, DEVELOPMENT AND LOAN AGREEMENT (the “Agreement”) is dated as of June, ___, 2024, and is entered into by and between the PALM DESERT HOUSING AUTHORITY, a public body (the “Authority”) and CHELSEA INVESTMENT CORPORATION, a California corporation, its successors and assigns (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 Authority owns that approximately one and eight tenths (1.84) acre site located in the City of Palm Desert as more particularly described in Exhibit A attached hereto (the “Property”).

C. The Developer intends to construct forty (40) rental units of housing, thirty-nine (39) of which shall be made available to and occupied by low-income households, very lowincome households, and extremely low-income households, and ten (10) of which shall be designated for use by individuals with intellectual and/or developmental disabilities and/or Desert Arc participants (the “Project”). One (1) of the units shall be used for on-site management.

D. To effectuate this purpose, the Authority will donate the Property to the Developer subject to the terms and conditions of this Agreement.

E. To assist the Developer in the construction of the rental units and the payment of the impact fees imposed by the City with respect to the Project, the Authority intends to make a loan to the Developer in the amount of Three Million Dollars ($3,000,000.00), subject to the terms and conditions of this Agreement.

F. The Authority 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 Authority’s and the City’s affordable housing goals through the development of the Property.

In consideration of the foregoing, and the mutual terms and conditions herein, the Parties agree as follows:
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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 ThirtyNine (39) Units restricted by the Housing Agreement 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 the Project, 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 Project that are approved by the Authority and consistent with the Financing Proposal.
“Approved Plans” means all designs for the Project 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 Documents” means, collectively, this Agreement, the Promissory Note, the Deed of Trust, the Housing Agreement, the Notice of Restriction and any other documents executed by the Authority and the Developer.
“Authority Event of Default” is defined in Section 8.2. “Authority Loan”, means the loan by the Authority to the Developer in the amount of Three Million Dollars ($3,000,000.00) to pay a portion of the construction cost of the Project and the payment of the impact fees imposed by the City in connection with the Project. “Building Permit” means the building permit and all other ministerial construction permits required from the City to construct the Project.
“Certificate of Completion” is defined in Section 4.11. “Certificate of Occupancy” means a final certificate of occupancy issued by the City for the Project, or equivalent final inspection.
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“City” means the City of Palm Desert, California, a municipal corporation. “City Approvals” means the permits and entitlements issued by the City to allow for the commencement of construction of the Project.
“Close of Escrow” or “Closing” means the date on which a fee interest of the Property is conveyed to the Developer.
“Construction Plans” means the final construction plans for the construction of the Project as approved by the City in accordance with Section 2.7. “Control” means the power to direct the day-to-day management responsibilities for the activities of Developer, and (a) with respect to a limited liability company means (1) the 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, and (b) with respect to a limited partnership, means the managing general partner. “Deed of Trust” shall mean the deed of trust, assignment of rents placed on the Developer’s interest in the Property, as security for the Authority Loan by the Developer as trustor with the Authority as beneficiary, as well as any amendments to, modifications of, and restatements of said deed of trust, in the form attached hereto as Exhibit D. “Deposit” is defined in Section 3.2.
“Desert Arc” means Desert Arc, a California nonprofit corporation. “Developer” has the meaning in the introductory paragraph of this Agreement. “Developer Event of Default” is defined in Section 8.3. “Effective Date” shall mean the date on which both the Developer and the Authority shall have executed this Agreement.
“Escrow” means the escrow opened with the Title Company to accomplish the transfer of the Property from the Authority to the Developer.
“Extremely Low Income Household” 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 under Section 50106 of the California Health and Safety Code, or successor provision. “Executive Director” means the Executive Director of the Authority. “Facilities and Services Agreement” is defined in Section 2.15. “Financing Proposal” means the Developer’s proposal for financing the construction of the Project, including an estimate of the sources and uses of funds, which is attached hereto as Exhibit H.
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“Grant Deed” means the grant deed in the form of Exhibit B attached hereto. “Grading Permit” means the permit issued by the City to commence grading on the Property.
“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 Project, including, but not limited to, alcoholic beverages, aspirin, tobacco products, nutra sweet 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 Project or any portion thereof.
“Housing Agreement” means the Housing Agreement between the Developer and the Authority in the form of Exhibit E that will be recorded against the Developer’s fee interest in the Property and all improvements thereon, and will restrict the household income levels for occupancy of the Units 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 under Section 50079.5 of the California Health and Safety Code, or successor provision.
“Notice of Restrictions” shall mean the Notice of Affordability Restrictions in the form attached hereto as Exhibit I, which is to be recorded against the Property upon Closing. “Official Records” means the official land records of Riverside County. 1064
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“Parties” means collectively the Authority and the Developer and the term Party refers to each of them individually.
“Project” is defined in the Recitals.
“Promissory Note” shall mean the promissory note that will evidence the Developer’s obligation to repay the Authority Loan as set forth in this Agreement, and shall be in the form of Exhibit C attached hereto.
“Property” is defined in the Recitals.
“Residual Receipts” in a particular calendar year for a Phase shall mean the cash (without regard to the source) derived from the operation of the Project minus the following 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 Project, (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 Two Hundred Fifty Dollars ($250.00) per unit per annum, increasing by three percent (3%) annually, (vi) the repayment of any amounts loaned by the Developer for material development costs, operating deficits or tax credit adjusters or other payments to the investor which costs were not reasonably anticipated, [(vii) deferred developer fees in the aggregate amount of __________________ Dollars ($_________)] (viii) a limited partner monitoring fee in the annual amount of Seven Thousand Five Hundred Dollars ($7,500.00), increasing three percent (3%) annually, unless fully paid on a permanent loan conversion; (ix) a managing general partner fee in the annual amount of Five Thousand Dollars ($5,000.00), increasing three percent (3%) annually; (xi) an administrative general partner fee in the annual amount of Five Thousand Dollars ($5,000.00), increasing three percent (3%) annually; and (xii) a monitoring fee of Five Thousand Dollars ($5,000.00), increasing three percent (3%) annually and payable annually in advance to the Authority. In no event shall depreciation/amortization be deducted from cash revenues. Residual Receipts shall be determined by the Developer and the 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 hereto as Exhibit G setting forth the schedule for the Developer’s construction of the Project. “Scope of Development” shall mean the description of the Project, 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 F. “Security Financing Interest” means a mortgage, deed of trust, or other reasonable method of security encumbering the Developer’s fee interest in the Property and the Project that:
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(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 the Project to be recorded as an encumbrance on the Property.
“Title Company” means First American Title Insurance Company, or such other title company as the Parties may mutually select.
“Title Report” is defined in Section 2.16.
“Transfer” has the meaning set forth in Section 7.1.
“Unit” means one of the residential rental 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 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 B: Form of Grant Deed
Exhibit C: Form of Promissory Note
Exhibit D: Form of Deed of Trust
Exhibit E: Form of Housing Agreement
Exhibit F: Scope of Development
Exhibit G: Schedule of Performance
Exhibit H: Financing Proposal
Exhibit I: Notice of Affordability Restrictions
Exhibit J: RESERVED
Exhibit K: Access Easement
Exhibit L: Memorandum of Understanding
ARTICLE 2

CONDITIONS FOR CONVEYANCE

OF THE PROPERTY
Section 2.1 Authority Right to Terminate for Failure to Timely Obtain Tax Credits; Other Conditions Precedent to Conveyance. The Executive Director may terminate this Agreement on behalf of the Authority in his or her sole and absolute discretion if Developer fails to obtain by December 31, 2025 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 Authority’s obligation to convey the Property to the Developer. The Authority has no obligation 1066
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to convey the Property 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 Property must occur on or before December 31, 2025, (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 Close of Escrow, the Developer must have obtained the City Approvals for the Project 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 any required improvement bonds upon the Close of Escrow.

Section 2.3 Financing. The financing(s) listed in the Financing Proposal shown in Exhibit H for the Project must close concurrently with the Close of Escrow for the Property.

Section 2.4 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 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 2.5 Tax Credits. Prior to or concurrently with the Close of Escrow, the tax credits necessary to help finance the Project must have been awarded, and the Developer shall have provided evidence thereof to Authority, 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 2.6 Loan Closings. All loans necessary to finance the costs described in the Financing Proposal shall have closed such that the lenders are unconditionally obligated to disburse their loan funds and copies of the applicable loan documents (or drafts that are final in all material respects) shall have been provided to and approved by the Executive Director.

Section 2.7 Construction Plans. The Developer shall prepare construction plans for the construction of the development of the Project and shall be submitted by the Developer for City approval and shall consist of all construction documentation upon which the Developer and its contractors shall rely in building the Project. 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 except as conditioned by the Planning Commission and/or Council land use approvals and shall not materially deviate from them without the written consent of the City.

As part of the Developer’s application for a Building Permit, the City shall also have reviewed and approved the proposed construction plans for conformance with the Approved Plans and the other commitments made by the Developer to the City with respect thereto. 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.
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As approved, these construction plans for the applicable component of the Project shall be referred to as the “Construction Plans”.

Section 2.8 Construction Contract. Developer shall have delivered to the Authority a copy of an executed Guaranteed Maximum Price or Stipulated Sum construction contract for the Project, which shows a development cost consistent with the Financing Proposal and equity and debt funds committed to the Project.

Section 2.9 Cost Estimate. The Developer’s construction lender must have shared its construction cost estimate with the Authority or, in the alternative, if the construction lender is unwilling to share its cost estimate, the Authority has obtained an independent cost estimate at the Developer’s cost to confirm the reasonableness of the construction costs.

Section 2.10 Construction Bonds. At least seven (7) days prior to Close of Escrow, the Developer shall deliver to the Authority forms of one (1) labor and material bond and one (1) performance bond for the Project 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. Treasury Department, and reasonably acceptable to the Authority, each in a penal sum of not less than one hundred percent (100%) of the scheduled cost of construction of the Project for the Authority’s review and approval. The bonds shall name the Authority as co-obligee. Upon receipt by the Authority of the proposed payment and performance bonds, the Authority 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 Authority. If the payment and performance bonds are not approved by the Authority, the Authority shall set forth in writing and notify the Developer of the Authority’s reasons for withholding such approval. The Developer shall thereafter submit revised payment and performance bonds for Authority approval, which approval shall be granted or denied in ten (10) business days in accordance with the criteria and procedures set forth above.

Section 2.11 Developer Organizational Documents. The Developer has provided the Developer organizational documents to the Authority for its review and the Authority has approved the documents.

Section 2.12 Authority Loan. The Authority must be ready to make the Authority Loan and the Developer shall have delivered the applicable Authority Documents, duly executed, to the Authority.

Section 2.13 Tax Credit Equity. The Authority has approved the Developer’s proposed uses of any tax credit equity paid as of the Close of Escrow to the Developer.

Section 2.14 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 2.15 Facilities and Services Agreement. Prior to or concurrently with the Close of Escrow, the Developer and Desert Arc, a California public benefit nonprofit corporation, shall have entered into a binding agreement, acceptable in form and substance to the Executive Director, and incorporating the terms and provisions contained in the Memorandum of Understanding attached to this Agreement as Exhibit L.
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Section 2.16 Access Easement. Prior to or concurrently with the Close of Escrow, the Developer has been granted and recorded an easement for vehicular and pedestrian access for the benefit of the Property described in the attached Exhibit K. The form and substance of such easement shall have been reviewed and approved by the Executive Director.

Section 2.17 Title Report Approved. Prior to the Closing of Escrow, the Developer has approved the following preliminary report and the title exceptions therein (the “Title Report”) from the Title Company: Preliminary Report issued on April 8, 2024 under Order Number NCS1183369-DF, or a subsequent title commitment. The Authority shall not further encumber the Property after the date hereof without the prior written consent of Developer. Such consent shall not be unreasonably withheld or delayed.

Section 2.18 Density Bonus Agreement. Concurrently with the Close of Escrow, the Developer and the City shall have entered into a binding density bonus agreement acceptable in form and substance to the Developer and the City Manager and incorporating the requirements contained in Section 32 of the Conditions of Approval attached to Resolution No. 2868 of the Planning Commission of the City.

ARTICLE 3

DISPOSITION OF PROPERTY
Section 3.1 Property Donation. Subject to the satisfaction of the conditions to closing set forth above, the Authority will donate to the Developer, and the Developer will accept from the Authority, the Property under the terms, covenants, and conditions of this Agreement.

Section 3.2 Deposit. Within thirty (30) days following the Effective Date, the Developer shall deposit Forty-Eight Thousand Dollars ($48,000.00) into Escrow as a good faith deposit for the acceptance of the Property (the “Deposit”). If this Agreement is terminated prior to the Close of Escrow for any reason other than a default by the Developer, pursuant to Section

8.3 herein, the Deposit shall be immediately refunded to the Developer upon the date the Agreement is terminated. The Deposit shall constitute liquidated damages to the Authority upon a termination of this Agreement prior to Closing due to a default by Developer under Section 8.3 herein. If this Agreement is not so terminated due to a default by the Developer, the Deposit shall be returned to the Developer upon the Closing.

THE DEVELOPER ACKNOWLEDGES THAT BY ENTERING INTO THIS

AGREEMENT, AUTHORITY 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 THE DEVELOPER IN THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS

AGREEMENT, THE DEVELOPER AND THE AUTHORITY AGREE THAT THE

AUTHORITY WILL SUSTAIN THESE AND OTHER DAMAGES, AND THAT THE AUTHORITY’S ACTUAL DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO DETERMINE. THE PARTIES THEREFORE AGREE THAT IN THE EVENT

THE ESCROW AND THIS TRANSACTION FAIL TO CLOSE AS A RESULT OF A

MATERIAL DEFAULT OF THE DEVELOPER, AND THE AUTHORITY IS READY, 1069
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WILLING AND ABLE TO PERFORM ITS OBLIGATIONS HEREUNDER, THE AUTHORITY, AS THE AUTHORITY’S SOLE AND EXCLUSIVE REMEDY, IS ENTITLED

TO LIQUIDATED DAMAGES IN THE AMOUNT OF THE DEPOSIT THERETOFORE MADE. IN THE EVENT ESCROW FAILS TO CLOSE SOLELY AS A RESULT OF THE DEVELOPER’S DEFAULT AND THE AUTHORITY IS READY, WILLING AND ABLE TO

PERFORM ITS OBLIGATIONS HEREUNDER, THEN (A) THIS AGREEMENT AND THE

RIGHTS AND OBLIGATIONS OF THE DEVELOPER AND THE AUTHORITY

HEREUNDER AND THE ESCROW CREATED HEREBY SHALL TERMINATE, AND (B) ESCROW AGENT SHALL, AND IS HEREBY AUTHORIZED AND INSTRUCTED TO,

RETURN PROMPTLY TO THE DEVELOPER AND THE AUTHORITY 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 INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO THE AUTHORITY PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. THE AUTHORITY HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. THE AUTHORITY AND THE DEVELOPER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS SECTION 3.2,

AND BY THEIR INITIALS IMMEDIATELY BELOW, AGREE TO BE BOUND BY ITS TERMS.

AUTHORITY’S INITIALS:

DEVELOPER’S INITIALS:

Section 3.3 Opening of Escrow. To accomplish the transfer of the Property from the Authority to the Developer, the Parties will promptly establish an escrow for such 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 3.4 Close of Escrow. The Close of Escrow shall occur within sixty (60) days after the Developer has met all of the closing conditions as set forth in Article 2, but in no event shall the Close of Escrow occur later than December 31, 2025. Notwithstanding the foregoing, the Executive Director may consent to extensions of the closing date in the exercise of his discretion. At the Close of Escrow, the Authority shall convey a fee interest in the Property to the Developer by the delivery of the Grant Deed to Escrow in the form set forth in the attached Exhibit B, or with such changes as the Parties may mutually agree, for recording at the Close of Escrow.

The Developer’s obligation to proceed with the acquisition of the Property from the Authority 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:
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(a) There exists no condition, event or act which would constitute a breach or default under this Agreement, the Authority Documents, the Project Approvals, or under any other project financing agreements or contracts related to the Project, or which, upon the giving of notice or the passage of time, or both, would constitute such a breach or default by the Authority. (b) Subject to payment of the applicable fees, the City shall be ready to issue the building permit(s) necessary for the Developer to commence construction of the Project. (c) 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 3.6 below.
(d) 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 the Developer’s intended uses of the Property or the value of the Property.
(e) The Authority has executed and delivered to Escrow the Housing Agreement and Notice of Affordability Restrictions, duly executed and acknowledged. (f) There shall not have occurred between the Effective Date and the Closing a material adverse change to the physical condition of the Property. (g) There is no existing, pending or threatened litigation, suit, action or proceeding before any court or administrative agency affecting the Authority or the Developer or the Property that would, if adversely determined, materially adversely affect the Project or the Developer’s or the Authority’s ability to perform their obligations under this Agreement or the Developers’ ability to develop and operate the Project.

Section 3.5 Costs of Escrow and Closing. The Developer must pay all of the Authority’s legal and consultants fees and costs, the cost of title insurance, the cost of appraisals, 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 Escrow.

Section 3.6 Condition of Title. Before the Close of Escrow, the Developer shall review the Title Report and notify the Authority of any objections to exception items therein. The Authority shall work with the Developer to cure or remedy any reasonable objections. Upon the Close of Escrow, the Developer will take title subject to all Developer-approved title exceptions in the Title Report and all other liens, encumbrances, clouds and conditions, applicable building and zoning laws and regulations show in a final title policy proforma based on the Title Report, including;
(a) the Housing Agreement;
(b) the Deed of Trust and Notice of Restrictions;
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(c) any lien for current taxes and assessments or taxes and assessments accruing subsequent to Close of Escrow;
(d) the liens of any Approved Financing; and
(e) any other matters created by or with the consent of the Developer.

Section 3.7 Condition of Property; Authority’s Information. In fulfillment of the purposes of Health and Safety Code Section 25359.7(a), to the Authority’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 Authority to the Developer. Prior to the Close of Escrow, the Developer will complete all due diligence activities, including but not limited to a physical adequacy determination and environmental survey of the Property. As used in this Agreement, the phrase “to the Authority’s Current Actual Knowledge” and words of similar import shall mean the actual knowledge of the Authority’s Executive Director, or his/her designee, (the “Authority Representative”), on behalf of the Authority, as of the Effective Date, without any duty of separate inquiry or investigation. The Authority represents and warrants that the Authority’s Representative is that person affiliated with the Authority most knowledgeable regarding the ownership and operation of the Property. The 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 Authority.

Section 3.8 “As is” Conveyance. The Developer specifically acknowledges and agrees that the Authority is conveying the Property to the Developer and the Developer is accepting the Property from the Authority (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 Authority 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 Authority or any of its agents, employees or contractors to select or furnish the Property for any particular purpose, and that the Authority 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, 1072
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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 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 3.9 Survival. The Authority 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 has fully reviewed the disclaimers and waivers set forth in this Agreement with the Developer’s counsel and understands the significance and effect thereof. The terms and conditions of this Section 3.9 expressly survive the Close of Escrow.

Section 3.10 Acknowledgment. The Developer acknowledges and agrees that: (1) to the extent required to be operative, the disclaimers of warranties contained in Section 3.8 are “conspicuous” disclaimers for purposes of all applicable laws and other legal requirements; and (2) the disclaimers and other agreements set forth in such section is an integral part of this Agreement, and that the Authority would not have agreed to convey the Property to the Developer without the disclaimers and other agreements set forth therein.

Section 3.11 Developer’s Release. Absent any fraud or willful misconduct by the responsible party, 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 the City and the 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 3.12 Scope of Release. The release set forth in Section 3.11 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, on behalf of itself and anyone 1073
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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 or the Authority be released from, the City’s or the Authority’s actual fraud or misrepresentation.

ARTICLE 4

CONSTRUCTION OF PROJECT
Section 4.1 Construction and Operation Consistent with Agreements. The Project 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 Project which are set forth in this Agreement and the City Approvals. As between the Authority and the Developer, the Developer shall be solely responsible for all costs necessary for the construction and operation of the Project, including, but not limited to, any construction cost overruns. The Developer shall defend, indemnify and hold the Authority 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 the Authority is liable for failure by the Developer to pay prevailing wages and/or comply with California Labor Code Sections 1720 et seq. The foregoing is not an admission by the Developer or the Authority that prevailing wages are required in connection with the construction of the Project.

Section 4.2 Commencement of Project; Interim Deadlines. The Developer must commence construction of the Project no later than the date set forth in the Schedule of Performance. For purposes of this Section 4.2, commencement of construction means the material commencement of grading of the Property.

Section 4.3 Completion of the Project. Subject to Section 10.3 below, the Developer must diligently prosecute to completion the construction of the Project and construction must be completed no later than the date set forth therefor in the Schedule of Performance.

Section 4.4 Equal Opportunity. During the construction of the Project, 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 Project on 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.
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Section 4.5 Construction Under Laws.
(a) Compliance with Project Documents. Developer shall construct the Project in conformance with the Approved Plans, Approved Financing, and Financing Proposal and consistent with the City Approvals. The Developer shall notify the Authority 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 and or the Authority.
(b) Compliance with Laws. The 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 the Developer shall be responsible to the Authority for the procurement and maintenance thereof, as may be required of the Developer and all entities engaged in work on the construction.

Section 4.6 Progress Reports. Until such time as the Developer has completed construction of the Project, as evidenced by the Certificate of Completion, the Developer must provide the Authority with quarterly progress reports regarding the status of the construction of the Project.

Section 4.7 Construction Responsibilities. The Developer is solely responsible for all aspects of the Developer’s conduct in connection with the Project, 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 Authority and/or the City with reference to the Project is solely for the purpose of determining whether the Developer is properly discharging its obligations to the Authority and should not be relied upon by the Developer or by any third parties as a warranty or representation by the Authority and/or the City as to the quality of the design or construction of the Project.

Section 4.8 Mechanics Liens, Stop Notices, and Notices of Completion. If any claim of lien is filed against the Property or the Project or a stop notice is served on any lender or other third party in connection with the Project, 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 Authority a surety bond from a surety reasonably acceptable to the Executive Director in sufficient form and amount, or provide the Authority with other assurance reasonably satisfactory to the Authority that the claim of lien or stop notice will be paid or discharged. 1075
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(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 Authority may (but is under no obligation to) discharge such lien, encumbrance, charge, or claim at the Developer’s expense. Alternatively, the Authority may require the Developer to immediately deposit with the Authority the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. The Authority 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 Project 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 Project. The Developer authorizes the Authority, but without any obligation, to record any notices of completion or cessation of labor, or any other notice that the Authority deems necessary or desirable to protect its interest in the Project and the Property.

Section 4.9 Inspections. The Developer must permit and facilitate, and require its contractors to permit and facilitate, observation and inspection at the Project by the Authority and/or the City during business hours with reasonable notice.

Section 4.10 Records. The Developer must maintain complete, accurate, and current records pertaining to the construction of the Project for a period of seven (7) years after the creation of such records, and permit any duly authorized representative of the Authority to inspect and copy records during regular business days/hours. Records must be kept accurate and current, and shall be kept at the Developer’s corporate office at 6339 Paseo Del Lago, Carlsbad, CA 92011. Upon reasonable written notice from the Authority requesting to review specified Developer records, the Developer shall deliver the records to the Authority’s offices within fifteen (15) business days following the Authority’s request. The Authority 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 Authority 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 Project in accordance with those provisions of this Agreement that relate solely to the obligations of the Developer to construct the Project (including the dates for beginning and completion thereof), the Authority will provide a Certificate of Completion so certifying (the “Certificate of Completion”).

The Certificate of Completion will be the conclusive determination that the covenants in this Agreement with respect to the obligations of the Developer to construct the Project 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 any holder of a Security Financing Interest. The Certificate of Completion may not be deemed a notice of completion under the California Civil Code. 1076
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ARTICLE 5

AUTHORITY LOAN PROVISIONS
Section 5.1 Authority Loan. Subject to the terms and conditions set forth in this Agreement, the Authority shall make a loan to the Developer for the Project in the original principal amount of Three Million Dollars ($3,000,000.00). The Authority Loan shall be evidenced by the Promissory Note executed by the Developer in favor of the Authority and secured by the Deed of Trust executed by the Developer as trustor in favor of the Authority as beneficiary and recorded against the Developer’s fee interest in the Project.

Section 5.2 Use of Authority Loan. The proceeds of the Authority Loan in the amount of Three Million Dollars ($3,000,000.00) shall be used to fund the impact fees imposed by the City in connection with the construction of the Project, and the remainder of the Authority Loan shall be used for construction costs of Project.

Section 5.3 Delivery of Promissory Note; Recording of Housing Agreement; Deed of Trust; Notice of Restrictions. Upon and as a condition to the Close of Escrow, the escrow holder shall record the Grant Deed, Access Easement, Housing Agreement, Notice of Restrictions and then the Deed of Trust (in that order with no intervening recordings, unless otherwise agreed upon by the Authority and the Developer or requested by senior lenders). The Housing Agreement and Notice of Restrictions shall remain in full force and effect for fifty-five (55) years following the date of the issuance of the Certificate of Occupancy, regardless of any repayment of the Authority Loan following a Developer Event of Default or otherwise, and shall automatically terminate on the fifty-fifth (55th) anniversary of the date of issuance of the Certificate of Occupancy. The Executive Director of the Authority shall have the authority to execute reasonable subordination agreements subordinating the Authority Deed of Trust to the deeds of trust securing other construction and permanent financing, provided copies of the senior loan documents shall have been provided for the Authority’s reasonable review and approval. The Housing Agreement will not be subordinated to any deeds of trust securing such construction or permanent financing.

Section 5.4 Term of the Authority Loan. Unless sooner due under the terms of the Promissory Note, all principal and interest on the Authority Loan shall be due upon the earliest of:
(a) a Transfer of any portion of the collateral Property or the Developer’s interest in such Property other than a Transfer permitted or approved by the Authority as provided in Article 7; or
(b) the occurrence of a Developer Event of Default for which the Authority exercises its right to cause the Authority Loan to become immediately due and payable; or (c) a default under the Housing Agreement which has not been cured within the time periods specified therein; or
(d) the stated maturity date of the Promissory Note.

Section 5.5 Interest; Payments. The Authority Loan shall bear interest at three percent (3%) per annum compounded monthly until the date of issuance of the Certificate of Occupancy, and simple interest at three percent (3%) thereafter, except in a Developer Event of Default, 1077
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whereupon interest shall accrue from and after the date of the Promissory Note until paid at the rate of ten percent (10%) or the highest rate permitted by law. Payments shall be structured as described in Section 5.7(a) below.

Section 5.6 Disbursement of Authority Loan. The proceeds of the Authority Loan shall be deposit into Escrow and disbursed at Closing.

Section 5.7 Repayment Schedule. The Authority Loan shall be repaid as follows:
(a) Payments. Commencing on the first (1st) anniversary of the date of the issuance of the Certificate of Occupancy and each such calendar date thereafter, until the Promissory Note is paid in full, the Developer shall make repayments of the Authority Loan from fifty 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 Project. 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 Project for the immediately preceding calendar year. Payments made shall be credited first against accrued interest and then against outstanding principal. (b) Prepayment. The Developer shall have the right to prepay the Authority Loan at any time. The Housing Agreement will not terminate upon payment of the Authority Loan.

Section 5.8 Reports and Accounting of Residual Receipts; Audited Financial Statement.

In connection with the annual repayment of the Authority Loan, the Developer shall furnish to the Authority an Annual Financial Statement.

Section 5.9 Books and Records. The Developer shall keep and maintain full, complete and appropriate books, record and accounts relating to the Project, 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, electronically or at the Developer’s corporate office currently at 6339 Paseo Del Lago, Carlsbad, CA 92011. 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. 1078
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Section 5.10 Non-Recourse. Following recordation of the 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 Authority Loan. The sole recourse of the Authority with respect to the principal of, or interest on, the Promissory Note shall be to the property described in the 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 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 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 Promissory Note and 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 the Developer in good faith) which may create liens on the Property 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 a Developer 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 Housing Agreement, unless a different period of applicability is specified for a particular condition or obligation.

Section 6.2 Use of Project. The Developer hereby agrees that the Project will be used and continuously operated only as affordable housing project 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 Sections 50079.5, 50105 and 50106 of the Law, at rents not exceeding the amounts set forth in Section 50053(b). In the event of any conflict between the terms of this Agreement and the Housing 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 Project, including, but not limited to, affordability restrictions of all other public entities encumbering the Property, and all TCAC regulations, for such time that the Project is subject to such regulations.

Section 6.3 Maintenance. The Developer agrees to maintain all interior and exterior portions of the Project, including landscaping, of the Project in first-class condition and repair and in a sanitary condition (and, as to landscaping, in a healthy condition, subject to any restrictions 1079
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on water use) and all applicable laws, rules, ordinances, orders, and regulations of all federal, state, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials.

The Developer acknowledges the great emphasis the Authority and the City place 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 Project 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 Project in first-class condition and repair and promptly eliminate all graffiti and replace dead and diseased plants and landscaping with comparable approved materials.

In the event that the Developer breaches any of the covenants contained in this Section and such default continues for a period of fifteen (15) days after written notice from the Authority and/or the City with respect to graffiti, debris, waste material, and general maintenance, or thirty (30) business days after written notice from the Authority and/or the City with respect to landscaping and building maintenance, then the Authority and/or 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 Authority and/or 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 Project and landscaped areas on the Property, and the Developer shall reimburse the Authority and/or the City for the costs thereof and a ten percent (10%) administrative charge within ten (10) business days after written demand with evidence of the costs.

Section 6.4 Taxes and Assessments. At and after the Close of Escrow, 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. The Authority is responsible to 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 the Property, before the Close of Escrow, if any.

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 Project on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code. The 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 Project. The foregoing covenant runs with the land. 1080
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Section 6.6 Provisions in Conveyance Documents. After the Close of Escrow, all deeds, leases or contracts made or entered into by the Developer, and its successor and assigns permitted under this Agreement, as to any portion of the Property must contain therein the following language:
(a) In Deeds:
“(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).”
(b) 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).”
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(c) In Real Property Conveyance 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 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 Project 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. The Developer shall be responsible for all repair and maintenance functions of the Project, 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. The Developer may contract with an experienced property management company or property manager, to operate and maintain the Project (the “Property Manager”). The Property Management contract shall be subject to prior review and approval by the Executive Director 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 the Authority as a condition to the Closing (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; 1082
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(5) Plans for carrying out an effective maintenance and repair program; (6) Rent collection policies and procedures;
(7) Plans for enhancing tenant-management relations;
(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 Executive Director that the Property Manager has failed to operate the Project in accordance with the Management Plan, the Authority 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 Authority’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 Authority 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 Authority 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 Project:
(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 ($1,000,000.00) each accident for bodily injury or disease. (b) Commercial General Liability insurance with limits not less than One Million Dollars ($1,000,000.00) each occurrence and Five Million Dollars ($5,000,000.00) 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 Five Million Dollars ($5,000,000.00) each occurrence and Six Million Dollars ($6,000,000.00) 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.
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(c) Commercial Automobile Liability insurance with limits not less than One Million Dollars ($1,000,000.00) each occurrence combined single limit for Bodily Injury and Property Damage, including coverages for owned, non-owned and hired vehicles, as applicable.

The Developer shall cause the Developer’s general contractor to maintain Commercial Automobile Liability Insurance with limits not less than Five Million Dollars ($5,000,000.00) each occurrence combined single limit for Bodily Injury and Property Damage, including coverage for owned, nonowned and hired vehicles, as applicable. (d) Professional liability insurance in an amount not less than One Million Dollars ($1,000,000.00) each occurrence and Two Million Dollars ($2,000,000.00) aggregate policy limit. The 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 Project 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 Authority. (f) Contractors’ Pollution Liability insurance with limits not less than One Million Dollars ($1,000,000.00) each occurrence combined single limit. (g) The Developer must require its contractor to require and verify that all subcontractors and agents working on the Project and required to have Workers’ Compensation insurance will maintain Workers’ Compensation insurance meeting all the requirements stated in this Section, and the 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.

Section 6.9 General Insurance Requirements.
(a) 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.
(b) 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 the 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 the 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.
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(c) The 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 the Authority shall be in excess of the Developer’s insurance and shall not contribute with it. (d) 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 the Authority by first class mail.
(e) 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. (f) Any deductibles or self-insured retentions must be declared to and approved by Authority and/or the City. At the option of the Authority and/or the City, either: the Developer must reduce or eliminate such deductibles or self-insured retentions as respects the Authority and/or the City and its elected officials, officers, directors, representatives, consultants, employees, and agents; or, the Developer must provide a financial guarantee satisfactory to the Authority and/or the City guaranteeing payment of losses and related investigations, claim administration, and defense expenses.

Section 6.10 Subrogation Waiver. The Developer hereby grants to the City and the Authority a waiver of any right to subrogation which any insurer of the Developer may acquire against the Authority and/or the City by virtue of the payment of any loss under such insurance.

The 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 the Authority and/or the City for all work performed by the 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 6.11 Certificates of Insurance. As a condition to the Close of Escrow, the Developer must provide certificates of insurance, in form and with insurers reasonably acceptable to the Authority and the City, evidencing compliance with the requirements of this Section, and complete copies of such insurance policies, including endorsements as required by this Section.

The Authority and the City reserve the right to require complete, certified copies of all required insurance policies, including endorsements, required by these specifications, at any time.

Section 6.12 Additional Coverage. The Developer may carry, at its own expense, any additional insurance it deems necessary or prudent. If the Developer maintains higher levels than the minimums shown above, the Authority and/or the City shall be entitled to coverage for the higher limits maintained by the Developer. Any available insurance proceeds in excess of the specified minimum levels of insurance and coverage shall be available to the Authority and/or the City.

Section 6.13 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, 1085
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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 6339 Paseo Del Lago, Carlsbad, CA 92011. The Authority and the City may make audits of such records.

ARTICLE 7

ASSIGNMENTS AND TRANSFERS
Section 7.1 Definitions. As used in this Article 7, the term “Transfer” means:
(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 this Agreement or of the Project or any part thereof or any interest therein or any contract or agreement to do any of the same; (b) 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 the ownership or Control of the Developer or any contract or agreement to do any of the same. For clarification, a Transfer shall not include any conveyance of a limited partner or other non-controlling interest in the Developer; (c) Any merger, consolidation, sale or lease of all or substantially all of the assets of the Developer; or
(d) The leasing of part or all of the Project thereon; provided, however, that leasing of the Units included within the Project to tenant occupants in accordance with the Housing 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 Project and its subsequent use in accordance with the terms hereof. The Developer recognizes that the qualifications and identity of the Developer are of particular concern to the Authority, in view of:
(a) The importance of the development of the Property to the general welfare of the community;
(b) The reliance by the Authority upon the unique qualifications and ability of the Developer to serve as the catalyst for development of the Property; (c) 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;
(d) The fact that the Property is not to be acquired or used for speculation, but only for development and operation of the Project by the Developer in accordance with this Agreement and the Housing Agreement; and
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(e) The Developer further recognizes that it is because of such qualifications and identity that the Authority 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 Article 7 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 Executive Director, and, unless approved by the Executive Director 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 7.1 or 7.3, the following Transfers are permitted and are hereby approved by the Authority without further review or approval:
(a) Any Transfer creating a Security Financing Interest permitted pursuant to the approved Financing Proposal;
(b) Any Transfer of the Project to a limited partnership in which the Developer, or an entity Controlled by the Developer, is the administrative or general partner of such limited partnership (provided the Authority shall have been given a copy of the limited partnership agreement, and copies of the organizational documents of the general partner). (c) The admission of a tax credit investor limited partner to the Developer or to such limited partnership described in subpart (b) above, and any subsequent transfer of an investor limited partner interest thereafter.
(d) 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 9;
(e) The leasing of residential units within the Project in accordance with the Housing Agreement; and
(f) The granting of reasonable easements or other rights of access to facilitate the development of the Property.

Section 7.5 Other Transfers with Authority Consent. Any Transfers not permitted under Section 7.4 shall require the prior written approval of the Executive Director, which shall not be unreasonably withheld, and no Transfer of this Agreement 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 Executive Director.

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 until issuance by the Authority of a Certificate of Completion for the Project. In the event of a refinance or re-syndication of the 1087
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Project, the Authority agrees to work with the Developer in good faith to accommodate reasonable requests related to the assignment and assumption of the Authority Loan and related documents.

ARTICLE 8

DEFAULT AND REMEDIES
Section 8.1 General Applicability. The provisions of this Article 8 govern the Parties’ remedies for breach or failure to perform under of this Agreement. If a condition to Closing does not occur, then neither Party shall be obligated to convey or accept the Property. 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 Authority acting in its governmental capacity).

Section 8.2 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 convey the Property to the Developer as provided in Article 3, and the Developer is otherwise entitled by this Agreement to such conveyance; or
(b) 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
(c) The Authority breaches any other material provision of this Agreement which is materially adverse to the Developer.

Section 8.3 Fault of Developer/Notice and Cure Period. 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 Authority’s obligation to convey the Property to the Developer; (b) The Developer refuses to accept conveyance from the Authority of the Property and under the terms set forth in Article 3 and fails to cure the default within thirty (30) business days after notice of default from the Authority; (c) The Developer fails to construct the Project in violation of Article 4 and fails to cure the default within thirty (30) business days after notice of default from the Authority; (d) The Developer fails to comply with any deadline in the Schedule of Performance, without acceptance or approval by the Authority; (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; 1088
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(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 Authority in connection with this Agreement proves to have been incorrect in any material and adverse respect; (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 (h) 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 suffers 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 the 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 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) business days after notice of default from the Authority, or the Developer breaches any other provision of any of the Authority Documents and fails to cure the same within: (a) the cure period in the Authority 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 the Developer fails to cure the default within thirty (30) business days after written notice from the Authority.

Notwithstanding anything in this Agreement to the contrary, the Authority hereby agrees that any cure made or tendered by a limited partner or tax credit investor of Developer, if 1089
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any, shall be deemed to be a cure by the Developer and shall be accepted or rejected on the same basis as if made or tendered by the Developer.

Section 8.4 Notice and Cure Period Regarding Authority Defaults. Before initiating any action for relief against the Authority for an alleged breach of this Agreement, the Developer must deliver to the Authority a written notice of breach specifying all of the reasons for the allegation of default with reasonable particularity. Within thirty (30) business days, the Authority 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 below; or (2) if in the determination of the Authority, the event does not constitute a breach of this Agreement, the Authority, as applicable, within thirty (30) days of receipt of such notice, must deliver to the 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 shall not be deemed an admission of the default.

If the Authority, as applicable, believes that the alleged breach cannot practically be cured within the thirty (30)-day period, it shall not constitute and Authority Event of Default provided that: (1) the cure is commenced during the thirty (30) day period after receipt of the notice of alleged breach by the Developer; (2) the cure is thereafter diligently prosecuted to completion.

Section 8.5 Authority Remedies. With respect to an uncured Developer Event of Default, the Authority 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 Authority’s remedies under this Article 8, the indemnification provisions of this Agreement, and 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), and exercising any remedies under the Authority Documents (including acceleration of the Authority Loan).

Section 8.6 Developer Remedies. With respect to an uncured Authority Event of Default, the Developer shall be entitled to take any or all of the following remedies:
(a) Terminating this Agreement by giving written notice to the Authority; provided, however, that the Developer’s remedies under this Article 8, the indemnification provisions of this Agreement, and 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 8.7 Rights of Mortgagees. Any rights of the 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.
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Section 8.8 Remedies Cumulative. No right, power, or remedy given to the Authority 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 Authority under the approved Financing Proposal or otherwise approved in writing by the Authority. Mortgages, deeds of trust, or other reasonable security instruments securing loans approved by the Authority 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 the Project or to guarantee such construction or completion. However, no such holder shall devote the Property or any portion thereof to any uses, or to construct any development thereon, other than the Project provided for or authorized by this Agreement and the Housing Agreement.

Section 9.3 Notice of Default and Right to Cure. Whenever the Authority 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 Project, the Authority 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, a copy of such notice or demand provided the Authority shall have been given written notice of the address for such notice by the Developer. Each such holder 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 debt and the lien on its Security Financing Interest. Nothing contained in this Agreement is deemed to permit or authorize such holder to undertake or continue the construction or completion of the Project (beyond the extent necessary to conserve or protect the Project or construction already made) without first having expressly assumed in writing the Developer’s obligations to the Authority relating to the Project under this Agreement pursuant to an assignment and assumption agreement prepared by the Authority and recordable in the Official Records (the “Security Financing Interest Assignment”). The holder in that event must agree to complete the Project, in the manner provided in the Schedule of Performance (or as may be amended by the Security Financing Interest Assignment; provided, however, the Authority is under no obligation to extend the dates for performance set forth in this Agreement). Any such holder properly completing the Project under 1091
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this paragraph must assume all rights and obligations of the Developer under this Agreement and will be entitled, upon completion and written request made to the Authority, to a Certificate of Completion from the Authority.

Section 9.4 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 Project, and the holder has not exercised its option to complete the Project on the Property, the Authority may cure the default, prior to the completion of any foreclosure. In such event the Authority will be entitled to reimbursement from the Developer of all reasonable costs and expenses incurred in curing the default and such costs and disbursements shall be included in the obligations secured by the applicable Security Instruments. The Developer will procure an 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. The Authority agrees that such lien will be subordinate to any Security Financing Interest, and the Authority will execute from time to time any and all documentation reasonably requested the holder thereof to effect such subordination.

Section 9.5 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) working days following receipt of the request. The 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 Authority 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 Authority and the Developer as follows:
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Authority: Palm Desert Housing Authority
73-510 Fred Waring Drive
Palm Desert, CA 92260
Attn: Housing Division
Developer: Chelsea Investment Corporation
6339 Paseo Del Lago
Carlsbad, CA 92011
Attn: Cheri Hoffman
with copies to: Winthrop & Weinstine, P.A.
225 South 6th Street, Suite 3500
Minneapolis, Minnesota 55402
Attn: Jon L. Peterson
and to: [Investor Limited Partner]
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 the 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, except in the case of fraud or willful misconduct by such individuals. 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 the 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 the Authority or successor or on any obligation under the terms of this Agreement.

Section 10.3 Forced Delay. The Parties hereunder shall not be deemed to be in default as a result of forced delays in the performance of their obligations hereunder 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; 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 1093
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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 Authority to inspect at reasonable times and on a confidential basis those books, records and all other documents of the Developer necessary to determine the Developer’s compliance with the terms of this Agreement.

Section 10.5 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 10.6 Third-Party Beneficiaries. With the exception of the City, there are no third party beneficiaries to this Agreement.

Section 10.7 Applicable Law. This Agreement must be interpreted under and under the laws of the State of California. Venue shall be Riverside County.

Section 10.8 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 the termination of this Agreement and will remain in full force and effect.

Section 10.9 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 10.10 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 10.11 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 1094
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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 10.12 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 10.13 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 Authority as follows, to the actual knowledge of Cheri Hoffman, as President of the Developer:
(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 the 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, 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.
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Section 10.16 Amendments. The Parties can amend this Agreement only by means of a writing executed by the Developer and the Authority.

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’s 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.

Section 10.18 Counterparts; Multiple Originals. This Agreement may be executed in counterparts, each of which is deemed to be an original. [Remainder of this page intentionally left blank]
[Signatures appear on next page]
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AUTHORITY:

PALM DESERT HOUSING AUTHORITY,
a public body
By:

Name: L. Todd Hileman
Title: Executive Director
Date: , 2024
DEVELOPER:

CHELSEA INVESTMENT CORPORATION,
a California corporation
By:

Name: Cheri Hoffman
Title: President
Date: , 2024
ATTEST:

Anthony J. Mejia, Secretary
APPROVED AS TO FORM:

Richards, Watson & Gershon
By:
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EXHIBIT “A”

LEGAL DESCRIPTION OF THE PROPERTY
Real property in the City of Palm Desert, County of Riverside, State of California, described as follows:

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF PALM

DESERT, IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1A
THE SOUTHERLY 323.50 FEET OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, OF THE SAN BERNARDINO MERIDIAN, IN THE

CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA,

ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE.

PARCEL 2A

AN EASEMENT FOR PEDESTRIAN AND VEHICULAR ACCESS FOR CONSTRUCTION AND EMERGENCY ACCESS PURPOSES OVER THAT PORTION OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO

MERIDIAN, IN THE CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF

CALIFORNIA, ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE, DESCRIBED AS FOLLOWS:

COMMENCING AT THE WEST 1/16 CORNER OF SAID SECTION 8, SAID CORNER

BEING ON THE CENTERLINE OF COUNTRY CLUB DRIVE, SAID CORNER ALSO BEING THE NORTHWEST CORNER OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG THE WEST LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8, S 0° 10' 27" W 124.00 FEET;
THENCE S 89° 49' 33" E 33.88 FEET TO THE EAST LINE OF THAT CERTAIN EASEMENT

TO THE CITY OF PALM DESERT FOR PUBLIC ROADWAY PURPOSES DESCRIBED IN DOCUMENT NO. 2003-461172 RECORDED JUNE 23, 2003, RECORDS OF SAID COUNTY OF RIVERSIDE, AND TO THE TRUE POINT OF BEGINNING;
THENCE S 89° 49' 33" E 30.28 FEET;
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THENCE S 0° 13' 14" E 873.45 FEET TO A LINE PARALLEL WITH AND 323.50 FEET NORTHERLY OF THE SOUTH LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG SAID PARALLEL LINE S 89° 41' 04" W 24.00 FEET; THENCE N 0° 13' 14" W 831.65 FEET;
THENCE N 89° 49' 33" W 8.74 FEET TO THE EAST LINE OF SAID EASEMENT TO THE CITY OF PALM DESERT PER DOCUMENT NO. 2003-461172 AND TO THE BEGINNING OF A CURVE CONCAVE TO THE NORTHWEST HAVING A RADIUS OF 187.50 FEET, A RADIAL LINE THROUGH SAID BEGINNING OF CURVE BEARS S 81° 07' 08" E; THENCE NORTHERLY 28.49 FEET ALONG SAID EAST LINE AND ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 8° 42' 25";
THENCE CONTINUING ALONG SAID EAST LINE N 0° 10' 27" E 13.62 FEET TO THE TRUE POINT OF BEGINNING.

APN: 622-370-014
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EXHIBIT B

FORM OF GRANT DEED
(Attached.)
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EXHIBIT C

FORM OF PROMISSORY NOTE
(Attached.)
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EXHIBIT D

FORM OF DEED OF TRUST
(Attached.)
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EXHIBIT E

FORM OF HOUSING AGREEMENT
(Attached.)
1103
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EXHIBIT F

SCOPE OF DEVELOPMENT
(Attached.)
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EXHIBIT G

SCHEDULE OF PERFORMANCE
(Attached.)
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EXHIBIT H

FINANCING PROPOSAL
(To be provided by Developer.)
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EXHIBIT I

NOTICE OF AFFORDABILITY RESTRICTIONS
(Attached.)
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EXHIBIT J

RESERVED
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EXHIBIT K

ACCESS EASEMENT
[Schematic/meets and bounds description
to be provided by the Developer]
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EXHIBIT L

MEMORANDUM OF UNDERSTANDING
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1111
L
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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:

Attention:

APN: 622-370-014
SPACE ABOVE THIS LINE FOR RECORDER’S USE
THE UNDERSIGNED GRANTOR(S) DECLARE(S):

DOCUMENTARY TRANSFER TAX $
_____________________
…Computed on the consideration or value of property
conveyed; OR
…Computed on the consideration or value less liens or
encumbrances remaining at time of sale.

SPACE ABOVE THIS LINE FOR RECORDER’S USE
_________________________________________________
Signature of Declarant or Agent determining tax - Firm Name This Grant Deed is recorded for the benefit of the City of Palm Desert and is exempt from California recording fees pursuant to Sections 6103, 27383 and 27388.1 of the California Government Code.

GRANT DEED
For valuable consideration, the receipt of which is hereby acknowledged, Palm Desert Housing Authority, a public body (herein called “Grantor”) grants to , a California limited partnership (herein called “Grantee”), the real property located in the City of Palm Desert, CA (the “Property”), as legally described in the attached 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 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 Disposition, Development and Loan Agreement dated June ___, 2024, by and between Grantor and Grantee, (as successor-in-interest 1113
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by assignment to Chelsea Investment Corporation, a California corporation (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.”
(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, 1114
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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 Real Property Conveyance 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__
AUTHORITY:

PALM DESERT HOUSING AUTHORITY,
a public body
By:

Name: L. Todd Hileman
Title: Executive Director
ATTEST:

Anthony J. Mejia, Secretary
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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:

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF PALM

DESERT, IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1A
THE SOUTHERLY 323.50 FEET OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, OF THE SAN BERNARDINO MERIDIAN, IN THE

CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA,

ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE.

PARCEL 2A

AN EASEMENT FOR PEDESTRIAN AND VEHICULAR ACCESS FOR CONSTRUCTION AND EMERGENCY ACCESS PURPOSES OVER THAT PORTION OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO

MERIDIAN, IN THE CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF

CALIFORNIA, ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE, DESCRIBED AS FOLLOWS:

COMMENCING AT THE WEST 1/16 CORNER OF SAID SECTION 8, SAID CORNER

BEING ON THE CENTERLINE OF COUNTRY CLUB DRIVE, SAID CORNER ALSO BEING THE NORTHWEST CORNER OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG THE WEST LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8, S 0° 10' 27" W 124.00 FEET;
THENCE S 89° 49' 33" E 33.88 FEET TO THE EAST LINE OF THAT CERTAIN EASEMENT

TO THE CITY OF PALM DESERT FOR PUBLIC ROADWAY PURPOSES DESCRIBED IN DOCUMENT NO. 2003-461172 RECORDED JUNE 23, 2003, RECORDS OF SAID COUNTY OF RIVERSIDE, AND TO THE TRUE POINT OF BEGINNING;
THENCE S 89° 49' 33" E 30.28 FEET;
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THENCE S 0° 13' 14" E 873.45 FEET TO A LINE PARALLEL WITH AND 323.50 FEET NORTHERLY OF THE SOUTH LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG SAID PARALLEL LINE S 89° 41' 04" W 24.00 FEET; THENCE N 0° 13' 14" W 831.65 FEET;
THENCE N 89° 49' 33" W 8.74 FEET TO THE EAST LINE OF SAID EASEMENT TO THE CITY OF PALM DESERT PER DOCUMENT NO. 2003-461172 AND TO THE BEGINNING OF A CURVE CONCAVE TO THE NORTHWEST HAVING A RADIUS OF 187.50 FEET, A RADIAL LINE THROUGH SAID BEGINNING OF CURVE BEARS S 81° 07' 08" E; THENCE NORTHERLY 28.49 FEET ALONG SAID EAST LINE AND ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 8° 42' 25";
THENCE CONTINUING ALONG SAID EAST LINE N 0° 10' 27" E 13.62 FEET TO THE TRUE POINT OF BEGINNING.

APN: 622-370-014
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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 RIVERSIDE
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, and that by his/her/their signature(s) on the instrument the person(s), or the entity(ies) 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.

Place Notary Seal Above
Signature of Notary Public
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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 RIVERSIDE
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, and that by his/her/their signature(s) on the instrument the person(s), or the entity(ies) 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.

Place Notary Seal Above
Signature of Notary Public
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SECURED PROMISSORY NOTE
, 2024 $3,000,000.00
Palm Desert, California
FOR VALUE RECEIVED, the undersigned, , a California
limited partnership (“Maker”), having its principal place of business at promises to pay to the order of the PALM DESERT HOUSING AUTHORITY (“Payee”), at 73-510 Fred Waring Drive, Palm Desert, CA 92260, Attn: Housing Manager, or at such other place as the holder of this Note from time to time may designate in writing, the principal sum of Three Million Dollars ($3,000,000.00) (the “Principal Amount”), together with interest on the unpaid principal amount disbursed under this promissory note (“Note”) from time to time outstanding at the “Applicable Interest Rate,” as defined below, in lawful money of the United States of America. This Note is being delivered, and the loans evidenced hereby are being made, pursuant to the terms of a Disposition, Development and Loan Agreement between Maker, as successor-in-interest by assignment to Chelsea Investment Corporation, a California corporation and Payee dated , 2024 (“DDLA”). All capitalized terms used herein which are not separately defined herein shall have the meanings set forth therefor in the DDLA.

As of the date of this Note, Three Million Dollars ($3,000,000.00) of principal has been disbursed in part to the City to pay the impact fees imposed by the City in connection with the Project and the remainder to Maker to pay a portion of the costs of construction of the Project. “Applicable Interest Rate” means three percent (3%) per annum, compounded monthly prior to the issuance of the Certificate of Occupancy, and simple interest at three percent (3%) per annum thereafter, accruing on all principal sums disbursed and outstanding, except that amounts not paid when due shall accrue interest from the date due until the date paid at the lesser of: (i) ten percent (10%) per annum, simple interest, or (ii) the maximum rate permitted by applicable law.

1. [Payments. Payments under this Note shall be due and payable as follows: fifty percent (50%) of Residual Receipts, as defined in the DDLA, from the Project for each calendar year shall be paid to Payee on an annual basis commencing on the first (1st) anniversary of the date of issuance of the Certificate of Occupancy and each anniversary date thereafter (with respect to the Residual Receipts for the preceding calendar year), until all outstanding principal and accrued interest under this Note has been paid in full. Payments shall first be applied to accrued interest, then to remaining outstanding principal. In addition, the entire amount of outstanding principal and accrued interest and any additional amounts which become owing hereunder shall be paid by Maker to Payee as of the earliest of: (i) a Developer Event of Default by Maker under the DDLA (including, without limitation, an uncured default under the Housing Agreement following the expiration of any applicable cure period; (ii) as provided in Section 4 below; or (iii) fifty-five (55) years after the date of issuance of the Certificate of Occupancy (the “Maturity Date”).

2. Secured by Deed of Trust. Repayment of this Note is secured by the Deed of Trust executed by Maker for the benefit of Payee encumbering the Property on which the Project described in the DDLA is to be constructed.
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3. Prepayment. Maker shall have the right to prepay amounts owing under this Note at any time, without premium.

4. Due on Sale or Encumbrance. In the event of any transfer of the Property, or any portion thereof or interest therein, not permitted by the DDLA or approved in writing by Payee, Payee shall have the absolute right at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Failure of Payee to exercise the option to declare all sums secured hereby immediately due and payable upon a Transfer will not constitute waiver of the right to exercise this option in the event of any subsequent Transfer.

5. Miscellaneous.
(a) Governing Law. All questions with respect to the construction of this Note and the rights and liabilities of the parties to this Note shall be governed by the laws of the State of California.
(b) Attorneys’ Fees.
(i) Maker shall reimburse Payee for all reasonable attorneys’ fees, costs and expenses, incurred by Payee in connection with the enforcement of Payee’s rights under this Note, including, without limitation, reasonable attorneys’ fees, costs and expenses for trial, appellate proceedings, out-of-court negotiations, workouts and settlements or for enforcement of rights under any state or federal statute, including, without limitation, reasonable attorneys’ fees, costs and expenses incurred to protect Payee’s security and attorneys’ fees, costs and expenses incurred in bankruptcy and insolvency proceedings such as (but not limited to) seeking relief from stay in a bankruptcy proceeding. The term “expenses” means any expenses incurred by Payee in connection with any of the out-of-court, or state, federal or bankruptcy proceedings referred to above, including, without limitation, the fees and expenses of any appraisers, consultants and expert witnesses retained or consulted by Payee in connection with any such proceeding. (ii) Payee shall also be entitled to its attorneys’ fees, costs and expenses incurred in any post-judgment proceedings to collect and enforce the judgment. This provision is separate and several and shall survive the merger of this Note into any judgment on this Note. (c) Time of the Essence. Time is of the essence with respect to every provision hereof.
(d) Waivers by Maker. Maker waives: presentment; demand; notice of dishonor; notice of default or delinquency; notice of acceleration; notice of protest and nonpayment; notice of costs, expenses or losses and interest thereon; and diligence in taking any action to collect any sums arising under this Note or in any proceeding against any of the rights or interests in or to properties securing payment of this Note. (e) Non-waivers. No previous waiver and no failure or delay by Maker in acting with respect to the terms of this Note, the DDLA the Deed of Trust or the Housing Agreement, shall constitute a waiver of any breach, default, or failure of condition under any of them. A waiver of any term must be made in writing and shall be limited to the express written terms of such waiver.
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(f) Non-Recourse. Repayment of this Note and all other obligations of Maker hereunder, shall be a non-recourse obligation of Maker. (g) Cure by Limited Partner(s). Payee hereby agrees that any cure of any default made or tendered by Maker’s limited partner (whose name and notice address is as set forth below in this Section 5(h)) shall be deemed to be a cure by Maker and shall be accepted or rejected on the same basis as if made or tendered by Maker.

Investor Limited Partner Name and Notice Address:

MAKER:
,
a California limited partnership
By:

Name:

Title: General Partner
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RECORDING REQUESTED BY,
AND WHEN RECORDED MAIL TO:

Palm Desert Housing Authority
73-510 Fred Waring Drive
Palm Desert. CA 92260
Attn: Housing Manager
APN: 622-370-014

SPACE ABOVE THIS LINE FOR RECORDER'S USE
This Deed of Trust and Assignment of Rents is recorded for the benefit of the Palm Desert Housing Authority and is exempt from California recording fees pursuant to Sections 6103, 27383 and 27388.1 of the California Government Code.

DEED OF TRUST AND ASSIGNMENT OF RENTS
THIS DEED OF TRUST AND ASSIGNMENT OF RENTS (this “Deed of Trust”) is dated as of ____________, 202__, and is executed by , a
California limited partnership (“Trustor”), in favor of FIRST AMERICAN TITLE INSURANCE COMPANY, as “Trustee,” for the benefit of the PALM DESERT HOUSING AUTHORITY, a public body (“Beneficiary”).

Trustor IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE IN TRUST, WITH POWER OF SALE, that certain land in the City of Palm Desert, Riverside County, California, described on Exhibit “A” attached hereto;
TOGETHER WITH the rents, issues and profits thereof and all leases and rental agreements related thereto, SUBJECT, HOWEVER, to the right, power, and authority hereinafter given to Trustor to collect and apply such rents, issues, and profits; TOGETHER WITH all buildings and improvements of every kind and description now or hereafter erected or placed thereon, and all fixtures, including but not limited to all gas and electric fixtures, engines and machinery, radiators, heaters, furnaces, heating equipment, laundry equipment, steam and hot water boilers, stoves, ranges, elevators and motors, bath tubs, sinks, water closets, basins, pipes, faucets and other plumbing and heating fixtures, mantels, cabinets, refrigerating plant and refrigerators, whether mechanical or otherwise, cooking apparatus and appurtenances, and all shades, awnings, screens, blinds and other furnishings, it being hereby agreed that all such fixtures and furnishings shall to the extent permitted by law be deemed to be permanently affixed to and a part of the realty;
TOGETHER WITH all building materials and equipment now or hereafter delivered to the premises and intended to be installed therein;
TOGETHER WITH all articles of personal property owned by the Trustor now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the lands described which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all 1124
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other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to the building or buildings in any manner.

All of the foregoing, together with the real property, is herein referred to as the “Property.” For the purpose of securing (a) payment of the indebtedness evidenced by that certain promissory note (the “Note”) of substantially even date herewith, in the stated principal sum of Three Million Dollars ($3,000,000.00), executed by Trustor, as maker, in favor of Beneficiary, as payee, and all amendments thereof; and (b) sums owing by Trustor to Beneficiary under this Deed of Trust.

Trustor hereby covenants and agrees:
(1) That it shall faithfully perform each and every covenant contained in the Note, the Disposition, Development and Loan Agreement (“Loan Agreement”) between Trustor, as successor-in-interest by assignment to Chelsea Investment Corporation, a California corporation, and Beneficiary dated ________________, 202__ and the Housing Agreement (as defined therein), and other documents described therein. Upon a Developer Event Default under (and as defined in) the Loan Agreement, Beneficiary may accelerate the loan evidenced by the Note, and if not paid, may exercise any and all remedies permitted by law, including foreclosure of this Deed of Trust.
(2) To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorneys’ fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed of Trust.
(3) To pay at least ten (10) calendar days before delinquency all property taxes and assessments and any other taxes affecting the Property, including assessments on appurtenant water stock; when due, all encumbrances, charges and liens, with interest, on the Property or any part thereof, which appear to be prior or superior hereto (provided, however, that Trustor may dispute in good faith any such tax or assessment after posting bond on same). (4) That should Trustor fail to make any payment or to do any act as herein provided, then Beneficiary, without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof may: make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon the Property for such purposes with written notice to Trustor; appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; pay, purchase, contest or compromise any encumbrance, charge or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, pay necessary expenses, employ counsel and pay its reasonable fees.
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(5) To pay immediately and without demand all sums so expended by Beneficiary hereunder.
(6) The Trustor further covenants that it will not voluntarily create, suffer, or permit to be created against the Property any lien or liens except for deeds of trust securing financing used to pay for construction of the Project, as defined in the Loan Agreement (or securing refinancing of such construction loans) and further that it will keep and maintain the Property and Project free from the claims of all persons supplying labor or materials which will enter into the construction of any and all buildings now being erected or to be erected on the Property, or will cause the release of or will provide a bond against any such liens within ten (10) days of the attachment of the lien or liens.
(7) That by accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums so secured or to declare default for failure so to pay. (8) That at any time or from time to time, without liability therefor and without notice, upon written request of Beneficiary, and without affecting the personal liability of any person for payment of the indebtedness secured hereby, Trustee may: reconvey any part of the Property; consent to the making of any map or plat thereof; join in granting any easement thereon; or join in any extension agreement or any agreement subordinating the lien or charge hereof. (9) That upon written request of Beneficiary stating that all sums secured hereby have been paid or forgiven by Beneficiary, and upon surrender of the Note to Trustee for cancellation and retention and upon payment of its fees, Trustee shall reconvey, without warranty, the Property then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as “the person or persons legally entitled thereto.”
(10) That Trustor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents, income and profits of the Property encumbered hereby, and hereby gives to and confers upon Beneficiary the right, power and authority to collect such rent, income, and profits, and Trustor irrevocably appoints Beneficiary Trustor’s true and lawful attorney at the option of Beneficiary, at any time, to give receipts, releases and satisfactions and to sue, either in the name of Trustor or in the name of Beneficiary, for all income, and apply the same to the indebtedness secured hereby; provided, however, so long as no default by Trustor in the payment of any indebtedness secured hereby shall exist and be continuing beyond any applicable cure period expressly provided therein, then, Trustor shall have the right to collect all rent, income and profits from the Property and to retain, use and enjoy the same. Upon any such default, Beneficiary may at any time without notice, either in person, by agent, or by a receiver to be appointed by a court, and without regard to the adequacy of any security for the indebtedness hereby secured, enter upon and take possession of the Property or any part thereof, in its own name sue for or otherwise collect such rents, issues and profits, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorney’s fees, upon any indebtedness secured hereby, and in such order as Beneficiary may determine. The entering upon and taking possession of the Property, the collection of such rents, issues and profits 1126
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and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. (11) That upon a default by Trustor under the Loan Agreement (after all notice and cure periods have elapsed), Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and of written notice of default and election to cause to be sold the Property, which notice Trustee shall cause to be filed for record. Beneficiary also shall deposit with Trustee this Deed of Trust, the Note and all documents evidencing expenditures secured hereby. After the lapse of such time as may then be required by law following the recordation of the notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell the Property at the time and place fixed by it in the notice of sale, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement.

Trustee shall deliver to such purchaser its deed conveying the Property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary as hereinafter defined, may purchase at the sale.

After deducting all costs, fees and expenses of Trustee and of this Trust, including cost of evidence of title in connection with sale, Trustee shall apply the proceeds of sale to payment of:
all sums expended under the terms hereof, not then repaid, with accrued interest at the amount allowed by law in effect at the date hereof; all other sums then secured hereby; and the remainder, if any, to the person or persons legally entitled thereto. (12) Beneficiary, or any successor in ownership of any indebtedness secured hereby, may from time to time, by instrument in writing, substitute a successor or successors to any Trustee named herein or acting hereunder, which instrument, executed by the Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Property is situated, shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the Trustee predecessor, succeed to all its title estate, rights, powers and duties. The instrument must contain the name of the original Trustor, Trustee and Beneficiary hereunder, the book and page where this Deed of Trust is recorded and the name and address of the new Trustee.
(13) That this Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. The term Beneficiary shall mean the owner and holder, including pledgees, of the Note, whether or not named as Beneficiary herein. In this Deed of Trust, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. (14) If Trustor shall sell, convey, hypothecate, transfer, encumber or alienate the Property, or any part thereof, or any interest therein, or any interest in Trustor is transferred, or Trustor shall be divested of title or any interest in the Property in any manner or way, whether voluntarily or involuntarily, without the prior written consent of the Beneficiary being first had 1127
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and obtained (if and to the extent such consent is required in the Loan Agreement or if the failure to get such consent would be a Developer Event of Default under the Loan Agreement), or if an Authority Event of Default by Trustor shall occur under the Loan Agreement, then Beneficiary shall have the right, at its option, to declare any indebtedness or obligations secured hereby, irrespective of the maturity date specified in any note evidencing the same, immediately due and payable.
(15) That Trustor shall promptly pay when due the payments of interest, principal, and all other charges accruing under any superior or prior trust deed, mortgage, or other instrument encumbering the Property. Beneficiary shall have the right, but not the obligation, to cure any defaults on any superior or prior deed of trust or promissory note secured thereby and upon curing such default Trustor shall immediately reimburse Beneficiary for all costs and expenses incurred thereby, together with interest thereon at the maximum legal rate permitted to be charged by nonexempt lenders under the State of California, and Trustor’s failure to pay such amount on demand shall be a breach hereof. Trustor’s breach or default of any covenant or condition of any superior or prior trust deed, mortgage or other instrument encumbering the Property shall be a default under this Deed of Trust, whereupon Beneficiary shall have the right to declare all sums under the Note secured hereby immediately due and payable as provided in the Note. (16) The undersigned Trustor requests that a copy of any notice of default and of any notice of sale hereunder (and any other notices hereunder) be mailed to it at its address for notices in the Loan Agreement.
(17) Trustor shall not commit waste with respect to the Property. (18) Any notices, requests or approvals given under this Deed of Trust from one party to another must be in writing and may be personally delivered; or deposited with the United States Postal Service, postage prepaid, for delivery by registered or certified mail, return receipt requested; or sent by next business day delivery service such as FedEx, to the following address:

If to Trustor: ,
a California limited partnership
c/o Chelsea Investment Corporation,
a California corporation
6339 Paseo Del Lago
Carlsbad, CA 92011
Attn: Cheri Hoffman
with copies to: Winthrop & Weinstine, P.A.
225 South 6th Street, Suite 3500
Minneapolis, MN 55402
Attn: Jon L. Peterson
and to: [Investor Limited Partner]
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If to Beneficiary: Palm Desert Housing Authority
73-510 Fred Waring Drive
Palm Desert, CA 92260
Attn: Housing Manager
Either party may change its address for notice by giving written notice of its change of address to the other party. Notices are considered delivered on the date received if given next business day delivery service and three (3) business days after mailing if sent by United States Postal Service registered or certified mail. If a notice is sent by registered or certified mail and receipt is rejected it shall be considered delivered on the date delivery was attempted by the United States Postal Service.
(19) Beneficiary acknowledges that Trustor and the California Tax Credit Allocation Committee have or intend to enter into, or concurrently with the execution and delivery of the Loan Documents are entering into, a Regulatory Agreement (the “TCAC Regulatory Agreement”), which constitutes the extended low-income housing commitment described in Section 42(h)(6)(B) of the Internal Revenue Code, as amended (the “Code”). Beneficiary acknowledges and agrees that, in the event of a foreclosure of its interest under the Deed of Trust or delivery by the Trustor of a deed in lieu thereof (collectively, a “Foreclosure”), the following rule contained in Section 42(h)(6)(E)(ii) of the Code shall apply: For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the TCAC Regulatory Agreement, (i) none of the eligible tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause, including but not limited to, the tenants’ ineligibility pursuant to Section 42 of the Code), (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Code.

TRUSTOR:
,
a California limited partnership
By:

Name:

Title: General Partner
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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 RIVERSIDE
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, and that by his/her/their signature(s) on the instrument the person(s), or the entity(ies) 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.

Place Notary Seal Above
Signature of Notary Public
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EXHIBIT A

LEGAL DESCRIPTION OF THE LAND

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF PALM

DESERT, IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1A
THE SOUTHERLY 323.50 FEET OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, OF THE SAN BERNARDINO MERIDIAN, IN THE

CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA,

ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE.

PARCEL 2A

AN EASEMENT FOR PEDESTRIAN AND VEHICULAR ACCESS FOR CONSTRUCTION AND EMERGENCY ACCESS PURPOSES OVER THAT PORTION OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO

MERIDIAN, IN THE CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF

CALIFORNIA, ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE, DESCRIBED AS FOLLOWS:

COMMENCING AT THE WEST 1/16 CORNER OF SAID SECTION 8, SAID CORNER

BEING ON THE CENTERLINE OF COUNTRY CLUB DRIVE, SAID CORNER ALSO BEING THE NORTHWEST CORNER OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG THE WEST LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8, S 0° 10' 27" W 124.00 FEET;
THENCE S 89° 49' 33" E 33.88 FEET TO THE EAST LINE OF THAT CERTAIN EASEMENT

TO THE CITY OF PALM DESERT FOR PUBLIC ROADWAY PURPOSES DESCRIBED IN DOCUMENT NO. 2003-461172 RECORDED JUNE 23, 2003, RECORDS OF SAID COUNTY OF RIVERSIDE, AND TO THE TRUE POINT OF BEGINNING;
THENCE S 89° 49' 33" E 30.28 FEET;
THENCE S 0° 13' 14" E 873.45 FEET TO A LINE PARALLEL WITH AND 323.50 FEET NORTHERLY OF THE SOUTH LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG SAID PARALLEL LINE S 89° 41' 04" W 24.00 FEET; 1131
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THENCE N 0° 13' 14" W 831.65 FEET;
THENCE N 89° 49' 33" W 8.74 FEET TO THE EAST LINE OF SAID EASEMENT TO THE CITY OF PALM DESERT PER DOCUMENT NO. 2003-461172 AND TO THE BEGINNING OF A CURVE CONCAVE TO THE NORTHWEST HAVING A RADIUS OF 187.50 FEET, A RADIAL LINE THROUGH SAID BEGINNING OF CURVE BEARS S 81° 07' 08" E; THENCE NORTHERLY 28.49 FEET ALONG SAID EAST LINE AND ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 8° 42' 25";
THENCE CONTINUING ALONG SAID EAST LINE N 0° 10' 27" E 13.62 FEET TO THE TRUE POINT OF BEGINNING.

APN: 622-370-014
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P6401-0001\2946251v5.doc

RECORDING REQUESTED BY, AND
WHEN RECORDED RETURN TO:

City of Palm Desert
73-510 Fred Waring Drive
Palm Desert,. CA 92260-2578
Attn: Housing Division
SPACE ABOVE THIS LINE FOR RECORDER’S USE
This Document is recorded for the benefit of the Palm Desert Housing Authority and is exempt from recording fees pursuant to Sections 6103, 27383 and 27388.1 of the California Government Code.

HOUSING AGREEMENT
by and between the

PALM DESERT HOUSING AUTHORITY,
and

CHELSEA INVESTMENT CORPORATION,
a California corporation
DATED AS OF _________ ____, 2024
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HOUSING AGREEMENT
THIS HOUSING AGREEMENT (the “Agreement”) is dated as of ______________ ___, 2024, and is by and between the PALM DESERT HOUSING AUTHORITY, a public body, corporate and politic (the “Authority”) and CHELSEA INVESTMENT CORPORATION, a California corporation (the “Owner”). The Authority and the 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 Authority and the Owner have entered into that certain Disposition, Development and Loan Agreement dated _____, 2024 (the “DDLA”), pursuant to which the Authority conveyed the Property to the Owner for the development described in the DDLA (the “Development”) and made a loan to the Owner for the construction of the Development and the payment of impact fees imposed by the City of Palm Desert, California (the “City”) with respect thereto. 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. The Authority loan was made with moneys in the Low and Moderate Income Housing Asset Fund established and held by the Authority as successor to the housing assets of the former Palm Desert Redevelopment Agency, and the DDLA requires that the Authority obtain recorded restrictions on the Property and the Development thereon restricting the apartment units on the Property to extremely low, very low and low income households at an affordable rent.

E. This Agreement contains the restrictions described in Recital D above.

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 Authority and the Owner hereby agree as follows:
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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 the 39 of the 40 units in the Development that shall be made available to and occupied by, or held vacant for occupancy only by, Extremely Low Income Households, Very Low Income Households, and 59% AMI Low Income Households and rented at an Affordable Rent. Specifically, the Affordable Units consist of four (4) units for Extremely Low Income Households, twenty (20) units for Very Low Income Households and fifteen (15) units for 59% AMI Low Income Households. The Affordable Units will include the number of bedrooms shown on the following table:

Bedroom
Size
Extremely
Low
Income
Household
Affordable
Units
Very Low
Income
Household
Affordable
Units
59% AMI
Low
Income
Household
Affordable
Units
One 2 10 8
Two 1 5 3
Three 1 5 4
Total 4 20 15
“Affordable Rent” hall 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, (1) for each of the four (4) Affordable Units reserved for Extremely Low Income Households, the maximum monthly Affordable Rent, including a Reasonable Utility Allowance, may not exceed thirty percent (30%) of thirty percent (30%) of the AMI, adjusted for a Household Size Appropriate to the Affordable Unit, divided by twelve, (2) for each of the twenty (20) Affordable Units reserved for Very Low Income Households, 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 (12); and (3) for each of the fifteen (15) Affordable Units reserved for 59% AMI Low Income Households, the maximum monthly Affordable Rent, including a Reasonable Utility Allowance, may not exceed thirty 1135
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percent (30%) of fifty-nine percent (59%) 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 50093, or successor statute, as adjusted for family size in accordance with the state regulations adopted pursuant to California Health and Safety Code Section 50093. “Extremely Low Income Household” shall mean persons and families whose income does not exceed the qualifying limits for extremely low income households, adjusted for actual household size, set forth in California Health and Safety Code Section 50106 and Title 25 of the California Code of Regulations, as such statute and regulations may be amended from time to time. “Household Size Appropriate to the Affordable Unit” in the absence of pertinent federal statutes or regulations applicable to the Development, shall have the meaning set forth in California Health and Safety Code Section 50052.5(h), as amended from time to time. “59% AMI Low Income Household” shall mean persons and families whose income does not exceed the 59% of the AMI, adjusted for actual household size, as set forth in California Health and Safety Code Section 50079.5 and Title 25 of the California Code of Regulations, including Section 6912, as such statute and regulations may be 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 Development have been completed as evidenced by the City’s issuance of a final Certificate of Occupancy for the Development, and ending as of the fifty-seventh (57th) anniversary thereof. “Very Low Income Household” shall mean persons and families whose income does not exceed the qualifying limits for very low income households, adjusted for actual household size, set forth in California Health and Safety Code Section 50105 and Title 25 of the California Code of Regulations, as such statute and regulations may be amended from time to time.

1.2 Rules of Construction.

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. 1136
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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 DEVELOPMENT OBLIGATIONS

2.1 Development and Affordable Units.

The Owner shall develop and construct the Development on the Property in conformity with the DDLA. Thereafter, during the Required Covenant Period, the Owner agrees that not less than thirty-nine (39) units in the Development shall be Affordable Units, meaning that (a) four (4) of such units shall be continually available to and occupied by, or held vacant for occupancy only by Extremely Low Income Households, (b) twenty (20) of such units shall be continually available to and occupied by, or held vacant for occupancy only by Very Low Income Households, and (c) fifteen (15) of such units shall be continually available to and occupied by, or held vacant for occupancy only by 59% AMI Low Income Households. In addition, ten (10) of such units shall be designated for occupancy for otherwise qualifying households with developmental disabilities which may be identified from time to time by Desert Arc, a California nonprofit corporation. All of the rental units in the Development shall be similarly constructed and generally constructed at the same time. All of the Units shall be of comparable quality. 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, or by Authority Resolution HA-84 adopted on December 14, 2017 (and the occupancy policy attached as Exhibit A thereto) and any amendments or replacements thereof.

2.2 Residential Rental Property.

The Owner covenants to operate the Development 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 Development to provide such affordable rental housing. All of the rental units in the Development with the exception of one (1) manager’s 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 Development, 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 Extremely Low, Very Low and 59% AMI Low Income Households.

2.3.1 Income Qualification; Initial Certification. Subject to the applicable provisions hereof, throughout the Required Covenant Period, Affordable Units will be exclusively occupied by, or available for occupancy only by, Extremely Low, Very Low and 59% AMI Low Income Households as described above. 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 1137
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Income Certification (“Income Certification”) substantially in the form attached hereto as Exhibit “B” and incorporated herein by this reference for each Extremely Low, Very Low and 59% AMI Low Income Household, as applicable, and shall provide copies of same to the Authority at such times as the Authority 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 Authority.

The initial 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; (ii) Obtain a true copy of an income tax return for the most recent tax year in which a return was filed;
(iii) Obtain an income verification form from the household member’s current employer;
(iv) 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; (v) If the household member is unemployed and has no tax return, obtain another form of independent verification; or
(vi) 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; Annual Monitoring/Administration Fee. Throughout the Required Covenant Period, the Owner will prepare and submit to the Authority, at such periodic frequency as the Authority 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 Authority 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 Authority summarizing the vacancy rate of the Development, including the number of Affordable Units held vacant for occupancy by Extremely Low, Very Low and 59% AMI Low Income Households for such calendar year. The Owner shall pay an annual monitoring/administration fee in the amount of Five Thousand Dollars ($5,000.00), increasing by three percent (3%) annually, concurrently with Developer’s scheduled annual payment of Residual Receipts to Authority under the Authority Loan.

2.4 Affordable Rent. Throughout the Required Covenant Period, an Affordable Rent shall be charged to the Extremely Low, Very Low and 59% AMI Low Income Household occupants of Affordable Units, as more specifically described above. 1138
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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 an Extremely Low, Very Low or 59% AMI Low Income Households, as applicable, 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 Authority 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 an Extremely Low, Very Low and 59% AMI Low Income Household, as applicable, the Owner shall obtain and maintain on file an annual income certification, in form and substance reasonably satisfactory to the Authority, 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 an Extremely Low, Very Low and 59% AMI Low Income Household, as applicable, 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 an Extremely Low, Very Low or 59% AMI Low Income Household, as applicable. At such time as a household ceases to qualify as an Extremely Low, Very Low or 59% AMI Low Income Household, as applicable, 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 an Extremely Low, Very Low or 59% AMI Low Income Household, as applicable, so that the number of Affordable Units occupied by or reserved for occupancy by Extremely Low, Very Low or 59% AMI 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 an Extremely Low, Very Low or 59% AMI Low Income Household, as applicable, and, upon occupancy, the income eligibility of the household as an Extremely Low, Very Low or 59% AMI 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 an Extremely Low, Very Low or 59% AMI 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 Section 2.5 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, and (iii) contain a provision to the effect that the tenant’s occupancy of the 1139
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Affordable Unit may be terminated if as a result of such annual recertification of income it is determined that the occupant no longer qualifies for occupancy of the Affordable Unit.

2.7.1 No Discrimination. The Owner covenants, by and for itself and any successors in interest, that there shall be no discrimination against or segregation of any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Development, nor shall the Owner, itself or any person claiming under or through it, 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, subleases or vendees in the Development.

2.7.2 Required Clauses. All deeds, subleases or contracts made relative to the Development, the improvements thereon or any part thereof, shall contain or be subject to substantially the following nondiscrimination and nonsegregation clauses:
“(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).”
(a) In leases: “The lessee herein covenants, by and for himself or herself, his or her heirs, executors, administrators and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions:
(b) That there shall be no discrimination against or segregation of any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government 1140
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Code, in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased, nor shall the lessee, himself or herself or any person claiming under or through him or her, 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, subleases, subtenants or vendees in the land herein leased.
(c) Notwithstanding paragraph (a), with respect to familial status, paragraph (a) 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 (a) 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. Subdivisions (d) of Section 51 and Section 1360 of the Civil Code and subdivision (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (a).”
(3) In contracts: “There shall be no discrimination against or segregation of any person or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee, himself or herself or any person claiming under or through him or her, 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, subleases, subtenants or vendees in the land.

2.7.3 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.

2.7.4 The Authority is 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 Authority.

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 Authority 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 Authority’s written request. 1141
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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 Authority having entered into the DDLA, and that, in the event of the Owner’s breach of such requirements, potential monetary damages to the Authority as well as to existing and prospective Extremely Low, Very Low and 59% AMI Low Income Households, would be difficult, if not impossible, to evaluate and quantify.

Therefore, in addition to any other relief to which the Authority 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 Authority shall have the right to perform an audit of the Development 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 management agent of the Owner and any other contractor of the Owner who provides services to occupants of the Development shall be subject to the reasonable written approval of the Authority. The Owner and/or the management agent (if not the Owner) shall operate the Development 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 Authority, the Owner shall cooperate with the Authority 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 Authority to determine if the Affordable Units are being operated and managed in accordance with the requirements and standards of this Agreement. Results of such Authority review shall be provided to Owner, and the Authority shall have the right 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 otherwise expressly provided herein, the provisions of this Agreement shall apply to the Development 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 Authority 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. 1142
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3.3 Early Termination 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 during involuntary noncompliance as a result of unforeseen events such as fire or act of God which leaves the entire Development uninhabitable (and the proceeds of insurance available to the Owner as a result thereof are insufficient to reconstruct the Development), 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 Authority 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 Authority concerning the Development, or of this Agreement, if such failure remains uncured thirty (30) days after written notice of such failure from the Authority 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 Authority or the City proves to have been incorrect in any material respect when made.

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 Authority’s interests hereunder are not imminently threatened in its reasonable business judgment, then the Authority shall not declare a default under this subsection.
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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 Authority, a substantial part of the Development, except for condemnation initiated by the City, the Authority or any other 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 Development, which loan is secured by a deed of trust or other instrument affecting the Development, and such default remains uncured following the expiration of any applicable cure period.

4.2 Authority Remedies. The Authority shall have the right by 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 Authority 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.

4.3 Action at Law; No Remedy Exclusive. The Authority 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 Authority 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 Authority may deem expedient. In order to entitle the Authority to 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 [Reserved].

5.2 Maintenance, Repair, Alterations. The Owner shall maintain and preserve the Development in good condition and repair and in a prudent and businesslike manner. The Owner shall comply with all laws, ordinances, rules, regulations, covenants, conditions, restrictions, and orders of any governmental authority now or hereafter affecting the conduct or operation of the Development 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 Development or any part thereof in violation of any such laws, ordinances, rules, regulations, or orders. The Owner hereby agrees that the Authority 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 Development, including a review of all maintenance and repair programs and practices and all reports and records pertaining thereto, including records of 1144
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expenditures relating thereto; and (ii) such other facilities, practices, and records of the Owner relating to the Affordable Units as the Authority 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 mailed by certified mail, postage prepaid, or twenty-four (24) hours following delivery of such notice to Federal Express or similar commercial carrier for overnight or next business day delivery, addressed as follows:

If to the Authority or the City: Palm Desert Housing Authority City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260
Attn: Housing Division
If to the Owner: Chelsea Investments Corporation
6339 Paseo Del Lago
Carlsbad, CA 92011
Attn:

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 Authority 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 Development. 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 Development, 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 Authority 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 Authority 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 Authority.
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5.7 Non-Liability of Authority Officials, Employees and Agents. No member, official, employee or agent of the Authority shall be personally liable to the Owner, or any successor in interest, in the event of any default or breach by the Authority or for any amount which may become due to the Owner or successor in connection with this Agreement or on any obligation of the Authority under the terms of this Agreement.

5.8 Unavoidable Delay; Extension of Time of Performance. In addition to specific provisions of this Agreement, and except for performance under the DDLA (which is governed by the terms of the DDLA), performance of a construction obligation by any Party hereunder 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 Authority excuse any such delay as an Unavoidable Delay and the Authority shall make their determinations as to whether such delay constitutes an Unavoidable Delay using their reasonable judgment.

5.9 Indemnity. The Owner shall indemnify, defend and hold harmless the Authority and all officials, employees and agents of the Authority (with counsel reasonably satisfactory to the Authority) 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 Development, or the Owner’s performance of its obligations under this Agreement, and in the event of settlement, compromise or judgment hold the Authority free and harmless therefrom. 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 Authority 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 Authority 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 Authority in the exercise of any right, power, or remedy hereunder or under any agreements ancillary or related hereto.
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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.

5.15 Time of the Essence. In all matters under this Agreement, time is of the essence.

5.16 Approvals by the Authority. Any approvals required under this Agreement to be made by the Authority shall be made by the Executive Director of the Authority or his or her designee. Any such approval or consent 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. The DDLA, 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 Property and the Development to the covenants, reservations, and restrictions set forth in this Agreement. The Authority 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 Property and the Development; 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 Property or the Development 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. 1147
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5.19 Burden and Benefit. The Authority 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 Development, in that Owner’s legal interest in the Development is rendered less valuable thereby, (ii) the covenants, reservations, restrictions, and agreements set forth herein directly benefit the Property and the Development (a) by enhancing and increasing the enjoyment and use of the Development by Extremely Low, Very Low and 59% AMI 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 Development, and (c) by furthering the public purposes advanced by the Authority, 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 Authority 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 Authority and the Owner.
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WHEREFORE, the undersigned has executed this Agreement as of the date first-above written.

OWNER:

CHELSEA INVESTMENT CORPORATION,
a California corporation
By:

Name:

Title:

AUTHORITY:

PALM DESERT HOUSING AUTHORITY,
a public body, corporate and politic
By:

Name: Karina Quintanella
Title: Executive Director
ATTEST:

Anthony J. Mejia, Secretary
1149
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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 Riverside )
On ____________, 2024, before me, ________________________________________________, Notary Public, personally appeared ________________________________________________, (insert name and title of the officer)
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)
1150
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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 Riverside )
On ____________, 2024, before me, ________________________________________________, Notary Public, personally appeared ________________________________________________, (insert name and title of the officer)
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)
1151
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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 Riverside )
On ____________, 2024, before me, ________________________________________________, Notary Public, personally appeared ________________________________________________, (insert name and title of the officer)
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)
1152
-A-1- P6401-0001\2946251v5.doc
EXHIBIT “A”

LEGAL DESCRIPTION OF THE PROPERTY
Real property in the City of Palm Desert, County of Riverside, State of California, described as follows:

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF PALM

DESERT, IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1A
THE SOUTHERLY 323.50 FEET OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, OF THE SAN BERNARDINO MERIDIAN, IN THE

CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA,

ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE.

PARCEL 2A

AN EASEMENT FOR PEDESTRIAN AND VEHICULAR ACCESS FOR CONSTRUCTION AND EMERGENCY ACCESS PURPOSES OVER THAT PORTION OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO

MERIDIAN, IN THE CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF

CALIFORNIA, ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE, DESCRIBED AS FOLLOWS:

COMMENCING AT THE WEST 1/16 CORNER OF SAID SECTION 8, SAID CORNER

BEING ON THE CENTERLINE OF COUNTRY CLUB DRIVE, SAID CORNER ALSO BEING THE NORTHWEST CORNER OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG THE WEST LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8, S 0°10’27” W 124.00 FEET;
THENCE S 89°49’33” E 33.88 FEET TO THE EAST LINE OF THAT CERTAIN EASEMENT

TO THE CITY OF PALM DESERT FOR PUBLIC ROADWAY PURPOSES DESCRIBED IN DOCUMENT NO. 2003-461172 RECORDED JUNE 23, 2003, RECORDS OF SAID COUNTY OF RIVERSIDE, AND TO THE TRUE POINT OF BEGINNING;
THENCE S 89°49’33” E 30.28 FEET;
1153
A-2- P6401-0001\2946251v5.doc
THENCE S 0°13’14” E 873.45 FEET TO A LINE PARALLEL WITH AND 323.50 FEET NORTHERLY OF THE SOUTH LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG SAID PARALLEL LINE S 89°41’04” W 24.00 FEET; THENCE N 0°13’14” W 831.65 FEET;
THENCE N 89°49’33” W 8.74 FEET TO THE EAST LINE OF SAID EASEMENT TO THE CITY OF PALM DESERT PER DOCUMENT NO. 2003-461172 AND TO THE BEGINNING OF A CURVE CONCAVE TO THE NORTHWEST HAVING A RADIUS OF 187.50 FEET, A RADIAL LINE THROUGH SAID BEGINNING OF CURVE BEARS S 81°07’08” E; THENCE NORTHERLY 28.49 FEET ALONG SAID EAST LINE AND ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 8°42’25”;
THENCE CONTINUING ALONG SAID EAST LINE N 0°10’27” E 13.62 FEET TO THE TRUE POINT OF BEGINNING.

APN: 622-370-014
1154
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EXHIBIT “B”

HOUSEHOLD INCOME CERTIFICATION
(Attached)
1155
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EXHIBIT “C”

CERTIFICATE OF CONTINUING COMPLIANCE
(Attached)
1156
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EXHIBIT F

SCOPE OF DEVELOPMENT
A 40-unit apartment complex, with 20 one-bedroom apartments, 10 two-bedroom apartments, and 10 three-bedroom apartments (including one (1) two-bedroom manager unit). 49 total off-street parking spaces, of which 40 will be carport covered spaces.

The Developer shall develop a 40 multi-family rental housing development, with 20 onebedroom apartments, 10 two-bedroom apartments, and 10 three-bedroom apartments (including 1 two-bedroom manager unit). All capitalized terms not defined herein shall have the meaning ascribed to such terms in the Agreement,
The Project shall conform to plans approved by the City, including all conditions and mitigation measures imposed by the City in connection with the entitlement/development approval process of the City.

The Project shall be constructed on the Property (such property consisting of approximately

1.84 acres of vacant land located off of Country Club Drive in the City of Palm Desert). The Project, which will be called “Arc Village”, will be built as a single phase. The quality of construction shall be of a high level.

HOUSING TYPE
Arc Village will consist of forty (40) multi-family rental units, thirty-nine (39) of which shall be made available to and occupied by households with incomes of less than 60% AMI, and ten (10) of which shall be designated for use by individuals with developmental and/or intellectual disabilities and/or Desert Arc participants. Units will consist of a mix of one, two and threebedroom units, and be restricted by a recorded Housing Agreement. One of the units shall be used for on-site management.

SITE AMENITIES

1. Attached 1,543 square-foot community lounge with:
a. On-site office area
b. Communal Kitchen
c. Lounge
d. Restrooms

2. BBQ Gathering Space

3. Laundry Facilities

4. Enclosed Tot-Lot with Play Structure, Shade Structure and Benches

5. On-Site Property Management

6. 49 off-street parking spaces, 40 of which will be carport covered spaces. 1157
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CONSTRUCTION TYPE & ARCHITECTURAL GOALS
The Construction Type will be Type VB Construction with NFPA 13 fire sprinklers (1- hour walls between occupancy separations). The Project will be constructed as a two-story multifamily apartment building consisting of forty (40) residential dwelling units. The Architectural goal is to blend into the existing development using neutral tones as well as provide articulation of the exterior with recesses and different materials.

SUSTAINABLE BUILDING / GREEN BUILDING PRACTICES
The Project will comply with all applicable ‘Green Building Standards’ and ‘Minimum Sustainable Building Specifications’ required by the State of California and the City of Palm Desert. The Project will meet the State of California Title 24 Requirements and provide both solar power and EV charging.

UNIT AMENITIES

1. Energy Star Appliances
a. Stove/Oven
b. Refrigerator
c. Dishwasher
d. Garbage Disposal

2. Solid Surface Countertops

3. Upgraded Cabinets

4. Central Air Conditioning/Heating

5. Window Blinds

6. Carpet, Vinyl or Tile

7. Patio or Balcony

8. Storage Closet, to be located on patio/balcony.

SOCIAL SERVICE PROGRAMS

1. Social Service Programs will be conducted on site and available for all residents free of charge. A program coordinator will be hired, or a contract will be executed with a local nonprofit, to provide family appropriate classes for the residents, as well as collaborate with outside nonprofits and agencies to expand program options. Residents will have input as to which classes and programs are offered at the center. Typically, the classes and programs will include adult educational and skill building classes to include computer literacy, ESL and art classes, job counseling, financial literacy, health and wellness workshops and a food distribution program.

The Developer shall commence and complete the Project in accordance with the Schedule of Performance. The Project shall conform to and shall complete and satisfy any and all conditions from the City’s entitlement approval of Project.

I. DEVELOPMENT STANDARDS
The improvements shall conform to all applicable Governmental Requirements, including without limitation, local subdivision, zoning, building code and other applicable ordinances, 1158
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resolutions, policies, applicable general and Specific Plans, and regulations of the City of Palm Desert (“City Ordinances”) and the following development standards:

A. General Requirements:

1. Vehicular Access. The placement of vehicular driveways shall be coordinated with the needs of proper street traffic flow as approved by the City in accordance with City Ordinances. In the interest of minimizing traffic congestion, the City of Palm Desert will control the number and location of curb breaks for access to the Project for off street parking and truck loading. All access driveways shall require written approval of the City.

Any gated access shall comply with the requirements of the City and will be subject to review.

2. Building Signs. Signs shall be limited in size, subdued and otherwise designed to contribute positively to the environment. Signs identifying the building use will be permitted, but their height, size, location, color, lighting and design will be subject to City approval, and signs must conform to the City Ordinances.

3. Screening. All outdoor storage of materials or equipment shall be enclosed or screened to the extent and in the manner required by the City.

4. Landscaping. The developer shall provide and maintain landscaping within the project area and within setback area along all street frontages and internal property boundaries and conforming to the plans as hereafter approved by the City. Landscaping shall consist of trees, shrubs and installation of an automatic irrigation system adequate to maintain such plant material. The type and size of trees to be planted, together with a landscaping plan are to be determined by the Developer and in accordance with applicable ordinances and requirements.

5. Utilities. All utilities on the Property provided to service the units constructed by the Developer shall be underground at the Developer’s expense.

6. Building Design. Buildings shall be constructed such that the improvements shall be of high architectural quality and shall be effectively and aesthetically designed and in conformance with City approvals.

7. Energy Considerations. The design of the improvements shall include, where feasible, energy conservation construction techniques and design, including co-generation facilities and active and passive solar energy design. The Developer shall be required to demonstrate consideration of such energy features during the design review process and to consistency with energy conservation provisions of the building code.

8. Site Preparation. The City of Palm Desert, at its cost and expense, shall prepare the Property for development. Such preparations shall consist of the complete demolition and removal of all existing improvements, if any.

9. Environmental Impact Mitigation Measures. To the extent required under the terms of the DDLA, the Developer shall implement any and all mitigation measures 1159
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and/or mitigation monitoring requirements as identified in any certified environmental document, certified or mitigated negative declaration adopted in connection with the project.

10. Construction Fence. The Developer shall install a temporary construction chain link fence with opaque screening. The construction fence shall be maintained free of litter and in good repair for the duration of its installation.

11. Development Identification Signs. Prior to commencement of construction on the Property, the Developer shall prepare and install, at its cost and expense, one sign on the barricade around the Property which identifies the Development. The sign shall be at least four (4) feet by six (6) feet and be visible to passing pedestrians and vehicular traffic. The design of the sign, as well as the proposed location, shall be submitted to the City and the Authority for review and approval prior to installation. The sign shall, at a minimum, include:
- Illustration of development
- Development name
- Logo of the City of Palm Desert
- List of City Council Members
- Information number
- Completion Date
B. Design Features:

The following design features are considered essential components to the improvements:

Accessible Units – An agreed upon number of units are to be fully handicap accessible in compliance with State Housing Code – Title 24 requirements.

Overall Design Quality, Materials, Colors, Design Features – Quality of design is important, materials and colors are to be approved by the City.

All southern-facing windows, located on the second floor of the southernmost elevation of the building shall be privacy windows. Said privacy windows shall be designed to obscure views through the glass by window treatments including, but not limited to, frosted glass, patterned glass, or other acceptable methods which visually obstruct views through the glass. The use of external window treatments, such as an applied film or self-adhesive material to alter light transmission through the window shall not be used. Final construction plans shall provide sufficient information to demonstrate compliance with this condition of approval and shall be subject to approval by the Development Services Department.

II. SPECIAL AMENITIES
The Developer shall undertake all improvements required by the City as a condition of development of the Property, as more particularly provided in the City approvals given for the Property.
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EXHIBIT G

SCHEDULE OF PERFORMANCE
SCHEDULE OF PERFORMANCE:
# TASK DEADLINE

1. Open escrow. Promptly after execution of the
Agreement.

2. Developer shall obtain the City Approvals
and obtain permit ready letter for all permits
necessary to construct the Project, and pay the
grading permit fees and all Final Map fees,
and shall cause all security required for the
Final Map under the conditions thereto
(including security under the Subdivision
Improvement Agreement, which must be
signed and delivered as a condition to Close
of Escrow).

Prior to or concurrent with the conveyance
of the Property.

3. Developer shall submit evidence of financing
commitments consistent with the Financing
Proposal.

At least thirty (30) days prior to Close of
Escrow.

4. All construction financing to close, and
evidence of committed equity to be provided.

By or concurrently with Close of Escrow.

5. Closing of the conveyance of the Property. December 31, 2025.

6. Developer and City to execute and deliver all
documents required for Closing into Escrow,
as applicable, and satisfy all applicable
closing conditions
Prior to Close of Escrow.

7. Developer commences Construction. March 1, 2026.

8. Completion of Grading. June 1, 2026.

9. Completion and issuance of final Certificate
of Occupancy/Certificate of Completion.

September 1, 2026.
1161
Affordable Development Financing Plan
Chelsea Investment Corporation will form a limited partnership entities as the owner of Arc Village Apartments. Through this related entity, Chelsea will acquire the property, finance and operate the apartments.

Chelsea is proposing to finance the 40-unit development, to be located directly south of Desert Arc, primarily using 9% Low Income Housing Tax Credits (“LIHTC”) equity, a permanent loan from a private bank, a land donation from the Palm Desert Housing Authority, loans from the Palm Desert Housing Authority, and CRDP DDS funding from the Inland Regional Center (IRC). The total development cost is estimated at $23,600,849.

Chelsea brings a long and successful history of developing 9% LIHTC apartments with the California Tax Credit Allocation Committee (“TCAC”). TCAC’s application process for the 9% LIHTC is conducted semiannually and is very competitive. Despite this risk, the high yield of the 9% LIHTC makes it an appealing source to pursue for affordable housing. Chelsea intends to mitigate the competitive nature of the allocation program through maximization of the project site amenity, sustainability and services points which are important in the 9% LIHTC application, and assistance from the Palm Desert Housing Authority and the IRC to increase our tiebreaker to a very competitive level.

Chelsea will be applying for $1,515,218 in annual tax credits over 10 years from TCAC. Our investor, The Richman Group, is expected to pay $0.90 per credit for a total investment of $13,636,958. Funding is expected to be as follows:

LIHTC equity (Richman Group) $13,636,958
Solar tax credit equity (Richman Group) $99,659
First Mortgage (Banner Bank) $3,320,000
Land Donation (Palm Desert Housing Authority) $1,600,000 Soft Debt (Palm Desert Housing Authority) $3,000,000
Soft Debt (Inland Regional Center) $1,500,000
Deferred Developer Fee $444,232
Total Development Cost $23,600,849
The first mortgage is underwritten at a 7.65% interest rate with a 35-year amortization and 17-year term. Soft debt is underwritten at 3.0% interest rate and will receive a pro rate share of half of the cash flow after the deferred developer fee is repaid.

A construction loan of approximately $13,457,132 will be used to bridge the tax credit equity and finance the construction of Arc Village. The loan is underwritten at an 8.35% interest rate.

Construction is expected to take 12 months. The loan will be for 24 months to allow for lease up and stabilization after construction completion.
1162

PROJECT SUMMARY
Revision Date: 6/4/2024
Arc Village Apartments
255 Country Club Drive, Palm Desert CA 92260
Palm Desert
Riverside County
AMI Studio 1BR 2BR 3BR 4BR Totals
Development Costs: LIHTC Tax Credit Rate 9.00% 0.00% 0.00% 100.00% 0.00% 0.00% Land (including existing improvements) $40,625/unit 1,625,000 10 Yr Federal Tax Credits 15,152,175 Net SF 500 578 733 954 1,250 Direct Construction Costs (inc Contingency) $368,465/unit 14,738,584 State Tax Credit Total 0 Development Impact Fees $37,401/unit 1,496,047 Federal Tax Credit Price $ 0.9000 100% 0 0 0 0 0 0 A&E $14,039/unit 561,554 State Tax Credit Price $ 0.8800 80% 0 0 0 0 0 0 Financing Fees and Interest $42,369/unit 1,694,753 Other Tax Credit Price $ 0.9000 70% 0 0 0 0 0 0 Developer Fee $62,500/unit 2,500,000 DDA/QCT Boost Y 60% 0 8 3 4 0 15 Other Soft Costs $24,623/unit 984,911 50% 0 6 3 3 0 12
Total Development Costs $590,021/unit 23,600,849 Opr. Exp./Unit/Year 5,586 40% 0 4 2 2 0 8 Replacement Reserves/Unit/Year 250 30% 0 2 1 1 0 4
Vacancy Rate 5.00% Mgr. 0 0 1 0 0 1
Sources: Totals 0 20 10 10 0 40
Federal LIHTC Equity $340,924/unit 13,636,958 DCR 1.15
State LIHTC / Solar / Other Tax Credit Equity $2,491/unit 99,659 Perm Loan Amort 35 Permanent Loans $83,000/unit 3,320,000
Priority Deferred Developer Fee $11,106/unit 444,232 Interest Rate - Permanent Loan 7.65% Tax Credit Allocation October-24 Acquisition Value Loan $40,000/unit 1,600,000 Interest Rate - Construction Loan 8.35% Construction Begin - Initial Closing March-25 Subordinate Deferred Developer Fee $0/unit 0 Construction Complete March-26 Private Placement Junior Bond $0/unit 0 TIEBREAKER 62.90% Lease Up Complete June-26 Soft Local $112,500/unit 4,500,000 Total Construction Loan 13,457,132 Conversion/Stabilizatiion September-26 Soft State $0/unit 0
Soft Loan Interest $0/unit 0 Tax- Exempt Bonds - Construction 0 8609 March-27 Other $0/unit 0 Tax- Exempt Bonds - Construction/Perm 0 Estimated 1st Year Credit Delivery 1,136,413 Total Sources $590,021/unit 23,600,849 50% Test n/a Estimated 2nd Year Credit Delivery 1,515,218 Prevailing Wage: None Estimated 3rd Year Credit Delivery 1,515,218 *Preliminary Projections, Subject to Revision*

PROJECT TIMING AND CREDIT DELIVERY

DEVELOPMENT COSTS & SOURCES DEAL STRUCTURE AND ASSUMPTIONS PROJECT UNIT & INCOME MIX 1163
3/1/2025 Construction Period Construction Stabilization Conversion 8609 Total Pre-Dev Closing Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 5 Quarter 6 Quarter 7 Quarter 8 Quarter 9 Quarter 10 Quarter 11 Quarter 12 Subtotal 6 months

20.0% 25.0% 25.0% 25.0% 5.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% SOURCES OF FUNDS interest rate
1 Federal LIHTC Equity 0 1,363,696 - - - - - - - - - - - - 1,363,696 3,409,239 8,714,022 150,000 13,636,958 2 State LIHTC Equity 0 per unit - - - - - - - - - - - - - - - - - 3 Solar Equity - - - - - - - - - - - - - - - 99,659 - 99,659 4 Other Equity - - - - - - - - - - - - - - - - - -
5 Construction Loan 634,859 - 392,472 3,717,502 3,798,010 3,880,262 1,034,027 - - - - - - - 13,457,132 (2,336,184) (11,120,948) - - 6 Perm Loan (Tranche A) - - - - - - - - - - - - - - - 3,320,000 - 3,320,000 7 Perm Loan (Tranche B) - - - - - - - - - - - - - - - - - - 8 Priority Deferred Developer Fee 1.00% - - - - - - - - - - - - - - - 444,232 - 444,232 9 Private Placement Junior Bond 8.50% - - - - - - - - - - - - - - - - - - 10 Acquisition Value Loan 3.00% 1,600,000 - - - - - - - - - - 1,600,000 - - - 1,600,000 11 Subordinate Deferred Developer Fee 0.00% - - - - - - - - - - - - - - - - - - 12 CalHFA MIP 3.00% - - - - - - - - - - - - - - - - - - 13 Local Funds: Authority Loan 3.00% 3,000,000 - - - - - - - - - - - - 3,000,000 - - - 3,000,000 14 Local Funds: CRDP DDS 3.00% 1,500,000 - - - - - - - - - - - - 1,500,000 - - - 1,500,000 15 State Funds: MIP 3.00% - - - - - - - - - - - - - - - - - - 16 State Funds: AHSC 3.00% - - - - - - - - - - - - - - - - - - 17 State Funds: Serna or NPLH or State HOME 3.00% - - - - - - - - - - - - - - - - - - 18 State Funds: IIG 0.00% - - - - - - - - - - - - - - - - - - 19 Soft Loan Interest - - - - - - - - - - - - - - - - - - 20 Gap Funding needed - - - - - - - - - - - - - - - - - - 21 Basis Adjuster - - - - - - - - - - - - - - - - - -
22 Timing Adjuster - - - - - - - - - - - - - - - - - -
23 Total Sources of Funds 634,859 7,463,696 392,472 3,717,502 3,798,010 3,880,262 1,034,027 - - - - - - - 20,920,828 1,073,056 1,456,966 150,000 23,600,849 24 25
26 USES OF FUNDS
27 ACQUISITION
28 Land Cost $0 ground lease value 0 1,600,000 - - - - - - - - - - - - 1,600,000 1,600,000 29 Building Cost 0 - - - - - - - - - - - - - - -
30 Broker Fees 0 - - - - - - - - - - - - - - -
31 Site Improvement Purchase 0 - - - - - - - - - - - - - - - 32 Offiste Improvement Purchase 0 - - - - - - - - - - - - - - - 33 Other Land Related Expenses / Option Pmnt 5,000 20,000 - - - - - - - - - - - - 25,000 25,000 34 Other Closing Costs 0 - - - - - - - - - - - - - - -
35 Total Land / Acquitisiton 5,000 1,620,000 - - - - - - - - - - - - 1,625,000 - - - 1,625,000 36 37 RELOCATION
38 Relocation Admin And Temp Relocation 0 - - - - - - - - - - - - - - - 39 Permanent Relocation Expense 0 - - - - - - - - - - - - - - - 40 Total Relocation - - - - - - - - - - - - - - - - - - - 41 SOV
42 NEW CONSTRUCTION
43 Demolition $ - - - -
43 Design Assistance $ 350,000 0 350,000 - - - - - - - - - - - - 350,000 350,000 44 Off-site Improvements $ 228,050 - 45,610 57,013 57,013 57,013 11,403 - - - - - - - 228,050 228,050 45 Site Work $ 3,292,584 - 658,517 823,146 823,146 823,146 164,629 - - - - - - - 3,292,584 3,292,584 46 Solar $ 323,780 - 64,756 80,945 80,945 80,945 16,189 - - - - - - - 323,780 323,780 47 Parking Garage - -
48 Vertical $ 8,188,037 0 - 1,637,607 2,047,009 2,047,009 2,047,009 409,402 - - - - - - - 8,188,037 8,188,037 49 Commercial incl. fees $ - 0 - - - - - - - - - - - - - - 50 GC Contingency 0% - - - - - - - - - - - - - - -
51 General Requirements 9% 31,500 216,584 270,730 270,730 270,730 54,146 - - - - - - - 1,114,421 1,114,421 52 Contractor Preconstruction Services 0% - - -
53 Contractor Fees 4% 15,260 104,923 131,154 131,154 131,154 26,231 - - - - - - - 539,875 539,875 54 Design Contingency 0% - - - - - - - - - - - - - - -
55 Escalation 0% - - - - - - - - - - - - - - -
56 Total New Construction $350,919/unit - 396,760 2,727,997 3,409,997 3,409,997 3,409,997 681,999 - - - - - - - 14,036,746 - - - 14,036,746 57 58 ARCHITECTURAL/SURVEY/ENGINEERING
59 Other Architectural 43,000 - 7,400 9,250 9,250 9,250 1,850 - - - - - - - 80,000 80,000 60 Survey/Engineering 278,959 - 40,519 50,649 50,649 50,649 10,130 - - - - - - - 481,554 481,554 61 Other: - -
62 Total Architectural 321,959 - 47,919 59,899 59,899 59,899 11,980 - - - - - - - 561,554 - - - 561,554 63 64 CONTINGENCY COSTS
65 Hard Cost Contingency 5% 19,838 136,400 170,500 170,500 170,500 34,100 - - - - - - - 701,837 701,837 66 Soft Cost Contingency 3% 50,000 68,974 2,536 3,990 6,335 8,731 9,260 - - - - - - - 149,827 - 149,827 67 Total Contingency 50,000 88,812 138,936 174,490 176,835 179,231 43,360 - - - - - - - 851,664 - - - 851,664 68 PROJECTED SOURCES AND USES OF FUNDS
Arc Village Apartments
6/4/2024
1164
3/1/2025 Construction Period Construction Stabilization Conversion 8609 Total Pre-Dev Closing Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 5 Quarter 6 Quarter 7 Quarter 8 Quarter 9 Quarter 10 Quarter 11 Quarter 12 Subtotal 6 months

20.0% 25.0% 25.0% 25.0% 5.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

PROJECTED SOURCES AND USES OF FUNDS
Arc Village Apartments
6/4/2024
69 CONSTRUCTION PERIOD EXPENSES
70 Construction Loan Interest 0 - 15,984 47,313 125,476 205,332 266,527 - - - - - - - 660,632 480,556 0 1,141,188 71 Private Placement Junior Bond Interest 0 - - - - - - - - - - - - - - - - 72 Soft Loan Interest 0 - - -
73 Predevelopment Loan Interest 0 49,995 49,995 49,995
74 Origination/Application Fee 1% 0 134,571 134,571 - 134,571 75 Subordinate/Soft Debt Origination Fee 0 - - - -
76 Lender Reports and Inspections 25,000 - 3,600 4,500 4,500 4,500 900 - - - - - - - 43,000 - 43,000 77 Title/Recording/Taxes 0 25,000 2,500 3,125 3,125 3,125 625 - - - - - - - 37,500 - 37,500 78 Insurance During Construction 0 180,000 - - - - - - - - - - - - 180,000 - 180,000 79 Construction Mgmt and Monitoring 0 - - - - - - - - - - - - - - - - 80 Owner Requirements 0 - - - - - - - - - - - - - - - - 81 Other:
82 Total Construction Period Expense 25,000 389,566 22,084 54,938 133,101 212,957 268,052 - - - - - - - 1,105,699 480,556 - - 1,586,254 83 84 PERMANENT FINANCING EXPENSES
85 Loan Origination Fees 0.75% 0 24,900 - - - - - - - - - - - - 24,900 - - 24,900 86 Title/Recording/Taxes 0 - - - 5,000 - 5,000
87 Insurance 0 - - - - -
88 Other: Bond/Issuer/FA fees 0 - - - - - - - - - - - - - - - - - 89 Other: LIHTC fees 123,217 - - - - - - - - - - - - 123,217 - (44,619) - 78,599 90 Total Permanent Financing 123,217 24,900 - - - - - - - - - - - - 148,117 - (39,619) - 108,499 91 92 LEGAL FEES
93 Lender Legal 0 45,000 - - - - - - - - - - - 45,000 - 15,000 - 60,000 94 Sponsor Legal 27,000 148,000 175,000 - - - 175,000
95 Total Legal Fees 27,000 193,000 - - - - - - - - - - - - 220,000 - 15,000 - 235,000 96 97 CAPITALIZED RESERVES
98 Operating Reserve 3 months - - - - - - - - - - - - - - - 131,584 - 131,584 99 Transition Reserve - - - - - - - - - - - - - - - - - - 100 Other Reserve - - - - - - - - - - - - - - - - -
101 Total Reserves - - - - - - - - - - - - - - - - 131,584 - 131,584 102
103 REPORTS & STUDIES
104 Market Study 10,000 - - - - - - - - - - - - - 10,000 - - 10,000 105 Appraisal 10,000 - - - - - - - - - - - - - 10,000 - - 10,000 106 Environmental 6,000 - - - - - - - - - - - - - 6,000 - - 6,000 107 Preconstruction Studies 5,000 - - - - - - - - - - - - - 5,000 - - 5,000 108 Other: - - - - - - - - - - - - - - - - - -
109 Total Reports & Studies 31,000 - - - - - - - - - - - - - 31,000 - - - 31,000 110
111 OTHER
112 Local Permit Fees $13,204/unit 44,396 483,754 - - - - - - - - - - - - 528,150 528,150 113 Local Development Impact Fees $24,197/unit 0 967,897 - - - - - - - - - - - - 967,897 - 967,897 114 Accounting/Reimbursable/Cost Certification 7,286 15,000 2,543 3,178 3,178 3,178 636 - - - - - - - 35,000 27,500 62,500 115 Financial Consulting/App Prep/Review (SA) 0 100,000 - - - - - - - - - - - - 100,000 100,000 116 Entitlement Services and CM (SA) 0 100,000 12,000 15,000 15,000 15,000 3,000 - - - - - - - 160,000 160,000 117 Tenant File Review 0 - - -
118 GP Service Fee 0 25,000 25,000 25,000
119 Marketing & Lease Up 0 - 65,000 65,000
120 Prevailing Wage / Labor Compliance 0 - - - - - - - - - - - - - - - 121 FF&E 0 - 25,000 25,000 25,000
122 Other: 0 - - - - - - - - - - - - - - -
123 Total Other Costs 51,683 1,691,651 14,543 18,178 18,178 18,178 28,636 - - - - - - - 1,841,047 92,500 - - 1,933,547 124
125 DEVELOPER COSTS
126 Developer Fee 500,000 - - - - - - - - - - - 500,000 500,000 1,350,000 150,000 2,500,000 127 Other - - - - - - - - - - - - - - - - - -
128 Total Developer Costs - 500,000 - - - - - - - - - - - - 500,000 500,000 1,350,000 150,000 2,500,000 129
130
131 Total Uses of Funds 634,859 4,904,689 2,951,479 3,717,502 3,798,010 3,880,262 1,034,027 - - - - - - - 20,920,828 1,073,056 1,456,966 150,000 23,600,849 1165
Arc Village Apartments
Estimate of LIHTC Basis Calculation
0% 100%
ACTUAL OR EST. ACQ NC/REHAB

DESCRIPTION OF COSTS OF COSTS ELIGIBLE BASIS ELIGIBLE BASIS

ACQUISITION
Land Cost $ 1,600,000
Building Cost $ - $ -
Broker Fees $ -
Site Improvement Purchase $ - $ -
Offiste Improvement Purchase $ - $ -
Other Land Related Expenses / Option Pmnt $ 25,000
Other Closing Costs $ -
TOTAL LAND/AQUISITION COSTS $ 1,625,000 $ - $ -

RELOCATION
Relocation Admin And Temp Relocation $ -
Permanent Relocation Expense $ -
TOTAL RELOCATION COSTS $ -

NEW CONSTRUCTION
Demolition $ -
Design Assistance $ 350,000 $ 350,000
Off-site Improvements $ 228,050 $ 228,050
Site Work $ 3,292,584 $ 3,237,218
Solar $ 323,780 $ 323,780
Parking Garage $ - $ -
Vertical $ 8,188,037 $ 8,188,037
Commercial incl. fees $ - $ -
GC Contingency $ - $ -
General Requirements $ 1,114,421 $ 1,114,421
Contractor Preconstruction Services $ - $ -
Contractor Fees $ 539,875 $ 539,875
Design Contingency $ - $ -
Escalation $ - $ -
TOTAL CONSTRUCTION $ 14,036,746 $ - $ 13,981,380

ARCHITECTURAL FEES
Other Architectural $ 80,000 $ 80,000
Survey/Engineering $ 481,554 $ 481,554
Other: $ - $ -
TOTAL ARCHITECTURAL COSTS $ 561,554 $ - $ 561,554

CONTINGENCY COSTS
Hard Cost Contingency $ 701,837 $ 701,837
Soft Cost Contingency $ 149,827 $ 149,827
TOTAL CONTINGENCY COSTS $ 851,664 $ - $ 851,664

CONSTRUCTION PERIOD EXPENSES
Construction Loan Interest $ 1,141,188 $ 660,632
Private Placement Junior Bond Interest $ - $ -
Soft Loan Interest $ - $ 228,750
Predevelopment Loan Interest $ 49,995 $ 49,995
Origination/Application Fee $ 134,571 $ 100,928
Subordinate/Soft Debt Origination Fee $ - $ -
Lender Reports and Inspections $ 43,000 $ 43,000
Title/Recording/Taxes $ 37,500 $ 28,125
Insurance During Construction $ 180,000 $ 180,000
Construction Mgmt and Monitoring $ - $ -
Owner Requirements $ - $ -
Other: $ - $ -
TOTAL CONSTRUCTION PERIOD EXPENSE $ 1,586,254 $ - $ 1,291,4311166 Arc Village Apartments
Estimate of LIHTC Basis Calculation

PERMANENT FINANCING EXPENSES
Loan Origination Fees $ 24,900
Title/Recording/Taxes $ 5,000
Insurance $ -
Other: Bond/Issuer/FA fees $ -
Other: LIHTC fees $ 78,599
TOTAL PERMANENT FINANCING COSTS $ 108,499 $ - $ -

LEGAL FEES
Lender Legal $ 60,000 $ 33,750
Sponsor Legal $ 175,000 $ 57,750
TOTAL LEGAL $ 235,000 $ - $ 91,500

CAPITALIZED RESERVES
Operating Reserve $ 131,584
Transition Reserve $ -
Other Reserve $ -
TOTAL RESERVE COSTS $ 131,584

REPORTS & STUDIES
Market Study $ 10,000 $ 10,000
Appraisal $ 10,000 $ 10,000
Environmental $ 6,000 $ 6,000
Preconstruction Studies $ 5,000 $ 5,000
Other: $ - $ -
TOTAL REPORTS & STUDIES $ 31,000 $ - $ 31,000

OTHER EXPENSES
Local Permit Fees $ 528,150 $ 528,150
Local Development Impact Fees $ 967,897 $ 967,897
Accounting/Reimbursable/Cost Certification $ 62,500 $ 62,500 Financial Consulting/App Prep/Review (SA) $ 100,000 $ 100,000 Entitlement Services and CM (SA) $ 160,000 $ 160,000
Tenant File Review $ - $ -
GP Service Fee $ 25,000
Marketing & Lease Up $ 65,000
Prevailing Wage / Labor Compliance $ - $ -
FF&E $ 25,000 $ 25,000
Other: $ - $ -
TOTAL OTHER COSTS $ 1,933,547 $ - $ 1,843,547

DEVELOPER COSTS
Developer Fee Limit - Per TCAC Application $ 2,500,000 $ - $ 2,500,000 Developer Fee Calculation $ 2,797,811.42 $ - $ 2,797,811 Developer Fee $ 2,500,000 $ - $ 2,500,000
TOTAL DEVELOPER FEE $ 2,500,000 $ - $ 2,500,000
TOTAL RESIDENTIAL COSTS $ 23,600,849 $ - $ 21,152,076
REDUCE BY TOTAL COMMERCIAL COSTS $ - $ -
TOTAL RESIDENTIAL PROJECT $ 23,600,849 $ - $ 21,152,076 1167
Arc Village Apartments
Estimate of LIHTC Basis Calculation
Adjustment for Excess Basis $ 2,951,499
Additional Amount Voluntarily Excluded From Basis $ - $ 5,250,000 Requested Undadjusted Eligible Basis $ - $ 12,950,577
130% FACTOR? Tract #: 451.24 Y $ 16,835,750
Total Adjusted Qualified Basis $ - $ 16,835,750
TX CREDITS @ % LI Eligible@ Tx Credit Rt 100.00% 4.00% 9.00% TX CREDITS @ % LI Eligible $ - $ 1,515,218
TX CREDITS OVER TEN YEARS $ - $ 15,152,175
TX CREDIT EQUITY INVESTMENT $ 0.9000 100.00% $ 13,636,958 State Tax Credits 30.00% $ - $ -
State Tax Credit Equity $ 0.8800 100.00% $ -
Solar Credits 30.00% $ 369,109
Solar Equity $ 0.9000 100.00% $ 99,659
1168
Arc Village Apartments Revision Date: 6/4/2024
Detailed Operating Budget and Income Analysis
TCAC Min 2022
RivCo HA UA 7/1/23
100% FMR PBV NOfA
(to HSC rents)
Square Total Gross Rent Utility Monthly Annual RA Contract Annual Annual Rent: Restriction %AMI Units Feet/Unit Sq. Ft. Rents Adjustment Allowance Net Rent Rent Rent Units Overhang Overhang / TCAC 1BR/1BA MKT 100% 0 578 0 $ - $ - $ 63.00 $ - $ - $ 1,611 - $ - $ - 1BR/1BA LIHTC 80% 0 578 0 $ 1,538 $ - $ 63.00 $ 1,475 $ - $ 1,611 - $ - $ - 1BR/1BA LIHTC 70% 0 578 0 $ 1,346 $ - $ 63.00 $ 1,283 $ - $ 1,611 - $ - $ - 1BR/1BA LIHTC 60% 8 578 4,624 $ 1,153 $ 19 $ 63.00 $ 1,071 $ 102,816 $ 1,611 - $ - $ - 1BR/1BA LIHTC 50% 6 578 3,468 $ 961 $ - $ 63.00 $ 898 $ 64,656 $ 1,611 - $ - $ - 1BR/1BA LIHTC 40% 4 578 2,312 $ 769 $ - $ 63.00 $ 706 $ 33,888 $ 1,611 2.00 $ 21,720 $ 21,720 1BR/1BA LIHTC 30% 2 578 1,156 $ 577 $ 1 $ 63.00 $ 513 $ 12,312 $ 1,611 2.00 $ 26,352 $ 21,720 1BR/1BA MGR Mgr. 0 578 0 $ - $ - $ 63.00 $ - $ -
2BR/1BA MKT 100% 0 733 0 $ - $ - $ 91.00 $ - $ - $ 2,010 - $ - $ - 2BR/1BA LIHTC 80% 0 733 0 $ 1,845 $ - $ 91.00 $ 1,754 $ - $ 2,010 - $ - $ - 2BR/1BA LIHTC 70% 0 733 0 $ 1,615 $ - $ 91.00 $ 1,524 $ - $ 2,010 - $ - $ - 2BR/1BA LIHTC 60% 3 733 2,199 $ 1,383 $ 24 $ 91.00 $ 1,268 $ 45,648 $ 2,010 - $ - $ - 2BR/1BA LIHTC 50% 3 733 2,199 $ 1,153 $ 56 $ 91.00 $ 1,006 $ 36,216 $ 2,010 - $ - $ - 2BR/1BA LIHTC 40% 2 733 1,466 $ 922 $ - $ 91.00 $ 831 $ 19,944 $ 2,010 1.00 $ 14,148 $ 14,148 2BR/1BA LIHTC 30% 1 733 733 $ 692 $ 34 $ 91.00 $ 567 $ 6,804 $ 2,010 1.00 $ 17,316 $ 14,148 2BR/1BA MGR Mgr. 1 733 733 $ - $ - $ 91.00 $ - $ -
3BR/2BA MKT 100% 0 954 0 $ - $ - $ 117.00 $ - $ - $ 2,707 - $ - $ - 3BR/2BA LIHTC 80% 0 954 0 $ 2,132 $ - $ 117.00 $ 2,015 $ - $ 2,707 - $ - $ - 3BR/2BA LIHTC 70% 0 954 0 $ 1,866 $ - $ 117.00 $ 1,749 $ - $ 2,707 - $ - $ - 3BR/2BA LIHTC 60% 4 954 3,816 $ 1,599 $ 27 $ 117.00 $ 1,455 $ 69,840 $ 2,707 - $ - $ - 3BR/2BA LIHTC 50% 3 954 2,862 $ 1,333 $ 114 $ 117.00 $ 1,102 $ 39,672 $ 2,707 - $ - $ - 3BR/2BA LIHTC 40% 2 954 1,908 $ 1,066 $ - $ 117.00 $ 949 $ 22,776 $ 2,707 1.00 $ 21,096 $ 21,096 3BR/2BA LIHTC 30% 1 954 954 $ 799 $ 68 $ 117.00 $ 614 $ 7,368 $ 2,707 1.00 $ 25,116 $ 21,096 3BR/2BA MGR Mgr. 0 954 0 $ - $ - $ 117.00 $ - $ -
Total Rents 40 28,430 461,940 RA Total 8 125,748 113,928 Community Room/Office 2,500 % Loss to Efficiency 15% 4,640 Construction Square Feet 30,930
default 40% AMI
(use 30% AMI for
SN)
2024
Riverside County
$51,250
Year
MSA
4 Person 50% AMI
Expenses Source
UA source
Other
1169
Arc Village Apartments Revision Date: 6/4/2024
Detailed Operating Budget and Income Analysis
Income from Operations PUPM
Total Rents 461,940
Laundry $ 10.00 4,800
Other Income (App. Fees, Late, etc.) $ 10.00 4,800
Sub-Total $ 20.00 471,540
Rental Assistance 125,748
Less: Vacancies @ 5% 29,864
Commercial Income $ - PSF RENT 0 Commercial SF 0
Less: Vacancies @ 50% 0
Total Income 567,424
Operating Expenses PUPA MANUAL INPUT
Admin $ 500 20,000
Management Fee $ 720 28,800
Utilities $ 900 36,000
Payroll $ 1,900 76,000
Repair & Maintenance $ 900 36,000
Insurance $ 591 23,640
Taxes (HOA, CFD) $ 75 3,000
Additional expense $ - 0
Total Expenses $ 5,586 4700 min for TCAC IE LF no elev w/out taxes 223,440 Commercial Expenses $ - psf 0
Net Operating Income 343,984
Reserves $250.00/unit 10,000
Services $375/unit 15,000
Other Annual Cost 0
Issuer and Monitoring Fees 0.000% 0 minimum 0 per unit monitoring fee 5,000 Soft Loan Payments 0.420% 0
Net Income Available for Debt Service 313,984
DSC TEST 1.15000
N/A
Tranche B
0 7.65%
35 35

1.15 11
132
40,954
0 Loan Type:

Loan Sizing
Notes
Loan Amount
Interest
Term
Amortization
Max Loan Amount 0
Debt Service Coverage
Monthly Payment
Annual Payment
Cash Flow After D/S

1.15 22,741
272,898
41,086

7.65%
17 35
Private
Tranche A
3,320,000
Arc Village Apartments Revision Date: 6/4/2024
Cash Flow
2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Gross Revenue Inflation @ 2.00% $ 471,540 $ 480,971 $ 490,590 $ 500,402 $ 510,410 $ 520,618 $ 531,031 $ 541,651 $ 552,484 $ 563,534 $ 574,805 $ 586,301 $ 598,027 $ 609,987 $ 622,187 634,631 Subsidy Revenue 2.00% $ 125,748 $ 128,263 $ 130,828 $ 133,445 $ 136,114 $ 138,836 $ 141,613 $ 144,445 $ 147,334 $ 150,281 $ 153,286 $ 156,352 $ 159,479 $ 162,668 $ 165,922 169,240 Vacancy 5.00% $ (29,864) $ (30,462) $ (31,071) $ (31,692) $ (32,326) $ (32,973) $ (33,632) $ (34,305) $ (34,991) $ (35,691) $ (36,405) $ (37,133) $ (37,875) $ (38,633) $ (39,405) (40,194) Net Revenue $ 567,424 $ 578,772 $ 590,348 $ 602,154 $ 614,198 $ 626,482 $ 639,011 $ 651,791 $ 664,827 $ 678,124 $ 691,686 $ 705,520 $ 719,630 $ 734,023 $ 748,703 $ 763,677 Operating Expenses Inflation @ 3.00% $ 223,440 $ 230,143 $ 237,047 $ 244,159 $ 251,484 $ 259,028 $ 266,799 $ 274,803 $ 283,047 $ 291,539 $ 300,285 $ 309,293 $ 318,572 $ 328,129 $ 337,973 348,112 Commercial Revenue 2.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Vacancy 50.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Net Revenue $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Commercial Operating Expenses Inflation @ 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Net Operating Income $ 343,984 $ 348,629 $ 353,300 $ 357,996 $ 362,714 $ 367,453 $ 372,212 $ 376,988 $ 381,780 $ 386,585 $ 391,402 $ 396,227 $ 401,058 $ 405,894 $ 410,730 415,565 Replacement Reserves Inflation @ 3.00% $ 10,000 $ 10,300 $ 10,609 $ 10,927 $ 11,255 $ 11,593 $ 11,941 $ 12,299 $ 12,668 $ 13,048 $ 13,439 $ 13,842 $ 14,258 $ 14,685 $ 15,126 $ 15,580 Other Annual Cost Inflation @ 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Services Inflation @ 3.00% $ 15,000 $ 15,450 $ 15,914 $ 16,391 $ 16,883 $ 17,389 $ 17,911 $ 18,448 $ 19,002 $ 19,572 $ 20,159 $ 20,764 $ 21,386 $ 22,028 $ 22,689 23,370 Cash Available to Debt Service $ 318,984 $ 322,879 $ 326,778 $ 330,677 $ 334,576 $ 338,471 $ 342,361 $ 346,241 $ 350,111 $ 353,966 $ 357,804 $ 361,621 $ 365,414 $ 369,180 $ 372,916 $ 376,616 Principal and Interest Tranche A 3,320,000 7.65% $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 $ 272,898 272,898 Principal and Interest Tranche B 0 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Issuer and Monitoring Fees Inflation @ 3.00% $ 5,000 $ 5,150 $ 5,305 $ 5,464 $ 5,628 $ 5,796 $ 5,970 $ 6,149 $ 6,334 $ 6,524 $ 6,720 $ 6,921 $ 7,129 $ 7,343 $ 7,563 $ 7,790 Soft Loan Payments Inflation @ 1.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Admin GP Fee Inflation @ 3.00% $ 5,000 $ 5,150 $ 5,305 $ 5,464 $ 5,628 $ 5,796 $ 5,970 $ 6,149 $ 6,334 $ 6,524 $ 6,720 $ 6,921 $ 7,129 $ 7,343 $ 7,563 7,790 Managing GP Fee Inflation @ 3.00% $ 5,000 $ 5,150 $ 5,305 $ 5,464 $ 5,628 $ 5,796 $ 5,970 $ 6,149 $ 6,334 $ 6,524 $ 6,720 $ 6,921 $ 7,129 $ 7,343 $ 7,563 7,790 Net Project Cash Flow $ 31,086 $ 34,531 $ 37,966 $ 41,389 $ 44,796 $ 48,185 $ 51,552 $ 54,896 $ 58,212 $ 61,497 $ 64,747 $ 67,960 $ 71,130 $ 74,255 $ 77,329 80,349 DEBT SERVICE COVERAGE RATIO 115% 116% 118% 119% 121% 122% 123% 125% 126% 127% 129% 130% 131% 133% 134% 135% TCAC Gross Revenue Test no more than 2% in year 15 if DSCR > 125% or 8% test 8.00% 8% 8% 9% 9% 10% 10% 11% 11% 12% 12% 12% 13% 13% 13% 14% 14% UMR Operating Expense Test <= 1.20 DSCR or 12% cash flow to expense ratio 12.00% 14% 15% 16% 17% 18% 19% 19% 20% 21% 21% 22% 22% 22% 23% 23% 23% Private Placement Junior Bond 100%of Avail Cashflow after deferred fee until fee paid 8.50% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 50%of available cashflow after deferred fee paid off
Distributions:

Refinance Proceeds
Debt Service Coverage Reserve - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Other: 0 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Other: LP Fee 7,500 3.00% $ 7,500 $ 7,725 $ 7,957 $ 8,195 $ 8,441 $ 8,695 $ 8,955 $ 9,224 $ 9,501 $ 9,786 $ 10,079 $ 10,382 $ 10,693 $ 11,014 $ 11,344 $ 11,685 Accrued LP Fee, if applicable $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Deferred Dev Fee 100% 1.00% $ 23,586 $ 26,806 $ 30,010 $ 33,193 $ 36,355 $ 39,490 $ 42,597 $ 45,672 $ 48,711 $ 51,711 $ 54,668 $ 44,538 $ - $ - $ - 0 Cash Available After Deferred Fee Payment $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 13,040 $ 60,437 $ 63,241 $ 65,985 68,664 Total Cash Available for Waterfall $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 13,040 $ 60,437 $ 63,241 $ 65,985 $ 68,664 Cash Available For Soft Loans 50.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 6,520 $ 30,219 $ 31,620 $ 32,992 $ 34,332 Ground Lease 0.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Acquisition Value Loan 26.23% 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 1,710 $ 7,926 $ 8,294 $ 8,654 9,005 Local Funds: Authority Loan 49.18% 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 3,207 $ 14,862 $ 15,551 $ 16,226 16,885 Local Funds: CRDP DDS 24.59% 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 1,603 $ 7,431 $ 7,776 $ 8,113 8,442 State Funds: MIP 0.00% 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 State Funds: AHSC 0.00% 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 State Funds: Serna or NPLH or State HOME 0.00% 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 CalHFA MIP 0.00% 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Other 0.00% 3.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Check 100%
Cash Flow Available After Soft Loan Loans $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 6,520 $ 30,219 $ 31,620 $ 32,992 34,332 Subordinate Deferred Developer fee 0.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Partnership Admin Fee (90% of Cash Flow) 90.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 5,868 $ 27,197 $ 28,458 $ 29,693 30,899 Cash Flow Available after Partnership Admin Fee $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 652 $ 3,022 $ 3,162 $ 3,299 3,433 LP Distribution 100.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 652 $ 3,022 $ 3,162 $ 3,299 3,433 GP Distribution 0.00% $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 Remaining Cash Flow After Partnership Distribution $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 0 -1- P6401-0001\2953060v3.doc

RECORDING REQUESTED BY,
AND WHEN RECORDED MAIL TO:

Palm Desert Housing Authority
74-510 Fred Waring Drive
Palm Desert, CA 92260
Attn: Executive Director
SPACE ABOVE THIS LINE FOR RECORDER’S USE
This Notice of Affordability Restrictions is recorded for the benefit of the Palm Desert Housing Authority and is exempt from California recording fees pursuant to Sections 6103, 27383 and 27388.1 of the California Government Code.

NOTICE OF AFFORDABILITY RESTRICTIONS

IMPORTANT NOTICE TO OWNERS, PURCHASERS, TENANTS, LENDERS, BROKERS,

ESCROW AND TITLE COMPANIES, AND OTHER PERSONS, REGARDING

AFFORDABLE HOUSING RESTRICTIONS ON THE REAL PROPERTY DESCRIBED IN THIS NOTICE: RESTRICTIONS HAVE BEEN RECORDED WITH RESPECT TO THE

PROPERTY DESCRIBED BELOW WHICH RESTRICT OCCUPANCY TO EXTREMELY

LOW, VERY LOW AND LOW-INCOME HOUSEHOLDS AND THE RENTS WHICH MAY BE CHARGED. THESE RESTRICTIONS MAY LIMIT THE RENTS FOR EACH UNIT TO AN AMOUNT WHICH IS LESS THAN FAIR MARKET RENT. THESE RESTRICTIONS LIMIT

THE INCOME OF PERSONS AND HOUSEHOLDS WHO ARE PERMITTED TO RENT AND OCCUPY THE UNITS.

This NOTICE OF AFFORDABILITY RESTRICTIONS (the “Notice”), is dated as of _________, 2024, and is executed by , a California limited
partnership (“Owner”), whose address is 6339 Paseo Del Lago, Carlsbad, CA 92011, and by the PALM DESERT HOUSING AUTHORITY, a public body (“PDHA”) in connection with that certain Housing Agreement by and between the Owner and the PDHA dated substantially concurrently herewith and recorded in the Official Records of Riverside County substantially concurrently herewith (the “Housing Agreement”).

RECITALS
A. Owner owns the land described on Exhibit “A” located in the City of Palm Desert, State of California and the improvements thereon (the “Property”), and which constitutes APN 622-370-014.

B. Owner and PDHA are entering into and recording the Housing Agreement substantially concurrently herewith, which relates to and encumbers the Property.

C. Capitalized terms used herein but not defined shall have the meaning set forth in the Housing Agreement.
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TERMS OF NOTICE

1. Requirement for Recorded Notice. This Notice is being executed and recorded pursuant to California Health and Safety Code Section 33334.3(f)(3)(B).

2. Housing Agreement (Regulatory Agreement). This Notice is being recorded substantially concurrently with the recordation of the Housing Agreement, which is incorporated herein by reference.

3. General Recitation of Affordability Restrictions; Term. The Housing Agreement restricts the occupancy of thirty-nine (39) rental units on the Property to occupancy by extremely low, very low and low-income households as their principal residence at an affordable rent (as more particularly described in and required by the Housing Agreement), and in compliance with California Health & Safety Code Sections 50053, 50105, 50079.5, 50106 and Title 25 of the California Code of Regulations Section 6910, et. seq., for a term commencing on the date thereof and continuing until fifty-five (55) years after issuance of a final Certificate of Occupancy by the City of Palm Desert for the improvements required to be made by Owner to the Property under that Disposition, Development and Loan Agreement between PDHA and the Owner dated , 2024. An additional unit is restricted to be used by an on-site manager as its residence.

4. Summary of Affordable Housing Restrictions.

Occupancy Restrictions. The Housing Agreement restricts the occupants (tenants) of the apartments on the Property to extremely low, very low and low income households, as follows:
(a) Four (4) units shall be restricted to persons and families whose income does not exceed the qualifying limits for extremely low income households, adjusted for actual household size, set forth in California Health and Safety Code Section 50106 and Title 25 of the California Code of Regulations;
(b) Twenty (20) units shall be restricted to persons and families whose income does not exceed the qualifying limits for very low income households, adjusted for actual household size, set forth in California Health and Safety Code Section 50105 and Title 25 of the California Code of Regulations.
(c) Fifteen (15) units shall be restricted to persons and families whose income does not exceed the qualifying limits for low income households, adjusted for actual household size, set forth in California Health and Safety Code Section 50079.5 and Title 25 of the California Code of Regulations; provided that the qualifying limit is capped at fifty-nine percent (59%) of area median income.
(d) The remaining unit shall be used solely as a manager’s unit for on-site apartment managers.

As referenced above, “area median income” shall have the meaning set forth in California Health and Safety Code Section 50093.
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Rent Restrictions. Rent is restricted to an “affordable” rent for extremely low, very low and low-income households pursuant to Section 50053(b) of the California Health & Safety Code and the regulations adopted by the California Department of Housing and Community Development pursuant thereto.

This Notice does not contain a full description of the details of all of the terms and conditions of the Housing Agreement. You will need to obtain and read the Housing Agreement to fully understand the restrictions and requirements which apply to the Property. The Housing Agreement is on file with the PDHA and available for review at the offices of the PDHA located at 73-510 Fred Waring Drive, Palm Desert, CA 92260.

IN WITNESS WHEREOF, this Notice has been executed and made effective on the day and year first above written.

PDHA:

PALM DESERT HOUSING AUTHORITY,
a public body
By:

Name: L. Todd Hileman
Title: Executive Director
OWNER:
,
a California limited partnership
By:

Name:

Title:

ATTEST:

Anthony J. Mejia, Secretary
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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 RIVERSIDE
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, and that by his/her/their signature(s) on the instrument the person(s), or the entity(ies) 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.

Place Notary Seal Above
Signature of Notary Public
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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 RIVERSIDE
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, and that by his/her/their signature(s) on the instrument the person(s), or the entity(ies) 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.

Place Notary Seal Above
Signature of Notary Public
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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 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, and that by his/her/their signature(s) on the instrument the person(s), or the entity(ies) 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.

Place Notary Seal Above
Signature of Notary Public
1177
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EXHIBIT “A_

LEGAL DESCRIPTION OF THE LAND

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF PALM

DESERT, IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1A
THE SOUTHERLY 323.50 FEET OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, OF THE SAN BERNARDINO MERIDIAN, IN THE

CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA,

ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE.

PARCEL 2A

AN EASEMENT FOR PEDESTRIAN AND VEHICULAR ACCESS FOR CONSTRUCTION AND EMERGENCY ACCESS PURPOSES OVER THAT PORTION OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO

MERIDIAN, IN THE CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF

CALIFORNIA, ACCORDING TO AN OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE, DESCRIBED AS FOLLOWS:

COMMENCING AT THE WEST 1/16 CORNER OF SAID SECTION 8, SAID CORNER

BEING ON THE CENTERLINE OF COUNTRY CLUB DRIVE, SAID CORNER ALSO BEING THE NORTHWEST CORNER OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG THE WEST LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8, S 0° 10' 27" W 124.00 FEET;
THENCE S 89° 49' 33" E 33.88 FEET TO THE EAST LINE OF THAT CERTAIN EASEMENT

TO THE CITY OF PALM DESERT FOR PUBLIC ROADWAY PURPOSES DESCRIBED IN DOCUMENT NO. 2003-461172 RECORDED JUNE 23, 2003, RECORDS OF SAID COUNTY OF RIVERSIDE, AND TO THE TRUE POINT OF BEGINNING;
THENCE S 89° 49' 33" E 30.28 FEET;
THENCE S 0° 13' 14" E 873.45 FEET TO A LINE PARALLEL WITH AND 323.50 FEET NORTHERLY OF THE SOUTH LINE OF THE WEST 7-1/2 ACRES OF THE WEST 15 ACRES OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE ALONG SAID PARALLEL LINE S 89° 41' 04" W 24.00 FEET; 1178
A-2- P6401-0001\2953060v3.doc
THENCE N 0° 13' 14" W 831.65 FEET;
THENCE N 89° 49' 33" W 8.74 FEET TO THE EAST LINE OF SAID EASEMENT TO THE CITY OF PALM DESERT PER DOCUMENT NO. 2003-461172 AND TO THE BEGINNING OF A CURVE CONCAVE TO THE NORTHWEST HAVING A RADIUS OF 187.50 FEET, A RADIAL LINE THROUGH SAID BEGINNING OF CURVE BEARS S 81° 07' 08" E; THENCE NORTHERLY 28.49 FEET ALONG SAID EAST LINE AND ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 8° 42' 25";
THENCE CONTINUING ALONG SAID EAST LINE N 0° 10' 27" E 13.62 FEET TO THE TRUE POINT OF BEGINNING.

APN: 622-370-014
1179
(Space Above Reserved for Recording Information)

ACCESS EASEMENT AGREEMENT
This Access Easement Agreement (“Agreement”) by and between ________________________, a ______________ _____________ (“Grantor”), and ________________________, a ______________ _____________ (“Grantee”) (collectively, the “Parties” or individually, a “Party”) is entered into on the date last executed by the Parties effective as of this ________ day of __________, 2024 (the “Effective Date”).

A. Grantor is the fee simple owner of certain real property legally described on Exhibit A attached hereto and made a part hereof by this reference (the “Grantor’s Property”).

B. Grantee is the fee simple owner of that certain real property adjacent to the Grantor’s Property, legally described on Exhibit B attached hereto and made a part hereof by this reference (the “Grantee’s Property”).

C. Grantee will be developing a residential apartment project on Grantee’s Property (the “Project”) and in connection with the development of the Project, Grantee requires easements from Grantor for vehicle ingress and egress as well as pedestrian access across Grantor’s Property to provide Grantee’s Property vehicular and pedestrian access to the public right of way and sidewalk.

D. Grantor wishes to grant to Grantee, subject to the conditions described in this Agreement, an easement for vehicular ingress and egress upon, over, across and through a portion of Grantor’s Property (the “Vehicle Easement Area”) and an easement for pedestrian purposes upon, over, across and through a portion of Grantor’s Property (the “Pedestrian Easement Area”). The Vehicle Easement Area is legally described and/or depicted on Exhibit C attached hereto and made a part hereof by this reference. The Pedestrian Easement Area is legally described and/or depicted on Exhibit D attached hereto and made a part hereof by this reference.

E. The purpose of this Agreement is to establish said Easement which will burden Grantor’s Property and benefit of Grantee’s Property.
1180
2 NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, for themselves and their respective successors and assigns, agree as follows:

1. Grant of Easements. Subject to the terms of this Agreement, Grantor hereby grants to Grantee and to the Grantee Parties (as defined below): (i) a perpetual, non-exclusive easement upon, over, across and through the Vehicle Easement Area for ingress and egress of vehicles and equipment to Grantee’s Property (the “Vehicle Easement”), and (ii) a perpetual, nonexclusive easement upon, over, across and through the Pedestrian Easement Area for pedestrian ingress and egress to Grantee’s Property (the “Pedestrian Easement” and, collectively with the Vehicle Easement, the “Easements”). As used herein, the term “Grantee Parties” shall mean Grantee’s employees, agents, tenants, contractors, invitees (including, without limitation, the City), permittees and licensees.

2. Appurtenant Easement; Runs with the Land. Subject to the terms and conditions of this Agreement, this Agreement is binding upon and inures to the benefit of the Parties and their respective legal heirs, successors and assigns. The Easements shall be appurtenant to Grantee’s Property and all portions thereof and binding upon Grantor’s Property.

3. Construction.
(a) Grantee shall be responsible, at Grantee’s sole cost and expense, to perform such repairs and/or modifications to the Vehicle Easement Area as are necessary, in Grantee’s opinion, to prepare the Vehicle Easement Area for its use by the Grantee Parties in connection with the Vehicle Easement.

Grantee shall use commercially reasonable efforts to perform such work to the Vehicle Easement Area in a manner that will not unreasonably interfere with Grantor’s use of the Vehicle Easement Area.
(b) Grantee shall be responsible, at Grantee’s sole cost and expense, to construct a sidewalk on the Pedestrian Easement Area for non-exclusive use by Grantee Parties of the Pedestrian Easement.

4. Temporary Construction Easements.
(a) Grantor hereby grants to Grantee Parties, a nonexclusive temporary easement for access, construction, grading and all other ancillary construction purposes (“Temporary Vehicle Construction Easement”) over, upon, under and across those portions of Grantor’s Property as described and depicted on Exhibit E attached hereto and incorporated herein by reference (the “Temporary Vehicle Construction Easement Area”).

Grantee and the Grantee Parties shall have the right to enter upon the Grantor Property at all reasonable times for access, construction and grading of the Grantor Property in connection with the repairs and/or modifications of the Vehicle Easement Area. Grantee shall have the further right to trim trees and remove brush, trees, undergrowth and other obstructions within the Temporary Vehicle Construction Easement Area. 1181
3 The Temporary Vehicle Construction Easement shall commence on the Effective Date and, unless extending in writing, expire upon the completion of the construction referenced herein, whereupon the Temporary Vehicle Construction Easement shall terminate and be of no further force and effect. (b) Grantor hereby grants to Grantee Parties, a nonexclusive temporary easement for access, construction, grading and all other ancillary construction purposes (“Temporary Pedestrian Construction Easement”) over, upon, under and across those portions of Grantor’s Property as described and depicted on Exhibit F attached hereto and incorporated herein by reference (the “Temporary Pedestrian Construction Easement Area”). Grantee and the Grantee Parties shall have the right to enter upon the Grantor Property at all reasonable times for access, construction and grading of the Grantor Property in connection with the construction of the sidewalk within the Pedestrian Easement Area.

Grantee shall have the further right to trim trees and remove brush, trees, undergrowth and other obstructions within the Temporary Pedestrian Construction Easement Area. The Temporary Pedestrian Construction Easement shall commence on the Effective Date and, unless extending in writing, expire upon the completion of the construction referenced herein, whereupon the Temporary Pedestrian Construction Easement shall terminate and be of no further force and effect.

5. Maintenance and Repair.
(a) Grantor shall be responsible for maintaining the driveway areas within the Vehicle Easement Area, except as otherwise provided in this Agreement.

Such maintenance shall include all repairs, resurfacing, cleaning, clearing, snow and ice removal, maintenance and replacement of the Vehicle Easement Area, that are reasonably necessary in Grantor’s reasonable discretion to maintain the same in good, safe, level, smooth and serviceable condition and in compliance with all applicable governmental laws and regulations, and any such work shall be done in a good and workmanlike manner. Grantee shall have no liability or obligation to repair, restripe or otherwise maintain any of the parking areas other than the 24-foot wide driveway area of the Vehicle Easement Area. Grantor and Grantee are each responsible for paying their proportionate share of such maintenance and repair costs for the Vehicle Easement Area. Grantor’s proportionate share shall be 50% and Grantee’s proportionate share shall be 50%. Following any expenditure by Grantor, Grantor shall provide Grantee copies of all bills, invoices, and/or other reasonable evidence as to the cost of such maintenance and/or repairs, and Grantee shall reimburse Grantor for Grantee’s proportionate share thereof within thirty (30) days of Grantee’s receipt of such written evidence. In the event Grantor fails to perform its maintenance and/or repair obligations set forth in this Section 4(b) after written notice from Grantee and a reasonable opportunity to cure, Grantee shall have the option, but not the obligation, to perform such maintenance 1182
4 and/or repairs and Grantor shall reimburse Grantee for Grantee’s reasonable expenditures in performing the same, together with interest as a rate of eight percent (8%) per annum until such amounts are paid in full.

Notwithstanding the foregoing, if any damage to the Vehicle Easement Area is caused by the gross negligence or willful misconduct of any Party, or its agents, contractors, tenants, employees, licensees, guests or invitees, the cost of repairing such damage shall be assessed exclusively against such Party.
(b) Grantee shall be responsible for maintaining the sidewalk located within the Pedestrian Easement Area, at Grantee’s sole cost and expense, except as otherwise provided in this Agreement. Grantee shall have no obligation to maintain any vegetation or other improvements constructed, installed, or plated in the Pedestrian Easement Area by Grantor. Such maintenance shall include all repairs, clearing, snow and ice removal, maintenance and replacement of the Pedestrian Easement Area, that are reasonably necessary in Grantee’s reasonable discretion to maintain the same in good, safe and serviceable condition. Notwithstanding the foregoing, if any damage to the sidewalk located within the Pedestrian Easement Area is caused by the gross negligence or willful misconduct of any Party, or its agents, contractors, tenants, employees, licensees, guests or invitees, the cost of repairing such damage shall be assessed exclusively against such Party. In the event Grantee fails to perform its maintenance and/or repair obligations set forth in this Section 4(a) after written notice from Grantor and a reasonable opportunity to cure, Grantor shall have the option, but not the obligation, to perform such maintenance and/or repairs and Grantee shall reimburse Grantor for Grantor’s reasonable expenditures in performing the same, together with interest as a rate of eight percent (8%) per annum until such amounts are paid in full.

6. Improvements; Interference. Neither Party shall place or permit to be placed any improvements upon, over, under or about the Vehicle Easement Area or the Pedestrian Easement Area that would impede Grantee’s or the Grantee Parties’ ability to use the Vehicle Easement Area or the Pedestrian Easement Area for the purposes set forth in this Agreement.

7. Reserved Rights. Grantor, its successors and assigns, reserve the right to use the Vehicle Easement Area and/or Pedestrian Easement Area, and the right to grant others the right to use the same, provided that none of such uses interfere with Grantee’s or the Grantee Parties’ use of the Vehicle Easement Area and/or Pedestrian Easement Area, and subject to such other restrictions set forth in this Agreement.

8. Indemnification. Each party agrees to indemnify, defend, and hold the other party, and its respective officers, partners, directors, employees, agents, tenants, licensees, invitees, successors and assigns (collectively, the “Indemnified Parties”) harmless from and against any and all liability, loss, claims, damages, penalties, fines, costs and expenses, including, without limitation, reasonable attorneys' fees, and for any and all injury to persons or damage to property 1183
5 (including any gate and/or access-limiting or security device), that arise from or out of a breach of the indemnifying party’s respective covenants and obligations hereunder and/or the indemnifying party’s negligence or willful acts or omissions, except to the extent caused by the negligent or willful acts or omissions of the Indemnified Parties.

9. Recording. This Agreement shall be filed with the Registrar of Titles and Office of the County Recorder, Riverside County, California, and shall serve as notice to and shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

10. Non-Use. Non-use or limited use of the easement rights granted in this Agreement shall not prevent a Party from using the easement rights to the fullest extent authorized in this Agreement to the fullest extent authorized in this Agreement at a later time.

11. Notices. All notices with respect to this Agreement shall be delivered in person or sent by certified mail, postage prepaid, return receipt requested, to the Party to whom such notice is provided at that Party’s last known address. If that Party’s address is not known to the Party desiring to send a notice, the Party sending the notice may use the address to which the other Property’s real estate tax bills are sent. A Party may change its address for notice by providing written notice to the Party.

12. Entire Agreement and Modification. This writing represents the entire agreement and understanding of the Parties with respect to the subject matter hereof and supersedes any and all previous agreements of whatever nature between the Parties with respect to the subject.

This Agreement may not be altered or amended except by an agreement in writing signed by all Parties.

13. No Waiver. No waiver of any right or obligation created or arising under this Agreement shall be binding upon a Party unless such waiver is in writing and signed by the Party against whom enforcement thereof is sought. No failure of a Party to exercise any power or right granted by this Agreement, or to insist upon strict compliance with any obligation specified herein, and no custom or practice at variance with the terms hereof, shall constitute a waiver of such right or power or a waiver of the right of any such person to demand exact compliance with the terms hereof.

14. Enforcement. Each Party shall have the right to enforce any and all provisions of this Agreement. Such right of enforcement shall include both damages for and injunctive relief against the breach of any provision of this Agreement. If a suit is brought to enforce this Agreement, the prevailing Party shall be entitled to recover its costs, including reasonable attorney fees, from the non-prevailing Party.

15. Headings; Exhibits. The headings of sections in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. The recitals contained herein, and all schedules, exhibits, addenda or attachments referred to herein are incorporated in and constitute a part of this Agreement. 1184
6 16. Severability. If any provision of this Agreement, or the application of such provisions to any person, shall be held to be invalid or unenforceable by any court of competent jurisdiction, such provision shall be deemed to be modified to be within the limits of enforceability or validity, if feasible; provided, however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable.

17. Controlling Law. This Agreement shall be governed by and construed under the laws of the State of California.

18. Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which, when taken together, constitute the same instrument.
(Signature Pages Follow)
1185
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first above written.
__________________________
a ___________ _________________
By:

Name:

Its:

STATE OF CALIFORNIA )
) ss.

COUNTY OF ___________ )
This instrument was acknowledged before me on this ______ day of ______________________, 2024, by _____________________, the _______________ of ____________________________, a _______________ ________________, on behalf of said ________________.
_____________________________________
Notary Public
1186
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first above written.
__________________________
a ___________ _________________
By:

Name:

Its:

STATE OF CALIFORNIA )
) ss.

COUNTY OF ___________ )
This instrument was acknowledged before me on this ______ day of ______________________, 2024, by _____________________, the _______________ of ____________________________, a _______________ ________________, on behalf of said ________________.
_____________________________________
Notary Public
1187
9 MORTGAGEE CONSENT
TO

ACCESS EASEMENT
[Confirm if Desert Arc has mortgage in place that requires consent] THIS INSTRUMENT WAS DRAFTED BY:

WINTHROP & WEINSTINE, P.A.
225 S 6th Street
Suite 3500
Minneapolis, Minnesota 55402
1188
10 EXHIBIT A
Legal Description of Grantor’s Property
1189
11 EXHIBIT B
Legal Description of Grantee’s Property
1190
12 EXHIBIT C
Description and Depiction of Vehicle Easement Area
[INSERT]
1191
13 EXHIBIT D
Description and Depiction of Pedestrian Easement Area
[INSERT]
1192
14 EXHIBIT E
Description and Depiction of Temporary Vehicle Construction Easement Area [INSERT]
1193
15 EXHIBIT F
Description and Depiction of Temporary Pedestrian Construction Easement Area [INSERT]
28973608v2
1194