PISMO BEACH COUNCIL AGENDA REPORT
Agenda Item #12.B
SUBJECT/TITLE:
AMENDED LOAN AGREEMENTS FOR HOUSING AUTHORITY OF SAN LUIS OBISPO FOR THE FUNDING OF A 25-UNIT AFFORDABLE SENIOR HOUSING PROJECT AT 2655 SHELL BEACH ROAD
RECOMMENDATION:
Adopt a Resolution authorizing amended loan agreements with the Housing Authority of San Luis Obispo for design, funding, construction, and management of a 25-unit affordable senior housing project at 2655 Shell Beach Road.
BACKGROUND:
On March 16, 2021, the City Council adopted Resolution No. R-2021-023 authorizing the City Manager to execute a loan agreement to the Housing Authority of San Luis Obispo (HASLO) for $1.0 million, deferral of City Development Impact Fees related to the project not to exceed $223,676, and additional regulatory documents. Since that time, HASLO has been working toward project funding and maintained necessary project entitlements.
As a result of inflation, increasing interest rates, and decreased demand for tax credit investments, HASLO has requested modifications to the City’s deferred fee amount from $223,676 to a total of $443,676 (Attachment 2). The City’s applicable Development Impact Fees total approximately $677,806 and the requested increase in fee deferral totals approximately 66% of this total compared to the 33% previously approved. Based on the community need for affordable housing, staff supports this increase in fee deferral.
Additionally, the City’s previously approved financial commitments were provided without interest paid to the City. Due to the nature of Tax Credit Financing that HASLO is securing for the Shell Beach Road project, they are requesting to increase this interest from 0% to 4%. This increase results in improved buying power of the Tax Credits and is also supported by staff.
A revised loan agreement (Attachment 3) specifies the City Take a note and deed of trust (Attachments 4, 5, and 6) consistent with the Council’s previous action regarding this project and consistent with the affordable housing regulatory agreement (Attachment 7).
Conclusion and Recommendation
Development of affordable housing is an important step toward addressing the City’s Regional Housing Needs Allocation. The City’s financial assistance will help HASLO successfully develop the project at 2655 Shell Beach Road. Staff recommends the Council adopt a Resolution (Attachment 1) approving the revised loan of Housing In- Lieu Fee interest and Development Impact Fee waivers and the associated legal instruments.
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-1
FISCAL IMPACT:
The fiscal impact of approving the attached Resolution and corresponding documents is a loan of $1,443,676 in Fiscal Year (FY) 2023 to be paid back to the City in 55 years with 4% interest per year, consistent with the obligation for tax credit financing requirements for a term of 55 years. Of the total $1,443,676, $1,000,000 are loan proceeds from the Housing In-Lieu Fee Fund and $443,676 is a deferred payment of approximately 66% of the City’s development impact fees that are deposited in six impact fee funds.
Budget
There is already $1.00 million budgeted in the Housing In-Lieu Fee Fund for the 2655 Shell Beach Road affordable senior housing project. This will leave an estimated $955 thousand available for other affordable housing project costs.
Development Impact Fees
The City’s development impact fees for this project are approximately $677,806, of which HASLO will pay $234,130 upfront, and the remaining $443,676 will be deferred for 55 years. If Council adopts the Resolution per staff’s recommendation, staff will set up a note receivable and deferred revenues for the promissory note in the amount of $443,676.
ALTERNATIVES:
1. Do not adopt the Resolution; provide direction to staff.
ATTACHMENTS:
1. Resolution
2. HASLO Funding Request
3. Loan Agreement
4. Promissory Note – Housing In-Lieu Fee Funds
5. Promissory Note – Deferred Impact Fees
6. Deed of Trust
7. Affordable Housing Regulatory Agreement
Submitted by: Meeting Date: December 6, 2022
Matthew Downing, Community Development Director
City Manager Approval:
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-2
RESOLUTION NO. R-2022-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH,
CALIFORNIA AUTHORIZING A REVISED LOAN AGREEMENT AND ASSOCIATED
DOCUMENTS WITH THE HOUSING AUTHORITY OF SAN LUIS OBISPO FOR FUNDING, CONSTRUCTION, AND MANAGEMENT OF A 25-UNIT AFFORDABLE SENIOR HOUSING PROJECT AT 2655 SHELL BEACH ROAD
WHEREAS, the City Council previously approved a loan agreement and associated documents with the Housing Authority of San Luis Obispo (HASLO) in support of the development of a 25-unit affordable senior housing project at 2655 Shell Beach Road; and
WHEREAS, as a result of inflation, increasing interest rates, and decreased demand for tax credit investments, HASLO has requested modifications to the City’s deferred fee amount to a total of $443,676; and
WHEREAS, HASLO is additionally requesting to increase the interest rates for City funding from 0% to 4%; and
WHEREAS, City Development Impact Fees can be deferred to further assist with project funding.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Pismo Beach hereby approves and authorizes the City Manager to execute a loan agreement to the Housing Authority of San Luis Obispo for $1.0 million, a regulatory agreement, note, and deed of trust, and deferral of City Development Impact Fees related to project development not to exceed $443,676, in substantially the form attached to the December 6, 2022, report to the Council.
BE IT FURTHER RESOLVED that the City Council of the City of Pismo Beach hereby sets up notes receivable and deferred revenues for the promissory note in the amount of $443,676, including any related accounting adjustments.
UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 6th day of December 2022, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
Attachment 1
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-3
Approved: Attest:
________________________ ________________________
Ed Waage, Mayor Erica Inderlied, City Clerk
Attachment 1
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-4
Attachment 2
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-5
LOAN AGREEMENT
THIS LOAN AGREEMENT (“Agreement”) is made and entered into on _________________________, 2022 by SHELL BEACH SENIOR, L.P., a California limited partnership (hereinafter referred to as the “Owner”), and the CITY OF PISMO BEACH, a California general law city (hereinafter referred to as the “City”).
WITNESSETH:
WHEREAS, the City operates a revolving loan fund for the purpose of increasing the supply of affordable housing for very low, low, and moderate income residents of the City; WHEREAS, the Loan (defined below) will be funded using the City’s affordable housing funds; WHEREAS, City has agreed to provide Owner a loan in the aggregate amount of ONE MILLION
FOUR HUNDRED FORTY-THREE THOUSAND SIX HUNDRED SEVENTY-SIX DOLLARS AND NO CENTS ($1,443,676) (the “Loan”) consisting of the following two tranches: (i) $1,000,000 in cash (the “Loan Proceeds”) and (ii) $443,676 in deferred payment of fees (the “Deferred Fees”) to finance the development of real property located at 2655 Shell Beach Road, Pismo Beach, California, 93449, in the County of San Luis Obispo, as more particularly described in Exhibit A (the “Property”) as a housing project for low income households in the City of Pismo Beach; WHEREAS, the Owner will construct a residential project with twenty-six (26) multi-family rental apartment units including the manager’s unit consisting of twelve (12) units affordable to households earning less than 80% area median income (“AMI”), plus one unrestricted manager’s unit (the “Project”) on the Property;
WHEREAS, the Loan Proceeds will be disbursed upon the date of this Agreement for the development of the Property (the “Funding Date”);
WHEREAS, in addition to this Agreement, the Loan will be evidenced by two promissory notes of even date herewith, secured by a deed of trust and include a regulatory agreement recorded against the Property, (all of which documents collectively are the “Loan Documents”); NOW, therefore, in consideration of the mutual promises, recitals, and other provisions hereof, the parties agree as follows:
1.Scope of Activities.
a.Within twenty-four (24) months after execution of this Agreement, subject to force majeure delays, the Owner shall complete construction of the Project and obtain final permit approval allowing occupancy of all twenty-six (26) rental apartment units including the manager’s unit (the “Completion Date”). The Project shall be constructed in material compliance with the approved development permit and construction permits.
b.This completion schedule may be amended upon written agreement between the parties. The date on which construction is completed and final approval has been granted for occupancy of the 26th rental apartment unit shall be the Completion Date. There shall be no default for construction delays beyond the reasonable control of Owner, provided that such delays do not exceed one hundred eighty (180) days, or such longer period of time as may be specified in the Loan Documents.
Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-6
c.During the term of this Agreement, the Owner shall retain leasehold interest in the Property and a fee interest in the Project and of all rights, royalties, profits, and proceeds generated or caused by the residential units of the Project, except that the Owner may transfer the Property and/or Project as permitted in the Deed of Trust.
d.Owner hereby covenants and agrees to maintain a minimum of twelve (12) units in the Project as affordable rental units, in accordance with the Affordability Schedule attached as Exhibit B hereto.
2.Term of Agreement. The term of this Agreement shall commence on the date first above written and shall terminate fifty-five (55) years from the Completion Date, unless sooner terminated as hereinafter provided.
3.Loan. Subject to the terms and conditions of this Agreement, the City shall fund the Loan Proceeds on the Funding Date. The Owner shall not obligate or expend the funds for any purpose other than for the Project. The Owner shall execute two promissory notes in the amount of (i) $1,000,000.00 (the “Loan Proceeds Note”); and (ii) $443,676.00 (the “Deferred Fees Note” and, together with the Loan Proceeds Note, the “Note”), a deed of trust and a regulatory agreement in favor of the City. Prior to the City funding the Loan Proceeds to the Owner, (i) the Note shall be executed and delivered to City, and each of the deed of trust and regulatory agreement shall be executed and recorded, and (ii) the title insurance company shall provide City with an ALTA lender’s policy of title insurance insuring City’s lien, with a liability amount equal to the amount of the Loan, at Owner’s cost and expense. The City agrees to subordinate its lien position to any commercial construction financing obtained by Owner in connection with the development of the Project, including but not limited to that certain [Construction Loan From Pacific Western Bank, N.A.].
4.Termination of Agreement for Cause. If the City reasonably determines that the Owner has incurred obligations or made expenditures for purposes which are not permitted or are prohibited under the terms and provisions of this Agreement, or if the City reasonably determines that the Owner has failed to fulfill its obligations under this Agreement in a timely and professional manner, or if the Owner is in violation of any of the terms or provisions of the Loan Documents, or if the Owner should be adjudged to be bankrupt, or if the Owner makes a general assignment for the benefit of the Owner's creditors, or if a receiver should be appointed in the event of the Owner's insolvency, or if an event of default has occurred under the Loan Documents or any other deed of trust or regulatory agreement evidencing or securing a loan to the Owner and has continued beyond expiration of applicable notice and cure periods, then the City shall have the right to terminate this Agreement upon giving written notice thereof to the Owner and to Owner’s limited partner, and giving thirty (30) days to cure such default and such additional time if the default cannot reasonably be cured in thirty (30) days provided the Owner has commenced to cure during the 30 day cure and is pursuing the cure to completion. A cure by the limited partner of Owner will be deemed a cure by the Owner. Owner’s Limited Partner may remove and replace Owner’s general partner(s) in furtherance of a cure and shall have a reasonable period of time thereafter to effect a cure. Termination shall have no effect upon the rights and obligations of the parties arising out of any transaction occurring prior to effective date of such termination. If the City's termination of Agreement for cause is defective for any reason, including but not limited to the City's reliance on erroneous facts concerning the Owner’s performance, or any defect in the notice thereof, the City's maximum liability shall not exceed the amount payable to the Owner under paragraph 3 of this Agreement.
5.Employment Status. The Owner shall, during the entire term of this Agreement, be construed as a contractor, and nothing in this Agreement is intended nor shall be construed to create an employer-employee relationship or a joint venture relationship. Neither the Owner nor any of the Owner's Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-7
agents, employees, or contractors are or shall be considered to be agents or employees of the City in connection with the performance of the Owner's obligations under this Agreement.
6. Inspections/Signs. The City reserves the right to inspect any work performed hereunder to ensure that the Project is being and has been constructed, managed and operated in accordance with the applicable federal, state and/or local requirements, and this Agreement at all reasonable times and upon reasonable notice. The Owner agrees that all work found by such inspections not to materially conform to the applicable requirements shall be corrected promptly. The City’s failure to inspect any work performed hereunder shall not be construed as a waiver of its right to require corrections to defective work or to enforce any other provisions of this Agreement. If assistance is provided as a secured development loan, any signs placed on the property during construction which identifies the Project, or lenders to, the Project shall include the City as one of the entities providing financing to the Project. During the construction period, the City may place one or more signs on the property stating that it is providing financing for the Project.
7.Records. All records, accounts, documentation, and all other materials relevant to a fiscal audit or examination shall be retained by the Owner for a period of not less than three (3) years from the date of Owner’s final payment under this Agreement.
8. Audit. All records, accounts, documentation, and other materials deemed to be relevant to the Project by the City shall be accessible at any time to the authorized representatives of the City on reasonable prior notice, for the purpose of examination or audit. The Owner agrees that it shall provide City with copies of all annual audits, performance and/or occupancy reports that it submits to the California Tax Credit Allocation Committee.
9. Indemnification. The Owner agrees to accept responsibility for loss or damage to any person or entity, and shall defend, indemnify and hold harmless the City, its officers, employees, volunteers and agents from any and all claims and demands, damages, costs, expenses, judgments, reasonable attorney fees, or liability that may be asserted by any person or entity, including the Owner, to the extent arising out of or in connection with the performance by the Owner hereunder. The obligation to indemnify shall be effective and shall extend to all such claims and losses, in their entirety, even when such claims or losses are brought about in part by the comparative passive negligence of the City, its officers and employees.
However, this indemnity will not extend to any claims or losses arising out of the sole negligence or willful misconduct of the City, its officers, employees, volunteers, and agents.
The preceding paragraph applies to any theory of recovery relating to said act or omission, including, but not limited to the following:
a.Violation of statute, ordinance, or regulation.
b.Professional malpractice.
c.Willful, intentional, or other wrongful act(s), or failures to act. d.Negligence or recklessness.
e.Furnishing of defective or dangerous products.
f.Premises liability.
g.Strict Liability.
h.Inverse condemnation.
i.Violation of civil rights.
j.Violation of any federal or state statute, regulation, or ruling resulting in a determination by the Internal Revenue Service, California Franchise Tax Board, or any other California public entity responsible for collecting payroll taxes, when the Owner is not an independent contractor.
It is the intent of the parties to provide the City the fullest indemnification, defense, and “hold Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-8
harmless” rights allowed under the law. If any word(s) contained herein are deemed by a court to be in contravention of applicable law, said word(s) shall be severed from this contract and the remaining language shall be given full force and effect.
10. Insurance. The Owner, at its sole cost, shall purchase and maintain the insurance policies set forth below on all of its operations under this Agreement. All of the insurance companies providing insurance for Owner shall have, and provide evidence of, an A.M. Best & Co. rating of A:VII or above, unless exception is granted by the City’s Risk Manager. Furthermore, all policies shall be maintained for the full term of this Agreement and related warranty period if applicable. Any failure to comply with reporting provision(s) of the policies referred to above shall not affect coverage provided to the City, its officers, employees, volunteers, and agents. For purposes of the insurance policies required hereunder, the term “City” shall include officers, employees, volunteers, and agents of the City of Pismo Beach, individually or collectively.
a.Scope and Limits of Required Insurance Policies. The following policies shall be maintained with insurers authorized to do business in the State of California and shall be issued under forms of policies satisfactory to the City:
i.Commercial General Liability: Policy shall include coverage at least as broad as set forth in Insurance Services Office Commercial General Liability Coverage (CG 0001) with policy limits of not less than $1 million combined single limit per occurrence. Policy shall be endorsed with the following specific language or contain equivalent language in the policy:
1.The City of Pismo Beach, its officers, employees, volunteers, and agents are named as an additional insured for all liability arising out of the operations by or on behalf of the named insured in the performance of this Agreement.
2.The insurance provided herein shall be considered primary coverage to the City with respect to any insurance or self-insured retention maintained by the City. Further, the City’s insurance shall be considered excess insurance only and shall not be called upon to contribute to this insurance.
3.The policy shall not be cancelled or materially changed without first giving thirty (30) days’ prior written notice to the City.
ii.Business Automobile Liability: Policy shall include coverage at least as broad as set forth in the liability section of Insurance Services Office Business Auto Coverage (CA 0001) with policy limits of no less than $1 million combined single limit for each occurrence. Said insurance shall include coverage for owned, non- owned, and hired vehicles. Policy shall be endorsed with the following specific language or contain equivalent language in the policy:
1.The City, its officers, employees, volunteers, and agents are named as an additional insured for all liability arising out of the operations by or on behalf of the named insured in the performance of this Agreement.
2.The policy shall not be cancelled or materially changed without first giving thirty (30)’ days prior written notice to the City.
iii.Workers’ Compensation/Employer’s Liability Insurance: Workers’ Compensation: policy shall provide statutory limits as required by State of California. Policy shall be endorsed with the following specific language or contain equivalent language in the policy:
1.Owner and its insurer shall waive all rights of subrogation against the City, Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-9
its officers, employees, volunteers, and agents for workers’ compensation losses arising out of this Agreement.
2.The policy shall not be cancelled or materially changed without first giving thirty (30) days’ prior written notice to the City.
iv.Employer’s Liability: Policy shall provide $1 million per accident for bodily injury or disease.
b.Deductibles and Self-Insurance Retentions: All deductibles and/or self-insured retentions which apply to any of the insurance policies required herein shall be declared in writing by the Owner and approved by the City prior to commencement of this Agreement. c.Documentation: Prior to commencement of work under this Agreement and annually thereafter for the term of this Agreement, the Owner will provide to the City properly executed certificates of insurance clearly evidencing the coverage, limits, and endorsements specified in this Agreement. Further, at the City’s request, the Owner shall provide certified copies of the insurance policies within thirty (30) days of request. The certificate(s) of insurance and coverage verification and all other notices related to cancellation or non-renewal shall be mailed to:
City of Pismo Beach
760 Mattie Road
Pismo Beach, California, 93449
Attn: Management Services Director
No cancellation or non-renewal of any required insurance policy, or reduction of coverage afforded under the policy, shall be effective until written notice has been given at least thirty (30) days prior to the effective date of such reduction or cancellation to City. d.Absence of Insurance Coverage: City may direct the Owner to immediately cease all activities with respect to this Agreement if it determines that the Owner fails to carry, in full force and effect, all insurance policies with coverage levels at or above the limits specified in this Agreement. Any delays or expense caused due to stopping of work and change of insurance shall be considered the Owner’s delay and expense. At the City's discretion, under conditions of lapse, the City may purchase appropriate insurance and charge all costs related to such policy to the Owner.
11.Hazardous Materials.
a.Owner shall comply with all environmental laws applicable to the Property. Owner shall not cause or permit any of the following (each, a “Prohibited Activity or Condition”): (i) the presence, use, generation, release, treatment, processing, storage handling, or disposal of any Hazardous Materials on or under the Property; (ii) the transportation of any Hazardous Materials to, from, or across the Property; (iii) any occurrence or condition on the Property, which occurrence or condition is or may be in violation of applicable environmental laws; or (iv) the imposition of any environmental lien against the Property.
Owner shall pay the cost of any investigation, site monitoring, containment, clean-up, restoration or other remedial work necessary to comply with or cure a violation of any environmental law or order of any governmental authority that has or acquires jurisdiction over the Property or the use, operation or improvement of the Property, or is otherwise reasonably required by City as a consequence of any Prohibited Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition. “Hazardous Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (“PCBs”) and compounds containing them; lead and lead-based paint; asbestos Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-10
or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; radon; mold; toxic or mycotoxin spores; any substance the presence of which on the Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance (whether or not naturally occurring) now or in the future that (x) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “solid waste,” “pesticide,” “contaminant,” or “pollutant,” or otherwise classified as hazardous or toxic by or within the meaning of any environmental law, or (y) is regulated in any way by or within the meaning of any environmental law. The term “Hazardous Materials” shall exclude those materials commonly used in the construction, operation, and maintenance of residential apartment buildings.
b.Owner shall indemnify, hold harmless and defend City and its officers, employees, volunteers and agents (collectively, the “Indemnitees”) from and against all losses, proceedings, claims, damages, penalties, and costs (whether initiated or sought by governmental authorities or private parties), including, without limitation, reasonable fees and out-of-pocket expenses of attorneys and expert witnesses, engineering fees, environmental consultant fees, investigatory fees, and remediation costs, and any other liabilities of whatever kind and whatever nature, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:
i.any breach of any representation or warranty of Owner in this Section 11; ii.any failure by Owner to perform any of its obligations under this Section 11;
iii.the existence or alleged existence of any Prohibited Activity or Condition; iv.the presence or alleged presence of Hazardous Materials on or under the Property (whether as a result of activities on the Property or on surrounding properties) or in any of the improvements; or v. the actual or alleged violation of any applicable environmental law.
Notwithstanding anything herein to the contrary, (i) Owner shall have no obligation hereunder to indemnify any Indemnitee for any liability under this Section 11 to the extent that the Prohibited Activity or Condition giving rise to such liability resulted solely from the gross negligence or willful misconduct of such Indemnitee, and (ii) Owner’s liability under this Section 11 shall not extend to cover the violation of any environmental laws or Prohibited Conditions that first arise, commence or occur as a result of actions of City, its successors, assigns or designees, after the satisfaction, discharge, release, assignment, termination, or cancellation of the Loan following the payment in full of the Note and all other sums payable under the Loan Documents or after the actual dispossession from the Property of Owner and all entities which control, are controlled by, or are under common control with Owner following foreclosure of the Deed of Trust or acquisition of the Property by a deed in lieu of foreclosure.
12.Equal Employment Opportunity. During the performance of this Agreement, the Owner agrees that it will not discriminate against any employee or applicant for employment because of race, religion, sex, national origin, disability, or familial status (i.e., family size), or on any other basis protected under California or federal law.
13.Casualty, Condemnation. In the event of any fire or other casualty to the Project or eminent domain proceedings resulting in condemnation of the Project or any part thereof, Owner shall have the right to rebuild the Project, and to use all available insurance or condemnation proceeds therefor, provided that Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-11
no material default then exists under the Loan Documents.
14.Compliance with Laws and Regulations. The Owner agrees to comply with all applicable county, state and federal laws and regulations that pertain to construction, health and safety, labor, fair employment practices, equal opportunity and all other matters applicable to the Owner, its subcontractors, the Property and/or the Project. Owner and City acknowledge that the Loan, in and of itself, will not cause the Project to become subject to either state prevailing wage laws or Davis-Bacon wages.
15.Reserved.
16.Permitted Transfers and Assignments. Owner may not cause or permit any voluntary transfer, assignment, or encumbrance of its interest in the Property or Project or of any ownership interests in Owner, or lease or permit a sublease on all or any part of the Project, except that, notwithstanding anything to the contrary in the Loan Documents, the following are permitted: (a) leases, subleases, or occupancy agreements to occupants of Units in the Project; or (b) security interests for the benefit of lenders securing loans for the Project as approved by the City on terms and in amounts as approved by City in its reasonable discretion; (c) transfers from Owner to a limited partnership formed for the tax credit syndication of the Project, where Owner or an affiliated nonprofit public benefit corporation is the sole general partner or manager of that entity or is the manager of a limited liability company that is the sole general partner or manager of that entity; (d) transfers of the general partnership or manager's interest in Owner to a nonprofit public benefit corporation approved in advance by the City; (e) transfers of any limited partnership interest in Owner; or (f) the grant or exercise of an option agreement between a successor limited partnership as Owner and such limited partnership's general partner or any of its affiliates in connection with the tax credit syndication of the Project; or (g) to remove or replace the General Partner in accordance with the terms of any City-approved partnership agreement, a transfer of any general partnership interest to a new general partner approved in advance by the City, which approval shall not be unreasonably withheld, delayed or conditioned. Any other transfer, assignment, encumbrance, or lease without the City's prior written consent will be voidable and, at the City's election, constitute an Event of Default under this Agreement. The City's consent to any specific assignment, encumbrance, lease, or other transfer will not constitute its consent to any subsequent transfer or a waiver of any of the City's rights under this Agreement. In the event of a conflict between this Loan Agreement and the Deed of Trust, the Deed of Trust shall control.
17.Law Governing and Forum Selection. This Agreement has been executed and delivered in the State of California, and the validity, enforceability, and interpretation of any of the clauses of this Agreement shall be determined and governed by the laws of the State of California. All duties and obligations of the parties created hereunder are performable in San Luis Obispo County, and a state court in the State of California and in the County shall be that forum for any action, or proceeding that may be brought, or arise out of this Agreement, or be in connection with or be caused by reason of this Agreement.
18.Severability. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the provisions hereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.
19.Binding on Successors in Interest. All provisions of this Agreement shall be binding on the parties and their heirs, assigns, and successors in interest.
20.Effect of Waiver. City's waiver or breach of any one term, covenant, or other provision of this Agreement shall not be a waiver of a subsequent breach of the same term, covenant, or provision of this Agreement or of the breach of any other term, covenant or, provision of this Agreement.
21.Notices. Unless otherwise provided, all notices herein required shall be in writing, and Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-12
delivered in person or sent by United States first class mail, postage prepaid. Notices required to be given to City shall be addressed as follows: City of Pismo Beach, 760 Mattie Road, Pismo Beach, California, 93449. Notices required to be given to the Owner shall be addressed as follows:
Shell Beach Senior, L.P.
487 Leff Street
San Luis Obispo, CA 93401
with a copy to:
MCC Housing LLC
c/o Merritt Community Capital Corporation
1970 Broadway, Suite 250
Oakland, California 94612
Attention: President & CEO
with a copy to:
Carle, Mackie, Power & Ross LLP
100 B Street, Suite 400
Santa Rosa, CA 95401
Attention: Henry Loh II
Provided that any party may change such address by notice in writing to the other parties and thereafter notices shall be transmitted to the new address. Provided further, that City agrees to provide notice to any future limited partner of limited partnership formed for the tax credit syndication of the Project, where Owner or an affiliated nonprofit public benefit corporation is the sole general partner or manager of that entity or is the manager of a limited liability company that is the sole general partner or manager of that entity.
22.Partial Subordination to CTCAC Regulatory Agreement. City acknowledges that Owner and the California Tax Credit Allocation Committee have entered, or intend to enter, into a separate 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”). City acknowledges and agrees that, in the event of a foreclosure of its interest under the Deed of Trust or delivery by the Partnership 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 regulatory agreement with CTCAC, (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.
23.Non-Recourse Obligation. The Owner's obligation to pay principal and interest on the sums advanced hereunder shall be a non-recourse obligation, and the sole recourse of City for repayment shall be the exercise of City’s rights against the Property covered by the Deed of Trust.
24.Entire Agreement and Modification. This Agreement sets forth the full and entire understanding of the parties regarding the matter set forth herein, and any other prior or existing understandings or agreement by the parties, whether formal or informal, regarding any matters are hereby superseded or terminated in their entirety. No changes, amendments, or alterations shall be effective unless in writing and signed by all parties hereto. The Owner specifically acknowledges that in entering into and executing this Agreement, the Owner relies solely upon the provisions contained in this Agreement and no Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-13
others.
[Remainder of Page Left Intentionally Blank.]
Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
Owner:
SHELL BEACH SENIOR, L.P.,
a California limited partnership
By: San Luis Obispo Nonprofit Housing Corporation,
a California nonprofit public benefit corporation,
its managing general partner
By:
Michelle Pedigo,
Deputy Chief Financial Officer
By: Pacific SPT LLC,
a California limited liability company,
its co-general partner
By:
Joseph Michael,
Manager
City:
City of Pismo Beach,
a California general law city
By: ______________________________________
James R. Lewis,
City Manager
Date: __________________________
Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-15
EXHIBIT “A”
LEGAL DESCRIPTION
Real property in the City of Pismo Beach, County of San Luis Obispo, State of California, described as follows:
THAT PORTION OF LOT 5 OF THE SUBDIVISIONS OF THE RANCHOS EL PISMO AND SAN
MIGUELITO, AS SHOWN ON MAP FILED IN THE CITY OF PISMO BEACH, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, BOOK A PAGE 157 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE EASTERLY TERMINUS OF THE COURSE RECITED AS THENCE (7) FROM TANGENT THAT BEARS NORTH 68 DEGREES 46' 16" WEST, ALONG A CURVE TO THE RIGHT, WITH A RADIUS OF 1000 FEET, THROUGH AN ANGLE OF 18 DEGREES 24' 28" FOR A DISTANCE OF 321.28' IN PARCEL 2 OF THE NOTICE OF ACTION ENTERED IN SAN LUIS OBISPO SUPERIOR COURT, CASE NO. 27806 A COPY OF WHICH WAS RECORDED OCTOBER 18, 1962 IN BOOK 1207, PAGE 3, OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE ALONG THE SOUTHERLY LINE OF THE LAND DESCRIBED IN SAID PARCEL 2, SOUTH 66 DEGREES 56' 23" EAST TO THE EASTERLY LINE OF SAID LOT 5 BEING THE TRUE POINT OF BEGINNING; THENCE ALONG SAID SOUTHERLY LINE, NORTH 66 DEGREES 56' 23" WEST 155 FEET; THENCE AT RIGHT ANGLES, SOUTH 23 DEGREES 03' 37" WEST 150 FEET; THENCE AT RIGHT ANGLES, SOUTH 66 DEGREES 56' 23" EAST TO THE EASTERLY LINE OF SAID LOT 5; THENCE NORTHERLY ALONG SAID EASTERLY LINE TO THE TRUE POINT OF BEGINNING.
EXCEPTING THEREFROM AN UNDIVIDED ONE-HALF INTEREST OF ALL THE OIL, GAS,
CASINGHEAD GAS, AND OTHER HYDROCARBONS, IN UNDER OR UPON SAID LAND, AS RESERVED BY RUTH ORTON LAIRD IN DEED RECORDED APRIL 6, 1950 IN BOOK 559 PAGE 257 OF OFFICIAL RECORDS.
BY AN INSTRUMENT DATED MAY 25, 1964 EXECUTED BY RUTH ORTON LAIRD, A MARRIED WOMAN, AND WILLIAM E. BURNETT AND MARGARET F. BURNETT, HIS WIFE, AND WILLIAM E. MOORE AND AUDREY R. MOORE, HIS WIFE, SAID RUTH ORTON LAIRD
RELINQUISHED ALL HER RIGHTS TO ENTER UPON, POSSESS OR USE ANY PART OF THE
SURFACE OF SAID LAND, OR ANY PART OF THE SUBSURFACE THEREOF TO A DEPTH OF THREE HUNDRED FIFTY (350) FEET BENEATH THE SURFACE THEREOF, RECORDED JUNE 12, 1964 IN BOOK 1301 PAGE 582 OF OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM THE REMAINING ONE-HALF INTEREST OF ALL OIL, GAS,
CASINGHEAD GAS AND OTHER HYDROCARBON SUBSTANCES IN, UNDER OR UPON THE
LAND HEREINAFTER DESCRIBED, HOWEVER, WITHOUT ANY RIGHTS TO THE SURFACE OF SAID LAND OR THE SUBSURFACE THEREOF EXCEPT BELOW A DEPTH OF 350.00 FEET
BELOW SAID SURFACE OF SAID LAND, AS GRANTED IN THE DEED TO RUTH ORTON LAIRD, A MARRIED WOMAN, RECORDED JUNE 12, 1964 IN BOOK 1301 PAGE 588 OF OFFICIAL RECORDS.
APN: 010-042-042
Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-16
EXHIBIT “B”
AFFORDABILITY SCHEDULE
Owner agrees to maintain the following affordability schedule pursuant to this agreement throughout the Term of this Agreement:
Number of Units Affordability Level
12 Up to 80% of AMI
1 Unrestricted Manager’s Unit
The parties to this Agreement acknowledge that upon entering the regulatory agreement with the California Tax Credit Allocation Committee, a total of twelve (12) dwelling units in the Project will be deed restricted by the Owner to be affordable to and occupied by households with the following income levels for at least 55 years:
Number of Units Affordability Level
12 Up to 80% of AMI
1 Unrestricted Manager’s Unit
Attachment 3
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-17
Promissory Note
Secured by Deed of Trust
(Loan Proceeds Note)
Principal Amount: $1,000,000 _____________________, 2022 FOR VALUE RECEIVED, Shell Beach Senior, L.P., a California limited partnership (“Maker”) promises to pay The City of Pismo Beach, a California general law city (“Holder”) the amount of One Million and no/100 Dollars ($1,000,000) (the “Loan Proceeds”). The Loan Proceeds may be referred to herein as the Loan.
1.SECURITY. This Note shall be secured by a deed of trust (the “Deed of Trust”) recorded against Maker’s leasehold interest in that certain real property located in Pismo Beach, California, as more particularly described in the Deed of Trust (the “Property”).
2.MATURITY DATE. The maturity date for the Loan Proceeds shall be the date which is fifty-five (55)years from the Completion Date, as defined in the Loan Agreement between Maker and Holder (the “Maturity Date”).
3.REPAYMENT OF LOAN PROCEEDS. This Note shall be repaid with interest as follows:
(a) Interest. The outstanding principal balance of the Loan shall bear interest in the amount of four percent (4%) annually.
(b)Payments – Construction Period. All principal and interest payments will be deferred prior to the Conversion Date.
(c) Payments – Permanent Period. Commencing on the one-year anniversary from date that Maker converts from construction to permanent financing (the “Conversion Date”), and on each anniversary of such date thereafter, Maker shall submit an annual payment on this Note to Holder in an amount equal to the City’s proportionate share of 50% of the Residual Receipts as defined below. The entire outstanding principal balance plus interest accrued thereon shall be due and payable on the Maturity Date. “Residual Receipts” is defined as the excess (if any) of (a) all rental income actually received by Maker during the calendar year immediately prior to the applicable payment date in connection with the operation of the Project, over (b) the sum of (i) all fees, costs and expenses incurred by Maker during such calendar year in connection with the ownership, operation, leasing, management, maintenance, repair and replacement of the Project, including but not limited to fees and expenses associated with property management, resident services, and social service reimbursement fees, if any; (ii) all debt payments and other amounts payable by Maker during such calendar year by Maker under the Senior Loan, (iii) all amounts deposited by Maker during such calendar year into reserve accounts for the Project as required by lenders and/or Maker's limited partner, if any, (iv) all deferred developer fees, (v) all partnership management fees and limited partner asset management fees paid by Maker during such calendar year, in an amount not to exceed $25,000 in the aggregate, increasing each year by 3%, (vi) all operating deficit loan payments and all payments made by Maker during such calendar year on all loans received by Maker from the Maker’s limited partner, and (vii) tax credit adjustor and indemnity payments and taxes owed on taxable income allocated to Maker’s limited partner, and (viii) any deposits into reserves required by Maker’s limited partner or under the Senior Loan.
Attachment 4
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-18
(d)Payment of Principal upon Event of Default or Sale. In the event the Property is sold (except as permitted under the terms of the Loan Documents (as defined herein)) or upon an Event of Default, which continues beyond expiration of applicable notice and cure periods, payment of the outstanding principal balance of the Loan and accrued interest shall be due and payable. (e)The indebtedness evidenced by this Note may be subordinated in right of payment to the prior payment in full of all amounts then due and payable (including, but not limited to, all amounts due and payable by virtue of any default or acceleration or upon maturity) with respect to any construction loan made by a commercial lender (“Senior Lender”) to the extent and in the manner provided in any subordination agreements entered into in connection therewith (the “Subordination Agreement”). The rights and remedies of the payee and each subsequent holder of this Note shall be deemed, by virtue of such holder’s acquisition of this Note, to have agreed to perform and observe all of the terms, covenants and conditions to be performed or observed by the “Subordinate Lender” under the Subordination Agreement. (f) Prepayment. This Note may be prepaid in whole or part at any time and from time to time without penalty, fee or premium.
(g)Place of Payment. Any payment required under this Note shall be made payable to The City of Pismo Beach, 760 Mattie Road, Pismo Beach, California, 93449. The place of payment may be changed from time to time as Holder may from time to time designate in writing. Payments shall be in lawful money of the United States of America.
4.COLLECTION. This Note evidences the Loan and is secured by the Deed of Trust recorded against the Property. The terms of the Deed of Trust are incorporated herein by this reference. Maker agrees to pay all the collection and enforcement costs, expenses and reasonable attorneys’ fees paid or incurred by the holder of this Note or adjudged by a court in any litigation or controversy connected with this Note, or security for it, including but not limited to actions for declaratory relief that any such holder is required to prosecute or defend and actions for relief based on rescission, or actions to cancel this Note that any such holder is required to defend.
5.DEFAULT.
(a)The occurrence of any of the following shall constitute an “Event of Default” under this Note: (i) Maker fails to pay to Holder any amount due hereunder within ten (10) days of notice from Holder that such payments is due; (ii) any default by Maker of any other covenant under this Note; (iii) any default by Maker under the Deed of Trust or any other document evidencing or securing the Loan; (iv) Maker fails to pay any taxes or assessments due on the Property when due (subject to Maker’s right to contest the same in good faith); or (v) Maker’s bankruptcy, whether voluntary or involuntary that is not dismissed within ninety (90) days.
(b)Upon the occurrence of any Event of Default which continues beyond expiration of applicable notice and cure periods, or at any time thereafter, at the option of Holder hereof and without notice, the entire unpaid principal and interest owing on this Note shall become immediately due and payable. This option may be exercised at any time following any such event, and the acceptance of one or more installments thereafter shall not constitute a waiver of Holder’s option. Holder’s failure to exercise such option shall not constitute a waiver of such option with respect to any subsequent event. Holder’s failure in the exercise of any other right or remedy hereunder or under any agreement which secures the indebtedness or is related thereto shall not affect any right or remedy and no single or partial exercise of any such right or remedy shall preclude any further exercise thereof.
Attachment 4
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-19
(c)Notwithstanding anything to the contrary in this Note, that certain Affordable Housing Regulatory Agreement or the Deed of Trust (collectively, the “Loan Documents”) and except with respect to any obligation to make payments to Holder, Maker shall have the right to cure any defaults under the Loan Documents and Holder agrees to accept cures tendered by Maker within thirty (30) days of written notice to Maker of such default, plus such additional time as is reasonably necessary to cure the default provided Maker has commenced the cure within such thirty (30) day period and is diligently prosecuting the cure to completion.
(d)Notwithstanding anything to the contrary in the Loan Documents, the limited partner(s) of Maker (collectively, the “Limited Partner”) shall have the right, but not the obligation, to cure any defaults of Maker hereunder, and Holder agrees to accept cures tendered by the Limited Partner on behalf of Maker within the cure periods described in this Section 5. The Limited Partner may replace Borrower’s general partner(s) in furtherance of a cure and shall have a reasonable period of time thereafter to effect a cure. (e)The Note is a nonrecourse obligation of Maker and its partners. Neither Maker nor any of its partners nor any other party shall have any personal liability for repayment of this Note. The sole recourse of the Holder under the Loan Documents for repayment of the Note shall be the exercise of its rights against the Property.
6.WAIVER. Maker and any endorsers hereof and all others who may become liable for all or any part of this obligation, severally waive presentment for payment, demand and protest and notice of protest, and of dishonor and nonpayment of this Note, and expressly consent to any extension of the time of payment hereof or of any installment hereof, to the release of any party liable for this obligation, and any such extension or release may be made without notice to any of said parties and without any way affecting or discharging this liability.
7.ATTORNEY FEES. Maker agrees to pay immediately upon demand all costs and expenses of Holder, including reasonable attorneys’ fees, (i) after an Event of Default this Note be placed in the hands of an attorney or attorneys for collection, (ii) if after an Event of Default hereunder or under the Deed of Trust, Holder finds it necessary or desirable to secure the services or advice of one or more attorneys with regard to collection of this Note against Maker, any guarantor or any other party liable therefore or to the protection of its rights under the Loan Documents, or (iii) if Holder seeks to have the Property abandoned by or reclaimed from any estate in bankruptcy, or attempts to have any stay or injunction prohibiting the enforcement or collection of the Note or prohibiting the enforcement of the Loan Documents or any other agreement evidencing or securing this Note lifted by any bankruptcy or other courts.
8.INTEGRATION. This Note, the Deed of Trust and the other loan documents relating to this Note, embody the agreement between Holder and Maker for the Loan and its terms and conditions.
9.AMENDMENTS. This Note may not be modified or amended except by an instrument in writing executed by the parties sought to be bound thereby.
10.GOVERNING LAW. This Note shall be governed by and construed in accordance with the laws of the State of California.
11.NOTICES. Notices hereunder shall be given pursuant to the Loan Agreement described above. [SIGNATURE ON FOLLOWING PAGE]
Attachment 4
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-20
Executed as of the date first written above.
SHELL BEACH SENIOR, L.P.,
a California limited partnership
By: San Luis Obispo Nonprofit Housing Corporation,
a California nonprofit public benefit corporation,
its managing general partner
By:
Michelle Pedigo,
Deputy Chief Financial Officer
By: Pacific SPT LLC,
a California limited liability company,
its co-general partner
By:
Joseph Michael,
Manager
Attachment 4
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-21
Promissory Note
Secured by Deed of Trust
(Deferred Fees Proceeds Note)
Principal Amount: $443,676.00 _____________________, 2022 FOR VALUE RECEIVED, Shell Beach Senior, L.P., a California limited partnership (“Maker”) promises to pay the City of Pismo Beach (“Holder”) the amount of Four Hundred Forty-Three Thousand, Six Hundred Seventy-Six and no/100 Dollars ($443,676) (the “Deferred Fee Proceeds”). The Deferred Fee Proceeds may be referred to herein as the Loan.
1.SECURITY. This Note shall be secured by a deed of trust (the “Deed of Trust”) recorded against Maker’s leasehold interest in that certain real property located in Pismo Beach, California, as more particularly described in the Deed of Trust (the “Property”).
2.MATURITY DATE. The maturity date for the Deferred Fee Proceeds shall be the date which is fifty-five (55) years from the Completion Date, as defined in the Loan Agreement between Maker and Holder (the “Maturity Date”).
3.REPAYMENT OF LOAN PROCEEDS. This Note shall be repaid with interest as follows:
(a) Interest. The outstanding principal balance of the Loan shall bear interest in the amount of four percent (4%) annually.
(b)Payments – Permanent Period. All payments will be deferred between the Funding Date and the Maturity Date.
(c)Payment of Principal upon Event of Default or Sale. Notwithstanding anything to the contrary contained herein, in the event the Property is sold (except as permitted under the terms of the Loan Documents (as defined herein)) or upon an Event of Default, which continues beyond expiration of applicable notice and cure periods, payment of the outstanding principal balance of the Loan shall be due and payable.
(d)The indebtedness evidenced by this Note may be subordinated in right of payment to the prior payment in full of all amounts then due and payable (including, but not limited to, all amounts due and payable by virtue of any default or acceleration or upon maturity) with respect to any construction loan made by a commercial lender (“Senior Lender”) to the extent and in the manner provided in any subordination agreements entered into in connection therewith (the “Subordination Agreement”). The rights and remedies of the payee and each subsequent holder of this Note shall be deemed, by virtue of such holder’s acquisition of this Note, to have agreed to perform and observe all of the terms, covenants and conditions to be performed or observed by the “Subordinate Lender” under the Subordination Agreement. (e) Prepayment. This Note may be prepaid in whole or part at any time and from time to time without penalty, fee, or premium.
Attachment 5
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-22
(f)Place of Payment. Any payment required under this Note shall be made payable to The City of Pismo Beach, 760 Mattie Road, Pismo Beach, California, 93449. The place of payment may be changed from time to time as Holder may from time to time designate in writing. Payments shall be in lawful money of the United States of America.
4.COLLECTION. This Note evidences the Loan and is secured by the Deed of Trust recorded against the Property. The terms of the Deed of Trust are incorporated herein by this reference. Maker agrees to pay all the collection and enforcement costs, expenses, and reasonable attorneys’ fees paid or incurred by the holder of this Note or adjudged by a court in any litigation or controversy connected with this Note, or security for it, including but not limited to actions for declaratory relief that any such holder is required to prosecute or defend and actions for relief based on rescission, or actions to cancel this Note that any such holder is required to defend.
5.DEFAULT.
(a)The occurrence of any of the following shall constitute an “Event of Default” under this Note: (i) Maker fails to pay to Holder any amount due hereunder within ten (10) days of notice from Holder that such payments is due; (ii) any default by Maker of any other covenant under this Note; (iii) any default by Maker under the Deed of Trust or any other document evidencing or securing the Loan; (iv) Maker fails to pay any taxes or assessments due on the Property when due (subject to Maker’s right to contest the same in good faith); or (v) Maker’s bankruptcy, whether voluntary or involuntary that is not dismissed within ninety (90) days.
(b)Upon the occurrence of any Event of Default which continues beyond expiration of applicable notice and cure periods, or at any time thereafter, at the option of Holder hereof and without notice, the entire unpaid principal and interest owing on this Note shall become immediately due and payable. This option may be exercised at any time following any such event, and the acceptance of one or more installments thereafter shall not constitute a waiver of Holder’s option. Holder’s failure to exercise such option shall not constitute a waiver of such option with respect to any subsequent event. Holder’s failure in the exercise of any other right or remedy hereunder or under any agreement which secures the indebtedness or is related thereto shall not affect any right or remedy and no single or partial exercise of any such right or remedy shall preclude any further exercise thereof. (c)Notwithstanding anything to the contrary in this Note, that certain Affordable Housing Regulatory Agreement or the Deed of Trust (collectively, the “Loan Documents”) and except with respect to any obligation to make payments to Holder, Maker shall have the right to cure any defaults under the Loan Documents and Holder agrees to accept cures tendered by Maker within thirty (30) days of written notice to Maker of such default, plus such additional time as is reasonably necessary to cure the default provided Maker has commenced the cure within such thirty (30) day period and is diligently prosecuting the cure to completion.
(d)Notwithstanding anything to the contrary in the Loan Documents, the limited partner(s) of Maker (collectively, the “Limited Partner”) shall have the right, but not the obligation, to cure any defaults of Maker hereunder, and Holder agrees to accept cures tendered by the Limited Partner on behalf of Maker within the cure periods described in this Section 5. The Limited Partner may replace Borrower’s general partner(s) in furtherance of a cure and shall have a reasonable period of time thereafter to effect a cure. (e)The Note is a nonrecourse obligation of Maker and its partners. Neither Maker nor any of its partners nor any other party shall have any personal liability for repayment of this Note. The sole recourse of the Holder under the Loan Documents for repayment of the Note shall be the exercise of its rights against the Property.
Attachment 5
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-23
6.WAIVER. Maker and any endorsers hereof and all others who may become liable for all or any part of this obligation, severally waive presentment for payment, demand and protest and notice of protest, and of dishonor and nonpayment of this Note, and expressly consent to any extension of the time of payment hereof or of any installment hereof, to the release of any party liable for this obligation, and any such extension or release may be made without notice to any of said parties and without any way affecting or discharging this liability.
7.ATTORNEY FEES. Maker agrees to pay immediately upon demand all costs and expenses of Holder, including reasonable attorneys’ fees, (i) after an Event of Default this Note be placed in the hands of an attorney or attorneys for collection, (ii) if after an Event of Default hereunder or under the Deed of Trust, Holder finds it necessary or desirable to secure the services or advice of one or more attorneys with regard to collection of this Note against Maker, any guarantor or any other party liable therefore or to the protection of its rights under the Loan Documents, or (iii) if Holder seeks to have the Property abandoned by or reclaimed from any estate in bankruptcy, or attempts to have any stay or injunction prohibiting the enforcement or collection of the Note or prohibiting the enforcement of the Loan Documents or any other agreement evidencing or securing this Note lifted by any bankruptcy or other courts.
8.INTEGRATION. This Note, the Deed of Trust and the other loan documents relating to this Note, embody the agreement between Holder and Maker for the Loan and its terms and conditions.
9.AMENDMENTS. This Note may not be modified or amended except by an instrument in writing executed by the parties sought to be bound thereby.
10.GOVERNING LAW. This Note shall be governed by and construed in accordance with the laws of the State of California.
[SIGNATURE ON FOLLOWING PAGE]
Attachment 5
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-24
Executed as of the date first written above.
SHELL BEACH SENIOR, L.P.,
a California limited partnership
By: San Luis Obispo Nonprofit Housing Corporation,
a California nonprofit public benefit corporation,
its managing general partner
By:
Michelle Pedigo,
Deputy Chief Financial Officer
By: Pacific SPT LLC,
a California limited liability company,
its co-general partner
By:
Joseph Michael,
Manager
Attachment 5
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-25
When recorded mail to:
City of Pismo Beach
760 Mattie Road
Pismo Beach, California, 93449
LEASEHOLD DEED OF TRUST WITH ASSIGNMENT OF RENTS
This LEASEHOLD DEED OF TRUST WITH ASSIGNMENT OF RENTS, made as of the ____ day of __________________, 2022, between
Shell Beach Senior, L.P., a California limited partnership, herein called “TRUSTOR”, whose address is 487 Leff Street, San Luis Obispo, California 93401, and First American Title Company, herein called “TRUSTEE”, and City of Pismo Beach, a California Municipal Corporation, herein called “BENEFICIARY” Trustor irrevocably grants, transfers, and assigns to Trustee in Trust, with Power of Sale that property in the City of Pismo Beach, County of SAN LUIS OBISPO, State of CALIFORNIA, described as follows:
SEE EXHIBIT A ATTACHED
Together with the rents, issues, and profits thereof, subject, however, to the right, power and authority hereinafter given to and conferred upon Beneficiary to collect and apply such rents, issues and profits.
FOR THE PURPOSE OF SECURING (1) payment of the sum of ONE MILLION FOUR
HUNDRED FORTY-THREE THOUSAND SIX HUNDRED SEVENTY-SIX DOLLARS AND NO CENTS ($1,443,676) with interest thereon according to the terms of a promissory note or notes of even date herewith made by TRUSTOR, payable to order of BENEFICIARY, and extensions or renewals thereof; (2) the performance of each agreement of TRUSTOR incorporated by reference or contained herein or reciting it is so secured; (3) payment of additional sums and interest thereon which may hereafter be loaned to Trustor, or his or her successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Deed of Trust.
To protect the security of this Deed of Trust, and with respect to the property above described, Trustor agrees:
(1)To keep said property in good condition and repair, ordinary wear and tear excepted; not to remove or demolish any building thereon; to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor (or to bond over any liens to Beneficiary’s reasonable satisfaction); to comply with all laws affecting said property or requiring any alterations or improvements to be made thereon; not to commit or permit waste Attachment 6
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-26
thereof; not to commit, suffer or permit any act upon said property in violation of the law; to cultivate, irrigate, fertilize, fumigate, prune, and do all other acts which from the character or use of said property may be reasonably necessary, the specific enumerations herein not excluding the general.
(2)To provide, maintain and deliver to Beneficiary fire insurance satisfactory to and with loss payable to Beneficiary. The amount collected under any fire or other insurance policy may be applied by Beneficiary upon any indebtedness secured hereby and in such order as Beneficiary may determine, or at option of Beneficiary the entire amount so collected or any part thereof may be released to Trustor. Such application or release shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. Notwithstanding the foregoing, in the event Beneficiary determines in its reasonable discretion that its lien is not impaired, it shall release any insurance amounts to Trustor for restoration. (3)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 attorney’s fees in a reasonable sum, in any action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed of Trust.
(4)To pay: at least ten (10) days before delinquency all taxes and assessments affecting said property, including assessments on appurtenant water stock; when due, all encumbrances, charges and liens, with interest, on said property or any part thereof, which appear to be prior or superior hereto; all costs, fees and expenses of this Trust. Should Trustor fail to make any payment or to do any act as herein provided, then Beneficiary or Trustee, but 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 said property for such purposes; 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 his or her reasonable fees.
(5) To pay immediately and without demand all sums so expended by Beneficiary or Trustee, with interest from date of expenditure at the amount allowed by law in effect at the date hereof, and to pay for any statement provided for by law in effect at the date hereof regarding the obligation secured hereby, any amount demanded by the Beneficiary not to exceed the maximum allowed by law at the time when said statement is demanded.
(6)That any award of damages in connection with any condemnation for public use of or injury to said property or any part thereof is hereby assigned and shall be paid to Beneficiary who may apply or release such moneys received by him or her in the same manner and with the same effect as above provided for disposition or proceeds of fire or other insurance. (7) That by accepting payment of any sum secured hereby after its due date, Beneficiary does not waive his or her right either to require prompt payment when due of all other sums so secured or to declare default for failure so to pay.
Attachment 6
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-27
(8)That at any time or from time to time, without liability therefor and without notice, upon written request of Beneficiary and presentation of this Deed and said note for endorsement, and without affecting the personal liability or any person for payment of the indebtedness secured hereby, Trustee may: reconvey any part of said 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, and upon surrender of this Deed and said note to Trustee for cancellation and retention or other disposition as Trustee in its sole discretion may choose 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 as additional security, Trustor hereby gives to and confers upon Beneficiary the right, power and authority, during the continuance of these Trusts, to collect the rents, issues and profits of said property, reserving unto Trustor the right, prior to any default by Trustor in payment of any indebtedness secured hereby or in performance of any agreement hereunder, to collect and retain such rents, issues and profits as they become due and payable. 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 said property or any part thereof, in his or her 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 said property, the collection of such rents, issues, and profits 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 default by Trustor in payment of any indebtedness secured hereby or in performance of any agreement hereunder beyond any applicable notice or cure period, 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 of election to cause to be sold said property, which notice Trustee shall cause to be filed for record. Beneficiary also shall deposit with Trustee this Deed, said 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 said notice of default, and notice of sale having been given as then required by law, Trustee without demand on Trustor, shall sell said property at the time and place fixed by it in said 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 said 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.
Attachment 6
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-28
Any person, including Trustor, Trustee, or Beneficiary as hereinafter defined, may purchase at such 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 of 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 said 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. Said instrument must contain the name of the original Trustor, Trustee and Beneficiary hereunder, the book and page where this Deed is recorded and the name and address of the new Trustee.
(13)That this Deed 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 secured hereby, whether or not named as Beneficiary herein. In this Deed, whenever the context so requires, the masculine gender includes the feminine and/or the neuter, and the singular number includes the plural. Personal liability for the indebtedness secured hereby shall be limited as set forth in the other documents evidencing and/or securing such indebtedness.
(14)The Trustee accepts this Trust when this Deed, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obliged to notify any party hereto of pending sale under any other Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. Beneficiary may charge for a statement regarding the obligation secured hereby, provided the charge thereof does not exceed the maximum allowed by law.
(15)This Deed of Trust will subordinate in lien priority to any commercial lender’s deed of trust or deed in lieu provided as security for a construction loan for the development of the Project. (16) Notwithstanding anything to the contrary contained herein, the following transfers shall be permitted without Beneficiary consent:
(a)The admission of one or more limited partners of Trustor (each, a “Limited Partner”) for the purposes of syndicating the low income housing tax credits for the project.
(b)Future transfers of the Limited Partner interest in accordance with the terms of Trustor’s partnership agreement.
(c)In the event the general partner of Trustor is removed by a Limited Partner of Trustor for cause following default under Trustor’s partnership agreement, Attachment 6
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-29
Beneficiary hereby approves the removal, and in addition, approves the transfer of the general partner interest to the Limited Partner of Trustor, or an affiliate thereof, or to a nonprofit corporation that is exempt from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code, or a limited liability company, whose sole member is a nonprofit corporation exempt from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code, selected by the Limited Partner of Trustor.
(d) The grant of an option and/or right of first refusal to the general partner of Trustor, or an affiliate thereof, pursuant to the terms of Trustor’s partnership documents, and the subsequent exercise of such option and/or right of first refusal by the optionee.
(e)Transfers permitted under the Loan Agreement of even date herewith between Beneficiary and Trustor evidencing the loan described above (the “Loan Agreement”).
(17)Beneficiary acknowledges that Trustor and the California Tax Credit Allocation Committee (CTCAC) intend to enter into an extended use agreement, which constitutes the extended low-income housing commitment described in Section 42(h)(6)(B) of the Internal Revenue Code (IRC), as amended. As of the date hereof, IRC Section 42(h)(6)(E)(ii) does not permit the eviction or termination of tenancy (other than for good cause) of an existing tenant of any low-income unit or any increase in the gross rent with respect to such unit not otherwise permitted under Section 42 for a period of three (3) years after the date the building is acquired by foreclosure or instrument in lieu of foreclosure. In the event the regulatory agreement required by CTCAC is recorded against the Property, the Beneficiary agrees to comply with the provisions set forth in IRC Section 42(h)(6)(E)(ii).
(18) Notices hereunder shall be given pursuant to the Loan Agreement. [Signature Pages Follow]
Attachment 6
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-30
The undersigned Trustor requests that a copy of any notice of default and any notice of sale hereunder be mailed to him or her at his or her address hereinbefore set forth.
Trustor:
SHELL BEACH SENIOR, L.P.,
a California limited partnership
By: San Luis Obispo Nonprofit Housing Corporation,
a California nonprofit public benefit corporation,
its managing general partner
By:
Michelle Pedigo,
Deputy Chief Financial Officer
By: Pacific SPT LLC,
a California limited liability company,
its co-general partner
By:
Joseph Michael,
Manager
Date: __________________________
Attachment 6
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-31
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
Real property in the County of San Luis Obispo, State of California, described as follows:
THAT PORTION OF LOT 5 OF THE SUBDIVISIONS OF THE RANCHOS EL PISMO AND SAN
MIGUELITO, AS SHOWN ON MAP FILED IN THE CITY OF PISMO BEACH, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, BOOK A PAGE 157 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE EASTERLY TERMINUS OF THE COURSE RECITED AS THENCE (7) FROM TANGENT THAT BEARS NORTH 68 DEGREES 46' 16" WEST, ALONG A CURVE TO THE RIGHT, WITH A RADIUS OF 1000 FEET, THROUGH AN ANGLE OF 18 DEGREES 24' 28" FOR A DISTANCE OF 321.28' IN PARCEL 2 OF THE NOTICE OF ACTION ENTERED IN SAN LUIS OBISPO SUPERIOR COURT, CASE NO. 27806 A COPY OF WHICH WAS RECORDED OCTOBER 18, 1962 IN BOOK 1207, PAGE 3, OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE ALONG THE SOUTHERLY LINE OF THE LAND DESCRIBED IN SAID PARCEL 2, SOUTH 66 DEGREES 56' 23" EAST TO THE EASTERLY LINE OF SAID LOT 5 BEING THE TRUE POINT OF BEGINNING; THENCE ALONG SAID SOUTHERLY LINE, NORTH 66 DEGREES 56' 23" WEST 155 FEET; THENCE AT RIGHT ANGLES, SOUTH 23 DEGREES 03' 37" WEST 150 FEET; THENCE AT RIGHT ANGLES, SOUTH 66 DEGREES 56' 23" EAST TO THE EASTERLY LINE OF SAID LOT 5; THENCE NORTHERLY ALONG SAID EASTERLY LINE TO THE TRUE POINT OF BEGINNING.
EXCEPTING THEREFROM AN UNDIVIDED ONE-HALF INTEREST OF ALL THE OIL, GAS,
CASINGHEAD GAS, AND OTHER HYDROCARBONS, IN UNDER OR UPON SAID LAND, AS RESERVED BY RUTH ORTON LAIRD IN DEED RECORDED APRIL 6, 1950 IN BOOK 559 PAGE 257 OF OFFICIAL RECORDS.
BY AN INSTRUMENT DATED MAY 25, 1964 EXECUTED BY RUTH ORTON LAIRD, A MARRIED WOMAN, AND WILLIAM E. BURNETT AND MARGARET F. BURNETT, HIS WIFE, AND WILLIAM E. MOORE AND AUDREY R. MOORE, HIS WIFE, SAID RUTH ORTON LAIRD
RELINQUISHED ALL HER RIGHTS TO ENTER UPON, POSSESS OR USE ANY PART OF THE
SURFACE OF SAID LAND, OR ANY PART OF THE SUBSURFACE THEREOF TO A DEPTH OF THREE HUNDRED FIFTY (350) FEET BENEATH THE SURFACE THEREOF, RECORDED JUNE 12, 1964 IN BOOK 1301 PAGE 582 OF OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM THE REMAINING ONE-HALF INTEREST OF ALL OIL, GAS,
CASINGHEAD GAS AND OTHER HYDROCARBON SUBSTANCES IN, UNDER OR UPON THE
LAND HEREINAFTER DESCRIBED, HOWEVER, WITHOUT ANY RIGHTS TO THE SURFACE OF SAID LAND OR THE SUBSURFACE THEREOF EXCEPT BELOW A DEPTH OF 350.00 FEET
BELOW SAID SURFACE OF SAID LAND, AS GRANTED IN THE DEED TO RUTH ORTON LAIRD, A MARRIED WOMAN, RECORDED JUNE 12, 1964 IN BOOK 1301 PAGE 588 OF OFFICIAL RECORDS.
APN: 010-042-042
Attachment 6
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-32
RECORDING REQUESTED BY:
WHEN RECORDED MAIL TO:
City of Pismo Beach 760 Mattie Road Pismo Beach, California, 93449 APN: 010-042-042 (Space above for Recorder’s use only)
AFFORDABLE HOUSING REGULATORY AGREEMENT
This Affordable Housing Regulatory Agreement (the “Agreement”) is made this _____ day of _____________________, 2022, by and between the City of Pismo Beach, a California general law city (the “Lender”), and Shell Beach Senior, L.P., a California limited partnership (the “Owner”).
RECITALS
A.The Owner is acquiring a leasehold interest in real property in the city of Pismo Beach, in the County of San Luis Obispo, as more particularly described in Exhibit A (the “Property”).
B.The Owner intends to operate the Property as an affordable housing project for low income households.
C.Lender has agreed to provide Owner a loan in the amount of ONE MILLION and No/100 Dollars ($1,000,000.00) (the “Loan Proceeds”) and to defer payment of certain development fees in the amount of FOUR HUNDRED FORTY-THREE THOUSAND SIX HUNDRED SEVENTY-SIX AND No/100 dollars ($443,676.00) (the “Deferred Fees” and together with the Loan Proceeds, the “Loan”) to finance the construction of a twenty-six (26) unit housing project (the “Project”) consisting of twelve (12) units for Low Income Households, located on the Property to benefit low income households in the City of Pismo Beach.
D.As consideration for Lender’s agreement to fund the Loan, Owner has agreed to operate the Property and the Project as affordable housing to low income tenants for a minimum of fifty-five (55) years, subject to the restrictions contained herein.
E.As further consideration for Lender’s agreement to provide the Loan, and to further the interests of the Lender, the Owner has agreed to enter into and record this Agreement. The purpose of this Agreement is to regulate and restrict the occupancy, rents, operation, ownership, and management of the Property and the Project for affordable housing and related uses. The covenants in this Agreement are intended to run with the land and be binding on the Owner and its successors and assigns in the Property.
NOW THEREFORE, IN CONSIDERATION of the mutual agreements, obligations, and representations, and in further consideration for the aforementioned funding of the Loan, the Owner and the Lender hereby agree as follows:
Attachment 7
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-33
DEFINITIONS
The following terms have the meanings and content set forth in this section wherever used in this Agreement or attached exhibits.
“AFFORDABLE RENT” means the total charges for rent and utilities to each Qualifying Household as allowed based on household size, income level, and unit size pursuant to Fair Market Rents and Income Limits published annually by HUD.
“DEED OF TRUST” means that certain Deed of Trust with Assignment of Rents recorded on the Property as security for the Loan, with the Owner as Trustor and the Lender as Beneficiary, as well as any amendments to, modifications of, and restatements of, said Deed of Trust. “DEFERRED FEE NOTE” means the promissory note executed by the Owner in favor of the Lender in the amount of FOUR HUNDRED FORTY-THREE THOUSAND SIX HUNDRED SEVENTY-SIX AND No/100 dollars ($443,676.00) to evidence the Loan, which is secured by the Deed of Trust, as well as any amendments to, modifications of, or restatements of said promissory note. “EXTREMELY LOW INCOME HOUSEHOLD” means a household whose annual income does not exceed thirty percent (30%) of the Area Median Income for the San Luis Obispo Metropolitan Statistical Area as determined annually by HUD and adjusted for household size. “HUD” means the Federal Department of Housing and Urban Development. “LENDER” is the City of Pismo Beach, a California general law city incorporated under the laws of the State of California, and its officers, officials, directors, employees, agents, and authorized representatives. “LOAN” means the Loan made by the Lender to the Owner for development of the Project pursuant to the Loan Agreement and the Deferred Fee Note and Loan Proceeds Note. “LOAN AGREEMENT” is the Development Loan Agreement executed by and between the Owner and the Lender, setting forth the terms and conditions governing the Loan. “LOAN DOCUMENTS” are collectively the Loan Agreement, the Notes evidencing the Loan, the Deed of Trust securing the Note, and this Agreement as they may be amended, modified, or restated from time to time, along with all exhibits and attachments to these documents. “LOW INCOME HOUSEHOLD” means a household whose annual income does not exceed eighty percent (80%) of the Area Median Income for the San Luis Obispo Metropolitan Statistical Area as determined annually by HUD and adjusted for household size. Low Income Household includes Extremely Low Income Households.
“LOAN PROCEEDS NOTE” means the promissory note executed by the Owner in favor of the Lender in the amount of ONE MILLION AND NO/100 DOLLARS ($1,000,000) to evidence the Loan, which is secured by the Deed of Trust, as well as any amendments to, modifications of, or restatements of said promissory note.
“OWNER” means Shell Beach Senior, L.P., a California limited partnership. “PROJECT” means the Units on the Property and any supportive services and programs provided to tenants of the Property.
“PROPERTY” means the real property described in Exhibit A attached hereto and incorporated herein, including all parking, landscaping, and other improvements appurtenant thereto.
Attachment 7
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-34
“QUALIFYING HOUSEHOLD” means a household that qualifies as either a Low Income Household or Extremely Low Income Household.
“TERM” means the term of this Agreement described herein. “UNIT” means any one of the units in the Project.
THE OWNER'S OBLIGATIONS
1.COMPLIANCE WITH LOAN DOCUMENTS. The Owner's actions with respect to the Property and the use of funds from the Loan shall at all times be in full conformity with all of the requirements of the Loan Documents, including but not limited to the insurance requirements contained therein.
2.USE FOR AFFORDABLE HOUSING. The Owner agrees that, at all times during the Term of this Agreement, a minimum of twelve (12) units in the Project will be used as affordable housing for Low Income Households. Owner shall not convert the residential units in the Project to condominium or cooperative ownership or sell condominium or cooperative rights to the Project or any part thereof during the term of this Agreement.
3.TERM OF AGREEMENT. This Agreement shall commence upon completion of construction of the Project and conversion to a permanent loan and shall remain in full force and effect for a period of fifty-five (55) years.
OCCUPANCY AND RENTS
4.OCCUPANCY OF UNITS. During the term of this Agreement, twelve (12) units in the Project will be used as affordable housing for Low Income Households.
5.TENANT SELECTION. The Owner shall adopt written tenant selection policies for at least the assisted units that: (a) are reasonably related to program eligibility and the applicant’s ability to perform the obligations of the lease; (b) are consistent with the purpose of providing housing for Low Income Households and Extremely Low Income Households; and (c) give prompt written notification to any rejected applicant of the grounds for rejection.
6.NONDISCRIMINATION. The Owner shall not discriminate or segregate in the use, enjoyment, occupancy, conveyance, lease, sublease, or rental of any units in the Project on the basis of race, color, ancestry, national origin, religion, sex, sexual preference, age, marital status, family status, source of income, physical or mental disability, Acquired Immune Deficiency Syndrome (AIDS) or AIDS-related conditions (ARC), or any other arbitrary basis or basis protected by applicable law.
The Owner shall include a statement in all advertisements, notices, and signs for the availability of units for rent to the effect that the Owner is an Equal Housing Opportunity Provider.
7.INCOME CERTIFICATION AND INCREASES IN TENANT INCOME. The Owner shall certify the incomes of all prospective tenants in the Project prior to their initial occupancy of a unit and shall recertify their incomes annually. If upon recertification, a tenant’s income exceeds the maximum designated for a Low Income Household, the Owner may increase the monthly rent for such tenants to no more than one-twelfth of 30% of the tenant’s annual income and the tenant may be permitted to continue to occupy a unit in the Project. Owner shall rent the next available unit to a tenant whose household income does not exceed the income of a Low Income Household in order to achieve the affordability requirements of this Agreement. Owner shall provide Lender an annual report on the income recertification evidencing that Project occupants meet the requirements of qualified households. To the Extent of a conflict between this Agreement and the requirements of the California Tax Credit Allocation Committee (“TCAC”), TCAC’s requirements shall control.
8.RENTAL CHARGES. Total charges for rent, utilities, and related services for each unit in the Project Attachment 7
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-35
shall not exceed the Affordable Rent for that unit. If upon recertification, a tenant’s income exceeds the Low Income Household limit, Owner may increase the rent for such tenants to no more than 30% of the tenant’s income.
PROPERTY MANAGEMENT
9.MANAGEMENT RESPONSIBILITIES. The Owner is responsible for all management functions with respect to the Project, including without limitation the selection of tenants, certification and recertification of household size and income, evictions, collection of rents and deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital items, and security. The Lender shall have no responsibility over management of the Property or the Project. Throughout the term of this Agreement, Owner shall at its own expense, maintain the Property and the Project in good physical condition, in good repair, and in decent, safe, sanitary, habitable and tenantable living conditions in conformity with all applicable state, federal, and local laws, ordinances, codes, and regulations, ordinary wear and tear excepted. Without limiting the foregoing, Owner agrees to maintain the Project and the Property (including without limitation, the residential units, common areas, meeting rooms, landscaping, driveways, parking areas, and walkways) in a condition free of all waste, nuisance, debris, unmaintained landscaping, graffiti, disrepair, abandoned vehicles/appliances, and illegal activity, and shall take all reasonable steps to prevent the same from occurring on the Property or at the Project. Owner shall prevent and/or rectify any physical deterioration of the Property and the Project and shall make all repairs, renewals, and replacements necessary to keep the Property and the improvements located thereon in good condition and repair.
Owner shall provide adequate security services for occupants of the Project. In the event that Owner breaches any of the covenants regarding maintenance and landscaping in this Section 9, and such default continues for a period of ten (10) days after written notice from Lender (with respect to graffiti, debris, and waste material) or thirty (30) days after written notice from Lender (with respect to landscaping, building improvements and general maintenance), then Lender, in addition to any other remedy it may have under this Agreement or at law or in equity, shall have the right, but not the obligation, to enter upon the Property and perform all acts and work necessary to protect, maintain, and preserve the improvements and the landscaped areas on the Property. All reasonable costs expended by Lender in connection with the foregoing, shall constitute an indebtedness secured by the Deed of Trust, and shall be paid by Owner to Lender upon demand. All such sums remaining unpaid thirty (30) days following delivery of Lender’s invoice therefor shall bear interest at the lesser of 10% per annum or the highest rate permitted by applicable law.
10.REVIEW OF MANAGEMENT POLICIES. The Owner shall submit its written management policies with respect to the Project and Program to the Lender for its review, and shall amend such policies in any way necessary to insure that such policies comply with the provisions of this Agreement and the requirements of all lenders providing financing for the Property and/or the Project.
11.INSPECTION AND RECORDS. The Owner shall maintain records that clearly document the Owner's performance of its obligations to operate the Property under the terms of this Agreement.
The Owner shall submit any records to the Lender within ten (10) business days of the Lender's request. The Owner shall permit the Lender to enter and inspect the Project for compliance with obligations under this Agreement upon twenty-four (24) hours advance notice of such visit, at all reasonable times, by the Lender to the Owner or the Owner's management agent and to tenants of any Units.
12.ANNUAL REPORT. The Owner shall submit to the Lender each year, on or prior to the date such report is required to be submitted to the California Tax Credit Allocation Committee (“TCAC”), a report for the preceding calendar year showing the necessary information to allow the Lender to determine the Owner's compliance with this Agreement, and within thirty (30) days after receipt of a written request, any other information or completed forms requested by the Lender in order to comply with reporting requirements of the Lender.
Attachment 7
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-36
13.FEES, TAXES, AND OTHER LEVIES. Owner shall be responsible for payment of all fees, assessments, taxes, charges, liens, and levies applicable to the Property or the Project, including without limitation possessory interest taxes, if applicable, imposed by any public entity, and shall pay such charges prior to delinquency. However, Owner shall not be required to pay any such charge so long as (a) Owner is contesting such charge in good faith and by appropriate proceedings, (b) Owner maintains reserves adequate to pay any contested liabilities, and (c) on final determination of the proceeding or contest, Owner immediately pays or discharges any decision or judgment rendered against it, together with all costs, charges and interest. Nothing in this Section 13 is intended to prohibit Owner from applying for any exemption from property taxes and fees that may be available to the owners of low-income housing.
GENERAL PROVISIONS
14. SUBORDINATION. This Agreement shall be subordinated in priority to the lien to any commercial lender’s deed of trust, deed in lieu or other security agreements to be made by Owner, provided that the instruments effecting such subordination include reasonable protections to the Lender in the event of default, including without limitation, extended notice and cure rights. Owner agrees to use best efforts to ensure that all deeds of trust or other security instruments and any applicable subordination agreement recorded against the Property, the Project or part thereof for the benefit of a lender other than City (“Third-Party Lender”) shall contain each of the following provisions: (i) Third-Party Lender shall use its best efforts to provide to Lender a copy of any notice of default issued to Owner concurrently with provision of such notice to Owner; (ii) Lender shall have the reasonable right, but not the obligation, to cure any default by Owner within the same period of time provided to Owner for such cure; and (iii) following the tax credit compliance period, Lender shall have the right to transfer the Project without acceleration of Third-Party Lender’s debt to a nonprofit corporation or other entity which shall own and operate the Project as an affordable rental housing Project, subject to the prior written consent of the Third-Party Lender. Owner agrees to provide to Lender a copy of any notice of default Owner receives from any Third-Party Lender within three (3) business days following Owner’s receipt thereof.
15.DAMAGE/INSURANCE. If any part of the Project is damaged or destroyed, Owner shall repair or restore the same, consistent with the occupancy and rent restriction requirements set forth in this Agreement. Such work shall be commenced as soon as reasonably practicable after the damage or loss occurs and shall be completed within one year thereafter or as soon as reasonably practicable, provided that insurance proceeds are available to be applied to such repairs or restoration within such period and the repair or restoration is financially feasible. During such time that lenders or low- income housing tax credit investors providing financing for the Project impose requirements that differ from the requirements of this Section the requirements of such lenders and investors shall prevail. Throughout the term of this Agreement Owner shall comply with the insurance requirements set forth in the Loan Agreement and shall, at Owner’s expense, maintain in full force and effect such insurance coverage.
16.DEFAULT AND REMEDIES. In the event of any breach of any agreement or obligation under this Agreement by the Owner, the Lender shall provide written notice to the Owner of such breach. The Owner shall have an opportunity to cure such breach within thirty (30) days from the Owner's receipt of such written notice or such longer period of time as the Lender determines is necessary to cure the breach if the Owner diligently undertakes to cure such breach. If the Owner fails to perform a timely cure of the specified breach, the Lender may (i) proceed with any remedy provided under the Loan Agreement, (ii) bring an action for equitable relief seeking the specific performance of the terms and conditions of this Agreement, and/or enjoining, abating, or preventing any violation of such terms and conditions, and/or seeking declaratory relief, (iii) accelerate and declare the balance of the Notes and interest accrued thereon immediately due and payable and proceed with foreclosure under the Deed of Trust, (iv) for violations of obligations with respect to affordable rents for Units, impose as Attachment 7
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-37
liquidated damages a charge in an amount equal to the actual amount collected in excess of the Affordable Rent, or (v) pursue any other remedy allowed by law to enforce the terms and conditions of this Agreement. A cure by Owner’s limited partners shall be accepted or rejected on the same basis as if made or tendered by Owner.
17.NON-LIABILITY OF OFFICIALS, EMPLOYEES, AND AGENTS. No officers, directors, employees, and agents of the Lender shall be personally liable to the Owner for any obligation created under the terms of this Agreement.
18.INDEMNITY. The Owner shall defend, indemnify and hold the Lender free and harmless against any losses, damages, liabilities, claims, demands, judgments, actions, court costs, and legal or other expenses (including reasonable attorneys' fees) which the Lender may incur as a direct or indirect consequence of the Owner's failure to perform any obligations as and when required by this Agreement. This indemnity obligation shall not extend to any claim arising solely from the gross negligence or willful misconduct of the Lender, its agents, and its employees. The Owner's duty to indemnify the Lender shall survive the term of this Agreement. It is further agreed that Lender does not and shall not waive any rights against Owner that it may have by reason of this indemnity and hold harmless agreement because of the acceptance by Lender, or the deposit with Lender by Owner, of any of the insurance policies described in this Agreement or the Loan Agreement.
19. GOVERNING LAW. This Agreement shall be interpreted under and be governed by the laws of the State of California, except for those provisions relating to choice of law and those provisions preempted by federal law.
20.AGREEMENT CONTROLS. Notwithstanding any provisions of the Loan Agreement, in the event that any provisions of this Agreement and any Loan Document irreconcilably conflict, the terms of this Agreement shall control.
21.ATTORNEYS' FEES AND COSTS. In the event that any legal or administrative action or proceeding is commenced between the parties hereto to interpret or to enforce the terms of this Agreement, the prevailing party in any such action shall be entitled to recover all reasonable attorneys' fees and costs incurred in such action.
22.CONSENTS AND APPROVALS. Any consent or approval of the Lender required under this Agreement shall not be unreasonably withheld. Any approval must be in writing and executed by an authorized representative of the Lender.
23.NOTICES, DEMANDS, AND COMMUNICATIONS. Formal notices, demands and communications between the Owner and the Lender shall be sufficiently given and shall not be deemed given unless dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally, to the principal offices of the Owner and the Lender as follows:
Lender:
City of Pismo Beach
760 Mattie Road
Pismo Beach, CA, 93449
Attention: City Manager
Owner:
Shell Beach Senior, L.P.
487 Leff Street
San Luis Obispo, California 93401
Attention: Chief Financial Officer
with a copy to:
MCC Housing LLC
c/o Merritt Community Capital Corporation
1970 Broadway, Suite 250
Oakland, California 94612
Attention: President & CEO
Attachment 7
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-38
with a copy to:
Carle, Mackie, Power & Ross LLP
100 B Street, Suite 400
Santa Rosa, CA 95401
Attention: Henry Loh II
24.BINDING UPON SUCCESSORS. All provisions of this Agreement shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors-in-interest, transferee, and assigns of the Owner, and the Lender, and shall run with the land for the full term of this Agreement, regardless of any assignment, payment, prepayment, expiration, extinguishment of the Loan or Note, any reconveyance of the Deed of Trust, or any conveyance or transfer of the Property or portion thereof.
25.RELATIONSHIP OF PARTIES. The relationship of the Owner and the Lender during the term of this Agreement is solely that of lender and owner shall not be construed as a joint venture, equity venture, or partnership.
26.WAIVER. Any waiver by the Lender of any obligation in this Agreement must be in writing. No waiver will be implied from any delay or failure by the Lender to take action on any breach or default of the Owner or to pursue any remedy allowed under this Agreement, the Loan Documents, or applicable law. Any extension of time granted to the Owner to perform any obligation under this Agreement shall not operate as a waiver or release from any of its obligations under this Agreement.
Consent by the Lender to any act or omission by the Owner shall not be construed to be consent to any other or subsequent act or omission or to waive the requirement for the Lender's written consent to future waivers.
27.INTEGRATION/AMENDMENTS AND MODIFICATIONS. This Agreement, together with the Loan Agreement, the Notes, the Deed of Trust, and the other Loan Documents contains the entire agreement of Parties with respect to the subject matter hereof, and supersedes all prior oral or written agreements between the Parties with respect thereto. Any amendments or modifications to this Agreement must be in writing, and shall be made only if executed by both the Owner and the Lender.
This Agreement and any amendments or modifications may be executed in multiple counterparts, each of which shall be an original and all of which together shall constitute one agreement.
28.SEVERABILITY. Every provision of this Agreement is intended to be severable. If any provision of this Agreement shall be held invalid, illegal, or unenforceable by a court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired.
IN WITNESS WHEREOF, Lender and Owner have caused this Regulatory Agreement to be executed by their duly authorized representatives.
Attachment 7
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-39
Lender:
City of Pismo Beach,
a California general law city
By: ____________________________
James R. Lewis
City Manager
Date: __________________________
Owner:
SHELL BEACH SENIOR, L.P.,
a California limited partnership
By: San Luis Obispo Nonprofit Housing
Corporation,
a California nonprofit public benefit corporation,
its managing general partner
By:
Michelle Pedigo,
Deputy Chief Financial Officer
By: Pacific SPT LLC,
a California limited liability company,
its co-general partner
By:
Joseph Michael,
Manager
Attachment 7
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-40
EXHIBIT “A”
Legal Description
Real property in the County of San Luis Obispo, State of California, described as follows:
THAT PORTION OF LOT 5 OF THE SUBDIVISIONS OF THE RANCHOS EL PISMO AND SAN
MIGUELITO, AS SHOWN ON MAP FILED IN THE CITY OF PISMO BEACH, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, BOOK A PAGE 157 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE EASTERLY TERMINUS OF THE COURSE RECITED AS THENCE (7) FROM TANGENT THAT BEARS NORTH 68 DEGREES 46' 16" WEST, ALONG A CURVE TO THE RIGHT, WITH A RADIUS OF 1000 FEET, THROUGH AN ANGLE OF 18 DEGREES 24' 28" FOR A DISTANCE OF 321.28' IN PARCEL 2 OF THE NOTICE OF ACTION ENTERED IN SAN LUIS OBISPO SUPERIOR COURT, CASE NO. 27806 A COPY OF WHICH WAS RECORDED OCTOBER 18, 1962 IN BOOK 1207, PAGE 3, OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE ALONG THE SOUTHERLY LINE OF THE LAND DESCRIBED IN SAID PARCEL 2, SOUTH 66 DEGREES 56' 23" EAST TO THE EASTERLY LINE OF SAID LOT 5 BEING THE TRUE POINT OF BEGINNING; THENCE ALONG SAID SOUTHERLY LINE, NORTH 66 DEGREES 56' 23" WEST 155 FEET; THENCE AT RIGHT ANGLES, SOUTH 23 DEGREES 03' 37" WEST 150 FEET; THENCE AT RIGHT ANGLES, SOUTH 66 DEGREES 56' 23" EAST TO THE EASTERLY LINE OF SAID LOT 5; THENCE NORTHERLY ALONG SAID EASTERLY LINE TO THE TRUE POINT OF BEGINNING.
EXCEPTING THEREFROM AN UNDIVIDED ONE-HALF INTEREST OF ALL THE OIL, GAS,
CASINGHEAD GAS, AND OTHER HYDROCARBONS, IN UNDER OR UPON SAID LAND, AS RESERVED BY RUTH ORTON LAIRD IN DEED RECORDED APRIL 6, 1950 IN BOOK 559 PAGE 257 OF OFFICIAL RECORDS.
BY AN INSTRUMENT DATED MAY 25, 1964 EXECUTED BY RUTH ORTON LAIRD, A MARRIED WOMAN, AND WILLIAM E. BURNETT AND MARGARET F. BURNETT, HIS WIFE, AND WILLIAM E. MOORE AND AUDREY R. MOORE, HIS WIFE, SAID RUTH ORTON LAIRD
RELINQUISHED ALL HER RIGHTS TO ENTER UPON, POSSESS OR USE ANY PART OF THE
SURFACE OF SAID LAND, OR ANY PART OF THE SUBSURFACE THEREOF TO A DEPTH OF THREE HUNDRED FIFTY (350) FEET BENEATH THE SURFACE THEREOF, RECORDED JUNE 12, 1964 IN BOOK 1301 PAGE 582 OF OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM THE REMAINING ONE-HALF INTEREST OF ALL OIL, GAS,
CASINGHEAD GAS AND OTHER HYDROCARBON SUBSTANCES IN, UNDER OR UPON THE
LAND HEREINAFTER DESCRIBED, HOWEVER, WITHOUT ANY RIGHTS TO THE SURFACE OF SAID LAND OR THE SUBSURFACE THEREOF EXCEPT BELOW A DEPTH OF 350.00 FEET
BELOW SAID SURFACE OF SAID LAND, AS GRANTED IN THE DEED TO RUTH ORTON LAIRD, A MARRIED WOMAN, RECORDED JUNE 12, 1964 IN BOOK 1301 PAGE 588 OF OFFICIAL RECORDS.
APN: 010-042-042
Attachment 7
Attachments 3, 4, 6, and 7 Amended December 2, 2022
Council Agenda 12-6-2022 12.B-41