RESOLUTION NO. R-2023-41
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PLACENTIA, CALIFORNIA, APPROVING A LAND
PURCHASE OPTION AGREEMENT AND THE EXECUTION
OF A LOAN COMMITMENT LETTER IN THE AMOUNT OF
$3,274,260 FOR A RESIDUAL RECEIPTS LOAN TO
FINANCE AN AFFORDABLE HOUSING DEVELOPMENT
AT 323, 307, 312 AND 314 BAKER STREET
A. Recitals.
(i.) On February 6, 2023, the City issued a Request for Proposals (RFP) for an Affordable Housing Development on Baker Street and on April 3, 2023 the Evaluation Committee reviewed and scored the proposals received. The Evaluation Committee agreed that Mercy Housing would be the best qualified developer to construct and operate a high-quality affordable housing development along Baker Street; (ii.) On April 19, 2023 the Planning and Economic Development Ad Hoc Committee reviewed the proposals and the recommendation of the Evaluation Committee. The Ad Hoc Committee also agreed to recommend Mercy Housing as the top selected proposal to the City Council. On May 16, 2023 the City Council convened in Closed Session to review the recommendation. The City Council agreed to begin negotiations with Mercy Housing on the financing and development of the site; (iii.) Mercy Housing California plans to design, construct and administer an affordable housing development for families and families moving out of homeless on the property located at 323, 307, 312, and 314 Baker Street in the City of Placentia; (iv.) The development will include approximately 68 units of affordable housing, with a mix of 1, 2, and 3 bedrooms ranging from 30% to 60% AMI, 20 of the units to be set-aside for formerly homeless households, and potentially a Phase II Plan for approximately 40 units;
(v.) All other legal prerequisites to the adoption of this Resolution have occurred.
B. Resolution.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PLACENTIA DOES HEREBY RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS:
(1.) In all respects as set forth in the Recitals, Part A., of this Resolution.
RESOLUTION R-2023-41
PAGE 1 of 2
(2.) A loan commitment fora Residual Receipts Loan is hereby approved to assist in the financing for the Baker Street Affordable Housing Development as set forth in the Commitment Letter attached hereto as Exhibit "A"; (3.) The Land Purchase Option Agreement attached hereto as Exhibit "B" is approved and the City Administrator is authorized to execute the Land Purchase Option Agreement.
(4.) The City Administrator, or his designee, hereby is authorized and directed to take all actions necessary and appropriate to carry out this Resolution. (5.) The Mayor shall sign this resolution, and the Clerk shall attest and certify to the passage and adoption thereof.
(6.) The City Council declares that, should any provision, section, paragraph, sentence or word of this resolution be rendered or declared invalid by any final court action in a court of competent jurisdiction, or by reason of any preemptive or inconsistent legislation, the remaining provisions, sections, paragraphs, sentences and words of this resolution shall remain in full force and effect.
PASSED AND ADOPTED this 6th day of June, 2023.
Ward L. Smith, Mayor
ATTEST:
Robert McKinnell, City Clerk
RESOLUTION R-2023-41
PAGE 2 of 2
STATE OF CALIFORNIA
CITY OF PLACENTIA
I, Robert McKinnell, City Clerk of the City of Placentia, do hereby certify that the foregoing resolution was adopted at a regular meeting of the City Council of the City of Placentia held on the 6th day of June, 2023 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Robert McKinnell, City Clerk
APPROVED AS TO FORM:
Christian L. Bettenhausen, City Attorney
RESOLUTION R-2023-41
PAGE 3 of 2
Exhibit A: Commitment Letter
Exhibit B: Land Purchase Option Agreement
Mayor
WARD L. SMITH
Mayor Pro Tem
JEREMY B. YAMAGUCHI
Councilmembers:
KEVIN KIRWIN
RHONDA SHADER
CHAD P. WANKE
The People are the City
Litaucal
i PLACENTIA
"IT',AKITA CITY
401 East Chapman Avenue - Placentia, California 92870
June 7, 2023
Julia Bidwell, Director
Housing & Community Development
1501 E. St. Andrew PI, First Floor
Santa Ana, CA 92705
RE: Baker Street Residual Receipts Loan Commitment
Dear Ms. Bidwell:
City Clerk:
ROBERT S. MCKINNELL
City Treasurer
KEVIN A. LARSON
City Administrator
DAMIEN R. ARRULA
This letter is submitted to confirm the commitment of the City of Placentia ("City") to provide a residual receipts loan for an affordable housing project to be located on Baker Street (the "Project"). On May 16, 2023, the Placentia City Council formally selected Mercy Housing California ("MHC") to develop and operate an affordable housing community for families and families moving out of homeless on the property located at 300/307, 312, 314 and 323 Baker Street. The City and MHC are separately entering into a purchase option agreement under which MHC will acquire the properties located at 300/307, 312, 314 and 323 Baker Street as well as the public street located between 307 Baker Street and 312 Baker Street to be dedicated to Developer ("Property") at a purchase price of $3,274,260, to be confirmed by an appraisal.
Per the terms of the Request for Proposal issued by the city and previously authorized by Council on May 16, 2023, the City has agreed to provide a residual receipts loan equal to the value of the land on terms described below:
• The City will sell the land at the fair market value of the Property, based on an appraisal. This commitment is estimated to equal $3,274,260 and will be confirmed by appraisal. • The City will carry back the purchase price as a residual receipts note with the following terms:
o A 3% simple interest rate
o A 55 -year term from Certificate of Occupancy
o Annual payments of a proportional share of 50% of the residual receipts with other soft lenders
o A regulatory agreement and affordability restrictions consistent with the use of former housing set-aside land
This is a critical project to the City and one which will advance our redevelopment efforts in the City's Old Town Placentia area by providing critical housing near shopping and future mass transit. If you have any questions, please do not hesitate to contact me at darrula(cr�placentia.ora.
Sincerely,
Damien R. Arrula
City Administrator
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is effective as of May 1, 2023 (the "Agreement Date"), by and between MERCY HOUSING CALIFORNIA, a California nonprofit public benefit corporation, or its assignee (the "Developer") and the CITY OF PLACENTIA, a California municipal corporation (the "City"). Developer and City may sometimes hereinafter individually be referred to as "PARTY" or jointly as "PARTIES."
RECITALS
A. City is the fee owner of that certain real property located at 300/307, 312, 314 and 323 Baker Street, Placentia, California, as more particularly described in Exhibit "A" attached hereto, as well as that certain approximately 5,146 square feet of public street located between 307 W. Baker Street and 312 Baker Street to be dedicated to Developer ("Street Dedication Area") as depicted on Exhibit "B" attached hereto (collectively, the "Property").
B. The City desires to cause the development of affordable housing on the Property.
Developer, or its affiliates, wishes to develop approximately 68 units of affordable housing, with a mix of 1, 2, and 3 bedrooms ranging from 30% to 60% AMI, 20 of the units to be set-aside for formerly homeless households and related improvements (the "Project") generally consistent with the Request for Qualifications/Proposals Affordable Housing Development Opportunity issued by the City (the "RFP") with respect to the Property and the responsive proposal by Developer dated March 20, 2023 (the "Proposal").
C. In connection therewith, the Developer desires to purchase a fee interest in the Property. City desires to grant to the Developer, upon the specific terms and conditions set forth in this Agreement, the exclusive right and option to purchase the Property. The Parties shall negotiate a Disposition and Development Agreement (the "DDA") during the Option Term setting forth the final terms for the conveyance of the Property and which will more fully describe the scope of the Project, development entitlements, California Environmental Quality Act ("CEQA") compliance, and the schedule of performance.
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. OPTION TO PURCHASE. City hereby grants to Developer an exclusive option (the "Option") to purchase the Property subject to the terms and conditions contained in this Agreement. During the Option Term, the City agrees not to marker the Property for lease or sale, not to release and further request for proposals for the lease or sale of the Property, and not to enter into any contract (other than the DDA) or grant any option to lease or sell the Property.
2. TERM OF OPTION. The rights conferred upon Developer shall commence on the Agreement Date, and shall automatically terminate, without any further action of either party hereto, at five o'clock p.m. (5:00 p.m.) on January 1, 2025 (the "Initial Option 1 Option — Baker Street
Term"). Developer may extend the Initial Option Term for up to 12 months (the "Extension Term") by notifying City at least thirty (30) business days prior to expiration of the Initial Option Term and paying the Extension Payment (defined below) to City.
The Initial Option Term, as it may be extended by the Extension Term, is the "Option Term."
3. OPTION PAYMENT(S). In consideration for the grant of the Option, within five (5) days of Developer's execution of this Agreement, Developer shall pay to City One Dollar ($1.00) (the "Option Payment"), which amount shall be nonrefundable to Developer and not applicable to the Purchase Price. In the event Developer desires to extend the Initial Option Term for the Extension Term, then concurrently with Developer's notice under Section 2, Developer shall pay to City One Dollar ($1.00) (the "Extension Payment"), which amount shall be nonrefundable to Developer and not applicable to the Purchase Price.
4. EXERCISE OF OPTION. Subject to the Exercise Conditions, Developer shall exercise the Option no later than the expiration of the Option Term. Developer shall exercise the Option by Developer's delivery of written notice to City and Fidelity National Title (the "Title Company"). The date of Developer's written notice shall be the "Option Exercise Date."
5. CONDITIONS PRECEDENT TO EXERCISE OF OPTION. Developer's right to exercise the Option pursuant to Section 4 above is expressly subject to the satisfaction of the following conditions precedent (the "Exercise Conditions"). The Exercise Conditions are for the sole and exclusive benefit of the City, and may not be waived, amended, or otherwise modified except by the City:
(a) Developer and City have agreed on the final form of the DDA, consistent with the terms and conditions of this Agreement. (b) Developer shall have secured all financing commitments necessary for the construction of the Project as reasonably determined by the City. (c) Developer shall have obtained all governmental permits and approvals necessary for conveyance of the Property and construction of the Project (excluding building permits).
(d) All applicable environmental reviews have been completed.
If the Exercise Conditions have not occurred by the expiration of the Option Term, the City may terminate this Agreement, and neither party shall have any further rights or obligations hereunder.
6. DUE DILIGENCE MATERIALS. Promptly after the Agreement Date, City shall deliver or make available to Developer all non -confidential, non-proprietary documents and materials in its possession relating to the ownership or operation of the Property. 2 Option — Baker Street
7. PURCHASE AGREEMENT; CLOSING. During the Option Term, the parties shall negotiate in good faith the DDA which will include the specific terms for Developer's purchase of the Property, including the final agreed upon Purchase Price in accordance with the below. The parties shall use good faith, diligent efforts to finalize the DDA during the Option Term and to execute the DDA immediately following the Option Exercise Date. The closing of the purchase of the Property, evidenced by the recordation of a grant deed in the Official Records (the "Closing") shall occur within one hundred eighty (180) days following the Option Exercise Date. The DDA shall include the following terms, together with such other terms as are mutually acceptable to the parties:
(a) The Purchase Price shall be the appraised value of the Property based on an appraisal to be obtained by Developer from an MAI appraiser with experience appraising properties similar to the Property ("Purchase Price"). Developer assumed a purchase price of $82 per square foot of land area for purposes of its Proposal. Developer shall obtain such appraisal no later than 60 days prior to the Option Exercise Date. (b) Upon Closing, Developer shall receive from the Title Company an extended ALTA owner's policy of title insurance in the amount of the Purchase Price, showing fee title to the Property vested in Developer, and subject only to those title exceptions acceptable to Developer, in its sole discretion. City shall be responsible for taking any actions necessary to ensure that any title exceptions which are not acceptable to Developer are removed prior to the close of escrow.
(c) Closing costs will be paid by the parties as customary in Orange County. (d) The Property will be transferred in an as -is condition with no warranties or representations from the City concerning the condition of the Property.
(e)
(f)
Developer shall have no contingencies in the DDA.
The City has all remedies available at law and equity if Developer defaults under the DDA.
8. ENTRY AND INSPECTION. During the Option Term, Developer and its agents and representatives shall be entitled to enter onto the Property during normal business hours at times mutually acceptable to Developer and City to perform appraisals, inspections and tests of the Property, but not including invasive testing, as reasonably necessary to satisfy the requirements of proposed lenders or investors providing financing for the acquisition or development of the Property. Inspection of the Property shall require forty eight (48) hours advanced written notice to City. Developer's advance written notice to the City shall include a description of the scope of activities and specific locations for which entry is required. No invasive testing shall be done without prior written consent from City. As a condition to entering the Property, Developer shall deliver to City a certificate of 3 Option — Baker Street
liability insurance in an amount not less than $1,000,000 combined single limit. After making such tests and inspections, Developer shall promptly restore the Property to its condition prior to such tests and inspections. Developer shall defend, indemnify and hold harmless City from all losses, costs, liabilities, claims, and expenses (including reasonable attorneys' fees), of any kind or nature whatsoever, incurred, suffered by, or claimed against the City, its directors, officers, employees, and agents by reason of any damages or injuries arising out of or resulting from Developer and/or its agents, employees or contractors in exercising said inspection rights. The Developer's indemnification obligations set forth herein shall survive the Closing and shall not be merged with the deed, and shall survive the termination of this Agreement.
9. CITY'S OPERATION OF THE PROPERTY DURING THE OPTION TERM.
During the Option Term, City shall continue to operate and maintain the Property according to its customary property management practices, provided that City may not enter into any lease, occupancy, mortgage or other agreement regarding occupancy or possession of the Property that cannot by its terms be terminated as of the Closing or modify the terms of any existing lease or occupancy agreement without the prior written consent of Developer, which Developer may give or withhold in its sole and absolute discretion.
10. CANCELLATION NOTICE; QUITCLAIM.
(a) At any time during the Option Term, the Developer may cancel the Option by giving written notice (the "Cancellation Notice") of its election to cancel the Option. If Developer cancels this Agreement, Developer agrees to execute, acknowledge, and deliver a quitclaim deed to City within ten (10) business days after cancellation for recordation in the Official Records, and any other document as may be required by any title company to remove any potential cloud on title of this Option from the Property.
These obligations shall survive termination of this Agreement. (b) Pursuant to the terms of the RFP, Developer shall submit to City a good faith deposit in the amount of Fifteen Thousand Dollars ($15,000) prior to the commencement of negotiations of the DDA. The Funds will be used by the City to offset any administrative, legal and/or consultant costs associated with reviewing the proposal and negotiating the sale transaction. The City will track deductions from the good faith deposit.
The City staff time will be charged at a fully burdened rate based on an established cost allocation process. Work undertaken by the contract City Attorney and the City's consultants will be billed at their standard hourly rates. In addition, any technical studies commission by the City will be paid for using the good faith deposit. If all of the funds in the good faith deposit account are spent before the development negotiations are completed, Developer will be required to make an additional deposit. The deposit amount will be based on the City's estimate of the additional costs that will be incurred.
4 Option — Baker Street
(c)
The Option will automatically terminate and be of no further force or effect (other than the provisions which by their terms survive termination) on the earlier of (i) the date of the Closing, if the Option is exercised, or (ii) the date of expiration of the Option Term or earlier termination of the Agreement.
11. ASSIGNMENT. Developer may, with written notice to City, assign this Agreement to an affiliated nonprofit public benefit corporation or limited liability company, or to a limited partnership of which an affiliated nonprofit public benefit corporation or limited liability company is the general partner, provided that the limited partnership assignee agrees: (a) to be bound by all the terms of this Agreement; and (b) the Developer provides the City with an executed copy of the assignment within seven (7) days after the assignment agreement is executed. Developer shall not otherwise assign, transfer or convey its rights and/or obligations under this Agreement and/or with respect to the Property without the prior written consent of City, which consent City may grant or withhold in its sole discretion. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors, heirs, administrators, and assigns.
12. DEFAULT AND TERMINATION. In the event of a breach or violation of any of the obligations of Developer under this Agreement, which violation is not cured within ten (10) days after delivery of written notice thereof by the City to Developer, then in addition to any other rights and remedies it may have at law or in equity, the City may terminate this Agreement (a "Default Termination"). The City may terminate this Agreement due to a Default Termination by delivering a termination notice in writing to Developer after expiration of the cure period described above. Upon the date of delivery of such termination notice to Developer, this Agreement will be terminated, and neither party will have any further rights or obligations under this Agreement except those that expressly survive termination.
13. INDEMNIFICATION. Developer shall indemnify, defend and hold the City and its members, supervisors, directors, officers, employees, agents, successors and assigns harmless against any and all claims, suits, actions, losses and liability of every kind, nature and description made against it and expenses (including reasonable attorneys' fees) resulting from any misrepresentations or breach of warranty or breach of covenant made by Developer in this Agreement or in any document, certificate, or exhibit given or delivered to City or in connection with this Agreement. The indemnification obligations set forth in this section shall survive the Closing or any termination of this Agreement.
14. NOTICES. All notices or other communications required or permitted hereunder shall be in writing, and shall be personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, facsimile or electronic mail, shall be deemed received upon the earlier of (a) if personally delivered, the date of delivery to the address of the person to receive such notice, (b) if mailed, three (3) business days after the date of posting by the United States post office, (c) if given by electronic mail or facsimile, when sent (if sent before 5:00 p.m. on a business day, otherwise on the next business day), or 5 Option — Baker Street
(d) if delivered by overnight delivery, one (1) business day after mailing. Any notice, request, demand, direction or other communication sent by facsimile or electronic mail must be confirmed within by letter mailed or delivered in accordance with the foregoing.
To City: City of Placentia
401 E. Chapman Avenue
Placentia, California 92870
Attn: Damien R. Arrula
With a copy to: Jones & Mayer
3777 N. Harbor Blvd..
Fullerton, CA 92835
Attn: Christian Bettenhausen
To Developer: Mercy Housing California
1500 South Grand Avenue, Suite 100
Los Angeles, CA 90015
Attn. Ed Holder, Vice President
15. MODIFICATION. No modification, variation or amendment of this Agreement shall be effective unless it is in writing and is signed by all parties to this Agreement.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement between the parties and supersedes all prior agreements, with respect to the subject matter, and no warranties, agreements or representations have been made or shall be binding upon either party unless expressly set forth therein.
17. CONSTRUCTION. This Agreement shall be construed according to the laws of the State of California.
18. VENUE. The Parties hereto agree that this Agreement has been negotiated and executed in the State of California and shall be governed by and construed under the laws of California. In the event of any legal action to enforce or interpret this Agreement, the sole and exclusive venue shall be a court of competent jurisdiction located in the County of Orange, California, and the Parties hereto agree to and do hereby submit to the jurisdiction of such court, notwithstanding Code of Civil Procedure Section 394.
Furthermore, the Parties hereto specifically agree to waive any and all rights to request that an action be transferred for trial to another county.
19. SEVERABILITY If any term, covenant, condition, or provision of this Option 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. 6 Option — Baker Street
20. DISPUTE RESOLUTION. The parties shall attempt to resolve any disputes under this Agreement through mediation. Any and all controversies or claims arising out of or relating to this Agreement which cannot be resolved by mediation shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association and judgment on the award rendered by the arbitrator or arbitrators shall be entered in any court having jurisdiction thereof. The arbitration shall take place in Orange County, California.
21. ATTORNEY FEES. In any action or proceeding brought to enforce or interpret any provision of this Agreement, or where any provision hereof is validly asserted as a defense, each Party shall bear its own attorney fees and costs.
22. AUTHORITY. Each party has full power and authority to execute this Agreement and perform its respective obligations hereunder.
23. TIME OF THE ESSENCE. Time is of the essence of this Agreement and each of its terms.
24. NO WAIVER. No consent or waiver by either party to or of any breach or any representation, covenant, or warranty will be construed as a consent to or waiver of any other breach of the same or any other representation, covenant, or warranty.
25. COUNTERPARTS. This Agreement may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument. Electronic signatures will be accepted as evidence of execution of this Agreement.
[Remainder of Page Intentionally Left Blank;
Signatures on Following Page]
7 Option — Baker Street
IN WITNESS WHEREOF, Developer and City have executed this Agreement as of the Agreement Date.
"Developer"
MERCY HOUSING CALIFORNIA,
a California nonprofit public benefit corporation
By:
Name:
Title:
[Signatures Continue on Following Page]
[Signature Page to Option Agreement]
Option — Baker Street
485.000/537411
"City"
CITY OF PLACENTIA,
a California municipal corporation
By:
Name: Damien R. Arrula
Title: City Administrator
Attest:
By:
Name: Robert S. McKinnell
Title: City Clerk
Approved as to Form:
By:
Name: Christian Bettenhausen
Title: City Attorney
[Signature Page to Option Agreement]
Option — Baker Street
485.000/537411
EXHIBIT "A" TO OPTION AGREEMENT
LEGAL DESCRIPTION OF THE PROPERTY
The land referred to is situated in the City of Placentia, the County of Orange, State of California, and is described as follows:
300 and 307 Baker Street:
PARCEL 1, IN THE CITY OF PLACENTIA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 236, PAGES 11 AND 12 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
APN: 339-392-14, 339-392-15
312 Baker Street:
LOT 24 IN BLOCK "B" OF BRADFORD'S RESUBDIVISION OF BLOCKS "H" AND "I" OF
THE TOWNSITE OF PLACENTIA, IN THE CITY OF PLACENTIA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 8, PAGE 65,
MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
APN: 339-391-15
314 Baker Street:
LOT 25 IN BLOCK "B" OF BRADFORD'S RESUBDIVISION OF BLOCKS "H" AND "I" OF
THE TOWNSITE OF PLACENTIA, IN THE CITY OF PLACENTIA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 8, PAGE 65 OF
MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
APN: 339-391-14
323 Baker Street:
LOT 18 IN BLOCK "B" OF BRADFORDS RE -SUBDIVISION OF BLOCKS "H" AND "I"
TOWNSITE OF PLACENTIA, IN THE CITY OF PLACENTIA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP THEREOF RECORDED IN BOOK 8, PAGE 65 OF MISCELLANEOUS MAPS, RECORDS OF SAID ORANGE COUNTY.
APN: 339-392-19
EXHIBIT "B" TO OPTION AGREEMENT
DEPICTION OF STREET DEDICATION AREA
et
Icatl.ni
46 sf
Lot Size!
6,234 sf
Street Dedication = 5,146 square feet
Lot SIzei
11,810 sf