• 660\14\4020879.2
GROUND LEASE AGREEMENT
By and Between
the
City of San Mateo
and
AH Bespoke LP
(__________________)
• 660\14\4020879.2
TABLE OF CONTENTS
ARTICLE 1 Definitions .................................................................................................................. 4 Section 1.1 Definitions ................................................................................................... 4 ARTICLE 2 Lease of the Land; Rental Provisions; Taxes and Assessments ................................. 8 Section 2.1 Lease of the Land ........................................................................................ 8 Section 2.2 Lease Term .................................................................................................. 8 Section 2.3 Ground Rent Charges .................................................................................. 8 Section 2.4 Use of Project and Assurances of Lessee .................................................... 8 Section 2.5 Taxes and Assessments ............................................................................. 10 Section 2.6 Definitions ................................................................................................. 10 Section 2.7 Purpose of Restrictions on Transfer .......................................................... 11 Section 2.8 Prohibited Transfers .................................................................................. 11 Section 2.9 Permitted Transfers ................................................................................... 12 Section 2.10 Effectuation of Certain Permitted Transfers ............................................. 13 Section 2.11 Other Transfers with City Consent ........................................................... 13 Section 2.12 Assumptions .............................................................................................. 13 ARTICLE 3 Maintenance; Use of Premises ................................................................................. 14 Section 3.1 Title to Improvements ............................................................................... 14 Section 3.2 Permits, Licenses and Easements .............................................................. 14 Section 3.3 Use of Project ............................................................................................ 14 Section 3.4 Construction of the Improvements ............................................................ 15 Section 3.5 Maintenance of the Project ........................................................................ 15 Section 3.6 Outdoor Public Access Area ..................................................................... 16 Section 3.7 Limitations on the Outdoor Public Access Area ....................................... 16 Section 3.8 Property Management ............................................................................... 17 Section 3.9 Utilities ...................................................................................................... 18 • 660\14\4020879.2
Section 3.10 Inspection .................................................................................................. 18 Section 3.11 Subordination ............................................................................................ 18 Section 3.12 Non-Discrimination .................................................................................. 19 ARTICLE 4 Mortgage Loans........................................................................................................ 19 Section 4.1 Loan Obligations ....................................................................................... 19 Section 4.2 Liens and Encumbrances against Lessee's Interest in the Leasehold Estate ......................................................................................................... 19 Section 4.3 Cost of Other Loans to be Paid by Lessee ................................................ 21 Section 4.4 Proceeds of Loans ..................................................................................... 22 Section 4.5 Notice and Right to Cure Defaults Under Loans ...................................... 22 ARTICLE 5 Insurance .................................................................................................................. 22 Section 5.1 Required Insurance Coverage ................................................................... 22 Section 5.2 Additional Insurance Provisions ............................................................... 23 Section 5.3 Proceeds of Insurance ............................................................................... 24 Section 5.4 Indemnification ......................................................................................... 24 Section 5.5 Hazardous Materials Indemnification ....................................................... 25 Section 5.6 "As Is" Conveyance................................................................................... 26 ARTICLE 6 Condemnation, Damage or Destruction of the Project ............................................ 27 Section 6.1 Condemnation ........................................................................................... 27 Section 6.2 Administration of Construction Fund in the Event of Condemnation, or Damage or Destruction of Project ............................... 29 Section 6.3 Lessee, City, Lenders to be Made Parties in Legal Proceedings ............... 29 ARTICLE 7 Assurances of City ................................................................................................... 30 Section 7.1 City to Give Peaceful Possession .............................................................. 30 Section 7.2 City to Lease Project with Marketable Title ............................................. 30 Section 7.3 Release of City .......................................................................................... 30 • 660\14\4020879.2
ARTICLE 8 Defaults and Remedies ............................................................................................. 31 Section 8.1 Events of Default; Remedy of Default by Lessee ..................................... 31 Section 8.2 Cure of Material Breach by Lessee ........................................................... 32 Section 8.3 Termination ............................................................................................... 32 Section 8.4 Redelivery of Premises ............................................................................. 32 ARTICLE 9 Miscellaneous ........................................................................................................... 33 Section 9.1 Instrument Is Entire Agreement ................................................................ 33 Section 9.2 Notices ...................................................................................................... 33 Section 9.3 Recording .................................................................................................. 33 Section 9.4 Non-Waiver of Breach .............................................................................. 33 Section 9.5 Effective Date; Counterparts ..................................................................... 34 Section 9.6 Lease Binding on Successors .................................................................... 34 Section 9.7 Relationship of Parties .............................................................................. 34 Section 9.8 No Merger ................................................................................................. 34 Section 9.9 Gender and Number .................................................................................. 34 Section 9.10 Titles .......................................................................................................... 34 Section 9.11 Severability ............................................................................................... 35 Section 9.12 Applicable Law and Venue ....................................................................... 35 Section 9.13 Costs and Attorney Fees............................................................................ 35 Section 9.14 Mediation .................................................................................................. 35 Section 9.15 Litigation ................................................................................................... 35
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GROUND LEASE
This Ground Lease ("Lease"), is entered into effective as of __________, 20__, by and between the City of San Mateo, a California charter city (the "City") and AH Bespoke LP, a California limited partnership (the "Lessee").
RECITALS
A. The City is the fee owner of that certain property located at the corner of E 4th Avenue and N. Railroad Avenue (APNs 034-179-050 and 034-179-060) as more fully described in Exhibit A attached to this Lease and incorporated into this Lease by this reference (collectively, the “Land”).
B. The Lessee will develop, own and operate a seventy-one unit 100% affordable housing building (with one unrestricted manager’s unit) with a nearly 6,000 square feet ground- floor community space (the “Community Space”) to be initially leased to Self-Help Center for the Elderly and a portion of an underground parking garage located on the Land in the City of San Mateo, California defined as the "Improvements" for a period of ninety-nine (99) years pursuant to the terms of the Lease.
C. DTSM Talbots Venture, LLC, a Delaware limited liability company (the “Commercial Developer”) has commenced construction of approximately 163,000 square feet of commercial space, and an underground parking garage, which will provide a concrete podium that can support construction of the residential building and related improvements;
D. The Improvements may be financed through one or more alternative construction and permanent lenders and insured or guaranteed by a credit enhancement provider.
E. The City desires to lease the land upon which the Improvements will be constructed for a period of ninety-nine (99) years pursuant to the terms of the Lease.
F. All the property owners and leaseholders of the commercial and residential development will enter into a reciprocal easement agreement that would allocate appropriate responsibilities and cost sharing relating to facilities (e.g., the Underground Parking Garage) to be shared by the Lessee and the adjacent commercial development.
NOW, THEREFORE, in consideration of the promises and the respective covenants and agreements contained in this Lease, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.
(a) "Annual Operating Expenses" with respect to a particular fiscal year shall mean the following costs reasonably and actually incurred for operation and maintenance of the
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Project to the extent that they are consistent with the annual budget for the Project, approved by the City pursuant to the Regulatory Agreement and with an annual independent audit performed by a certified public accountant, reasonably acceptable to the City, using generally accepted accounting principles:
(1) Property taxes and assessments imposed on the Project; (2) Debt service currently due on a non-optional basis (excluding debt service due from residual receipts or surplus cash of the Project) on loans associated with construction of the Project and approved by the City in the Financing Plan; (3) Property management fees and reimbursements;
(4) Premiums for property damage and liability insurance; (5) Utility services not paid for directly by tenants, including water, electrical, sewer, and trash collection;
(6) Maintenance and repair expenses and services, including pest control, landscaping, grounds maintenance, painting and decorating, cleaning, common systems repair, janitorial supplies and services, including capital replacements, each to the extent not funded by reserves, insurance proceeds, grants, or loans; (7) Any annual license or certificate of occupancy fees required for operation of the Project, and any applicable annual program administration fees; (8) Security services;
(9) Advertising and marketing;
(10) Cash deposited into reserves for capital replacements of the Project;
(11) Cash deposited into an operating reserve;
(12) Resident services;
(13) Any previously unpaid portion of the Developer Fee due (without interest) not exceeding a cumulative amount of the Developer Fee; provided that this shall only apply to any deferred portion of the net cash developer fee (net of any general partner capital contributions) that is approved by the City and County if applicable as payable from development sources (“Net Developer Fee”). For the avoidance of doubt, any deferred Developer Fee remaining after payment of the Net Developer Fee may be paid only from Borrower's share of Residual Receipts;
(14) Current and accrued annual partnership management fee of ______________________________per year and current and accrued annual asset management fee of______________________________ , and other fees approved by Senior Lenders ;
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(15) Reasonable accounting fees and legal fees;
(16) An annual audit fee;
(17) Extraordinary operating costs specifically approved in writing by the City as part of the annual budget approval process pursuant to this Agreement; (18) Payments of deductibles in connection with casualty insurance claims not normally paid from reserves;
(19) Fidelity bond premiums;
(20) The amount of uninsured losses actually replaced, repaired or restored, and not normally paid from reserves;
(21) Repayment of operating deficits, loans or advances from the general partner of the partnership or an affiliate thereof; (22) Repayment of loans made by the general partner of the partnership or an affiliate thereof to cover eligible basis adjusters required pursuant to the Lessee’s partnership agreement, but excluding any compliance adjusters required pursuant to the Lessee’s partnership agreement;
(23) Extraordinary operating costs specifically approved in writing by the City unless incurred in connection with an emergency; and (24) Other ordinary and reasonable operating expenses approved in the Financing Plan or as otherwise approved in writing by the City and not listed above. (25) Annual Operating Expenses shall exclude the following:
depreciation, amortization, depletion or other non-cash expenses; initial deposits to establish the operating reserve and the replacement reserve and any amount expended from a reserve account; and any capital cost with respect to the Project not otherwise listed above, as determined by the accountant for the Project.
(b) "City" means the City of San Mateo, a California charter city. (c) "City Disposition and Loan Agreement" means the Disposition, Development and Loan Agreement by and between City and Lessee dated___________. (d) "City Loan" shall mean a loan, or loans in the amount of ______________________from City to Lessee as evidenced by the City Disposition and Loan Agreement.
(e) "City Loan Documents" means the City Disposition and Loan Agreement, City Regulatory Agreement, the promissory notes evidencing the City Loan and the deed of trust securing the City Loan.
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(f) "City Regulatory Agreement" means the regulatory agreement by and between City and Lessee, of even date herewith, setting forth the requirement to provide occupancy and certain services to a specified number of low and very low-income households at affordable charges at the Project.
(g) "Effective Date" means the date first written above on which this Lease is effective.
(h) "Financing Plan" means a City approved Financing Plan pursuant to the terms of Section 5.4 of the City Disposition and Loan Agreement, containing the following: (1) a "sources and uses" breakdown of the costs of constructing the Improvement; and (2) an operating proforma for the Development. Such sources and uses breakdown and operating proforma shall reflect the Lessee's then current expectations for funding sources, development costs, and Annual Operating Expenses. The approved Financing Plan is attached hereto as Exhibit B. (i) "Gross Revenue" with respect to a particular fiscal year shall mean all revenue, income, receipts, and other consideration earned from operation and leasing of the Project. Gross Revenue shall include, but not be limited to: all rents, fees and charges paid by tenants, Section 8 payments or other rental subsidy payments received for the dwelling units, deposits forfeited by tenants, interest on tenant security deposits not otherwise required to be paid to tenants, all cancellation fees, price index adjustments and any other rental adjustments to leases or rental agreements; net proceeds from vending and laundry room machines; the proceeds of business interruption or similar insurance and not paid to Senior Lenders; the proceeds of casualty insurance not used to rebuild the Project or replace damaged property and not paid to Senior Lenders; and condemnation awards for a taking of part or all of the Project for a temporary period not paid to Senior Lenders. Gross Revenue shall not include tenants' security deposits, loan proceeds, capital contributions or similar advances. (j) "Improvements" means the buildings, structures, underground parking, landscaping and other improvements, including any building fixtures, now or later located on the Land and generally consisting of seventy-one (71) residential units, including one (1) unrestricted manager unit, of multi-family rental housing for lower income households, approximately 6,000 square feet of ground floor community space and below grade parking as shown in the Lessee’s approved planning application.
(k) "Investor" means the limited partner(s) of Lessee,
_________________________.
(l) "Land" has the meaning set forth in Recital A.
(m) "Lease" has the meaning set forth in the first paragraph of this Agreement. (n) "Lease Term" means the ninety-nine (99) year period set forth in Section
2.2 below, during which this Lease shall be in effect unless terminated earlier in accordance with the provisions of this Lease.
(o) "Lenders" means each and all of the lenders providing the Other Loans to Lessee, or guaranteeing, insuring or credit enhancing Other Loans to the Lessee.
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(p) "Lessee" means AH Bespoke LP, a California limited partnership. (q) “Other Loan Documents" means all documents executed by the Lessee evidencing, guaranteeing, insuring or securing the Other Loans, including, but not limited to, regulatory agreements, notes, deeds of trust, security agreements, fixture filings, and financing statements.
(r) "Other Loans" shall mean any loans, certificates of participation financing and related credit enhancement now or later obtained by the Lessee as evidenced by promissory notes and secured by deeds of trust recorded against the Project or any installment sales financing (and any related security documents, including regulatory agreements, use agreements, security agreements, fixture filings, and financing statements required of the Lessee) which are given by the Lessee. Other Loans shall not include the City Loan. (s) "Parties" shall mean the City and the Lessee collectively. (t) "Party" shall mean the City or the Lessee individually. (u) "Project" shall mean the Improvements and the Lessee's leasehold interest in the Land.
(v) “Reciprocal Easement Agreement” means that certain Agreement of Easements, Covenants and Restrictions by and between __________ dated as of _______. (w) "Resident" means the resident who is authorized by Lessee to occupy the units.
(x) "Residual Receipts" in a particular fiscal year shall mean the amount by which Gross Revenue exceeds Annual Operating Expenses.
ARTICLE 2
LEASE OF THE LAND; RENTAL PROVISIONS; TAXES AND ASSESSMENTS Section 2.1 Lease of the Land.
For and in consideration of the covenants and agreements to be kept and performed by the Lessee and the City, the City leases the Land to the Lessee, and the Lessee does take, hire and lease the Land from the City pursuant to the terms of this Lease.
Section 2.2 Lease Term.
The term of this Lease shall commence on the Effective Date, and shall continue from such date until the date which is ninety-nine (99) years from the Effective Date, unless terminated earlier in accordance with this Lease.
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Section 2.3 Ground Rent Charges.
The Lessee shall pay to the City rent in the amount of Ninety-Nine Dollars ($99.00), which shall represent payment of rent equal to One Dollar ($1.00) per year for the first ninety-nine (99) years of the Lease Term, payable one time only upon execution of this Lease.
Section 2.4 Use of Project and Assurances of Lessee.
The City and the Lessee understand and agree that the rent has been set at a nominal amount for the specific purpose of assisting the Lessee to operate and maintain the Project. In consideration of the nominal amount of the rent and the other financial assistance from the City to the Lessee, the Lessee shall use the land and operate the Project in accordance with the uses outlined in this Lease.
The Lessee agrees:
(a) To operate the Improvements as affordable multifamily residential housing in accordance with the terms of the City Regulatory Agreement, and this Lease; (b) To lease the ground floor community space (see Exhibit C) to an entity compatible with affordable housing and approved by the City Manager in its sole and reasonable discretion, on a Triple-Net Basis. “Triple Net Basis” means that the lessee is responsible for the property taxes (if any), security, maintenance, cleaning, insurance, gas, electric, internet and any other utility charges associated with the Community Space; (c) To maintain the character of the Project as required by this Lease and any Other Loan Documents or the City Loan Documents for so long as such Other Loan Documents, the City Loan Documents remain in effect;
(d) To select Residents in accordance with a resident selection plan approved by the City;
(e) Not to use the Project for any disorderly or unlawful purpose; (f) To use commercially reasonable efforts to prevent any Resident from committing or maintaining any nuisance or unlawful conduct on or about the Project; (g) To use commercially reasonable efforts to prevent any Resident from violating any of the covenants and conditions of this Lease with respect to the Project; (h) To take commercially reasonable action, if necessary, to abate any violation of this Lease by any Resident upon notice from the City; (i) To provide City with Project annual audited financial statements, copies of the current management plan, and the annual operating budget. Lessee shall also notify City of any financial situation that may result in Lessee's inability to meet the Project's Annual Operating Expenses; and
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(i) To provide approximately 71 housing units in accordance with the City Regulatory Agreement.
Section 2.5 Taxes and Assessments.
(a) Payment by Lessee. Lessee covenants and agrees during the entire Lease Term, at its own cost and expense, to pay the public officers charged with their collection, as the same become due and payable and before any fine, penalty, interest, or other charge may be added to them for nonpayment, all real estate taxes, general and special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind and nature, made, assessed, levied or imposed upon, or due and payable in connection with, or which become a lien upon, the Land, the Improvements, or any part of the Land or Improvements, or upon this Lease, as well as assessments for sidewalks, streets, sewers, water, or any other public improvements and any other improvements or benefits which shall, during the Lease Term, be made, assessed, levied, or imposed upon or become due and payable in connection with, or a lien upon the Land, the Improvements, or any part of the Land or Improvements, or upon this Lease. Notwithstanding the foregoing, nothing in this Lease shall limit the right of Lessee to seek and obtain an exemption from real property taxation pursuant to Section 214(g) of the California Revenue Code and any other provisions of applicable law.
(b) Lessee's Right to Contest. If Lessee disputes any amount or validity of any liens, taxes, assessments, or charges upon the Land or the Improvements, Lessee may contest and defend against the same at its cost, and in good faith diligently conduct any necessary proceedings in connection therewith to prevent and avoid the same; provided, however, that such contest shall be prosecuted to a final conclusion as speedily as possible. City agrees to render to Lessee all reasonable assistance, at no expense to City, in contesting the validity or amount of any such liens, taxes, assessments or charges, including joining in the signing of any protests or pleadings which Lessee may deem advisable to file; provided, however, that to the extent the City is a party whose action is being contested, the City's assistance shall be at the discretion of the City. During any such contest, Lessee shall (by the payment or bonding of such liens, disputed taxes, assessments or charges, if necessary) prevent any advertisement of tax sale, any foreclosure of, or any divesting thereby of City's title, reversion or other interest in or to the Land.
Section 2.6 Transfer Definition.
As used in this Article 2, the term "Transfer" means:
(a) Any total or partial sale, assignment or conveyance, or any trust or power, or any transfer in any other mode or form, of or with respect to this Lease or of the Land or Improvements or any part thereof or any interest therein or any contract or agreement to do any of the same; or
(b) Any total or partial sale, assignment or conveyance, or any trust or power, or any transfer in any other mode or form, of or with respect to any ownership interest in the Lessee or any contract or agreement to do any of the same; or
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(c) Any merger, consolidation, sale or lease of all or substantially all of the assets of the Lessee; or
(d) The leasing of part or all of the Land or Improvements; provided, however, that leases of the individual units included within the Improvements to Resident occupants or leasing of the Community Space to a City approved tenant shall not be deemed a Transfer for purposes of this Article 2.
Section 2.7 Purpose of Restrictions on Transfer.
(a) This Lease is entered into solely for the purpose of development and operation of the Project and its subsequent use in accordance with the terms of this Lease. The Lessee recognizes that the qualifications and identity of the Lessee are of particular concern to the City, in view of:
(1) The importance of the development of the Land and Improvements as affordable housing to the general welfare of the community; and (2) The leasehold assistance that has been made available by the City for the purpose of making such development possible; and (3) The reliance by the City upon the unique qualifications and ability of the Lessee to serve as the catalyst for development of the Improvements and upon the continuing interest which the Lessee will have in the Land and Improvements to assure the quality of the use, operation and maintenance deemed critical by the City in the development of the Land or Improvements; and
(4) The fact that a change in ownership or control of the Lessee, or of a substantial part thereof, or any other act or transaction involving or resulting in a significant change in ownership or with respect to the identity of the parties in control of the Lessee or the degree thereof is for practical purposes a Transfer or disposition of the Land or Improvements; and
(5) The fact that the Land is not to be acquired or used for speculation, but only for development and operation by the Lessee in accordance with this Lease; and (6) The importance to the City of the standards of use, operation and maintenance of the Land and Improvements.
(b) The Lessee further recognizes that it is because of such qualifications and identity that the City is entering into this Lease with the Lessee and that Transfers are permitted only as provided in this Lease.
Section 2.8 Prohibited Transfers.
The limitations on Transfers set forth in this Article 2 shall apply throughout the Lease Term. Except as expressly permitted in this Lease, the Lessee represents and agrees that the Lessee has not made or created, and will not make or create or suffer to be made or created, any
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Transfer, either voluntarily or by operation of law without the prior written approval of the City, such approval not to be unreasonably withheld.
Any Transfer made in contravention of this Article 2 shall be void and shall be deemed to be a default under this Lease whether or not the Lessee knew of or participated in such Transfer.
Section 2.9 Permitted Transfers
Notwithstanding other provisions of Article 2, the following Transfers shall be permitted and are hereby approved by the City subject to satisfaction of the requirements of Section 2.10:
(a) Any Transfer creating a lien or trust relationship pursuant to an Other Loan permitted pursuant to this Lease or the City Loan. (b) Any Transfer directly resulting from the foreclosure of an Other Loan Document, including the transfer in lieu of foreclosure to nominees of any Lender, or the granting of a deed in lieu of foreclosure of an Other Loan Document, including the transfer in lieu of foreclosure to the nominees of any Lender and any subsequent transfer, or as otherwise permitted under Article 4;
(c) The leasing of residential units and the Community Space to a City- approved tenant within the Project in accordance with this Agreement; (d) The granting of easements, rights of way, or permits to facilitate the development of the Property;
(e) The City hereby approves a Transfer of a limited partnership interest in the Lessee to the Investor, or to an affiliate of the Investor (provided such affiliate provides documentation reasonably acceptable to the City that the affiliate has sufficient financial capability to provide the capital contributions set forth in the Financing Plan) and future transfers of such interest;
(f) Any Transfer to a nonprofit public benefit corporation recognized by the Internal Revenue Service to be an exempt organization pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, and affiliated with Alta Housing ("Alta"), subject to review by the City to determine that such entity is a tax exempt organization, is affiliated with Alta, and has adequate assets to carry out its obligations under this Lease, and City expressly covenants that such consent shall not be unreasonably or arbitrarily refused; (g) The Parties agree and acknowledge that AH Bespoke LLC, an entity wholly owned by Alta Housing, shall remain the managing general partner of the Lessee throughout the Lease Term. In the event the general partner of the Lessee is removed by the Investor for cause following default under the Lessee's partnership agreement, the City hereby approves the transfer of the general partner interest to an affiliate of the Investor or to a 501(c) (3) tax-exempt nonprofit public benefit corporation that is selected by the Investor and approved in advance and in writing by the City, which approval shall not be unreasonably withheld;
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(h) Any Transfer to a limited liability company or limited partnership, the managing member or partner of which is Alta Housing, subject to review by the City to determine that such entity is a tax-exempt organization, is affiliated with Alta, and has adequate assets to carry out its obligations under this Lease, and City expressly covenants that such consent shall not be unreasonably or arbitrarily refused. (i) A sublease or subleases of non-residential spaces in the Improvements.
The Lessee shall not, without first obtaining the written consent of the City and City approval of the sublease, sublet the Improvements or any part of such Improvements. (j) The initial tenant for the Community Space shall be Self Help for the Elderly (or an entity wholly owned by Self Help for the Elderly) and the Community Space shall be leased to them at $1 per year (or such other amount as may be approved by the City in its sole and absolute discretion) on a Triple Net Basis.
(k) A loan to refinance the financing identified in Exhibit B. (k) Any other Transfer approved by the City in writing.
Section 2.10 Effectuation of Certain Permitted Transfers No Transfer of this Lease permitted pursuant to Section 2.9 or Section 2.11 (other than a Transfer pursuant to Section 2.9 (a), (b) or (e)), shall be effective unless, at the time of the Transfer, the person or entity to which such Transfer is made, by an instrument in writing reasonably satisfactory to the City and in form recordable among the land records, shall expressly assume the obligations of the Lessee under this Lease and agree to be subject to the conditions and restrictions to which the Lessee is subject arising during this Lease, and or Improvements to the fullest extent that such obligations are applicable to the particular portion of or interest in the Land or Improvements conveyed in such Transfer. Anything to the contrary notwithstanding, the holder of an Other Loan whose interest shall have been acquired by, through or under a Other Loan Document or shall have been derived immediately from any holder thereof shall not be required to give to the City such written assumption until such holder or other person is in possession of the Land or Improvements or entitled to possession thereof pursuant to enforcement of the Other Loan Document.
In the absence of specific written agreement by the City, no such Transfer, assignment or approval by the City shall be deemed to relieve the Lessee or any other party from any obligations under this Lease.
Section 2.11 Other Transfers with City
The City may, in its reasonable discretion, approve in writing other Transfers as requested by the Lessee. In connection with such request, there shall be submitted to the City for review all instruments and other legal documents proposed to affect any such Transfer. If a requested Transfer is approved by the City such approval shall be indicated to the Lessee in writing or denied by the City within ninety (90) days of receipt by the City of Lessee's request
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for approval of a Transfer. In the event the City does not respond either granting or denying the request within ninety (90) days the request shall be deemed approved.
Section 2.12 Assumptions.
Except as allowed under Section 2.9, the Lease shall not be assumable by successor or assigns of the Lessee without the prior written consent of the City, which consent shall be granted or denied in the City's reasonable discretion. The Lease shall be assumable by a limited partnership, a general partner, or a nonprofit public benefit corporation affiliated with Alta Housing or by any entity pursuant to a permitted or approved transfer as provided in Section 2.10 and 2.11 above.
ARTICLE 3
MAINTENANCE; USE OF PREMISES
Section 3.1 Title to Improvements.
The City grants to the Lessee without warranty, express or implied, any right, title, or interest that the City may have in the Improvements now or later located on the Land. The Improvements on the Land during the Lease Term shall be and remain the property of the Lessee; provided, however, that the Lessee shall have no right to destroy, demolish or remove the Improvements except as specifically provided for in this Lease and in the performance of maintenance obligations set forth in this lease. When the Lease Term expires or, subject to applicable cure rights of any Lenders, when the Lease is otherwise terminated under the terms of this Lease, title to the Improvements shall revert to and vest in the City without cost to the City. It is the intent of the Parties that this Lease shall create a constructive notice of severance of the Improvements from the Land without the necessity of a deed from the City to the Lessee after the Improvements have been constructed. The Lessee agrees to execute, at the request of the City at the end of the Lease Term, a confirmatory quitclaim deed of the Improvements to the City to be recorded at the City's option and expense and any other documents that may be reasonably required by the City or the City's title company to provide the City title to the Improvements. Lessee agrees that it will ensure all reserve funds other than those that are funded by Lessee or its affiliates outside any loan or grant funds will revert to City at the end of the Lease Term.
Section 3.2 Permits, Licenses and Easements.
The City agrees that, within ten (10) days after receipt of written request from the Lessee, it shall (at no expense to the City) join in any and all applications for permits, licenses or other authorizations required by any governmental or other body claiming jurisdiction in connection with any work the Lessee may do pursuant to this Lease, and shall also join in any grants of easements for public utilities useful or necessary to the development of the Land or of the Improvements. City
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Section 3.3 Use of Project.
(a) The Lessee shall at all times during the Lease Term use or cause the Project to be used as affordable multifamily rental housing and ground floor community space in accordance with the terms and provisions of the City Regulatory Agreement. (b) Lessee shall also use or cause the Project to be used in a manner consistent with all applicable zoning and environmental laws of any governmental authority having jurisdiction over the Project, and with all requirements of any Lenders. Subject to the next sentence, the Lessee agrees to comply with all applicable and lawful statutes, rules, orders, ordinances, requirements and regulations of the United States, the State of California, and of any other governmental authority having jurisdiction over the Project. The Lessee may, in good faith and on reasonable grounds, dispute the applicability of, or the validity of any charge, complaint or action taken pursuant to or under color of, any statute, rule, order, ordinance, requirement or regulation, defend against the same, and in good faith diligently conduct any necessary proceedings to prevent and avoid any adverse consequence of the same.
Section 3.4 Construction of the Improvements.
The Lessee shall commence construction of the Improvements within thirty (30) days after the Effective Date and shall diligently prosecute completion of the Improvements in accordance with the provisions of the Other Loan Documents and the City Loan Documents.
Section 3.5 Maintenance of the Project.
(a) The Lessee agrees, for the entire Term of this Agreement, to maintain all interior and exterior improvements, including landscaping, of the Project in condition, repair and tenantable condition (and, as to landscaping, in a healthy condition) and in accordance with a management plan, as the same may be amended from time to time. The Lessee shall not permit the accumulation of waste or refuse matter on the Land or in the Project. The Lessee shall commit no act of waste and shall take good care of the Project and the fixtures and appurtenances therein, and shall, in the use and occupancy of the Project, conform to and all applicable laws, rules, ordinances, orders, and regulations of all federal, state, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials, with the exception of those areas identified in the Reciprocal Easement Agreement. Lessee agrees, for the entire Term of this Agreement, to comply with all requirements of the Reciprocal Easement Agreement, including but not limited to making regular payments in accordance with the cost sharing provisions, and maintenance and repair of improvements located on the residential portion of the garage, as specified in the Reciprocal Easement Agreement. (b) In the event that the Lessee breaches any of the covenants contained in this section and such default continues for a period of fifteen (15) days after written notice from the City with respect to graffiti, debris, waste material, and general maintenance or thirty (30) days after written notice from the City with respect to landscaping and building improvements, then the City, in addition to whatever other remedy it may have at law or in equity, shall have the right to enter upon the Land and perform or cause to be performed all such acts and work necessary to cure the default. Pursuant to such right of entry, the City shall be permitted (but is not required) to enter
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upon the Land and perform all acts and work necessary to protect, maintain, and preserve the Improvements and landscaped areas on the Land, and to attach a lien on the Land (which shall in all events be subordinate to all Loans), or to assess the Land, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by the City and/or costs of such cure, including a ten percent (10%) administrative charge, which amount shall be promptly paid by the Lessee to the City upon demand.
(c) Not later than the last day of the Lease Term, the Lessee shall, at the Lessee's expense, remove all of the Lessee's personal property and those improvements made by the Lessee that have not become the property of the City; repair all injury done by or in connection with the removal of the Lessee's personal property and improvements, and surrender the Project in good condition. City shall agree to accept the Land with any damage not caused by the misuse or neglect of the Lessee, the Lessee's agents and tenants, the Residents, and the Resident's visitors, including damage related to reasonable wear and tear resulting from the elements or any remaining damage caused by an event for which insurance coverage was not required under this Lease or the insurance coverage did not allow a complete restoration. The Lessee shall remove all personal property by the last day of the Lease Term if this Lease, unless agreed otherwise by the City. All property of the Lessee remaining after the last day of the Lease Term shall be conclusively deemed abandoned and may be removed by the City, and the Lessee shall reimburse the City for the cost of such removal.
The City shall provide the Lessee with five (5) days prior notice before disposing of any such items. (d) During the Lease Term, the Lessee shall not, without first obtaining the written consent of the City, abandon the Project, or allow the Project to become vacant or deserted.
Section 3.6 Public Sidewalk and Streetlight
The Land includes a public sidewalk and portion of city streetlights along 4th Avenue and S.
Railroad Avenue, which are shown in Exhibit D. In accordance with Section 3.5(a), with the exception of those areas identified in the Reciprocal Easement Agreement, Lessee is responsible for maintaining the sidewalk, provided, however, that City reserves the right to construct, reconstruct, replace, remove, access, inspect, and maintain the sidewalk. City shall maintain the streetlight, the streetlight box and the streetlight’s appurtenances (the “Streetlight Improvements”) and, accordingly, reserves the right to construct, reconstruct, replace, remove, access, and inspect such Streetlight Improvements. Lessee shall not be liable to the City or its employees, agents, invitees or any third party, for any injury loss or damage arising out of or in connection with the access to and use of the Streetlight Improvements, except to the extent arising from Lessee's active negligence or willful misconduct. Furthermore, Lessee shall not construct or install any Streetlight Improvements within the Land without prior approval from the City, a grant of public utility easement, and an amendment to this Agreement defining the ownership and maintenance responsibilities of such Streetlight Improvements.
Section 3.7 Property Management.
(a) The Project shall at all times be managed by an experienced Management Agent reasonably acceptable to the City, with demonstrated ability to operate residential facilities like the Project in a manner that will provide decent, safe, and sanitary housing. The Lessee shall retain a property management agent that is acceptable to the City to manage the
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Project (the "Management Agent"). The City agrees that Alta Housing is acceptable to the City as Management Agent. For any change in the Management Agent, the Lessee shall submit for the City's approval the identity of any proposed Management Agent. The Lessee shall also submit such additional information about the background, experience and financial condition of any proposed Management Agent as is reasonably necessary for the City to determine whether the proposed Management Agent meets the standard for a qualified Management Agent set forth above. If the proposed Management Agent meets the standard for a qualified Management Agent set forth above, the City shall approve the proposed Management Agent by notifying the Lessee in writing.
(b) Each year during the Term, Lessee shall provide to City an annual report which shall include the following information for the fiscal year; unaudited financial statements, a report on unit vacancies and turnover, copies of material indicating significant procedural or policy changes affecting services and admissions, copies of significant complaints related to services including marketing and the applicant qualification and income certification of the affordable units, and a variance report showing actual versus budgeted expenses provided in the approved Annual Operating Expenses.
Section 3.8 Utilities.
The Lessee shall be responsible for the cost of all utilities, including water, heat, gas, electricity, waste removal, sewers, and other utilities or services supplied to the Project, and the Lessee shall pay or cause same to be paid currently and as due.
Section 3.9 Inspection.
Lessee shall permit and facilitate, and shall require its contractors to permit and facilitate, observation and inspection of the Project and Land by the City and by public authorities with reasonable prior written notice during reasonable business hours for the purposes of determining compliance with this Agreement.
Section 3.10 Subordination.
(a) Upon written request by the Lessee, the City agrees to provide the subordination of its deed of trust securing the City loan, subject to the conditions described below, including the following:
(1) The liability of the City under any documents executed in connection with any Other Loan shall be limited by the express terms of the instrument of subordination. The limitations shall include: the limitation of the City's liability solely to the interest or interests subordinated, and the City's right not to execute any instrument which would obligate City for the payment of the Other Loan secured by a deed of trust to which the fee is subordinated.
(2) The Lessee shall not be in Material Default under the terms of this Lease at the time of a request for subordination. "Material Default" shall mean any material breach by the Lessee under this Lease, including, without limitation, the failure to pay rent then
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due and payable, or, the filing of a bankruptcy petition by or against the Lessee. The Lessee shall not be in Material Default if the Lessee has commenced to cure the Material Default at the time in question and diligently pursues such cure to completion. (b) Provided the conditions of this Section are satisfied, the City shall, within ten (10) business days after written request by the Lessee, execute, acknowledge and deliver an instrument of subordination, together with other documents as may be reasonably required by a Lender from the City to effectuate the provisions of this Section, subject to the terms and conditions contained in Section 4.10(a). The agreement of subordination contained in this Lease shall be self-operative and no further instrument of subordination shall be necessary unless it be required by a Lender, or a title insurance company insuring any interest of a Lender. If any proceeds are made payable to both the City and the Lessee, the City shall immediately sign any papers necessary to transfer the proceeds to the Lessee.
Section 3.11 Non-Discrimination.
(a) There shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the Lessee, or any person claiming under or through the Lessee, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sub lessees, subtenants, or vendees in the premises herein leased.
(b) To the maximum extent permitted by law and applicable tax credit rules and regulations, the Lessee shall comply with the City's adopted affordable housing marketing policies, as such may apply to the Project, and as they may be amended from time to time.
Notwithstanding anything to the contrary herein, nothing in this section shall require that the preference be based on a minimum duration for residency or employment. To the extent the preferences required under this Section are in conflict with the requirements of Section 42 of the Internal Revenue Code and implementing guidelines, the requirements of Section 42 will supersede.
ARTICLE 4
MORTGAGE LOANS
Section 4.1 Loan Obligations.
Nothing contained in this Lease shall relieve the Lessee of its obligations and responsibilities under any Other Loans to operate the Project as set forth in the Other Loan Documents. Nothing contained in this Lease shall relieve the Lessee of its obligations and responsibilities under the City Loan to operate the Project as set forth in the City Loan Documents.
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Section 4.2 Liens and Encumbrances against Lessee's Interest in the Leasehold Estate. (a) The Lessee shall have the right to encumber the leasehold estate created by this Lease and the Improvements with the deeds of trust or mortgages of the Other Loans. (b) For as long as the Project is subject to the Other Loan Documents or there is any lien securing any Other Loans:
(1) The City shall not agree to any mutual termination or accept any surrender of this Lease, nor shall the City consent to any amendment or modification of this Lease without the consent of any Lenders which have an outstanding Other Loan. In the event that the City receives competing or conflicting offers to cure any default, the City shall accept the offers to cure in the following order: First, the Lessee then each Lender in the same relative priority as their respective deeds of trust.
(2) Notwithstanding any default by the Lessee under this Lease, the City shall have no right to terminate this Lease unless the City shall have given any Lenders which have an outstanding Other Loan written notice of such default pursuant to Section
4.2(b)(7) of this Lease, and such Lenders shall have failed to remedy such default or acquire the Lessee's leasehold estate created by this Lease or commence foreclosure or other appropriate proceedings as set forth in, and within the time specified by, this Section. (3) Any Lender which has an outstanding Other Loan shall have the right, but not the obligation, at any time to pay any or all of the rental due pursuant to the terms of this Lease, and do any other act or thing required of the Lessee by the terms of this Lease, to prevent termination of this Lease. Each Lender shall have ninety (90) days after receipt of notice from the City describing such default to cure the default. All payments so made and all things so done shall be as effective to prevent a termination of this Lease as the same would have been if made and performed by the Lessee instead of by any Lender. (4) In addition to the cure period provided in paragraph (3) above, if the default is such that possession of the Land may be reasonably necessary to remedy the default, or any Lender which has an outstanding Other Loan shall have a reasonable time after the expiration of such ninety (90)-day period within which to remedy such default, provided that:
(i) such Lender shall have fully cured any default in the payment of any monetary obligations of the Lessee under this Lease within such ninety (90)-day period and shall continue to pay currently such monetary obligations when the same are due; and (ii) such Lender shall have acquired the Lessee's leasehold estate under this Lease or commenced foreclosure or other appropriate proceedings prior to or within such period, and shall be diligently prosecuting the same.
(5) Any default under this Lease which by its nature cannot be remedied by any Lender shall be deemed to be remedied if: (i) within ninety (90) days after receiving written notice from the City describing the default, or prior thereto, any Lender shall have acquired the Lessee's leasehold estate or commenced foreclosure or other appropriate proceedings; (ii) the Lender shall diligently prosecute any such proceedings to completion; (iii) the Lender shall have fully cured any default in the payment of any monetary obligations of the
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Lessee under this Lease which does not require possession of the Land; and (iv) after gaining possession of the Land, the Lender shall perform all other obligations of the Lessee under this Lease capable of performance by the Lender when the obligations are due. (6) If the Lenders are prohibited, stayed or enjoined by any bankruptcy, insolvency or other judicial proceedings involving the Lessee from commencing or prosecuting foreclosure or other appropriate proceedings, the times specified for commencing or prosecuting such foreclosure or other proceedings shall be extended for the period of such prohibition; provided that any Lender shall have fully cured any default in the payment of any monetary obligations of the Lessee under this Lease and shall continue to pay currently such monetary obligations when the same fall due; provided, further, that such Lender shall not interfere with the City's efforts to seek compliance by the Lessee with any non-monetary obligation under this Lease.
(7) The City shall mail or deliver to any Lenders which have any outstanding Other Loan, whose addresses will be provided to City by Lessee, a duplicate copy of all notices which the City may from time to time give to the Lessee pursuant to this Lease, including without limitation notices of an Event of Default. No notice by the City to the Lessee under this Lease shall be effective unless and until a copy of the notice shall have been mailed or delivered to such Lenders as set forth in this Section. Absent City's written notice to Lenders with delivery confirmation of all defaults by Lessee under this Lease, City may not exercise any remedies for such defaults.
(8) In the event any Lender becomes the Lessee under this Lease by means of foreclosure or deed in lieu of foreclosure or pursuant to any new lease obtained under subsection (9) below, that Lender shall be personally liable under this Lease or such new lease only for the period of time that the Lender remains the Lessee under this Lease. Any such Lender shall have the right, without City's consent, to assign the leasehold estate following acquisition of the leasehold estate by a foreclosure or granting of a deed in lieu of foreclosure.
Nothing in this Section shall be construed to obligate any Lender to remedy any default of the Lessee, and any failure of any Lender to complete any such cure after commencing the same shall not give rise to any liability of any Lender to the City or the Lessee. (9) In the event a Lender, its designee or another purchaser in foreclosure, bankruptcy or other proceedings becomes the legal owner of the leasehold estate, and upon written request by the Lender given within sixty (60) days after becoming the legal owner of the leasehold estate, the City shall enter into a new lease of the Land with the Lender, or its nominee, purchaser, assignee or transferee, for the remainder of the Lease Term with the same agreements, covenants, reversionary interests and conditions (except for any requirements which have been fulfilled by the Lessee prior to termination) as are contained in this Lease and with priority equal to this Lease; provided, however, that the Lender shall promptly cure any defaults by the Lessee susceptible to cure by the Lender. In the event Lender, or its nominee, purchaser, assignee or transferee becomes the legal owner of the leasehold estate, such Lender, nominee, purchaser, assignee or transferee shall only be liable for acts or omissions of the tenant under the Lease taking place during the period in which it had record title to the leasehold estate and such liability is limited to the value of its interest in the leasehold interest and the Lease.
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(10) The City shall cooperate in including in this Lease by suitable amendment from time to time any provision which may reasonably be requested by any proposed Lender for the purpose of implementing the mortgagee-protection provisions contained in this Lease and allowing such proposed Lender reasonable means to protect or preserve the lien of the leasehold mortgage and the value of its security. The City agrees to execute and deliver (and to acknowledge, if necessary, for recording purposes) any agreement necessary to effect any such amendment; provided, however, that any such amendment shall not in any way affect the Lease Term or rent under this Lease;
Section 4.3 Cost of Other Loans to be Paid by Lessee.
The Lessee shall bear all of the costs and expenses in connection with: (a) the preparation and securing of the Other Loans; (b) the delivery of any instruments and documents and their filing and recording, if required; and (c) all taxes and charges payable in connection with the Other Loans.
Section 4.4 Proceeds of Loans.
It is expressly understood and agreed that all Other Loan and City Loan proceeds shall be paid to and become the property of the Lessee, and that the City shall have no right to receive any such Other Loan or the City Loan proceeds.
Section 4.5 Notice and Right to Cure Defaults Under Loans.
Upon the recording of a Memorandum of Lease or this Lease, the City may record in the office of the Recorder of the County in which the land is situated, a request for notice of any default under each Other Loan. In the event of default by the Lessee under an Other Loan, the City shall have the right, but not the obligation, to cure the default. Any payments made by the City to cure a default shall be treated as rent due from the Lessee which shall be paid, with interest which shall equal the City's Local Agency Investment Fund Rate (established pursuant to Section 16429.1 of the California Government Code) within thirty (30) days of the date on which the payment was made by the City. If Lessee is not able to cure a default under the Other Loan, Lessee agrees to work cooperatively with City if City seeks to cure the default, pay any amounts due under the Other Loan if accelerated, or assume the Other Loan.
ARTICLE 5
INSURANCE; DAMAGE AND DESTRUCTION OF IMPROVEMENTS
Section 5.1 Required Insurance Coverage.
Coverage during the Ground Lease Term, Lessee shall, at its own cost and expense, maintain insurance as required in Exhibit E.
Section 5.2 No Termination of Lease; Obligation to Restore Except as otherwise provided in Section 5.3, no loss or damage by fire or any other cause resulting in either partial or total destruction of any buildings or the Improvements now or
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hereafter located in, upon or on the Land, or any fixtures, equipment or machinery used or intended to be used in connection with the Improvements shall operate to terminate this Lease, or to relieve or discharge the Lessee from the payment of any rent or other amounts payable under this Lease, as rent or otherwise, as and when they become due and payable, or from the performance and observance of any of the agreements, covenants and conditions herein contained to be performed and observed by the Lessee. The Lessee hereby waives the provisions of Section 1932, subsection 2, and of Section 1933, subsection 4, of the California Civil Code, as either or both may from time to time be amended, replaced, or restated. Except as provided in Section 5.5 and 5.7, the Lessee shall promptly repair, or cause the prompt repair of, any damage or destruction caused to the Improvements and restore the Improvements to at least as good a condition as existed prior to the damage or destruction, as more specifically provided in Section
5.6. The Lessee's failure to make such full repair and restoration under any conditions in which it has elected or is required so to do shall constitute a Lessee Event of Default under this Lease.
Section 5.3 Damage or Destruction Occurring Prior to Final Years of Term Subject to the provisions of Section 5.1, if at any time after the Effective Date and during the Term, all or any part of the Land or Improvements are damaged or destroyed by any cause (“Casualty”), Lessee shall, at Lessee’s sole cost and expense, repair, restore, and reconstruct the Land and Improvements to substantially the same condition that existed immediately prior to the Casualty in substantial conformance with the previously approved final plans and specifications for the Improvements (as may be modified pursuant to this Lease), subject to any changes necessary to comply with then applicable federal, state, and local laws and regulations and with any upgrades or improvements proposed by Lessee and reasonably approved by City. All such work shall be promptly constructed in a good and workmanlike manner according to and in conformance with all laws and the requirements of this Lease.
In the event of a Casualty, all insurance proceeds shall be applied first to fully repair, restore, and reconstruct the Land and Improvements, and any insurance proceeds remaining after completion of all such repair, restoration, and reconstruction in accordance with this Lease shall be paid to Lessee. If the insurance proceeds are insufficient to pay all costs to fully repair, restore, and reconstruct the Land and Improvements as required under this Lease, Lessee shall pay the deficiency and shall proceed to complete the repair, restoration and reconstruction of the Land and Improvements and pay the costs of completing the repair, restoration and reconstruction, or shall be in default under this Lease.
Section 5.4 Damage or Destruction During Final Years of Term.
In the event of major damage or destruction to the Improvements on the Land during the last five (5) years of the Term, the Lessee shall have the right, at the Lessee's election, to either make full repair of such damage and fully restore the Improvements on the Land in accordance with the provisions of Section 5.3 or to terminate this Lease, and provided that if the Lessee elects to terminate this Lease, the Lessee shall comply with all of the following conditions:
(a) The Lessee shall give the City written notice of the damage or destruction within ten (10) days after the event causing such damage or destruction;
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(b) There shall not then exist an Event of Default (or an event which, after notice and the passage of time as required by this Lease without cure of such event, would constitute an Event of Default);
(c) As promptly as is feasible, the Lessee shall repair or restore the damaged Improvements to the extent necessary to preserve them and make them safe from immediate danger to the public; and
(d) The Lessee shall deliver possession of the Land and the Improvements thereon to the City and shall quitclaim to the City all right, title and interest in the Land and the Improvements thereon.
Major damage or destruction to the Improvements on the Land (as used in this Section) means damage or destruction where the cost to make full repair of such damage and restore the Improvements in accordance with the provisions of Section 5.1 would be fifty percent (50%) or more of the replacement cost of all of the Improvements on the Land in their entirety. The calculation of such percentage shall be based upon the replacement cost of the Improvements on the Land as of the date of the damage or destruction. The determination of whether any particular damage or destruction constitutes major damage or destruction within the meaning of this paragraph shall be determined and certified by a professional cost estimator experienced in such matters and mutually designated by the City and the Lessee within ten (10) days of the occurrence of such damage or destruction. If the Parties are unable to designate a mutually acceptable cost estimator within such period, either party may apply to the presiding judge of the Superior Court of San Mateo County who shall appoint such cost estimator.
Section 5.5 Procedures for Repair and Restoration
The provisions of this Section shall apply whenever the Improvements on the Land are to be repaired or restored under the provisions of this Article. (a) In the event of any damage or destruction to the Land or the Improvements, the Lessee shall promptly give the City written notice of such damage or destruction, setting forth the cause (if known), the date on which such damage or destruction occurred, and the estimated cost of repair and restoration as certified by a professional cost estimator experienced in such matters. Whenever any part of the Land or the Improvements shall have been damaged or destroyed, the Lessee shall promptly make proof of loss and shall proceed promptly to collect, or cause to be collected, all valid claims which the Lessee may have against insurers or others based upon any such damage or destruction. Except as otherwise provided below, sums of money received as payments for any losses pursuant to said insurance policies shall be used and expended for the purpose of fully repairing or reconstructing the portions of the Land or the Improvements which have been destroyed or damaged in accordance with the procedures of subsections (b) and (c) below, unless the Lessee has established alternate procedures that, in the City's reasonable judgment, will accomplish the use and expenditure of the insurance proceeds to effectuate full repair or reconstruction of the portions of the Land or the Improvements which have been destroyed or damaged in a more effective manner than the procedures set forth in subsections (b) and (c).
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The provisions of subsection (d) below shall apply regardless of the procedure employed for the use and expenditure of insurance proceeds.
(b) Within one hundred eighty (180) days after the event of damage or destruction, the Lessee shall make available to the Insurance Trustee, described in subsection (c) below, the difference, if any, between the certified estimated cost of repair and restoration and the amount of insurance proceeds anticipated to be received for such repair and restoration (such amount is hereinafter referred to as the "Lessee Contribution"). (c) All proceeds of insurance together with the Lessee Contribution, if any, shall be paid by the Lessee to the insurance trustee, which insurance trustee shall be a commercial bank or trust company experienced in such matters and designated by the City and approved by Lessee and the Other Loan holders (the "Insurance Trustee"). The Insurance Trustee shall hold such proceeds in trust and shall disburse same to the Lessee as follows: from time to time as the work of restoration progresses, the Lessee shall submit to the Insurance Trustee a certificate of the Lessee, signed by an authorized officer or representative thereof, and approved by an architect selected by the Lessee and approved by the City (the "Architect"), which certificate shall:
(1) accurately describe the work for which the Lessee is requesting payment and the cost incurred by the Lessee in connection therewith, (2) certify that the Lessee has not theretofore received payment for such work, and
(3) conditional lien releases based upon payment executed by all persons or entities supplying labor or materials in connection with such work; and (4) contain or be accompanied by a statement by the Lessee that the work for which the Lessee is requesting payment has been performed substantially in accordance with plans and specifications therefor approved by the City.
Within five (5) days after receipt of any such certificate, the Insurance Trustee shall pay to the Lessee, from the funds on hand, an amount equal to ninety percent (90%) of the amount of the cost of the work for which the Lessee is requesting payment, as shown on such certificate. Upon completion of such work, the remainder of such cost (to the extent of the balance of the funds held by the Insurance Trustee) and all other insurance proceeds held by the Insurance Trustee shall be paid to the Lessee within five (5) days after the delivery to the Insurance Trustee of a certificate of the Lessee, signed by an authorized officer or representative thereof and approved by the Architect for the work, stating that the work has been completed and setting forth the total cost thereof, which certificate shall: (1) contain or be accompanied by a statement by the Lessee that the work has been completed substantially in accordance with plans and specifications therefor approved by the City; and (2) be accompanied by either (A) an unconditional waiver or release of mechanics' and materialmen's liens executed by all persons or entities supplying labor or materials in connection with such work or (B) other evidence reasonably satisfactory to the City that the period for filing any such lien has expired and no such
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lien has been filed, or, if filed, has been bonded by the Lessee to the reasonable satisfaction of the City and the Insurance Trustee. The Insurance Trustee shall not be required to invest or pay interest on any funds held by such trustee, except in accordance with any agreement between the Lessee and the Insurance Trustee.
The Lessee shall promptly commence and complete, in a good and workmanlike manner and in accordance with Article 3 the reconstruction or repair of any part of the Property or the Improvements thereon damaged or destroyed after (1) the City has approved the Lessee's plans, drawings, specifications and construction schedule for such reconstruction or repair as such approval may be required under Article 5, and (2) the proceeds of insurance, if any, applicable to such reconstruction or repair have been made available for such purpose.
Section 5.6 Procedures Upon Permitted Termination
Upon termination of this Lease pursuant to Section 5.5, insurance proceeds for the Improvements not used in repair or restoration shall be distributed as follows:
(a) First, to any Lenders with then outstanding Other Loan. (b) Second, at the option of the City, to the City in the amount necessary to raze the remaining Improvements, clear the Land, make it safe, and return the Land to the condition of a developable pad.
(c) Third, any balance shall be divided between the City and the Lessee on the following basis: Proceeds for Improvements having a remaining useful life less than the remaining Term as of the termination date shall be paid to the Lessee. A proportionate share of proceeds for the Improvements having a remaining useful life greater than the remaining Term as of the termination date, calculated by the ratio that the remaining Term bears to the remaining useful life, shall be paid to the Lessee, and the balance of such proceeds for such Improvements shall be paid to the City.
All other insurance proceeds shall be paid to and become the sole property of the Lessee.
Section 5.7 Prosecution of Claims
In connection with and as a condition of any termination pursuant to Section 5.5 the Lessee shall make proof of loss and proceed to collect or commence collection of all valid claims which the Lessee may have against insurers or others based upon such damage or destruction, and shall assign and transfer to the City all rights under insurance policies and against others and proceeds of insurance and other claims resulting from the casualty.
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Upon termination of this Lease, the Lessee shall deliver possession of the Land and the Improvements thereon to the City and quitclaim to the City all right, title and interest in the Property and the Improvements thereon.
Section 5.8 Indemnification.
Lessee shall indemnify, defend, hold harmless City, and its supervisors, employees, agents, volunteers, successors, and assigns against any and all suits, actions, claims, causes of actions, whether actual or alleged, administrative proceedings, arbitrations or enforcement actions which arise out of or in connection with directly or indirectly, in whole or in part, Lessee's ownership, occupancy, development, or operation of the Improvements or construction, maintenance, rehabilitation or repair on the Land by Lessee or Lessee's contractors, subcontractors, agents, employees or tenants and all damages (direct or consequential), costs, losses, injuries, fines, penalties, liens, encumbrances, charges, liabilities, demands, judgments, remedial action requirements, obligations, and all costs and expenses incurred in connection therewith (including, but not limited to, attorney fees and costs); provided, however, that this indemnity shall not extend to (i) any claim arising solely from City's failure to perform its obligations under this Lease or solely from the gross negligence or willful misconduct of City, or its supervisors, employees, agents, volunteers, successors, and assigns or (ii) any claim arising from the actions or inaction of the Commercial Developer, or its supervisors, employees, agents, volunteers, successors, and assigns. The provisions of this section shall survive expiration of the Term or other termination of this Lease and shall remain in full force and effect and are not limited by the amount of insurance as may be required.
Section 5.9 Hazardous Materials Indemnification.
(a) No Hazardous Materials Activities. The Lessee hereby represents and warrants to the City that, at all times from and after the Closing Date, the Lessee shall not cause or permit the Land or the Improvements thereon to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials, except to the extent such Hazardous Materials were present on or about the site prior to the Closing Date. Without the City's prior written consent, which shall not be unreasonably withheld or delayed, the Lessee shall not take any remedial action in response to the presence of any Hazardous Materials on, under, or about the Development (other than in emergency situations or as required by governmental agencies having jurisdiction), nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Materials Claims
(b) Definition of Hazardous Material or Hazardous Substances. As used in this Section, "Hazardous Materials" or "Hazardous Substances" shall mean the following:
hazardous substance, hazardous waste, infectious waste, or hazardous material as defined in any federal, state or local statute, ordinance, regulation, or rule applicable to the Land, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
Section 9601 et seq.) or Sections 25280 et seq., 25310 et seq., 25110 et seq., or 25500 et seq. of the California Health and Safety Code at such time; any other waste, substance or material designated or regulated in any way as "toxic" or "hazardous" in the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), Federal Water Pollution Control Act (33 U.S.C.
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Section 1251 et seq.), Safe Drinking Water Act (42 U.S.C. Section 300f et seq.), Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), Clean Air Act (42 U.S.C. Section 7401 et seq.), California Health and Safety Code (Section 25100 et seq.), or California Water Code (Section 13000 et seq.) at such time; and any additional wastes, substances or material which at such time are classified, considered or regulated as hazardous or toxic under any other present or future environmental or other similar laws relating to the Land, including asbestos, asbestos- containing materials, radon gas, oil or any fraction thereof of petroleum products, but excluding any substances or materials used in the construction, development, maintenance or operation of the Improvements, so long as the same are used in accordance with all applicable laws. (c) Definition of Hazardous Materials Law: As used in this Section, Hazardous Materials Law shall mean: All federal, state, and local laws, ordinances, regulations, orders and directives pertaining to Hazardous Materials in, on or under the leased premises or any portion thereof.
(d) Indemnity. Lessee agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to City) City, its board members, officers, and employees from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders judgments, remediation action requirements, enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including, but not limited to, attorney's fees and expenses), arising directly or indirectly, in whole or in part, out of: (1) the failure during the Lease Term of Lessee or any employees, agents, contractors or subcontractors of the Lessee, other than any indemnitee, to comply with any Hazardous Materials Law relating in any way whatsoever to the handling, treatment, presence, removal, storage, decontamination, cleanup, transportation or disposal of Hazardous Materials into, on, under or from the Land; (2) any releases or discharges of any Hazardous Materials by Lessee or any employees, agents, contractors or subcontractors of the Lessee, other than any indemnitee, occurring during the Lease Term into, on, under or from the Land, except for Hazardous Materials that existed in , on, or under the Land prior to the execution of this Lease; (3) any activity carried on or undertaken on or off the Land during the Lease Term by Lessee or any employees, agents, contractors or subcontractors of Lessee, in connection with the handling, treatment, removal, storage, decontamination, cleanup, transport or disposal of any Hazardous Materials at any time located or present on or under the Land. The provisions of this subsection shall survive expiration of the Lease Term, as set forth in Section 2.2, or other termination of this Lease, and shall remain in full force and effect. Notwithstanding the foregoing, Lessee's duty to indemnify City under the provisions of this Section shall not include any claims arising from any acts, omissions or events occurring subsequent to a Transfer approved by City pursuant to this Lease. This indemnity obligation shall not extend to any claim arising from City's sole negligence or willful misconduct.
Section 5.10 "As Is" Conveyance.
(a) Lessee hereby agrees and acknowledges that except in the event of any fraud, misrepresentation, or withholding of information by City: (1) neither City, nor anyone acting for or on behalf of City, has made any representation, statement, warranty or promise to Lessee concerning the development potential or condition of the Land; (2) in entering into this Lease, Lessee has not relied on any representation, statement or warranty of City, or anyone
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acting for or on behalf of City, other than as may expressly be contained in writing in this Lease; (3) all matters concerning the Land have been or shall be independently verified by Lessee and that Lessee shall purchase or lease the Land on Lessee's own prior examination thereof; and (4) THAT LESSEE IS PURCHASING OR LEASING THE LAND, AS APPLICABLE, IN AN "AS IS" PHYSICAL CONDITION AND IN AN "AS IS" STATE OF REPAIR. (b) General Release. Subject to subsection (a) above and all other indemnities provided by the City to Lessee in this Lease and/or in the City Disposition and Loan Agreement, Lessee and its owners, employees, agents, assigns and successors agree that upon the execution of the Lease, Lessee shall be deemed conclusively to have released and discharged City and its agents, employees, trustees, assigns and successors, from any and all damages, losses, demands, claims, debts, liabilities, obligations, causes of action and rights, whether known or unknown, by Lessee regarding the Land, including, but not limited to, the environmental condition of the Land.
(c) Waiver of Civil Code §1542. Lessee agrees that, with respect to the General Release contained in subsection (b) above, the General Release extends to all matters regarding the Land, whether or not claimed or suspected, to and including the date of execution hereof, and constitutes a waiver of each and all the provisions of the California Civil Code §1542, which reads as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR OR RELEASING PARTY DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT
THE TIME OF EXECUTING THE RELEASE AND THAT, IF
KNOWN BY HIM OR HER, MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR
OR RELEASED PARTY"
________ Initial
Lessee acknowledges that the effect and import of the provisions of Civil Code §1542 have been explained to it by its own counsel. Lessee understands and acknowledges the significance and the consequence of such specific waiver of unknown claims and hereby assumes full responsibility for any injuries, damages, losses or liabilities that it may hereinafter incur from the waiver of these unknown claims.
ARTICLE 6
CONDEMNATION
Section 6.1 Condemnation.
If the Project or the fee interest in the Land or any part of them shall be taken or condemned, for any public or quasi-public purpose or use by any competent entity in appropriate proceedings, or by any right of eminent domain, the City and the Lessee shall request that awards and other
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payments on account of a taking of the Project or the fee interest in the Land (less costs, fees and expenses incurred by the City and the Lessee in connection with the collection of such awards and other payments) shall be divided by the presiding court between loss of value of the fee interest in the Land and loss of value of the Project. In any case, such awards and payments shall be applied as follows:
(a) Net awards and payments received on account of a partial taking of the Project, other than a taking for a temporary use not exceeding one (1) year, shall be paid to the Insurance Trustee referred to in Section 5.5 above to be held and disbursed in the same manner as insurance proceeds, except that any such remaining after completion of any restoration shall be divided between the City and the Lessee and disbursed by the Insurance Trustee in the manner provided in Section 5. 6.
(b) Net awards and payments received on account of a partial or total taking of only the City's fee interest in the Land or the reversionary interest in the Improvements (that is, a taking of City's fee interest in the Land or the City's reversionary interest in the Improvements that has no effect on the value of the Lessee's leasehold interest in the Land or the Lessee's fee interest in the Improvements), including severance damages, shall be paid to the City, which amount shall be free and clear of any claims of the Lessee, or any other persons claiming rights to the Land through or under the Lessee. (c) Net awards and payments received on account of a taking for temporary use not exceeding one (1) year and relating to a period during the Lease Term shall be paid to the Lessee and first applied to pay the cost of relocation of Residents and lessee of ground floor community space and restoration of any damage to or destruction of the Project if the Lessee determines that restoration is feasible. If the Lessee determines that such restoration is not feasible, the Lessee and the City shall petition the court to determine the relative damages to the Lessee and the City, and net awards and payments shall be made as the court determines. Net awards and payments received on account of a taking for temporary use not exceeding one (1) year and relating to a period beyond the Lease Term shall be paid to the City. (d) Net awards and payments received on account of a total taking of the Project shall be allocated and paid in the following order of priority:
(1) First, to any Lenders with then-outstanding Other Loans or the City with an outstanding City Loan secured by the Project (in the order of their respective lien priority, if there is more than one Lender), an amount equal to the unpaid balance secured by their respective Other Loan or City Loan (as applicable) to the extent there are sufficient funds to make such payments;
(2) The balance, if any, shall be divided between the City and the Lessee in the manner specified in subparagraph (e) below; provided, however, if the taking has no effect on the value of the City's fee interest in the Land or reversionary interest in the Improvements, the balance shall be paid exclusively to the Lessee. (e) The Lessee shall receive reimbursement for any funds it has reasonably expended for repair and/or reconstruction of the Project (other than funds received from Lenders
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or the City) pursuant to Article 6. The value of the Lessee's and City's interest in the Lease, the residual value of the Land, and the Improvements shall be determined by an MAI or SRI appraiser selected by the Lessee.
(f) The Lessee shall receive any award granted for or allocated to trade fixtures, moving expenses or loss of business.
(g) If the Project is taken or condemned during the last five (5) years of the Lease Term under circumstances described in subparagraph (a) above, the Lessee may elect to terminate the Lease and proceeds of any payment or award shall be distributed in accordance with the provisions of subparagraphs (d) and (e) above.
Section 6.2 Administration of Construction Fund in the Event of Condemnation, or Damage or Destruction of Project.
In the event that the Other Loans and the City Loan have been paid in full, and if the Project or any part of it is to be repaired or reconstructed, after damage or destruction of the Project or its condemnation, all proceeds collected under any and all policies of insurance referred to in Article V above covering such damage or destruction, or all compensation received by Lessee for such taking by the exercise of the power of eminent domain, shall be paid into a special fund to be created and held by the Lessee and to be designated as the construction fund, during such repairing or reconstructing. Any surplus of such insurance or condemnation proceeds remaining after the completion of all payments for such repairing or reconstructing shall be held or applied by the Lessee in a manner consistent with the applicable provision of Article V or this Article VI.
Section 6.3 Lessee, City, Lenders to be Made Parties in Legal Proceedings. (a) In the event proceedings shall be instituted: (1) for the exercise of the power of eminent domain; or (2) as a result of any damage to or destruction of the Project, the Lessee, the City, and any Lender with a then-outstanding Other Loan shall be made parties to those proceedings, and if not made parties by the petitioning party, shall be brought into the proceedings by appropriate proceedings of other parties so that adjudication may be made of the damages, if any, to be paid to the Lessee, the City and the Lenders as compensation for loss of their rights in the Improvements or the Land, or for damage to or destruction of the Project.
Should the City or the Lessee receive notice of institution of any proceedings subject to Section
6.1, the Party receiving such notice shall notify the other in accordance with Section 9.2 of this Lease, not later than thirty (30) days after receiving such notice. (b) The City and the Lessee shall cooperate and consult with each other in all matters pertaining to the settlement, compromise, arbitration, or adjustment of any and all claims and demands for damages on account of damage to or destruction of the Project, or for damages on account of the taking or condemnation of the Project, the Improvements or the Land.
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ARTICLE 7
ASSURANCES OF CITY
Section 7.1 City to Give Peaceful Possession.
The City covenants that it owns in fee simple, and that it has good and marketable title to the Land and that the Land is free of all easements, covenants, conditions and restrictions except for permitted exceptions as reasonably accepted by Lessee as of the Effective Date. The City has the full right and authority to make this Lease. The City covenants and warrants that the Lessee and its Residents shall have, hold and enjoy, during the Lease Term, peaceful, quiet and undisputed possession of the Land leased without hindrance or molestation by or from anyone so long as the Lessee is not in default under this Lease.
Section 7.2 City to Lease Project with Marketable Title.
The City covenants and warrants that there are no outstanding liens and encumbrances on the Land, other than permitted exceptions as reasonably accepted by Lessee as of the Effective Date.
Section 7.3 Release of City.
The City may sell, assign, transfer or convey (but not encumber), with the prior written consent of any Lenders, all or any part of City's interest in the Land, reversionary interest in the Improvements or this Lease without obtaining the Lessee's consent, provided that the purchaser, assignee, or transferee expressly assumes all of the obligations of the City under this Lease by a written instrument in a form reasonably satisfactory to the Lessee and recordable in the Official Records of the jurisdiction in which the Land is located. In the event the City intends to sell, assign, transfer, or convey all or any part of the Land, the City shall notify the Lessee of such intention and the terms of such sale not later than ninety (90) days before anticipated close of escrow. The Lessee shall then have sixty (60) days after the receipt of notice from the City to exercise a right of first refusal on the same terms as are included in the City's notice to the Lessee. In the event of a sale, assignment, transfer or conveyance by City of the Land or its rights under this Lease, the same shall operate to release the City from any future liability upon any of the covenants or conditions of this Lease, expressed or implied, in favor of Lessee, and in such event the Lessee shall look solely to the successor in interest of the City in and to the Land or this Lease. This Lease shall not be affected by any such sale, and the Lessee agrees to attorn to any such purchaser or assignee.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.1 Events of Default; Remedy of Default by Lessee. (a) Any one or more of the following events shall constitute an "Event of Default":
(1) Failure to pay rent, as required pursuant to Section 2.3 of this Lease, or any other payment required under this Lease, and continuance of such failure for a
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period of thirty (30) days after receipt by the Lessee of written notice specifying the nonpayment;
(2) Failure of the Lessee to observe and perform any covenant, condition or agreement hereunder on its part to be performed, and (i) continuance of such failure for a period of thirty (30) days after receipt by the Lessee of written notice specifying the nature of such default, or (ii) if by reason of the nature of such default the same cannot be remedied within said thirty (30) days, the Lessee fails to proceed with reasonable diligence after receipt of said notice to cure the same; or
(3) A general assignment by the Lessee for the benefit of creditors; or (4) The filing of a voluntary petition by the Lessee, or the filing of an involuntary petition by any of the Lessee's creditors seeking the rehabilitation, liquidation or reorganization of the Lessee under any law relating to bankruptcy, insolvency or other relief of debtors, provided that in the case of an involuntary petition Lessee shall have sixty (60) days to cause such petition to be withdrawn or dismissed; or
(5) The appointment of a receiver or other custodian to take possession of substantially all of the Lessee's assets or of this leasehold which appointment is not withdrawn or dismissed within sixty (60) days; or
(6) The Lessee becomes insolvent or declares it is unwilling to pay its debts as they become due; or any court enters a decree or order directing the winding up or liquidation of the Lessee or of substantially all of its assets; or the Lessee takes any action toward the dissolution or winding up of its affairs or the cessation or suspension of its use of the Project; or
(7) Attachment, execution or other judicial seizure of substantially all of the Lessee's assets or this leasehold, which is not dismissed, bonded, or stayed within sixty (60) days.
(b) Whenever any default shall have occurred and be continuing and upon expiration of any applicable cure periods provided in this Lease, and subject to the cure rights of Lenders of the Lessee set forth in this Lease, the City may take whatever action at law or in equity as may appear reasonably necessary to enforce performance or observance of any obligations, agreements, or covenants of the Lessee under this Lease, including without limitation, termination of this Lease, provided, however, that for so long as an Other Loan encumbers this Project, this lease shall not be terminated. In the event of such default, the City's remedies shall be cumulative, and no remedy expressly provided for in this Section shall be deemed to exclude any other remedy allowed by law. Notwithstanding the foregoing, the City shall not terminate this Lease prior to the end of the Compliance Period (as defined in Section 42(i)(1) of the Internal Revenue Code).
Section 8.2 Cure of Material Breach by Lessee
If the Lessee defaults under the Lease, the City shall give the Lessee, the Investor and the Lenders written notice requiring that the default is to be remedied by the Lessee. If the default is
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not cured within the time set forth by the City (which shall be a reasonable time for curing the default and shall in any event be at least ninety (90) days), the City, the Investor or the Lenders may take any action as may be necessary to protect their respective interests. Such action, in the event that the Lessee shall fail to perform any of its obligations under this Lease and such failure shall continue after the expiration of the cure period specified in this Section, shall include the right of the City, the Investor or the Lenders to cure such default and receive any expenditure with interest thereon (at the reference rate then in effect at Bank of America, N.A. or any successor institution) from the Lessee within thirty (30) days after sending to the Lessee a statement for such expenditure and interest.
Section 8.3 Termination.
In the event of a total taking or in the event of damage, destruction, or a partial taking, other than a temporary taking of the Project, which the Lessee reasonably determines renders continued operation of the Project infeasible both as a whole and in substantial part, this Lease shall terminate (except if the Lessee is rebuilding the Project in accordance with the terms of this Lease), and in such event any proceeds shall be allocated pursuant to Section 5.3 or Article 6, as appropriate. In the event of a partial taking that does not result in termination pursuant to this Section, this Lease shall remain in full force and effect as to the portion of the Project remaining. Notwithstanding the preceding sentences, for so long as (i) an Other Loan encumbers this Project and/or the Project remains within the Compliance Period (as defined in Section 42(i)(1) of the Internal Revenue Code), this lease shall not be terminated.
Section 8.4 Redelivery of Premises.
At the expiration or sooner termination of this Lease, the Lessee will peaceably and quietly quit and surrender the premises to the City in good order and condition, subject to the other provisions of this Lease.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Instrument Is Entire Agreement.
This Lease and the attached Exhibits constitute the entire agreement between the Parties with respect to the matters set forth in this Lease. This Lease shall completely and fully supersede all other prior understandings or agreements, both written and oral, between the City and the Lessee relating to the lease of the Land by the City to the Lessee.
Section 9.2 Notices.
All notices under this Lease shall be in writing signed by Authorized Officer(s) and shall be sufficient if sent by United States first class, certified mail, postage prepaid, or reputable private delivery service with a receipt showing the date of delivery, addressed:
If to the City: City of San Mateo
320 W. 20th Avenue
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San Mateo, CA 99403
Attn: City Manager
If to the Lessee: AH Bespoke LP
c/o Alta Housing
3460 West Bayshore Road, Suite 104
Palo Alto, CA 94303
Attn: President
With copy to:
or any other address as either Party may have furnished to the other in writing pursuant to the requirements of this Section as a place for service of notice. Any notice so mailed shall be deemed to have been given on the delivery date, the date that delivery is refused by the addressee or the date shown on the delivery receipt as the date delivery was attempted if undeliverable, as shown on the delivery receipt.
Section 9.3 Recording.
A Memorandum of Lease shall be executed by the Parties in recordable form and shall be recorded in the official records of the jurisdiction in which the Land is located. In the event this Lease is amended or assigned a memorandum of such amendment or assignment shall also be executed by the Parties in recordable form and shall be recorded in the official records of the jurisdiction in which the Land is located.
Section 9.4 Non-Waiver of Breach.
Neither the failure of the City or the Lessee to insist upon strict performance of any of the covenants and agreements of this Lease nor the failure by the City or the Lessee to exercise any rights or remedies granted to such Party under the terms of this Lease shall be deemed a waiver or relinquishment: (a) of any covenant contained in this Lease or of any of the rights or remedies of the Lessee or the City under this Lease; or (b) or the right in the future of the City or the Lessee to insist upon and to enforce by any appropriate legal remedy a strict compliance with all of the covenants and conditions of this Lease.
Section 9.5 Effective Date; Counterparts.
This Lease shall become effective upon the commencement of the Lease Term. This Lease may be executed in counterparts, each of which shall be an original and all of which shall constitute the same instrument.
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Section 9.6 Lease Binding on Successors.
This Lease and all of its provisions and attached Exhibits shall inure to the benefit of, and shall be binding upon, the City, the Lessee, and their respective permitted successors and permitted assigns and, as provided in this Lease, the Lenders.
Section 9.7 Relationship of Parties.
Nothing contained in this Lease shall be deemed or construed by the Parties or by any third party to create the relationship of principal or agent or of partnership, joint venture or association or of buyer and seller between the City and the Lessee, it being expressly understood and agreed that neither the computation of any payments and other charges under the terms of this Lease nor any other provisions contained in this Lease, nor any act or acts of the Parties, shall be deemed to create any relationship between the City and the Lessee other than the relationship of landlord and tenant.
Section 9.8 No Merger.
There shall be no merger of this Lease or any interest in this Lease nor of the leasehold estate created by this Lease, with the fee estate in the Land, by reason of the fact that this Lease or such interest in the Lease, or such leasehold estate may be directly or indirectly held by or for the account of any person who shall hold the fee estate in the Land, or any interest in such fee estate, nor shall there be such a merger by reason of the fact that all or any part of the leasehold estate created by this Lease may be conveyed or mortgaged in a leasehold mortgage to a leasehold mortgagee who shall hold the fee estate in the Land or any interest of the City under this Lease.
Section 9.9 Gender and Number.
Words of any gender used in this Lease shall be held to include any other gender, and any words in the singular number shall be held to include the plural (and vice versa), when the sense requires.
Section 9.10 Titles.
The titles and article or paragraph headings are inserted only for convenience, and are in no way to be construed as a part of this Lease or as a limitation on the scope of the particular provisions to which they refer.
Section 9.11 Severability.
If any provision of this Lease or the application of any provision to any person or circumstances shall be invalid or unenforceable to any extent, the remainder of this Lease, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected, and each provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
Section 9.12 Applicable Law and Venue.
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This Lease shall be governed by and construed in accordance with the laws of the State of California. In the event any legal action is commenced to interpret or to enforce the terms of this Agreement or to collect damages as a result of any breach thereof, the venue for such action shall be the Superior Court of the County of San Mateo, or where otherwise appropriate, exclusively in the United District Court, Northern District, San Francisco, California.
Section 9.13 Costs and Attorney Fees.
Attorney fees in total amount not to exceed Five Thousand Dollars ($5,000), shall be recoverable as costs (by the filing of a cost bill) by the prevailing party in any action or actions to enforce the provisions of this Agreement. The above dollar limit is the total of attorney fees recoverable whether in the trial court, appellate court, or otherwise, and regardless of the number of attorneys, trials, appeals, or actions. It is the intent of this provision that neither party shall have to pay the other more than Five Thousand Dollars ($5,000) for attorney fees arising out of an action, or actions, to enforce the provisions of this Agreement.
Section 9.14 Mediation.
Should any dispute arise out of this Agreement, any party may request that it be submitted to mediation. The parties shall meet in mediation with thirty days (30) days of a request, and such mediation shall be limited to one (1) day of mediation. The mediator shall be agreed to by the mediating parties. In the absence of an agreement, the parties shall each submit one name from mediators listed by either the American Arbitration Association, the State Mediation and Conciliation Service, or other agreed-upon service. The mediator shall be selected by a blind draw. The cost of mediation (other than attorneys' fees of each party) shall be borne equally by the parties. Neither party shall be deemed the prevailing party. No party shall be permitted to file a legal action without first meeting in mediation and making a good faith attempt to reach a mediated settlement. The mediation process, once commenced by a meeting with the mediator, shall last until agreement is reached by the parties, but not more than sixty (60) days from when such process is commenced, unless the maximum time is extended by mutual written agreement executed by both parties.
Section 9.15 Litigation.
Lessee may at the reasonable request testify at City's request, if litigation is brought against City in connection with this Agreement, to the extent the Lessee is considered a material witness to the action being litigated. Unless the action is brought by Lessee, or is based upon Lessee's wrongdoing, City shall compensate Lessee for preparation for all reasonable attorneys' fees, and for preparation of testimony and travel at Lessee's standard hourly rates at the time of actual testimony.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have executed this Lease effective as of the day and year first above written.
CITY:
CITY OF SAN MATEO, a California charter
city
By: ______________________________
Name: Alex Khojikian
Its: City Manager
Approved to as form and legality
__________________________________
Mazarin Vakharia, Assistant City Attorney
LESSEE:
AH Bespoke LP,
a California limited partnership
By: AH Bespoke LLC,
a California limited liability
company
its managing general partner
By: Alta Housing, a California
nonprofit public benefit
corporation, its manager
By:
_____________________
Name: __________________
Title: ___________________
(Note: All of the Exhibits that follow have been revised to include the latest information.)
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EXHIBIT A
LEGAL DESCRIPTION OF APN 034-179-050 and 034-179-060
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF SAN MATEO, COUNTY OF SAN MATEO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOTS 2, 3 AND 4, BLOCK 10, AS DELINEATED UPON THAT CERTAIN MAP ENTITLED "MAP OF THE TOWN OF SAN MATEO", FILED FOR RECORD IN THE OFFICE OF THE
RECORDER OF THE COUNTY OF SAN MATEO, STATE OF CALIFORNIA, ON JANUARY 24TH, 1867 IN BOOK 2 OF MISCELLANEOUS RECORDS, PAGE 95 AND A COPY ENTERED INTO BOOK 1 OF MAPS, PAGE 45.
APN: 034-179-050, JPN: 034-017-179-05.00, 034-179-060, JPN: 034-017-179-06.00
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EXHIBIT B
FINANCING PLAN
TO BE INSERTED
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EXHIBIT C
GROUND FLOOR COMMUNITY SPACE
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EXHIBIT D
SIDEWALK AREA
City sidewalk along Railroad Avenue and 4th Avenue, as identified in diagrams below, will be located within Property. Area of sidewalk within Property is approximately __TO BE INSERTED________.
660\14\5005419.1
EXHIBIT E
INSURANCE REQUIREMENTS
Developer will maintain the insurance coverage described below for itself and its applicable Improvements:
1. Construction Coverage - Minimum Scope and Limits of Insurance
Developer shall procure and maintain for the duration of the project construction until issuance of certificate of occupancy insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the construction work hereunder by the Developer, its agents, representatives, or employees.
Coverage shall be at least as broad as:
a. Commercial General Liability (CGL): Insurance Services Office (ISO) Form CG 00 01 covering CGL on an “occurrence” basis, including products and completed operations, property damage, bodily injury and personal & advertising injury with limits no less than $5,000,000 per occurrence. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location (ISO CG 25 03 or 25 04) or the general aggregate limit shall be twice the required occurrence limit. The $5,000,000 per occurrence limit can also be met with an umbrella liability policy in the amount of at least $5,000,000.
b. Automobile Liability: Insurance Services Office Form CA 0001 covering Code 1 (any auto), with limits no less than $2,000,000 per accident for bodily injury and property damage..
c. Workers’ Compensation insurance as required by the State of California, with Statutory Limits, and Employers’ Liability insurance with a limit of no less than $1,000,000 per accident for bodily injury or disease.
d. Builder’s Risk (Course of Construction) insurance utilizing an “All Risk” (Special Perils) coverage form, with limits equal to the completed value of the project and no coinsurance penalty provisions.
e. Developer shall cause its Contractor to maintain Contractors’ Pollution Legal Liability with limits no less than $2,000,000 per occurrence or claim, and $4,000,000 policy aggregate and Developer’s contract with its Contractor will require the Contractor to indemnify the City and name the City as an additional insured on Pollution policy. f. Umbrella liability policy: Developer shall maintain an umbrella liability policy in the amount of $5,000,000.
g. If developer maintains broader coverage and/or higher limits than the minimums shown above, the City requires and shall be entitled to the broader coverage and/or the higher limits maintained by the developer. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City.
2. Post Coverage – Minimum Scope and Limits of Insurance 660\14\5005419.1
Coverage shall be at least as broad as:
a. Commercial General Liability (CGL): Developer shall maintain Insurance Services Office Form CG 00 01 covering CGL on an “occurrence” basis, including products and completed operations, property damage, bodily injury and personal & advertising injury with limits no less than $3,000,000 per occurrence. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location (ISO CG 25 03 or 25 04) or the general aggregate limit shall be twice the required occurrence limit.
b. Automobile Liability: Insurance Services Office Form CA 0001 covering Code 1 (any auto), with limits no less than $1,000,000 per accident for bodily injury and property damage.
c. Workers’ Compensation insurance as required by the State of California, with Statutory Limits, and Employer’s Liability Insurance with limits of no less than $1,000,000 per accident for bodily injury or disease.
c. Property insurance against all risks of loss (other than with respect to loss resulting from Earthquake) to the commercial and residential buildings including the parking garageat full replacement cost with no coinsurance penalty provision. d. Pollution Legal Liability with limits no less than $2,000,000 per occurrence or claim, and $2,000,000 policy aggregate.
3. Additional Insurance Provisions Applicable to Construction and Post Coverage a. Broader Coverage: If the Developer maintains broader coverage and/or higher limits than the minimums shown above, the City requires and shall be entitled to the broader coverage and/or the higher limits maintained by the developer. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City.
b. Self-insured retentions: Self-insured retentions for insurance required herein must be declared to and approved by the City. At the option of the City, either: the developer shall cause the insurer shall to reduce or eliminate such self-insured retentions as respects the City, its elected and appointed officials, employees, and agents; or the developer shall provide a financial guarantee satisfactory to the City guaranteeing payment of losses and related investigations, claim administration, and defense expenses. The policy language shall provide, or be endorsed to provide, that the self-insured retention may be satisfied by either the named insured or City.
c. Endorsements: The insurance policies are to contain, or be endorsed to contain, the following provisions:
1. The City, its elected and appointed officials, employees, and agents are to be covered as additional insureds on the CGL policy with respect to liability arising out of work or operations performed by or on behalf of the Developer including materials, parts, or equipment furnished in connection with such work or operations and automobiles owned, leased, hired, or borrowed by or on behalf of the Developer. General liability coverage can be provided in the form of an endorsement to the Developer’s insurance (at least as broad as ISO Form CG 20 10, CG 11 85 or both CG 20 10, CG 20 26, CG 20 33, or CG 20 38; and CG 20 37 forms if later revisions used). 660\14\5005419.1
2. For any claims related to this project, the Developer’s insurance coverage shall be primary insurance coverage at least as broad as ISO CG 20 01 04 13 as respects the City, its elected and appointed officials, employees, and agents. Any insurance or self-insurance maintained by the City, its elected and appointed officials, employees, or agents shall be excess of the Developer’s insurance and shall not contribute with it.
3. Each insurance policy required by this clause shall provide that coverage shall not be canceled, except with notice to the City.
d. Acceptability of Insurers: Insurance is to be placed with insurers authorized to conduct business in the state with a current A.M. Best rating of no less than A: VII, unless otherwise acceptable to the City.
e. Waiver of Subrogation: Developer hereby agrees to waive rights of subrogation which any insurer of Developer may acquire from Developer by virtue of the payment of any loss. Developer agrees to obtain any endorsement that may be necessary to affect this waiver of subrogation. The Workers’ Compensation policy shall be endorsed with a waiver of subrogation in favor of the City for all work performed by the Developer, its employees, or agents.
f. Verification of Coverage: Developer shall furnish the City with original Certificates of Insurance including all required amendatory endorsements (or copies of the applicable policy language effecting coverage required by this clause) and a copy of the Declarations and Endorsement Page of the CGL policy listing all policy endorsements to City before work begins. However, failure to obtain the required documents prior to the work beginning shall not waive the Developer’s obligation to provide them. The City reserves the right to require complete, certified copies of all required insurance policies, including endorsements, required by these specifications, at any time. g. Developer shall require and verify that its contractor and all subcontractors maintain insurance meeting all requirements stated herein, and Contractor shall ensure that Entity is an additional insured on insurance required from subcontractors. For CGL coverage, subcontractors shall provide coverage with a form at least as broad as CG 20 38 04 13. h. If any coverage required is written on a claims-made coverage form:
1. The retroactive date must be shown, and this date must be before the execution date of the contract or the beginning of contract work.
2. Insurance must be maintained and evidence of insurance must be provided for at least five (5) years after completion of contract work.
3. If coverage is cancelled or non -renewed, and not replaced with another claims -made policy form with a retroactive date prior to the contract effective, or start of work date, the Contractor must purchase extended reporting period coverage for a minimum of five (5) years after completion of contract work.
4. A copy of the claims reporting requirements must be submitted to the Entity for review.
5. If the services involve lead- based paint or asbestos identification/remediation, the Contractors Pollution Liability policy shall not contain lead -based paint or asbestos exclusions. If the services involve mold identification/remediation, the Contractors 660\14\5005419.1
Pollution Liability policy shall not contain a mold exclusion, and the definition of Pollution shall include microbial matter, including mold.