Agenda packet — Santa Barbara City Council, December 2, 2025 (part 2 of 5)

is not part of the DDA. The DDA also contemplates that a portion of Parking Lot 2 will be transferred to Paseo Propco to facilitate construction of income-restricted units (if the Developer chooses to implement that option instead of providing income restricted units within the residential development on the former Macy’s parcel). The Developer also has the option to select another adjacent parcel for development of the income-restricted units.

A copy of the final draft DDA is included as the first attachment to this Agenda Report.

The project includes demolition of approximately 135,000 square feet of obsolete retail space (the former Macy’s building) and development of approximately 233 rental units of which 10% would be restricted to rents affordable to low income households (up to 80% AMI) above the existing parking facilities, along with approximately 17,000 - 20,000 square feet of new retail space at State and Ortega Streets and approximately 28 additional parking spaces. As an alternative to providing the low-income restricted units in the residential development on the former Macy’s site, the Developer may elect to pursue development of between 45 but not more than 80 income-restricted units on a portion of City Parking Lot

2. If the housing project on Parking Lot 2 is implemented, then the all of the units on the former Macy’s parcel can convert to market rate rental units without displacing tenants. The retail space and additional parking spaces on the Paseo Nuevo property would be the same under either development scenario.

Redevelopment of the site requires resolving long-standing ground lease and easement restrictions that currently prohibit residential use. The City’s ground leases, established by the former Redevelopment Agency, have approximately 40 years remaining and cannot be extended under the City Charter’s 50-year lease limitation. To achieve financial feasibility for the project, the DDA provides for transfer of the City’s fee interest in the Paseo Nuevo Parcels to Paseo Propco. The City Council and the California Department of Housing and Community Development has found that the Paseo Nuevo property and Lot 2 are exempt from the Surplus Land Act, which allows this project to proceed.

Financial analysis conducted by the City’s independent consultants confirms that the project is feasible but offers a below-market return of approximately 4.3% to 6.5%, compared to the Developer’s target rate of 8%, which is consistent with reasonable market return expectations. In spite of this lower rate of return, the Developer is willing to proceed with the project, providing substantial public benefits, including new housing supply, affordable units, preservation of community-serving facilities, and activation of the City’s central downtown area.

City staff recommend approval of the DDA as the most effective and timely means of achieving the City’s downtown housing and economic development objectives. Advancing the project now will resolve existing legal and financial constraints, align public and private goals, and position Paseo Nuevo as a catalyst for long-term downtown reinvestment and revitalization.

Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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DISCUSSION:

Background
In the 1980s, Downtown Santa Barbara had become economically distressed, prompting the Redevelopment Agency of the City of Santa Barbara (RDA) to initiate a major revitalization effort through development of the Paseo Nuevo Mall. Conceived as a publicprivate partnership between the RDA, the mall developer, and two department store anchors, the project opened in 1990 and became the centerpiece of downtown’s commercial core.

To facilitate the project, the RDA assembled privately owned parcels, while the City contributed surface Parking Lot No. 1 and right-of-way from De La Guerra Street to the development. The private developer financed and constructed the mall, while the RDA constructed parking garages (City Parking Lots 2 and 10) to support the project.

The transaction was structured through a Disposition and Development Agreement (DDA) executed in 1987 between the RDA and Paseo Nuevo Associates, followed by the establishment of three 75-year ground leases in 1989. These included:
 The Paseo Nuevo Ground Lease, leased to Santa Barbara Associates (covering the area referred to in the DDA as the Inline Retail Parcel and including the central mall common areas);
 The Broadway Ground Lease, leased to Carter Hawley Hale Stores (covering the area referred to in the DDA as the Former Macy’s Parcel and vacant since 2017); and
 The Nordstrom Ground Lease (covering the area referred to in the DDA as the Former Nordstrom Parcel leased to Nordstrom, Inc. (vacant since 2020).

Parking Lot 1 was also leased to Santa Barbara Associates by the Third Amendment to the Paseo Nuevo Ground Lease. Under these leases, the RDA retained ownership of the land (fee interest), while the lessees owned the improvements. Upon lease expiration, all improvements would revert to the lessor. The Ground Leases and related agreements also limit use of the site to retail and commercial uses — restrictions that currently prohibit housing development.

Following dissolution of the RDA in 2012, and pursuant to State law ownership of the Paseo Nuevo Property and parking garages (City Parking Lots 2 and 10) transferred to the City in 2016. The City was able to obtain ownership of the Paseo Nuevo Parcels because the California Department of Finance determined that the fee interest had essentially no economic value because of the ground leases and other restrictive agreements. The City thereby became the lessor under the ground leases, which then became subject to the City Charter’s 50-year limitation on lease terms, with no opportunity for extension. The leases currently expire between 2064 and 2065.

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Over the decades, the leased interest in the Paseo Nuevo Property changed ownership multiple times. In 2021, the lessees of the former Macy’s parcel and the in-line retail parcel defaulted on a loan made by Alliance Bernstein Commercial (AB). AB acquired those leases in 2022, through a deed in-lieu of foreclosure and —subsequently assigned them to Paseo Propco LLC, an affiliate of AB (Developer). Developer has since managed the mall property and, in consultation with City staff, has explored redevelopment opportunities to reposition the Paseo Nuevo Parcels for long-term economic and community benefit.

Meanwhile, an investment group led by Shopoff Realty Investments purchased the leasehold interest in the Nordstrom Ground Lease in 2021.

Today, Paseo Nuevo is considered a distressed asset. Retail industry trends have shifted significantly since the 1990s, and while smaller in-line shops may be adapted to current market conditions, the large-format department store buildings are no longer viable for retail use. There is strong community and policy support for introducing housing as a replacement use. However, residential redevelopment can only occur if the existing ground leases and related legal encumbrances are modified or terminated to allow for mixed-use development.

Project Analysis and Redevelopment Approach
To ensure an objective and data-driven evaluation of redevelopment options, the city retained Strategic Economics and Maxima Group, two consulting firms with extensive experience advising public agencies on real estate feasibility and complex public-private redevelopment projects. Working collaboratively, City staff and the consultant team analyzed the legal encumbrances, lease obligations, and financial parameters that currently restrict redevelopment of the Paseo Nuevo and Macy’s parcels.

At its September 19, 2023 meeting, the City Council authorized staff to negotiate a project agreement with Developer to redevelop Developer leasehold interests into a mixed-use housing project and to evaluate the transfer of the City’s fee interest in the Paseo Nuevo Parcels. On March 5, 2024, City Council approved the initial Project Agreement and the Surplus Lands Act Resolution, described below. Developer continued to refine the redevelopment concept to work towards an economically viable project Because the financial feasibility of the proposed redevelopment depends on Developer obtaining fee ownership of the land, the City was required to comply with the Surplus Land Act (California Government Code §§ 54220 et seq.) before any disposition could occur. The City met this requirement through Resolution No. 24-016, which declared the Paseo Nuevo, Macy’s, and Nordstrom parcels to be exempt surplus land under Government Code § 54221(f)(1)(J). By letter dated March 18, 2024, the California Department of Housing and Community Development (HCD) confirmed the City’s Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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determination, recognizing that the Paseo Nuevo properties qualify as exempt surplus land due to contractual and legal constraints.

The earlier 2024 concept, which proposed approximately 500 market-rate housing units across the former Macy’s site and in-line retail areas, proved financially infeasible due to high structural and foundation construction costs. In response, the Developer developed a revised plan focused on demolishing the obsolete Macy’s building, retaining the in-line retail shops, museum, and theater, and introducing new residential uses that integrate more seamlessly with the surrounding urban fabric. In addition, the Developer proposed development of an affordable housing project on a portion of City Parking Lot 2.

The revised project description was presented to the City Council on August 5, 2025. The City Council approved the amended project description and directed the City Manager and City Attorney to negotiate a DDA consistent with the new project description and to present the negotiated agreement for Council consideration before the end of this year.

That action contemplated the transfer of the fee title to the Developer. At the same meeting, the City Council adopted Resolution No. 25-090, which added Parking Lot 2 to the Surplus Land Act exemption for the Paseo Nuevo Property.

To implement this project, the City proposes to transfer fee title of the Paseo Nuevo Transfer Parcels to Paseo Propco LLC in exchange for the Developer’s commitment to construct the project consistent with the DDA. This approach has been reviewed and discussed in multiple City Council meetings (September 2023, March 2024, and August 2025). It was included in the Project Agreement approved in March 2024 and amended in August 2025. While a potential City Charter amendment to eliminate the 50-year lease limitation, could, in theory, allow extensions of the ground leases such that redevelopment might be feasible, such an amendment would require voter approval and would not occur before the November 2026 election. If approved, the property would still be subject to the leasehold interests and encumbered by the many easements. Given the leaseholder’s development timelines and financial constraints, further delays would likely prevent the project from moving forward.

City staff have concluded that proceeding with the land transfer provides a greater public benefit by ensuring the timely delivery of new housing, economic reinvestment, and public improvements downtown. Pursuing a Charter amendment would introduce multi-year uncertainty and postpone redevelopment of this key site for what could be decades.

Advancing the Paseo Nuevo project now will enable transformational investment in the City Center, bringing new residents, supporting local businesses, and realizing the community’s vision for a vibrant, mixed-use downtown core.

Project Overview
The scope of development is outlined in the DDA. The proposed project entails redevelopment of a portion of the Paseo Nuevo Parcels to introduce new housing and Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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retail improvements that strengthen the vitality of the downtown core. The project includes demolition of approximately 135,000 square feet of existing retail space formerly occupied by Macy’s, construction of a new mixed-use residential building, and some reconfiguration of Parking lot 1. This is referred to in the DDA as the Paseo Development. Parking Lot 1 will remain public parking, except for approximately 233 spaces reserved for the new residential units.

The Paseo Development is a new multi-family residential housing development project containing approximately 233 residential rental units located on the Former Macy’s Parcel and a portion of the Lot 1 Parcel, along with an estimated 17,000 square feet of new retail uses also on a portion of the Former Macy’s Parcel. The Paseo Development will include 10% affordable rental units restricted to Low-Income Households, unless Developer pursues the Lot 2 Development or alternate affordable development concurrently with or after the Paseo Development is built and ready for occupancy. The new ground-floor retail space will be at the corner of State and Ortega Streets. The project also proposes the addition of 28 new parking spaces within the reconfigured parking structure, and reservation of 233 existing parking spaces in Lot 1 for the residential units.

The Lot 2 Development (described in the DDA), if implemented, will be a multi-family residential housing project including not less than 45 and up to 80 affordable rental units restricted to Low-Income Households (80% of Area Median Income). The number of affordable rental units between 45 and 80 units will be determined by Developer at Developer’s sole discretion as stated in the Planning Application for the Lot 2 Development. If Developer elects to pursue the Lot 2 Development, the City will transfer a portion of Parking Lot 2 to Developer. The Developer may select the Lot 2 Development either concurrently with the Paseo Development or within 5 years after completion of the Paseo Development. Implementation of the Lot 2 Development will require one parking bay and approximately 186 existing parking spaces to be demolished. The remaining Lot 2 parking facility would be structurally reinforced, and circulation would be revised to address the loss of the parking bay. The affordable units would be developed in partnership with a qualified affordable housing provider. The DDA also provides an option for the Developer to select a different adjacent parcel to complete the affordable housing project within the same 5 year time window.

All affordable units will be subject to a 90-year restrictive covenant limiting rental of the units to low-income households having an annual income up to 80% of Area Median Income (AMI). Units in the Paseo Development will also be subject to a restrictive covenant limiting the units for rental as domiciles (permanent, primary residences); and prohibiting short-term vacation rentals.

No new development or changes to the existing retail uses are proposed on the Inline Retail Parcel as part of the Project. Future development on the Inline Retail Parcel, if any, will be subject to separate processing by the City under the City’s standard procedures and subject to the same requirements as any project not subject to the DDA. However, in Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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all cases, Developer will maintain the building spaces currently occupied by the Museum of Contemporary Art Santa Barbara and the Center State Theater on the Inline Retail Parcel (the “Public Art Space”) for continued use by the current occupants or such other public art use approved by the City; provided, however, Developer may relocate the Public Art Space within the Inline Retail Parcel upon approval by the City Together, these improvements would redevelop underutilized retail space into a functional mixed-use development that integrates housing, retail, and open spaces. The project supports improved pedestrian connectivity, increased economic activity, and the City’s broader goals for a more livable, inclusive, and economically resilient downtown.

Upon completion, the project is expected to introduce approximately 600 new residents to the city center, contributing to a more active and sustainable urban environment.

Project Statistics
Existing Proposed
Market Rate Units
(replacing Macy’s building)
0 233*
Affordable Units
(replacing portion of
Parking Lot #2)
0 45 to 80 (10% or 24
required)*
Commercial Floor Area
(excluding Nordstrom)
240,000 sf 125,000 sf
Community Uses
Art Museum/Theater Art Museum/Theater
Parking Spaces
Lot 1
Lot 2
572
569
600
383
Residential Parking n/a 1 space/unit (market rate
only)
Building Height ~66 ft Up to 75 ft (Macy’s site)
Up to 70 ft (Lot 2 site)
Residential Density n/a 56 du/ac
*If the developer chooses to incorporate the affordable units into the Paseo Development rather than using Lot 2, there would be 209 market rate units and 24 affordable units replacing the Macy’s building if 233 units are built, and Lot 2 would remain as-is.

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State Density Bonus Law
The project utilizes the State Density Bonus Law by providing affordable housing units for low-income households. By providing affordable housing units in accordance with State Density Bonus Law, the applicant is eligible for development standard waivers. In this case, they are requesting to use a waiver to exceed the City’s Charter height limit. These affordable units would also count toward meeting the City’s inclusionary housing requirement. The State Density Bonus Law preempts the City’s Charter height limit. The maximum height of the new construction at the former Macy’s site would be approximately 75 feet, while the affordable housing building on Lot 2 could reach a maximum height of approximately 70 feet.

If the project’s average unit size is 811 square feet or less, it would qualify under state law for a base density of approximately 351 units (63 dwelling units per acre × 5.57-acre site). As currently proposed, the project includes 313 total units, remaining below the base density threshold and therefore not requiring a density bonus. However, the project would still be eligible for the waivers, concessions, and incentives provided under State Density Bonus Law. The project is requesting a concession since the proposed development at both sites exceeds the 60-foot height limit in the City’s Charter.

Affordable Housing Options
Incorporate Affordable Units into Market Rate Development The DDA requires the Developer to include a minimum of 10% of the total 233 units— equivalent to 24 units—that would be restricted for households earning up to 80% of AMI.

The DDA also provides the option to pursue the Lot 2 Development. The initial election to pursue the Lot 2 Development must be made before the close of escrow for transfer of the Paseo Nuevo Property. If Developer proceeds with the Paseo Development without concurrently pursuing the Lot 2 Development, then Developer will have the right to choose to pursue the Lot 2 Development, at Developer’s discretion, for up to 5 years after completion of the Paseo Development. The Developer could then relocate the affordable units from the Paseo Development to the Lot 2 Development upon completion of the Lot 2 Development, as provided in the DDA. The Lot 2 Development can be pursued only as housing restricted to low-income households.

If Developer determines that the Lot 2 affordable housing project is infeasible, then affordability restrictions for 10% of the units in the Paseo Development will remain in effect. This approach provides flexibility to adapt to market conditions while guaranteeing delivery of market rate and affordable housing as soon as possible. The DDA also includes an option for the Developer to choose an alternative adjacent parcel for affordable housing if the Lot 2 project is not viable.

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The affordability covenants must be recorded prior to the close of escrow for the transfer of either the Paseo Nuevo Property or the Lot 2 development parcel. The affordability covenants have a duration of 90 years. The covenant language is specified by the DDA and the covenant templates are attached as DDA exhibits.

Lot 2 Development
The proposed Lot 2 Development would be constructed and operated by an affordable housing provider selected by Developer and approved by the City. It would include from 45 up to 80 low-income restricted rental units. All of the units, except for one onsite manager unit, would serve low-income households earning up to 80% of the Area Median Income (AMI).The project would remove one of the three existing parking bays— specifically the bay closest to the Canary Hotel—resulting in the loss of approximately 186 public parking spaces while retaining 383 spaces in the remainder of the structure.

The remaining parking areas would be reconfigured with modified access and circulation to support both parking operations and the new residential development, along with spaces allocated to specific users under existing agreements.

The new affordable housing building would front the paseo adjacent to the Canary Hotel, with corresponding improvements to enhance pedestrian connectivity and streetscape design.

To facilitate development, the City would transfer fee title of this portion of the Lot 2 property to Paseo Propco LLC, who would partner with a qualified affordable housing developer to finance, construct, and operate the project. Developing the affordable units as a standalone building enables eligibility for State of California Low-Income Housing Tax Credits (LIHTC), enhancing financial feasibility.

The proposed 45 to 80 units exceeds the 10% low-income units required under the City’s Average Unit-Size Density (AUD) Program and the State Density Bonus Law, representing significant public benefit. Conceptual designs include a diverse mix of unit types. The City will work with the Developer and the selected qualified affordable housing provider to determine the most appropriate mix of unit types for this location and to ensure that they are consistent with the unit mix of the market rate units.

Disposition and Development Agreement
The proposed DDA is an attachment to this Agenda Report. The DDA establishes the terms and conditions for the transfer of the Paseo Nuevo Transfer Parcels and a portion of Parking Lot 2 to Developer for development of the Project, including the conditions precedent that must be met before the property transfer, as well as continuing obligations for construction, operation, and maintenance of the Project after transfer. The DDA provides for the conveyance to the Developer of the City’s fee interest in the Paseo Nuevo parcels that are currently leased to the Developer under long-term ground leases for the Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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purpose of constructing, operating, and maintaining the Paseo Nuevo Redevelopment Project.

The DDA establishes the requirements for the Project (including the Paseo Development and the Lot 2 Development) such as the:
 Scope and Scale of the Project, including the number and location of residential units, parking, affordability requirements, and building height  Historic Landmark Commission Design Review Approval Process  Restrictive Covenants for Affordable Housing
 Performance security
 Contract Remedies and Enforcement Rights in the event of default 
 A limited property tax refund
 All preconditions to close of escrow and transfer of land, including Developer’s obligation to obtain all necessary consents and approvals from the current ground lessee of the Nordstrom Ground Lease
 Schedule of Performance
Per the Council’s prior direction, the DDA includes a provision that prohibits any of the residential units from being used as short term vacation rentals and that the units must serve as a primary residence. The Council also expressed concern about performance guarantees for the project to ensure that the City is not left with an unconstructed or partially constructed site. The DDA contains a provision requiring the Developer to secure an irrevocable letter of credit in favor of the City in an amount equal to at least 20% of the total budgeted construction costs of the Project (Section 3.1.8).

Neither the Paseo Nuevo Property nor the Lot 2 Development parcel will be transferred unless all the conditions for close of escrow are met, including an approved financing plan, HLC approval, issuance of building permits, insurance, consents, and performance security as provided in the DDA. .

The DDA sets forth all terms, conditions, and obligations related to the conveyance of property, project entitlements, and ongoing operation and maintenance. It includes specific conditions that must be met before conveyance occurs, ensuring that the redevelopment proceeds in accordance with City policies, applicable laws, and the City’s objectives for downtown revitalization, economic development, and housing production.

Value of the City’s Existing Fee Rights
City staff recognize that many community members have expressed concern regarding the proposed transfer of the City’s fee interest in the Paseo Nuevo Parcels to Paseo Propco LLC. These concerns generally reflect the assumption that the land holds substantial current value due to its location in the heart of one of California’s most desirable coastal cities, or that the property could appreciate significantly following Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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redevelopment—raising questions about whether the City would forgo future financial benefit.

To evaluate this issue objectively, staff and the City’s financial consultants analyzed both the current and potential future value of the City’s fee interest. Because the City owns only the underlying land (fee) and does not control the improvements on the site, the land’s current value is limited to the present value of projected lease revenues plus the residual value of the land and improvements at the end of the remaining 40-year lease term.

Due to lease provisions established when Paseo Nuevo was originally developed, no ground lease revenues have been paid to the City to date, nor are any expected for the duration of the existing lease term. While there may be some value to the existing improvements at the end of the lease term, such value is speculative given the existing physical and economic challenges with the two largest buildings on the site. Under these conditions, the present value of the City’s fee interest is effectively zero.

This conclusion is consistent with the findings of the California Department of Finance (DOF), which reviewed the property’s valuation and associated legal encumbrances when ownership of the Paseo Nuevo Parcels was approved for transfer from the former RDA to the City. At that time, the DOF determined that the fee interest had no economic value due to these encumbrances. Instead of requiring sale and distribution of the proceeds to County taxing entities, DOF permitted transfer to the City. Had the property possessed any residual economic value, state law would have required the City—as successor agency to the RDA—to sell the asset and distribute proceeds among the affected taxing entities, including Santa Barbara County and the Santa Barbara Unified School District.

For approximately the next 40 years, the future value of the City’s fee interest could only change if all the following conditions are met:

1. The existing easements and legal encumbrances are extinguished;

2. The current ground lease structure is modified or terminated; and

3. The site’s residual land value, following redevelopment, proves financially feasible.

Absent these conditions, the City’s current fee interest in the Paseo Nuevo Parcels holds no independent market value.

Potential Process for Extinguishing the Existing Easement Agreements Redevelopment of the Paseo Nuevo Parcels requires eliminating or amending the existing leases and easement agreements that currently prohibit residential use.

Removing these encumbrances is in the mutual interest of all three affected parties—the City of Santa Barbara, the Developer, and Shopoff Realty Investments, the current leaseholder of the former Nordstrom’s Parcel—as it would enable each to pursue their respective redevelopment goals. However, extinguishment of the easements will require Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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a coordinated agreement that achieves outcomes acceptable to all parties; absent such an agreement, any party retains the ability to block future reuse or redevelopment efforts.

City Goals
The City’s redevelopment goals for the Paseo Nuevo site have been defined through multiple City Council discussions (September 2023, March 2024, and August 2025) and informed by extensive public input through the State Street Master Plan process. These goals include:
 Redeveloping the site to accommodate new residential uses, including some affordable housing;
 Retaining the two existing community facilities (Museum of Contemporary Art Santa Barbara and Center Stage Theater) within the Paseo Nuevo complex; and
 Advancing the project quickly to serve as a catalyst for downtown revitalization.

Additional community input gathered through recent outreach efforts identified two further considerations:

1. Exploring mechanisms to extend or modify ground lease terms to allow the City to retain some form of ongoing ownership interest; and

2. Including a value-recapture provision in the Disposition and Development Agreement (DDA) to ensure the City shares in potential future increases in property value.

Developer’s Goals
The Developer’s goals are to work with the City to deliver the community’s preferred land use, primarily residential development, for the site, to move forward as quickly as possible, and to recapture the amount it has already invested in the site. That investment includes some amount up to the value of a $120 million line of credit extended to the project in 2019, ongoing costs associated with maintaining tenancy and operations at Paseo Nuevo, and predevelopment costs for the proposed redevelopment.

The City and Developer’s goals are similarly aligned. Both parties agree that housing is the highest and best use for any future redevelopment. The Developer has agreed to retain the community facilities on the site, and they will provide the required number of affordable housing units whether on the Paseo Nuevo Parcels or Lot 2.

Shopoff Realty Investment Goals
Shopoff Realty Investments, the owner of the former Nordstrom building, is the current lessee under the Nordstrom’s Ground Lease, a separate leasehold interest, and is in a distinct position. Shopoff acquired the property in 2021, likely with the expectation of earning a market-rate return through redevelopment.

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However, changing market conditions and project complexities have introduced new challenges and risks. Shopoff’s presumed goal is to recoup the investment they made when they purchased the Nordstrom building in 2021.

In 2024, Shopoff submitted a Preliminary Project Application indicating an intent to complete an adaptive reuse project with approximately 112 units. This demonstrates a shared interest in aligning with the City’s broader redevelopment objectives and provides an incentive for Shopoff to participate in negotiations to extinguish or modify the existing easement agreements.

The DDA specifically requires that Developer shall have received the necessary consents and approvals from the City and Shopoff under the current ground lessees and restrictive covenants sufficient to permit the development, construction, operation, and maintenance of the project. Eliminating the existing contractual restrictions is a necessary first step toward realizing the City’s housing and revitalization goals, while providing each party with a viable path forward under current market conditions. However, to do so requires a transaction that enables each party to accomplish its own goals.

Extending the Paseo Nuevo Ground Lease
When Paseo Nuevo’s ground leases were originally executed, the RDA served as the lessor and possessed the legal authority to enter into lease agreements with terms of up to 75 years. Following the dissolution of the RDA, ownership of the underlying fee interest transferred to the City, and the leases became subject to the City Charter. Charter Section 521 limits all City ground leases to a maximum term of 50 years and does not permit further lease extensions.

The existing ground leases now have approximately 40 years remaining—expiring in 2064 for the former Macy’s and Nordstrom parcels, and in 2065 for the Paseo Nuevo parcel. From a financing perspective, this remaining term presents a significant challenge.

When making a loan on a property with a ground lease, lenders typically require a lease term that extends at least 10-20-years beyond the loan amortization term. This ensures that, in the event of loan default or foreclosure, the lender has sufficient time to amortize the loan, refinance the loan, or sell the asset. The remaining 40-year lease term is insufficient for the substantial investment required to redevelop this asset.

During discussions of the initial Project Agreement in 2023, and through subsequent Council meetings in 2024 and 2025, both the City and Developer agreed that redevelopment of Developer’s leasehold interests would require transfer of the City’s fee interest. Although the Project Agreement was non-binding, it clearly reflected this intent on the City’s part.

In 2021, prior to Alliance Bernstein’s assumption of the leasehold interests through a deed-in-lieu of foreclosure, the Planning Commission considered and rejected a development agreement proposal by Alliance Bernstein’s predecessor in interest. That Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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proposal would have allowed the lessee to extend the ground lease term in exchange for renovating the mall and former Macy’s site, though it did not include residential uses.

As the remaining ground lease term shortens, reinvestment becomes increasingly infeasible. The current condition of Paseo Nuevo illustrates this challenge: with roughly 40 years left on the lease and no ability to extend, financing or reinvesting in the property is difficult, resulting in a gradual decline in asset quality. For these reasons, continuing under the existing long-term ground lease structure offers no material advantage to either party.

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Financial Feasibility of the Redevelopment Project
Redevelopment of the Paseo Nuevo site presents significant physical and financial challenges. Unlike the original 1980s construction, the property now incorporates a large subterranean parking structure, which, while valuable, complicates redevelopment due to the engineering requirements of building above it.

In 2023, the initial concept outlined for inclusion in the Project Agreement with the Developer envisioned demolition of the existing retail structures and construction of a new mixed-use development containing approximately 500 housing units above the parking structure. The Developer, in collaboration with its development partner Georgetown Company, a nationally experienced mixed-use developer, conducted over a year of due diligence and structural analysis. This evaluation determined that the cost of constructing new foundations to span the existing underground garage would exceed projected project revenues, rendering the concept financially infeasible.

In addition to high foundation costs, the 500-unit plan would have required a multi-phase construction schedule, introducing extended market risk and significant disruption to downtown during the build-out period. As a result, the Developer and its team refined the concept to focus on redevelopment of the former Macy’s site only, ultimately producing the 233-unit proposal reflected in the current DDA.

Over a two-year period, the Developer provided multiple iterations of project pro formas for review by the City’s independent financial advisors. Each iteration was tested using comparable data from recently completed Santa Barbara projects, similar developments in the Los Angeles market, and interviews with local real estate and construction experts.

The City’s review confirmed that the Developer’s assumptions align with prevailing market conditions—particularly with respect to projected rents, which, while near the upper range of the Santa Barbara market, are consistent with recent residential rental projects in Santa Barbara. The primary factor constraining feasibility remains construction cost, especially the need for a large concrete slab spanning the underground portions of Lot 1 and for reconfigured and new parking and access for the proposed market, despite using reasonable per square foot costs.

The City’s financial consultants also conducted independent sensitivity analyses using a static cash-on-cost pro forma approach to evaluate the project’s rate of return. Because the Developer did not purchase the land, traditional residual land value analysis is not applicable. Instead, the Developer’s investment base includes the outstanding balance of a $120 million line of credit, ongoing operating costs for maintaining Paseo Nuevo, and predevelopment expenditures incurred to advance the current proposal. The Developer has not disclosed its total investment to date.

To account for this uncertainty around the amount the Developer has invested in the project to date, i.e., the proxy for land cost, two return scenarios were modeled: one Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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assuming the full $120 million investment and another assuming no land cost (which is a proxy for testing the project’s return if AB received the land for free). The resulting returnon-cost analysis (i.e. capitalized net operating revenues minus construction costs), as shared with City Council in August 2025, indicated an expected range between 4.27% and 6.54%, which falls below the Developer’s target return of approximately 8%, which is consistent reasonable market return expectations.

This analysis demonstrates that even with the proposed fee transfer, the project reflects a modest financial return relative to market expectations, underscoring both the complexity and the constrained feasibility of redeveloping Paseo Nuevo under current market and site conditions.

City Partnership: Given the low rate of return anticipated for this project, the City and the Developer have negotiated several incentives in order to move this catalytic project forward.
 Land transfer of the Paseo Nuevo Parcels (including former Macy’s parcel, Paseo Nuevo in-line retail parcel, Nordstrom’s parcel, and Parking Lot 1) to Propco LLC.  Property tax refund for 20 years capped at $300,000 per year to begin following completion of the project on the former Macy’s parcel.
 Land transfer of portion of Lot 2 for affordable housing should the developer decide to pursue affordable housing on this site.

Tradeoffs for the City
Determining the most advantageous path for the City regarding redevelopment of Paseo Nuevo requires weighing several competing factors and acknowledging key tradeoffs.

Approval of the Disposition and Development Agreement (DDA)—including the transfer to the Developer of the City’s fee interest associated with the Developer’s leasehold interests would align the City and AB’s objectives, allowing the project to advance toward construction as early as 2027. Approval would also provide Shopoff with greater incentive to collaborate on extinguishing existing easements and encumbrances, facilitating coordinated redevelopment across the full site because it will be unable to develop the former Nordstrom Parcel without the other’s approval.

Alternatively, if the City elects to retain its fee interest, the continuing status of the Macy’s building and in-line mall would remain unclear. The earliest opportunity to place a Charter amendment to amend the 50-year lease limitation on the ballot would be in November 2026, resulting in at least a one-year delay for the project. Such a delay would increase financial and market risks for both the City and AB, while the underlying development constraints—short lease terms, high construction costs, and complex site conditions— would remain unchanged.

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Outreach
In addition to the September 19, 2023, March 5, 2024, and August 5, 2025 City Council discussions, several advisory boards and commissions have conceptually reviewed the project:

On September 10, 2025, City staff presented the project to the Housing Authority of the City of Santa Barbara and discussed potential partnership opportunities related to the affordable housing component of the project.

The Historic Landmarks Commission (HLC) reviewed the proposed redevelopment concept on September 24, 2025. The HLC emphasized the importance of ensuring that the workforce housing building be designed with the same architectural quality, detailing, and character as the market-rate building, while remaining contextually appropriate to the site. Commissioners expressed concern regarding the massing, height, and scale of the proposed buildings and recommended studying ways to reduce their perceived bulk.

Additional recommendations included incorporating a mid-block paseo connecting to Ortega Street, integrating arcades and other pedestrian-oriented design elements on primary frontages, and maintaining clear and inviting public circulation through the property. The HLC minutes are attached as Attachment 3. HLC would review the project again under the design review process specified in the Municipal Code, and as provided in the DDA.

The Planning Commission held a concept review on October 9, 2025, focusing on design, land use, and density considerations. Planning Commissioners expressed concerns regarding transfer of City-owned assets to the Developer. Commissioners also emphasized the importance of ensuring that the affordable housing component is treated with the same architectural quality and access to amenities as the market-rate units. The Planning Commission also raised several concerns regarding public transparency and the financial structure of the deal. Commissioners recommended that the final DDA include provisions ensuring local preference for affordable units. Commissioners also requested enhanced paseo connectivity. The Planning Commission minutes are attached as Attachment 5.

The Downtown Parking Committee (DPC) held a Concept Review of the project on October 9, 2025. DPC expressed overall support for construction of high-density housing on the former Macy’s site; however, the DPC raised concerns related to parking supply, operations, and long-term system capacity. Members noted that the project would result in a net reduction of public parking, including removal of one bay from Lot 2 and the reservation of spaces in Lot 1 for residential use. The Committee emphasized the need for a comprehensive parking demand analysis that reflects the proposed unit mix. The DPC also requested that a structural assessment be provided. The DPC minutes and a letter to City Council, which was finalized during the November 13, 2025 DPC meeting, are attached as Attachment 4.

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To reach the broader community, the City and the Developer jointly hosted two public open house events on October 15 and 16, 2025, where members of the public had an opportunity to review conceptual plans for the project. City staff and the development team were available to answer questions and receive feedback, Spanish translation was available, and the events were held at different times of the day to try to reach a broad audience. Approximately 250 members of the public attended the open house events.

The project was posted multiple times in the City News in Brief, with a request for members of the public to participate in a survey to share their feedback about the project.

Staff received 167 responses to the survey, with 80 responses indicating they are supportive or possibly supportive of the redevelopment project and 85 responses indicating they were not in favor of the project. Of those that responded to the survey, 40 attended one or both open house events. Comments received from the public can be found in Attachment 7.

City staff have also met with various interested stakeholder groups to provide an update and receive feedback, including:
 Downtown Santa Barbara Improvement Association Board of Directors and Land Use Committee (October 9, 2025 and October 23, 2025, November 13, 2025)  Chamber of Commerce Board of Directors and Government Affairs Committee (October 23, 2025 and October 24, 2025)
 Santa Barbara County Action Network (November 7, 2025)  Adjacent property owners to City Lot #2 (November 10, 2025) The Developer has prepared preliminary responses to comments received through the public outreach process, most notably responses to some of the design concerns shared by HLC and the Planning Commission. These responses are included in Attachment 2.

Project information, public meeting summaries, and related materials have been made available on the City’s project website at santabarbaraca.gov/PaseoNuevo.

Next Steps
Should the City Council approve the DDA, the project would advance into the design and entitlement phase. The DDA requires design review and approval by the Historic Landmarks Commission (HLC) to ensure the project’s consistency with the City’s design guidelines and historic context.

Following execution of the DDA, the applicant will submit formal land use and entitlement applications. This process is anticipated to begin in Spring 2026, with the goal of commencing construction in 2027.

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BUDGET/FINANCIAL IMPACT:

As outlined in this report, staff is recommending incentives to facilitate the project that include land transfers and future tax revenues. The proposed contribution consists of (1) the transfer of the City-owned Paseo Nuevo parcels—including the former Macy’s parcel, Paseo Nuevo in-line retail parcel, and Parking Lot 1—to the Developer(2) a property tax refund estimated at approximately $300,000 annually for a period of 20 years; and (3) transfer of a portion of City Parking Lot 2 to the developer should the affordable housing component be pursued on that site.

Given the current restrictions and financial status of the property, these contributions are necessary to ensure that this catalytic project for Downtown Santa Barbara moves forward.

A copy of the Disposition and Development Agreement is attached as Attachment 1. The agreement is also available for public review by contacting the City Clerk’s Office at [email protected] to request a copy.

SUSTAINABILITY IMPACT:

The Paseo Nuevo Redevelopment project, which includes 233 market-rate units, up to 80 affordable units, and 125,000 square feet of retail space, presents opportunities to advance key sustainability goals within the community. The project will be subject to California’s Green Building Standards Code, which promotes energy efficiency, water conservation, and waste reduction during construction and occupancy. Incorporation of high-efficiency fixtures, drought-tolerant landscaping, and potential use of solar-ready infrastructure will support long-term resource conservation. Additionally, by integrating housing and retail in a walkable downtown location, the project supports transit use and reduces vehicle miles traveled, contributing to greenhouse gas reduction goals.

ENVIRONMENTAL REVIEW:

The project as described in the DDA (Project) has been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (“CEQA”) (Public Resources Code Sections 21000 et seq.), the State CEQA Guidelines (California Code of Regulations, Title 14, Sections 15000 et seq.), and the environmental regulations of the City. Based on this review, the Project qualifies for a statutory exemption pursuant to Public Resources Code (“PRC”) Section 21080.66 for the following reasons:

A. The Project has been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (“CEQA”) (Public Resources Code Sections 21000 et seq.), the State CEQA Guidelines (California Code of Regulations, Title 14, Sections 15000 et seq.), and the environmental regulations of the City. Based on that assessment, the City Council can find that the Project Council Agenda Report
Disposition and Development Agreement Between the City of Santa Barbara and Alliance Bernstein for the Proposed Redevelopment at Paseo Nuevo [Ordinance Introduction; Agreement]
December 2, 2025

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as described in the DDA qualifies for a statutory exemption pursuant to Public Resources Code (“PRC”) Section 21080.66. Specifically, the Project meets all of the following site and development criteria under PRC Section 21080.66(a) as follows:

1. Project Site Size (PRC Section 21080.66(a)(1)(A)): The Project site is less than 20 acres in size.

2. Project Location (PRC Section 21080.66(a)(2)(A)): The Project site is located within the incorporated boundaries of the City of Santa Barbara.

3. Urban Uses (PRC Section 21080.66(a)(3)): The Project site has been previously developed with an urban use and over 75 percent of the perimeter is developed with urban uses.

4. General Plan and Zoning Consistency (PRC Section 21080.66(a)(4)(A), (C)): The Project is consistent with the City’s General Plan and Zoning Ordinance.

5. Minimum Density (PRC Section 21080.66(a)(5)): Pursuant to Government Code Section 65583.2(c)(3)(B)(iii), as a suburban jurisdiction, the City must permit at least 20 units per acre. The statutory exemption requires a minimum density equal to one-half of that amount, or 10 dwelling units per acre. The Project meets this requirement.

6. Environmental Conditions (PRC Section 21080.66(a)(6)): Pursuant to Government Code Section 65913.4(a)(6), the Project site is not located in any of the following areas nor contains any of the following characteristics: a coastal zone; prime farmland or farmland of statewide importance; wetlands; a very high fire hazard severity zone; a hazardous waste site which has not received a uniform closure letter or has otherwise not been determined to be suitable for residential use or residential mixed uses; a delineated earthquake fault zone; a special flood hazard area; a regulatory floodway; lands identified for conservation; habitat for protected species, or; land under conservation easement.

7. Historic Resources (PRC Section 21080.66(a)(7)): The Project does not involve the demolition of any structure listed on a national, state, or local historic register prior to the date of preliminary application submittal.

8. Hotel or Transient Use (PRC Section 21080.66(a)(8)): The Project does not include a hotel or other transient lodging or transient use component.

B. PRC Section 21080.66(b) requires the City to provide formal notification via certified mail and email to each California Native American tribe that is traditionally and culturally affiliated with the project site as an invitation to consult on the Project, its location, and the project’s potential effects on tribal cultural resources. The City provided said required notification via certified mail on September 15, 2025 and email on September 16, 2025, to five Native American tribes and received a consultation request from one tribe, the Santa Ynez Band of Chumash Indians.

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The City concluded the tribal consultation process on October 27, 2025.

Development requirements relating to Native American concerns as expressed during the consultation are included in the DDA as express conditions of development.

C. A Phase I Environmental Assessment will be completed for the Project in compliance with PRC Section 21080.66(c)(1)(A). If a recognized environmental condition is found, the Developer must complete a Preliminary Endangerment Assessment, as defined in Section 78095 of the Health and Safety Code. If a release of a hazardous substance is found to exist on the site or if a potential for exposure to significant hazards from surrounding properties or activities is found to exist, the release and effects of the potential exposure will be properly mitigated to levels required by current federal and state statutory and regulatory standards before the local government issues a certificate of occupancy.

D. The design requirements under PRC Section 21080.66(c)(2) do not apply because the Project is not located within 500 feet of a freeway. In addition, the labor standards set forth in PRC Section 21080.66(d) do not apply because the Project is not 100 percent affordable to lower income households, will not exceed 85 feet in height, and is not within the City or County of San Francisco.

ATTACHMENTS:

1. Disposition and Development Agreement

2. Project Conceptual Plans and Renderings with draft updates to reflect Developer response to comments

3. Historic Landmarks Commission Minutes

4. Downtown Parking Committee Minutes and Letter to City Council

5. Planning Commission Minutes

6. Planning Commission Staff Report

7. Public Outreach and Survey Responses

8. Exempt Surplus Land and Long-Range Property Management Plan

PREPARED AND
SUBMITTED BY: Tess Harris, State Street Master Planner
APPROVED BY: Kelly McAdoo, City Administrator

PASEO NUEVO REDEVELOPMENT PROJECT

DISPOSITION AND DEVELOPMENT AGREEMENT

BY AND BETWEEN

THE CITY OF

SANTA BARBARA, CALIFORNIA
AND

PASEO PROPCO LLC
______ State Street
Santa Barbara, California
ATTACHMENT 1
Table of Contents
Page
ARTICLE 1. SUBJECT OF AGREEMENT. ..................................................... 4

1.1. Purpose of Agreement....................................................................................4

1.2. Definitions....................................................................................................5 ARTICLE 2. PARTIES TO THE AGREEMENT. ........................................... 17

2.1. Parties.........................................................................................................17

2.2. No Third-Party Beneficiaries....................................................................... 17

2.3. No Joint Venture..........................................................................................17 ARTICLE 3. DISPOSITION OF PROJECT PROPERTY. ............................. 17

3.1. Conditions Precedent to City Disposition of Paseo Nuevo Transfer Parcels.... 17

3.2. Conditions Precedent to City Disposition of Lot 2 Affordable Parcel............. 20

3.3. City Covenant to Subdivide Lot 2 Affordable Parcel..................................... 23

3.4. Additional Covenants. .................................................................................23

3.5. Disposition of Project Property .................................................................... 24

3.6. Condition of the Project Property................................................................. 24

3.7. Discovery of Hazardous Materials................................................................ 26

3.8. Escrow......................................................................................................277

3.9. Recordation of Documents........................................................................... 29

3.10. Title Insurance.............................................................................................29 ARTICLE 4. ENTITLEMENT. ....................................................................... 29

4.1. Project Approvals........................................................................................29

4.2. City Design Review of Project..................................................................... 30

4.3. Construction Approvals. ..............................................................................30

4.4. Fees............................................................................................................30

4.5. Scope of City Review..................................................................................30 ARTICLE 5. PROVISION OF AFFORDABLE DEVELOPMENT................ 31

5.1. Developer Option........................................................................................31

5.2. Developer Obligations for Paseo Affordable Development. .......................... 31

5.3. Developer Obligations for Lot 2 Development............................................. 31

5.4. Release of Obligations.................................................................................32

5.5. Reassignment of Affordable Units from Paseo Affordable Development to Lot 2 Development. 32

5.6. Alternative Affordable Parcel....................................................................... 33 ARTICLE 6. CONSTRUCTION OF THE PROJECT. ................................... 33

6.1. Commencement of Construction.................................................................. 33

6.2. Completion of Construction......................................................................... 33

6.3. Construction Pursuant to Scope of Development and Project Documents....... 34

6.4. Certificate of Occupancy..............................................................................34

6.5. Certificate of Completed Obligations. .......................................................... 34

6.6. Compliance with Applicable Law................................................................. 34

6.7. Entry by the City.........................................................................................35

6.8. Mechanics’ Liens.........................................................................................35

6.9. Zoning of the Project Property ..................................................................... 35

6.10. Cost of Project Construction ........................................................................ 35 ARTICLE 7. USE OF THE DEVELOPABLE PARCELS AND OBLIGATIONS DURING AND AFTER CONSTRUCTION......................................................... 35

7.1. Uses............................................................................................................35

7.2. Maintenance of Paseo Nuevo Transfer Parcels.............................................. 36

7.3. Insurance Coverage. ....................................................................................36

7.4. Hazardous Materials....................................................................................38

7.5. Accessibility Requirements.......................................................................... 40

7.6. Taxes, Assessments, Encumbrances and Liens.............................................. 40

7.7. Inline Retail Parcel......................................................................................41 ARTICLE 8. ASSIGNMENT AND TRANSFERS........................................... 41

8.1. Definitions..................................................................................................41

8.2. Purpose of Restrictions on Transfer. ............................................................. 42

8.3. Prohibited Transfers.....................................................................................42

8.4. Permitted Transfers......................................................................................42

8.5. Effectuation of Permitted Transfers.............................................................. 43 ARTICLE 9. SECURITY FINANCING AND RIGHTS OF HOLDERS......... 45

9.1. Encumbrances.............................................................................................45

9.2. Holder Not Obligated to Construct............................................................... 45

9.3. Notice of Default and Right to Cure............................................................. 45

9.4. Failure of Holder to Complete Project.......................................................... 46

9.5. Right of City to Cure...................................................................................46

9.6. Holder to be Notified...................................................................................47

9.7. Modifications..............................................................................................47 ARTICLE 10. DEFAULT AND REMEDIES..................................................... 47

10.1. Application of Remedies..............................................................................47

10.2. Fault of City................................................................................................47

10.3. Fault of Developer.......................................................................................48

10.4. Survival......................................................................................................50

10.5. Limitation on Remedies - Rights and Remedies Cumulative ......................... 50

10.6. Inaction Not a Waiver of Default.................................................................. 51

10.7. No Attorneys’ Fees......................................................................................51 ARTICLE 11. GENERAL PROVISIONS.......................................................... 51

11.1. Developer Representations and Warranties................................................... 51

11.2. City Representations and Warranties............................................................ 52

11.3. Notices, Demands and Communications....................................................... 53

11.4. Non-Liability of Officials, Employees and Agents........................................ 53

11.5. Enforced Delay............................................................................................54

11.6. Indemnification...........................................................................................54

11.7. No Third-Party Beneficiary.......................................................................... 54

11.8. Title of Parts and Sections............................................................................54

11.9. Applicable Law...........................................................................................54

11.10. Severability.................................................................................................55

11.11. Binding Upon Successors; Covenants to Run with Land; Term of the Agreement.............................................................................................................55

11.12. Parties Not Co-Venturers.............................................................................55

11.13. Entire Understanding of the Parties.............................................................. 55

11.14. City Approval..............................................................................................55

11.15. Incorporation of Exhibits.............................................................................56

11.16. Context and Construction.............................................................................56

11.17. Effectiveness of Agreement.......................................................................... 56

11.18. Counterparts................................................................................................56

11.19. Amendments...............................................................................................56

11.20. Police Power................................................................................................56

11.21. No Obligation to Third Parties..................................................................... 57

11.22. Brokers. ......................................................................................................57

11.23. Standard of Approval...................................................................................57

11.24. Submittals and Approvals............................................................................ 57 1 DISPOSITION AND DEVELOPMENT AGREEMENT
This Disposition and Development Agreement is dated as of this __ day of ______________, 2025, for identification purposes and is entered into by and between PASEO PROPCO LLC, a Delaware limited liability company, and THE CITY OF SANTA BARBARA, CALIFORNIA, municipal corporation.

BACKGROUND AND PURPOSE
A. The City is the fee simple owner of multiple parcels of real property associated with the Paseo Nuevo Shopping Center that it acquired from the Successor Agency of the Redevelopment Agency of the City of Santa Barbara pursuant to Successor Agency Resolution No. 15-099, City Council Ordinance No. 5731, and Grant Deed No. 61-456 recorded February 19, 2017 as Instrument No. 2016-0007814 in the Official Records of the County of Santa Barbara (collectively the “Paseo Nuevo Property”).

B. The City is also the owner of an ancillary parking site located adjacent to the Paseo Nuevo Property commonly known as “Parking Lot 2” described as those certain tracts of real property located within Block 158, in the City of Santa Barbara, State of California, as shown on the Official Map thereof, particularly described as follows: Lot 1 and Lot 2 of Parcel Map 20,511, according to the map thereof recorded on October 10, 1989, filed in Book 44 of Parcel Maps, at Pages 35 through 41, inclusive, records of Santa Barbara County (the “Lot 2 Parcel”), which was acquired from the Successor Agency of the Redevelopment Agency of the City of Santa Barbara pursuant Grant Deed No. 61-415 recorded July 15, 2013, as Instrument No. 2013-0048015 in the Official Records of the County of Santa Barbara. Together, the Paseo Nuevo Property and the Lot 2 Parcel, are referred to herein as the “City Parcels.” The City Parcels are shown for convenience on the City ParcelsMap included as Exhibit A. The legal descriptions for each parcel included above are included as Exhibit B.

C. The Paseo Nuevo Property is encumbered by numerous “Paseo Nuevo Agreements” identified in the Assignment and Assumption of Paseo Nuevo Documents, recorded in the Official Records of the County of Santa Barbara as Instrument No. 2018-001378.

D. Developer is the current ground lessee of portions of the Paseo Nuevo Property as follows: (1) the “Paseo Nuevo Ground Lease,” which includes Parcels 2 and 12 of Parcel Map No. 20,504, according to the map thereof recorded February 24, 1989, filed in Book 42 of Parcel Maps, at pages 86 through 98, inclusive, of the Official Records of the County of Santa Barbara, California (“Parcel Map No. 20,504”) referred to in this Agreement as the “Inline Retail Parcel;” (2) the Third Amendment to the Paseo Nuevo Ground Lease, which includes Parcels 4, 5, 6, 13, and 14 of Parcel Map No. 20,504 referred to in this Agreement as the “Lot 1 Parcel”); and (3) the “Broadway Ground Lease,” which includes Parcels 3, 9, 10, and 11 of Parcel Map No. 20,504 referred to in this Agreement as the “Former Macy’s Parcel.” Collectively, these ground leases are referred to in this Agreement as the “Developer Ground Leases”). The relevant Developer Ground Leases documents are listed in Exhibit I. The Paseo Nuevo Property is also subject to the “Nordstrom Ground Lease,” -- a separate ground lease for Parcels 1, 7, and 8 of Parcel Map No. 20,504, which are referred to in this Agreement as the “Former Nordstrom Parcel.” The 2 Former Nordstrom Parcel is not a subject of this Agreement except as provided in Sections 3.1.9 and 3.2.8.

E. Parking Lot 2 was developed pursuant to and in reliance on the Paseo Nuevo Agreements and is additionally subject to the Paseo Nuevo Lot 2 Public Parking Covenants, Conditions and Restriction Agreement recorded February 24, 1989, as document 89-012339, and amended by the Amendment to Parking Covenants and Parking Agreement, also recorded February 24, 1989 as document 89-012341 of the official records of the County of Santa Barbara (“Lot 2 Covenants”). Parking Lot 1 was similarly developed pursuant to and in reliance on the Paseo Nuevo Agreements and is subject to the Paseo Nuevo Lot 1 Parking Covenants, Conditions and Restrictions Agreement recorded February 24, 1989, as document 89-012338 of the official records of the County of Santa Barbara (the “Lot 1 Covenants”). Developer is a successor in interest and party to the Paseo Nuevo Agreements, the Lot 2 Covenants, and the Lot 1 Covenants.

F. On March 5, 2024, the City Council adopted Resolution No. 24-016, A Resolution Of The City Council Of The City Of Santa Barbara Declaring Designated Parcels Of City-Owned Property To Be Exempt Surplus Land Pursuant To Subparagraph (J) Of Paragraph (1) Of Subdivision (F) Of California Government Code Section 54221 – Paseo Nuevo, pertaining to the Paseo Nuevo Properties. On August 5, 2025, the City Council adopted Resolution No. 25-090, A Resolution Of The City Council Of The City Of Santa Barbara Supplementing Resolution No. 24- 016 Declaring Designated Parcels Of City-Owned Property To Be Exempt Surplus Land Pursuant To Subparagraph (J) Of Paragraph (1) Of Subdivision (F) Of California Government Code Section 54221 – Paseo Nuevo – By The Addition Of City-Owned Property Commonly Referred To As Parking Lot 2, pertaining to Parking Lot 2. By letters dated March 18, 2024, and August 20, 2025, HCD notified the City that the Paseo Nuevo Property and Lot 2 Parcel qualify as “exempt surplus land” under Government Code section 54221, subdivision (f)(1)(j), due to existing constraints under contractual rights.

G. The DeveloperGround Leases, each of which have a term that expires on December 31, 2065, along with other Paseo Nuevo Agreements, the Lot 2 Covenants, and Lot 1 Covenants, restrict uses of the City Parcels to retail, office, and service establishments common to high quality regional shopping centers. Accordingly, the City Parcels have been developed with an outdoor regional shopping center commonly referred to as the Paseo Nuevo Shopping Center. However, due to changed economic circumstances, including closure of two anchor tenants, the Paseo Nuevo Shopping Center no longer provides the financial or community benefits originally envisioned by the City.

H. On March 14, 2024, the City and Developer entered in a Project Agreement for the redevelopment of the Paseo Nuevo Shopping Center wherein the Parties agreed to commit to good faith cooperation for the negotiation of a Disposition and Development Agreement for the transfer of fee title to the Paseo Nuevo Properties from the City to the Developer for the development of the proposed project, as described in Exhibit B of the Project Agreement, subject to terms and conditions to be agreed upon by the parties.

I. At its meeting of August 5, 2025, the City Council unanimously approved an amendment to the proposed project description contained in the Project Agreement and directed 3 the City Administrator and the City Attorney to negotiate a Disposition and Development Agreement for redevelopment of the Paseo Nuevo Shopping Center consistent with the terms outlined in the Council Agenda Report for the Paseo Nuevo Redevelopment – Project Update Agenda Item No. 10.

J. At its meeting of September 24, 2025, the Historic Landmarks Commission conducted Concept Design Review of the proposed project as allowed by Section 30.205.040 of the Santa Barbara Municipal Code and provided comments and recommendations based on that review. The Project described in this Agreement incorporates responses to those design comments and recommendations. The City Council considered those comments and recommendations before taking action to approve this Agreement.

K. At its meeting of October 9, 2025, the Planning Commission reviewed the proposed project and provided comments and recommendations. The City Council considered those comments and recommendations before taking action to approve this Agreement.

L. Before taking action to approve this Agreement, the City Council considered the full potential scope of the Project in accordance with the California Environmental Quality Act (Pub. Res. Code §§ 21000, et seq.), (“CEQA”) and concluded that substantial evidence supports the conclusion that the Project is exempt from CEQA under Public Resources Code Section 21080.66 (the “AB 130 Exemption”) as detailed in the Ordinance approving this Agreement.

M. The City Council analyzed the Project, as revised to respond to comments and recommendations provided by the Historic Landmarks Commission has determined that the size, mass, bulk, height, and scale of the Project is generally appropriate for its location and its neighborhood, and that the existing and proposed landscaping and open space within the area are appropriate for the Project.

N. This Agreement includes the following exhibits and documents attached to this Agreement or incorporated into this Agreement by reference.

1. Exhibit A – City Parcels Map

2. Exhibit A-1 – Lot 2 Affordable Parcel Map

3. Exhibit B – Project Property Legal Descriptions

4. Exhibit C – Scope of Development

5. Exhibit D – Project Approvals

6. Exhibit E – Schedule of Performance

7. Exhibit F – Declarations of Affordability and Use Covenants 4 8. Exhibit G – Grant Deed

9. Exhibit H – Memorandum of Agreement

10. Exhibit I – Developer Ground Leases
ARTICLE 1. SUBJECT OF AGREEMENT.

1.1. Purpose of Agreement.

1.1.1. The purpose of this Agreement is to effectuate the redevelopment of Paseo Nuevo Shopping Center by providing for conveyance from the City to Developer of the Project Property for the purpose of construction, operation, and maintenance by the Developer of the Project. Developer has proposed this Project under the State Density Bonus Law (California Government Code Section 65915 et.seq.) and has requesteda waiver of the height limit applicable to the construction of the Project under the City’s Charter and Santa Barbara Municipal Code to enable the Developer to construct the Project as described in this Agreement.

1.1.2. As defined below, the Paseo Development is a new multi-family residential housing development project containing approximately 233 residential rental units located on the Former Macy’s Parcel and a portion of the Lot 1 Parcel, along with an estimated 17,000 square feet of new retail uses also on a portion of the Former Macy’s Parcel.The Paseo Development will include 10% affordable rental units restricted to Low-Income Households, unless Developer pursues the Lot 2 Development concurrently with or after Developer receives the Certificate of Completed Obligations for the Paseo Development. If Developer, elects to pursue the Lot 2 Development, the Disposition will include the conveyance of the Lot 2 Affordable Parcel.

1.1.3. The Lot 2 Development, if implemented, will be a multi-family residential housing project including not less than 45 and up to 80 affordable rental units restricted to LowIncome Households. Notwithstanding anything to the contrary contained in this Agreement, the number of affordable rental units between 45 and 80 units will be determined by Developer at Developer’s sole discretion as stated in the Planning Application for the Lot 2 Development. If the Lot 2 Development is implemented, then the units in the Paseo Development will not be subject to any affordability restrictions but will be subject to the Paseo Residential Use Covenant.

1.1.4. No new development or changes to the existing retail uses are proposed on the Inline Retail Parcel as part of the Project. Future development on the Inline Retail Parcel will be subject to separate processing by the City, the processing of which shall be subject to the City’s standard procedures and shall be subject to the same requirements as any project not subject to this Agreement. However, in all cases, Developer agrees to maintain the building spaces currently occupied by the Museum of Contemporary Art Santa Barbara and the Center State Theater on the Inline Retail Parcel (the “Public Art Space”) for continued use by the current occupants or such 5 other public art use approved by the City; provided, however, Developer may relocate the Public Art Space within the Inline Retail Parcel upon approval by the City.

1.1.5. This Agreement establishes the terms and conditions for such Dispositions and development of the Project, as more fully described in this Agreement, including certain conditions precedent which must be met before Disposition, as well as continuing obligations for construction, operation, and maintenance of the Project following Disposition.

1.1.6. This Agreement is entered into for the purpose of developing the Project and not for speculation in landholding. Disposition of the Project Property to the Developer and development of the Project pursuant to this Agreement are in the best interests of the City and the health, safety, and welfare of its residents, and are in accord with the public purposes and provisions of applicable state and local laws. The City wishes to cause the Project to be developed to stimulate economic development within the City and provide housing in the City’s downtown core.

1.2. Definitions.

In addition to words and phrases defined by parenthetical clauses within the various sections of this Agreement, the following words and phrases have the definitions set forth in this Section

1.2. 1.2.1. Affiliate.
“Affiliate” means any person directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the Person in question, which, in the case of a partnership, shall include, each of the constituent general partners and in the case of a limited liability company, shall include the managing members thereof. The term “control,” as used in the immediately preceding sentence, means, with respect to a corporation, the right to exercise, directly or indirectly, fifty percent (50%) or more of the voting rights attributable to the shares of the controlled corporation and, with respect to a person that is not a corporation, the possession directly or indirectly, of the power to direct or cause the direction of the day-to-day management or policies of the controlled person.

1.2.2. Affordable Development.
“Affordable Development” means either the Paseo Affordable Development or the Lot 2 Development.

1.2.3. Agreement.
“Agreement” means this Disposition and Development Agreement. 6 1.2.4. Approved Housing Provider.
“Approved Housing Provider” means an affordable housing provider selected by Developer and approved by the City for the Lot 2 Development. Such approval shall not be unreasonably withheld or delayed. For purposes of this Agreement, Developer shall be deemed an Approved Housing Provider for the Lot 2 Development.

1.2.5. Approved Housing Provider Agreement.
“Approved Housing Provider Agreement” means that agreement entered into between Developer and the Affordable Housing Provider and approved by the City priorto transfer of the Lot 2 Affordable Parcel.

1.2.6. “Area Median Income” or “AMI.”
“Area Median Income” or “AMI” means the annual median income adjusted by household size, of the City of Santa Barbara, or the smallest area including the City for which such figure is available, as determined by the State of California Department of Housing and Community Development (“HCD”) periodic “State Income Limits” publication. These income limits are based on U.S. Department of Housing and Urban Development (“HUD”) data and amended from time to time. If at some time HCD or HUD ceases to publish theArea Median income figure, or at such time as HUD has not published an updated figure for at least two years, the City may determine the Area Median Income in the manner the City deems appropriate

1.2.7. Building Permit.
“Building Permit” means all building and grading permits required to be obtained from the City for the construction of the Improvements on the relevant parcel.

1.2.8. Certificate of Completed Obligations.
“Certificate of Completed Obligations” means a certificate issued by the City to the Developer pursuant to Section 6.5 of this Agreement.

1.2.9. Certificate of Occupancy.
“Certificate of Occupancy” means a certificate issued by the City’s Chief Building Official following construction or change of use of a structure confirming compliance with all applicable codes and regulations enforced by the jurisdiction. The certificate authorizes use of the structure or portion thereof. The issued Certificate of Occupancy shall contain all the information required by Section 111.2 of the edition of the California Building Code in effect at the time of 7 application of the project. A building may not be occupied or used until a Certificate of Occupancy has been issued.

1.2.10. City.
“City” meansthe City of Santa Barbara, California, a charter city, operating through its governing body, the City Council, and its various departments.

1.2.11. Close of Escrow.
“Close of Escrow” means the close of escrow for Disposition of the fee estate in the Project Property by the City to the Developer as provided in Article 3.

1.2.12. Closing Date.
“Closing Date” means the date set forth in Section 3.8.

1.2.13. City Council.
“City Council” means the governing body of the City.

1.2.14. City Delays.
“City Delays” means an (i) unexcused failure by the City to take an action required of it within the time frame specified for that action by this Agreement, or (ii) delay in a performance by the Developer caused by any action of the City that precludes performance by the Developer.

City Delay does not include ordinary delays arising from the processing or review of regulatory permits or approvals.

1.2.15. City Event of Default.
“City Event of Default” means the events set forth in Section 10.2.1.

1.2.16. City Administrator.
“City Administrator” means the person holding the position of City Administrator of the City and any City officer or employee exercising authority expressly delegated by the City Administrator to implement provisions of this Agreement.

1.2.17. Demolition Permit.
“Demolition Permit” means any permits required by the City for the Parking Lot 2 Demolition.
8 1.2.18. Developable Parcels.
“Developable Parcels” means those portions of the Project Property that will be developed with the Project. The Developable Parcels for the Paseo Development are the Former Macy’s Parcel and the Lot 1 Parcel as shown on Exhibit A, which may be adjusted to include a portion of the Inline Retail Parcel that is added to the Former Macy’s Parcel by a lot line adjustment, as provided in Section 3.1.4. The Developable Parcels shall include the Lot 2 Affordable Parcel, if the Developer elects to implement the Lot 2 Development.The Developable Parcels shall exclude any portion of the Project Property not subject to development of the Project.

The Inline Retail Parcel is not a Developable Parcel.

1.2.19. Developer.
“Developer” means Paseo Propco, LLC, or any Transferee or successor in interest permitted in accordance with Article 8 of this Agreement. As of the date of this Agreement, Developer is a Delaware limited liability company.

1.2.20. Developer Event of Default.
“Developer Event of Default” means the events set forth in Section 10.3.1.

1.2.21. Disposition.
“Disposition” means the City’s conveyance by the Grant Deed of the Paseo Nuevo Transfer Parcels and, if Developer elects to pursue the Lot 2 Development, the Lot 2 Affordable Parcel, upon satisfaction of the Conditions Precedent for each described in Article 3, and subject to the Declarations of Affordability and Use Covenants.

1.2.22. Effective Date.
“Effective Date” means the date on which this Agreement, as executed and delivered by the Developer is executed by the City after approval by the Santa Barbara City Council. In no instance shall the Effective Date be earlier than the effective date of the ordinance of the City Council approving and authorizing the execution of this Agreement.

1.2.23. Encumbrance.
“Encumbrance” means and include any mortgage, trust deed, encumbrance, lien or other mode of financing real estate construction and development, including a sale and lease-back.

1.2.24. Exceptions.
“Exceptions” means all exceptions, reservations, liens, encumbrances, qualifications, covenants, conditions, restrictions, leases, easements, rights of way, or other like matters affecting the title to the Project Property, and all matters or states of facts reflected on or arising out of any tentative or final parcel map for the Project Property, or concerning or related to 9 zoning, subdivision, permitted use or physical condition of the Project Property, or arising from the redevelopment, development or related activities of Developer.

1.2.25. Financing Plan.
“Financing Plan” means a plan evidencing the availability of the funds necessary to develop the Project, as described in Section 3.1.1 and Section 3.2.4.

1.2.26. Final Design Approval.
“Final Design Approval” means the final design review approval by HLC permitted under Section 30.220.020 of the Santa Barbara Municipal Code.

1.2.27. Force Majeure Event.
“Force Majeure Event” means acts of God (such as earthquake, firestorm, flood, etc.), extreme weather (such as earthquake, tornado, flood, blizzard, hurricane, etc.), fires, explosions and other casualties; act of the public enemy, war, insurrection, riot, unavoidable casualty, blockade embargos, disruption to transportation or supply lines, strikes, lockouts or other labor or industrial disturbances; sabotage; terrorism; civil unrest or other civil disturbance; shortages of, or inability to obtain, utilities or materials; stop work orders; preemptions, restrictions or changes in law imposed by any governmental authority after the date hereof; future order of any government, court or regulatory body claiming jurisdiction; failure or inability to secure materials, supplies or labor through ordinary sources by reason of shortages or priority or similar regulation or order of any government or regulatory body actual or threatened pandemic, epidemic or other emergency, including any government-imposed or mandated shutdowns, quarantine restrictions or delays; global financial disruption; tariffs, and any other events which are beyond Developer’s reasonable control, whether or not similar to the aforementioned events, in each case which prevents, hinders or delays Developer’s ability to perform its obligations hereunder (other than lack of funds of the Developer or the Developer’s inability to finance the construction of the Project).

1.2.28. Intentionally Deleted.

1.2.29. Governmental Restrictions.
“Governmental Restrictions” means and includes any and all laws, statutes, ordinances, codes, rules, regulations, writs, injunctions, orders, decrees, rulings, conditions of approval, or authorization, now in force or which may hereafter be in force, of a governmental entity, agency or political subdivision having jurisdiction over the Project Property or the Project.

1.2.30. Grant Deed.
“Grant Deed” means an instrument substantially in the form attached hereto as Exhibit G.
10 1.2.31. Hazardous Materials.
“Hazardous Materials” means: (i) any chemical, compound, material, mixture or substance that is now or may later be defined or listed in, or otherwise classified pursuant to, any Hazardous Materials Law as a “hazardous substance”, “hazardous waste”, “extremely hazardous waste”, “acutely hazardous waste”, “radioactive waste”, “infectious waste”, “biohazardous waste”, “toxic substance”, “pollutant”, “toxic pollutant”, “contaminant”, as well as any formulation not mentioned herein intended to define, list or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, “EP” toxicity, or “TCLP toxicity”; (ii) petroleum, natural gas, natural gas liquids, liquefied natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas) and ash produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas, or geothermal resources; (iii) “hazardous substance” as defined in Section 25281 of the California Health and Safety Code; (iv) “waste” as defined in Section 13050(d) of the California Water Code; (v) asbestos in any form; (vi) urea formaldehyde foam insulation; (vii) transforms or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs) in excess of 50 parts per million; (viii) radon; and (ix) any other chemical, material, or substance that, because of its quantity, concentration, or physical or chemical characteristics, exposure to which is now or hereafter limited or regulated for health and safety reasons by any governmental authority, or which poses or is later determined to pose a significant present or potential hazard to human health and safety or to the environment if released into the workplace or the environment. The term “Hazardous Materials” shall not include: construction materials, gardening materials, household products, office supply products or janitorial supply products customarily used in the construction, maintenance, rehabilitation, or management of residential property, or commonly used or sold by hardware, home improvement stores, or medical clinics and which are used and stored in accordance with all applicable Hazardous Materials Laws.

1.2.32. Hazardous Materials Laws.
“Hazardous Materials Laws” means all present and future federal, state and local laws, ordinances, regulations, permits, guidance documents, policies, decrees, orders and any other requirements, whether statutory, regulatory or contractual, of governmental authorities relating to health, safety, the environment or the use, handling, disposal or transportation of any Hazardous Materials (including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation Recovery Act, the Clean Water Act, the Clean Air Act, and the applicable provisions of the California Health and Safety Code and the California Water Code, as each such statute may from time to time be amended, and the rules, regulations and guidance documents promulgated pursuant to any such statute). 11 1.2.33. Historic Landmarks Commission or HLC.
“Historic Landmarks Commission” or “HLC” means the City’s Historic Landmarks Commission as described in City Charter Section 817.

1.2.34. Intentionally Deleted.

1.2.35. Improvements.
“Improvements” means and includes all demolition, excavation, or grading to be done on the Developable Parcels, as well as all construction of new, or alteration or rehabilitation of existing, buildings, structures, fixtures, parking facilities, landscaping, and other and improvements of whatsoever character to be done by Developer on, in, around, under or over the Developable Parcels pursuant to this Agreement. Alteration or rehabilitation includes striping or restriping of parking spaces and travel lanes within parking facilities.

1.2.36. Losses and Liabilities.
“Losses and Liabilities” means and include all claims, demands, writs, actions, causes of action, liabilities, losses, damages, judgments, injuries, expenses (including, without limitation, attorneys’ fees and costs incurred by the indemnified party with respect to legal counsel reasonably acceptable to it and the indemnifying party), charges, penalties or costs of whatsoever character, nature and kind, whether to property or to person, and whether by direct or derivative action, known or unknown, suspected or unsuspected, latent or patent, existing or contingent.

1.2.37. Lot 2 Affordable Parcel.
“Lot 2 Affordable Parcel” means that portion of Parking Lot 2 which shall be subdivided by the City for the purpose of development, construction, and operation the Lot 2 Development. The Lot 2 Affordable Parcel is more particularly depicted in the attached Exhibit A-1.

1.2.38. Lot 2 Development.
“Lot 2 Development” means the affordable housing development containing not less than 45 and up to 80 Lot 2 Affordable Units on the Lot 2 Affordable Parcel, along with one unrestricted onsite manager’s unit to be constructed, operated, and maintained by an Approved Housing Provider. The Lot 2 Development does not contain any unrestricted units other than the one onsite manager’s unit.

1.2.39. Lot 2 Development Approvals.
“Lot 2 Development Approvals” means those permits and approvals required by the Santa Barbara Municipal Code or applicable law necessary for the development and construction of the Lot 2 Development.
12 1.2.40. Lot 2 Affordable Units.
“Lot 2 Affordable Units” means rental housing units restricted at rents affordable to Low-Income Households (80% AMI or below) as provided in the Lot 2 Affordability Covenant and located on the Lot 2 Affordable Parcel.

1.2.41. Lot 2 Affordability Covenant.
“Lot 2 Affordability Covenant” means the Declaration of Affordability Covenant described in Section 3.2.7 and Exhibit F.

1.2.42. Lot 2 Development Option Term.
“Lot 2 Development Option Term” is the term during which Developer may elect, in its sole discretion and in accordance with Section 5.1 below, to pursue the Lot 2 Development.

The Lot 2 Development Option Term shall commence on the date Developer receives the Certificate of Completed Obligations for the Paseo Development and terminate on the date five years thereafter.

1.2.43. Low-Income Households.
“Low-Income Households” means persons and families with a combined income that does not exceed 80% of the AMI adjusted for household size as described in the Paseo Affordability Covenant or Lot 2 Affordability Covenant.

1.2.44. Ownership or Control.
“Ownership or Control” means, without limitation, all voting rights and beneficial ownership with respect to all classes of stock, interests in partnerships or limited liability companies, and/or beneficial interests under a trust, as may be applicable to the type of entity in question. In the case of a trust, such term shall also include the rights of the trustee as well as the beneficiary.

1.2.45. Parcel Map No. 20,504.
“Parcel Map No. 20,504” means the subdivision map recorded February 24, 1989, filed in Book 42 of Parcel Maps, at pages 86 through 98, inclusive, of the Official Records of the County of Santa Barbara, California.

1.2.46. Parking Lot 2 Demolition.
“Parking Lot 2 Demolition” means the demolition of the portion of the existing Parking Lot 2 structure located on the Lot 2 Affordable Parcel necessary to prepare the Lot 2 Affordable Parcel for construction of the Lot 2 Development. The Parking Lot 2 Demolition shall also require reconstruction and restriping of the remaining Parking Lot 2 structure as necessary to 13 assure its structural integrity and make such internal modifications to traffic flow patterns to maintain its continued operation as a public parking facility as determined by the City Engineer.

1.2.47. Party/Parties.
“Parties” means the City and the Developer, collectively, and “Party” means either the City or the Developer.

1.2.48. Paseo Affordable Development.
“Paseo Affordable Development” means the Paseo Affordable Units within the Paseo Development.

1.2.49. Paseo Affordable Development Approvals.
“Paseo Affordable Development Approvals” means those permits and approvals listed in Exhibit D necessary for the development and construction of the Paseo Development, unless the Lot 2 Development Approvals are processed and approved concurrently with the Paseo Development Approvals and all the conditions precedent to disposition of the Lot 2 Affordable Parcel are met before Close of Escrow for Disposition of the Paseo Nuevo Transfer Parcels, in which case the Paseo Affordable Development will not be included in the Project.

1.2.50. Paseo Affordable Units.
“Paseo Affordable Units” means, if the Paseo Affordable Development is selected, 10% of the units included in the Paseo Development are restricted for a term of 90 years to rental at rents affordable to Low-Income Households. For example, if there are 233 units in the Paseo Development, then there will be 24 Paseo Affordable Units and 209 unrestricted units. The Paseo Affordable Units shall be constructed to the same standards and have access to the same on-site amenities as unrestricted units within the Paseo Development.

1.2.51. Paseo Affordability Covenant.
“Paseo Affordability Covenant” means the Declaration of Affordability Covenant, described in Section 3.1.7 and Exhibit F.

1.2.52. Paseo Residential Use Covenant.
“Paseo Residential Use Covenant” means the Declaration of Residential Use Covenant described in Section 3.1.7 and Exhibit F.

1.2.53. Paseo Development.
“Paseo Development” means the (1) residential development project containing approximately 233 multi-family residential rental units located on the Former Macy’s Parcel and Lot 1 Parcel, to be constructed, operated, and maintained by Developer; and (2) the estimated 17,000 square feet of new retail uses developed on the Former Macy’s Parcel, to be constructed, 14 operated, and maintained by Developer. The Paseo Development shall include the Paseo Affordable Units, unless the Lot 2 Development is selected pursuant to Section 5.1.

1.2.54. Paseo Development Approvals.
“Paseo DevelopmentApprovals” means only those permits and approvals listed in Exhibit D necessary for the development and construction of the Paseo Development and the Paseo Affordable Development, if, and only if, the Paseo Affordable Development is selected.

1.2.55. Paseo Nuevo Transfer Parcels.
“Paseo Nuevo Transfer Parcels” means the Inline Retail Parcel, the Former Macy’s Parcel, Lot 1 Parcel. The Former Nordstrom Parcelis specifically excluded from the Paseo Nuevo Transfer Property.

1.2.56. Performance Security.
“Performance Security” has the meaning established by Section 3.1.8 of this Agreement.

1.2.57. Person.
“Person” means an individual, corporation, partnership, limited liability company, joint venture, association, firm, joint stock company, trust, unincorporated association, public agency, or other entity.

1.2.58. Planning Application.
“Planning Application” means the application for Project Design Review submitted in accordance with Section 30.205.020 of the Santa Barbara Municipal Code.

1.2.59. Project.
“Project” means the Paseo Development and the Affordable Development as further described in the Scope of Development as set forth in Exhibit C.

1.2.60. Project Construction.
“Project Construction” means (1) the construction of the Paseo Development, and (2) either (a) the construction of the Paseo Affordable Development, or (b) the Parking Lot 2 Demolition. Project Construction in all events includes the construction of the Paseo Development. If Developer elects to pursue the Paseo Affordable Development, the Project Construction shall also include the construction of the Paseo Affordable Development. If 15 Developer elects to pursue the Lot 2 Development, the Project Construction as referred to herein shall include the Parking Lot 2 Demolition.

1.2.61. Project Design Approval.
“Project Design Approval” means project design review approval by the HLC required under Section 30.220.020 of the Santa Barbara Municipal Code, which will occur after the Planning Application is deemed complete.

1.2.62. Project Documents.
“Project Documents” means such preliminary and final design drawings, preliminary and final construction drawings and specifications, grading plans, landscape plans, development plans, plot plans, off-site improvement plans, architectural renderings and elevations, material specifications, parking plans, art plans and/or other plans and documents for the Project as are required to be submitted to City pursuant to this Agreement or any applicable Governmental Restrictions.

1.2.63. Project Property.
“Project Property” means the Paseo Nuevo Transfer Parcels and, if the Lot 2 Development is selected, the Lot 2 Affordable Parcel, as applicable.

1.2.64. Public Works Permit.
“Public Works Permit” means all public works permits required to be obtained from the City for construction within, or use of, the right-of-way associated with development on the relevant parcel.

1.2.65. Qualified Developer.
“Qualified Developer” means an organization with the financial wherewithal and experience reasonably anticipated to be necessary to develop the Developable Parcels as set forth in this Agreement. An organization shall be presumed to be a Qualified Developer if it or its Affiliates have (1) completed not less than 1,000 housing units and two separate housing projects within the previous 7 years, and (2) sufficient net worth and liquidity reasonably expected to be necessary to meet the contemplated financing requirements for the Project. The City agrees that AllianceBernstein L.P., Arcturus SG, LLC, Georgetown CA Advisor, LLC, Prism Places, and each of their respective Affiliates are deemed to be Qualified Developers.

1.2.66. Qualified Financial Institution.
“Qualified Financial Institution” means a real estate investment trust, bank; saving and loan association; investment bank; insurance company; trust company; commercial credit corporation; pension plan; pension fund or pension advisory firm; mutual fund; government entity or plan; investment company; money management firm; investment fund; financial institution; limited liability company; limited partnership; general partnership; corporation; any “qualified 16 institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended; any institutional “accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended; any institution similar to any of the foregoing Persons; provided, that such Person has total assets (in name or under management) in excess of $500,000,000 and is regularly engaged in the business of owning, operating or investing in commercial real estate or making commercial mortgage and/or mezzanine real estate loans or owning interests in such commercial mortgage and/or mezzanine real estate loans. The City hereby agrees that AllianceBernstein L.P. and its Affiliates a Qualified Financial Institution.

1.2.67. Reassigned Affordable Units.
“Reassigned Affordable Units” means those Paseo Affordable Units originally included in the Paseo Affordable Development that later become part of the Lot 2 Development as Lot 2 Affordable Units in the event that Developer selects the Lot 2 Development within the Lot 2 Development Option Term following recordation of the Paseo Affordability Covenant on the Paseo Nuevo Transfer Property as provided in Section 5.5 of this Agreement.

1.2.68. Restrictive Covenants.
“Restrictive Covenants” means the Paseo Affordability Covenant, the Paseo Residential Use Covenant, and the Lot 2 Affordability Covenant.

1.2.69. Santa Barbara Municipal Code or SBMC.
“Santa Barbara Municipal Code” or “SBMC” means the Santa Barbara Municipal Code as existing on the date of this Agreement and as may be amended from time to time thereafter.

1.2.70. Schedule of Performance.
“Schedule of Performance” means the Schedule of Performance attached hereto as Exhibit E, which is incorporated herein by this reference. The Schedule of Performance is subject to minor revision from time to time as mutually agreed upon in writing between the Developer and the City Administrator, such approval not to be unreasonably withheld, conditioned or delayed.

1.2.71. Scope of Development.
“Scope of Development” means the document attached to this Agreement as Exhibit C, which is incorporated herein by this reference.

1.2.72. Security Financing Interests.
“Security Financing Interests” has the definition set forth in Section 9.1 of this Agreement.
17 1.2.73. Term of the Agreement.
“Term of the Agreement” means the period from the Effective Date until the date on which both of the following have occurred: (1) Developer has received the Certificates of Completed Obligations for the Project pursuant to Section 6.5; and (2) (a) if the Developer has elected to proceed with the Paseo Affordable Development, then Developer has provided written notice to the City that Developer is foregoing Developer’s right to implement the Lot 2 Development, or (b) the Lot 2 Development Option Term has terminated, unless this Agreement earlier terminated in accordance with Article 10.

1.2.74. Transfer/Transferee.
“Transfer” means and include any voluntary or involuntary transfer, sale, assignment, lease, sublease, license, franchise, concession, operating agreement, or gift, of all or any portion of the Developable Parcels, any rights or obligation of the Developer hereunder, or any interest in the Developer to any person or entity (“Transferee”).

ARTICLE 2. PARTIES TO THE AGREEMENT.

2.1. Parties.

City and Developer are the only Parties to this Agreement.

2.2. No Third-Party Beneficiaries.

There are no third-party beneficiaries to this Agreement whether express or implied.

2.3. No Joint Venture.

The City and Developer are not and shall not be deemed to be partners, coventurers, joint ventures or in any other way related to one another, nor shall either Party have any fiduciary or agency relationship with the other.

ARTICLE 3. DISPOSITION OF PROJECT PROPERTY.

3.1. Conditions Precedent to City Disposition of Paseo Nuevo Transfer Parcels.

The following conditions shall be conditions precedent to the Disposition of the Paseo Nuevo Transfer Parcels and shall be satisfied in all material respects by the Developer no later than the times specified for such conditions below or in the Schedule of Performance.

3.1.1. Developer Financing.
(a) No later than 60 days before Close of Escrow, the Developer shall submit to the City a Financing Plan for the Paseo Development, which shall include: (1) a projected cost breakdown for the Paseo Development based upon government permits and 18 approvals(“Projected Costs”); (2) a copy of each term sheet or letter of intent issued by a Qualified Financial Institution for the loans for construction (“Construction Loan”) and for other financing from external sources in the amounts together with the amounts described in clause (3) reasonably anticipated to be necessary to fully fund the development of the Paseo Development; (3) evidence that the Developer has sufficient funds available and is able to commit such funds to cover the difference, if any, between the projected costs of the Paseo Development and the amount reasonably anticipated to be available to the Developer from external sources(Developer’s “Equity Contribution”); and (4) a list of all Developer performance guarantees. (b) If the City has any objection to the Financing Plan, the City shall provide notice to Developer of such objection within 30 days from the date of receipt of the Financing Plan. The notice shall state in writing the detailed reasons for the City’s objection and the specific changes which the City requests. Developer shall thereafter work in good faith with the City to address the City’s objection. Failure to provide written notice of such objection within 30 days shall be deemed an acceptance of the Financing Plan by the City. The only basis for the City to objectshall be to ensure that sufficient funding necessary for the construction of the Paseo Development is available.
(c) All Construction Loans and other financing, including the Developer’s Equity Contribution, for the Paseo Development will be executed or dedicated before or simultaneously with the Close of Escrow.

3.1.2. Insurance.

No later than the Close of Escrow, the Developer shall furnish to the City certificates of insurance demonstrating that Developer has obtained the type and amounts of insurance required pursuant to Section 7.3 of this Agreement. Developer’s obligation to carry any insurance on the Paseo Nuevo Transfer Parcels or in relation to the Paseo Development shall terminate upon receipt of the Certificate of Completed Obligations for the Paseo Development.

3.1.3. Paseo Development Approvals.

Prior to the Close of Escrow, Developer shall have obtained the Paseo Development Approvals. Developer will use reasonable, good faith efforts to take all actions within its control to obtain such permits and approvals by the time provided in the Schedule of Performance. City will use reasonable, good faith efforts to take all actions within its control to process, review, and issue such permits and approvals assuming timely submittals by Developer. The City and Developer will cooperate in good faith to make adjustments to the Schedule of Performance as may be necessary to respond to Force Majeure Events, City Delays, or other causes.

3.1.4. Paseo Development Lot Line Adjustment.

No later than the Close of Escrow, Developer, if necessary, will process a lot line adjustment whereby land from the Inline Retail Parcel is added to the Former Macy’s Parcel so that the footprint of the Paseo Development is located entirely within the new legal boundary of the Former Macy’s Parcel as adjusted. This shall not be a condition to Close of Escrow if the 19 footprint of the Paseo Development is modified such that the lot line adjustment is no longer necessary.

3.1.5. Construction Contract.

Prior to Close of Escrow and pursuant to the terms of the Financing Plan, Developer shall have submitted to the City an executed copy of the general construction contract for the Paseo Development. The general construction contract shall be consistent with the Scope of Development and Projected Costs contained in the Financing Plan. If the City has any objection to a construction contract, the City shall provide notice to Developer of such objection within 30 days from the date of receipt of the construction contract. The notice shall state in writing the detailed reasons for the City’s objection and the specific changes which the City requests.

Developer shall thereafter work in good faith with the City to address the City’s objection. Failure to provide written notice of such objection within 30 days shall be deemed an acceptance of the construction contract by the City. The only basis for the City to object is to ensure that the contract is consistent with the Scope of Development and the Financing Plan.

3.1.6. Memorandum of Disposition and Development Agreement.

The Developer shall have submitted to Escrow a Memorandum of Disposition and Development Agreement in recordable form attached as Exhibit H duly executed by Developer and City on or before the Close of Escrow. The Memorandum of Disposition and Development Agreement shall be recorded against the Paseo Nuevo Transfer Parcels and shall have superior position on title relative to the liens of all lenders who provide financing for the Project.

3.1.7. Restrictive Covenants.
(a) Developer shall have submitted to Escrow the Paseo Residential Use Covenant for the benefit of the City, substantially in the form set forth in Exhibit F and as approved as to form by the City Attorney, wherein the Developer shall be obligated to cause all of the residential units to be constructed, operated, and maintained by Developer as rental apartments restricted to rent to households that:(1) agree as a term of the rental agreement to occupy the rental unit as their domicile (permanent primary residence); and (2) agree as a term of the rental agreement that the rental unit shall not be sublet for short-term vacation rental. The Paseo Residential Use Covenant shall be deposited into Escrow before Close of Escrow and shall be recorded such that the Paseo Residential Use Covenant has superior position on title relative to the liens of all lenders who provide financing for the Project.
(b) If, and only if, Developer selects the Paseo Affordable Development, Developer shall have submitted to Escrow the Paseo Affordability Covenant for the benefit of the City, substantially in the form set forth in Exhibit F and as approved as to form by the City Attorney.

The Paseo Affordability Covenant shall be deposited into Escrow prior to the Close of Escrow and shall be recorded such that the Paseo Affordability Covenant has equal senior priority to the Paseo Residential Use Covenant. If Developer subsequently selects the Lot 2 Development following recordation of the Paseo Affordability Covenant, the City shall promptly execute all documents 20 necessary to remove the Paseo Affordability Covenant from the Paseo Nuevo Transfer Parcels as to the Reassigned Affordable Units.

3.1.8. Performance Security
Developer shall have delivered to Escrow an irrevocable standby letter of credit in favor of the City in customary form in the amount of the guaranty cap to secure Developer’s obligation under Section 10.3.1(b), which the City may draw on as provided in this Section 3.1.8. The guaranty cap shall be an amount equal to the Equity Contribution made by Developer or its owners to the total construction cost of the Project, which amount shall be equal to at least 20% of the total budgeted construction costs of the Project. The City may draw on the letter of credit if: (a) Developer defaults on its obligation under Section 10.3.1(b) and fails to cure such default within the notice and cure periods specified in Article 10, and (b) the City provides Developer with an additional notice of at least 30 days that the City intends to draw on the letter of credit. In all events, at the time that the Paseo Development has reached substantial completion the letter of credit will be released.

3.1.9. Reciprocal Agreements and Consent.

The Developer shall have received the necessary consents and approvals from the City and the current ground lessee under the Nordstrom Ground Lease under the Paseo Nuevo Agreements and Lot 1 Covenant sufficient to permit the development, construction, operation, and maintenance of the Paseo Development, as reasonably determined by Developer and the City, including without limitation the amendment, revision or termination of the Paseo Nuevo Agreements and Lot 1 Covenant. City hereby agrees to provide Developer all necessary City consents and approvals under the Paseo Nuevo Agreements and Lot 1 Covenant to permit the development, construction operation, and maintenance of the Paseo Development; provided that such consents and approvals must be in form and substance reasonably acceptable to both Parties.

3.2. Conditions Precedent to City Disposition of Lot 2 Affordable Parcel.

The following conditions shall be conditions precedent to the Disposition of the Lot 2 Affordable Parcel only if the Lot 2 Development is selected and in such an event, shall be satisfied by the Developer no later than the times specified for such conditions below or in the Schedule of Performance.

3.2.1. Insurance.

No later than the Close of Escrow, the Developer shall furnish to the City certificates of insurance demonstrating that Developer has obtained the type and amounts of insurance required pursuant to Section 7.3 of this Agreement. For any insurance amounts required for the Lot 2 Development under Section 7.3, the City shall be named as loss payee or additional insured on the policies, as applicable, prior to recordation of the Grant Deed. Additionally, Developer shall ensure that all worker compensation insurance policies carried by the general contractor and subcontractors working on the Lot 2 Development shall include a waiver of subrogation in favor of the City. Developer’s obligation to carry any insurance on the Lot 2 Affordable Parcel or in relation to the Lot 2 Development shall terminate upon receipt of the 21 Certificate of Completed Obligations for the Lot 2 Development, provided that the Approved Housing Provider has provided insurance that meets the requirements of this Agreement pursuant to the Approved Housing Provider Agreement.

3.2.2. Lot 2 Development Approvals.

Prior to the Close of Escrow, Developer shall have obtained from the City the Lot 2 Development Approvals. Developer shall endeavor to obtain such permits and approvals by the time provided in the Schedule of Performance, provided that the City acts promptly in processing such permits and approvals; provided, however, in the event that Developer applies for such permits and approvals no later than the date specified on the Schedule of Performance but does not obtain such permits and approvals by the times provided in the Schedule of Performance due to any Force Majeure Events or City Delays, then such times provided in the Schedule of Performance shall be extended accordingly. The Developer’s application for the City approvals shall be consistent with the Scope of Development and the terms and conditions of this Agreement.

The City agrees to cause its various departments and agencies to be as responsive as possible to Developer’s submissions and to react in a timely manner according to the Schedule of Performance.

3.2.3. Subdivision of Lot 2 Parcel.

The Lot 2 Parcel shall have been subdivided by the City to create a separate, legal parcel to accommodate the development of the Lot 2 Affordable Project pursuant to Section 3.3, below. The City agrees to cooperate in all reasonable respects and act timely in effectuating this subdivision.

3.2.4. Approved Housing Developer Agreement.

Prior to Close of Escrow, Developer shall have entered into a binding, written agreement with an Approved Housing Provider for: (1) the transfer of the Lot 2 Affordable Parcel to an Approved Housing Provider; (2) the construction of the Lot 2 Development by the Approved Housing Provider; and (3) the operation and maintenance of the Lot 2 Development by the Approved Housing Provider following completion of the Lot 2 Development. The City shall be a designated third-party beneficiary of the Approved Housing Developer Agreement with the right of specific enforcement. Specifically, the Approved Housing Developer Agreement shall contain the following, as well as any other terms or conditions acceptable to Developer and City:
(a) Design and Affordability Compliance. The Approved Housing Provider shall agree to construct, maintain, and operate the Lot 2 Development in compliance with the Lot 2 Development Approvals and subject to the affordability requirements for the Lot 2 Project contained in the Lot 2 Affordability Covenant.
(b) Approved Housing Provider Financing Plan. The Approved Housing Provider shall provide to Developer and the City a Financing Plan for the Lot 2 Development, which shall include: (1) a Projected Costs for Lot 2 Development based upon government permits and approvals; (2) a copy of each term sheet or letter of intent for the 22 Construction Loan and for other financing from external sources in the amounts together with the amounts described in clause (3) reasonably anticipated to be necessary to fully fund the development of the Lot 2 Development; (3) evidence that the Approved Housing Provider has sufficient funds available and is able to commit such funds to cover the difference, if any, between the projected costs of the Lot 2 Development and the amount reasonably anticipated to be available to the Approved Housing Provider from external sources; and (4) a list of all Approved Housing Provider’s performance guarantees. The terms defined in Section 3.1.1 have the same meaning in this subdivision except in reference to the Lot 2 Development. (c) Assumption of Obligations. The Approved Housing Provider shall provide an express assumption of obligations under this Agreement relating to the insurance, construction, operation, and maintenance of the Lot 2 Development as required by this Agreement.

3.2.5. Parking Lot 2 Demolition.

Prior to Close of Escrow, Developer shall have either: (1) completed the Parking Lot 2 Demolition, or (2) (a) obtained the Demolition Permit from the City; (b) submitted to the City an executed copy of the general construction contract for the Parking Lot 2 Demolition; (c) provided evidence that Developer or the Affordable Housing Provider has sufficient funds available and is able to commit such funds to satisfy the general construction contract to complete the Parking Lot 2 Demolition; and (d) established a separate escrow account for the benefit of the Affordable Housing Provider and deposited into that account an amount equivalent to the estimated cost of the Parking Lot 2 Demolition.The escrow account referred to in clause (d) may be used by Developer or the Affordable Housing Provider to pay for the costs related to the Parking Lot 2 Demolition.

3.2.6. Memorandum of Disposition and Development Agreement Developer shall have submitted to the City and deposited into Escrow a duly executed and acknowledged Memorandum of Disposition and Development Agreement in recordable form as attached as Exhibit H on or before the Close of Escrow. The Memorandum of Disposition and Development Agreement shall be recorded against the Lot 2 Affordable Parcel and shall have superior position on title relative to the liens of all lenders who provide financing for the Lot 2 Development.

3.2.7. Restrictive Covenants.

The Developer shall have submitted to Escrow a duly executed and acknowledged Lot 2 Affordability Covenant for the benefit of the City, substantially in the form set forth in Exhibit F and as approved as to form by the City Attorney. The Lot 2 Affordability Covenant shall be deposited into Escrow prior to the scheduled Close of Escrow and shall be recorded such 23 that the Lot 2 Affordability Covenant has superior position on title relative to the liens of all lenders who provide financing for the Project.

3.2.8. Reciprocal Agreements and Consent.

Developer shall have received all necessary consents and approvals from the City and current ground lessee under the Nordstrom Ground Lease under the Paseo Nuevo Agreements and Lot 2 Covenant to permit the development, construction, operation, and maintenance of the Lot 2 Development, as reasonably determined by Developer and the City, including without limitation the amendment, revision or termination of the Paseo Nuevo Agreements and Lot 2 Covenant. City hereby agrees to provide Developer all necessary City consents and approvals under the Paseo Nuevo Agreements and Lot 2 Covenant to permit the development, construction operation, and maintenance of the Lot 2 Development; provided that. such consents and approvals must be in form and substance reasonably acceptable to both Parties.

3.3. City Covenant to Subdivide Lot 2 Affordable Parcel.

Upon Developer’s selection of the Lot 2 Development, the City shall immediately initiate the process to subdivide the Lot 2 Parcel to create the Lot 2 Affordable Parcel in substantial conformance with the Lot 2 Affordable Parcel as depicted in Exhibit A-1. The City agrees to act expeditiously in processing such subdivision and cooperate with Developer in all reasonable respects. Nothing in this section will be construed as restricting the City’s discretionary authority under applicable law.

3.4. Additional Covenants.

The following shall also constitute conditions to the Close of Escrow for either the Paseo Nuevo Transfer Parcels or the Lot 2 Affordable Property, which conditions shall be satisfied by the times set forth in the Schedule of Performance:
(a) The City shall have deposited into Escrow prior to the scheduled Close of Escrow, duly executed and acknowledged, and otherwise in recordable form, the Memorandum of Disposition and Development Agreement, the Restrictive Covenants, as applicable, and the Grant Deed;
(b) Developer and City shall have executed and delivered mutuallyagreed-upon irrevocable Escrow instructions authorizing Escrow to record and/or deliver to the City the closing documents. The Escrow instructions shall also state that the Grant Deed may be recorded only if it is recorded concurrently with the closing of the Construction Loan, which closing shall be evidenced by the recordation of the deed of trust securing the Construction Loan, provided, however, that the Construction Loan deed of trust will be subordinate to the Restrictive Covenants;
(c) Developer shall have provided to City written verification from Escrow confirming that the deed of trust to be recorded in conjunction with the closing of the Construction Loan has been deposited into escrow;
24 (d) As of Close of Escrow there are no material defaults (after the giving of notice and a reasonable opportunity to cure) by the Developer under this Agreement; and (e) As of Close of Escrow, there are no defaults (after the giving of notice and a reasonable opportunity to cure) by the City under this Agreement, unless waived by Developer.

3.5. Disposition of Project Property.

Provided the conditions precedent in Section 3.1 and/or Section 3.2 have been satisfied, upon the terms, covenants and conditions set forth in this Agreement, City agrees to convey to Developer, and Developer agrees to accept from City, City’s fee interest in the Project Property in accordance with this Agreement and the Grant Deed.

3.6. Condition of the Project Property.

3.6.1. Due Diligence. The Developer acknowledges that it has conducted all studies and investigations of the Project Property that it has deemed necessary to assure itself of the physical condition of the Project Property and the suitability of the Project Property for the development contemplated by this Agreement.

3.6.2. “As Is” Conveyance.
(a) THE DEVELOPER SPECIFICALLY ACKNOWLEDGES AND

AGREES THAT THE CITY IS CONVEYING TO THE DEVELOPER AND THE DEVELOPER IS ACQUIRING FROM THE CITY THE PROJECT PROPERTY ON AN “AS IS WITH ALL FAULTS” BASIS AND THAT THE DEVELOPER IS NOT RELYING ON ANY

REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS (EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT) OR IMPLIED, FROM THE

CITY AS TO ANY MATTERS CONCERNING THE PROJECT PROPERTY, INCLUDING WITHOUT LIMITATION: (A) THE QUALITY, NATURE, ADEQUACY AND PHYSICAL

CONDITION OF THE PROJECT PROPERTY (INCLUDING, WITHOUT LIMITATION,

TOPOGRAPHY, CLIMATE, AIR, WATER RIGHTS, WATER, GAS, ELECTRICITY, UTILITY

SERVICES, GRADING, DRAINAGE, SEWERS, ACCESS TO PUBLIC ROADS AND RELATED CONDITIONS); (B) THE QUALITY, NATURE, ADEQUACY, AND PHYSICAL

CONDITION OF SOILS, GEOLOGY AND GROUNDWATER, (C) THE EXISTENCE,

QUALITY, NATURE, ADEQUACY AND PHYSICAL CONDITION OF UTILITIES SERVING

THE PROJECT PROPERTY, (D) THE DEVELOPMENT POTENTIAL OF THE PROJECT PROPERTY, AND THE PROJECT PROPERTY’S USE, HABITABILITY,

MERCHANTABILITY, OR FITNESS, SUITABILITY, VALUE OR ADEQUACY OF THE

PROJECT PROPERTY FOR ANY PARTICULAR PURPOSE, (E) THE ZONING OR OTHER

LEGAL STATUS OF THE PROJECT PROPERTY OR ANY OTHER PRIVATE OR

GOVERNMENTAL RESTRICTIONS ON THE USE OF THE PROJECT PROPERTY, (F) THE

COMPLIANCE OF THE PROJECT PROPERTY OR ITS OPERATION WITH ANY

APPLICABLE CODES, LAWS, REGULATIONS, STATUTES, ORDINANCES, COVENANTS, CONDITIONS AND RESTRICTIONS OF ANY GOVERNMENTAL OR QUASIGOVERNMENTAL ENTITY OR OF ANY OTHER PERSON OR ENTITY, AND (G) THE 25 PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS ON, UNDER OR ABOUT THE

PROJECT PROPERTY OR EMANATING FROM THE ADJOINING OR NEIGHBORING PROPERTY. THE DEVELOPER AFFIRMS THAT THE DEVELOPER HAS NOT RELIED ON

THE SKILL OR JUDGMENT OF THE CITY OR ANY OF ITS RESPECTIVE AGENTS,

EMPLOYEES, CONSULTANTS OR CONTRACTORS TO SELECT OR FURNISH THE

PROJECT PROPERTY FOR ANY PARTICULAR PURPOSE, AND THAT THE CITY MAKES

NO WARRANTY THAT THE PROJECT PROPERTY IS FIT FOR ANY PARTICULAR PURPOSE. THE DEVELOPER ACKNOWLEDGES THAT IT SHALL USE ITS

INDEPENDENT JUDGMENT AND MAKE ITS OWN DETERMINATION AS TO THE SCOPE

AND BREADTH OF ITS DUE DILIGENCE INVESTIGATION WHICH IT SHALL MAKE

RELATIVE TO THE PROJECT PROPERTY AND SHALL RELY UPON ITS OWN

INVESTIGATION OF THE PHYSICAL, ENVIRONMENTAL, ECONOMIC AND LEGAL

CONDITION OF THE PROJECT PROPERTY (INCLUDING, WITHOUT LIMITATION,

WHETHER THE PROJECT PROPERTY IS LOCATED IN ANY AREA WHICH IS

DESIGNATED AS A SPECIAL FLOOD HAZARD AREA, DAM FAILURE INUNDATION

AREA, EARTHQUAKE FAULT ZONE, SEISMIC HAZARD ZONE, HIGH FIRE SEVERITY AREA OR WILDLAND FIRE AREA, BY ANY FEDERAL, STATE OR LOCAL CITY). THE

DEVELOPER UNDERTAKES AND ASSUMES ALL RISKS ASSOCIATED WITH ALL MATTERS PERTAINING TO THE PROJECT PROPERTY’S LOCATION IN ANY AREA

DESIGNATED AS A SPECIAL FLOOD HAZARD AREA, DAM FAILURE INUNDATION

AREA, EARTHQUAKE FAULT ZONE, SEISMIC HAZARD ZONE, HIGH FIRE SEVERITY AREA OR WILDLAND FIRE AREA, BY ANY FEDERAL, STATE OR LOCAL CITY. (b) Developer’s Release of the City. Except as set forth in the representations and warranties of City in this Agreement, a breach by the City of its obligations under this Agreement or the gross negligence or willful misconduct of the City, the Developer, on behalf of itself and anyone claiming by, through or under the Developer, hereby waives its right to recover from and fully and irrevocably releases the City and its council members, board members, employees, officers, directors, representatives, attorneys and agents (the “Released Parties”) from any and all claims, responsibility or liability that the Developer may have or hereafter acquire against any of the Released Parties for any claims, fines, penalties, fees, costs, loss, liability, damage, expenses, demand, action or cause of action arising from or related to the condition (including any construction defects, errors, omissions or other conditions, latent or otherwise), valuation, salability or utility of the Project Property as of the Close of Escrow, or its suitability for any purpose whatsoever.
(c) Scope of Release. Except as set forth in Section 3.6.2(b), the release set forth in Section 3.6.2(b) hereof includes claims (other than claims for the presence of Hazardous Materials on, under or about the Project Property prior to the Close of Escrow) of which the Developer is presently unaware or which the Developer does not presently suspect to exist which, if known by the Developer, would materially affect the Developer’s release of the Released Parties. The Developer specifically waives the provision of any statute or principle of law that provides otherwise. In this connection and to the extent permitted by law, the Developer agrees, represents and warrants that the Developer realizes and acknowledges that factual matters now unknown to the Developer may have given or may hereafter give rise to causes of action, claims, fines, penalties, fees, demands, debts, controversies, damages, costs, losses and expenses which are presently unknown, unanticipated and unsuspected, and the Developer further agrees and 26 represents that the waivers and releases herein have been negotiated and agreed upon in light of that realization and that the Developer nevertheless hereby intends to release, discharge and acquit the City from any such unknown causes of action, claims, fines, penalties, fees, demands, debts, controversies, damages, costs, losses and expenses. Accordingly, the Developer, on behalf of itself and anyone claiming by, through or under the Developer, hereby assumes the above-mentioned risks and hereby expressly waives any right the Developer and anyone claiming by, through or under the Developer, may have under Section 1542 of the California Civil Code, which reads as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS

WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT

TO EXIST IN HIS OR HER FAVOR AT THE TIME OF

EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM

OR HER MUST HAVE MATERIALLY AFFECTED HIS OR
HER SETTLEMENT WITH THE DEBTOR.”
Developer’s Initials: ________
The provisions of this section shall survive the termination of the Term of the Agreement.

3.7. Discovery of Hazardous Materials.

3.7.1. Developer Responsibility. In the event that the Developer discovers the presence of Hazardous Materials on, under, or about the Project Property following the commencement or completion of the construction of Improvements, and the presence of such Hazardous Materials are not caused by the City, the Developer shall be responsible for the payment of all costs of remediation in accordance with Governmental Restrictions. The Developer hereby waives its right to recover from and fully and irrevocably releases the City from any and all claims, responsibility and/or liability that the Developer may have or hereafter acquire from the discovery of Hazardous Materials on, under or about the Project Property following the completion of the construction of the Improvements as evidenced by the issuance by the City of a Certificate of Occupancy, except to the extent that the release of Hazardous Materials on the Project Property was caused or suffered by the City. Developer acknowledges that the Project Property contains certain identified Leaking Underground Storage Tanks (“LUST”) and Cleanup Sites regulated by the Regional Water Resources Control Board and/or Santa Barbara County. Developer hereby agrees that the City shall not be held responsible for any contamination that may result from these LUST and Cleanup Sites on the Project Property or from neighboring LUST or Cleanup Sites not under the City’s control.

3.7.2. Scope of Release. The release set forth in this Section 3.7 includes claims (other than claims for the presence of Hazardous Materials on, under or about the Project Property prior to the Close of Escrow) of which the Developer is presently unaware or which the Developer does not presently suspect to exist which, if known by the Developer, would materially affect the Developer’s release of the Released Parties. The Developer specifically waives the provision of any statute or principle of law that provides otherwise. In this connection and to the extent permitted by law, the Developer agrees, represents and warrants that the Developer realizes and 27 acknowledges that factual matters now unknown to the Developer may have given or may hereafter give rise to causes of action, claims, fines, penalties, fees, demands, debts, controversies, damages, costs, losses and expenses which are presently unknown, unanticipated and unsuspected, and the Developer further agrees and represents that the waivers and releases herein have been negotiated and agreed upon in light of that realization and that the Developer nevertheless hereby intends to release, discharge and acquit the City from any such unknown causes of action, claims, fines, penalties, fees, demands, debts, controversies, damages, costs, losses and expenses. Accordingly, the Developer, on behalf of itself and anyone claiming by, through or under the Developer, hereby assumes the above-mentioned risks and hereby expressly waives any right the Developer and anyone claiming by, through or under the Developer, may have under Section 1542 of the California Civil Code, which reads as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS

WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT

TO EXIST IN HIS OR HER FAVOR AT THE TIME OF

EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM

OR HER MUST HAVE MATERIALLY AFFECTED HIS OR
HER SETTLEMENT WITH THE DEBTOR.”
Developer’s Initials: ___________
The provisions of this section shall survive the termination of the Term of the Agreement.

3.8. Escrow.

Developer and City shall open Escrow with the Escrow Agent, as set forth in the Schedule of Performance. The delivery to Escrow Agent of a duplicate original of this Agreement shall constitute the “Opening of Escrow” and the date of the Opening of Escrow shall constitute the “Opening Date.” The Escrow Agent shall accomplish the recordation of the Grant Deed and the documents to be recorded pursuant to this Agreement as more particularly set forth herein.

This Agreement constitutes the joint basic escrow instructions of City and Developer with respect to conveyance of the Project Property pursuant to the Grant Deed. City and Developer shall provide such additional escrow instructions as shall be consistent with this Agreement and necessary for the accomplishment of its purpose. Escrow Agent is hereby empowered to act under this Agreement, and Escrow Agent, upon indicating within 5 days after the Opening of Escrow its acceptance of the provisions of this Section 3.8 in writing delivered to City and Developer, shall carry out its duties as Escrow Agent hereunder. In the case of any inconsistency between the additional escrow instructions and this Agreement, the terms of this Agreement shall govern.

3.8.1. Closing Costs. Developer shall pay to the Title Insurer the following fees, charges, and costs of the Escrow promptly after the Title Insurer has notified Developer of the amount of such fees, charges and costs:
(a) The Escrow fee;
28 (b) Recording fees, if any, for the Grant Deed and the Restrictive Covenant, the Occupancy Covenant, and any other Encumbrance placed on the Project Property by or for the benefit of Developer;
(c) Any other reasonable costs, expenses or fees of the Escrow not otherwise provided for shall be paid by the party who customarily pays for such costs in the county in which the Property is located.

3.8.2. Duty of Escrow Agent.

The Escrow Agent is authorized to:
(a) Pay and charge Developer for its fees, charges and costs payable under this Section 3.8. Before such payments or charges are made, Escrow Agent shall notify City and Developer of the fees, charges and costs necessary to close Escrow. (b) Deliver the Grant Deed and other documents, including any applicable covenants, promissory notes and deeds of trusts, to the parties entitled thereto when the conditions of this Escrow have been fulfilled by City and Developer. (c) Record any instruments delivered through this Escrow, if necessary or proper, to vest title in the Project Property, or the applicable portion thereof, in Developer in accordance with the terms and provisions of this Agreement.

If this Escrow is not in condition to close on or before the Closing Date (as defined in Section 3.8.4), any Party who then shall have fully performed the acts to be performed before the conveyance of title may, in writing, demand from Escrow Agent and the Title Insurer, if appropriate, the return of its money, papers, or documents deposited with Escrow Agent and the Title Insurer. No demand for return shall be recognized until 10 days after Escrow Agent shall have mailed copies of such demand to the other Party or parties at the address or addresses of its or their principal place or places of business and such other Party shall have failed to have taken the action required by that Party to effectuate the Close of Escrow with such 10 day period.

Objections, if any, shall be raised by written notice to the Escrow Agent and to the other Party within the 10 day period described above, in which event Escrow Agent and the Title Insurer are authorized to hold all money, papers and documents with respect to the Project Property, or the affected portion thereof, until instructed by mutual agreement of the Parties or by a court of competent jurisdiction. If no such demands are made, Escrow shall be closed as soon as possible.

Neither the Escrow Agent nor the Title Insurer shall be obligated to return any such money, papers or documents, except upon the written instructions of City and Developer or until the Party entitled thereto has been determined by a final decision of a court of competent jurisdiction.

Any amendment to these Escrow instructions shall be in writing and signed by both City and Developer. At the time of any amendment, Escrow Agent shall agree to carry out its duties as Escrow Agent under such amendment.
29 All communications from Escrow Agent to City or Developer shall be directed to the addresses and in the manner established in Section 11.3 of this Agreement for notices, demands, and communications among City and Developer.

3.8.4 Close of Escrow
Subject to any extensions of time mutually agreed upon between City and Developer, the conveyance of title to Developer pursuant to the Grant Deed shall be completed:
(i) after satisfaction of all conditions set forth in Section 3.1 and/or Section 3.2 of this Agreement, (ii) concurrently with the closing of the Construction Loan, as evidenced by the recordation of the deed of trust securing the Construction Loan, and (iii) on or prior to the date specified in the Schedule of Performance (the “Closing Date”). City shall agree to a reasonable extension of time to Close of Escrow so long as Developer has provided evidence to the City that Developer is diligently proceeding to close the Construction Loan. Notwithstanding anything to the contrary, Close of Escrow shall not occur without the concurrent closing of the Construction Loan

3.9. Recordation of Documents.

Escrow Agent shall record or cause to be recorded, in the following order, the (i) Grant Deed, (ii) the Restrictive Covenants, (iii) the Memorandum of Disposition and Development Agreement, and (iv) such other instruments as required hereby in the Office of the County Recorder of Santa Barbara County, California, in conjunction with the delivery to Developer of “Developer’s Policy” pursuant to and in conformity with Section 3.10 of this Agreement.

3.10. Title Insurance.

In conjunction with the Close of Escrow, the Title Insurer shall provide, at the Developer’s cost and expense, a California Land Title Association Standard Coverage Policy (“CLTA”) of title insurance. If Developer desires an extended coverage American Land Title Association Owner’s Policy (“ALTA”) of title insurance in lieu of the ALTA policy, Developer shall pay the incremental difference in cost (“Developer’s Policy”), such Developer’s Policy insuring marketable title to the Project Property is, pursuant to the Grant Deed, vested in the Developer in accordance with this Agreement. The Developer’s Policy may include such endorsements as may be required and paid for by the Developer. Escrow Agent shall provide or cause to be provided a copy of any such policy to City.

ARTICLE 4. ENTITLEMENT.

4.1. Project Approvals.

Developer shall use good faith efforts to obtain the permits and approvals for the Paseo Development and the Affordable Development, as described in Exhibit D, within the time specified in the Schedule of Performance. All applications for such permits and approvals shall be consistent with the approved Project Documents. The Developer acknowledges that execution of this Agreement by the City does not constitute approval by the City of any required permits, applications, or allocations, and in no way limits the discretion of the City in the permit and 30 approval process as described herein; however, the City agrees to cause it departments and agencies to process all permits and approvals expeditiously in accordance with the Schedule of Performance.

4.2. City Design Review of Project.

Developer shall submit a complete Planning Application for Project Design Review as required by SBMC Chapter 30.205. The Planning Application shall include plans that generally conform to the description of the Project contained in the Scope of Development. Developer shall proceed diligently to prepare and submit to the HLC information necessary for the HLC to complete Project Design Approval and Final Design Approval for the Project in accordance with SBMC Section 30.220.020 and this Section 4.2. By approving this DDA, the City Council has determined that the size, mass, bulk, height, and scale of the Project is generally appropriate for its location and its neighborhood, and that the existing and proposed landscaping and open space within the area are appropriate for the Project. SBMC Section 30.220.020 D shall not be applicable to the review of the Project. Project Design Approval is the substantive discretionary approval for the Project. The HLC shall conduct not more than two public hearings to grant or deny Project Design Approval for the Project. If HLC has not granted or denied Project Design Approval at the conclusion of the second public hearing, then the Project Design Approval will be deemed denied and the Developer may appeal to the City Council as provided in as provided in SBMC Sections

30.205.150 and 30.220.020 G. The City Council shall hold no more than a total of two public hearings to consider any appeal on the Project. After Project Design Approval is granted, either by the HLC or by the City Council on appeal, the Developer may obtain Final Design Approval from the HLC, which is the final discretionary approval required for the Project. The City is limited to a total of five public hearings for both Project Design Approval and Final Design Approval including any appeals to City Council.

4.3. Construction Approvals.

Following receipt of Final Design Approval, the Developer shall prepare and submit construction plans, drawings, and related documents to the City Building & Safety Division necessary to receive the demolition, grading, and construction and building permits specified in Exhibit D for the Paseo Development and the Affordable Development subject to the same standards as any project not subject to this Agreement. Within the times set forth in the Schedule of Performance, the Developer shall submit to the City such documents as are typically required by the City Building Division under Title 22 of the Santa Barbara Municipal Code and the City shall expeditiously review such Project Documents in accordance with this Article 4.

4.4. Fees.

Developer shall pay all applicable fees as required by the City’s adopted schedule of fees and charges in effect at the time payment of the fee or charge is required.

4.5. Scope of City Review.

Developer shall be solely responsible for all aspects of Developer’s conduct in connection with the Project, including, but not limited to, the quality and suitability of the Project 31 Documents, the supervision of construction work, and the qualifications, financial condition, and performance of all architects, engineers, contractors, subcontractors, suppliers, consultants, and property managers. Any review or inspection undertaken by the City with reference to the Project is solely for the purpose of determining whether the Developer is properly discharging its obligations to the City and should not be relied upon by the Developer or by any third parties as a warranty or representation by the City as to the quality of the design or construction of the Project.

ARTICLE 5. PROVISION OF AFFORDABLE DEVELOPMENT

5.1. Developer Option.

Developer shall have the option to elect, in its sole discretion, to pursue either the Paseo Affordable Developmentor the Lot 2 Development. Developer shall make an initial election before the Close of Escrow for the Paseo Development such that the Paseo Affordable Development shall be deemed to have been selected unless Developer elects the Lot 2 Development by: (1) providing written notice to the City of its intention to pursue both the Paseo Development and the Lot 2 Development; and (2) submitting to the City the Planning Application for the Lot 2 Development. If Developer elects to pursue the Lot 2 Development concurrently with the Paseo Development, Close of Escrow for Disposition of the Paseo Nuevo Transfer Parcelsshall occur concurrently with the Close of Escrow for Disposition of the Lot 2 Affordable Parcel. If the Paseo Development and Lot 2 Development are not processed concurrently, then Developer may elect, at any time within the Lot 2 Development Option Term, to pursue the Lot 2 Development as set forth in this Section 5.1, provided, however, that the Paseo Affordability Covenantshall not be released until after issuance of a Certificate of Occupancy for the Lot 2 Development. None of the provisions of this Agreement related to Disposition of the Lot 2 Affordable Parcel shall apply unless and until Developer elects to pursue the Lot 2 Development. Notwithstanding anything to the contrary, Developer may, at any time during the Lot 2 Development Option Term, provide written notice to the City that it is foregoing its right to elect to pursue the Lot 2 Development, at which time, the Lot 2 Development Option Term shall immediately terminate.

5.2. Developer Obligations for Paseo Affordable Development.

If Developer selects the Paseo Affordable Development as provided in Section 5.1, Developer shall use good faith efforts to, within the timeframes set forth in this Agreement or otherwise specified in the Schedule of Performance: (1) obtain the Paseo DevelopmentApprovals; (2) satisfy all other conditions precedent to the Disposition of the Paseo Property, as described in Section 3.1 or otherwise in this Agreement; and (3) following Disposition of the Paseo Nuevo Transfer Parcels, construct the Paseo Development pursuant to the general construction contract entered into as a condition precedent to Disposition under Section 3.1.5. The Paseo Affordable Units shall be of comparable quality and design and have the same rights and privileges as the unrestricted units.

5.3. Developer Obligations for Lot 2 Development.

If Developer selects the Lot 2 Development as provided in Section 5.1, Developer shall use reasonable, good faith efforts to, within the timeframes set forth in this Agreement or otherwise specified in the Schedule of Performance: (1) obtain the Paseo Development Approvals 32 and Lot 2 Development Approvals; (2) satisfy all other conditions precedent to the Disposition of the Paseo Nuevo Property and the Lot 2 Affordable Parcel; and (3) following Disposition of the Lot 2 Affordable Parcel, complete the Parking Lot 2 Demolition and transfer the Lot 2 Affordable Parcel to an Approved Housing Developer.

5.4. Release of Obligations.

Notwithstanding anything contained in this Agreement to the contrary, upon transfer of the Lot 2 Affordable Parcel to the Approved Housing Provider and issuance of the Certificate of Completed Obligations for the Lot 2 Development, Developer shall be released of all obligations under this Agreement in relation to the Lot 2 Affordable Units, the Lot 2 Affordable Parcel, and the Paseo Affordable Units.

5.5. Reassignment of Affordable Units from Paseo Affordable Development to Lot 2 Development.

If Developer initially selects the Paseo Affordable Development, Developer shall retain the right at any time during the Lot 2 Development Option Term to elect, in its sole discretion, to pursue the Lot 2 Development. If Developer exercises its election under this Section

5.5 to pursue the Lot 2 Development, the Paseo Affordable Units shall be reassigned from the Paseo Affordable Development to the Lot 2 Development in accordance with the following subdivisions of this Section 5.5.

5.5.1. Reassignment Prior to Certificate of Completed Obligations.

If Developer elects to pursue the Lot 2 Development and Developer has satisfied all conditions precedent to Close of Escrow for the Disposition of the Lot 2 Affordable Parcel under Section 3.2 prior to issuance of the Certificate of Completed Obligations for the Paseo Development, then the Paseo Affordable Units shall be immediately reassigned from the Paseo Affordable Development to the Lot 2 Development at which time the Paseo Affordability Covenant shall be terminated. Upon such election, the City shall immediately execute any and all documents necessary to effectuate such termination and release of the Paseo Affordability Covenant.

5.5.2. Limitation.

The City shall not impose any additional requirements on the development and construction of the Lot 2 Development which exceed those requirements that would have been imposed under this Agreement had the Developer initially elected to proceed with the Lot 2 Development prior to Close of Escrow for the Paseo Nuevo Transfer Parcels.

5.5.3. Reassignment After Certificate of Completed Obligations.

If Developer elects at its sole discretion to pursue the Lot 2 Development after issuance of a Certificate of Completed Obligations for the Paseo Affordable Units, then upon receipt of a Certificate of Occupancy for the Lot 2 Development Developer may relocate tenants 33 of the Paseo Affordable Units to a Reassigned Affordable Unit with equal bedroom count and comparable square footage, at which time, with respect to each such unit the Paseo Affordability Covenant shall be terminated and the City shall immediately execute any and all documents necessary to effectuate such termination.

5.5.4. Relocation of Tenants.

Any tenant occupying a Reassigned Affordable Unit shall have the option to relocate to a Lot 2 Affordable Unit, provided the tenant meets the income and eligibility requirements applicable to the Lot 2 Affordable Units under the Lot 2 Affordability Covenant (the “Relocation Option”). If the tenant does not exercise the Relocation Option or otherwise does not qualify, the tenant’s lease shall continue only until expiration of the then-current lease term, subject to the terms and conditions of such lease. Developer shall pay the actual moving expenses for tenants who exercise the Relocation Option. Thereafter, Developer shall have no continuing obligations to the tenant or with respect to the Reassigned Affordable Unit. Nothing in this Agreementshall be interpreted to require Developer to pay any relocation fees, including without limitation those under SBMC Chapter 30.190, associated with tenant’s exercise of the Relocation Option, except for the tenant’s actual moving expenses. SMBC Chapter 26.50 does not apply to the relocation of the tenants under this Section 5.5.4.

5.6. Alternative Affordable Parcel.

Nothing in this Agreement shall limit the ability of the City and Developer to mutually agree, by amendment to this Agreement approved by the City Council, to an Alternative Affordable Parcel for the Lot 2 Development In such event, all conditions, requirements, and obligations applicable to the Lot 2 Development under this Agreement shall apply equally to the development of the Alternate Affordable Parcel, except those requirements set forth in Section

3.2.5. The intent of this Section 5.6 is to provide an alternate location for the affordable housing such that the Project remains eligible as a density bonus project pursuant to the State Density Bonus Law and as a housing development project pursuant to the Housing Accountability Act.

Nothing in this paragraph affects any provisions relating to the Paseo Development or Disposition of the Paseo Nuevo Transfer Parcels. The provisions of this Section 5.6 are applicable only during the Lot 2 Development Option Term.

ARTICLE 6. CONSTRUCTION OF THE PROJECT.

6.1. Commencement of Construction.

If the Close of Escrow occurs, Developer shall use reasonable, good faith efforts to commence construction of the Project within the time set forth in the Schedule of Performance.

6.2. Completion of Construction.

If the Close of Escrow occurs, Developer shall diligently pursue Project Construction and complete the Project Construction in all material respects within the time set forth in the Schedule of Performance.
34 6.3. Construction Pursuant to Scope of Development and Project Documents.

If the Close of Escrow occurs, Developer shall construct the Project Construction as required by the approved Project Documents and the terms and conditions of the Project Approvals.

6.4. Certificate of Occupancy.

6.4.1. When the obligations of the Developer under Section 6.1 through Section

6.3 have been met in all material respects for the Paseo Development, the City shall issue a Certificate of Occupancy for the Paseo Development certifying that the Paseo Development conforms with all applicable state and local building codes and is safe for occupancy and use.

6.4.2. If Developer elects to pursue the Lot 2 Development, Developer shall have no obligation to obtain a Certificate of Occupancy for the Lot 2 Development, provided that such obligation has been assigned to the Approved Housing Provider under the Approved Housing Provider Agreement.

6.5. Certificate of Completed Obligations.

6.5.1. Paseo Development/Paseo Affordable Development Certificate of Completed Obligations. When the obligations of Developer under Section 6.1 through Section 6.4 relating to the Project Construction have been met in all material respects for the Paseo Development and Developer has obtained a Certificate of Occupancy from the City for the Paseo Developmentpursuant to Section 6.4, the City shall within 10 days after issuance of the Certificate of Occupancy issue a Certificate of Completed Obligations in a form approved by the City Attorney and recordable in the Official Records of the County of Santa Barbara for the Paseo Development.

6.5.2. Lot 2 Development Certificate of Completed Obligations. When the obligations of Developer under Section 6.1 through Section 6.3 relating to the Project Construction have been met in all material respects for the Lot 2 Development, , and the Lot 2 Affordable Parcel has been transferred to an Approved Housing Developer, the City shall within 10 days following said transfer of the Lot 2 Affordable Parcel to an Approved Housing Developer, issue to Developer a Certificate of Completed Obligations for the Lot 2 Development.

6.5.3. Such Certificates of Completed Obligations shall constitute evidence of the Project’s compliance with the requirements of this Article 6. Such certification shall not constitute satisfaction of any obligation of Developer to any holder of deed of trust securing money loaned to finance the Project or any portion thereof or otherwise release Developer from any obligations that survive termination of this Agreement.

6.6. Compliance with Applicable Law.

Developer shall cause all work performed in connection with construction of the Project to be performed substantially in compliance with (a) all applicable laws, ordinances, rules and regulations of federal, state, county or municipal governments or agencies now in force or that may be enacted hereafter, (b) all directions, rules and regulations of any fire marshal, health officer, 35 building inspector, or other officer of every governmental agency now having or hereafter acquiring jurisdiction, (c) all applicable accessible access requirements of state and federal law.

The work shall proceed only after procurement of each permit, license, or other authorization that may be required by any governmental agency having jurisdiction, and Developer shall be responsible for the procurement and maintenance thereof, as may be required of Developer and all entities engaged in work on the Developable Parcels.

6.7. Entry by the City.

Until a Certificate of Occupancy has been issued, Developer shall permit City Representatives to enter the Developable Parcels at all reasonable times with at least 2 days prior written notice to the Developer so that Developer shall have an opportunity to decide whether or not to have a Developer representative(s) accompany the City representative(s) to inspect the Project Property for compliance with this Agreement. Developershall have the right to accompany the City during an inspection, but the failure of Developer to attend an inspection for any reason shall not constitute a reason for prohibiting or delaying any such inspection. The City is under no obligation to (a) supervise construction or (b) inspect the Developable Parcels. Developer shall not rely upon the City for any supervision or inspection. The rights granted to the City pursuant to this section are in addition to any rights of entry and inspection the City may have in exercising its municipal regulatory authority. This Section 6.7 does not apply to regulatory inspections and City Representatives shall have immediate access for inspections relating to compliance with requirements of issued building or public works permits, or applicable provisions of Title 22 of the Santa Barbara Municipal Code.

6.8. Mechanics’ Liens.

Developer shall promptly resolve any mechanic’s lien, stop notice or other claim brought by a subcontractor, laborer or material supplier who alleges having supplied labor or materials in the course of the construction of the Project by Developer; provided, however, that Developer shall have the right to contest the legitimacy of any lien and seek appropriate legal remedies against the party placing such lien on the Project. This indemnity obligation shall survive the issuance of a Certificate of Completed Obligations and expiration of the Term of the Agreement of this Agreement.

6.9. Zoning of the Project Property.

The City acknowledges and agrees that the Project is consistent with the City’s General Plan and applicable zoning.

6.10. Cost of Project Construction. Except as otherwise provided in this Agreement, Developer shall bear all costs and expenses incurred in connection with the Project Construction.

ARTICLE 7. USE OF THE DEVELOPABLE PARCELS AND OBLIGATIONS DURING AND AFTER CONSTRUCTION.

7.1. Uses.
36 7.1.1. Developer covenants and agrees for itself, its successors and assigns, which covenants shall run with the land and bind every successor or assigns of an interest in Developer, that Developer and/or such successors and/or such assignees shall devote the Developable Parcels primarily for the construction, development and completion of the Project and the uses contemplated by the Scope of Development.

7.1.2. Developer further covenants and agrees for itself and its successors and assigns that it shall not engage in or permit any activity on the Developable Parcels that would violate this Agreement, the Restrictive Covenants, and any Project Documents approved for the Developable Parcels, or any applicable governmental regulations.

7.2. Maintenance of Paseo Nuevo Transfer Parcels.

Developer agrees that, prior to receiving a Certificate of Completed Obligationsfor the Paseo Development, the Paseo Nuevo Transfer Parcelsshall be maintained in a neat and orderly condition to the extent practicable and in accordance with industry health and safety standards.

The Developer shall maintain or cause to be maintained the Paseo Nuevo Transfer Parcels in good repair and working order, and in a neat, clean and orderly condition, including the walkways, driveways, parking areas and landscaping, and from time to time make all necessary and proper repairs, renewals, and replacements. In the event that there arises a condition in contravention of the above maintenance standard, then the City shall notify the Developer in writing of such condition, giving the Developer 60 days from receipt of such notice to commence and thereafter diligently to proceed to cure said condition unless such condition cannot reasonably be cured within such 60-day period, in which event the Developer shall commence such cure within 60 days and thereafter diligently prosecute such cure to completion. In the event the Developer fails to cure or commence to cure the condition within the time allowed, the City shall have the right to perform all acts necessary to cure such a condition, or to take other recourse at law or equity the City may then have. The City shall receive from the Developer the City’s cost in taking such action and shall provide reasonable evidence of such costs to the Developer. The Parties hereto furthermutually understand and agree that the rights conferred upon the City expressly include the right to enforce or establish a lien or other Encumbrance against any of the parcels comprising the Paseo Nuevo Transfer Parcels not complying with this Agreement by recordation of a notice of lien against the Paseo Nuevo Transfer Parcels. The foregoing provisions shall be a covenant running with the land enforceable by the City, its successors and assigns, and shall expire upon receipt of the Certificate of Completed Obligations for the Paseo Development.

7.3. Insurance Coverage.

7.3.1. Insurance Required for Developable Parcels.
(a) Property Insurance. During construction and until issuance of the Certificate of Completed Obligations, Developer shall carry fire insurance in an amount not less than the full replacement value of the improvements, with extended coverage, against the perils of fire, lightning, vandalism, malicious mischief, riot and civil commotion, and such other perils ordinarily included in extended coverage fire insurance policies, and an endorsement naming the City as loss payee however any Qualified Financial Institution with a recorded lien against the Developable Parcels shall have primary rights of Loss Payee; and a Builder’s Risk Coverage 37 Endorsement, covering course of construction exposure unless such coverage is included within the Special Form Property Coverage. It is further noted and agreed that the Developer will not be required to have Special Form Property Coverage nor Builder’s Risk coverage for any building that is scheduled for demolition. Prior to the commencement of construction on the Developable Parcels, the Developer shall furnish or cause to be furnished to the City certificates of such coverage. Developer shall also name the City as a loss payee on any such insurance any Qualified Financial Institution with a recorded lien against Developable Parcels. Such insurance shall be kept in full force until the issuance of the Certificate of Completed Obligations for the Paseo Development or the Lot 2 Development, as applicable.
(b) Commercial General Liability. Prior to the commencement of any work or construction on the Developable Parcels, Developer shall (1) furnish or cause to be furnished to the City certificates of general liability (bodily injury and Developable Parcels property damage) insurance in the amount of at least $5,000,000 per occurrence, naming the City as an additional insured (such limits can be obtained by way of excess/umbrella policies), and (2) ensure that the development contractor and subcontractors furnish or cause to be furnished to the City certificates of general liability (bodily injury and Developable Parcels property damage) insurance policies, naming the City as an additional insured. Such insurance shall be kept in full force until the issuance of the Certificate of Completed Obligations for the Paseo Development or the Lot 2 Development, as applicable.
(c) Automobile Liability Insurance. Developer shall require contractors working on the Developable Parcels to have comprehensive automobile liability insurance having a combined single limit of not less than $1,000,000, and insuring the Contractor against liability for claims arising out of ownership, maintenance, or use of any owned, hired or non-owned automobiles for vehicles on the Developable Parcels or used for Project Construction on the Developable Parcels. Such insurance shall be kept in full force until the issuance of the Certificate of Completed Obligations for the Paseo Development or the Lot 2 Development, as applicable. (d) Workers’ Compensation and Employer’s Liability Insurance. In accordance with applicable State and compensation laws, the Developer shall cause all contractors hired to work on the Developable Parcels to carry Workers’ Compensation Insurance and Employers’ Liability Insurance in an amount not less than $1,000,000 or in such other amount as State law requires. Such Insurance shall cover all persons employed in connection with the Developable Parcels and the development and shall cover liability within statutory limits for compensation under any such acts aforesaid, based upon death or bodily injury claims made by, for or on behalf of any such person incurring or suffering injury or death in connection with the Developable Parcels or the development or the operation thereof by Developer. Prior to the commencement of Project Construction, Developer or Developer’s contractor(s) shall furnish or cause to be furnished to the City certificates of such coverage, or a certificate of consent to selfinsure issued by the State Department of Industrial Relations. Such insurance shall be kept in full force until the issuance of the Certificate of Completed Obligations for the Paseo Development or the Lot 2 Development, as applicable.

7.3.2. All required insurance policies shall not be subject to any of the following events: cancellation, or non-renewal except after notice in writing shall have been sent by registered mail addressed to the City not less than 30 days prior to the effective date of such event 38 or 10 days for nonpayment of premium. All policies shall name the holder of any mortgage, the City, the Developer and/or any general contractor as insureds, additional insureds, and/or loss payable as may be applicable or legally permissible.

7.3.3. All insurance required by this Agreement shall be for the benefit of the Developer and the City, as well as any mortgagee and any contractor at the Developer’s discretion, provided that anyone added as a loss payee of such insurance other than the City or any Qualified Financial Institution must be added with the approval of the City so that coverage limits of such insurance may be increased to protect the interests of the City if it is deemed reasonably necessary to do so. The Developer agrees to timely pay all premiums for such insurance and, at its sole cost and expense, to comply and secure compliance with all insurance requirements necessary for the maintenance of such insurance.

7.3.4. All insurance required by this Agreement shall be affected under policies issued by insurers of recognized responsibility, licensed or permitted or authorized to do business in the State of California (or as otherwise agreed to by City) and reasonably acceptable to the City, and subject to the approval rights of Developer’s construction lender.

7.3.5. Subject to the rights of any holder of a Security Financing Interest or any other senior lienholder subsequently approved by the City which shall have first priority and right to proceeds, all proceeds of casualty insurance with respect to loss or damage to the development shall be jointly payable under the provisions of the policy of insurance to the Developer and the City, and said proceeds shall be used for the restoration, repair or rebuilding of the development in accordance with plans and specifications approved in writing by the City.

7.3.6. In the event Developer fails or refuses to maintain the full insurance coverage required by this Agreement, the City, after at least 30 days prior written notice to Developer and all mortgagees entitled to notice may, but shall be under no obligation as the City’s sole remedy for such failure or refusal to, take out the required policies of insurance and pay the premiums on such policies. Any amount so advanced by the City, together with interest thereon from the date of such advance at the highest rate allowed by applicable law, shall become an additional obligation of Developer to the City.

7.4. Hazardous Materials.

7.4.1. Certain Covenants and Agreements.

Following Disposition of the Project Property to Developer, Developer hereby covenants and agrees that:
(a) Developer shall not knowingly permit the Developable Parcels or any portion thereof to be for the use, generation, treatment, manufacture, storage, disposal or transportation of Hazardous Materials in violation of applicable law or otherwise knowingly permit the presence of Hazardous Materials in, on, or under the Developable Parcels in violation of any applicable law;
39 (b) The Developer shall keep and maintain the Project and each portion thereof in material compliance with, and shall not cause or permit the Project or any portion thereof to be in material violation of any Hazardous Materials Laws; (c) Upon receiving actual knowledge of the same, the Developer shall within 10 days advise the City in writing of: (A) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted or threatened against the Developer or the Project pursuant to any applicable Hazardous Materials Laws; (B) any and all claims made or threatened by any third-party against the Developer or the Project relating to damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in the foregoing clause (A) and this clause (B) are hereinafter referred to as “Hazardous Materials Claims”); (C) the presence of any Hazardous Materials in, on or under the Developable Parcels in such quantities which require reporting to a government agency; or (D) the Developer’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Project classified as “borderzone property” under the provisions of California Health and Safety Code, Sections 25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Project under any Hazardous Materials Laws. If the City reasonably determines that the Developer is not adequately responding to a written directive or order from a regulatory body or court regarding a Hazardous Material Claim, the City shall have the right, upon 10 days written notice to the Developer, to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any such Hazardous Materials Claims and, if such claim could result in any liability or damage to the City, to have its reasonable attorney’s fees in connection therewith paid by the Developer.

7.4.2. Indemnity. Without limiting the generality of the indemnification set forth in Section 11.6, the Developer hereby agrees to indemnify, protect, hold harmless and defend (by counsel reasonably acceptable to the City) the City, its Council Members, officers, employees and agents from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial action requirements, enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including, but not limited to, reasonable attorney’s fees and expenses), arising directly or indirectly, in whole or in part, out of: (1) the failure of the Developer, its agents, employees, or contractors 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 Project; (2) the presence in, on or under the Developable Parcels of any Hazardous Materials not otherwise present before the Close of Escrow (provided that the release or discharge was not caused or suffered by the City), or any releases or discharges of any Hazardous Materials into, on, under or from the Project occurring after the Close of Escrow; or (3) any activity carried on or undertaken on or off the Project, subsequent to the Disposition of the Project Property to the Developer, by the Developer or any employees, agents, contractors or subcontractors of the Developer at any time occupying or present on the Project, 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 Project except to the extent that any of the foregoing was caused by the City prior to the Close of Escrow (collectively “Indemnification Claims”). The foregoing indemnity shall further apply to any residual contamination on or under the Project, or affecting any natural resources, and 40 to any contamination of any property or natural resources arising in connection with the generation, use, handling, treatment, storage, transport or disposal of any such Hazardous Materials by the Developer, and irrespective of whether any of such activities were or will be undertaken in accordance with Hazardous Materials Laws.

7.5. Accessibility Requirements.
(a) Compliance with all Accessibility Requirements. Developer shall comply with all applicable requirements of state, local and federal rules, laws and regulations relating to accessibility and reasonable accommodations for persons with disabilities, including, without limitation, the following to the extent any are applicable to the Project: the Americans with Disabilities Act (42 U.S.C. Sections 12131 et seq. and 12181 et seq., and implementing regulations at 28 CFR Parts 35 and 36); the Fair Housing Act (42 U.S.C. Section 3601 et seq., and implementing regulations at 24 CFR Part 100); the Fair Employment and Housing Act (California Government Code Section 12926); and Title 24 of the California Building Code. (b) ADA Certification. Developer hereby certifies as follows:
(i) Developer is in compliance with and will continue to comply with the Americans with Disabilities Act, 42 U.S.C. 12101 et seq. and its implementing regulations.
(ii) Developer shall provide for reasonable accommodations to allow qualified individuals with disabilities to have access to and participate in its programs, services and activities in accordance with the provisions of the Americans with Disabilities Act. (iii) Developer shall not discriminate against persons with disabilities nor against persons due to their relationship or association with a person with a disability.

7.6. Taxes, Assessments, Encumbrances and Liens.

7.6.1. Following issuance of the Certificate of Occupancy for the Paseo Development, City will pay to Developer or Developer’s successor in interest to the Paseo Nuevo Transfer Parcels $300,000 annually (the “Property Tax Refund”) as provided in this Section 7.6.1.

The first payment of the Property Tax Refund will be made on or before December 31 of the year during which the Certificate of Occupancy is first obtained. Annual payments will be made thereafter on or before December 31 of each following year for a total of 20 years. The Property Tax Refund will be excused and will not be made in any year during which Developer or Developer’s successor in interest to the Paseo Nuevo Transfer Parcels fails to timely pay any portion of required property taxes or remains delinquent in payment of property taxes. The 20- year term of repayments will not be extended to account for any year during which a Property Tax Refund is excused.

7.6.2. Subject to the provisions of Section 7.6.1. above, Developer shall pay when due (subject to Developer’s right to challenge the assessment or amounts due) any and all real estate taxes and assessments (including any possessory interest tax) assessed and levied on the Project Property or any portion thereof and Developer hereby agrees to indemnify, defend and hold 41 City and all City Representatives free and harmless against any and all Losses and Liabilities arising from such taxes and assessments.

7.6.3. Prior to the issuance of a Certificate of Completed Obligations for the Project, Developer shall not place or allow to be placed on the Developable Parcels, or any portion thereof, any monetary Encumbrance (which excludes easements, restrictions, or similar matters reasonably necessary for development) unless it first obtains the written consent of City, which consent shall not to be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, the City hereby approves the recordation of one or more deeds of trust and other related security documents in favor of a holder of a Security Financing Interest and/or pledges or other Encumbrances of the direct or indirect equity interests in Developer in favor of holders of a Security Financing Interest pursuant to the terms of this Agreement. Developer shall promptly notify the City of any Encumbrance that, without prior written approval from the City, has been created or attached to the Developable Parcels, or a portion thereof, prior to issuance of a Certificate of Completed Obligations for the Project and shall promptly remove, or shall have removed, any such unauthorized Encumbrance and any levy or attachment made on the Developable Parcels, or any portion thereof, or shall assure the satisfaction thereof, within a reasonable time. Nothing contained herein shall be deemed to prohibit the Developer from contesting the validity or amounts of any tax assessment or any mechanic’s lien, or limit the remedies available to Developer with respect thereto. With respect to mechanic’s liens, the Developer shall not be required to promptly remove a mechanic’s lien provided that Developer in good faith and diligently contests the amount and/or validity of same.

7.7. Inline Retail Parcel.

No new development or changes to the existing retail uses are proposed on the Inline Retail Parcel as part of the Project. Future development on the Inline Retail Parcel will be subject to separate processing by the City, the processing of which shall be subject to the City’s standard procedures and shall be subject to the same requirements as any project not subject to this Agreement. However, in all cases, Developer agrees to maintain the Public Art Space for continued use by the current occupants or such other public art use approved by the City.

Developer may relocate the Public Art Space within the Inline Retail Parcel upon approval by the City.

ARTICLE 8. ASSIGNMENT AND TRANSFERS.

8.1. Definitions.

As used in this Article 8, the term “Transfer” means:
(a) Any total or partial sale, assignment or conveyance, of any trust or power, or any transfer in any other mode or form, of or with respect to this Agreement, or of the Developable Parcels or any part thereof or any interest therein or of the Project constructed thereon, or any contract or agreement to do any of the same; or
(b) Any total or partial sale, assignment or conveyance, of any trust or power, or any transfer in any other mode or form, of or with respect to any ownership interest in 42 the Developer, or any contract or agreement to do any of the same (except for any right of a member of the Developer to acquire the interest of another member in the Developer). (c) Notwithstanding the foregoing, the holder of a Security Financing Interest and any other Qualified Financial Institution shall have the right to convey interests of any kind in any loan secured by Developer’s fee estate in the Developable Parcels or in Developer Ground Leases , or direct or indirect interests in Developer, directly or indirectly, and provided that the loan continues to be held by a Qualified Financial Institution.

8.2. Purpose of Restrictions on Transfer.

This Agreement is entered into solely for the purpose of development of the Project on the Developable Parcels in accordance with the terms of this Agreement. It is the intent of the City and Developer that the Developable Parcels are not the subject of real estate speculation. The qualifications and identity of the Developer are of particular concern to the City, in view of:
(a) The importance of the development of the Developable Parcels to the general welfare of the community; and
(b) The fact that a Transfer as defined in Section 8.1 above is for practical purposes a transfer or disposition of the Developable Parcels It is because of the qualifications and identity of the Developer that the City is entering into this Agreement with the Developer and that Transfers are permitted only as provided in this Agreement.

8.3. Prohibited Transfers. The limitations on Transfers set forth in this Article 8 shall apply only from the Effective Date until the date of issuance of the Certificate of Completed Obligations for the Project, provided, however, that if Developer does not elect to pursue the Lot 2 Development concurrently with the Paseo Development, then any limitation on Transfers shall continue until either the issuance of a Certificate of Completed Obligations for the Lot 2 Development or until the termination of the Lot 2 Development OptionTerm. Except as expressly permitted in this Agreement, the Developer represents, warrants and agrees that the Developer has not made or created, and will not make or create or suffer to be made or created, any Transfer, either voluntarily or by operation of law, without the prior written approval of City, which approval shall not be unreasonably withheld, conditioned, or delayed. Any Transfer made in contravention of this Section 8.3 shall be void and shall be deemed to be a default under this Agreement.

8.4. Permitted Transfers. The following Transfers shall be permitted (subject to satisfaction of the conditions of Section 8.5):
(a) Any Transfer creating a Security Financing Interest. (b) Any Transfer directly resulting from the foreclosure of a Security Financing Interest or the granting of a deed in lieu of foreclosure of a Security Financing Interest or other exercise of any rights by the holder of a Security Financing Interest. (c) The leasing of commercial or residential space within the Project. 43 (d) The assignment of a direct or indirect membership interest in Developer as security for the repayment of any loan held by the holder of a Security Financing Interest or any holder of a direct or indirect owner of an interest in Developer as part of the organizational documents to which holder is a member or partner is a party. (e) Any transfer by the holder of a Security Financing Interest to a single asset subsidiary of such holder.
(f) Any transfer by the holder of a Security Financing Interest of any interest in the Project it acquires as a result of foreclosure, deed in lieu of foreclosure or otherwise and the first subsequent Transfer after such holder acquires any portion of the Developable Parcels. (g) Any participation sold by the holder of a Security Financing Interest of any interest in its loan.
(h) Prior to Close of Escrow, any Transfer directly or indirectly so long as (1) Developer or an Affiliate of AB maintains Control of the Developer, or (2) Developer, an Affiliate of AB or a Qualified Financial Institution holds the senior Security Financing Interest. (i) After Close of Escrow, any Transfer directly or indirectly so long as (i) such development rights are held by a Qualified Developer, and (2) a Qualified Financial Institution holds a Security Financing Interest.
(j) Any transfer to an entity or entities in which Developer retains a minimum of fifty percent (50%) of the ownership or beneficial interest or retains management and control of the transferee entity or entities.
(k) Any transfer or dedication of any portion of the Project Property to the City or other government agency or public utility, or the granting of easements or permits to facilitate construction of the Project.
(l) Any transfer to an entity or entities in which AB or its Affiliate holds the Security Financing Interest.
(m) A Transfer otherwise approved by the City in writing, which approval shall not be unreasonably withheld, conditioned or delayed. (n) The sale or other transfer of a direct or indirect membership interest in Developer to another direct or indirect member of Developer. (o) Notwithstanding anything to the contrary herein, any transfer of the Lot 2 Affordable Parcel to an Approved Housing Provider, or an entity or entities approved by the City (which consent shall not be unreasonably withheld, conditioned, or delayed) for the purpose of developing, constructing, and operating the Lot 2 Development. For purposes of this subsection (o), the City of Santa Barbara Housing Authority or an Affiliate of Developer is an approved Transferee.

8.5. Effectuation of Permitted Transfers.
44 8.5.1. No Transfer of a Developable Parcel, including those otherwise authorized or approved pursuant to Section 8.4 shall be permitted unless, at the time of any direct Transfer of a Developable Parcel by Developer, the person or entity to which such direct Transfer is made, by an agreement reasonably satisfactory to the City (which consent shall not be unreasonably withheld, conditioned or delayed), expressly agrees to perform and observe, from and after the date of the Transfer, the obligations, terms and conditions of this Agreement subject to the terms of this Agreement; provided, however, that no such Transferee shall be liable for the failure of its predecessor to perform any such obligation.

8.5.2. Any proposed Transferee for which the City’s approval is required because the Transfer is not a Permitted Transfer pursuant to Section 8.4 shall have the qualifications, development experience and financial capability necessary and adequate to fulfill the obligations undertaken in this Agreement by the Developer as reasonably determined by the City. The City shall grant or deny approval of a proposed Transfer if such approval is required within 30 days of receipt by the City of the Developer’s request for approval of a Transfer, which request shall include evidence of the proposed transferee’s business expertise and financial capacity. Failure by the City to approve or disapprove the proposed Transfer within 30 days after receipt of the Developer’s written request shall be deemed to be approval of the proposed Transfer by the City if the request for a Transfer includes the fee/deposit required by Section 8.5.4 and the following warning printed in bold type not smaller than 12 point:

NOTICE IS HEREBY GIVEN THAT FAILURE TO
APPROVE THE REQUESTED MATTER WITHIN 30 DAYS

SHALL BE DEEMED AN APPROVAL PURSUANT TO
SECTION 8.5 OF THE DISPOSITION AND
DEVELOPMENT AGREEMENT.

8.5.3. Any assignment of rights and/or delegation of obligations under this Agreement in connection with a direct Transfer (whether or not City approval is required) shall be in writing executed by Developer and the assignee or transferee (the “Assumption Agreement”) with a copy thereof delivered to the City within 10 days after the effective date thereof. Upon a direct Transfer of the rights with respect to any portion of the Project pursuant to an Assumption Agreement, the assignor shall be relieved of liability with respect to any such obligations relating to such portion of the Project assumed by the assignee. Notwithstanding the foregoing, unless such assignee specifically assumes pursuant to the Assumption Agreement the obligations under this Agreement to indemnify City with respect to the portion of the Developable Parcels transferred, the assignor will retain such obligations arising prior to the Transfer. Unless otherwise agreed by the assignee, the assignee will only be liable for obligations first arising after the Transfer.

8.5.4. Developer shall reimburse the City for all actual third-party consultant (legal and financial) costs associated with the City’s review and consideration of any request for approval of a Transfer not otherwise approved pursuant to Section 8.4 above up to $5,000.00.

Developer shall deposit the sum of $5,000.00 with its request for approval of any transfer. If the costs of City review are less than the amount deposited, the excess deposit shall be returned to 45 Developer. This Section 8.5.4 does not apply to Permitted Transfers pursuant to Section 8.4 of this Agreement.

ARTICLE 9. SECURITY FINANCING AND RIGHTS OF HOLDERS.

9.1. Encumbrances.

9.1.1. Until a Certificate of Completed Obligations has been issued by the City for the Project, mortgages, deeds of trust, and other real property security instruments and pledges of direct or indirect interests in Developer are permitted to be placed upon the Developer’s interest in the Developable Parcels or direct or indirect interests in Developer only by Qualified Financial Institutions and only as permitted pursuant to this Section 9.1. Such permitted security instruments and related interests shall be referred to as “Security Financing Interests.” The Grant Deed and the Restrictive Covenants shall be recorded prior to the recording of any instrument evidencing or securing Security Financing Interests. The City hereby confirms that upon recordation of a Deed of Trust encumbering the Developable Parcels to secure a construction loan between the Developer and the holder of a Security Financing Interest, such a Security Financing Interest shall be deemed created hereunder. Developer shall promptly notify the City of any Security Financing Interest that has been or will be created or attached to the Developable Parcels in accordance with the Financing Plan.

9.1.2. Developer may place mortgages, deeds of trust, or other reasonable methods of security on Developer’s interest in the Developable Parcels pledges or other Encumbrances of direct or indirect interests in Developer only for the purpose of securing bridge financing, construction loans and permanent financing contemplated by the approved Financing Plan or any refinance thereof or other financing approved by the City, which consent shall not be unreasonably withheld, conditioned, or delayed. The final mortgages, deeds of trust or other real property security instruments shall be provided to City promptly after recordation, provided such financing instruments shall not conflict with the terms and provisions of this Agreement. Provided Developer has satisfied the requirements set forth in Section 11.3 below, failure of the City to approve or disapprove any such mortgages, deeds of trust or other real property security instruments for which approval is requested within 15 days of receipt shall be deemed approved by City but only to the extent that the terms and provisions of any such security instruments do not conflict with the terms and provisions of this Agreement.

9.2. Holder Not Obligated to Construct.

The holder of any Security Financing Interest authorized by this Agreement is not obligated to construct or complete any improvements or to guarantee such construction or completion, nor shall any covenant or any other provision of this Agreement be construed so to obligate such holder. However, nothing in this Agreement shall be deemed to permit or authorize any such holder to devote the Developable Parcels or any portion thereof to any uses, or to construct any improvements thereon, other than those uses or Improvements provided for or authorized by this Agreement.

9.3. Notice of Default and Right to Cure.
46 Whenever the City pursuant to its rights set forth in Article 10 delivers any notice or demand to Developer with respect to the commencement, completion, or cessation of the construction of the Project or any other notice, the City shall at the same time deliver to each holder of record of any Security Financing Interest creating a lien upon the Developable Parcels or any portion thereof, or a pledge of direct or indirect interests in Developer, a copy of such notice or demand. Each such holder shall (insofar as the rights of the City are concerned) have the right, but not the obligation, at its option, within those time periods set forth in this Agreement including Section 10.3.2(c) (plus in the case of any such holder an additional 270 days, which time period shall be extended for any period during which the holder is attempting to obtain title to the Developable Parcels or portion hereof, or if otherwise diligently attempting to cure Developer’s default or breach), after the receipt of the notice, to cure or remedy or commence to cure or remedy any such default or breach which is subject to the lien of the Security Financing Interest held by such holder and to add the cost thereof to the security interest debt and the lien on its security interest. Any such holder properly completing the development of the Project pursuant to this section shall have all rights of Developer under this Agreement and shall be entitled, upon written request made to the City, to a Certificate of Completed Obligations from the City.

9.4. Failure of Holder to Complete Project.

Subject to any delays caused by any bankruptcy of Developer or other Force Majeure Event or City Delays, in any case where 12 months have elapsed after default by the Developer in completion of construction of the Project under this Agreement, the holder of record of any Security Financing Interest or any member of the Developer, having first exercised its right to cure and option to construct the Project pursuant to Section 9.3, above, has not proceeded diligently, the City shall be afforded those rights against such holder it would otherwise have against Developer under this Agreement. However, such 12-month period shall be extended provided such holder is diligently attempting to cure Developer’s default or breach or is attempting to obtain title.

9.5. Right of City to Cure.

In the event of a default or breach by Developer of a Security Financing Interest prior to the completion of construction of the Project, and if all holders of Security Financing Interests have advised the City in writing that such holders have elected not to complete the Project, the City shall provide notice and the opportunity to cure such default and may, upon prior written notice to Developer, thereafter cure the default, prior to the completion of any foreclosure.

In such event, the City shall be entitled to a lien upon the Project and/or Developable Parcels to the extent of such costs and disbursements incurred by the City in completing the Project. The City agrees that such lien shall be subordinate to any Security Financing Interest, and the City shall execute from time to time any and all documentation reasonably requested by Developer to affect such subordination. Nothing in this Section 9.5 shall be construed as a limitation of the City’s rights to enforce the Performance Security. Right of City to Satisfy Other Liens.

After the Close of Escrow and after Developer has had a reasonable time to challenge, cure, or satisfy any liens or encumbrances on the Project or any portion thereof, and has failed to do so, in whole or in part, the City shall, upon prior written notice to Developer, have the 47 right to satisfy any such lien or encumbrances; provided, however that nothing in this Agreement shall provide the City the rights set forth in this sentence or require Developer to pay or make provision for the payment of any tax, assessment, lien or charge so long as Developer in good faith shall contest the validity or amount therein and so long as such delay in payment shall not subject the Project Property or any portion thereof to forfeiture or sale. Notwithstanding the foregoing, the City shall not satisfy a lien of a Security Financing Interest.

9.6. Holder to be Notified.

Developer shall procure acknowledgement of each term contained in this Article 9 by each holder of a Security Financing Interest prior to its coming into any security right or interest in the Developable Parcels or portion thereof.

9.7. Modifications.

If a holder of a Security Financing Interest should, as a condition of providing financing for development of all or a portion of the Project, request any modification of this Agreement in order to protect its interests in the Project or this Agreement, the City shall consider such request promptly, reasonably and in good faith consistent with the purpose and intent of this Agreement and the rights and obligations of the Parties under this Agreement. Any modification of this Agreement shall require the prior approval of the City.

ARTICLE 10. DEFAULT AND REMEDIES.

10.1. Application of Remedies.

This Article 10 shall govern the Parties’ remedies for breach or failure of condition under this Agreement.

10.2. Fault of City.

10.2.1. Each of the following events, if uncured after expiration of the applicable cure period, shall constitute a “City Event of Default”:
(a) The City fails to convey the Project Property within the time and in the manner specified in Article 3, and the Developer is otherwise entitled to such conveyance. (b) The City breaches any other material provision of this Agreement.

10.2.2. Upon the occurrence of any of the above-described events, Developer shall first notify the City in writing of its purported breach or failure, giving the City 30 days from receipt of such notice to cure such breach or failure. In the event the City does not then cure the default within such 30-day period (or, if the default is not susceptible of cure within such 30-day period, the City fails to commence the cure within such period and thereafter to prosecute the cure diligently to completion), then the Developer shall be entitled to the following remedies: (1) 48 seeking specific performance of this Agreement; or (2) seeking any other remedy available at law or in equity.

10.3. Fault of Developer.

10.3.1. Each of the following events, if uncured after written notice to the Developer, and after notice to the holder of any Security Financing Interest, if and where required by this Agreement, and the expiration of the applicable cure period as provided in Section 10.3.2 below, together with any additional time to cure expressly granted to the holder of any Security Financing Interest by the provisions of this Agreement or any separate Agreement between the City and any such holder, shall constitute a “Developer Event of Default”:
(a) Developer wrongfully refuses for any reason (including, but not limited to, lack of funds but excluding any reason to the extent arising from an event of default by the City under this Agreement) to accept conveyance from the City of the Project Property within the time and in the manner specified in Article 3.
(b) Developer fails to construct the Project substantially in the manner and by the deadline set forth in Article 6 of this Agreement. (c) Developer completes a Transfer except as permitted under Article 8. (d) Developer breaches any other material provision of this Agreement.

10.3.2. Upon the occurrence of an event described in Section 10.3.1, the City shall notify Developer and holders of Security Financing Interests in writing of the purported breach or failure (the “Default Notice”). Developer shall have 30 days from receipt of such Default Notice to cure such breach or failure. If Developer does not cure the default within such 30-day period (or if the default is not susceptible of being cured within such 30-day period and if Developer fails to commence the cure within such period and thereafter to prosecute the cure diligently to completion), then the City shall provide further notice and time to cure to any holders of Security Financing Interests as set forth in Section 10.3.3. If any holder of Security Financing Interests fails to cure the default within the time period permitted herein or pursuant to any other agreement between the City and such holder, the City shall be afforded cumulatively all of the following rights and remedies:
(a) Prior to Closing. With respect to a Developer Event of Default occurring prior to the Close of Escrow, the City shall have as the City’s sole remedy the right to terminate this Agreement.
(b) After Closing. With respect to a Developer Event of Default occurring after the Close of Escrow, the City shall have as the City’s sole remedy the right to seek specific performance of this Agreement against the Developer. Nothing in this paragraph shall be construed as a limitation on the City’s rights to enforce the Performance Security. (c) In the event the holder of Security Financing Interest acquires Developer’s interest in the Developable Parcels by foreclosure or deed in lieu of foreclosure or other remedy, the holder of Security Financing Interest shall take subject to Developer’s 49 obligations under this Agreement arising from and after the date such holder takes title, provided that the liability of the holder of Security Financing Interest shall be limited to its interest in the Developable Parcels. In the event the holder of Security Financing Interest acquires Developer’s interest in the Developable Parcels by foreclosure or deed in lieu of foreclosure or other remedy, the holder of Security Financing Interest shall have the right to Transfer its interest in the Developable Parcels, without City approval, to a single purpose entity wholly owned or controlled by the holder of Security Financing Interest and the right to make one subsequent Transfer of the portion of the Project acquired by such holder and in each such event the City shall release the holder Security Financing Interest from all obligations or liability under this Agreement to the extent arising after the date of such transfer.

10.3.3. Right to Cure.
(a) Notices to Qualified Financial Institutions. If Developer fails to cure a default within 30 days after notice thereof, then the City shall send to each holder of Security Financing Interest a second copy of the Default Notice. (b) Right to Cure. Notwithstanding anything stated to the contrary in this Agreement, City shall not exercise any of City’s remedies because of a default or breach thereunder on the part of Developer, until and unless (A) the City has complied with 10.3.3(a);
(B) with respect to a default or breach that is curable solely by the payment of money, no holder of
Security Financing Interest has cured such default or
breach within 30 days following the expiration of any
Developer’s notice and cure periods set forth in this
Agreement; and
(C) with respect to a default or breach that is not curable solely by the payment of money, no holder of
Security Financing Interest has cured such default or
breach within the time period set forth under Section

9.3 above, or, if such default or breach is curable but cannot be cured within such time period, no holder
of Security Financing Interest has notified City
within such time period that it intends to attempt to
cure such default or breach, and has diligently
commenced to cure such default or breach which
shall include, without limitation, commencement of
foreclosure and/or receivership actions, and
thereafter has diligently prosecuted such cure to
completion. The time period for any such holder to
cure will be automatically extended by any period
during which such holder is diligently attempting to
50 obtain title to the Developable Parcels or otherwise cure the default.

10.4. Survival.

Upon termination of the Term of the Agreement under this Article 10 or as otherwise provided in this Agreement, only the following provisions of this Agreement shall survive: (i) the waivers in Sections 3.6 and 3.7; and (ii) the indemnification obligations in Sections

6.8, 7.4.2, 7.6.1, 7.6.2, and 11.6. This Section 10.4 does not alter the scope or nature of the surviving provisions.

10.5. Limitation on Remedies - Rights and Remedies Cumulative.

It is acknowledged by the Parties that neither Party would have entered into this Agreement if doing so would subject it to the risk of incurring liability in money damages, either for breach of this Agreement, anticipatory breach, repudiation of the Agreement, or for any actions with respect to its implementation or application. The Parties intend by the provisions of this Section 10.5 that neither Party shall have any liability for money damages arising out of a breach or repudiation of this Agreement, or any liability in money damages for any claims arising out of the application process, negotiation, execution and adoption, or the implementation or application of this Agreement. The Parties further acknowledge that money damages and remedies at law or equity are inadequate, and specific performance is the most appropriate remedy for the enforcement of this Agreement for the following reasons:
(a) money damages are expressly excluded as provided above (b) due to the size, nature, and scope of development of the Project Property, it will be impractical to restore the Project Property to its original condition once implementation of this Agreement has begun and Developer may be foreclosed from other choices it may have had to utilize the Project Property or portions thereof. Further, after Close of Escrow, the City will have disposed of its interest in the Property. The Parties will have invested significant time and resources and performed extensive planning, processing, and implementation of this Agreement, and it is not possible to determine the sum of money which would adequately compensate the nonbreaching Party for such efforts.

10.5.1. Except for the provisions of this Agreement relating to the enforcement of indemnity, Performance Security, insurance, or for claims, demands, actions, or suits in which specific performance is the sole remedy sought, Developer, on the one hand, and the City, on the other hand, for themselves, their successors and assignees, hereby release one another’s officers, trustees, directors, partners, agents and employees from any and all claims, demands, actions, or suits of any kind or nature arising out of any liability, known or unknown, present or future, including, but not limited to, any claim or liability, based or asserted, pursuant to Article I, Section 19 of the California Constitution, the Fifth and Fourteenth Amendments of the United States Constitution, or any other law or ordinance which seeks to impose any money damages, 51 whatsoever, upon the Parties because the Parties entered into this Agreement, because of the terms of this Agreement, or because of the manner of implementation or performance of this Agreement.

10.5.2. Except as otherwise provided, the rights and remedies of the Parties are cumulative, and the exercise or failure to exercise any right or remedy shall not preclude the exercise, at the same time or different times, of any right or remedy for the same default or any other default. Except as otherwise limited by this Agreement, each of the Parties may pursue any remedy at law or equity available for the breach of any provision of this Agreement, including but not limited to specific performance, temporary or permanent injunctive relief, declaratory relief, or restraining orders, except that none of the Parties shall have any liability in money damages for any acts or omissions which are alleged to have arisen out of or relate to this Agreement and no Party may pursue a claim for money damages under this Agreement.

10.6. Inaction Not a Waiver of Default.

Any failures or delays by any Party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies or deprive such Party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies.

10.7. No Attorneys’ Fees.

In the event that any Party hereto brings any action or files any proceeding to declare the rights granted herein or to enforce any of the terms of this Agreement or as a consequence of any breach by another Party of its obligations hereunder, the prevailing Party or Parties in such action or proceeding shall not be entitled to have its attorneys’ fees and out-ofpocket expenditures paid by the losing Party. Each Party shall bear its own attorney’s fees and costs.

ARTICLE 11. GENERAL PROVISIONS.

11.1. Developer Representations and Warranties.

Developer represents and warrants to the City, as follows:
(a) Organization. Developer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, with full power and authority to conduct its business as presently conducted and to execute, deliver and perform its obligations under this Agreement. Developer is duly authorized to do business in the State of California.
(b) Authorization. Developer has taken all necessary action to authorize its execution, delivery and, subject to any conditions set forth in this Agreement, performance of the Agreement. Upon the date of this Agreement, this Agreement shall constitute a legal, valid and binding obligation of Developer, enforceable against it in accordance with its terms. 52 (c) No Conflict. The execution, delivery and performance of this Agreement by Developer does not and will not materially conflict with, or constitute a material violation or material breach of, or constitute a default under (i) the charter or incorporation documents of Developer, (ii) any applicable law, rule or regulation binding upon or applicable to Developer, or (iii) any material agreements to which Developer is a party. (d) No Litigation. Unless otherwise disclosed in writing to the City prior to the date of this Agreement, there is no existing or, to Developer’s actual knowledge, pending or threatened litigation, suit, action or proceeding before any court or administrative agency affecting the Developer or, to the best knowledge of Developer, the Project Property that would, if adversely determined, materially and adversely affect Developer or the Project Property or Developer’s ability to perform its obligations under this Agreement or to develop and operate the Project, other than litigation, suit, action or proceeding that are (i) covered by insurance or (ii) relate to claims arising in the ordinary course of business. (e) Licenses, Permits, Consents and Approvals. Developer and/or any person or entity owning or operating the Project Property has duly obtained and maintained, or will duly obtain and maintain, and will continue to obtain and maintain, all licenses, permits, consents and approvals required by all applicable governmental authorities to own and operate the business on the Project Property.

11.2. City Representations and Warranties.

The City represents and warrants to Developer, as follows:
(a) Authorization. The City has taken all necessary action to authorize its execution, delivery and, subject to any conditions set forth in this Agreement, performance of the Agreement. Upon the date of this Agreement, this Agreement shall constitute a legal, valid and binding obligation of the City, enforceable against the City in accordance with its terms subject to the laws of the State of California which limit the types of remedies available against a municipality and/or its agencies, and subject to equitable principles limiting the rights of creditors generally.
(b) No Conflict. The execution, delivery and performance of this Agreement by the City does not and will not materially conflict with, or constitute a material violation or material breach of, or constitute a default under (i) the charter or incorporation documents of the City, (ii) any applicable law, rule or regulation binding upon or applicable to the City, or (iii) any material agreements to which the City is a party. (c) No Litigation. Unless otherwise disclosed in writing to the Developer prior to the date of this Agreement, to the actual knowledge of the City Attorney as derived from a writing received by the City Attorney as of the date of execution of this Agreement, there is no existing, pending or threatened litigation, suit, action or proceeding before any court or administrative agency affecting the City or the Project Property that would, if adversely determined, materially and adversely affect the City, the Developer or the Project Property or the City’s ability to perform its obligations under this Agreement or to develop and operate the Project. 53 11.3. Notices, Demands and Communications.

Formal notices, demands, and communications between the City and Developer shall be sufficiently given if, and shall not be deemed given unless, delivered personally, or dispatched by certified mail, return receipt requested, or by electronic mail transmission with the original to follow by reputable overnight delivery service with a receipt showing date of delivery, to the principal offices of the City and Developer as follows:

To City:

Mailing Address:

City of Santa Barbara
Post Office Box 1990
Santa Barbara, CA 93102-1990
Attn: City Administrator
Personal delivery at City Administrator’s Office, 735 Anacapa Street, Santa Barbara, CA With a copy to:

Mailing Address:

City Attorney
Post Office Box 1990
Santa Barbara, CA 93102-1990
Personal delivery at City Attorney’s Office, 740 State Street, Suite 201. Santa Barbara, CA Developer:

Paseo Propco LLC
c/o AllianceBernstein L.P.
66 Hudson Blvd. E, Floor 27
New York, New York 10001
Attention: AB Commercial Real Estate Debt, Head of Asset Management Email: [email protected]
Email: [email protected]
Email: [email protected]
Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected Party may from time to time designate by mail as provided in this Section 11.3. Delivery shall be deemed to have occurred at the time indicated on the receipt for delivery or refusal of delivery.

11.4. Non-Liability of Officials, Employees and Agents.

No member, official, employee or agent of the City shall be personally liable to the Developer, or any successor in interest, in the event of any default or breach by the City or for any amount which may become due to the Developer or on any obligation under the terms of this Agreement. No member, official, employee or agent of Developer shall be personally liable to the 54 City, or any successor in interest, in the event of any default or breach by Developer or for any amount which may become due to the City or on any obligation under the terms of this Agreement.

11.5. Enforced Delay.

In addition to specific provisions of this Agreement, and notwithstanding anything to the contrary herein, the Schedule of Performance shall be extended and performance by either Party shall not be deemed to be in default for Force Majeure Events and in the case of Developer, City Delays or matters otherwise beyond the control or without the fault of the Party claiming an extension of time to perform. An extension of time for any cause will be deemed granted if notice by the Party claiming such extension is sent to the other within 10 days from the commencement of the cause and such extension of time is not reasonably rejected in writing by the other Party within 30 days of receipt of the notice.

11.6. Indemnification.

Except for the gross negligence, willful misconduct, fraud, or breach of this Agreement by the City and except for any internal matters related to City governance, Developer undertakes and agrees to defend, indemnify, and hold harmless the City (the “Indemnitees”) from and against all suits and causes of action, claims, writs, losses, demands and expenses, including, but not limited to, reasonable attorney’s fees and costs of litigation, damage or liability of any nature whatsoever, arising in any manner by reason of or incident to (i) the approval of the Project and/or this Agreement by Indemnitees; and/or (ii) the performance of this Agreement on the part of Developer, or any contractor or subcontractor of Developer (collectively, “Claims”). Developer shall pay immediately upon the Indemnitees’ demand any amounts owing under this indemnity unless Developer is challenging the obligation to indemnify. The duty of Developer to indemnify includes the duty to defend the Indemnitees or, at the Indemnitees’ choosing, to pay the Indemnitee’s, costs of its defense in any court action, administrative action, or other proceeding brought by any third-party arising from the Claims. The Indemnitors may make all reasonable decisions with respect to its representation in any legal proceeding, including, but not limited to, the selection of attorney(s).

11.7. No Third-Party Beneficiary.

The provisions of this Agreement are and will be for the benefit of the City and Developer only and are not for the benefit of any third-party. Accordingly, no third-party shall have the right to enforce the provisions of this Agreement.

11.8. Title of Parts and Sections.

Any titles of the sections or subsections of this Agreement are inserted for convenience of reference only and shall be disregarded in interpreting any part of its provision.

11.9. Applicable Law.
55 This Agreement shall be interpreted under and pursuant to the laws of the State of California.

11.10. Severability.

If any term, provision, covenant or condition of this Agreement is held in a final disposition by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding or unenforceability.

11.11. Binding Upon Successors; Covenants to Run with Land; Term of the Agreement.

This Agreement shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors in interest, and assigns of each of the Parties; provided, however, that there shall be no Transfer except as permitted in Article 8. Any reference in this Agreement to a specifically named Party shall be deemed to apply to any successor, heir, administrator, executor, successor, or assign of such Party who has acquired an interest in compliance with the terms of this Agreement or under law.

This Agreement shall run with the land and shall bind all successors in title to the Project Property only for the Term of the Agreement. Every contract, deed, or other instrument hereafter executed covering or conveying the Project Property or any portion thereof shall be held conclusively to have been executed, delivered, and accepted subject to such covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the City expressly releases the Project Property or the applicable portion of the Project Property from the requirements of this Agreement, which the City agrees to do promptly upon issuance of a Certificate of Completed Obligations.

11.12. Parties Not Co-Venturers.

Nothing in this Agreement is intended to or does establish the Parties as partners, co-venturers, or principal and agent with one another.

11.13. Entire Understanding of the Parties.

This Agreement constitutes the entire understanding and agreement of the Parties with respect to the conveyance of the Project Property and the development of the Project.

11.14. City Approval.

Whenever this Agreement references City approval, consent, or waiver, the written approval, consent, or waiver of the City Administrator shall constitute the approval, consent, or waiver of the City, except where City Council approval is expressly required by this Agreement.

The City Council authorizes the City’s Administrator to deliver such approvals or consents as are contemplated by this Agreement, or to waive requirements under this Agreement, on behalf of the 56 City. Any material amendment or modification to this Agreement as determined by the City Attorney shall require approval by the City Council.

11.15. Incorporation of Exhibits.

All Exhibits referred to in this Agreement are incorporated herein by such reference and made a part hereof.

11.16. Context and Construction.

When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural, and the masculine shall include the feminine and neuter and vice versa. The term person as used in this Agreement, includes a natural person, corporation, association, partnership, organization, business, trust, individual, or a governmental authority, agency. “Day” or “days” is used herein, such shall refer to calendar day or days, unless otherwise specifically provided herein. Whenever a reference is made herein to a particular Article of this Agreement, it means and includes all sections, subsections and subparts thereof, and, whenever a reference is made herein to a particular section or subsection, it shall include all subsections and subparts thereof.

11.17. Effectiveness of Agreement.

This Agreement is dated for convenience only and shall only become effective on the Effective Date.

11.18. Counterparts.

This Agreement may be executed in counterparts and multiple originals.

11.19. Amendments.

The Parties can amend this Agreement only by means of a writing signed by both Parties.

11.20. Police Power.

Nothing contained herein shall be deemed to limit, restrict, amend or modify, nor to constitute a waiver or release of, any ordinances, notices, orders, rules, regulations or requirements (now or hereafter enacted or adopted and/or as amended from time to time) of the City, its departments, commissions, agencies and boards and the officers thereof and/or the City, including, without limitation, any general plan or any zoning ordinances, or any of City’s duties, obligations, rights or remedies thereunder or pursuant thereto or the general police powers, rights, privileges and discretion of City in the furtherance of the public health, welfare and safety of the inhabitants thereof, including, without limitation, the right under law to make and implement independent judgments, decisions and/or acts with respect to planning, development and/or 57 redevelopment matters (including, without limitation, approval or disapproval of plans and/or issuance or withholding of building permits) whether or not consistent with the provisions of this Agreement, any Exhibits attached hereto or any other documents contemplated hereby (collectively, “City Rules and Powers”). In the event of any conflict, inconsistency or contradiction between any terms, conditions or provisions of this Agreement, Exhibits or such other documents, on the one hand, and any such City Rules and Powers, on the other hand, the former shall prevail and govern in each case. This section shall be interpreted for the benefit of City.

11.21. No Obligation to Third Parties.

This Agreement shall not be deemed to confer any rights upon, nor obligate either of the Parties to this Agreement to, any person or entity not a Party to this Agreement.

11.22. Brokers.

City and Developer each represents that it has not engaged any broker, agent or finder in connection with this transaction. Developer agrees to defend, indemnify and hold City and all City Representatives harmless from and against any Losses and Liabilities with respect to such commissions based upon the alleged acts of Developer. City agrees to defend, indemnify and hold Developer harmless from and against Losses and Liabilities with respect to such commissions based upon the alleged acts of City.

11.23. Standard of Approval.

Any consents or approvals required or permitted under this Agreement shall not be unreasonably or untimely withheld or made, except where it is specifically provided that a sole discretion standard applies.

11.24. Submittals and Approvals.

Various submittals are required by the Developer pursuant to the Agreement. As expressly provided by this Agreement, City shall approve or disapprove certain submittals from Developer within specified timeframes, or else such submittal shall be deemed approved by the City. Notwithstanding the provisions for deemed approval, no submittal or matter shall be deemed approved unless the request for approval contains the following provision, in bold print with the appropriate time period stated:

NOTICE IS HEREBY GIVEN THAT PURSUANT TO
SECTION 11.24 OF THE DEVELOPMENT AND

DISPOSITION AGREEMENT THAT FAILURE TO
APPROVE THE REQUEST MATTER WITHIN [__] DAYS
SHALL BE DEEMED AN APPROVAL.
58 IN WITNESS WHEREOF, the Parties have executed this Disposition and Development DDA.

Executed this __ day of _________________, 2025.
“CITY”

CITY OF SANTA BARBARA,
By:___________________________
Kelly R. McAdoo, City Administrator
APPROVED AS TO FORM:

Sarah J. Knecht, CITY ATTORNEY
By;_________________________
Daniel S. Hentschke Assistant City Attorney
Executed this __ day of __________________, 2025.
“DEVELOPER”
By: __________________________
59 EXHIBIT
A

CITY PARCEL MAPS
60 Exhibit A – City Parcels Map
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61 Exhibit A-1 – Lot 2 Affordable Parcel Map
62 EXHIBIT
B
Project Property Legal Descriptions
63 Inline Retail Parcel
64 Former Macy’s Parcel
65 Intentionally Blank
66 Lot 1 Parcel
67 Lot 2 Parcel
68 69
70 71
72 73

EXHIBIT
C
Scope of Development
74 Exhibit C – Scope of Development
The Project contains the Paseo Development and the Affordable Development described below.

1. Paseo Development.The Project will contain the following residential and commercial uses:
a. Development of approximately 233 new multi-family residential rental units on the Former Macy’s Parcel and Lot 1 Parcel. On the Former Macy’s Parcel, a new residential building will replace the existing Macy’s building in its entirety. On the Lot 1 Parcel, the residential units are expected to be constructed above the existing above-ground portion of Parking Lot 1. The units will be constructed, operated, and maintained as rental apartments restricted by the Paseo Residential Use Covenant. Unless Developer electsthe Lot 2 Development, the Paseo Development will include the Paseo Affordable Development.
b. Development of approximately 17,000 square feet of new retail uses on the Former Macy’s Parcel, at the corner of State Street and Ortega Street.

2. Affordable Development. The Project, at Developer’s sole discretion, will include either the Paseo Affordable Development or the Lot 2 Development:
a. Paseo Affordable Development: 10% of the Paseo Development residential rental units restricted to rental at rents affordable to Low-Income Households for a term of 90 years.

All fractional units shall be rounded up to the next whole unit. The Paseo Affordable Units shall be constructed at the same time, under the same standards, and have access to the same on-site amenities, as the unrestricted units within the Paseo Development.

For example, if the number of residential units in the Paseo Development is 233, then the Paseo Affordable Units would be 24 of the total units and the remaining 209 units would be unrestricted units.

Lot 2 Development: No less than 45 units and no more than 80 rental units, as determined by Developer, restricted at rents affordable to Low-Income Households located on the Lot 2 Affordable Parcel, along with appropriate onsite amenities as determined by Developer.

3. Additional Project Components.
a. Inline Retail Parcel: No new development or changes to the existing retail uses are proposed on the Inline Retail Parcel as part of the Project. Future development on the Inline Retail Parcel will be subject to separate processing by the City, the processing of which shall be subject to the City’s standard procedures and shall be subject to the same requirements as any project not subject to this Agreement. However, in all cases, Developer agrees to maintain the Public Art Space for continued use by the current occupants or such other public art use approved by the City. Developer may relocate the Public Art Space within the Inline Retail Parcel upon approval by the City. 75 b. Former Nordstrom Parcel: No new development is proposed on the Former Nordstrom Parcel as part of the Project.
c. Parking Lot 1: No new development is proposed in the underground Parking Lot 1 structure. However, Developer will reconfigure the existing Parking Lot 1 to accommodate the Project’s new residential uses and address Building Code requirements. Public will remain in Parking Lot 1 except for those spaces allocatedose Paseo Development.

4. Vehicular Parking.

The Project Property is in a 100% parking “zone of benefit” due to its proximity to the City’s public parking lots. (SBMC §30.175.050.B). The Project Property is also located in an area subject to AB2097 (2022), which removes required parking for both proposed residential and nonresidential land uses based on proximity to the transit center and train station. Therefore, no parking is legally required for the Project.
a. Paseo Development.

The Project will allocate parking spaces within Parking Lot 1, located below the Paseo Development, for residential use on a 1:1 ratio. Developer may restripe and relocate parking spaces in Parking Lot 1, as necessary, and will provide additional parking for the proposed market as generally shown in the plans provided to City Council at its December 2, 2025, hearing held to consider this Agreement and on file with the City Clerk. b. Lot 2 Development.

If the Lot 2 Development is selected, one bay of the existing Parking Lot 2 will be demolished to accommodate the Lot 2 Development, resulting in a reduction of approximately 186 spaces in Parking Lot 2. The Lot 2 Development will not include any specifically required parking.

5. Bicycle Parking.

The Project will provide bicycle parking at a rate of one covered and secured space per residential unit for both the Paseo Development and the Affordable Development.

6. Design.

The Project design of the Paseo Development and the Affordable Development will be generally as shown in the plans provided to City Council at its December 2, 2025, hearing held to consider this Agreement and on file with the City Clerk, subject to any design changes implemented at the time of Project Design Approval and Final Design Approval. 76 7. Development Requirements.

The Project will comply with applicable provisions of the Santa Barbara Municipal Code relating to water, sewer, and refuse collection service. Improvements to street and sidewalk surrounding the Project will be provided as required by the Santa Barbara Municipal Code.

8. Requirements Relating to Native American Concerns.

Unanticipated Discovery of Archaeological and Tribal Cultural Resources:

Prior to the start of any vegetation or paving removal, demolition, trenching or grading, contractors and construction personnel shall be alerted to the possibility of uncovering unanticipated subsurface archaeological features or artifacts associated with past human occupation. If such archaeological resources are encountered or suspected, work shall be halted immediately. The City Environmental Analyst shall be notified, and a City Qualified Archaeologist shall be retained by the Developer to assess the nature, extent, and significance of the discovery. The City Qualified Archaeologist will develop appropriate management recommendations for the treatment of archaeological resources, which may include, but are not limited to, redirection of grading and/or excavation activities, and consultation and/or monitoring with a local Chumash representative. If a discovery consists of possible human remains, the Santa Barbara County Coroner and the California Native American Heritage Commission shall be contacted immediately, and a local Chumash representative shall be retained to monitor all further subsurface disturbance in the area of the find. Work in the area may only resume after the Environmental Analyst grants authorization. If a discovery consists of possible prehistoric or Native American artifacts or materials, a local Chumash representative shall be retained to monitor all further subsurface disturbance in the area of the find. Work in the area may only resume after the Environmental Analyst grants authorization.

Workers Environmental Awareness Program (WEAP)
The Developer shall retain a City Qualified Archaeologist and tribal representative from the Santa Ynez Band of Chumash Indians to provide a Workers Environmental Awareness Program (WEAP) to all personnel involved in project construction, including field consultants and construction workers, prior to the commencement of ground disturbing activities. Chumash tribal representatives involved with initial project outreach should assist in preparation of the WEAP. The WEAP shall include:
• Applicable regulations including the requirement for confidentiality and consequences of violating state laws and regulations.
• Protocols for avoidance and appropriate measures for avoiding and minimizing impacts resources that could be present.
77 • Culturally appropriate treatment of any discovery of significance to Native Americans, including appropriate behaviors and responsive actions to follow, consistent with Native American tribal values.
• Relevant information outlining what to do and who to contact if any potential cultural resources or tribal cultural resources are encountered.

All grading/excavating workers, contractors, and visitors shall attend the WEAP prior to entering the project site and performing any work. The Developer shall provide copies of the training attendance sheets to City staff as a record of compliance. As new crew members are added during project construction, they will be required to review the WEAP training manual and sign off on it with acknowledgement from the construction superintendent, who will inform the monitoring archaeologist and local Chumash tribal representative observer.

Native American Monitoring
The Developer shall complete the following prior to the issuance of building permits: Contract with a Santa Ynez Band of Chumash Indians tribal representative and an archaeologist from the most current City Qualified Archaeologists List, for monitoring during all ground disturbing activities associated with the project including but not limited to, vegetation or paving removal, grading, excavation, and trenching in the areas identified during informal outreach or consultation with Chumash tribal representatives, and in the Phase I Archaeological Resources Report to be prepared for this site. The contract shall be subject to the review and approval of the Environmental Analyst. The Santa Ynez Band tribal representative and archaeologist's monitoring contract shall include the following provisions:
a. If unknown tribal cultural resources are encountered or suspected, work shall be halted or redirected immediately, and the City Environmental Analyst shall be notified. The local Chumash tribal representative monitor (and City Qualified Archaeologist if archaeological resources are identified) shall assess the nature, extent and significance of any discoveries and develop appropriate management recommendations for tribal cultural resource and archaeological resource treatment. This may require additional consultation with other Chumash tribal representatives. Resulting management recommendations may include, but are not limited to, archaeological investigations to determine the spatial extent and characteristics of the resources, possible alternative construction methods to avoid the resource, and continued monitoring by the local Chumash tribal representative and archaeologist. b. If a discovery consists of possible human remains, the Santa Barbara County Coroner shall be contacted immediately pursuant to Health and Safety Code Sections 7050.5 and Public Resources Code Sections 5097.94, 5097.98, and 5097.99. If the Coroner determines that the remains are Native American, the Coroner shall contact the California Native American Heritage Commission to identify the Most Likely Descendant, who shall work with the project Developer to determine the appropriate disposition of the remains in a location that ensures their 78 preservation in perpetuity. Work in the area may only proceed after the Environmental Analyst grants authorization.

Prior to issuance of the Certificate of Occupancy (Final Inspection), the Developer shall submit a final report on the results of the tribal cultural resource monitoring to the Environmental Analyst within 180 days of completion of the monitoring, or prior to the issuance of the Certificate of Occupancy (Final Inspection), whichever is earlier. The tribal cultural resource report shall include a statement as to the duration of monitoring completed, any resources encountered, and a conclusion that any potential impacts to the resource were satisfactorily addressed. If required, the Developer shall also submit a final report on the results of the archaeological monitoring complying with the MEA Guidelines for Archaeological Resources Section 4.6, Archaeological Resources Construction Monitoring Report guidelines.

Phase 1 Archaeological and Tribal Cultural Resources Report.

Prior to the Planning Application being deemed complete, the Developer shall submit a Phase 1 Archaeological and Tribal Cultural Resources Report prepared by an archaeologist listed on the City of Santa Barbara Qualified Archaeologists List to the Community Development Department. The Phase 1 Archaeological Report shall evaluate the potential for archaeological resources on the project site in accordance with the City Master Environmental Assessment (MEA) Guidelines for Archaeological Resources. The Qualified Archaeologist shall engage Santa Ynez Band of Chumash Indians Cultural Resources Manager and Cultural Resources Archaeologist during preparation and draft phases of the report in accordance with the City MEA Guidelines for Tribal Cultural Resources.

The Phase 1 Archaeological Resources Report will be reviewed by the Archaeological Advisory Member of the Historic Landmarks Commission (City Archaeological Advisor). If City Archaeological Advisor concurs with the conclusions of the report and determines that the site does not contain significant archaeological resources, the report will be accepted by the Community Development Department.

If the report identifies the potential for significant archaeological resources, additional investigation, avoidance, or mitigation measures may be required, subject to review and approval by the City Environmental Analyst, City Archaeological Advisor, and/or Historic Landmarks Commission.
79 EXHIBIT
D
Project Approvals
80 Exhibit D – Project Approvals

1. Paseo Development Approvals
a. Project Design Approval by HLC
b. Final Design Approval by HLC
c. Demolition Permit
d. Building Permits
e. Public Works Permits

2. Paseo Affordable Development Approvals
Same as above when Paseo Affordable Units are included in Paseo Development.

3. Lot 2 Development Approvals
a. Project Design Approval by HLC
b. Final Design Approval by HLC
c. Demolition Permit
d. Building Permits
e. Public Works Permits
Application Submittal Requirements

1. Applications must be submitted as required by the SBMC unless preempted by state law.

2. Housing Units. To the extent feasible, Developer will use reasonable efforts to address the following matters in the Project design submitted for Project Design Review. a. The average number of bedrooms in affordable units will be equal to or exceed the average bedrooms in the unrestricted units.
b. One- and two-bedroom units will have a minimum of 1.5 bathrooms, and threebedroom units must have a minimum of two bathrooms. c. Project plans must show the location and square footage of all affordable units.

3. Stormwater Management Program (SWMP). The Project will meet the applicable SWMP requirements.

4. Technical Reports & Project Data. The following technical reports and data must be submitted for a complete application submittal to properly review compliance with SBMC requirements. a. Phase 1 cultural report,
a. Hydrology/hydraulic and storm drain capacity analysis, 81 b. Project data for sewer capacity analysis,
c. Project data for water capacity analysis.
82 EXHIBIT
E
Schedule of Performance
83 Schedule of Performance
Paseo Development
Action Item Timing
Effective Date of Agreement. Promptly upon the effective date of the Ordinance approving the Agreement and
execution by City and Developer as provided
in Section 1.2.22.

Optional: HLC Hearing(s) for Conceptual
Design Review.

At any time following Developer submission
of the Planning Application, but prior to City
deeming the Planning Application complete,
Developer has the option to request
Conceptual Design Review with HLC.

HLC Hearing for Project Design Review.
(Sections 4.1 and 4.2)
The first HLC hearing for Project Design
Review shall be scheduled by the City to occur
within 60 days from City deeming the
Planning Application complete and consistent
with applicable SBMC requirements.

If Developer is required to submit revised
plans to a second Project Design Review
hearing, the second hearing shall be scheduled
by the City to occur within 30 days of
Developer’s submission of the revised plans.

HLC Project Design Review Approval or
Denial. (Sections 4.1 and 4.2)
HLC shall approve or deny the Project Design
Approval within 120 days from City deeming
the Planning Application complete and
consistent with applicable SBMC
requirements.

HLC Hearing for Final Design Review.
(Sections 4.1 and 4.2)
The first HLC hearing for Final Design
Review shall be scheduled by the City to occur
within 60 days from Developer submission of
final plans.

If Developer is required to submit revised
plans to a second Final Design Review
hearing, the second hearing shall be scheduled
by the City to occur within 20 days of
Developer’s submission of the revised plans.
84 HLC Final Design Review Approval or
Denial. (Section 4.2)
HLC shall approve or deny the Final Design
Approval within 120 days from the first HLC
hearing for Final Design Review.

Appeal to City Council. (Section 4.2) As provided in the SBMC 30.205.150 and

30.220.020 (G).

Lot Line Adjustments / Subdivision
Approvals (Section 3.1.4)
Applications for lot line adjustments or
subdivision approvals, if and as needed, will be
submitted and processed concurrently with the
design approvals as determined by Developer.

Building and Public Works Department
Submittals. (Section 4.3)
Developer shall use reasonable, good faith
efforts to submit to the City within 120 days
following Final Design Approval such
documents as are typically required by the City
Building Division under Title 22 of the SBMC
to receive demolition, grading, construction
and building permits.

Response to Building and Public Works
Department Submittals. (Section 4.3)
City response within 45 days from Developer
submission of initial application for
demolition, grading, construction and/or
building permits; within 21 days for
resubmittals.

Receipt of All Paseo Development
Approvals. (Section 3.1.3)
Developer shall use reasonable, good faith
efforts to take all actions within its control to
obtain the Paseo Development Approvals prior
to Close of Escrow.

Opening and Closing Date.
(Sections 3.8)
Developer and City will open Escrow with the
Escrow Agent no later than 10 days prior to the
Close of Escrow.

The Closing Date shall be the date the
conditions set forth in Section 3.8 are satisfied
or such other date mutually acceptable to both
parties.

Commencement of Construction
(Section 6.1)
If the Close of Escrow occurs, Developer shall
use reasonable, good faith efforts to commence
construction of the Project within 120 days of
the Close of Escrow.
85 Completion of Construction
(Section 6.2)
If the Close of Escrow occurs, Developer shall
use reasonable, good faith efforts to complete
the Project Construction in all material
respects demonstrated by issuance of a
Temporary Certificate of Occupancy or
Certificate of Occupancy within 48 months of
the Close of Escrow.

Lot 2 Development
If Developer elects to pursue the Lot 2 Development concurrently with or after the Paseo Development, the Performance Schedule for the Paseo Development will apply in all substantial respects to the Lot 2 Development. The Performance Schedule for the Lot 2 Development shall be measured from the date of Developer’s election to proceed with the Lot 2 Development.

Notice and Right to Cure
Failure to achieve any of the deadlines set forth above will be subject to the notice and cure provisions in Section 9.3 and Article 10 of the Agreement. 86 EXHIBIT
F
Declarations of Affordability and Use
Covenants
87 Exhibit F – Declarations of Affordability and Use Covenants

RECORDING REQUESTED BY )
AND WHEN RECORDED, MAIL TO: )
)
)
City of Santa Barbara )
City Administrator’s Office )
P.O. Box 1990 )
Santa Barbara, CA 93102-1990 )
____________________________________)____________________________________________ Address: [Street Address] No fee per Govt. Code 6103
Santa Barbara, CA
APNs: [List]
[Paseo Affordable Development]

AFFORDABILITY CONTROL COVENANT

IMPOSED ON REAL PROPERTY
This Affordability Control Covenant Imposed on Real Property (the “Covenant”) is made for the benefit of the City of Santa Barbara, a municipal corporation, (the “City”) by PASEO PROPCO LLC, a Delaware limited liability company (“Developer”).

This Covenant applies to the interest of Developer and any of Developer’s successors in interest to the real property commonly known as [Street Address], Santa Barbara, California, more fully described in “Exhibit A” attached to this Covenant (“Property”).

RECITALS
a. The City and Developer are parties to an agreement dated __________ titled Paseo Nuevo Redevelopment Project Disposition and Development Agreement (“DDA”), a memorandum of which has been recorded concurrently with this Covenant. Pursuant to the DDA, the City has transferred the Property to Developer by Grant Deed recorded concurrently with this Covenant. In consideration for the City’s transfer of the Property, Developer has agreed, among other things, to maintain, and operate on the Property a new multi-family residential housing development project containing [] residential rental units including [] units restricted to rental at rents affordable for LowIncome households for a duration of 90 years (“Restricted Units”) and subject to the terms and conditions specified in the DDA (“Project”).
b. Developer’s execution and enforcement of this Covenant is material consideration in exchange for the City’s transfer of the Property under the DDA. But for Developer’s covenants under the DDA, including the execution and enforcement of this Covenant, the City would not have transferred the Property to Developer.

TERMS OF AGREEMENT
88 In consideration of the transfer of the Property by City, along with other good and valuable consideration, receipt of which is hereby acknowledged, Developer covenants and agrees to maintain and operate the Restricted Units once constructed subject to the following covenants, conditions, restrictions and limitations.

A. DEFINITIONS
In addition to the terms defined by parenthetical reference above, the following terms have the meaning stated in this Section A.

1. Area Median Income: the annual median income adjusted by household size, of the City of Santa Barbara, or the smallest area including the City for which such figure is available, as determined by the State of California Department of Housing and Community Development (“HCD”) periodic “State Income Limits” publication. These income limits are based on U.S. Department of Housing and Urban Development (“HUD”) data and amended from time to time. If at some time HCD or HUD ceases to publish the Area Median Income figure, or at such time as HUD has not published an updated figure for at least two years, the City may determine the Area Median Income in the manner the City deems appropriate.

2. City Administrator: the person holding the position of City Administrator of the City and any City officer or employee exercising authority expressly delegated by the City Administrator to implement provisions of this Covenant.

3. Low-Income Household: a household in which the total income of the individuals residing in the dwelling unit does not exceed 80% of AMI, adjusted by household size. Income will be determined according to the regulations and procedures approved by the City.

4. Target Income Percentage: a number inserted into the calculation for maximum rents, to assure that the rent is affordable to a Low-Income Household.

5. Unit Size Adjustment Factor (USAF): a number inserted into the calculation for maximum rents, to adjust for the size of the dwelling unit. The appropriate USAF is 0.70 for a studio unit, 0.80 for a one-bedroom unit, 0.90 for a two-bedroom unit and 1.00 for a three-bedroom unit

6. Effective Date: the date that this Covenant is recorded in the official records of the County of Santa Barbara, California.

7. Duration of Restriction: 90 years from the Effective Date.

8. Utility Allowance: a monthly cost reduction applied to the tenant’s rent calculation to account for out-of-pocket payment of utility expenses. The Utility Allowance shall be calculated based on the Utility Allowance Schedule adopted by the City.

B. AFFORDABILITY RESTRICTIONS

1. All Restricted Units shall be restricted for rental at affordable rent to Low-Income Households for the Duration of Restriction.
89 2. Affordable rent for units restricted to rental to a Low-Income Household means a monthly rent that does not exceed one-twelfth (1/12) of thirty percent (30%) of the Area Median Income multiplied by a Target Income Percentage of sixty percent (60%) multiplied by a Unit Size Adjustment Factor. Affordable rent for units restricted to Low-Income Households includes utilities, i.e., electricity, gas, water, sewer, and refuse collection. If the tenant pays directly for any such utilities, the maximum rent shall be reduced by the amount of the Utility Allowance. The affordable rent for each restricted unit will be determined annually by Developer in compliance with this Covenant. and approved in writing by the City Administrator.

C. ADDITIONAL RESTRICTIONS

1. The Restricted Units shall be constructed and maintained to substantially the same standards and have access to the same on-site amenities as the unrestricted units in the Project.

2. All loans, deeds of trust, and other security interests entered into by the Developer with respect to the Project shall be subject to and subordinate to this Covenant.

3. This Covenant shall be subordinate only to a similar affordability covenant required by a state or federal agency in connection with provision of state or federal financial assistance, to the extent of any required state or federal preemption under applicable law.

D. DEFAULT UNDER DEED OF TRUST; NOTICE TO CITY

1. In the event of default and foreclosure under any deed of trust, the City shall have the same right as the Developer to cure defaults and redeem the Property prior to foreclosure sale. Nothing herein shall be construed as creating an obligation on the part of the City to cure any such default nor shall this right to cure and redeem operate to extend any time limitations in the default provisions of the underlying deed of trust or mortgage. This paragraph creates an additional remedy for the City and shall not be construed in any way as a limitation on Section C.2. of this Covenant.

2. Developer must notify City of any deed of trust or mortgage recorded against the Property and shall provide the City with the information needed by the City to record a request for notice of default. The City may record such request for notice of default upon receiving the required information.

E. REPORTING REQUIREMENTS

1. On April 1 of each year or at such other annual date as specified by the City in writing, Developer must submit an annual report that lists for each Restricted Unit the following information:
a. The address, unit number, verification of household members during the previous calendar year; and
b. The household income and rent collected from and owed by the tenants during the previous calendar year; and
c. Either a certification that all provisions of this Covenant have been complied with during the previous calendar year, or an explanation of each violation of the terms of this Covenant; and
90 d. Such other documentation as reasonably requested in writing by the City, necessary or convenient to assure compliance with the requirements of this Covenant.

2. The City reserves the right to request ask for other related information at any time.

3. Notwithstanding Section H.7., below, the annual report may be delivered in any manner approved by the City Administrator.

F. HOUSING QUALITY STANDARDS AND SITE INSPECTIONS
Developer must maintain the Restricted Units in conformance with State and local housing quality standards and code requirements, as well as the federal Housing Quality Standards specified by HUD in 24 CFR 982.401. Developer agrees to allow the City to inspect the Restricted Units annually for compliance with the provisions for operation and maintenance, upon 10 days written notice from the City. Developer must correct every condition that City, determines does not comply with the operational and maintenance requirements herein (“Deficiency”). City shall provide written notification (“Notice of Deficiency”) to Developer within 10 days of each inspection identifying the Deficiencies and describing the work needed to correct the Deficiency. If Developer fails to correct a Deficiency within 60 days of the date of City’s Notice of Deficiency, the City shall have the right to enter the Project site and correct the Deficiency. Developer must reimburse the City for all expenses incurred in correcting the Deficiency within 30 days of the date that City provides Developer with an invoice for the City costs incurred to correct the Deficiency.

G. DEFAULTS AND REMEDIES AND ASSIGNMENT OF RENTS

1. If a default occurs under the terms of this Covenant, City will give written notice of such default to parties identified in Section H. 7., below. If Developer does not correct the default within 30 days after the date Developer receives the notice (or such longer period as set forth below), the City may proceed with any and all remedies available under this Covenant or any other remedies available under rules of law or equity. If the default cannot reasonably be cured within 30 days, Developer will have a reasonable period of time to cure such default, so long as Developer has commenced to cure the default within the original 30 day period and is diligently pursuing such cure to completion.

2. It is understood and agreed between the parties that the obligations of both parties under this Covenant are unique, and in furtherance of important public policies encouraging development of housing for Low-Income Households, and that in case of a breach or default, it would be extremely difficult or impossible to compensate for the breach or default in money. Consequently, both parties agree that their respective rights and obligations hereunder may be specifically enforced by any court having jurisdiction, in addition to any and all other remedies at law or in equity that may be available to them.

3. Developer acknowledges that occupancy of any Restricted Unit in violation of this Covenant is prohibited. In consideration of the benefits conferred on Developer and the transfer of Property to Developer for development of the Project, Developer hereby assigns to City the right to receive the rents due or collected from any Restricted Unit on the Property occupied in violation of the 91 terms of this Covenant, during the entire period of the violation. The City may enforce this right by any legal means.

4. The remedies stated herein are not exclusive but shall be cumulative to all other remedies and rights the parties may lawfully exercise.

H. ADDITIONAL PROVISIONS

1. No Restricted Unit shall be occupied in the absence of a written lease or rental agreement between the Developer and each adult resident of that unit. Any material change or amendment to a lease or rental agreement shall also be in writing and shall require prior written approval by the City.

2. Developer declares that the Property is held and hereafter shall be held, conveyed, hypothecated, encumbered, used, and occupied subject to these covenants, conditions, restrictions and limitations. All of the covenants, conditions, restrictions and limitations of this Covenant are intended to constitute both equitable servitudes and covenants running with the land.

3. Any purchaser of the Property and/or Project, by the acceptance of a deed therefore, whether from Developer or from any subsequent owner of the Property, or by the signing of a contract or agreement to purchase the same, or to make a loan secured by the Property, shall, by the acceptance of such deed or by the signing of such contract or agreement, be deemed to have consented to and accepted the covenants, conditions, restrictions and limitations set forth herein.

4. Developer covenants that it has not and will not execute any other agreement or covenant with provisions contradictory to or in opposition to the provisions hereof.

5. If any one or more of the provisions contained in this Covenant shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Covenant, and this Covenant shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.

6. The terms of this Covenant shall be interpreted under the laws of the State of California.

7. All notices required herein shall be sent by certified mail, return receipt requested, or in such other manner as agreed in writing by the City Administrator of the City and the Executive Director of the Housing Authority, to the parties at the addresses listed below or such other addresses as the parties hereafter designate in writing:

To Developer:

With a copy to:

To City: The City of Santa Barbara
Post Office Box 1990
Santa Barbara, CA 93102
Attn: City Adminstrator
92 With a copy to: City Attorney
Post Office Box 1990
Santa Barbara, CA 93102
The City and Developer may each change the identity or address of a person to receive notice by giving notice to the other party in the manner provided by this paragraph.

8. This Covenant constitute the entire agreement between City and Developer with respect to the restrictions contained herein and supersedes all prior agreements and negotiations, oral and written.

This Covenant may not be amended or modified in any respect whatsoever except by an instrument in writing, approved and executed by the City and Developer.

IN WITNESS WHEREOF, the Parties have executed this Covenant as of the date first written above.

CITY OF SANTA BARBARA
By: _____________________________________
Kelly R. McAdoo, City Administrator

APPROVED AS TO FORM
Sarah J. Knecht, City Attorney
By: _____________________________________
Daniel S. Hentschke
Assistant City Attorney

DEVELOPER
By: _____________________________________

APPROVED AS TO FORM
By: _____________________________________

Note: This Covenant will be recorded; the signatures of the parties (not including approvals as to form and content) must be acknowledged by a notary.
93 EXHIBIT “A”
Exhibit A - Legal Description of Property
4937-4364-7610, v. 1
94 RECORDING REQUESTED BY )
AND WHEN RECORDED, MAIL TO: )
)
)
City of Santa Barbara )
City Administrator’s Office )
P.O. Box 1990 )
Santa Barbara, CA 93102-1990 )
____________________________________)____________________________________________ Address: [Street Address] No fee per Govt. Code 6103
Santa Barbara, CA
APNs: [List]

RESIDENTIAL USE COVENANT

IMPOSED ON REAL PROPERTY
This Residential Use Covenant Imposed on Real Property (the “Covenant”) is made for the benefit of the City of Santa Barbara, a municipal corporation, (the “City”) by PASEO PROPCO LLC, a Delaware limited liability company (“Developer”).

RECITALS
a. The City and Developer are parties to an agreement dated __________ titled Paseo Nuevo Redevelopment Project Disposition and Development Agreement (“DDA”), a memorandum of which has been recorded concurrently with this Covenant. Pursuant to the DDA, the City has transferred the Property to Developer by Grant Deed recorded concurrently with this Covenant. t. b. As material consideration for the City’s transfer of the Property, Developer and City desire to restrict use of the multi-family residential housing units for rental to persons that agree to occupy the unit as their domicile as provided herein.
c. Developer’s execution and enforcement of this Covenant are material consideration in exchange for the City’s transfer of the Property under the DDA. But for Developer’s covenants under the DDA, including the execution and enforcement of this Covenant, the City would not have transferred the Property to Developer.

TERMS OF AGREEMENT
In consideration of the transfer of the Property by City, along with other good and valuable consideration, receipt of which is hereby acknowledged, Developer covenants and agrees to maintain and operate the Project subject to the following covenants, conditions, restrictions, and limitations. 95 A. RESIDENTIAL USE COVENANTS AND RESTRICTIONS

1. Each rental unit in the Project will be rented only to persons who agree as a term of the rental agreement to occupy the rental unit as their domicile (meaning principal or primary place of residence).

2. No rental unit may be occupied in the absence of a written lease or rental agreement between the Developer and each adult resident of that unit.

3. Each rental unit in the Project will be rented only to persons who agree as a term of the rental agreement that the rental unit shall not be sublet as a short-term vacation rental, meaning a rental for a period of less than 30 days.

4. Developer is responsible for implementation and enforcement of this Covenant.

5. Developer shall include in each rental agreement a clause implementing this Covenant that has been approved by the City Administrator and City Attorney. The Developer will use only rental agreements containing the clauses or provisions implementing this Covenant as approved by the City Administrator and City Attorney for the rental of units in the Project.

6. The City may, upon 10 days written notice, request that Developer provide a copy of the current form rental agreement to the City Administrator in order to verify compliance with Covenant. The City Administrator shall at all times maintain the confidentiality of the form rental agreement to the extent authorized by law.

7. All loans, deeds of trust, and other security interests entered into by the Developer with respect to the Project shall be subject to and subordinate to this Covenant.

B. REPORTING REQUIREMENTS
On April 1 of each year or at such other annual date as specified by the City Administrator in writing, Developer must submit a certification that all provisions of this Covenant have been complied with during the previous calendar year.

C. ADDITIONAL PROVISIONS

1. Developer declares that the Property is held and hereafter shall be held, conveyed, hypothecated, encumbered, used, and occupied subject to these covenants, conditions, restrictions and limitations. All of the covenants, conditions, restrictions and limitations of this Covenant are intended to constitute both equitable servitudes and covenants running with the land.

2. Any purchaser of the Property and/or Project, by the acceptance of a deed therefore, whether from Developer or from any subsequent owner of the Property, or by the signing of a contract or agreement to purchase the same, or to make a loan secured by the Property, shall, by the acceptance of such deed or by the signing of such contract or agreement, be deemed to have consented to and accepted the covenants, conditions, restrictions and limitations set forth herein. 96 3. The Developer covenants that it has not and will not execute any other agreement or covenant with provisions contradictory to or in opposition to the provisions hereof.

4. Developer and City will jointly defend this covenant against any third-party legal challenge. If any one or more of the provisions contained in this Covenant shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions may be modified or amended as necessary to implement the intention of this Covenant to the fullest extent authorized by law.

5. The terms of this Covenant shall be interpreted under the laws of the State of California.

6. All notices required herein shall be sent by certified mail, return receipt requested, or in such other manner as agreed in writing by the City Administrator of the City and Developer to the parties at the addresses listed below or such other addresses asthe parties hereafter designate in writing:

To Developer:

With a copy to:

To City: The City of Santa Barbara
Post Office Box 1990
Santa Barbara, CA 93102
Attn: City Administrator
With a copy to: City Attorney
Post Office Box 1990
Santa Barbara, CA 93102
The City and Developer may each change the identity or address of a person to receive notice by giving notice to the other party in the manner provided by this paragraph.

7. This Covenant constitutes the entire agreement between City and Developer with respect to the restrictions contained herein and supersede all prior agreements and negotiations, oral and written.

This Covenant may not be amended or modified in any respect whatsoever except by an instrument in writing, approved and executed by the City and Developer or their respective successors and assigns.

Signatures on the following page.
97 IN WITNESS WHEREOF, the Parties have executed this Covenant as of the date first written above.

CITY OF SANTA BARBARA
By: _____________________________________
Kelly R. McAdoo, City Administrator

APPROVED AS TO FORM
Sarah J. Knecht, City Attorney
By: _____________________________________
Daniel S. Hentschke
Assistant City Attorney

DEVELOPER
By: _____________________________________

APPROVED AS TO FORM
By: _____________________________________

Note: This Covenant will be recorded; the signatures of the parties (not including approvals as to form and content) must be acknowledged by a notary.
98 EXHIBIT “A”
Exhibit A - Legal Description of Property
99 RECORDING REQUESTED BY )
AND WHEN RECORDED, MAIL TO: )
)
)
City of Santa Barbara )
City Administrator’s Office )
P.O. Box 1990 )
Santa Barbara, CA 93102-1990 )
____________________________________)____________________________________________ Address: [Street Address] No fee per Govt. Code 6103
Santa Barbara, CA
APNs: [List]
[Lot 2 Development]

AFFORDABILITY CONTROL COVENANT

IMPOSED ON REAL PROPERTY
This Affordability Control Covenant Imposed on Real Property (“Covenant”) is made for the benefit of the City of Santa Barbara, a municipal corporation, (“City”) by PASEO PROPCO LLC, a Delaware limited liability company (“Developer”).

This Covenant applies to the interest of Developer and of any Developer’s successor in the real property commonly known as [Street Address], Santa Barbara, California, more fully described in “Exhibit A” attached to this Covenant (“Property”).

RECITALS
a. The City and Developer are parties to an agreement dated __________ titled Paseo Nuevo Redevelopment Project Disposition and Development Agreement, a memorandum of which has been recorded concurrently with this Covenant (“DDA”). Pursuant to the DDA, theCity has transferred the Property to Developer by Grant Deed recorded concurrently with this Covenant. In consideration for the City’s transfer of the Property, Developer has agreed, among other things, to restrict the use of the Property to an affordable housing development containing not less than 45 and up to 80 rental housing units restricted at rents affordable to Low-Income Households (80% AMI or below) along with one unrestricted onsite manager’s unit to be constructed, operated, and maintained by an Approved Housing Provider.
b. Developer’s execution and enforcement of this Covenant is material consideration in exchange for the City’s transfer of the Property under the DDA. But for Developer’s covenants under the DDA, including the execution and enforcement of this Covenant, the City would not have transferred the Property to Developer.

TERMS OF AGREEMENT
In consideration of the transfer of the Property by City, among good and valuable consideration, receipt of which is hereby acknowledged, Developer covenants and agrees that the Property is subject 100
to the following covenants, conditions, restrictions and limitations.

A. DEFINITIONS
In addition to the terms defined by parenthetical reference above, the following terms have the meaning stated in this Section A.

1. “Approved Housing Provider” means the Developer or an affordable housing provider selected by Developer and approved by the City for the Project according to the terms of the DDA.

2. “Area Median Income”: the annual median income adjusted by household size, of the City of Santa Barbara, or the smallest area including the City for which such figure is available, as determined by the State of California Department of Housing and Community Development (“HCD”) periodic “State Income Limits” publication. These income limits are based on U.S. Department of Housing and Urban Development (“HUD”) data and amended from time to time. If at some time HCD or HUD ceases to publish the Area Median income figure, or at such time as HUD has not published an updated figure for at least two years, the City may determine the Area Median Income in the manner the City deems appropriate.

3. “City Administrator”: the person holding the position of City Administrator of the City and any City officer or employee exercising authority expressly delegated by the City Administrator to implement provisions of this Covenant.

4. “Duration of Restriction”: 90 years from the Effective Date

5. “Effective Date”: the date that this Covenant is recorded in the official records of the County of Santa Barbara, California.

6. “Low-Income Household”: a household in which the total income of the individuals residing in the dwelling unit does not exceed 80% of AMI, adjusted by household size. Income will be determined according to the regulations and procedures approved by the City.

7. “Project”: an affordable housing development containing not less than 45 and up to 80 rental housing units restricted at rents affordable to Low-Income Households (80% AMI or below) along with one unrestricted onsite manager’s unit to be constructed, operated, and maintained by an Approved Housing Provider, which is referred to in the DDA as the Lot 2 Development.

8. “Restricted Units”: all of the residential units in the Project except for the one onsite manager’s unit.

9. “Target Income Percentage”: a number inserted into the calculation for maximum rents, to assure that the rent is affordable to a Low-Income Household.

10. “Unit Size Adjustment Factor (USAF)”: a number inserted into the calculation for maximum rents, to adjust for the size of the dwelling unit. The appropriate USAF is 0.70 for a studio unit, 0.80 for a one-bedroom unit, 0.90 for a two-bedroom unit and 1.00 for a three-bedroom unit 101

11. “Utility Allowance”: a monthly cost reduction applied to the tenant’s rent calculation to account for out-of-pocket payment of utility expenses. The Utility Allowance shall be calculated based on the Utility Allowance Schedule adopted by the City
B. AFFORDABILITY RESTRICTIONS

1. All of the Restricted Units are restricted for rental at affordable rent to Low-Income Households for the Duration of Restriction.

2. [To be used only if the Approved Housing Provider is the Housing Authority of the City of Santa Barbara]. Affordable rent for units restricted to rental to a Low-Income Household means a monthly rent shall be set to an amount that does not exceed the Payment Standard by unit size for the Section 8 Housing Choice Voucher program established by the Housing Authority of the City of Santa Barbara and in effect at the time of initiation, extension, or renewal of a rental as published on the Housing Authority’s website so long as the Housing Authority maintains a website. If the Housing Authority terminates the Section 8 Housing Choice Voucher program, then the affordable rents will be determined according to the following formula: one twelfth of 30% of the Area Median Income for Low-Income Households. For purposes of this calculation, it is assumed that studio units will have a household size of 1, one-bedroom units will have a household size of 2 and two-bedroom units will have a household size of 3. Affordable rent for units restricted to rental to Low-Income Households includes utilities, i.e., electricity, water, sewer, and refuse collection. If the tenant pays for any such utilities, the maximum rent shall be reduced by the amount of the Utility Allowance for those utilities as established and periodically revised by the Housing Authority. The affordable rent for each restricted unit will be determined annually by Developer and approved in writing by the City Administrator.

2. [To be used only if the Approved Housing Provider is other than the Housing Authority of the City of Santa Barbara.] Affordable rent for units restricted to rental to a LowIncome Household means a monthly rent that does not exceed one-twelfth (1/12) of thirty percent (30%) of the Area Median Income multiplied by a Target Income Percentage of sixty percent (60%) multiplied by a Unit Size Adjustment Factor. Affordable rent for units restricted to Low-Income Households includes utilities, i.e., electricity, gas, water, sewer, and refuse collection. If the tenant pays directly for any such utilities, the maximum rent shall be reduced by the amount of the Utility Allowance. The affordable rent for each restricted unit will be determined annually by Developer in compliance with this Covenant. and approved in writing by the City Administrator.

3. Unless prohibited by Federal law, Restricted Units may be rented under the HUD Section 8 Program, but in no event shall the tenant portion of the rent exceed the limit specified in Section B. 2. of this Covenant, and in no event shall the total rent (tenant portion and subsidy portion together) exceed the exception rents approved by HUD, as amended from time to time, which set the maximum rents which can be charged for a given unit size by a landlord participating in the Section 8 Program in the City of Santa Barbara. Exception rents vary according to whether the landlord pays for all utilities. There shall be no adjustment of the rent under the Unit Size Adjustment Factor for any Restricted Unit occupied under the Section 8 Program
C. ADDITIONAL RESTRICTIONS

1. The Project will be constructed as provided in the DDA. 102

2. All loans, deeds of trust, and other security interests entered into by the Developer with respect to the Project shall be subject to and subordinate to this Covenant.

3. This Covenant shall be subordinate only to a similar affordability covenant required by a state or federal agency in connection with provision of state or federal financial assistance, to extent of any required state or federal preemption under applicable law.

D. DEFAULT UNDER DEED OF TRUST; NOTICE TO CITY

1. In the event of default and foreclosure under any deed of trust, the City shall have the same right as the Developer to cure defaults and redeem the Property prior to foreclosure sale. Such redemption shall be subject to the same fees, charges and penalties which would otherwise be assessed against the Housing Authority. Nothing herein shall be construed as creating an obligation on the part of the City to cure any such default nor shall this right to cure and redeem operate to extend any time limitations in the default provisions of the underlying deed of trust or mortgage. This paragraph creates an additional remedy for the City and shall not be construed in any way as a limitation on Section C.2. of this Covenant.

E. REPORTING REQUIREMENTS

1. On April 1 of each year or at such other annual date as specified by the City in writing, Developer must submit an annual report that lists for each Restricted Unit the following information:
a. The address, unit number, verification of household members during the previous calendar year; and
b. The household income and rent collected from and owed by the tenants during the previous calendar year; and
c. Either a certification that all provisions of this Covenant have been complied with during the previous calendar year, or an explanation of each violation of the terms of this Covenant; and d. Such other documentation as reasonably requested in writing by the City, necessary or convenient to assure compliance with the requirements of this Covenant.

2. The City reserves the right to request ask for other related information at any time.

3. Notwithstanding Section H.7., below, the annual report may be delivered in any manner approved by the City Administrator.

F. HOUSING QUALITY STANDARDS AND SITE INSPECTIONS
103
Developer must maintain the Project in conformance with State and local housing quality standards and code requirements, as well as the federal Housing Quality Standards specified by HUD in 24 CFR 982.401. Developer agrees to allow the City to inspect the Project at least annually for compliance with the provisions for operation and maintenance. Developer must correct every condition that City, in its discretion, determines does not comply with the operational and maintenance requirements herein (“Deficiency”). City shall provide written notification (“Notice of Deficiency”) to Developer within 10 days of each inspection identifying the Deficiencies and describing the work needed to correct the Deficiency. If Developer fails to correct a Deficiency within 60 days of the date of City’s Notice of Deficiency, the City shall have the right to enter the Project site and correct the Deficiency. Developer must reimburse the City for all expenses incurred in correcting the Deficiency within 30 days of the date that City provides Developer with an invoice for the City costs incurred to correct the Deficiency.

G. DEFAULTS AND REMEDIES AND ASSIGNMENT OF RENTS

1. If a default occurs under the terms of this Covenant, City will give written notice of such default to parties identified in Section H. 7., below. If the Developer does not correct the default within 30 days after the date Developer receives the notice (or such longer period as set forth below), the City may proceed with any and all remedies available under this Covenant or any other remedies available under rules of law or equity. If the default cannot reasonably be cured within 30 days, the Developer will have a reasonable period of time to cure such default, so long as Developer has commenced to cure the default within the original 30 day period and is diligently pursuing such cure to completion

2. It is understood and agreed between the parties that the obligations of both parties under this Covenant are unique, and in furtherance of important public policies encouraging development of housing for lower-income persons and families, and that in case of a breach or default, it would be extremely difficult or impossible to compensate for the breach or default in money. Consequently, both parties agree that their respective rights and obligations hereunder may be specifically enforced by any court having jurisdiction, in addition to any and all other remedies at law or in equity that may be available to them.

3. Developer acknowledges that occupancy of any Restricted Unit in violation of this Covenant is prohibited. In consideration of the benefits conferred on Developer and the Property by the grant land to the Developer for the Project, Developer hereby assigns to City the right to receive the rents due or collected from any Restricted Unit occupied in violation of the terms of this Covenant, during the entire period of the violation. The City may enforce this right by any legal means.

4. The remedies stated herein are not exclusive but shall be cumulative to all other remedies and rights the parties may lawfully exercise.

H. ADDITIONAL PROVISIONS

4. The Developer covenants that it has not and will not execute any other agreement or covenant with provisions contradictory to or in opposition to the provisions hereof.

6. The terms of this Covenant shall be interpreted under the laws of the State of California.

To Developer:

With a copy to:

8. This Covenant constitutes the entire agreement between City and Developer with respect to the restrictions contained herein and supersedes all prior agreements and negotiations, oral and written.

This Covenant may not be amended or modified in any respect whatsoever except by an instrument in writing, approved and executed by the City and Developer. 105
IN WITNESS WHEREOF, the Parties have executed this Covenant as of the date first written above.

CITY OF SANTA BARBARA
By: _____________________________________
Kelly R. McAdoo, City Administrator

APPROVED AS TO FORM
Sarah J. Knecht, City Attorney
By: _____________________________________
Daniel S. Hentschke
Assistant City Attorney

DEVELOPER
By: _____________________________________

APPROVED AS TO FORM
By: _____________________________________

Note: This Covenant will be recorded; the signatures of the parties (not including approvals as to form and content) must be acknowledged by a notary.
106
EXHIBIT “A”
Exhibit A - Legal Description of Property
107

EXHIBIT
G
Grant Deed
108
Exhibit G – Grant Deed
RECORDING REQUESTED BY:

WHEN RECORDED RETURN TO:

APNs: 037-400-002; 037-400-003;
037-400-005; 037-400-004; 037-400-001

GRANT DEED
The undersigned Grantor declares under penalty of perjury that the following is true and correct:

DOCUMENTARY TRANSFER TAX $________
( X ) computed on full value of property conveyed, or
( ) computed on full value less value of liens and encumbrances remaining at time of sale. ( ) Unincorporated area: ( X ) City of Santa Barbara, and ( ) There is no Documentary Transfer Tax due. (State reason and give Code § or Ordinance number.) GRANTOR: The CITY OF SANTA BARBARA, a municipal corporation does hereby remise, release and forever grants to:

GRANTEE: PASEO PROPCO, LLC, a Delaware limited liability company the following described real property in the City of Santa Barbara, County of Santa Barbara, State of California:

LEGAL DESCRIPTION ATTACHED HERETO AS EXHIBIT A
(“Paseo Nuevo Transfer Parcels”)
[Signature on following page]
109
MAIL TAX STATEMENTS TO:

Date: _____________________________

GRANTOR
_____________________________________
City of Santa Barbara, a municipal corporation

ALL PURPOSE NOTARY ACKNOWLEDGMENT
A notary public or other officer completing this Certificate verifies only the identity of the individual who signed the document to which this Certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF

COUNTY OF
On ____________________, before me, __________________________________________, Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature _____________________________ (Seal)
110

EXHIBIT
H
Memorandum of Agreement
111
Exhibit H – Memorandum of Agreement
RECORDING REQUESTED BY:

AND WHEN RECORDED RETURN TO:

APNs: 037-400-002; 037-400-003; 037-400-005; 037-
400-004; 037-400-001; 039-321-047; 039-321-051;
039-321-055; 039-321-054; 039-321-056; 039-321-
048

MEMORANDUM OF AGREEMENT
This Memorandum of Agreement (“Memorandum”) is executed by and among Paseo Propco, LLC, a Delaware limited liability company (“Developer”) and the City of Santa Barbara, a municipal corporation (“City”), each individually referred to as “Party” and collectively referred to as “Parties,” with reference to the following facts:

RECITALS
WHEREAS, City is the fee owner of the real property referred to as the “Paseo Nuevo Transfer Parcels,” as more particularly described in Exhibit A attached hereto and incorporated herein by this reference;
WHEREAS, City is also the fee owner of the real property referred to as “Lot 2 Parcel,” as more particularly described in Exhibit B attached hereto and incorporated herein by this reference; WHEREAS, the Parties entered into that certain Disposition and Development Agreement, dated December ____, 2025 (the “Agreement”), whereby the City shall transfer the Paseo Nuevo Transfer Parcels and the Lot 2 Parcel to Developer and Developer shall construct, operate and maintain certain improvements thereon, subject to the terms and conditions set forth in the Agreement; and WHEREAS, the Agreement requires the Parties to execute and cause to be recorded this Memorandum, a copy of which is on file with the City as a public record; NOW, THEREFORE, the Parties for themselves, their successors, and assigns, do hereby declare as follows:
112

1. The Agreement is binding on the Parties and the successors and assigns of the Parties, and the owners and successor owners of the Paseo Nuevo Transfer Parcels and the Lot 2 Parcel.

2. The Agreement includes terms and conditions related to the transfer of the Paseo Nuevo Transfer Parcels and the Lot 2 Parcel by the City to the Developer and the entitlement, construction and operation of certain improvements by the Developer on the Paseo Nuevo Transfer Parcels and Lot 2 Parcel.

3. This Memorandum is prepared for recordation purposes only, and in no way modifies the terms, conditions, provisions and covenants set forth in the Agreement. The inclusion of the following provisions shall not limit the incorporation of the Agreement, but is merely for convenience. In the event of any inconsistency between the terms, conditions, provisions and covenants set forth in the Agreement and this Memorandum, the terms, conditions, provisions and covenants set forth in the Agreement shall prevail.

4. Capitalized terms not defined herein shall have the meanings ascribed to such terms in the Agreement.

5. This Memorandum may be executed in counterparts and multiple originals. [Signatures on following page]
113
IN WITNESS WHEREOF, Developer and the City do hereby execute this Memorandum to be effective as of the date first written above.

DEVELOPER:

Paseo Propco, LLC, a Delaware limited liability company By: __________________________
A notary public or other officer completing this
certificate verifies only the identity of the individual who signed the document to which this certificate is
attached, and not the truthfulness, accuracy, or validity of that document.

State of California
County of Santa Barbara
On _____________________, before me, , a Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature _______________________ (Seal)
114
CITY:

The City of Santa Barbara, a municipal corporation
By: __________________________

ALL PURPOSE NOTARY ACKNOWLEDGMENT
A notary public or other officer completing this
certificate verifies only the identity of the individual who signed the document to which this certificate is
attached, and not the truthfulness, accuracy, or
validity of that document.

State of California
County of Santa Barbara
On ___________, 2025, before me, _________________________________, Notary Public, personally appeared ___________, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature _____________________________ (Seal)
115

EXHIBIT A
Legal Description of Paseo Nuevo Transfer Parcels
116

EXHIBIT B
Legal Description of Lot 2 Parcel
4920-0610-1621, v. 2
117

EXHIBIT
I
Developer Ground Leases
118
Exhibit I – Developer Ground Lease Documents

1. Lease Agreement dated February 24, 1989, executed by the Redevelopment Agency of The City of Santa Barbara, as lessor, and Carter Hawley Hale Stores, Inc., as lessee, for certain improved real property located at 701 State Street, Santa Barbara, California 93101, as referenced in the document entitled Memorandum of Lease, which was recorded on February 24, 1989 as Instrument No. 89-012336 of the Official Records of the County of Santa Barbara, for the term, and upon and subject to all the provisions contained in said document, and in said lease. (Unrecorded Lease)
a. That certain Assignment and Assumption Agreement, dated January 31, 1999, executed by Broadway Stores, Inc., a Delaware corporation (formerly named Carter Hawley Hale Stores, Inc.), successor by various mesne mergers to Carter Hale Stores, Inc., a California corporation, Broadway-Hale Stores, Inc., The Emporium Capwell Company, and Broadway Department Stores, Inc., as assignor, the interest of the lessee in the above leasehold estate was assigned to Federated Western Properties, Inc., an Ohio corporation (predecessor in interest to Assignor) by instrument recorded February 09, 1999 as Instrument No. 99-010742 of the Official Records of the County of Santa Barbara.
b. That certain Grant Deed, dated January 28, 2016, by and between The Successor Agency to the Redevelopment Agency of the City of Santa Barbara and the City of Santa Barbara, Grant Deed Np. 61-456 recorded February 19, 2016, as Instrument No. 2016-0007815 of Official Records.
c. That certain Assignment and Assumption of Ground Lease, dated January 31, 2018, between Macy's West Stores, Inc., an Ohio corporation and Paseo Nuevo Owner II LLC, a Delaware limited liability company, recorded February 2, 2018, as Instrument No. 2018-0004595, of Official Records.

2. Ground Lease dated February 24, 1989, by and between The Redevelopment Agency of the City of Santa Barbara and Santa Barbara Associates. (Unrecorded Lease) a. Memorandum of Ground Lease recorded February 24, 1989, as Instrument 89- 012335 in Official Records of Santa Barbara County.
b. First Amendment to Ground Lease dated February 24, 1989, between The Redevelopment Agency of the City of Santa Barbara and Santa Barbara Associates. (Unrecorded Lease)
c. Second Amendment to Ground Lease dated February 24, 1989, between The Redevelopment Agency of the City of Santa Barbara and Santa Barbara Associates. (Unrecorded Lease)
d. Third Amendment to Ground Lease dated September 18, 1990, between The Redevelopment Agency of the City of Santa Barbara and Santa Barbara Associates. (Unrecorded Lease)
e. Amendment to Memorandum of Ground Lease dated September 18, 1990, by and between the Redevelopment Agency of the City of Santa Barbara and Santa Barbara Associates and recorded October 16, 1990, as Instrument 90-067768 in Official Records of Santa Barbara County.
119
f. Confirmatory Assignment and Assumption of Ground Lease dated June 7, 1991, and recorded June 14, 1991, as Document No. 91-037603 in Official Records of Santa Barbara County, from Santa Barbara Associates to PNSC, L.P. g. Supplement to Lease dated June 26, 1996, between The Redevelopment Agency of the City of Santa Barbara and PNSC, L.P. (Unrecorded Lease) h. Assignment and Assumption of Ground Lease dated June 27, 1996, and recorded June 28, 1996, as Document 96-039823 in Official Records of Santa Barbara County, from PNSC, L.P. to Paseo Nuevo Associates.
i. Assignment and Assumption of Ground Leases dated May 30, 2002, and recorded May 30, 2002, as Document No. 2002-0052394 in the Official Records of Santa Barbara County, from Paseo Nuevo Associates to I&G Direct Real Estate 3, LP. j. Assignment and Assumption of Ground Leases, dated July 15, 2015, between I&G Direct Real Estate 3, LP, a Delaware limited partnership and Paseo Nuevo Owner LLC, a Delaware limited liability company, recorded July 15, 2015, as Instrument No. 2015-0037623, of Official Records.

PASEO NUEVO
ATTACHMENT 2
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 2

AERIAL VIEW AT CHAPALA/ORTEGA

CHAPALA STREET

STATE STREET

W ORTEGA STREET

STATE STREET
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 3

LOCAL CONTEXT
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 4

RETAIL EXPERIENCE
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 5

AERIAL VIEW AT CHAPALA/ORTEGA

CHAPALA STREET

STATE STREET

W ORTEGA STREET

MULTI-FAMILY

RESIDENTIAL
INCOME

RESTRICTED

RESIDENTIAL

PASEO NUEVO BALBOA

BUILDING NORDSTROM

DE LA GUERRA
PLAZA

STATE STREET
• + 80 INCOME RESTRICTED UNITS AT LOT 2
• + 233 MARKET HOUSING UNITS
• NEW ANCHOR GROCER ON STATE STREET
• RETAIL RESCALED AND TARGETED FOR DEVELOPMENT
• ON-SITE PARKING FOR ALL HOUSING
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 6

AERIAL VIEW AT CHAPALA/CANON PERDIDO

W CANON PERDIDO ST

CHAPALA STREET

STATE STREET

MULTI-FAMILY

RESIDENTIAL
INCOME

RESTRICTED

RESIDENTIAL
CANARY
HOTEL

PASEO NUEVO
BALBOA

BUILDING

NORDSTROM

DE LA GUERRA
PLAZA
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 1” = 100’ 11.14.2025 | (E) RETAIL OTTS PARMA
GROUND
LEASE
7 ILLUSTRATIVE SITE PLAN

STATE STREET

NORDSTROM
LOT 2

PARKING

STRUCTURE

NEW INCOME RESTRICTED

HOUSING BUILDING

DE LA GUERRA
PLAZA

NEW MULTIFAMILY

BUILDING
CANARY
HOTEL
BALBOA

BUILDING

CHAPALA STREET
(E) RETAIL
(E) RETAIL (E) RETAIL
(E) RETAIL
OTHER

OWNERSHIP
OTHER

OWNERSHIP OTHER

OWNERSHIP
OTHER

OWNERSHIP

W CANON PERDIDO STREET

W CARRILLO STREET

W ORTEGA STREET

CHAPALA

ENTRANCE

STATE STREET

ENTRANCE

CHAPALA
STATE
ORTEGA
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 8

PUBLIC SPACES

CHAPALA
STATE
ORTEGA
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 9

PRIVATE SPACES

INTIMATE GARDEN DECK

INTIMATE

GARDEN DECK

ACTIVE POOL
& AMENITY DECK

ACTIVE GARDEN DECK WITH

CONNECTION TO MALL
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 10

VIEW FROM CORNER OF CHAPALA AND ORTEGA

CHAPALA
STATE
ORTEGA
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 11

VIEW FROM CORNER OF STATE AND ORTEGA

CHAPALA
STATE
ORTEGA
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 12

VIEW FROM PASEO AT STATE STREET

CHAPALA
STATE
ORTEGA
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 13

VIEW OF CENTRAL PLAZA SPACE IN MALL

CHAPALA
STATE
ORTEGA
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 14 VIEW OF INCOME RESTRICTED HOUSING AT LOT 2 GARAGE ON CHAPALA

CHAPALA

CANON PERDIDO
STATE

CARRILLO
ORTEGA
15 4
1 3
2 MARKET

MARKET MARKET
1 16
17 2
18 3
MARKET
19 4
MARKET
20 5
MARKET
21 6
22 RES. LOBBY/

LEASING
TENANT

STORAGE
POOL
EQUIP.

ORTEGA
STREET

RESIDENTIAL

COURTYARD
UNIT
POOL
UNIT

MEZZANINE
UNIT

PASEO RETAIL MARKET PARKING
(E) PARKING
UNIT
UNIT
UNIT

UNIT UNIT

UNIT UNIT
RES. AMENITY
RES. AMENITY

ENLARGED SECTION
SCALE: 1/8” = 1’-0” 1

RESIDENTIAL

COURTYARD
23 ORTEGA
STREET

UNIT UNIT

MARKET LOADING MARKET PASEO
(E) PARKING

UNIT UNIT

UNIT UNIT
SCALE: 1/8” = 1’-0” 2 ENLARGED SECTION

RESIDENTIAL

COURTYARD

RESIDENTIAL

COURTYARD
3640 SF
(E) RETAIL
9300 SF
(E) RETAIL
3900 SF
(E) RETAIL
2582 SF
(E) RETAIL
6420 SF
(E) RETAIL
5190 SF
(E) RETAIL
1150 SF
(E) RETAIL
5650 SF
(E) RETAIL
1470 SF
(E) RETAIL
500 SF
(E) RETAIL

EXISTING

PARKING
2 08 ________ ________
1 08 ________ ________

RESIDENTIAL

LOADING
15000 SF
MARKET
6825 SF
RETAIL
2183 SF
RES. LOBBY/

LEASING
6070 SF
(E) RETAIL
1700 SF
(E) RETAIL
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
4670 SF
(E) RETAIL
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
1500 SF
(E) RETAIL
1000 SF
(E) RETAIL
4150 SF
(E) RETAIL
3950 SF
(E) RETAIL
2640 SF
(E) RETAIL
1200 SF
(E) RETAIL
1700 SF
(E) RETAIL
710 SF
(E) RETAIL
630 SF
(E) RETAIL
960 SF
(E) RETAIL
1460 SF
(E) RETAIL
1020 SF
(E) RETAIL
2620 SF
(E) RETAIL
840 SF
(E) RETAIL
910 SF
(E) RETAIL
1580 SF
(E) RETAIL
1450 SF
(E) RETAIL
1410 SF
(E) RETAIL
2320 SF
(E) RETAIL
1320 SF
(E) RETAIL
1320 SF
(E) RETAIL
3360 SF
(E) RETAIL
4890 SF
(E) RETAIL
2048 SF
(E) RETAIL
2678 SF
(E) RETAIL
3325 SF
(E) RETAIL
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
1 2 3 4 5 6
B
C
D
E
F
G
H
J
K
L
M
N
A

RECYCLING
CENTER
MARKET
TRASH
RES.

TRASH
85' - 0"
25' - 0"

MARKET LOADING
SCE
VAULT
(BELOW)
ELEC.

BIKE STOR.
117' - 0"
125' - 0" 73' - 0" 58' - 0" 27' - 6" 151' - 6"
(N) PARKING
47 SPACES

RETAIL RESI
2047 SF
(E) RETAIL
2368 SF
(E) RETAIL
5018 SF
(E) RETAIL
3378 SF
(E) RETAIL
(E) RETAIL
1447 SF
(E) RETAIL
3689 SF
(E) RETAIL
716 SF
(E) RETAIL
645 SF
(E) RETAIL
1413 SF
(E) RETAIL 618 SF
(E) RETAIL
1925 SF
(E) RETAIL
GENE
4\OneDrive - Gensler\Desktop\paseo\005.4511.000_Paseo Nuevo_Main Model_A23_sz'.rvt

STATE STREET STATE STREET

NORDSTROM

CHAPALA STREET CHAPALA STREET

W CANON PERDIDO STREET

W ORTEGA STREET
0 100’
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 24

STREET LEVEL PLAN
A
B
0 50’
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 25

BUILDING SECTIONS
1 08 ________ ________
TYP.
10' - 3" 20' - 0"
STATE
STREET

CHAPALA

STREET (N) PARKING LOADING MARKET
(E) PARKING

RESIDENTIAL

AMENITY DECK
& POOL
(E) PARKING/

CIRCULATION

STAIR/ELEVATOR
CORE

HIGHEST OCCUPIED FLOOR
74' - 3"
TRASH
LOW

RESIDENTIAL

RESIDENTIAL
11' - 0"

LOBBY / LEASING MEZZANINE

AMENITY / LEASING
POOL
1 STAIR/ELEVATOR
2 08 ________ ________
TYP.
10' - 3" 20' - 0"
FL. TO FL.

APPROX. 17' - 0"

RESIDENTIAL
(E) RETAIL
(E) PARKING

AT ROOFTOP
(E) PARKING/

CIRCULATION
(E) PARKING
ORTEGA
STREET
74' - 3"

RESIDENTIAL

RESIDENTIAL
11' - 0"
ORTEGA
STREET
B
A

SECTION A

SECTION B
B
A

STAIR/ELEVATOR
CORE
UP
UP
UP
UPDN

COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT

COMPACT COMPACT COMPACT COMPACT COMPACT

COMPACT COMPACT

COMPACT COMPACT COMPACT

COMPACT COMPACT

COMPACT

COMPACT COMPACT

COMPACT

COMPACT COMPACT

COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT

COMPACT

COMPACT COMPACT

COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT COMPACT

P ON KRA GNI

NO PARK NI G

EXISTING

PARKING
2 08 ________ ________
1 08 ________ ________
SCE
VAULT
MAIN.

ELEC.

MAINT.

GENE
://005.4511.000 - Paseo Nuevo/005.4511.000_Paseo Nuevo_Main Model_A23.rvt

STATE STREET STATE STREET

CHAPALA STREET CHAPALA STREET

W CANON PERDIDO STREET

W ORTEGA STREET
A
B
0 100’
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 26

UNDERGROUND PARKING PLAN
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 27

RESIDENTIAL
(MACY’S)
117/233 SPACES
RETAIL
54/320 SPACES

RESIDENTIAL
(MACY’S)
116/233 SPACES
RETAIL
250/320 SPACES
RETAIL
16/320 SPACES

MARKET/LEASING
47/47 SPACES
ONSITE
600
SPACES

PARKING DIAGRAM

OFFSITE

RATIO PROVIDED PROVIDED
236 1.2/UNIT 287
47 266
579
546
1,125 600

PARKING UNITS

PARKING ONSITE

RESI (MACY'S)
MARKET

ONSITE RETAIL
PARKING - LOT 2
PARKING - LOT 10
LEVEL B1 (EXISTING)
LEVEL B1 (EXPANDED &

RESTRIPED )
LEVEL 01 (EXISTING)
LEVEL 01 (NEW)
LEVEL 01.5 (EXISTING)
LEVEL 02 (EXISTING)

STATE STREET

CHAPALA STREET

W CANON PERDIDO STREET

W ORTEGA STREET
233
393
939

1.0/UNIT 233
320
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | 28

LEVEL RESIDENTIAL
GROSS

RESIDENTIAL
NET

RESIDENTIAL
CIR.

RESIDENTIAL

BALCONIES

RETAIL/F&B
(N) MARKET OUTDOOR

AMENITY

LOBBY/ INDOOR

AMENITY BOH SUM

SF SF SF SF SF SF SF SF SF SF COUNT SF COUNT SF
07 44,495 37,435 4,637 2,423 739 600 502 46,336
06 47,029 39,843 4,637 2,548 502 47,531
05 45,300 38,156 4,624 2,520 418 45,718
04 46,076 37,791 5,042 3,243 5,735 1,989 418 54,218
03 35,244 27,129 5,565 2,550 2,343 37,587
02 34,072 23,913 5,696 4,464 5,513 3,751 1,012 49,391 116 93,739

1.5 0 2,816 24,363 55 27,179
01 0 6,825 15,000 2,183 23,057 19,431 16 20,258 47 86,753 B1 0 1,827 146,344 366 1,471 149,642
TOTALS 252,215 204,267 30,201 17,747 6,825 15,000 11,987 11,339 30,078 239,529 553 21,728 47 588,702 TOTAL PARKING STALLS 600

EXISTING PARKING NEW PARKING

PROJECT METRICS

BUILDING AREA

UNIT MIX
The Re-imagined Paseo Nuevo RCLCO Unit Mix Comparison 1/30/2025 Floor Plan Original Net SF Net SF Gross SF Original Mix Mix % Count Total GrossSF Studio 550 526 576 12% 13% 31 17,871
1 BR 625 685 740 5% 7% 17 12,588
1 BR LG 725 703 760 30% 30% 69 52,436
1 BR+ 800 800 864 10% 10% 23 19,872
2 BR 1050 1050 1120 34% 34% 80 89,628
2 BR LG 1200 1200 1273 4% 4% 9 11,459
3 BR 1350 1350 1430 5% 2% 4 5,719
Total/Avg. 867 837 899 100% 233 209,573
Floor Plan Original Net SF Net SF Gross SF Original Mix Mix % Count Total GrossSF Studio 550 526 576 12% 13% 31 17,871
1 BR 625 685 740 5% 8% 19 14,069
1 BR LG 725 703 760 30% 31% 73 55,476
1 BR+ 800 800 864 10% 10% 23 19,872
2 BR 1050 1050 1120 34% 34% 81 90,748
2 BR LG 1200 1200 1273 4% 4% 9 11,459
3 BR 1350 1350 1430 5% 0% - -
Total/Avg. 867 826 888 100% 236 209,496
Revised Luxury Program B - Reduced 3BR and increase studios + 1BR Revised Luxury Program C - Eliminate 3BR and increase studios and 1BR The Re-imagined Paseo Nuevo RCLCO Unit Mix Comparison 2/10/2025 Count Target Mix % Target %
Studio 33 31 14% 13%
1 BR 22 17 10% 7%
1 BR LG 68 69 30% 30%
1 BR+ 24 23 10% 10%
2 BR 70 80 30% 34%
2 BR LG 9 9 4% 4%
3 BR 4 4 2% 2%
Total/Avg. 230 233 100% 100%

REVISED TARGET PROGRAM

CHANGES TO THE PROJECT BASED ON FEEDBACK

PASEO NUEVO

STRATEGIES TO REDUCE

APPARENT BUILDING MASS
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 |

CURRENT ELEVATION
GREAT ARTICULATION AND VARIATION.

HORIZONTAL VARIATION OVERLAPS VERTICAL BLOCKS
CREATING A UNIFYING EFFECT OVERALL.

MARKET
Building Mass and Height
Feedback
• Some comments questioned the appearance of the new residential building, citing the massing. Suggestions were made to break up the building visually to deal with horizontal massing; additionally, comments expressed a desire to visually soften or reduce the appearance of the upper levels.

THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 |

PROPOSED STRATEGY
INTRODUCE THE APPEARANCE OF INDIVIDUAL FACADES.

MINIMIZE THE IMPACT TO THE CURRENT DESIGN.

MARKET
Building Mass and Height
Objectives
• Design the upper one or two levels to appear lighter and recede visually. • Introduce different details to enhance the idea of the building being a series of different buildings.

THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 |

PROPOSED ELEVATION
ENHANCE GLAZING/WOOD/OPENESS/LIGHTNESS IN THE ATTIC STORY.

ALTHOUGH DARKER, "WOOD" IS A LIGHTER, MORE OPEN MATERIAL THAN PLASTER.

RETAIN LEGIBILITY OF PRIMARY FACADES AND ACCESS POINTS AT GROUND LEVEL ENHANCE SEPERATION BETWEEN PRIMARY AND SECONDARY VOLUMES.

Building Mass and Height
Proposed Solutions
• Lighten and transform the upper levels with greater openness, more glazing and lighter materials.
• Taking cues from traditional Santa Barbara historic architecture, reduce the appearance of mass using wood detailing.
• Enhance the “separate” building volumes with varying detail at each vertical building block.

THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | Building Mass and Height
Proposed Solutions
• Reduce mass by visually “opening” the upper levels with more glass. • Vary and lower rooflines where possible.
• Reduce heavy plaster massing elements at the upper levels. • Building mass along State Street will be articulated as one building. Podium courtyards serve as natural separation between buildings. • Integrate an arcade along the sidewalk at West Ortega Street similar to the existing arcade.

PASEO CONNECTION TO

WEST ORTEGA STREET
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | UP
UP
DN
DN
UP
3640 SF
(E) RETAIL
9300 SF
(E) RETAIL
3900 SF
(E) RETAIL
4840 SF
(E) RETAIL
1810 SF
(E) RETAIL
6420 SF
(E) RETAIL
5190 SF
(E) RETAIL
1150 SF
(E) RETAIL
500 SF
(E) RETAIL

EXISTING

PARKING
2 08 ________________
1 08 ________________

RESIDENTIAL

LOADING
15000 SF
MARKET
6825 SF
RETAIL
2183 SF
RES. LOBBY/

LEASING
6070 SF
(E) RETAIL
1700 SF
(E) RETAIL
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
4670 SF
(E) RETAIL
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
1500 SF
(E) RETAIL
1000 SF
(E) RETAIL
4150 SF
(E) RETAIL
3950 SF
(E) RETAIL
2640 SF
(E) RETAIL
1200 SF
(E) RETAIL
1700 SF
(E) RETAIL
710 SF
(E) RETAIL
630 SF
(E) RETAIL
960 SF
(E) RETAIL
1460 SF
(E) RETAIL
1020 SF
(E) RETAIL
2620 SF
(E) RETAIL
840 SF
(E) RETAIL
1410 SF
(E) RETAIL
2320 SF
(E) RETAIL
1320 SF
(E) RETAIL
1320 SF
(E) RETAIL
3360 SF
(E) RETAIL
4890 SF
(E) RETAIL
720 SF
(E) RETAIL
650 SF
(E) RETAIL
1410 SF
(E) RETAIL
620 SF
(E) RETAIL
7700 SF
(E) RETAIL
4360 SF
(E) RETAIL
2530 SF
(E) RETAIL
4900 SF
(E) RETAIL
3390 SF
(E) RETAIL
2330 SF
(E) RETAIL
3020 SF
(E) RETAIL
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
(E) RETAIL TO
REMAIN
1 2 3 4 5 6
B
C
D
E
F
G
H
J
K
L
M
N
A

RECYCLING
CENTER
MARKET
TRASH
RES.

TRASH
85' - 0"
25' - 0"

MARKET LOADING
SCE
VAULT
(BELOW)
ELEC.

BIKE STOR.
117' - 0"
125' - 0" 73' - 0" 58' - 0" 27' - 6" 151' - 6"
(N) PARKING
47 SPACES

RETAIL RESI

GENERAL NOTES
2 08 ________________
1 08 ________________

EXISTING

PARKING
1 2 3 4 5 6
B
C
D
E
F
G
H
J
K
L
M
N
A
2816 SF
RES. LOBBY/

LEASING

OPEN TO BELOW

OPEN TO BELOW
OPEN
TO
BELOW

MAINT ROOM

GENERAL NOTES
Date Description
Project Name
Seal / Signature

NOT FOR

CONSTRUCTION

PASEO NUEVO
1” = 50’
0 50’
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO | PROJECT UPDATE 04.07.2025 | 33 LEVEL 01.5 LEVEL 01

ENLARGED PLANS
B B
LOADING DOCK AT +4’ ABOVE

MARKET/LOADING ELEVATION

WITH RAMP ACCESS

LINE OF MEZZANINE ABOVE
(E) SIDEWALK ACCESS

TO SCE VAULT BELOW

ACCESS TO ORTEGA/
RES. LOBBY FROM PARKING
(N) SECURITY FENCE

AND ACCESS GATE

RESIDENTIAL

PARKING
RETAIL

PARKING

ACCESS TO MALL/MARKET

FROM PARKING

LINE OF BASEMENT BELOW

STATE STREET

CHAPALA STREET

W ORTEGA STREET
A A
Paseo Connection from
W. Ortega Street
Feedback
• City expressed a desire for a paseo connection
from W. Ortega Street to the Mall.

THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | Paseo Connection from
W. Ortega Street
Proposed Solution
• The new Paseo connecting W. Ortega Street to
the Mall is delineated by specialty paving, a
colonnade and special ceiling treatment.
• Integrate an arcade along the sidewalk at W.

Ortega Street similar to the existing arcade.

STATE STREET

NORDSTROM
LOT 2

PARKING

STRUCTURE

NEW INCOME RESTRICTED

HOUSING BUILDING

NEW MULTIFAMILY

BUILDING
CANARY
HOTEL
BALBOA

BUILDING

CHAPALA STREET
(E) RETAIL
(E) RETAIL
(E) RETAIL
(E) RETAIL (E) RETAIL
(E) RETAIL
OTHER

OWNERSHIP
OTHER

OWNERSHIP OTHER

OWNERSHIP
OTHER

OWNERSHIP

W CANON PERDIDO STREET

W CARRILLO STREET

W ORTEGA STREET
Building Height and Footprint
Feedback
• The City asked if it was possible to spread the density of the 233 units across the top of the existing retail highlighted in the black boxes above instead of going up to 75’ with our current scheme.
(E) RETAIL OTTS PARMA
GROUND
LEASE
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO | PROJECT UPDATE 1” = 100’ 04.07.2025 | 10

STATE STREET

NORDSTROM
LOT 2

PARKING

STRUCTURE

NEW INCOME RESTRICTED

HOUSING BUILDING

NEW MULTIFAMILY

BUILDING
CANARY
HOTEL
BALBOA

BUILDING

CHAPALA STREET
(E) RETAIL
(E) RETAIL
(E) RETAIL
(E) RETAIL (E) RETAIL
(E) RETAIL
OTHER

OWNERSHIP
OTHER

OWNERSHIP OTHER

OWNERSHIP
OTHER

OWNERSHIP

W CANON PERDIDO STREET

W CARRILLO STREET

W ORTEGA STREET
Building Height and Footprint
Explanations
• Building residential above the existing above-grade parking structure would require building a new concrete deck to support the wood frame residential construction above and there would be no way to create street level lobbies and amenities without substantial structural redesign and reconstruction.
• Spreading residential buildings across Lot 1 would involve tearing down and re-building existing retail as well as parking. This presented design and construction challenges which were thoroughly examined, and this option was determined to be infeasible. • Building some of the residential over the ‘internal’ blocks would require extensive excavation to park beneath units, and tunneled vehicular access could only occur from the Macy’s basement parking.
• Parking re-distributed across the site would disrupt the ability to re-use on site parking for retail customers. The current plan maximizes parking utilization, taking maximum advantage of existing parking, while adding some additional parking at ground level to supplement the new market parking.
(E) RETAIL OTTS PARMA
GROUND
LEASE
LOT 2 AFFORDABLE
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 |

08.20.2025 THE RE - IMAGINED PASEO NUEVO
Lot 2 Affordable Height
Feedback
• The City commented that the new Affordable Building is higher than the the Canary Hotel, which would block the views of their rooftop pool deck and asked if was possible to reduce the height of the building below the Canary Hotel and still be close to 80 total units.

THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 |

08.20.2025 THE RE - IMAGINED PASEO NUEVO 09.18.2025 RENDERED VIEW FROM CHAPALA THE RE - IMAGINED PASEO NUEVO 9'-11 2 "
LEVEL 05 5'-0"
ELEV 100'
ELEV 100'
LEVEL 01
LEVEL 07
ELEV 97'

POOL DECK
15'-0"
LEVEL 06
4'-0" 10'-0" 10'-0" 10'-0"
1'-41
2 "
LEVEL 04
10'-0"
LEVEL 03
LEVEL 02
LEVEL 01
9'-11
2 "
ELEV 97'
75'-0"
10'-0"
5'-0"
10'-0" 10'-0" 9'-11
2 "
LEVEL 02
10'-0"

POOL DECK
LEVEL 05
10'-0"
15'-0" 4'-0"
9'-11
2 "
LEVEL 03
10'-0"
10'-0"
9'-11
2 "
10'-0"
10'-0"
10'-0"
LEVEL 06
10'-0"
LEVEL 04
10'-0"
60'-71
2 "
13'-0"
9'-11
2 "
LEVEL 05 5'-0"
ELEV 100'
ELEV 100'
LEVEL 01
LEVEL 07
ELEV 97'

POOL DECK
15'-0"
LEVEL 06
4'-0" 10'-0" 10'-0" 10'-0"
1'-41
2 "
LEVEL 04
10'-0"
LEVEL 03
LEVEL 02
LEVEL 01
9'-11
2 "
ELEV 97'
75'-0"
10'-0"
5'-0"
10'-0" 10'-0" 9'-11
2 "
LEVEL 02
10'-0"

POOL DECK
LEVEL 05
10'-0"
15'-0" 4'-0"
9'-11
2 "
LEVEL 03
10'-0"
10'-0"
9'-11
2 "
10'-0"
10'-0"
10'-0"
LEVEL 06
10'-0"
LEVEL 04
10'-0"
60'-71
2 "
13'-0"
w CARRILLO ST

SECTION STUDY
ELEVATION ASSUMPTIONS:
-POOL DECK IS 4’ HIGHER THAN THE ROOF LEVEL AT HOTEL
-ADD 5’ ABOVE ROOF AT AFFORDABLE HOUSING FOR PARAPET, SLOPED ROOF AND

MECHANICAL SCREENING
-AFFORDABLE HOUSING LOBBY ELEVATION APPROX 3’ LOWER THAN HOTEL LOBBY

ELEVATION (FROM CITY OF SANTA BARBARA PUBLIC WORKS TOPOGRAPHIC MAP) INITIAL DESIGN - 7 LEVELS AT 10’ FTF UPDATED DESIGN - 1 LEVEL AT 10’ FTF, 5 LEVELS AT 9’1 1/2” FTF

09.04.2025 SECTION STUDY THE RE - IMAGINED PASEO NUEVO
Lot 2 Affordable Height
Proposed Solutions
• The 7 floor building was reduced to 6 floors total.
• For levels 2-6, the floor to floor height was also reduced by 10 1/2” per floor.

THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 |

UPDATED DESIGN

AERIAL VIEW STREET VIEW

HOTEL POOL VIEW SE (GOOGLE EARTH)

ROOFLINE OF AFFORDABLE

HOUSING

ROOFLINE OF AFFORDABLE

HOUSING

HOTEL POOL VIEW S (GOOGLE EARTH)

09.18.2025 Lot 2 Affordable Height THE RE - IMAGINED PASEO NUEVO • The height of the Affordable building is less that the height of the Canary Hotel’s Pool Deck, with views preserved to the south and east.

THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 | Lot 2 Affordable Amenities
Feedback
• The City commented that Affordable Housing Building should have a comparable amenities package to the Market Rate Housing Building.

GROUND LEVEL TYPICAL UPPER LEVEL
(E) PARKING EXIT

CHAPALA STREET

W CANON PERDIDO STREET

W CARRILLO STREET
1” = 50’
(E) KIMPTON CANARY
HOTEL

NEW PARKING
ENTRY
(E) PARKING ENTRY
(E) PARKING ENTRY

NEW PARKING
EXIT
(E) VERTICAL CIRCULATION

FOR PUBLIC PARKING
(E) SURFACE PARKING
(E) NORDSTROM

PASEO NUEVO
(E) CHARLES SCHWAB
RES.

LOBBY

LOADING
(E) RETAIL
(E) RETAIL
(E) RETAIL
RES. UNITS
RES.

COURTYARD
RES.

COURTYARD
nta Barbara
FIGURE 2: 90 DEGREE PARKING

PARKING AT THIS BAY RECONFIGURED

FOR TWO-WAY TRAFFIC, SEE TABLE TO LEFT

FROM CITY OF SANTA BARBARA ACCESS &

PARKING DESIGN STANDARDS

FROM CITY OF SANTA BARBARA ACCESS & PARKING DESIGN STANDARDS 0 50’ 100’ 200’
LEVEL 01

08.20.2025 OPTION A THE RE - IMAGINED PASEO NUEVO

CHAPALA STREET

W CANON PERDIDO STREET

W CARRILLO STREET
1” = 50’
(E) KIMPTON CANARY
HOTEL
(E) VERTICAL CIRCULATION

FOR PUBLIC PARKING
(E) NORDSTROM
(E) CHARLES SCHWAB
RES. UNITS
City of Santa Barbara
6 FIGURE 2: 90 DEGREE PARKING

PARKING AT THIS BAY RECONFIGURED

FOR TWO-WAY TRAFFIC, SEE TABLE TO LEFT

FROM CITY OF SANTA BARBARA ACCESS &

PARKING DESIGN STANDARDS

FROM CITY OF SANTA BARBARA ACCESS & PARKING DESIGN STANDARDS 0 50’ 100’ 200’
LEVELS 03 & 04

08.20.2025 OPTION A THE RE - IMAGINED PASEO NUEVO
THE GEORGETOWN COMPANY | ALLIANCE BERNSTEIN PASEO NUEVO 11.14.2025 |

AMENTIY
AREA
1100 SF

AMENITY
DECK
1350 SF
Floor Plan Gross SF Mix % Co
Studio 435 25%
1BR 540 4%
1BR LG 552 22%
2 BR 750 12%
2 BR LG 769 13%
3 BR 945 22%
3 BR LRG 980 3%
Total/Avg. 672 100%
LEVEL 3-5 LEVELS 6

09.18.2025 UNIT MIX THE RE - IMAGINE
LOBBY
1470 SF
COMMON
AREA
700 SF
PLAY
SPACE
600SF
BOH
700 SF
BOH
280 SF

LEASING
OFFICE
840 SF
Floor Plan Gross SF Mix % Count Total Gross SF
Studio 435 25% 19 8,265
1BR 540 4% 3 1,620
1BR LG 552 22% 17 9,384
2 BR 750 12% 9 6,750
2 BR LG 769 13% 10 7,690
3 BR 945 22% 17 16,065
3 BR LRG 980 3% 2 1,960
Total/Avg. 672 100% 77 51,734
LEVEL 1 LEVELS 2

09.18.2025 UNIT MIX THE RE - IMAGINED PASEO NUEVO
Lot 2 Affordable Amenities
Proposed Solution
• Amenity space was added at Chapala Street, around the Lobby and the Outdoor Playspace Courtyard.

Amenity space was also added at the top level, along with an outdoor amenity deck.

City of Santa Barbara

HISTORIC LANDMARKS COMMISSION

MINUTES
SEPTEMBER 24, 2025
1:30 P.M.

David Gebhard Public Meeting Room
630 Garden Street
SantaBarbaraCA.gov
COMMISSION MEMBERS:

Anthony Grumbine, Chair
Robert Ooley, Vice Chair
Keith Butler
Dennis Doordan
Michael Drury
Cass Ensberg
Ed Lenvik
Sheila Lodge
Charles McClure
ADVISORY MEMBER: Dr. Glenn Russell
CITY COUNCIL LIAISON: Kristen Sneddon
PLANNING COMMISSION LIAISON: Donald
DeLuccio
STAFF:

Tava Ostrenger, Assistant City Attorney
Ted Hamilton-Rolle, Acting Design Review
Supervisor
Nicole Hernandez, Architectural Historian
Heidi Reidel, Assistant Planner
Jasper Carman, Commission Secretary

CALL TO ORDER
The Full Commission meeting was called to order at 1:30 p.m. by Chair Grumbine.

ATTENDANCE
Commissioners present: Grumbine, Ooley, Butler, Doordan, Drury, Ensberg, Lenvik, and Lodge
Commissioners absent: McClure
Staff present: Hernandez, Reidel, and Carman

GENERAL BUSINESS
A. Public Comment:

No public comment.

B. Approval of the minutes of the Historic Landmarks Commission meeting of September 10, 2025.

Motion: Approve the minutes of the Historic Landmarks Commission meeting of September 10, 2025, as submitted.

Action: Drury / Ooley, 7/0/1. (Ensberg abstained. McClure absent.) Motion carried.

ATTACHMENT 3
Historic Landmarks Commission Minutes September 24, 2025 Page 2 of 4 C. Approval of the minutes of the Historic Landmarks Commission Consent meeting of September 10, 2025.

Motion: Approve the minutes of the Historic Landmarks Commission Consent meeting of September 10, 2025, as submitted.

Action: Butler / Drury, 7/0/1. (Ensberg abstained. McClure absent.) Motion carried.

D. Ratification of action taken on the Consent Calendar of September 24, 2025.

Consent Calendar September 24, 2025:

REVIEW TYPE & ADDRESS APN/PLN/ZONE OWNER/APPLICANT ACTION A. Project Design Approval and
Final Approval
735 Anacapa St
APN: 037-092-037
PLN: 2024-00418
Zone: C-G / P-R
City of Santa Barbara /
Maja Adamski
Postponed
indefinitely.

Motion: Ratify the Consent Calendar of September 24, 2025, as reviewed by Vice Chair Ooley.

Action: Ooley / Drury, 8/0/0. (McClure absent.) Motion carried.

E. Announcements, requests by applicants for continuances and withdrawals, future agenda items, and appeals:

1. Commissioner Drury announced a show from artist John Comer, running October 2, 2025 to February 28, 2026.

F. Subcommittee Reports:

Commissioner Ensberg reported on the State Street Interim Working Group. The Commission requested a discussion item on the pedlets at the 500 block of State Street. (1:45PM) NEW ITEM: CONCEPT REVIEW

1. 330 STATE ST
Assessor's Parcel Number: 037-254-014
Zone: M-C
Application Number: PLN2025-00399
Owner: Jeffrey Wilkins, 9 Muses LLC
Applicant: Clay Aurell, AB Design Studio, Inc.
(This is a revised project description. Located in El Pueblo Viejo Landmark District, Part I and designated a Structure of Merit, the Andalucia Building/Seaside Oil Company Building was designed in 1926 by Lionel Pries in the Spanish Colonial Revival style, and the tower at the corner of State St. and Gutierrez St. was designed in 1937 by Carlton Winslow and R.H. Pitman. Proposed exterior alterations including: removal of the existing parking lot to replace with plaza and outdoor dining area, new hardscape, landscape, trees, fences, gates, trash enclosure, transformer, bike enclosures, door and window alterations, new steel canopies, and new vestibule elements. Project originally received Project Design Approval under PLN2021-00104 on July 21, 2021.) Historic Landmarks Commission Minutes September 24, 2025 Page 3 of 4 No final appealable action will take place at this meeting. Project Compatibility Findings and Minor Alterations Findings will be required for Project Design Approval.

Actual time: 1:41 p.m.

Present: Clay Aurell, AB Design Studio and Graham Goldich, Bosky Landscape Architecture.

Staff comments: Ms. Reidel stated that the laptop used for applicant presentations is experiencing a technical issue so the staff computer will be used for presentations.

Public comment opened at 2:10 p.m., and as no one wished to speak, it closed.

Motion: Continue indefinitely with the following comments:

1. Thanks the applicant for finishing up this wonderful project and for adding to the beauty of Santa Barbara.

2. The Commission is appreciative of the historic sensitivity and study of the original design as elements are being restored.

3. Study steel trellis and structure, noting that the fluted columns and Santa Barbara traditions of wrought iron and steel are appreciated. Recognizes that proximity to the funk zone may incorporate some industrial qualities as well.

4. Simplify the geometry of the landscaping, reducing some of the curvy free-form design and considering a more formal and urban open design.

5. The Commission is split on the acceptability of the boulders in the planters.

6. Study the hardscape with the suggestion of incorporating a darker brick or stone into the cobble entries off of Gutierrez and State streets.

7. The Commission requests more information on the lighting and to consider various strategies regarding building and park lighting.

8. Return with a photometric plan.

9. The Commission finds the Project Compatibility and Minor Alterations findings to be generally supportable at this time.

Action: Doordan / Ooley, 8/0/0. (McClure absent.) Motion carried. (2:30PM) ONE-TIME PRE-APPLICATION REVIEW

2. 701 STATE ST ET AL. & 914 CHAPALA ST
Assessor's Parcel Number: 037-400-002, -003, -004, and 039-321-047 Zone: C-G
Application Number: PRE2025-00121
Owner/Applicant: Edward Gellert, Paseo Propco LLC
(Located in El Pueblo Viejo Landmark District, Part I. Proposal to demolish 135,000 square feet of existing retail space to construct 233 rental housing units over the existing underground and aboveground parking structure, as well as new retail space at the corner of State and Ortega Streets. Project also includes demolition of 186 parking stalls in City Lot #2 to construct an additional 80 affordable rental housing units.)
No final appealable action will take place at this meeting. Project Compatibility Findings will be required for Project Design Approval.

Historic Landmarks Commission Minutes September 24, 2025 Page 4 of 4 Actual time: 2:54 p.m.

Present: Kelly McAdoo, City Administrator; Sarah Knecht, City Attorney; Dan Hentschke, Assistant City Attorney; Allison Debusk, Community Development Director; Tess Harris, State Street Master Planner; Patsy Price, Contract Planner; Graham Lyons, Mullen & Henzel L.L.P.; Duncan Paterson, Gensler Architecture; and Clay Aurell, AB Design Studio.

Public comment opened at 3:25 p.m.,
The following individuals spoke:

1. Pedro Toscano

2. Thomas Foley
Written correspondence from Cheryl Rawlings was acknowledged.

Public comment closed at 3:28 p.m.

Commission Comments:

1. Thanks the applicant team for the extensive work to date on this project and continued collaboration with HLC moving forward.

2. The Commission appreciates this review to provide comments on the project, understanding the constraints, challenges, and importance of this project.

3. Continue to develop the detailing of the workforce housing building to ensure it has equal dignity and character to the market rate building, while keeping it appropriate to the site.

4. The Commission is concerned with the massing, size, and proposed height of the building. The Commission understands the need for housing and revitalization in the area, the benefit the project will provide, and the state laws that apply, but believes more work needs to be done before compatibility findings can be made.

5. Study shifting the actual or apparent massing to make it appear more like a 5 or 6 story building rather than a 7 story, especially from the areas most visible from the public right-of-way.

6. Study design to add more “poetry” to meet El Pueblo Viejo design standards and to read more as a village or collection of buildings rather than one or two large buildings.

7. The Commission believes it is essential to incorporate a paseo around midblock on Ortega to be consistent with our paseo program.

8. Study integrating arcades and other public benefit design elements, especially on primary streets.

9. Maintain continued consideration for the flow of the public through the property. * MEETING ADJOURNED AT 4:37 P.M. *

CITY OF SANTA BARBARA

DOWNTOWN PARKING COMMITTEE

REGULAR MEETING MINUTES
Date: Thursday, October 9, 2025
Time: 8:00 a.m.

David Gebhard Public Meeting Room
630 Garden Street
Santa Barbara, CA 93101
No. 377 House
Nassauke 377
1054 AC, Amsterdam

LINK TO MEETING RECORDING

CALL TO ORDER
Vice Chair Newkirk called the meeting to order at 8:00 a.m.

ROLL CALL
PRESENT: Matt La Brie, Joseph Evers, Sean Pratt (left at 8:45 a.m.), Wesley McRae, Anita Stahl, Andrew Newkirk, Trey Pinner (Online Panelist).

CITY STAFF PRESENT: Downtown Parking and Plaza Manager Edward France, Downtown Team Manager Sarah Clark, Parking Operations Supervisor Roy Forney, Parking Maintenance Supervisor Sergio Arriaga, State Street Master Planner Tess Harris, City Attorney Sarah Knetcht, Assistant City Attorney Daniel Hentschke.

LIAISONS PRESENT: Planning Commissioner Lucille Boss.

CHANGES TO AGENDA
No changes to the agenda.

GENERAL PUBLIC COMMENT
None.

ANNOUNCEMENTS
Sarah Clark gave the announcements.

CONSENT AGENDA

1. APPROVAL OF THE MINUTES FROM THE REGULAR MEETING OF SEPTEMBER 11, 2025 MOTION: Committee members La Brie/Pratt moved to approve the minutes as presented.

VOTE: Unanimous roll-call vote.

ATTACHMENT 4
Meeting Minutes
October 9, 2025

Page 2 of 2 ends

Santa Barbara City CouncilDecember 2, 2025

Santa Barbara City Council
December 2, 2025