1 CITY OF SOUTH SAN FRANCISCO
SECURED PROMISSORY NOTE
PROMISSORY NOTE SECURED BY DEED OF TRUST
CITY OF SOUTH SAN FRANCISCO
AFFORDABLE HOUSING PROGRAM
$7,867,409.00
South San Francisco, California
__________________________
FOR VALUE RECEIVED, the undersigned, ______________ [INSERT ROTARY ENTITY] ( “Borrower”) promises to pay to the City of South San Francisco, a municipal corporation, (“City”), at 400 Grand Avenue, South San Francisco, California 94080, or any other place designated in writing by City to Borrower, in lawful money of the United States a principal sum
SEVEN MILLION, EIGHT HUNDRED AND SIXTY-SEVEN THOUSAND, FOUR HUNDRED AND NINE DOLLARS ($7,867,409), together with interest on the outstanding principal balance pursuant to the loan agreement described in paragraph 1 below and in accordance with the terms and conditions described herein (“Loan”). Capitalized terms used but not defined herein shall have the same meaning as set forth in the Loan Agreement (defined below).
1. Loan. The Promissory Note (“Note”) has been executed and delivered pursuant to the terms of a Loan Agreement dated evenly herewith (“Loan Agreement”) between Borrower and City, which details the terms and conditions under which City agrees to lend to Borrower and Borrower agrees to borrow up to $7,867,409 to fund certain construction costs associated with the Project. The rights and obligations of Borrower under this Note shall be governed by the Loan Agreement and by the terms set forth in this Note.
2. Payment Terms.
(A) The term of the Note shall be from execution and shall mature fifty-five (55) years of the date of issuance of the last certificate of occupancy or equivalent certification provided for the Senior Project by the City’s Building Official (the “Maturity Date”); provided, however, that if such date cannot be established, the Maturity Date shall be the fifty-seventh (57th) anniversary of the execution of this Note. If the California Department of Housing and Community Development (“HCD") is a lender to the Project, at conversion to permanent financing, the Parties will extend to the Maturity Date to match the maturity date of the HCD financing.
(B) Interest Rate. Except as provided under Section 6, the outstanding principal Governent Code Section 54957.5
SB 343 Item #6a
09/30/2026 SP CC
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SECURED PROMISSORY NOTE
balance of the Loan shall accrue interest at three percent (3%) per annum for so long as Borrower is not in default under the Loan Agreement, this Note, the Deed of Trust, or the Regulatory Agreement (collectively, the “Loan Obligations”). If payment is due, payment will first be applied to outstanding interest and then to any outstanding principal until the Note is paid as set forth herein. In the event this payment is less than accumulated interest owed plus current interest, any unpaid interest shall carry over to the following year. Interest shall not compound on this interest carry-over.
(C) Repayment. Borrower shall make an annual payment on a residual receipts basis in accordance with the formula set forth below.
i. Annual Payment from Residual Receipts. Commencing on April 1 following the first (1st) anniversary of the City’s issuance of a final certificate of occupancy for the Project, and on each April 1 thereafter, Borrower shall pay to City a share a share of fifty percent (50%) of all Residual Receipts (defined below) generated by the Project during the previous calendar year to reduce the indebtedness owed under this Note.
The City’s share of Residual Receipts shall be as set forth in negotiated intercreditor agreements, but in no case shall the City’s share of Residual Receipts be negotiated at less than a pro rata share based on the amount that each subsidy lender has contributed to Borrower for the Project.The City’s pro-rata share shall be based on the ratio that the original principal amount of the City’s Loan bears to the sum of the original principal amounts of all loans made to the Borrower that are payable from Residual Receipts, including any other loan from the City and any loan from the County of San Mateo. Payments shall be accompanied by Borrower’s calculation of Residual Receipts for the previous calendar year and such supporting documentation as City may reasonably request, including without limitation, an independent audit prepared for the Project by a certified public accountant in accordance with generally accepted accounting principles. Payments shall be credited first to any unpaid late charges and other costs and fees then due, then to any accrued interest, and then to principal. No later than November 1 of each year during the term hereof beginning after the first (1st) anniversary of the City’sissuance of a final certificate of occupancy for the Project, if requested by City, Borrower shall provide to City a projected budget for the following calendar year which shall include an estimation of Residual Receipts. ii. “Residual Receipts” means for each calendar year during the Term hereof, the amount by which Gross Revenue (defined below) exceeds Annual Operating Expenses (defined below) for the Project. Residual Receipts shall also include (a) condemnation awards for a permanent taking of part or all of the Property or the Project; and (b) net cash proceeds realized from any refinancing of the Project, less fees and closing costs reasonably 3 CITY OF SOUTH SAN FRANCISCO
SECURED PROMISSORY NOTE
incurred in connection with such refinancing and any City-approved uses of the net cash proceeds of the refinancing.
iii. “Gross Revenue” means for each calendar year during the Term, all revenue, income, receipts and other consideration actually received by Borrower from the operation and leasing of the Project. Gross Revenue shall include, but not be limited to: all rents, fees and charges paid by tenants; Section 8 payments or other rental subsidy payments received for the dwelling units; deposits forfeited by tenants; all cancellation fees, price index adjustments and any other rental adjustments to leases or rental agreements; proceeds from vending and laundry room machines; the proceeds of business interruption or similar insurance; the proceeds of casualty insurance (provided however, expenditure of such proceeds for repair or restoration of the Project shall be included within Annual Operating Expenses in the year of the expenditure); condemnation awards for a taking of part or all of the Property or the Project for a temporary period; the fair market value of any goods or services provided to Borrower in consideration for the leasing or other use of any part of the Project; and any release of funds from replacement and other reserve accounts to Borrower other than for costs associated with the Project.
Gross Revenue shall not include tenant security deposits, loan proceeds, capital contributions or similar advances.
iv. “Annual Operating Expenses” means for each calendar year during the Term, the following costs reasonably and actually incurred for the operation and maintenance of the Project to the extent that they are consistent with an annual independent audit performed by a certified public accountant using generally accepted accounting principles; all state and local property and other taxes and annual assessments imposed on the Project; premiums for property damage and liability insurance; debt service currently due and payable on a non-optional basis (excluding debt service due from residual receipts or surplus cash of the Project) on loans that have been approved by the City and which are secured by deeds of trust (each, an “Approved Loan”); utility services not paid for directly by tenants, including but not limited to water, sewer, trash collection, gas and electricity; maintenance and repair, including but not limed to pest control, landscaping and grounds maintenance, painting and decorating, cleaning, common systems repairs, general repairs, janitorial and supplies; any annual license or certificate of occupancy fees required for operation of the Project; general administrative expenses including but not limited to advertising and marketing, security services and systems, and professional fees for legal, audit and accounting; property management fees and reimbursements including on-site manager expenses, not to exceed fees and reimbursements which are standard in the industry and pursuant to a management contract approved by the City; 4 CITY OF SOUTH SAN FRANCISCO
SECURED PROMISSORY NOTE
depositsinto a reserve for capital replacements of Project improvementsin an amount no more than Five Hundred Dollars ($500) per unit per year or such greater amount as reasonably required by the holder of an Approved Loan or Borrower's organizational documents; deposits into an operating reserve in such reasonable amounts as are approved by the City, or in such amounts reasonably required by the holder of an Approved Loan or Borrower's organizational documents. Annual Operating Expenses shall not include the following: debtservice payments on any loan which is not an Approved Loan, including without limitation, unsecured loans; depreciation, amortization, depletion or other non-cash expenses; capital expenditures; expenses paid for with disbursements from any reserve account; any amount paid to Borrower, or any entity controlled by the persons or entities in control of Borrower (unless such payment consists of fees paid to a property management agent or resident services agent, to the Project developer, to the Borrower’s general partners, or the asset management fee, or as otherwise set forth in the Borrower's organizational documents).
3. Security. This Note is secured by a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Deed of Trust") dated as of the date hereof, executed by Borrower for the benefit of City and encumbering Borrower's fee simple estate in the property described therein. City shall be entitled to the benefits of the security provided by the Deed of Trust and shall have the right to enforce the covenants and agreements contained herein, in the Deed of Trust, and the Loan Agreement. The Borrower shall not have any direct or indirect personal liability for payment of the principal of, or interest on, the Loan, and the sole recourse of the City with respect to the principal of, or interest on, this Note shall be to the property described in the Deed of Trust.
4. Event of Default. In the event Borrower commits an Event of Default pursuant to the Loan Obligations, Borrower shall be in default under of the terms and conditions of this Note and the Deed of Trust, and City may demand immediate and full payment of the total outstanding principal amount of the Note and any accrued interest under the Loan Obligations, and/or may initiate foreclosure proceedings under the Deed of Trust.
5. No Waiver or Consent. The failure by City to assert its right upon the occurrence of an Event of Default, or the waiver by City of its rights upon any Event of Default, shall not constitute a consent to or waiver of City’s rights with respect to any other Event of Default.
6. Default Interest. Upon the occurrence of any Event of Default, the interest rate on the sums as to which Borrower is in Default (including principal, if City has elected to declare it immediately due and payable) shall be the lower of (i) Three Precent (3%) per annum, or (ii) the highest rate then allowed by law, commencing as of the date of the Default until paid in full, or until the Default has been cured, whichever is applicable.
7. Borrower’s Waivers.
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SECURED PROMISSORY NOTE
(A)Additional Security. Borrower expressly agrees that City may accept further security for this Note, all without in any way affecting the obligations of Borrower under this Note.
(B) Original Liability. No extension of time for payment of this Note or any installment hereof made by agreement by City with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part. (C) Obligations Absolute. The obligations of Borrower under this Note shall be absolute and Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reasons whatsoever. (D)Waivers. Borrower hereby waives (i) any notice of default or delinquency in addition to any notice expressly required by this Note; (ii) notice of acceleration; (iii) any notice of nonpayment in addition to any notice required by this Note; (iv) notice of costs, expenses, losses and interest thereon; (v) notice of interest on interest and late fees; (vi) diligence in taking any action to collect any sums owing under the Note or in proceeding against any of the rights and interest in and to properties securing payment of the Note; and (vii) presentment for payment, demand, protest, and notices of dishonor and/ or protest.
8. City Forbearance. No waiver of any breach, default or failure of condition under the terms of this Note, the Loan Agreement, Deed of Trust, Regulatory Agreement, or the obligations secured thereby, shall be implied from any failure of City to take, or any delay by City in taking, action with respect to such breach, default or failure or from any previous waiver of any similar or unrelated breach, default or failure; and a waiver of any term of this Note or the Loan Agreement must be made in writing and shall be limited to the express written terms of such waiver.
9. Notice. Except as otherwise specified herein, all notices to be sent pursuant to this Agreement shall be made in writing and sent to the Parties at their respective addresses specified below or to such other address as a Party may designate by written notice delivered to the other Party in accordance with this Section. All such notices shall be sent by:
(A) Personal delivery, in which case notice is effective upon delivery; (B) Certified or registered mail, return receipt requested, in which case notice shall be deemed delivered on receipt if delivery is confirmed by a return receipt; (C) Nationally recognized overnight courier, with charges prepaid or charged to the sender’s account, in which case notice is effective on delivery if delivery is confirmed by the delivery service;
(D) Electronic mail, in which case notice shall be deemed delivered upon transmittal, provided that, (i) a duplicate copy of the notice is promptly delivered by firstclass or certified mail or by overnight delivery (in which case notice shall be deemed given two business days after the duplicate is deposited in the mail), or 6 CITY OF SOUTH SAN FRANCISCO
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(ii) receipt is voluntarily acknowledged by the Party to be noticed (in which case notice shall be deemed given when acknowledged.
CITY:
City of South San Francisco
400 Grand Avenue
South San Francisco, CA 94080
Attention: Economic & Community Development Department
BORROWER:
____________
and:
Goldfarb & Lipman LLP
1300 Clay Stret, 11th Floor
Oakland, CA 94612
Attn: William DiCamillo
Email: [email protected]
with a copy to Tax Credit Investor:
10. Miscellaneous Provisions.
(A) Successors and Assigns. This Note (i) may not be assigned by Borrower without City's written consent except as otherwise permitted by the Loan Agreement, , ( ii) can be assigned by City, at its sole option, and (iii) shall be binding on all successors and assigns of City and Borrower.
(B) Attorneys' Fees. If City elects to employ any of the remedies available to it in connection with any Event of Default, Borrower shall pay all reasonable costs and expenses incurred by or on behalf of City including, without limitation, reasonable attorneys' fees, incurred in connection with the City's enforcement of this Note and the exercise of any or all of its rights and remedies. (C) Severability. If a court of competent jurisdiction finds any provisions of this Note invalid or unenforceable, the remaining provisions shall not in any way be affected or impaired thereby, and all other provisions of this Note shall remain in full force and effect.
(D) Time. Time is of the essence in the performance of the terms and conditions of this Note.
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SECURED PROMISSORY NOTE
(E) Governing Law. The laws of the State of California shall govern this Note. (F) Amendment. This Note may not be changed orally, but only by an amendment in writing signed by Borrower and approved by City.
(G) Headings. The headings within this Note are for the purpose of reference only and shall not limit or otherwise affect any of the terms of the Note. (H) Assumptions. Except as otherwise set forth in the Loan Agreement, the Loan, including this Note, may not be assumed in whole or in part without the prior written consent of City, which consent shall be given or withheld at the sole discretion of City. City may condition its consent to an assumption of the Loan on the satisfaction of conditions reasonably required by City at the time of the assumption. Conditions may include, but not be limited to, City’s satisfaction, in its sole discretion, with the proposed assuming party’s ability to meet the Loan obligations, the payment of an assumption fee and reimbursement of City’s fees and costs incurred by reason of the assumption.
(I) Electronic Signature. Borrower may deliver the executed version of this Note by electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g. www.docusign.com) or other transmission method and any such signature delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. No party may raise the use of any image transmission device or method of the fact that any signature was transmitted as an image as a defense to the enforcement of this Note.
Executed this Note on ____________
BORROWER:
[INSERT ROTARY ENTITY INFORMATION]