Loading...
HomeMy WebLinkAbout2019-05-21; City Council; Resolution 2019-069RESOLUTION NO. 2019-069 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING THE FIRST AMENDMENT TO GROUND LEASE BETWEEN THE CITY OF CARLSBAD AND TOBRIA TERRACE LLC FOR CITY PROPERTY LOCATED AT 6421 TOBRIA TERRACE AND COMMONLY KNOWN AS VILLA LOMA APARTMENTS, AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE FIRST AMENDMENT TO THE GROUND LEASE AND THE GROUND LESSOR'S ESTOPPEL CERTIFICATE AND OTHER RELATED DOCUMENTS TO EXTEND THE LEASE TERM FOR SAID PROPERTY. WHEREAS, the City Council of the City of Carlsbad, California has determined that it desires to extend the ground lease between the City of Carlsbad and Tobria Terrace LLC for an additional eight (8) years to allow for refinancing of a private loan to lower the interest rate on said loan and to provide additional loan proceeds for physical improvements to aging infrastructure at the affordable housing development known as Villa Loma Apartments within the City of Carlsbad; and WHEREAS, Bridge Housing, also known as Tobria Terrace LLC has indicated its intent to proceed with refinancing the private loan on the Villa Loma Apartments to lower the interest rate and obtain additional loan proceeds for physical improvements to aging infrastructure at the affordable housing development; and WHEREAS, in order to refinance said loan and receive the additional loan proceeds the lender is requesting that the ground lease between the City of Carlsbad and Tobria Terrace LLC be extended for an additional eight (8) years; and WHEREAS, Bridge Housing on behalf of Tobria Terrace LLC has requested an eight (8) year extension of the ground lease between the City of Carlsbad and Tobria Terrace LLC, and the city desires to extend the ground lease as requested in order to allow for the improvement of aging infrastructure at the Villa Loma Apartments and thereby extending the term of the affordable housing rental development, known as the Villa Loma Apartments. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the City Council hereby approves the First Amendment to Ground Lease (Attachment A) between the City of Carlsbad and Tobria Terrace LLC for city-owned May 21, 2019 Item #4 Page 4 of 105 property located at 6421 Tobria Terrace and commonly known as the Villa Loma Apartments. 3. That the City Council hereby authorizes the City Manager to execute the First Amendment to the Ground Lease and the Ground Lessor's Estoppel Certificate and to take all actions necessary to implement the First Amendment to Ground Lease, that are consistent with and in full compliance with terms and conditions expressed in the aforementioned First Amendment, and to the satisfaction of the City Attorney. PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 21st day of May 2019, by the following vote, to wit: AYES: NAYS: ABSENT: Hall, Blackburn, Bhat-Patel, Schumacher. None. Hamilton. (SEAL) May 21, 2019 Item #4 Page 5 of 105 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Katten Muchin Rosenman LLP 2029 Century Park East, Suite 2600 Los Angeles, California 90067 Attention: Mark L. Sonefeldt, Esq. FIRST AMENDMENT TO GROUND LEASE THIS FIRST AMENDMENT TO GROUND LEASE (this "Amendment") is made this __ day of ___ , 2019 (the "Effective Date"), by and between THE CITY OF CARSLBAD, a California municipal corporation ("Lessor"), and TO BRIA TERRACE LLC, a California limited liability company ("Lessee"). RECITALS A. Lessee's predecessor in interest, La Terraza Associates, a California limited partnership ("Original Lessee"), and Lessor entered into that certain Ground Lease (the "Ground Lease"), dated as of October 28, 1994, with respect to that certain real property described on Exhibit A hereto (the "Property"). All capitalized terms used but not defined herein shall have the meanings set forth in the Ground Lease. B. The Ground Lease was memorialized by that certain Memorandum of Lease (the "Memorandum"), dated as of October 28, 1994, by and between Lessor and Original Lessee, and recorded in the Official Records of San Diego County, California (the "Official Records") on November 4, 1994 as Instrument No. 1994-0645097. C. Original Lessee's interest in the Ground Lease was assigned by Original Lessee to, and assumed by, Lessee pursuant to that certain Assignment and Assumption of Ground Lease and Memorandum of Ground Lease (the "Assignment"), dated as of March 17, 2011, by and between Original Lessee and Lessee and recorded on March 22, 2011 in the Official Records as Instrument No. 2011-0149636. D. Pursuant to Section 2.2 of the Ground Lease, the term of the Ground Lease commenced on October 28, 1994 and will expire on October 28, 2051 (the "Initial Term"). E. Lessor and Lessee each desire to amend the Ground Lease, as more fully set forth below. In consideration of the mutual promises and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows: 136635488v7 Attachment A May 21, 2019 Item #4 Page 6 of 105 1. GROUND LEASE TERM. 1.1 Extension of Initial Term. The Ground Lease is hereby amended such that eight (8) years shall be added to the Initial Term, so that the expiration date shall be October 28, 2059, subject to any earlier termination in accordance with the terms of the Ground Lease. 136635488v7 2. PAYMENT OF RENT. 2.1 Accrued Rent. (A) Section 2.3(b) is hereby replaced in its entirety with the following: "The first payment of Rent shall be equal to the Rent multiplied by a fraction, the numerator of which is the number of days from the date of this Lease through the end of the first Lease Year and the denominator of which is 3 65. The final payment of Rent under this Lease shall be prorated in a similar manner. Rent shall be payable only the extent of thirty percent (30%) of Surplus Cash. "Surplus Cash" shall mean operating income of the Development ( excluding interest income earned on tenant security deposits and Development reserve accounts) less reasonable operating expenses. For this purpose, operating expenses shall include all costs and expenses related to ownership and operation of the Development including, but not limited to, deposits into reserves, taxes and other similar charges, the partnership management fee in an amount not to exceed twenty thousand dollars ($20,000), debt service due in that year on Approved Loans, the property management fee and other expenses of a property manager in amounts reasonable and customary in the industry, but shall not include any allowance for depreciation. In the event the thirty percent (30%) of Surplus Cash available to pay the Rent is less than the amount of rent due under this Lease in any year, the difference between thirty percent (30%) of Surplus Cash and the Rent shall accrue with interest at three percent (3%) compounded annually, and shaU be paid when and to the extent Surplus Cash becomes available. All payments of Rent shall be applied first to accrued amounts due for prior years, then to accrued interest from that year, and then to current Rent due, beginning with the first year Rent accrued. Any Rent outstanding shall be payable on the earlier of the sale of the Improvements (in full) or expiration or earlier termination of this Lease (in full). After a sale, Rent shall be due currently on an annual basis on the date set forth in subsection (a) above. Notwithstanding anything to the contrary, (i) if the sale is due to a judicial foreclosure, nonjudicial foreclosure or deed- in-lieu of foreclosure which does not terminate this Lease or (ii) the Lease terminates in accordance with Section 6.2( c )(9) due to a judicial foreclosure, then the Lender or other transferee of the Development ( a "Foreclosure Transferee") and its successors and assigns shall have no liability for the payment of any Rent which accrued prior to such transfer, and thereafter Lessor shall have no right to terminate this Lease on account of nonpayment of such accrued Rent." 2 May 21, 2019 Item #4 Page 7 of 105 the following: (B) Section 2.3(c) of the Ground Lease is replaced in its entirety with the following: "Notwithstanding the provisions of section (b ), irrespective of the existence of Surplus Cash, accrued Rent for any year, and any interest which accrued on said unpaid Rent in the year the Rent payment was due, shall be paid in full not later than the twentieth (20th) anniversary of the date such Rent accrued or the expiration of this Lease, whichever is earlier." 3. INSURANCE. 3.1 Insurance Proceeds. Section 7.3(a) is hereby replaced in its entirety with "For so long as any Approved Loan on the Development is outstanding and provided Lessee complies with the conditions precedent to Lessee's election to restore the Development as set forth in Section 8( a)(l) of this Lease, all fire and standard risk or extended coverage ( casualty) insurance proceeds (the "Insurance Proceeds") shall be paid to either (i) the Approved Lender in senior lien position, or (ii) in the manner outlined in Section 8(a)(l) of this Lease to be disbursed for the restoration of the Development and for no other purpose. Upon completion of the restoration of the Development, the remaining balance of the Insurance Proceeds, if any, shall be disbursed to Lessee (subject to rights of any Approved Lenders). If the Development is not restored, all Insurance Proceeds shall be applied in a manner consistent with the Approved Loans." 4. INDEMNITY. 4.1 Lessee Additional Indemnification Obligation. The following provisions are hereby added to the end of Section 7.4 of the Lease as follows: "For the avoidance of doubt, the Lessee hereby agrees and acknowledges that the indemnification obligation set forth in this Section specifically includes, but is not limited to, all claims, actions, demands, judgements, settlements, costs, expenses and attorneys' fees arising out of, attributable to or otherwise occasioned, in whole or in part, by any deed of trust, mortgage, or equivalent security financing interest encumbering the Lessor's fee interest in the Land, so long as not arising out of Lessor's gross negligence or willful misconduct. The obligations set forth in this Section shall survive the termination or expiration of this Lease." 5. CONDEMNATION, DAMAGE OR DESTRUCTION OF THE DEVELOPMENT. 5 .1 Condemnation. (A) The first paragraph of Section 8.1 of the Ground Lease is hereby replaced in its entirety with the following: 3 136635488v7 May 21, 2019 Item #4 Page 8 of 105 136635488v7 "If the Development or the Land or any part thereof is damaged or destroyed, shall be taken or condemned, for any public or quasi-public purpose or use by any competent entity in appropriate proceedings, or by any right of eminent domain, all Insurance Proceeds, or all compensation received for such taking by the exercise of the power of eminent domain (the "Loss Proceeds"), shall be shall be applied as follows:" (B) Section 8.l(a)(l) of the Ground Lease is hereby replaced in its entirety with the following: "(a) Loss Proceeds received on account of partial destruction or a partial taking of the Development or the Land (the "Partial Loss Proceeds"), other than a taking for a temporary use not exceeding one (1) year, shall be allocated and paid as follows: "(1) If the following conditions are met: (i) Lessee reasonably believes restoration is economically feasible, (ii) Lessee is not in default under this Lease and the opportunity to cure has not expired under the Approved Loan Documents, and (iii) the Approved Lender in senior lien position consents to the use of the of the Partial Loss Proceeds for the restoration of the Development, all Partial Loss Proceeds shall be paid to a FDIC insured financial institution designated by the Approved Lender, but subject to the reasonable approval of Lessor (the "Depository"), to be held pursuant to the following terms. Lessor hereby assigns to Lessee and the Approved Lender in senior lien position the right to receive all Partial Loss Proceeds. The Approved Lender in senior lien position shall, in its sole discretion, control the receipt and disbursement of the Partial Loss Proceeds by the Depository and shall have the right to elect to apply the Partial Loss Proceeds to the Approved Loan in lieu of consenting to the restoration of the Development. Lessee's obligation to restore the Development shall be limited to the amount of the Partial Loss Proceeds. Upon direction from the Approved Lender in senior lien position, the Depository shall pay Partial Loss Proceeds over to Lessee from time to time, upon the following terms, for the restoration of the Development. The Depository shall first reimburse Lessor and Lessee from such Partial Loss Proceeds for their actual, necessary, and proper costs and expenses in collecting such Partial Loss Proceeds. The Depository shall release the Partial Loss Proceeds to Lessee from time to time as the restoration of the Development progresses in accordance with the procedures required by the Approved Lender. Until Lessee has completed and paid for restoration of the Development, Lessee shall hold all Partial Loss Proceeds in trust to be used first for such restoration and for no other purpose. If any lien is filed against the Premises, Lessee shall not be entitled to receive any further installment of Partial Loss Proceeds until Lessee has satisfied, bonded, or otherwise discharged such lien when and as this Ground Lease requires. When Lessee has completed and paid for the restoration of the Development, the Depository shall release to Lessee, and Lessee may retain (subject to rights 4 May 21, 2019 Item #4 Page 9 of 105 of any Approved Lenders) any remaining Partial Loss Proceeds. If the Partial Loss Proceeds are insufficient to restore the Development, then Lessee shall nevertheless restore the Development at its expense. The Depository shall not release any Partial Loss , Proceeds until and unless Lessee has expended on such restoration of the Development an amount equal to any such insufficiency. (C) The first sentence of Section 8. l(a)(2) of the Ground Lease is hereby replaced in its entirety with the following: "(2) If Lessee does not reasonably believe that restoration is economically feasible, or (ii) Lessee is in default under this Lease and the opportunity to cure has expired under the Approved Loan Documents, the Partial Loss Proceeds shall be paid to any Approved Lender (in the order of their respective lien priority, if there is more than one Approved Lender) in an amount equal to the total value of the Partial Loss Proceeds less the value of the land that was subject to the taking." (D) Section 8.l(a)(3) of the Ground Lease 1s hereby deleted m its entirety. (E) The first sentence of Section 8 .1 ( d) of the Ground Lease is hereby replaced in its entirety with the following: "( d) Loss Proceeds received on account of a total taking of the Development (the "Total Loss Proceeds") shall be received, disbursed and controlled by the Approved Lender in senior lien position and shall be allocated and paid in the following order of priority:" 6. MISCELLANEOUS. 6.1 References. All references to the "Ground Lease," "ground lease" or "lease" appearing in this Amendment shall mean the Ground Lease as amended by this Amendment. 6.2 Severability. If any provision of this Amendment is held to be invalid or unenforceable, the remainder of this Amendment will not be affected, and each provision of this Amendment will be valid and be enforced to the fullest extent permitted by applicable laws. Lessor shall use its best efforts to oppose any action that challenges the validity of the transactions contemplated under this Amendment. 6.3 Entire Agreement/Modification. This Amendment, together with the Ground Lease, the Memorandum and the Assignment, contains all of the agreements of the parties hereto with respect to the matters contained herein, and no prior agreement, arrangement or understanding pertaining to any such matters shall be effective for any purpose. There have been no additional oral or written representations or agreements. All amendments or modifications to the Ground Lease or this Amendment shall be in writing and signed by the parties to this Amendment. 5 136635488v7 May 21, 2019 Item #4 Page 10 of 105 6.4 Execution; Counterparts. This Amendment may be executed in any number of counterparts and each counterpart shall be deemed to be an original document. All executed counterparts together shall constitute one and the same document, and any counterpart signature pages may be detached and assembled to form a single original document. 6.5 Heirs and Successors. This Amendment shall be binding upon the heirs, legal representatives, successors and permitted assigns of the parties hereto; provided, however nothing in this section shall be deemed to waive, limit, or impair Lessor's rights set forth in Section 2.5 of the Lease. 6.6 Authority. Each party represents and warrants that the individual signing this Amendment on behalf of such party is duly authorized to execute and deliver this Amendment on behalf of said entity in accordance with the governing documents of such entity, and that upon full execution and delivery this Amendment is binding upon said entity in accordance with its terms. 6. 7 Ratification. Except as modified by this Amendment, the Ground Lease shall continue in full force and effect and Lessor and Lessee do hereby ratify and confirm all of the terms and provisions of the Ground Lease, subject to the modifications contained herein. In the case of any inconsistency between the provisions of the Ground Lease and this Amendment, the provisions of this Amendment shall govern and control. 6.8 In consideration for the execution of this Amendment by the Lessor, the Lessee shall pay the Lessor the amount not to exceed $10,000 for certain costs and expenses incurred by the Lessor, but not limited to legal fees. Signatures appear on following page. 6 136635488v7 May 21, 2019 Item #4 Page 11 of 105 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of the date first written above. 136635488v7 LESSOR: THE CITY OF CARLSBAD, a California municipal corporation By:-----=----------- Name:_Q_, ~C-◊-t~+--l!.~h~a_d~w-,_· e,_K. __ _ Title:_~(!,.~i~:h"""'/~M~a.~na.=-#'£&'1.=r:~---- LESSEE: TOBRIA TERRACE LLC a California limited liability company By: BRIDGE Housing Corporation -Southern California, a California nonprofit public benefit corporation, its sole member By:----------- Name: ---------Title: ---------- APPROVED AS TO FORM: CELIA A. BREWER, CITY ATTORNEY By: ~~istant City Att S-2 May 21, 2019 Item #4 Page 12 of 105 136635488v7 EXHIBIT A DESCRIPTION OF THE PROPERTY Exhibit A May 21, 2019 Item #4 Page 13 of 105