HomeMy WebLinkAbout2002-10-15; City Council; 16929; Calavera Hills Village Y4B# 16,929
WTG. 10/15/02
IEPT. HlRED I CITY OF CARLSBAD -AGENDA BILL
TITLE: APPROVAL OF CITY FINANCIAL ASSISTANCE FOR DEPT. HD@
THE CALAVERA HILLS VILLAGE Y AFFORDABLE HOUSING
PROJECT, AND APPROVAL OF THE CITY’S INTENTION TO
CONSTRUCTION OF THE SUBJECT PROJECT.
CITY ATTY. fhU ISSUE MULTI-FAMILY HOUSING REVENUE BONDS FOR
RECOMMENDED ACTION:
That the City Council take the following four actions: 1) ADOPT Resolution No. 2002- 302
APPROVING a request to provide financial assistance to Chelsea Investment Corporation which
includes a construction loan of $1,060,000 from the City’s Housing Trust Fund and to approve the
related loan documents for construction of one hundred six (1 06) affordable apartment units within the
Calavera Hills Master Plan Village Y; 2) ADOPT Resolution No. 2002 - 303
APPROVING the City’s intention to issue tax-exempt multi-family revenue bonds in an amount not to
exceed Eight Million Five Hundred Thousand Dollars ($8,500,000) for the purposes of financing the
construction of the Calavera Hills Village Y Affordable Apartment Project; 3) set November 12, 2002
as the public hearing date to accept comments from the public on the City’s intent to issue bonds for
the subject project; and 4) AUTHORIZE the Finance Director, or designee, to accept and hold the
Developer’s Bond Allocation Application Deposit in an amount not to exceed one hundred thousand
dollars ($100,000), and then to release the deposit following City receipt of a written notification from
the California Debt Limit Allocation Committee (CDLAC) authorizing release or forfeiture of the
deposit, in whole or in part, pursuant to CDLAC procedures.
ITEM EXPLANATION:
AFFORDABLE HOUSING PROJECT DESCRIPTION
On September IO, 2002, the City Council approved Site Development Plan SDPO1-05, allowing for
the development of 106 affordable apartment units. This project, the Mariposa Apartments, will be
located on the west side of the future extension of College Boulevard, approximately % mile south of
Carlsbad Village Drive, in what is known as Village Y of the Calavera Hills Master Plan Phase II. The
106 affordable units will be developed by Chelsea Investment Corporation (Developer). The project
will satisfy the affordable housing requirement for the Calavera Hills Master Plan Phase II.
The Mariposa Apartments will consist of 14 residential structures, a 2,100 square foot recreation
building, and a leasing office. The development includes 10 one-bedroom (9%), 64 two-bedroom
(60%) and 34 three-bedroom (31%) apartments. Units will range in size from 615 square feet for the
one-bedroom unit, 905 square feet for the two-bedroom unit and 1,045 for the three-bedroom unit. In
addition, the project will contain three unique recreation areas, with amenities for all ages.
One significant feature of this project is the utilization of State of California Multifamily Housing
Program Funding (MHP). The MHP program is a competitive statewide loan program that provides
funding for affordable housing developments. In exchange for the loan, the MHP program requires
the Developer to rent 10 units at levels affordable to households earning 20% of the State Median
Income (SMI) and 22 units at levels affordable to households earning 30% of SMI (SMI is
approximately 1% higher than the San Diego County Area Median Income). The remainder of the
project, 74 units, will be affordable to household earning 60% of the San Diego County Area Median
Income. The rents will range from approximately $245 a month for a one bedroom unit to $930 per
month for a three bedroom unit. Thus, this project will contain the most affordable units of any such
development in the City of Carlsbad.
Page 2 of AB # 16,929
FINANCIAL ASSISTANCE
As part of the project financing, the Developer is requesting that the City provide a loan during
construction in the amount of $1,060,000, or $10,000 per unit, from the Housing Trust Fund. The
Developer is also requesting that the City issue tax-exempt multi-family revenue bonds in an amount
not to exceed $8.5 million to assist in financing the subject project. In addition to the City’s financial
participation, the Developer will use a variety of sources to finance the affordable development. The
financial details of the subject project are provided below.
USES AND SOURCES OF FUNDS
The total cost of the Mariposa Apartments is estimated to be $15.9 million, exclusive of the value of
the land. Based on a detailed review of the costs, staff has found that the costs are reasonable and
the total per unit cost of $150,000 is generally consistent with other affordable multi-family
developments within the City. The following chart provides a breakdown of the project costs, or uses
of funds
The following chart provides a breakdown of the permanent sources of funds for the proposed
development. The three primary sources of funding for the proposed project are 1) proceeds from the
sale of tax credits to a limited partnership; 2) proceeds from tax-exempt multi-family revenue bonds;
and 3) proceeds from the State of California Multifamily Housing Program. The Master Developer of
Calavera Hills (McMillin Homes) will contribute the land (valued at $3.025 million) and cash in the
amount of $123,000 to the project. The Developer is requesting that the City contribute a total of
$1,060,000 to the project. The City’s proposed contribution of $10,000 per unit is equivalent to the
amount the City has provided for similar projects. The City’s contribution, if approved by the Council,
will be provided to the project during construction and will be repaid through future surplus cash
generated from project operations.
PERMANENT SOURCES OF FUNDS
Source Per Unit Total Amount
Tax Credit Investor Equity
$3,786,342 MHP Loan
$48,400 $5,126,700 Permanent Senior Bonds
$51,800 $5,571,441
$1,160 123,000 Master Developer Contribution
$2,400 $256,638 Deferred Developer Fee
$1 0,000 $1,060,000 City Contribution
$24,528 $2,600,000 Bridge Bond
$35,700
Total Sources of Funds $1 50,228 $1 5,924,121
2
Page 3 of AB # 16,929
FINANCIAL ASSISTANCE DOCUMENTS
As proposed, the City assistance ($1,060,000) will be provided in the form of a residual receipts loan
secured by a note and deed of trust. The outstanding principal and accrued interest on the City loan
will be amortized over fifty-five years and repaid from surplus cash in equal annual installments of
principal and interest. In the event that there is not adequate cash surplus to repay the City loan, the
outstanding balance shall accrue with simple interest at 3% per annum. The terms of the City
assistance is the same loan structure that was utilized for each previous affordable housing project
developed in the City of Carlsbad.
In order for the project to receive the $1,060,000 loan, the Developer is required to enter into loan and
regulatory agreements with the City of Carlsbad. These agreements and related documents are
attached for review. As one of the actions set forth within this report, the City Council is being asked
to approve, in substantially the form presented, the Loan Agreement, Deed of Trust, Promissory Note
and Regulatory Agreement that are all attached as Exhibit 4 for review. These documents are
explained below:
I. Loan Agreement states the terms and conditions relating to the City’s loan.
2. Regulatory Agreement records the terms of affordability and the operation requirements for the
project.
3. Promissory Note is executed by the Developer and expresses their intent to repay the loan.
4. Deed of Trust is recorded against the property to secure the City’s interest in the subject property
and related improvements.
It is important to also note that the City will ultimately be required to subordinate the subject
documents to the senior lien holder. If approved, the attached resolution authorizes the City
Manager, or his designee, to execute subsequent subordination agreements. While the subordination
documents will not return to the City Council for review, Staff will take the necessary steps to insure
that the documents provide the City with adequate notice and cure ability. The subordination
documents will be reviewed by, and be subject to final approval by the City Attorney.
BOND ISSUANCE REQUEST
As noted above, in addition to the direct financial assistance, the Developer has requested that the
City issue tax-exempt, Multi-Family Housing Revenue Bonds to assist in financing the project.
Through this process, the City may act as a conduit whereby bonds are issued and sold, and the
proceeds are loaned to the Developer to be used for a private development purpose. The purchaser
of the bonds will function as the construction and permanent loan lender. The legal obligation for the
repayment of the bonds rests solely with the developer of the project. Further, all costs associated
with the bond issuance, including any fees and expenses incurred or assessed by the City, are paid
from the proceeds of the bonds.
In the above Permanent Sources of Funds chart, the Developer states that approximately $5.2 million
in bond proceeds will be required to finance the subject project on a long-term basis. However, the
Council is being asked to issue bonds in an amount not to exceed $8.5 million, as the majority of the
funds from the tax credit equity will not be available until after the project is constructed. The bond
issue will be structured to pay down the bonds as the funds are received from the various equity
sources such as tax credit and other revenue. Once project construction is complete, the bonds will
be paid down to approximately $5.2 million as shown above, and will be repaid over a 30-year period.
3
To issue tax-exempt bonds, the City must apply for, and receive, an allocation of private activity
bonds from the California Debt Limit Allocation Committee (CDLAC). While the City will be the
applicant, it will actually be the responsibility of the Developer to complete and submit the application
to CDLAC in the name of, and on behalf of the City, subject to staff review. It is anticipated that the
Developer will apply to CDLAC in January of 2003.
Before the City may apply to CDLAC, the Council must adopt an lnducement Resolution allowing for
certain actions to occur. The subject resolution must contain the following provisions: 1) declaration of
the City’s intention to issue tax-exempt bonds; 2) allowance for a portion of the bond proceeds to be
used to reimburse appropriate expenditures related to the subject bond issuance; and, 3) declaration
of the City’s intent to hold a public hearing in compliance with Section 147(f) of the Internal Revenue
Code of 1986, which requires approval of the issuance of the bonds to be approved by the applicable
elected representative (City Council), following a reasonably noticed public hearing. With approval of
the City Council, a public hearing will be scheduled for November 12, 2002 to accept public
comments on the City’s intent to issue bonds to finance the subject project. The subject public hearing
is required to be noticed by October 25, 2002. The attached lnducement Resolution sets the public
hearing for November 12th and instructs the City Clerk to publish the required notice by October 25,
2002.
Adoption of the lnducement Resolution expresses the City’s intent to issue the bonds. However, it
does not obligate the City to issue the bonds. The lnducement Resolution establishes the maximum
amount of bonds to be issued for the purposes of filing an application to the State for approval of a
bond allocation for the project. The public hearing on November 12th will allow the Council to receive
comments on the intent to issue bonds. Then, a future action by the Council will be required to adopt
a “Bond Resolution” to authorize the actual sale and issuance of the bonds. This action on the actual
authorization to issue the bonds would most likely occur in March of 2003.
In conjunction with submitting the application, staff is requesting that the Council take required action
related to the Developer’s Bond Allocation Application Deposit. Under the current requirements of
CDLAC, the Developer is required to place on deposit with the City an amount not to exceed
$100,000. The City is required to hold the deposit until such time as it receives written notification
from CDLAC that the deposit has been authorized to be released or forfeited to either CDLAC or the
Developer. Therefore, staff is requesting that the Council authorize the Finance Director to receive
and hold the subject deposit and then reimburse the funds to either CDLAC andlor the Developer,
upon written notification from CDLAC.
HOUSING COMMISSION RECOMMENDATION ON FINANCIAL ASSISTANCE
At their meeting on August 1, 2002, the Housing Commission reviewed the request from the
Developer for financial assistance in the amount of $1,060,000 and the City issuance of tax exempt
bonds in an amount not to exceed $8.5 million. The Commission also reviewed the draft financial
assistance agreementsldocuments. The Commission recommended (3-0) that the City Council
approve the loan in the amount of $1,060,000 from the Housing Trust Fund and the related loan and
regulatory documents, and to issue tax exempt bonds in an amount not to exceed $8.5 million. At the
subject Commission meeting, staff recommended that the Developer be limited to a maximum
developer fee of $1,000,000 (6.3% of total project costs). The Developer requested that the
maximum developer fee be increased to $1,200,000 (7.5% of total project costs). The Housing
Commission recommended that staff return at a future meeting with additional information on the
recommendation to limit the developer fee to $1,000,000, including an analysis comparing the
requested fee to the developer fee received by other affordable housing developers in the City of
Carlsbad.
In the past, the developer fee has been a specific point for discussion and has been limited as a result
of City assistance to a project. The developer fee covers costs for developer overhead and profit,
construction management oversight, costs of personal guarantees, syndication consulting fees, and
reserves in excess of those customarily required by multi-family housing lenders. As with all
affordable housing projects, staff seeks to determine that all development and operation costs are
reasonable, and that the need for City subsidy is justified. It is important that any financial assistance
have the effect of making the units more affordable and not creating undue gain for any party. One
method that staff relies upon in making this determination is to compare the proposed costs and fees
of previously developed affordable housing projects. This is the information requested by, and
submitted to, the Housing Commission for further consideration of the appropriate developer fee
amount.
As indicated to the Housing Commission, the two most similar projects to the Mariposa Apartments
are the 1 16-unit Rancho Carrillo Apartments and the 92-unit Poinsettia Station Apartments. These two
projects received developer fees of $910,000 (6.09% of the total project costs) and $819,000
developer fee (5.82% the total project costs) respectively. For Mariposa Apartments, the Affordable
Housing Policy Team (staff) recommended that the developer fee be set as $1,000,000 (6.3% of the
total project costs) rather than $1.2 million requested by the developer. The recommended fee was
greater on both a percentage and dollar basis when compared with the two most similar projects
developed in Carlsbad. This staff recommendation recognized that the developer had obtained
additional subsidy sources (State of California MHP funds), and that the project will provide more
affordable rents than similar developments.
After reviewing the information provided by staff, the Housing Commission recommended
unanimously (3-0) that the developer fee be set at the amount of $1.2 million as requested by the
developer. The Commission felt very strongly that the City should recognize the higher amount of risk
and additional time and increased efforts of the developer in obtaining the MHP funding. The
Commission also believed the development of units at 20% and 30% of the State Median Income
would be a tremendous benefit to the City of Carlsbad and warranted an additional amount of
developer fee. By providing the maximum developer fee permitted under the Tax Credit Program and
the MHP program, the Commission believes other developers would be encouraged to seek out
similar funding. Finally, the Commission determined that by providing the higher developer fee, there
would be no additional increase in the City’s financial assistance, nor would there be any impact to
the repayment schedule of the City’s loan.
STAFF RECOMMENDATION
Staff recommends that the City Council adopt the attached resolution to authorize financial assistance
for the Calavera Hills Village Y Affordable Apartment Project. The adoption of the financial assistance
resolution will also approve the developer fee in the amount of $1.2 million as recommended by the
Housing Commission. Adoption of .the second resolution will indicate the City’s intent to issue tax-
exempt bonds to finance the project and reimburse appropriate expenditures related to that bond
issuance. Approval of the second resolution will also set the date of November 12, 2002 for a public
hearing to receive comments from the public on the City’s intent to issue bonds. These actions will
allow the Developer to submit the required application to CDLAC by January 15, 2003 for a bond
allocation in the amount of $8.5 million.
ENVIRONMENTAL REVIEW
A Negative Declaration was approved by the City Council for the Site Development Plan (SDP 01-05)
on September IO, 2002. No further environmental review is required as part of the approval of the
subject financial assistance or the bond issuance.
Page 6 of AB # 16,929
FISCAL IMPACT:
The financial assistance in the form of a $1,060,000 residual receipts loan will be provided from the
City of Carlsbad’s Housing Trust Fund, which has a current undesignated fund balance of
approximately $2.97 million. The Council is also being asked to take action to express the City’s
intent to issue tax-exempt bonds in an amount not to exceed $8.5 million to assist in financing the
subject project. If the Council does in fact take action at a later date to issue bonds for the subject
project, all costs associated with issuance of those bonds (City expenses, bond counsel, underwriting,
financial advisor, etc.) will be paid from the proceeds of the bond issue. In addition, the entire legal
obligation to repay the bonds rests with the Developer. Therefore, there will be no net fiscal impact to
the City resulting from the issuance of the bonds.
EXHIBITS:
1.
2.
3.
4.
5.
City Council Resolution No. 2002 - 302 , to approve financial assistance for the
Calavera Hills Village Y Affordable Apartment Project.
City Council Resolution No. 2002 - 303 , to indicate the City’s intent to issue bonds
and to reimburse appropriate expenditures.
Housing Commission Staff Report dated August 1, 2002, including the Loan Documents for
financial assistance from the City of Carlsbad (Loan Agreement, Note, Deed of Trust and
Regulatory Agreement).
Housing Commission Staff Report dated September 11, 2002, including Developer Proforma for
the Calavera Hills Village Y Affordable Apartment Project and Housing Commission Minutes of
August 1,2002.
Draft Housing Commission Minutes of September 11, 2002.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
CITY COUNCIL RESOLUTION NO. 2002-302
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, TO APPROVE A REQUEST TO
PROVIDE FINANCIAL ASSISTANCE TO CHELSEA
INVESTMENT CORPORATION WHICH INCLUDES A LOAN OF
$1,060,000 FROM THE HOUSING TRUST FUND AND TO
APPROVE THE RELATED LOAN DOCUMENTS FOR
CONSTRUCTION OF ONE HUNDRED SIX (106) AFFORDABLE
APARTMENT UNITS WITHIN THE CALAVERA HILLS MASTER
PLAN PHASE 11.
APPLICANT: CHELSEA INVESTMENT CORPORATION
CASE NO: SDP 01-05
WHEREAS, the master developer of the Calavera Hills Master Plan Phase 11, McMillin
Homes, has proposed to construct 106 apartment units affordable to lower income households
as a means to satisfy their affordable housing obligation as permitted by Carlsbad Municipal
Code Section 2 1.85 of the City’s Inclusionary Housing Ordinance; and
WHEREAS, McMillin Homes has retained Chelsea Investment Corporation, the
Developer, to develop and operate the 106 apartment units affordable to lower income
households; and
WHEREAS, Chelsea Investment Corporation has requested that the City of Carlsbad
provide financial assistance in the form of a construction loan to assist in the construction of
said apartment units; and
WHEREAS, on the lSf day of August, 2002, City of Carlsbad Housing Commission did
hold a public meeting to consider a request for City financial assistance for the construction of
said 106 affordable housing apartment units by the affordable housing developer, Chelsea
Investment Corporation, and subsequently recommended approval of the request for
assistance; and
WHEREAS, on the 1lth day of September, 2002, City of Carlsbad Housing
Commission did hold a public meeting to consider a request to allow the Developer to receive
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
CC Resolution No. 2002-302
Page 2
a developer fee of One Million Two Hundred Thousand Dollars ($1,200,000) for the
construction of said 106 affordable housing apartment units by the Developer, Chelsea
Investment Corporation, and subsequently recommended approval of the requested developer
fee; and
WHEREAS, on the 15t” day of October, 2002, the City Council did hold a public
meeting to consider said request for City financial assistance for the construction of said 106
affordable housing apartment units by the affordable housing developer, Chelsea lnvestment
Corporation; and;
WHEREAS, at said public meeting, upon hearing and considering all testimony, if any,
of all persons desiring to be heard, said Council considered all factors relating to the
application and request for financial assistance:
NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of
Carlsbad, California, as follows:
1. The above recitations are true and correct.
2. The request for City financial assistance is consistent with the goals and
objectives of the City of Carlsbad’s Housing Element and Consolidated Plan,
the Inclusionary Housing Ordinance, and the Carlsbad General Plan.
3. The request for City financial assistance will assist the affordable housing
developer to construct a total of 106, one, two and three bedroom affordable
apartment units. The project, therefore, has the ability to effectively serve the
City’s housing needs and priorities as expressed in the Housing Element and the
Consolidated Plan.
4. That the City Council of the City of Carlsbad hereby APPROVES financial
assistance to the proposed affordable housing project lcnown as the Mariposa
Affordable Apartments Project in the form of a construction loan in the amount
of $1,060,000 from the City of Carlsbad’s Housing Trust Fund.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
5. That the City Council authorizes the City Manager or his designee to execute all
documents related to provision of the City assistance, including but not limited
to a Loan Agreement, Note, Deed of Trust and Regulatory Agreement, in
substantially the form presented to the City Council, and subject to review and
approval by the City Attorney.
6. That the City Council authorizes the City Manager or his designee to execute
subsequent subordination agreement(s), as required, subject to review and
approval by the City Attorney and/or Special Legal Counsel.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City
Council of the City of Carlsbad, California, held on the 15th day of October I 2002, by
the following vote, to wit:
AYES:Council Members Lewis, Kulchin, Finnila, Nygaard, Hal
NOES: None
ABSENT: None
ABSTAIN: None
II AI’TEST:
(SEAL)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
CITY COUNCIL RESOLUTION NO. 2002-303
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, APPROVING THE ISSUANCE OF
ACTIONS AND AUTHORIZING THE FINANCE DIRECTOR, OR
DESIGNEE, TO HOLD THE DEVELOPER'S BOND ALLOCATION
APPLICATION DEPOSIT IN THE AMOUNT NOT TO EXCEED
ONE HUNDRED THOUSAND DOLLARS ($100,000), AND THEN TO
RELEASE THE DEPOSIT FOLLOWING CITY RECEIPT OF A
WRITTEN NOTIFICATION FROM THE CALIFORNIA DEBT
LIMIT ALLOCATION COMMITTEE (CDLAC) AUTHORIZING
RELEASE OR FORFEITURE OF THE DEPOSIT, IN WHOLE OR
IN PART, PURSUANT TO CDLAC PROCEDURES
APPLICANT: CHELSEA INVESTMENT CORPORATION
CASE NO: SDP 01-05
TAX-EXEMPT OBLIGATIONS AND DIRECTING CERTAIN
WHEREAS, the City of Carlsbad (the "City") intends to issue tax-exempt obligations
(the "Obligations") for the purpose, among other things, of making a loan to Chelsea
Investment Corporation ("Chelsea") or a limited partnership or limited liability company to be
established by Chelsea (the "Developer"), the proceeds of which shall be used by the
Developer to finance the acquisition, construction and development of a multifamily housing
rental facility to be located on the west side of the future extension of College Boulevard,
approximately % mile south of Carlsbad Village Drive, in what is known as Village Y of the
Calavera Hills Master Plan Phase I1 in the City of Carlsbad, California (the "Project"); and
WHEREAS, the City is authorized by Chapter 7 of Part 5 of Division 3 1 of the Health
and Safety Code of the State of California (the "Law") to issue and sell revenue bonds for the
purpose of financing the acquisition, construction and development of multifamily rental
housing facilities to be occupied in part by low and very low income tenants; and
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Carlsbad DECLARES and ORDERS as follows:
1. The City hereby finds and determines that the foregoing recitals are true and
correct.
ri:!
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
CC Resolution No. 2002-303
Page 2
2.
3.
4.
5.
6.
7.
8.
The City intends to issue the Obligations for the purpose of paying the costs of
financing the acquisition, construction and development of the Project.
The City hereby declares that it reasonably expects that a portion of the
proceeds of the Obligations will be used for reimbursement of expenditures for
the acquisition, construction and development of the Project that are paid before
the date of initial execution and delivery of the Obligations.
The maximum amount of proceeds of the Obligations to be used for
reimbursement of expenditures for the acquisition, construction and
development of the Project that are paid before the date of initial execution and
delivery of the Obligations is $8,500,000.
The foregoing declaration is consistent with the budgetary and financial
circumstances of the City in that there are no funds (other than proceeds of the
Obligations) that are reasonably expected to be (i) reserved, (ii) allocated or (iii)
otherwise set aside, on a long-term basis, by or on behalf of the City, or any
public entity controlled by the City, for the expenditures for the acquisition,
construction and development of the Project that are expected to be reimbursed
from the proceeds of the Obligations.
The Developer shall be responsible for the payment of all present and future
costs in connection with the issuance of the Obligations, including but not
limited to, any fees and expenses incurred by the City in anticipation of the
issuance of the Obligations, the City’s financing fee with respect to the issuance
of the Obligations, the City’s annual administration fee with respect to
administering the provisions of a regulatory agreement with respect to the
Project, the cost of printing any official statement, rating agency costs, bond
counsel fees and expenses, underwriting discount and costs, financial advisor’s
fees and expenses, trustee fees and expense, and the costs of printing the
Obligations. The payment of the principal, redemption premium, if any, and
purchase price of and interest on the Obligations shall be solely the
responsibility of the Developer. The Obligations shall not constitute a debt or
obligation of the City.
The City of Carlsbad will collect from the Developer and will place on deposit
an amount not to exceed One Hundred Thousand Dollars. The City Council
hereby authorizes the Finance Director or designee to hold said deposit and then
to release the deposit following City receipt of a written notification from the
California Debt Limit Allocation Committee authorizing release or forfeiture of
the deposit, in whole or in part, pursuant to the procedures of the Committee.
The City Clerk is hereby directed to publish on or before October 25,2002 in a
paper of general circulation within the City of Carlsbad a notice of public
hearing with respect to a public hearing to be held by the City Council on
November 12,2002 regarding the financing of the Project.
11
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
9.
10.
The appropriate officers or staff of the City are hereby authorized, for and in the
name of and on behalf of the City, to make an application to the California Debt
Limit Allocation Committee for an allocation of private activity bonds for the
financing of the Project.
The adoption of this Resolution is solely for the purpose of meeting the
requirements of the provisions of the Internal Revenue Code of 1986, as
amended, and shall not be construed in any other manner, with neither the City
nor its staff having fully reviewed or considered the financial feasibility of the
Project or the expected operation of the project with regards to any State of
California statutory requirements, and such adoption shall not obligate, without
hrther formal action to be taken by this City Council, including but not limited
to, (i) the approval of the financing documents by the City Council by
resolution, (Ii) the City to provide financing to the Developer for the
acquisition, construction and development of the Project or to issue the
Obligations for purposes of such financing; or (iiI) the City, or any department
of the City, to approve any application or request for, or take any other action in
connection with any environmental, General Plan, zoning or any other permit or
other action necessary for the acquisition, construction and development of the
Project .
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City
Council of the City of Carlsbad, California, held on the 15" day of October ¶
2002, by the following vote, to wit:
AYES: Council Members Lewis, Kulchin, Finnila, Nygaard, Ha:
NOES: None
ABSENT: None
ABSTAIN: None
ATTEST:
CC Resolution No.
Page 3
2002-303
Oct-29-02 08:llA P.01
Hyatt Sainte Claire 302 South Market Street San Jose, CA 951 13 USA 408.885.1234 FAX 408.977.0403
Guest Account
I Room \ Rate I Arrive 1 Depart i Folio No. I Account 1 Affiliation 1 FF I ID I Page1
602 1 19.00 1011 8102 10121/02 53445 2 CCARD 2-LAND 11 KAA 1
KETABIAN ELIZABETH
1200 CARLSBAD VILLAGE DR
CARLSBAD CA 92008
RES NO: HH- 59405-1 SPIRIT: 22539693
Date
1018
1018
1018
101 9
101 9
1019
1020
1020
1020
1020
1021
VI:
Uo frequt
To enroll
:ode
112
812
81 1
112
812
81 1
71 1
112
81 2
81 1
932
travelr
Sold P
Reference j ID Description
Rm 602 NHG GROUP ROOM
Rm 602 NHG 'LOCOCCPNCY TAX
Rm 602 NHG *ROOM TAX
Rm 602 SRH GROUPROOM
Rm 602 I SRH LOC OCCPNCY TAX
Rm 602 SRH 'ROOM TAX
Rm 602 SRH GROUP ROOM
Rm 602 SRH LOC OCCPNCY TAX
Rm 602 ; SRH "ROOMTAX
Ex04/05 ' KAA 40550160001 14365
175902 . XXX 408-998-0400 L
I1 i TOTAL
i
Signature
01:29 PVR 210
"* DEPARTED **
-01 40550160001 14365 04/05
Zharges Credits
89.00
.40 1
.54 I
8.90 '
119.00
11.90 j
-329.04
1
Balance
89.00
89.40
98.30
187.30
187.70
196.60
197.60
316.60
317.14
329.04
. 00
. 00
agree to be held personally hable In !he event that the I agree that my liability for this billjs not waived and I
indicated person, company or assoclation fails to pay for any part or the full amount of these charges.
DATE: SEPTEMBER 12,2002
SUBJECT: SDP 01-05 - CALAVERA HILLS AFFORDABLE APARTMENT
DEVELOPMENT- RECOMMENDATION OF APPROVAL TO THE CITY
COUNCIL TO ALLOW THE DEVELOPER TO RECEIVE A $1,000,000
DEVELOPER FEE FOR THE CONSTRUCTION OF ONE HUNDRED SIX
AFFORDABLE APARTMENT UNITS TO SATISFY THE REQUIREMENTS
OF THE INCLUSIONARY HOUSING ORDINANCE FOR THE CALAVERA
HILLS MASTER PLAN PHASE 11.
I. RECOMMENDATION
That the Housing Commission ADOPT Resolution No. 2002-004 recommending APPROVAL
to the City Council to allow the developer to receive a $1,000,000 developer fee for the
construction of one hundred six (106) affordable apartment units to satisfy the inclusionary
housing ordinance requirement for the Calavera Hills Master Plan Phase 11.
11. PROJECT BACKGROUND
On August 1 , 2002, the Housing Commission recommended approval to the City Council to
provide $1,060,000 in financial assistance from the Housing Trust Fund, to issue tax exempt
bonds in the amount not to exceed $8,500,000, and approval of the Loan Agreement and related
. documents with Chelsea Investment Corporation (Developer) for construction of one hundred six
(106) affordable apartment units to satisfy the inclusionary housing ordinance requirement for
the Calavera Hills Master Plan Phase 11. Also at that meeting, staff recommended that the
Developer be entitled to receive a developer fee of $1,000,000. The Developer requested that the
developer fee be increased to $1,200,000. The Housing Commission recommended that staff
return at a future meeting with further details of how staff arrived at the $1,000,000
recommendation, and an analysis comparing the developer fee received by other affordable
housing developments in the City of Carlsbad.
111. PROJECT DESCRIPTION
The affordable development, the Mariposa Apartments, will be located on the west side of the
fkture extension of College Boulevard, approximately ?4 mile south of Carlsbad Village Drive, in
what is known as Village Y of the Calavera Hills Master Plan Phase 11. The proposed 106-unit
affordable apartment project consists of 14 residential structures, a 2,100 square foot recreation
building, and a leasing office. The proposed development includes 10 one-bedroom, 64 two-
SDP 01-05 - CALAVERA HILLS AFFORDABLE HOUSING PROJECT
1
SEPTEMBER 12,2002
PAGE 2
bedroom and 34 three-bedroom apartments. Units will range in size from 615 square feet for the
one-bedroom unit, 905 square feet for the two-bedroom unit and 1,045 for the three-bedroom
unit, The project will contain three unique recreation areas, with amenities for all ages.
One significant feature of this project is the utilization of State of California Multifamily
Housing Program Funding (MHP). The MHP program is a competitive statewide loan program
that provides funding for affordable housing developments. In exchange for the loan, the MHP
program requires the Developer to rent 10 of the units at levels affordable to households earning
20% of the State Median Income (SMI) and 22 of the units at levels affordable to households
earning 30% of SMI (SMI is approximately 1% higher than the San Diego County Area Median
Income). Thus, a one-bedroom unit at 20% of SMI will rent for approximately $2 15 per month
while a two-bedroom unit at 30% of the SMI will rent for approximately $375 per month. The
remainder of the project, 74 units, will be affordable to household earning 60% of the San Diego
County Area Median Income. Thus, this project will contain the most affordable units of any
such development in the City of Carlsbad.
IV. DEVELOPER FEE
When requesting financial assistance from the City, the developer of the affordable housing is
required to provide detailed information regarding the development and operation costs of the
project (known as a “Proforma”). One of the costs of the project is the developer fee. A
developer fee is defined as the use of project funds to be paid as compensation for developing the
affordable housing project. The fee covers costs for developer overhead and profit, construction
management oversight, costs of personal guarantees, syndication consulting fees, and reserves in
excess of those customarily required by multi-family housing lenders.
In reviewing the Proforma, staff seeks to determine that all development and operation costs are
reasonable, and that the need for City subsidy is justified. It is important that any ‘financial
assistance have the effect of making the units more affordable and not creating undue gain for
any party. One method that staff relies upon in making this determination is to compare the
proposed costs against previously developed affordable housing projects. Exhibit 6 shows the
development costs for each affordable housing project previously developed and approved in the
City. The two most similar projects to Mariposa are the Rancho Carrillo and Poinsettia Station
Apartments. Both projects are similar in size to the Calavera Hills project, and both projects
were financed with a combination of 4% Tax Credits and Tax Exempt Bonds. Exhibit 7 shows a
comparison of all 3 projects.
As shown in Exhibit 7, Rancho Carrillo is a 1 16-unit apartment complex that received a
$910,000 developer fee, or 6.09% of the total project costs. Poinsettia Station is a 92-unit project
that received an $819,000 developer fee, or 5.82% the total project costs. The proposed
developer fee for Mariposa of $1,000,000 is larger on both a percentage and dollar basis when
compared with the two most similar projects developed in Carlsbad. This higher developer fee
recognizes that the developer has obtained additional subsidy sources (State of California MHP
funds), and that the project will provide more affordable rents than similar developments.
2
SDP 01-05 - CALAVERA HILLS AFFORDABLE HOUSING PROJECT
SEPTEMBER 12,2002
PAGE 3
A second factor that staff reviews is the amount of direct financial assistance, exclusive of the
cost of land, that are contributed by the master developer who has the obligation to provide the
affordable housing units. Exhibit 8 shows the master developer financial contribution for each
affordable housing project while Exhibit 9 compares Rancho Carrillo, Poinsettia Station and
Mariposa Apartments. As shown in Exhibit 9, the developer of Rancho Carrillo, Continental
Homes, provided approximately $4.2 million, or 28% of the total project costs. Benchmark
Pacific, developer of Poinsettia Station provided approximately $1 million, or 7% of the total
project costs. Generally, staff has recommended a developer fee that is less than the amount of
the financial contribution of the master developer. The contribution of $1 15,000 by McMillin
Homes is significantly less than that provided by the master developers of similar projects.
Again, the proposed developer fee of $1,000,000 recognizes that the Developer has obtained
additional subsidy sources (State of California MHP funds), and that the project will provide
more affordable rents than similar developments.
Also, in making a recommendation on financial assistance, staff considers other factors that are
often difficult to quantify. As stated above, the Mariposa project is providing greater
affordability levels than previous projects. Other projects, such as the Villages of La Costa,
provide a significant number of large bedroom units, while the Laurel Tree Apartments has
provided greater tenant amenities. All such factors are considered when making a
recommendation on the developer fee.
Lastly, it is important to note that the developer fee is not the only opportunity for the Developer
to earn fees for this development. As with all City loans, the City receives 70% of the cash flow
from the operation of the property while 30% is available to the Developer. While the cash flow
is not a large amount in the early years of operation, the Developer will receive a significant
amount funding over the life of the project.
As stated previously, the Developer has requested that the Housing Commission recommend to
the City Council that the developer fee be increased to $1,200,000. The Developer’s justification
for the increased fee is stated in the minutes of the August 1 Housing Commission meeting
(Exhibit 2) and in a memo from the developer dated August 5,2002 (Exhibit 3).
VI STAFF RECOMMENDATION
As stated in the analysis above, staffs recommendation of the $1,000,000 developer fee is based
upon several factors. When comparing the Mariposa Apartment with similar affordable housing
projects previously developed in the City of Carlsbad, the recommended amount is both fair and
reasonable. Therefore, it is staffs recommendation that the Housing Commission recommend to
the City Council that the developer fee for the Mariposa Apartments be in the amount of
$1,000,000.
3
SDP 01-05 - CALAVERA HILLS AFFORDABLE HOUSQJG PROJECT
SEPTEMBER 12,2002
PAGE 4
VI. EXHIBIT
1.
2.
3.
4.
5.
6.
7.
8.
9.
Housing Commission Resolution No. 2002-004.
Minutes of the August 1,2002, Housing Commission meeting.
Developer letter seeking increased developer fee.
Proforma with $1,000,000 Developer Fee
Proforma with $1,200,000 Developer Fee
Development Costs - all projects
Development costs - similar projects
Master Developer Financial Contributions - all projects
Master Developer Financial Contributions -similar projects
4
HOUSING COMMISSION RESOLUTION NO. 2002-004
THAT THE HOUSING COMMISSION RECOMMEND APPROVAL TO
THE CITY COUNCIL TO ALLOW THE DEVELOPER TO RECEIVE A
$1,000,000 DEVELOPER FEE FOR THE CONSTRUCTION OF ONE
HUNDRED SIX (106) AFFORDABLE APARTMENT UNITS TO SATISFY
THE INCLUSIONARY HOUSING ORDINANCE REQUIREMENT FOR
THE CALAVERA HILLS MASTER PLAN PHASE 11.
APPLICANT: CHELSEA INVESTMENT CORPORATION
CASE NO: SDP 01 -05
WHEREAS, the Master Developer of the Calavera Hills Master Plan,
McMillin Homes, has proposed to construct 106 apartment units affordable to lower
income households as a means to satisfy their affordable housing obligation as
required by Carlsbad Municipal Code Section 21.85 of the City’s Inclusionary
Housing Ordinance; and
WHEREAS, the City of Carlsbad Housing Commission did, on the lst day of
August, 2002, hold a special public meeting to consider a request for the City to
provide $1,060,000 in financial assistance from the Housing Trust Fund, for the City
of Carlsbad to issue tax exempt bonds in the amount not to exceed $8,500,000, and
approval of the Loan Agreement and related documents with Chelsea Investment
Corporation for construction of one hundred six (106) affordable apartment units to
satisfy the inclusionary housing ordinance requirement for the Calavera Hills Master
Plan Phase 11; and
WHEREAS, upon hearing and considering all testimony, if any, of all persons
desiring to be heard, the City of Carlsbad Housing Commission approved said
request; and
HC RESOLUTION NO. 2002-003
5 17
PAGE 2
WHEREAS, the City of Carlsbad Housing Commission did, on the lst day of
August, 2002, direct staff to return at a subsequent meeting with further details
regarding staffs recommendation for a developer fee in the amount of $1,000,000,
and for staff to provide an analysis comparing the developer fee received by other
affordable housing developments in the City of Carlsbad; and
WHEREAS, said Housing Commission did, on the 12th day of September,
2002, hold a public meeting to consider staffs recommendation for a developer fee in
the amount of $1,000,000, and for staff to provide an analysis comparing the
developer fee received by other affordable housing developments in the City of
Carlsbad; and
WHEREAS, upon hearing and considering all testimony, if any, of all persons
desiring to be heard, said Commission considered all factors relating to developer fee
related to construction of said affordable housing units
NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing
Commission of the City of Carlsbad, California, as follows:
1. The above recitations are true and correct.
2. That based on the information provided within the Housing
Commission Staff Report and testimony presented during the special
public meeting of the Housing Commission on September 12, 2002,
the Housing Commission hereby ADOPTS Resolution No. 2002-004,
recommending APPROVAL to the City Council to allow the
developer to receive a $1,000,000 developer fee for the construction of
one hundred six (106) affordable apartment units to satisfy the
requirements of the Inclusionary Housing Ordinance for the Calavera
Hills Master Plan Phase 11.
6
PASSED, APPROVED, AND ADOPTED at a special meeting of the
Housing Commission of the City of Carlsbad, California, held on the 12th' day of
September, 2002, by the following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
EDWARD SCARPELLI, VICE-CHAIRPERSON
CARLSBAD HOUSING COMMISSION
DEBORAH K. FOUNTAIN
HOUSING AND REDEVELOPMENT DIRECTOR
HC RESOLUTION NO. 2002-003
PAGE 3
7
EXHIBIT 2
Minutes of: HOUSING COMMISSION
Time of Meeting: 6:OO P.M.
Date of meeting: August 1,2002
Place of Meeting: HOUSING AND REDEVELOPMENT DEPARTMENT OFFICE
CALL TO ORDER
Vice-chairman Scarpelli called the Regular Meeting to order at 6:07 p.m.
PLEDGE OF ALLEGIANCE
Vice-chairman Scarpelli waived the Pledge of Allegiance since there wasn't a flag in the Housing
and Redevelopment Ofice.
ROLL CALL
Present: Commissioners: C. Charles Griffin
Renee Huston
Edward Scarpelli
Absent: Doris Ritchie
Staff Present: Housing and Redevelopment Director: Debbie Fountain
Management Analyst: Craig Ruiz
APPROVAL OF MINUTES
Minutes of May 9,2002, were approved as written.
COMMENTS FROM THE AUDIENCE ON ITEMS NOT LISTED ON THE AGENDA
There was no audience in attendance, who wished to speak at this time.
NEW BUSINESS
Vice-chairman Scarpelli announced the agenda item to recommend to the City Council to provide
$1,060,000 in financial assistance, to issue tax-exempt bonds in an amount not to exceed
$8,500,000 and approval of the loan agreement and related documents for construction of the
Calavera Hills affordable housing project. Staff is recommending approval.
Mr. Ruiz presented the affordable housing project at Calavera Hills. A map was pointed out
behind the commissioners. The project is at College and Carlsbad Village Drive. The project is
106 units; 10 one-bedroom units; 64 two-bedroom units; 34 three-bedroom units. The rent will be
between 20 and 60% of the median income. This project will be receiving funds from the State of
California Multifamily Housing Program; a portion of the two and three bedroom units will be within
20 and 30% of the state median income. The state and the state median income is just slightly
higher then the San Diego County median income. The remainder of the project will be within the
60% of the San Diego County median income.
Mr. Ruiz continued, there will be a clubhouse, a play area, and a basketball court in the project.
The project roughly is going to cost about 16 million dollars to construct. Part of the project will
include tax-exempt bonds. The developer will receive a developer fee of $1,000,000 or
approximately 6.4% of the total project costs. The developer is proposing to receive
approximately 70% of the developer fee and the remainder of the fee would be repaid over the
first ten years from income derived from the operation of the project.
HOUSING COMMISSION d MUTES
AUGUST 1,2002 PAGE 2 of 9
Vice-chairman Scarpelli asked if there were any questions of Mr. Ruiz at this time. There were no
questions from the commissioners.
Mr. Brian Milich from Corky McMillin Company gave his presentation. His company is partners in
this project. He stated that his company purchased the property 6 or 7 years ago. They are
currently building out the last two phases of the project. The first phase is finished and now they
are entitling the last phase. They received approval of the master plan January from the City
Council. The requirement is to build 15% of affordable housing so the last phase is now being
applied. After reviewing the site, we have come up with our plan on the site. College Boulevard
will be extended; it meets Cannon Road down to El Camino Real. The affordable housing site is a
little over 7 acres, and there is a l-acre community facility site that also is required on the
property. Actually there is another community facility site that is about 2 acres. There has already
been a strong interest from a daycare operator so it seems to us to be a great location; it‘s on a
major corridor; there’s a bus turnout; it‘s about % of a mile from a brand new elementary school.
The possible daycare center site is one net acre.
Mr. Milich continued, it’s a great location. They have worked very closely with the Cape
homeowners, the neighbors just above this site. Early on in the master plan the height of the buildings was discussed as well as how many units are going to be on the site. The master plan
allows three story buildings with 441 units. We just received approval from the Planning
Commission for 106 apartments, which is all that is needed. This will create a less dense and
more neighbor friendly community to the Cape homeowners. We had a Planning Commission
hearing on July 17, 2002, and it was unanimously approved by the Planning Commission and it
now goes to City Council probably in August. There was an issue that Craig eluded to which is
part of the project. Handouts of the site plans have been handed out.
Commission Houston asked if this was all Village Y.
Mr. Milich answered, yes, and incorporated in that is the l-acre community facility.
Mr. Milich continued, one issue that came up was the location of one of the recreational amenities.
Early on there was a discussion with the Housing Department and the Planning Department .and it
was decided that the basketball court would be a nice amenity to the project, and we still think it is.
We had it originally located in the back of the property next to the Cape property. The Planning
Commission raised some concerns about this being an attractive nuisance in terms of a lot of kids
using that, and how late they would be using it. Although I think we’ve mitigated most of those
issues, we were directed to find another site. We had some extra parking, 242 spaces and we
only needed 236 so we have designed a basketball court area to one side of the end of a parking
area. We presented that to the Planning Department. We want to make sure that you concur with
that. In place we put a volleyball court where the basketball court originally was. We had a
meeting with the homeowners on the property of the other side and they were supportive of that.
Vice-chairman Scarpelli stated it was indicated Mr. Milich feels that it won’t cause an impact on
those two units as well as the Planning Commission, but it appears as though it would. It must be
more area there then I’m able to visualize. Are you going to eliminate that parking or is that
parking remaining?
Mr. Milich answered that six parking spaces will be eliminated.
Vice-chairman Scarpelli reiterated the parking will be eliminated and inquired as to where the front entrances of those homes are on those units by the basketball court.
21
HOUSING COMMISSION Q rNUTES AUGUST 1,2002
PAGE 3 of 9
Mr. Milich answered the entrances are on the side. These units are very similar to the Villa Loma
project architecturally. These are eight-plexes so there are two units down below and two above
on each side so there will be entrances on the side.
Vice-chairman Scarpelli continued as to whether the basketball court would be coming up to the
edge of the building.
Mr. Milich answered yes.
Vice-chairman Scarpelli asked if there was a hazard as far as vehicle traffic.
Mr. Milich said no. The way it was worked out, there wouldn’t be any impact from the basketball
court and traffic.
Vice-chairman Scarpelli stated it is not this committee’s decision, but wanted to make sure that
the area around the basketball court be protected as far as the landscaping goes. He asked what
would restrict people from parking there.
Mr. Milich answered the restriction would be signage and management. He commented that they
could look into barriers and something else that might add to that.
Vice-chairman Scarpelli said it is not this committee’s decision. He was just asking as a matter of
interest.
Mr. Milich continued that everyone thought it was a great project, low density, we’ve taken care of
the issues with the neighbors. This is going to be built along with the first phases of development.
It allows us to bring in up front the first units of the project. If all goes according to plan, the target
date for completion is October of 2003.
Mr. Milich said they are happy to have Chelsea as their partner in this. They’ve worked together
on several projects, including a very large project in Chula Vista. More details will be given on that
later in this presentation. Are there any questions?
Vice-chairman Scarpelli inquired as to what is the staffs position on the location of the basketball
court. Are you in concurrence with moving the basketball court, because it certainly appeared that
the other was a much better location?
Ms. Fountain stated that staff liked the original location much better, but came to the conclusion
that it had to be moved. We wanted them to keep it because they needed something for the
teenagers to do. It‘s probably a good compromise. The volleyball court will be on grass and the
ball won’t be heard.
Vice-chairman Scarpelli was looking at another area for the basketball court and asked if there
was a reason it couldn’t be a possible site.
Mr. Milich answered that the site identified was an emergency access, actually an open access, a
secondary access for the project. It is a street so we need that for access.
James Schmid, President of Chelsea Investment Corporation stated he has been doing this for 18
years. His company’s focus is affordable housing. He has done several projects and they all involve a collaboration with a non-profit. In his case it is Southwest Community Development
Corporation, executive director is Mike Wallace who is a long time resident of Carlsbad, and Red
Capital is a major player in affordable housing. Evan Becker, who is here tonight, has joined Red
0 HOUSING COMMISSION “UTES
AUGUST 1,2002
PAGE 4 of 9
Capital. Recently they opened a San Diego office. Wallace Dieckman our CFO is here and he loves architecture and designs and will run through the project with you, later.
Mr. Schmid continued that also with him is Robert Harrington, but Jessica Skare is absent. They will both be part of this operation, but tonight Ms. Skare is working at another project where they
are moving in tonight. They have all done a lot of lnclusionary housing. They did their very first
project with McMillin. They had pictures with them. He commented that some developers stick
these projects in the worst sites, hidden away from everything else. This project is located in a
site they can be proud of. They manage their own projects. These projects are all held by
partnerships, but they have the ownership and the management interest. We don’t feel that a
third party manager cares as much about it, We feel the same way about managing as we do
about the design so we own and operate. We have about 1500 units under management. All of
our managers are trained and certified, not only in property management issues, but also in client issues as well. This will be their third project (affordable). We just closed our second affordable
project.
Mr. Schmid gave a quick tour with a slide presentation. He first showed a slide of Teresina, which
is the first lnclusionary project, built by a master developer. They’ve been working on this project for two and a half years. They worked with McMillin for about a year on this 88-unit project and it
was decided to go with a 440-unit project. It is in Chula Vista.
Vice-chairman Scarpelli asked if it was part of the lnclusionary housing or is it non-inclusionary.
Mr. Schmid answered they had 88 inclusionary units and rather than doing 88 within the project,
we did a 440 unit project of which 88 are Inclusionary. They are not 88 specific units. They are
440 identical units and then the affordable tenants pick their own unit within the whole 440. It is a
terrific way to do a project, but it requires for huge projects to be done. Within the project was a
training center where the women’s national soccer team was there training for the last Olympics. They put them up for a couple of months while they did their training at the training center in Chula Vista. There were more pictures of Teresina.
Mr. Schmid continued with the second project. This was more advanced, also in Chula Vista, and
also an lnclusionary project. It is felt that with more density, the project is improved. Every project
we have ever done is 100% pre-leased. So essentially when move-in day comes, a traffic officer
is needed in the parking lot. We feel that will happen here at Calavera Hills. The senior’s projects
are normally developed because of the density, they have elevators, and are built with secure
courtyards.
He continued with a north San Diego project, which was built to satisfy a smaller requirement.
This has a clubhouse, which has the T.V. room, the library, the computer room and other
amenities. It is located next to homes, which sold for $600,000 to $800,000. Again, it was built
first with the landscaping in.
This one was 76 units and it was built by Greystone. It is close to Torrey Highlands High School,
which is more like a university campus. The figures were taken in the final throws of construction.
This is a three story so what you see at Calavera is a lot less dense and a lot less bulky buildings.
They will be very attractive. By the time we opened the doors, we had 200+ applicants for these
units as well which rent for much higher then Calavera Hills will be renting.
Mr. Schmid showed slides of Calavera. I will let Wallace Dieckmann talk with you further in more
detail.
HOUSING COMMISSION MINUTES
AUGUST 1,2002 PAGE 5 of 9
Mr. Wallace Dieckmann stated that most of it has already been heard so he will quickly run
through it and try not to be too redundant. There are a 106 units, there are an allocation of units
of unit types. There is an 1800 square foot clubhouse that includes a computer laboratory, and
there are a lot of facilities throughout the complex. We have adjusted the number of parking
spaces down to close to the number that Brian mentioned earlier. There are two different kinds of
amenities. Project amenities and unit amenities. Unit amenities include a refrigerator, range, garbage disposal, dishwasher, balconies for the second floor units, and the first floor units will
have patios. The project amenities include the clubhouse, the turf play area, the play structure for
the young kids, the basketball court, and possibly a volleyball court as well. It is near a new
elementary school, which I believe is due to complete next fall. It is about three quarters of a mile
up College Boulevard. We provide community services as part of our program and the most
popular one is the after school program to help children with their homework and give them some
supervision after school. Part of that is computer skills training, not only for children, but for the
adults as well. Once we get a tenant base in, we survey the tenants and try to identify other services that are appropriate for them.
Vice-chairman Scarpelli asked if they would be offering those types of amenities on a regular
daily basis or is it on a lesser schedule.
Mr. Dieckmann answered that it would be on a twice a week basis.
Vice-chairman Scarpelli further asked if this program would be offered in-house.
Mr. Dieckmann answered that is part of the role of Southwest Community, a non-profit performs.
Craig went over this, but the important thing to note is that 32 of the 106 units will rent at 20 and
30% of state median income, which means the poorest people will qualify to live here and that is a
tremendous asset. As Brian pointed out, the architect is Kirk McKinley of McKinley and
Associates.
Commissioner Houston stated the vegetation in the picture is more advanced then actual.
Mr. Dieckmann agreed it will take a couple of years to grow it in. It is an important aspect of these
projects for sound reasons and visual reasons. McMillin will start the site preparation by the end
of this year. The construction financing and bond issuance will be complete probably around June
or July of next year. With the construction starting early in the fourth quarter of next year and the
completion a year later, with a total lease up and conversion of the construction to permanent
status by the end of 2004.
James Schmid asked if there are any questions. Then wanted to let the Commissioners know
they previously had a conversation with Debbie Fountain and Craig Ruiz about the developer fee. Under the tax credit bond it is allowable for a project of this sort to be allowed 15% of the cost up
to 1.2 million cap, and it is felt this project qualifies for that cap to be available. The city has a
housing policy guideline whereby the cap would be a million dollars. For two reasons, I would like
to ask you to waive that cap. One reason is that about a month or so ago you approved the La
Costa project which is 180 units and that permits the 1.2 million fee, which I know sounds like a lot
until you divide it by the six or so years we worked on the project and the thirty or fifty years of
compliance for management. This project is actually more work than the bigger project. That
wouldn’t normally be so, but i think we are bringing something special to the table in this project.
We were thrilled to get two of the awards from the state for this project. There is a lot of work that
goes into that. That causes the City of Carlsbad and this community to get those very, very low rents. That happens to not be a feature of the La Costa project. So I would tell you that this
project is more work for us and considerably so. It is not just a loan application. We are going to
have to close it and comply with prevailing wage requirements and we have to report to another
0 HOUSING COMMISSION MINUTES
AUGUST 1,2002 PAGE 6 of 9
regulatory agency for 75 years as well so this is a significant amount of work. I think that brings
something special to the community. These will be the lowest rents in the community, and
certainly among the lnclusionary projects. That may or may not impress you, but I’m hoping will convince you that it would be fair for us to receive the full fee that the other agencies would allow,
to increase it to 1.2 million, it will not cost the city a dime. There is a certain black magic in tax
credit financing, but the plain fact is that if you increase that fee, what can happen is the amount of
loan we are asking for will not go up. What it does is lets us get tax credits based on the
additional fee.
Point two is that you expect to get your loan paid back. Because of the way the numbers work, it also does not decrease the cash flow to the city. So the only economic impact over this 10 year
period would be to that capital. The project costs more, you get more tax credits, you get more
tax credits to sell for Red Capital, and they put more money into the project. We would hope that
you would find because of our additional work, any additional benefit to the community, which is
not a penny’s worth of additional obligation, or cost to the city. We see that as a good selling point
to allow us the full fee that would be allowed by the other agencies. I understand that‘s almost
incomprehensible, but it is true. James Schmid asked Evan Becker to speak.
Mr. Evan Becker said in addition to the tax credit fee levels being regulated already, each state,
through their state allocated agency, sets the 50% limit already mentioned. That has evolved over
the years a tremendous amount of public policy discussion; the developers, housing, and the
public sector. We will be a limited partner in the project for fifteen years. It will have to comply
with affordability restrictions. It is to our benefit that the investor keep us in it for 15 years. That fee plays a very important part for us, not because we care that much about them making that fee,
but it’s their stake in the project. If for some reason they don’t a) deliver the benefits to us that
give Us the return for us putting in the tax payer equity or b) for some reason they don’t deliver a
project that complies with all of the affordability requirements and deliver to you what you want in
terms of these affordability levels, quality people, the unit built on time, leased up and so on. If for any reason they falter, they are at risk and what is at risk is that developer fee. That is their stake
in the project. That’s their cushion that we would use as both the lender and an investor in the
project to make sure it has to get finished, that it gets leased up to qualified people, and actually
that over time, the entire 15 years we are in it, that they comply.
Mr. Becker continued they have a very good asset management group which is watching
throughout the construction, the lease up and qualification of move-in plus through the 15 years
that they are involved as a limited partner. The point of the developer fee, in the sense of an
affordable tax written project, is not profit in the sense of your more traditional conventional
project; either home ownership or rental. It is a fee that a) is earned for a tremendous amount of
effort, which is extraordinary in terms of dealing with affordable housing, and b) it is something
that compensates for a lot of risk that they take because they guarantee in several different ways
that they will deliver the project. In the case of an lnclusionary context, there is another player
that has a lot at stake there too. It plays a key economic roll and fee levels have been set.
Vice-chairman Scarpelli asked a question to staff. We are talking about a development fee of 1
million with a request by the Developer that the fee be increased to the maximum allowable by
200,000. Does staff want to make any recommendations to the commission?
Craig Ruiz said the Affordable Housing Policy Team reviewed the project and felt the fee was
comparable with other projects in the city.
Commissioner Renee Houston asked, is there a reason to set the cap there?
Evan Becker said, in this case it is $200,000 less then the maximum state allowance.
a HOUSING COMMISSION MINUTES
AUGUST 1,2002
PAGE 7 of 9
Craig Ruiz stated the criteria the Housing Policy Team utilizes and how the amount of the fee
compares with other projects.
Commissioner Renee Houston questioned whether there had been a time when staff had waived
it before.
Craig Ruiz answered that it is not necessarily a waiver. The last time we reviewed the issue of a
developer fee was with the Villages of La Costa project.
Debbie Fountain said that when the policy was looked at, a whole spreadsheet was laid out to
look at all the projects and how they compare. Not approving 1.2 million dollars is a policy from
staff, but it does not mean that the commission will be breaking any rule or we have to approve a
variance or waive it. If you think that the developers made a good argument that they should get
the whole 1.2, you can make that decision from a policy standpoint at this level, and that is what
we told the developer we thought was most appropriate since the staff level was maintained from
the perspective of the team and this is how they look at the total costs and how it compares. But it
doesn’t mean that as policy makers, you, or the city council can’t raise that for good reason.
Commissioner Renee Houston asked, in La Costa was it 1.2 million? And staff recommendation was consistent with that?
Debbie Fountain answered right. The La Costa project as a percentage was consistent.
Commissioner Renee Houston stated, in here you have a million, but that‘s what your
recommendation was?
Debbie Fountain said right. They (the developer) are asking for 1.2 million.
Vice-chairman Scarpelli said the presentation by the developer and Becker would warrant a
consideration. He felt enough of a comparison was made, though it was hard to follow. The
commission would like to see that spreadsheet (reviewed by staff) and a comparison to some
previous projects to review why this project doesn’t have the benefit of the additional $200,000 as
being requested by the developer. Is that available, and how soon would it be available to us to
review it? I’d like to recommend to the commission to leave it open so that we can study the request on the basis of the spreadsheet that was done. They certainly have made a good
argument for it, but then again staff is not supporting it. I’d like to review that spreadsheet.
Commissioner Renee Houston questioned the developer fee money. It was brought up at the last
meeting on La Costa. Where does that come from?
Craig Ruiz answered when put all together it is off the top.
Commissioner Renee Houston said okay.
Mr. Wallace Dieckmann interrupted. It doesn’t come off the top. The developer’s fee is the buffer
of the project. If the project costs overrun what they are expected to be, it comes out of that.
Commissioner Renee Houston asked what would happen if there are no costs overrun.
Mr. Wallace Dieckmann said it is a project cost.
HOUSING COMMISSION MINUTES
AUGUST 1,2002 PAGE 8 of 9
Debbie Fountain concurred it is a project cost. What they are saying is that they are only going to have a certain amount of money to pay for costs, so if that exceeds the amount of money they
have, the developer fee will pay for the cost overrun.
Mr. James Schmid said if you were to approve this, it does not increase the city’s economic
interest.
Vice-chairman Scarpelli said that once again you made a very good argument for it and it is an
issue of $200,000, and still if staff was supporting it, it would be very easy to go along with that recommendation. Since staff is not supporting it, we don’t have the details that were available to
staff to not grant the request for the $200,000. What I would like to do is make a motion that we
consider the request of the developer for the additional $200,000 subject to our review of the
analysis by the policy committee and that be accomplished within one week from today.
Debbie Fountain asked if they want another meeting in one week.
Commissioner Renee Houston said only an informational meeting.
Debbie Fountain said we would have to schedule another official meeting of the Housing
Commission because action would have to be taken.
Vice-chairman Scarpelli stated it is going from here to Council. How soon will it be going to
Council? So obviously we would have to meet before it goes to Council if we are going to
recommend a higher fee after review of the facts. That is if we want to support the request.
Debbie Fountain said it won’t go to council until the commission actually makes a
recommendation. It couldn’t go before September 10, 2002. If you want it to continue, I don’t know how that affects the scheduling.
Craig Ruiz said there is a real time issue with our approval.
Vice-chairman Scarpelli asked how much time is needed?
James Schmid asked if everything could be approved except the $200,000 fee. Subject to review
at a subsequent meeting so that we can go forward with the MHP and demonstrate our readiness.
Vice-chairman Scarpelli said the commission will go ahead and approve the resolution as
recommended by the staff and take time later to review what is being requested. He commented
that it seems like a legitimate request and legitimate time and effort should be given to evaluate it.
ACTION: Motion by Commissioner Houston that the Housing Commission adopt
resolution 2002-03 recommending approval to the City Council to provide $1,060,000 in
financial assistance to issue tax exempt bonds in an amount not to exceed $8,500,000, and
approval of the loan agreement and related documents for construction of one hundred six
affordable apartment units to satisfy the requirements of the lnclusionary housing ordinance
for the Calavera Hills Master Plan Phase II and to request additional time to explore the
additional $200,000 requested in developer fee.
VOTE: 3-0-0
AYES: Huston, Griffith and Scarpelli
NOES: None
ABSTAIN: None
ABSENT: Ritchie
27
0 HOUSING COMMISSION MINUTES
AUGUST 1,2002
PAGE 9 of 9
DIRECTOR REPORT:
Debbie Fountain said she didn't have anything to add.
ADJOURNMENT
By proper motion, the Special meeting of August 1,2002 was adjourned at 7:02 p.m.
Respectfully submitted,
Debbie Fountain
Housing and Redevelopment Director
PATRICIA CRESCENT1
Minutes Clerk
MINUTES ARE ALSO TAPED AND KEPT ON FILE UNTIL THE WRITTEN MINUTES ARE
APPROVED.
23
Sent By: CHELSEA INVESTMENT CO’ e 8582592644 ;
EXHIBIT 3
Memo
To: Debbie Fountain, Craig Ruiz
5 Aug’O2 12:27PM; Job 559;Page 214
Cmm: Jim Schmid
Date: August 5,2002
cc: Brian Milich, Wally Dieckmann, Evan Becket, Cheri Hoffman
Re: Calavera Hills Developer Fee
Thank you for your cooperation and assistance Thursday night. We appreciate the staff
report and presentation and the Committee’s approval of the project financing and City loan
commitment.
This memorandum is offered in support of our request that the City allow the full $1.2 million
developer fee permitted under the California Tax Credit Allocation Committee regulations.
As you knaw, the Calavera Hills project will be unique among inclusionary projects
developed in Carlsbad in the very low rents it provides to Very Very Low Income
households. Most inclusionary projects provide affordability to households earning 50% to
60% of Area Medlan Income. In contrast, Calavera Hills will offer 32 units to households earning 20% to 30% of Area Median Income. These families will pay rents that start as low
as $216 for a one-bedroom unit and $242 for a two-bedmm unit. The Staff Report
indicates ”thls project wlil contain the most affordable units of any such development in the
City of Carlsbad.” Indeed, we are not aware of any inclusionary project in the entire County
providing this level of affordability.
There is one reason, and one reason only, that Calavera Hills will be affordable to Very
Very Low Income households. The additional subsidy that achieves this level of:
affordability is the Multifamily Housing Program funds that we obtained in a competitive
application process that resulted in an award of almost $3.8 million of state funds to the
Sent By: CHELSEA INVESTMENT CO. m 8582592644; 5 Aug’02 12:27PM; Job 559;Page 3/4 0
project. The primary condition of the MHP award is that the project provides units at
affordable rents to Very Very Low Income households.
The application process required a great deal of work and was very competitive.
Approximately 70 applications were submitted for some $42 million of avallable funds.
Calavera Hills received one of just 15 MHP awards in the entire state and almost 9% of the
statewide allocation. In addition, to the work required to obtain the commitment, additional
work will be required to coordinate the award with other funding sources, observe prevailing
wage laws, and to comply with the MHP regulatory program. Compliance with the MHP
program guidelines and annual reporting and certification will be required for 55 years.
It is for this additional work, which results in achieving an important City housing policy of
deep targeting to Very Very Low Income families, that we request the full statutory fee of
$1.2 milllon.
This requested fee is allowed under the regulations of the California Tax Credit Allacation
Committee, the California Debt Limit Allocation Committee and the MHP program, which
provide 92% of the funding required for the project.
As we understand it, the City has a policy which determines a developer fee based primarily
or exclusively on the cost of the project. We understand that it Is important that the City
have a policy on this issue in order to maintain costs at a reasonable level and to maintain
fairness among developers. Clearly, however, the amount of work and the risk involved
with a project is not directly or solely correlated with project size alone. Therefore, we think
that the policy should allow flexibility in calculating the developer fee in order to avoid
discouraging developers from undertaking the more difficult projects that satisfy important
City housing goals. Rather. we sucraest that the Citv rmlicy allow for the waiver of the cap on the fee where aood cause is shown. ‘Good cause” could include Droiects that are more
difficult to finance and develop such as s~ecial needs proiects, mixed income or mixed use
groiects, or, as here. extraordinarily deep targeting to Vew Vew Low IncomeJamilies. In
other words, the developer should be able to show good cause for a waiver of the fee cap
where he demonstrates that the project satisfies an important City housing goal and that it takes significant additional work to do so. We believe that those criteria are satisfied here.
As it is appears to be structured, the current rigid “percentage of cost” method of
determinlng the development fee would discourage developers from undertaking unique
projects even if they satisfy important City goals and objectives, since the City cffers no
compensation for the additional time, effort and risk required to do so.
Here are some additional facts that we think you should take into consideration:
1. The addltknal affordability achieved at Calavera Hills is solely a result of our
success in obtaining MHP funds. The project is receiving $10,000 per unit
subsidy from the City, the same amount of subsidy it has loaned to other projects
that provide 50%-60% affordability.
Ptlye 2
Sent By: CHELSEA INVESTMENT CO; * 8502592644; 5 Auq'02 12:28PM; Job 559;Page 414
subsidy from the City, the same amount of subsidy it has loaned to other projects
that provide 50%-60% affordability.
2. Permltting the requested developer fee would not result in an_y increase of the
City financial contribution to the project. It will remain at the $10,000 per Unit
level approved for most other projects which achieved much lower affordability.
3. Further, allowing the fee does not reduce the amount of cash flow avallable to
repay the Clty loan. Cash flow will remain as projected.
4. Atlowing the requested developer fee does result in increased tax credit equity
invested in the project by the tax credit investor. The investor, Red Capital
Markets, Inc. favors the requested development fee and will contrlbute additional
equity to the project if the larger fee is approved.
5. As Evan Becker testified, the tax credit investor pays the development fee
through is equity contribution to the project. However, the investor controls the
payment of the fee throughout the development and lease-up of the project, 80 that a portion of the fee is always held in resewe to insure the completion of
construction, lease-up and sound management of the project.
6. If there are cost over-runs or other problems in the development process, the
funds earmarked for payment of the development fee are instead expended to
remedy the problems.
SUMMARY AND CONCLUSION
Cslavera Hills is a unique project that offered dramatically lower rents than any other
inclusionary project in the Clty and perhaps in the entire County. This affordability will be
achieved through the use of Multifamily Housing Program funds the we secured through
successful participation in a competitive appllcation process. Other affordable housing
developers could have applied for the MHP funds and could have brought the same level of
affordability to inclusionary projects in Carlsbad, but none did. We should be compensated
for the additional work which satisfles an important priority in the City's Housing goals. The
requested developer fee, which complies with the regulations of every other lender and
investor in the transaction, as well as the State agency which regulates the tax credit
program, does not increase the costs to the City, nor does it diminish the City's cash flow or
security. Therefore, we respectfully request a developer fee in the full amount of $1.2
million permitted by law.
Page 3
Calave-1 .XIS EXHIBIT 4
Calavara Hills Ranch
MHPlFNMA I Low-Income Housing lax Credits 4%
PROJECTEDSOURCESANDUSESOFFUNDS
106 units ~ 50~,~-Test-,.~-"~
i Pass 1
Subtotal I. -I ."..,. ".,! (Actual)
$1.2M - $25K AM FEE 8-1-02 REVISED 8-14-02
~ ~~
1:30 PM construction period Completion Construction break-eve1
Quarter1 Quarter 2 Quarter 3 Quarter 4 Period Qtrs 5 8 E
1 Deferred Fees(50%Developer Fee 8 Contractor Fee) 0 256.63
2 B of A Construction Loan 0 3,786.34
3 LIH Tax Credits (25%. 30%,30%.15%)
1,864,786 1,864.786 (1,864,78
1,392,860 .
4 Activity Bonds Used 1,671,432 1,671,432 4,735,724 835.71
5 City Loan @ $10,00O/unit 1,060,000
5 Master Developer Contribution 123,000
5 Master Developer Contribution (Bridge Bonds) 2,600,000 2,600,000 (2,600.00
6 Total Sources of Funds 5,478,342 4,199,954 4,160,482 1,671,432 15,510,210 413.91
7 Site Acquisition
8 TitlelRecording 8 Escrow 5,000
9 Subtotal Site Acquisition 5,000
SOURCES OF FUNDS
MHP
302,482 4,199,954 624,264 5,126,700
1,060,000
123,000
USES OF FUNDS
5,000
5,000 1,338,688 446,229 1,784,917 10 Grading I On-site Infrastructure
11 Structures @/ft
15 Contingency %of Hard Costs
16 5%
17 Contingency % of Soft Costs
18 3%
19 Contractor OH, Profit & Gen. Req'ts
20 "' 14%
12 s 75.00 708.780
104,452
93,051
301,269
2,835,120
159.474
22.1 11
481,715
3,189,510
155,010
23,766
468.233
354,390
17,223
10,422
52,026
7,087,800
0
436,160
0
149,350
0
1,303,243
0
21.83
21 Developer OHI Profit 8 Gen. Req'ts 120,000 120,000
22 120,000 120,000 480.000 720.00
23 SDGE 8 $345/unit 36,570
., 1 , 15% 0
36.570 23 Permit Fees 8 Plan Check
24 :# ; $728/unit
25 Impact Fees - CFDs
26 . 8,
27 School Fees
29 Water 8 Sewer Fees
30 $3,896/un&
31 Architects I Engineering Fees
32 Pre-construction - Studies
33 Pre-construction -Appraisals
34 Pre-construction - Environmental Study
34 Bond Premium/Contractor
35 Title 8 Recording
36 Real Estate Taxes
37 Legal I Improvements Fees
38 Other - AccountinglFinance
39 LiabiliylCOC Insurance
40 Subtotal Improvements
53,@9/unit
28 ,_ ' ' .$6,7WtiqR
77.168
407,994
71 1,048
412,976
300,000
10,000
10,000
10,000
101,760
15,000
7,500 15,000
15,000 5,000
10.084 9.894 9.905
77,168
0
407,994
0
711,048
0
412,976
0
300,000
10,000
10,000
10,000
101,760
15,000
22,500
20,000
29.883
5.001
35,000 35,000
4,826,340 4,074,542 3,986,424 554,061 13,441,367 746.83 41 Other LoanilCAC Costs 52,431
42 Construction Loan Letter of Credit I Origination Fees @ 76,900
43
44 Bank Legal Counsel Fee 8 Documentation
46 Construction Inspection Fee $450 per month 3,350 47 Net Construction Interest 1,350 1,350 7,400 2,701 1,350
48 Subtotal InterestlFees 273.613 125.412 174.058 175.359 748.442 2 701
52,431
76,900
., , 1 SO% 0
35,000 35,000
172.708 174,009 576,710 105,932 124,062
49 Marketing Fees
50 Replacement Reserve
51 Insurance Reserves
2,500 2,500 2.501
0
0
53,84:
23.45,
~, ~~ ~. ~ -. -
52 Operating Deficit Reserve
53 FNMAjDUS Commitment Fee,
322,400 322,400
54 . '
77,267 77,267
53 Underwriting Fee 92,720
0
54 92,720
55 Legal(underwriter, DUS lender, FNMA) /Financing 80,000 0
57 Cash Flow Verification Consultant 8 Audit 4,000 80,000
58 Non Permanent Loan Oper Interest 4.000
59 Trustee 28,838 28.838 172,85
60 Rating Agency 13,500
60 CDLAClCDlAC 4,000 61 Bond Counsel 35,000 62 Printing 8 Mailing 4,084
63 Borrower's Counsel 40,000
64 Issuer Fee - 25 bps 12,817
~. . .-
;; ., :I .O%
1.2%
10,000 10,000
13,500
4,000
35,000
4.084
40,000
12,817 Total Uses of Funds 5,478,342 4,199,954 4,160,482 1,083,157 14,921,935 1,002.18
Net Source & Use 0 Distributions 0
Balance of Funds 0 0 0 588,275 588.275
425,482 4,199,954 624,264 0 4,073,149 3,786.34
0 0 588,275 588.275 (588.27
0
Total Project Costs
51.87% -
Total
256,638
3,786.342
5,126,700
5,571,441
1,060,000
123,000
a
0
15,924,121
0
5,000
5,000
1.784.917
7,087,800
0
436,160
0
171,181
0
1,303,243
0
1,200,000
0
36,570
77,168
0
407,994
0
71 1,048
0
412,976
0
300,000
10,000
10,000
10,000
101,760
22,500
15,000
25,000
29,883
35,000
14,188,198
52,431
76,900
0
35,000
576,710
10,100
751,142
5,000
53.847
23,451
322,400
77,267
0
92,720
0
80,000
201,695
4,000
10,000
13,500
35,000
4,000
40,000
4,084
15,924,121 12.81 7
. . . . . . .
0
0
0
, 15,924,121
09mBnW2 4.55 PM
Calave-l.xls
Soft Costs Totals
Arbitrage- Interest Earned on Undisbursed Bonds
Beginning Bond Loan Balance
Quarterly Construction Disbursement
Bonds Undisbursed at End of Quarter
Average amount of Disbursed Bonds
Interest From Closing
Previous Balance Interest
Quarterly Average Interest on disbursed during quarte
3 months Interest on Undisbursed Proceeds
Total Interest per Quarter
Balance of Undisbursed Funds
-2.50%
Interest on Bonds Proceeds Upon Closing
Interest for 18 months
Payments
Loan Balance Interest Rate@
6.75%
Master Developer Contribution (Bridge Bonds)
Construction Interest
B of A Construction LOC against MHP Commitment
8.00%
Net Interest Paid on Bonds
TCAC 8 Other Related Costs:
Initial Filing Fee:
Reservation Fee, as % Of Federal Credit Amount
TCAC Monitoring Fee:
FilinglPreparaiion
3,101,716
5,126,700
302,482
4.824.218
100,827
0
0
(630)
(30,151)
(30,782)
4.824,218
5,126,700
86.513
5,126,700
2,600,000
6.50%
42,250
0
0
55,732
$410
11,244 33,255 30,188
792,196 347,385 737,021
4,824,218 624,264
4,199,954
624,264
624,264
0 0
1,399,985 208,088 0
180,557
727,700
0
0
624,264 0 0 0
5,126,700 5,126,700 5,126,700 5,126,700
86.513 86.513 86,513 173,026
5,126,700 5,126,700 5,126,700 5,126,700
0 0 37,296
0 0 0
42,250 42,250 42,250
0 1,864,786 0
0 37,296 37,296
73.862 85,213 86,513 173,026
5,706,018
2,a00
1.0% 6,971
43,460
. . . . . . . . . . . .. .. 52,431 ..
33
Calavara Hills Ranch
I 06
2 B R/2 BA
0 0 0 1,800 Clubhouse
344,064 896 41 937 32,864 1,027 32 60% 3BR/2BA
377,496 749 32 781 36,876 878 42 60% 2BRI2BA
378 I 72,576 32 410 14,048 878 16 30%
Total Rents 106 92,704 844,680
Laundry $ 10.00 Per unit/ Per month 1 2,720
Other Income (App. Fees, Late, etc.) $ 150.00 per month 1,800
Sub-Total 859 200
Less: Vacancies @ 5%
~~~ ~~ ~~
42,960 I
ITotal Income $816,240
Operating Expenses
Building Maintenance Expense
Cleaning
4,475 Painting
2,000 Carpets
3,240
Sub-Total $9,715
Appliance Repairs
Supplies
0 Plumbing Repairs
Electricical Repairs
6,000 Building Repairs
0
0
Trash Removal 1 2,000
Other 1.200 I Total Bld. Maintenance $28,915
Assistant Managers Salary
24,000 Maintenance Salary
12,000
6,832 Payroll Taxes & Worker's Comp
Aministrtation/General 4,000
Total On-Site Management $81,584
Management Fees 5.0% of Total Income 40,812
Taxes:
Property
2,500 Personal Property
0
2,500 Total Taxes
Utilities:
Gas & Electric
2,400 Telephone
2 1,800
53,600 Water & Sewer
Total Utilities $77,800
Total Expenses . $ 2,740 Per Unit $290,461
lNet Operating Income $52 5,779
[Reserves $400 per Unit 42,400
lNet Income Available for Debt Service 483,379
Perm Loan :
Debt Service Coverage 1.20
Interest 6.750%
Amortization 30
Valuation Cap Rate 8.25%
Loan to Value @ 90% ** Value without tax credits
Potential Reduction in Loan
Bond - Tax Exempt
Taxable Tail 15%
5,126,700
5,126,700
5,859,139
5,273,225
(146,526)
0 Calavara Hills Ranch
0
EXHIBIT 6 - DEVELOPMENT BUDGET 8. CALCULATION OF TAX CREDIT EQUITY
06-Sep-02
04:54 PM
DEVELOPMENT BUDGET & CALCULATION OF TAX CREDIT EQUITY (Con’t)
36
0 EXHIBIT 6, PAGE 2 0
ACTUAL OR EST. 30% 70%
DESCRIPTION OF COSTS ELIGIBLE BASIS ELIGIBLE BASIS OF COSTS
NON PERMANENT OPERATING LOAN INTEREST
TOTAL RESERVE COSTS
XXXXXXXxMo(X XXXXXXXXXXXXX $201,695
XXXXXXXXXXXXX XXXXXXXXXXXXX $601,392
TOTAL RESIDENTIAL COSTS $14,895,880 $15,924,121
I TOTAL COMMERCIAL COSTS $0 I $0 11
1 TOTAL PROJECT AND BASIS COSTS $15,924,121 I $14,895,880
1130% DIFFICULT DEVELOPMENT FACTOR? Tract #: Not Avail. Y $19,364,644 I $150.227.55/unit $171.77lsq fl
[TX CREDITS @ Tx Credit Rt @ % LI Eligible 3.60% 1 OO:QO% $697,12711
MAXIMUM TAX CREDITS $0
ITX CREDITS OVER TEN YEARS $6,971,271.93 I
ITX CREDIT EQ'Y@$/Credit@% Investment $0.80 99.90% $5,571,441 I
37
off 0 00 0 00
'4
L P
08 0 00 0 00
0. 3
0% 0 00 0 00
0 "
L
38
m
3 3 lL
v) I
0 4
0 I B
6
a
z c
a 4
K q +
P
0
WW zz
0. 8 n 8
Calave-2.xls
Calavara Hills Ranch
MHPlFNMA I Low-lncome Housing Tax Credits 4%
PROJECTEDSOURCESANDUSESOFFUNDS
106 units
Subtotal
EXHIBIT 5
$lM - $25K AM FEE REVISED 8-14-02.XLS construction period Completion Construction break-even
1:30 PM
SOURCES OF FUNDS
Quarter1 Quarter 2 Quarter 3 Quarter 4 Period Qtrs 5 8 6
1 Deferred Fees(50%Developer Fee 8 Contractor Fee)
2 B of A Construction Loan 2,033,591
3 LIH Tax Credits (25%, 30%,30%,15%)
4 Activity Bonds Used 444,445 4,200,871 481,383
5 City Loan @ $10,0OO/unit
5 Master Developer Contribution (Bridge Bonds) 2,600,000 2,600,000 (2,600,000
6 Total Sources of Funds 5,478,856 4.200.871 4,164,267 1,649,293 15,493,287 234,035
7 Site Acquisition
8 TitlelRecording 8 Escrow
9 Subtotal Site Acquisition
MHP
0 256.638
0 3,786,342
2,033,591 (2,033,591
1,649,293 1,649,293 4,672,996 824.646
5,126,700
1,060,000
1,374,411 .
1,060,000
USES OF FUNDS
5,000
5,000
5,000
5.000
10 Grading I On-site Infrastructure
11 Structures @/ft
12 s ',_ ' .' ,75.60
15 Contingency % of Hard Costs
16 I :_ .,' , . . .> , , .;'. , I 5%
, .> , . 1,
,I,
17 Contingency % of Soft Costs
18
19 Contractor OH, Profit 8 Gen. Req'ts
i 3%
20 ;: . 3: I' ., ~ . 14%
21 Developer OH; Profit 8 Gen. Req'ts
22 15%
39 LiabilitylCOC Insurance
40 Subtotal Improvements
41 Other LoanlTCAC Costs
1.338.688 446,229
708.780 2.835.120
104,452 159,474
93,066 22,137
301,269 481.715
120,000 120,000
36,570
77,168
407,994
71 1,048
412,976
300,000
10,000
10,000
10,000
101,760
15,000
15,000
7,500
10.084 9.894
3,189,510
155,010
23,876
468,233
120,000
15.000
5,000
9,905
1,784.917
354,390 7,087.800
0
17,223 436,160
0
10,523 149,603
0
52,026 1,303,243
0
120,000 480.000
0
36,570
77.168
0
407,994
0
71 1,048
0
412,976
0
300,000
10,000
10.000
10,000
101,760
15,000
22,500
20,000
29.883
15,831
520,000
5,000
35,000 35,000
52.339 52.339
4,826,355 4,074,569 3,986,534 554,162 13,441,621 540,831
43 :: '>
42 Construction Loan Letter of Credit I Origination Fees Q 76,900
44 Bank Legal Counsel Fee 8 Documentation 35.000
. . .. .. ,, )_' , , ' , , 'I, '1.50% . ..
: ,_
76,900
0
35.000
46 Construction Inspection Fee $450 per month 3,350 1,350 1,350 1,350 7,400 2,700
47 Net Construction Interest
48 Subtotal InteresUFees
49 Marketing Fees
50 Replacement Reserve
51 Insurance Reserves
52 Operating Deficit Reserve
106,523 124,953 176.382 177,385 585,243
274,112 126,303 177.732 178,735 756,082 2,700
2,500 2,500
0
2,500
53,847
0 23,451
322,400 322,400 53 FNMNDUS Commitment Fee 77,267
54 53 Underwritina Fee 97 77n
1.0%
~ ~ ~~ " ", ;, .. . ,. . 54 '.
55 LeoaMunderwriter. DUS lender. 'FNMA) I Financino 80.000
-_ :'"~ , ~ . : ; 1.26/.
57 Cash Flow Verification Consultant 8 Abdit 4,000
58 Non Permanent Loan Oper Interest
60 Rating Agency
59 Trustee
60 CDLAClCDlAC
61 Bond Counsel
62 Printing 8 Mailing
63 Borrower's Counsel
64 Issuer Fee - 25 bps Total Uses of Funds
Net Source 8 Use
Distributions
Balance of Funds
10,000
13,500
35,000
4,000
40,000
4,084
77.267
92,720
80,000
28,838
4,000
28,838 173,366
10,000
13,500
4,000
35,000
4,084
40,000 12.817 5.478.856 4,200,872 4,164,266 1,086,634 14,930,628 796,695
0 5,126,700 3,786,343 1 562,659 562,659 (562,659
12,817
444,445 4,200,872 481,383
0 (0)
0 0
0 (0) 0 562,659 562,659
Total Project Costs
52.57%
Total
256,63€
3,786,342
C
5,497,642
5,126.70C
1.060,OOC
C
15,727,323
0
5,000
1,784,917
5.000
7,087,800
0
436,160
0
165,434
0
1,303,243
0
1,000,000
0
36,570
77,168 a
407,994 a
71 1.048
0
412,976
0
300,000
10,000
10,000
10,000
101,760
22,500
15,000
25,000 29,883
35,000
13,982,452
52,339
76,900
0
35,000
585,243
10,100
759,582
5,000
53,847
23,451
322,400
77,267
0
92,720
0
80,000
4,000
202,204
10.000
13,500
4,000
35,000
4.084
40,000
12.817
. . . . . 15,727,323 . .. . . . . . . . . . .
(0 0
@
~ , 15.727,323
Calave-2.xls -
Sofl Costs Totals
Arbitrage- Interest Earned on Undisbursed Bonds
Beginning Bond Loan Balance
Quarterly Construction Disbursement
Bonds Undisbursed at End of Quarter
Average amount of Disbursed Bonds
Interest From Closing
Previous Balance Interest
Quarterly Average Interest on disbursed during quarte
3 months Interest on Undisbursed Proceeds
Total Interest per Quarter
Balance of Undisbursed Funds
,: -2.50%
Interest on Bonds Proceeds Upon Closing
Interest for 18 months
Payments
Loan Balance Interest Rate@
6.75%
Master Developer Contribution (Bridge Bonds)
Construction Interest
B of A Construction LOC against MHP Commitment
Net Interest Paid on Bonds
TCAC & Other Related Costs:
Initial Filing Fee:
Reservation Fee, as % Of Federal Credit Amount
TCAC Monitoring Fee:
Filing/Preparation
11,244 31,255
3,102,215 737,912 795.870
5,126,700 4,682,254 481,383
444,445 4.200.871 481,383
4,682.254 481.383 0
.. . 148.148 1,400,290 160,461
0 0 .. .. ...l .. .............,
(926) (8,752) (I ,003); 0;
(30,190) (11,760) (I ,003 j (29,264) . ... " ..P. 009) ...~
4.682,254 481,383 0
5,126,700 5,126,700 5,126,700
86,513 86.513 86,513
5,126,700 5,126,700 5,126,700
2.600.000 0 0
6.50% 0 0
42,250 42,250 42,250
0 0 2,033,591
0 0 40,672
56,323 74,753 85.510
Mi0
350,761
30.188
0
0
181,066
527,700 5,514.458
0
0
0 0
5,126,700 5,126,700
86,513 173,026
5,126,700 5,126,700
40,672
0
42,250
0
40,672
86.513 173.026
. ', n,m,
1.0% 6,079
43,460
.. ... . 52,339
09106R032 4 53 PM
Calavara Hills Ranch
106
Q1 Q2 Q3 Q4
Bond Amount
5,126,700 4,682,254 481,383 0 0
444,445 4,200,871 481,383 0 0
4.682.254 481.383 0 0 0
Calavara Hills Ranch
106
06-Se~-02
Carpets
4,475 Painting
2,000
$9,715 Sub-Total
Managers Salary
' ', 6,832 Payroll Taxes & Worker's Comp
', 24,000 Maintenance Salary
" :12,qoo Assistant Managers Salary
',i ' 24,000
Aministrtation/General ,' 4,000
Total On-Site Management $8 1 ,584
Management Fees 5.0% of Total Income 40,812
Taxes:
Property
.. 2,500 Personal Property
.. ' '0
I Total Taxes 2,500
Utilities:
Gas & Electric
53,600 Water & Sewer
I ,, , '. . 2,400 Telephone
'1: .' 21,890
Total Utilities $77.800
ITotal Expenses $ 2,740 Per Unit $290,461
[Net Operating Income $525,779 ~
I Reserves $400 per Unit 42,400
[Net Income Available for Debt Service 483,379
Perm Loan :
Debt Service Coverage 1.20
Interest 6.750%
Amortization 30
Valuation Cap Rate 8.25%
Loan to Value @ 90% ** Value without tax credits
Potential Reduction in Loan
Bond - Tax Exempt
Taxable Tail 15%
5,126,700
5,126,700
5,859,139
5,273,225
(1 46,526)
(L
+ P
m
0
L n Q k n
V J
u15 .= u1 EO 25 00
EXHIBIT 6
EXHIBIT 7
U u)
0 0
EXHIBIT 8
53
EXHIBIT 9
e EXHIBIT 4
DATE: AUGUST 1,2002
SUBJECT: SDP 01-05 - CALAVERA HILLS AFFORDABLE APARTMENT
DEVELOPMENT- RECOMMENDATION OF APPROVAL TO THE CITY
COUNCIL TO PROVIDE $1,060,000 IN FINANCIAL ASSISTANCE, TO
ISSUE TAX EXEMPT BONDS IN AN AMOUNT NOT TO EXCEED
$8,500,000, AND APPROVAL OF THE LOAN AGREEMENT AND
RELATED DOCUMENTS FOR CONSTRUCTION OF ONE HUNDRED SIX
AFFORDABLE APARTMENT UNITS TO SATISFY THE REQUIREMENTS
OF THE INCLUSIONARY HOUSING ORDINANCE FOR THE CALAVERA
HILLS MASTER PLAN PHASE 11.
1. RECOMMENDATION
That the Housing Commission ADOPT Resolution No. 2002-003 recommending APPROVAL
to the City Council to provide $1,060,000 in financial assistance from the Housing Trust Fund, to
issue tax exempt bonds in the amount not to exceed $8,500,000, and approval of the Loan
Agreement and related documents with Chelsea Investment Corporation for construction of one
hundred six (106) affordable apartment units to satisfjr the inclusionary housing ordinance
requirement for the Calavera Hills Master Plan Phase 11.
11. PROJECT BACKGROUND
On January 22, 2002, the City Council approved the Calavera Hills Master Plan Phase II. The
Master Plan allows for the development of the remaining areas of the Calavera Hills community.
Under the original Master Plan approval, 1,619 residential units have been developed in Calavera
Hills. The approval of Phase I1 of the Master Plan will allow for the build-out of this
community. Phase I1 will allow for the development of 706 units, 106 of which will be
affordable to low-income households.
111. PROJECT DESCRIPTION
The affordable apartments units will be located on the west side of the fiture extension of
College Boulevard. Approximately % mile south of Carlsbad Village Drive, in what is known as
Village Y of the Calavera Hills Master Plan Phase II (Exhibit 4). The106 affordable units will be
developed by Chelsea Investment Corporation (Developer).
SDP 01-05 - CALAVEFU HILLS AFFORDABLE HOUSING PROJECT
AUGUST 1,2002
PAGE 2
The proposed 106-unit affordable apartment project consists of 14 residential structures, a 2,100
square foot recreation building, and a leasing office. The proposed development includes 10
one-bedroom (9%), 64 two-bedroom (60%) and 34 three-bedroom (3 1 %) apartments. Units will
range in size from 615 square feet for the one-bedroom unit, 905 square feet for the two-bedroom
unit and 1,045 for the three-bedroom unit. The project will contain three unique recreation areas,
with amenities for all ages. Within the three areas, amenities will include turf play areas, a play
structure, a basketball half court (or other teenage type activity area based upon Planning
Commission recommendation), a picnic and barbeque area, and a gardening area. The project
will also feature laundry facilities and 242 parking spaces.
One significant feature of this project is the utilization of State of California Multifamily
Housing Program Funding (MHP). The MHP program is a competitive statewide loan program
that provides funding for affordable housing developments. In exchange for the loan, the MIW
program requires the Developer to rent 9% of the units (10 units) at levels affordable to
households earning 20% of the State Median Income (SMI) and 21% of the units (22 units) at
levels affordable to households earning 30% of SMI (SMI is approximately 1% higher than the
San Diego County Area Median Income). The remainder of the project, 74 units, will be
affordable to household earning 60% of the San Diego County Area Median Income. Thus, this
project will contain the most affordable units of any such development in the City of Carlsbad
IV. DEVELOPMENT TEAM
The Master Developer for Calavera Hills, McMillin Homes, has retained Chelsea Investment
Corporation (Chelsea) to develop the affordable housing project. Chelsea, which is based in
Solana Beach, has developed several affordable housing projects in the cities of San Diego and
Chula Vista, and also has experience in Imperial County and Yuma County, Arizona. The
architectural firm for the project is McKinley Associates. McKinley Associates were the
designers of the first affordable housing development in the City of Carlsbad, the Villa Loma
apartments. The architectural style of the Calavera Apartments is very similar to the design of
Villas Loma. The General Contractor will be McMillin Homes. McMillin Homes has extensive
experience in developing multi-family housing developments.
V. FINANCIAL ASSISTANCE
A. Cost Reasonableness
The developer has provided a detailed development pro forma for review by staff and the
Housing Commission (See Attachment 2). Since development costs are one of the key variables
determining the need for subsidies, it is important that those costs be reasonable. At
approximately $15.7 million, not including the cost of the land, the average unit cost of $148,000
is generally consistent with typical affordable multi-family development within the City.
2
SDP 01-05 - CALAVERA HILLS AFFORDABLE HOUSING PROJECT
AUGUST 1,2002
PAGE 3
B. Undue Gain
It is important that any financial assistance have the effect of making the units more affordable
and not creating undue gain for any party. The Developer will receive a “Developer Fee” of
$1,000,000, or approximately 6.4% of total project costs. The Developer is proposing that they
receive approximately 75% of the developer fee ($744,000) during the construction of the
project. The remainder of the fee, $256,000, would be repaid over the first ten years from income
derived from the operation of the project. Staff feels that the developer fee is within acceptable
limits for a project of this size and affordability. Further, the deferral of approximately 25% of
the developer fee is consistent with previous recommendations adopted by the Housing
Commission for similar projects.
C. Subsidy Analysis
The Developer is proposing to finance the project with a variety of hding sources, including
tax-exempt bonds, 4% tax credits and funding from the State Mutifamily Housing Program
(MHP). Under this scenario, the developer would initially receive approximately $8.5 million
from the bond issuance and will raise $5.5 million through the sale of the tax credits and $3.8
million from the MHP program. Under this scenario, staff is recommending the City provide
$1,060,000 in financial assistance with the understanding that the Master Developer will provide
$2.6 million in financial assistance and $6.5 million in land contribution. Under this option, the
City’s $1,060,000 million assistance equates to $10,000 per affordable unit. The $10,000 per unit
is equal to what has been previously approved for similar projects
The following is a summary of the sources and uses of funds based on the estimated development
costs and the proposed financing structure. The developer’s detailed proforma is attached as
Exhibit 2:
TOTAL PER UNIT
Permanent Senior Bonds
5 1,800 5,497,000 Tax Credit Investor Equity
2,400 256,000 Deferred Developer Fee
35,700 3,786,000 MHP Loan
10,000 1,060,000 City Contribution
$48,400 $5,126,000
, ,, Total Sources ’ z, ’’ . ,, ~$‘ $15.725.000 $148,00(
3
SDP 01-05 - CALAVERA HILLS AFFORDABLE HOUSING PROJECT
AUGUST 1,2002
PAGE 4
As noted previously, the initial amount of the bond issuance will not exceed $8,500,000. When
the project is constructed, the Developer will utilize bond proceeds, a construction loan, Master
Developer Contributions and the City Contribution to fund the construction of the improvements.
When the improvements are completed and the project is occupied, funds from the tax credit
investor and the MHP program will be paid to the Developer. Those funds will be utilized to pay
off a portion of the bonds. The principal amount of the bonds will be reduced to approximately
$5.5 million and will be repaid during the first 30 years of the operation of the development.
D. Form of Assistance
City assistance will be in the form of a residual receipts loan secured by a note and deed of trust.
The loan will begin accruing after the completion of construction of the improvements. The
outstanding principal and accrued interest on the City loan will be amortized over fifty-five years
and repaid from cash surplus in equal annual installments of principal and interest. In the event
that there is not adequate cash surplus to repay the City loan, the outstanding balance shall accrue
with simple interest at 3% per annum. The City may also receive repayment of the loan through
any savings between the amount budgeted for construction and the actual construction cost.
These savings will be split 50% to the City and 50% to the developer.
The financial assistance will be provided from the City of Carlsbad’s Housing Trust Fund. The
Fund currently has a balance of approximately $2.9 million.
E. Security
As stated above, the City takes a security interest in the property for the affordable housing
project. In addition, the Developer will be required to provide completion bonds to both the City
and the permanent lender to insure that construction is completed.
F. Risk
In its role as a lender to the project, the City is exposed to three risks inherent to real estate
development. These risks generally include 1) predevelopment (project does not get to
construction, 2) construction (project cannot be completed, cost overruns, contractor problems),
and 3) operation (revenues do not cover expenses). Adding to this risk, any City financial
assistance will be subordinated to conventional financing.
A number of factors mitigate the risks. First, the development team has a strong track record
with similar affordable housing projects. The presence of other major financial commitments,
such as a tax credit investment, is also key as this means that other stakeholders depend on the
success of the project both short and long term. Because the release of building permits for
market rate units are tied to the completion of the affordable units, the construction completion of
the affordable units is a strong incentive for McMillin Homes. Finally, the position of City and
other subordinated financing is a feature that helps attract the necessary private financing.
4 5 7
SDP 01-05 - CALAVERA HILLS AFFORDABLE HOUSING PROJECT
AUGUST 1,2002
PAGE 5
VI. FINANCIAL ASSISTANCE DOCUMENTS
A copy of the draft Loan Agreement and related documents are provided as exhibits (Exhibit 3)
to this report for review by the Housing Commission. The Commission is being requested to
review and recommend approval of this agreement and related documents in substantially the
form presented and subject to approval by the City Attorney.
VI1 SUMMARY AND STAFF RECOMMENDATION
It is the role of the Housing Commission to make financial assistance recommendations to the
City Council based on several considerations with respect to affordable housing projects. These
are:
The proposal's effectiveness in serving the City's needs and priorities as expressed in the
Housing Element of the General Plan and the Consolidated Plan.
The proposal's consistency with the City's affordable housing policies and ordinances as
expressed in the Housing Element and Inclusionary Housing Ordinance.
The proposal's development and operating feasibility, emphasizing the development team
capacity, financing sources and the role of the City in providing financial assistance or
incentives.
The Calavera Hills affordable apartment project is proposed by a capable development team led
by a credible for-profit developer that is committed to affordable housing. The financing
structure of the project is sound. The proposed City assistance meets the City's three key
underwriting goals of a strong borrower, reasonable project costs and a high degree of
leveraging. The project quality includes good design and location. City housing goals are
supported by the project's unit mix and affordability.
It is the Affordable Housing Policy Team's (stam recommendation that the Housing
Commission approve the resolution of support recommending to the City Council the following:
1) financial assistance in the amount of $1,060,000; 2) approval of the Loan Agreement and
related documents in substantially the form presented and subject to approval by the City
Attorney; 3) that the City of Carlsbad issue tax-exempt bonds in an amount not to exceed
$8,500,000.
VIII. EXHIBITS
1. Housing Commission Resolution No. 2002-003
2. Proforma
3. Draft Loan Agreement, Deed of Trust, and Regulatory Agreement.
4. Vicinity Map
5 5;";
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
HOUSING COMMISSION RESOLUTION NO. 2002-003
THAT THE HOUSING COMMISSION RECOMMEND APPROVAL TO
THE CITY COUNCIL OF $1,060,000 IN FINANCIAL ASSISTANCE FROM
THE HOUSING TRUST FUND, TO ISSUE TAX EXEMPT BONDS IN AN
AMOUNT NOT TO EXCEED $8,500,000, AND APPROVAL OF THE LOAN
AGREEMENT AND RELATED DOCUMENTS WITH CHELSEA
INVESTMENT CORPORATION FOR CONSTRUCTION OF ONE
HUNDRED SIX (106) AFFORDABLE APARTMENT UNITS TO SATISFY
THE CALAVERA HILLS MASTER PLAN PHASE 11.
’ THE INCLUSIONARY HOUSING ORDINANCE REQUIREMENT FOR
APPLICANT: CHELSEA INVESTMENT CORPORATION
CASE NO: SDP 0 1-05
WHEREAS, the Master Developer of the Calavera Hills Master Plan,
McMillin Homes, has proposed to construct 106 apartment units affordable to lower
income households as a means to satisfy a portion of their affordable housing
obligation as permitted by Carlsbad Municipal Code Section 21.85 of the City’s
Inclusionary Housing Ordinance; and
WHEREAS, the proposal to construct said units has been submitted to the
City of Carlsbad’s Housing Commission for review and consideration; and
WHEREAS, said Housing Commission did, on the lst day of August, 2002,
hold a special public meeting to consider the request for City financial assistance for
the construction of said 106 affordable housing apartment units by the affordable
housing developer, Chelsea Investment Corporation.; and
WHEREAS, upon hearing and considering all testimony, if any, of all persons
desiring to be heard, said Commission considered all factors relating to the proposal
to construct said affordable housing units.
NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing
Commission of the City of Carlsbad, California, as follows:
1. The above recitations are true and correct.
6
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
0
HC RESOLUTION NO. 2002-003
PAGE 2
2.
3.
4.
Iff
Iff
Iff
Ill
Iff
Iff
Iff
Ill
The request for City financial assistance is consistent with the goals
and objectives of the City of Carlsbad’s Housing Element,
Consolidated Plan, the Inclusionary Housing Ordinance, and the
Carlsbad General Plan.
The request for City financial assistance will assist the affordable
housing developer to construct a total of 106, one, two, and three
bedroom affordable apartment units which will be affordable to low,
very low and extremely low income households. The project,
therefore, has the ability to effectively serve the City’s housing needs
and priorities as expressed in the Housing Element and the
Consolidated Plan.
That based on the information provided within the Housing
Commission Staff Report and testimony presented during the special
public meeting of the Housing Commission on August 1, 2002, the
Housing Commission hereby ADOPTS Resolution No. 2002-003,
recommending APPROVAL to the City Council to provide up
$1,060,0000 in financial assistance from the City of Carlsbad’s
Housing Trust Fund to Chelsea Investment Corporation, and for the
City to issue tax-exempt bonds in an amount not to exceed $8,500,000
for the construction of one hundred six (106) affordable apartment
units to help satisfy the requirements of the Inclusionary Housing
Ordinance for the Calavera Hills Master Plan Phase 11.
7
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
5. That the Housing Commission recommends that the City Manager or
his or her designee be authorized by the City Council to execute all
documents related to provision of the City assistance, including but
not limited to a Loan Agreement, Note, Deed of Trust and Regulatory
Agreement, in substantially the form presented to the Housing
Commission on August 1, 2002, and subject to review and approval
by the City Attorney.
PASSED, APPROVED, AND ADOPTED at a special meeting of the
Housing Commission of the City of Carlsbad, California, held on the 1" day of
August, 2002, by the following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
EDWARD SCARPELLI, VICE-CHAIRPERSON
CARLSBAD HOUSING COMMISSION
DEBORAH K. FOUNTAIN
HOUSING AND REDEVELOPMENT DIRECTOR
HC RESOLUTION NO. 2002-003
PAGE 3
8
Cabvera Hills Dev Fee Capped 5lM - 525K AM Fee. c LS 0 Exhibit 2
Calavara Hili. Ranch .__ -. 106 units 50%Test ,
MHPlFNMA I Low-lncome Housing Tax Credits 4% 70%6gOWMI Pass . -. .. . . . . ._ . (Actual) PROJECTEDSOURCESANDUSESOFFUNDS
24Jui-02 construction period - Completion break-evef
130 PM
SOURCES OF FUNDS
Quarter1 Quarter 2 Quarter 3 Quarter 4 Qtrs 5 8 6
~~~ 1 Deferred Fees(50XDeveloper Fee 8 Contractor Fee)
2 B of A Construction Loan 2,033.591 (2,033.59
3,78634
3 LIHTaxCredits (25%. 30%.30%.15%)
4 Activity Bonds Used
1,649.293 1,649,293 824,641
5 Citv Loan 6 010.000lunit 1.060.000
~-
256,638 MHP
1.374.41 1 ,
444,445 4,zoo.a71 481.383
5 Master Developer Contribution (Bridge Bonds) " . ~
2:600;000 (2.600.001
5,470,856 4.200m 4,164,267 1,649,293 234.03! 6 Total Sources of Funds
7 Site Acquisition
8 TitieIRecording 8 Escrow
9 Subtotal Site Acquisition
USES OF FUNDS
10 Grading I On-site Infrastructure
11 Structures @/R
12 5 15 Contingency % of Hard Costs
16
17 Contingency X of Soft Costs
18
19 Contractor OH, Profit 8 Gen. Req'ts 20
21 Developer OH, Profit 8 Gen. Req'ts
22
23 SDGE 8 5343unil
23 Permit Fees 8 Plan Check
24
25 Impact Fees - CFDs
26
27 School Fees
28 29 Water 8 Sewer Fees 30
32 Preconsbuction - Studies 31 Architects I Engineering Fees
33 Preconstruction - Appraisals 34 Preconstruction - Environmental Study
34 Bond PmmiumlContractor
35 Title 8 Recording
36 Real Estate Taxes 37 Legal I Improvements Fees
39 LiabilityICOC Insurance
38 Other - AccountinglFinance .
40 Subtotal lmorovements
75.00
5%
3%
14%
15%
572Wunit
$3,84B/unlt
S6,708/unIt
S3.896Iunit
1,338,688
708,780
104,452
93.066
301,269
120,000
36,570
77,168
407,994
71 1,048
412,976
300,000
10,000
10,000
101,760
10,000
15,000
7,500
15.000
10,084
446,229
2.835.120 3,189,510
159,474 155.010
22.137 23.876
481.71 5 468.233
120,000 120,000
354.390
17.223
10,523 15.03'
52.026
120.000 520,00(
15.000
5.000
9,894 9.905
5.00C
35,000
41 Other LoadTCAC Costs 52,339 42 Construction Loan Letter of Credit I Origination Fees
43
76,900
44 Bank Legal Counsel Fee 8 Documentation 35.000 46 Construction Inspection Fee $450 per month 3,350 1.350 1,350 1,350 2,700
47 Net Construction Interest 106,523 124,953 176.3a2 177,385
48 Subtotal InteresVFees 274,112 126,303 177,732 17am 2.700
49 Marketing Fees 2,500 2,500
50 Replacement Reserve 53,847 51 Insurance Reserves 23.451 52 Operating Deficit Reserve 322,400
54 53 FNWDUS Commitment Fee 77,267
1 .O%
53 Underwriting Fee 92,720
54 1.2% 55 Legal(underwriter, DUS lender, FNMA) I Financing 80,000
57 Cash Flow Verification Consultant 8 Audit 4,000
58 Non Permanent Loan Oper Interest
59 Trustee 10,000
60 Rating Agency
60 CDLAClCDlAC
13,500
4,000
61 Bond Counsel 35,000
62 Printing 8 Mailing 4,084
63 Borrower's Counsel 40,000
64 Issuer Fee - 25 bps 12.817
4,826,355 4,074,569
1.50%
Total Uses of Funds 5.478m 4,200,872 4.164.266 1,086,634 796.695
Net Source 8 Use 0 (0) 1 562,659 (562,659
DbMbutions 0
Balance of Funds 0 (0 ) 0 562,659 (0,
444,445 4.2oo.a72 481.383 0 3.706343
Total Project Costs
52.57%
Subtotal
3,786.34:
256.638
. 5,126.701
5,497.64:
1 ,ow ,001
I
15,72732:
I
5.00(
5.OCi
1.784.91i
7.087.8M
436.W
165.43
1.303,24:
1,000,00(
36.57(
77.1M
407,994
71 1,Mt
412.97C
300,00c
10,ooc
10,ooc
10,ooc
101,76C
15,000
22,500
35,000
13.9a2.452
25,000
29.883
. 76,900
52.339
35,000 10,100
585,243
759,582
5,000
53.847
322.400
77.267
92,720
80,000
202,204
4,000
10,000
13,500
35,000
4,000
40,000
4,084
15.727.323 12,817
(0: 0
(0; 15.727.323
Calavera Hills Dev Fee Capped $1 M - S25K AM Fee. a LS
Soft Costs Totals
Arbltrage- Interest Earned on Undisbursed Bonds
Beginning Bond Loan Balance Quarterly Construction Disbursement
Bonds Undisbursed at End of Quarter
Average amount of Disbursed Bonds
Interest From Closing
Previous Balance Interest
Quarterly Average Interest on disbursed during quartel
3 months Interest on Undisbursed Proceeds
Total Interest per Quarter
Balance of Undisbursed Funds
-2.50%
Interest on Bonds Proceeds Upon Closing
Interest for 18 months
Payments
Loan Balance Interest Rate@
Master Developer Contribution (Bridge Bonds)
6.75%
Construction Interest
B of A Construction LOC against MHP Commitment
8.00%
Net Interest Paid on Bonds
TCAC 8 Other Related Costs:
Initial Filing Fee:
Reservation Fee, as % Of Federal Credit Amount
TCAC Monitoring Fee:
FilinglPreparation
11,244 31,255 30,188
3,102,215 737,912 795,870 350,761
5,126,700
444,445
4.682.254
148,148
;,
(926)'
(29,264):
(30,190)
4,682,254
4,682,254
4,200,871
481.383
1,400,290
481.383 481,383 0 0
160,461 0
. ..
(8,752).
(I 1,760) (3.009)
481,383
5,126,700 5,126,700 5,126,700 5,126,700
86.51 3 86,513 86.513 86.513
5,126,700 5,126,700 5,126,700 5,126,700
2,600,000 0 0 40,672
6.50% 0 0 0
42,250 42,250 42,250 42.250
0 0 2,033,591 0
0 0 40.672 40,672
56.323 74,753 85,510 86,513
181.066
527,700 5,514,458
0
0
5,126,700
173,026
5,126,700
173.026
2.000
1 .O% 6,879
43.460
52,339
Calavara Hills Ranch
106
Q1 Q2 Q3 Q4
Bond Amount
5,126,700 4,682,254 481,383 0 0
444,445 4,200,871 481,383 0 0
4,682,254 481,383 0 0 0
Calavara Hills Ranch
106
23-Jul-02
Operating Expenses
Building Maintenance Expense
Cleaning
4,475 Painting
2,000 Carpets
3,240
Sub-Total $9,715
Appliance Repairs
Supplies
0 Plumbing Repairs
Electricical Repairs
6,000 Building Repairs
0
0
Trash Removal 12,000
Other 1,200
Total Bld. Maintenance $28,915
Advertising
Legal
2,000 Pest Control
17,600 Landscape Maintenance
5,400
7,000
Accounting/Audit 5,250
Insurance(Fire,Liability&Earthquake) 17,500
Licenses 1,000
Office Supplies/Minor Equipment 3,100
Total Other Costs $58,850
Yearly
On-Site Management: ,, Expense
I A I. v
Managers Salary
6,832 Payroll Taxes & Worker's Comp
24,000 Maintenance Salary
12,000 Assistant Managers Salary
24,000
Aministrtation/General 4,000
- Total On-Site Management $81,584
Taxes: , I Property
2,500 Personal Property
0
2,500 Total Taxes
Gas & Electric
2,400 Telephone
2 1,800
53,600 Water & Sewer
Total Utilities $77,800
ITotal Expenses $ 2,740 Per Unit $290,461
I Net Operating Income $525,779
Reserves $400 per Unit 42,400
lNet Income Available for Debt Service 483,379
Perm Loan :
Debt Service Coverage
Interest
Amortization
Valuation Cap Rate
Loan to Value @
Potential Reduction in Loan
1.20
6.750%
30
8.25%
90% ** Value without tax credits
Bond - Tax Exempt
Taxable Tail 15%
5,126,700
5,126,700
5,859,139
5,273,225
(1 46,526)
06 0 00 0 00 0 9
og 0 00 0 00
z
09 0 00 0 00 4 e
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8 0 s
00 gj 00 v) Sm 2 N NO
N ON 0 0 mr- m 0 -N
N. N. 9
00 w 00 m 6m
m mo -. P P -m
m m W N(D N N -N
-. o! N.
6 +
P
00 0 a 9
po 0 -
0 0
B
0
z
ONOON
Nr In
1-71
I Exhibit 3 i
CITY LOAN AGREEMENT
This City Loan Agreement ("the Agreement") is entered into as of , 2002,
by and between the City of Carlsbad (the "City") and CIC Calavera , L.P. a (the
"Borrower").
RECITALS
1. Pursuant to Title 21, Chapter 21.85 of the Carlsbad Municipal Code, the City has
established a Housing Trust Fund administered by the City and used for the purpose of providing
funding assistance for the provision of affordable housing consistent with the policies and
programs contained in the Housing Element of the City's General Plan.
2. Borrower desires to construct one hundred six (1 06) residential units in the City of
Carlsbad, of which at least fifty-four (52) units shall be rented to very low income households at
an affordable housing cost and the remainder, including a manager's unit, which shall be rented
to moderate income households at affordable housing cost.
3. The City desires to provide financial assistance to Borrower for development costs
in the form of a loan for a total amount not to exceed One Million Sixty Thousand Dollars
($1,060,000) (the "City Loan"). The funds utilized to fund the City Loan are Housing Trust Fund
monies and are not federal funds or the proceeds of a tax-exempt bond issue.
4. The City intends to utilize the development to obtain affordable housing
production credits for the Agency pursuant to Health and Safety Code Section 3341 3(b)(2)(A)(ii)
as newly constructed housing units located outside of the Carlsbad Village Redevelopment Area
(the "Redevelopment Area") and available at affordable housing cost to low and moderate
income households. Such units are required to remain affordable to such households for not less
than the period of the land use controls established in the Redevelopment Plan for the
Redevelopment Area. This Agreement and the accompanying City Regulatory Agreement are
also intended to implement this requirement.
ARTICLE 1
DEFINITIONS AND EXHIBITS
1.1 Definitions. The following terms shall have the following meanings in this
Agreement:
(a) "Agreement" shall mean this City Loan Agreement.
(b) "Agency" shall mean the Carlsbad Redevelopment Agency, Carlsbad,
California, a public body corporate and politic.
(c) "Borrower" shall mean Chelsea Investment Corporation, a .
(d) "Certificate of Completion" shall have the meaning set forth in Section 4.8
of this Agreement.
(0 "City Deed of Trust" shall mean the deed of trust to be placed on the
Development, in a form to be provided by the City, securing the City Note and naming the City
as beneficiary.
(g) "City Loan" shall mean the loan for an amount not to exceed One Million
Sixty Thousand Dollars ($1,060,000) by the City to Borrower, which loan is the subject of this
Agreement.
(h) "City Note" shall mean the promissory note, in a form to be provided by
the City, in the principal amount of One Million Sixty Thousand Dollars ($1,060,000),
evidencing the City Loan.
(i) "City Regulatory Agreement" shall mean the City Regulatory Agreement
in a form to be provided by the City to be recorded against the Development pursuant to Section
3.1 below.
(j) "Construction and Permanent Financing" shall mean any of the following
financing acquired by the Borrower for the purpose of financing the Improvements and approved
by the City, in addition to the City Loan:
(9 construction loan in an amount not to exceed Dollars ($ ); and
(ii) City multifamily housing revenue bond-financed loan in the
approximate amount of ($ ) and
(the "City Bond Loan"); and
(iii) Construction and permanent loan in the approximate amount of
Dollars ($ >.
(iv) Tax credit investor equity funds in the approximate amount of
($ ); and
(v) Any loans refinancing the above-described loans, exclusive of any
"cash-out" refinance loans, and subject approval by the City.
(k) "Development" shall mean the Land and Improvements to be constructed
on the Land.
(m) "Improvements" shall mean the buildings and improvements to be
constructed on the Land, including the Units, and the parking spaces and landscaping appurtenant
to such buildings and improvements.
(n) "Land" shall mean the property on which the Borrower shall construct the
Improvements, which property is more particularly described in Exhibit A attached hereto and
incorporated herein.
(0) "Limited Partner" shall mean the limited partner of Borrower, if and when
admitted as a limited partner of Borrower, and its successors and assigns, provided the limited
partner has given the City written notice of its name and address and that it has been admitted as
a limited partner to the Borrower.
(p) "Loan Amount'' shall mean the amount loaned to Borrower pursuant to
Section 2.1 below.
(q) "Loan Documents'' shall mean the following documents evidencing the
City Loan: (i) the City Note; (ii) the City Regulatory Agreement; (iii) the City Deed of Trust;
(iv) this Agreement.
(r) "Parties" shall mean the City and the Borrower.
(s) "Term" shall mean the term of the City Loan commencing on
, and ending fifty-five (55) years following the date of issuance of a
certificate of occupancy for all Units in the Development.
(t) "Unit" shall mean one of the one hundred six (1 06)dwelling units located
within the Development.
1.2 Exhibits. The following Exhibits are attached to this Agreement and incorporated
herein:
Exhibit A - Legal Description of the Land
Exhibit B - Permitted Uses of Loan Proceeds
Exhibit C - Form of Certificate of Completion
ARTICLE 2
LOAN
2.1 Amount. The City hereby agrees to loan, and the Borrower hereby agrees to
borrow, an amount not to exceed One Million Sixty Thousand Dollars ($1,060,000), subject to
the terms and conditions set forth in this Agreement, and subject further to the terms and
conditions set forth within the documents and instruments executed by the Borrower in
connection with this transaction, including:
(a) The City Note;
(b) The City Regulatory Agreement; and
(c) The City Loan Deed of Trust.
2.2 Interest. The outstanding principal amount of the Loan shall accrue simple
interest at three percent (3%) per annum.
2.3 Repayment.
(a) Repayment of the Loan shall be deferred during construction of the
Improvements. Commencing on the date of issuance by the City of a certificate of occupancy for
all Units in the Development, the outstanding principal and accrued interest on the City Loan
shall be amortized over the next fifty-five (55) years of the Term such that equal payments of
principal and interest (the "Amortized Payments") shall be due and payable on June 1'' of each
calendar year, commencing on the first June lSt following the recordation of the deed of trust
securing the Permanent Loan; provided however, that the Amortized Payments shall be due and
payable only to the extent of seventy percent (70%) of Surplus Cash (as defined below) generated
by the Development in the previous calendar year.
(b) "Surplus Cash" means, in a particular calendar year, the amount by which
Gross Revenue (as defined below) exceeds Annual Operating Expenses (as defined below).
(i) Gross Revenue. "Gross Revenue," with respect to a particular calendar
year, shall mean all revenue, income, receipts, and other consideration actually
received from operation and leasing of the Development. "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 to the
extent not utilized to repair or rebuild the Development or repay existing
loans; and condemnation awards for a taking of part or all of the Development
for a temporary period. "Gross Revenue" shall not include tenants' security
deposits, loan proceeds, capital contributions or similar advances.
(ii) Annual Operating Expenses. "Annual Operating Expenses," with respect
to a particular calendar year shall mean the following costs reasonably and
actually incurred for operation and maintenance of the Development to the
extent that they are consistent with an annual independent audit performed by
a certified public accountant using generally accepted accounting principles:
property and other taxes and assessments imposed on the Development;
premiums for property damage and liability insurance; 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
limited to pest control, landscaping and grounds maintenance, painting and
decorating, cleaning, common systems repairs, general repairs, janitorial,
supplies, and others; any annual license or certificate of occupancy fees
required for operation of the Development; 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;
asset management/partnership management fees in an annual amount not to
exceed Twenty-Five Thousand Dollars ($25,000); deferred developer fees in
an amount approved by the City; cash deposited into a reserve for capital
replacements of Development improvements and an operating reserve in such
reasonable amounts as are required by Development lenders andor equity
investors, and approved by the City; and debt service payments on financing
for the Development approved by the City, including the financing described
above in Section 1 .I (i) (excluding debt service due from residual receipts or
surplus cash of the Development). "Annual Operating Expenses" shall not
include the following: ground lease payments, depreciation, amortization,
depletion or other non-cash expenses or any amount expended from a reserve
account.
(c) In the event that seventy percent (70%) of Surplus Cash in any year is less
than the amount of the Amortized Payment due on June 1 of the following year, the difference
between the amount of seventy percent (70%) of Surplus Cash and the Amortized Payment shall
be deferred, and shall be paid on the next June 1 when and to the extent Surplus Cash becomes
available. All payments on the City Loan shall be applied first to accrued, but unpaid, amounts
for prior years and then to the current Amortized Payment due, beginning with the earliest year
for which an Amortized Payment accrued.
(d) In the event that seventy percent (70%) of Surplus Cash in any year
exceeds the amount necessary to make the Amortized Payment due on June 1 of the following
calendar year, plus any amounts due pursuant to subsection (c) above, such excess amount shall
be paid to the City as prepayment of the City Loan. Such prepayment shall not reduce the
amounts of subsequent Amortized Payments due, except to the extent that the City Loan is fully
repaid.
(e) A mandatory partial prepayment of the City Loan may also occur pursuant
to Section 2.14 below. Such prepayment shall not reduce the amounts of subsequent Amortized
Payments due, except to the extent the City Loan is fully repaid.
(f) Any portion of the principal and interest on the City Loan not sooner paid
shall be due and payable upon the earlier of: (i) the occurrence of an Event of Default hereunder;
(ii) expiration of the Term; or (iii) sale or transfer of the Development other than a transfer
described in Section 2.5 below.
(g) Repayment of the City Loan shall be nonrecourse to the Borrower as set
forth in Section 10 of the City Note, subject to the exceptions set forth therein.
2.4 Prepayment. Borrower may prepay the principal and any interest due the City
under the City Note prior to or in advance of the time for payment thereof as provided in the City
Note, without penalty; provided, however, that Borrower acknowledges that the provisions of the
City Regulatory Agreement will be applicable to the Development throughout the term of the
City Regulatory Agreement even though Borrower may have prepaid the City Note.
2.5 Assumption. The Loan shall not be assumable by any transferee, except a
transferee meeting the requirements of Section 6.16 below.
2.6 Loan Disbursement. Upon satisfaction of the preconditions to disbursement set
forth in Sections 3.1 below and pursuant to the disbursement procedures set forth in Sections 3.1
and 3.2 below, the City will disburse to Borrower the Loan Amount.
2.7 Use of Loan Proceeds. Borrower shall use Loan Proceeds only to pay the costs of
the items set forth in Exhibit B.
2.8 Security for Loan. The City Loan shall be secured by the City Loan Deed of Trust
on Borrower's fee interest in the Land. The Borrower shall provide the City with a ALTA
lender's policy of title insurance in an amount equal to the City's loan, issued by Title Insurer,
insuring the City Loan Deed of Trust as a lien against the Borrower's fee interest in the Land,
subject only to the lien or liens of the Construction and Permanent Financing mortgages. The
City shall not accept any mechanics liens exceptions related to Borrower's early start of
construction.
2.9 Approval of Additional Financing. The Borrower shall not place any
encumbrances on the Development other than the Construction and Permanent Financing without
the prior written consent of the City, which consent shall not be withheld unreasonably.
2.10 Subordination of Deed of Trust. The City agrees to subordinate the City Deed of
Trust to the lien of the deeds of trust securing the Construction and Permanent Loans.
2.1 1 Subordination of the City Regulatory Ameement. The City agrees that the City's
Housing and Redevelopment Director shall subordinate the City Regulatory Agreement to the
lien or encumbrance of any private construction or permanent financing provided for the
77
2.12 Reports and Accounting of Surplus Cash.
(a) Audited Financial Statement. In connection with the annual repayment of the City
Loan, the Borrower shall furnish to the City within one hundred and twenty (1 20) days after the
end of the Borrower's fiscal year (ending December 3 1 th of each year) an audited statement duly
certified by an independent firm of certified public accountants approved by the City, setting
forth in reasonable detail the computation and amount of Surplus Cash during the preceding
calendar year.
(b) Books and Records. The Borrower shall keep and maintain at the location of the
General Partners, or elsewhere with the City's written consent, full, complete and appropriate
books, records and accounts relating to the Development, including all such books, records and
accounts necessary or prudent to evidence and substantiate in full detail Borrower's calculation of
Surplus Cash. Books, records and accounts relating to Borrower's compliance with the terms,
provisions, covenants and conditions of this Agreement shall be kept and maintained in
accordance with generally accepted accounting principles consistently applied, and shall be
consistent with requirements of this Agreement which provide for the calculation of Surplus
Cash on a cash basis. All such books, records, and accounts shall be open to and available for
inspection at place of storage by the City, its auditors or other authorized representatives at
reasonable intervals during normal business hours and upon five (5) days prior written notice to
Borrower. Copies of all tax returns and other reports that Borrower may be required to furnish
any governmental agency shall at all reasonable times be open for inspection by the City at the
place that the books, records and accounts of the Borrower are kept and upon 5 days prior written
notice to Borrower. The Borrower shall preserve records on which any statement of Surplus
Cash is based for a period of not less than five (5) years after such statement is rendered.
2.13 Developer Fee. The maximum cumulative developer fee that may be paid to any
entity or entities providing development services to the Development, whether paid up-front or
on a deferred basis (at Borrower's discretion), shall not exceed One Million Two Hundred
Thousand Dollars ($1,200,000).
2.14 Use of Net Proceeds of Permanent Financing.
(a) For purposes of this Section 2.14, the term "Net Proceeds of Permanent
Financing" shall mean the portion of the Construction and Permanent Financing that is not
required to pay the costs of development of the Development (including but not limited to the
funding'of reserves, and the developer fee, subject to the cap described in Section 2.13 above).
(b) The Net Proceeds of Permanent Financing shall be utilized as follows:
(i) Borrower may retain one-half of the Net Proceeds of Permanent Financing
for any use it deems appropriate (subject to the limitations on developer fee set forth in Section
2.13 above) and which is approved by the City; and
(ii) One-half of the Net Proceeds of Permanent Financing shall be paid to the
City as a mandatory partial prepayment of the City Loan.
(c) The amount of the Net Proceeds of Permanent Financing shall be
determined by the Borrower and submitted to the City for approval on the date the Borrower
submits the final cost audit for the Development to the California Tax Credit Allocation
Committee. The Borrower shall also submit to the City any additional documentation sufficient
to verify the amount of the Net Proceeds of Permanent Financing. The City shall approve or
disapprove Borrower's determination of the amount of the Net Proceeds of Permanent Financing
in writing within thirty (30) days of the City's receipt of Borrower's cost audit and supplemental
documentation. If Borrower's determination is disapproved by the City, Borrower shall re-submit
documentation to the City until City approval is obtained. The City's one-half share of the Net
Proceeds of Permanent Financing shall be due the City from the Borrower no later than five (5)
days following the date Borrower receives its final capital contribution from the Borrower's
investor limited partner. As of the date of this Agreement, this final capital contribution is
expected to be received on ,200
ARTICLE 3
DISBURSEMENT OF LOAN
3.1 Conditions Precedent to Disbursement of Loan Proceeds. The City shall
not disburse Loan proceeds to the Borrower until all of the following conditions precedent are
satisfied.
(a) Budget. Borrower shall have submitted to the City and obtained City
approval of a development budget for the Development, and the City has determined that the
undisbursed proceeds of the City Loan, together with other funds or firm commitments for funds
that the Borrower has obtained in connection with the Development, are not less than the amount
that the City determines is necessary to pay for the construction of the Development and to
satisfy all of the covenants contained in this Agreement.
(b) Corporate Authorization; Good Standing. Borrower shall have provided
the City with a certified copy of a corporate authorizing resolution of the general partner of the
Partnership, approving the Loan and the Borrower's execution of all Loan Documents, and with
evidence reasonably satisfactory to the City that the Borrower exists in good standing at the time
of the proposed disbursement.
(c) Purchase of Land. Borrower shall hold fee title to the Land.
(d) Close of Construction Loan. Borrower shall have closed the Construction
Loan, or such loan shall close concurrently with the City Loan.
(f) Execution, Delivery and Recordation of Documents. Borrower shall have
executed and delivered to the City the City Note, the City Deed of Trust, and the City Regulatory
Agreement, and any other documents and instruments required to be executed and delivered, all
in form and substance satisfactory to the City, and the City Deed of Trust and the City Regulatory
Agreement shall have been recorded against the Development.
(g) Insurance. Borrower shall have furnished the City with evidence of the
insurance coverage required pursuant to Sections 6.4 and 6.5'below.
(h) Bonds. Prior to any disbursement for hard construction costs, the City has
received copies of labor and material (payment) bonds and performance bonds, or a dual bond
which covers both payment and performance obligations, with respect to the construction of the
Development in a penal sum each of not less than one hundred percent (100%) of the scheduled
cost of construction. Such bonds must be issued by an insurance company reasonable acceptable
to the City and must name the City as a co-obligee.
(i) Construction Contracts. Prior to any disbursement for hard construction
costs, the City has received and approved all contracts that the Borrower has entered or proposed
to enter into for construction of the Development. All construction work and professional
services shall be performed by persons or entities licensed or otherwise authorized to perform the
applicable construction work or service in the State of California. Each contract that the
Borrower enters for construction of the Development shall provide that at least ten percent (10%)
of the costs incurred shall be payable only upon completion of said contractor's construction
(unless an early release of retention or no retention for specified subcontractors has been
approved by the City) and shall include the nondiscrimination language set forth in Section 6.14
below. Approval of the construction contract by the City shall constitute City approval of any
early release of retention or no retention for specified subcontractors that is included in the
construction contract.
0') Approval of Loan Guarantees. Borrower shall have provided
documentation satisfactory to the City assuring that adequate funding exists to pay for all
construction costs.
(k) No Default. There shall exist no condition, event or act constituting an
Event of Default (as hereinafter defined) hereunder or which, upon the giving of notice or the
passage of time, or both, would constitute an Event of Default.
3.2 Procedure for Disbursement of Loan Proceeds. Upon satisfaction of the
conditions set forth in Section 3.1 above, the City shall promptly, but in no event later than
fifteen (15) business days after receiving Borrower's written request and any required
documentation disburse the Loan Amount to Borrower from time to time, but in no event more
than monthly (if Borrower requests), upon receipt of written requests from the Borrower: (a)
reaffirming the accuracy as of the date of the disbursement request of Borrower's representation,
and warranties set forth in Article 5 below; (b) certifjmg that Borrower is not in default under the
City Loan Documents or loan documents for other Construction and Permanent Financing; and
(c) setting forth the proposed uses of funds consistent with Section 2.7 above, the amount of
funds needed, and, where applicable, a copy of the bill or invoice covering a cost incurred or to
be incurred. When a disbursement is requested to pay any contractor in connection with the
Development, the written request must be accompanied by certification by Borrower that the
work for which disbursement is requested has been completed (although the City reserves the
right to inspect the Development and make an independent evaluation), and lien releases and/or
mechanics lien title insurance endorsements reasonably acceptable to the City.
ARTICLE 4
DEVELOPMENT OF THE IMPROVEMENTS
4.1 Commencement of Construction. Subject to Section 8.2 below, the Borrower
hereby covenants and agrees to commence construction of the Development no later than thirty
(30) days following the recordation of the City Deed of Trust.
4.2 Completion of Construction. The Borrower hereby covenants and agrees to
diligently prosecute to completion the construction of the Development within eighteen (18)
months from the date of commencement of construction, subject to Section 8.2 below.
4.3 Construction Pursuant to Plans. The Borrower shall construct the Improvements
in accordance with the plans approved by the City in connection with issuance of the building
permit, and with the terms and conditions of all land use permits and approvals required by the
City.
4.4 Construction in Compliance with Law. The Borrower shall cause all work
performed in connection with the Development, including construction of the Improvements, to
be performed in compliance with all governmental requirements, including (without limitation
and where applicable) the following:
(a) The prevailing wage provisions of Sections 1770 et seq. of the California
Labor Code and implementing rules and regulations, if applicable. The City is not imposing a
prevailing wage requirement independent of any applicable California Labor Code requirement.
(b) All directions, rules, and regulations of any fire marshal, health officer,
building inspector, or other officer of any governmental agency having jurisdiction.
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 the
Borrower shall be responsible to the City for the procurement and maintenance thereof, as may
be required of the Borrower and all entities engaged in work on the Development.
4.5 Changes in Development Budget. Developer shall submit all material changes in
the development budget for the Development, as approved by the City pursuant to Section 3.l(a)
above, to the City for approval, which approval shall not be unreasonably withheld.
4.6 Entry by the City. Borrower shall permit the City, through its officers, agents, or
employees, at all reasonable times and upon three (3) business days prior written notice to enter
into the Development and inspect the work of construction to determine that the same is in
conformity with the construction plans approved by the City. Borrower acknowledges that the
City is under no obligation to supervise, inspect, or inform Borrower of the progress of
construction, and Borrower shall not rely upon the City therefore. Any inspection by the City is
entirely for its purposes in determining whether Borrower is in default under this Agreement and
is not for the purpose of determining or informing Borrower of the quality or suitability of
construction. Borrower shall rely entirely upon its own supervision and inspection in
determining the quality and suitability of the materials and work, and the performance of
architects, subcontractors, and material suppliers.
4.7 Equal Opportunity. During the construction of the Improvements there shall be
no discrimination on the basis of race, color, creed, religion, sex, sexual orientation, marital
status, national origin, ancestry, or handicap in the hiring, firing, promoting, or demoting of any
person engaged in the construction work.
4.8 Mechanics Liens, Stop Notices, and Notices of Completion.
(a) If any claim of lien is filed against the Land or a stop notice affecting the
City Loan is served on the City or any other lender or other third party in connection with the
Development, then the Borrower shall, within twenty (20) days after such filing or service, either
pay and fully discharge the lien or stop notice, effect the release of such lien or stop notice by
delivering to the City a surety bond in sufficient form and amount, or provide the City with other
assurance satisfactory to the City that the claim of lien or stop notice will be paid or discharged.
(b) If the Borrower fails to discharge any lien, encumbrance, charge, or claim
in the manner required in Section 4.8, then in addition to any other right or remedy, the City may
(but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at the
Borrower's expense. Alternately, the City may require the Borrower to immediately deposit with
the City the amount necessary to satisfy such lien or claim and any costs, pending resolution
thereof. The City may use such deposit to satisfy any claim or lien that is adversely determined
against the Borrower.
(c) The Borrower shall file a valid notice of cessation or notice of completion
upon cessation of construction on the Development for a continuous period of thirty (30) days or
more, and take all other reasonable steps to forestall the assertion of claims of lien against the
Land. The Borrower authorizes the City, but without any obligation, to record any notices of
completion or cessation of labor, or any other notice that the City deems necessary or desirable to
protect its interest in the Development.
4.9 Certificate of Completion. When the Borrower has determined it has met its
obligations under this Article 4, the Borrower may request that the City issue a Certificate of
Completion, in the form shown in Exhibit C. Within ten (10) days of such a request, the City
shall issue a Certificate of Completion or shall provide the Borrower with a written explanation
of its refusal to issue the Certificate of Completion. If and when the Borrower has taken the
specified measures or met the specified standards, the City shall issue a Certificate of
Completion.
The Certificate of Completion shall not be deemed a notice of completion under the
California Civil Code, nor shall it constitute evidence of compliance with or satisfaction of any
obligation of the Borrower to any holder of a deed of trust securing money loaned to finance the
Development.
53
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BORROWER
5.1 Representations and Warranties. Borrower hereby represents and warrants to the
City as follows:
(a) Orpanization. Borrower is duly formed, validly existing and in good
standing under the laws of the State of California and has the power and authority to own its
property and carry on its business as now being conducted.
(b) Authority of Borrower. Borrower has full power and authority to execute
and deliver this Agreement and to make and accept the borrowings contemplated hereunder, to
execute and deliver the Loan Documents and all other documents or instruments executed and
delivered, or to be executed and delivered, pursuant to this Agreement, and to perform and
observe the terms and provisions of all of the above.
(c) Authority of Persons Executing Documents. This Agreement and the
Loan Documents and all other documents or instruments executed and delivered, or to be
executed and delivered, pursuant to this Agreement have been executed and delivered by persons
who are duly authorized to execute and deliver the same for and on behalf of Borrower, and all
actions required under Borrower's organizational documents and applicable governing law for the
authorization, execution, delivery and performance of this Agreement and the Loan Documents
and all other documents or instruments executed and delivered, or to be executed and delivered,
pursuant to this Agreement, have been duly taken.
(d) Valid Binding Agreements. This Agreement and the Loan Documents and
all other documents or instruments which have been executed and delivered pursuant to or in
connection with this Agreement constitute or, if not yet executed or delivered, will when so
executed and delivered constitute, legal, valid and binding obligations of Borrower.
(e) Pending Proceedings. There are no claims, actions, suits or proceedings
pending or, to the knowledge of Borrower, threatened against or affecting Borrower or the
Development, at law or in equity, before or by any court, board, commission or agency
whatsoever which might, if determined adversely to Borrower, materially affect Borrower's
ability to repay the City Loan or impair the security to be given to the City pursuant hereto.
(f) Financial Statements. The financial statements of Borrower and other
financial data and information furnished by Borrower to the City fairly present the information
contained therein. As of the date of this Agreement, there has not been any adverse, material
change in the financial condition of Borrower from that shown by such financial statements and
other data and information.
ARTICLE 6
CONTINUING OBLIGATIONS
6.1 Applicability. The Borrower shall comply with the provisions of this Article 6
throughout the Term.
6.2 Compliance with Loan Documents. Borrower shall comply with all the terms and
provisions of the Loan Documents.
6.3 Rental of Units. The Borrower shall comply with the occupancy and affordability
restrictions for the rental of the Units as set forth in the City Regulatory Agreement.
6.4 Required Insurance Coverage.
(a) Fire and Extended Coverage Endorsement. The Borrower shall during the
Term keep the Development insured against loss or damage by a standard all risk policy in
amounts not less than the replacement value of the Development, or should insurance in such
amount not be reasonably and commercially available, such lesser amount as may be acceptable
to the City. The amount of such insurance shall be adjusted by reappraisal of the Improvements
by the insurer or its designee at least once every five (5) years during the Term, if requested by
the City. If an all risk policy insuring the full replacement value of the Development is not
reasonably and commercially available, the Borrower shall use best efforts to obtain and maintain
an extended coverage endorsement that ensures the full replacement value of the Development as
soon as such coverage becomes commercially and reasonably available.
(b) Liability and Property Damage Insurance. . During the Term, the
Borrower shall keep in full force and effect a policy or policies of comprehensive general liability
and property damage insurance against liability for bodily injury to or death of any person or
property damage arising out of an occurrence on or about the Development. The limits of such
insurance shall be not less than five million dollars ($5,000,000) combined single limit for bodily
injury and property damage. The limits of the insurance shall be adjusted once every five (5)
years if and as reasonably required by the City.
(c) Workers' Compensation Insurance. The Borrower shall carry or cause to
be carried workers' compensation insurance covering all persons employed by the Borrower in
connection with the Development and with respect to whom death, bodily injury, or sickness
insurance claims could be asserted against the Borrower or the City.
(d) Builders' Risk Insurance. During the course of any alteration, construction
or reconstruction, the cost of which exceeds one hundred thousand dollars ($100,000), the
Borrower shall provide or require any contractor to provide builders' risk insurance for not less
than, in the event of new construction, the full insurable value of the Development or, in the
event of alteration or reconstruction, the insurable value of the alteration or reconstruction,
insuring the interests of the City, the Borrower and any contractors and subcontractors.
85
6.5 Insurance Policies and Premiums.
(a) All liability policies required by this Agreement shall name the City as an
additional insured. Duplicate copies of such policies or certificates of such insurance shall be
promptly furnished to the City.
(b) To the extent obtainable, any policy of insurance shall provide that any
change or cancellation of said policy must be made in writing and sent to the Borrower and the
City at their respective principal offices at least thirty (30) days before the effective date of any
change or cancellation.
6.6 Proceeds of Insurance. All fire and standard risk or extended coverage (casualty)
insurance proceeds shall be applied to the payment of the costs of repairing or rebuilding that part
of the Development damaged or destroyed if (i) the Borrower agrees in writing within ninety (90)
days after payment of the proceeds of insurance that such repair or rebuilding is economically
feasible, and (ii) each lender of an outstanding Construction and Permanent Loan permits such
repairing or rebuilding,' provided that the extent of Borrower's obligation to restore the
Development shall be limited to the amount of the insurance proceeds. If the Development is not
repaired or rebuilt as provided in this Section 6.6, all such proceeds shall be applied to repayment
of outstanding loans including this City Loan, in the order of lien priority.
6.7 Taxes and Assessments. So long as Borrower owns the Development, Borrower
shall pay all real and personal property taxes, assessments and charges and all franchise, income,
unemployment, old age benefit, withholding, sales, and other taxes assessed against it, or payable
by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or
charge from attaching to the Development; provided, however, that Borrower shall have the right
to contest in good faith any such taxes, assessments, or charges. In the event Borrower exercises
its right to contest any tax, assessment, or charge against it, Borrower, on final determination of
the proceeding or contest, shall immediately pay or discharge any judgment rendered against it,
together with all costs, charges, and interest. The City acknowledges that Borrower intends to
apply for a property tax exemption for the Development pursuant to California Revenue and
Taxation Code Section 2 14(g).
6.8 Compliance with Laws. Borrower shall comply with all laws and regulations of
the United States and of California and of any political subdivision thereof, or of any
governmental authority which may be applicable to it or to its business, subject to Borrower's
right to contest the validity or applicability of laws or regulations.
6.9 Changes. Borrower shall promptly notify the City in writing of any changes in the
location of any place of business or material assets of the Borrower.
6.10 Notification of Litigation. Borrower shall promptly notify the City in writing of
any litigation affecting the Borrower or the Development and of any claims or disputes that
involve a material risk of litigation, which may materially adversely affect the City Loan.
6.1 1 Indemnity. Borrower shall defend, indemnify, save and hold the City and the
Agency, their councilmembers, boardmembers, officers, employees, agents, and contractors,
utilizing attorneys approved by the City, harmless from any and all claims, actions, demands,
costs, expenses, and reasonable attorneys' fees, arising out of, attributable to, or otherwise
occasioned, in whole or in part, by any act or omission of Borrower arising from or related to the
Development, except as such claim may arise from the negligence or willful misconduct of an
indemnified party. This Section 6.1 1 shall not operate to impose personal liability on Borrower
or its partners for nonpayment of principal and interest under the City Note.
6.12 Hazardous Materials.
(a) The Borrower shall keep and maintain the Development in compliance
with, and shall not cause or permit the Development to be in violation of, any federal, state, or
local laws, ordinances, or regulations relating to industrial hygiene or to the environmental
conditions on or under the Development, including (but not limited to) soil and ground water
conditions. The Borrower shall not use, generate, manufacture, store, or dispose of, on, under, or
about the Development, or transport to or from the Development, any flammable explosives,
radioactive materials, hazardous wastes, toxic substances, or related materials, including (without
limitation) any substances defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," or "toxic substances" under any applicable federal or
state laws or regulations (collectively referred to as "Hazardous Materials") except such of the
foregoing as may be customarily and lawfully kept and used in and about multifamily residential
property.
(b) The Borrower shall immediately advise the City in writing if at any time it
receives written notice of: (i) any and all enforcement, cleanup, removal, or other governmental
or regulatory actions instituted, completed, or threatened against the Borrower or the
Development pursuant to any applicable federal, state, or local laws, ordinances, or regulations
relating to any Hazardous Materials ("Hazardous Materials Law"); (ii) all claims made or
threatened by any third party against the Borrower or the Development relating to damage,
contribution, cost recovery compensation, loss, or injury resulting from any Hazardous Materials
(the matters set forth in clauses (i) and (ii) above are referred to as "Hazardous Materials
Claims"); and (iii) the Borrower's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of the Development that could cause the Development or any part
thereof to be classified as "border-zone property" under California Health and Safety Code
Sections 25220 et seq. or corresponding regulations, or to be otherwise subject to any restrictions
on the ownership, occupancy, transferability, or use of the Development under any Hazardous
Materials Law.
(c) The Borrower shall permit the City to join and participate in, as a party if
it so elects, any legal proceedings or actions initiated in connection with any Hazardous
Materials. The Borrower shall indemnify, defend (with counsel reasonably chosen by the City, at
the City's option), and hold harmless the City, and the Agency, and their respective
councilmembers, boardmembers, officers, agents, and employees from and against any loss,
87
damage, cost, expense, or liability directly or indirectly arising out of or attributable to the use,
generation, storage, release, threatened release, discharge, disposal, or presence of Hazardous
Materials on or under the Development, including (without limitation): (i) all foreseeable
consequential damages; (ii) the costs of any required or necessary repair, cleanup, or
detoxification of the Development and the preparation and implementation of any closure,
remedial, or other required plans; and (iii) all reasonable costs and expenses incurred by the City
or the City in connection with clauses (i) and (ii), including (but not limited to) reasonable
attorneys' fees. This paragraph shall survive termination of this Agreement.
(d) Without the City's prior written consent, which shall not be unreasonably
withheld, the Borrower shall not take any remedial action in response to the presence of any
Hazardous Materials on, under or about the Development, nor enter into any settlement
agreement, consent decree, or other compromise in respect to any Hazardous Material Claims,
which remedial action settlement, consent decree or compromise might, in the City's reasonable
judgment, impair the value of the City's security hereunder; provided, however, that the City's
prior consent shall not be necessary in the event that the presence of Hazardous Materials on,
under, or about the Development either poses an immediate threat to the health, safety, or welfare
of any individual or is of such a nature that an immediate remedial response is necessary and it is
not reasonably possible to obtain the City's consent before taking such action, provided that in
such event the Borrower shall notify the City as soon as practicable of any action so taken. The
City agrees not to withhold its consent, where such consent is required hereunder, if either (i) a
particular remedial action is ordered by a court of competent jurisdiction, (ii) the Borrower will
or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action;
(iii) the Borrower establishes to the reasonable satisfaction of the City that there is no reasonable
alternative to such remedial action which would result in less impairment of the City's security
hereunder; or (iv) the action has been agreed to by the City.
(e) The Borrower hereby acknowledges and agrees that (i) this Section 6.12 is
intended as the City's written request for information (and the Borrower's response) concerning
the environmental condition of the Development as required by California Code of Civil
Procedure Section 726.5, and (ii) each representation and warranty in this Agreement (together
with any indemnity obligation applicable to a breach of any such representation and warranty)
with respect to the environmental condition of the Development is intended by the Parties to be
an "environmental provision" for purposes of California Code of Civil Procedure Section 736.
6.13 Non-Discrimination. The Borrower covenants by and for itself and its successors
and assigns that there shall be no discrimination against or segregation of a person or of a group
of persons on account of race, color, religion, creed, sex, sexual orientation, marital status,
ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or
enjoyment of the Development, nor shall the Borrower or any person claiming under or through
the Borrower establish or permit any such practice or practices of discrimination or segregation
with reference to the selection, location, number, use or occupancy of tenants, lessees,
subtenants, sublessees or vendees in the Development. Pursuant to the terms of the City
Regulatory Agreement, the foregoing covenant shall run with the land and shall survive
termination of this Agreement.
6.14 Mandatorv Language in All Subsequent Deeds, Leases and Contracts. The
Borrower and its agents shall not, in the selection or approval of tenants or provision of services
or in any other matter, discriminate against any person or group of persons on the grounds of
race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, age,
or disability. All deeds, contracts, or leases made or entered into by Borrower, its successors or
assigns, as to any portion of the Development shall contain the following language:
(a) In Deeds: "Grantee herein covenants by and for itself, its successors and
assigns that there shall be no discrimination against or segregation of a person or of a group of
persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national
origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the
property herein conveyed nor shall the grantee or any person claiming under or through the
grantee establish or permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants,
sublessees or vendees in the property herein conveyed. The foregoing covenant shall run with
the land."
(b) In Contracts: "There shall be no discrimination against or segregation of
any person or group of persons on account of race, color, creed, religion, sex, sexual orientation,
marital status, national origin or ancestry in the sale, transfer or use of the property."
(c) In Leases: "The lessee herein covenants by and for the lessee and lessee's
heirs, personal representatives and assigns and all persons claiming under the lessee or through
the lessee that this lease is made subject to the condition that there shall be no discrimination
against or segregation of any person or of a group of persons on account of race, color, creed,
religion, sex, sexual orientation, marital status, national origin or ancestry in the leasing,
subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased nor shall
the lessee or any person claiming under or through the lessee establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the land
herein leased."
6.15 Records.
(a) The Borrower shall maintain complete, accurate, and current records
pertaining to the Development for a period of five (5) years after the creation of such records, and
shall permit any duly authorized representative of the City to inspect and copy records, including
records pertaining to income and household size of residents of the Development. Such records
shall include records regarding the occupancy and rent levels of the residential units in the
Development, as well as records that accurately and fully show the date, amount, purpose, and
payee of all expenditures drawn from Loan funds. Such records shall also include all invoices,
receipts, and other documents related to expenditures from the City Loan funds. Records must
be kept accurate and current.
(b) The City shall notify the Borrower of any records it deems insufficient.
The Borrower shall have fifteen (15) calendar days after the receipt of such a notice to correct
any deficiency in the records specified by the City in such notice, or if a period longer than
fifteen (15) days is reasonably necessary to correct the deficiency, then the Borrower shall begin
to correct the deficiency within fifteen (15) days and correct the deficiency as soon as reasonably
possible.
(c) The Borrower shall promptly comply with all requirements or conditions
of the City Loan Documents relating to notices, extensions, and other events required to be
reported or requested. The Borrower shall promptly supply, upon the request of the City, any and
all information and documentation involving the Development.
6.16 Transfers.
(a) For purposes of this Agreement, "Transfer" shall mean any sale,
assignment, or transfer, whether voluntary of involuntary, of (i) any rights and/or duties under
this Agreement, and/or (ii) any interest in the Development, including (but not limited to) a fee
simple interest, a joint tenancy interest, a life estate, a partnership interest, a leasehold interest, a
security interest, or an interest evidenced by a land contract by which possession of the
Development is transferred and the Borrower retains title. The term "Transfer" shall exclude the
leasing of any single unit in the Development to an occupant in compliance with the City
Regulatory Agreement.
(b) No Transfer shall be permitted without the prior written consent of the
City, which the City shall not unreasonably withhold, provided that construction of the
Development has been completed, the proposed transferee meets the City's reasonable standards
regarding creditworthiness, and the proposed transferee has at least five (5) years experience in
the ownership, management, and operation of large affordable housing developments, without
any record of material violations of discrimination laws, housing codes, or other federal, state, or
local laws or regulations applicable to such developments. Pursuant to Section 2.3(e) above, the
City Loan shall automatically accelerate and be due in full upon any unauthorized Transfer.
Upon request to transfer, Borrower must submit a "Reserve Plan" on how the existing reserves
will be used to the benefit and long term health of the Development. Said Reserve Plan must be
acceptable to the City.
(c) The City approves the transfer of limited partnership interests to an
investor limited partner in connection with the low income housing tax credit syndication of the
Development, provided Borrower's partnership agreement and related syndication documents are
first approved by the City, which approval shall not be withheld unreasonably.
(d) If a Limited Partner removes the general partner of Borrower in
accordance with the terms of Borrower's partnership agreement, such removal will not constitute
a default under any of the Loan Documents, provided that within ninety (90) days after the
removal of the general partner, Limited Partner shall have selected a substitute general partner
approved by the City, which approval shall not be unreasonably withheld or delayed.
Notwithstanding anything contained in the Loan Documents to the contrary, any assignment or
transfer by Limited Partner of Limited Partner's partnership or ownership interest in Borrower
pursuant to Borrower's partnership agreement will not constitute a default or impermissible
transfer under any of the Loan Documents.
(e) The City approves the grant of the security interests in the Development in
connection with the financing described in Section 1.10') above.
ARTICLE 7
DEFAULT AND REMEDIES
7.1 Events of Default. Each of the following shall constitute an "Event of Default'' by
Borrower under this Agreement:
(a) Failure to Construct. Subject to Section 8.2, failure of Borrower to
construct all of the Development within the time set forth in Section 4.2 above;
(b) Failure to Make Payment. Failure to make prompt payments of the
principal and interest on the City Note when due and such failure having continued uncured for
thirty (30) days after receipt of written notice thereof to the Borrower from the City;
(c) Breach of Covenants. Failure by Borrower to duly perform, comply with,
or observe any of the conditions, terms, or covenants of any of the Loan Documents, and such
failure having continued uncured for thirty (30) days after receipt of written notice thereof by the
Borrower from the City or, if the breach cannot be cured within thirty (30) days, the Borrower
shall not be in breach so long as Borrower is diligently undertaking to cure such breach and such
breach is cured within ninety (90) days; provided, however, that if a different period or notice
requirement is specified under any other section of this Article 7, the specific provisions shall
control.
41
(d) Insolvency. A court having jurisdiction shall have made or entered any
decree or order (i) adjudging Borrower to be bankrupt or insolvent, (ii) approving as properly
filed a petition seeking reorganization of Borrower or seeking any arrangement for Borrower
under the bankruptcy law or any other applicable debtor's relief law or statute of the United
States or any state or other jurisdiction, (iii) appointing a receiver, trustee, liquidator, or assignee
of Borrower in bankruptcy or insolvency or for any of their properties, or (iv) directing the
winding up or liquidation of Borrower, if any such decree or order described in clauses (i) to (iv),
inclusive, shall have continued unstayed or undischarged for a period of ninety (90) days; or
Borrower shall have admitted in writing its inability to pay its debts as they fall due or shall have
voluntarily submitted to or filed a petition seeking any decree or order of the nature described in
clauses (i) to (iv), inclusive. The occurrence of any of the Events of Default in this paragraph
shall act to accelerate automatically, without the need for any action by the City, the indebtedness
evidenced by the Note. The occurrence of any of the events described in this subsection with
respect to a general partner of the Borrower shall also constitute an Event of Default hereunder.
(f) Assimment; Attachment. Borrower (or a general partner of Borrower)
shall have assigned its assets for the benefit of its creditors or suffered a sequestration or
attachment of or execution on any substantial part of its property, unless the property so assigned,
sequestered, attached or executed upon shall have been returned or released within ninety (90)
days after such event or prior to sooner sale pursuant to such sequestration, attachment, or
execution. The occurrence of any of the events of default in this paragraph shall act to accelerate
automatically, without the need for any action by the City, the indebtedness evidenced by the
Note.
(g) Suspension; Termination. Borrower (or a general partner of Borrower)
shall have voluntarily suspended its business or, Borrower's partnership shall have been dissolved
or terminated, other than a technical termination of the partnership for tax purposes.
(h) Liens on Property and the Proiect. There shall be filed any claim of lien
(other than liens approved in writing by the City) against the Development or any part thereof, or
any interest or right made appurtenant thereto, or the service of any notice to withhold proceeds
of the City Loan and the continued maintenance of said claim of lien or notices to withhold for a
period of twenty (20) days without discharge or satisfaction thereof or provision therefor
satisfactory to the City. In the event that Borrower is diligently working to remove a claim of
lien or to remove a notice to withhold proceeds and the City's interests under the Loan
Documents are not imminently threatened, the City shall not declare a default under this
subsection.
(i) Condemnation. The condemnation, seizure, or appropriation of all or the
substantial part of the Land and the Development.
(j) Unauthorized Transfer. Any Transfer other than as permitted by Article
Six.
(k) Representation or Warranty Incorrect. Any material Borrower
representation or warranty contained in this Agreement, or in any application, financial
statement, certificate, or report submitted to the City in connection with any of the City Loan
Documents, proving to have been incorrect in any material respect when made.
(1) Limited Partner Notice and Cure Rights. Notwithstanding anything to the
contrary contained in the Loan Documents, Limited Partner shall have the right, but not the
obligation, to cure defaults of Borrower under any of the Loan Documents and the City agrees to
accept cures tendered by Limited Partner as follows: (a) with respect to any monetary default
under any of the Loan Documents, the City shall notify Limited Partner in writing of the
monetary default and Limited Partner shall have thirty (30) days after the receipt of said notice of
such monetary default to cure such monetary default; and (b) with respect to any breach of
covenant pursuant to Section 7.1 (c) above, the City shall notify Limited Partner in writing of the
breach and Limited Partner shall have thirty (30) additional days to cure the breach beyond the
cure periods granted to Borrower under Section 7.l(c). If a Limited Partner cannot cure a breach
because the Borrower's general partner is in bankruptcy and/or because the cure requires removal
of the general partner of the Borrower and the Limited Partner is proceeding diligently to remove
the general partner of the Borrower in order to effect a cure of the breach, the cure period shall be
extended for such reasonable time as is necessary for the Permitted Limited Partner to effect a
cure of the breach, but in no event longer than one hundred and eighty (1 80) days after the date of
receipt by the Limited Partner of written notice of the breach. The City agrees that no Event of
Default hereunder shall be deemed to exist until the expiration of any contractual notice and cure
periods provided to Borrower and Limited Partner.
7.2 Remedies. The occurrence of any Event of Default following the expiration of all
applicable notice and cure periods will, either at the option of the City or automatically where so
specified, relieve the City of any obligation to make or continue the City Loan and shall give the
City the right to proceed with any and all remedies set forth in this Agreement and the Loan
Documents, including but not limited to the following:
(a) Acceleration of Note. The City shall have the right to cause all
indebtedness of the Borrower to the City under this Agreement and the City Note, together with
any accrued interest thereon, to become immediately due and payable. The Borrower waives all
right to presentment, demand, protest or notice of protest or dishonor. The City may proceed to
enforce payment of the indebtedness and to exercise any or all rights afforded to the City as a
creditor and secured party under the law including the Uniform Commercial Code, including
foreclosure under the City Deed of Trust. The Borrower shall be liable to pay the City on
demand all reasonable expenses, costs and fees (including, without limitation, reasonable
attorney's fees and expenses) paid or incurred by the City in connection with the collection of the
Loan and the preservation, maintenance, protection, sale, or other disposition of the security
given for the Loan.
(b) Specific Performance. The City shall have the right to mandamus or other
suit, action or proceeding at law or in equity to require Borrower to perform its obligations and
covenants under the Loan Documents or to enjoin acts on things which may be unlawful or in
violation of the provisions of the Loan Documents.
93
(c) Right to Cure at Borrower's Expense. The City shall have the right (but
not the obligation) to cure any monetary default by Borrower under a loan other than the City
Loan. The Borrower agrees to reimburse the City for any funds advanced by the City to cure a
monetary default by Borrower upon demand therefor, together with interest thereon at the rate of
three percent (3%) per annum from the date of expenditure until the date of reimbursement.
7.3 Right of Contest. Borrower shall have the right to contest in good faith
any claim, demand, levy, or assessment the assertion of which would constitute an Event of
Default hereunder. Any such contest shall be prosecuted diligently and in a manner unprejudicial
to the City or the rights of the City hereunder.
7.4 Remedies Cumulative. No right, power, or remedy given to the City by the terms
of this Agreement or the Loan Documents is intended to be exclusive of any other right, power,
or remedy; and each and every such right, power, or remedy shall be cumulative and in addition
to every other right, power, or remedy given to the City by the terms of any such instrument, or
by any statute or otherwise against Borrower and any other person. Neither the failure nor any
delay on the part of the City to exercise any such rights and remedies shall operate as a waiver
thereof, nor shall any single or partial exercise by the City of any such right or remedy preclude
any other or further exercise of such right or remedy, or any other right or remedy.
7.5 Waiver of Terms and Conditions. The City Manager may at his or her discretion
waive in writing any of the terms and conditions of this Agreement, without the Borrower
completing an amendment to this Agreement. No waiver of any default or breach by Borrower
hereunder shall be implied from any omission by the City to take action on account of such
default if such default persists or is repeated, and no express waiver shall affect any default other
than the default specified in the waiver, and such waiver shall be operative only for the time and
to the extent therein stated. Waivers of any covenant, term, or condition contained herein shall
not be construed as a waiver of any subsequent breach of the same covenant, term, or condition.
The consent or approval by the City to or of any act by Borrower requiring further consent or
approval shall not be deemed to waive or render unnecessary the consent or approval to or of any
subsequent similar act. The exercise of any right, power, or remedy shall in no event constitute a
cure or a waiver of any default under this Agreement or the Loan Documents, nor shall it
invalidate any act done pursuant to notice of default, or prejudice the City in the exercise of any
right, power, or remedy hereunder or under the Loan Documents.
ARTICLE 8
MISCELLANEOUS
8.1 Time. Time is of the essence in this Agreement.
8.2 Force Maieure. Performance by either party hereunder shall not be deemed to be
in default where defaults are due to war; insurrection; strikes; lock-outs; riots; floods;
earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine
restrictions; freight embargoes; governmental restrictions or priority; litigation (including suits
filed by third parties concerning or arising out of this Agreement); weather or soils conditions
which, in the opinion of the Borrower's contractor, will necessitate delays; inability to secure
necessary labor, materials or tools; delays of any contractor, sub-contractor or supplier; acts of
the other party; acts or failure to act of any public or governmental agency or entity (other than
the acts or failure to act of the City); or any other causes (other than Borrower's inability to obtain
financing for the Development) beyond the control or without the fault of the party claiming an
extension of time to perform. Times of performance under this Agreement may also be extended
in writing by the City and the Borrower.
8.3 Notices. All notices, demands and communications between the Borrower and
the City shall be sufficiently given and shall not be deemed given unless dispatched by certified
mail, postage prepaid, return receipt requested, or delivered by express delivery service with a
delivery receipt, to the principal officers of the Borrower and the City as follows:
Borrower: Chelsea Investment Corporation
Attn: Wallace Dieckmann
2 15 South Highway 10 1, Suite 200
Solana Beach, Ca. 92075
City: City of Carlsbad
Housing and Redevelopment Department
Attn: Housing and Redevelopment Director
2965 Roosevelt Drive, Suite B
Carlsbad, CA 92008
Such addresses may be changed by notice to the other party given in the same manner as
provided above.
Notice shall be deemed to have been effective on the date shown on the delivery receipt
as the date of delivery, the date delivery was refused, or the date the notice was returned as
undelivered.
8.4 Attorneys' Fees. If either party brings a legal or administrative action or
proceeding to enforce, protect or establish any right or remedy hereunder or under any of the
Loan Documents, the prevailing party shall be entitled to recover from the other party its costs of
suit and reasonable attorneys' fees which shall be fixed by the court.
8.5 No Third Parties Benefited. There are no third party beneficiaries of this
Agreement, and no person or persons other than the Borrower and the City shall have any right of
action hereon, except with respect to Section 7.1(1), the limited partner of Borrower shall be a
third party beneficiary.
8.6 Actions. The City shall have the right to commence, appear in, or defend any
action or proceeding purporting to affect the rights, duties, or liabilities of the parties hereunder,
or the disbursement of any proceeds of the Loan.
8.7 Signs. Borrower agrees that the City may place signs mutually satisfactory to
Borrower and the City upon the Development at locations selected by Borrower and the City
advising of the financing of the Development by the City. The City may also announce such
placement through press releases to newspapers and trade publications.
8.8 Successors and Assigns. The terms hereof shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto; provided, however, that no assignment
of Borrower's rights hereunder shall be made, voluntarily or by operation of law, without the
prior written consent of the City and that any such assignment without said consent shall be void.
8.9 Construction of Words. Except where the context otherwise requires, words
imparting the singular number shall include the plural number and vice versa, words imparting
persons shall include firms, associations, partnerships and corporations, and words of either
gender shall include the other gender.
8.10 Partial Invaliditv. If any provision of this Agreement shall be declared invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired.
8.1 1 Governing, Law. This Agreement and the Loan Documents and other instruments
given pursuant hereto shall be construed in accordance with and be governed by the laws of the
State of California.
8.12 Amendment. This Agreement may not be changed orally, but only by agreement
in writing signed by Borrower and City.
8.13 Captions and Headings. Captions and headings in this Agreement are for
convenience of reference only, and are not to be considered in construing the Agreement.
8.14 Action bv the City. Except as may be otherwise specifically provided herein,
whenever any approval, notice, direction, consent, request, or other action by the City is required
or permitted under this Agreement, such action may be given, made, or taken by the City
Manager, or by any person who shall have been designated in writing to the Borrower by the City
Manager, without further approval by the City Council, and any such action shall be in writing.
The City Manager is also hereby authorized to approve, on behalf of the City, requests by
Borrower for reasonable extensions of time deadlines set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
and year first above written.
DEVELOPER CITY
Chelsea Investment Corporation,
a
CITY OF CARLSBAD,
A Municipal Corporation
By:
By:
SANDRA L. HOLDER
By: COMMUNITY DEVELOPMENT DIRECTOR
Name:
Title: ATTEST:
By: By:
Name: LORRAINE M. WOOD
Title: CITY CLERK
If required by City, proper notarial acknowledgment of execution by Developer must be attached.
If a Corporation, Agreement must be signed by one corporate officer from each of the following
two groups.
*Group A.
Chairman,
President, or
Vice-president
**Group B.
Secretary,
Assistant Secretary,
CFO or Assistant Treasurer
Otherwise, the corporation must attach a resolution certified by the secretary or assistant
secretary under corporate seal empowering the officer(s) signing to bind the corporation.
APPROVED AS TO FORM
RONALD R. BALL, CITY ATTORNEY
By:
JANE MOBALDI
ASSISTANT CITY ATTORNEY
47
EXHIBIT A
Legal Description of the Land
EXHIBIT B
Permitted Uses of Loan Proceeds
EXHIBIT C
Form of Certificate of Completion
Recording Requested By
And When Recorded Mail To:
City of Carlsbad
Housing and Redevelopment Department
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008
Attn: Housing and Redevelopment Director
No fee for recording pursuant to
Government Code Section 27383
CERTIFICATE OF COMPLETION
Pursuant to Section 4.9 of the City Loan Agreement by and between the City of Carlsbad,
a municipal corporation (the "City"), and Chelsea Investement Corporation, a (the
"Borrower"), the City certifies that the Borrower has met its obligations under Article 4 of the
Loan Agreement. This Certificate of Completion shall not constitute evidence of compliance
with or satisfaction of any obligation of the Borrower to any holder of a deed of trust securing
money loaned to finance the Development (as defined in the Loan Agreement) or any part thereof
and shall not be deemed either a notice of completion under the California Civil Code or a
certificate of occupancy.
City of Carlsbad, a municipal corporation
By:
Its:
[Notarize signature and
attach legal description]
July 24, 2002 c- 1
LOAN AGREEMENT
BY AND BETWEEN
The City Of Carlsbad
and
Chelsea Investment Corporation,
a
July 24,2002
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND EXHIBITS ................................................................................ 1
1.1 Definitions ..................................................................................................................... 1
1.2 Exhibits ......................................................................................................................... 2
..
ARTICLE 2 LOAN .......................................................................................................................... 3
2.1 Amount ......................................................................................................................... 4
2.2 Interest ........................................................................................................................... 4
2.3 Repayment .................................................................................................................... 4
2.4 Prepayment .................................................................................................................... 6
2.5 Assumption ................................................................................................................... 6
2.6 Loan Disbursement ....................................................................................................... 6
2.7 Use of Loan Proceeds ................................................................................................... 6
2.8 Security for Loan ........................................................................................................... 6
2.9 Approval of Additional Financing ................................................................................ 6
2.1 1 Subordination of the City Regulatory Agreement ....................................................... 6
2.10 Subordination of Deed of Trust .................................................................................. 6
2.12 Reports and Accounting of Surplus Cash ................................................................... 7
2.13 Developer Fee ............................................................................................................. 7
2.14 Use ofNet Proceeds of Permanent Financing ............................................................. 7
ARTICLE 3 DISBURSEMENT OF LOAN .................................................................................... 8
3.1 Conditions Precedent to Disbursement of Loan Proceeds ............................................ 8
3.2 Procedure for Disbursement of Loan Proceeds ............................................................. 9
ARTICLE 4 DEVELOPMENT OF THE IMPROVEMENTS ...................................................... 10
4.1 Commencement of Construction ................................................................................ 10
4.2 Completion of Construction ........................................................................................ 10
4.3 Construction Pursuant to Plans ................................................................................... 10
4.4 Construction in Compliance with Law ....................................................................... 10
4.6 Entry by the City ............................................................... i ......................................... 11
4.7 Equal Opportunity ....................................................................................................... 11
4.8 Mechanics Liens, Stop Notices, and Notices of Completion ...................................... 11
4.9 Certificate of Completion ........................................................................................... 12
4.5 Changes in Development Budget ................................................................................ 11
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BORROWER ........................... 13
5.1 Representations and Warranties .................................................................................. 13
ARTICLE 6 CONTINUING OBLIGATIONS .............................................................................. 13
6.1 Applicability ................................................................................................................ 14
6.2 Compliance with Loan Documents ............................................................................. 14
6.3 Rental of Units ............................................................................................................ 14
6.4 Required Insurance Coverage ..................................................................................... 14
6.5 Insurance Policies and Premiums ............................................................................... 15
...
July 24. 2002 ((7 ;1
6.6 Proceeds ofhsurance ................................................................................................. 15
6.7 Taxes and Assessments ............................................................................................... 15
6.8 Compliance with Laws ................................................................................................ 15
6.9 Changes ....................................................................................................................... 15
6.10 Notification of Litlgatlon 15
6.1 1 Indemnity .................................................................................................................. 16
6.13 Non-Discrimination .................................................................................................. 17
6.15 Records ..................................................................................................................... 18
6.16 Transfers ................................................................................................................... 19
.. ..........................................................................................
6.12 Hazardous Materials ................................................................................................. 16
6.14 Mandatory Language in All Subsequent Deeds, Leases and Contracts .................... 18
ARTICLE 7 DEFAULT AND REMEDIES .................................................................................. 20
7.1
7.2
7.3
7.4
7.5
ARTICLE
8.1
8.2
8.3
Events of Default ........................................................................................................ 20
Remedies ..................................................................................................................... 22
Right of Contest .......................................................................................................... 23
Remedies Cumulative ................................................................................................. 23
Waiver of Terms and Condltlons 23 .. ................................................................................
8 MISCELLANEOUS .................................................................................................. 24
Time ............................................................................................................................ 24
Force Majeure ............................................................................................................. 24
Notices ........................................................................................................................ 24
8.4 Attorneys' Fees ............................................................................................................ 24
8.5 No Third Parties Benefited ......................................................................................... 25
8.6 Actions ........................................................................................................................ 25
8.7 Signs ............................................................................................................................ 25
8.8 Successors and Assigns ............................................................................................... 25
8.9 Construction of Words ................................................................................................ 25
8.10 Partial Invalidity ........................................................................................................ 25
8.1 1 Governing Law ......................................................................................................... 25
8.12 Amendment ............................................................................................................... 25
8.13 Captions and Headings ............................................................................................. 25
8.14 Action by the City ..................................................................................................... 25
..
Exhibit A . Legal Description of the Land
Exhibit B . Permitted Uses of Loan Proceeds
Exhibit C . Form of Certificate of Completion
CITY NOTE
$1,060,000 ,2002
Carlsbad, California
FOR VALUE RECEIVED, CIC Calavera , L.P. a ("Borrower"),
promises to pay to the City of Carlsbad ("City"), or order, the principal sum of One Million Sixty
Thousand Dollars ($1,060,000), or so much thereof as is advanced to Borrower by the City
pursuant to Section 2.6 of the Loan Agreement (defined below), plus simple interest accruing at
the rate of three percent (3%) per annum, commencing upon the final certificate of occupancy for
the development.
1. Loan Agreement. This City Note is made pursuant to a City Loan Agreement
dated as of ,2002, by and between the Borrower and the City (the "City Loan
Agreement"), and as contemplated by a Regulatory Agreement executed by the Borrower and the
City (the "City Regulatory Agreement").
2. Term. The term of this City Note (the "Term") shall commence on the date of this
City Note and shall end on the earlier of (i) fifty-five (55) years from the date of issuance of a
certificate of occupancy for all units in the Development (as defined in the City Loan
Agreement); or (ii) 7 20".
3. Amount and Time of Payments. All amounts due under this City Note shall be
due and payable as set forth in Section 2.3 of the City Loan Agreement.
4. Prepayment. Borrower shall have the right to prepay all or a portion of the
principal and interest due under this City Note without any charge or penalty being made
therefor.
5. Deed of Trust. This City Note is secured by a deed of trust of even date herewith
(the "City Deed of Trust).
6. Acceleration. Upon the occurrence of a default under the City Loan Agreement,
City Regulatory Agreement or City Deed of Trust, and expiration of all applicable notice and
cure periods (an "Event of Default"), the City shall have the right to accelerate the Term of this
City Note and declare all of the unpaid principal and accrued interest immediately due and
payable. Any failure by the City to pursue its legal and equitable remedies upon an Event of
Default shall not constitute a waiver of the City's right to declare an Event of Default and
exercise all of its rights under this City Note, the City Regulatory Agreement, the City Deed of
Trust, and the City Loan Agreement. Nor shall acceptance by the City of any payment provided
for herein constitute a waiver of the City's right to require prompt payment of any remaining
principal and interest owed.
7. No Offset. Borrower hereby waives any rights of offset it now has or may
hereafter have against the City, its successors and assigns.
8. Waiver; Attorneys' Fees. Borrower and any endorsers or guarantors of this City
Note, for themselves, their heirs, legal representatives, successors and assigns, respectively,
severally waive diligence, presentment, protest, and demand, and notice of protest, dishonor and
non-payment of this City Note, and expressly waive any rights to be released by reason of any
extension of time or change in terms of payment, or change, alteration or release of any security
given for the payments hereof, and expressly waive the right to plead any and all statutes of
limitations as a defense to any demand on this City Note or agreement to pay the same, and
jointly and severally agree to pay all costs of collection when incurred, including reasonable
attorneys' fees. If an action is instituted on this City Note, the undersigned promises to pay, in
addition to the costs and disbursements allowed by law, such sum as a court may adjudge
reasonable as attorneys' fees in such action.
9. Manner and Place of Payment. All payments of principal and interest due under
this City Note, as well as any additional payments set forth in the City Deed of Trust, shall be
payable in lawful money of the United States of America at the office of the Housing and
Redevelopment Department, City of Carlsbad, 2965 Roosevelt Drive, Suite B, Carlsbad,
California 92008, or such other address as the City may designate in writing.
10. Nonrecourse Obligation. Except as provided below, neither the Borrower nor, if
the Borrower is a partnership, any partner of the Borrower shall have any direct or indirect
personal liability for payment of the principal of, or interest on, this City Note, the City Loan
Agreement, or the City Regulatory Agreement or the performance of the covenants of the
Borrower under the City Deed of Trust. The sole recourse of the City with respect to the
principal of, or interest on, the City Note and defaults by Borrower in the performance of its
covenants under the City Loan Agreement, City Regulatory Agreement, and City Deed of Trust
shall be to the property described in the City Deed of Trust; provided, however, that nothing
contained in the foregoing limitation of liability shall (a) limit or impair the enforcement against
all such security for the City Note of all the rights and remedies of the City thereof, or (b) be
deemed in any way to impair the right of the City thereof to assert the unpaid principal amount
of the Note as demand for money within the meaning and intendment of Section 43 1.70 of the
California Code of Civil Procedure or any successor provision thereto. The foregoing limitation
of liability is intended to apply only to the obligation for the repayment of the principal of, and
payment of interest on the Note and the performance of Trustor's obligations under the City
Regulatory Agreement and the City Deed of Trust, except as hereafter set forth; nothing
contained therein is intended to relieve the Borrower of its obligation to indemnify the City under
Section 6.1 1 and 6.12(c) of the City Loan Agreement, or liability for (i) fraud or willful
misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create
liens on the Property that are payable or applicable prior to any foreclosure under the City Deed
of Trust (to the full extent of such taxes, assessments or other charges); (iii) the fair market value
of any personal property or fixtures removed or disposed of by Borrower other than in
accordance with the City Deed of Trust; and (iv) the misappropriation of any proceeds under any
insurance policies or awards resulting from condemnation or the exercise of the power of
eminent domain or by reason of damage, loss or destruction to any portion of the Property.
Chelsea Investment Corporation,
a
By:
Name:
Title:
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Carlsbad
City Clerk's Office
Attn. City Clerk
1200 Carlsbad Village Drive
Carlsbad, CA 92008
(Space above for Recorder's Use)
CITY DEED OF TRUST AND SECURITY AGREEMENT
THIS CITY DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust") is
made as of ,2002, by and among CIC Calavera , L.P. a
("Trustor"), ,a ("Trustee"), and the City of
Carlsbad, a municipal corporation ("Beneficiary").
FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein
recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby
irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF
SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions
hereinafter set forth, Trustor's interest in the property located in the County of San Diego, State
of California, that is described in the attached Exhibit A, incorporated herein by this reference
(the "Property").
TOGETHER WITH all interest, estates or other claims, both in law and in equity which
Trustor now has or may hereafter acquire in the Property and the rents;
TOGETHER WITH Trustork interest in all easements, rights-of-way and rights used in
connection therewith or as a means of access thereto, including (without limiting the generality
of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto;
TOGETHER WITH Trustor's interest in any and all buildings and improvements of every
kind and description now or hereafter erected thereon, and all property of the Trustor now or
hereafter affixed to or placed upon the Property;
TOGETHER WITH Trustor's interest in all building materials and equipment now or
hereafter delivered to said property and intended to be installed therein;
TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter
acquired, in and to any land lying within the right-of-way of any street, open or proposed,
adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to
or used in connection with the Property;
April 30,2002
TOGETHER WITH Trustor's estate, interest, right, title, other claim or demand, of every
nature, in and to such property, including the Property, both in law and in equity, including, but
not limited to, all deposits made with or other security given by Trustor to utility companies, the
proceeds from any or all of such property, including the Property, claims or demands with respect
to the proceeds of insurance in effect with respect thereto, which Trustor now has or may
hereafter acquire, any and all awards made for the taking by eminent domain or purchase in lieu
thereof of the whole or any part of such property, including without limitation, any awards
resulting from a change of grade of streets and awards for severance damages to the extent
Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein; and
TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures
now or hereafter attached to or used in and about the building or buildings now erected or
hereafter to be erected on the Property which are necessary to the complete and comfortable use
and occupancy of such building or buildings for the purposes for which they were or are to be
erected, and all renewals or replacements thereof or articles in substitution therefor, whether or
not the same are, or shall be attached to said building or buildings in any manner.
All of the foregoing, together with the Property, is herein referred to as the "Security." To
have and to hold the Security together with acquittances to the Trustee, its successors and assigns
forever.
FOR THE PURPOSE OF SECURING:
(a) Payment of just indebtedness of Trustor to Beneficiary as set forth in the Note and
the Loan Agreement (both as defined in Article 1 below) until paid or cancelled. Said principal
and other payments shall be due and payable as provided in the Note and the Loan Agreement.
The Note, the Loan Agreement, and the Regulatory Agreement (defined below), and all their
terms are incorporated herein by reference, and this conveyance shall secure any and all
extensions thereof, however evidenced; and
(b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to
the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to
advance said sums and the expiration of any applicable cure period, with interest thereon as
provided herein; and
(c) Performance of every obligation, covenant or agreement of Trustor contained
herein and in the Loan Documents (defined in Section 1.2 below).
AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR
COVENANTS AND AGREES:
April 30,2002 2
ARTICLE 1 DEFINITIONS
In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall
have the following meanings in this Deed of Trust:
Section 1.1 The term "Loan Agreement" means that certain City Loan Agreement
between Trustor and Beneficiary dated as of ,2002, providing for the Beneficiary
to loan to Trustor One Million Sixty Thousand Dollars ($1,060,000) for the development on the
Property of improvements.
Section 1.2 The term "Loan Documents" means this Deed of Trust, the Note, the Loan
Agreement, and the Regulatory Agreement.
Section 1.3 The term "Note" means the City Note in the principal amount of One
Million Sixty Thousand Dollars ($1,060,000) dated ,2002, executed by
Trustor in favor of the Beneficiary, the payment of which is secured by this Deed of Trust. (A
copy of the Note is on file with the Beneficiary and terms and provisions of the Note are
incorporated herein by reference.)
Section 1.4 The term "Principal" means the aggregate of the amounts required to be
paid under the Note.
Section 1.5 The term "Regulatory Agreement" means the Regulatory Agreement by
and between the Trustor and the Beneficiary, of even date herewith.
ARTICLE 2
MAINTENANCE AND MODIFICATION OF THE PROPERTY
AND S.ECURITY
Section 2.1 Maintenance and Modification of the Property by Trustor.
The Trustor agrees that at all times prior to full payment of the sum owed under the Note,
the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause
the Security to be maintained and preserved in good condition, subject to Article 4 below. The
Trustor will from time to time make or cause to be made all repairs, replacements and renewals
deemed proper and necessary by it. The Beneficiary shall have no responsibility in any of these
matters or for the making of improvements or additions to the Security.
Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all
claims for labor done and for material and services furnished in connection with the Security,
diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation
of labor on the work or construction on the Security for a continuous period of thirty (30) days or
more, and to take all other reasonable steps to forestall the assertion of claims of lien against the
Security of any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary
April 30,2002 3
as its agent (said agency being coupled with an interest) with the authority, but without any
obligation, to file for record any notices of completion or cessation of labor or any other notice
that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the
Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Trustor
only in the event that Trustor shall fail to take, or shall fail to diligently continue to take, those
actions as hereinbefore provided, after notice and expiration of all applicable cure periods.
Notwithstanding anything to the contrary contained in this Deed of Trust, Trustor shall
not be obligated to pay any claims for labor, materials or services which Trustor in good faith
disputes and is diligently contesting provided that Trustor shall, at Beneficiary's written request,
within thirty (30) days after the filing of any claim of lien, record in the Office of the Recorder of
San Diego County, a surety bond in an amount 1 and 1/2 times the amount of such claim item to
protect against a claim of lien, or provide such other security reasonably satisfactory to
Beneficiary.
Section 2.2 Granting of Easements.
Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in
the nature of easements with respect to any property or rights included in the Security except
those required or desirable for installation and maintenance of public utilities including, without
limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law. As to
these exceptions, Beneficiary will grant andor direct the Trustee to grant such easements.
ARTICLE 3
TAXES AND INSURANCE; ADVANCES
Section 3.1 Taxes, Other Governmental Charges and Utility Charges.
Trustor shall pay, or cause to be paid, prior to delinquency, all taxes, assessments, charges
and levies imposed by any public authority or utility company which are or may become a lien
affecting the Security or any part thereof; provided, however, if such taxes, assessments or
charges may be paid in installments, Trustor may pay in such installments; and provided further,
that Trustor shall not be required to pay and discharge any such tax, assessment, charge or levy
so long as Trustor is contesting the legality thereof in good faith and by appropriate proceedings
and Trustor has adequate funds to pay any liabilities contested pursuant to this Section 3.1. The
provisions of this Section 3.1 shall not be construed to require that Trustor maintain a reserve
account, escrow account, impound account or other similar account for the payment of future
taxes, assessments, charges and levies.
In the event that Trustor shall fail to pay any of the foregoing items required by this
Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the same,
after the Beneficiary has notified the Trustor in writing of such failure to pay and the Trustor fails
to fully pay such items within seven (7) business days after receipt of such notice or,
alternatively, provides Beneficiary with evidence Trustor is contesting such items in accordance
April 30, 2002 4
with this Section. Any amount so advanced therefor by Beneficiary, together with interest
thereon from the date of such advance at the maximum rate permitted by law, shall become an
additional obligation of Trustor to the Beneficiary and shall be secured hereby, and Trustor
agrees to pay all such amounts.
April 30,2002 5
Section 3.2 Provisions Respecting Insurance.
Trustor agrees to provide insurance conforming in all respects to that required under the
Loan Documents during the course of construction and following completion, and at all times
until all amounts secured by this Deed of Trust have been paid and all other obligations secured
hereunder fulfilled, and this Deed of Trust reconveyed.
All such insurance policies and coverages shall be maintained at Trustor's sole cost and
expense. Certificates of insurance for all of the above insurance policies, showing the same to be
in full force and effect, shall be delivered to the Beneficiary upon demand therefor at any time
prior to the Beneficiary's receipt of the entire Principal and all amounts secured by this Deed of
Trust.
Section 3.3 Advances.
In the event the Trustor shall fail to maintain the full insurance coverage required by this
Deed of Trust, the Beneficiary, after at least seven (7) days prior written notice to Trustor, may
(but shall be under no obligation to) take out the required policies of insurance and pay the
premiums on the same; and all amounts so advanced therefor by the Beneficiary shall become an
additional obligation of the Trustor to the Beneficiary (together with interest as set forth below)
and shall be secured hereby, which amounts the Trustor agrees to pay on the demand of the
Beneficiary, and if not so paid, shall bear interest from the date of the advance at the lesser rate of
ten percent (1 0%) per annum or the maximum amount permitted by law.
ARTICLE 4
DAMAGE, DESTRUCTION OR CONDEMNATION
Section 4.1 Awards and Damages.
All judgments, awards of damages, settlements and compensation made in connection
with or in lieu of (1) taking of all or any part of or any interest in the Property by or under
assertion of the power of eminent domain, (2) any damage to or destruction of the Property or
any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the
Property ("Funds") are hereby assigned to and shall be paid to, subject to the requirements of
lienholders senior to Beneficiary, the Beneficiary by a check made payable to the Beneficiary.
Upon the occurrence of an Event of Default (as defined in the Loan Agreement), the Beneficiary
shall be entitled to settle and adjust all claims under insurance policies provided under this Deed
of Trust and may deduct and retain from the proceeds of such insurance the amount of all
expenses incurred by it in connection with any such settlement or adjustment. All fire and
standard risk or extended coverage (casualty) insurance proceeds shall be applied to the payment
of the costs of repairing or rebuilding that part of the improvements on the Property damaged or
destroyed if (i) the Trustor agrees in writing within ninety (90) days after payment of the
proceeds of insurance that such repair or rebuilding is economically feasible, and (ii) each lender
in connection with outstanding Construction and Permanent Financing (as defined in the Loan
April 30,2002 6
Agreement) permits such repairing or rebuilding, provided that the extent of Trustor's obligation
to restore the improvements shall be limited to the amount of the insurance proceeds. If the
improvements are not repaired or rebuilt as provided in this Section 4.1, all such proceeds shall
be applied to repayment of outstanding loans including the loan secured by this Deed of Trust, in
the order of lien priority. Application of all or any part of the Funds collected and received by
the Beneficiary or the release thereof shall not cure or waive any default under this Deed of Trust.
The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior
mortgage lender.
ARTICLE 5
AGREEMENTS AFFECTING THE PROPERTY; FURTHER
ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.1 Other Agreements Affecting Property.
The Trustor shall duly and punctually perform all terms, covenants, conditions and
agreements binding upon it under the Loan Documents and any other agreement of any nature
whatsoever now or hereafter involving or affecting the Security or any part thereof.
Section 5.2 Agreement to Pay Attorneys' Fees and Expenses.
In the event of any Event of Default (as defined below) hereunder, and if the Beneficiary
should employ attorneys or incur other expenses for the collection of amounts due or the
enforcement of performance or observance of an obligation or agreement on the part of the
Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the
Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so incurred
by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the
indebtedness secured by the lien of this Deed of Trust, and shall bear interest from the date such
expenses are incurred at the lesser of ten percent (1 0%) per annum or the maximum amount
permitted by law.
Section 5.3 Payment of the Principal.
The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth
in the Note in the amounts and at the times set out therein.
Section 5.4 Personal Property.
To the maximum extent permitted by law, the personal property subject to this Deed of
Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall
constitute a fixtures filing under the California Commercial Code. As to any personal property
not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement
under the California Commercial Code.
April 30, 2002 7
Section 5.5 Financing Statement.
The Trustor shall execute and deliver to the Beneficiary such financing statements
pursuant to the appropriate statutes, and any other documents or instruments as are reasonably
required to convey to the Beneficiary a valid perfected security interest in the Security. The
Trustor agrees to perform all acts which the Beneficiary may reasonably request so as to enable
the Beneficiary to maintain such valid perfected security interest in the Security in order to secure
the payment of the Note in accordance with its terms. The Beneficiary is authorized to file a
copy of any such financing statement in any jurisdiction(s) as it shall deem appropriate fiom time
to time in order to protect the security interest established pursuant to this instrument.
Section 5.6 Operation of the Security.
The Trustor shall operate the Security (and, in case of a transfer of a portion of the
Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in
full compliance with the Loan Documents.
Section 5.7 Inspection of the Security.
At any and all reasonable times upon seventy-two (72) hours prior written notice, subject
to the rights of tenants, the Beneficiary and its duly authorized agents, attorneys, experts,
engineers, accountants and representatives shall have the right, without payment of charges or
fees, to inspect the Security.
Section 5.8 Nondiscrimination.
The Trustor herein covenants by and for itself, its heirs, executors, administrators, and
assigns, and all persons claiming under or through them, that there shall be no discrimination
against or segregation of, any person or group of persons on account of race, color, creed,
religion, age, disability, sex, sexual orientation, marital status, national origin or ancestry in the
sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Security, nor shall the
Trustor itself or any person claiming under or through it establish or permit any such practice or
practices of discrimination or segregation with reference to the selection, location, number, use
or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Security. The
foregoing covenants shall run with the land.
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default.
The following shall constitute Events of Default under this Deed of Trust: (1) failure to
make any payment to be paid by Trustor under the Loan Documents subject to applicable notice
and cure periods set forth in the Loan Documents; (2) failure to observe or perform any of
April 30,2002 8
Trustor's other covenants, agreements or obligations under the Loan Documents, including,
without limitation, the provisions concerning discrimination, subject to applicable notice and
cure periods, if any, included in the Loan Documents; or (3) failure to make any payment or
perform any of Trustor's other covenants, agreements, or obligations under any other debt
instruments or regulatory agreement secured by the Property, which default shall not be cured
within the times and in the manner provided therein.
Section 6.2 Acceleration of Maturity.
If an Event of Default shall have occurred and be continuing, then at the option of the
Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal
of the Note shall immediately become due and payable, upon written notice by the Beneficiary to
the Trustor (or automatically where so specified in the Loan Documents), and no omission on the
part of the Beneficiary to exercise such option when entitled to do so shall be construed as a
waiver of such right.
Section 6.3 The Beneficiary's Right to Enter and Take Possession.
If an Event of Default shall have occurred and be continuing, the Beneficiary may:
(a) Either in person or by agent, with or without bringing any action or
proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its
security, enter upon the Security and take possession thereof (or any part thereof), in its own
name or in the name of Trustee, and do any acts which it deems necessary or desirable to
preserve the value or marketability of the Property, or part thereof or interest therein, increase the
income therefrom or protect the security thereof. The entering upon and taking possession of the
Security shall not cure or waive any Event of Default or Notice of Default (as defined below)
hereunder or invalidate any act done in response to such Event of Default or pursuant to such
Notice of Default and, notwithstanding the continuance in possession of the Security, Beneficiary
shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon
occurrence of any Event of Default, including the right to exercise the power of sale;
(b) Commence an action to foreclose this Deed of Trust as a mortgage,
appoint a receiver, or specifically enforce any of the covenants hereof;
(c) Deliver to Trustee a written declaration of default and demand for sale,
and a written notice of default and election to cause Trustor's interest in the Security to be sold
("Notice of Default and Election to Sell"), which notice Trustee or Beneficiary shall cause to be
duly filed for record in the Official Records of San Diego County; or
(d) Exercise all other rights and remedies provided herein, or in any other
document or agreement now or hereafter evidencing, creating or securing all or any portion of the
obligations secured hereby, or provided by law.
April 30,2002 9 I IS
Section 6.4 Foreclosure By Power of Sale.
Should the Beneficiary elect to foreclose by exercise of the power of sale herein
contained following an Event of Default, the Beneficiary shall give notice to the Trustee (the
"Notice of Sale") and shall deposit with Trustee this Deed of Trust which is secured hereby (and
the deposit of which shall be deemed to constitute evidence that the unpaid principal amount of
the Note is immediately due and payable), and such receipts and evidence of any expenditures
made that are additionally secured hereby as Trustee may require.
(a) Upon receipt of such notice from the Beneficiary, Trustee shall cause to be
recorded, published and delivered to Trustor such Notice of Default and Election to Sell as then
required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse
of such time as may then be required by law and after recordation of such Notice of Default and
Election to Sell and after Notice of Sale having been given as required by law, sell the Security,
at the time and place of sale fixed by it in said Notice of Sale, whether as a whole or in separate
lots or parcels or items as Trustee shall deem expedient and in such order as it may determine
unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at
public auction to the highest bidder, for cash in lawful money of the United States payable at the
time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient
deed or deeds conveying the property so sold, but without any covenant or warranty, express or
implied. The recitals in such deed or any matters of facts shall be conclusive proof of the
truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary,
may purchase at such sale, and Trustor hereby covenants to warrant and defend the title of such
purchaser or purchasers.
(b) After deducting all reasonable costs, fees and expenses of Trustee,
including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds
of sale to payment of: (i) the unpaid Principal amount of the Note; (ii) all other amounts owed to
Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the
remainder, if any, to Trustor.
(c) Trustee may postpone sale of all or any portion of the Property by public
announcement at such time and place of sale, and from time to time thereafter, and without
further notice make such sale at the time fixed by the last postponement, or may, in its discretion,
give a new Notice of Sale.
Section 6.5 Receiver.
If an Event of Default shall have occurred and be continuing, Beneficiary, as a matter of
right and without further notice to Trustor or anyone claiming under the Security, and without
regard to the then value of the Security or the interest of Trustor therein, shall have the right to
apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part
thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice
of any application therefor. Any such receiver or receivers shall have all the usual powers and
duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of
April 30,2002 10
entry as provided herein, and shall continue as such and exercise all such powers until the date of
confirmation of sale of the Security, unless such receivership is sooner terminated.
Section 6.6 Remedies Cumulative.
No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of
Trust is intended to be exclusive of any other right, power or remedy, but each and every such
right, power and remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law or in equity.
Section 6.7 No Waiver
(a) No delay or omission of the Beneficiary to exercise any right, power or
remedy accruing upon any Event of Default shall exhaust or impair any such right, power or
remedy, or shall be construed to be a waiver of any such Event of Default or acquiescence
therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be
exercised from time to time and as often as may be deemed expeditious by the Beneficiary. No
consent or waiver, expressed or implied, by the Beneficiary to any breach by the Trustor in the
performance of the obligations hereunder shall be deemed or construed to be a consent to or
waiver of obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain
of any act or failure to act or to declare an Event of Default, irrespective of how long such failure
continues, shall not constitute a waiver by the Beneficiary of its right hereunder or impair any
rights, power or remedies consequent on any Event of Default by the Trustor.
(b) If the Beneficiary (i) grants forbearance or an extension of time for the
payment of any sums secured hereby, (ii) takes other or additional security or the payment of any
sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents,
(iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any
of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the
granting of any easement or other right affecting the Security, or (iv) makes or consents to any
agreement subordinating the lien hereof, any such act or omission shall not release, discharge,
modify, change or affect the obligations under this Deed of Trust, or any other obligation of the
Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co-signer,
endorser, surety or guarantor (unless expressly released); nor shall any such act or omission
preclude the Beneficiary from exercising any right, power or privilege herein granted or intended
to be granted in any Event of Default then made or of any subsequent Event of Default, nor,
except as otherwise expressly provided in an instrument or instruments executed by the
Beneficiary shall the lien of this Deed of Trust be altered thereby.
Section 6.8 Suits to Protect the Security.
The Beneficiary shall have power to (a) institute and maintain such suits and proceedings
as it may deem expedient to prevent any impairment of the Security and the rights of the
Beneficiary as may be unlawfbl or any violation of this Deed of Trust, (b) preserve or protect its
interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or
April 30, 2002 11
compliance with any legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment,
rule or order would impair the Security thereunder or be prejudicial to the interest of the
Beneficiary.
Section 6.9 Trustee May File Proofs of Claim.
In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition or other proceedings affecting the Trustor, its creditors or its property,
the Beneficiary, to the extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have the claims of the Beneficiary
allowed in such proceedings and for any additional amount which may become due and payable
by the Trustor hereunder after such date.
Section 6.10 Waiver.
The Trustor waives presentment, demand for payment, notice of dishonor, notice of
protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in
taking any action to collect any sums owing under the Note or in proceedings against the
Security, in connection with the delivery, acceptance, performance, default, endorsement or
guaranty of this Deed of Trust.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Amendments.
This instrument cannot be waived, changed, discharged or terminated orally, but only by
an instrument in writing signed by Beneficiary and Trustor.
Section 7.2 Reconveyance by Trustee.
Upon written request of Beneficiary stating that all sums secured hereby have been paid
or forgiven, and upon surrender of this Deed of Trust to Trustee for cancellation and retention,
and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to
Trustor, or to the person or persons legally entitled thereto.
Section 7.3 Notices.
If at any time after the execution of this Deed of Trust it shall become necessary or
convenient for one of the parties hereto to serve any notice, demand or communication upon the
other party, such notice, demand or communication shall be in writing and shall be served
personally or by depositing the same in the registered United States mail, return receipt
requested, postage prepaid and (1) if intended for Beneficiary shall be addressed to:
April 30,2002 12
City of Carlsbad
2965 Roosevelt Drive, Suite B
Carlsbad, CA 92008
Attention: Housing and Redevelopment Director
and (2) if intended for Trustor shall be addressed to:
Chelsea Investment Corporation
Attn: Wallace Dieckman
2 15 South Highway 101, Suite 200
Solana Beach, CA 92075
Any notice, demand or communication shall be deemed given, received, made or
communicated on the date personal delivery is effected or, if mailed in the manner herein
specified, on the delivery date or date delivery is refused by the addressee, as shown on the return
receipt. Either party may change its address at any time by giving written notice of such change
to Beneficiary or Trustor as the case may be, in the manner provided herein, at least ten (1 0) days
prior to the date such change is desired to be effective.
Section 7.4 Captions.
The captions or headings at the beginning of each Section hereof are for the convenience
of the parties and are not a part of this Deed of Trust.
Section 7.5 Invalidity of Certain Provisions.
Every provision of this Deed of Trust is intended to be severable. In the event any term
or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or
other body of competent jurisdiction, such illegality or invalidity shall not affect the balance of
the terms and provisions hereof, which terms and provisions shall remain binding and
enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the
debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or
partially secured portion of the debt, and all payments made on the debt, whether voluntary or
under foreclosure or other enforcement action or procedure, shall be considered to have been first
paid or applied to the full payment of that portion of the debt which is not secured or partially
secured by the lien of this Deed of Trust.
Section 7.6 Governing Law.
This Deed of Trust shall be governed by and construed in accordance with the laws of the
State of California.
Section 7.7 Gender and Number.
April 30, 2002 13
In this Deed of Trust the singular shall include the plural and the masculine shall include
the feminine and neuter and vice versa, if the context so requires.
Section 7.8 Deed of Trust, Mortgage.
Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and
any reference to a deed of trust shall also refer to a mortgage.
Section 7.9 Actions.
Trustor agrees to appear in and defend any action or proceeding purporting to affect the
Security.
Section 7.10 Substitution of Trustee.
Beneficiary may from time to time substitute a successor or successors to any Trustee
named herein or acting hereunder to execute this Trust. Upon such appointment, and without
conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties
conferred upon any Trustee herein named or acting hereunder. Each such appointment and
substitution shall be made by written instrument executed by Beneficiary, containing reference to
this Deed of Trust and its place of record, which, when duly recorded in the proper office of the
county or counties in which the Property is situated, shall be conclusive proof of proper
appointment of the successor trustee.
Section 7.1 1 Statute of Limitations.
The pleading of any statute of limitations as a defense to any and all obligations secured
by this Deed of Trust is hereby waived to the hll extent permissible by law.
Section 7.12 Acceptance by Trustee.
Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is
made public record as provided by law. Except as otherwise provided by law the Trustee is not
obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of
proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee.
April 30,2002 14
Section 7. 13 Restrictions under the Internal Revenue Code.
The parties hereto acknowledge that Section 42(h)(6)(E)(ii) of the Internal Revenue code
of 1986, as amended, does not permit the eviction or termination of tenancy (other than for good
cause) of an existing tenant of any low-income unit or any increase in the gross rent with respect
to such unit not otherwise permitted under Section 42 for a period of three (3) years after the date
the building is acquired by foreclosure or instrument in lieu of foreclosure. Beneficiary agrees
that, in the event Beneficiary acquires the Property through foreclosure or an instrument in lieu of
foreclosure, Beneficiary will refrain for a 3-year period thereafter from terminating tenancies
(other than for good cause) or increasing rents in a manner not permitted by Section 42.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year
first above written.
TRUSTOR:
Chelsea Investment Corporation,
a
By:
Name:
Title:
April 30, 2002 15 tzl
STATE OF CALIFORNIA )
COUNTY OF 1 1 ss
On , 200 - , before me, the undersigned, a Notary Public, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) idare subscribed to the within
instrument, and acknowledged to me that he/she/they executed the same in hishedtheir
authorized capacity(ies), and that by hishedtheir signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
EXHIBIT A
(Legal Description of Property)
The land is situated in the State of California, County of San Diego, and is described as follows:
A- 1
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Carlsbad
City Clerk's Office
Attn. City Clerk
1200 Carlsbad Village Drive
Carlsbad, CA 92008
(Space above for Recorders Use)
REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS
This Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement")
is made and entered into as of this day of ,2002, by and between the
City of Carlsbad, a municipal corporation (the "City"), CIC Calavera , L.P. a
("Owner").
RECITALS
1. The City has entered into the Loan Agreement with Owner under which the City
will loan funds (the "Loan") to Owner which will be used, together with finds obtained from
other sources, for the development and construction of one hundred six (106) residential units
known as the Calavera Hills I1 Affordable Housing Development ("Development"), located on
the real property in the City of Carlsbad, County of San Diego, more particularly described in
Exhibit A attached hereto and incorporated herein (the "Property").
2. The funds loaned to Owner pursuant to the Loan Agreement are City Housing
Trust Fund monies. Such funds are required to be utilized to assist housing affordable to lower
income households. This Agreement is intended to implement this requirement.
3. The City intends to utilize the Development to obtain affordable housing
production credits for the City of Carlsbad Redevelopment Agency pursuant to Health and Safety
Code Section 33413(b)(2)(A)(ii) as newly constructed housing units located outside of the
Carlsbad Village Redevelopment Project Area and available at affordable housing cost to low
and moderate income households. Such units are required to remain affordable to such
households for not less than the period of the land use controls established in the Redevelopment
Plan for the Carlsbad Village Redevelopment Project Area. This Agreement is also intended to
implement this requirement.
4. The City has agreed to loan funds to Owner on the condition that the
Development be maintained and operated in accordance with Health and Safety Section 3341 3(b)
and in accordance with additional restrictions concerning affordability, operation, and
maintenance of the Development, as specified in this Agreement.
1
5. In consideration of receipt of the Loan at an interest rate substantially below the
market rate, Owner has further agreed to observe all the terms and conditions set forth below.
6. Owner holds a fee interest in the Development land, and in all improvements to be
constructed by Owner on such land.
7. In order to ensure that the entire Development will be used and operated in
accordance with these conditions and restrictions, the City and the Owner wish to enter into this
Agreement.
THEREFORE, the City and the Owner hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions
When used in this Agreement, the following terms shall have the respective meanings
assigned to them in this Article 1.
(a) "Adjusted Income" shall mean the total anticipated annual income of all
persons in a household, as calculated in accordance with 25 California Code of Regulations
Section 6914 or pursuant to a successor State housing program that utilizes a reasonably similar
method of calculation of adjusted income. In the event that no such program exists, the City
shall provide the Owner with a reasonably similar method of calculation of adjusted income as
provided in said Section 691 4.
(b) "Agency" shall mean the Carlsbad Redevelopment Agency, Carlsbad,
California, a public body, corporate and politic.
(c) "Agreement" shall mean this Regulatory Agreement and Declaration of
Restrictive Covenants.
(d) "City" shall mean the City of Carlsbad, a municipal corporation.
(e) "Deed of Trust'' shall mean the deed of trust to the City on the Property
that secures repayment of the Loan and performance of this Agreement.
(f) "Development" shall mean the Property and the one hundred six (1 06)
units to be constructed on the Property, as well as all landscaping, roads and parking spaces
existing thereon, as the same may from time to time exist.
(g) "HCD" shall mean the California Department of Housing and Community
Development.
2
(h) "Loan" shall mean all funds loaned to Owner pursuant to the Loan
Agreement.
(i) "Loan Agreement" shall mean the City Loan Agreement entered into by
and between the City and Owner and dated of even date herewith.
(j) "Lower Income Household" shall mean a household with an Adjusted
Income that does not exceed the qualifying limits for low income households as established and
amended from time to time pursuant to Section 8 of the United States Housing Act of 1937, and
as published by HCD.
(k) "Median Income" shall mean the median gross yearly income adjusted for
actual household size, in the County of San Diego, California, as published from time to time by
HCD. In the event that such income determinations are no longer published, or are not updated
for a period of at least eighteen (1 8) months, the City shall provide the Owner with other income
determinations which are reasonably similar with respect to methods of calculation to those
previously published by HCD.
(1) "Moderate Income Household" shall mean a household whose annual
gross income does not exceed ninety percent (90%) of Median Income, adjusted for household '
size.
(m) "Moderate Income Units" shall mean the Units limited to occupancy by
Moderate Income Households pursuant to Section 2.1 below.
(n) "Note" shall mean the promissory note from the Owner to the City
evidencing all or any part of the Loan.
(0) "Owner" shall mean Chelsea Investment Corporation, a
and its successors and assigns to the Development.
@) "Property" shall mean the real property described in Exhibit A attached
hereto and incorporated herein.
(q) "Rent'' shall mean the total of monthly payments by the tenants of a Unit
for the following: use and occupancy of the Unit and land and associated facilities, including
parking; any separately charged fees or service charges assessed by Owner which are required of
all tenants, other than security deposits; an allowance for the cost of an adequate level of service
for utilities paid by the tenant, including garbage collection, sewer, water, electricity, gas and
other heating, cooking and refrigeration fuel, but not telephone service; any other interest, taxes,
fees or charges for use of the land or associated facilities and assessed by a public or private
entity other than Owner, and paid by the tenant.
3
(r) "Term" shall mean the period of time beginning on the date of recordation
of this Agreement and ending fifty-five (55) years after a Certificate of Occupancy is issued by
the City for all Units.
(s) "Units" shall mean the one hundred six (106) rental units to be constructed
on the Property by the Owner, but excluding therefrom one (1) resident manager's unit.
(v) "Very Low Income Household" shall mean shall mean a household whose
annual gross income does not exceed fifty percent (50%) of Median Income, adjusted for
household size.
(w) Very Low Income Unit" shall mean the Units limited to occupancy by
Moderate Income Households pursuant to Section 2 below.
ARTICLE 2
AFFORDABILITY COVENANTS
2.1 Occupancy Requirement. Thirty-two of the Units shall be rented and occupied by
or, if vacant, available for rental and occupancy by Very Low Income Households and 20 units
shall be rented and occupied by or, if vacant, available for rental and occupancy by Low Income
Households. The remainder of the Units shall be occupied by Moderate Income Households.
2.2 Allowable Rent.
(a) Subject to Section 2.3 below, the monthly Rent charged the occupants of
the Very Low Income Units shall not exceed one-twelfth of thirty percent (30%) of fifty percent
(50%) of Median Income, adjusted for household size, and the monthly Rent charged the
occupants of the Low Income Units shall not exceed one-twelfth of thirty percent (30%) of sixty
percent (60%) of Median Income, adjusted for household size . The Rent charged the occupants
of the Moderate Income Units shall not exceed one-twelfth of thirty percent (30%) of ninety
percent (90%) of Median Income, adjusted for household size.
(b) Subject to Section 2.3(b) below, in calculating the allowable Rent for all
Units, the following assumed household sizes shall be utilized:
Number of Bedrooms Assumed Household Size
Studio
One
Two
Three
Four
4
1
1.5
3
4.5
6
2.3 Increased Income of Occupying Households.
(a) In the event, upon recertification of an occupant household's income, the
Owner discovers that a Very Low Income Household no longer qualifies as a Very Low Income
Household (but does qualify as a Low Income Household), such household's Unit shall be
considered a Low Income Unit (and the Rent may be increased to one-twelfth of thirty percent of
sixty percent (60%) of Median Income upon sixty (60) days written notice to the household) and
the Owner shall rent the next available Unit to a Very Low Income Household to comply with the
requirements of Section 2.1 above. In the event, upon recertification of an occupant household's
income, the Owner discovers that a Low Income Household no longer qualifies as a Low Income
Household (but does qualifL as a Moderate Income Household), such household's Unit shall be
considered a Moderate Income Unit (and the Rent may be increased to one-twelfth of thirty
percent of ninety percent (90%) of Median Income upon sixty (60) days written notice to the
household) and the Owner shall rent the next available Low Income Unit to a Low Income
Household to comply with the requirements of Section 2.1 above. In the event that the income of
a Very Low, Low or Moderate Income Household increases above the qualifying limit for a
Moderate Income Household, the rent shall remain at the level required for a Moderate Income
Unit and the Unit shall be deemed to be a Moderate Income Unit until the occupying household
vacates the Unit, and the next available Unit shall be rented to a Very Low, Low or Moderate
Income Household as necessary to meet the requirements of Section 2.1 above. Moreover, a Unit
occupied by a Very Low, Low or Moderate Income Household shall be deemed, upon the
termination of such Very Low , Low or Moderate Income Household's occupancy, to be
continuously occupied by a Very Low, Low or Moderate Income Household, as applicable, until
reoccupied, at which time the character of the Unit shall be redetermined.
(b) If the Development is subject to federal low income housing tax credit
requirements, the provisions of those requirements regarding assumed household size and
continued occupancy by households whose incomes exceed the eligible income limitations and
rents to be charged to those households shall apply in place of the provisions set forth in
subsections 2.2(b) and 2.3(a) above.
2.4 Lease Provisions. Owner shall include in leases for all Units provisions which
authorize Owner to immediately terminate the tenancy of any household one or more of whose
members misrepresented any fact material to the household's qualification as a Very Low Income
Household, Low Income Household or a Moderate Income Household. Each lease or rental
agreement shall also provide that the household is subject to annual certification in accordance
with Section 3.1 below, and that, if the household's income increases above the applicable limits
for a Very Low Income Household or a Moderate Income Household, as applicable, such
household's Rent may be subject to increase.
2.5 Section 8 Certificate Holders. The Owner will accept as tenants, on the same
basis as all other prospective tenants, persons who are recipients of federal certificates for rent
subsidies pursuant to the existing housing program under Section 8 of the United States Housing
Act, or its successor. The Owner shall not apply selection criteria to Section 8 certificate or
voucher holders that is more burdensome than criteria applied to all other prospective tenants,
5
nor shall the Owner apply or permit the application of management policies or lease provisions
with respect to the Development which have the effect of precluding occupancy of units by such
prospective tenants.
2.6 Condominium Conversion. The Owner shall not convert Development units to
condominium or cooperative ownership or sell condominium or cooperative conversion rights to
the Property during the Term of this Agreement.
ARTICLE 3
INCOME CERTIFICATION AND REPORTING
3.1 Income Certification. The Owner will obtain, complete and maintain on file,
immediately prior to initial occupancy and annually thereafter, income certifications from each
Very Low Income Household, Low Income Household and each Moderate Income Household
renting any of the Units. The Owner shall make a good faith effort to verify that the income
provided by an applicant or occupying household in an income certification is accurate by taking
one or more of the following steps as a part of the verification process: (1) obtain a pay stub for
the most recent pay period; (2) obtain an income tax return for the most recent tax year; (3)
conduct a credit agency or similar search; (4) obtain an income verification form from the
applicant's current employer; (5) obtain an income verification form from the Social Security
Administration andor the California Department of Social Services if the applicant receives
assistance from either of such agencies; or (6) if the applicant is unemployed and has no such tax
return, obtain another form of independent verification. Copies of tenant income certifications
shall be available to the City upon written request.
3.2 Annual Report to City. Each year Owner shall submit an annual report to the
City, in a form approved by the City. The annual report shall include for each Unit covered by
this Agreement, the Rent and the income and household size of the household occupying' the
Unit. The report shall also state the date the tenancy commenced for each rental Unit and such
other information as the City may be required by law to obtain.
3.3 Additional Information. Owner shall provide any additional information
reasonably requested by the City. Upon 5 days prior written request and during regular business
hours, the City shall have the right to examine and make copies of all books, records or other
documents of Owner which pertain to any Unit.
3.4 Records. Owner shall maintain complete, accurate and current records pertaining
to the Units, and, upon 5 days prior written request by the City, shall permit any duly authorized
representative of the City to inspect records, including records pertaining to income and
household size of tenant households.
3.5 Welfare Reform Act Compliance. Unless Owner is otherwise exempt from the
following requirement under applicable law, Owner shall comply with the requirements of the
Public Responsibility and Work Opportunity Reform Act of 1996, as amended, including,
6
without limitation, verifying the citizenship or immigration status of prospective tenants in
accordance with the verification procedures established under such Act.
ARTICLE 4
OPERATION OF THE DEVELOPMENT
4.1 Residential Use. The Development shall be operated only for residential use. No
part of the Development shall be operated as transient housing.
4.2 Compliance with Loan Agreement. - Owner shall comply with all the terms and
provisions of the Loan Agreement.
4.3 Property Tax Exemption. Owner shall only apply for a property tax exemption for
the Property under Revenue and Taxation Section 2 14(g), and not under any other provision of
law, without the City's prior written consent, which consent, shall not be unreasonably withheld.
4.4 Taxes and Assessments. Owner shall pay all real and personal property taxes,
assessments and charges and all franchise, income, employment, old age benefit, withholding,
sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to
prevent any penalty from accruing, or any lien or charge from attaching to the Property; provided,
however, that Owner shall have the right to contest in good faith, any such taxes, assessments, or
charges. In the event Owner exercises its right to contest any tax, assessment, or charge against
it, Owner, on final determination of the proceeding or contest, shall immediately pay or discharge
any decision or judgment rendered against it, together with all costs, charges and interest.
4.5 Nondiscrimination. All of the Units shall be available for occupancy on a
continuous basis to members of the general public who are income eligible. Owner shall not give
preference to any particular class or group of persons in renting or selling the Units, except to the
extent that the Units are required to be leased to Very Low Income Households, Low Income
Households and Moderate Income Households or to Carlsbad Redevelopment Agency or City
displacees pursuant to Section 4.6 below. There shall be no discrimination against or segregation
of any person or group of persons, on account of race, color, creed, religion, sex, sexual
orientation, marital status, national origin, or ancestry, in the leasing, subleasing, transferring,
use, occupancy, tenure, or enjoyment of any Unit nor shall Owner or any person claiming under
or through the Owner, establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use, or occupancy, of tenants,
lessees, sublessees, subtenants, or vendees of any Unit or in connection with the employment of
persons for the operation and management of the Development. All deeds, leases or contracts
made or entered into by Owner as to the Units or the Development or portion thereof, shall
contain covenants concerning discrimination as prescribed by the Loan Agreement.
4.6 Preference to Displacees. Owner shall give a preference in the rental of any Units
to eligible households displaced by activity of the Carlsbad Redevelopment Agency or the City
upon receiving a written request of the Agency or the City regarding such displacement.
7
ARTICLE 5
PROPERTY MANAGEMENT AND MAINTENANCE
5.1 Management Responsibilities. The Owner is responsible for all management
functions with respect to the Development, including without limitation the selection of tenants,
certification and recertification of household size and income, evictions, collection of rents and
deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital
items, and security. The City and the Agency shall have no responsibility over management of
the Development. The Owner shall retain a professional property management company
approved by the City in its reasonable discretion to perform its management duties hereunder,
unless the Owner demonstrates to the City that it has the capacity to self-manage the
Development and receives written City approval for self-management. A resident manager shall
also be required, selection of whom shall be at the discretion of the Owner.
5.2 Management Agent; Periodic Reports. The Development shall at all times be
managed by an experienced management agent reasonably acceptable to the City, with
demonstrated ability to operate residential facilities like the Development in a manner that will
provide decent, safe, and sanitary housing (as approved, the "Management Agent"). The Owner
shall submit for the City's approval the identity of any proposed Management Agent. The Owner
shall also submit such additional information about the background, experience and financial
condition of any proposed Management Agent as is reasonably necessary for the City to
determine whether the proposed Management Agent meets the standard for a qualified
Management Agent set forth above. If the proposed Management Agent meets the standard for a
qualified Management Agent set forth above, the City shall approve the proposed Management
Agent by notifying the Owner in writing. Unless the proposed Management Agent is
disapproved by the City within thirty (30) days, which disapproval shall state with reasonable
specificity the basis for disapproval, it shall be deemed approved. The City herby approves
Mercy Services Corp. as the initial Management Agent.
5.3 Performance Review. The City reserves the right to conduct an annual (or more
frequently, if deemed necessary by the City) review of the management practices and financial
status of the Development. The purpose of each periodic review will be to enable the City to
determine if the Development is being operated and managed in accordance with the
requirements and standards of this Agreement. The Owner shall cooperate with the City in such
reviews.
5.4 Replacement of Management Agent. If; as a result of a periodic review, the City
determines in its reasonable judgement that the Development is not being operated and managed
in accordance with any of the material requirements and standards of this Agreement, the City
shall deliver notice to Owner of its intention to cause replacement of the Management Agent,
including the reasons therefor. Within fifteen (1 5) days of receipt by Owner of such written
notice, City staff and the Owner shall meet in good faith to consider methods for improving the
8
financial and operating status of the Development, including, without limitation, replacement of
the Management Agent.
If, after such meeting, City staff recommends in writing the replacement of the
Management Agent, Owner shall promptly dismiss the then Management Agent, and shall
appoint as the Management Agent a person or entity meeting the standards for a Management
Agent set forth in Section 5.2 above and approved by the City pursuant to Section 5.2 above.
Any contract for the operation or management of the Development entered into by Owner
shall provide that the contract can be terminated as set forth above. Failure to remove the
Management Agent in accordance with the provisions of this Section shall constitute default
under this Agreement, and the City may enforce this provision through legal proceedings as
specified in Section 6.3.
5.5 Approval of Management Policies. The Owner shall submit its written
management policies with respect to the Development to the City for its review, and shall amend
such policies in any way necessary to ensure that such policies comply with the provisions of this
Agreement.
5.6 Property Maintenance. The Owner agrees, for the entire Term of this Agreement,
to maintain all interior and exterior improvements, including landscaping, on the Property in
good condition and repair (and, as to landscaping, in a healthy condition) and in accordance with
all applicable laws, rules, ordinances, orders and regulations of all federal, state, county,
municipal, and other governmental agencies and bodies having or claiming jurisdiction and all
their respective departments, bureaus, and officials.
The City places prime importance on quality maintenance to protect its investment and to
ensure that all City-assisted affordable housing projects within the City are not allowed to
deteriorate due to below-average maintenance. Normal wear and tear of the Development will be
acceptable to the City assuming the Owner agrees to provide all necessary improvements to
assure the Development is maintained in good condition. The Owner shall make all repairs and
replacements necessary to keep the improvements in good condition and repair.
In the event that the Owner breaches any of the covenants contained in this section and
such default continues for a period of five (5) days after written notice from the City with respect
to graffiti, debris, and waste material, or thirty (30) days after written notice with respect to
general maintenance, landscaping and building improvements, (and subject to any stricter
requirements included in any applicable City ordinance) then the City, in addition to whatever
other remedy it may have at law or in equity, shall have the right to enter upon the Property and
perform or cause to be performed all such acts and work necessary to cure the default. Pursuant
to such right of entry, the City shall be permitted (but is not required) to enter upon the Property
and perform all acts and work necessary to protect, maintain, and preserve the improvements and
landscaped areas on the Property, and to attach a lien on the Property, or to assess the Property, in
the amount of the reasonable expenditures arising from such acts and work of protection,
maintenance, and preservation by the City and/or costs of such cure, including an administrative
9
charge equal to ten percent (1 0%) of such expenditures, which amount shall be promptly paid by
the Owner to the City upon demand.
ARTICLE 6
MISCELLANEOUS
6.1 Term. The provisions of this Agreement shall apply to the Property for the entire
Term even if the entire Loan is paid in full prior to the end of the Term. This Agreement shall
bind any successor, heir or assign of Owner, whether a change in interest occurs voluntarily or
involuntarily, by operation of law or otherwise, except as expressly released by the City. The
City makes the Loan on the condition, and in consideration of, this provision, and would not do
so otherwise.
6.2 Covenants to Run With the Land. The City and the Owner hereby declare their
express intent that the covenants and restrictions set forth in this Agreement shall run with the
land, and shall bind all successors in title to the Property, provided, however, that on the
expiration of the Term of this Agreement said covenants and restrictions shall expire. Each and
every contract, deed or other instrument hereafter executed covering or conveying the 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 release such
conveyed portion of the Property from the requirements of this Agreement.
6.3 Enforcement bv the Citv. If Owner fails to perform any obligation under this
Agreement, and fails to cure the default within 30 days after the City has notified the Owner in
writing of the default or, if the default cannot be cured within 30 days, failed to commence to
cure within 30 days and thereafter diligently pursue such cure to completion within ninety (90)
days (and subject also to the notice and cure rights of the limited partner of Owner set forth in
Section 7.1(1) of the Loan Agreement), the City shall have the right to enforce this Agreement by
any or all of the following actions, or any other remedy provided by law:
(a) Calling the Loan. The City may declare a default under the Note,
accelerate the indebtedness evidenced by the Note, and proceed with foreclosure under the Deed
of Trust.
(b) Action to Compel Performance or for Damages. The City may bring an
action at law or in equity to compel Owner's performance of its obligations under this
Agreement, and/or for damages.
(c) Remedies Provided Under Loan Agreement. The City may exercise any
other remedy provided under the Loan Agreement.
6.4 Attorneys Fees and Costs. In any action brought to enforce this Agreement, the
prevailing party shall be entitled to all reasonable costs and expenses of suit, including
10 '33
reasonable attorneys' fees. This section shall be interpreted in accordance with California Civil
Code Section 17 17 and judicial decisions interpreting that statute.
6.5 Recording and Filing. The City and the Owner shall cause this Agreement, and all '
amendments and supplements to it, to be recorded against the Property in the Official Records of
the County of San Diego.
6.6 Governing Law. This Agreement shall be governed by the laws of the State of
California.
6.7 Amendments. This Agreement may be amended only by a written instrument
executed by all the parties hereto or their successors in title, and duly recorded in the real
property records of the County of San Diego, California.
6.8 Notice. All notices given or certificates delivered under this Agreement shall be
deemed received on the delivery or refusal date shown on the delivery receipt, if: (i) personally
delivered by a commercial service which furnishes signed receipts of delivery or (ii) mailed by
certified mail, return receipt requested, postage prepaid, addressed as shown on the signature
page. Any of the parties may, by notice given hereunder, designate any further or different
addresses to which subsequent notices, certificates or communications shall be sent.
6.9 Severability. If any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining portions of this
Agreement shall not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the City and the Owner have executed this Agreement by
duly authorized representatives, all on the date first written above.
BORROWER
CIC Calavera , L.P. a, a
CITY
City of Carlsbad, a municipal corporation
By: By:
Raymond R. Patchett, City Manager
By: Attest:
(name/title) Lorraine M. Wood, City Clerk
Approved as to Form
Ronald R. Ball, City Attorney
By: By:
(namekitle) Jane Mobaldi, Assistant City Attorney
11
EXHIBIT A
Property Description
DRAFT EXHIBIT 5
Minutes of: HOUSING COMMISSION
Time of Meeting: 6:OO P.M.
Date of meeting: September 12,2002
Place of Meeting: HOUSING AND REDEVELOPMENT DEPARTMENT OFFICE
CALL TO ORDER
Vice-chairman Scarpelli called the Regular Meeting to order at 6:lO p.m.
PLEDGE OF ALLEGIANCE
Vice-chairman Scarpelli waived the Pledge of Allegiance since there wasn’t a flag in the Housing
and Redevelopment Office.
ROLL CALL
Present: Commissioners: C. Charles Griffin
Doris Ritchie
Edward Scarpelli
Absent: Renee Houston
Staff Present: Housing and Redevelopment Director: Debbie Fountain
Management Analyst: Craig Ruiz
APPROVAL OF MINUTES
Minutes of August 1, 2002, were continued because Commissioner Houston was not present.
COMMENTS FROM THE AUDIENCE ON ITEMS NOT LISTED ON THE AGENDA
There was no audience in attendance, who wished to speak at this time.
NEW BUSINESS
Vice-chairman Scarpelli announced the agenda item, the recommendation to the City Council
allowing the developer to receive a $1,000,000 developer fee for the construction of one hundred
six affordable apartment units to satisfy the requirements of the lnclusionary Housing Ordinance
for the Calavera Hills Master Plan Phase II, which is Resolution 2002-004. Staff is
recommending approval.
Vice-chairman Scarpelli inquired as to any additional presentation being made on this from the
last meeting.
Mr. Ruiz answered that he would make a brief one. Then Mr. Schmidt will make a presentation.
Mr. Ruiz began by reviewing the last meeting where the project was discussed. The project will
be a hundred and six units. It will have units between 20 and 30% of state median income.
Those units will be the most affordable that we have in the city. The other units will be at 60% of
the median income. At the last meeting, the Commission approved providing financial assistance
at $10,000 a unit or a $1,060,000 and the one remaining item was their request that the
development fee be increased from our recommendation of $1,000,000 to $1,200,000, which is
the maximum amount allowed under the tax credit program.
Mr. Ruiz said the board questioned how staff came up with this recommendation. In review,
when there is a proposal for financial assistance, it first starts with Debbie Fountain and I
37
HOUSING COMMISSION MINUTES
SEPTEMBER 12,2002
PAGE 2 of 5 DRAFT
reviewing the proposal. Then we have something called the Housing Policy Team of which
Debbie Fountain and I are members. The Committee is also made up of the Community
Development Director, the Planning Director, the Finance Director and the Assistant City
Attorney. We also review those as a group. The presentation that you see in the staff report is
the collective agreement of that group.
As stated in the staff report, one thing the group looks at is all the affordable housing projects that
have been developed in the city so far. Attachment 6 shows the five projects that have been
completed, including the Villages of La Costa, which has been approved but has not yet started
construction and this project. When we did our analysis, out of all the previous projects, we felt
that the Rancho Carrillo Apartments and the Poinsettia Station Apartments were the two most
similar projects to this project. They are similar in size; roughly a 100-unit projects; and they
were financed similarly; by that, they received tax exempt bonds, and 4% Tax Credits as the
primary financing structure. As discussed at the last meeting, this project is a little different in that
they are getting MHP funds, which helps drive down the affordability. So when looking at these
previous projects, and comparing the total project costs and the developer fees that were allowed
under those projects, both received a developer fee of approximately 6%. The Poinsettia Station
project was slightly less than 6%; and Rancho Carrillo is slightly above 6%. So this project on a
percentage bases and a dollar amount is slightly higher; 1/3 of a percentage point. It is roughly in
line with the other ones but it is slightly higher. As discussed in the staff report, it is slightly
higher, because it recognizes the effort that went into the MHP application and the fact that these
units are going to have greater affordability.
Mr. Ruiz continued that another point the Housing Policy Team considered was the total sources
of funding that the project is getting. In particular, the team looks at the developer contribution.
Part of it is the amount of money the city is contributing, and the amount the developer, who has
the obligation to provide the affordable housing, is contributing. Again, we looked at the most
similar projects to this project as far as the size and scope. With the Rancho Carrillo Project, they contributed a little over $4,200,000 cash contributions. The Poinsettia Station Apartments
was a little over $1,000,000. This project was a little over $100,000. Those were the main
factors that we took into account when we considered how much assistance we should provide
and how much we thought was a fair and reasonable developer fee. Those are the primary
criteria that we took into account.
Mr. Ruiz also stated there are things that are not quantifiable. The Villages of La Costa got the
maximum developer fee. They are a larger project, but 60% of the project are larger units; 3- and
4-bedroom units. The Calavera Hills project is desirable because they are going to have units at
20 and 30% of the state's median income. There is a lot of effort that went in, like they
mentioned last meeting, into acquiring the MHP funding. There will also be a lot of effort in the
Villages of La Costa project in providing a larger project and they are tough to compare. They
both were difficult, they both take effort, and that is something we as a Policy Team struggle with
all the time. That was the criteria we used. That was the recommendation we made at the last
meeting and that is our recommendation here again tonight. Just to let the Commission know,
there is only three Commissioners and it takes three votes, either for or against to carry an action so if there was a 2-1 vote for any reason that would not be an action. Just please keep that in
mind. Do you have any questions for me?
Vice-chairman Scarpelli asked about the request of the $1,000,000 that is part of the staffs
recommended resolution, if we were to adjust that number this evening, would that in any way
delay the process for the developer?
Mr. Ruiz answered, not at all.
HOUSING COMMISSION MINUTES
SEPTEMBER 12,2002
PAGE 3 of 5 DRAFT
Ms. Fountain added that it would be the Commissions recommendation that goes forward to the
Council.
Vice-chairman Scarpelli said it is understood that the Commission’s recommendation will go to
Council. Vice-chairman Scarpelli thanked staff for putting together this report as it made it a lot
clearer as to the points raised at the last meeting regarding the request for the additional funds.
Again, it was very difficult to grasp at that meeting, but now the Commission has had the
opportunity to receive the information and to review the information and it makes a lot more
sense in coming to hopefully a rational decision on this. We thank staff for taking the time to assist the Commission in efforts to understand more clearly the recommendation.
Vice-chairman Scarpelli continued by asking Commissioner Ritchie and Commissioner Griffin if
they have any comments to make regarding the presentation at this time.
Both Commissioners Ritchie and Griftin said they do not have any comments. Questions have been answered.
Vice-chairman Scarpelli said he personally reviewed this in great detail because he feels it is
important enough to the city as it was to the residents of this future community for us to give it all
the serious consideration that is needed. He continued that he came to a different conclusion
from that of staffs recommendation and would like to make a motion and propose that the
resolution be adjusted to read that the Commission recommends to City Council that the
developer receive the $1,200,000 as requested. He asked for a second to that before continuing
on to any discussion.
Commissioner Griffin seconded it.
Vice-chairman Scarpelli continued with his appreciation of the fact that there were various
individuals and disciplines applying their knowledge to this request and came to the resolution.
He believes that the role of the Housing Commission, as it was from the outset, is to provide
affordable housing to members of our community to the greatest extent possible. The fact that
this particular project is providing affordable housing to the lowest element, an area in which we
have had a very difficult time in targeting over the years to provide as much affordable housing in
the low rental areas to that group that falls within the 20% range is a significant factor in this
whole area of request. He feels it is significant enough but wasn’t given sufficient attention by
staff. He agrees with the comments made in Exhibit 3 by the developer regarding the fact and
supported by staff that an additional amount of risk and an additional amount of time and effort
and continued effort beyond the point of this approval would warrant their receiving the
$1,200,000, which, in fact, is allowable by the MHP funds. This has no bearing on any cost to the
city or any further liability to the city and does not financially impact negatively the project in any
event. In fact, it enhances the ability of the project to continue successfully into the future. Again,
a major emphasis in this area deals with the idea that we are going to provide 32 units to 20 or
30% of the area median income. The city, in order to accomplish what we are trying to
accomplish with affordable housing, ought to take very serious consideration in the comments
regarding us looking at each case on a case-by-case basis and not under a set of rules or outline
that has been developed by the city which is very sterile, which is typical bureaucratic, and does
not take into consideration. He believes the effect that this kind of a project, or special needs project, as brought out by the applicant, should receive.
Vice-chairman Scarpelli continued that any applicant coming to this city that can do something
where it requires further risk, further work and difficulty should be rewarded. He believes we
should send a message to all future developers of affordable housing in the City of Carlsbad that
if they do take the extra time, make the extra effort, take the extra risk to provide affordable
HOUSING COMMISSION MINUTES
SEPTEMBER 12,2002
PAGE 4 of 5 DRAFT
housing in the ranges of 20 to 30% as on a case-by-case basis that they would have the
opportunity to receive the additional compensation up to the amount allowable under the credit
program, any credit program they are subscribing.
The analysis done on the basis that staff and the committee as described was shortsighted in
that area. Shortsighted in the area that we are doing nothing to encourage the future developers
by our actions here today to take those more difficult steps in providing the kind of affordable
housing that we can reach this group in the 20 to 30% area median range. He requested the full
support of this committee in supporting this resolution on the basis of the $1,200,000 request.
Again, reminding the Commission that 1) it has no additional effect on the cost to the City; 2) that
in fact, it will enhance the city's ability to encourage people to take these extra steps in the future;
3) It will strengthen the project from the availability of its financial ability through the tax exempt
program from which it is embarking upon. With saying that, does anyone have any further
comments regarding this motion?
Commissioner Ritchie said she thinks Vice-chairman Scarpelli stated it very well.
Commissioner Griffin also stated Vice-chairman Scarpelli did a good job.
Vice-chairman Scarpelli continued, reminding the Commission on what has been advised, unless
there is a 3-0 vote on this, this motion cannot be carried. If there are no further comments or
questions, I would like to bring this motion to a vote.
ACTION: Motion by Vice-chairman Scarpelli that the Housing Commission adopt
resolution 2002-04 recommending approval to the City Council to allow the developer to
receive $1,200,000 developer fee for the construction of 106 affordable apartment units to
satisfy the requirements of the lnclusionary Housing Ordinance for the Calavera Hills Master
Plan Phase II.
VOTE: 3-0-0
AYES: Griffith, Ritchie and Scarpelli
NOES: None
ABSTAIN: None
ABSENT: Houston
DIRECTOR REPORT:
Ms. Fountain stated, on Tuesday the Council approved the Calavera Hills Project. Now that the project has been approved, they can move forward on it and their financial assistance Will 90 1''
of October.
Mr. Ruiz stated a fifth Commissioner should be added for the next meeting.
Ms. Fountain continued that the application has gone forward to the City Council for the fifth
Commissioner. Hopefully we will have another member by the next time we meet.
Vice-chairman Scarpelli said once again that it is his hope that the City Council will give very
serious consideration to the Memorandum Exhibit 6 provided by the applicant in this particular
case and to review it's own policies as it regards developer fees in the future and to look
particularly at those effects on a case-by-case basis that it has in making affordable housing
more available in the City of Carlsbad. This Commission believes by it's vote of 3-0 that by
taking such action we will be able to enhance our ability to provide affordable housing in all
ranges, including that of the 20 to 30% range.
HOUSING COMMISSION MINUTES
SEPTEMBER 12,2002
PAGE 5 of 5 DRAFT
ADJOURNMENT
By proper motion, the meeting of September 12,2002 was adjourned at 6:30 p.m.
Respectfully submitted,
Debbie Fountain
Housing and Redevelopment Director
PATRICIA CRESCENT1
Minutes Clerk
MINUTES ARE ALSO TAPED AND KEPT ON FILE UNTIL THE WRITTEN MINUTES ARE
APPROVED.