HomeMy WebLinkAbout2005-08-16; City Council; 18251; Hunters Pointe Affordable Housing Project4B# 18.251
\IITG. 8/16/05
IEPT. HIRED I Y
TITLE: APPROVAL OF CITY FINANCIAL ASSISTANCE FOR DEPT. HD.
THE HUNTERS POINTE AFFORDABLE HOUSING PROJECT
WITHIN THE VILLAGES OF LA COSTA DEVELOPMENT. CITY ATTY.
RECOMMENDED ACTION:
That the City Council ADOPT Resolution No. 2005- 264 APPROVING a request to provide
financial assistance to Chelsea Investment Corporation in the form of a construction loan of
$1,932,000 from the City’s Housing Trust Fund and to approve the related loan documents for
construction of one hundred sixty-eight (168) affordable apartment units within the Villages of La
Costa Master Plan Development.
ITEM EXPLANATION:
AFFORDABLE HOUSING PROJECT DESCRIPTION
On April 5, 2005, the City Council approved a Site Development Plan (SDP 04-13) allowing for the
development of 168 affordable apartment units within the Villages of La Costa Master Plan
development. This project, the Hunters Pointe Apartments, will be located on a 15.84 acre parcel that
is currently referred to as La Costa Oaks Village. 3.6 of the Villages of La Costa Master Plan
development. It is located on the east side of realigned Rancho Santa Fe Road. It lies south of San
Elijo Road (old Questhaven Road) and west of the City limit for the City of San Marcos. This project
will represent Phase II of the affordable housing development required for the Villages of La Costa.
The first project known as La Costa Paloma contains 180 units and recently completed construction. It
was developed by Community Housing Works. The Hunters Pointe project of 168 affordable units will
be developed by Chelsea Investment Corporation. This second project will satisfy the total affordable
housing requirement for the Villages of La Costa development.
The Hunters Pointe Apartments will consist of 9 residential structures, a 2,700 square foot community
building, a leasing office, three picnic areas, two tot lots and a half basketball court. The development
includes 36 one-bedroom (21 Oh), 60 two-bedroom (36%) and 72 three-bedroom (43%) apartments.
Units will range in size from 682 square feet for the one-bedroom unit, 800 to 880 square feet for the
two-bedroom unit and 1,122 for the three-bedroom unit. The community building will include a
community room and kitchen, a computer homework room, bathrooms, leasing staff offices, a laundry
facility and storage.
One significant feature of this project is the proposed 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 78 units at levels affordable to households earning 35% of the State
Median Income (SMI). SMI is approximately 1% higher than the San Diego County Area Median
Income. The remainder of the project, 90 units, will be affordable to household earning 60% of the
San Diego County Area Median Income. The net monthly rents will range from approximately $419 for a one bedroom unit to $988 for a three bedroom unit. Thus, this project will provide 46% of its units
affordable to households at some of the very lowest incomes within Carlsbad.
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Page 2 of AB ## 18,251
Expense
Land
Consultants
Permits & Fees
Construction - Hard Costs
Development
FINANCIAL ASSISTANCE
Total Amount Per Unit Cost
$8,400,000 $50,000
$1,577,100 $5,885
$2,301,697 $13,701 $26,144,993 $1 55,625
$3,685,430 $21,937
As part of the project financing, the Developer is requesting that the City provide a loan during
construction in the amount of $1,932,000, or $11,500 per unit, from the Housing Trust Fund. 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.
Developer Fee
Lender Fees, Interest & Costs
USES AND SOURCES OF FUNDS
$2,500,000 $14,881
$1,978,962 $1 1,780
The total cost of the Hunters Pointe Apartments is estimated to be $46.6 million, inclusive 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 $277,311 is generally consistent with more recent affordable multi-family
developments within the City. The following chart provides a breakdown of the project costs, or uses of
funds
Totat Uses of Funds $46,588,182 $277,311 -
I USES OF FUNDS
1 Source Total Amount Per Unit
Tax Credit Investor Equity $1 5,077,000 $89,744
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
Villages of La Costa (Morrow Development) will contribute the land (valued at $8.4 million) and cash in
the amount of $1,772,058 to the project, for a total contribution of $10,172,058. The Affordable
Housing Developer is requesting that the City contribute a total of $1,932,000 to the project. The City’s
proposed contribution of $1 1,500 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
Page 3 of AB # 18,251
FINANCIAL ASSISTANCE DOCUMENTS
As proposed, the City assistance ($1,932,000) 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 $1,932,000 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.
HOUSING COMMISSION RECOMMENDATION ON FINANCIAL ASSISTANCE
At their meeting on June 9, 2005, the Housing Commission reviewed the request from the Developer
for financial assistance in the amount of $1,932,000. The Commission recommended (3-0) that the
City Council approve the loan in the amount of $1,932,000 from the Housing Trust Fund.
STAFF RECOMMENDATION
The proposed request for financial assistance was reviewed by the Housing Policy Team (staff). The
Team recommends that the City Council adopt the attached resolution to authorize financial
assistance for the Hunters Pointe Affordable Apartment Project, as recommended by the Housing
Commission.
ENVIRONMENTAL REVIEW
The Hunters Pointe affordable apartment project was reviewed pursuant to the California
Environmental Quality Act (CEQA). Staff prepared an initially study for the project and concluded that
no potentially significant impacts would result with the implementation of the project that were not
previously examined and evaluated in the Final Program Environmental Impact Report for the Villages
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Page 4 of AB # 18,251
of La Costa Master Plan (EIR 98-07), dated October 23, 2001. The City Council certified the EIR on
October 23, 2001. At that time CEQA Findings of Fact, a Statement of Overriding Considerations, and
a Mitigation Monitoring and Reporting Program were approved. All mitigation measures contained in
the adopted Mitigation Monitoring and Reporting Program that were applicable to the subject project
were completed, incorporated into the project design or were required as conditions of approval for the
project.
The proposed project will have no effects beyond those analyzed in the program EIR, as they are a
part of the program analyzed earlier. This project is within the scope of Final Program EIR 98-07 and
no further CEQA compliance is required.
FISCAL IMPACT:
The financial assistance in the form of a $1,932,000 residual receipts loan will be provided from the
City of Carlsbad’s Housing Trust Fund, which has a current undesignated fund balance of
approximately $1 0 million.
EXHIBITS:
1. City Council Resolution No. 2005 - 264
Hunters Pointe Affordable Apartment Project.
, to approve financial assistance for the
2. Project Location Map
3. Project Financial Proforma.
4. Housing Commission Staff Report dated June 9, 2005.
5. Draft Housing Commission Minutes of June 9, 2005.
6. Draft Loan Documents.
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CITY COUNCIL RESOLUTION NO. 2005-264
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 $1,932,000 FROM
THE HOUSING TRUST FUND AND TO APPROVE THE RELATED
LOAN DOCUMENTS FOR CONSTRUCTION OF ONE HUNDRED
SIXTY EIGHT (168) AFFORDABLE APARTMENT UNITS WITHIN
THE VILLAGES OF LA COSTA MASTER PLAN.
APPLICANT: CHELSEA INVESTMENT CORPORATION -
HUNTERS POINTE AFFORDABLE PROJECT
CASE NO: SDP 04-13
WHEREAS, the master developer of the Villages of La Costa Master Plan development,
Morrow Development, has proposed to construct 168 apartment units affordable to lower income
households as a means to satisfy their affordable housing obligation as permitted by Carlsbad
Municipal Code Section 21.85 of the City’s Inclusionary Housing Ordinance; and
WHEREAS, Morrow Development has retained Chelsea Investment Corporation, the
affordable housing Developer, to develop and operate the 168 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 9th day of June, 2005, City of Carlsbad Housing Commission did
hold a public meeting to consider a request for City financial assistance for the construction of
said 168 affordable housing apartment units by the affordable housing developer, Chelsea
hvestment Corporation, and subsequently recommended approval of the request for assistance;
md
’Ill
‘Ill
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Page 2 of CC Resolution No. 2005264
WHEREAS, on the date of this resolution, the City Council did hold a public meeting to
consider said request for City financial assistance for the construction of said 168 affordable
housing apartment units by the affordable housing developer, Chelsea Investment 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 168, 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 known as the Hunters Pointe
Affordable Apartments Project in the form of a construction loan in the amount of
$1,932,000 from the City of Carlsbad’s Housing Trust Fund.
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Page 3 of CC Resolution No. 2005-264
5. That the City Council authorizes the City Manager or his designee to execute all
documents related to provision of the City assistance, including but not limited to a
Loan Agreement, Note, Deed of Trust and Regulatory Agreement, in substantially
the form presented to the City Council, and subject to review and approval by the
City Attorney.
6. That the City Council authorizes the City Manager or his designee to execute
subsequent subordination agreement(s), as required, subject to review and approval by
the City Attorney and/or Special Legal Counsel.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City
day of AUGUST , 2005 by the Council of the City of Carlsbad, California, held on the 16th
following vote, to wit:
AYES: Council Members Lewis, Hall, Kulchin, Sigafoose
NOES: None
ABSENT: Council Member Pack
ABSTAIN: None
CLAUDE A. LEWIS, Mayor
ATTEST:
n
LORRAINE M. WOOD, City Clerk U
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EXHIBIT 2
PROJECT LOCATION MAP
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VLC - OAKS NEIGHBORHOOD 3.6
SDP 04=13/HDP 04-10
EXHIBIT 3
PROJECT FINANCIAL PROFORMA
Villages of La Costa
Carlsbad, CA
2005 TCAClMHP Rents
07- Jun-05
3BR12BA 341 1,122 1 38,148 1 608 I 1 226,848
Clubhouse & Other 1 Oj 0 --_- -- --- l__--__ly --__I
3,700 I ^-.-- -,-- --.----- 111 I Total Rents 168 155,256 1,445,856
Construction Squan I Feet 173,268 j 158,956 - ---- ----.,I-- _- -.-.,
[Net Income Available for Debt Service 820,994 I
Perm Loan :
Debt Service Coverage
Interest
Amortization
1.17
6.40%
30
Per Bond Sizing 9,348,000
Monthly Payment 58,472
701,668
NO1 for MHP not less then 1.101
NO1 820,994
Annual .-.- Paxment - *- -.. " I ._ _"_. I--
MHP Payment @ 42% 39,977
Perm Loan Payment 70_1;6$?8_
Total Debt Service 741,645
1.11 DCR -- _l_l__l " * -"x I_
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EXHIBIT 4
HOUSING COMMISSION STAFF REPORT
DATED JUNE 9,2005
I XCem No. 1
DATE: JUNE 9,2005
SUBJECT: HUNTERS POINTE APARTMENTS - RECOMMENDATION OF
APPROVAL TO THE CITY COUNCIL TO PROVIDE A TOTAL OF
$1,932,000 IN FINANCIAL ASSISTANCE FOR CONSTRUCTION OF ONE
THE VILLAGES OF LA COSTA DEVELOPMENT.
HUNDRED SIXTY-EIGHT (168) AFFORDABLE APARTMENT UNITS IN
I. RECOMMENDATION
That the Housing Commission ADOPT Resolution No. 2005-004, r- *& PROVAI, to the City Council to provide $1~32,000 in financial assistance &om the
City of Carisbad's Housing Trust Fund to Chelsea Investment Corporation for
construction of one hundred sixty4ght (168) affordable apartment units in the Villages
of La Costa Development.
11. PROJECT BACKGROUND
In AM€ 5, 2005, the City Comd Wved the site development plan permit for the
Hunters Point@ Afibrdable Apartments developmenb. It is a one hundred sixty-eight (1 68)
unit housing project which will be affordable to lower income households (35% to 60%
of AMI), This project represents Phase IT of the affordable housing requirement for the
Villages of La Costa Master Plan development. The first project was one hundred eighty
(180) apartment units. It just recently completed construction and is 100% leased as of
this date. The first project was completed by Community Housing Works with financial
assistance from the City of Carlsbad. This second project will be completed by Chelsea
hvestment Corporation and is also requesting financial assistance from the City.
111. PROJECT DESCRIPTION
The subject project will be located on a 15.84 acre parcel that is currently referred to as
La Costa Oaks Village 3.6 of the Villages of La Costa Master Plan. The site is oriented
north to south and is contiguous to the east side of realigned Rancho Santa Fe Road. It
lies south of San Elijo Road (old Questhaven Road) and west of the city limit for the City
of San Marcos.
Hunter Pointe HC Report
June 9,2005
Page 2
IV.
V.
The proposed 168-unit affordable apartment project consists of nine residential three-
story buildings with surface level parking. There will be 36 one bedroom (798sf),60 two
bedroom (1,006sf) and 72 three bedmom (1,24790 units. A total of 43% of the units will
be provided with 3 bedrooms. The project will include three picnic areas, two tot lots, a
half basketball court and a 2700 square foot community building. The community
building will include a lobby, a community room and kitchen, a computerhomework
room, batbrooms, two office for the managernentlleasing staff, a laundry facility, and
storage.
DEVELOPMENT TEAM
Chelsea Investment Copration will develop, own, and aperate the affordable housing
project. Chelsea is a for-profit corporation based in Encinitas. The corporation 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. Their
developments also include the Mariposa affordable housing development (106 units) in
Calavera Hills of Carlsbad. The development team has extensive experience in all major
areas of residential development.
FINANCIAL ASSISTANCE
A. Cost Reasonableness
The developer has provided a detailed development proforma 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 $41.3 million, including the cost of the land, the average
unit cost of $246,104 is reasonable with significant consideration of the requirement to
pay prevailing wage rates and the current costs of construction.
In staffs review of the various requests for financial assistance for affordable housing
developments, we compare the project costs and financing to other affordable housing
projects developed in Carlsbad. Attached is a copy of the comparison uses and sources
summaries that we use in our review. These summaries include all of the affordable rental
projects assisted (or pending assistance) by the City to date. As demonstrated in the
attached spreadsheets, Hunters Pointe is comparable to other recently proposed projects
in terms of development costs. Therefore, staff believes that the projected costs are
reasonable and acceptable.
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 $1.2 million, or approximately 3% of total project costs (including
land). The Developer is proposing that they receive 100% of the developer fee during the
development of the project. The developer fee is appropriate for the size of the project
lk
Hunter Pointe HC Report
June 9,2005
Page 3
SOURCES
Master Developer (land & cash)
MHP Loan
and level of complexity of the financing for, or development of, the project. It is also the
maximum fee permitted under the tax credit financing program.
TOTAL PER UNIT
$10,592,058 $63,048
$9.5 18,418 $56.657
C. Subsidy Analysis
LIH Tax Credits
Cal HFA Permanent Loan
Citv Contribution (cash assistance)
The total projected cost for the project is $41,345,476. The Developer is proposing to
finance the project with loans from the Multi Family Housing State Funding Program
(MHP), private bank (construction loan) and Cal HFA (permanent loan) in the total
amount of $17,187,418. They also will provide equity to the project through the low
income housing tax credit program in the amount of $11,634,000. The Master Plan
Developer, Morrow Development, will donate the land (estimated at $8,400,000) and
cash assistance of $2,192,058. Staff is recommending that the City of Carlsbad provide a
total of $1,932,000. The City Assistance will amount to $11,500 per unit. This is
consistent with previous contributions to affordable housing projects in Carlsbad and the
City's funding is being well leveraged with other outside sources including the private
master plan developer.
$1 1,634,000 $69,250
$7,669,000 $45,649
$1.932.000 $1 1.500
The following is a summary of the sources and uses of finds based on the estimated
development costs and the proposed financing structure. The developer's detailed
proforma is attached as Exhibit 2:
Total Sources
USES
Land
Consultants
$41,345,476 $246,1 OC
$8,400,000 $5 0,000
$1.273.600 $7.580
TOTAL PER UNIT
Permit Fees
Construction
Develoument
$2,401,706 $14,296
$23,202,414 $138,110
$3.3 08.466 $19.693
Financing
Developer Fee
Total Sources
$1,559,290 $9,282
$1,200,000 $7,141
$41,345,476 $246,1 OL
D. Form of Assistance
City cash 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, as cash is available or
I.
Hunter Pointe HC Report
June 9,2005
Page 4
E.
F.
VI.
VI1
becomes available. 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 mum.
The financial assistance will be provided from the City of Carlsbad’s Housing Trust
Fund.
Security
The Developer will be required to provide completion bonds to both the City and the
permanent lender to insure that construction is completed.
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 and has been successful to date in all of
its efforts to construct and operate those projects in a financially sound manner. The
reasonable terms of the City loan allow the developer to lower its financing costs which
help to ensure that expenses will not exceed revenues generated by the project. The
developer will partner with a contractor with a proven history of success. Both the City
and the developer will closely monitor the costs of the project and work with the
contractor to address project issues in a timely manner to reduce cost impacts.
The financial assistance from the City helps the developer to obtain the other funding
sources set forth above.
FINANCIAL ASSISTANCE AGREEMENT
With a recommendation from the Housing Commission and approval of the City Council,
appropriate documents, including a Financial Assistance Agreement, Regulatory
Agreement, Promissory Note and Deed of Trust, will be prepared and executed to set
forth the terms of the financial assistance and its repayment.
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:
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Hunter Pointe HC Report
June 9,2005
Page 5
o 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.
o The proposal's consistency with the City's affordable housing policies and
ordinances as expressed in the Housing Element and Inclusionary Housing
Ordinance.
o 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 Hunters Pointe Affordable Apartment development is proposed by a capable development
team that is committed to affordable housing. The proposed City assistance meets the City's
three key underwriting goals of a strong borrower, reasonable project costs based on the project
size and requirements and an acceptable level of leveraging. The project qual- good
design and location. City housing goals are supported by the project's affordability.
It is the Affordable Housing Policy Team's (staff) recommendation that the Housing
Commission approve the resolution of support recommending to the City Council that the City
provide a total of $1,932,000 ($11,500 per unit) in financial cash assistance to Chelsea
Investment Corporation Housing for the Hunters Pointe Affordable Apartment development.
VIII. EXHIBITS
1. Housing Commission Resolution No. 2005-004.
2. Proforma
3. Affordable Housing Costs Comparison Chart
4. Affordable Housing Funding Comparison Chart
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HOUSING COMMISSION RESOLUTION NO. 2005-004
THAT THE HOUSING COMMISSION RECOMMEND APPROVAL TO THE CITY
COUNCIL OF $1,932,000 IN FINANCIAL CASH ASSISTANCE FROM THE CITY
OF CARLSBAD’S HOUSING TRUST FUND TO CHELSEA INVESTMENT
(168) AFFORDABLE APARTMENT UNITS TO BE LOCATED IN THE VILLAGE
OF LA COSTA MASTER PLAN DEVELOPMENT OF THE CITY OF CAFUSBAD.
CORPORATION FOR CONSTRUCTION OF ONE HUNDRED SIXTY-EIGHT
APPLICANT: HUNTERS POINTE APARTMENTS
WHEREAS, the Chelsea Investment Corporation has proposed to construct 168
apartment units affordable to low and very low income households within the City of Carlsbad
and has requested financial assistance from the City of Carlsbad to assist in the financing of said
affordable housing project; and,
WHEREAS, the request for financial assist 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 9th day of June, 2005, hold a public
meeting to consider the request for City financial assistance for the construction of said 168
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.
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HC RESOLUTION NO. 2005-04
PAGE 2
2.
3.
4.
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 168, one, two and three bedroom affordable
apartment units which will be affordable to households earning 35% to 60% of
area median income for San Diego County or less. 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 public meeting of the Housing
Commission on June 9, 2005, the Housing Commission hereby ADOPTS
Resolution No. 2005-04, recommending APPROVAL, to the City Council to
provide up $1,932,000 in financial cash assistance from the City of Carlsbad’s
Housing Trust fund to Chelsea Investment Corporation for the construction of one
hundred sixty-eight (168) affordable apartment units to be located in the La Costa
Oaks Village 3.6 of the Villages of La Costa Master Plan Development within the
City of Carlsbad.
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HC RESOLUTION NO. 2005-004
PAGE 3
5. That the Housing Commission recommends that the City Manager or his or her
designee be authorized by the City Council to prepare and execute all documents
related to provision of the City assistance, including but not limited to a Financial
Assistance Loan Agreement, Note, Deed of Trust and Regulatory Agreement,
subject to review and approval by the City Attorney.
PASSED, APPROVED, AND ADOPTED at a meeting of the Housing Commission of
the City of Carlsbad, California, held on the 9* of June, 2005, by the following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
EDWARD SCARPELLI, CHAIRPERSON
CARLSBAD HOUSING COMMISSION
DEBORAH K. FOUNTAIN
HOUSING AND REDEVELOPMENT DIRECTOR
3
EXHIBIT 2
FINANCIAL PROFORMA
CHELSEA INVESTEMENT CORPORATION
FOR HUNTERS POINTE APARTMENTS
January 7,2005
WALLACE C. DIECKMANN
CHELSEA INVESTMENT CORPORATION
725 SOUTH COAST HIGHWAY 101
ENCINITAS, CA. 92024
RE: FINANCIAL ASSISTANCE FOR HUNTERS POINTE APARTMENTS
Dear Wally:
On January 6, 2005, the Housing Policy Staff Team for the City of Carlsbad reviewed your
request for financial assistance for the 168 unit Hunters Pointe Affordable Apartment project
proposed for the Villages of La Costa development. Per your request, the team considered an
increase in the City subsidy for the project from $lO,OOO per unit to $14,000 per unit. The team
is willing to recommend financial assistance for the subject project and an increase in our per
unit subsidy amount. However, your request for $14,000 per unit was not supported. The team is
willing to rccommend a subsidy amount of $1 1,500 per unit, or a total amount of $1,932,OOO for
the proposed project.
While the team agreed that increases in cost of materials and prevailing wage requirements over
time have resulted in higher construction costs to warrant the increased subsidy from the City,
the team was not willing to support a higher subsidy (in excess of $11,500 per unit) due to
inordinate costs related to @ng and on-site infrastructure requirements, or other physical
constraints of the site. The team felt that selection of an appropriate site for the affordable
housing project is the responsibility of the Master Developer for the project. Therefore, the team
felt that the Master Developer should increase its cash contribution to the project in an amount of
$420,000, which would result in a total cash contribution of $2,192,058 for the developer.
Staff will begin to prepare the appropriate paperwork and reports to move this matter forward to
the Housing Commission and then the City Council. Please note, however, that the financial
assistance request will not ultimately be presented to the City Council until your Site
Development Plan for the affordable has been approved by the Planning Commission and/or City
Council.
If you have any questions regarding this correspondence or the Housing Policy Team's review of
your financial assistance request, please contact my office at (760) 434-2935.
DEBBIE FOUNTAIN
Housing and Redevelopment Director
2965 Roosevelt St., Ste. B Carlsbad, CA 92008-2389 (760) 434-2810/2811 FAX (760) 720-2037 @ all
INVESTMENT COR PO RAT1 ON + l-
Finance
Development
Management
725 South Coast Highway 101
Encinitas, CA 92024
Rl (?fa) 4566000
Fax (760) 4566001
~ December 2,2004
Debbie Fountain
Director
Housing and Redevelopment Department
City of Carlsbad
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008
Re: Hunters Pointe Affordable Apartments, a 168-unit affordable multifamily
community in La Costa Oaks
Dear Debbie:
Chelsea Investment Corporation has been appointed by Morrow Development Company
to design, finance and construct a 168-unit affordable housing development to hlfill the
affordable housing requirement for the Villages of La Costa.
Proiect Description
Hunters Pointe will be located on a 15.84-acre site, which is referred to as La Costa Oaks
Village 3.6. The site is oriented north south and is contiguous to the eastside of realigned
Rancho Santa Fe Road. The site lies south of San Elijo Road (old Questhaven Road) and
west of the city limit with the City of San Marcos. A new street, Avenida Soledad,
bisects the southern portion of the site.
Hmtm Pointd wil in&& 16% un&a in nine redentid three-story buildinga The unit
mix consists of 36 oIIcI.bddroom Units, 60 twaderfroom unit# and 72 thra-bedroom units.
With 4PA three badraom units, Hunters Pointe is a “large family” development. The one-
bedroom unit is approximately 798 square feet, the two-bedroom unit is approximately
1,006 square feet and the three-bedroom unit is approximately 1,247 square feet. The
project’s total residential square footage is estimated at 178,872 square feet. The linear
site provides for a total of 381 parking spaces, three picnic areas, two tot lots, a half
basketball court and a 2,705 square foot community building. The community building
will include a lobby, a community room and kitchen, a computerlhomework room,
bathrooms, two ofices for the management/leasing staff, a laundry facility and storage.
Hunters Pointe design will follow the Craftsman style prevalent throughout the La Costa
Oaks planning area and will make extensive use ofa variety of window treatments and
stone accents to evoke the arts and crafts tone. The community building will include a
a5
tower element that will provide a focal point and an identity for the affordable
community.
Plan of Financing
Chelsea plans to file an application with the State’s Housing and Community
Development for MHP subsidy for the Hunters Pointe development during the first
quarter, 2005. Chelsea has received MHP loan commitments for five inclusionary
multifamily developments in the cities of Carlsbad and San Diego. We believe that
Hunters Pointe will be a very attractive candidate for MHP financing and is assured of
receiving a loan commitment. The MHP loan nubriditor rentr for approximately 46% of
the units below tax-exempt bond maximums of 50 and W!! of Anwaf Median Income
(Aha) to 35% of AMI. The MM, financing allowa for net rants ranging fhn 5417 per mod for a ombadroom unit to $550 Pcrr a thrmoom Unit fop ths MfiP subsidized
ut&&.
Following receipt of the MHP commitment, an over-the-counter application for bond
allocation will be made to the California Debt Limit Allocation Committee. A bond
allocation can be expected in September 2005 and the financial closing would follow
before year-end. A recent inclusionary housing project developed by Chelsea has been
financed by California Housing Financs Agency (CdHFA). An alternative would be to w- bonds issued by the Housing Authoritp OfthH3ty WRM uu it
pthmte phmment b&$ trr 8 fi&J iartitUtioa fike US Ba&. A decision between a
CalHFA financing or a private placement of tax-exempt bonds to a major financial
institution will be made prior to submission of the bond cap allocation application to the
California Debt Limit Allocation Committee. The decision, in large part, will depend on
the direction of interest rates during the coming months. Following grading of the site by
Real Estate Collateral Management Company during the fourth quarter, 2005,
coda would befM@ the end of 2006.
in January 2006 with cornpieth of construction expectad
Reauest for Citv Loan
We respectfblly request the City of Carlsbad’s Housing Policy Team consider and
approve a City loan 6914,000 per Unit 01 I totd af52,352,000 fbr the Hunters Pointe
development. We believe the City’s subsidy is warranted for the following reasons.
First, this project will bring greater affordability than most rent restricted projects in the
City. While not assured, we are confident that Hunters Pointe development will receive a
subsidy of $9.5 million (approximately $56,600 per unit) from the MHP program, which
will allow 469’0 of the units (78 units) to be leased at 35% of Annual Median Income (net
rents ranging from $417 for a one-bedroom unit to $550 for a three-bedroom unit). The
MHP subsidy will assure housing to very, very low-income families of Carlsbad. As you
may recall, we made use of MHP financing at our Mariposa project at Calavera Hills,
where the MHP subsidized units serve very low-income families and were very well
received.
Second, the gmiq and on-site infrastructure costa for the Hunters Pointe site are
significantly hiehg thur those typically incurred in preparing an affordable housing
prow site for CotlStNction. The grading and on-site infrastructure budget is $5.8
million, which reflects the inordinate costs relating to grading the site and constructing an
internal road parallel to Rancho Santa Fe Road the length of the site. The site hm
significant grade changes that require numerous retaining walls that contribute to the
unusually high cost of preparing the site for construction.
Third, the physical constraints of the site require that one of the buildings have
underground parking. The added cost of a below grade parking garage is estimated at
approximately $250,000.
The Mariposa project was recently completed at a cost of $10 1 per square foot. We are
about to complete construction of a comparable 119 unit inclusionary project at Santa
Luz where the construction costs will be $1 18 per square foot. The difference in costs is
largely attributable to material cost increases.
’ of tb project will requk tbt payment of stste prclllpairinq wqp. Fifth, cm#rw&m
~wm&m&tlumn6r afsub@ontroctwr am Mi-
adcaabrrctorrts k ccmptirncscosts, incnaJc insurance castsand iaasnsa thehe required to constrw4 a projcd. We are constructing or have recently completed
construction of affordable projects with and without prevailing wage requirements and
believe that prwaiiigQ wqp rccpiirtanwra incr~ totpi project costs by approximately
25%.
inctdlisar&oditfurr oa#ofl8h€agow Wm * cos& birt 08 th job, nxprirs the
In summary, Hunters Pointe warrants a loan of $14,000 per unit, if for no other reason
than the affordable development will be of the highest quality, providing superior rental
housing to many of Carlsbad families with incomes at 35% of AMI.
Proiect Status
Hunters Pointe was resubmitted to the Planning Department, City of Carlsbad, on
November 24 for Site Development Plan approval. This is the second submittal in
response to comments received from the Planning Staff The SDP approval is expected
prior to the deadline for submittal of an MHP application to Housing and Community
Development. For a successful MI-€P application, in addition to a hlly entitled site, a
87
commitment for all financing is required. Therefore, it is important to consider this
request for financial support recognizing the MHP application deadline.
Jim Schmid and I are available to discuss our second new construction affordable
development for the City of Carlsbad at your convenience. Please do not hesitate to call.
r'\ Sincerely,
Wallace C. Dieckrnann
Chief Financial Officer
c
L
Villages of La Costa
Carlsbad. CA
2004 TCAClMHP Rents
1,435,296 - -_I--
155,868 - - I TotalRents 168 camtn&mssunh.t 173m 159.568
LT.1.l Expenses S 3.600 Per Unfi (TCAC Mm $2.600) 604,800
0
JNetOperating Income 5782,671
CFD Spaai Tax -- 0 Per us--- -
Cal HFA Undowrites zero mhc incc (9,072)
Cal HFA NO1 886,388 I \Net income Avadable for Debt Service
Perm Loan :
Debt Service Coverage f.l*
Amortm tion 3@f
Interest a+
Villages of La Chsta
Cal HFA Required Reserves
Funding Source
Lctter of Crcdit Caqh HCWVt%:
( )perating Expense Rcwrve
Keplaccment Rcscrves
C'onstruction Defect
Insurance Reserve
Marketing Account
Kent Up Account
Covcrud
By MHP
145.142 v
Varies - using underwriting assumption S430;unit 87.21 I 4
2.5% Hard Costs held I2 months post conversion 58O.060
I year Earthquake 6i Hazard
10% of Gross Income - not funded by C'al HFA
N, A
N;'A
1506 Gross Rents - not hnded by Cal tlFA N, A
725.203 87.2 I I
Covered by MHP (145,142) (87,2 I I)
580.060
LOC Pees Calculated as Follows:
1,000
Operating Expense Reserve NIA
C'onstruction Defect Release I2 months after conversion - I06,'year 5,801
6,801
Administrative & Application Fees (estimated)
Release no earlier than 2 yrs - 2 yrs @, I "hiyear
20 yr Amortization
Ikht Service Coverage Ratio
Max Debt
32
Villages of La Costa
EXHIBIT 6 - DEVELOPMENT BUDGET 8 CALCULATION OF TAX CREDIT EQUITY
02-Dec-04
02:08 PM
TOTAL ACQUISITION COST
DEMOLITION EXPENSE 1 wl xXXxxxxxxxxM I XXXXXXXXMXXX
OTAL LAND COSTS $10,138.600 I XXXXXXMXXXXX I XXXXXXXXXXXXX
xxxxXXxxxxxxx $0
NEW CONSTRUCTION
SITE WORK
STRUCTURES
GENERAL REQUIREMENTS
CONTRACTOROVERHEAD
CONTRACTOR PROFIT
TOTAL CONSTRUCTION
$5,817.059 $5,817.859
14.535.1 36 $1 4,535,136
$1,187,258 $1,187,258
$474,903 $474.903
$1,187.258 $1,187,258
$23,202,414 $23,202.4 14
ARCHITECTURAL FEES
DESIGN
SUPERVISION
TOTAL ARCHITECTURAL COSTS
TOTAL SURVEY & ENGINEERING I $190,000 I I $190.000 I
$570,000 $570,000
$190,000 $190,000
$760,000 3760,000
CONSTRUCTtON NTEREST/FEES
CONSTRUCTION LOAN INTEREST
LEGAL COUNSEL FEE
ORIGINATION FEE
CONSTRUCTION INSPECTION F €E
BOND PREMIUM
FORWARD RATE LOCK
INSURANCE
857,546 $487.198
$0 $0
$21 1,627 $21 1,627
$13.050 $13.050
$0 $0 ~
$0, $0
$300,000 I $300.000
I I I
TOTAL CONSTRUCTION CONTINGENCY $1,017.650 I I $1,017,650 I I
TITLE a RECORDING
TOTAL CONST. INTERESTlFEES
$5.000 $5,000
$1.387.223 $7,016,875
PERMANENT FINANCING
PERM LOAN FEES a COSTS
APPLICATION FEE
TITLE 8 RECORDING
OTHER: LEGAL, MISC.
TOTAL PERM FINANCING COSTS
I
38,345 xxxxxxxxxxxxx xxxxxxMxxxxx
500 XXXXXXXXXXXXX XXXMXXXXXXXX
8 xxxxxxxxxxxxx xxxxxxxxxXXXX
130,000 XXXXXXXXXMXX ~~ XXXXXXXXXXXXX
$168 845 xXXXXXXXxxMX XXXXXXXXXMM
BHIBIT 6, PAGE 2
LENDER LEGAL $100,000
TOTAL LEGAL (NOT INC. SYNDICATION) $200.000
OTHER (Including CPA Opinions 8 Acctg.) 1 $1 00,000
I
BHIBIT 6, PAGE 2
xxxxxIoo<xxxxx
$100,000
$1 00,000
MARKET/APPRAISAL
MARKET STUDY
APPRAISAL
TClTAL MARKETIAPPRAISAL
$10.000 $1 0,000
$10.000 $lO.OOO
920.000 $20.000
I I I I
DEVELOPER COSTS
DEVELOPER OVERHEADIPROFIT - Limit
DEVELOPER OVERHEAD/PROFIT
CONSULTANTS
PROJECT ADMINISTRATION
I I $26,906,411 ~U~TOTAL RESIDENTIAL COSTS $40,145,476 I
1
I
$1.200.000 $1,200,000
$4,335,962 $4,335,962 w4 $0
to4 $0
I I I
$30.106.41 1 r - TOTAL RESIDENTIAL COSTS $41,345,476 I
OTHER I I I $0
TOTAL ONELOPER FEE $1.200.000 I $1,200,000
Rounded 1 1.634.000
EXHIBIT 3
AFFORDABLE HOUSING COSTS
COMPARISON CHART
I
I I
EXHIBIT 4
AFFORDABLE HOUSING FUNDING
COMPARISON CHART
, ...
EXHIBIT 5
DRAFT HOUSING COMMISSION MINUTES
DATED JUNE 9,2005
FT
Minutes of: HOUSING COMMISSION
Time of Meeting: 6:OO P.M.
Date of Meeting: June 9,2005
Place of Meeting: HOUSING AND REDEVELOPMENT OFFICE
CALL TO ORDER
Chairperson Scarpelli called the Meeting to order at 6:07 p.m.
PLEDGE OF ALLEGIANCE
The Pledge of Allegiance was waived due to the lack of a flag at the Housing and Redevelopment Office.
ROLL CALL
Present:
Absent:
Commissioners: Edward Scarpelli
Margaret Schraml
Bobbie Smith
Renee Huston
Dons Ritchie
Staff Present: Housing and Redevelopment Director: Debbie Fountain
APPROVAL OF MINUTES
Minutes of May 12,2004, were approved as written.
VOTE: 3-0
AYES: 3-0
NOES: None
ABSTAIN: None
NEW BUSINESS
Mr. Wally Dieclanan, Chief Financial Officer for Chelsea Investment Corporation, gave a brief overview of the
project. The location is on the far eastern edge of the City of Carlsbad. It is in an area called the La Costa Oaks,
which is part of the Villages of La Costa. The master developer is Morrow Development Company. The site is on a
challenging piece of property to develop. It is bordered with San Marcos. Mr. Dieckman pointed out the site on a
map he showed to the Commission.
There is a new road called Avenida Soledad, which will go up the hill off of Santa Fe Road. There will be single-
family lots and homes that will be built on this side.
Chairperson Scarpelli asked if there will be a traffic signal there?
Mr. Dieckman said yes there will be a signal light intersection. He pointed out where the entrance is and the other
exit on the north end of the property on the San Elijo Hills Road with a right turn only.
Chairperson Scarpelli asked if there was a median in that area?
Mr. Dieckman said yes there is a median up into San Elijo Hills Road. There will be a lot of fill work being done on
the property. In the final configuration, the track would meander through the parking lot and down a sloping hill.
There are nine buildings. Three of the buildings have sixteen units. The balance of the buildings are twenty unit
HOUSING COMMISSION MINUTES
JUNE 9,2005
PAGE 2 of 12
buildings. They are three stories in the middle and then two story configurations on the ends. All of the parkmg is
surface parking. There are 38 parking spaces under one building.
Chairperson Scarpelli asked if the three-story buildings have elevators?
Mr. Dieclanan answered no. Except for the motif, the style is Craftsman, which is consistent with La Costa Oaks.
Chairperson Scarpelli asked if the only parking under a building is that one building?
Mr. Dieckman said correct.
Chairperson Scarpelli asked if the parking for all of the other buildings is surface parking?
Mr. Dieckman answered yes. He Mer said there is a “theme wall” also serves as a sound wall. So there is a
significant amount of sound attenuation. Many of the balcony areas will be enclosed with plexiglass to not permit
the sound to reach the interior units.
Chairperson Scarpelli expressed his concern that people would use those as storage spaces for recreational vehicles
like bicycles. I’m sure there will be restrictive rules and regulations as to what can and cannot happen on those
balconies?
Mr. Dieckman said generally his company is very tough on their tenants because they can be selective since there
will be a lot of demand for these units. Because of the rent differentials, rent that is 50% of the market rents in the
area, the tenants generally are very well behaved.
Debbie Fountain, Director of Housing and Redevelopment, stated what the Commission has before them is a request
for financial assistance for the Hunter’s Pointe Project. The Council has already approved this project in April of
2005. It is a 168-unit project. Thls is the second phase of the Villages of La Costa affordable housing. Their first
project was La Paloma, which you have the invitation in front of you to their grand opening at the end of this month.
Community Housing Works did that project. That project was 180 units. Chelsea Investment Corporation will
actually be doing this project.
Again, this project will be targeting those lower income groups down to 35% of AMI. Chelsea has a lot of
experience because the Calavera Hills Project is also similar in how it was fimded and also targeting the lower
income groups. It is a 15.84-acre site and is within the Villages of La Costa master plan area.
Chairperson Scarpelli asked about the 35% of AMI, is there any chance that the people going into the three-
bedrooms would also fall into that category?
Ms. Fountain said that would be in the profom.
Chairperson Scarpelli was concerned about larger families.
Ms. Fountain said there will be 34 three-bedroom units that will be affordable to people at 35% and below of the
area median income. There will be one-, two- and three-bedroom units. They will have amenities.
Chelsea Investment Corporation will develop, own and operate the housing. They are experience in affordable
housing, both in the county of San Diego and outside of California, in Anzona. All of their staff are experienced in
getting funding for projects and developing the projects. We felt very comfortable with the development team
experience that Chelsea brings to the table with this project. They have done quite a bit of work in the City of Chula
Vista. We also have Mariposa Apartments in Carlsbad.
HOUSING COMMISSION MINUTES
JUNE 9,2005
PAGE 3 of 12
The proforma was updated recently so I will talk about the most updated one. In terms of the sources, the low
income tax credit went up from $1 1,634,000 to $15,077,000. The land donation and the master developer
contributions are about the same. Their permanent loan has also gone up from $7,669,000 to $9,348,000. Overall,
the cost you are seeing has gone from the original proforma from $41,345,476 to $46,588,182, so it is about a 5.2
million dollar increase. This is not surprising because when proformas are completed, things are constantly in action
so we have to take a moment in time and look at the proforma and make decisions, but they will actually change a
little more after this. What we typically do is look at what our city subsidy is. We don’t always increase our subsidy
just because these numbers are changing. They had actually requested $2,352,000 from the city and we agreed to
$1,932,000, which is $11,500 per unit. That meant that funding had to come from other sources. They have
adjusted the proforma to deal with some changing situations.
In terms of the uses, there has been a change in the grading and on-site costs. The land and off-site costs have stayed
the same. Grading and on-site has gone up a little bit from 5.8 million to about 6 million. The structure’s cost has
gone up about 14.5 million to 16.9 million. Contractor overhead is typically going to go up with your cost of
construction going up. That has gone from 2.8 to 3.2 million. Probably the biggest increase you will see is the 1.2
million dollars in developer overhead, which is their developer fee. One of the reasons hs has happened is when
their original proforma came in, 1.2 million dollars was the maximum that was allowed by the tax credit financing.
They recently loosened up their allowance and will allow it to go to the 2.5 million. If you look at it in terms of
percentages of what that is in total costs, it went from 3% to 5%. Now 5% is still pretty low compared to what you
have seen in other projects. In the past, we have typically agreed to go up to 5 to 10%. We not only regulate what
we will allow, but the other financing authorities will regulate what they will allow. Where we might allow
something a little bit higher, these other financing agencies have said that is the maximum they will allow.
I gave you mformation on how this project compares to the other projects. They are right in line with their costs
where we have seen other projects. What it did was increase the per unit cost from $246,104 to $277,311. That is in
your information in the comparison chart. Staff has used these types of comparisons quite a bit to see what is
happening with the project. Since 2002, what we have seen is costs have started to increase fairly significantly in
both construction and other kinds of financing costs. If you compare 2002, you can see we started to move up on
that per unit cost. In 2002, La Paloma, the other affordable housing project, was at $183,997 per unit. Now we are
at $277,3 1 1. It is not a situation where the developer is coming in and padding any of their costs. We are just seeing
the gradual increase in different types of costs and materials. The dates on the chart are when their financial
assistance was approved because sometimes the project can be approved almost a year before, but the financial
assistance doesn’t come until afterwards. We want to make sure the project is approved before we come to the
Commission and ask for financial assistance.
Again, our contribution is not changing. We are still recommending to assist with the $1.9 million. That is what
your action would be if you approve this. It would be a recommendation to the City Council to approve that. The
second page on your summary sheet shows you the comparisons for subsidy purposes. La Paloma, which is the other
project, had received $1 1,500 per unit and this one is recommended for $1 1,500 per unit. You have seen some at
$10,000 and some a little higher, such as $15,000, which was Las Flores, and then there is the Roosevelt Street
apartments we had done before.
Affirmed Housing was hired because that was a non-inclusionary project, so it didn’t have the master developer
contribution, which is the reason they received a little higher. We try to be consistent but try to recognize that costs
are going up. Sometimes, as you saw in the letter that came from the developer, they might ask for more money
because the site is difficult to work with. We won’t always recommend as staff that we will give more money
because sometimes that is the developer’s choice on what site they selected for the project. If a developer selects a
more difficult site, then they have to bear some of the additional costs.
Chairperson Scarpelli had a question with regard to the risk factor on page 4. What is written into the contract that
would penalize the developer for not being able to perfom?
HOUSING COMMISSION MINUTES
JUNE 9,2005
PAGE 4 of 12
Mr. Dieckman said the master developer, in this case Marrow Development, has a million dollar investment in land
out in that area and the Housing Commission has a hammer over him in that they won’t allow him to pull building
permits for their market rate housing without making significant progress with completion of this affordable project.
Ms. Fountain agreed. She said it is not so much written into these contracts, but as Mr. Dieckman mentioned, when
we have an affordable housing agreement with a master developer, the schedule they get their market rate building
permits released is based on the success of building the affordable. So they are only going to get a certain number of
market rates until they have the foundations done on the buildings. The third release doesn’t come until you actually
get to see the affordable building. There is a lot of pressure because the developer wants to get the market rate units
released, and we won’t release the building pennits until there is success. We did have one project where it started
to get stalled because of financing, they didn’t project well enough, so they came to the city and said, you need to
solve our problem for us, and we said no, your master developer will solve your problem for you and provide more
money because they are the ones with the obligation.
Mr. Dieckman said on a project level, it is the parties that are in the financing, the tax credit equity partner and in this
case, for $15 million at the end of this project. They will have about 50 to 60% of that 15 million dollars into this
project as it is built. For instance, before a spade of dirt is turned, they will have 20 to 25% of that $15 million into
the project. Once they put that money in to protect their invest, they are going to keep putting the money in to get
the project done. There are so many checks and balances in one of these affordable projects.
Chairperson Scarpelli commented the developer is a major player. I am satisfied with the answers I received. The
other question is dealing with the developer partnering with a contractor with a proven history of success. Do you
know who that is yet?
Mr. Dieckman said we plan on using our own contracting firm, Emerson Construction.
Chairperson Scarpelli said okay, so it’s an in-house fm Emerson Construction?
Mr. Dieckman said yes.
Chairperson Scarpelli commented that both the city and the developer will monitor the project. Who monitors for
the city?
Ms. Fountain answered that it is the Housing and Redevelopment Ofice. We do the monitoring so we are the ones
releasing the funds and monitoring it.
Chairperson Scarpelli asked how we do that? Does someone go out and do an actual physical inspection?
Ms. Fountain answered that sometimes we do. We are always involved with the city from a building inspection
standpoint. If we ever reach a problem, we will hear about it through building inspection.
Chairperson Scarpelli asked if that conduit is always open? Do they know they need to contact thls office?
Ms. Fountain answered right. We have actually developed a very good relationship because so many affordable
housing projects have been done. We are notified if a project is having problems. We usually have the builder
coming to us if they are having problems on our side so it is a good communication we have. We find out quickly if
there are any problems with the project.
Chauperson Scarpelli questioned do we actually have a staff member go on site to do these inspections before the
release of the next requested funds?
Ms. Fountain said yes.
HOUSING COMMISSION MINUTES
JUNE 9,2005
PAGE 5 of 12
Chairperson Scarpelli asked who is that?
Ms. Fountain said it is her right now.
Mr. Dieckman added that every month they have a construction draw on site and both the construction lender and the
equity investor are represented at those meetings. They have engineering firms they have hired to do those
inspections and to check to make sure the percentage of completion is correct.
Chairperson Scarpelli said he understands that procedure.
Redevelopment office, who actually goes out and does the inspections.
He was just wondering in the Housing and
Commissioner Smith asked if all of Hunter’s Pointe is going to be low and very low income?
Ms. Fountain answered that it will be all low and very low. So it will be 35 to 50%. Almost to extremely low.
Commissioner Smith said her concern was that the property would be taken care of.
Mr. Dieckman suggested she stop by and see Mariposa at sometime.
Commissioner Smith said she was there.
Mr. Dieckman suggested she go back again and see how it is looking. Mariposa has the same income as this project
will have. One of our major sources of finance that allows us to do that is a special program from the State of
California called the Multifamily Housing Program. It has gotten to be pretty competitive. They were about 150%
oversubscribed this last round. That is the money at 3% interest that allows us to bring those rents down to 35%.
Ms. Fountain said we have been very happy with the management they have. Whenever we have a question, they are
very quick to respond and to take care of any issue that might be raised.
Ms. Socorro Anderson commented about Mr. Dieckman saying they are very selective of the tenants. For someone
like me, I don’t like to hear that. Selective in what way? These are very low income. Are we assuming they are not
good tenants? How do we monitor that the tenants going in are actually residents of this area? With the La Paloma
development, we sat down with the people and made sure that some of the families that live here in Carlsbad got
applications in. We actually had one of the ladies from La Paloma come into Saint Patrick’s where we had a
Housing Workshop and take applications from a lot of our families. Some of our families are living there now. How
do we make sure that other affordable housing developments are doing the same?
Chairperson Scarpelli wanted to answer the first part of her question. In context, the question and the concern that
this Commissioner had was the balconies that were visible to Rancho Santa Fe Road. The question was dealing with
what kind of rules or regulations would the management have that would prevent those balconies from getting loaded
up with bicycles and surfboards, etc., because it would be an eyesore and would be a concern. That was the
question. I think the response to that was the selection of the tenants would be the kind of tenants that would respect
the rights of the neighbors around them. That was the context of that particular question. And the second question?
Mr. Dieckman said she was asking if we have an outreach program to reach specific groups of families in Carlsbad.
Ms. Fountain asked if Mr. Dieckman knew what his selection process is going to be? Maybe you could share what
you did with Mariposa?
Mr. Dieckman said he is not in the management side of the business. We comply with the Fair Housing Act
religiously. We have an incredible mix of families as well as disabled people.
Y4
HOUSING COMMISSION MINUTES
JUNE 9,2005
PAGE 6 of 12
Ms. Fountain said typically we can’t restrict it to Carlsbad residents only because of the Fair Housing Law, but we do
try to ask the developer, for marketing purposes, to give first preference to Carlsbad residents. That would be where
you were saying that information could go out to the churches and to Ms. Anderson a little bit ahead of doing the
other marketing.
Ms. Anderson said a lot of the participants at the churches in Carlsbad don’t live in Carlsbad because they can’t
afford to live here. But because they were here at some point and developed a relationship with the church they
belong to, they still keep coming back. They would like to live here at some point. That is why we had La Paloma
come in. A lot of Oceanside residents that come into St. Patrick’s are now living there. There are people that work
here that live outside of Carlsbad.
Ms. Fountain said that is generally what we try to do. We ask them to give preference in marketing to people who
live or work in Carlsbad. We are always looking for ways to get the information out to the right organization. If that
worked well in La Paloma, it is something we can share with Chelsea that we will try to get this type of publicity out
there so people know about the opportunity.
Ms. Anderson commented another thing they do is hold tenant landlord responsibilities meetings,and the majority of
our families are given a lecture on it working both ways. You are also a tenant and you have responsibilities as well.
I also had a question. Since some of the buildings are three stories, what will people with disabilities do?
Mr. Dieckman said they will be on the first floor.
Chairperson Scarpelli commented that without elevators, disabled people wouldn’t be able to use the stairs.
Mr. Dieckman commented under the Disabilities Act, every unit on the ground floor is handicapped adaptable. I
think 5% of the units have to be handicapped accessible. That means that 5% of the units on the ground floor are
already set up for the handicapped. The rest of the units on the ground floor, with minimal amount of adjustments,
can be made handicapped accessible.
Chairperson Scarpelli said in addition to the developer for the non-profit management fm marketing the units, do
we do any of the marketing in the city itself, directly out of the Housing and Redevelopment office?
Ms. Fountain answered staff will not do any paid marketing, but staff does share the information. We have an
interest list where people can request to be put on that list and then we share the mformation with the developer. We
also provide information in our office.
Chairperson Scarpelli asked if staff could do something to get the word out to organizations that deal with people in
this income group.
Ms. Fountain said that is required of the developer to do. They have to give us their marketing plan, and we would
share the things we would want as part of the marketing.
Chairperson Scarpelli commented that the developer may not be aware of all of the organizations within the city.
Ms. Fountain agreed but said we can give that to them.
Chairperson Scarpelli asked if staff will share that with the developer?
Ms. Fountain answered right. We really think it is the developer’s responsibility.
Chairperson Scarpelli commented that staff is making every effort to notify people with our community.
HOUSING COMMISSION MINUTES
JUNE 9,2005
PAGE 7 of 12
Ms. Fountain said right, but we are always open to different organizations such as St. Patrick’s. We require the
developer to get that information out such as by sending flyers. We keep copies of the developer’s preliminary
application in our oflice also. We have that contact mformation on our website as well.
Chairperson Scarpelli asked if the project is targeting people at 35%, shouldn’t the Section 8 people be able to be in
that 35% category?
Ms. Fountain said yes.
Chairperson Scarpelli asked if they are notified as well?
Ms. Fountain answered yes. If people have a voucher, we have a list in our ofice that is available for them. They
would be able to go and look at this project and decide if that is where they want to live. Most of our people we are
helping now on the program are below 30% of the area median income. They are even going to still have a portion,
even with rent at 35%, that we pay. So they wouldn’t be in a situation they wouldn’t have to pay anythmg because
they are so extremely low.
Chairperson Scarpelli said hs thoughts are more of dwindling that list down because we have such a long waiting
period. A year now?
Ms. Fountain said it does help definitely because it gets more people in units.
Chairperson Scarpelli asked if we will screen that list as well?
Ms. Fountain answered right.
Commissioner Smith asked if that means Section 8 participants will be given first preference?
Ms. Fountain said they are not given first preference. They are treated like any tenant where they still have to qualify
and they have to go through the process, but they will have their voucher they can use there.
Commissioner Schraml asked if Section 8 participants will be notified well in advance so they do have the
opportunity to get their application in?
Ms. Fountain said we don’t noti@ people that are in existing units that there is a new project available. Most of the
people we are dealing with have new vouchers, which will not be happening much in the future because we have lost
finding. Currently, we don’t have funding to bring new people on the program, but there are people out there right
now with vouchers. Plus if someone comes in and says they want to move because their current residence isn’t
workmg for them, then we would let them how that these units are available.
Chairperson Scarpelli said he was thinking more of a waiting list.
Ms. Fountain said we use that waiting list as part of our interest list for developers. We let the developers know who
is looking for housing.
Ms. Anderson asked what the rents will be in these units?
Ms. Fountain gave Ms. Anderson a listing of the rents.
chairperson Scarpelli asked Ms. Fountain where that information was.
HOUSING COMMISSION MINUTES
JUNE 9,2005
PAGE 8 of 12
Ms. Fountain gave Chairperson Scarpelli the information also.
Chairperson Scarpelli said then if you are in the 35% AMI, for a one bedroom, one bathroom, it could be gross rent
at $452 and a monthly net rent at $419.
Ms. Fountain added you would take a utility allowance out so that would give you what the actual rent would be.
Chaqerson Scarpelli added that the three bedroom, two bathroom, would be at $988, so that is still pretty tough for
low income.
Ms. Fountain said that is a three bedroom at 60%. The three bedroom at 35% is $556.
Mr. Dieclanan said that is about a third of the cost of a market rate apartment.
Commissioner Smith asked"who selects the manager?
Mr. Dieckman said his management firm will select the manager.
Chairperson Scarpelli added that is the on-site manager.
Commissioner Schraml asked if there are any requirements as to how many bedrooms you have according to how
many people are occupying the unit?
Mr. Dieckman said he can't site those verbatim.
Ms. Fountain asked if she was asking how my people could be in a unit?
Commissioner Schraml agreed.
Ms. Fountain said the general rule of thumb is two people per bedroom or living space. Most living projects don't
get to those kind of levels very often. Yes with a three-bedroom you could techmcally have maybe eight people
living there because you could count the living room as a living space. But not too many of these projects ever get
those kind of levels in them because that gets difficult for the unit to be manageable.
Commissioner Schraml said so there is no regulation as far as adults and children? What I am thinking of is parkmg
spaces.
Ms. Fountain said no there aren't any limits. They will all have to be related in some way so they aren't all moving
in with roommate situations. You could have a large family that size living in that unit, but it is pretty unusual.
Mr. Dieckman said with these low rents, like the 35% of AMI, we will typically have single mothers with one or two
children and seniors.
Commissioner Schraml commented that not all seniors are disabled.
Ms. Fountain said if they are disabled, they most likely will have to be on that fust floor if they are not able to use
the stairs.
Mr. Dieckman said seniors are a good addition to these projects because they are typically there most of the day.
They are the eyes and ears of management and help maintain order.
Chairperson Scarpelli asked Mr. Dieckman if there are any recreational facilities there for the children?
HOUSING COMMISSION MINUTES
JUNE 9,2005
PAGE 9 of 12
Mr. Dieckman said there are tot lots. There is also half of a basketball court.
Chairperson Scarpelli commented that it is fairly limited for on-site recreation.
Mr. Dieckman added there is also a large lawn area. This is a very open area.
Chairperson Scarpelli asked where the clubhouse is?
Mr. Dieckman pointed out the clubhouse. He added this is 15.6 acres for 168 units, which is a lot of open space.
Ms. Fountain commented that it doesn’t have a pool. That was an issue in a past project.
Ms. Anderson asked where the surface parking will be?
Mr. Dieckman pointed out the outdoor parking lot.
Ms. Fountain just said it is not in a structure. It is across the street on the surface.
Commissioner Schraml moved that the Housing Commission adopt Resolution 2005-004 recommending approval to
the City Council to provide a total of $1,932,000 in financial assistance from the City of Carlsbad Housing Trust
Fund to Chelsea Investment Corporation for construction of one hundred sixty eight (1 68) affordable apartment units
in the Villages of La Costa Development.
Commissioner Smith seconded the motion.
VOTE: 3-0-0
AYES: Scarpelli, Schraml, and Smith
NOES: None
ABSTAIN: None
showed a video fiom the Access Center. At the last Housing Element Workshop, Lee Price of
asked you to take a look at this video. The Commission viewed the Universal Design Video provi
with trying to get donors
into consideration the op
inches at the most. What happens in o
wheelchair? If the structure is built accor
getting data from them to see what their pro
this is one place we can have the developers
Basically what I saw
and of course the swi
e for the 35% of AMI is in a
Housing Commission’s perspective, maybe
ving this option to these people.
the building to make it more
nsideration, at least at our
Mflaid she will.
EXHIBIT 6
DRAFT LOAN DOCUMENTS
LOAN AGREEMENT
by and between
THE CITY OF CARLSBAD
and
CHELSEA INVESTMENT CORPORATION
(Hunters' Pointe Housing Development)
1010\18\235233.2
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND EXHIBITS 2
.. Section 1.1 Defirutions ...................................................................................................... 2
Section 1.2 Exhibits ........................................................................................................... 4
ARTICLE 2 LOAN PROVISIONS 5
..
Section 2.1
Section 2.2
Section 2.3
Section 2.4
Section 2.5
Section 2.6
Section 2.7
Section 2.8
Section 2.9
Loan ................................................................................................................ 5
Interest ........................................................................................................... 5
Use ofFunds ................................................................................................... 5
Security ........................................................................................................... 5
Loan Disbursement ........................................................................................ 5
Repayment of the Loan .................................................................................. 7
Reports and Accounting of Residual Receipts ............................................... 9
Non-Recourse ............................................................................................... 10 Subordination ............................................................................................... 11 ..
ARTICLE 3 CONSTRUCTION AND OPERATION OF THE DEVELOPMENT 11
Section 3.1
Section 3.2
Section 3.3
Section 3.4
Section 3.5
Section 3.6
Section 3.7
Section 3.8
Section 3.9
Section 3.10
Section 3.11
Section 3.12
Section 3.13
Section 3.14
Section 3.15
Section 3.16
Section 3.17
Section 3.18
Section 3.19
Section 3.20
Section 3.21
Section 3.22
Section 3.23
Section 3.24
Section 3.25
Section 3.26
Permits and Approvals ................................................................................. 11
Plans and Specifications ............................................................................... 11
Construction Contract .................................................................................. 12
Performance and Payment Bonds ................................................................. 12
Commencement of Construction .................................................................. 13
Completion of Construction ......................................................................... 13
Construction Pursuant to Plans and Laws; Prevailing Wages ...................... 13
Marketing Plan ............................................................................................. 14
Relocation ..................................................................................................... 14
Equal Opportunity ........................................................................................ 15
Progress Reports ........................................................................................... 15
Construction Responsibilities ....................................................................... 15
Inspections .................................................................................................... 16
Approved Development Budget; Revisions to Budget ................................ 16
Information ................................................................................................... 16
Records ......................................................................................................... 16
Audits ........................................................................................................... 17
Hazardous Materials ..................................................................................... 17
Fees and Taxes ............................................................................................. 19
Notice of Litigation ...................................................................................... 19
Operation of Development as Affordable Housing ...................................... 19
Non-Discnrnination ...................................................................................... 20
Mandatory Language in All Subsequent Deeds, Leases and Contracts ....................................................................................................... 20
Insurance Requirements ............................................................................... 21
Developer Fee .............................................................................................. 22
....
Mechanics Liens, Stop Notices, and Notices of Completion ....................... 15
....
1 1010\18\235233.2
TABLE OF CONTENTS
(continued)
Page
ARTICLE 4 ASSIGNMENT AND TRANSFERS 22
.. Section 4.1 Definitions .................................................................................................... 22
Section 4.2 Purpose of Restrictions on Transfer ............................................................. 23
Section 4.3 Prohlbited Transfers ..................................................................................... 23
Section 4.4 Permitted Transfers Without Prior City Approval ....................................... 24
Section 4.5 Permitted Transfers With Prior Approval; City Pre-Approved
Transfers ........................................................................................................ 24
Section 4.6 Release of the Borrower ............................................................................... 24
..
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE
BORROWER 25
Section 5.1 Representations and Warranties ................................................................... 25
ARTICLE 6 DEFAULT AND REMEDIES 26
Section 6.1 Events of Default .......................................................................................... 26
Section 6.2 Remedies ...................................................................................................... 28
Section 6.3 Assignment of Plans. Data and Approvals ................................................... 29
Section 6.4 Remedies Cumulative .................................................................................. 29
ARTICLE 7 GENERAL PROVISIONS 29
Section 7.1 Relationship of Parties ................................................................................. 29
Section 7.2 No Claims ..................................................................................................... 30
Section 7.3 Amendments ................................................................................................. 30
Section 7.4 Entire Understanding of the Parties ............................................................. 30
Section 7.5 Indemnification ............................................................................................ 30
Section 7.6 Non-Liability of Agency and City Officials, Employees and Agents .......... 30
Section 7.7 No Third Party Beneficiaries ........................................................................ 30
Section 7.8 Action by the City ........................................................................................ 31
Section 7.9 Waivers ......................................................................................................... 31
Section 7.10 Notices, Demands and Communications ..................................................... 31
Section 7.1 1 Applicable Law and Venue .......................................................................... 32
Section 7.12 Parties Bound ............................................................................................... 32
Section 7.13 Attorneys' Fees ............................................................................................. 32
Section 7.14 Severability ................................................................................................... 32
Section 7.15 Force Majeure .............................................................................................. 32 Section 7.16 Title of Parts and Sections ............................................................................ 32
Section 7.17 Multiple Originals; Counterpart ................................................................... 33
..
Exhibit A Legal Description
Exhibit B Development Budget
.. 11 1010\18\235233.2
LOAN AGREEMENT
(Hunters' Pointe Housing Development)
This Loan Agreement (the "Agreement") is entered into as of 9 2005, by and between the City of Carlsbad, a municipal corporation (the "City") and Chelsea
Investment Corporation, a California corporation (the "Borrower"), with reference to the
following facts, purposes and intentions.
RECITALS
A. These Recitals refer to and utilize certain capitalized terms which are defined in
Article 1 of this Agreement. The Parties intend to refer to those definitions in connection with
the use of capitalized terms in these Recitals.
B. The City has established a Housing Trust Fund administered by the City and used
for the purpose of providing funding assistance for the development of affordable housing
consistent with the policies and programs contained in the Housing Element of the City's General
Plan.
C. Pursuant to Resolution Number , adopted by the City on 9
2005, the City committed to make the Loan to the Borrower in an amount not to exceed One
Million Nine Hundred Thirty-Two Thousand Dollars ($1,932,000) for the development of the
Development. The Loan hds are Housing Trust Fund monies and are not federal funds or the
proceeds of a tax-exempt bond issue.
D. As a condition to providing the Loan the City is imposing occupancy and
affordability restrictions on the Development, pursuant to the Regulatory Agreement, ensuring
that certain units remain affordable to specified income categories of occupants for a specified
period.
E. 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) as
newly constructed located outside of the Project Area and available at affordable housing cost to
very low income 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 Project Area. This Agreement and the accompanying Regulatory
Agreement are also intended to implement this requirement.
F. The Negative Declaration adopted by the City Council of the City by
Resolution
Environmental Quality Act (Public Resources Code Sections 21000 et seq.), for the development
activities proposed to be undertaken under this Agreement.
, has served as the environmental documentation pursuant to the California
NOW, THEREFORE, in consideration of the recitals hereof and the mutual promises and
covenants set forth in this Agreement, the Parties agree as follows:
1010\18\235233.2 1 53
ARTICLE 1
DEFINITIONS AND EXHIBITS
Section 1.1 Definitions.
The following capitalized terms have the meanings set forth in this Section 1.1 wherever
used in this Agreement, unless otherwise provided:
(a) "Agency" means the Carlsbad Redevelopment Agency, a public body,
corporate and politic.
(b) "Agreement" means this Loan Agreement.
(c) "Approved Development Budget" means the proforma development
budget, including sources and uses of funds, as approved by the City, and attached hereto and
incorporated herein as Exhibit B, but which may be amended with the approval of the City as set
forth in this Agreement.
(d) "Approved Financing" means all of the following funds acquired by the
Borrower, or intended to be acquired by the Borrower, and approved by the City for the purpose
of financing the Development, in addition to the Loan:
(1) Tax credit equity contribution from the Tax Credit Investor in the
approximate amount of Dollars ($ ) (the "Tax Credit
Equity Funds"); and
(2) Multifamily Housing Program ("MHP") loan funds in an
approximate amount of Dollars ($ ) (the "MHP
Funds").
[BORROWER: NED TO INCLUDE ALL OTHER SOURCES]
(e) "Borrower" means Chelsea Investment Corporation, a California
corporation.
(f) "City" means the City of Carlsbad, a municipal corporation.
(g) "City Council" means the City Council of the City.
(h) Tontrol" means (i) direct or indirect management or control of the
managing member or members in the case of a limited liability company; (ii) direct or indirect
management or control of the managing general partner or general partners in the case of a
partnership and (iii) (a) boards of directors that overlap by fifty percent (50%) or more of their
1010\18\235233.2 2
directors, or (b) direct or indirect control of a majority of the directors in the case of a
corporation.
(i) "Deed of Trust" means the deed of trust that will encumber the
Development to secure repayment of the Loan. The form of the Deed of Trust shall be provided
by the City.
(i) "Default" has the meaning set forth in Section 6.1 below.
(k) "Development" means the Property and the Improvements.
(1) "Hazardous Materials" has the meaning set forth in Section 3.20 below.
(m) "Hazardous Materials Claim" has the meaning set forth in Section 3.20
below.
(n) "Hazardous Materials Law" has the meaning set forth in Section 3.20
below.
(0) "Housing Trust Fund" means the City's Housing Trust Fund as set forth in
Title 21, Chapter 21.85 of the Carlsbad Municipal Code, as amended from time to time.
(p) "HUD" means the U.S. Department of Housing and Urban Development.
(9) "Improvements" means the approximately one hundred sixty-eight (1 68)-
unit residential rental facility, to be constructed on the Property, plus appurtenant landscaping
and improvements.
(r) "Loan" means the amount of One Million Nine Hundred Thirty-Two
Thousand Dollars ($1,932,000) to be provided by the City to the Borrower pursuant to the Loan
Documents.
(s) "Loan Documents" means this Agreement, the Note, the Regulatory
Agreement, and the Deed of Trust.
(t) "Note" means the promissory note that will evidence the Borrowerk
obligation to repay the Loan. The form of the Note shall be provided by the City.
(u) "Parties" means the City and the Borrower.
(v) "Partnership" means the California limited partnership to be formed by the
Borrower for the development of the Development in which the Borrower, or an entity
Controlled by the Borrower, is the general partner.
1 0 10\18\23523 3.2 3
(w) "Project Area" means, collectively, the Carlsbad Village Redevelopment
Area, as amended from time to time, and the South Carlsbad Coastal Redevelopment Area, as
amended from time to time.
(x) "Property" means the real property located in the City of Carlsbad, County
of San Diego, State of California, more particularly described in the attached Exhibit A.
(y) "Regulatory Agreement" means the Regulatory Agreement and
Declaration of Restrictive Covenants between the City and the Borrower associated with the
Loan and recorded against the Property.
(z) "Regulatory Term" means the term of the Regulatory Agreement.
(aa) "Tax Credits" means the low income housing tax credits established
pursuant to Section 42 of the Internal Revenue Code of 1986, as amended, and allocated by
TCAC to be obtained by the Borrower to finance the development of the Development.
(bb) "Tax Credit Investor" means , to be admitted
to the Partnership as a limited partner, and which shall provide the Tax Credit Equity Funds.
(cc) "TCAC" means the California Tax Credit Allocation Committee.
(dd) "Term" means the term of the Loan which is fifty-five (55) years from the
date of this Agreement.
(ee) "Transfer" has the meaning set forth in Section 4.1 below.
(ff) "Unit" means one of the approximately one hundred sixty-eight (168)
apartment units to be constructed on the Property.
Section 1.2 Exhibits.
The following exhibits are attached to this Agreement and incorporated into this
Agreement by this reference:
EXHIBIT A: Legal Description of the Property
EXHIBIT B: Approved Development Budget
1010\18\235233.2 4
ARTICLE 2
LOAN PROVISIONS
Section 2.1 Loan.
Subject to satisfaction of the conditions set forth in Section 2.5, the City shall lend to the
Borrower the Loan in the principal sum not to exceed One Million Nine Hundred Thirty-Two
Thousand Dollars ($1,932,000). The Developer's obligation to pay the Loan shall be evidenced
by the Note.
Section 2.2 Interest.
(a) Subject to the provisions of Section 2.2(b) below, the outstanding
principal balance of the Loan shall accrue simple interest at the rate of three percent (3%).
(b) In the event of a Default, interest on the Loan shall begin to accrue, as of
the date of Default and continue until such time as the Loan funds are repaid in full or the
Default is cured, at the default rate of the lesser of ten percent (lo%), compounded annually, or
the highest rate permitted by law.
Section 2.3 Use of Funds.
(a) The Loan shall be used for construction financing in accordance with the
Financing Plan to be approved by the City.
(b) prior written consent of the City.
The Borrower shall not use the Loan for any other purpose without the
Section 2.4 Security.
The Borrower shall secure its obligation to repay the Loan, as evidenced by the Note, by
executing the Deed of Trust, and recording it as a lien against the Borrower's Fee interest in the
Property in a lien position reasonably acceptable to the City.
Section 2.5 Loan Disbursement.
The City shall not be obligated to fund any portion of the Loan or take any other action
under the Loan Documents unless all of the following conditions precedent are satisfied:
(a) There exists no Default nor any act, failure, omission or condition that
would constitute an event of Default under the Loan Documents;
(b) The Borrower has delivered to the City a copy of a corporate authorizing
resolution authorizing the Borrower's execution of the Loan Documents and the transactions
contemplated by the Loan Documents;
1010\18\235233.2 5
(c) The Borrower has furnished the City with evidence of the insurance
coverage meeting the requirements of Section 3.25 below;
(d) The Borrower holds fee interest to the Property;
(e) The Borrower has executed and delivered to the City this Agreement, the
Note, the Deed of Trust and the Regulatory Agreement, and the Deed of Trust and the
Regulatory Agreement have been recorded against the Property in the Office of the Recorder of
the County of San Diego in a lien position acceptable to the City;
(f) The Borrower has executed and delivered to the City all documents,
instruments, and policies required under the Loan Documents;
(g) A title insurer reasonably acceptable to the City is unconditionally and
irrevocably committed to issuing an ALTA Lender's Policy of insurance insuring the priority of
the Deed of Trust in the amount of the Loan, subject only to such exceptions and exclusions as
may be reasonably acceptable to the City, and containing such endorsements as the City may
reasonably require;
(h) The Borrower has obtained all necessary land use approvals, and such
other approvals and permits necessary to develop the Development, other than the building
permit for the Improvements;
(i) The City has received and approved the final plans and specifications for
construction of the Development pursuant to Section 3.2, below;
(j) The City has received and approved all contracts that the Borrower has
entered or proposed to enter for construction of the Development as required pursuant to Section
3.3 below;
(k) The City has received copies of labor and material (payment) bonds and
performance bonds as required pursuant to Section 3.4 below;
(1) The Borrower has obtained the building permit necessary for the
construction of the Improvements;
(m) The undisbursed proceeds of the 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 development of the
Development and to satisfy all of the covenants contained in this Agreement and the Regulatory
Agreement;
(n) 1 . l(d) above; and
The Borrower has closed all Approved Financing described in Section
1010\18\235233.2 6
(0) The City has received a written draw request from the Borrower, including
certification that the condition set forth in Section 2.5(a) continues to be satisfied, and setting
forth the proposed uses of funds consistent with the Approved Development Budget, 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
improvements on the Property, the written request must be accompanied by (i) certification by
the Borrower's architect reasonably acceptable to the City that the work for which disbursement
is requested has been completed (although the City reserves the right to inspect the Property and
make an independent evaluation); and (ii) lien releases and/or mechanics lien title insurance
endorsements reasonably acceptable to the City.
Section 2.6 Repayment of the Loan.
The Loan shall be repaid as follows:
(a) Term. The Term of the Loan shall commence as of the date of this
Agreement and shall expire on the date that is fifty-five (55) years after the date of this
Agreement.
(b) Annual Repayments. Commencing on May 1st first occurring after the
fiscal year in which the Improvements are completed pursuant to this Agreement, and on each
May 1 st thereafter throughout the Term of the Loan, the Developer shall make repayments of the
Loan equal to seventy percent (70%) of the Residual Receipts. The Developer shall provide the
City, by each May 1 st following each fiscal year, a report showing the actual income and
expenditures with respect to the Development for the immediately preceding fiscal year, the
calculation of Annual Operating Expenses, Gross Revenue, and Residual Receipts and the status
of all reserve funds, including without limitation, an annual audited financial statement for the
Development prepared by a certified public accountant approved by the City. Payments made
shall be credited first against accrued interest and then against outstanding principal.
(c) Special Repayments fkom Net Proceeds of Permanent Financing. The Net
Proceeds of Permanent Financing shall be paid seventy percent (70%) to the City as a special
repayment of the Loan. The amount of the Net Proceeds of Permanent Financing shall be
determined by the Developer and submitted to the City for approval on the date the Developer
submits the final cost audit for the Development to TCAC. The amount of the Net Proceeds of
Permanent Financing shall be calculated using the actual principal amount of the permanent loan
made to Developer, provided that Developer provides sufficient evidence that the permanent
loan is the maximum principal amount that Developer could secure for the Development
applying reasonable underwriting standards. The Developer 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 Developer's determination of the amount of the
Net Proceeds of Permanent Financing in writing within thirty (30) days of the receipt of
Developer's cost audit and supplemental documentation. If Developer's determination is
disapproved by the City, Developer shall re-submit documentation to the City until the City
approval is obtained. The City's share of the Net Proceeds of Permanent Financing shall be due
the City from the Developer no later than five (5) days following the date Developer receives its
final capital contribution from the Investor.
10 10\18\235233.2 7
(d) Payment in Full. All principal and interest, if any, on the Loan shall, at
the option of the City, be due and payable upon the earliest of: (i) a Transfer other than a
Transfer permitted or approved by the City as provided in Article 4 below; (ii) the occurrence of
a Default for which the City exercises its right to cause the Loan indebtedness to become
immediately due and payable; or (iii) the expiration of the Term specified in (a) above.
(e) Prepayment. The Borrower shall have the right to prepay the Loan at any
time without premium or penalty. However, this Agreement, the Deed of Trust, and the
Regulatory Agreement shall remain in effect for the entire Term, regardless of any prepayment.
(f) Special Definitions. The following definitions shall apply for purposes of
this Section 2.6:
(1) "Annual Operating Expenses" with respect to a particular fiscal
year shall mean the following costs reasonably and actually incurred for operation and
maintenance of the Development to the extent that they are consistent with the annual budget for
the Development, approved by the City pursuant to the Regulatory Agreement and with an
annual independent audit performed by a certified public accountant, reasonably acceptable to
the City, using generally accepted accounting principles: property taxes and assessments
imposed on the Development; debt service currently due on a non-optional basis (excluding debt
service due from residual receipts or surplus cash of the Development) on loans associated with
development of the Development and approved by the City in the Financing Plan pursuant to
Section 2.5; property management fees and reimbursements, not to exceed fees and
reimbursements which are standard in the industry and pursuant to a management contract
approved by the City as set forth in the Regulatory Agreement; premiums for property damage
and liability insurance; utility services not paid for directly by tenants, including water, sewer,
and trash collection; maintenance and repair; any annual license or certificate of occupancy fees
required for operation of the Development; security services; advertising and marketing; cash
deposited into reserves for capital replacements of the Development in an amount not to exceed
the amount required in connection with the permanent financing approved by the City pursuant
to Section 2.5, or by the City if no other lender or investor requires approvals of such amount;
payment of any previously unpaid portion of the Developer Fee due (without interest) not
exceeding a cumulative amount of the Developer Fee as set forth in Section 3.26; extraordinary
operating costs specifically approved in writing by the City as part of the annual budget approval
process pursuant to the Regulatory Agreement; payments of deductibles in connection with
casualty insurance claims not normally paid from reserves; the amount of uninsured losses
actually replaced, repaired or restored, and not normally paid from reserves; and other ordinary
and reasonable operating expenses approved in writing by the City and not listed above. Annual
Operating Expenses shall not include the following: depreciation, amortization, depletion or
other non-cash expenses; any amount expended from a reserve account; and any capital cost with
respect to the Development, as determined by the accountant for the Development.
(g) "Gross Revenue" with respect to a particular fiscal 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
10 10\18\235233.2 8
dwelling units, deposits forfeited by tenants, all cancellation fees, price index adjustments and
any other rental adjustments to leases or rental agreements; net proceeds from vending and
laundry room machines; the proceeds of business interruption or similar insurance and not paid
to senior lenders; the proceeds of casualty insurance not used to rebuild the Development and not
paid to senior lenders; and condemnation awards for a taking of part or all of the Development
for a temporary period not paid to senior lenders. Gross Revenue shall not include tenants'
security deposits, loan proceeds, capital contributions or similar advances.
(1) "Net Proceeds of Permanent Financing" shall mean the portion of
the Approved Financing funds that are not required to pay the costs of acquisition and
development of the Development (including but not limited to the funding of reserves). Net
Proceeds of Permanent Financing, if any, shall be determined pursuant to the procedure set forth
in Section 2.6(c).
(2) "Residual Receipts" in a particular calendar year shall mean the
amount by which Gross Revenue (as defined above) exceeds Annual Operating Expenses (as
defined above).
Section 2.7 Reports and Accounting: of Residual Receiuts.
(a) Audited Financial Statement. In connection with the annual payments set
forth in Section 2.6(b), within sixty (60) days of the end of the Borrower's fiscal year, the
Borrower shall furnish to the City 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 Residual Receipts during the preceding calendar year.
(b) Books and Records. The Borrower shall keep and maintain on the
Property, or at its principal place of business, 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
the Borrower's calculation of Residual Receipts. Books, records and accounts relating to the
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 Residual Receipts on a cash basis. All such books, records, and accounts
shall be open to and available for inspection by the City, its auditors or other City authorized
representatives at reasonable intervals during normal business hours. Copies of all tax returns
and other reports that the 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. The Borrower shall preserve records on which any statement
of Residual Receipts is based for a period of not less than five (5) years after such statement is
rendered, and for any period during which there is an audit undertaken pursuant to subsection (c)
below then pending.
(c) Audits. The receipt by the City of any statement pursuant to subsection
(a) above or any payment by the Borrower or acceptance by the City of any Loan repayment for
any period shall not bind the City as to the correctness of such statement or such payment.
1010\18\235233.2 9
Within three (3) years after the receipt of any such statement, the City or any designated agent or
employee of the City at any time shall be entitled to audit the Residual Receipts and all books,
records, and accounts pertaining thereto. Such audit shall be conducted during normal business
hours at the principal place of business of the Borrower and other places where records are kept.
Immediately after the completion of an audit, the City shall deliver a copy of the results of such
audit to the Borrower. If it shall be determined as a result of such audit that there has been a
deficiency in a Loan repayment to the City, then such deficiency shall become immediately due
and payable with interest at the default rate set forth in this Agreement, determined as of and
accruing from the date that said payment should have been made. In addition, if the Borrower's
auditor's statement for any Development fiscal year shall be found to have understated Residual
Receipts by more than five percent (5%) and at least Five Thousand Dollars ($5,000), and the
City is entitled to any additional Loan repayment as a result of said understatement, then the
Borrower shall pay, in addition to the interest charges referenced hereinabove, all of the City's
reasonable costs and expenses connected with any audit or review of the Borrower's accounts
and records.
(d) Maximization of Residual Receipts. The Borrower agrees at all times
during the Term to continue its operations of the Development and to use its skills and diligence
to produce the maximum Residual Receipts, subject to the rent and occupancy requirements of
the Regulatory Agreement.
Section 2.8 Non-Recourse.
Except as provided below, the Borrower shall not have any direct or indirect personal
liability for payment of the principal of, or interest on, the Loan or the performance of the
covenants of the Borrower under the Deed of Trust. The sole recourse of the City with respect to
the principal of, or interest on, the Note and defaults by the Borrower in the performance of its
covenants under the Deed of Trust shall be to the Property described in the 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 Note of all the rights and remedies of the
City thereunder, or (b) be deemed in any way to impair the right of the City 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 the Borrower's
obligations under the Deed of Trust, except as hereafter set forth; nothing contained herein is
intended to relieve the Borrower of its obligation to indemnify the City under Sections 3.7, 3.9,
3.19, and 7.5 of this 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 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 the Borrower other than in accordance with the 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.
1010\18\235233.2 10
Section 2.9 Subordination.
(a) Deed of Trust. The City agrees to subordinate the Deed of Trust to the
lien of the deeds of trust securing the Approved Financing provided the subordination documents
provide the City with reasonably adequate notice and cure rights to enable the City to avoid
foreclosure of the deeds of trust securing the Approved Financing.
(b) Remlatoxv Ameement. The City agrees that the City's Housing and
Redevelopment Director shall subordinate the City Regulatory Agreement to the lien or
encumbrance of Approved Financing upon the finding of the City's Housing and Redevelopment
Director that (i) an economically feasible loan is not reasonably available on comparable terms
and conditions without subordination, and (ii) the mortgage to which the City Regulatory
Agreement is being subordinated contains provisions meeting the requirements of Health and
Safety Code Section 33334.14(a) reasonably designed to protect the City's and Agency's interests
in the event of default under such mortgage. The City agrees that the City Regulatory
Agreement shall be subordinated to any federal or state governmental agency regulating the
Development which requires that the City Regulatory Agreement be subordinate to such
government agency's documents and liens. The City will execute subordination agreements in a
form reasonably acceptable to the City and the lending entity or government agency requesting
subordination of the City Regulatory Agreement as provided in this Section.
ARTICLE 3
CONSTRUCTION AND OPERATION OF THE DEVELOPMENT
Section 3.1 Permits and Approvals.
(a) As of the date of this Agreement, the Borrower has obtained all permits
and approvals necessary for the development of the Development on the Property, other than the
building permit for the construction of the Improvements.
(b) No later than October 3,2005, the Borrower shall obtain the building
permit for the construction of the Improvements on the Property, or the City, at its option, and
with thirty (30) days' prior written notice to the Borrower and opportunity to cure, may declare
the Borrower in default hereunder.
Section 3.2 Plans and SDecifications.
(a) Simultaneously with submission to the City building department, the
Borrower shall submit to the City a copy of the Construction Plans for the Development. As
used in this Agreement, "Construction Plans" shall mean all construction documentation upon
which the Borrower and the Borrower's contractor shall rely in constructing all the improvements
on the Property (including the Units, landscaping, parking, and common areas) and shall include,
but not necessarily be limited to, final architectural drawings, landscaping plans and
specifications, final elevations, building plans and specifications (also known as "working
drawings").
1010\18\235233.2 11 ca3
(b) The City shall, if the Construction Plans submitted conform to the
provisions of this Agreement, approve in writing such Construction Plans. Unless rejected by
the City for their failure to comply with the foregoing requirements within fifteen (1 5) days
following submission by the Borrower, said Construction Plans shall be deemed accepted. Such
approval of the City shall not relieve Borrower's obligation to obtain any and all approvals
required by the City building department.
(c) If rejected by the City in whole or in part, the Borrower shall submit new
or corrected Construction Plans within thirty (30) days after notification of the City's rejection
and the reasons therefor. The City shall then have fifteen (15) days to review and approve the
Borrower's new or corrected Construction Plans. The provisions of this Section relating to time
periods for approval, rejection, or resubmission of new or corrected Construction Plans shall
continue to apply until the Construction Plans have been approved by the City.
Section 3.3 Construction Contract.
(a) Not later than October 17,2005, the Borrower shall submit to the City for
its approval the proposed construction contract for the construction of the Improvements. 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. The City's approval of the construction contract shall in no way be deemed to
constitute approval of or concurrence with any term or condition of the construction contract
except as such term or condition may be required by this Agreement.
(b) Upon receipt by the City of the proposed construction contract, the City
shall promptly review same and approve or disapprove it within ten (10) working days. If the
construction contract is not approved by the City, the City shall set forth in writing and notify the
Borrower of the City's reasons for withholding such approval. The Borrower shall thereafter
submit a revised construction contract for City approval, which approval shall be granted or
denied in five (5) working days in accordance with the procedures set forth above. Any
construction contract executed by the Borrower for the Development shall be in the form
approved by the City;
Section 3.4 Performance and Payment Bonds.
Prior to commencement of construction of the Development, the Borrower shall deliver
to the City copies of one (1) labor and material bond in an amount equal to one hundred percent
(1 00%) of the scheduled cost of the Development and one (1) performance bond for the
construction of the Development. Such bonds shall (i) be in a form reasonably acceptably to the
City, (ii) be issued by a surety licensed to do business in California and reasonably acceptable to
the City, and (iii) name the City as a co-obligee.
1010\18\235233.2 12
Section 3.5 Commencement of Construction.
The Borrower shall cause the commencement of construction of the Development no
later than November 1,2005. For the purposes of this Agreement, the term kommencement of
construction" shall mean the date the Borrower commences, or causes the commencement of,
physical work on the Property pursuant to a building permit.
Section 3.6 Comdetion of Construction.
The Borrower shall diligently prosecute construction of the Development to completion,
and shall cause the completion of the construction of the Development no later than December 1,
2006. For the purposes of this Agreement, the term completion of construction" shall mean the
date the City issues a certificate of occupancy for the Improvements.
Section 3.7 Construction Pursuant to Plans and Laws; Prevailing Wages.
(a) The Borrower shall construct the Development in conformance with the
plans and specifications approved by the City. The Borrower shall notify the City in a timely
manner of any changes in the work required to be performed under this Agreement, including
any additions, changes, or deletions to the plans and specifications approved by the City. A
written change order authorized by the City must be obtained before any of the following
changes, additions, or deletions in work for the Development may be performed: (1) any change
in the work the cost of which exceeds Ten Thousand Dollars ($10,000); or (2) any set of changes
in the work the cost of which cumulatively exceeds Twenty-Five Thousand Dollars ($25,000); or
(3) any material change in building materials or equipment, specifications, or the structural or
architectural design or appearance of the Development as provided for in the plans and
specifications approved by the City. Consent to any additions, changes, or deletions to the work
shall not relieve or release the Borrower from any other obligations under this Agreement, or
relieve or release the Borrower or its surety from any surety bond. The City shall utilize best
efforts to approve or disapprove change orders within five (5) working days of receipt of a
request for approval.
(b) The Borrower shall cause all work performed in connection with the
Development to be performed in compliance with (i) all applicable laws, ordinances, rules and
regulations of federal, state, county or municipal governments or agencies now in force or that
may be enacted hereafter, and (ii) all directions, rules and regulations of any fire marshal, health
officer, building inspector, or other officer of every governmental agency now having or
hereafter acquiring 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.
(c) The Borrower shall and shall cause the contractor and subcontractors to
pay prevailing wages in the construction of the Improvements as those wages are determined
pursuant to Labor Code Sections 1720 et seq., and the implementing regulations of the
10 10\1 tu3523 3.2 13
Department of Industrial Relations (the "DIR") and comply with the other applicable provisions
of Labor Code Sections 1720 et seq., including but not limited to the hiring of apprentices as
required by Labor Code Sections 1775 et seq., and the implementing regulations of the DIR.
The Borrower shall and shall cause the contractor and subcontractors to keep and retain such
records as are necessary to determine if such prevailing wages have been paid as required
pursuant to Labor Code Sections 1720 et seq. The Borrower shall indemnify, hold harmless and
defend (with counsel reasonably selected by the City) the City against any claim for damages,
compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any
person or entity (including Borrower, its contractor and subcontractors) to pay prevailing wages
as determined pursuant to Labor Code Sections 1720 et seq., to hire apprentices in accordance
with Labor Code Sections 1777.5 et seq., and the implementing regulations of the DIR or comply
with the other applicable provisions of Labor Code Sections 1720 et seq., and the implementing
regulations of the DIR in connection with construction of the Improvements or any other work
undertaken or in connection with the Property.
Section 3.8 Marketing Plan.
(a) No later than six (6) months prior to the projected date of the completion
of the construction of the Development, the Borrower shall submit to the City for approval its
plan for marketing the Development to income-eligible households as required pursuant to the
Regulatory Agreement, including information on affirmative marketing efforts and compliance
with fair housing laws (the "Marketing Plan").
(b) Upon receipt of the Marketing Plan, the City shall promptly review the
Marketing Plan and shall approve or disapprove it within thirty (30) days after submission. If the
Marketing Plan is not approved, the Borrower shall submit a revised Marketing Plan within
thirty (30) days following the Borrower's receipt of the City's written disapproval. If the City
does not approve the revised Marketing Plan because the Borrower fails to make specific
revisions requested by the City, the Borrower shall be in default hereunder.
Section 3.9 Relocation.
If and to the extent that acquisition of the Property or construction of the Development
results in the permanent or temporary displacement of residential tenants, homeowners, or
businesses, then the Borrower shall comply with all applicable local, state, and federal statutes
and regulations, (including without limitation the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970, as amended, California Government Code Section
7260 et seq., and accompanying regulations, as amended) with respect to relocation planning,
advisory assistance, and payment of monetary benefits. The Borrower shall be solely
responsible for payment of any relocation benefits to any displaced persons and any other
obligations associated with complying with such relocation laws. The Borrower shall defend
(with counsel reasonably acceptable to the City), the City against any claim for damages,
compensation, fines, penalties, relocation payments or other amounts arising out of the failure or
alleged failure of any person or entity (including the Borrower or the City) to satisfy relocation
obligations related to the development of the Development. This obligation to indemnify shall
survive termination of this Agreement.
1010\18\235233.2 14
Section 3.10 Equal Omortunity.
During the construction of the Development there shall be no discrimination on the basis
of race, color, creed, religion, age, sex, sexual orientation, marital status, national origin,
ancestry, or disability in the hiring, firing, promoting, or demoting of any person engaged in the
construction work.
Section 3.1 1 Promess Reports.
Until such time as the Borrower has completed construction of the Property, as evidenced
by a certificate of occupancy issued by the City, the Borrower shall provide the City with
quarterly progress reports regarding the status of the construction of the Development, including
a certification that the actual construction costs to date conform to the Approved Development
Budget, as it may be amended from time to time pursuant to Section 3.15 below.
Section 3.12 Construction Responsibilities.
(a) It shall be the responsibility of the Borrower to coordinate and schedule
the work to be performed so that commencement and completion of construction will take place
in accordance with this Agreement.
(b) The Borrower shall be solely responsible for all aspects of the Borrower's
conduct in connection with the Development, including (but not limited to) the quality and
suitability of the plans and specifications, the supervision of construction work, and the
qualifications, financial condition, and performance of all architects, engineers, contractors,
subcontractors, suppliers, consultants, and property managers. Any review or inspection
undertaken by the City with reference to the Development is solely for the purpose of
determining whether the Borrower is properly discharging its obligations to the City, and should
not be relied upon by the Borrower or by any third parties as a warranty or representation by the
City as to the quality of the design or construction of the Development.
Section 3.13 Mechanics Liens, Stop Notices, and Notices of Completion.
(a) If any claim of lien is filed against the Property or the Improvements or a
stop notice affecting the 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 hlly discharge the lien or stop notice, effect the release of such
lien or stop notice by delivering to the City a surety bond fiom a surety acceptable to the City 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 this Section, 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
1010\18\235233.2 15
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 of 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
Property and/or Improvements. 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 and Property.
Section 3.14 Inspections.
The Borrower shall permit and facilitate, and shall require its contractors to permit and
facilitate, observation and inspection at the Development by the City and by public authorities
during reasonable business hours for the purposes of determining compliance with this
Agreement.
Section 3.15 Approved Development Budget: Revisions to Budget.
As of the date of this Agreement, the City has approved the Approved Development
Budget set forth in Exhibit B. The Borrower shall submit any required amendments to the
Approved Development Budget to the City for approval within fifteen (1 5) days of the date the
Borrower receives information indicating that actual costs of the Development vary or will vary
from the costs shown on the Approved Development Budget. Written consent of the City shall
be required to amend the Approved Development Budget. The City shall utilize best efforts to
approve or disapprove requested amendments to the Development Budget within five (5)
working days of receipt of a request for approval.
Section 3.16 Information.
The Borrower shall provide any information reasonably requested by the City in
connection with the Development.
Section 3.17 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. Such
records shall include all invoices, receipts, and other documents related to expenditures from the
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 twenty-one (21) 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 twenty-one (21) days is reasonably necessary to correct the deficiency, then the Borrower
1010\18\235233.2 16
shall begin to correct the deficiency within twenty-one (21) days and correct the deficiency as
soon as reasonably possible.
Section 3.18 Audits.
The Borrower shall make available for examination at reasonable intervals and during
normal business hours to City all books, accounts, reports, files, and other papers or property
with respect to all matters covered by this Agreement, and shall permit City to audit, examine,
and make excerpts or transcripts from such records. City may make audits of any conditions
relating to this Agreement.
Section 3.19 Hazardous Materials.
(a) The Borrower shall keep and maintain the Property in compliance with,
and shall not cause or permit the Property to be in violation of any federal, state or local laws,
ordinances or regulations relating to industrial hygiene or to the environmental conditions on,
under or about the Property 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
Property or transport to or from the Property 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 hereinafter as "Hazardous Materials") except such of the
foregoing as may be used in construction of the Development or customarily kept and used in
and about residential property of this type.
(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 Property
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 Property 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 hereinafter 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 Property that could cause the Property or any part thereof to be classified as
"border-zone property" under the provision of California Health and Safety Code, Sections
25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to
any restrictions on the ownership, occupancy, transferability or use of the Property under any
Hazardous Materials Law.
(c) The City shall have the right to join and participate in, as a party if it so
elects, any legal proceedings or actions initiated in connection with any Hazardous Materials
Claims and to have its reasonable attorneys' fees in connection therewith paid by the Borrower.
The Borrower shall indemnifj and hold harmless the City and its councilmembers, directors,
officers, employees, agents, successors and assigns from and against any loss, damage, cost,
1010\18\235233.2 17
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,
under, or about the Property including without limitation: (a) all foreseeable consequential
damages; (b) the costs of any required or necessary repair, cleanup or detoxification of the
Property and the preparation and implementation of any closure, remedial or other required
plans; and (c) all reasonable costs and expenses incurred by the City in connection with clauses
(a) and (b), including but not limited to reasonable attorneys' fees. This obligation to indemnify
shall survive termination of this Agreement, but shall not apply to the extent of the City's gross
negligence or willful misconduct.
(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 Property, 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 Property 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 is
intended as the City's written request for information (and the Borrower's response) concerning
the environmental condition of the Property 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 Property is intended by the Parties to be an
"environmental provision" for purposes of California Code of Civil Procedure Section 736.
(f) In the event that any portion of the Property is determined to be
"environmentally impaired" (as that term is defined in California Code of Civil Procedure
Section 726S(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of
Civil Procedure Section 726.5(e)( l)), then, without otherwise limiting or in any way affecting the
City's or the trustee's rights and remedies under the Deed of Trust, the City may elect to exercise
its rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such
environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and
remedies of an unsecured creditor, including reduction of its claim against the Borrower to
judgment, and (b) any other rights and remedies permitted by law. For purposes of determining
the City's right to proceed as an unsecured creditor under California Code of Civil Procedure
1010\18\235233.2 18
Section 726.5(a), the Borrower shall be deemed to have willfully permitted or acquiesced in a
release or threatened release of hazardous materials, within the meaning of California Code of
Civil Procedure Section 726.5(d)( l), if the release or threatened release of Hazardous Materials
was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any
portion of the Property and the Borrower knew or should have known of the activity by such
lessee, occupant, or user which caused or contributed to the release or threatened release. All
costs and expenses, including (but not limited to) attorneys' fees, incurred by the City in
connection with any action commenced under this paragraph, including any action required by
California Code of Civil Procedure Section 726.5(b) to determine the degree to which the
Property is environmentally impaired, plus interest thereon at the rate specified in the Note until
paid, shall be added to the indebtedness secured by the Deed of Trust and shall be due and
payable to the City upon its demand made at any time following the conclusion of such action.
Section 3.20 Fees and Taxes.
The Borrower shall be solely responsible for payment of all fees, assessments, taxes,
charges, and levies imposed by any public authority or utility company with respect to the
Property or the Development to the extent owned by the Borrower, and shall pay such charges
prior to delinquency. However, the Borrower shall not be required to pay and discharge any
such charge so long as (a) the legality thereof is being contested diligently and in good faith and
by appropriate proceedings, and (b) if requested by the City, the Borrower deposits with the City
any funds or other forms of assurance that the City in good faith from time to time determines
appropriate to protect the City fiom the consequences of the contest being unsuccessful. During
the Term, the Borrower shall not apply for a property tax exemption for the Property under any
provision of law, including but not limited to Revenue and Taxation Section 2 14, without the
City's prior written consent.
Section 3.2 1 Notice of Litigation.
The Borrower shall promptly notify the City in writing of any litigation affecting the
Borrower or the Property and of any claims or disputes that involve a material risk of litigation.
Section 3.22 Op eration of Development as Affordable Housing.
(a) Promptly following the completion of construction of the Improvements,
the Borrower shall continuously operate and maintain the Development as multifamily housing
rented to eligible occupants at rent levels in conformity with the Regulatory Agreement and this
Agreement.
(b) Before leasing any Unit in the Development, the Borrower shall submit its
proposed form of lease agreement for the City's review and approval.
(c) Before leasing the Development, the Borrower must provide the City, for
its review and approval, with the Borrower's written tenant selection plan.
(d) The Borrower must determine the income eligibility of each tenant
household occupying an Unit pursuant to the City's approved tenant certification procedures
1010\18\235233.2 19
within sixty (60) days before the household's expected occupancy of one of the Units. The
Borrower shall certify each tenant household's income on an annual basis.
(e) The maximum household income of a household occupying a Unit, and
the total charges for rent, utilities, and related services to each household occupying a Unit, shall
be maintained as provided in the Regulatory Agreement.
Section 3.23 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, familial 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.
Section 3.24 Mandatory Language in All Subsequent Deeds, Leases and Contracts.
All deeds, leases or contracts made or entered into by the Borrower, its successors or
assigns, as to any portion of the Development shall contain therein the following language:
(a) InDeeds:
"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, familial 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) InLeases:
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, familial 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
1010\18\235233.2 20 72
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."
(c) 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, familial status, national origin or ancestry in the
sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the
property nor shall the transferee or any person claiming under or through
the transferee 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 of the land."
Section 3.25 Insurance Requirements.
The Borrower shall maintain the following insurance coverage throughout the Loan
Term:
(a) Workers' Compensation insurance to the extent required by law, including
Employer's Liability coverage, with limits not less than One Million Dollars ($1,000,000) each
accident.
(b) Commercial General Liability insurance with limits not less than Two
Million Dollars ($2,000,000) each occurrence combined single limit for Bodily Injury and
Property Damage, including coverage for Contractual Liability, Personal Injury, Broadform
Property Damage, and Products and Completed Operations.
(c) Comprehensive Automobile Liability insurance with limits not less than
One Million Dollars ($1,000,000) each occurrence combined single limit for Bodily Injury and
Property Damage, including coverage for owned, non-owned and hired vehicles, as applicable;
provided, however, that if the Borrower does not own or lease vehicles for purposes of this
Agreement, then no automobile insurance shall be required.
(d) Property insurance, including during the course of construction builder's
risk insurance, covering the Development, in form appropriate for the nature of such property,
covering all risks of loss, excluding earthquake, for one hundred percent (1 00%) of the
replacement value, with deductible, if any, acceptable to the City, naming the City as a Loss
Payee, as its interests may appear. Flood insurance shall be obtained if required by applicable
federal regulations.
(e) The Borrower shall cause any general contractor or agent working on the
Development under direct contract with the Borrower to maintain insurance of the types and in at
1010\18\235233.2 21
least the minimum amounts described in subsections (a), (b), and (c) above, except that the limit
of liability for commercial general liability insurance for subcontractors shall be One Million
Dollars ($1 ,OOO,OOO), and shall require that such insurance shall meet all of the general
requirements of subsections (e), (f), and (g) below, including, without limitation, the requirement
of subsection (f). Subcontractors working on the Development under indirect contract with the
Borrower shall be required to maintain the insurance described in subsections (a), (b), and (c)
above. Liability and Comprehensive Automobile Liability insurance to be maintained by such
contractors and agents pursuant to this subsection shall name as additional insureds the City,
their officers, agents, employees and members of the City Council.
(f) The required insurance shall be provided under an occurrence form, and
the Borrower shall maintain such coverage continuously so long as the Note is outstanding.
Should any of the required insurance be provided under a form of coverage that includes an
annual aggregate limit or provides that claims investigation or legal defense costs be included in
such annual aggregate limit, such annual aggregate limit shall be three times the occurrence
limits specified above.
(g) Commercial General Liability and Property insurance policies shall be
endorsed to name as an additional insured the City, the Agency, and their officers, agents,
employees and members of the City Council and Agency Board.
(h) All policies and bonds shall contain (a) the agreement of the insurer to
give the City at least thirty (30) days' notice prior to cancellation (including, without limitation,
for non payment of premium) or any material change in said policies; (b) an agreement that such
policies are primary and non contributing with any insurance that may be carried by the City; (c)
a provision that no act or omission of the Borrower shall affect or limit the obligation of the
insurance carrier to pay the amount of any loss sustained; and (d) a waiver by the insurer of all
rights of subrogation against the City and its authorized parties in connection with any loss or
damage thereby insured against.
Section 3.26 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, shall not exceed One Million Two Hundred Thousand Dollars ($1,200,000).
ARTICLE 4
ASSIGNMENT AND TRANSFERS
Section 4.1 Definitions.
As used in this Article Four, the term "Transfer" means:
(a) Any total or partial sale, lease, assignment, or other conveyance, or any
trust or power, or any transfer in any other mode or form, of or with respect to this Agreement or
of any part of or interest in the Development, or any agreement to do any of the foregoing; or
1010\18\235233.2 22
(b) Any total or partial sale, assignment, or other conveyance, or any trust or
power, or any transfer in any other mode or form, of or with respect to any ownership interest in
the Borrower or any agreement to do any of the foregoing.
Section 4.2 Purpose of Restrictions on Transfer.
This Agreement is entered into solely for the purpose of the Borrower's construction and
operation of the Development in accordance with the terms of this Agreement and the
Regulatory Agreement. The qualifications and identity of the Borrower are of particular concern
to the City, in view of:
(a) of the community;
The importance of the development of the Property to the general welfare
(b) The public aids that have been made available by law and by the
government for the purpose of making such development possible;
(c) The reliance by the City upon the unique qualifications and ability of the
Borrower to serve as the catalyst for development of the Property and upon the continuing
interest which the Borrower will have in the Property to assure the quality of the use, operation,
and maintenance deemed critical by the City in the development of the Property;
(d) The fact that a change in ownership or control of the owner of the
Property, or of a substantial part thereof, or any other act or transaction involving or resulting in
a significant change in ownership or with respect to the identity of the parties in control of the
Borrower or the degree thereof, is for practical purposes a transfer or disposition of the Property;
and
(e) The importance to the City of the standards of use, operation, and
maintenance of the Property.
It is because of the qualifications and identity of the Borrower that the City is entering
into this Agreement and that Transfers are permitted only as provided in this Agreement.
Section 4.3 Prohibited Transfers.
The limitations on Transfers set forth in this Article Four shall apply throughout the
Term. Except as expressly permitted in this Agreement, the Borrower represents that it has not
made or created, and agrees that it will not make or create or suffer to be made or created, any
Transfer, either voluntarily or by operation of law, without the prior written approval of the City.
Any Transfer made in contravention of this Section 4.3 shall at the City's discretion be
void and shall be deemed to be a default under this Agreement, whether or not the Borrower
knew of or participated in such Transfer.
1010\18\235233.2 23
Section 4.4 Permitted Transfers Without Prior City Approval.
The only Transfer permitted at any time without the prior approval of the City is the
rental of a Unit by the Borrower in the ordinary course of business and in compliance with the
Regulatory Agreement.
Section 4.5 Permitted Transfers With Prior Approval; City Pre-Approved Transfers.
(a) Except as permitted under Section 4.4, any Transfer shall be permitted
only after (a) the City, in its sole discretion, has delivered to the Borrower its prior written
approval of such Transfer, and (b) the transferee has assumed the Borrower's obligations under
this Agreement by signing an assignment and assumption agreement, in a form prepared by the
City, and such other reasonable documentation as the City may reasonably require to evidence
such transferee's assumption of the Borrower's duties and obligations under the Loan Documents.
(b) The Borrower anticipates syndicating the Tax Credits that will be
generated by the Development, which syndication will require the transfer of the Property and
the Loan Documents to the Partnership and the admission of the Tax Credit Investor as a limited
partner in the Partnership. The City hereby approves the Transfer of the Property to the
Partnership and the assignment of the Loan Documents to the Partnership, provided that the
Partnership has assumed the Borrower's obligations under the Loan Documents pursuant to an
assignment and assumption agreement described in subsection (a) above. The City hereby
approves the admission of the Tax Credit Investor to the Partnership, provided that: (i) the
partnership agreement of the Partnership provides for capital contributions of the general and
limited partners of the Borrower consistent with Section 1.1 (d) above and is first approved by the
City in its reasonable discretion; and (ii) all documents associated with the Tax Credit
syndication of the Development are submitted to the City for approval prior to execution, which
approval shall not be unreasonably withheld;
(c) The City hereby approves Transfer of the limited partner interest in the
Partnership by the Tax Credit Investor provided that: (i) such transfers do not affect the timing
and amount of the limited partner capital contributions provided for in and subject to the terms of
the partnership agreement agreed to by the City; (ii) in subsequent transfers, a wholly owned
affiliate of the Tax Credit Investor retains a membership interest and serves as a managing
member of the successor limited partner; and (iii) in subsequent transfers the Tax Credit Investor
remains liable for all unpaid capital contributions.
Section 4.6 Release of the Borrower.
Upon all of the terms of this Article Four being satisfied for a permitted Transfer to be
effective, the Borrower or the successor transferor party, as applicable, shall be released from all
liability under this Agreement so transferred arising subsequent to the effectiveness of such
Transfer.
1010\18\235233.2 24
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 5.1 Representations and Warranties.
The Borrower hereby represents and warrants to the City as follows:
(a) Organization. The Borrower is a duly organized, validly existing
California corporation and is 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) Authoritv of the Borrower. The Borrower has fbll 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 the Borrower, and
all actions required under the 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 the Borrower
enforceable against it in accordance with their respective terms.
(e) No Breach of Law or Agreement. Neither the execution nor delivery of
this Agreement and the Loan Documents OK of any other documents or instruments executed and
delivered, or to be executed or delivered, pursuant to this Agreement, nor the performance of any
provision, condition, covenant or other term hereof or thereof, will conflict with or result in a
breach of any statute, rule or regulation, or any judgment, decree or order of any court, board,
commission or City whatsoever binding on the Borrower, or any provision of the organizational
documents of the Borrower, or will conflict with or constitute a breach of or a default under any
agreement to which the Borrower is a party, or will result in the creation or imposition of any
lien upon any assets or property of the Borrower, other than liens established pursuant hereto.
(0 Compliance With Laws; Consents and Approvals. The construction of the
Development will comply with all applicable laws, ordinances, rules and regulations of federal,
state and local governments and agencies and with all applicable directions, rules and regulations
1010\18\235233.2 25 77
of the fire marshal, health officer, building inspector and other officers of any such government
or agency.
(g) Pending Proceedings. The Borrower is not in default under any law or
regulation or under any order of any court, board, commission or agency whatsoever, and there
are no claims, actions, suits or proceedings pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or the Property, at law or in equity, before or by any
court, board, commission or agency whatsoever which might, if determined adversely to the
Borrower, materially affect the Borrowerk ability to repay the Loan or impair the security to be
given to the City pursuant hereto.
(h) Title to Land. At the time of recordation of the Deed of Trust and the
Regulatory Agreement, the Borrower will have good and marketable fee title to the Property and
there will exist thereon or with respect thereto no mortgage, lien, pledge or other encumbrance of
any character whatsoever other than liens for current real property taxes and assessments not yet
due and payable, and liens in favor of the City or approved in writing by the City.
(i) Financial Statements. The financial statements of the Borrower and other
financial data and information furnished by the 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 the Borrower from that shown by such financial
statements and other data and information.
0) Sufficient Funds. The Borrower holds sufficient funds andor binding
commitments for sufficient fimds to complete the acquisition of the Property and the
construction of the Development in accordance with the plans and specifications approved by the
City.
ARTICLE 6
DEFAULT AND REMEDIES
Section 6.1 Events of Default.
Each of the following shall constitute a "Default" by the Borrower under this Agreement:
(a) Failure to Obtain Approvals. Failure of the Borrower to obtain all
planning approvals and building permits necessary to construct the Development within the time
set forth in Article 3.
(b) Failure to Make Pavment. Failure to repay the principal and any interest
on the Loan that is due and payable to the City pursuant to the Loan Documents following
written notice by the City of such failure and ten (10) days opportunity to cure.
(c) Failure to Construct. Failure of the Borrower to commence and complete
construction of the Development within the time frames set forth in Article 3 above.
1010\18\235233.2 26
(d) Breach of Covenants. Failure by the 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 City or, if the breach cannot be cured within thirty (30) days, the Borrower
shall not be in breach so long as the Borrower is diligently undertaking to cure such breach and
such breach is cured within ninety (90) days from the date of the City's written notice; provided,
however, that if a different period or notice requirement is specified under any other section of
this Article 6, the specific provisions shall control.
(e) Default Under Other Loans. A default is declared under the Approved
Financing by the lender of such Approved Financing.
(f) Insolvencv. A court having jurisdiction shall have made or entered any
decree or order (i) adjudging the Borrower to be bankrupt or insolvent, (ii) approving as properly
filed a petition seeking reorganization of the Borrower or seeking any arrangement for the
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 the Borrower in bankruptcy or insolvency or for any of their properties, (iv) directing
the winding up or liquidation of the 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 (v) the 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.
(g) Assimment; Attachment. The 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, if sooner,
prior to 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.
(h) Suspension; Dissolution. The Borrower shall have voluntarily suspended
its business or the dissolution of the Borrower.
(i) Liens on Property and the DeveloDment. There shall be filed any claim of
lien (other than liens approved in writing by the City) against the Development, the Property, or
any part thereof, or any interest or right made appurtenant thereto, or the service of any notice to
withhold proceeds of the Loan and the continued maintenance of said claim of lien or notice to
withhold for a period of twenty (20) days without discharge or satisfaction thereof or provision
therefore (including, without limitation, the posting of bonds) satisfactory to the City.
1 0 1 0\18\23523 3.2 27
6) Condemnation. The condemnation, seizure, or appropriation of all or the
substantial part of the Property and the Development, except that condemnation by the City or
the City shall cause the Loan to accelerate but shall not be a Default.
(k) Unauthorized Transfer. Any Transfer other than as permitted by Article 4.
(1) Representation or Warranty Incorrect. Any representation or warranty of
the Borrower contained in this Agreement, or in any application, financial statement, certificate,
or report submitted to the City in connection with any of the Loan Documents, proves to have
been incorrect in any material and adverse respect when made.
(m) funds, sufficient to acquire the Property and develop the Development, as determined by the City
in the City's reasonable discretion.
Insufficient Funds. The Borrower fails to obtain funds, or commitment of
(n) Applicability to General Partner. In the event the Borrower is a
partnership, the occurrence of any of the events set forth in subsection (f), subsection (g), or
subsection (h) in relation to the general partner of Borrower.
Section 6.2 Remedies.
The City agrees that any cure of a Default by the Tax Credit Investor, or other limited
partners of the Borrower shall be deemed to be a cure by the Borrower, and shall be accepted or
rejected on the same basis as if made or tendered by the Borrower. The occurrence of any
Default hereunder 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 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. Subject to the provisions of Section 2.8, the City
shall have the right to cause all indebtedness of the Borrower to the City under this Agreement
and the 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 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 the 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.
1010\18\235233.2 28
(c) Right to Cure at the Borrower's Expense. The City shall have the right
(but not the obligation) to cure any monetary default by the Borrower under a loan other than the
Loan. The Borrower agrees to reimburse the City for any funds advanced by the City to cure a
monetary default by the Borrower upon demand therefore, together with interest thereon at the
lesser of the maximum rate permitted by law or ten percent (10%) per annum from the date of
expenditure until the date of reimbursement.
Section 6.3 Assignment of Plans, Data and Approvals. If this Agreement is
terminated pursuant to Section 6.2, then the Borrower shall promptly assign and deliver to the
City, copies of all plans, studies, reports, data and specifications for the Development, all permits
and approvals obtained in connection with the Development, and all applications for permits and
approvals not yet obtained but needed in connection with the Improvements (collectively, the
"Planning Documents"). The Planning Documents shall be delivered by the Borrower without
any warranties or representations of any type or kind, express or implied, including whether the
Planning Documents have been completed in final form. The City agrees and acknowledges that
all such Planning Documents will be delivered subject to the rights of any copyright holders.
Section 6.4 Remedies Cumulative.
Subject to the non-recourse provisions contained in the Note, 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 the 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.
ARTICLE 7
GENERAL PROVISIONS
Section 7.1 Relationship of Parties.
Nothing contained in this Agreement shall be interpreted or understood by any of the
parties, or by any third persons, as creating the relationship of employer and employee, principal
and agent, limited or general partnership, or joint venture between the City and the Borrower or
the Borrower's agents, employees or contractors, and the Borrower shall at all times be deemed
an independent contractor and shall be wholly responsible for the manner in which it or its
agents, or both, perform the services required of it by the terms of this Agreement for the
development of the Development. In regards to the development of the Development, the
Borrower shall be solely responsible for all matters relating to payment of its employees,
including compliance with Social Security, withholding and all other laws and regulations
governing such matters, and shall include requirements in each contract that contractors shall be
10 10\18\235233.2 29 gr
solely responsible for similar matters relating to their employees. The Borrower agrees to be
solely responsible for its own acts and those of its agents and employees.
Section 7.2 No Claims.
Nothing contained in this Agreement shall create or justify any claim against the City, by
any person the Borrower may have employed or with whom the Borrower may have contracted
relative to the purchase of materials, supplies or equipment, or the furnishing or the performance
of any work or services with respect to the development of the Development, and the Borrower
shall include similar requirements in any contracts entered into for the development of the
Development.
Section 7.3 Amendments.
No alteration or variation of the terms of this Agreement shall be valid unless made in
writing by the Parties.
Section 7.4 Entire Understanding of the Parties.
This Agreement constitutes the entire understanding and agreement of the Parties with
respect to the Loan.
Section 7.5 Indemnification.
Except as directly caused by the City's gross negligence or willhl misconduct, the
Borrower agrees to indemnify, protect, hold harmless and defend (by counsel reasonably
satisfactory to the City), the City and its council members, officers and employees, from all suits,
actions, claims, causes of action, costs, demands, judgments and liens arising out of: (i) the
Borrower's performance or non-performance of its obligations under this Agreement; (ii) the
Borrower's ownership of the Property; (iii) the development, marketing, rental and operation of
the Development, or (iv), or any documents executed by the Borrower in connection with the
Development. The provisions of this Section 7.5 shall survive termination of this Agreement.
Section 7.6 Non-Liabilitv of Anencv and Citv Officials, Employees and Agents.
No member, official, employee or agent of the Agency or the City shall be personally
liable to the Borrower, or any successor in interest, in the event of any Default or breach by the
City, or for any amount which may become due to the Borrower or its successor or on any
obligation under the terms of this Agreement.
Section 7.7 No Third Party Beneficiaries.
Except for the Agency there shall be no third party beneficiaries to this Agreement.
1010\18\235233.2 30
Section 7.8 Action bv the City.
Except as may be otherwise specifically provided herein, whenever any approval, notice,
direction, consent, request, extension of time, waiver of condition, termination, 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 without further approval by the City Council, and any such action shall be
in writing. The amount of the Loan may not be increased without approval of the City Council.
Any consents or approvals required under this Agreement shall not be unreasonably
withheld or made, except where it is specifically provided that a sole discretion standard applies.
The City Manager is also hereby authorized to approve, on behalf of the City, requests by the
Borrower for reasonable extensions of time deadlines set forth in this Agreement. The City shall
not unreasonably delay in reviewing and approving or disapproving any proposal by the
Borrower made in connection with this Agreement.
Section 7.9 Waivers.
Any waiver by the City of any obligation or condition in this Agreement must be in
writing. No waiver will be implied from any delay or failure by the City to take action on any
breach or default of the Borrower or to pursue any remedy allowed under this Agreement or
applicable law. Any extension of time granted to the Borrower to perform any obligation under
this Agreement shall not operate as a waiver or release from any of its obligations under this
Agreement. Consent by the City to any act or omission by the Borrower shall not be construed
to be a consent to any other or subsequent act or omission or to waive the requirement for the
City's written consent to future waivers.
Section 7.10 Notices, Demands and Communications.
Formal notices, demands, and communications between the City and the Borrower shall
be sufficiently given if and shall not be deemed given unless dispatched by registered or certified
mail, postage prepaid, return receipt requested, or delivered by reputable overnight delivery
service, return receipt requested, or delivered personally, to the principal office of the City and
the Borrower as follows:
City:
City of Carlsbad
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008
Attn: City Manager
Borrower:
Chelsea Investment Corporation
1010\18\235233.2 31 03
Attn:
Such written notices, demands and communications may be sent in the same manner to such
other addresses as the affected party may from time to time designate by mail as provided in this
Section. Receipt shall be deemed to have occurred on the date shown on a written receipt for
delivery or refusal of delivery.
Section 7.1 1 Applicable Law and Venue.
This Agreement will be governed by California law. Any action brought claiming a
breach of this Agreement or interpreting this Agreement shall be brought and venued in Alameda
County, California.
Section 7.12 Parties Bound.
Except as otherwise limited herein, the provisions of this Agreement shall be binding
upon and inure to the benefit of the parties and their heirs, executors, administrators, legal
representatives, successors and assigns. This Agreement is intended to run with the land and
shall bind the Borrower and its successors and assigns in the Property and the Development for
the entire Term, and the benefit hereof shall inure to the benefit of the City and its successors and
assigns.
Section 7.13 Severability.
If any term of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the provisions shall continue in full force and effect
unless the rights and obligations of the parties have been materially altered or abridged by such
invalidation, voiding or unenforceability.
Section 7.14 Force Maieure.
In addition to specific provisions of this Agreement, performance by either Party shall not
be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lock-
outs; riots; floods; earthquakes; fires; quarantine restrictions; freight embargoes; lack of
transportation; or court order; or any other similar causes (other than lack of funds of the
Borrower or the Borrower's inability to finance the construction of the Development) beyond the
control or without the fault of the Party claiming an extension of time to perform. An extension
of time for any cause will be deemed granted if notice by the Party claiming such extension is
sent to the other within ten (10) days from the commencement of the cause and the Party
granting the extension agrees to the extension in writing. In no event shall the City be required
to agree to cumulative delays in excess of one hundred eighty (1 80) days.
Section 7.15 Title of Parts and Sections.
Any titles of the sections or subsections of this Agreement are inserted for convenience of
reference only and shall be disregarded in interpreting any part of the Agreement's provisions.
1010\18\235233.2 32
Section 7.16 Multiple Originals; Counterpart.
This Agreement may be executed in multiple originals, each of which is deemed to be an
original, and may be signed in counterparts.
WHEREFORE, this Agreement has been entered into by the undersigned as of the date
first above written.
BORROWER:
CHELSEA INVESTMENT CORPORATION,
a California corporation
By:
Its:
By:
Its:
CITY:
CITY OF CARLSBAD, a municipal corporation
By:
Its:
APPROVED AS TO FORM:
Ronald Ball
City Attorney
1 0 lOU8U35233.2 33
1010\18\235233.2
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
A- 1
1010\18\235233.2
EXHIBIT B
APPROVED DEVELOPMENT BUDGET
B- 1
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City Clerk's Office
City of Carlsbad
Attn: City Clerk
1200 Carlsbad Village Drive
Carlsbad, CA 92008
No fee for recording pursuant to
Government Code Section 27383
REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS
(Hunters' Pointe)
This Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement")
is made and entered into as of
the Carlsbad Redevelopment Agency, a public body, corporate and politic (the "Agency"), the
City of Carlsbad, a municipal corporation (the "City"), and Chelsea Investment Corporation, a
California corporation (the "Developer").
,2005 (the "Agreement Date"), by and among
RECITALS
1. The City and the Developer have entered into a Loan Agreement (the "Loan
Agreement") under which the City agreed to loan up to One Million Nine Hundred Thirty-Two
Thousand Dollars ($1,932,000) (the "City Loan") to the Developer to finance the development of
a one hundred sixty eight (1 68)-unit affordable apartment complex (the "Development") on
certain real property in the City of Carlsbad owned by the Developer and more particularly
described in Exhibit A attached to and incorporated herein (the "Property"). Capitalized terms
used but not defined in this Agreement shall have the meanings set forth in the Loan Agreement.
2. The City Loan consists of Housing Trust Fund monies.
3. Through this Agreement the Agency is imposing occupancy and affordability
restrictions on the Development in order to meet replacement housing requirements applicable to
the Redevelopment Area pursuant to Health and Safety Code Section 33413(a).
4. The Agency also intends to utilize the Development to obtain affordable housing
production credits for the Agency pursuant to Health and Safety Code Section 33413@)(2)(A) as
newly constructed units located outside of the Redevelopment Area and available at affordable
housing cost to very low income households, lower-income households, and moderate income
1 1010\18\235364.2
households. Such units are required to remain affordable to such households for fifty-five (55)
years. This Agreement is also intended to implement this requirement.
5. The City has agreed to provide the City Loan to the Developer on the condition
that the Development be maintained and operated in accordance with Health and Safety Sections
33334.2 et seq., 33413(a) and 33413(b)(2)(A), and in accordance with additional restrictions
concerning affordability, operation, and maintenance of the Development, as specified in this
Agreement and the Loan Agreement.
6. In consideration of receipt of the City Loan, the Developer has further agreed to
observe all the terms and conditions set forth below.
7. In order to ensure that the entire Development will be used and operated in
accordance with these conditions and restrictions, the Agency, the City, and the Developer wish
to enter into this Agreement.
THEREFORE, the Agency, the City, and the Developer hereby agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1 Definitions.
When used in this Agreement, the following terms shall have the respective meanings
assigned to them in this Article 1.
(a) "Actual Household Size" shall mean the actual number of persons in the
applicable household.
(b) "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 Agency
shall provide the Owner with a reasonably similar method of calculation of adjusted income as
provided in said Section 6914.
(c) "Agency" shall mean the Carlsbad Redevelopment Agency, a public body,
corporate and politic.
(d) "Agreement" shall mean this Regulatory Agreement and Declaration of
Restrictive Covenants.
(e) "Agreement Date" shall mean the date of this Agreement as set forth
above.
1010\18\235364.2 2
(0 "Assumed Household Size" shall have the meaning set forth in Section
2.2(d). The definition is utilized to calculate affordable rent and is not intended to be a limit on
the number of persons occupying a unit.
(g) "City" shall mean the City of Carlsbad, a municipal corporation.
(h) pursuant to the Loan Agreement.
"City Loan" shall mean the fimds loaned to the Developer by the City
(i) "Deed of Trust" shall mean the deed of trust of even date herewith in favor
of the City on the Developer's fee interest in the Property which secures repayment of the City
Loan and the performance of the Loan Agreement.
(i) "Developer" shall mean Chelsea Investment Corporation, a California
corporation, and its permitted successors and assigns.
(k) "Development" shall mean the Property and the one hundred sixty-eight
(168) residential units to be constructed on the Property, as well as any additional improvements,
and all landscaping, roads and parking spaces existing thereon, as the same may from time to
time exist.
(1) "Housing Trust Fund" shall mean the City's Housing Trust Fund.
(m) "Loan Agreement" shall mean that certain Loan Agreement dated
concurrently herewith by and between the Agency and the Developer.
(n) "Lower Income Household" shall mean a household with an Adjusted
Income that does not exceed the qualifying limits for lower 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 the State of California Department of Housing and Community
Development.
(0) "Lower Income Units" shall mean any of the Units which, pursuant to
Section 2.1 below, are required to be occupied by Lower Income Households.
(p) "Median Income" shall mean the median gross yearly income, adjusted for
Actual Household Size or Assumed Household Size as specified herein, in the County of San
Diego, California, as published from time to time by the United States Department of Housing
and Urban Development ("HUD") and the State of California. 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 Agency or the City shall provide the Developer with other income determinations
which are reasonably similar with respect to methods of calculation to those previously
published by HUD and the State.
1010\18\235364.2 3
(9) "Other Income Household" shall mean a household with an Adjusted
Income which does not exceed ninety percent (90%) of Median Income, adjusted for Actual
Household Size.
(r) "Other Income Units" shall mean the Units which, pursuant to Section 2.1
below, are required to be occupied by Other Households.
(s) hereto and incorporated herein.
"Property" shall mean the real property described in Exhibit A attached
(t) "Redevelopment Area" shall mean, collectively, the Carlsbad Village
Redevelopment Project Area and the South Carlsbad Coastal Redevelopment Area, as may be
amended from time to time.
(u) "Rent" shall mean the total of monthly payments by the Tenant 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 the Developer 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 fiel, but not telephone service or
cable TV; and 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 the Developer, and paid by the Tenant.
(v) "Tenant" shall mean a household legally occupying a Unit pursuant to a
valid lease with the Developer.
(w) "Term" shall mean the term of this Agreement, which shall commence on
the Agreement Date and shall continue for fifty-five (55) years.
(x) "Unit(s)" shall mean one (1) or all of the one hundred sixty-eight (168)
rental units to be constructed on the Property.
(y) "Very Low Income Household" shall mean a household with an Adjusted
Income that does not exceed the qualifying limits for very low income households, as established
and amended fkom time to time pursuant to Section 8 of the United States Housing Act of 1937,
and as published by the State of California Department of Housing and Community
Development.
(z) "Very Low Income Rent" shall mean the maximum allowable rent for a
Very Low Income Unit pursuant to Section 2.2(a) below.
(aa) "Very Low Income Units" shall mean any of the Units which, pursuant to
Section 2.1 below, are required to be occupied by Very Low Income Households.
1010\18\235364.2 4
ARTICLE 2.
AFFORDABILITY AND OCCUPANCY COVENANTS
Very Low Lower Other Income
Section 2.1 Occupancy Requirements.
The Developer shall regulate the use and occupancy of the Units in the following manner:
Total
One Bedroom
Two Bedroom
16 10 10 36
16 11 33 60
Three Bedroom .
Total
Section 2.2 Allowable Rent.
19 10 43 72
51 31 86 168
(a) Very Low Income Rent. Subject to the provisions of Section 2.3 below,
the Rent charged to Tenants of the Very Low Income Units shall not exceed one-twelfth (1/12th)
of thirty percent (30%) of fifty percent (50%) of Median Income, adjusted for Assumed
Household Size.
(b) Lower Income Rent. Subject to the provisions of Section 2.3 below, the
Rent charged to Tenants of the Lower Income Units shall not exceed one-twelfth (1/12th) of
hrty percent (30%) of sixty percent (60%) of Median Income, adjusted for Assumed Household
Size.
(c) Other Income Rent. Subject to the provisions of Section 2.3 below, the
Rent charged to Tenants of the Other Income Units shall not exceed one-twelfth (1/12th) of thirty
percent (30%) of ninety percent (90%) of Median Income, adjusted for Assumed Household
Size.
(d) Assumed Household Size. In calculating the allowable Rent for the Units,
the following Assumed Household Sizes shall be utilized (except that if any federal statutes or
regulations require use of alternate household size assumptions in calculating rents, such
federally-mandated household size assumptions shall be used instead of the assumptions
provided below):
Number of Bedrooms
One 2
Two 3
Three 4
Assumed Household Size
(e) Approval of Rents for Units. Initial rents for all Units shall be approved
by the Agency and the City prior to occupancy. All rent increases for all Units shall also be
submitted to the Agency and the City for approval not less than thirty (30) days before notice is
5 1010\18\235364.2
given to the affected Tenant and shall be imposed only if in compliance with this Agreement.
The Agency and the City shall provide the Developer with a schedule of maximum permissible
rents for the Units annually.
Section 2.3 Increased Income of Tenants.
(a) Increased Income Over Very Low Income. In the event, upon
recertification of a Tenant's household's income, the Developer determines that a former Very
Low Income Household has an Adjusted Income that exceeds the qualifying income for a Very
Low Income Household, but has an Adjusted Income not exceeding the qualifying limit for a
Lower Income Household, upon expiration of the Tenant's lease, and sixty (60) days' written
notice to the Tenant, the Rent may be increased to one-twelfth (l/lZth) of thirty percent (30%) of
sixty percent (60%) of Median Income, and the Owner shall rent the next available Unit to Very
Low Income Household to comply with the requirements of Section 2.1 above.
(b) Increased Income Over Lower Income. In the event that, following
recertification of a Tenant's income, the Developer determines that a former Very Low Income
Household, or Lower Income Household has an Adjusted Income that exceeds the qualifying
limit for a Lower Income Household but does not exceed ninety percent (90%) of Median
Income, adjusted for Actual Household Size, then, upon expiration of the Tenant's lease and
sixty (60) days' written notice to the Tenant, such household's Unit shall be considered an Other
Unit, and the Rent may be increased to one-twelfth ( 1/12th) of thirty percent (30%) of ninety
percent (90%) of Median Income, and the Developer shall rent the next available Unit to or Very
Low Income Household or Lower Income Household to comply with the requirements of
Section 2.1 above.
(c) Increased Income Over 90% of Median Income. If, upon recertification of
a Tenant's income, the Developer determines that a Tenant has an Adjusted Income exceeding
ninety percent (90%) of Median Income, adjusted for Actual Household Size, such Tenant shall
be permitted to continue to occupy the Unit, and, upon expiration of the Tenant's lease, and sixty
(60) days' written notice to the Tenant, the Rent may be increased to one-twelfth (1/12th) of thirty
percent (30%) of actual Adjusted Income, and the Unit shall continue to be classified as an Other
Unit until the Tenant vacates the Unit at which time the Unit shall be re-rented to an income-
eligible household to meet the requirements of Section 2.1.
(d) Termination of Occupancy. Upon termination of occupancy of a Unit by a
Tenant, such Unit shall be deemed to be continuously occupied by a household of the same
income level (e.g., Very Low Income Household, Lower Income Household, or Other Income
Household) as the income level of the vacating Tenant, until such Unit is reoccupied, at which
time the income character of the Unit (e.g., Very Low Income Household, Lower Income
Household, or Other Income Household) shall be redetermined.
Section 2.4 Tax Credit Rules. To the extent the provisions of this Agreement,
regarding Adjusted Income, assumed household size or increased income of Tenants, conflicts
with requirements applicable to any Units regulated by a low income housing tax credit
regulatory agreement, such that the Developer cannot comply with both the tax credit
6 1010\18\235364.2
requirements and the requirements of this Agreement, the Developer shall so notify the Agency
and may comply with the tax credit requirements regarding Adjusted Income, assumed
household size or increased income in lieu of the requirements of this Agreement provided that
the Developer shall, at all times during the Term, comply with the requirements of Section 2.1
and Section 2.2.
ARTICLE 3.
INCOME CERTIFICATION AND REPORTING
Section 3.1 Income Certification.
The Developer shall obtain, complete and maintain on file, immediately prior to initial
occupancy and annually thereafter, income certifications from each Tenant renting any of the
Units (excluding the manager's Unit). The Developer 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 and/or 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 Agency and the City upon request.
Section 3.2 Annual Report to the Agency and Citv.
The Developer shall submit to the Agency and the City (a) not later than the sixtieth
(60th) day after the close of each calendar year, or such other date as may reasonably be
requested by the Agency and City, a statistical report, including income and rent data for all
Units covered by this Agreement, setting forth the information called for therein, and (b) within
fifteen (1 5) days after receipt of a written request, any other information or completed forms
requested by the Agency or the City in order to comply with reporting requirements of the State
of California, the City, and/or the Agency.
Section 3.3 Additional Information.
The Developer shall provide any additional information reasonably requested by the
Agency or the City. The Agency and the City shall have the right to examine and make copies of
all books, records or other documents of the Developer which pertain to the Development.
Section 3.4 Records.
The Developer shall maintain complete, accurate and current records pertaining to the
Development, and shall permit any duly authorized representative of the Agency and the City to
inspect records, including records pertaining to income and household size of Tenants. All
7 1010\18\235364.2
Tenant lists, applications and waiting lists relating to the Development shall at all times be kept
separate and identifiable from any other business of the Developer and shall be maintained as
required by the Agency, in a reasonable condition for proper audit and subject to examination
during business hours by representatives of the Agency and the City. The Developer shall retain
copies of all materials obtained or produced with respect to occupancy of the Units for a period
of at least five (5) years.
Section 3.5 On-site Inspection.
The Agency and the City shall have the right to perform an on-site inspection of the
Development at least one (1) time per year. The Developer agrees to cooperate in such
inspection. If the Agency or the City desires to inspect the interior of the Units, the Agency or
the City shall give Developer sufficient notice to allow the Developer to give seventy-two (72)
hours notice to residents. Such right to annually inspect the Development shall be addition to the
City's right to inspect the Development in accordance with the City's municipal code as may be
amended from time to time.
ARTICLE 4.
OPERATION OF THE DEVELOPMENT
Section 4.1 Residential Use.
The Development shall be operated only for residential use. No part of the Development
shall be operated as transient housing.
Section 4.2 Compliance with Loan Ameement.
The Developer shall comply with all the terms and provisions of the Loan Agreement.
Section 4.3 Taxes and Assessments.
The Developer 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
Developer shall have the right to contest in good faith, any such taxes, assessments, or charges.
In the event Developer exercises its right to contest any tax, assessment, or charge against it,
Developer, 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. The Developer shall not apply for a property tax exemption for the Property under any
provision of law, including but not limited to Revenue and Taxation Section 214, without the
Agency's and the City's prior written consent.
8 1010\18\235364.2
95
Section 4.4 Preference to' Displacees.
The Developer shall give a preference in the rental of any Units to eligible households
displaced by activity of the Agency or the City upon receiving a written request of the Agency or
the City regarding such displacement.
ARTICLE 5.
PROPERTY MANAGEMENT AND MAINTENANCE
Section 5.1 Management Responsibilities.
The Developer 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. Neither the City nor the Agency shall have responsibility over management of the
Development. The Developer shall retain a professional property management company
approved by the Agency and the City in their reasonable discretion to perform its management
duties hereunder as set forth below. A resident manager shall also be required.
Section 5.2 Management Agent.
The Development shall at all times be managed by an experienced management agent
reasonably acceptable to the Agency and 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 Developer shall submit for the Agency's
(and the City's) approval the identity of any proposed Management Agent. The Developer shall
also submit such additional information about the background, experience and financial
condition of any proposed Management Agent as is reasonably necessary for the Agency and 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 Agency and the City shall approve the
proposed Management Agent by notifying the Developer in writing. If the proposed
Management Agent is disapproved by the Agency and the City, the disapproval shall state with
reasonable specificity the basis for disapproval. Thereafter, the Developer shall submit a
different proposed Management Agent, and submit such additional information about the
background, experience and financial condition of the proposed Management Agent as is
reasonably necessary for the Agency and the City to determine whether the proposed
Management Agent meets the standard for a qualified Management Agent set forth above. Only
upon the written approval of the Agency and the City of the Developer's proposed Management
Agent shall constitute the Developer's compliance with this Section.
1010\18\235364.2 9
Section 5.3 Periodic Performance Review.
The Agency and the City reserve the right to conduct an annual (or more frequently, if
deemed necessary by the Agency and the City) review of the management practices and financial
status of the Development, including the performance of the Management Agent. The purpose
of each periodic review will be to enable the Agency and the City to determine if the
Development is being operated and managed in accordance with the requirements and standards
of this Agreement. The Developer shall cooperate with the Agency and the City in such reviews.
Section 5.4 Replacement of Management Agent.
If, as a result of a periodic review, the Agency and the City determine in their reasonable
judgment that the Development is not being operated and managed in accordance with any of the
material requirements and standards of this Agreement, the Agency and the City shall deliver
notice to Developer of their intention to cause replacement of the Management Agent, including
the reasons therefor. Within fifteen (15) days after receipt by Developer of such written notice,
Agency and City staff and the Developer shall meet in good faith to consider methods for
improving the financial and operating status of the Development, including, without limitation,
replacement of the Management Agent.
If, after such meeting, Agency and City staff recommend in writing the replacement of
the Management Agent, Developer 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 Agency and the City
pursuant to Section 5.2 above.
Any contract for the operation or management of the Development entered into by
Developer 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 Agency and the City may enforce this provision through legal
proceedings as specified in Section 6.8.
Section 5.5 Approval of Management Policies.
The Developer shall submit its written management policies with respect to the
Development to the Agency and the City for their review, and shall amend such policies in any
way necessary to ensure that such policies comply with the provisions of this Agreement.
Section 5.6 ProDertv Maintenance.
The Developer 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.
1010\18\235364.2 10
47
The City and the Agency place prime importance on quality maintenance to protect their
investment and to ensure that all Agency and 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 and the Agency assuming the Developer agrees
to provide all necessary improvements to assure the Development is maintained in good
condition. The Developer shall make all repairs and replacements necessary to keep the
improvements in good condition and repair.
In the event that the Developer breaches any of the covenants contained in this section
and such default continues for a period of ten (10) days after written notice from the City or the
Agency 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 or the Agency, in
addition to whatever other remedy each 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 and the Agency shall be permitted (but are
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 the
Agency and/or costs of such cure, including an administrative charge equal to fifteen percent
(1 5%) of such expenditures, which amount shall be promptly paid by the Developer to the City
and the Agency upon demand.
ARTICLE 6.
MISCELLANEOUS
Section 6.1 Lease Provisions.
The Developer shall use a form of Tenant lease approved by the Agency and the City.
The form of Tenant lease shall also comply with all requirements of this Agreement, and the
Loan Agreement, and shall, among other matters:
(a) provide for termination of the lease and consent by the Tenant to
immediate eviction for failure: (1) to provide any information required under this Agreement or
reasonably requested by the Developer to establish or recertify the Tenant's qualification, or the
qualification of the Tenant's household, for occupancy in the Development in accordance with
the standards set forth in this Agreement, or (2) to qualify as a Very Low Income Household or
Lower Income Household as a result of any material misrepresentation made by such Tenant
with respect to the income computation or certification; and
(b) be for an initial term of not less than one (1) year, and provide for no Rent
increase during such year. After the initial year of tenancy, the lease may be month to month by
mutual agreement of the Developer and the Tenant, however the Rent may not be raised more
often than once every twelve (12) months. The Developer will provide each Tenant with at least
1010\18\235364.2 11
sixty (60) days' written notice of any increase in Rent applicable to such Tenant, and with such
further notice as may be required by Section 2.3 above.
Section 6.2 Nondiscrimination.
All of the Units shall be available for occupancy on a continuous basis to members of the
general public who are income eligible. The Developer shall not give preference to any
particular class or group of persons in renting the Units, except to the extent that the Units are
required to be leased to Very Low Income Households and Lower Income Households. 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, source of
income (e.g., SSI), age, ancestry, or disability, in the leasing, subleasing, transferring, use,
occupancy, tenure, or enjoyment of any Unit nor shall the Developer or any person claiming
under or through the Developer, 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 construction, operation and management of any Unit.
All deeds,'leases or contracts made or entered into by Developer as to the Units or the
Development or portion thereof, shall contain covenants concerning discrimination as prescribed
by the Loan Agreement.
Section 6.3 Section 8 Certificate Holders.
The Developer 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 of 1937, as amended, or its
successor. The Developer shall not apply selection criteria to Section 8 certificate or voucher
holders that are more burdensome than criteria applied to all other prospective Tenants, nor shall
the Developer 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.
Section 6.4 Term.
The provisions of this Agreement shall apply to the Property for the entire Term. This
Agreement shall bind any successor, heir or assign of the Developer, whether a change in interest
occurs voluntarily or involuntarily, by operation of law or otherwise, except as expressly
released by the Agency and the City. The City makes the City Loan on the condition, and in
consideration of, this provision, and would not do so otherwise.
Section 6.5 Compliance with Loan Agreement and Promam Reauirements.
The Developer's actions with respect to the Property shall at all times be in full
conformity with: (i) all requirements of the Loan Agreement; (ii) all requirements imposed on
projects assisted with the Agency monies under California Health and Safety Code Section
1010\18\235364.2 12
33334.2 et seq., as may be amended fiom time to time; and (iii) all requirements of the Housing
Trust Fund as may be amended from time to time.
Section 6.6 Notice of Expiration of Term.
At least six (6) months prior to the expiration of the Term the Developer shall provide by
first-class mail, postage prepaid, a notice to all Tenants in the Units containing (a) the anticipated
date of the expiration of the Term, (b) any anticipated Rent increase upon the expiration of the
Term, (c) a statement that a copy of such notice will be sent to the Agency and the City, and (d) a
statement that a public hearing may be held by the Agency and the City on the issue and that the
Tenant will receive notice of the hearing at least fifteen (1 5) days in advance of any such
hearing. The Developer shall also file a copy of the above-described notice with the Agency and
the City.
Section 6.7 Covenants to Run With the Land.
The City, the Agency, and the Developer 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 Agency expressly releases such conveyed portion of the
Property from the requirements of this Agreement.
Section 6.8 Default bv the Developer; Enforcement by the Agency or City.
If the Developer fails to perform any obligation under this Agreement (including but not
limited to the failure to rent the Units as set forth in Article 2), and fails to cure the default within
thirty (30) days after the Agency or the City have notified the Developer in writing of the default
or, if the default cannot be cured within thirty (30) days, fails to commence to cure within thirty
(30) days and thereafter diligently pursue such cure and complete such cure within ninety (90)
days, or such longer period as approved by the Agency or the City in writing, the Agency or 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 City Loan. The City may declare a default under the Loan
Agreement, and declare the City Loan due and payable and proceed with foreclosure under the
Deed of Trust.
(b) action at law or in equity to compel the Developer's performance of its obligations under this
Agreement, andor for damages.
Action to Compel Performance or for Damages. The City may bring an
13 1010\18\235364.2
(c) Remedies Provided Under Loan Agreement. The City may exercise any
other remedy provided under the Loan Agreement.
(d) Agencv or City Sublease of Units. If and to the extent necessary to correct
any Developer default, the Developer hereby grants to the Agency and the City the option to
lease, from time to time, Units in the Development for a rental of One Dollar ($1 .OO) per Unit
per year for the purpose of subleasing such units to comply with Article 2 of this Agreement.
Upon the request of the City or the Agency following such default by the Developer, the
Developer hereby agrees to execute such documents as reasonably requested by the City or the
Agency, as applicable, including but not limited to, rental agreement(s) in a form prepared by the
City, to implement the sublease of the Unit(s). Any rents received by the Agency or the City, as
applicable, under any such sublease shall be paid to the Developer after the Agency, or the City,
as applicable, has been reimbursed for any expenses incurred in connection with such sublease.
Section 6.9 Recording and Filing.
The Agency, the City, and the Developer shall cause this Agreement, and all amendments
and supplements to it, to be recorded in the Official Records of the County of San Diego.
Section 6.10 Governing Law.
This Agreement shall be governed by the laws of the State of California.
Section 6.11 Waiver of Requirements.
Any of the requirements of this Agreement may be expressly waived by the Agency or
the City in writing, but no waiver by the Agency or the City of any requirement of this
Agreement shall, or shall be deemed to, extend to or affect any other provision of this
Agreement.
Section 6.12 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.
Section 6.13 Notices.
Any notice requirement set forth herein shall be deemed to be satisfied one (1) day after
mailing of the notice by reputable overnight delivery service or three (3) days after mailing of the
notice by first-class United States certified mail, postage prepaid, addressed to the appropriate
party as follows:
1010\18\235364.2 14
Developer:
Agency:
City:
Chelsea Investment Corporation
Attn:
Carlsbad Redevelopment Agency
2965 Roosevelt St., Suite B
Carlsbad, CA 92008
Attn: Executive Director
City of Carlsbad
2965 Roosevelt St., Suite B
Carlsbad, CA 92008
Attn: City Manager
Such addresses may be changed by notice to the other party given in the same manner as
provided above.
Section 6.14 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.
Section 6.15 Multiple Originals; Counterparts.
This Agreement may be executed in multiple originals, each of which is deemed to be an
original, and may be signed in counterparts.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
1010\18\235364.2 15
IN WITNESS WHEREOF, the Agency, the City and the Developer have executed this
Agreement by duly authorized representatives, as of the last date written below.
Developer:
CHELSEA INVESTMENT CORPORATION, a
California corporation
By:
Name:
Its:
By:
Name:
Its:
Agency:
CARLSBAD REDEVELOPMENT AGENCY, a public
body corporate and politic
By:
Its:
City:
CITY OF CARLSBAD, a municipal corporation
By:
Its:
APPROVED AS TO FORM:
By Ronald Ball, City Attorney
By:
1010\18\235364.2 16
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
) ss.
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 his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed the instrument.
, before me, the undersigned, a Notary Public, personally appeared
, personally known to me (or proved to me on
WITNESS my hand and official seal.
STATE OF CALIFORNIA
) ss.
COUNTY OF SAN DIEGO 1
On
the basis of satisfactory evidence) to be the person(s) whose name(s) ishe subscribed to the
within instrument, and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed the instrument.
, before me, the undersigned, a Notary Public, personally appeared , personally known to me (or proved to me on
WITNESS my hand and official seal.
1010\18\235364.2
EXHIBIT A
(Legal Description)
The land is situated in the State of California, County of San Diego, City of Carlsbad, and
is described as follows:
A- 1
1010\18\235364.2
PROMISSORY NOTE
(Hunters' Pointe)
$1,932,000 Carlsbad, California
, 2005
FOR VALUE RECEIVED, Chelsea Investment Corporation, a California corporation
("Borrower"), promises to pay to the City of Carlsbad, a municipal corporation (the "City"), or
order, the principal sum of up to One Million Nine Hundred Thirty Two Thousand Dollars
($1,932,000), or so much as is disbursed to Borrower, plus interest thereon pursuant to Section 2
below.
1. Borrower's Obligation. This promissory note (the "Note") evidences the
Borrower's obligation to pay the City the principal amount of up to One Million Nine Hundred
Thirty Two Thousand Dollars ($1,932,000) for the hds loaned to the Borrower by City to
finance the development of the Property pursuant to the Loan Agreement between the Borrower
and the City, dated
otherwise defined in this Note shall have the meanings set forth in the Agreement.
, 2005 (the "Agreement"). All capitalized terms not
2. Interest. The outstanding principal balance of this Note shall bear simple
interest at the rate of three percent (3%) per annum fkom the date of disbursement until paid;
provided, however, if a Default occurs, interest on the principal balance shall begin to accrue, as
of the date of Default (following expiration of applicable notice and cure periods), and
continuing until such time as the Loan funds are repaid in full or the Default is cured, at the
default rate of the lesser of ten percent (lo%), compounded annually, or the highest rate
permitted by law.
3. Term and Repayment Reauirements. The term of this Note shall
commence with the date of this Note and shall expire fifty-five (55) years thereafter. This Note
shall be due and payable as set forth in Section 2.6 of the Agreement. Repayment of this Note
shall be nonrecourse to the Borrower pursuant to Section 2.8 of the Agreement, and subject to
the exceptions set forth therein.
4. No Assumption. This Note shall not be assumable by the successors and
assigns of Borrower without the prior written consent of the City, or as set forth in Article 4 of
the Agreement.
5. Security. This Note is secured by a Deed of Trust with Assignment of
Rents and Security Agreement (the "Deed of Trust") of even date herewith, wherein the
Borrower is Trustor and the City is the Beneficiary, covering the Borrower's fee interest in the
Property.
1010\01\235379.2
6. Terms of Payment.
(a) All payments due under this Note shall be paid in currency of the
United States of America, which at the time of payment is lawful for the payment of public and
private debts.
(b) All payments on this Note shall be paid to the City at City of
Carlsbad, 2965 Roosevelt Street, Suite B, Carlsbad, CA 92008 or to such other place as the City
may from time to time designate in writing.
(c) All payments on this Note shall be without expense to the City,
and the Borrower agrees to pay all costs and expenses, including re-conveyance fees and
reasonable attorney's fees of the City, incurred in connection with the payment of this Note and
the release of any security hereof.
(d) Notwithstanding any other provision of this Note, or any
instrument securing the obligations of the Borrower under this Note, if, for any reason
whatsoever, the payment of any sums by the Borrower pursuant to the terms of this Note would
result in the payment of interest which would exceed the amount that the City may legally charge
under the laws of the State of California, then the amount by which payments exceeds the lawful
interest rate shall automatically be deducted fiom the principal balance owing on this Note, so
that in no event shall the Borrower be obligated under the terms of this Note to pay any interest
which would exceed the lawful rate.
7. Default,
(a) Any of the following shall constitute an Event of Default under
this Note:
(i) Any failure to pay, in full, any payment required under this
Note when due following written notice by City of such failure and thirty (30) days opportunity
to cure;
(ii) Any failure in the performance by the Borrower of any
term, condition, provision or covenant set forth in this Note subject to the notice and cure period
set forth in Section 8.4 of the Agreement; and
(iii) The occurrence of any Default under the Agreement, the
Deed of Trust or the Regulatory Agreement (the "Loan Documents"), or other instrument
securing the obligations of the Borrower under this Note or under any other promissory notes
hereafter issued by the Borrower to the City pursuant to the Agreement or the Deed of Trust,
subject to notice and cure periods, if any, set forth therein.
(b) Upon the occurrence of such an Event of Default, the entire unpaid
principal balance, together with all interest thereon, and together with all other sums then
payable under this Note and the Deed of Trust shall at the option of the City become
2 10 1 O\O lD35379.2
immediately due and payable upon written notice by the City to the Borrower without further
demand.
(c) The failure to exercise the remedy set forth in Subsection 7(b)
above or any other remedy provided by law upon the occurrence of one or more of the foregoing
events of default shall not constitute a waiver of the right to exercise any remedy at any
subsequent time in respect to the same or any other default. The acceptance by City hereof of
any payment which is less than the total of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise any of the foregoing remedies or
options at that time or at any subsequent time, or nullify any prior exercise of any such remedy
or option, without the express consent of the City, except as and to the extent otherwise provided
by law.
8. Waivers.
(a) The Borrower hereby waives diligence, presentment, protest and
demand, and notice of protest, notice of demand, and notice of dishonor of this Note. The
Borrower expressly agrees that this Note or any payment hereunder may be extended from time
to time, and that the City may accept fbrther security or release any security for this Note, all
without in any way affecting the liability of the Borrower.
(b) No extension of time for payment of this Note or any installment
hereof made by agreement by the City with any person now or hereafter liable for payment of
this Note shall operate to release, discharge, modify, change or affect the original liability of the
Borrower under this Note, either in whole or in part.
(c) and the Borrower waives any and all rights to offset, deduct or withhold any payments or charges
due under this Note for any reason whatsoever.
The obligations of the Borrower under this Note shall be absolute
9. Miscellaneous Provisions.
(a) All notices to the City or the Borrower shall be given in the
manner and at the addresses set forth in the Agreement, or to such addresses as the City and the
Borrower may hereinafter designate.
(b) The Borrower promises to pay all costs and expenses, including
reasonable attorney's fees, incurred by the City in the enforcement of the provision of this Note,
regardless of whether suit is filed to seek enforcement.
(c) This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change, modification or
discharge is sought.
(d) This Note shall be governed by and construed in accordance with
the laws of the State of California.
1010\01\235379.2 3
(e) be strictly construed, time being of the essence.
The times for the performance of any obligations hereunder shall
(0 This document, together with the Loan Documents, contains the
entire agreement between the parties as to the Loan. It may not be modified except upon written
consent of the parties.
Chelsea Investment Corporation, a California
corporation
By:
Name:
Its:
By:
Name:
Its:
1010\01\235379.2 4
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City Clerk's Ofice
City of Carlsbad
Attn: City Clerk
1200 Carlsbad Village Drive
Carlsbad, CA 92008
No fee for recording pursuant to
Government Code Section 27383
DEED OF TRUST WITH ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
(Hunters' Pointe)
THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS AND SECURITY
AGREEMENT ("Deed of Trust") is made as of
California corporation ("Trustee"), and the City of Carlsbad, a municipal corporation
("Beneficiary").
,2005, by and among Chelsea
Investment Corporation, a California corporation ("Trustor"), ,a
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 fee interest in the property located in the City of Carlsbad, 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 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 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 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,
1 1010\01\235386.2
adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to
or used in connection with the Property;
TOGETHER WITH all 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 by any
proceeding 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;
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, including all other goods and chattels and personal property as are ever used or
furnished in operating a building, or the activities conducted therein, similar to the one herein
described and referred to, 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; and
TOGETHER WITH all of Trustor's interest in all building materials, fixtures, equipment,
work in process and other personal property to be incorporated into the Property; all goods,
materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other
personal property now or hereafter appropriated for use on the Property, whether stored on the
Property or elsewhere, and used or to be used in connection with the Property; all rents, issues
and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles,
chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance
and condemnation awards and proceeds, trade names, trademarks and service marks arising from
or related to the Property and any business conducted thereon by Trustor; all replacements,
additions, accessions and proceeds; and all books, records and files relating to any of the
foregoing.
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
(defined in Article 1 below) until paid or cancelled. Said principal and other payments shall be
due and payable as provided in the Note. Said Note and all its terms are incorporated herein by
reference, and this conveyance shall secure any and all extensions thereof, however evidenced;
and
1010\01\235386.2 2
(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:
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 Loan Agreement between
Trustor and Beneficiary, dated of even date herewith providing for the Beneficiary to loan to the
Trustor One Million Nine Hundred Thirty Two Thousand Dollars ($1,932,000) for the
development of the Property.
Section 1.2 The term "Loan Documents" means this Deed of Trust, the Note, the Loan
Agreement, the Regulatory Agreement, and any other debt, loan or security instruments between
Trustor and the Beneficiary relating to the Property.
Section 1.3 The term "Note" means the promissory note in the principal amount of
One Million Nine Hundred Thirty Two Thousand Dollars ($1,932,000) dated of even date
herewith executed by the 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 amount required to be paid under the
Note.
Section 1.5 The term "Regulatory Agreement" means the regulatory agreement by and
between the Beneficiary and the Trustor, dated and recorded in the official Records of San Diego
County concurrently herewith.
ARTICLE 2
MAINTENANCE AND MODIFICATION OF THE PROPERTY
AND SECURITY
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,
1010\01\235386.2 3
112-
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. 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
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.
Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or
claims as Beneficiary shall specify upon laborers, materialmen, subcontractors or other persons
who have furnished or claim to have furnished labor, services or materials in connection with the
Security. Nothing herein contained shall require Trustor to pay any claims for labor, materials or
services which Trustor in good faith disputes and is diligently contesting provided that Trustor,
upon written request of the Beneficiary, shall, 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.
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 and as
approved, in writing, by Beneficiary.
Section 2.3 Assignment of Rents.
As part of the consideration for the indebtedness evidenced by the Note, Trustor hereby
absolutely and unconditionally assigns and transfers to Beneficiary all the rents and revenues of
the Property including those now due, past due, or to become due by virtue of any lease or other
agreement for the occupancy or use of all or any part of the Property, regardless of to whom the
rents and revenues of the Property are payable. Trustor hereby authorizes Beneficiary or
Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of
the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that
prior to written notice given by Beneficiary to Trustor of the breach by Trustor of any covenant
or agreement of Trustor in the Loan Documents, Trustor shall collect and receive all rents and
revenues of the Property as trustee for the benefit of Beneficiary and Trustor to apply the rents
1010\01\235386.2 4
and revenues so collected to the sums secured by this Deed of Trust with the balance, so long as
no such breach has occurred, to the account of Trustor, it being intended by Trustor and
Beneficiary that this assignment of rents constitutes an absolute assignment and not an
assignment for additional security only. Upon delivery of written notice by Beneficiary to
Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan
Documents, and without the necessity of Beneficiary entering upon and taking and maintaining
full control of the Property in person, by agent or by a court-appointed receiver, Beneficiary shall
immediately be entitled to possession of all rents and revenues of the Property as specified in this
Section 2.3 as the same becomes due and payable, including but not limited to rents then due and
unpaid, and all such rents shall immediately upon delivery of such notice be held by Trustor as
trustee for the benefit of Beneficiary only; provided, however, that the written notice by
Beneficiary to Trustor of the breach by Trustor shall contain a statement that Beneficiary
exercises its rights to such rents. Trustor agrees that commencing upon delivery of such written
notice of Trustor's breach by Beneficiary to Trustor, each tenant of the Property shall make such
rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's
written demand to each tenant therefor, delivered to each tenant personally, by mail or by
delivering such demand to each rental unit, without any liability on the part of said tenant to
inquire further as to the existence of a default by Trustor.
Except as previously approved by the Beneficiary as set forth in the Loan Agreement,
Trustor hereby covenants that Trustor has not executed any prior assignment of said rents, that
Trustor has not performed, and will not perform, any acts or has not executed and will not
execute, any instrument which would prevent Beneficiary from exercising its rights under this
Section 2.3, and that at the time of execution of this Deed of Trust, there has been no anticipation
or prepayment of any of the rents of the Property for more than two (2) months prior to the due
dates of such rents. Trustor covenants that Trustor will not hereafter collect or accept payment
of any rents of the Property more than two (2) months prior to the due dates of such rents.
Trustor further covenant that Trustor will execute and deliver to Beneficiary such further
assignments of rents and revenues of the Property as Beneficiary may from time to time request.
Upon Trustor's breach of any covenant or agreement of Trustor in the Loan Documents,
Beneficiary may in person, by agent or by a court-appointed receiver, regardless of the adequacy
of Beneficiary's security, enter upon and take and maintain full control of the Property in order to
perform all acts necessary and appropriate for the operation and maintenance thereof including,
but not limited to, the execution, cancellation or modification of leases, the collection of all rents
and revenues of the Property, the making of repairs to the Property and the execution or
termination of contracts providing for the management or maintenance of the Property, all on
such terms as are deemed best to protect the security of this Deed of Trust. In the event
Beneficiary elects to seek the appointment of a receiver for the Property upon Trustor's breach of
any covenant or agreement of Trustor in this Deed of Trust, Trustor hereby expressly consents to
the appointment of such receiver. Beneficiary or the receiver shall be entitled to receive a
reasonable fee for so managing the Property.
All rents and revenues collected subsequent to delivery of written notice by Beneficiary
to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan
Documents shall be applied first to the costs, if any, of taking control of and managing the
Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees,
premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies,
5 1010\01\235386.2
taxes, assessments and other charges on the Property, and the costs of discharging any obligation
or liability of Trustor as lessor or landlord of the Property and then to the sums secured by this
Deed of Trust. Beneficiary or the receiver shall have access to the books and records used in the
operation and maintenance of the Property and shall be liable to account only for those rents
actually received. Beneficiary shall not be liable to Trustor, anyone claiming under or through
Trustor or anyone having an interest in the Property by reason of anything done or left undone by
Beneficiary under this Section 2.3.
If the rents of the Property are not sufficient to meet the costs, if any, of taking control of
and managing the Property and collecting the rents, any funds expended by Beneficiary for such
purposes shall become indebtedness of Trustor to Beneficiary secured by this Deed of Trust
pursuant to Section 3.3 hereof. Unless Beneficiary and Trustor agree in writing to other terms of
payment, such amounts shall be payable upon notice from Beneficiary to Trustor requesting
payment thereof and shall bear interest from the date of disbursement at the rate stated in
Section 3.3.
Any entering upon and taking and maintaining of control of the Property by Beneficiary
or the receiver and any application of rents as provided herein shall not cure or waive any default
hereunder or invalidate any other right or remedy of Beneficiary under applicable law or
provided herein. This assignment of rents of the Property shall terminate at such time as this
Deed of Trust ceases to secure indebtedness held by Beneficiary. The rights of the Beneficiary
under this Section 2.3 are subject to the rights of any senior mortgage lender.
ARTICLE 3
TAXES AND INSURANCE; ADVANCES
Section 3.1 Taxes, Other Governmental Charges and Utility Charges.
Trustor shall pay, or cause to be paid, at least fifteen (15) days prior to the date of
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, that Trustor shall not be required to pay and discharge any such tax, assessment, charge
or levy so long as (a) the legality thereof shall be promptly and actively contested in good faith
and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities
contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar
governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien
therefor on any part of the Security; provided, however, if such taxes, assessments or charges
may be paid in installments, Trustor may pay in such installments. Except as provided in clause
(b) of the first sentence of this paragraph, 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 of such failure to pay and the Trustor fails to
fully pay such items within seven (7) business days after receipt of such notice. Any amount so
advanced therefor by Beneficiary, together with interest thereon from the date of such advance at
6 1010\01\235386.2 I15
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.
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. Trustee is aware that California Civil Code Section 2955.5(a) provides as follows: No
lender shall require a borrower, as a condition of receiving or maintaining a loan secured by real
property, to provide hazard insurance coverage against risks to the improvements on that real
property in an amount exceeding the replacement value of the improvements on the property.
Section 3.3 Advances.
In the event the Trustor shall fail to maintain the full insurance coverage required by this
Deed of Trust or shall fail to keep the Security in accordance with the Loan Documents, the
Beneficiary, after at least seven (7) days prior notice to Beneficiary, may (but shall be under no
obligation to) take out the required policies of insurance and pay the premiums on the same or
may make such repairs or replacements as are necessary and provide for payment thereof; 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 of eight percent (8%) per annum or
the maximum rate 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 in
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 the Beneficiary by a check made
payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to
collect and receive any funds and is authorized to apply them in whole or in part upon any
indebtedness or obligation secured hereby, in such order and manner as the Beneficiary shall
determine at its sole option. 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
7 1010\01\235386.2
proceeds of such insurance the amount of all expenses incurred by it in connection with any such
settlement or adjustment. All or any part of the amounts so collected and recovered by the
Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for
its disposition, and Beneficiary agrees to release Funds to Trustor to rebuild the Project on the
Property provided Trustor demonstrates to Beneficiary that such rebuilding is economically
feasible. 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 rate
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 by 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.
Section 5.5 Financing Statement.
The Trustor shall execute and deliver to the Beneficiary such financing statements
8
pursuant to the appropriate statutes, and any other documents or instruments as are required to
1010\01\235386.2
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 their terms. The Beneficiary is authorized to file a copy of any such
financing statement in any jurisdiction(s) as it shall deem appropriate from 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' notice, 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, 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
HAZARDOUS WASTE
Trustor shall keep and maintain the Property in compliance with, and shall not cause or
permit the Property to be in violation of any federal, state or local laws, ordinances or regulations
relating to industrial hygiene or to the environmental conditions on, under or about the Property
including, but not limited to, soil and ground water conditions. Trustor shall not use, generate,
manufacture, store or dispose of on, under, or about the Property or transport to or fiom the
Property 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
hereinafter as "Hazardous Materials") except such of the foregoing as may be customarily kept
and used in and about multifamily residential property.
10 1 O\O 1D35386.2 9
Trustor shall immediately advise Beneficiary 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 Trustor or the Property 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 Trustor or the Property 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 hereinafter referred to a "Hazardous Materials Claims"); and (iii) Trustor's discovery of
any occurrence or condition on any real property adjoining or in the vicinity of the Property that
could cause the Property or any part thereof to be classified as "border-zone property" under the
provision of California Health and Safety Code, Sections 25220 et seq., or any regulation
adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership,
occupancy, transferability or use of the Property under any Hazardous Materials Law.
Beneficiary shall have the right to join and participate in, as a party if it so elects, any
legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to
have its reasonable attorneys' fees in connection therewith paid by Trustor. Trustor shall
indemnifL and hold harmless Beneficiary and its boardmembers, supervisors, directors, officers,
employees, agents, successors and assigns fi-om and against any loss, 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, under, or about
the Property including without limitation: (a) all foreseeable consequential damages; (b) the costs
of any required or necessary repair, cleanup or detoxification of the Property and the preparation
and implementation of any closure, remedial or other required plans; and (c) all reasonable costs
and expenses incurred by Beneficiary in connection with clauses (a) and (b), including but not
limited to reasonable attorneys' fees.
Without Beneficiary's prior written consent, which shall not be unreasonably withheld,
Trustor shall not take any remedial action in response to the presence of any Hazardous
Materials on, under or about the Property, 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 Beneficiary's reasonable judgement,
impair the value of the Beneficiary's security hereunder; provided, however, that Beneficiary's
prior consent shall not be necessary in the event that the presence of Hazardous Materials on,
under, or about the Property 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 Beneficiary's consent before taking such action, provided that
in such event Trustor shall notify Beneficiary as soon as practicable of any action so taken.
Beneficiary 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) Trustor
will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required
action; (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no
reasonable alternative to such remedial action which would result in less impairment of
Beneficiary's security hereunder; or (iv) the action has been agreed to by Beneficiary.
The Trustor hereby acknowledges and agrees that (i) this Article is intended as the
Beneficiary's written request for information (and the Trustor's response) concerning the
environmental condition of the Property as required by California Code of Civil Procedure
10 1 0 1 O\O 1 E353 86.2
Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other
Loan Documents (together with any indemnity applicable to a breach of any such representation
and warranty) with respect to the environmental condition of the property is intended by the
Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code
of Civil Procedure Section 736.
In the event that any portion of the Property is determined to be "environmentally
impaired" (as that term is defined in California Code of Civil Procedure Section 726S(e)(3)) or
to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section
726.5(e)(l)), then, without otherwise limiting or in any way affecting the Beneficiary's or the
Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its
rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such
environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and
remedies of an unsecured creditor, including reduction of its claim against the Trustor to
judgment, and (b) any other rights and remedies permitted by law. For purposes of determining
the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil
Procedure Section 726.5(a), the Trustor shall be deemed to have willfully permitted or
acquiesced in a release or threatened release of hazardous materials, within the meaning of
California Code of Civil Procedure Section 726.5(d)( l), if the release or threatened release of
hazardous materials was knowingly or negligently caused or contributed to by any lessee,
occupant, or user of any portion of the Property and the Trustor knew or should have known of
the activity by such lessee, occupant, or user which caused or contributed to the release or
threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred
by the Beneficiary in connection with any action commenced under this paragraph, including any
action required by California Code of Civil Procedure Section 726.5(b) to determine the degree
to which the Property is environmentally impaired, plus interest thereon at the rate specified in
the Note until paid, shall be added to the indebtedness secured by this Deed of Trust and shall be
due and payable to the Beneficiary upon its demand made at any time following the conclusion
of such action.
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default.
The following shall constitute Events of Default following the expiration of any
applicable notice and cure periods: (1) failure to make any payment to be paid by Trustor under
the Loan Documents; (2) failure to observe or perform any of Trustor's other covenants,
agreements or obligations under the Loan Documents, including, without limitation, the
provisions concerning discrimination; 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.
1010\01\235386.2 11
Section 7.2 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 7.3 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) and of any of
the Security, 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 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, in the instruments
by which the Trustor acquires title to any Security, 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.
Section 7.4 Foreclosure By Power of Sale.
Should the Beneficiary elect to foreclose by exercise of the power of sale herein
contained, 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.
1010\01\235386.2 12
(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 oE (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 7.5 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
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 7.6 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.
1010\01\235386.2 13
Section 7.7 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 fiom time to time and as often as may be deemed expeditious by the Beneficiary.
Beneficiary 's expressed or implied consent to a breach by Trustor, or a waiver of any obligation
of Trustor hereunder shall not be deemed or construed to be a consent to any subsequent breach,
or further waiver, of such obligation or of any other 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 fiom 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 original liability 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 fiom 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 7.8 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 unlawful 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
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 7.9 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 Trustee, 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
14 1010\01\235386.2
allowed in such proceedings and for any additional amount which may become due and payable
by the Trustor hereunder after such date.
Section 7.10 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 8
MISCELLANEOUS
Section 8.1 Amendments.
This instrument cannot be waived, changed, discharged or terminated orally, but only by
an instrument in writing signed by Beneficiary and Trustor.
Section 8.2 Reconveyance by Trustee.
Upon written request of Beneficiary stating that all sums secured hereby have been paid
or forgiven, that all obligations to be performed by the Trustee under the Loan Documents
(including, but not limited to, the operation of the Property in accordance with, and for the entire
term of, the Regulatory Agreement), 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 8.3 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, by reputable overnight delivery service, 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:
City of Carlsbad
2965 Roosevelt St., Suite B
Carlsbad, CA 92008
Attn: City Manager
1010\01\235386.2 15
and (2) if intended for Trustor shall be addressed to:
Chelsea Investment Corporation
Attn:
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 8.4 Successors and Joint Trustors.
Where an obligation is created herein binding upon Trustor, the obligation shall also
apply to and bind any transferee or successors in interest. Where the terms of the Deed of Trust
have the effect of creating an obligation of the Trustor and a transferee, such obligation shall be
deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is
more than one entity or person, all obligations of Trustor shall be deemed to be a joint and
several obligation of each and every entity and person comprising Trustor.
Section 8.5 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 8.6 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 8.7 Governing Law.
This Deed of Trust shall be governed by and construed in accordance with the laws of the
State of California.
1010\01\235386.2 16
Section 8.8 Gender and Number.
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 8.9 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 8.10 Actions.
Trustor agrees to appear in and defend any action or proceeding purporting to affect the
Security.
Section 8.1 1 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 8.12 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 full extent permissible by law.
Section 8.13 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.
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1010\01\235386.2 17
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and
year first above written.
TRUSTOR:
Chelsea Investment Corporation, a
California corporation
Its:
By:
Name:
Its:
18 1010\01\235386.2
STATE OF CALIFORNIA 1
COUNTY OF )
) ss.
On , before me, , personally
appeared
the basis of satisfactory evidence) to be the person(s) whose name(s) islare subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or
the entity upon behalf of which the person(s) acted, executed the instrument.
, personally known to me (or proved to me on
WITNESS my hand and official seal.
1010\01\235386.2
EXHIBIT A
(Legal Description)
The land is situated in the City of Carlsbad, County of San Diego, State of California, and
is described as follows:
10 1 O\O 1D35386.2 A- 1