HomeMy WebLinkAbout2011-10-25; City Council; 20720; AMENDMENTS LOAN HUNTERS POINT HOUSING PROJECTCITY OF CARLSBAD - AGENDA BILL
AB#
MTG.
DEPT.
_20,720 _
10/25/11
HNS
I APPROVAL OF AMENDMENTS TO LOAN &
J REGULATORY DOCUMENTS RELATED TO
FINANCIAL ASSISTANCE FOR THE
HUNTERS POINT AFFORDABLE HOUSING
PROJECT
DEPT. DIRECTO
CITY ATTORNEY
CITY MANAGER (K
RECOMMENDED ACTION:
That the City Council ADOPT Resolution No. 2011252 APPROVING amendments to
City loan and regulatory documents to allow Chelsea Investment Corporation to refinance their
$9,630,000 mortgage loan using the HUD 223f financing program for the Hunters Point
affordable housing development.
ITEM EXPLANATION:
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, known as the Hunters Point Apartments, is located on a 15.84 acre
parcel 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. The Hunters Pointe
project of 168 affordable units was developed, and is managed, by Chelsea Investment
Corporation. It has been fully occupied since late 2007, and received financial assistance from
the City in the total amount of $1,932,000.
The City's assistance was 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 has been
amortized over fifty-five years and is to be 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 accrues simple interest at 3% per annum. The terms of the City
assistance is the same loan structure that has been utilized for all other affordable housing
projects financed by and developed in the City of Carlsbad.
Chelsea Investment Corporation has proposed a HUD 223f refinance for the Hunters Point
development to provide a $9,750,000 loan to pay off the existing approximately $9,630,000
mortgage balance. The excess proceeds of approximately $120,000 will primarily be used to
pay the transaction costs associated with the refinance. The benefit of the refinance is to
replace a loan that currently has an interest rate reset/remarking feature in Year 16 with a fully
amortizing loan. The refinance is also expected to result in a lower interest rate that is
anticipated to produce more annual cash flow available for distribution to junior lenders, such as
the City of Carlsbad. The actual interest rate has not yet been locked in, but it is anticipated that
the project will generate approximately $40,000 in additional annual cash flow as a benefit of
the refinance.
DEPARTMENT CONTACT: Debbie Fountain 760-434-2935; debbie.fountain@carlsbadca.gov
FOR CITY CLERKS USE ONLY.
COUNCIL ACTION: APPROVED
DENIED
CONTINUED
WITHDRAWN
AMENDED
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CONTINUED TO DATE SPECIFIC
CONTINUED TO DATE UNKNOWN
RETURNED TO STAFF
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Page 2
In order for the project to receive approval for the refinance, the City must approve
amendments to its loan and regulatory agreements to address HUD requirements and to
subordinate to the new senior loan. The City Council is being asked to approve, in substantially
the form presented, the Amendment to the Regulatory Agreement, the Amendment to the
Promissory Note, and Amendment to the Deed of Trust that are all attached as Exhibit 2 for
review. These documents are explained below:
1. Regulatory Agreement records the terms of affordability and the operation requirements
for the project.
2. Promissory Note is executed by the Developer and expresses their intent to repay the
loan.
3. Deed of Trust is recorded against the property to secure the City's interest in the subject
property and related improvements.
If approved, the attached resolution authorizes the City Manager, or her designee, to provide
final approval and to execute the amendments to the above noted documents, subject to City
Attorney approval as to form.
ENVIRONMENTAL REVIEW
The Hunters Pointe affordable apartment project was reviewed pursuant to the California
Environmental Quality Act (CEQA). Staff prepared an initial 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 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 refinancing project is within the scope of Final Program EIR 98-07 and no
further CEQA compliance is required for refinancing of said loan.
FISCAL IMPACT:
There is no fiscal impact to the City of Carlsbad as related to the refinancing of the noted loan
for the Hunters Point affordable housing development. It is anticipated that the refinancing
will result in additional cash flow to assist in repayment of the City loan. However, there are
no additional funds to be provided by the City of Carlsbad. This action represents a
refinancing only of the senior loan for the development by the owner, and all costs of the
refinancing will be paid by the owner.
Page 3
EXHIBITS:
1. City Council Resolution No. 2011-252 approving amendments to the Regulatory
Agreement, Deed of Trust and Promissory Note for the Hunters Point affordable housing
development to address HUD requirements, and authorizing the City Manager to provide
final approval and to execute said documents upon approval by the City Attorney as to form.
2. Loan and Regulatory Documents, in form to be approved.
3
1 CITY COUNCIL RESOLUTION NO. 2011-252
2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, TO APPROVE AMENDMENTS TO THE
3 REGULATORY AGREEMENT, DEED OF TRUST, PROMISSORY
NOTE AND RELATED DOCUMENTS FOR THE $1,932,000
RESIDUAL RECEIPTS LOAN PROVIDED TO CHELSEA
5 INVESTMENT CORPORATION FOR CONSTRUCTION OF ONE
HUNDRED SIXTY EIGHT (168) AFFORDABLE APARTMENT UNITS
6 WITHIN THE VILLAGES OF LA COSTA MASTER PLAN, KNOWN
AS HUNTERS POINT.
7
APPLICANT: CHELSEA INVESTMENT CORPORATION -
8 HUNTERS POINT AFFORDABLE PROJECT
CASE NO: SDP 04-139 -
10 WHEREAS, Chelsea Investment Corporation developed and currently operates the 168
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apartment units affordable to lower income households known as Hunters Point; and
12
WHEREAS, Chelsea Investment Corporation received a residual receipts loan from the
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City of Carlsbad in the amount of $1,932,000 to provide financial assistance for the construction
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of said apartment units; and
16 WHEREAS, the City of Carlsbad recorded a regulatory agreement and related loan
17 documents in connection with the noted loan against the real property known as Hunters Point
1 8 affordable housing development, and holds a junior loan position as a result of subordination to
19 the senior loan on said property; and
20 WHEREAS, Chelsea Investment Corporation desires to refinance the senior loan on the
21 subject property by receiving a HUD 223f insured loan to provide $9,750,000 loan to pay off the
22 existing $9,630,000 mortgage balance; and
23
WHEREAS, in order for Chelsea Investment Corporation to refinance said loan through
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the noted HUD financing program, the City of Carlsbad must approve amendments to its
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regulatory agreement and related loan documents for its financial assistance to said development
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to add HUD financing requirements and subordinate to said loan; and
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WHEREAS, on the date of this resolution, the City Council did hold a public meeting to
consider said request for approval of amended regulatory and loan documents to allow for the
HUD 223 f refinancing of the senior loan for the Hunters Point affordable housing development;5
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Page 2 of CC Resolution No. 2011-252
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 request for
amended regulatory and loan documents.
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. That the City Council of the City of Carlsbad hereby APPROVES the request by
Chelsea Investment Corporation to amend applicable regulatory and loan
documents to allow for the HUD 223f refinance of the senior loan for the
affordable housing project known as the Hunters Point Affordable Apartments.
3. That the City Council authorizes the City Manager or her designee to provide final
approval and to execute all city documents required to allow for the refinance of
the senior loan for the Hunters Point Affordable Apartments, including but not
limited to the Promissory 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 as to form.
4. That the City Council authorizes the City Manager or his designee to provide final
approval and to execute subsequent subordination agreement(s), as required,
subject to approval by the City Attorney as to form.
1 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council
2 of the City of Carlsbad on the 25th day of October, 2011, by the following vote to wit:
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AYES: Council Members Hall, Blackburn, Douglas and Packard.
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5 NOES: None.
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ABSENT: Council Member Kulchin.
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11 MATT'HALL, Mayor
12 ATTEST:
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L0RRA^l£ M. \N0<3$, Cify Clerk
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EXHIBIT 2
REGULATORY AND LOAN DOCUMENTS
7
flecording Requested By
And When Recorded Mail To:
City Clerk's Office
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Attention: City Clerk
No fee for recording pursuant to Government
Code Section 27383
AMENDMENT TO REGULATORY AGREEMENT AND DECLARATION OF
RESTRICTIVE COVENANTS
AND
SUBORDINATION OF NOTICE OF AFORDABILITY RESTRICTIONS ON TRANSFER
OF PROPERTY
(Hunters Pointe)
THIS AMENDMENT TO REGULATORY AGREEMENT AND DECLARATION OF
RESTRICTIVE COVENANTS AND SUBORDINATION OF NOTICE OF AFORDABILITY
RESTRICTIONS ON TRANSFER OF PROPERTY ("Amendment") is dated as of the day of
October, 2011, by and between the. Carlsbad Redevelopment Agency, a public body, corporate and
politic ("Agency"), the City of Carlsbad, a municipal corporation ("City") and CIC La Costa, L.P., a
California limited partnership ("Owner").
RECITALS
A. Agency, City and Owner entered into that certain Regulatory Agreement and
Declaration of Restrictive Covenants ("Regulatory Agreement"), dated June 10, 2008 and recorded
on August 19, 2008 as Instrument #2008-0445217 in the Official Records of the San Diego County
Recorder ("Official Records") in connection with a loan from the City to the Owner in the amount of
$1,932,000 for the financing of that certain multifamily rental housing project known as Hunters
Pointe Apartments located in Carlsbad, California ("Project"), and recorded against the real property
("Property") described on Exhibit A attached hereto. Any capitalized terms not defined herein shall
have the meanings ascribed to them in the Regulatory Agreement.
B. Owner is obtaining a permanent loan in the amount of Nine Million Seven Hundred
Fifty-Thousand ($9,750,000) ("Senior Loan") from Oak Grove Commercial Mortgage, LLC, which
loan shall be insured by the U.S. Department of Housing and Urban Development Federal Housing
Administration ("HUD") pursuant to Section 223(f) of the National Housing Act. City, Agency and
Owner desire to amend the Regulatory Agreement to include certain provisions required by HUD in
connection with the Senior Loan.
Amendment to Regulatory Agreement Page
C. Additionally, in compliance with Sections 33334.3(f)(3) and (4) and/or 33413(c)(5)
of the California Health and Safety Code, the parties executed that certain Notice of Affordability
Restrictions on Transfer of Property (the "Notice") and recorded the same on August 19, 2008 as
Instrument #2008-0445223 in the Official Records. HUD requires that the Notice be subordinated to
the Senior Loan documents and the City and Owner desire to do so.
NOW, THEREFORE, in furtherance of the recitals stated above, the mutual covenants set
forth below, City, Agency and Owner hereby agree follows:
1. The Regulatory Agreement is hereby amended by adding the following new Section 7
thereto:
"Section 7. HUD Provisions.
(a) Notwithstanding anything in this document to the contrary, the provisions hereof are
expressly subordinate to the mortgage or security deed encumbering the Property insured by
the United States Department of Housing and Urban Development ("HUD"), to the HUD
regulatory agreement encumbering the Property and to all applicable HUD mortgage
insurance (and Section 8, if applicable) regulations and related administrative requirements.
In the event of any conflict between the provisions of this document and the provision of an
applicable HUD regulation, related HUD administrative requirements or HUD/FHA loan
documents, the HUD regulations, related administrative requirements or loan documents
shall control.
(b) In the event of foreclosure or transfer of title by deed in lieu of foreclosure, any and
all land use covenants contained herein shall automatically terminate.
(c) Failure to comply with the land-use covenants contained herein will not serve as a
basis for default on the HUD insured mortgage.
(d) Enforcement of the covenants herein will not result in any claim against the Project,
the mortgage proceeds, any reserve or deposit required by HUD in connection with the
mortgage transaction, or the rents or other income from the property other than available
surplus cash, since the Owner is profit-motivated.
(f) Any subsequent amendment to this document is subject to prior HUD approval for so
long as property is subject to a mortgage insured or held by HUD."
2. Subordination of Notice. The Notice shall be subordinated in all respects to any deed of
trust, regulatory agreement, UCC-1 Financing Statement, and/or any other document recorded in the
Official Records.
3. Counterparts. This Amendment may be executed in any number of counterparts and, as so
executed, the counterparts shall constitute one and the same agreement. The parties agree that each
such counterpart is an original and shall be binding upon all the parties, even though all of the parties
are not signatories to the same counterpart.
Amendment to Regulatory Agreement Page 2
4. Conflicts. In the event of any conflict between the Regulatory Agreement and/or the Notice
and this Amendment, this Amendment shall control.
5. Governing Law. This Amendment shall be construed and enforced in accordance with and
governed by the laws of the State of California.
[Signature Page Follows]
Amendment to Regulatory Agreement Page 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the
date set forth above:
AGENCY:
CARLSBAD REDEVELOPMENT AGENCY,
a public body, corporate and politic
By.
Name: Lisa Hildabrand
Title: Executive Director
State of California
County of
on Dcjfot*y 2.1
personally appeared _
2011, before me,
who proVed to me on the
basis of satisfactory evidence to be the person(^ whose nameOs) is/are, subscribed to the within
instrument and acknowledged to me that he/she/they- executed the same in ^HS/her/thetr-authorized
capacity(4es), and that by hw/her/thetr signature^*) on the instrument the person(-s), or the entity on
behalf of which the person(s)-acted, executed the instrument.
I certify under penalty of perjury under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
MOAGEN FRY
Comminton # 1918442
Notary Public • C«Hforrt«
Sin Ditflo County
Camm.EiirtrMDtc24.2014
Amendment to Regulatory Agreement Page 4
OWNER:
CIC LA COSTA, L.P., a California limited partnership
By: DDC La Costa, LLC, a California limited liability company
Its: Co-General Partner
By: Chelsea Investment Corporation, a California corporation
Its: Manager
By:
Cheri Hoffman
President
By: Pacific Southwest Community Development Corporation,
a California nonprofit public benefit corporation
Its: Managing General Partner
By:
Robert Laing
Executive Director
[ACKNOWLDEGMENT PAGE FOLLOWS]
Amendment to Regulatory Agreement Page 5
State of California
County of
On _ , 2011, before me, _
personally appeared _ who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity on
behalf of which the person(s) acted, executed the instrument.
I certify under penalty of perjury under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
State of California
County of
On _ _, 2011, before me, _
personally appeared _ _ who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity on
behalf of which the person(s) acted, executed the instrument.
I certify under penalty of perjury under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
Amendment to Regulatory Agreement Page 6
CITY:
CITY OF CARLSBAD, a municipal corporation
By:
Name: Lisa Hildabrand
Title: City Manager_
Approved as to form:
By:_
ity Attorney
State of California
County of )
On
personally appeared
. 2011, before me,
who proved to me on the
basis of satisfactory evidence to be the person^ whose name(s) is/are* subscribed to the within
instrument and acknowledged to me that he/she/tkey executed the same in •Ws/her/theti' authorized
capacity(ies^ and that by h-h/her/theif-signaturef*) on the instrument the person(*)s or the entity on
behalf of which the person(») acted, executed the instrument.
I certify under penalty of perjury under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
MORGENFRY
Commltfion * 1918442
Notary PuWic - CaUfornit
San Diego County
MyComm.EnphftO«c24.2014
Amendment to Regulatory Agreement Page?
Exhibit "A"
Legal Description of the Property
AH that certain real property situated in the City of Carlsbad, County of San Diego, State of
California, described as follows:
LOTS 207, 208 AND 209 OF CITY OF CARLSBAD TRACT 99-04-03 VILLAGES OF LA
COSTA-LA COSTA OAKS NORTH, IN THE CITY OF CARLSBAD, COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 15318, FILED IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, APRIL 18, 2006.
Amendment to Regulatory Agreement Page 8
Recording Requested By
And When Recorded Mail To:
City Clerk's Office
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Attention: City Clerk
No fee for recording pursuant to Government
Code Section 27383
AMENDMENT TO DEED OF TRUST WITH ASSIGNMENT
OF RENTS AND SECURITY AGREEMENT
(Hunters Pointe)
THIS AMENDMENT TO DEED OF TRUST WITH ASSIGNMENT OF RENTS AND
SECURITY AGREEMENT ("Amendment") is dated as of the day of October, 2011, by and
between the City of Carlsbad, a municipal corporation ("City") and CIC La Costa, L.P., a California
limited partnership ("Owner").
RECITALS
A. City, as beneficiary, Chicago Title Company, as trustee, and Owner, as trustor,
entered into that certain Deed of Trust with Assignment of Rents and Security Agreement, dated
August 19, 2008 and recorded on August 19, 2008 as Instrument #2008-0445218 in the Official
Records of the San Diego County Recorder ("Deed of Trust") in connection with a loan from the
City to the Owner in the amount of $1,932,000 for the financing of that certain multifamily rental
housing project known as Hunters Pointe Apartments located in Carlsbad, California ("Project"), and
recorded against the real property ("Property") described on Exhibit A attached hereto. Any
capitalized terms not defined herein shall have the meanings ascribed to them in the Deed of Trust.
B. Owner is obtaining a permanent loan in the amount of Nine Million Seven Hundred
Fifty-Thousand ($9,750,000) ("Senior Loan") from Oak Grove Commercial Mortgage, LLC, which
loan shall be insured by the U.S. Department of Housing and Urban Development Federal Housing
Administration ("HUD") pursuant to Section 223(f) of the National Housing Act. City and Owner
desire to amend the Deed of Trust to include certain provisions required by HUD in connection with
the Senior Loan.
NOW, THEREFORE, in furtherance of the recitals stated above, the mutual covenants set
forth below, City and Owner hereby amend the Deed of Trust as follows:
Amendment to Deed of Trust Page 1
1. HUD Provisions. The HUD Rider attached to this Amendment as Exhibit B, is hereby added
as Exhibit B to the Deed of Trust.
2. Counterparts. This Amendment may be executed in any number of counterparts and, as so
executed, the counterparts shall constitute one and the same agreement. The parties agree that each
such counterpart is an original and shall be binding upon all the parties, even though all of the parties
are not signatories to the same counterpart.
3. Conflicts. In the event of any conflict between the Deed of Trust and this Amendment, this
Amendment shall control.
4. Governing Law. This Amendment shall be construed and enforced in accordance with and
governed by the laws of the State of California.
[Signature Page Follows]
Amendment to Deed of Trust Page 1
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the
date set forth above:
OWNER:
CIC LA COSTA, L.P., a California limited partnership
By: DDC La Costa, LLC, a California limited liability company
Its: Co-General Partner
By: Chelsea Investment Corporation, a California corporation
Its: Manager
By:
Cheri Hoffman
President
By: Pacific Southwest Community Development Corporation,
a California nonprofit public benefit corporation
Its: Managing General Partner
By:
Robert Laing
Executive Director
[ACKNOWLDEGMENT PAGE FOLLOWS]
Amendment to Deed of Trust Page 3
State of California
County of
On _ , 2011, before me, _
personally appeared _ who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity on
behalf of which the person(s) acted, executed the instrument.
I certify under penalty of perjury under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
State of California
County of
On _ , 2011, before me, _ _
personally appeared _ who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity on
behalf of which the person(s) acted, executed the instrument.
I certify under penalty of perjury under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
Amendment to Deed of Trust Page 4
CITY:
CITY OF CARLSBAD, a municipal corporation
By:
Tslame: Lisa Hildabrand
Title: City Manager
Approved as to form:
By: /
City Attorney
State of California
County of
On
personally appeared
2011, before me,
who prove to me on the
subscribed to the withinbasis of satisfactory evidence to be the person^s) whose name^s)
instrument and acknowledged to me that he/she/they executed the same in Ws/her/theif. authorized
capacity(4es), and that by rrrsT'her/theu: signature^ on the instrument the person^ or the entity on
behalf of which the personOjs^cted, executed the instrument.
I certify under penalty of perjury under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
MORGEN FRY
Commission * 1916442
Notary Public • California
San Diego County
My Comm. Expires10«g2|
Amendment to Deed of Trust Page5
Exhibit "A"
Legal Description of the Property
AH that certain real property situated in the City of Carlsbad, County of San Diego, State of
California, described as follows:
LOTS 207, 208 AND 209 OF CITY OF CARLSBAD TRACT 99-04-03 VILLAGES OF LA
COSTA-LA COSTA OAKS NORTH, IN THE CITY OF CARLSBAD, COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 15318, FILED IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, APRIL 18, 2006.
Amendment to Deed of Trust Page 6
Exhibit B
HUD RIDER
THIS RIDER ("Rider") is attached to and made a part of the foregoing deed of trust (herein,
the "Junior Mortgage") between CIC La Costa, L.P., a California limited partnership, referred to
herein as the "Mortgagor," and the City of Carlsbad, a municipal corporation, referred to herein as
the "Junior Lender." The Junior Mortgage and all other documents evidencing or securing the loan
from Junior Lender to Mortgagor are collectively referred to as the "Junior Loan Documents". The
terms and conditions of the Rider supersede the terms of the Junior Loan Documents, and, should
there be any conflict or inconsistency between this Rider and the Junior Loan Documents, the terms
and conditions of this Rider shall prevail. The Junior Lender and Mortgagor agree to the following
provisions:
1. The Junior Loan Documents are specifically subordinate to that certain note and deed of trust
("Senior Mortgage") between the Mortgagor and Oak Grove Commercial Mortgage, LLC,
(herein, the "Senior Lender") dated as of October 1, 2011, and recorded concurrently
herewith in the real property records of San Diego County, California.
2. The Junior Note may not mature, and may not bear a maturity date, prior to the date on which
the Senior Mortgage matures. The term of the Junior Mortgage may be extended if the Junior
Note matures, there are no surplus cash funds available for repayment and the Senior
Mortgage has not been retired in full or HUD grants a deferment of amortization or
forbearance that results in an extended maturity of the Senior Mortgage.
3. The Junior Mortgage may be assumed when a sale or transfer of the physical assets occurs
under the following conditions:
a. Not more than 70 percent of the net proceeds of the sale or transfer is applied to the
reduction of the loan.
b. For these instructions, net proceeds are the funds available to the original mortgagor
after:
i. Correcting any monetary or covenant default on the Senior Mortgage, and
ii. Making required contributions to any reserve funds and needed improvements
to the property as evidenced by HUD's annual inspection reports.
4. If HUD approves a sale of the project pursuant to HUD guidelines for transfers of physical
assets, then Junior Lender will agree to such transfer of the ownership of the Project.
5. The Junior Note and Junior Mortgage automatically terminate if HUD acquires title to the
project by a deed in lieu of foreclosure.
6. All work performed with the proceeds of the Junior Mortgage must be cost certified and must
conform to Davis-Bacon requirements.
Amendment to Deed of Trust Page 7
7- The Junior Mortgage is subject to and subordinate to the Senior Mortgage, the HUD
regulatory agreement between HUD and the Mortgagor.
8- Proceeds of the Junior Loan may only be used to cover allowable project costs or an
anticipated operating shortfall.
9. Payment Only From Surplus Cash. [Check the appropriate alternative below]
a. X [For junior loans secured by a lien against the project] As long as the
Secretary of Housing and Urban Development, or his/her successors or assigns, is the
insurer or holder of the Senior Mortgage, any payments due from project income
under the Junior Loan Documents, or any prepayments made, shall be payable only
form surplus cash of the project, as that term is defined in the Regulatory Agreement
dated as of October 1, 2011, between the Secretary and the Mortgagor ("Surplus
Cash"), and subject to the availability of such Surplus Cash in accordance with the
provision of said Regulatory Agreement. The restriction on payment imposed by this
paragraph shall not excuse any default caused by the failure of the maker to pay the
indebtedness evidence by the Junior Note.
b. n/a [For junior loans NOT secured by a lien against the project] As long as the
Secretary of Housing and Urban Development, or his/her successors or assigns, is the
insurer or holder of the Senior Mortgage, any payment due from project income
under the Junior Loan Documents, or any prepayments made, shall be payable only
from surplus cash of the project, as that term is defined in the Regulatory Agreement
dated , between the Secretary and Mortgagor, and subject to
the availability of such surplus cash in accordance with the provisions of said
Regulatory Agreement. The restrictions on payment imposed by this paragraph shall
not excuse any default caused by the failure of the maker to pay the indebtedness
evidenced by the Junior Note. Junior Lender has no claim and will not later assert any
claim for payment against the mortgaged property, the mortgage proceeds, any
reserve or deposit made with the Senior Lender or another required by the Secretary
in connection with the mortgage transaction, or against the rents or other income from
the mortgaged property. The Mortgagor cannot issue a surplus cash note to the
principals as evidence of an obligation for payment of the Junior Loan.
10. Mortgagor has obtained the prior written consent of the Senior Lender to the existence of the
Junior Loan.
11. To the extent that the Junior Note provides for payment of principal and interest, such
principal and interest shall be due and payable on the maturity date of the Senior Mortgage,
provided that if the Senior Mortgage is prepaid in full, the holder of the Junior Note, at its
option and without notice, may declare the whole principal sum or any balance thereof,
together with interest thereon, immediately due and payable. Interest due pursuant to the
terms of the Junior Note that is not paid in accordance therewith shall not create any default
in the terms of the Junior Note, but shall accrue and be payable in full at the date of maturity
of the Senior Mortgage.
12. The Junior Note is non-negotiable and may not be sold, transferred, assigned, or pledged by
the Junior Lender except with the prior written approval of HUD.
Amendment to Deed of Trust Page 8
13. The Junior Lender certifies that the Junior Loan Documents represent a bonafide transaction
and that it fully understands all of HUD's requirements for such secondary financing, and that
no prepayment of principal or interest shall be accepted without evidence that the Federal
Housing Commissioner has authorized such prepayment. If an unauthorized prepayment is
accepted, the funds shall be held by the Junior Lender in trust for the project.
14. Without the prior written consent of HUD, Junior Lender shall not consent to a transfer of
any interest in (a) the Mortgagor entity, or (b) the property subject to the Senior Mortgage,
for so long as the Senior Mortgage remains in effect. Further, in the event HUD agrees to any
such transfer of interest, the Junior Lender shall also agree to same.
15. Junior Lender shall deliver to Senior Lender a default notice within five business days in
each case where Junior Lender has given a default notice to Mortgagor. Senior Lender shall
have the opportunity, but not the obligation, to cure any Junior Mortgage default within 30
days following the date such notice is received; provided, however that Junior Lender shall
not, without prior written permission of HUD, exercise any remedies under the Junior Loan
Documents until the end of such 30-day period.
16. Senior Lender shall deliver to Junior Lender a default notice within five business days in
each case where Senior Lender has given a default notice to Mortgagor. Junior Lender shall
have the opportunity, but not the obligation, to cure any Senior Mortgage default within 30
days following the such notice is received. In the event the Senior Loan is transferred by
Senior Lender to HUD, HUD shall not be required to provide notice as set forth in this
paragraph 16.
17. Notice to Senior Lender or Junior Lender, as the case may be, shall be delivered by first class
mail or reputable overnight courier service (such as FedEx or UPS) to the address set forth
below. Such notice shall be deemed received by the addressee on the fourth business day
after mailing, in the case of notice sent by first class mail, or on the actual date of receipt for
delivery methods where such date is recorded. Notice addresses are as follows:
SENIOR LENDER:
Oak Grove Commercial Mortgage, LLC
ATTN: FHA Loan Servicing
RE: FHA Project No. 129-11060
2177 Youngman Avenue, Suite 300
St. Paul, MN 55116
With a copy to:
Krooth & Altman LLP
James R. Peck, Esq.
1850 M Street NW, Suite 400
Washington, DC 20036
Amendment to Deed of Trust Page 9
JUNIOR LENDER:
City of Carlsbad
Attn: Housing and Neighborhood Services Director
2965 Roosevelt Street, Suite B
Carlsbad, Ca. 92008
[SIGNATURE PAGE FOLLOWS]
Amendment to Deed of Trust Page 10
JUNIOR LENDER:
CITY OF CARLSBAD, a municipal corporation
By:
Name: Lisa Hildabrand
Title: City Manager
State of California
County of
On DcJtpV>tY
personally appeared
.1 ^ .
lJL<>
2011, before me,lA
eswho proved to me on the
basis of satisfactory evidence to be the person(s^, whose name^s) is/ar^subscribed to the within
instrument and acknowledged to me that •he/she/they executed the same in •kts/her/the» authorized
capacity(+es)r, and that by hts/her/their signature(-s) on the instrument the person^s), or the entity on
behalf of which the person(-s)*acted, executed the instrument.
I certify under penalty of perjury under the laws of the 'State of California that the foregoing
paragraph is true and correct.
ESS my hand and official seal.
Signature (Seal)
MORGENFRY
Commission * 1918442
Notary Public - California
San Diego County
My Comm. Expires OK 24.2014
Amendment to Deed of Trust Page 11
AMENDMENT TO PROMISSORY NOTE
(Hunters Pointe)
THIS AMENDMENT TO PROMISSORY NOTE ("Amendment") is dated as of the
day of October, 2011, by and between the City of Carlsbad, a municipal corporation ("City") and
CIC La Costa, L.P., a California limited partnership ("Borrower").
RECITALS
A. Borrower entered into that certain Promissory Note in favor of the City (the "Note"),
which Note is undated but effective as of August 19, 2008, in order to memorialize a loan from the
City to the Borrower in the amount of $1,932,000 for the financing of that certain multifamily rental
housing project known as Hunters Pointe Apartments located in Carlsbad, California ("Project").
Any capitalized terms not defined herein shall have the meanings ascribed to them in the Note.
B. Borrower is obtaining a permanent loan in the amount of Nine Million Seven
Hundred Fifty-Thousand ($9,750,000) ("Senior Loan") from Oak Grove Commercial Mortgage,
LLC, which loan shall be insured by the U.S. Department of Housing and Urban Development
Federal Housing Administration ("HUD") pursuant to Section 223(f) of the National Housing Act.
City and Borrower desire to amend the Note to include certain provisions required by HUD in
connection with the Senior Loan.
NOW, THEREFORE, in furtherance of the recitals stated above, the mutual covenants set
forth below, City and Borrower hereby amend the Note as follows:
1. HUD Provisions. The HUD Rider attached to this Amendment as Exhibit A, is hereby added
as Rider 1 to the Note.
2. Counterparts. This Amendment may be executed in any number of counterparts and, as so
executed, the counterparts shall constitute one and the same agreement. The parties agree that each
such counterpart is an original and shall be binding upon all the parties, even though all of the parties
are not signatories to the same counterpart.
3. Conflicts. In the event of any conflict between the Note and this Amendment, this
Amendment shall control.
4. Governing Law. This Amendment shall be construed and enforced in accordance with and
governed by the laws of the State of California.
[Signature Page Follows]
Amendment to Note Page 1
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the
date set forth above:
BORROWER:
CIC LA COSTA, L.P., a California limited partnership
By: DDC La Costa, LLC, a California limited liability company
Its: Co-General Partner
By: Chelsea Investment Corporation, a California corporation
Its: Manager
By:
Cheri Hoffman
President
By: Pacific Southwest Community Development Corporation,
a California nonprofit public benefit corporation
Its: Managing General Partner
By:
Robert Laing
Executive Director
CITY:
CITY OF CARLSBAD, a municipal corporation
By:
Name: Lisa Hildabrand
Title: City Manager
Approved as to form:
By:
y Attorney
Amendment to Note Page 2
Exhibit A
HUD RIDER
THIS RIDER ("Rider") is attached to and made a part of the foregoing Promissory Note
(herein, the "Junior Note") between CIC La Costa, L.P., a California limited partnership, referred to
herein as the "Mortgagor," and the City of Carlsbad, a municipal corporation, referred to herein as
the "Junior Lender." The Junior Note and all other documents evidencing or securing the loan from
Junior Lender to Mortgagor are collectively referred to as the "Junior Loan Documents". The terms
and conditions of the Rider supersede the terms of the Junior Loan Documents, and, should there be
any conflict or inconsistency between this Rider and the Junior Loan Documents, the terms and
conditions of this Rider shall prevail. The Junior Lender and Mortgagor agree to the following
provisions:
1. The Junior Loan Documents are specifically subordinate to that certain note and deed of trust
("Senior Mortgage") between the Mortgagor and Oak Grove Commercial Mortgage, LLC,
(herein, the "Senior Lender") dated as of October 1, 2011, and recorded concurrently
herewith in the real property records of San Diego County, California.
2. The Junior Note may not mature, and may not bear a maturity date, prior to the date on which
the Senior Mortgage matures. The term of the Junior Mortgage may be extended if the Junior
Note matures, there are no surplus cash funds available for repayment and the Senior
Mortgage has not been retired in full or HUD grants a deferment of amortization or
forbearance that results in an extended maturity of the Senior Mortgage.
3. The Junior Mortgage may be assumed when a sale or transfer of the physical assets occurs
under the following conditions:
a. Not more than 70 percent of the net proceeds of the sale or transfer is applied to the
reduction of the loan.
b. For these instructions, net proceeds are the funds available to the original mortgagor
after:
i. Correcting any monetary or covenant default on the Senior Mortgage, and
ii. Making required contributions to any reserve funds and needed improvements
to the property as evidenced by HUD's annual inspection reports.
4. If HUD approves a sale of the project pursuant to HUD guidelines for transfers of physical
assets, then Junior Lender will agree to such transfer of the ownership of the Project.
5. The Junior Note and Junior Mortgage automatically terminate if HUD acquires title to the
project by a deed in lieu of foreclosure.
6. All work performed with the proceeds of the Junior Mortgage must be cost certified and must
conform to Davis-Bacon requirements.
Amendment to Note Page 3
7- The Junior Mortgage is subject to and subordinate to the Senior Mortgage, the HUD
regulatory agreement between HUD and the Mortgagor.
8. Proceeds of the Junior Loan may only be used to cover allowable project costs or an
anticipated operating shortfall.
9. Payment Only From Surplus Cash. [Check the appropriate alternative below]
a. X [For junior loans secured by a lien against the project] As long as the
Secretary of Housing and Urban Development, or his/her successors or assigns, is the
insurer or holder of the Senior Mortgage, any payments due from project income
under the Junior Loan Documents, or any prepayments made, shall be payable only
form surplus cash of the project, as that term is defined in the Regulatory Agreement
dated as of October 1, 2011, between the Secretary and the Mortgagor ("Surplus
Cash"), and subject to the availability of such Surplus Cash in accordance with the
provision of said Regulatory Agreement. The restriction on payment imposed by this
paragraph shall not excuse any default caused by the failure of the maker to pay the
indebtedness evidence by the Junior Note.
b. n/a [For junior loans NOT secured by a lien against the project] As long as the
Secretary of Housing and Urban Development, or his/her successors or assigns, is the
insurer or holder of the Senior Mortgage, any payment due from project income
under the Junior Loan Documents, or any prepayments made, shall be payable only
from surplus cash of the project, as that term is defined in the Regulatory Agreement
dated , between the Secretary and Mortgagor, and subject to
the availability of such surplus cash in accordance with the provisions of said
Regulatory Agreement. The restrictions on payment imposed by this paragraph shall
not excuse any default caused by the failure of the maker to pay the indebtedness
evidenced by the Junior Note. Junior Lender has no claim and will not later assert any
claim for payment against the mortgaged property, the mortgage proceeds, any
reserve or deposit made with the Senior Lender or another required by the Secretary
in connection with the mortgage transaction, or against the rents or other income from
the mortgaged property. The Mortgagor cannot issue a surplus cash note to the
principals as evidence of an obligation for payment of the Junior Loan.
1 0. Mortgagor has obtained the prior written consent of the Senior Lender to the existence of the
Junior Loan.
11. To the extent that the Junior Note provides for payment of principal and interest, such
principal and interest shall be due and payable on the maturity date of the Senior Mortgage,
provided that if the Senior Mortgage is prepaid in full, the holder of the Junior Note, at its
option and without notice, may declare the whole principal sum or any balance thereof,
together with interest thereon, immediately due and payable. Interest due pursuant to the
terms of the Junior Note that is not paid in accordance therewith shall not create any default
in the terms of the Junior Note, but shall accrue and be payable in full at the date of maturity
of the Senior Mortgage.
12. The Junior Note is non-negotiable and may not be sold, transferred, assigned, or pledged by
the Junior Lender except with the prior written approval of HUD.
Amendment to Note Page 4
13. The Junior Lender certifies that the Junior Loan Documents represent a bonafide transaction
and that it fully understands all of HUD's requirements for such secondary financing, and that
no prepayment of principal or interest shall be accepted without evidence that the Federal
Housing Commissioner has authorized such prepayment. If an unauthorized prepayment is
accepted, the funds shall be held by the Junior Lender in trust for the project.
14. Without the prior written consent of HUD, Junior Lender shall not consent to a transfer of
any interest in (a) the Mortgagor entity, or (b) the property subject to the Senior Mortgage,
for so long as the Senior Mortgage remains in effect. Further, in the event HUD agrees to any
such transfer of interest, the Junior Lender shall also agree to same.
15. Junior Lender shall deliver to Senior Lender a default notice within five business days in
each case where Junior Lender has given a default notice to Mortgagor. Senior Lender shall
have the opportunity, but not the obligation, to cure any Junior Mortgage default within 30
days following the date such notice is received; provided, however that Junior Lender shall
not, without prior written permission of HUD, exercise any remedies under the Junior Loan
Documents until the end of such 30-day period.
16. Senior Lender shall deliver to Junior Lender a default notice within five business days in
each case where Senior Lender has given a default notice to Mortgagor. Junior Lender shall
have the opportunity, but not the obligation, to cure any Senior Mortgage default within 30
days following the such notice is received. In the event the Senior Loan is transferred by
Senior Lender to HUD, HUD shall not be required to provide notice as set forth in this
paragraph 16.
1 7. Notice to Senior Lender or Junior Lender, as the case may be, shall be delivered by first class
mail or reputable overnight courier service (such as FedEx or UPS) to the address set forth
below. Such notice shall be deemed received by the addressee on the fourth business day
after mailing, in the case of notice sent by first class mail, or on the actual date of receipt for
delivery methods where such date is recorded. Notice addresses are as follows:
SENIOR LENDER:
Oak Grove Commercial Mortgage, LLC
ATTN: FHA Loan Servicing
RE: FHA Project No. 129-11060
2177 Youngman Avenue, Suite 300
St. Paul, MN 55116
With a copy to:
Krooth & Altman LLP
James R. Peck, Esq.
1850 M Street NW, Suite 400
Washington, DC 20036
Amendment to Note Page 5
JUNIOR LENDER:
City of Carlsbad
Attn: Housing and Neighborhood Services Director
2965 Roosevelt Street, Suite B
Carlsbad, Ca. 92008
JUNIOR LENDER:
CITY OF CARLSBAD, a municipal corporation
By:
Name: Lisa Hildabrand
Title: City Manager
Amendment to Note Page 6