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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 ^D Dn n CONTINUED TO DATE SPECIFIC CONTINUED TO DATE UNKNOWN RETURNED TO STAFF OTHER -SEE MINUTES D D D D 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 11 apartment units affordable to lower income households known as Hunters Point; and 12 WHEREAS, Chelsea Investment Corporation received a residual receipts loan from the 13 City of Carlsbad in the amount of $1,932,000 to provide financial assistance for the construction 14 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 24 the noted HUD financing program, the City of Carlsbad must approve amendments to its 25 regulatory agreement and related loan documents for its financial assistance to said development 26 to add HUD financing requirements and subordinate to said loan; and 28 "" 1 2 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 6 7 8 9 10 11 12 13 14 15 16 18 19 20 21 22 23 24 25 26 27 28 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: 3 .. AYES: Council Members Hall, Blackburn, Douglas and Packard. 4 5 NOES: None. 6 ABSENT: Council Member Kulchin. 8 " 9 10 11 MATT'HALL, Mayor 12 ATTEST: 13 /7 14 // 0 L/ rV I A15 L0RRA^l£ M. \N0<3$, Cify Clerk 16 ($EAL) 17" 18 19 20 21 22 23 24 25 26 27 28 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