HomeMy WebLinkAbout2013-01-29; City Council; 21108; Approval Loan Documents Carol Harding AcquisitionCITY COUNCIL
AGENDA BILL
AB#
MTG.
DEPT.
21,108
1/29/13
HNS
APPROVAL OF FORM OF LOAN
DOCUMENTS AND AUTHORIZATION FOR
EXECUTION FOR THE CAROUHARDING
ACQUISITION - AFFORDABLE HOUSING
DEVELOPMENT
DEPT. HEA
CITY ATTY.
CITY MGR. 5^
RECOMMENDED ACTION:
That the City Council adopt Resolution No. 2013-026 APPROVING the form of the
loan documents for the project known as the Carol-Harding Duplex Acquisition for an affordable
housing development located in the historic Barrio neighborhood ofthe Village area, and
authorizing the Interim City Manager, or designee, to execute said documents subject to final
review and approval by the City Attorney, or designee.
ITEM EXPLANATION:
An affordable housing partnership - C&C Development and Irvine Housing Opportunities -
have previously contracted with a private property owner to purchase 21 duplexes (42 units
total) with addresses on Carol Place, Harding Street and Magnolia Avenue (site map attached)
in the historic Barrio neighborhood ofthe Carisbad Village Area. The development partnership,
which has incorporated and is now known as Harding Street Neighbors, LP, intends to initially
acquire the duplexes, complete some minor health and safety standard upgrades, and then
rent-restrict all of the units to provide affordable housing for lower income households. Within
approximately 3 to 5 years, the development partnership intends to complete the acquisition of
some additional properties within the neighborhood and then proceed with new construction of
a much larger, higher density affordable housing development. As an additional note, the
partnership has recently contracted to purchase one additional duplex within the subject
neighborhood with private financing. Therefore, a total of 22 duplexes will be purchased by the
partnership at the close of escrow (anticipated in February, 2013). If for any reason the new
construction does not move fon^/ard to completion, the development partnership will proceed
with substantial rehabilitation of the existing units and continue to rent-restrict those units for
affordable housing purposes.
The 3.39 acre site is located in close proximity to Jefferson School and is located within the
general boundaries of 1-5 (east), Carol Place/Tamarack Avenue (south), Jefferson Street (west)
and Magnolia Avenue (north). The development as originally proposed to the City consists of 42
existing rental units (2 bedroom/1 bath), single story with one car garages.
DEPARTMENT CONTACT: Debbie Fountain 760-434-2815 debbie.fountain(S:)carisbadca.qov
FOR CITY CLERKS USE ONLY. X COMMISSION APPROVED X CONTINUED TO DATE •
ACTION: X SPECIFIC
DENIED • CONTINUED TO DATE •
UNKNOWN
CONTINUED • RETURNED TO STAFF •
WITHDRAWN • OTHER-SEE MINUTES •
AMENDED •
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As noted above, there will be an additional duplex unit acquired at the close of escrow with
additional private financing; therefore, the total number of units for the project will increase to
44.
Upon acquisition, the project will have the following affordability levels:
• 20 units for households earning 60% of the San Diego County Area Median Income
(AMI);
• 23 units will be affordable to households earning 90% of AMI;
• 1 unit will be for an on-site property manager.
Financial Assistance
As part of the project financing, the Developer partnership has requested that the City provide a
residual receipts loan in the rounded amount of $7,408,000 to assist in the acquisition ofthe
property. The City Council approved the full amount ofthe requested financing on November 6,
2012 from the Housing Trust Fund. The City Council requested that the loan documents be
returned for approval by the Council. The loan documents have been drafted and are presented
for City Council review and approval, and authorization to execute.
Financial Assistance Documents
As proposed and if approved, the City assistance ($7,408,000) will be provided in the form of a
residual receipts loan secured by a note and deed of trust. The outstanding principal and
accrued interest on the City loan will be amortized over a fifty-five year period and repaid from
surplus cash in equal annual installments comprised of principal and interest. In the event that
there is not adequate cash surplus to pay an annual installment, the outstanding balance shall
accrue with simple interest at 3% per annum. The terms of the City assistance is the same loan
structure that has been utilized for each previous affordable housing project developed in the
City of Carisbad, with the exception of the following specific key conditions related to the
uniqueness of this project - acquisition/rehabilitation/new construction:
1. Developer must acquire the additional properties required to construct a new, larger (higher
density; approximately 140 units) affordable housing development on the site within 18
months from the date of approval of this agreement; or
2. No later than December 31, 2015 or three (3) years after the acquisition of the Property,
whichever is later, the Developer must (a) obtain all planning approvals and building permits
necessary to construct the future required improvements for a new, larger (higher density)
affordable housing development or (b) immediately Initiate work to substantially rehabilitate
the existing units with an investment of at least $75,000 per unit, including all improvements
and amenities (if larger project is not feasible for any reason).
3. Developer must commence construction ofthe improvements for a new, larger (higher
density; approximately 140 units) affordable housing development or the substantial
rehabilitation ofthe existing units (if larger project is not feasible for any reason) no later
than by December 31, 2016.
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4. Developer must complete construction of the improvements for a new, larger (higher density)
affordable housing development or the substantial rehabilitation ofthe existing units (if larger
project is not feasible for any reason) by December 31, 2018, or four (4) years after
construction financing closing for the larger development, whichever is later.
If any of the above conditions are not met and the City does not agree to extend the
deadlines for satisfaction of the conditions, the City may declare a breach of contract or a
default on the loan agreement resulting in a requirement for the development partnership to
immediately repay the full amount ofthe loan with interest to the City of Carisbad.
In order for the project to receive the $7,408,000 loan, the Developer is required to enter into
loan and regulatory agreements with the City of Carisbad. The City Council is being asked to
authorize the Interim City Manager, or designee, to execute the loan documents in the form
set forth herein and deposit said documents to escrow for recordation against the subject
property, following final review and approval by the City Attorney, or designee. The required
documents are explained further below:
1. Loan Agreement states the terms and conditions relating to the City's loan.
2. Regulatory Agreement records the terms of affordability and the operational
requirements for the project.
3. Promissory Note is executed by the Developer and expresses their intent to repay the
loan.
4. Deed of Trust is recorded against the property to secure the City/Agency's interest in the
subject property and related improvements.
It is important to also note that the City will ultimately be required to subordinate the subject
documents to the senior lien holder, which will initially be Bank of America. If approved, the
attached resolution authorizes the Interim City Manager, or designee, to execute subsequent
loan documents as well as a subordination agreement, upon final review and approval by the
City Attorney, or designee.
ENVIRONMENTAL REVIEW
The project is exempt from the California Environmental Quality Act (CEQA) per CEQA
Guidelines Section 15194 - Affordable Housing.
The financial assistance from the City of Carisbad will be used by the developer to acquire
existing residential units and rehabilitate them, and then to rent-restrict the units to be
affordable to lower income households. This proposed project was reviewed pursuant to the
California Environmental Quality Act (CEQA). The City Planner has determined that the
proposed project is exempt from additional environmental review per Section 15194
(affordable housing exemption) of CEQA because the project site is 1) no larger than five
acres, 2) is in an urbanized area, and 3) the project site has been previously developed for
qualified urban uses (residential). The project also consists ofthe construction, conversion, or
use of residential housing consisting of 100 or fewer units that are affordable to low-income
households, and the developer will legally commit to ensure the continued availability and
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use of the housing units for lower income households for a period of at least 30 years at
monthly costs deemed to be affordable rent for lower income households.
The future larger (higher density) apartment development will require separate environmental
review and approval, if it is determined that the subject project will proceed. The
environmental review for the new construction project will be completed at a later date and
represent a review of the project at the time it is proposed.
FISCAL IMPACT:
The financial assistance in the form of a $7,408,000 residual receipts loan will be provided
from the Housing Trust Fund, which has a current undesignated fund balance of
approximately $19.8 million. These funds may be used for affordable housing purposes only;
these are not general fund monies that may be used for other services or projects.
EXHIBITS:
1. City Council Resolution No. 2013-026 to approve the loan documents in the form
submitted to the City Council for the Carol/Harding Acquisition and Affordable Apartment
Development, and to authorize the Interim City Manager to execute said documents.
2. Project Location Map
3. Loan Agreement
4. Deed of Trust
5. Promissory Note
6. Regulatory Agreement
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1 RESOLUTION NO. 2013-026
2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, TO APPROVE THE LOAN
^ DOCUMENTS IN THE FORM SUBMITTED TO THE CITY COUNCIL
FOR A RESIDUAL RECEIPTS LOAN IN THE AMOUNT OF
$7,408,000 TO PROVIDE FINANCIAL ASSISTANCE TO THE
PARTNERSHIP OF C&C DEVELOPMENT AND IRVINE HOUSING
OPPORTUNITIES, KNOWN AS HARDING STREET NEIGHBORS
6 LP, FOR THE ACQUISITION OF FORTY-TWO (42) RENTAL UNITS
TO BE RESTRICTED FOR LOW INCOME AFFORDABLE HOUSING
7 WITHIN THE NORTHWEST QUADRANT OF THE CITY OF
CARLSBAD, AND AUTHORIZING THE INTERIM CITY MANAGER
^ OR DESIGNEE TO EXECUTE SAID DOCUMENTS.
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WHEREAS, C&C Development and Irvine Housing Opportunities (IHO) did partner
and propose to acquire 21 duplex (42 total) rental residential units and convert them to rent-
restricted affordable housing for lower income households on Harding Street, Carol Place and
13 Magnolia Avenue in the historic Barrio neighborhood of the Village Area within the Northwest
14 Quadrant of the City of Carlsbad; and
15 WHEREAS, C&C Development and IHO did request that the City of Carisbad provide
financial assistance in the form of an acquisition loan in the amount of $7,408,000 that will
convert to a residual receipts permanent loan to assist in the development of a new affordable
housing rental opportunity within Carlsbad or the substantial rehabilitation of the existing
development; and
WHEREAS, C&C Development and IHO recently created a new partnership known as
Harding Street Neighbors, LP, and request that said approved loan proceeds be disbursed to said
23 partnership for acquisition of the subject property; and
24 WHEREAS, Harding Street Neighbors, LP has agreed to diligently pursue the
25 development of a new, larger (higher density) affordable housing development on the site of the
26 subject property, or to substantially rehabilitate the existing units if the new, larger (higher
density) development is not feasible for any reasons.
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1 WHEREAS, the public benefits of the proposed project include physical enhancement of
2 a deteriorating neighborhood in the historic Barrio neighborhood of the Village area,
^ rehabilitation of existing dwelling units to improve livability for the residents, diversity of
housing opportunities for lower income households, and additional units to count as an
affordable housing opportunity for the City of Carlsbad's Housing Element; and
WHEREAS, the proposed acquisition and rehabilitation project will also encourage
future new development and upgrading of the neighborhood further, as well as providing for
desirable amenities to support economic development (with implementation of a micro-
enterprise loan program to residents for new businesses) and encouraging a sustainable
11 community (addition of a community garden).
12 WHEREAS, the City Council did on November 6, 2012 hold a public meeting to
^ ^ consider public comment on said request for City financial assistance for the acquisition of said
42 lower income-restricted affordable housing apartment units by the affordable housing
developer partnership of C&C Development and IHO, now known as Harding Street Neighbors,
LP, and did approve said request for $7,408,000 for acquisition of property with conditions that
the development partnership proceed with development of a new, larger (higher density)
affordable housing development within 3 to 5 years, or substantially rehabilitate the existing
units if the larger new development is not feasible for any reason; and,
21 WHEREAS, the City Council desires to review and approve the loan documents in the
22 form submitted to the City Council, and authorize the Interim City Manager, or designee, to
23 execute said documents upon final review and approval by the City Attomey.
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1 NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council oftiie City
2 of Carlsbad, Califomia, as follows:
1. The above recitations are tme and correct. 3
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The City Council approved the financial assistance request ($7,408,000) for the
5 acquisition of property for an affordable housing development at Carol Place,
Harding Street, Magnolia Avenue in the historic Barrio neighborhood of the Village
6 area by C&C Development and Irvine Housing Opportunities (IHO), now known as
^ Harding Street Neighbors, LP, on November 6, 2012.
g 3. That the City Coimcil hereby approves the loan documents as to form as submitted
herein, and authorizes the Interim City Manager, or designee, to execute all loan
9 documents related to provision of the City financial assistance in the form of a
residual receipts loan, subject to final review and approval by the City Attomey, to
10 fund the subject acquisition of property by Harding Street Neighbors, LP (C&C
Development and Irvine Housing Opportunities) for development of a low income-
restricted affordable housing project through acquisition and new constmction or
acquisition and substantial rehabilitation, and to deposit said documents to escrow for
recordation at time of property acquisition.
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4. That the City Coimcil authorizes the City Manager, or designee, to also execute
14 subsequent subordination agreement(s) subordinating the City's Regulatory
Agreement and Deed of Tmst to the Deed of Tmst to senior liens for permanent
15 lenders, as required, subject to review and approval by the City Attomey, and subject
to the City Manager finding that no other financing that does not require
subordination is reasonably available and the loan amount subordinated to by the City
does not exceed $4 million dollars unless good cause is demonstrated to the City
Manager to exceed this amount.
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5. That the City Council authorizes the Finance Director to disburse the loan proceeds as
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account for the residual receipts loan for the subject affordable housing project, and
2^ as set forth in the approved loan documents.
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PASSED, APPROVED AND ADOPTED at a Regular Meeting ofthe City Council
of the City of Carisbad on the 29*^ day of January 2013, by the following vote to wit:
AYES: Council Members Hall, Wood, and Blackburn.
NOES: Council Members Packard and Douglas.
ABSENT: None.
MATTiHALL, Mayor
ATTEST:
EXHIBIT 2
PROJECT LOCATION MAP
Subsequent Acquisition Sf
Total Land Area Including City Street- Approximately 7.02 acres
EXHIBITS
LOAN AGREEMENT
LOAN AGREEMENT
BY AND BETWEEN
CITY OF CARLSBAD
AND
HARDING STREET NEIGHBORS, LP
(Carol-Harding Duplex Property Acquisition)
This Loan Agreement ("Agreement") is entered into as of , 2013, by
and between the City ofCarlsbad, a Municipal Corporation ("City") and Harding Street
Neighbors LP, a Califomia limited partnership, (Borrower), with reference to the following
facts, purposes and intentions.
RECITALS
A. These Recitals refer to and utilize certain capitalized terms which are defined in
Article 1 of this Agreement. The Parties intend to refer to those definitions in connection with
the use of capitalized terms in these Recitals.
B. Pursuant to Resolution Number 2012-235, adopted by the City on November 6,
2012, the City committed to provide financial assistance in the form of a residual receipts loan of
Housing Tmst Funds to C & C Development Co., LLC and Irvine Housing Opportunities, both
as joint borrower, to allow for the acquisition of property with existing dwelling units for
affordable housing purposes.
C. The joint borrower of C&C Development Co., LLC and Irvine Housing
Opportunities shall herein be known as Harding Street Neighbors LP within this Agreement and
all other related loan documents for said Development.
D. Borrower will receive an amount not to exceed Seven Million Four Hundred
Eight Thousand Dollars ($7,408,000) initially for acquisition and minor rehabilitation of
property to be used to provide affordable housing opportunities for lower and moderate income
households until such time as the borrower can move forward as developers to build a larger,
higher density affordable rental development (of approximately 140 rental units) or substantially
rehabilitate the existing units if a new constmction project is not approved for any reason. The
loan will be funded solely from local govemment sources and will not be funded with any
federal funds.
E. As a condition to providing the Loan, the City is requiring that the Borrower
assist lower and moderate income households and to the maximum extent legally possible give
priority or preference in marketing to a proportionate share of Carlsbad residents or those
employees that work in Carlbad as set forth within the Regulatory Agreement between the
borrower and the City of Carlsbad and for a minimum of fifty-five years.
Draft: Carol-Harding Duplex Loan; 1/8/13 1
F. The noted property acquisition has been reviewed pursuant to the Califomia
Environmental Quality Act (CEQA) and found to be exempt from CEQA pursuant to Section
1530.
NOW, THEREFORE, in consideration of the recitals hereof and the mutual promises and
covenants set forth in this Agreement, the Parties agree as follows:
ARTICLE 1
DEFINITIONS AND EXHIBITS
Section 1.1 Definitions.
The following capitalized terms have the meanings set forth in this Section 1.1 wherever
used in this Agreement, unless otherwise provided:
(a) "Agreement" means this Loan Agreement.
(b) "Approved Development Budget" means the proforma development
budget, including sources and uses of funds, as approved by the City, and attached hereto and
incorporated herein as Exhibit B, but which may be amended with the approval of the City as set
forth in this Agreement.
(c) "Approved Financing" means the City's Housing Tmst Funds set forth
herein and a private bank loan for the acquisition of property set forth herein. This loan
agreement will be amended at such time as additional financing is acquired for the ultimate
development of new rental units on said property or to allow for the substantial rehabilitation of
the existing dwelling units.
(d) "Borrower" means Harding Street Neighbors LP, a Califomia limited
partnership.
(e) "City" means the City of Carlsbad, a municipal corporation.
(f) "City Council" means the City Council of the City.
(g) "Control" means (i) direct or indirect management or control ofthe
managing member or members in the case of a limited liability company; (ii) direct or indirect
management or control of the managing general partner or general partners in the case ofa
partnership and (iii) (a) boards of directors that overlap by fifty percent (50%) or more of their
directors, or (b) direct or indirect control of a majority of the directors in the case ofa
corporation.
Draft: Carol-Harding Duplex Loan; 1/8/13 2
(h) "Deed of Tmst" means the deed of tmst that will encumber the
Development to secure repayment of the Loan. The form of the Deed of Tmst shall be provided
by the City.
(i) "Default" has the meaning set forth in Section 6.1 below,
(j) "Development" means the Property and the Improvements.
(k) "Hazardous Materials" has the meaning set forth in Section 3.16 below.
(1) "Hazardous Materials Claim" has the meaning set forth in Section 3.16
below.
below.
(m) "Hazardous Materials Law" has the meaning set forth in Section 3.16
(n) "Improvements" means the approximately twenty-one duplexes or forty-
two (42) total existing dwelling units, to be acquired and rehabilitated for health and safety
improvements on the Property, plus an additional parcel of vacant land.
(o) "Loan" means the amount not to exceed Seven Million Four Hundred
Eight Thousand Dollars ($7,408,000) to be provided by the City to the Borrower pursuant to the
Loan Documents. The Loan is more particularly described in Section 2.1.
(p) "Loan Documents" means this Agreement, the Note, the Regulatory
Agreement, and the Deed of Tmst.
(q) "Note" means the promissory note that will evidence the Borrower'
obligation to repay the Loan. The form of the Note shall be provided by the City.
(r) "Parties" means the City and the Borrower.
(s) "Property" means the real property located in the historic Barrio
neighborhood ofthe City ofCarlsbad, County of San Diego, State of Califomia, more
particularly described in the attached Exhibit A, which includes 21 existing duplex rental units
and a vacant lot.
(t) "Regulatory Agreement" means the Regulatory Agreement between the
Borrower associated with the Loan and recorded against the Property.
(u) "Regulatory Term" means the term of the Regulatory Agreement.
(v) "Term" means the earlier of either: 1) fifty-five (55) years from the
issuance of a Certificate of Occupancy, or its equivalent; or 2) sixty (60) years from the date of
this agreement.
Draft: Carol-Harding Duplex Loan; 1/8/13
(w) "Transfer" has the meaning set forth in Section 4.1 below.
(x) "Unit" means one of the approximately forty-two (42) apartment units to
be acquired and rehabilitated on the Property; twenty (20) units of which will be specifically
restricted and required to be rented to lower income households by the City.
Section 1.2 Exhibits.
The following exhibits are attached to this Agreement and incorporated into this
Agreement by this reference:
EXHIBIT A: Legal Description of the Property
EXHIBIT B: Approved Development Budget
ARTICLE 2
LOAN PROVISIONS
Section 2.1 Loan: Excess Proceeds of Permanent Financing.
(a) Subject to satisfaction of the conditions set forth in Section 2.5, the City
shall lend to the Borrower the Loan in the principal sum not to exceed Seven Million Four
Hundred and Eight Thousand Dollars ($7, 408,000). The Borrower's obligation to repay the Loan
shall be evidenced by the Note.
Section 2.2 Interest.
(a) Subject to the provisions of Section 2.2(b) below, the outstanding
principal balance ofthe Loan shall accme simple interest at the rate of three percent (3%).
(b) In the event of a Default, interest on the Loan shall begin to accme, as of
the date of Default and continue until such time as the Loan funds are repaid in full or the
Default is cured, at the default rate of the lesser of ten percent (10%), compounded annually, or
the highest rate permitted by law.
Section 2.3 Use of Funds.
(a) The Loan funds shall be used for acquisition of the Property. In addition,
if financially feasible, the loan funds shall be used for permanent financing for the development
ofthe Property with a larger, higher density rental development to be affordable to lower income
households. Altematively, ifthe Borrower is unable to develop the larger and denser affordable
rental development, the Borrower shall utilize the Loan funds to finance the substantial
rehabilitation of the existing dwelling units on the Property.
Draft: Carol-Harding Duplex Loan; 1/8/13 4
IS
(b) The Borrower shall not use the Loan for any other purpose without the
prior written consent of the City, and without amendment to this loan agreement.
Section 2.4 Security.
The Borrower shall secure its obligation to repay the Loan, as evidenced by the Note, by
executing the Deed of Trust, and recording it as a lien against the Borrower's fee interest in the
Property in a lien position reasonably acceptable to the City.
Section 2.5 Loan Disbursement.
The City shall not be obligated to fund any portion of the Loan or take any other action
under the Loan Documents unless all of the following conditions precedent are satisfied. Upon
satisfaction ofthe conditions set forth below, the City shall promptly disburse the Loan Amount
into the appropriate escrow account to allow for acquisition of said property.
(a) There exists no Default nor any act, failure, omission or condition that
would constitute or cause a Default;
(b) The Borrower has delivered to the City a copy of a duly adopted
resolution authorizing the Borrower to execute the Loan Documents and the transactions
contemplated by the Loan Documents;
(c) The Borrower has fiimished the City with evidence of the insurance
coverage meeting the requirements of Section 3.21 below;
(d) The Borrower will hold fee interest to the Property at the close of escrow
on the property acquisition;
(e) The Borrower has executed and delivered to the City this Agreement, the
Note, the Deed of Tmst and the Regulatory Agreement, and the Deed of Trust and the
Regulatory Agreement have been recorded against the Property in the Office ofthe Recorder of
the County of San Diego in a lien position acceptable to the City;
(f) The Borrower has executed and delivered to the City all documents,
instmments, and policies required under the Loan Documents;
(g) A title insurer reasonably acceptable to the City is unconditionally and
irrevocably committed to issuing an ALTA Lender's Policy of insurance insuring the priority of
the Deed of Tmst in the amount ofthe Loan, subject only to such exceptions and exclusions as
may be reasonably acceptable to the City, and containing such endorsements as the City may
reasonably require;
(h) The City has received and approved the final property purchase contract;
Draft: Carol-Harding Duplex Loan; 1/8/13 5
(i) The Borrower shall have submitted to the City and obtained City approval of
a acquisition/minor improvement budget for the Development.
(j) The Borrower has closed all financing for said acquisition and minor
improvements (other than the financing described in Sections 1.1(c).
Section 2.6 Repayment of the Loan.
The Loan shall be repaid as follows:
(a) Term. The Term of the Loan shall commence as of the date of this
Agreement and shall expire at the end of the Term.
(b) Annual Repayments. Commencing on May 1 st of 2018, or May 1 of the
first year after completion of the new larger, higher density development on said property,
whichever is sooner, and on each May 1st thereafter throughout the Term ofthe Loan, the
Borrower shall make repayments of the Loan to the City equal to seventy percent (70%) ofthe
Residual Receipts calculated for the previous year. The Borrower shall provide the City, by each
May 1st following each fiscal year, a report showing the actual income and expenditures with
respect to the Development for the immediately preceding fiscal year, the calculation of Annual
Operating Expenses, Gross Revenue, and Residual Receipts (including, the Borrower' Share of
Residual Receipts, if any, and the City's Share of Residual Receipts), the status of all reserve
funds, including without limitation, an annual audited financial statement for the Development
prepared by a certified public accountant approved by the City. Payments made to the City shall
be credited first against accrued interest and then against outstanding principal.
(c) Payment in Full. All principal and interest, if any, on the Loan shall, at
the option ofthe City, be due and payable upon the eariiest of: (i) a Transfer other than a
Transfer permitted or approved by the City as provided in Article 4 below; (ii) the occurrence of
a Default for which the City exercises its right to cause the Loan indebtedness to become
immediately due and payable; or (iii) the expiration of the Term specified in (a) above.
(d) Prepayment. The Borrower shall have the right to prepay the Loan at any
time without premium or penalty. However, this Agreement, the Deed of Tmst, and the
Regulatory Agreement shall remain in effect for the entire Term, regardless of any prepayment.
(e) Special Definitions. The following definitions shall apply for purposes of
this Section 2.6:
(1)"Annual Operating Expenses" with respect to a particular fiscal year
shall mean the following costs reasonably and actually incurred for operation, maintenance and
City-approved repairs ofthe Development to the extent that they are consistent with the annual
budget for the Development, approved by the City pursuant to the Regulatory Agreement and
with an annual independent audit performed by a certified public accountant, reasonably
acceptable to the City, using generally accepted accounting principles: property taxes and
assessments imposed on the Development; debt service (including required escrow and reserve
deposits and tmstee and servicing fees) currently due on a non-optional basis (excluding debt
Draft: Carol-Harding Duplex Loan; 1/8/13
.1
service due from residual receipts or surplus cash of the Development) on loans associated with
development ofthe Development and approved by the City pursuant to Section 2.50); and
property management fees and reimbursements, not to exceed fees and reimbursements which
are standard in the industry and pursuant to a management contract approved by the City ;
partnership management fees (including asset management fees) payable to any partner or
affiliate of any partner of Borrower, if any, not to exceed a total of Twenty-Five Thousand
Dollars ($25,000), with such fees increasing at the rate of three percent (3%) per year; payment
of any previously unpaid portion of the development fee not exceeding a cumulative
development fee, which such fee is previously approved by the City; payment of a reasonable fee
to a social service provider for the development, which such fee is previously approved by the
City; premiums for property damage and liability insurance; utility services not paid for directly
by tenants, including water, sewer, and trash collection; maintenance and repair; any annual
license or certificate of occupancy fees required for operation of the Development; security
services; advertising and marketing; and cash deposited into reserve for capital replacements of
the Development in an amount not to exceed the amount required in connection with the
permanent financing approved by the City pursuant to Section 2.1 or by the City if no other
lender or investor requires approvals of such amount; extraordinary operating costs specifically
approved in writing by the City as part of the annual budget approval process pursuant to the
Regulatory Agreement; payments of deductibles in connection with casualty insurance claims
not normally paid from reserves; the amount of uninsured losses actually replaced, repaired or
restored, and not normally paid from reserves; credit adjusters from cash flow; operating deficit
loans; and other ordinary and reasonable operating expenses approved in writing by the City and
not listed above. Annual Operating Expenses shall not include the following: depreciation,
amortization, depletion or other non-cash expenses; any amount expended from a reserve
account; and any capital cost with respect to the Development, as determined by the accountant
for the Development.
(2)"Gross Revenue" with respect to a particular fiscal year shall mean all
revenue, income, receipts, and other consideration actually received from operation and leasing
ofthe Development. Gross Revenue shall include, but not be limited to: all rents, fees and
charges paid by tenants. Section 8 payments or other rental subsidy payments received for the
dwelling units, deposits forfeited by tenants, all cancellation fees, price index adjustments and
any other rental adjustments to leases or rental agreements; net proceeds from vending and
laundry room machines; the proceeds of business intermption or similar insurance and not paid
to senior lenders; the proceeds of title insurance not reinvested in the property; the proceeds of
casualty insurance not used to rebuild the Development and not paid to senior lenders; and
condemnation awards for a taking of part or all of the Development for a temporary period not
paid to senior lenders. Gross Revenue shall not include tenants' security deposits, loan proceeds,
capital contributions or similar advances.
(4)_"Residual Receipts" in a particular calendar year shall mean the amount by
which Gross Revenue (as defined above) exceeds Annual Operating Expenses (as defined
above).
Section 2.7 Reports and Accounting of Residual Receipts.
Draft: Carol-Harding Duplex Loan; 1/8/13
(a) Audited Financial Statement. In connection with the annual payments set
forth in Section 2.6(b), within ninety (90) days of the end of the Borrower's fiscal year, the
Borrower shall fumish to the City an audited statement duly certified by an independent firm of
certified public accountants approved by the City, setting forth in reasonable detail the
computation and amount of Residual Receipts during the preceding calendar year.
(b) Books and Records. The Borrower shall keep and maintain on the
Property, or at its principal place of business, or elsewhere with the City's written consent, full,
complete and appropriate books, records and accounts relating to the Development, including all
such books, records and accounts necessary or prudent to evidence and substantiate in full detail
the Borrower's calculation of Residual Receipts. Books, records and accounts relating to the
Borrower's compliance with the terms, provisions, covenants and conditions of this Agreement
shall be kept and maintained in accordance with generally accepted accounting principles
consistently applied, and shall be consistent with requirements of this Agreement which provide
for the calculation of Residual Receipts on a cash basis. All such books, records, and accounts
shall be open to and available for inspection by the City, its auditors or other City authorized
representatives at reasonable intervals during normal business hours. Copies of all tax retums
and other reports that the Borrower may be required to fumish any govemmental agency shall at
all reasonable times be open for inspection by the City at the place that the books, records and
accounts ofthe Borrower are kept. The Borrower shall preserve records on which any statement
of Residual Receipts is based for a period of not less than five (5) years after such statement is
rendered, and for any period during which there is an audit undertaken pursuant to subsection (c)
below then pending.
(c) Audits. The receipt by the City of any statement pursuant to subsection
(a) above or any payment by the Borrower or acceptance by the City of any Loan repayment
shall not bind the City as to the correctness of such statement or such payment. Within three (3)
years after the receipt of any such statement, the City or any designated agent or employee ofthe
City at any time shall be entitled to audit the Residual Receipts and all books, records, and
accounts pertaining thereto. Such audit shall be conducted during normal business hours at the
principal place of business ofthe Borrower and other places where records are kept. Immediately
after the completion of an audit, the City shall deliver a copy of the results of such audit to the
Borrower. If it shall be determined as a result of such audit that there has been a deficiency in a
Loan repayment to the City, then such deficiency shall become immediately due and payable
with interest at the default rate set forth in this Agreement, determined as of and accming from
the date that said payment should have been made. In addition, if the Borrower's auditor's
statement for any Development fiscal year shall be found to have understated Residual Receipts
by more than five percent (5%) and at least Five Thousand Dollars ($5,000), and the City is
entitled to any additional Loan repayment as a result of said understatement, then the Borrower
shall pay, in addition to the interest charges referenced hereinabove, all of the City's reasonable
costs and expenses connected with any audit or review of the Borrower's accounts and records.
(d) Maximization of Residual Receipts. The Borrower agrees at all times
during the Term to continue its operations of the Development and to use its skills and diligence
to produce the maximum Residual Receipts, subject to the rent and occupancy requirements of
the Regulatory Agreement.
Draft: Carol-Harding Duplex Loan; 1/8/13
Section 2.8 Non-Recourse.
Except as provided below, the Borrower and its general partners shall not have any direct
or indirect personal liability for payment of the principal of, or interest on, the Loan or the
performance ofthe covenants of the Borrower under the Deed of Tmst. The sole recourse ofthe
City with respect to the principal of, or interest on, the Note and defaults by the Borrower in the
performance of its covenants under the Deed of Tmst shall be to the Property described in the
Deed of Tmst; provided, however, that nothing contained in the foregoing limitation of liability
shall (a) limit or impair the enforcement against all such security for the Note of all the rights and
remedies ofthe City thereunder, or (b) be deemed in any way to impair the right ofthe City to
assert the unpaid principal amount of the Note as demand for money within the meaning and
intendment of Section 431.70 ofthe Califomia Code of Civil Procedure or any successor
provision thereto. The foregoing limitation of liability is intended to apply only to the obligation
for the repayment ofthe principal of, and payment of interest on the Note and the performance of
the Borrower' obligations under the Deed of Tmst, except as hereafter set forth; nothing
contained herein is intended to relieve the Borrower of its obligation to indemnify the City under
Sections 3.4, 3.6, and 3.15 of this Agreement; or liability for (i) fraud or willful
misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create
liens on the Property that are payable or applicable prior to any foreclosure under the Deed of
Tmst (to the full extent of such taxes, assessments or other charges); (iii) the fair market value of
any personal property or fixtures removed or disposed of by the Borrower other than in
accordance with the Deed of Tmst; and (iv) the misappropriation of any proceeds under any
insurance policies or awards resulting from condemnation or the exercise ofthe power of
eminent domain or by reason of damage, loss or destmction to any portion ofthe Property.
Section 2.9 Subordination.
(a) Deed of Tmst The City agrees that the City Manager shall have the
authority to agree to the subordination of the Deed of Tmst to the liens of the deeds of tmst
securing the private and other primary financing, as appropriate, provided the subordination
documents provide the City with reasonably adequate notice and cure rights to enable the City to
avoid foreclosure ofthe deeds of tmst securing the private or other primary financing and the
loan amount subordinated to by the City does not exceed four million dollars unless good cause
is demonstrated to the City Manager to exceed this amount.
(b) Regulatory Agreement. The City agrees that the City Manager, or
designee, shall have the authority to agree to the subordination of the Regulatory Agreement and
Deed of Tmst to the lien ofthe deeds of tmst securing the private and other primary financing
upon the finding that (i) an economically feasible loan is not reasonably available on comparable
terms and conditions without subordination, and (ii) the lien to which the Regulatory Agreement
and Deed of Tmst is being subordinated contains provisions reasonably designed to protect the
City's interests in the event of default under such lien, and (iii) the loan amount subordinated to
by the City does not exceed four million dollars unless good cause is demonstrated to the City
Manager to exceed this amount. The City agrees that the Regulatory Agreement and Deed of
Tmst shall be subordinated to any federal or state govemmental agency regulating the
Draft: Carol-Harding Duplex Loan; 1/8/13 9
2D
Development which requires that the Regulatory Agreement be subordinate to such govemment
agency's documents and liens. The City will execute subordination agreements in a form
reasonably acceptable to the City and the lending entity or government agency requesting
subordination of the Regulatory Agreement as provided in this Section.
ARTICLE 3
ACQUISITION AND OPERATION OF THE DEVELOPMENT
Section 3.1 Permits and Approvals.
(a) As ofthe date of this Agreement, the Borrower has obtained all approvals
necessary for the acquisition of the Property and operation of the existing dwelling units to
provide affordable housing for lower income households, if any permits are required.
(b) No later than December 31, 2015 or three (3) years after the acquisition of
the Property, whichever is later, the Borrower shall (i) design, obtain approvals of land use
entitlements and any other permits required for the constmction of a new larger, higher density
project (approximately 140 units) on the Property with rent restrictions affordable to low income
households, or (ii) immediately initiate work to substantially rehabilitate the existing forty-two
(42) dwelling units on the property with an investment of at least seventy-five thousand dollars
($75,000) per unit, inclusive of all depreciation costs; which will permit community center,
children's play area, and a community garden to be located on the Property; or, the City, at its
option, and with thirty (30) days' prior written notice to the Borrower and opportunity to cure,
may declare the Borrower in default hereunder and require repayment of the loan or transfer of
ownership of the Property to the City.
Section 3.2 Commencement of Construction of New Larger Development.
The Borrower shall cause the commencement of constmction of the improvements for a
new, larger development or for substantial rehabilitation of the existing units no later than
December 31, 2016. For the purposes of this Agreement, the term "commencement of
constmction" shall mean the date the Borrower commences, or causes the commencement of,
physical demolition and new constmction or physical rehabilitation work on the Property
pursuant to a building permit or other similar permit.
Draft: Carol-Harding Duplex Loan; 1/8/13 1Q
Section 3.3 Completion of Constmction.
The Borrower shall diligently prosecute constmction of the applicable improvements to
the Development to completion, and shall cause the completion of the constmction ofthe new,
larger Development improvements or the substantial rehabilitation improvements to the existing
dwelling unit no later than December 31, 2018, or four (4) years after constmction financing
closing for the larger development, whichever is later. For the purposes of this Agreement, the
term "completion of constmction" shall mean the date the development receives its Certificate of
Occupancy for the Improvements, or the first date that a tenant is placed in residency within the
Development.
Section 3.4 Constmction Pursuant to Plans and Laws: Prevailing Wages.
(a) The Borrower shall cause all work performed in connection with
the Development to be performed in compliance with (i) all applicable laws, ordinances, mles
and regulations of federal, state, county or municipal governments or agencies now in force or
that may be enacted hereafter, and (ii) all directions, mles and regulations of any fire marshal,
health officer, building inspector, or other officer of every govemmental agency now having or
hereafter acquiring jurisdiction. The work shall proceed only after procurement of each permit,
license, or other authorization that may be required by any governmental agency having
jurisdiction, and the Borrower shall be responsible to the City for the procurement and
maintenance thereof, as may be required of the Borrower and all entities engaged in work on the
Development.
(b) To the extent applicable, Borrower shall and shall cause the contractor and
subcontractors to pay prevailing wages, as applicable, in the constmction ofthe Improvements as
those wages are determined pursuant to Labor Code Sections 1720 et seq., and the implementing
regulations ofthe Department of Industrial Relations (the "DIR") and comply with the other
applicable provisions of Labor Code Sections 1720 et seq., including but not limited to the hiring
of apprentices as required by Labor Code Sections 1775 et seq., and the implementing
regulations ofthe DIR. To the extent applicable, the Borrower shall and shall cause the
contractor and subcontractors to keep and retain such records as are necessary to determine if
such prevailing wages have been paid as required pursuant to Labor Code Sections 1720 et seq.
If Labor Code Section 1720 et seq., applies to the Development, the Borrower shall indemnify,
hold harmless and defend (with counsel reasonably selected by the City) the City of Carisbad,
and its agents, officials, and employees, and members of the City Council against any claim for
damages, compensation, fines, penalties or other amounts arising out ofthe failure or alleged
failure of any person or entity (including Borrower, its contractors and subcontractors) to pay
prevailing wages as determined pursuant to Labor Code Sections 1720 et seq., to hire apprentices
in accordance with Labor Code Sections 1777.5 et seq., and the implementing regulations ofthe
DIR or comply with the other applicable provisions of Labor Code Sections 1720 et seq., and the
implementing regulations of the DIR in connection with constmction of the Improvements or
any other work undertaken or in connection with the Property.
Draft: Carol-Harding Duplex Loan; 1/8/13 11
Section 3.5 Marketing Plan.
(a) No later than six (6) months prior to the projected date of lease up ofthe
dwelling units for said Development, the Borrower shall submit to the City for approval its plan
for marketing the Development to program eligible families as required pursuant to the
Regulatory Agreement and this Agreement, including information on affirmative marketing
efforts and compliance with fair housing laws (the "Marketing Plan").
(b) Upon receipt of the Marketing Plan, the City shall promptly review the
Marketing Plan and shall approve or disapprove it within thirty (30) days after submission. Ifthe
Marketing Plan is not approved, the Borrower shall submit a revised Marketing Plan within
thirty (30) days following the Borrower's receipt of the City's written disapproval. Ifthe City
does not approve the revised Marketing Plan because the Borrower fails to make specific
revisions requested by the City, the Borrower shall be in default hereunder.
Section 3.6 Relocation.
If and to the extent that acquisition of the Property or constmction of the improvements
to the Development results in the permanent or temporary displacement of residential tenants,
homeowners, or businesses, then the Borrower shall comply with all applicable local, state, and
federal statutes and regulations, (including without limitation the Uniform Relocation Assistance
and Real Property Acquisition Policies Act of 1970, as amended, Califomia Govemment Code
Section 7260 et seq., and accompanying regulations, as amended) with respect to relocation
planning, advisory assistance, and payment of monetary benefits. The Borrower shall be solely
responsible for payment of any relocation benefits to any displaced persons and any other
obligations associated with complying with such relocation laws. The Borrower shall defend
(with counsel reasonably acceptable to the City), the City against any claim for damages,
compensation, fines, penalties, relocation payments or other amounts arising out ofthe failure or
alleged failure of any person or entity (including the Borrower or the City) to satisfy relocation
obligations related to the development of the Development. This obligation to indemnify shall
survive termination of this Agreement.
Section 3.7 Equal Opportunity.
During the constmction of the new, larger Development or completion ofthe substantial
rehabilitation improvements, there shall be no discrimination on the basis of race, color, creed,
religion, age, sex, sexual orientation, marital status, national origin, ancestry, or disability in the
hiring, firing, promoting, or demoting of any person engaged in the construction or improvement
work.
Section 3.8 Progress Reports.
The Borrower shall provide the City with quarterly progress reports regarding the status
ofthe new constmction project or the substantial rehabilitation of the existing dwelling units,
including a certification that the actual costs for operation of the existing development conform
Draft: Carol-Harding Duplex Loan; 1/8/13 12
7-3
to the Approved Development Budget, as it may be amended from time to time pursuant to
Section 3.11 below.
Section 3.9 Constmction Responsibilities.
(a) It shall be the responsibility of the Borrower to coordinate and schedule
the work to be performed so that commencement and completion of constmction of
improvements to the property will take place in accordance with this Agreement.
(b) The Borrower shall be solely responsible for all aspects of the Borrower's
conduct in connection with the Development, including (but not limited to) the quality and
suitability of the Constmction Plans, the supervision of constmction work, and the qualifications,
financial condition, and performance of all architects, engineers, contractors, subcontractors,
suppliers, consultants, and property managers. Any review or inspection undertaken by the City
with reference to the Development is solely for the purpose of determining whether the Borrower
is properly discharging its obligations to the City, and should not be relied upon by the Borrower
or by any third parties as a warranty or representation by the City as to the quality ofthe design
or constmction of the improvements to the Development.
Section 3.10 Inspections.
The Borrower shall permit and facilitate, and shall require its contractors to permit and
facilitate, observation and inspection at the Development by the City and by public authorities
during reasonable business hours for the purposes of determining compliance with this
Agreement.
Section 3.11 Approved Development Budget; Revisions to Budget.
As of the date of this Agreement, the City has approved the Approved Development
Budget set forth in Exhibit B. The Borrower shall submit any required amendments to the
Approved Development Budget to the City for approval within fifteen (15) days ofthe date the
Borrower receive information indicating that actual costs of the Development vary or will vary
from the costs shown on the Approved Development Budget. Written consent of the City shall
be required to amend the Approved Development Budget. The City shall utilize best efforts to
approve or disapprove requested amendments to the Development Budget within five (5)
working days of receipt of a request for approval.
Section 3.12 Information.
The Borrower shall provide any information reasonably requested by the City in
connection with the Development.
Section 3.13 Records.
(a) The Borrower shall maintain complete, accurate, and current records
pertaining to the Development for a period of five (5) years after the creation of such records,
Draft: Carol-Harding Duplex Loan; 1/8/13 13
and shall permit any duly authorized representative of the City to inspect and copy records. Such
records shall include all invoices, receipts, and other documents related to expenditures from the
Loan funds. Records must be kept accurate and current.
(b) The City shall notify the Borrower of any records it deems insufficient.
The Borrower shall have twenty-one (21) calendar days after the receipt of such a notice to
correct any deficiency in the records specified by the City in such notice, or if a period longer
than twenty-one (21) days is reasonably necessary to correct the deficiency, then the Borrower
shall begin to correct the deficiency within twenty-one (21) days and correct the deficiency as
soon as reasonably possible.
Section 3.14 Audits.
The Borrower shall make available for examination at reasonable intervals and during
normal business hours to City all books, accounts, reports, files, and other papers or property
with respect to all matters covered by this Agreement, and shall permit City to audit, examine,
and make excerpts or transcripts from such records. City may make audits of any conditions
relating to this Agreement.
Section 3.15 Hazardous Materials.
(a) The Borrower shall keep and maintain the Property in compliance with,
and shall not cause or permit the Property to be in violation of any federal, state or local laws,
ordinances or regulations relating to industrial hygiene or to the environmental conditions on,
under or about the Property including, but not limited to, soil and ground water conditions. The
Borrower shall not use, generate, manufacture, store or dispose of on, under, or about the
Property or transport to or from the Property any flammable explosives, radioactive materials,
hazardous wastes, toxic substances or related materials, including without limitation, any
substances defined as or included in the definition of "hazardous substances," hazardous wastes,"
"hazardous materials," or "toxic substances" under any applicable federal or state laws or
regulations (collectively referred to hereinafter as "Hazardous Materials") except such ofthe
foregoing as may be used in constmction of the Development or customarily kept and used in
and about residential property of this type.
(b) The Borrower shall immediately advise the City in writing if at any time it
receives written notice of (i) any and all enforcement, cleanup, removal or other govemmental or
regulatory actions instituted, completed or threatened against the Borrower or the Property
pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any
Hazardous Materials, ("Hazardous Materials Law"); (ii) all claims made or threatened by any
third party against the Borrower or the Property relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in
clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials Claims"); and (iii)
the Borrower's discovery of any occurrence or condition on any real property adjoining or in the
vicinity of the Property that could cause the Property or any part thereof to be classified as
Draft: Carol-Harding Duplex Loan; 1/8/13 14
25
"border-zone property" under the provision of Califomia Health and Safety Code, Sections
25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to
any restrictions on the ownership, occupancy, transferability or use ofthe Property under any
Hazardous Materials Law.
(c) The City shall have the right to join and participate in, as a party if it so
elects, any legal proceedings or actions initiated in connection with any Hazardous Materials
Claims and to have its reasonable attomeys' fees in connection therewith paid by the Borrower.
The Borrower shall indemnify and hold harmless the City, and its council members, board
members, directors, officers, employees, agents, successors and assigns from and against any
loss, damage, cost, expense or liability directly or indirectiy arising out of or attributable to the
use, generation, storage, release, threatened release, discharge, disposal, or presence of
Hazardous Materials on, under, or about the Property including without limitation: (a) all
foreseeable consequential damages; (b) the costs of any required or necessary repair, cleanup or
detoxification ofthe Property and the preparation and implementation of any closure, remedial or
other required plans; and (c) all reasonable costs and expenses incurred by the City in connection
with clauses (a) and (b), including but not limited to reasonable attomeys' fees. This obligation
to indemnify shall survive termination of this Agreement, but shall not apply to the extent ofthe
City's gross negligence or willful misconduct.
(d) Without the City's prior written consent, which shall not be unreasonably
withheld, the Borrower shall not take any remedial action in response to the presence of any
Hazardous Materials on, under or about the Property, nor enter into any settlement agreement,
consent decree, or other compromise in respect to any Hazardous Material Claims, which
remedial action, settlement, consent decree or compromise might, in the City's reasonable
judgment, impair the value of the City's security hereunder; provided, however, that the City's
prior consent shall not be necessary in the event that the presence of Hazardous Materials on,
under, or about the Property either poses an immediate threat to the health, safety or welfare of
any individual or is of such a nature that an immediate remedial response is necessary and it is
not reasonably possible to obtain the City's consent before taking such action, provided that in
such event the Borrower shall notify the City as soon as practicable of any action so taken. The
City agrees not to withhold its consent, where such consent is required hereunder, if either (i) a
particular remedial action is ordered by a court of competent jurisdiction, (ii) the Borrower will
or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action;
(iii) the Borrower establishes to the reasonable satisfaction of the City that there is no reasonable
altemative to such remedial action which would result in less impairment ofthe City's security
hereunder; or (iv) the action has been agreed to by the City.
(e) The Borrower hereby acknowledges and agrees that (i) this Section is
intended as the City's written request for information (and the Borrower's response) conceming
the environmental condition of the Property as required by Califomia Code of Civil Procedure
Section 726.5, and (ii) each representation and warranty in this Agreement (together with any
indemnity obligation applicable to a breach of any such representation and warranty) with
respect to the environmental condition of the Property is intended by the Parties to be an
"environmental provision" for purposes of Califomia Code of Civil Procedure Section 736.
Draft: Carol-Harding Duplex Loan; 1/8/13 15
(f) In the event that any portion of the Property is determined to be
"environmentally impaired" (as that term is defined in Califomia Code of Civil Procedure
Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in Califomia Code of
Civil Procedure Section 726.5(e)(1)), then, without otherwise limiting or in any way affecting the
City's or the tmstee's rights and remedies under the Deed of Tmst, the City may elect to exercise
its rights under Califomia Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such
environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and
remedies of an unsecured creditor, including reduction of its claim against the Borrower to
judgment, and (b) any other rights and remedies permitted by law. For purposes of determining
the City's right to proceed as an unsecured creditor under Califomia Code of Civil Procedure
Section 726.5(a), the Borrower shall be deemed to have willfully permitted or acquiesced in a
release or threatened release of hazardous materials, within the meaning of Califomia Code of
Civil Procedure Section 726.5(d)(1), ifthe release or threatened release of Hazardous Materials
was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any
portion ofthe Property and the Borrower knew or should have known of the activity by such
lessee, occupant, or user which caused or contributed to the release or threatened release. All
costs and expenses, including (but not limited to) attomeys' fees, incurred by the City in
connection with any action commenced under this paragraph, including any action required by
Califomia Code of Civil Procedure Section 726.5(b) to determine the degree to which the
Property is environmentally impaired, plus interest thereon at the rate specified in the Note until
paid, shall be added to the indebtedness secured by the Deed of Tmst and shall be due and
payable to the City upon its demand made at any time following the conclusion of such action.
Section 3.16 Fees and Taxes.
The Borrower shall be solely responsible for payment of all fees, assessments, taxes,
charges, and levies imposed by any public authority or utility company with respect to the
Property or the Development to the extent owned by the Borrower, and shall pay such charges
prior to delinquency. However, the Borrower shall not be required to pay and discharge any
such charge so long as (a) the legality thereof is being contested diligently and in good faith and
by appropriate proceedings, and (b) if requested by the City, the Borrower deposits with the City
any funds or other forms of assurance that the City in good faith from time to time determines
appropriate to protect the City from the consequences of the contest being unsuccessful.
Section 3.17 Notice of Litigation.
The Borrower shall promptly notify the City in writing of any litigation affecting the
Borrower or the Property and of any claims or disputes that involve a material risk of litigation.
Section 3.18 Operation of Development as Affordable Housing.
(a) Until such time as the new, larger Development is constmcted or the
substantial rehabilitation work is completed and this Agreement is amended to set forth new
requirements for operation ofthe Development, the Borrower shall continuously operate and
maintain the existing Development, promptly following close of escrow, as multifamily housing
rented to eligible lower and moderate income occupants at the following rent levels (including
Draft: Carol-Harding Duplex Loan; 1/8/13 16
2.-1
rent, utilities and related services): twenty (20) units shall have rents set at sixty percent (60%) of
the Area Median Income for San Diego County and twenty-two (22) units shall have rents set at
ninety percent (90%) ofthe Area Median Income for San Diego County as set forth by the US
Department of Housing and Urban Development, and in conformity with the Regulatory
Agreement and this Agreement.
(b) Before initially leasing the first Unit in the Development, the Borrower
shall submit its proposed form of lease agreement for the City's review and approval.
(c) Before initially leasing the first Unit in the Development, the Borrower
must provide the City, for its review and approval, with the Borrower's written tenant selection
plan.
(d) The Borrower must determine the income eligibility of each tenant
household occupying a Unit pursuant to the City's approved tenant certification procedures no
later than sixty (60) days before the household's expected occupancy. The Borrower shall certify
each tenant household's income on an annual basis.
(e) The maximum household income of a household occupying a Lower
Income Unit (with total charges for rent, utilities, and related services not exceeding 30% of 60%
of gross AMI), shall not exceed sixty percent (60%) of the Area Median Income for San Diego
County, as set forth by the US Department of Housing and Urban Development, and the
maximum household income of a household occupying a Moderate Income Unit (with total
charges for rent, utilities, and related services not exceeding 30% of 90%) of gross AMI), shall
not exceed ninety (90%) ofthe Area Median Income for San Diego County, as set forth by the
US Department of Housing and Urban Development.
Section 3.19 Non-Discrimination.
The Borrower covenants by and for itself and its successors and assigns that there shall
be no discrimination against or segregation of a person or of a group of persons on account of
race, color, religion, creed, sex, sexual orientation, marital status, familial status, ancestry or
national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment ofthe
Development, nor shall the Borrower or any person claiming under or through the Borrower
establish or permit any such practice or practices of discrimination or segregation with reference
to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or
vendees in the Development.
Section 3.20 Insurance Requirements.
The Borrower shall maintain the following insurance coverage throughout the Loan
Term:
(a) Workers' Compensation insurance to the extent required by law, including
Employer's Liability coverage, with limits not less than One Million Dollars ($1,000,000) each
accident.
Draft: Carol-Harding Duplex Loan; 1/8/13 17
(b) Commercial General Liability insurance with limits not less than Two
Million Dollars ($2,000,000) each occurrence combined single limit for Bodily Injury and
Property Damage, including coverage for Contractual Liability, Personal Injury, Broad form
Property Damage, and Products and Completed Operations.
(c) Comprehensive Automobile Liability insurance with limits not less than
One Million Dollars ($1,000,000) each occurrence combined single limit for Bodily Injury and
Property Damage, including coverage for owned, non-ovmed and hired vehicles, as applicable;
provided, however, that if the Borrower do not own or lease vehicles for purposes of this
Agreement, then no automobile insurance shall be required.
(d) Property insurance, including builder's risk insurance during the course of
any constmction of improvements on the Property, covering the Development, in form
appropriate for the nature of such property, covering all risks of loss, excluding earthquake, for
one hundred percent (100%) of the replacement value, with deductible, if any, acceptable to the
City, naming the City as a Loss Payee, as its interests may appear. Flood insurance shall be
obtained if required by applicable federal regulations.
(e) The Borrower shall cause any general contractor or agent working on the
Development under direct contract with the Borrower to maintain insurance ofthe types and in at
least the minimum amounts described in subsections (a), (b), and (c) above, except that the limit
of liability for commercial general liability insurance for subcontractors shall be One Million
Dollars ($1,000,000), and shall require that such insurance shall meet all of the general
requirements of subsections (e), (f), and (g) below, including, without limitation, the requirement
of subsection (f). Subcontractors working on the Development under indirect contract with the
Borrower shall be required to maintain the insurance described in subsections (a), (b), and (c)
above. Liability and Comprehensive Automobile Liability insurance to be maintained by such
contractors and agents pursuant to this subsection shall name as additional insureds the City, and
its officers, agents, employees and board members, and members of the City Council.
(f) The required insurance shall be provided under an occurrence form, and
the Borrower shall maintain such coverage continuously so long as the Note is outstanding.
Should any ofthe required insurance be provided under a form of coverage that includes an
annual aggregate limit or provides that claims investigation or legal defense costs be included in
such annual aggregate limit, such annual aggregate limit shall be three times the occurrence
limits specified above.
(g) Commercial General Liability and Property insurance policies shall be
endorsed to name as an additional insured the City and its officers, agents, employees and
members of the City Council.
(h) All policies and bonds shall contain (a) the agreement of the insurer to
give the City at least thirty (30) days' notice prior to cancellation (including, without limitation,
for non- payment of premium) or any material change in said policies; (b) an agreement that such
policies are primary and non- contributing with any insurance that may be carried by the City; (c)
Draft: Carol-Harding Duplex Loan; 1/8/13 18
a provision that no act or omission of the Borrower shall affect or limit the obligation ofthe
insurance carrier to pay the amount of any loss sustained; and (d) a waiver by the insurer of all
rights of subrogation against the City and its authorized parties in connection with any loss or
damage thereby insured against.
Section 3.21 Developer Fee.
There shall be no developer fee paid to the Borrower or other related parties for the
acquisition of property and ongoing operation until such time as a new, larger development is
proposed for constmction on the site or substantial rehabilitation is completed to the existing
dwelling units. The fee may be reconsidered at a later date for the constmction ofthe new, larger
development or the substantial rehabilitation work, and will require an amendment to this
Agreement.
ARTICLE 4
ASSIGNMENT AND TRANSFERS
Section 4.1 Definitions.
As used in this Article Four, the term "Transfer" means:
(a) Any total or partial sale, lease, assignment, or other conveyance, or any
tmst or power, or any transfer in any other mode or form, of or with respect to this Agreement or
of any part ofor interest in the Development, or any agreement to do any ofthe foregoing; or
(b) Any total or partial sale, assignment, or other conveyance, or any tmst or
power, or any transfer in any other mode or form, of or with respect to any ownership interest in
the Borrower or any agreement to do any of the foregoing.
Section 4.2 Purpose of Restrictions on Transfer.
This Agreement is entered into solely for the purpose of the Borrower's acquisition and
operation ofthe Development in accordance with the terms of this Agreement and the
Regulatory Agreement, until such time as a new, larger development is approved for
constmction on said Property or substantial rehabilitation is completed to the existing dwelling
units; an amendment to this Agreement shall be required to proceed with the new constmction or
substantial rehabilitation projects. The qualifications and identity of the Borrower are of
particular concem to the City, in view of:
(a) The importance of the development of the Property to the general welfare
of the community;
(b) The public aids that have been made available by law and by the
government for the purpose of making such development possible;
Draft: Carol-Harding Duplex Loan; 1/8/13 19
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(c) The reliance by the City upon the unique qualifications and ability ofthe
Borrower to serve as the catalyst for futre development of the Property and upon the continuing
interest which the Borrower will have in the Property to assure the quality ofthe use, operation,
and maintenance deemed critical by the City in the development ofthe Property;
(d) The fact that a change in ownership or control of the owner ofthe
Property, or ofa substantial part thereof, or any other act or transaction involving or resulting in
a significant change in ownership or with respect to the identity of the parties in control ofthe
Borrower or the degree thereof, is for practical purposes a transfer or disposition ofthe Property;
and
(e) The importance to the City of the standards of use, operation, and
maintenance of the Property.
It is because ofthe qualifications and identity of the Borrower that the City is entering
into this Agreement and that Transfers are permitted only as provided in this Agreement.
Section 4.3 Prohibited Transfers.
The limitations on Transfers set forth in this Article Four shall apply throughout the
Term. Except as expressly permitted in this Agreement, the Borrower represent that it has not
made or created, and agrees that it will not make or create or suffer to be made or created, any
Transfer, either voluntarily or by operation of law, without the prior written approval ofthe City.
Any Transfer made in contravention of this Section 4.3 shall at the City's discretion be
void and shall be deemed to be a default under this Agreement, whether or not the Borrower
knew of or participated in such Transfer.
Section 4.4 Permitted Transfers Without Prior City Approval.
The only Transfer permitted at any time without the prior approval of the City is the
rental ofa Unit by the Borrower in the ordinary course of business and in compliance with the
Regulatory Agreement.
Section 4.5 Permitted Transfers With Prior Approval: City Pre-Approved Transfers.
(a) Except as permitted under Section 4.4, any Transfer shall be permitted
only after (a) the City, in its sole discretion, has delivered to the Borrower its prior written
approval of such Transfer, and (b) the transferee has assumed the Borrower's obligations under
this Agreement by signing an assignment and assumption agreement, in a form prepared by the
City, and such other reasonable documentation as the City may reasonably require to evidence
such transferee's assumption of the Borrower's duties and obligations under the Loan Documents.
(b) The Borrower anticipates syndicating the Tax Credits that will be
generated for future new constmction of the larger rental Development or substantial
rehabilitation of existing units (if a new constmction project is not approved), which syndication
will require the admission ofthe Tax Credit Investor as a limited partner in the Borrower. This
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Agreement shall be amended to include the admission of the Tax Credit Investor and set forth the
requirements for said admission at such time as the Tax Credits are approved.
Section 4.6 Release of the Borrower.
Upon all ofthe terms of this Article Four being satisfied for a permitted Transfer to be
effective, the Borrower or the successor transferor party, as applicable, shall be released from all
liability under this Agreement so transferred arising subsequent to the effectiveness of such
Transfer.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 5.1 Representations and Warranties.
(a) The Borrower hereby represents to the City as follows:
(1) Organization. The Borrower represent duly organized entities,
validly existing as Califomia limited partnerships, and are in good standing under the laws ofthe
State of Califomia and have the power and authority to jointly own the Property and carry on its
business as now being conducted.
(2) Authority of the Borrower. The Borrower has full power and
authority to execute and deliver this Agreement and to make and accept the borrowings
contemplated hereunder, to execute and deliver the Loan Documents and all other documents or
instmments executed and delivered, or to be executed and delivered, pursuant to this Agreement,
and to perform and observe the terms and provisions of all ofthe above.
(3) Authority of Persons Executing Documents. This Agreement and
the Loan Documents and all other documents or instmments executed and delivered, or to be
executed and delivered, pursuant to this Agreement have been executed and delivered by persons
who are duly authorized to execute and deliver the same for and on behalf of the Borrower, and
all actions required under the Borrower's organizational documents and applicable goveming law
for the authorization, execution, delivery and performance of this Agreement and the Loan
Documents and all other documents or instmments executed and delivered, or to be executed and
delivered, pursuant to this Agreement, have been duly taken.
(4) Valid Binding Agreements. This Agreement and the Loan
Documents and all other documents or instmments which have been executed and delivered
pursuant to or in connection with this Agreement constitute or, if not yet executed or delivered,
will when so executed and delivered constitute, legal, valid and binding obligations ofthe
Borrower enforceable against it in accordance with their respective terms.
(5) No Breach of Law or Agreement. Neither the execution nor
delivery of this Agreement and the Loan Documents or of any other documents or instmments
executed and delivered, or to be executed or delivered, pursuant to this Agreement, nor the
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performance of any provision, condition, covenant or other term hereof or thereof, will conflict
with or result in a breach of any statute, mle or regulation, or any judgment, decree or order of
any court, board, commission or agency whatsoever binding on the Borrower, or any provision
ofthe organizational documents of the Borrower, or will conflict with or constitute a breach ofor
a default under any agreement to which the Borrower is a party, or will result in the creation or
imposition of any lien upon any assets or property of the Borrower, other than liens established
pursuant hereto.
(6) Pending Proceedings. The Borrower is not in default under any
law or regulation or under any order of any court, board, commission or agency whatsoever, and
there are no claims, actions, suits or proceedings pending or, to the knowledge ofthe Borrower,
threatened against or affecting the Borrower or the Property, at law or in equity, before or by any
court, board, commission or agency whatsoever which might, if determined adversely to the
Borrower, materially affect the Borrower's ability to repay the Loan or impair the security to be
given to the City pursuant hereto.
(b) The Borrower hereby warrants to the City as follows:
(1) Compliance With Laws: Consents and Approvals. Any
constmction of improvements to the Development will comply with all applicable laws,
ordinances, mles and regulations of federal, state and local governments and agencies, and with
all applicable directions, mles and regulations of the fire marshal, health officer, building
inspector and other officers of any such govemment or agency. The Development shall be
constmcted substantially in accordance with any Constmction Plans approved by the City
pursuant to Section 3.2.
(2) Title to Land. At the time of recordation of the Deed of Tmst and
the Regulatory Agreement, the Borrower will have good and marketable fee title to the Property
and there will exist thereon or with respect thereto no mortgage, lien, pledge or other
encumbrance of any character whatsoever other than liens for current real property taxes and
assessments not yet due and payable, and liens in favor of the City or approved in writing by the
City.
(3) Financial Statements. The financial statements of the Borrower
and other financial data and information fiimished by the Borrower to the City fairly present the
information contained therein. As of the date of this Agreement, there has not been any adverse,
material change in the financial condition of the Borrower from that shown by such financial
statements and other data and information.
(4) Sufficient Funds. The Borrower will hold or upon its acquisition
ofthe Property will hold sufficient funds and/or binding commitments for sufficient funds to
complete the acquisition ofthe Property and the constmction of any necessary improvements to
the Development for health and safety purposes.
(5) Acquisition of additional Duplex Properties. Borrower shall move
forward in a diligent manner to complete acquisition of all properties required to develop a
Draft: Carol-Harding Duplex Loan; 1/8/13 22
larger, higher density affordable rental development (of approximately 140 rental units) on the
identified site no later than eighteen (18) months from the date of approval of this Agreement or
such other time period as determined by the City Council, and then to subsequently diligently
move forward to design and obtain all required permits and financing to constmct a larger,
higher density affordable rental development within a reasonable period of time as determined
by the City Council and set forth within this Agreement. If Borrower is unable to develop the
larger development. Borrower shall diligently proceed with the substantial rehabilitation ofthe
existing units on the Property.
ARTICLE 6
DEFAULT AND REMEDIES
Section 6.1 Events of Default.
Each ofthe following shall constitute a "Defauh" by the Borrower under this Agreement:
(a) Failure to Obtain Approvals. Inability of the Borrower to obtain all
planning approvals and building permits necessary to constmct the future improvements for a
new, larger, and higher density affordable rental development or complete substantial
rehabilitation ofthe existing Development within a reasonable period of time as determined by
the City Council and set forth within this Agreement.
(b) Failure to Make Payment. Failure to repay the principal and any interest
on the Loan that is due and payable to the City pursuant to the Loan Documents following
written notice by the City to the Borrower of such failure and thirty (30) days opportunity to
cure.
(c) Failure to Constmct. Failure of the Borrower to commence and complete
constmction of the new, larger, and higher density affordable rental development or the
substantial rehabilitation work on the existing Development within a reasonable period of time as
determined by the City Council and set forth within this Agreement.
(d) Breach of Covenants. Failure by the Borrower to duly perform, comply
with, or observe any of the conditions, terms, or covenants of any ofthe Loan Documents, and
such failure having continued uncured for thirty (30) days after receipt of written notice thereof
by the Borrower from City or, ifthe breach cannot be cured within thirty (30) days, the Borrower
shall not be in breach so long as the Borrower is diligently undertaking to cure such breach and
such breach is cured within ninety (90) days from the date of the City's written notice to the
Borrower; provided, however, that if a different period or notice requirement is specified under
any other section of this Article 6, the specific provisions shall control.
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(e) Default Under Other Loans. A defauh is declared under the Approved
Financing or any other financing secured against the Property by the lender of such financing,
following the expiration of any applicable grace or cure period.
(f) Insolvency. A court having jurisdiction shall have made or entered any
decree or order (i) adjudging the Borrower to be bankmpt or insolvent, (ii) approving as properiy
filed a petition seeking reorganization ofthe Borrower or seeking any arrangement for the
Borrower under the bankmptcy law or any other applicable debtor's relief law or statute ofthe
United States or any state or other jurisdiction, (iii) appointing a receiver, trustee, liquidator, or
assignee ofthe Borrower in bankmptcy or insolvency or for any of their properties, (iv) directing
the winding up or liquidation of the Borrower, if any such decree or order described in clauses (i)
to (iv), inclusive, shall have continued unstayed or undischarged for a period of ninety (90) days;
or (y) the Borrower shall have admitted in writing its inability to pay its debts as they fall due or
shall have voluntarily submitted to or filed a petition seeking any decree or order ofthe nature
described in clauses (i) to (iv), inclusive. The occurrence of any of the events of Default in this
paragraph shall act to accelerate automatically, without the need for any action by the City, the
indebtedness evidenced by the Note.
(g) Assignment: Attachment. The Borrower shall have assigned its assets for
the benefit of its creditors or suffered a sequestration or attachment of or execution on any
substantial part of its property, unless the property so assigned, sequestered, attached or executed
upon shall have been retumed or released within ninety (90) days after such event or, if sooner,
prior to sale pursuant to such sequestration, attachment, or execution. The occurrence of any of
the events of default in this paragraph shall act to accelerate automatically, without the need for
any action by the City, the indebtedness evidenced by the Note.
(h) Suspension: Dissolution. The Borrower shall have voluntarily suspended
its business or the dissolution of the Borrower.
(i) Liens on Property and the Development. There shall be filed any claim of
lien (other than liens approved in writing by the City) against the Development, the Property, or
any part thereof, or any interest or right made appurtenant thereto, or the service of any notice to
withhold proceeds ofthe Loan and the continued maintenance of said claim of lien or notice to
withhold for a period of twenty (20) days without discharge or satisfaction thereof or provision
therefore (including, without limitation, the posting of bonds) satisfactory to the City.
(j) Condemnation. The condemnation, seizure, or appropriation of all or the
substantial part ofthe Property and the Development, except that condemnation by the City shall
cause the Loan to accelerate but shall not be a Default.
(k) Unauthorized Transfer. Any Transfer other than as permitted by Article 4
or approved by the City in writing.
(1) Representation or Warranty Incorrect. Any representation or warranty of
the Borrower contained in this Agreement, or in any application, financial statement, certificate.
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or report submitted to the City in connection with any of the Loan Documents, proves to have
been incorrect in any material and adverse respect when made.
(m) Insufficient Funds. The Borrower fails to obtain funds, or commitment of
funds, sufficient to acquire the Property and complete any required improvements to the
Development, as determined by the City in the City's reasonable discretion.
(n) Applicability to General Partner. In the event the Borrower is a
partnership, the occurrence of any of the events set forth in subsection (f), subsection (g), or
subsection (h) in relation to the general partner of Borrower. Occurrences under this subsection
will not constitute a default if, within thirty (30) days of notice of such event, the Investor
commences and diligently pursues the removal and replacement of the offending General Partner
pursuant to the permitted transfer provisions of Section 4.5(d).
Section 6.2 Remedies.
The City agrees that any cure of a Default by a limited partner of the Borrower shall be
deemed to be a cure by the Borrower, and shall be accepted or rejected on the same basis as if
made or tendered by the Borrower. The occurrence of any Default hereunder following the
expiration of all applicable notice and cure periods will, either at the option ofthe City or
automatically where so specified, relieve the City of any obligation to make or continue the Loan
and shall give the City the right to proceed with any and all remedies set forth in this Agreement
and the Loan Documents, including but not limited to the following:
(a) Acceleration of Note. Subject to the provisions of Section 2.8, the City
shall have the right to cause all indebtedness of the Borrower to the City under this Agreement
and the Note, together with any accmed interest thereon, to become immediately due and
payable. The Borrower waives all right to presentment, demand, protest or notice of protest or
dishonor. The City may proceed to enforce payment of the indebtedness and to exercise any or
all rights afforded to the City as a creditor and secured party under the law including the Uniform
Commercial Code, and including foreclosure under the Deed of Tmst. The Borrower shall be
liable to pay the City on demand all reasonable expenses, costs and fees (including, without
limitation, reasonable attomey's fees and expenses) paid or incurred by the City in connection
with the collection ofthe Loan and the preservation, maintenance, protection, sale, or other
disposition of the security given for the Loan.
(b) Specific Performance. The City shall have the right to mandamus or other
suit, action or proceeding at law or in equity to require the Borrower to perform its obligations
and covenants under the Loan Documents or to enjoin acts on things which may be unlaw^l or
in violation of the provisions of the Loan Documents.
(c) Right to Cure at the Borrower's Expense. The City shaU have the right
(but not the obligation) to cure any monetary default by the Borrower under a loan other than the
Loan. The Borrower agree to reimburse the City for any funds advanced by the City to cure a
monetary default by the Borrower upon demand therefore, together with interest thereon at the
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lesser ofthe maximum rate permitted by law or ten percent (10%)) per annum from the date of
expenditure until the date of reimbursement.
Section 6.3 Assignment of Plans, Data and Approvals. If this Agreement is
terminated pursuant to Section 6.2, then the Borrower shall promptly assign and deliver to the
City, copies of all plans, studies, reports, data and specifications for the Development, all permits
and approvals obtained in connection with the Development, and all applications for permits and
approvals not yet obtained but needed in connection with the Improvements (collectively, the
"Planning Documents"). The Planning Documents shall be delivered by the Borrower without
any warranties or representations of any type or kind, express or implied, including whether the
Planning Documents have been completed in final form. The City agrees and acknowledges that
all such Planning Documents will be delivered subject to the rights of any copyright holders.
Section 6.4 Remedies Cumulative.
Subject to the non-recourse provisions contained in the Note, no right, power, or remedy
given to the City by the terms of this Agreement or the Loan Documents is intended to be
exclusive of any other right, power, or remedy; and each and every such right, power, or remedy
shall be cumulative and in addition to every other right, power, or remedy given to the City by
the terms of any such instmment, or by any statute or otherwise against the Borrower and any
other person. Neither the failure nor any delay on the part of the City to exercise any such rights
and remedies shall operate as a waiver thereof, nor shall any single or partial exercise by the City
of any such right or remedy preclude any other or further exercise of such right or remedy, or
any other right or remedy.
ARTICLE 7
GENERAL PROVISIONS
Section 7.1 Relationship of Parties.
Nothing contained in this Agreement shall be interpreted or understood by any ofthe
parties, or by any third persons, as creating the relationship of employer and employee, principal
and agent, limited or general partnership, or joint venture between the City and the Borrower or
the Borrower's agents, employees or contractors, and the Borrower shall at all times be deemed
an independent contractor and shall be wholly responsible for the manner in which it or its
agents, or both, perform the services required of it by the terms of this Agreement for the
development ofthe Development. In regards to any future development of, or improvements to,
the Development or operation of said Development, the Borrower shall be solely responsible for
all matters relating to payment of its employees, including compliance with Social Security,
withholding and all other laws and regulations goveming such matters, and shall include
requirements in each contract that contractors shall be solely responsible for similar matters
relating to their employees. The Borrower agrees to be solely responsible for its own acts and
those of its agents and employees.
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Section 7.2 No Claims.
Nothing contained in this Agreement shall create or justify any claim against the City, by
any person the Borrower may have employed or with whom the Borrower may have contracted,
or will contract with, relative to the purchase of materials, supplies or equipment, or the
fumishing or the performance of any work or services with respect to future development, or
improvements to the Development or operation of said Development, and the Borrower shall
include similar requirements in any contracts entered into for the future development of, or
improvements to, the Development and operation of said Development.
Section 7.3 Amendments.
No alteration or variation of the terms of this Agreement shall be valid unless made in
writing by the Parties.
Section 7.4 Entire Understanding of the Parties.
This Agreement constitutes the entire understanding and agreement of the Parties with
respect to the Loan.
Section 7.5 Indemnification.
Except as directiy caused by the City's gross negligence or willful misconduct, the
Borrower agrees to indemnify, protect, hold harmless and defend (by counsel reasonably
satisfactory to the City), the City and its board members, council members, officers and
employees, from all suits, actions, claims, causes of action, costs, demands, judgments and liens
arising out of: (i) the Borrower' performance or non-performance of its obligations under this
Agreement; (ii) the Borrower' ownership of the Property; (iii) the development, marketing, rental
and operation of the Development, or (iv) any documents executed by the Borrower in
connection with the Development. The provisions of this Section 7.5 shall survive termination
of this Agreement.
Section 7.6 Non-Liability of City Officials, Employees and Agents.
No member, official, employee or agent of the City shall be personally liable to the
Borrower, or any successor in interest, in the event of any Default or breach by the City, or for
any amount which may become due to the Borrower or its successor or on any obligation under
the terms of this Agreement.
Section 7.7 No Third Party Beneficiaries.
There shall be no third party beneficiaries to this Agreement.
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Section 7.8 Action by the City.
Except as may be otherwise specifically provided herein, whenever any approval, notice,
direction, consent, request, extension of time, waiver of condition, termination, or other action by
the City is required or permitted under this Agreement, such action may be given, made, or taken
by the City Manager, or designee, without further approval by the City Council, and any such
action shall be in writing. The amount of the Loan and the deadlines for acquiring additional
property, constmcting a new larger, higher density development or completing substantial
rehabilitation of the existing Development may not be increased and/or revised without prior
approval of the City Council.
Any consents or approvals required under this Agreement by the City Manager, of
designee, shall not be unreasonably withheld or made, except where it is specifically provided
that a sole discretion standard applies. The City shall not unreasonably delay in reviewing and
approving or disapproving any proposal by the Borrower made in connection with this
Agreement.
Section 7.9 Waivers.
Any waiver by the city of any obligation or condition in this Agreement must be in
writing. No waiver will be implied from any delay or failure by the City to take action on any
breach or default of the Borrower or to pursue any remedy allowed under this Agreement or
applicable law. Any extension of time granted to the Borrower to perform any obligation under
this Agreement shall not operate as a waiver or release from any of its obligations under this
Agreement. Consent by the City to any act or omission by the Borrower shall not be constmed
to be a consent to any other or subsequent act or omission or to waive the requirement for the
City's written consent to future waivers.
Section 7.10 Notices, Demands and Communications.
Formal notices, demands, and communications between the City and the Borrower shall
be sufficientiy given if and shall not be deemed given unless dispatched by registered or certified
mail, postage prepaid, retum receipt requested, or delivered by reputable ovemight delivery
service, retum receipt requested, or delivered personally, to the principal office ofthe City and
the Borrower as follows:
City:
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Attn: Housing and Neighborhood Services Director
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Borrower:
Harding Street Neighbors LP
C/O Irvine Housing Opportunities
19772 MacArthur Blvd, Suite 110
Irvine, Ca. 92612
with a copy to:
C&C Development Co.
14211 Yorba Street, Suite 200
Tustin, Ca. 92780
with a copy to:
Goldfarb and Lipman LLP
1300 Clay Street 11* Floor
Oakland, Ca. 94612
Attn: M. David Kroot
with a copy to:
Goldfarb and Lipman LLP
1300 Clay Street
Oakland, Ca. 94612
Attn: Amy DeVaudrenil
Such written notices, demands and communications may be sent in the same manner to such
other addresses as the affected party may from time to time designate by mail as provided in this
Section. Receipt shall be deemed to have occurred on the date shown on a written receipt for
delivery or refusal of delivery.
Section 7.11 Applicable Law and Venue.
This Agreement will be govemed by Califomia law. Any action brought claiming a
breach of this Agreement or interpreting this Agreement shall be brought and venued in San
Diego County, Califomia.
Section 7.12 Parties Bound.
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Except as otherwise limited herein, the provisions of this Agreement shall be binding
upon and inure to the benefit of the parties and their heirs, executors, administrators, legal
representatives, successors and assigns. This Agreement is intended to mn with the land and
shall bind the Borrower and its successors and assigns in the Property and the Development for
the entire Term, and the benefit hereof shall inure to the benefit of the City and its successors and
assigns.
Section 7.13 Severability.
If any term of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the provisions shall continue in full force and effect
unless the rights and obligations of the parties have been materially altered or abridged by such
invalidation, voiding or unenforceability.
Section 7.14 Force Majeure.
In addition to specific provisions of this Agreement, performance by either Party shall not
be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lock-
outs; riots; floods; earthquakes; fires; quarantine restrictions; freight embargoes; lack of
transportation; or court order; or any other similar causes (other than lack of funds ofthe
Borrower or the Borrower's inability to finance the constmction of the future Development or the
substantial rehabilitation improvements) beyond the control or without the fault of the Party
claiming an extension of time to perform. An extension of time for any cause will be deemed
granted if notice by the Party claiming such extension is sent to the other within ten (10) days
from the commencement of the cause and the Party granting the extension agrees to the
extension in writing. In no event shall the City be required to agree to cumulative delays in
excess of one hundred eighty (180) days.
Section 7.15 Attomeys Fees.
If any lawsuit is commenced to enforce any of the provisions of this Agreement, the
prevailing party may recover its reasonable attomey's fees and costs ofthe suit.
Section 7.16 Title of Parts and Sections.
Any titles of the sections or subsections of this Agreement are inserted for convenience of
reference only and shall be disregarded in interpreting any part of the Agreement's provisions.
Section 7.17 Multiple Originals; Counterpart.
This Agreement may be executed in multiple originals, each of which is deemed to be an
original, and may be signed in counterparts.
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WHEREFORE, this Agreement has been entered into by the undersigned as of the date
first above written.
Harding Street Neighbors LP,
a Califomia limited partnership
By: IHO Harding Street LLC
Its managing general partner
By:
Patricia C. Whitaker
Its: Chief Executive Officer
By: C&C Harding Street, LLC
Its administrative general partner
By:
Todd R. Cottle
Its: Member
By:
Barry A. Cottle
Its: Tmstee
Draft: Carol-Harding Duplex Loan; 1/8/13 31
APPROVED AS TO FORM:
City Attomey or Assistant City Attomey
CITY :
CITY OF CARLSBAD,
a municipal corporation
By:
Name: John Coates
Its: Interim City Manager
Draft: Carol-Harding Duplex Loan; 1/8/13 32
M3
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
A-l
Draft: Carol-Harding Duplex Loan; 1/8/13
EXHIBIT B
APPROVED DEVELOPMENT BUDGET
B-1
Draft: Carol-Harding Duplex Loan; 1/8/13
M5
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Revised:
Page 1 of 10
1/16/2013
SOURCES OF FUNDS
PERMANENT SOURCES - 2020
Conventional Perm Loan
City of Carlsbad
City of Carlsbad - Land Contribution
Income From Operations
General Partner Equity
Limited Partner Equity
TOTAL
vs. TDC
Financing Surplus/(Cap)
Total Term
Amount Interest (Yrs) Comments
$8,166,550
$7,400,000
$1,750,000
$1,234,540
$100
$24,997,500
$43,548,690
$43,548,690
$0
6.50%
3.00%
3.00%
35
55
55
Includes income from Cash Flow Reserve.
Tax Credit Pricing: $1.00
Financing Surplus/(Gap)
CONSTRUCTION SOURCES - 2018 Total Term
Interest [Mnts) Comments Amount
Total Term
Interest [Mnts) Comments
Conventional Construction Loan $24,794,295 4.00% 24
City of Carlsbad $7,400,000 3.00% 24
City of Carlsbad - Land Contribution $1,750,000 3.00% 24
Income From Operations $1,234,540 Includes income from Cash Flow Reserve.
General Partner Equity $100
Limited Partner Equity $6,249,375 25% of Total Equity.
Dev. Fee Deferred Until Completion $1,300,000
other Costs Deferred Until Completion $820,380 Refer to Development Budget for Details.
TOTAL $43,548,690
VS. TDC $43,548,690
jACQ./PREDEV. SOURCES - 2013
BofA Acquisition/Predevelopment Loan
City of Carlsbad
Income From Open (33% of 5 Year Net Cash Flow)
TOTAL
Financing Surplus/(Gap)
$0
Total
Amount Interest
Term
(Yrs) Comments
$3,874,291
$7,400,000
$385,452
$11,659,743
$0
4.00% 5
3.00% 5
0.00% 5 57% of 3 year Net Cash Flow
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx
Prepared by: Strategic Consulting Initiative
www, scinitiative. com
^16
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Revised:
Page 2 of 10
1/16/2013
ACQUISTION/PREDEVELOPMENT USES BY SOURCE
Closing City of BofA BofA Income From
Item Amount Costs Carlsbad (Closing) (Post Closing) Operations
Property Purchase Price $10,450,000 $8,850,000 $7,400,000 $1,450,000 $1,600,000
Legal: Acquisition $15,000 $15,000 $15,000
Legal: Organization of Partnership $20,000 $20,000 $20,000
Acq./Predev. Lender Fee (1%) $38,743 $38,743 $38,743
Acq./Predev. Lender Expenses $30,000 $30,000 $30,000
Acq./Predev. Lender Legal $20,000 $20,000 $20,000
Pre-Construction Rehab $50,000 $50,000
Local Permit Processing Fees $50,000 $50,000
Environmental Studies $60,000 $60,000
Appraisal & Market Study $25,000 $25,000
Engineering $175,000 $99,548 $75,452
Architectural Design & Supervision $337,500 $337,500
Soils Engineer $80,000 $80,000
Relocation (inc. Consultant) $40,000 $40,000 $40,000
Dry Utility Consultant $30,000 $30,000
Financial/Syndication Consultant $32,500 $12,500 $12,500 $20,000
Title/Recording/Escrow - Acquisition $40,000 $25,000 $25,000 $15,000
Soft Cost Contingency $26,000 $26,000
Additional Potential Acq./Predev. Costs $140,000 $140,000
$11,659,743 $9,051,243 $7,400,000 $1,651,243 $2,223,048 $385,452
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx
Prepared by: Strategic Consuiting Initiative
www, scinitiative. com
41
Carlsbad •• New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Revised:
Page 3 of 10
1/16/2013
ESTIMATED ACQUISITION/PREDEVELOPMENT DRAW SCHEDULE
1 4.00%
Income
Monthly City of Income From Oper. BofA BofA
Month/Year Draws Totat Drawn Vo Drawn Carlsbad From Oper. Balance BofA Balance Interest
CLOSING Feb-13 9,051,243 9,051,243 $7,400,000 $0 $385,452 1,651,243 $2,223,048 $5,504
1 Mar-13 -9,051,243 0.00% $0 $0 $385,452 $0 $2,223,048 $5,504
2 Apr-13 -9,051,243 0.00% $0 $0 $385,452 $0 $2,223,048 $5,504
3 May-13 -9,051,243 0.00% $0 $0 $385,452 $0 $2,223,048 $5,504
4 Jun-13 403,750 9,454,993 15.48% $0 $0 $385,452 $403,750 $1,819,298 $6,850
5 Jul-13 -9,454,993 0.00% $0 $0 $385,452 $0 $1,819,298 $6,850
6 Aug-13 -9,454,993 0.00% $0 $0 $385,452 $0 $1,819,298 $6,850
7 Sep-13 60,000 9,514,993 2.30% $0 $60,000 $325,452 $0 $1,819,298 $6,850
8 Oct-13 403,750 9,918,743 15.48% $0 $0 $325,452 $403,750 $1,415,548 $8,196
9 Nov-13 -9,918,743 0.00% $0 $0 $325,452 $0 $1,415,548 $8,196
10 Dec-13 -9,918,743 0.00% $0 $0 $325,452 $0 $1,415,548 $8,196
11 Jan-14 -9,918,743 0.00% $0 $0 $325,452 $0 $1,415,548 $8,196
12 Feb-14 403,750 10,322,493 15.48% $0 $0 $325,452 $403,750 $1,011,798 $9,542
13 Mar-14 -10,322,493 0.00% $0 $0 $325,452 $0 $1,011,798 $9,542
14 Apr-14 75,452 10,397,945 2.89% $0 $75,452 $250,000 $0 $1,011,798 $9,542
15 May-14 -10,397,945 0.00% $0 $0 $250,000 $0 $1,011,798 $9,542
16 Jun-14 403,750 10,801,695 15.48% $0 $0 $250,000 $403,750 $608,048 $10,887
17 Jul-14 -10,801,695 0.00% $0 $0 $250,000 $0 $608,048 $10,887
18 Aug-14 80,000 10,881,695 3.07% $0 $80,000 $170,000 $0 $608,048 $10,887
19 Sep-14 -10,881,695 0.00% $0 $0 $170,000 $0 $608,048 $10,887
20 Oct-14 -10,881,695 0.00% $0 $0 $170,000 $0 $608,048 $10,887
21 Nov-14 -10,881,695 0.00% $0 $0 $170,000 $0 $608,048 $10,887
22 Dec-14 -10,881,695 0.00% $0 $0 $170,000 $0 $608,048 $10,887
23 Jan-15 30,000 10,911,695 1.15% $0 $30,000 $140,000 $0 $608,048 $10,887
24 Feb-15 -10,911,695 0.00% $0 $0 $140,000 $0 $608,048 $10,887
25 Mar-15 -10,911,695 0.00% $0 $0 $140,000 $0 $608,048 $10,887
26 Apr-15 -10,911,695 0.00% $0 $0 $140,000 $0 $608,048 $10,887
27 May-15 35,000 10,946,695 1.34% $0 $35,000 $105,000 $0 $608,048 $10,887
28 Jun-15 35,000 10,981,695 1.34% $0 $35,000 $70,000 $0 $608,048 $10,887
29 Jul-15 -10,981,695 0.00% $0 $0 $70,000 $0 $608,048 $10,887
30 Aug-15 -10,981,695 0.00% $0 $0 $70,000 $0 $608,048 $10,887
31 Sep-15 -10,981,695 0.00% $0 $0 $70,000 $0 $608,048 $10,887
32 Oct-15 35,000 11,016,695 1.34% $0 $35,000 $35,000 $0 $608,048 $10,887
33 Nov-15 35,000 11,051,695 1.34% $0 $35,000 $0 $0 $608,048 $10,887
34 Dec-15 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
35 Jan-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
36 Feb-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
37 Mar-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
38 Apr-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
39 May-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
40 Jun-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
41 Jul-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
42 Aug-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
43 Sep-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
44 Oct-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
45 Nov-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
46 Dec-16 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
47 Jan-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
48 Feb-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
49 Mar-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
50 Apr-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
51 May-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
52 Jun-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
53 Jul-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
54 Aug-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
55 Sep-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
56 Oct-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
57 Nov-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
58 Dec-17 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
59 Jan-18 -11,051,695 0.00% $0 $0 $0 $0 $608,048 $10,887
60 Feb-18 -11,051,695 0.00% $0 $0 $0 $0 $608,048
76.690% $7,400,000 $385,452 $7,806,328 $3,266,243 $599,396
130116_Carlsbad (Acq.-Predev-Const.- Pernn).xlsx
Prepared bv: Strategic Consulting Initiative
www.scinitiative.com
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Page 4 of 10
1/16/2013
DEVELOPMENT BUDGET
Tax Credit Eligible (100%)
Total Project Depreciable Non -Acquisition Construction
Item Costs Residential Depreciable Amortize Expense Basis /Rehab Basis
ACQUISITION
Property Purchase Price $10,450,000 $0 $10,450,000
Value of City Land Contribution $1,750,000 $0 $1,750,000 $0
Demolition $500,000 $0 $500,000 $0
Legal: Acquisition $15,000 $0 $15,000 $0
Subtotal Acquisition $12,715,000 $0 $12,715,000 $0 $0 $0 $0
CONSTRUCTION
Residential Structures (Inc. Site Work) $15,710,032 $15,660,032 $50,000 $15,660,032
Offsite Improvenients $200,000 $200,000 $200,000
PV/Solar $300,000 $300,000 $300,000
Furnishings Included in Contract $50,000 $50,000 $50,000
GC Profit, Overhead/Gen. Conditions $2,346,404 $2,346,404 $2,346,404
Construction Bonds $150,000 $0 $150,000 $0
Builder's Risk & Liability Insurance $120,000 $120,000 $120,000
Construction Contingency $952,822 $952,822 $952,822
Subtotal Construction $19,829,258 $19,629,258 $200,000 $0 $0 $0 $19,629,258
SOFT COSTS
Local Development Impact Fees $2,450,000 $2,450,000 $2,450,000
Local Permit Processing Fees $400,000 $400,000 $400,000
Environmental Studies $120,000 $120,000 $120,000
Appraisal & Market Study $25,000 $25,000 $25,000
Engineering $175,000 $175,000 $175,000
Architectural Design & Supervision $450,000 $450,000 $450,000
Soils Engineer $80,000 $80,000 $80,000
Relocation $1,300,000 $1,300,000 $1,300,000
Civil Engineering/Survey/Mapping $150,000 $150,000 $150,000
Dry Utility Consultant $50,000 $50,000 $50,000
Financial/Syndication Consultant $50,000 $0 $50,000 $0
Legal: Construction $20,000 $20,000 $20,000
Legal: Permanent $20,000 $0 $20,000 $0
Legal: Organization of Partnership $20,000 $0 $20,000 $0
Legal: Syndication $40,000 $0 $40,000 $0
Title/Recording/Escrow - Acquisition $40,000 $0 $40,000 $0
Title/Recording/Escrow - Construction $20,000 $20,000 $20,000
Const. Loan Interest $1,190,200 $892,650 $297,550 $892,650
Marketing (lease-up. Advertisement, Setup) $50,000 $0 $50,000 $0
Construrtion Inspection $13,000 $0 $13,000 $0
Insurance During Construction/Operations $120,000 $90,000 $30,000 $90,000
Real Estate Taxes $220,000 $165,000 $55,000 $165,000
TCAC App/Allocation - (Mont. Fee Below) $102,000 $0 $102,000 $0
Soft Cost Contingency $406,000 $406,000 $406,000
Investor Due Diligence $54,500 $0 $54,500 $0
Audit/Cost Certification $40,000 $40,000 $40,000
Developer Fee (Overhead) $500,000 $500,000 $0 $500,000
Developer Fee (Profit) $1,500,000 $900,000 $600,000 $0 $900,000
Subtotal Soft Costs $9,605,700 $8,233,650 $797,500 $142,000 $432,550 $0 $8,233,650
COSTS oeFERRBD UNTIL CONVERSION
Title/Recording/Escrow - Permanent $20,000 $0 $20,000 $0
Operating Reserve $743,800 $0 $743,800 $0
TCAC Monitoring Fee $56,580 $0 $56,580 $0
Subtotal Deferred Costs $820,380 $0 $743,800 $76,580 $0 $0 $0
FINANCING COSTS
Acq./Predev. Lender Orig. Fees $38,743 $8,243 $30,500 $8,243
Constr Lender Orig. Fees $247,943 $247,943 $247,943
Constr. Lender Expense $60,000 $60,000 $60,000
Constr Lender Legal $45,000 $0 $45,000 $0
Acq. Lender Expense $30,000 $6,383 $23,617 $6,383
Acq. Lender Legal $20,000 $4,255 $15,745 $4,255
Perm Lender Orig. Fees $81,666 $0 $81,666 $0
Perm Lender Expense $25,000 $0 $25,000 $0
Perm Lender Legal $30,000 $0 $30,000 $0
Subtotal Financing Costs $578,352 $326,824 $69,862 $181,666 $0 $0 $326,824
TOTAL DEVELOPMENT COST $43,548,690 $28,189,732 $14,526,162 $400,246 $432,550 $0 $28,189,732
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
Carlsbad - New Construction Page 5a of 10
Developer: C&C/IHO Revised: 1/16/2013
Version: Acq.-Predev-Const.-Pernn
UNIT MIX & RENTAL INCOME (Existina Units)
Avg Affordability (At Restricted AMIs): 78.24% UNIT MIX SUMMARY
2 Bdrm 52 100.00%
Total 52 100.00%
Initial Acquisition (Total of 42 units)
Restriction 60% AMI 39.22% Restricted
AMI Gross Monthly Net TOTAL TOTAL
Based on Monthly Utility Monthly NET MON. ANN. NET
Unit Type Program No. Units LIHTC Rents Allowance Rents RENTS RENTS
2 Bedroom Carlsbad 20 60% $1,084 ($44) $1,040 $20,800 $249,600
Subtotal 20 $1,040 $20,800 $249,600
Vacancy 5.00% Effective Gross 60% AMI: $19,760 $237,120
Note:
Restriction 90% AMI 41.18% Restricted
AMI Gross Monthly Net TOTAL TOTAL
Based on Monthly Utility Monthly NET MON. ANN. NET
Unit Type Program No. Units LIHTC Rents Allowance Rents RENTS RENTS
2 Bedroom Carlsbad 21 77% $1,394 ($44) $1,350 $28,350 $340,200
Subtotal 21 $1,350 $28,350 $340,200
Vacancy 5.00% Effective Gross 90% $26,933 $323,190
Note:
Subsequent Acquisition (Total of 10 units)
Restriction 90% AMI 19.61% Restricted
AMI Gross Monthly Net TOTAL TOTAL
Based on Monthly Utility Monthly NET MON. ANN. NET
Unit Type Program No. Units LIHTC Rents Allowance Rents RENTS RENTS
2 Bedroom Carlsbad 10 77% $1,394 ($44) $1,350 $13,500 $162,000
Subtotal 10 $1,350 $13,500 $162,000
Vacancy 5.00% Effective Gross 90% 4MJ; $12,825 $153,900
Note:
Manager's Unit
AMI Gross Monthly Net TOTAL TOTAL
Based on Monthly Utility Monthly NET MON. ANN. NET
Unit Type No. Units LIHTC Rents Allowance Rents RENTS RENTS
2 Bdrms 1 0% $0 $0 $0 $0 $0
Subtotal 1 $0 $0 $0
Vacancy 0.00% Effective Gross 0% AMI: $0 $0
Note:
Gross Rents $62,650 $751,800
TOTAL 52 Avg. Vacancy 5.00% Effective Gross Rents $59,518 $714,210
MISCELLANEOUS INCOME j
P/U/Month MONTHLY ANNUAL
Laundry $6.00 $312 $3,744
Subtotal $312 $3,744
Vacancy Factor 5.00% Eff. Gross Misc. Inc. $296 $3,557
Total Units TOTAL EFF. GROSS INCOME MONTHLY ANNUAL
TOTAL 52 GROSS INCOME $62,962 $755,544
EFF. GROSS INCOME $59,814 $717,767
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
50
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Page 6a of 10
Revised: 1/16/2013
OPERATING EXPENSES (Existing Units)
Income Summary
Gross Income
Avg. Gross Income Vacancy
Miscellaneous Income
Misc. Income Reduction
ANNUAL OPERATING EXPENSES
General Administrative
Advertising
Legal
Accounting/Audit
Telephone/Computer
Office Expense
Total Gen. Administrative
Management Fee
Utilities
Electricity
Water & Sewer
Total Utilities
Payroll/Pavroli Taxes
On-site Manager
Maintenance Personnel
Payroll Taxes, Benefits
Other
Total Payroll/Payroll Taxes
Insurance
Maintenance
Painting
Repairs
Exterminating
Landscaping
Supplies
Other
Total Maintenance
TOTAL OPERATING EXPENSES
Taxes, Reserves^ Services, Other
Real Estate Taxes
Replacement Reserves
Total Other Costs
TOTAL ANNUAL OPER. EXPENSES
Vac. Factor Residential
$751,800
5.00% ($37,590)
$3,744
5.00% ($187)
$717,767
Total Per Unit
$2,500 $48
$3,000 $58
$9,000 $173
$2,500 $48
$2,500 $48
$19,500 $375
$57,421 $1,104
$2,500 $48
$40,000 $769
$42,500 $817
$20,000 $385
$20,000 $385
$8,000 $154
$4,500 $87
$52,500 $1,010
$11,700 $225
$4,000 $77
$15,700 $302
$4,500 $87
$12,000 $231
$7,500 $144
$7,500 $144
$51,200 $985
$234,821 $4,516
$79,600 $1,531
$13,000 $250
$92,600 $1,781
$327,421 $6,297
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
SI
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Page 5b of 10
Revised: 1/16/2013
UNIT MIX & RENTAL INCOME (New Construction - 2018)
(Rents are based on 2012 AMI, trended by 2.5% for 6 years)
|Avg Affordability (At Restricted AMIs): | 48.84% 1 UNIT MIX SUMMARY
2 Bdrm 98 70.00%
3 Bdrm 42 30.00%
iTotal TCAC Affordability Points: | 52.00 1 Total 140 100,00%
Restriction 300/0 AMI 10.14% Restricted] 1 TCAC PTS: 17.00
AMI Gross Monthly Net TOTAL TOTAL
Based on Monthly Utility Monthly NET MON. ANN. NET
Unit Type Program No. Units LIHTC Rents Allowance Rents RENTS RENTS
2 Bedroom TCAC 9 30% $628 ($54) $574 $5,165 $61,983
3 Bedroom TCAC 5 30% $726 ($64) $662 $3,310 $39,725
Subtotal 14 $1,236 $8,476 $101,707
Vacancy 5.00% Effective Gross 50% AMJ: $8,052 $96,622
Note:
Restriction 400/0 AMI 20.29% Restricted! 1 TCAC PTS: 15.00
AMI Gross Monthly Net TOTAL TOTAL
Based on Monthly Utility Monthly NET MON. ANN. NET
Unit Type Program No. Units LIHTC Rents Allowance Rents RENTS RENTS
2 Bedroom TCAC 20 40% $838 ($54) $784 $15,678 $188,139
3 Bedroom TCAC 8 40% $968 ($64) $904 $7,233 $86,792
Subtotal 28 $1,688 $22,911 $274,931
Vacancy 5,00% Effective Gross 40% AAfJ; $21,765 $261,184
Note;
Restriction 50»/o AMI 40.58% Restricted! 1 TCAC PTS: 20.00
AMI Gross Monthly Net TOTAL TOTAL
Based on Monthly Utility Monthly NET MON. ANN, NET
Unit Type Program No, Units LIHTC Rents Allowance Rents RENTS RENTS
2 Bedroom TCAC 40 50% $1,048 ($54) $994 $39,757 $477,078
3 Bedroom TCAC 16 50% $1,211 ($64) $1,147 $18,353 $220,239
Subtotal 56 $2,141 $58,110 $697,317
Vacancy 5,00% Effective Gross 50% AMI: $55,204 $662,451
Note:
Restriction 600/0 AMI 28,99% Restricted!
AMI Gross Monthly Net TOTAL TOTAL
Based on Monthly Utility Monthly NET MON. ANN. NET
Unit Type Program No, Units LIHTC Rents Allowance Rents RENTS RENTS
2 Bedroom TCAC 27 60% $1,257 ($54) $1,203 $32,479 $389,744
3 Bedroom TCAC 13 60% $1,453 ($64) $1,389 $18,058 $216,696
Subtotal 40 $2,592 $50,537 $606,440
Vacancy 5,00% Effective Gross 60% AMI: $48,010 $576,118
Note:
Manager's Unit
Unit Type No. Units
AMI
Based on
LIHTC
Gross Monthly Net
Monthly Utility Monthly
Rents Allowance Rents
TOTAL
NET MON.
RENTS
TOTAL
ANN. NET
RENTS
2 Bdrms 2 0% $0 $0 $0 $0 $0
Subtotal 2 $0 $0 $0
Vacancy 0.00% Effective Gross 0% AMI: $0 \ $0
Note:
Gross Rents $140,033 $1,680,395
TOTAL 140 lAvg. Vacancy 5,00% Effective Gross Rents $133,031 $1,596,375
MISCELLANEOUS INCOME)
P/U/Month MONTHLY ANNUAL
Laundry $6,00 $840 $10,080
Subtotal $840 $10,080
Vacancy Factor 5,00% Eff. Cross Misc. Inc. $798 $9,576
Total Units TOTAL EFF. GROSS INCOME MONTHLY ANNUAL
TOTAL 140 GROSS INCOME $140,873 $1,690,475
EFF, GROSS INCOME $133,829 $1,605,951
130116_Carlsbad (Acq.-Predev-Const,- Perm),xlsx Prepared by: Strategic Consulting Initiative
52
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Page 6b of 10
Revised: 1/16/2013
OPERATING EXPENSES (New Construction - 2018)
(Expenses are based on 2012 Estimate trended by 3.5% for 6 years)
I Income Summary Vac. Factor
Gross Income
Avg. Gross Income Vacancy
Miscellaneous Income
Misc. Income Reduction
lANNUAL OPERATING EXPENSES
General Administrative
Advertising
Legal
Accounting/Audit
Security
Telephone/Computer
Office Expense
Totai Gen. Administrative
Management Fee
Utilities
Gas
Electricity
Water & Sewer
Total Utilities
Payroll/Payroll Taxes
On-site Manager
Maintenance Personnel
Payroll Taxes, Benefits
Other
Totai Payroll/Payroll Taxes
Insurance
Maintenance
Painting
Repairs
Trash Removal
Exterminating
Landscaping
Supplies
Other
Total Maintenance
TOTAL OPERATING EXPENSES
Taxes, Reserves, Services, Other
Real Estate Taxes
Replacement Reserves
Program Services
Total Other Costs
TOTAL ANNUAL OPER. EXPENSES
5.00%
5.00%
Total
Residentiai
$1,680,395
($84,020)
$10,080
($504)
$1,605,951
Per Unit
$4,500 $32
$4,500 $32
$15,000 $107
$22,500 $161
$6,500 $46
$8,000 $57
$61,000 $436
$128,476 $918
$6,500 $46
$20,000 $143
$80,000 $571
$106,500 $761
$65,000 $464
$60,000 $429
$25,000 $179
$15,000 $107
$165,000 $1,179
$31,500 $225
$49,000 $350
$85,000 $607
$40,000 $286
$27,000 $193
$40,000 $286
$20,000 $143
$35,000 $250
$296,000 $2,114
$788,476 $5,632
^30,000 $214
^42,000 $300
$35,000 $250
$107,000 $764
$895,476 $6,396
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
53
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Page 7 of 10
Revised: 1/16/2013
I^ORTGAGE CALCULATION
NET AVAILABLE INCOME
FINANCIAL EXPENSES
Debt Service Coverage (Conventional Financing)
Available for Conventional Debt Service
Year 2013
52 Units
$390,346
Net Cash Fiow
Year 2018
140 Units
$710,475
1.20
592,063
$118,413
LOAN CONSTANT/IMPUTED TOTAL INTEREST COST
INTEREST RATE STACK
Acq./Predev.
Loan
Conventional
Construction
Loan
Conventional
Perm Loan
LIBOR/Perm Rate 0.250% 0,250% 3.000%
Spread 3.500% 3.000% 2.000%
Cushion 0.250% 0.750% 1.500%
Base Rate 4.000% 4.000% 6.500%
Term (Months) 60 24 420
DSC --1.20
Totai All-In Underwriting Rate 4.000% 4.000% 6.500%
Imputed Totai Interest Cost (TIC) 4.000% 4.000% 6.500%
PERMANENT MORTGAGE
Loan Based on Debt Service Coverage (1.2 DSC)
Maximum Loan
$8,166,550
$8,166,550
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consuiting Initiative
SH
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Pernn
Revised:
Page 8 of 10
1/16/2013
THRESHOLD BASIS LIMIT
BASIS LIMITS CALCULATIONS 90/0
Total
County: San Diego
Unit Basis Limit # of Units
Unadjusted
Tlireshold
2 $234,400 98 $22,971,200
3 $300,032 42 $12,601,344
Total: 140 $35,572,544
(G) Plus (+) local development impact fees required to be paid to local government entities
Certification from local entities assessing fees also required. $2,450,000
iTotal Threshold Limit: $38,022,5441
High Cost Test I
Total Eligilbe Basis $28,189,732
Percentage of Adjusted Threshold Basis Limit 74.140% (Not a High Cost Project)
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
55
Carlsbad - New Construction
Developer: C&C/IHO
.Version: Acq.-Predev-Const.-Perm
Page 9 of 10
Revised: 1/16/2013
TAX CREDIT CALCULATION
Construction/
Reiiabilitation Acquisition Total
I Threshold Basis Limit $38.022,544 $0 $38.022,544
Total Eligible Basis $28,189,732 $0 $28,189,732
Deducted From Eligible Basis
- Eligible Basis Voluntarily Excluded ($2,131,779) $0 ($2,131,779)
7ota/ 6as/s Reduction ($2,131,779) $0 ($2,131,779)
I rota/ Requested Unadjusted Eligible Basis $26,057,953 $0 $26,057,953
Higii Cost Area Yes 130% 100%
Total Adjusted Eligible Basis $33,875,339 $0 $33,875,339
Applicable Fraction 100% 100% 100%
Qualified Basis $33,875,339 $0 $33,875,339
Credit Rate November-12 7.38% 0.00%
Total Annual Federal Credits $2,500,000 $0 $2,500,000
Total Federal Credits Over 10 Years $25,000,000 $0 I $25,000,000 I
1 CONSTRUCTION/REHABILITATION CREDITS
Building # Bldg ID
Total #
Total # LIHTC LIHTC
Units Units Unit <Vb
Total
Sq. Ft
LIHTC UHTC Total
Sq. Ft Sq. Ft <Vo Sq. Ft %
Requested
Eligible
Basis
QCT/
DDA
UHTC
Applicable %
QUALIFIED
BASIS
Credit Annual
Rate Credits
138 138 100% 100% 100.00% $26,057,953 130% 100% $33,875,339 7.38% $2,500,000
138 138 100.00% $26,057,953 $33,875,339 $2,500,000
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
Carlsbad - New Construction
Developer: CftC/IHO
Version: Acq.-Predev-Const.-Perm
Page 10 of 10
1/16/2013
60 YEAR CASH FLOW ANALYSIS
% Residential Operational 83% 100% 100% 100% 100% 100.00% % Residential Operational
r Acauisition/Hold Period Construciton Period!
Year 1
2013
Year 2
2014
Year 3
2015
Year 4
2016
Year 5
2017
Year 1
2018
Year 2
2019
Year 1
2020
Year 2
2021
Year 3
2022
1 INCOME ASSUMPTIONS 1 $1,782,731 Restricted Unit Rents 3.00% $626,500 $774,354 $797,585 $821,512 $846,158 $1,680,395 $1,730,807 $1,782,731
GROSS POTENTIAL INCOME - HOUSING $626,500 $774,354 $797,585 $821,512 $846,158 $1,680,395 $1,730,807 $1,782,731
OTHER INCOME
Miscellaneous Income 3.00% $3,120 $3,856 $3,972 $4,091 $4,214 $10,080 $10,382 $10,694
GROSS POTENTIAL INCOME - OTHER $3,120 $3,856 $3,972 $4,091 $4,214 $10,080 $10,382 $10,694
GROSS POTENTIAL INCOME - TOTAL $629,620 $778,210 $801,557 $825,603 $850,371 $1,690,475 $1,741,189 $1,793,425
IVACANCY ASSUMPTIONS 1 ($89,137)
($535) Restricted Units
Miscellaneous Income
TOTAL VACANCY LOSS
5.00%
5.00%
($31,325)
($156)
($38,718)
($193)
($39,879)
($199)
($41,076)
($205)
($42,308)
($211)
($84,020)
($504)
($86,540)
($519)
($89,137)
($535) Restricted Units
Miscellaneous Income
TOTAL VACANCY LOSS ($31,481) ($38,911) ($40,078) ($41,280) ($42,519) ($84,524) ($87,059) ($89,671)
EFFECTIVE GROSS INCOME $598,139 $739,300 $761,479 $784,323 $807,853 $1,605,951 $1,654,130 $1,703,754
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
3.50%
2.00%
$195,684
$66,333
$243,040
$81,192
$251,546
$82,816
$260,350
$84,472
$269,462
$86,162
$823,476
$30,000
$852,298
$30,600
$882,128
$31,212
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
$262,018 $324,232 $334,362 $344,822 $355,624 $853,476 $882,898 $913,340
NET OPERATING INCOME $336,122 $415,068 $427,117 $439,501 $452,229 $752,475 $771,232 $790,414
RESERVE DEPOSITS
Replacement Reserve 3.00% $10,833 $13,390 $13,792 $14,205 $14,632 $42,000 $43,260 $44,558
AVAILABLE FOR DEBT SERVICE $325,288 $401,678 $413,325 $425,295 $437,597 $710,475 $727,972 ^745,856
1 DEBT SERVICE 1 $67,320
$524,742
$71,829
$520,234 Principal
Interest $74,004 $122,573 $130,644 $130,644 $130,644
$63,095
$528,968
$67,320
$524,742
$71,829
$520,234
TOTAL DEBT SERVICE $74,004 $122,573 $130,644 $130,644 $130,644 $592,063 $592,063 $592,063
15% Reserve Account 15.00% $37,693 $41,866 $42,402 $44,198 $46,043
NET CASH FLOW $213,591 $237,239 $240,279 $250,453 $260,910 $118,413 $135,910 $153,793
DEBT SERVICE COVERAGE RATIO 1.20 1.23 1.26
1 NET CASH FLOW DISTRIBUTION 1
LP Management Fee $5,000 3.00% $5,000 $5,150 $5,305
General Partner Management Fee $25,000 3.00% $25,000 $25,750 $25,523
Residual Receipts $42,902 $50,955 $59,184 City of Carlsbad 48.52% $42,902 $50,955 $59,184
Begin Bai
Accrued Interest
$7,400,000 $7,400,000
tiss.ooo
$7,585,000
4222,000
$7,807,000
$222,000
$8,029,000
$222,000
$8,251,000
$222,000
$8,473,000
$222,000
$8,652,098
$222,000
$8,823,143
$222,000
Subtotal
Payment
End.Ln Bai
$7,585,000
$0
$7,807,000
$0
$8,029,000
$0
$8,251,000
$0
$8,473,000
$0
$8,695,000
$42,902
$8,874,098
$50,955
$9,045,143
$59,184 Subtotal
Payment
End.Ln Bai $7,585,000 $7,807,000 $8,029,000 $8,251,000 $8,473,000 $8,652,098 $8,823,143 $8,985,959
Citv of Carisbad - Land Contribution 11.48% $10,146 $12,050 $13,996
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$1,750,000 $1,750,000
$43,750
$1,793,750
$52,500
$1,846,250
$52,500
$1,898,750
$52,500
$1,951,250
$52,500
$2,003,750
$52,500
$2,046,104
$52,500
$2,086,554
$52,500 Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$1,793,750
$0
$1,846,250
$0
$1,898,750
$0
$1,951,250
$0
$2,003,750
$0
$2,056,250
$10,146
$2,098,604
$12,050
$2,139,054
$13,996
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai $1,793,750 $1,846,250 $1,898,750 $1,951,250 $2,003,750 $2,046,104 $2,086,554 $2,125,058
GP Incentive Management Fee (90%) $31,829 $37,803 $43,908
General Partner (.01%)
Limited Partner (99.99%)
$0
$3,536
$0
$4,200
$0
$4,878
130116_Carisbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Page 10 of 10
1/16/2013
160 YEAR CASH FLOW ANALYSIS
% Residential Operational
Year 4
2023
Year 5
2024
Year 6
2025
Year 7
2026
Year 8
2027
Year 9
2028
Year 10
2029
Year 11
2030
Year 12
2031
Year 13
2032
1 INCOME ASSUMPTIONS
Restricted Unit Rents
1
3.00% $1,836,213 $1,891,300 $1,948,039 $2,006,480 $2,066,674 $2,128,674 $2,192,535 $2,258,311 $2,326,060 $2,395,842
GROSS POTENTIAL INCOME - HOUSING $1,836,213 $1,891,300 $1,948,039 $2,006,480 $2,066,674 $2,128,674 $2,192,535 $2,258,311 $2,326,060 $2,395,842
OTHER INCOME
Miscellaneous Income 3.00% $11,015 $11,345 $11,685 $12,036 $12,397 $12,769 $13,152 $13,547 $13,953 $14,?72
GROSS POTENTIAL INCOME - OTHER $11,015 $11,345 $11,685 $12,036 $12,397 $12,769 $13,152 $13,547 $13,953 $14,372
GROSS POTENTIAL INCOME - TOTAL $1.847,228 $1.902.645 $1.959.724 $2.018.516 $2.079.071 $2.141.443 $2.205.687 $2.271.857 S2.340.013 $2.410.213
I VACANCY ASSUMPTIONS
Restricted Units 5.00% ($91,811) ($94,565) ($97,402) ($100,324) ($103,334) ($106,434) ($109,627) ($112,916) ($116,303) ($119,792)
TOTAL VACANCY LOSS ($92,361) ($95,132) ($97,986) ($100,926) ($103,954) ($107,072) ($110,284) ($113,593) ($117,001) ($120,511)
EFFECTIVE GROSS INCOME $1,754,866 $1,807,512 $1,861,738 $1,917,590 $1,975,118 $2,034,371 $2,095,402 $2,158,264 $2,223,012 $2,289,703
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
3.50%
2.00%
$913,003
$31,836
$944,958
$32,473
$978,031
$33,122
$1,012,262
$33,785
$1,047,691
$34,461
$1,084,361
$35,150
$1,122,313
$35,853
$1,161,594
$36,570
$1,202,250
$37,301
$1,244,329
$38,047
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
$944,839 $977,431 $1,011,154 $1,046,047 $1,082,152 $1,119,510 $1,158,166 $1,198,164 $1,239,551 $1,282,376
NET OPERATING INCOME $810,028 $830,082 $850,584 $871,543 $892,966 $914,861 $937,236 $960,100 $983,461 $1,007,327
RESERVE DEPOSITS
Replacement Reserve 3.00% $45,895 $47,271 $48,690 $50,150 $51,655 $53,204 $54,800 $56,444 $58,138 $59,882
AVAILABLE FOR DEBT SERVICE $764,133 $782,810 $801,895 $821,393 $841,311 $861,656 $882,436 $903,656 $925,323 $947,445
DEBT SERVICE i $120,649
$471,414
$128,729
$463,334
$137,350
$454,713 Principal
Interest
$76,639
$515,423
$81,772
$510,291
$87,248
$504,814
$93,092
$498,971
$99,326
$492,737
$105,978
$486,085
$113,076
$478,987
$120,649
$471,414
$128,729
$463,334
$137,350
$454,713
TOTAL DEBT SERVICE $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,063
15% Reserve Account 15.00%
NET CASH FLOW $172,070 $190,748 $209,832 $229,330 $249,248 $269,594 $290,373 $311,593 $333,261 $355,382
DEBT SERVICE COVERAGE RATIO 1.29 1.32 1.35 1.39 1.42 1.46 1.49 1.53 1.56 1.60
NET CASH FLOW DISTRIBUTION 1
LP Management Fee $5,000 3.00% $5,464 $5,628 $5,796 $5,970 $6,149 $6,334 $6,524 $6,720 $6,921 $7,129
General Partner Management Fee $25,000 3.00% $27,318 $28,138 $28,982 $29,851 $30,747 $31,669 $32,619 $33,598 $34,606 $35,644
Residual Receipts $141,562 $151,692 City of Carisbad 48,52% $67,589 $76,175 $84,944 $93,899 $103,043 $112,378 $121,908 $131,635 $141,562 $151,692
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$7,400,000 $8,985,959
$222,000
$9,140,370
$222,000
$9,286,195
$222,000
$9,423,251
$222,000
$9,551,352
$222,000
$9,670,309
$222,000
$9,779,930
$222,000
$9,880,022
$222,000
$9,970,387
$222,000
$10,050,824
$222,000 Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$9,207,959
$67,589
$9,362,370
$76,175
$9,508,195
$84,944
$9,645,251
$93,899
$9,773,352
$103,043
$9,892,309
$112,378
$10,001,930
$121,908
$10,102,022
$131,635
$10,192,387
$141,562
$10,272,824
$151,692
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai $9,140,370 $9,286,195 $9,423,251 $9,551,352 $9,670,309 $9,779,930 $9,880,022 $9,970,387 $10,050,824 $10,121,132
Citv of Carisbad - Land Contribution 11.48% $15,984 $18,014 $20,088 $22,206 $24,368 $26,576 $28,830 $31,130 $33,478 $35,873
Begin Bai
Accrued Interest
$1,750,000 $2,125,058
$52,500
$2,161,574
$52,500
$2,196,060
$52,500
$2,228,471
$52,500
$2,258,766
$52,500
$2,286,897
$52,500
$2,312,821
$52,500
$2,336,492
$52,500
$2,357,862
$52,500
$2,376,884
$52,500
Subtotal
Payment
End.Ln Bai
$2,177,558
$15,984
$2,214,074
$18,014
$2,248,560
$20,088
$2,280,971
$22,206
$2,311,266
$24,368
$2,339,397
$26,576
$2,365,321
$28,830
$2,388,992
$31,130
$2,410,362
$33,478
$2,429,384
$35,873 Subtotal
Payment
End.Ln Bai $2,161,574 $2,196,060 $2,228,471 $2,258,766 $2,286,897 $2,312,821 $2,336,492 $2,357,862 $2,376,884 $2,393,511
GP Incentive Management Fee (90%) $50,144 $56,514 $63,019 $69,663 $76,447 $83,373 $90,443 $97,659 $105,024 $112,539
General Partner (.01%)
Limited Partner (99.99%)
$1
$5,571
$1
$6,279
$1
$7,001
$1
$7,740
$1
$8,493
$1
$9,263
$1
$10,048
$1
$10,850
$1
$11,668
$1
$12,503
130116_Carlsbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
Carlsbad - New Construction
Developer: C81C/IHO
Version: Acq.-Predev-Const.-Perm
Page 10 of 10
1/16/2013
160 YEAR CASH FLOW ANALYSIS
% Residential Operational
Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23
2033 2034 2035 2036 2037 2038 2039 2040 2041 2042
1
$2,467,717 $2,541,748 $2,618,001 $2,696,541 $2,777,437 $2,860,760 $2,946,583 $3,034,981 $3,126,030 $3,219,811
$2,467,717 $2,541,748 $2,618,001 $2,696,541 $2,777,437 $2,860,760 $2,946,583 $3,034,981 $3,126,030 $3,219,811
$14,803 $15,247 $15,704 $16,175 $16,661 $17,161 $17,675 $18,206 $18,752 $19,314
I INCOME ASSUMPTIONS
Restricted Unit Rents
GROSS POTENTIAL INCOME - HOUSING
OTHER INCOME
Miscellaneous Income
GROSS POTENTIAL INCOME - OTHER $14,803 $15,247 $15,704 $16,175 $16,661 $17,161 $17,675 $18,752 $19,314
GROSS POTENTIAL INCOME - TOTAL $2.482.520 $2.556.995 $2,633.705 $2.712,716 $2,794.098 $2.877.921 $2.964.258 $3.053.186 $3.144.782 $3.239.125
'Restrirtedu"nTtl 5.00%' ($123,386) ($127,087) ($130,900) ($134,827) ($138,872) ($143,038) ($147,329) ($151,749) ($156,302) ($160,991) IVACANCY ASSUMPTIONS
TOTAL VACANCY LOSS ($124,126) ($127,850) ($131,685) ($135,636) ($139,705) ($143,896) ($148,213) ($152,659) ($157,239) ($161,956)
EFFECTIVE GROSS INCOME $2,358,394 $2,429,146 $2,502,020 $2,577,081 $2,654,393 $2,734,025 $2,816,046 $2,900,527 $2,987,543 $3,077,169
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
3.50%
2.00%
$1,287,880
$38,808
$1,332,956
$39,584
$1,379,610
$40,376
$1,427,896
$41,184
$1,477,872
$42,007
$1,529,598
$42,847
$1,583,134
$43,704
$1,638,543
$44,578
$1,695,892
$45,470
$1,755,249
$46,379
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
$1,326,688 $1,372,540 $1,419,986 $1,469,079 $1,519,879 $1,572,445 $1,626,838 $1,683,122 $1,741,362 $1,801,628
NET OPERATING INCOME $1,031,705 $1,056,605 $1,082,034 ^1.108,001 $1,134,514 $1,161,580 $1,189,208 $1,217,405 $1,246,180 $1,275,541
RESERVE DEPOSITS
Replacement Reserve 3.00% $61,678 $63,529 $65,435 $67,398 $69,420 $71,502 $73,647 $75,857 $78,132 $80,476
AVAILABLE FOR DEBT SERVICE $970,027 $993,076 $1,016,600 $1,040,603 $1,065,094 $1,090,077 $1,115,560 $1,141,548 $1,168,048 $1,195,065
1 DEBT SERVICE 1 $216,222
$375,841
$230,702
$361,360
$246,153
$345,910
$262,638
$329,424 Principal
Interest
$146,549
$445,514
$156,363
$435,700
$166,835
$425,228
$178,008
$414,054
$189,930
$402,133
$202,650
$389,413
$216,222
$375,841
$230,702
$361,360
$246,153
$345,910
$262,638
$329,424
TOTAL DEBT SERVICE $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,063
15% Reserve Account 15.00%
NET CASH FLOW $377,964 $401,014 $424,537 ^448,541 $473,031 $498,015 $523,497 $549,486 $575,985 $603,002
DEBT SERVICE COVERAGE RATIO 1.64 1.68 1.72 1.76 1.80 1.84 1.88 1.93 1.97 2.02
INET CASH FLOW DISTRIBUTION 1
LP Management Fee $5,000 3.00% $7,343 $7,563 $0 $0 $0 $0 $0 $0 $0 $0
General Partner Management Fee $25,000 3.00% $36,713 $37,815 $38,949 $40,118 $41,321 $42,561 $43,838 $45,153 $46,507 $47,903
Residual Receipts $232,753 $244,725 $256,927 $269,360 City of Carisbad 48.52% $162,028 $172,571 $187,105 $198,186 $209,485 $221,007 $232,753 $244,725 $256,927 $269,360
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$7,400,000 $10,121,132
$222,000
$10,181,104
$222,000
$10,230,533
$222,000
$10,265,428
$222,000
$10,289,243
$222,000
$10,301,757
$222,000
$10,302,750
$222,000
$10,291,997
$222,000
$10,269,272
$222,000
$10,234,345
$222,000 Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$10,343,132
$162,028
$10,403,104
$172,571
$10,452,533
$187,105
$10,487,428
$198,186
$10,511,243
$209,485
$10,523,757
$221,007
$10,524,750
$232,753
$10,513,997
$244,725
$10,491,272
$256,927
$10,456,345
$269,360
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai $10,181,104 $10,230,533 $10,265,428 $10,289,243 $10,301,757 $10,302,750 $10,291,997 $10,269,272 $10,234,345 $10,186,985
Citv of Carisbad - Land Contribution 11.48% $38,317 $40,811 $44,248 $46,868 $49,540 $52,265 $55,043 $57,874 $60,760 $63,700
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$1,750,000 $2,393,511
$52,500
$2,407,694
$52,500
$2,419,383
$52,500
$2,427,635
$52,500
$2,433,267
$52,500
$2,436,226
$52,500
$2,436,461
$52,500
$2,433,918
$52,500
$2,428,544
$52,500
$2,420,284
$52,500 Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$2,446,011
$38,317
$2,460,194
$40,811
$2,471,883
$44,248
$2,480,135
$46,868
$2,485,767
$49,540
$2,488,726
$52,265
$2,488,961
$55,043
$2,486,418
$57,874
$2,481,044
$60,760
$2,472,784
$63,700
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai $2,407,694 $2,419,383 $2,427,635 $2,433,267 $2,436,226 $2,436,461 $2,433,918 $2,428,544 $2,420,284 $2,409,084
GP Incentive Management Fee (90%) $120,207 $128,029 $138,812 $147,032 $155,416 $163,963 $172,678 $181,560 $190,612 $199,836
General Partner (.01%)
Limited Partner (99.99%)
$1
$13,355
$1
$14,224
$2 $2
$16,335
$2
$17,267
$2
$18,216
$2
$19,184
$2
$20,171
$2
$21,177
$2
$22,202
130116_Cartsbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
5^
Carlsbad - New Construction
Developer; C81C/IHO
Version; Acq.-Predev-Const.-Perm
Page 10 of 10
1/16/2013
160 YEAR CASH FLOW ANALYSIS
% Residential Operational
Year 24
2043
Year 25
2044
Year 26
2045
Year 27
2046
Year 28
2047
Year 29
2048
Year 30
2049
Year 31
2050
Year 32
2051
Year 33
2052
INCOME ASSUMPTIONS
Restricted Unit Rents 1
3.00% $3,316,405 $3,415,897 $3,518,374 $3,623,926 $3,732,643 $3,844,623 $3,959,961 $4,078,760 $4,201,123 $4,327,157
GROSS POTENTIAL INCOME - HOUSING $3,316,405 $3,415,897 $3,518,374 $3,623,926 $3,732,643 $3,844,623 $3,959,961 $4,078,760 $4,201,123 $4,327,157
OTHER INCOME
Miscellaneous Income 3.00% $19,894 $20,491 $21,105 $21,738 $22,391 $23,062 $23,754 $24,467 $25,201 $25,957
GROSS POTENTIAL INCOME - OTHER $19,894 $20,491 $21,105 $21,738 $22,391 $23,062 $23,754 $24,467 $25,201 $25,957
GROSS POTENTIAL INCOME - TOTAL
{VACANCY ASSUMPTIONS
Restricted Units
$3.336.299 $3.436.388 $3.539.480 $3.645.664 $3.755.034 $3.867.685 $3.983.716 $4.103.227 $4.226.324 $4.353.113
• 5.00% ($165,820) ($170,795) ($175,919) ($181,196) ($186,632) ($192,231) ($197,998) ($203,938) ($210,056) ($216,358)
TOTAL VACANCY LOSS ($166,815) ($171,819) ($176,974) ($182,283) ($187,752) ($193,384) ($199,186) ($205,161) ($211,316) ($217,656)
EFFECTIVE GROSS INCOME $3,169,484 $3,264,569 $3,362,506 $3,463,381 $3,567,282 $3,674,301 $3,784,530 $3,898,066 $4,015,008 $4,135,458
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
3.50%
2.00%
$1,816,682
$47,307
$1,880,266
$48,253
$1,946,076
$49,218
$2,014,188
$50,203
$2,084,685
$51,207
$2,157,649
$52,231
$2,233,166
$53,275
$2,311,327
$54,341
$2,392,224
$55,428
$2,475,952
$56,536
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
3.50%
2.00%
$1,863,989 $1,928,519 $1,995,294 $2,064,391 $2,135,891 $2,209,879 $2,286,442 $2,365,668 $2,447,651 $2,532,488
NET OPERATING INCOME $1,305,495 $1,336,049 $1,367,212 $1,398,990 f 1.431.391 $1,464,421 $1,498,088 $1,532,398 $1,567,356 $1,602,970
RESERVE DEPOSITS
Replacement Reserve 3.00% $82,891 $85,377 $87,939 $90,577 $93,294 $96,093 $98,976 $101,945 $105,003 $108,153
AVAILABLE FOR DEBT SERVICE $1,222,604 $1,250,672 $1,279,273 $1,308,413 ^1,338,097 $1,368,328 ^1,399,112 ^1,430,452 $1,462,353 $1,494,817
DEBT SERVICE $441,146
$150,917
$470,690
$121,373
$502,213
$89,850 Principal
Interest
$280,228
$311,835
$298,995
$293,068
$319,019
$273,043
$340,385
$251,678
$363,181
$228,882
$387,504
$204,559
$413,456
$178,607
$441,146
$150,917
$470,690
$121,373
$502,213
$89,850
TOTAL DEBT SERVICE $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,063 $592,053 $592,053 $592,063
15% Reserve Account 15.00%
$630,541 $658,609 $687,210 $716,350 $746,034 $776,266 $807,049 $838,390 $870,290 $902,754
DEBT SERVICE COVERAGE RATIO 2.06 2.11 2.16 2.21 2.26 2.31 2.36 2.42 2.47 2.52
NET CASH FLOW DISTRIBUTION
LP Management Fee $5,000 3.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
General Partner Management Fee $25,000 3.00% $49,340 $50,820 $52,344 $53,915 $55,532 $57,198 $58,914 $60,682 $62,502 $64,377
Residual Receipts $377,380 $391,976 $406,819 City of Carisbad 48.52% $282,026 $294,927 $308,066 $321,444 $335,063 $348,924 $363,030 $377,380 $391,976 $406,819
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$7,400,000 $10,186,985
$222,000
$10,126,960
$222,000
$10,054,032
$222,000
$9,967,966
$222,000
$9,868,522
$222,000
$9,755,459
$222,000
$9,628,534
$222,000
$9,487,505
$222,000
$9,332,125
$222,000
$9,162,149
$222,000 Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$10,408,985
$282,026
$10,348,960
$294,927
$10,276,032
$308,066
$10,189,966
$321,444
$10,090,522
$335,063
$9,977,459
$348,924
$9,850,534
$363,030
$9,709,505
$377,380
$9,554,125
$391,976
$9,384,149
$405,819
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai $10,126,960 $10,054,032 $9,967,966 $9,868,522 $9,755,459 $9,628,534 $9,487,505 $9,332,125 $9,162,149 $8,977,330
Citv of Carisbad - Land Contribution 11.48% $66,695 $69,746 $72,853 $76,017 $79,238 $82,516 $85,852 $89,245 $92,697 $95,207
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$1,750,000 $2,409,084
$52,500
$2,394,889
$52,500
$2,377,643
$52,500
$2,357,289
$52,500
$2,333,772
$52,500
$2,307,034
$52,500
$2,277,018
$52,500
$2,243,667
$52,500
$2,205,921
$52,500
$2,166,724
$52,500 Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
$2,461,584
$66,695
$2,447,389
$69,746
$2,430,143
$72,853
$2,409,789
$76,017
$2,386,272
$79,238
$2,359,534
$82,516
$2,329,518
$85,852
$2,296,167
$89,245
$2,259,421
$92,697
$2,219,224
$96,207
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai $2,394,889 $2,377,643 $2,357,289 $2,333,772 $2,307,034 $2,277,018 $2,243,667 $2,206,921 $2,166,724 $2,123,017
GP Incentive Management Fee (90%) $209,233 $218,804 $228,552 $238,477 $248,581 $258,864 $269,329 $279,975 $290,804 $301,816
General Partner (.01%)
Limited Partner (99.99%)
$2
$23,246
$2
$24,309
$3
$25,392
$3
$26,495
$3
$27,617
$3
$28,760
$3
$29,922
$3
$31,105
$3
$32,308
$3
$33,532
130116_Carisbad (Acq.-Predev-Const - Perm).xlsx Prepared by: Strategic Consulting Initiative
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Page 10 of 10
1/16/2013
160 YEAR CASH FLOW ANALYSIS
% Residential Operational
Year 34 Year 35 Year 36 Year 37 Year 38 Year 39 Year 40 Year 41 Year 42 Year 43
2053 2054 2055 2056 2057 2058 2059 2060 2061 2062
llNCOME ASSUMPTIONS 1
Restricted Unit Rents 3.00% $4,456,971 $4,590,680 $4,728,401 $4,870,253 $5,016,361 $5,156,851 $5,321,857 $5,481,513 $5,645,958 $5,815,337
GROSS POTENTIAL INCOME - HOUSING $4,456,971 $4,590,680 $4,728,401 $4,870,253 $5,016,361 $5,166,851 $5,321,857 $5,481,513 $5,645,958 $5,815,337
OTHER INCOME
Miscellaneous Income 3.00% $26,736 $27,538 $28,364 $29,215 $30,091 $30,994 $31,924 $32,881 $33,868 $34,884
GROSS POTENTIAL INCOME - OTHER $26,736 $27,538 $28,364 $29,215 $30,091 $30,994 $31,924 $32,881 $33,868 $34,884
GROSS POTENTIAL INCOME - TOTAL $4,483,707 $4,618,218 $4,756,765 $4,899,468 $5,046,452 $5,197,845 $5,353,781 $5,514,394 $5,679,826 $5,850,221
{VACANCY ASSUMPTIONS
Restricted Units
Miscellaneous Income
5.00%
5.00%
($222,849)
($1,337)
($229,534)
($1,377)
($236,420)
($1,418)
($243,513)
($1,461)
($250,818)
($1,505)
($258,343)
($1,550)
($266,093)
($1,596)
($274,076)
($1,644)
($282,298)
($1,693)
($290,767)
($1,744)
TOTAL VACANCY LOSS ($224,185) ($230,911) ($237,838) ($244,973) ($252,323) ($259,892) ($267,689) ($275,720) ($283,991) ($292,511)
EFFECTIVE GROSS INCOME $4,259,522 $4,387,307 $4,518,926 $4,654,494 $4,794,129 $4,937,953 $5,086,091 $5,238,674 $5,395,834 $5,557,709
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
3.50%
2.00%
$2,562,610
$57,667
$2,652,301
$58,820
$2,745,132
$59,997
$2,841,211
$61,197
$2,940,654
$62,421
$3,043,577
$63,659
$3,150,102
$64,942
$3,260,355
$66,241
$3,374,458
$57,566
$3,492,574
$68,917
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
$2,620,277 $2,711,121 $2,805,128 $2,902,408 $3,003,074 $3,107,246 $3,215,044 $3,326,597 $3,442,034 $3,561,492
NET OPERATING INCOME $1,639,245 $1,676,186 $1,713,798 $1,752,086 $1,791,055 $1,830,707 $1,871,047 $1,912,078 $1,953,801 $1,996,218
RESERVE DEPOSITS
Replacement Reserve 3.00% $111,398 $114,740 $118,182 $121,728 $125,380 $129,141 $133,015 $137,006 $141,116 $145,349
AVAILABLE FOR DEBT SERVICE $1,527,847 $1,561,446 $1,595,616 $1,630,359 $1,665,675 $1,701,566 ^1.738.032 $1,775,072 $1,812,685 $1,850,869
1 DEBT SERVICE
Principal
Interest
$535,847
$56,216
$571,734
$20,329
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
fO
TOTAL DEBT SERVICE $592,063 $592,063 $0 $0 $0 $0 $0 ^0 $0 $0
15% Reserve Account 15.00%
$935,784 $969,383 $1,595,616 $1,630,359 $1,665,675 $1,701,566 $1,738,032 $1,775,072 $1,812,685 $1,850,869
DEBT SERVICE COVERAGE RATIO 2.58 2.64 N/A N/A N/A N/A N/A N/A N/A N/A
INET CASH FLOW DISTRIBUTION
LP Management Fee $5,000 3.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
General Partner Management Fee $25,000 3.00% $66,308 $68,298 $70,347 $72,457 $74,631 $75,870 $79,176 $81,551 $83,997 $86,517
Residual Receipts
City of Carisbad 48.52% $421,909 $437,248 $740,131 $755,955 $772,048 $788,377 $804,953 $821,774 $838,838 $856,144
Begin Bai
Accrued Interest
$7,400,000 $8,977,330
$222,000
$8,777,421
$222,000
$8,562,173
$222,000
$8,044,042
$222,000
$7,510,077
$222,000
$6,960,029
$222,000
$6,393,652
$222,000
$5,810,698
$222,000
$5,210,924
$222,000
$4,594,086
$222,000
Subtotal
Payment
End.Ln Bai
$9,199,330
$421,909
$8,999,421
$437,248
$8,784,173
$740,131
$8,266,042
$755,965
$7,732,077
$772,048
$7,182,029
$788,377
$6,515,552
$804,953
$6,032,698
$821,774
$5,432,924
$838,838
$4,816,086
$856,144 Subtotal
Payment
End.Ln Bai $8,777,421 $8,562,173 $8,044,042 $7,510,077 $6,960,029 $6,393,552 $5,810,698 $5,210,924 $4,594,086 $3,959,941
Citv of Carisbad - Land Contribution 11.48% $99,776 $103,403 $175,031 $178,776 $182,579 $186,441 $190,351 $194,338 $198,374 $202,467
Begin Bai
Accrued Interest
$1,750,000 $2,123,017
$52,500
$2,075,741
$52,500
$2,024,838
$52,500
$1,902,307
$52,500
$1,776,032
$52,500
$1,645,953
$52,500
$1,512,012
$52,500
$1,374,152
$52,500
$1,232,313
$52,500
$1,086,439
$52,500
Subtotal
Payment
End.Ln Bai
$2,175,517
$99,776
$2,128,241
$103,403
$2,077,338
$175,031
$1,954,807
$178,776
$1,828,532
$182,579
$1,698,453
$186,441
$1,564,512
$190,361
$1,426,652
$194,338
$1,284,813
$198,374
$1,138,939
$202,467 Subtotal
Payment
End.Ln Bai $2,075,741 $2,024,838 $1,902,307 $1,776,032 $1,645,953 $1,512,012 $1,374,152 $1,232,313 $1,086,439 $936,473
GP Incentive Management Fee (90%) $313,011 $324,391 $549,097 $560,845 $572,776 $584,891 $597,188 $609,668 $622,327 $635,166
General Partner (.01%)
Limited Partner (99.99%)
$3
$34,776
$4
$36,040
$6
$51,005
»6
$62,310
$6
$53,535
$6
$64,981
$7
$66,348
$7
$57,734
$7
$69,141
$7
$70,567
130116_Carisbad (Acq.-Predev-Const - Perm).xlsx Prepared by: Strategic Consulting Initiative
61
Carlsbad - New Construction
Developer: CftC/IHO
Version: Acq.-Predev-Const.-Perm
Page 10 of 10
1/16/2013
[60 YEAR CASH FLOW ANALYSIS I
% Residential Operational
Year 44 Year 45 Year 46 Year 47 Year 48 Year 49 Year 50 Year 51 Year 52 Year 53
2063 2064 2065 2066 2067 2068 2069 2070 2071 2072
llNCOME ASSUMPTIONS 1
Restricted Unit Rents 3.00% $5,989,797 $6,169,491 $6,354,575 $6,545,213 $6,741,569 $6,943,816 $7,152,131 $7,356,695 $7,587,695 $7,815,326
GROSS POTENTIAL INCOME - HOUSING $5,989,797 $6,169,491 $6,354,575 $6,545,213 $6,741,569 $6,943,816 $7,152,131 $7,366,695 $7,587,695 $7,815,326
OTHER INCOME
Miscellaneous Income 3.00% $35,930 $37,008 $38,118 $39,262 $40,440 $41,653 $42,903 $44,190 $45,5^5 $46,881
GROSS POTENTIAL INCOME - OTHER $35,930 $37,008 $38,118 $39,262 $40,440 $41,653 $42,903 $44,190 $45,515 $46,881
GROSS POTENTIAL INCOME - TOTAL $6.025.727 $6.206.499 $6.392.694 $6.584.475 $6.782,009 $6,985.469 $7,195.033 $7.410.884 $7.633.211 $7.862.207
IVACANCY ASSUMPTIONS
Restricted Units 5.00% ($299,490) ($308,475) ($317,729) ($327,251) ($337,078) ($347,191) ($357,607) ($368,335) ($379,385) ($390,766)
TOTAL VACANCY LOSS ($301,286) ($310,325) ($319,635) ($329,224) ($339,100) ($349,273) ($359,752) ($370,544) ($381,661) ($393,110)
EFFECTIVE GROSS INCOME $5,724,441 $5,896,174 $6,073,059 $6,255,251 $6,442,909 $6,636,196 $6,835,282 $7,040,340 $7,251,550 $7,469,097
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
3.50%
2.00%
$3,614,814
$70,296
$3,741,333
$71,702
$3,872,279
$73,136
$4,007,809
$74,598
$4,148,083
$76,090
$4,293,265
$77,612
$4,443,530
$79,164
$4,599,053
$80,748
$4,760,020
$82,363
$4,926,621
$84,010
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
$3,685,110 $3,813,034 $3,945,415 $4,082,408 $4,224,173 $4,370,878 $4,522,694 $4,679,801 $4,842,383 $5,010,631
NET OPERATING INCOME $2,039,331 $2,083,140 $2,127,644 $2,172,843 $2,218,736 $2,265,318 $2,312,588 $2,360,539 $2,409,168 $2,458,466
RESERVE DEPOSITS
Replacement Reserve 3.00% $149,710 $154,201 $158,827 $163,592 $168,500 $173,555 $178,761 $184,124 $189,648 $195,337
AVAILABLE FOR DEBT SERVICE $1,889,621 $1,928,939 $1,968,817 $2,009,252 $2,050,236 $2,091,764 $2,133,826 $2,176,415 $2,219,520 $2,263,129
DEBT SERVICE
Principal
Interest
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0 $0
$0
$0
TOTAL DEBT SERVICE $0 $0 $0 $0 $0 $0 $0 $0 $0
15% Reserve Account 15.00%
NET CASH FLOW $1,889,621 $1,928,939 $1,968,817 $2,009,252 $2,050,236 $2,091,764 $2,133,826 $2,176,415 $2,219,520 $2,263,129
DEBT SERVICE COVERAGE RATIO N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
1 NET CASH FLOW DISTRIBUTION
LP Management Fee $5,000 3.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
General Partner Management Fee $25,000 3.00% $89,113 $91,786 $94,540 $97,376 $100,297 $103,306 $106,405 $109,598 $112,886 $116,272
Residual Receipts
City of Carisbad 48.52% $873,689 $891,471 $909,485 $927,730 $946,200 $743,366 $0 $0 $0 $0
Begin Bai
Accrued Interest
$7,400,000 $3,959,941
$222,000
$3,308,252
$222,000
$2,638,781
$222,000
$1,951,296
$222,000
$1,245,556
$222,000
$521,366
$222,000
$0
$0
$0
$0
$0
$0
$0
$0
Subtotal
Payment
End.Ln Bai
$4,181,941
$873,689
$3,530,252
$891,471
$2,860,781
$909,485
$2,173,296
$927,730
$1,467,555
$946,200
$743,366
$743,356
$0
$0
$0
$0
$0
$0
$0
$0 Subtotal
Payment
End.Ln Bai $3,308,252 $2,638,781 $1,951,296 $1,245,566 $521,366 $0 $0 $0 $0 $0
Citv of Carisbad - Land Contribution 11.48% $206,616 $210,821 $215,081 $219,396 $223,763 $175,795 $0 $0 $0 $0
Begin Bai
Accrued Interest
$1,750,000 $936,473
$52,500
$782,357
$52,500
$624,036
$52,500
$461,455
$52,500
$294,560
$52,500
$123,296
$52,500
$0
$0
$0
$0
$0
$0
$0
$0
Subtotal
Payment
End.Ln Bai
$988,973
$206,616
$834,857
$210,821
$676,536
$215,081
$513,955
$219,396
$347,060
$223,763
$175,796
$175,796
$0
$0
$0
$0
$0
$0
$0
$0 Subtotal
Payment
End.Ln Bai $782,357 $624,036 $461,455 $294,560 $123,296 $0 $0 $0 $0 $0
GP Incentive Management Fee (90%) $548,183 $661,375 $674,740 $688,275 $701,978 $962,365 $1,824,579 $1,860,136 $1,895,971 $1,932,171
General Partner (.01%)
Limited Partner (99.99%)
$7
$72,013
$7
$73,479
$7
$74,964
$8
$76,467
$8
$77,990
$11
$106,919
$20
$202,722
$21
$205,551
$21
$210,642
$21
$214,664
130115_Carisbad (Acq.-Predev-Const.- Perm).xlsx Prepared by: Strategic Consulting Initiative
(/I
Carlsbad - New Construction
Developer: C&C/IHO
Version: Acq.-Predev-Const.-Perm
Page 10 of 10
1/16/2013
60 YEAR CASH FLOW ANALYSIS
% Residential Operational
Year 54 Year 55
2073 2074
1
$8,049,786 $8,291,280
$8,049,786 $8,291,280
$48,287 $49,736
llNCOME ASSUMPTIONS
Restricted Unit Rents
GROSS POTENTIAL INCOME - HOUSING
OTHER INCOME
Miscellaneous Income
GROSS POTENTIAL INCOME - OTHER $48,287 $49,736
GROSS POTENTIAL INCOME - TOTAL
IVACANCY ASSUMPTIONS
Restricted Units
Miscellaneous Income
TOTAL VACANCY LOSS
EFFECTIVE GROSS INCOME
OPERATING EXPENSES
Residential Expenses
Real Estate Taxes
$8.098.073 $8.341.016
5.00%
5.00%
($402,489)
($2.414)
($414,554)
(^2,487)
($404,904) ($417,051)
$7,693,170 $7,923,965
3.50% $5,099,053 $5,277,519
2.00% $85.590 $87.404
$5,184,743 $5,364,923
NET OPERATING INCOME
RESERVE DEPOSITS
Replacement Reserve 3.00% $201,197 $207,233
AVAILABLE FOR DEBT SERVICE $2,307,230 $2,351,808
1 DEBT SERVICE
Principal
Interest
1
$0
$0
$0
$0
TOTAL DEBT SERVICE $0 $0
15% Reserve Account 15.00%
NET CASH FLOW $2,307,230 $2,351,808
DEBT SERVICE COVERAGE RATIO
I NET CASH FLOW DISTRIBUTION
LP Management Fee
General Partner Management Fee
Residual Receipts
City of Carisbad
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
City of Carisbad - Land Contribution
$5,000 3.00% $0 $0
$25,000 3.00% $119,750 $123,353
Begin Bai
Accrued Interest
Subtotal
Payment
End.Ln Bai
GP Incentive Management Fee (90%)
General Partner (.01%)
Limited Partner (99.99%)
$1,750,000
$0 $0
$0 $0
$0 $0
$0 $0
$0 $0
$0 $0
$0 $0
$1,968,723 $2,005,610
$22 $22
$218,725 $222,823
130115_Cartsbad (Acq.-Predev-Const - Perm).xlsx Prepared by: Strategic Consulting Initiative
63
EXHIBIT 4
DEED OF TRUST
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City ofCarlsbad
Housing and Neighborhood Services Department
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008
Attn: Executive Director
No fee for recording pursuant to
Govemment Code Section 27383
DEED OF TRUST WITH ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
(Carol-Harding Duplex Acquisition)
THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS AND SECURITY
AGREEMENT ("Deed of Trust") is made as of , 2013, by and among
Harding Street Neighbors, LP, a Califomia limited partnership ("Trustor"), Fidelity National
Title Company , a Califomia corporation ("Tmstee"), and the City of Carlsbad, a municipal
corporation ("Beneficiary").
FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein
recited and the tmst herein created, the receipt of which is hereby acknowledged. Trustor hereby
irrevocably grants, transfers, conveys and assigns to Tmstee, IN TRUST, WITH POWER OF
SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions
hereinafter set forth, Tmstor's fee interest in the property located in the City ofCarlsbad, County
of San Diego, State of Califomia, that is described in the attached Exhibit A, incorporated herein
by this reference (the "Property").
TOGETHER WITH all interest, estates or other claims, both in law and in equity which
Tmstor now has or may hereafter acquire in the Property and the rents;
TOGETHER WITH all easements, rights-of-way and rights used in connection therewith
or as a means of access thereto, including (without limiting the generality ofthe foregoing) all
tenements, hereditaments and appurtenances thereof and thereto;
TOGETHER WITH any and all buildings and improvements of every kind and
description now or hereafter erected thereon, and all property of the Tmstor now or hereafter
affixed to or placed upon the Property;
TOGETHER WITH all building materials and equipment now or hereafter delivered to
said property and intended to be installed therein;
TOGETHER WITH all right, title and interest of Tmstor, now ovmed or hereafter
acquired, in and to any land lying within the right-of-way of any street, open or proposed,
Draft: Carol-Harding Duplex DOT; 1/8/13 ]
(.5
adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to
or used in connection with the Property;
TOGETHER WITH all estate, interest, right, title, other claim or demand, of every
nature, in and to such property, including the Property, both in law and in equity, including, but
not limited to, all deposits made with or other security given by Tmstor to utility companies, the
proceeds from any or all of such property, including the Property, claims or demands with
respect to the proceeds of insurance in effect with respect thereto, which Tmstor now have or
may hereafter acquire, any and all awards made for the taking by eminent domain or by any
proceeding or purchase in lieu thereof of the whole or any part of such property, including
without limitation, any awards resulting from a change of grade of streets and awards for
severance damages to the extent Beneficiary has an interest in such awards for taking as
provided in Paragraph 4.1 herein;
TOGETHER WITH all of Tmstor's interest in all articles of personal property or fixtures
now or hereafter attached to or used in and about the building or buildings now erected or
hereafter to be erected on the Property which are necessary to the complete and comfortable use
and occupancy of such building or buildings for the purposes for which they were or are to be
erected, including all other goods and chattels and personal property as are ever used or
ftjmished in operating a building, or the activities conducted therein, similar to the one herein
described and referred to, and all renewals or replacements thereof or articles in substitution
therefor, whether or not the same are, or shall be attached to said building or buildings in any
manner; and
TOGETHER WITH all of Tmstor's interest in all building materials, fixtures, equipment,
work in process and other personal property to be incorporated into the Property; all goods,
materials, supplies, fixtures, equipment, machinery, fumiture and ftjmishings, signs and other
personal property now or hereafter appropriated for use on the Property, whether stored on the
Property or elsewhere, and used or to be used in connection with the Property; all rents, issues
and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles,
chattel paper, instmments, documents, notes drafts, letters of credit, insurance policies, insurance
and condemnation awards and proceeds, trade names, trademarks and service marks arising from
or related to the Property and any business conducted thereon by Tmstor; all replacements,
additions, accessions and proceeds; and all books, records and files relating to any ofthe
foregoing.
All ofthe foregoing, together with the Property, is herein referred to as the "Security."
To have and to hold the Security together with acquittances to the Tmstee, its successors and
assigns forever.
FOR THE PURPOSE OF SECURING:
(a) Payment of just indebtedness of Tmstor to Beneficiary as set forth in the Note
(defined in Article 1 below) until paid or cancelled. Said principal and other payments shall be
due and payable as provided in the Note. Said Note and all its terms are incorporated herein by
reference, and this conveyance shall secure any and all extensions thereof, however evidenced;
and
Draft: Carol-Harding Duplex DOT; 1/8/13 2
(b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to
the terms and provisions of this Deed of Tmst following a breach of Tmstor's obligations to
advance said sums and the expiration of any applicable cure period, with interest thereon as
provided herein; and
(c) Performance of every obligation, covenant or agreement of Tmstor contained
herein and in the Loan Documents (defined in Section 1.2 below).
AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR
COVENANTS AND AGREES:
ARTICLE 1
DEFINITIONS
In addition to the terms defined elsewhere in this Deed of Tmst, the following terms shall
have the following meanings in this Deed of Trust:
Section 1.1 The term "Loan Agreement" means that certain Loan Agreement between
Trustor and Beneficiary, dated of even date herewith providing for the Beneficiary to loan to the
Tmstor an amount not to exceed Seven Million Four Hundred Eight Thousand Dollars
($7,408,000) for the development ofthe Property.
Section 1.2 The term "Loan Documents" means this Deed of Tmst, the Note, the Loan
Agreement, the Regulatory Agreement, and any other debt, loan or security instmments between
Tmstor and the Beneficiary relating to the Property.
Section 1.3 The term "Note" means the promissory note in the principal amount of
Seven Million Four Hundred Eight Thousand Dollars ($7,408,000 ) dated of even date herewith
executed by the Tmstor in favor of the Beneficiary, the payment of which is secured by this
Deed of Tmst. (A copy ofthe Note is on file with the Beneficiary and terms and provisions of
the Note are incorporated herein by. reference.).
Section 1.4 The term "Principal" means the amount required to be paid under the
Note.
Section 1.5 The term "Regulatory Agreement" means the regulatory agreement by and
between the Beneficiary and the Tmstor, dated and recorded in the official Records of San Diego
County concurrently herewith.
ARTICLE 2
MAINTENANCE AND MODIFICATION OF THE PROPERTY
AND SECURITY
Section 2.1 Maintenance and Modification of the Property by Tmstor.
The Tmstor agree that at all times prior to full payment of the sum owed under the Note,
Draft: Carol-Harding Duplex DOT; 1/8/13 3
the Tmstor will, at the Tmstor's own expense, maintain, preserve and keep the Security or cause
the Security to be maintained and preserved in good condition. The Tmstor will from time to
time make or cause to be made all repairs, replacements and renewals deemed proper and
necessary by it. The Beneficiary shall have no responsibility in any of these matters or for the
making of improvements or additions to the Security.
Tmstor agree to pay fiilly and discharge (or cause to be paid fiilly and discharged) all
claims for labor done and for material and services fiimished in connection with the Security,
diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation
of labor on the work or constmction on the Security for a continuous period of thirty (30) days or
more, and to take all other reasonable steps to forestall the assertion of claims of lien against the
Security of any part thereof Tmstor irrevocably appoint, designate and authorize Beneficiary as
its agent (said agency being coupled with an interest) with the authority, but without any
obligation, to file for record any notices of completion or cessation of labor or any other notice
that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the
Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Tmstor
only in the event that Tmstor shall fail to take, or shall fail to diligently continue to take, those
actions as hereinbefore provided.
Upon demand by Beneficiary, Tmstor shall make or cause to be made such demands or
claims as Beneficiary shall specify upon laborers, material men, subcontractors or other persons
who have fiimished or claim to have fiimished labor, services or materials in connection with the
Security. Nothing herein contained shall require Tmstor to pay any claims for labor, materials or
services which Tmstor in good faith dispute and are diligentiy contesting provided that Tmstor,
upon written request of the Beneficiary, shall, within thirty (30) days after the filing of any claim
of lien, record in the Office of the Recorder of San Diego County, a surety bond in an amount 1
and 1/2 times the amount of such claim item to protect against a claim of lien.
Section 2.2 Granting of Easements.
Tmstor may not grant easements, licenses, rights-of-way or other rights or privileges in
the nature of easements with respect to any property or rights included in the Security except
those required or desirable for installation and maintenance of public utilities including, without
limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law and as
approved, in writing, by Beneficiary.
Section 2.3 Assignment of Rents.
As part of the consideration for the indebtedness evidenced by the Note, Trustor hereby
absolutely and unconditionally assign and transfer to Beneficiary all the rents and revenues of the
Property including those now due, past due, or to become due by virtue of any lease or other
agreement for the occupancy or use of all or any part of the Property, regardless of to whom the
rents and revenues of the Property are payable. Trustor hereby authorizes Beneficiary or
Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of
the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that
prior to written notice given by Beneficiary to Trustor of the breach by Trustor of any covenant
or agreement of Trustor in the Loan Documents, Tmstor shall collect and receive all rents and
revenues of the Property as trustee for the benefit of Beneficiary and Tmstor to apply the rents
Draft: Carol-Harding Duplex DOT; 1/8/13 4
LB
and revenues so collected to the sums secured by this Deed of Tmst with the balance, so long as
no such breach has occurred, to the account of Tmstor, it being intended by Tmstor and
Beneficiary that this assignment of rents constitutes an absolute assignment and not an
assignment for additional security only. Upon delivery of written notice by Beneficiary to
Tmstor of the breach by Tmstor of any covenant or agreement of Tmstor in the Loan
Documents, and without the necessity of Beneficiary entering upon and taking and maintaining
fiill control ofthe Property in person, by agent or by a court-appointed receiver. Beneficiary shall
immediately be entitied to possession of all rents and revenues of the Property as specified in this
Section 2.3 as the same becomes due and payable, including but not limited to rents then due and
unpaid, and all such rents shall immediately upon delivery of such notice be held by Tmstor as
trustee for the benefit of Beneficiary only; provided, however, that the written notice by
Beneficiary to Tmstor of the breach by Tmstor shall contain a statement that Beneficiary
exercises its rights to such rents. Tmstor agrees that commencing upon delivery of such written
notice of Tmstor's breach by Beneficiary to Tmstor, each tenant of the Property shall make such
rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's
written demand to each tenant therefor, delivered to each tenant personally, by mail or by
delivering such demand to each rental unit, without any liability on the part of said tenant to
inquire fiirther as to the existence of a default by Tmstor.
Except as previously approved by the Beneficiary as set forth in the Loan Agreement,
Tmstor hereby covenants that Tmstor has not executed any prior assignment of said rents, that
Tmstor has not performed, and will not perform, any acts or has not executed and will not
execute, any instmment which would prevent Beneficiary from exercising its rights under this
Section 2.3, and that at the time of execution of this Deed of Tmst, there has been no anticipation
or prepayment of any ofthe rents ofthe Property for more than two (2) months prior to the due
dates of such rents. Tmstor covenants that Tmstor will not hereafter collect or accept payment
of any rents ofthe Property more than two (2) months prior to the due dates of such rents.
Tmstor fiirther covenant that Tmstor will execute and deliver to Beneficiary such fiirther
assignments of rents and revenues ofthe Property as Beneficiary may from time to time request.
Upon Tmstor' breach of any covenant or agreement of Tmstor in the Loan Documents,
Beneficiary may in person, by agent or by a court-appointed receiver, regardless of the adequacy
of Beneficiary's security, enter upon and take and maintain fiill control of the Property in order to
perform all acts necessary and appropriate for the operation and maintenance thereof including,
but not limited to, the execution, cancellation or modification of leases, the collection of all rents
and revenues ofthe Property, the making of repairs to the Property and the execution or
termination of contracts providing for the management or maintenance ofthe Property, all on
such terms as are deemed best to protect the security of this Deed of Tmst. In the event
Beneficiary elects to seek the appointment of a receiver for the Property upon Tmstor's breach of
any covenant or agreement of Tmstor in this Deed of Tmst, Tmstor hereby expressly consents to
the appointment of such receiver. Beneficiary or the receiver shall be entitied to receive a
reasonable fee for so managing the Property.
All rents and revenues collected subsequent to delivery of written notice by Beneficiary
to Tmstor ofthe breach by Tmstor of any covenant or agreement of Tmstor in the Loan
Documents shall be applied first to the costs, if any, of taking control of and managing the
Property and collecting the rents, including, but not limited to, attomey's fees, receiver's fees,
premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies.
Draft: Carol-Harding Duplex DOT; 1/8/13 5
taxes, assessments and other charges on the Property, and the costs of discharging any obligation
or liability of Tmstor as lessor or landlord of the Property and then to the sums secured by this
Deed of Tmst. Beneficiary or the receiver shall have access to the books and records used in the
operation and maintenance of the Property and shall be liable to account only for those rents
actually received. Beneficiary shall not be liable to Tmstor, anyone claiming under or through
Tmstor or anyone having an interest in the Property by reason of anything done or left undone by
Beneficiary under this Section 2.3.
Ifthe rents of the Property are not sufficient to meet the costs, if any, of taking control of
and managing the Property and collecting the rents, any fimds expended by Beneficiary for such
purposes shall become indebtedness of Tmstor to Beneficiary secured by this Deed of Trust
pursuant to Section 3.3 hereof Unless Beneficiary and Tmstor agree in writing to other terms of
payment, such amounts shall be payable upon notice from Beneficiary to Tmstor requesting
payment thereof and shall bear interest from the date of disbursement at the rate stated in
Section 3.3.
Any entering upon and taking and maintaining of control of the Property by Beneficiary
or the receiver and any application of rents as provided herein shall not cure or waive any default
hereunder or invalidate any other right or remedy of Beneficiary under applicable law or
provided herein. This assignment of rents of the Property shall terminate at such time as this
Deed of Tmst ceases to secure indebtedness held by Beneficiary. The rights ofthe Beneficiary
under this Section 2.3 are subject to the rights of any senior mortgage lender.
ARTICLE 3
TAXES AND INSURANCE; ADVANCES
Section 3.1 Taxes, Other Govemmental Charges and Utility Charges.
Tmstor shall pay, or cause to be paid prior to the date of delinquency, all taxes,
assessments, charges and levies imposed by any public authority or utility company which are or
may become a lien affecting the Security or any part thereof; provided, however, that Tmstor
shall not be required to pay and discharge any such tax, assessment, charge or levy so long as (a)
the legality thereof shall be promptly and actively contested in good faith and by appropriate
proceedings, and (b) Tmstor maintains reserves adequate to pay any liabilities contested pursuant
to this Section 3.1. With respect to taxes, special assessments or other similar govemmental
charges, Tmstor shall pay such amount in fiill prior to the attachment of any lien therefor on any
part ofthe Security; provided, however, if such taxes, assessments or charges may be paid in
installments, Tmstor may pay in such installments. Except as provided in clause (b) ofthe first
sentence of this paragraph, the provisions of this Section 3.1 shall not be constmed to require that
Tmstor maintain a reserve account, escrow account, impound account or other similar account
for the payment of fiiture taxes, assessments, charges and levies.
In the event that Tmstor shall fail to pay any of the foregoing items required by this
Section to be paid by Tmstor, Beneficiary may (but shall be under no obligation to) pay the
same, after the Beneficiary has notified the Trustor of such failure to pay and the Tmstor fails to
fully pay such items within seven (7) business days after receipt of such notice. Any amount so
advanced therefor by Beneficiary, together with interest thereon from the date of such advance at
Draft: Carol-Harding Duplex DOT; 1/8/13 6
10
the maximum rate permitted by law, shall become an additional obligation of Tmstor to the
Beneficiary and shall be secured hereby, and Tmstor agrees to pay all such amounts.
Section 3.2 Provisions Respecting Insurance.
Tmstor agrees to provide insurance conforming in all respects to that required under the
Loan Documents during the course of constmction and following completion, and at all times
until all amounts secured by this Deed of Tmst have been paid and all other obligations secured
hereunder fiilfilled^ and this Deed of Tmst reconveyed.
All such insurance policies and coverages shall be maintained at Tmstor's sole cost and
expense. Certificates of insurance for all of the above insurance policies, showing the same to be
in fiill force and effect, shall be delivered to the Beneficiary upon demand therefor at any time
prior to the Beneficiary's receipt of the entire Principal and all amounts secured by this Deed of
Tmst. Tmstee is aware that Califomia Civil Code Section 2955.5(a) provides as follows: No
lender shall require a borrower, as a condition of receiving or maintaining a loan secured by real
property, to provide hazard insurance coverage against risks to the improvements on that real
property in an amount exceeding the replacement value of the improvements on the property.
Section 3.3 Advances.
In the event the Tmstor shall fail to maintain the full insurance coverage required by this
Deed of Tmst or shall fail to keep the Security in accordance with the Loan Documents, the
Beneficiary, after at least seven (7) days prior notice to Beneficiary, may (but shall be under no
obligation to) take out the required policies of insurance and pay the premiums on the same or
may make such repairs or replacements as are necessary and provide for payment thereof; and all
amounts so advanced therefor by the Beneficiary shall become an additional obligation ofthe
Tmstor to the Beneficiary (together with interest as set forth below) and shall be secured hereby,
which amounts the Tmstor agrees to pay on the demand of the Beneficiary, and if not so paid,
shall bear interest from the date of the advance at the lesser of eight percent (8%) per annum or
the maximum rate permitted by law.
ARTICLE 4
DAMAGE, DESTRUCTION OR CONDEMNATION
Section 4.1 Awards and Damages.
All judgments, awards of damages, settlements and compensation made in connection
with or in lieu of (1) taking of all or any part of or any interest in the Property by or under
assertion ofthe power of eminent domain, (2) any damage to or destmction ofthe Property or in
any part thereof by insured casualty, and (3) any other injury or damage to all or any part ofthe
Property ("Funds") are hereby assigned to and shall be paid to the Beneficiary by a check made
payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to
collect and receive any funds and is authorized to apply them in whole or in part upon any
indebtedness or obligation secured hereby, in such order and manner as the Beneficiary shall
determine at its sole option. The Beneficiary shall be entitied to settle and adjust all claims under
insurance policies provided under this Deed of Trust and may deduct and retain from the
Draft: Carol-Harding Duplex DOT; 1/8/13 7
71
proceeds of such insurance the amount of all expenses incurred by it in connection with any such
settlement or adjustment. All or any part of the amounts so collected and recovered by the
Beneficiary may be released to Tmstor upon such conditions as the Beneficiary may impose for
its disposition, and Beneficiary agrees to release Funds to Tmstor to be used for the restoration
ofthe Project so long as Beneficiary is reasonably satisfied that the proceeds of insurance,
together with any additional proceeds made available by Tmstor, are sufficient to restore the
Project, subject to the rights of any senior mortgage lender. Application of all or any part ofthe
Funds collected and received by the Beneficiary or the release thereof shall not cure or waive any
default under this Deed of Tmst. The rights of the Beneficiary under this Section 4.1 are subject
to the rights of any senior mortgage lender.
ARTICLE 5
AGREEMENTS AFFECTING THE PROPERTY; FURTHER
ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.1 Other Agreements Affecting Property.
The Tmstor shall duly and punctually perform all terms, covenants, conditions and
agreements binding upon it under the Loan Documents and any other agreement of any nature
whatsoever now or hereafter involving or affecting the Security or any part thereof
Section 5.2 Agreement to Pay Attomeys' Fees and Expenses.
In the event of any Event of Default (as defined below) hereunder, and if the Beneficiary
should employ attomeys or incur other expenses for the collection of amounts due or the
enforcement of performance or observance of an obligation or agreement on the part ofthe
Tmstor in this Deed of Tmst, the Tmstor agrees that it will, on demand therefor, pay to the
Beneficiary the reasonable fees of such attomeys and such other reasonable expenses so incurred
by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the
indebtedness secured by the lien of this Deed of Tmst, and shall bear interest from the date such
expenses are incurred at the lesser of ten percent (10%) per annum or the maximum rate
permitted by law.
Section 5.3 Payment of the Principal.
The Tmstor shall pay to the Beneficiary the Principal and any other payments as set forth
in the Note in the amounts and by the times set out therein.
Section 5.4 Personal Property.
To the maximum extent permitted by law, the personal property subject to this Deed of
Trust shall be deemed to be fixtures and part of the real property and this Deed of Tmst shall
constitute a fixtures filing under the Califomia Commercial Code. As to any personal property
not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement
under the Califomia Commercial Code.
Draft: Carol-Harding Duplex DOT; 1/8/13
Section 5.5 Financing Statement.
The Tmstor shall execute and deliver to the Beneficiary such financing statements
pursuant to the appropriate statutes, and any other documents or instmments as are required to
convey to the Beneficiary a valid perfected secuiity interest in the Security. The Tmstor agrees
to perform all acts which the Beneficiary may reasonably request so as to enable the Beneficiary
to maintain such valid perfected security interest in the Security in order to secure the payment of
the Note in accordance with their terms. The Beneficiary is authorized to file a copy of any such
financing statement in any jurisdiction(s) as it shall deem appropriate from time to time in order
to protect the security interest established pursuant to this instmment.
Section 5.6 Operation of the Security.
The Tmstor shall operate the Security (and, in case of a transfer of a portion of the
Security subject to this Deed of Tmst, the transferee shall operate such portion of the Security) in
full compliance with the Loan Documents.
Section 5.7 Inspection of the Security.
At any and all reasonable times upon seventy-two (72) hours' notice, the Beneficiary and
its duly authorized agents, attomeys, experts, engineers, accountants and representatives, shall
have the right, without payment of charges or fees, to inspect the Security.
Section 5.8 Nondiscrimination.
The Tmstor herein covenant by and for themselves, their heirs, executors, administrators,
and assigns, and all persons claiming under or through them, that there shall be no discrimination
against or segregation of, any person or group of persons on account of race, color, creed,
religion, age, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the Security, nor shall the Tmstor
itself or any person claiming under or through it establish or permit any such practice or practices
of discrimination or segregation with reference to the selection, location, number, use or
occupancy of tenants, lessees, subtenants, sublessees or vendees in the Security. The foregoing
covenants shall mn with the land.
ARTICLE 6
HAZARDOUS WASTE
Tmstor shall keep and maintain the Property in compliance with, and shall not cause or
permit the Property to be in violation of any federal, state or local laws, ordinances or regulations
relating to industrial hygiene or to the environmental conditions on, under or about the Property
including, but not limited to, soil and ground water conditions. Tmstor shall not use, generate,
manufacture, store or dispose of on, under, or about the Property or transport to or from the
Property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or
related materials, including without limitation, any substances defined as or included in the
definition of "hazardous substances," hazardous wastes," "hazardous materials," or "toxic
substances" under any applicable federal or state laws or regulations (collectively referred to
Draft: Carol-Harding Duplex DOT; 1/8/13 9
hereinafter as "Hazardous Materials") except such of the foregoing as may be customarily kept
and used in and about multifamily residential property.
Tmstor shall immediately advise Beneficiary in writing if at any time they receive
written notice of (i) any and all enforcement, cleanup, removal or other govemmental or
regulatory actions instituted, completed or threatened against Tmstor or the Property pursuant to
any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous
Materials, ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party
against Tmstor or the Property relating to damage, contribution, cost recovery compensation,
loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii)
above hereinafter referred to a "Hazardous Materials Claims"); and (iii) Tmstor's discovery of
any occurrence or condition on any real property adjoining or in the vicinity ofthe Property that
could cause the Property or any part thereof to be classified as "border-zone property" under the
provision of Califomia Health and Safety Code, Sections 25220 et seq., or any regulation
adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership,
occupancy, transferability or use of the Property under any Hazardous Materials Law.
Beneficiary shall have the right to join and participate in, as a party if it so elects, any
legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to
have its reasonable attomeys' fees in connection therewith paid by Tmstor. Tmstor shall
indemnify and hold harmless Beneficiary and its boardmembers, supervisors, directors, officers,
employees, agents, successors and assigns from and against any loss, damage, cost, expense or
liability directly or indirectiy arising out of or attributable to the use, generation, storage, release,
threatened release, discharge, disposal, or presence of Hazardous Materials on, under, or about
the Property including without limitation: (a) all foreseeable consequential damages; (b) the costs
of any required or necessary repair, cleanup or detoxification of the Property and the preparation
and implementation of any closure, remedial or other required plans; and (c) all reasonable costs
and expenses incurred by Beneficiary in connection with clauses (a) and (b), including but not
limited to reasonable attorneys' fees.
Without Beneficiary's prior written consent, which shall not be unreasonably withheld,
Tmstor shall not take any remedial action in response to the presence of any Hazardous
Materials on, under or about the Property, nor enter into any settlement agreement, consent
decree, or other compromise in respect to any Hazardous Material Claims, which remedial
action, settlement, consent decree or compromise might, in Beneficiary's reasonable judgement,
impair the value ofthe Beneficiary's security hereunder; provided, however, that Beneficiary's
prior consent shall not be necessary in the event that the presence of Hazardous Materials on,
under, or about the Property either poses an immediate threat to the health, safety or welfare of
any individual or is of such a nature that an immediate remedial response is necessary and it is
not reasonably possible to obtain Beneficiary's consent before taking such action, provided that
in such event Tmstor shall notify Beneficiary as soon as practicable of any action so taken.
Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if
either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Trustor
will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required
action; (iii) Tmstor establishes to the reasonable satisfaction of Beneficiary that there is no
reasonable altemative to such remedial action which would result in less impairment of
Beneficiary's security hereunder; or (iv) the action has been agreed to by Beneficiary.
Draft: Carol-Harding Duplex DOT; 1/8/13 1Q
The Tmstor hereby acknowledges and agrees that (i) this Article is intended as the
Beneficiary's written request for information (and the Tmstor' response) conceming the
environmental condition of the Property as required by Califomia Code of Civil Procedure
Section 726.5, and (ii) each representation and warranty in this Deed of Tmst or any ofthe other
Loan Documents (together with any indemnity applicable to a breach of any such representation
and warranty) with respect to the environmental condition of the property is intended by the
Beneficiary and the Tmstor to be an "environmental provision" for purposes of Califomia Code
of Civil Procedure Section 736.
In the event that any portion of the Property is determined to be "environmentally
impaired" (as that term is defined in Califomia Code of Civil Procedure Section 726.5(e)(3)) or
to be an "affected parcel" (as that term is defined in Califomia Code of Civil Procedure Section
726.5(e)(1)), then, without otherwise limiting or in any way affecting the Beneficiary's or the
Tmstee's rights and remedies under this Deed of Tmst, the Beneficiary may elect to exercise its
rights under Califomia Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such
environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and
remedies of an unsecured creditor, including reduction of its claim against the Tmstor to
judgment, and (b) any other rights and remedies permitted by law. For purposes of determining
the Beneficiary's right to proceed as an unsecured creditor under Califomia Code of Civil
Procedure Section 726.5(a), the Tmstor shall be deemed to have willfully permitted or
acquiesced in a release or threatened release of hazardous materials, within the meaning of
Califomia Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of
hazardous materials was knowingly or negligently caused or contributed to by any lessee,
occupant, or user of any portion of the Property and the Tmstor knew or should have known of
the activity by such lessee, occupant, or user which caused or contributed to the release or
threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred
by the Beneficiary in connection with any action commenced under this paragraph, including any
action required by Califomia Code of Civil Procedure Section 726.5(b) to determine the degree
to which the Property is environmentally impaired, plus interest thereon at the rate specified in
the Note until paid, shall be added to the indebtedness secured by this Deed of Tmst and shall be
due and payable to the Beneficiary upon its demand made at any time following the conclusion
of such action.
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Defauh.
The following shall constitute Events of Defauh following the expiration of any
applicable notice and cure periods: (1) failure to make any payment to be paid by Tmstor under
the Loan Documents; (2) failure to observe or perform any of Tmstor's other covenants,
agreements or obligations under the Loan Documents, including, without limitation, the
provisions conceming discrimination; or (3) failure to make any payment or perform any of
Tmstor's other covenants, agreements, or obligations under any other debt instmments or
regulatory agreement secured by the Property, which default shall not be cured within the times
and in the manner provided therein.
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15
Section 7.2 Acceleration of Maturity.
If an Event of Default shall have occurred and be continuing, then at the option ofthe
Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal
ofthe Note shall immediately become due and payable, upon written notice by the Beneficiary to
the Tmstor (or automatically where so specified in the Loan Documents), and no omission on the
part ofthe Beneficiary to exercise such option when entitled to do so shall be constmed as a
waiver of such right.
Section 7.3 The Beneficiary's Right to Enter and Take Possession.
If an Event of Default shall have occurred and be continuing, the Beneficiary may:
(a) Either in person or by agent, with or without bringing any action or
proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its
security, enter upon the Security and take possession thereof (or any part thereof) and of any of
the Security, in its own name or in the name of Trustee, and do any acts which it deems
necessary or desirable to preserve the value or marketability of the Property, or part thereof or
interest therein, increase the income therefrom or protect the security thereof The entering upon
and taking possession ofthe Security shall not cure or waive any Event of Default or Notice of
Default (as defined below) hereunder or invalidate any act done in response to such Defauh or
pursuant to such Notice of Default and, notwithstanding the continuance in possession ofthe
Security, Beneficiary shall be entitied to exercise every right provided for in this Deed of Tmst,
or by law upon occurrence of any Event of Defauh, including the right to exercise the power of
sale;
(b) Commence an action to foreclose this Deed of Tmst as a mortgage,
appoint a receiver, or specifically enforce any ofthe covenants hereof;
(c) Deliver to Tmstee a written declaration of default and demand for sale,
and a written notice of default and election to cause Tmstor's interest in the Security to be sold
("Notice of Default and Election to Sell"), which notice Tmstee or Beneficiary shall cause to be
duly filed for record in the Official Records of San Diego County; or
(d) Exercise all other rights and remedies provided herein, in the instmments
by which the Tmstor acquired title to any Security, or in any other document or agreement now
or hereafter evidencing, creating or securing all or any portion of the obligations secured hereby,
or provided by law.
Section 7.4 Foreclosure By Power of Sale.
Should the Beneficiary elect to foreclose by exercise of the power of sale herein
contained, the Beneficiary shall give notice to the Tmstee (the "Notice of Sale") and shall deposit
with Tmstee this Deed of Tmst which is secured hereby (and the deposit of which shall be
deemed to constitute evidence that the unpaid principaf amount of the Note is immediately due
and payable), and such receipts and evidence of any expenditures made that are additionally
secured hereby as Tmstee may require.
Draft: Carol-Harding Duplex DOT; 1/8/13 12
(a) Upon receipt of such notice from the Beneficiary, Tmstee shall cause to be
recorded, published and delivered to Tmstor such Notice of Defauh and Election to Sell as then
required by law and by this Deed of Tmst. Tmstee shall, without demand on Tmstor, after lapse
of such time as may then be required by law and after recordation of such Notice of Defauh and
Election to Sell and after Notice of Sale having been given as required by law, sell the Security,
at the time and place of sale fixed by it in said Notice of Sale, whether as a whole or in separate
lots or parcels or items as Tmstee shall deem expedient and in such order as it may determine
unless specified otherwise by the Tmstor according to Califomia Civil Code Section 2924g(b), at
public auction to the highest bidder, for cash in lawfiil money of the United States payable at the
time of sale. Tmstee shall deliver to such purchaser or purchasers thereof its good and sufficient
deed or deeds conveying the property so sold, but without any covenant or warranty, express or
implied. The recitals in such deed or any matters of facts shall be conclusive proof of the
tmthfulness thereof Any person, including, without limitation, Tmstor, Tmstee or Beneficiary,
may purchase at such sale, and Tmstor hereby covenants to warrant and defend the title of such
purchaser or purchasers.
(b) After deducting all reasonable costs, fees and expenses of Tmstee,
including costs of evidence of title in connection with such sale, Tmstee shall apply the proceeds
of sale to payment of (i) the unpaid Principal amount of the Note; (ii) all other amounts owed to
Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the
remainder, if any, to Tmstor.
(c) Tmstee may postpone sale of all or any portion of the Property by public
announcement at such time and place of sale, and from time to time thereafter, and without
further notice make such sale at the time fixed by the last postponement, or may, in its discretion,
give a new Notice of Sale.
Section 7.5 Receiver.
If an Event of Default shall have occurred and be continuing. Beneficiary, as a matter of
right and without fiirther notice to Tmstor or anyone claiming under the Security, and without
regard to the then value of the Security or the interest of Tmstor therein, shall have the right to
apply to any court having jurisdiction to appoint a receiver or receivers ofthe Security (or a part
thereof), and Tmstor hereby irrevocably consent to such appointment and waives further notice
of any application therefor. Any such receiver or receivers shall have all the usual powers and
duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of
entry as provided herein, and shall continue as such and exercise all such powers until the date of
confirmation of sale of the Security, unless such receivership is sooner terminated.
Section 7.6 Remedies Cumulative.
No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of
Tmst is intended to be exclusive of any other right, power or remedy, but each and every such
right, power and remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law or in equity.
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77
Section 7.7 No Waiver.
(a) No delay or omission of the Beneficiary to exercise any right, power or
remedy accming upon any Event of Default shall exhaust or impair any such right, power or
remedy, or shall be constmed to be a waiver of any such Event of Default or acquiescence
therein; and every right, power and remedy given by this Deed of Tmst to the Beneficiary may
be exercised from time to time and as often as may be deemed expeditious by the Beneficiary.
Beneficiary's expressed or implied consent to a breach by Tmstor, or a waiver of any obligation
of Tmstor hereunder shall not be deemed or construed to be a consent to any subsequent breach,
or further waiver, of such obligation or of any other obligations of the Tmstor hereunder. Failure
on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall not constitute a waiver by the
Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any
Event of Default by the Tmstor.
(b) If the Beneficiary (i) grants forbeai'ance or an extension of time for the
payment of any sums secured hereby, (ii) takes other or additional security or the payment of any
sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents,
(iv) releases any part of the Security from the lien of this Deed of Tmst, or otherwise changes
any of the terms, covenants, condhions or agreements in the Loan Documents, (v) consents to the
granting of any easement or other right affecting the Security, or (iv) makes or consents to any
agreement subordinating the lien hereof, any such act or omission shall not release, discharge,
modify, change or affect the original liability under this Deed of Tmst, or any other obligation of
the Tmstor or any subsequent purchaser of the Security or any part thereof, or any maker, co-
signer, endorser, surety or guarantor (unless expressly released); nor shall any such act or
omission preclude the Beneficiary from exercising any right, power or privilege herein granted
or intended to be granted in any Event of Default then made or of any subsequent Event of
Default, nor, except as otherwise expressly provided in an instmment or instmments executed by
the Beneficiary shall the lien of this Deed of Tmst be altered thereby.
Section 7.8 Suits to Protect the Security.
The Beneficiary shall have power to (a) institute and maintain such suits and proceedings
as it may deem expedient to prevent any impairment of the Security and the rights of the
Beneficiary as may be unlawful or any violation of this Deed of Tmst, (b) preserve or protect its
interest (as described in this Deed of Tmst) in the Security, and (c) restrain the enforcement of or
compliance with any legislation or other govemmental enactment, mle or order that may be
unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment,
mle or order would impair the Security thereunder or be prejudicial to the interest of the
Beneficiary.
Section 7.9 Tmstee May File Proofs of Claim.
In the case of any receivership, insolvency, bankmptcy, reorganization, arrangement,
adjustment, composition or other proceedings affecting the Tmstor, their creditors or their
property, the Tmstee, to the extent permitted by law, shall be entitled to file such proofs of claim
and other documents as may be necessary or advisable in order to have the claims ofthe
Draft: Caro^Harding Duplex DOT; 1/8/13 14
Beneficiary allowed in such proceedings and for any additional amount which may become due
and payable by the Tmstor hereunder after such date.
Section 7.10 Waiver.
The Tmstor waive presentment, demand for payment, notice of dishonor, notice of
protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in
taking any action to collect any sums owing under the Note or in proceedings against the
Security, in connection with the delivery, acceptance, performance, default, endorsement or
guaranty of this Deed of Tmst.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Amendments.
This instmment cannot be waived, changed, discharged or terminated orally, but only by
an instmment in writing signed by Beneficiary and Tmstor.
Section 8.2 Reconveyance by Trustee.
Upon written request of Beneficiary stating that all sums secured hereby have been paid
or forgiven, that all obligations to be performed by the Tmstee under the Loan Documents
(including, but not limited to, the operation of the Property in accordance with, and for the entire
term of, the Regulatory Agreement), and upon surrender of this Deed of Tmst to Tmstee for
cancellation and retention, and upon payment by Tmstor of Tmstee's reasonable fees, Tmstee
shall reconvey the Security to Tmstor, or to the person or persons legally entitled thereto.
Section 8.3 Notices.
If at any time after the execution of this Deed of Tmst it shall become necessary or
convenient for one of the parties hereto to serve any notice, demand or communication upon the
other party, such notice, demand or communication shall be in writing and shall be served
personally, by reputable ovemight delivery service, or by depositing the same in the registered
United States mail, retum receipt requested, postage prepaid and (1) if intended for Beneficiary
shall be addressed to:
City ofCarlsbad
Housing and Neighborhood Services Department
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Attn: Housing and Neighborhood Services Director
Draft: Carol-Harding Duplex DOT; 1/8/13 15
and (2) if intended for Trustor shall be addressed to:
Harding Street Neighbors LP
C/O Irvine Housing Opportunities
19772 MacArthur Blvd, Suite 110
Irvine, Ca. 92612
and copies to:
C& C Development Co
14211 Yorba Street, Suite 200
Tustin, Ca. 92780
Goldfarb & Lipman LLP
1300 Clay Street ll^"" Floor
Oakland, Ca. 94612
Attn: M. David Kroot
Goldfarb & Lipman LLP
1300 Clay Street
Oakland, Ca. 94612
Attn: Amy DeVaudrenil
Any notice, demand or communication shall be deemed given, received, made or communicated
on the date personal delivery is effected or, if mailed in the maimer herein specified, on the
delivery date or date delivery is refused by the addressee, as shown on the retum receipt. Either
party may change its address at any time by giving written notice of such change to Beneficiary
or Tmstor as the case may be, in the manner provided herein, at least ten (10) days prior to the
date such change is desired to be effective.
Section 8.4 Successors and Joint Tmstor.
Where an obligation is created herein binding upon Tmstor, the obligation shall also
apply to and bind any transferee or successors in interest. Where the terms ofthe Deed of Tmst
have the effect of creating an obligation of the Trustor and transferees, such obligation shall be
deemed to be a joint and several obligation of the Tmstor and such transferees. Where Tmstor is
more than one entity or person, all obligations of Tmstor shall be deemed to be a joint and
several obligation of each and every entity and person comprising Tmstor.
Section 8.5 Captions.
The captions or headings at the beginning of each Section hereof are for the convenience
of the parties and are not a part of this Deed of Tmst.
Draft: Carol-Harding Duplex DOT; 1/8/13 16
Section 8.6 Invalidity of Certain Provisions.
Every provision of this Deed of Tmst is intended to be severable. In the event any term
or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or
other body of competent jurisdiction, such illegality or invalidity shall not affect the balance of
the terms and provisions hereof, which terms and provisions shall remain binding and
enforceable. If the lien of this Deed of Tmst is invalid or unenforceable as to any part of the
debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or
partially secured portion of the debt, and all payments made on the debt, whether voluntary or
under foreclosure or other enforcement action or procedure, shall be considered to have been
first paid or applied to the full payment of that portion of the debt which is not secured or
partially secured by the lien of this Deed of Tmst.
Section 8.7 Goveming Law.
This Deed of Tmst shall be govemed by and constmed in accordance with the laws of the
State of Califomia.
Section 8.8 Gender and Number.
In this Deed of Tmst the singular shall include the plural and the masculine shall include
the feminine and neuter and vice versa, if the context so requires.
Section 8.9 Deed of Tmst, Mortgage.
Any reference in this Deed of Tmst to a mortgage shall also refer to a deed of tmst and
any reference to a deed of tmst shall also refer to a mortgage.
Section 8.10 Actions.
Tmstor agree to appear in and defend any action or proceeding purporting to affect the
Security.
Section 8.11 Substitution of Trustee.
Beneficiary may from time to time substitute a successor or successors to any Tmstee
named herein or acting hereunder to execute this Tmst. Upon such appointment, and without
conveyance to the successor tmstee, the latter shall be vested with all title, powers, and duties
conferred upon any Tmstee herein named or acting hereunder. Each such appointment and
substitution shall be made by written instmment executed by Beneficiary, containing reference to
this Deed of Tmst and its place of record, which, when duly recorded in the proper office of the
county or counties in which the Property is situated, shall be conclusive proof of proper
appointment of the successor tmstee.
Section 8.12 Statute of Limitations,
The pleading of any statute of limitations as a defense to any and all obligations secured
by this Deed of Tmst is hereby waived to the full extent permissible by law.
Draft: Carol-Harding Duplex DOT; 1/8/13 17
Section 8.13 Subordination.
The rights and remedies of the Beneficiary under this Deed of Tmst shall be subject in all
respects to the terms and conditions of that certain subordination agreement by and among the
Beneficiary, the Tmstor, Bank of America and Fidelity National Title Company , as tmstee,
recorded concurrently herewith.
Section 8.14 Acceptance by Tmstee.
Tmstee accepts this Tmst when this Deed of Tmst, duly executed and acknowledged, is
made public record as provided by law. Except as otherwise provided by law the Tmstee is not
obligated to notify any party hereto of pending sale under this Deed of Tmst or of any action of
proceeding in which Tmstor, Beneficiary, or Tmstee shall be a party unless brought by Tmstee.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Draft: Carol-Harding Duplex DOT; 1/8/13 1 g
IN WITNESS WHEREOF, Tmstor has executed this Deed of Tmst as of the day and
year first above written.
TRUSTOR:
Harding Street Neighbors LP,
a limited partnership
By: IHO Harding Street LLC
Its managing general partner
By: Irvine Housing Opportunities, Inc.
Its sole member
By:
Patricia C. Whitaker
Its: Chief Executive Officer
By: C&C Harding Street, LLC
Its administrative general partner
By:
Todd R. Cottle
Its: Member
By:
The Cottle Family Tmst dated 3/8/1987; Barry A. Cottle
Its; Member; tmstee
PROPER NOTARIAL ACKNOWLEDGEMENT OF EXECUTION MUST BE ATTACHED
Draft: Carol-Harding Duplex DOT; 1/8/13 19
82
EXHIBIT A
(Legal Description)
A-l
I010\20\406821.1
EXHIBITS
PROMISSORY NOTE
PROMISSORY NOTE
(Carol-Harding Duplex Acquisition)
$7,408,000 Carlsbad, Califomia
,2013
FOR VALUE RECEIVED, Harding Street Neighbors LP, a Califomia limited
partnership ("Borrower"), promises to pay to the City of Carlsbad , a municipal corporation (the
"City"), or order, the principal sum of up to Seven Million Four Hundred Eight Thousand
Dollars ($7,408,000), or so much as is disbursed to Borrower, plus interest thereon pursuant to
Section 2 below.
1. Borrower's Obligation. This promissory note ("Note") evidences the
Borrower's obligation to pay the City the principal amount of up to Seven Million Four Hundred
Eight Thousand Dollars ($7,408,000), or so much as is disbursed, for the funds loaned to the
Borrower by City to finance the acquisition and rehabilitation of the Property pursuant to the
Loan Agreement between the Borrower and the City, dated , 2013 (the
"Agreement"). All capitalized terms not otherwise defined in this Note shall have the meanings
set forth in the Agreement.
2. Interest. The outstanding principal balance of this Note shall bear simple
interest at the rate of three percent (3%) per annum from the date of disbursement until paid;
provided, however, if a Defauh occurs, interest on the principal balance shall begin to accme, as
ofthe date of Default (following expiration of applicable notice and cure periods), and
continuing until such time as the Loan funds are repaid in full or the Default is cured, at the
defauh rate of the lesser of ten percent (10%), compounded annually, or the highest rate
permitted by law.
3. Term and Repavment Requirements. The term of this Note shah
commence with the date of this Note and shall expire the earlier of either 1) fifty-five (55) years
from the issuance ofa Certificate of Occupancy, or its equivalent, or 2) sixty (60) years from the
date of this Agreement. This Note shall be due and payable as set forth in Section 2.6 ofthe
Loan Agreement. Repayment of this Note shall be nonrecourse to the Borrower pursuant to
Section 2.8 ofthe Loan Agreement, and subject to the exceptions set forth therein.
4. No Assumption. This Note shall not be assumable by the successors and
assigns of Borrower without the prior written consent of the City, or as set forth in Article 4 of
the Agreement.
5. Securitv. This Note is secured by a Deed of Tmst with Assignment of
Rents and Security Agreement (the "Deed of Tmst") of even date herewith, wherein the
Borrower are Tmstors and the City is the Beneficiary, covering the Borrower's fee interest in the
Property.
I010\20\406820.
6. Terms of Pavment.
(a) All payments due under this Note shall be paid in currency of the
United States of America, which at the time of payment is lawful for the payment of public and
private debts.
(b) All payments on this Note shall be paid to the City at City of
Carlsbad, Housing and Neighborhood Services Department, 1200 Carlsbad Village Drive,
Carlsbad, CA 92008 or to such other place as the City may from time to time designate in
writing.
(c) All payments on this Note shall be without expense to the City,
and the Borrower agree to pay all costs and expenses, including re-conveyance fees and
reasonable attomey's fees ofthe City, incurred in connection with the payment of this Note and
the release of any security hereof
(d) Notwithstanding any other provision of this Note, or any
instmment securing the obligations of the Borrower under this Note, if, for any reason
whatsoever, the payment of any sums by the Borrower pursuant to the terms of this Note would
result in the payment of interest which would exceed the amount that the City may legally charge
under the laws ofthe State of Califomia, then the amount by which payments exceeds the lawful
interest rate shall automatically be deducted from the principal balance owing on this Note, so
that in no event shall the Borrower be obligated under the terms of this Note to pay any interest
which would exceed the lawful rate.
7. Default.
(a) Any of the following shall constitute an Event of Default under
this Note:
(i) Any failure ofthe Borrower to obtain all planning approvals
and building permits necessary to constmct the future improvements for a new, larger and higher
density affordable rental development or complete substantial rehabilitation ofthe existing
Development within a reasonable period of time as determined by the City Council and set forth
with the Loan Agreement;
(ii) Any failure to pay, in full, any payment required under this
Note when due following written notice by the City to Borrower of such failure and thirty (30)
days opportunity to cure by Borrower;
(iii) Any failure of the Borrower to commence and complete
constmction ofthe new, larger, and higher density affordable rental development or the
substantial rehabilitation work on the existing Development within a reasonable period of time as
determined by the City Council and set forth with the Loan Agreement
(iv) Any failure in the performance by the Borrower of any term,
condition, provision or covenant set forth in this Note subject to the notice and cure period set
forth in Section 6.1 of the Loan Agreement; and
2
Draft: Promissory Note - Carol-Harding Duplex - 1/8/13e
(v) The occurrence of any Default under the Agreement, the
Deed of Tmst or the Regulatory Agreement (the "Loan Documents"), or other instmment
securing the obligations ofthe Borrower under this Note or under any other promissory notes
hereafter issued by the Borrower to the City pursuant to the Agreement or the Deed of Tmst,
subject to notice and cure periods, if any, set forth therein.
(b) Upon the occurrence of such an Event of Default, the entire unpaid
principal balance, together with all interest thereon, and together with all other sums then
payable under this Note and the Deed of Tmst shall at the option of the City become
immediately due and payable upon written notice by the City to the Borrower without further
demand.
(c) The failure to exercise the remedy set forth in Subsection 7(b)
above or any other remedy provided by law upon the occurrence of one or more ofthe foregoing
events of default shall not constitute a waiver of the right to exercise any remedy at any
subsequent time in respect to the same or any other defauh. The acceptance by City hereof of
any payment which is less than the total of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise any of the foregoing remedies or
options at that time or at any subsequent time, or nullify any prior exercise of any such remedy
or option, without the express consent of the City, except as and to the extent otherwise provided
by law.
(d) The rights and remedies of the City under this Note shall be subject
in all respects to the terms and conditions of that certain Subordination Agreement by and among
the City, the Borrower and Fidelity National Title Company, as Tmstee, executed concurrently
herewith.
8. Waivers.
(a) The Borrower hereby waives diligence, presentment, protest and
demand, and notice of protest, notice of demand, and notice of dishonor of this Note. The
Borrower expressly agrees that this Note or any payment hereunder may be extended from time
to time, and that the City may accept further security or release any security for this Note, all
without in any way affecting the liability of the Borrower.
(b) No extension of time for payment of this Note or any installment
hereof made by agreement by the City with any person now or hereafter liable for payment of
this Note shall operate to release, discharge, modify, change or affect the original liability ofthe
Borrower under this Note, either in whole or in part.
(c) The obligations of the Borrower under this Note shall be absolute
and the Borrower waives any and all rights to offset, deduct or withhold any payments or charges
due under this Note for any reason whatsoever.
9. Miscellaneous Provisions.
(a) All notices to the City or the Borrower shall be given in the
manner and at the addresses set forth in the Agreement, or to such addresses as the City and the
Borrower may hereinafter designate.
3
Draft: Promissory Note - Carol-Harding Duplex - 1/8/13e QB
(b) The Borrower promises to pay all costs and expenses, including
reasonable attomey's fees, incurred by the City in the enforcement of the provision of this Note,
regardless of whether suit is filed to seek enforcement.
(c) This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change, modification or
discharge is sought.
(d) This Note shall be govemed by and constmed in accordance with
the laws of the State of Califomia.
(e) The times for the performance of any obligations hereunder shall
be strictly constmed, time being of the essence.
(f) This document, together with the Loan Documents, contains the
entire agreement between the parties as to the Loan. It may not be modified except upon written
consent of the parties.
10. Non-Recourse. Except as provided below, the Borrower and its general
partners shall not have any direct or indirect personal liability for payment ofthe principal of, or
interest on, the Loan or the performance of the covenants of the Borrower under the Deed of
Tmst. The sole recourse ofthe City with respect to the principal of, or interest on, the Note and
defaults by the Borrower in the performance of its covenants under the Deed of Tmst shall be to
the Property described in the Deed of Tmst; provided, however, that nothing contained in the
foregoing limitation of liability shall (a) limit or impair the enforcement against all such security
for the Note of all the rights and remedies of the City thereunder, or (b) be deemed in any way to
impair the right ofthe City to assert the unpaid principal amount ofthe Note as demand for
money within the meaning and intendment of Section 431.70 of the Califomia Code of Civil
Procedure or any successor provision thereto. The foregoing limitation of liability is intended to
apply only to the obligation for the repayment of the principal of, and payment of interest on the
Note and the performance of the Borrower' obligations under the Deed of Tmst, except as
hereafter set forth; nothing contained herein is intended to relieve the Borrower of its obligation
to indemnify the City under Sections 3.4, 3.6, 3.15, and 7.5 of this Agreement; or liability for (i)
fraud or willful misrepresentation; (ii) the failure to pay taxes, assessments or other charges
which may create liens on the Property that are payable or applicable prior to any foreclosure
under the Deed of Trust (to the full extent of such taxes, assessments or other charges); (iii) the
fair market value of any personal property or fixtures removed or disposed of by the Borrower
other than in accordance with the Deed of Tmst; and (iv) the misappropriation of any proceeds
under any insurance policies or awards resulting from condemnation or the exercise ofthe power
of eminent domain or by reason of damage, loss or destruction to any portion ofthe Property.
[Remainder of this page has been left intentionally blank]
4
Draft: Promissory Note - Carol-Harding Duplex - 1/8/13e 8^
Borrower:
Harding Street Neighbors LP,
A Califomia limited partnership
By: IHO Harding Street LLC
Its: managing general partner
By: Irvine Housing Opportunities, Inc.
Its: sole member
By:.
Patricia C. Whitaker
Its: Chief Executive Officer
By: C & C Harding Street, LLC
Its: administrative general partner
By:
Todd R. Cottle,
Its: Member
By: The Cottle Family Trust dated 3/8/1987
Its: Member
By:
Barry A. Cottle,
Its: Tmstee
5
Draft: Promissory Note - Carol-Harding Duplex - 1/8/13e ^0
EXHIBITS
REGULATORY AGREEMENT
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City Clerk's Office
City ofCarlsbad
Attn: City Clerk
1200 Carlsbad Village Drive
Carlsbad, CA 92008
No fee for recording pursuant to
Govemment Code Section 27383
REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS
(Carol-Harding Duplex Acquisition)
This Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement")
is made and entered into as of , 2013 (the "Agreement Date"), by and among
the City ofCarlsbad, a municipal corporation (the "City"), and Harding Street Neighbors LP, a
Califomia limited partnership (the "Developer").
RECITALS
1. The City and the Developer have entered into a Loan Agreement (the
"Agreement") under which the City agreed to loan up to Seven Million Four Hundred Eight
Thousand Dollars ($7,408,000) (the "City Loan") to the Developer to finance the acquisition of
twenty-one (21) duplex dwelling units, forty-two (42) total dwelling units, appurtenances,
landscaping and vacant parcel of land to provide for affordable housing for lower and moderate
income household on property described as Carol-Harding and fiirther described in Exhibit A.
Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the
Loan Agreement.
2. The City Loan consists of Seven Million Four Hundred Eight Thousand Dollars
($7,408,000) ofCarlsbad Housing Tmst Funds.
3. The Carlsbad Housing Trust Fund must be used to provide housing for lower
income households for the longest feasible time, determined to be a minimum of fifty-five (55)
years. The City intends to initially restrict twenty (20) of the units in the Development to low
income households, and shall amend this Agreement to regulate a larger number if a new, larger,
and higher density development is approved for said property.
4. Through this Agreement the City is imposing occupancy and affordability
restrictions on the Development in order to meet the needs for affordable housing in Carlsbad for
lower and moderate income households.
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 1
5. In consideration of receipt ofthe City Loan, the Developer has further agreed to
observe all the terms and conditions set forth below.
6. In order to ensure that the entire Development will be used and operated in
accordance with these conditions and restrictions, the City and the Developer wish to enter into
this Agreement.
THEREFORE, the City and the Developer hereby agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1 Definitions.
When used in this Agreement, the following terms shall have the respective meanings
assigned to them in this Article 1.
(a) "Actual Household Size" shall mean the actual number of persons in the
applicable household.
(b) "Adjusted Income" shall mean the total anticipated annual income of all
persons in a household as calculated in accordance with 24 CFR 92.203(b)(1) (which
incorporates 24 CFR 813).
(c) "Agreement" shall mean this Regulatory Agreement and Declaration of
Restrictive Covenants.
(d) "Agreement Date" shall mean the last date opposite the respective
signatures ofthe Developer and the City on this Agreement.
(e) "Assumed Household Size" shall mean the assumed household size of
three (3) persons for a two-bedroom unit.
(f) "City" shall mean the City of Carlsbad, a municipal corporation.
(g) "City Loan" shall mean the funds loaned to the Developer by the City
pursuant to the Loan Agreement.
(h) "Deed of Tmst" shall mean the deed of tmst of even date herewith in favor
ofthe City on the Developer' interest in the Property which secures repayment ofthe City Loan
and the performance of the Loan Agreement.
(i) "Developer" shall mean Harding Street Neighbors LP, a Califomia limted
partnership, and hs permitted successors and assigns.
(j) "Development" shall mean the Property and the forty-two (42) residential
units and related improvements to be acquired on the Property, as well as any additional
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 2 ^ .
improvements in the future, and all landscaping, roads and parking spaces existing thereon, as
the same may from time to time exist.
(k) "Housing Fund" shall mean the City's Housing Trust Fund.
(1) "Low Income Household" shall mean a household with an Adjusted
Income that does not exceed sixty percent (60%) of the Area Median Income for San Diego
County, and as published by the US Department of Housing and Urban Development.
(m) "Median Income" shall mean the median gross yearly income, adjusted for
Actual Household Size or Assumed Household Size as specified herein, in the County of San
Diego, Califomia, as published from time to time by the United States Department of Housing
and Urban Development ("HUD") and the State of Califomia. In the event that such income
determinations are no longer published, or are not updated for a period of at least eighteen (18)
months, the City shall provide the Developer with other income determinations which are
reasonably similar with respect to methods of calculation to those previously published by HUD
and the State.
(n) "Other Income Household" shall mean a household with an Adjusted
Income which does not exceed ninety percent (90%) of Median Income, adjusted for Actual
Household Size.
(o) "Other Income Units" shall mean the Units which, pursuant to Section
2.1(c) below, are required to be occupied by Other Households.
(p) "Property" shall mean the real property described in Exhibit A attached
hereto and incorporated herein.
(q) "Rent" shall mean the total of monthly payments by the Tenant of a Unit
for the following: use and occupancy of the Unit and land and associated facilities, including
parking; any separately charged fees or service charges assessed by the Developer which are
required of all Tenants, other than security deposits; an allowance for the cost of an adequate
level of service for utilities paid by the Tenant, including garbage collection, sewer, water,
electricity, gas and other heating, cooking and refrigeration fuel, but not telephone service or
cable TV; and any other interest, taxes, fees or charges for use of the land or associated facilities
and assessed by a public or private entity other than the Developer, and paid by the Tenant.
(r) "Tenant" shall mean a household legally occupying a Unit pursuant to a
valid lease with the Developer.
(s) "Term" shall mean the term of this Agreement, which shall commence on
the earlier of (1) fifty-five (55) years from the issuance of a Certificate of Occupancy, or
equivalent, or (2) sixty (60) years from the date of this Agreement and shall continue until the
end of the term.
(t) "Unit(s)" shall mean one (1) or all of the forty-two (42) rental units to be
constmcted on the Property.
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 3
ARTICLE 2.
AFFORDABILITY AND OCCUPANCY COVENANTS
Section 2.1 Occupancy Requirements.
(a) The Developer shall regulate the use and occupancy ofthe Units in the
following manner:
Forty-two (42) Units shall be rented to and occupied by or, if vacant, available for occupancy by
households as follows:
Low
(Sixty Percent)
Other Income
(Ninety Percent) Total
Two Bedroom 20 21 41
Total 20 21 41
(+1 Mgr Unit)
(b) If the Developer is able to constmct the larger development of
approximately 140 units, the City and the Developer will amend these occupancy requirements.
(c) Notwithstanding the occupancy and income requirements in this Section
2.1, the existing tenants at the time of acquisition within the development shall not be required to
be displaced unless required by another public agency.
Section 2.2 Allowable Rent.
(a) Low. Sixtv Percent Rent. Subject to Section 2.3 below, the Rent charged
to Tenants ofthe Low, Sixty Percent Units shall not exceed one-twelfth (1/12'*') of thirty percent
(30%) of sixty percent (60%) of Area Median Income for San Diego County, adjusted for
Assumed Household Size.
(c) Other Income Rent. Subject to the provisions of Section 2.3 below, the
Rent charged to Tenants ofthe Other Income Units shall not exceed one-twelfth (1/12^) of thirty
percent (30%) of ninety percent (90%) of Area Median Income for San Diego County, adjusted
for Assumed Household Size.
(d) Assumed Household Size. In calculating the allowable Rent for the Units,
the following Assumed Household Size shall be utilized: three (3) persons per two (2) bedroom
unit.
(e) Approval of Rents for Units. Imtial rents for all Units shall be approved
by the City prior to occupancy. All rent increases for all Units shall also be submitted to the City
for approval not less than thirty (30) days before notice is given to the affected Tenant and shall
be imposed only if in compliance with this Agreement. The City shall provide the Developer
with a schedule of maximum permissible rents for the Units annually.
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 4 ^5
Section 2.3 Increased Income of Tenants.
(a) Increased Income Over Low Income. In the event that, following
recertification of a Tenant's income, the Developer determines that a former Low Income
Household has an Adjusted Income that exceeds the qualifying limit for a Low Income
Household but does not exceed ninety percent (90%) of Area Median Income for San Diego
County, adjusted for Actual Household Size, then, upon expiration of the Tenant's lease and sixty
(60) days' written notice to the Tenant, such household's Unit shall be considered an Other Unit,
and the Rent may be increased to one-twelfth (1/12^*^) of thirty percent (30%) of ninety percent
(90%) of Median Income, and the Developer shall rent the next available Umt to a Low Income
Household to comply with the requirements of Section 2.1 above.
(b) Increased Income over 90% of Median Income. If, upon recertification of
a Tenant's income, the Developer determines that a Tenant has an Adjusted Income exceeding
ninety percent (90%) of Area Median Income for San Diego County, adjusted for Actual
Household Size, such Tenant shall be permitted to continue to occupy the Unit, and, upon
expiration ofthe Tenant's lease, and sixty (60) days' written notice to the Tenant, the Rent may
be increased to one-twelfth (1/12'*') of thirty percent (30%) of actual Adjusted Income ofthe
Tenant, and the Unit shall continue to be classified as an Other Unit until the Tenant vacates the
Unit at which time the Unit shall be re-rented to an income-eligible household to meet the
requirements of Section 2.1.
(c) Termination of Occupancy. Upon termination of occupancy of a Umt by a
Tenant, such Unit shall be deemed to be continuously occupied by a household ofthe same
income level (e.g., Low Income Household) as the income level of the vacating Tenant, until
such Unit is reoccupied, at which time the income character of the Unit (e.g.. Low Income
Household) shall be redetermined.
Section 2.4 Units Available to the Disabled.
The Developer shall comply with all requirements of the American Disabilities Act.
ARTICLE 3.
INCOME CERTIFICATION AND REPORTING
Section 3.1 Income Certification.
The Developer shall obtain, complete and maintain on file, immediately prior to initial
occupancy and annually thereafter, income certifications from each Tenant renting any ofthe
Units (excluding the manager's Unit). The Developer shall make a good faith effort to verify that
the income provided by an applicant or occupying household in an income certification is
accurate by taking one or more ofthe following steps as a pari of the verification process: (1)
obtain a pay stub for the most recent pay period; (2) obtain an income tax retum for the most
recent tax year; (3) conduct a credit agency or similar search; (4) obtain an income verification
form from the applicant's current employer; (5) obtain an income verification form from the
Social Security Administration and/or the Califomia Department of Social Services ifthe
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 5
applicant receives assistance from either of such agencies; or (6) if the applicant is unemployed
and has no such tax retum, obtain another form of independent verification. Copies of tenant
income certifications shall be available to the City upon request.
Section 3.2 Annual Report to the Citv.
The Developer shall submit to the City (a) not later than the sixtieth (60^'') day after the
close of each calendar year, or such other date as may reasonably be requested by the City, a
statistical report, including income and rent data for all Unhs covered by this Agreement, setting
forth the information called for therein, and (b) within fifteen (15) days after receipt ofa written
request, any other information or completed forms requested by the City in order to comply with
reporting requirements ofthe City.
Section 3.3 Addhional Information.
The Developer shall provide any additional information reasonably requested by the
City. The City shall have the right to examine and make copies of all books, records or other
documents ofthe Developer which pertain to the Development.
Section 3.4 Records.
The Developer shall maintain complete, accurate and current records pertaining to the
Development, and shall permit any duly authorized representative ofthe City to inspect records,
including records pertaining to income and household size of Tenants. All Tenant lists,
applications and waiting lists relating to the Development shall at all times be kept separate and
identifiable from any other business of the Developer and shall be maintained as required by the
City, in a reasonable condition for proper audit and subject to examination during business hours
by representatives ofthe City. The Developer shall retain copies of all materials obtained or
produced with respect to occupancy of the Units for a period of at least five (5) years.
Section 3.5 On-site Inspection.
The City shall have the right to perform an on-site inspection of the Development at least
one (1) time per year. The Developer agrees to cooperate in such inspection. Ifthe City desires
to inspect the interior ofthe Units, the City shall give Developer sufficient notice to allow the
Developer to give seventy-two (72) hours notice to residents. Such right to annually inspect the
Development shall be addition to the City's right to inspect the Development in accordance with
the City's municipal code as may be amended from time to time.
ARTICLE 4.
OPERATION OF THE DEVELOPMENT
Section 4.1 Residential Use.
The Development shall be operated only for residential use. No part ofthe Development
shall be operated as short term transient or emergency housing.
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 6
Section 4.2 Taxes and Assessments.
The Developer shall pay all real and personal property taxes, assessments and charges
and all franchise, income, employment, old age benefit, withholding, sales, and other taxes
assessed against it, or payable by it, at such times and in such manner as to prevent any penalty
from accming, or any lien or charge from attaching to the Property; provided, however, that
Developer shall have the right to contest in good faith, any such taxes, assessments, or charges.
In the event Developer exercise their rights to contest any tax, assessment, or charge against it.
Developer, on final determination ofthe proceeding or contest, shall immediately pay or
discharge any decision or judgment rendered against h, together wilh all costs, charges and
interest. The Developer shall not apply for a property tax exemption for the Property under any
provision of law, including but not limited to Revenue and Taxation Section 214, without the
City's prior written consent.
Section 4.3 Preference to Displacees.
The Developer shall give a preference in the rental of any Units to eligible households
displaced by activity ofthe City upon receiving a written request ofthe City regarding such
displacement.
ARTICLE 5.
PROPERTY MANAGEMENT AND MAINTENANCE
Section 5.1 Management Responsibilities.
The Developer is responsible for all management functions with respect to the
Development, including without limitation the selection of tenants, certification and
recertification of household size and income, evictions, collection of rents and deposits,
maintenance, landscaping, routine and extraordinary repairs, replacement of capital items, and
security. The City shall have no responsibility over management of the Development. The
Developer shall retain a professional property management company approved by the City in its
reasonable discretion to perform its management duties hereunder as set forth below. A resident
manager shall also be required.
Section 5.2 Management Agent.
The Development shall at all times be managed by an experienced management agent
reasonably acceptable to the City, with demonstrated ability to operate residential facilities like
the Development in a manner that will provide decent, safe, and sanitary housing (as approved,
the "Management Agent"). The Developer shall submit for the City's approval the identity of
any proposed Management Agent. The Developer shall also submit such additional information
about the background, experience and financial condition of any proposed Management Agent as
is reasonably necessary for the City to determine whether the proposed Management Agent
meets the standard for a qualified Management Agent set forth above. Ifthe proposed
Management Agent meets the standard for a qualified Management Agent set forth above, the
City shall approve the proposed Management Agent by notifying the Developer in writing. Ifthe
proposed Management Agent is disapproved by the City, the disapproval shall state with
reasonable specificity the basis for disapproval. Thereafter, the Developer shall submh a
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 7
different proposed Management Agent, and submit such additional information about the
background, experience and financial condition of the proposed Management Agent as is
reasonably necessary for the City to determine whether the proposed Management Agent meets
the standard for a qualified Management Agent set forth above. Only upon the City's written
approval ofthe Developer's proposed Management Agent shall constitute the Developer's
compliance with this Section.
Section 5.3 Periodic Performance Review.
The City reserves the right to conduct an annual (or more frequently, if deemed necessary
by the City) review ofthe management practices and financial status of the Development,
including the performance ofthe Management Agent. The purpose of each periodic review will
be to enable the City to determine if the Development is being operated and managed in
accordance with the requirements and standards of this Agreement. The Developer shall
cooperate with the City in such reviews.
Section 5.4 Replacement of Management Agent.
If, as a result of a periodic review, the City determines in its reasonable judgment that the
Development is not being operated and managed in accordance with any ofthe material
requirements and standards of this Agreement, the City shall deliver notice to Developer of its
intention to cause replacement ofthe Management Agent, including the reasons therefor. Within
fifteen (15) days of receipt by Developer of such written notice. City staff and the Developer
shall meet in good faith to consider methods for improving the financial and operating status of
the Development, including, without limitation, replacement of the Management Agent.
If, after such meeting. City staff recommends in writing the replacement ofthe
Management Agent, Developer shall promptly dismiss the then Management Agent, and shall
appoint as the Management Agent a person or entity meeting the standards for a Management
Agent set forth in Section 5.2 above and approved by the City pursuant to Section 5.2 above.
Any contract for the operation or management of the Development entered into by
Developer shall provide that the contract can be terminated as set forth above. Failure to remove
the Management Agent in accordance with the provisions of this Section shall constitute default
under this Agreement, and the City may enforce this provision through legal proceedings as
specified in Section 6.8.
Section 5.5 Approval of Management Policies.
The Developer shall submit its written management policies with respect to the
Development to the City for its review, and shall amend such policies in any way necessary to
ensure that such policies comply with the provisions of this Agreement.
Section 5.6 Property Maintenance.
The Developer agrees, for the entire Term of this Agreement, to maintain all interior and
exterior improvements, including landscaping, on the Property in good condition and repair (and,
as to landscaping, in a healthy condition) and in accordance with all applicable laws, mles,
ordinances, orders and regulations of all federal, state, county, municipal, and other
Draft: Carol-Harding Duplex Regulatory Agreement; 1 /8/13 g ^
govemmental agencies and bodies having or claiming jurisdiction and all their respective
departments, bureaus, and officials.
The City places prime importance on quality maintenance to protect its investment and to
ensure that all City-assisted affordable housing projects within the City are not allowed to
deteriorate due to below-average maintenance. Normal wear and tear of the Development will
be acceptable to the City assuming the Developer agrees to provide all necessary improvements
to assure the Development is maintained in good condition. The Developer shall make all
repairs and replacements necessary to keep the improvements in good condition and repair.
In the event that the Developer breaches any of the covenants contained in this section
and such default continues for a period of ten (10) days after written notice from the City with
respect to graffiti, debris, and waste material, or thirty (30) days after written notice with respect
to general maintenance, landscaping and building improvements, (and subject to any stricter
requirements included in any applicable City ordinance) then the City, in addition to whatever
other remedy it may have at law or in equity, shall have the right to enter upon the Property and
perform or cause to be performed all such acts and work necessary to cure the default. Pursuant
to such right of entry, the City shall be permitted (but is not required) to enter upon the Property
and perform all acts and work necessary to protect, maintain, and preserve the improvements and
landscaped areas on the Property, and to attach a lien on the Property, or to assess the Property,
in the amount of the reasonable expenditures arising from such acts and work of protection,
maintenance, and preservation by the City and/or costs of such cure, including an administrative
charge equal to fifteen percent (15%) of such expenditures, which amount shall be promptly paid
by the Developer to the City upon demand.
ARTICLE 6.
MISCELLANEOUS
Section 6.1 Lease Provisions.
The Developer shall use a form of Tenant lease approved by the City. The form of
Tenant lease shall also comply with all requirements of this Agreement and the Loan Agreement,
and shall, among other matters:
(a) provide for termination of the lease and consent by the Tenant to
immediate eviction for failure: (1) to provide any information required under this Agreement or
reasonably requested by the Developer to establish or recertify the Tenant's qualification, or the
qualification of the Tenant's household, for occupancy in the Development in accordance with
the standards set forth in this Agreement, or (2) to qualify as a Low Income Household as a
result of any material misrepresentation made by such Tenant with respect to the income
computation or certification; and
(b) be for an initial term of not less than one (1) year, and provide for no Rent
increase during such year. After the initial year of tenancy, the lease may be month to month by
mutual agreement of the Developer and the Tenant, however the Rent may not be raised more
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 9
often than once every twelve (12) months. The Developer will provide each Tenant with at least
sixty (60) days' written notice of any increase in Rent applicable to such Tenant, and with such
further notice as may be required by Section 2.3 above.
(c) any termination of a lease or refusal by the Developer to renew must be
preceded by no less than sixty (60) days written notice to the tenant by the Developer specifying
the grounds for the action.
Section 6.2 Nondiscrimination.
All ofthe Units shall be available for occupancy on a continuous basis to members ofthe
general public who are income eligible. The Developer shall not give preference to any
particular class or group of persons in renting or selling the Units, except to the extent that the
Units are required to be leased to Low Income Households. There shall be no discrimination
against or segregation of any person or group of persons, on account of race, color, creed,
religion, sex, sexual orientation, marital status, national origin, source of income (e.g., SSI), age,
ancestry, or disability, in the leasing, subleasing, transferring, use, occupancy, tenure, or
enjoyment of any Unit nor shall the Developer or any person claiming under or through the
Developer, establish or permit any such practice or practices of discrimination or segregation
with reference to the selection, location, number, use, or occupancy, of tenants, lessees,
sublessees, subtenants, or vendees of any Unit or in connection with the employment of persons
for the constmction, operation and management of any Unit. All deeds, leases or contracts made
or entered into by Developer as to the Units or the Development or portion thereof, shall contain
covenants conceming discrimination as prescribed by the Loan Agreement.
Section 6.3 Section 8 Certificate Holders.
The Developer will accept as Tenants, on the same basis as all other prospective Tenants,
persons who are recipients of federal certificates for rent subsidies pursuant to the existing
housing program under Section 8 of the United States Housing Act of 1937, as amended, or hs
successor. The Developer shall not apply selection criteria to Section 8 certificate or voucher
holders that are more burdensome than criteria applied to all other prospective Tenants, nor shall
the Developer apply or permit the application of management policies or lease provisions with
respect to the Development which have the effect of precluding occupancy of units by such
prospective Tenants.
Section 6.4 Term.
The provisions of this Agreement shall apply to the Property for the entire Term. This
Agreement shall bind any successor, heir or assign of the Developer, whether a change in interest
occurs voluntarily or involuntarily, by operation of law or otherwise, except as expressly
released by the City. The City makes the City Loan on the condition, and in consideration of,
this provision, and would not do so otherwise.
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 1Q
Section 6.5 Compliance with Loan Agreement and Program Requirements.
The Developer's actions with respect to the Property shall at all times be in full
conformity with: (i) all requirements of the Loan Agreement; and, (ii) all requirements imposed
on projects assisted with the City's Housing Tmst Fund.
Section 6.6 Notice of Expiration of Term.
At least six (6) months prior to the expiration of the Term the Developer shall provide by
first-class mail, postage prepaid, a notice to all Tenants in the Units containing (a) the anticipated
date of the expiration of the Term, (b) any anticipated Rent increase upon the expiration of the
Term, (c) a statement that a copy of such notice will be sent to the City, and (d) a statement that a
public hearing may be held by the City on the issue and that the Tenant will receive notice of the
hearing at least fifteen (15) days in advance of any such hearing. The Developer shall also file a
copy of the above-described notice with the City.
Section 6.7 Covenants to Run With the Land.
The City and the Developer hereby declare their express intent that the covenants and
restrictions set forth in this Agreement shall mn with the land, and shall bind all successors in
title to the Property, provided, however, that on the expiration of the Term of this Agreement
said covenants and restrictions shall expire. Each and every contract, deed or other instmment
hereafter executed covering or conveying the Property or any portion thereof, shall be held
conclusively to have been executed, delivered and accepted subject to such covenants and
restrictions, regardless of whether such covenants or restrictions are set forth in such contract,
deed or other instmment, unless the City expressly releases such conveyed portion of the
Property from the requirements of this Agreement.
Section 6,8 Default by the Developer: Enforcement by the City.
If the Developer fails to perform any obligation under this Agreement (including but not
limited to the failure to rent the Units as set forth in Section 2.1), and fails to cure the default
within thirty (30) days after the City has notified the Developer in writing of the default or, if the
default cannot be cured within thirty (30) days, fails to commence to cure within thirty (30) days
and thereafter diligently pursue such cure and complete such cure within ninety (90) days, or
such longer period as approved by the City in writing, the City shall have the right to enforce this
Agreement by any or all of the following actions, or any other remedy provided by law:
(a) Calling the Citv Loan. The City may declare a default under the Loan
Agreement, and declare the City Loan due and payable and proceed with foreclosure under the
Deed of Tmst.
(b) Action to Compel Performance or for Damages. The City may bring an
action at law or in equity to compel the Developer' performance of its obligations under this
Agreement, and/or for damages.
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 11
(c) Remedies Provided Under Loan Agreement. The City may exercise any
other remedy provided under the Loan Agreement.
Section 6.9 Recording and Filing.
The City and the Developer shall cause this Agreement, and all amendments and
supplements to it, to be recorded in the Official Records of the County of San Diego.
Section 6,10 Goveming Law.
This Agreement shall be govemed by the laws of the State of Califomia.
Section 6.11 Waiver of Requirements.
Any of the requirements of this Agreement may be expressly waived by the City in
writing, but no waiver by the City of any requirement of this Agreement shall, or shall be
deemed to, extend to or affect any other provision of this Agreement.
Section 6.12 Amendments.
This Agreement may be amended only by a written instmment executed by all the parties
hereto or their successors in title, and duly recorded in the real property records ofthe County of
San Diego.
Section 6.13 Notices.
Any notice requirement set forth herein shall be deemed to be satisfied three (3) days
after mailing of the notice first-class United States certified mail, postage prepaid, addressed to
the appropriate party as follows:
Developer: Harding Street Neighbors LP
C/O Irvine Housing Opportunities
19772 MacArthur Blvd
Suite 110
Irvine, Ca. 92612
With a copy to: C&C Development Co
14211 Yorba Street
Suite 200
Tustin, Ca. 92780
With a copy to: Goldfarb & Lipman LLP
1300 Clay Street 11*^ Floor
Oakland, Ca. 94612
Attn: M. David Kroot
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 12
With a copy to: Goldfarb and Lipman LLP
1300 Clay Street
Oakland, Ca 94612
Attn: Amy DeVaudrenil
City: City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, Ca 92008
Attn: Housing and Neighborhood Services Director
Such addresses may be changed by notice to the other party given in the same manner as
provided above.
Section 6.14 Severability.
If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability ofthe remaining portions of this Agreement shall not in any way be
affected or impaired thereby.
Section 6.15 Multiple Originals: Counterparts.
This Agreement may be executed in multiple originals, each of which is deemed to be an
original, and may be signed in counterparts.
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 13 j 0iJ
IN WITNESS WHEREOF, the City and the Developer have executed this Agreement by
duly authorized representatives, as of the last date written below.
Developer:
Harding Street Neighbors LP
a Califomia limited partnership
By: IHO Harding Street LLC
Its managing general partners
By: Irvine Housing Opportunities, Inc.
Its sole member
By:
Patricia C. Whitaker
Its: Chief Executive Officer
By: C & C Harding Street, LLC
Its administrative general partner
By:
Todd R. Cottle
Its: Member
By: The Cottle Family Trust dated 3/8/1987
Its: Member
By:
Barry A. Cottle
Its: Tmstee
City:
CITY OF CARLSBAD, a municipal corporation
By:
John Coates
Its: Interim City Manager
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 14 loS
APPROVED AS TO FORM
By City Attomey or Assistant City
Attomey
By:
All party signatures must be notarized.
Draft: Carol-Harding Duplex Regulatory Agreement; 1/8/13 15 jpy
11/24/03
1010\16\220427.1 trj
EXHIBIT A
(Legal Description)
The land is situated in the State of Califomia, County of San Diego, City of Carlsbad, and
is described as follows:
A-l ^
I010\16\220427.1