HomeMy WebLinkAbout2003-04-22; Housing & Redevelopment Commission; 357; Laguna Point Financial Assistance,.,> HOUSING AND REDEVELOPMENT COMMISSION AGENDA BILL ' ,.'
AB# 357
clTyAny& CITY MGR DEPT. H/RED
DEPT. HD. TITLE:
MTG. 4-22-03 LAGUNA POINT FINANCIAL ASSISTANCE
RECOMMENDED ACTION:
That the Housing and Redevelopment Commission ADOPT Resolution No. 3 66 I
APPROVING a request to provide financial assistance to Wave Crest Resort I1 in the amount of
$210,000 from the Redevelopment Agency's Low and Moderate Income Housing Fund and to
approve the related loan documents for construction of three (3) affordable for-sale condominium
units within the Laguna Point Development as recommended by the Housing Commission.
ITEM EXPLANATION:
On April 9, 2002, the Housing and Redevelopment Commission approved the Laguna Point project.
The approval allows for the development of 21 condominiums on property located on the southeast
corner of Roosevelt Street and Laguna Drive. Three of units will be sold at a price that will be
affordable to low income households.
The proposed project consists of two levels of residential units over a fully enclosed garage. The
three-story building is broken up into two separate components, each with its own security access
garage, connected by a central lobby. Building A is located on the west side of the property, at the
corner of State Street and Laguna Drive and consists of 10 stacked flats. Building B is located on the
east side of the property at the corner of Roosevelt Street and Laguna Drive and consists of 9 two-
story units. The project also includes extensive landscaping on all sides of the building, decorative
walls along the street frontages, and a pool and spa.
The project contains a wide range of units. There are 4 one-bedroom units ranging in size from 829
to 1,022 square feet, 8 two-bedroom units ranging from 1,442 to 1,657 square feet, and 9 three-
bedroom units from 1,527 to 2,106 square feet. Each unit is equipped with a private deck. The three
affordable units will all be one-bedroom units, varying in size from 829 to 859 square feet.
FINANCIAL ASSISTANCE FOR THE AFFORDABLE HOUSING PROJECT
The developer is requesting a total of $210,000, or $70,000 per unit, in Redevelopment Agency
financial assistance to construct the subject affordable housing condominium project. This request
for assistance is higher per housing unit than previously approved for-sale projects. The reason for
this higher subsidy amount is the limited sources of financing for affordable homeownership product.
In addition, because of the small size of the project, there is a limited opportunity to derive revenue in
which to fund the affordable units. Currently, multi-family rental projects have multiple sources of
funding. Unfortunately, although the product is very desirable, for-sale housing unit financing is
limited to conventional first trust deed financing, developer subsidies and public subsidies.
The developer intends to seek a conventional loan to finance the subject condominium project. The
developer will also help to subsidize the affordable units within the overall development. For each
one-bedroom unit, the developer subsidy for a buyer earning 80% of the Area Median Income is
estimated to be approximately $82,152 per unit. The developer subsidy will be combined with the
Redevelopment Agency's subsidy ($70,000 per unit) to represent the total subsidy required to create
an affordable for-sale condominium product within the Laguna Point project.
Within the chart noted below, staff has provided a summary of the per unit cost and subsidy required
for the proposed condominium product. As required by the lnclusionary Housing Ordinance, the
PAGE 2 OF AGENDA BILL NO. 357
maximum purchase price for the subject units must be set at an amount which is affordable to
households with gross annual incomes no greater than eighty percent (80%) of AMI. The chart below
provides the Proforma Subsidy Analysis for the subject project.
HOMEBUYER INCOME
80% AMI*
I UNIT COST: $272,152
MAXIMUM PURCHASE
PRICE** $1 20,000
SUBSIDY REQUIREMENT ($1 52,152) (Including Land)
SUBSIDY SOURCES
Developer Subsidy
Agency Assistance
(Including Land)
$ 70,000
$1.2 : $1 AGENCY LEVERAGE
$ 82,152
* AMI = Area Median Income, San Diego County
** Based upon an average maximum income of 2 persons for a one bedroom unit
As described in the chart above, the amount of recommended Redevelopment Agency assistance
effectively “leverages” the Redevelopment Agency Low and Moderate Income Housing Funds.
Leveraging is defined as the ratio of Agency subsidy to the subsidy provided from other sources. As
shown above, the recommended level of Agency assistance will provide $1 of subsidy for each $1.20
from the developer or some other outside source (leverage of 1.2: 1). Although this is a lower level
of leveraging than rental projects such as Villa Loma and Laurel Tree Apartments, staff believes it is
acceptable for a homeownership project where there are no “deep subsidy” funding programs
available to assist in production.
The Developer and Redevelopment Agency assistance have been structured in a form that is first
used for project construction financing and then for deferred financing for the actual homebuyer.
This subsidy financing (developer and Redevelopment Agency assistance) is structured as a loan
that is repaid to the Redevelopment Agency upon the future resale of the unit. Any real appreciation
is shared between the Redevelopment Agency and the homebuyer based on the initial contribution to
the purchase.
FINANCIAL ASSISTANCE DOCUMENTS
In order for the project to receive the City’s loan, the Developer is required to enter into loan and
regulatory agreements with the City of Carlsbad Redevelopment Agency. These agreements and
related documents are contained within Exhibit 2. As one of the actions set forth within this report,
the Housing and Redevelopment Commission is being asked to approve, in substantially the form
PAGE 3 OF AGENDA BILL NO. 33 I
presented, the Loan Agreement, Developer Deed of Trust and Security Agreement, Developer
Promissory Note, Borrower Promissory Note, Borrower Deed of Trust and Security Agreement and
Borrower Disclosure Statement. These documents are explained below.
Loan Agreement - this agreement .outlines the terms of the loan to be provided by the
Redevelopment Agency to Wave Crest Resorts 11, during construction of the affordable housing
project. As each individual home is sold, the developer will be credited with repayment of $70,000
of the Redevelopment Agency Loan. The loan will then be recorded against the individual
property and be recaptured when the home is sold.
Developer Promissory Note - this document is an instrument of implementation related to the
Loan Agreement described above. It is a “promise to pay” the Redevelopment Agency for the
total amount of the construction loan advanced to Wave Crest Resorts 11, for the subject project.
The note is secured by a Deed of Trust.
Developer Deed of Trust and Security Agreement - this document outlines the security for the
construction loan to be made by the City of Carlsbad Redevelopment Agency to Wave Crest
Resorts 11. The security provided for the loan includes: 1) the owner’s fee interest in the property,
2) interest in all easement, right-of-ways, and other rights used for access purposes, 3) all
buildings and improvements of every kind and description on the property, 4) interest in all
building materials and equipment on property, and 5) interest in all personal property or fixtures
on the property.
Borrower Promissory Note - this document offers the same security for the borrower’s (home)
loan as outlined above for the City’s Developer Loan Agreement. In this agreement, the borrower
is promising to repay the seller carryback loan that includes the original Redevelopment Agency
Loan of $70,000, all developer subsidies, and any contingent interest upon sale or transfer of the
property.
Borrower Deed of Trust and Security Agreement - this document outlines the security for the
loan between the City of Carlsbad Redevelopment Agency and the individual property owner.
The security provided for in the loan includes: 1) the owner’s interest in the property, 2) all
buildings and improvements of every kind and description on the property, and 3) interest in all
personal property or fixtures on the property.
Borrower Disclosure Statement - this document explains the major provisions of the
Promissory Note and Deed of Trust to help the borrower better understand the terms and
conditions of said documents.
HOUSING COMMISSION RECOMMENDATION ON FINANCIAL ASSISTANCE
At their meeting on March 18, 2003, the Hous,ing Commission reviewed the request from the
Developer for financial assistance and the draft financial assistance agreements/documents. At that
meeting, it was staffs recommendation that the financial assistance be in the amount of $105,000, or
$35,000 per unit. With past for-sale affordable housing projects, the Redevelopment Agency has
provided a maximum financial assistant amount of $15,000 per affordable unit. Staff supported a
higher assistance amount for several reasons. First, the Developer did not receive a density bonus
or any reduction in development standards with the approval of this project. From time to time, the
City will grant such incentives in lieu of providing financial assistance. Second, this is a small
development, and there are few market rate units in which the developer can recapture the costs of
subsidizing the affordable units. Finally, the Redevelopment Agency is attempting to encourage
residential development in the Redevelopment Area. This project will help meet the goals of making
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PAGE 4 OF AGENDA BILL NO. 357
the Redevelopment Area a place to work, live, shop and visit. The Affordable Housing Policy Team
(Staff) recommended to the Commission $1 5,000 per affordable unit for the housing value offered by
the project, and recommended the additional $20,000 per unit for the redevelopment value offered by
the project.
After reviewing the information presented by staff and the developer, the Housing Commission
recommended (3-1) that the Housing and Redevelopment Commission approve financial assistance
in the amount of $210,000 as requested by the developer. The Housing Commission also
recommended approval of the related loan and regulatory documents. The developer’s Proforma
stated that by receiving assistance of $210,00, it would result in a profit of 10%. Under staff’s
proposal, the developer would receive a profit of 8.7% percent. Commission felt very strongly that
the amount requested by the developer was reasonable, given the amount of risk involved in
developing the project.
SUBORDINATION OF REDEVELOPMENT AGENCY AGREEMENTS
As stated previously, the developer will seek conventional financing for the project. The financing
agreements have been written to allow for subordination of the City’s loans and agreements to the
lien of deeds of trust securing any Construction and Permanent Financing provided by a private
lender. As with similar previous projects, if required, staff will ensure that the lenders provide
commitments reasonably designed to protect the City’s investment in the event of default. These
protections include a notice of default to the Redevelopment Agency and a right of the Agency to
cure the default.
ENVIRONMENTAL REVIEW
A Negative Declaration was approved by the Housing and Redevelopment Commission for the Site
Development Plan (SDP 01 -05) on September 10, 2002. No further environmental review is required
as part of the approval of the subject financial assistance or the bond issuance.
FISCAL IMPACT:
The financial assistance in the form of a $210,000 loan will be provided from the Carlsbad
Redevelopment Agency’s Low and Moderate Income Housing Fund, which has a current
undesignated fund balance of approximately $1.49 million. California redevelopment law requires
that 20% of the revenue generated by a redevelopment agency be set aside in a Low and Moderate
Income Fund. This funding can only be used to develop housing for low and moderate income
households. Therefore, the use of Low and Moderate Income Funds to assist in the development of
three affordable units will be consistent with the requirements of redevelopment law.
EXHIBITS:
1. Housing and Redevelopment Commission Resolution No. 366 , APPROVING the financial
2. Housing Commission Staff Report dated March 18, 2003, w/attachments
3. Draft Housing Commission Minutes, dated March 18, 2003
assistance request for the Laguna Point project
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HOUSING AND REDEVELOPMENT COMMISSION RESOLUTION NO. 366
A RESOLUTION OF THE HOUSING AND REDEVELOPMENT COMMISSION OF THE CITY OF CARLSBAD, CALIFORNIA,
APPROVING A REQUEST TO PROVIDE $210,000 IN FINANCIAL ASSISTANCE FROM THE REDEVELOPMENT LOW AND MODERATE INCOME HOUSING FUND TO WAVE CREST RESORTS 11, FOR
BEDROOM CONDOMINIUM UNITS IN ORDER TO SATISFY THE
REQUIREMENTS OF THE INCLUSIONARY HOUSING ORDINANCE FOR THE LAGUNA POINT CONDOMINIUM PROJECT AND APPROVING THE RELATED LOAN AGREEMENT, DEEDS OF TRUST, PROMISSORY
NOTES, REGULATORY AGREEMENT AND BORROWER DISCLOSURE.
APPLICANT: WAVE CREST RESORTS II, LLC CASE NO: RP 0148/CT 01-13
CONSTRUCTION OF THREE, FOR-SALE, AFFORDABLE ONE
WHEREAS, the Wave Crest Resorts I1 is the developer of the twenty-one unit (21) Laguna Point
condominium project; and
WHEREAS, on April 9, 2002, the Housing and Redevelopment Commission of the City of
Carlsbad approved the twenty-one unit (21) Laguna Point condominium project; and
WHEREAS, as a requirement of the approval of the Laguna Point condominium project, the
Developer is required to construct and sell three (3) units that will be affordable to low income
households as a means to satisfy the affordable housing obligation as required by Carlsbad Municipal
Code Section 21.85 of the City’s Inclusionary Housing Ordinance; and
WHEREAS, the Developer has requested financial assistance from the Housing and
Redevelopment Commission to assist with the development of the affordable housing units; and
WHEREAS, on March 18,2003, the Housing Commission held a public meeting to consider the
developer’s request for financial assistance to construct said affordable housing units; and
WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, of all
persons desiring to be heard, said Commission considered all factors relating to the request for financial
assistance and recommend to the City Council that said assistance be granted;
WHEREAS, the Housing and Redevelopment Commission did hold a public meeting to consider
the developer’s request for financial assistance to construct said affordable housing units; and;
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WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, of all
persons designing to be heard, said Council considered all factors relating to the application and request
for financial assistance:
NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing and Redevelopment Commission of the City of Carlsbad, California, as follows:
1. The above recitations are true and correct.
2. The request for Redevelopment Agency financial assistance is consistent with the goals and objectives of the City of Carlsbad’s Housing Element, Consolidated Plan, the
Inclusionary Housing Ordinance, the Carlsbad General Plan and the Village Master Plan.
3. The request for Redevelopment Agency financial assistance will assist the affordable housing developer to construct a total of three one-bedroom affordable condominium
units which will be sold at prices which are affordable to low income households. The project, therefore, has the ability to effectively serve the AgencyKity’s housing needs
and priorities as expressed in the Housing Element, the Consolidated Plan and the Village Master Plan.
4. That based on the information provided within the Housing and Redevelopment Commission and the Housing Commission Staff Reports, the testimony presented during the public meeting of the Housing and Redevelopment Commission and Housing
Commission, and the Conditions of Approval contained herein, the Housing and Redevelopment Commission hereby APPROVES a request to provide $210,000 in financial assistance from the Carlsbad Redevelopment Agency’s Low and Moderate Income Housing Fund to Wave Crest Resorts I1 for the Laguna Point condominium
project.
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HRC Resolution No. 3 66 Page 2
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5. That the Housing and Redevelopment Commission hereby authorizes the Redevelopment Agency’s Executive Director or his designee to execute all documents related to
provision of the Redevelopment Agency assistance, including but not limited to a Loan Agreement, Note, Deed of Trust and Regulatory Agreement, in substantially the form presented to the Housing and Redevelopment Commission, subject to review and
approval by the City Attorney.
PASSED, APPROVED, AND ADOPTED at a special meeting of the Housing and
Redevelopment Commission of the City of Carlsbad, California, held on the 22nd day of April,
2003 by the following vote, to wit:
AYES: Commissioners Finnila, Kulchin, Hall
NOES: Commissioners Lewis, Packard
ABSENT: None
11 HRC Resolution No. 366
Page 3
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EXHIBIT 2
DATE: MARCH 13,200
SUBJECT: RP 01-08 - LAGUNA POINT CONDOMINIUMS - RECOMMENDATION
OF APPROVAL TO THE HOUSING AND REDEVELOPMENT
COMMISSION TO PROVIDE $105,000 IN FINANCIAL ASSISTANCE AND
APPROVAL OF THE LOAN AGREEMENT AND RELATED DOCUMENTS
FOR CONSTRUCTION OF THREE AFFORDABLE CONDO" UNITS
TO SATISFY THE REQUIREMENTS OF THE INCLUSIONARY HOUSING
ORDINANCE FOR THE LAGUNA POINT PROJECT.
I. RECOMMENDATION
That the Housing Commission ADOPT Resolution No. 2003-002 recommending APPROVAL
to the Housing and Redevelopment Commission to provide $105,000 in financial assistance from
the Redevelopment Low and Moderate Income Fund and approval of the Loan Agreement and
related documents with Wave Crest Resorts II for construction of three (3) affordable
condominium units to satisfy the inclusionary housing ordinance requirement for the Laguna
Point project.
11. PROJECT BACKGROUND
On April 9, 2002, the Housing and Redevelopment Commission approved the Laguna Point
project. The approval allows for the development of 21 condominiums on property located on
the southeast corner of Roosevelt Street and Laguna Drive. Three of units will be affordable to
low income households.
111. PROJECT DESCRIPTION
The 1.15 acre site is located on the south side of Laguna Drive between Roosevelt Street and
State Street in Land Use District 4 of the Carlsbad Village Redevelopment Area. The proposed
project consists of two levels of residential units over a fully enclosed garage. The three-story
building is broken up into two separate components, each with its own security access garage,
connected by a central lobby. Building A is located on the west side of the property, at the comer
of State Street and Laguna Drive and consists of 10 stacked flats. Building B is located on the
east side of the property at the comer of Roosevelt Street and Laguna Drive and consists of 9
two-story units. The project also includes extensive landscaping on all sides of the building,
decorative. walls along the street frontages, and a pool and spa.
RP 01-08 - LAGUNA POINT
MARCH 13,2003
PAGE 2
The project contains a wide range of units. There are 4 one-bedroom units ranging in size from
829 to 1,022 square feet, 8 two-bedroom units ranging from 1,442 to 1,657 square feet, and 9
three-bedroom units from 1,527 to 2,106 square feet. Each unit is equipped with a private deck.
The affordable units will all be one-bedroom units, varying in size from 829 to 859 square feet.
IV. DEVELOPMENT TEAM
The Developer of the project is Wave Crest Resorts II. Over the past 30 years, the Developer has
constructed several residential and commercial projects in coastal north San Diego County. The
developer’s most recent project in the City of Carlsbad is the Hilton Gardens Hotel. The
architectural firm for the project is McGeeBehun Architects. McGeeBehun Architects has
extensive experience in designing multi-family residences. The General Contractor has not yet
been determined. However, all of the firms the developer is currently interviewing have a great
deal of experience in constructing multi-family housing developments.
V. FINANCIAL ASSISTANCE
A. Cost Reasonableness
The Developer has provided a development pro forma for review by staff and the Housing
Commission (See Attachment 2). Since development costs are one of the key variables
determining the need for subsidies, ,it is important that those costs be reasonable. At
approximately $9.1 million, including the cost of the land, the average unit cost of $431,000 is
considered to be reasonable for a high-end, multi-family development within the City.
B. Undue Gain
The Developer is requesting $210,000 ($70,000 per affordable unit) in financial assistance for
this project. The City’s Housing Policy Team (staff) is recommending that the developer receive
$105,000 ($35,000 per affordable unit) in financial assistance
It is important that any financial assistance have the effect of making the units more affordable
and not creating undue gain for any party. The Developer is projecting that they will earn a profit
of $893,239, or 10% of total project costs. Under Staff‘s proposed level of assistance, the
Developer’s profit would be 8.7% of total project cost. Staff feels that the developer profit of
8.7% would be within acceptable limits for a project of this size and affordability.
With past for-sale affordable housing projects, the Redevelopment Agency. has provided a
maximum financial assistant amount of $15,000 per affordable unit. Staff is supporting the
higher assistance amount for several reasons. First, the Developer did not receive a density
bonus or any reduction in development standards with the approval of this project. From time to
time, the City will grant such incentives in lieu of providing financial assistance. Second, this is a
small development, and there are few market rate units in which the developer can recapture the
RP 01-08 - LAGUNA POINT
MARCH 13,2003
PAGE 3
costs of subsidizing the affordable units. Finally, the Redevelopment Agency is attempting to
encourage residential development in the Redevelopment Area. This project will help meet the
goals of making the Redevelopment Area a place to work, live, shop and visit. The Policy Team
agreed to recommend $15,000 per affordable unit for the housing value offered by the project,
and to recommend the additional $20,000 per unit for the redevelopment value offered by the
project.
C. Subsidy Analysis
Within the chart noted below, staff has provided an example of the per unit cost and subsidy
required for the proposed condominium product.
HOMEBUYER INCOME
80% AMI*
UNIT COST: $272,152
_____ ~~ ~
MAXIMUM PURCHASE
PRICE* * $120,000
(Including Land) ($152,152) SUBSIDY REQUIREMENT
SUBSIDY SOURCES
City Assistance $ 35,000
~~ Developer Subsidy
(Including Land)
$ 3.3 : $1 CITY LEVERAGE
$ 117,152
* AMI = Area Median Income, San Diego County ** Based upon an average maximum income of 2 persons for a one bedroom unit
As described in the chart above, the amount of recommended Redevelopment Agency assistance
effectively “leverages” the Agency’s Redevelopment Low and Moderate Income Funds.
Leveraging is defined as the ratio of Agency subsidy to the subsidy provided from other sources.
Although this is a lower level of leveraging than rental projects such as Villa Loma and Laurel
Tree Apartments, staff believes it is acceptable for a homeownership project where there are no
“deep subsidy” funding programs available to assist in production.
RP 01-08 - LAGUNA POINT
MARCH 13,2003
PAGE 4
D. Form of Assistance
Agency, as well as developer assistance will be provided in the form of funds that are first used
for construction and then for deferred financing (no payment for a specified period of time) for
the actual homebuyer. This subsidy financing is structured as a loan that will ultimately be
repaid to the Agency upon resale of the unit. Any real appreciation is shared between the Agency
and the homebuyer based on the contribution to the initial purchase. No “windfall” comes to the
subsidized buyer.
The source of the Agency’s financial assistance will be provided from the Redevelopment Low
and Moderate Income Fund. The Redevelopment Low and Moderate Income Fund currently has
a balance of $1.4 million.
E. Security
As stated above, the Agency takes a security interest in the property for the affordable housing
project. Because the amount of Agency assistance is only a portion of the total subsidy, the
Agency will have a significant “cushion” of equity protecting its actual cash loan.
F. Risk
The two major types of risk in this for-sale development are construction risk (the units do not
get built) and market risk (units do not sell). In addition, any Agency financial assistance will be
subordinated to conventional bank financing. If a problem did arise, the bank’s interest would
come ahead of the Agency’s. Although the Agency would be taking on some of the risk inherent
with development, there are several factors that mitigate these risks. First, the Agency’s financial
involvement would constitute a very small portion of the project, meaning that the other lender(s)
and developer will be motivated to insure successful completion. Second, in terms of market
risk, the Agency’s assistance will be fixed and additional subsidies required to insure the sale of
all units will be the obligation of the developer.
G. Subsidy Repayment
The three affordable units will be sold at a price which is affordable to households earning 80%
or less of the San Diego County Area Median Income (AMI). The AMI for a household with two
people is $40,850.
In similar previous developments, the initial buyer had the option of selling the property to a low
income buyer. In that instance, any Agency andor Developer subsidy would not be required to
be repaid to the Agency. The obligation to repay the subsidy would be transferred (the loan
RP 01-08 -LAGUNA POINT
MARCH 13,2003
PAGE 5
would be assumed) by the subsequent buyer. The initial buyer also had the option to sell the
property at a market price. In this situation, the Agency/developer subsidy, plus shared
appreciation would be repaid to the Agency. With this project, if the property is sold within the
first fifteen years of ownership, the seller will be required to sell the property to a low income
household. The purchase price will be limited to the annual increase to the AMI. Starting in year
16, the property may be sold at a market price, and the seller would be required to repay the
Agency/developer subsidy, plus shared appreciation.
VI. AFFORDABLE HOUSING AGREEMENT
Prior to the issuance of a final map or issuance of any building permits, the developer will be
required to enter into an Affordable Housing Agreement with the AgencyEity which binds the
developer to the specifics of the affordable housing project, including, but not limited to the size,
location and tenure of affordability of the project.
VII. LOAN AGREEMENT
A draft of the Developer Loan Agreement and related documents are provided as attachments
(Attachment 3) to this report for review by the Housing Commission. The Commission is being
requested to review and recommend approval of this agreement and related documents in
substantially the form presented and subject to final approval by the City Attorney.
VIII. SUMMARY AND STAFF RECOMMENDATION
It is the role of the Housing Commission to make financial assistance recommendations to the
City Council and Housing and Redevelopment Commission based on several considerations with
respect to affordable housing projects. These are:
The proposal's effectiveness in serving the Agency/City's needs and priorities as
expressed in the Housing Element of the General Plan and the Consolidated Plan.
The proposal's consistency with the Agency/City's affordable housing policies and
ordinances as expressed in the Housing Element and Inclusionary Housing Ordinance.
The proposal's development and operating feasibility, emphasizing the development team
capacity, financing sources and the role of the AgencyKity in providing financial
assistance or incentives.
RP 01-08 -LAGUNA POINT
MARCH 13,2003
PAGE 6
Staff recognizes that affordable homeownership units of the size proposed are costly in
comparison to other affordable housing alternatives. The financial information contained in the
proforma demonstrates the need for financial assistance to assist in the development of this
project. The project will meet an affordable housing need and is consistent with AgencyICity
policies and ordinances on affordable housing.
It is the Affordable Housing Policy Team’s (staff) recommendation that the Housing
Commission approve the resolution of support recommending to the Housing and
Redevelopment Commission the following: 1) financial assistance in the amount of $105,000;
and 2) approval of the Loan Agreement and related documents in substantially the form
presented and subject to approval by the City Attorney.
IX. ATTACHMENTS
1. Housing Commission Resolution No. 2003-002
2. Proforma
3. Draft Loan Agreement, Deed of Trust, and Regulatory Agreement.
4. Vicinity Map
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HOUSING COMMISSION RESOLUTION NO. 2003-002
THAT THE HOUSING COMMISSION RECOMMEND APPROVAL TO
THE HOUSING AND REDEVELOPMENT COMMISSION OF $210,000 IN
FINANCIAL ASSISTANCE FROM THE REDEVELOPMENT LOW AND
MODERATE INCOME FUND AND APPROVAL OF THE LOAN
AGREEMENT AND RELATED DOCUMENTS WITH WAVE CREST
RESORTS I1 FOR CONSTRUCTION OF THREE (3) AFFORDABLE
CONDOMINIUM UNITS TO SATISFY THE INCLUSIONARY HOUSING
ORDINANCE REQUREMENT FOR THE LAGUNA POINT PROJECT
APPLICANT: WAVE CREST RESORTS I1
CASE NUMBER: RPo1-08
WHEREAS, the Wave Crest Resorts I1 is the developer of the twenty-one
unit (21) Laguna Point condominium project; and
WHEREAS, on April 9,2002, the Housing and Redevelopment Commission
of the City of Carlsbad approved the twenty-one unit (21) Laguna Point
condominium project; and
WHEREAS, as a requirement of the approval of the Laguna Point
condominium project; the Developer is required to construct and sell three (3) units
that will be affordable to low income households as a means to satisfy the affordable
housing obligation as required by Carlsbad Municipal Code Section 21.85 of the
City's Inclusionary Housing Ordinance; and
WHEREAS, the Developer has requested financial assistance from the
Housing and Redevelopment Commission to assist with the development of the
affordable housing units; and
WHEREAS, the Housing Commission did, on the lSth day of March, 2003,
hold a special public meeting to consider the request for Redevelopment Agency
financial assistance for the construction of said three (3) affordable condominium
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HC RESOLUTION NO. 2003-002
PAGE 2
WHEREAS, upon hearing and considering all testimony, if any, of all
persons desiring to be heard, said Commission considered all factors relating to the
proposal to construct said affordable housing units.
NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing
Commission of the City of Carlsbad, California, as follows:
1. The above recitations are true and correct.
2. The request for Redevelopment Agency financial assistance is
consistent with the goals and objectives of the City of Carlsbad’s
Housing Element, Consolidated Plan, the Inclusionary Housing
Ordinance, the Carlsbad General Plan and the Village Master Plan.
3. The request for Redevelopment Agency financial assistance will assist
the affordable housing developer to construct a total of three one-
bedroom affordable condominium units which will be sold at prices
which are affordable to low income households. The project,
therefore, has the ability to effectively serve the AgencyICity’s
housing needs and priorities as expressed in the Housing Element, the
Consolidated Plan and the Village Master Plan.
4. That based on the information provided within the Housing
Commission Staff Report and testimony presented during the special
public meeting of the Housing Commission on MARCH 18,2003, the
Housing Commission hereby ADOPTS Resolution No. 2002-003,
recommending APPROVAL to the Housing and Redevelopment
Commission to provide up to $21 0,000 in financial assistance from
the Carlsbad Redevelopment Agency’s Low and Moderate Income
Housing Fund to Wave Crest Resorts I1 for the Laguna Point
condominium project.
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5. That the Housing Commission recommends that the Redevelopment
Agency Executive Director or his or her designee be authorized by the
Housing and Redevelopment Commission to execute all documents related to
provision of the Agency assistance, including but not limited to a Loan
Agreement, Note, Deed of Trust and Regulatory Agreement, in substantially
the form presented to the Housing Commission on March 18, 2003, and
subject to review and final approval by the City Attorney.
PASSED, APPROVED, AND ADOPTED at a special meeting of the
I
March, 2003, by the following vote, to wit: I
Housing Commission of the City of Carlsbad, California, held on the lSth day of
I
AYES:
NOES:
ABSENT:
ABSTAIN: A qq+A
EDWARD ARPEL , CHAIRPERSON
CARLSY? HOUSId6 COMMISSION
U
HOUSING AND REDEVELOPMENT DIRECTOR
11 HC RESOLUTION NO. 2003-002
PAGE 3
02/21/2003
ATTACHMENT 2
Laguna Point
Proforma
Sales Revenue
18 units-base price
View premiums
3 affordable units
Requested City subsidy
Total Sales Revenue
I costs
Land acquisition cost
Soils/Geology
Civil Eng.
Bonds & Fees
Property Taxes
Architecture
Landscape Arch.
Legal & Accounting
Structural Engineering
Mech. Engineering
Elect. Engineering
Prints
Insurance
Permits
School Fees
Marketing
. Sales Comm.
Closing Costs
General & Admin.
Finance Costs
Contractor est.*
Total
Less Contractor Contingency
Total
Profit
$ 8,595,000.00
$ 800,000.00
$ 360,000.00
$ 21 0,000.00
$ 9,965,000.00
1,725,000.00
25,200.00
46,700.00
36,141 .OO
27,838.00
231,950.00
24,990.00
68,000.00
32,300.00
12,500.00
6,090.00
250,000.00
495,371 .OO
70,205.00
162,100.00
300,000.00
100,000.00
125,000.00
420,000.00
5,167,309.00
21,000.00
$ 9,347,694.00
$ (275,933.00)
$ 9,071,761 .OO
$ 893,239.00
*See Taylor Frager estimate
dated 2/14/03
Laguna Point
03/04/2003
Affordable Unit Proforma
Sales Revenue
3 Affordable Units
Requested City Subsidy
Total Sales Revenue
Total Cost'
Developer Contribution
$360,000
$21 0,000
$570,000
$81 6,458
$246,458
*The affordable units comprise approximately 7.71% of the
project's living area and 14.26% of its parking requirement.
This proforma assumes a 9% weighted cost of the entire project
which has been estimated to be $9,071,761 as of 2/21/03.
ATTACHMENT 3
LOAN AGREEMENT
BY AND BETWEEN
The Agency Of Carlsbad
and
Wave Crest Resorts 11, Inc., a California corporation,
LOAN AGREEMENT
This Loan Agreement (the "Agreement") is entered into as of , 2003,
by and between the Carlsbad Redevelopment Agency, a body corporate and politic (the
"Agency"), and Wave Crest Resorts II, Inc., a California corporation, (the "Developer"), with
reference to the following facts:
A. Developer is the owner of certain real property in the City of Carlsbad, in the
County of San Diego, California ("Development Property") described in "Attachment A," which
is attached hereto and incorporated herein by this reference.
B. The Developer seeks to construct a total of 21 residential housing units in the City
of Carlsbad, in a development known as Laguna Point (the "Development"). In satisfaction of
certain conditions of approval in connection with the Agency 's approvals of the Development,
the Agency and the Developer executed an Affordable Housing Agreement Imposing
Restrictions on Real Property dated , 2003 (the "Affordable Housing Agreement") and
recorded as Document No.
C. Pursuant to the Affordable Housing Agreement Imposing Restrictions the
Developer agreed to sell three (3) of the housing units to be built in the Development in the
Development at affordable housing cost to lower income households (the "Affordable Units").
Pursuant to the terms of this Loan Agreement, the Developer further agrees to carry back second
mortgage financing on the Affordable Units in an amount equal to the difference between the
market rate purchase price of the Affordable Unit and the affordable price of such unit, and to
assign such second mortgage financing to the Agency.
D. Pursuant to Housing and Redevelopment Commission Resolution No. Y
the Redevelopment Agency agreed to provide financial assistance to the Developer for the
Affordable Units in the form of a $105,000 loan (the "Agency Loan"), which represents a direct
Agency subsidy amount of $35,000 per Affordable Unit. As more fully set forth herein, upon
sale of each Affordable Unit to an eligible lower income household in compliance with the
Affordable Housing Agreement, and execution of second mortgage loan documents by the
homebuyer to the Agency in compliance with the Affordable Housing Agreement, the Agency
will credit the Developer with repayment of $35,000 of the Agency Loan.
F. The Agency intends to fund the Agency Loan with moneys from the
Redevelopment Agency's Low and Moderate Income Housing Fund.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1. DEFINITIONS AND EXHIBITS
Section 1.1 Definitions. The following capitalized terms shall have the following
meanings in this Agreement;
1
(a) Affordable Housing Agreement'' shall mean the Affordable Housing
Agreement Imposing Restrictions on Real Property dated ,2003 and recorded as
Document No. in the Official Records of San Diego County,(the "Affordable
Housing Agreement").
(b) "Affordable Unit" shall mean a Unit sold to an Eligible Purchaser in
compliance with the Affordable Housing Agreement.
(c) "Agency" shall mean the Carlsbad Redevelopment Agency, a body
corporate and politic.
(d) "Agency Loan" shall mean the construction loan in the amount One
Hundred Five Thousand Dollars ($105,000) made by the Agency to the Developer pursuant to
this Agreement.
(e) "AgencyMomebuyer Second Mortgage Loan" shall mean the carryback
financing provided by the Developer to Eligible purchasers and assigned by the Developer to the
Agency. Each Agency /Homebuyer Second Mortgage Loan shall be evidenced by an Eligible
Buyer Note and secured by an Eligible Buyer Deed of Trust.
(f) "Agency Second Mortgage Loan Documents" shall mean an Eligible
Buyer Note secured by an Eligible Buyer Deed of Trust evidencing each Agency Momebuyer
Second Mortgage Loan.
(8) "Agreement" shall mean this Loan Agreement.
(h) "Bank" shall mean the maker of the Bank Loan.
(i) "Bank Loan" shall mean the construction loan obtained by the Developer
from a private institutional lender, to pay for costs of construction of the Affordable Units not
paid from the Agency Loan.
(j) "Borrower Disclosure Statement" shall mean the borrower disclosure
statement to be signed by Eligible Buyers purchasing Units.
(k) "City" shall mean the City of Carlsbad.
(1) "Default" shall have the meaning set forth in Section 5.1 below.
(m) "Developer Deed of Trust" shall mean the deed of trust to be placed on the
Development Property, in substantially the form shown in the attached "Exhibit C", securing the
Developer Note and naming the Agency as beneficiary.
(n) "Developer Note" shall mean the promissory note, in substantially the
form shown in the attached Exhibit B, in the principal amount of One Hundred Five Thousand
Dollars ($105,000), evidencing the Agency Loan.
2
(0) "Development shall mean the Development Property, the Affordable
Units, and all landscaping, roads, parking spaces, and common area appurtenant to such units.
(p) "Direct Agency Subsidy Amount" shall mean the $35,000 increment of the
Agency Loan attributable to each Affordable Unit.
(4) "Eligible Buyer" shall mean a Lower Income Household purchasing an
Affordable Unit.
(r) "Eligible Buyer Deed of Trust" shall mean the deed of trust held by the
Agency to secure payment of an Eligible Buyer Note executed and delivered to the Agency by
the Eligible Buyer of an Affordable Unit, in the form attached hereto as "Exhibit E'.
(s) "Eligible Buyer Note" shall mean the promissory note, in the form
attached hereto as "Exhibit D", executed and delivered to the Agency by an Eligible Buyer of a
Affordable Unit.
(t) "Hazardous Materials" shall have the meaning set forth in Section 4.5
below.
(u) "Hazardous Materials Claim" shall have the meaning set forth in Section
4.5 below.
(v) "Hazardous Materials Law" shall have the meaning set forth in Section 4.5
below.
(w) "Loan Documents" shall mean the following documents: (i) the Developer
Note; (ii) the Developer Deed of Trust; (iii) the Affordable Housing Agreement and (iv) this
Agreement.
(x) "Lower Income Household" shall mean a household with an annual
income, adjusted for actual household size, which is no greater than eighty percent (80%) of
Median Income.
(y) "Median Income" shall mean the median gross yearly income for
households in San Diego County, California, as adjusted for household size, as published
periodically by the United States Department of Housing and Urban Development ("HUD"). In
the event such income determinations are no longer published by HUD, or are not updated for a
period of at least eighteen (1 8) months, the Agency shall provide the Developer with other
income determinations which are reasonably similar with respect to method of calculation to
those previously published by HUD.
(z) "Parties" shall mean the Agency and the Developer.
(aa) "Primary Affordability Subsidy" shall mean the difference between the
appraised value of the property and the purchase price affordable to the particular Eligible Buyer.
3
(bb) "Property" shall mean the property on which the Developer shall construct
the Improvements, as more particularly described in the attached Exhibit A.
(cc) "Schedule of Performance" shall mean the schedule of performance set
forth in Section 4.6 of the Second Amended Affordable Housing Agreement.
(dd) "Term" shall mean the thirty-six (36) month term of the Loan,
commencing on the date of recordation of the Deed of Trust and continuing for thirty-six (36)
months thereafter.
(ee) "Transfer" shall have the meaning set forth in Section 4.9 below.
(ff) "Unit" shall mean a housing unit located within the Development.
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 Development Property
EXHIBIT B: Form of the Developer Note
EXHIBIT C: Form of the Developer Deed of Trust
EXHIBITD: Form of Eligible Buyer Note
EXHIBITE: Form of Eligible Buyer Deed of Trust
EXHIBIT F: Form of Borrower Disclosure Statement
EXHIBIT G: Development Budget
ARTICLE 2. LOAN PROVISIONS
Section 2.1 Loan.
The Agency shall loan to the Developer the Loan in the principal amount of One Hundred
Five Thousand Dollars ($105,000) for the purposes set forth in Section 2.3 of this Agreement.
The obligation of the Developer to repay the Loan shall be evidenced by the Developer Note in
substantially the form attached to this Agreement as "Exhibit By'.
Section 2.2 Interest.
The Loan shall not bear interest; provided, however, if a Default is declared by the
Agency , the Loan shall bear interest, commencing on the date of declaration of the Default
4
The Loan shall not bear interest; provided, however, if a Default is declared by the
Agency , the Loan shall bear interest, commencing on the date of declaration of the Default
(subject to applicable cure periods), at the default rate equal to the lesser of ten percent (lo%),
compounded annually or the maximum rate permitted by law.
Section 2.3 Use of Loan Funds.
The Developer shall use the Agency Loan to pay for a portion of costs associated with
development of the Affordable Units, identified as Agency -funded costs in the budget attached
hereto as “Exhibit G’. The Developer shall not use the Agency Loan funds for any other purpose
without the prior written consent of the Agency.
Section 2.4 Security.
The Developer shall secure its obligation to repay the Agency Loan, as evidenced by the
Developer Note, by signing and delivering to the Agency the Developer Deed of Trust in
substantially the form attached to this Agreement as “Exhibit C”.
Section 2.5 Disbursement of Loan Proceeds.
(a) The Agency shall have no obligation to disburse any portion of the Agency
Loan unless the following conditions have been satisfied and continue to be satisfied:
(i) The Developer has signed and delivered to the Agency the
Developer Note in substantially the form attached to this Agreement as “Exhibit B” and the
Developer Deed of Trust in substantially the form attached to this Agreement as “Exhibit C”.
(ii) The Developer Deed of Trust has been recorded against the
Development Property in the Office of the Recorder of the County of San Diego.
(iii) A title insurer reasonably acceptable to the Agency is
unconditionally and irrevocably committed to issuing a CLTA Lender’s Policy of insurance
insuring the priority of the Agency Deed of Trust in the amount of the Agency Loan, subject only
to such exceptions and exclusions as may be reasonably acceptable to the Agency and containing
such endorsements as the Agency may reasonably require. The Agency agrees to accept the deed
of trust securing the Bank Loan as a prior exception to title.
(iv) The Developer has furnished the Agency with evidence of the
insurance coverage required pursuant to Section 4.4 below.
(v) The Agency has received a good standing certificate issued by the
California Secretary of State’s office indicating that the Developer exists in good standing at the
time of the proposed disbursement, as well as a copy of a resolution of the Developer indicating
that Developer has duly authorized entry into and performance under this Agreement.
5
(vi) The Developer has certified in writing to the Agency that the
Agency Loan, together with the Bank Loan and any other financing obtained by the Developer, is
projected to be sufficient to pay all development costs of the Affordable Units.
(vii) The Developer (A) has received all general plan and zoning
approvals necessary to construct the Affordable Units, (B) has submitted to the Agency a
proposed final tract map for the Development which satisfies all tentative tract map conditions
and is reasonably acceptable to the City Engineer, together with all fees required therefor, and
(C) has submitted to the City all grading and improvement plans required for the Development ,
in a form which is reasonably acceptable to the City Engineer, together with all fees required
therefore, and (D) has received from the City temporary or interim approval to commence
grading of the Development, and (E) has received approval of building plans for the
Development by the City Building and Safety Department, pending pad certification for permit
issuance.
(viii) If Developer obtains a bank loan, then the closing of the Bank
Loan shall be completed and the Agency, the Bank, and the Developer shall have executed an
Intercreditor Agreement as provided in Section 2.6 below. Prior to such closing, the Agency and
the Developer shall cooperate in good faith with the Bank and shall make changes to the terms
and conditions of this Agreement (including the exhibits hereto) as the Bank may require, and
which the Developer and the Agency Housing and Community Development Director determine
are reasonable.
(b) Upon satisfaction of the conditions set forth in this Section 2.5(a) the Agency
shall promptly, but in no event later than five (5) business days after receiving Developer's
written request and any required documentation, disburse the Agency Loan proceeds to
Developer from time to time, but in no event more often than monthly. Disbursement requests
shall include a certified statement from Developer: (i) reaffirming the accuracy as of the date of
the disbursement request of Developer's representations and warranties set forth in Article 6
below; (ii) certifying that Borrower is not in default under the Agency Loan Documents or loan
documents for the Bank Loan; and (iii) setting forth the proposed uses of funds consistent with
Section 2.3 and Exhibit G, the amount of funds needed, and, where applicable, a copy of the bill
or invoice covering a cost incurred or to be incurred. When a disbursement is requested to pay
any contractor in connection with the Development , the written request must be accompanied by
certification by Developer that the work for which disbursement is requested has been completed
(although the Agency reserves the right to inspect the Development and make an independent
evaluation), and lien releases andor mechanics lien title insurance endorsements reasonably
acceptable to the Agency. Agency Loan proceeds utilized for hard construction costs of on-site
improvements shall be subject to a retention of ten percent (lo%), with retained proceeds to be
released upon completion of the on-site improvements.
Section 2.6 Subordination.
The Agency shall execute such documents as may be necessary to subordinate the priority of the
Agency Deed of Trust to the lien of the deed of trust securing the Bank Loan, if Developer obtains a
6
bank loan. The subordination documents shall provide the Agency with reasonably adequate notice and
cure rights to enable the Agency to avoid foreclosure of a senior deed of trust.
Section 2.7 Term and Repayment Schedule.
The Loan shall be repaid as follows:
(a) Upon sale of an Affordable Unit to an Eligible Buyer, the Developer shall carry
back second mortgage financing to the Eligible Buyer in an amount equal to the Primary Affordability
Subsidy for the Affordable Unit. The Developer shall assign its interest in such second mortgage
financing to the Agency, and shall require that the Eligible Buyer sign, at close of escrow on the
purchase of the Affordable Unit, the Borrower Disclosure Statement and the Eligible Buyer Note and the
Eligible Buyer Deed of Trust for the benefit of the Agency. Upon the execution of the Borrower
Disclosure Statement, the Eligible Buyer Note and the Eligible Buyer Deed of Trust, and the recordation
of the Eligible Buyer Deed of Trust against the Affordable Unit, the Agency shall credit the Developer
with repayment of Thirty-Five Thousand Dollars ($35,000) of the Agency Loan. The Agency and the
Developer acknowledge that the principal amount of the Eligible Buyer Note to the Agency shall be
equal to the Primary Affordability Subsidy, which includes the value to the Eligible Purchaser of the
Agency 's inclusionary housing restrictions pursuant to the Affordable Housing Agreement and will
therefore be greater in principal amount than the Direct Agency Subsidy Amount of Thirty-Five
Thousand Dollars ($35,000), but nevertheless agree that only the Direct Agency Subsidy Amount of
Thirty-Five Thousand Dollars ($35,000) shall be credited toward repayment of the Agency Loan .
(b) Upon the sooner of the date of expiration of the Term, the date of an unauthorized
Transfer of the Development, or Developer's Transfer of the last Affordable Unit still owned by the
Developer, all principal remaining unpaid or uncredited shall be due and payable.
(c) At the time of sale of an Affordable Unit to an Eligible Buyer, the Agency shall
execute a partial reconveyance of the Developer Deed of Trust to release the Affordable Unit being sold
from the lien of the Developer Deed of Trust. Upon the sale of all Affordable Units in compliance with
the Affordable Housing Agreement, the Agency shall entirely reconvey the Developer Deed of Trust.
(d) The Developer may pay the principal and any interest due the Agency under the
Developer Note prior to or in advance of the time for payment thereof as provided in the Developer
Note, without penalty. However, the provisions of this Agreement and the Affordable Housing
Agreement will be applicable to the Development even though Developer may have prepaid the
Developer Note, including the requirement that a minimum of ninety (90) of the Units shall be sold to
Eligible Buyers who execute Agency Second Mortgage Loan documents.
Section 2.8 Assumption.
Subject to Section 4.9 below, the Developer Note shall not be assumable by successors and
assigns of Developer without the prior written consent of the Agency, which consent shall not be
withheld unreasonably.
Section 2.9 Approval of Additional Financing.
7 26
The Developer shall not place any additional encumbrances on the Development Property
without the prior written consent of the Agency, which consent shall not be withheld unreasonably. The
Agency consents to encumbrances in connection with the Bank Loan, if Developer obtains a bank loan.
ARTICLE 3. CONSTRUCTION OF THE DEVELOPMENT
Section 3.1 Schedule of Performance.
The Developer shall develop the Development in compliance with the Schedule of
Performance.
Section 3.2 Construction Pursuant to Plans and Laws.
(a) The Developer shall construct the Development in conformance with the
construction drawings approved by the City in connection with approval of the building permits
for the Development.
(b) The Developer shall cause all work performed in connection with the
Development to be performed in compliance with (i) all applicable laws, ordinances, rules and
regulations of federal, state, county or municipal governments or agencies now in force or that
may be enacted hereafter, and (ii) all directions, rules and regulations of any fire marshal, health
officer, building inspector, or other officer of every governmental agency now having or hereafter
acquiring jurisdiction. The work shall proceed only after procurement of each permit, license, or
other authorization that may be required by any governmental agency having jurisdiction, and the
Developer shall be responsible to the Agency for the procurement and maintenance thereof, as
may be required of the Developer and all entities engaged in work on the Development.
(c) All construction work and professional services shall be performed by
persons or entities licensed or otherwise authorized to perform the applicable construction work
or service in the State of California.
(d) The Developer shall be solely responsible for all aspects of the Developer's
conduct in connection with the Development, including (but not limited to) the quality and
suitability of the construction drawings, the supervision of construction work, and the
qualifications, financial condition, and performance of all architects, engineers, contractors,
subcontractors, suppliers, consultants, and property managers.. Any review or inspection
undertaken by the Agency with reference to the Development is solely for the purpose of
determining whether the Developer is properly discharging its obligations to the Agency, and
should not be relied upon by the Developer or by any third parties as a warranty or representation
by the Agency as to the quality of the design or construction of the Development.
Section 3.3 Eaual Opportunitv.
During the construction of the Development there shall be no discrimination on the basis
of race, color, creed, religion, age, disability, sex, sexual orientation, marital status, national
8 27
origin, or ancestry, in the hiring, firing, promoting, or demoting of any person engaged in the
construction work.
Section 3.4 Mechanics Liens, Stop Notices, and Notices of Completion.
(a) If any claim of lien is filed against the Development Property or the
Development or a stop notice affecting the Agency Loan is served on the Agency or any other
lender or other third party in connection with the Development, then the Developer shall, within
twenty (20) days after such filing or service, either pay and fully discharge the lien or stop notice,
effect the release of such lien or stop notice by delivering to the Agency a surety bond in
sufficient form and amount, or provide the Agency with other assurance satisfactory to the
Agency that the claim of lien or stop notice will be paid or discharged.
(b) If the Developer fails to discharge any lien, encumbrance, charge, or claim
in the manner required in Section 3.4(a), then in addition to any other right or remedy, the
Agency may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or
claim at the Developer's expense. Alternately, the Agency may require the Developer to
immediately deposit with the Agency the amount necessary to satisfy such lien or claim and any
costs, pending resolution thereof. The Agency may use such deposit to satisfy any claim or lien
that is adversely determined against the Developer.
(c) The Developer shall file a valid notice of cessation or notice of completion
upon cessation of construction on the Development for a continuous period of thirty (30) days or
more, and take all other reasonable steps to forestall the assertion of claims or lien against the
Development. The Agency may (but has no obligation to) record any notices of completion or
cessation of labor, or any other notice that the Agency deems necessary or desirable to protect its
interest in the Development.
ARTICLE 4. REQUIREMENTS DURING AND AFTER CONSTRUCTION
Section 4.1 Information.
The Developer shall promptly provide any information reasonably requested by the
Agency in connection with the Development.
Section 4.2 Records.
The Developer shall maintain complete, accurate, and current records pertaining to the
Development for a period of five (5) years after the creation of such records, and shall permit any
duly authorized representative of the Agency to inspect and copy records, including records
pertaining to income and household size of purchasers of the Affordable Units. Such records
shall include records regarding the occupancy and sales price of the Affordable Units, as well as
records that accurately and fully show the date, amount, purpose, and payee of all expenditures
drawn from Loan funds. Such records shall also include all invoices, receipts, and other
documents related to expenditures from the Loan funds. Records shall be maintained accurately
and shall be kept current.
9 28
Section 4.3 Inspections.
The Developer shall permit and facilitate, and shall require its contractors to permit and
facilitate, observation and inspection at the Development by the Agency and by public authorities
during reasonable business hours and upon reasonable advance notice for the purposes of
determining compliance with this Agreement.
Section 4.4 Insurance.
Throughout the period of Developer's ownership of any portion of the Development,
Developer shall maintain the following insurance policies:
(a) Worker's Compensation insurance, including Employer's Liability
coverage, with limits not less than One Million Dollars ($1,000,000) each accident, if required by
law or if the Developer has employees.
(b) Comprehensive General Liability insurance with limits not less than Five
Million Dollars ($5,000,000) each occurrence combined single limit for Bodily Injury and
Property Damage, including coverages for Contractual Liability, Personal Injury, Broadfonn
Property Damage, 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 coverages for owned, non-owned and hired vehicles, as applicable.
However, if the Developer does not own or lease vehicles for purposes of this Agreement, then
no automobile insurance shall be required.
(d) Property insurance covering all Development real and personal (non-
expendable) property, in form appropriate for the nature of such property, covering all risks of
loss, including flood (if the Development Property is located within a flood zone), for 100% of
the replacement value, with deductible, if any, acceptable to the Agency, naming the Agency as a
Loss Payee, as its interests may appear.
(e) The Developer shall cause any general contractor or agent worlung on the
Development under direct contract with the Developer to maintain insurance of the types and in
at least the minimum amounts described in Sections 4.4(a), (b) and (c), and shall require that
such insurance meet all of the general requirements of Sections 4.4(f), (g), and (h). Liability and
Comprehensive Automobile Liability insurance to be maintained by such general contractor and
agents pursuant to this subsection shall name as additional insureds the Agency, its officers,
agents, employees, members of the Redevelopment Agency, the Housing and Redevelopment
Commission and the City Council. The Developer shall cause the conditions in this Section
4.4(e) to continue to be satisfied at all times after the disbursement of any Agency Loan funds
and before sale of all Affordable Units in compliance with the Affordable Housing Agreement.
(f) The required insurance shall be provided under an occurrence form, and
Developer shall maintain such coverage continuously until all Affordable Units are sold.
10
(8) Comprehensive General Liability, Comprehensive Automobile Liability
and Property insurance policies shall be endorsed to name as additional insured the Agency and
its officers, agents, and employees, as well members of the Redevelopment Agency, the Housing
and Redevelopment Commission and the City Council.
(h) All policies and bonds shall be endorsed to provide thirty (30) days prior
written notice of cancellation, reduction in coverage, or intent not to renew to the address
established for notices to the Agency.
Section 4.5 Hazardous Materials.
(a) The Developer shall keep and maintain the Development in compliance
with, and shall not cause or permit the Development to be in violation of, any federal, state or
local laws, ordinances or regulations relating to industrial hygiene or to the environmental
conditions on, under or about the Development including, but not limited to, soil and ground
water conditions. The Developer shall not use, generate, manufacture, store or dispose of on,
under, or about the Development or transport to or from the Development any flammable
explosives, radioactive materials, hazardous wastes, toxic substances or related materials,
including without limitation, any substances defined as or included in the definition of
"hazardous substances, "hazardous wastes," "hazardous materials," or "toxic substances" under
any applicable federal or state laws or regulations (collectively referred to hereinafter as
"Hazardous Materials") except such of the foregoing as may be customarily kept and used in and
about single family residential property.
(b) The Developer shall immediately advise the Agency in writing if at any
time it receives written notice of (i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against the Developer or
the Development pursuant to any applicable federal, state or local laws, ordinances, or
regulations relating to any Hazardous Materials ("Hazardous Materials Law"); (ii) all claims
made or threatened by any third party against the Developer or the Development relating to
damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous
Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as
"Hazardous Materials Claims"); and (iii) the Developer's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the Development that could cause
the Development or any part thereof to be classified as "border-zone property" under California
Health and Safety Code Sections 25220 et seq. or any regulation adopted in accordance
therewith, or to be otherwise subject to any restrictions on the ownership, occupancy,
transferability or use of the Development Property under any Hazardous Materials Law.
(c) The Agency shall have the right to join and participate in, as a party if it so
elects, any legal proceedings or actions initiated in connection with any Hazardous Materials
Claims and to have its reasonable attorneys' fees in connection therewith paid by the Developer.
The Developer shall indemnify, defend (with counsel reasonably chosen by the Agency, at the
Agency Is option), and hold harmless the Agency and its officers, Housing and Redevelopment
Commissioners, councilmembers, employees, and agents from and against any loss, damage,
11
cost, expense, or liability directly or indirectly arising out of or attributable to the use, generation,
storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on,
under, or about the Development , including (without limitation): (i) all foreseeable
consequential damages; (ii) the costs of any required or necessary repair, cleanup, or
detoxification of the Development and the preparation and implementation of any closure,
remedial, or other required plans; and (iii) all reasonable costs and expenses incurred by the
Agency in connection with clauses (i) and (ii), including (but not limited to) reasonable
attorneys' fees. This paragraph shall survive termination of this Agreement.
(d) Without the Agency 's prior written consent, which shall not be
unreasonably withheld, the Developer shall not take any remedial action in response to the
presence of any Hazardous Materials on, under or about the Development, nor enter into any
settlement agreement, consent decree, or other compromise in respect to any Hazardous Material
Claims, which remedial action, settlement, consent decree or compromise might, in the Agency 's
reasonable judgment, impair the value of the Agency 's security hereunder. However, the Agency
's prior consent shall not be necessary if the presence of Hazardous Materials on, under, or about
the Development either poses an immediate threat to the health, safety or welfare of any
individual, or is of such a nature that an immediate remedial response is necessary and it is not
reasonably possible to obtain the Agency 's consent before taking such action, provided that in
such event the Developer shall notify the Agency as soon as practicable of any action so taken.
The Agency shall not withhold its consent, where consent is required hereunder, if either (i) a
particular remedial action is ordered by a court of competent jurisdiction, (ii) the Developer will
or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action;
or (iii) the Developer establishes to the reasonable satisfaction of the Agency that there is no
reasonable alternative to such remedial action which would result in less impairment of the
Agency Is security hereunder.
(e) The Developer acknowledges and agrees that (i) this Section 4.5 is
intended as the Agency 's written request for information (and the Developer's response)
concerning the environmental condition of the Development as required by California Code of
Civil Procedure Section 726.5, and (ii) each representation and warranty in this Agreement
(together with any indemnity obligation applicable to a breach of or such representation and
warranty) with respect to the environmental condition of the Development is intended by the
Parties to be an "environmental provision" for purposes of California Code of Civil Procedure
Section 736.
Section 4.6 Fees and Taxes.
During the period of ownership of the Development by the Developer, the Developer
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 Development. or portion
thereof owned by the Developer, and shall pay such charges prior to delinquency. However, the
Developer 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 Agency, the Developer deposits with the Agency any funds or other forms of
12 31
assurance that the Agency in good faith from time to time determines appropriate to protect the
Agency from the consequences of the contest being unsuccessful.
Section 4.7 Nondiscrimination.
The Developer covenants by and for itself and any person subject to legal contract by the
Developer 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, age,
disability, sex, sexual orientation, marital status, ancestry or national origin in the sale, transfer,
use, occupancy, or enjoyment of any Affordable 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. The foregoing covenant shall run with the land.
Section 4.8 Notice of Litigation.
During the period of ownership of the Development by the Developer, the Developer
shall promptly notify the Agency in writing of any litigation affecting the Developer or the
Development and of any claims or disputes that involve a material risk of litigation.
Section 4.9 Transfers.
(a) The qualifications and identity of the Developer are of particular concern
to the Agency. It is because of those qualifications and identity that the Agency has entered into
this Agreement with the Developer. The Agency shall have no obligation to perform hereunder
if any voluntary or involuntary successor in interest of the Developer shall acquire any rights or
powers under this Agreement except as expressly set forth herein. The Agency may terminate
this Agreement upon the occurrence of a Transfer prohibited by subsection (b). The Agency
shall approve a proposed Transfer if the Developer is transferring the entire Development
Property to the transferee and the Agency reasonably determines that the proposed transferee
possesses the qualifications, development experience and financial capability necessary and
adequate to fulfill the obligations undertaken in this Agreement and the Affordable Housing
Agreement by the Developer.
(b) No Transfer shall be permitted prior to repayment of the Agency Loan in
full or prior to sale of all Affordable Units in compliance with the Affordable Housing
Agreement without the prior written consent of the Agency, which the Agency shall grant or
withhold in accordance with the standard set forth in subsection (a) above. Pursuant to Section
2.8(b) above, the Agency Loan shall automatically accelerate and be due in full upon any
Transfer for which prior written Agency approval has not been obtained.
(c) For purposes of this Agreement, "Transfer" shall mean, except as excluded
by the provisions of subsection (d), any sale, assignment, or transfer, whether voluntary or
involuntary, of (i) any rights and/or duties under this Agreement, and/or (ii) any interest in the
Development, including (but not limited to) a fee simple interest, a joint tenancy interest, a life
estate, a partnership interest, a leasehold interest, a security interest, or an interest evidenced by a
13 32
land contract by which possession of the Development is transferred and the Developer retains
title.
(d) The term "Transfer" shall exclude the following transfers that would
otherwise be Transfers under subsection (a):
(i) the assignment of this Agreement (and the transfer of the
Development ) to a corporation controlled by the Developer, or to a partnership or joint venture
in which the Developer, or an entity controlled by the Developer, is a general partner and is in
control thereof;
(ii) the admission of additional new general or limited partners, or the
substitution or deletion of partners to any partnership or joint venture set forth in (i) above so
long as the Developer, or an entity controlled by the Developer, continues in control;
(iii) the granting of easements, licenses or permits to facilitate the
development of the Development ;
(iv) the granting of any security interest in the Development or other
financing arrangement for the purposes of securing the Bank Loan or other financing or the
transfer of such security interests to another entity;
(v) the transfer or conveyance of all or any portion of the Development
by foreclosure of a mortgage or deed of trust or by transfer in-lieu-of foreclosure thereof, and a
subsequent transfer or conveyance of all or any portion of the Development to a third party
transferee.
(vi) the sale or transfer of individual Units in the Development to
homebuyers in compliance with the Affordable Housing Agreement.
(e) In the absence of specific written agreement by the Agency , or except to a
transferee otherwise authorized in this Agreement (whereupon the transferor-assignor shall be
relieved of its obligations hereunder), no Transfer (whether authorized or unauthorized) shall be
deemed to relieve the Developer or any other party of any obligations under this Agreement.
Section 4.10 Sale of Units.
All Units in the Development shall be sold to Eligible Buyers in compliance with the
Affordable Housing Agreement. The Developer shall grant preference in the sale of Units to
persons who have lived for sixty (60) days in the City of Carlsbad or who are employed in the
City of Carlsbad.
ARTICLE 5. DEFAULT
Section 5.1 Events of Default.
Each of the following shall constitute a "Default" by Developer under this Agreement:
14 33
(a) Failure to Make Payment. Failure to make prompt payments of the
principal on the Developer Note when due;
(b) Breach of Covenants. Failure by the Developer to duly perform, comply
with, or observe any of the conditions, terms, or covenants of any of the Loan Documents (other
than a monetary default as described in paragraph (a) above). If such a non-monetary event of
default occurs under the terms of the Loan Documents, unless automatic acceleration is provided
for hereunder, prior to exercising any remedies thereunder, the Agency shall give the Developer
written notice of such default and the Developer shall have thirty (30) days (unless an alternative
time period is specified hereunder, in which event such alternate cure period shall apply) to effect
a cure prior to exercise of remedies by the Agency.
(c) Insolvencv. A court having jurisdiction shall have made or entered any
decree or order (i) adjudging the Developer to be bankrupt or insolvent, (ii) approving as
properly filed a petition seeking reorganization of the Developer or seeking any arrangement for
the Developer under the bankruptcy law or any other applicable debtor's relief law or statute of
the United States or any state or other jurisdiction, (iii) appointing a receiver, trustee, liquidator,
or assignee of the Developer in bankruptcy or insolvency or for any of their properties, or (iv)
directing the winding up or liquidation of the Developer, or the Developer shall have admitted in
writing its inability to pay its debts as they fall due or shall have voluntarily submitted to or filed
a petition seeking any decree or order of the nature described in clauses (i) to (iv), inclusive. The
occurrence of any of the events described in clauses (i) to (iv) with regard to Developer's
managing member shall also be a Default hereunder. The occurrence of any of the events of
Default in this Section 5.l(c) shall act to accelerate automatically, without the need for any notice
or action by the Agency , the indebtedness evidenced by the Developer Note.
(d) Assignment; Attachment. The Developer, by reason of a default under its
obligations to creditors, has 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; provided that
Developer shall have sixty (60) days to cure any sequestration, attachment, or execution not
consented to by Developer. The occurrence of any of the events of Default in this Section 5.l(d)
shall act to accelerate automatically, without the need for any notice or action by the Agency, the
indebtedness evidenced by the Developer Note.
(e) SusDension; Termination. The Developer shall have voluntarily
suspended its business or, if Developer is a partnership, the partnership shall have been dissolved
or terminated.
(f) Liens on the Development. There shall be filed any claim of lien (other
than the deed(s) of trust and other security instruments in connection with the Bank Loan lien
approved in writing by the Agency) against the Development or any part thereof, or any interest
or right made appurtenant thereto, or the service of any notice to withhold proceeds of the
Agency Loan, and such claim of lien or notices to withhold is maintained for a period of forty-
five (45) days without discharge or satisfaction thereof or provision therefor satisfactory to the
Agency.
15
(g) Condemnation. The condemnation, seizure, or appropriation of all or, in
the opinion of the Agency, a substantial part of the Development.
(h) Defaults Under Other Loans. Any default declared by the lender under any
loan document related to the Bank Loan or other loan secured by the Development Property,
which default is not cured by the Developer following the expiration of applicable notice and
cure periods under the Bank Loan Documents or other loan document, shall act to accelerate
automatically, without the need for any notice or action by the Agency, the indebtedness
evidenced by the Developer Note.
(i) Breach of Representation. Any representation or warranty of Developer to
the Agency was materially incorrect when made.
Section 5.2 Remedies.
The occurrence of any Default will either at the option of the Agency, or automatically
where so specified, relieve the Agency of any obligation to make or continue the Agency Loan
and shall give the Agency 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 Developer Note. The Agency shall have the right to cause
all indebtedness of the Developer to the Agency under this Agreement and the Developer Note to
become immediately due and payable, with interest accruing on the principal amount from the
date of acceleration to the date of repayment at an interest rate equal to the lesser of ten percent
(10%) or the maximum rate permitted by law. The Developer waives all right to presentment,
demand, protest or notice of protest or dishonor. The Agency may proceed to enforce payment of
the indebtedness and to exercise any or all rights afforded to the Agency as a creditor and secured
party under the law including the Uniform Commercial Code, including foreclosure under the
Agency Deed of Trust. The Developer shall be liable to pay the Agency on demand all expenses,
costs and fees (including, without limitation, attorney's fees and expenses) paid or incurred by the
Agency in connection with the collection of the Agency Loan and the preservation, maintenance,
protection, sale, or other disposition of the security given for the Loan.
(b) Specific Performance. The Agency shall have the right to mandamus or
other suit, action or proceeding at law or in equity to require the Developer to perform its
obligations and covenants under the Loan Documents or to enjoin acts on things which may be
unlawful or in violation of the provisions of the Loan Documents.
(c) Right to Cure at the Developer's Expense. The Agency shall have the right
to cure any monetary default by the Developer under a loan other than the Agency Loan. The
Developer shall reimburse the Agency for any funds advanced by the Agency to cure a monetary
default by Developer upon demand therefor, together with interest thereon at the rate of interest
equal to the rate of interest on the Bank Loan from the date of expenditure until the date of
reimbursement.
16 35
Section 5.3 Remedies Cumulative.
No right, power, or remedy given to the Agency 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 Agency by the terms of any such instrument, or by any statute or
otherwise against the Developer and any other person. Neither the failure nor any delay on the
part of the Agency to exercise any such rights and remedies shall operate as a waiver thereof, nor
shall any single or partial exercise by the Agency of any such right or remedy preclude any other
or further exercise of such right or remedy, oi any other right or remedy.
Section 5.4 Waiver of Terms and Conditions.
The Agency 's Housing and Redevelopment Director may at his or her discretion waive in
writing any of the obligations of the Developer under this Agreement, without the Developer
completing an amendment to this Agreement. No waiver of any default or breach by Developer
hereunder shall be implied from any omission by the Agency to take action on account of such
default if such default persists or is repeated, and no express waiver shall affect any default other
than the default specified in the waiver, and such waiver shall be operative only for the time and
to the extent therein stated. Waivers of any covenant, term, or condition contained herein shall
not be construed as a waiver of any subsequent breach of the same covenant, term, or condition.
The consent or approval by the Agency to or of any act by the Developer requiring further
consent or approval shall not be deemed to waive or render unnecessary the consent or approval
to or of any subsequent similar act. The exercise of any right, power, or remedy shall in no event
constitute a cure or a waiver of any default under this Agreement or the Loan Documents, nor
shall it invalidate any act done pursuant to notice of default, or prejudice the Agency in the
exercise of any right, power, or remedy hereunder or under the Loan Documents, unless in the
exercise of any such right, power, or remedy all obligations of the Developer to Agency are paid
and discharged in full.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF DEVELOPER
Section 6.1 Representations and Warranties.
Developer hereby represents and warrants to the Agency as follows:
(a) Organization. Developer is duly organized, validly existing and in good
standing under the laws of the State of California and has the power and authority to own its
property and carry on its business as now being conducted.
(b) Authority of Developer. Developer 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 Agency Loan Documents and all other documents or
instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement,
and to perform and observe the terms and provisions of all of the above.
17
(c) Authority of Persons Executing Documents. This Agreement and the
Loan Documents and all other documents or instruments executed and delivered, or to be
executed and delivered, pursuant to this Agreement have been executed and delivered by persons
who are duly authorized to execute and deliver the same for and on behalf of Developer, and all
actions required under Developer's organizational documents and applicable governing law for
the authorization, execution, delivery and performance of this Agreement and the Loan
Documents and all other documents or instruments executed and delivered, or to be executed and
delivered, pursuant to this Agreement, have been duly taken.
(d) Valid Binding Agreements. This Agreement and the Loan Documents and
all other documents or instruments which have been executed and delivered pursuant to or in
connection with this Agreement constitute or, if not yet executed or delivered, will when so
executed and delivered constitute, legal, valid and binding obligations of Developer enforceable
against it in accordance with their respective terms.
(e) No Breach of Law or Agreement. Neither the execution nor delivery of
this Agreement and the Loan Documents or of any other documents or instruments executed and
delivered, or to be executed or delivered, pursuant to this Agreement, nor the performance of any
provision, condition, covenant or other term hereof or thereof, will conflict with or result in a
breach of any statute, rule or regulation, or any judgment, decree or order of any court, board,
commission or agency whatsoever binding on Developer, or any provision of the organizational
documents of Developer, or will conflict with or constitute a breach of or a default under any
agreement to which Developer is a party, or will result in the creation or imposition of any lien
upon any assets or property of Developer, other than liens established pursuant hereto.
(f) Pending Proceedings. Developer is not in default under any law or
regulation or under any order of any court, board, commission or agency whatsoever, and there
are no claims, actions, suits or proceedings pending or, to the knowledge of Developer,
threatened against or affecting Developer or the Development, at law or in equity, before or by
any court, board, commission or agency whatsoever which might, if determined adversely to
Developer, materially affect Developer's ability to repay the Agency Loan or impair the security
to be given to the Agency pursuant hereto.
(g) Financial Statements. The financial statements of Developer and other
financial data and information furnished by Developer to the Agency 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 Developer from that shown by such financial
statements and other data and information.
(h) Sufficient Funds. Developer holds sufficient funds and/or binding
commitments for sufficient funds to complete the construction of Development in accordance
with the plans and specifications approved by the Agency.
ARTICLE 7. GENERAL PROVISIONS
Section 7.1 RelationshiD of Parties.
18 37
Nothing contained in this Agreement shall be interpreted or understood by any of the
Parties, or by any third persons, as creating the relationship of employer and employee, principal
and agent, limited or general partnership, or joint venture between the Agency and the Developer
or its agents, employees or contractors, and the Developer 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. The Developer has
and retains the right to exercise full control of employment, direction, compensation, and
discharge of all persons assisting in the performance of services under the Agreement. In regards
to the construction of the Improvements and sale of the Units, the Developer shall be solely
responsible for all matters relating to payment of its employees, including compliance with
Social Security, withholding, and all other laws and regulations governing such matters, and shall
include requirements in each contract that contractors shall be solely responsible for similar
matters relating to their employees. The Developer shall be solely responsible for its own acts
and those of its agents and employees.
Section 7.2 No Claims.
Nothing contained in this Agreement shall create or justify any claim against the Agency
by any person that the Developer may have employed or with whom the Developer may have
contracted relative to the purchase of materials, supplies or equipment, or the furnishing or the
performance of any work or services with respect to the construction or sale of the Affordable
Units, and the Developer shall include similar requirements in any contracts entered into for the
construction or sale of the Affordable Units.
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 Indemnification.
Developer shall indemnify, defend, and hold harmless (without limit as to amount)
Agency and its elected officials, officers, employees and agents in their official capaAgency
(hereinafter collectively referred to as "Indemnitees"), and any of them, from and against all loss,
all risk of loss and all damage (including expense and attorneys fees) sustained or incurred
because of or by reason of any and all claims, demands, suits, actions, judgments and executions
for damages of any and every kind and by whomever and whenever made of obtained, allegedly
caused by, arising out of or relating in any manner to Developer's actions or defaults pursuant to
this
Agreement, or construction of the Development and sale of any Units, and shall protect and
defend Indemnitees, and any of them with respect thereto. The provisions of this Section 7.4
shall survive the expiration of the Term or the termination of this Agreement.
Section 7.5 Non-Liability of Agency Officials, Emdoyees and Agents.
19 38
No member, official, employee or agent of the Agency shall be personally liable to the
Developer in the event of any default or breach by the Agency or for any amount that may
become due to the Developer or its successor or on any obligation under the terms of this
Agreement.
Section 7.6 No Third Party Beneficiaries.
There shall be no third party beneficiaries to this Agreement.
Section 7.7 Discretion Retained By Agency.
The Agency 's execution of this Agreement in no way limits the discretion ,of the Agency
in the permit and approval process in connection with the Development.
Section 7.8 Notices, Demands and Communications.
Formal notices, demands, and communications between the Parties shall be sufficiently
given if .and shall not be deemed given unless dispatched by registered or certified mail, postage
prepaid, return receipt requested, or delivered by express delivery service, return receipt
requested, or delivered personally, to the principal office of the Parties as follows:
Agency :
Carlsbad Redevelopment Agency
Housing and Community Development Department
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008-2389
Attention: Housing and Redevelopment Director
Developer:
Wave Crest Resorts II
Attn: Bill Canepa
829 Second Street, ##A
Encinitas, CA 92024
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 7.8. Receipt shall be deemed to have occurred on the date shown on a written
receipt as the date of delivery or refusal of delivery (or attempted delivery if undeliverable).
Section 7.9 Applicable Law.
This Agreement shall be governed by California law.
Section 7.10 Parties Bound; Covenants Running with the Land.
20 39
Except as otherwise limited herein, the provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties and their heirs, executors, administrators, legal
representatives, successors, and assigns. This Agreement is intended to run with the land and
shall bind the Developer and its successors and assigns in the Development Property and the
Development for the entire Term, and the benefit hereof shall inure to the benefit of the Agency
and its successors and assigns.
Section 7.1 1 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 7.12 Force Maieure.
In addition to specific provisions of this Agreement, performance by either Party shall not
be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lock-
outs; riots; floods; earthquakes; fires; quarantine restrictions; freight embargoes; lack of
transportation; third party lawsuit; or court order; or any other similar causes beyond the control
or without the fault of the Party claiming an extension of time to perform (but not including any
inability by Developer to secure financing). An extension of time for any such cause shall be for
the period of the enforced delay and shall commence to run from the time of the commencement
of the cause. If, however, notice by the party claiming such extension is sent to the other party
more than thirty (30) days after the commencement of the cause, the period shall commence to
run only thirty (30) days prior to the giving of such notice.
Section 7.13 Approvals.
Whenever this Agreement calls for Agency approval, consent, or waiver, the written
approval, consent, or waiver of the Agency Is Housing and Redevelopment Director shall
constitute the approval, consent, or waiver of the Agency, without further authorization required
from the Housing and Redevelopment Commission. The Agency hereby authorizes the Agency's
Housing and Redevelopment Director to deliver such approvals or consents as are required by
this Agreement, or to waive requirements under this Agreement, on behalf of the Agency.
Section 7.14 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 7.15 Entire Understandinp of the Parties.
This Agreement constitutes the entire understanding and agreement of the Parties with
respect to the Loan.
21
Section 7.16 Multiple Originals; Counterpart.
This Agreement may be executed in multiple originals, each of which is deemed to be an
original, and may be signed in counterparts.
Section 7.17 Time of the Essence.
Time is of the essence in this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
above written.
DEVELOPER: AGENCY :
Wave Crest Resorts II, Inc., a California Carlsbad Redevelopment Agency, a body corporate
and politic
Name: Bill Canepa
Its: President
(print or type)
By:
By:
RAYMOND R. PATCHETT
Agency Manager
Name:
(print or type)
Approved as to form:
By:
RONALD R. BALL,
Agency Attorney
(Proper notarial acknowledgment of execution by Developer must be attached)
Chairman, president or vice-president and secretary, assistant secretary, CFO or assistant treasurer must sign for corporations. Otherwise, the corporation must attach a resolution certified by the secretary
or assistant secretary under corporate seal empowering the officer(s) signing to bind the corporation.)
22
STATE OF CALIFORNIA )
COUNTY OF 1 >ss
On ,2003, before me, the undersigned, a Notary Public, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument, and acknowledged to me that he/she/they executed the same in his/her/their
authorized capaAgency (ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
STATE OF CALIFORNIA )
COUNTY OF 1 >ss
On ,2000, before me, the undersigned, a Notary Public, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument, and acknowledged to me that he/she/they executed the same in his/her/their
authorized capaAgency (ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
23
EXHIBIT A
LEGAL DESCRIPTION OF THE DEVELOPMENT PROPERTY
Y3 101 0\03\111527.3 A- 1
101 0\03\111527.3
EXHIBIT B
FORM OF THE DEVELOPER NOTE
B- 1
EXHIBIT C
FORM OF THE DEVELOPER DEED OF TRUST
101 0\03\111527.3 c- 1
EXHIBIT D
FORM OF ELIGIBLE BUYER NOTE
1010\03\111527.3 -1-
EXHIBIT E
FORM OF ELIGIBLE BUYER DEED OF TRUST
1010\03\111527.3 2 47
EXHIBITF
FORM OF BORROWER DISCLOSURE STATEMENT
101 0\03\111527.3 3
EXHIBIT G
DEVELOPMENT BUDGET
4? 1010\03\?11527.3 4
TABLE OF CONTENTS .
Section 2.1
Section 2.2
Section 2.3
Section 2.4
Section 2.5
Section 2.6
Section 2.7
Section 2.8
Section 2.9
Section 2.10
Loan ............................................................................................................. 4
Interest ......................................................................................................... 4
Use of Loan Funds ...................................................................................... 5
Security ........................................................................................................ 5
Disbursement of Loan Proceeds .................................................................. 5
Intercreditor Agreement ............................ Error! Bookmark not defined .
Subordination ............................................ Error! Bookmark not defined .
Term and Repayment Schedule ................. Error! Bookmark not defined .
Assumption ............................................... Error! Bookmark not defined .
Approval of Additional Financing ............ Error! Bookmark not defined .
ARTICLE 3 . CONSTRUCTION OF THE DEVELOPMENT ..................................................... 8
Section 3.1 Schedule of Performance ............................................................................. 8
Section 3.2 Construction Pursuant to Plans and Laws ................................................... 8
Section 3.3 Equal Opportunity ....................................................................................... 8
Section 3.4 Mechanics Liens. Stop Notices. and Notices of Completion ...................... 9
ARTICLE 4 . REQUIREMENTS DURING AND AFTER CONSTRUCTION ........................... 9
Section 4.1 Information .................................................................................................. 9
Section 4.2 Records ........................................................................................................ 9
Section 4.3 Inspections ................................................................................................. 10
Section 4.4 Insurance ................................................................................................... 10
101 0\03\111527.3 -1- 50
TABLE OF CONTENTS
(continued)
Section 4.5
Section 4.6
Section 4.7
Section 4.8
Section 4.9
Section 4.10
Hazardous Materials .................................................................................. 11
Fees and Taxes .......................................................................................... 12
.... Nondlscnmnatlon ..................................................................................... 13
Notice of Litigation ................................................................................... 13
Transfers .................................................................................................... 13
Sale of Units .............................................................................................. 14
ARTICLE 5 . DEFAULT ............................................................................................................. 14
Section 5.1 Events of Default ....................................................................................... 14
Section 5.2 Remedies ................................................................................................... 16
Section 5.3 Remedies Cumulative ............................................................................... 17
Section 5.4 Waiver of Terms and Conditions .............................................................. 17
ARTICLE 6 . REPRESENTATIONS AND WARRANTIES OF DEVELOPER ....................... 17
Section 6.1 Representations and Warranties ................................................................ 17
ARTICLE 7 . GENERAL PROVISIONS .................................................................................... 18
Section 7.1
Section 7.2
Section 7.3
Section 7.4
Section 7.5
Section 7.6
Section 7.7
Section 7.8
Section 7.9
Section 7.10
Relationship of Parties .............................................................................. 18
No Claims .................................................................................................. 19
Amendments .............................................................................................. 19
Indemnification ......................................................................................... 19
Non-Liability of Agency Officials. Employees and Agents ..................... 19
No Third Party Beneficiaries ..................................................................... 20
Discretion Retained By Agency ............................................................... 20
Notices. Demands and Communications .................................................. 20
Applicable Law ......................................................................................... 20
Parties Bound; Covenants Running with the Land ................................... 20
101 0\03\111527.3 11 ..
TABLE OF CONTENTS
(continued)
Section 7.1 1
Section 7.12
Section 7.13
Section 7.14
Section 7.15
Section 7.16
Section 7.17
Section 7.18
Attorneys' Fees .......................................................................................... 21
Severability ................................................................................................ 21
Force Majeure ............................................................................................ 21
Approvals .................................................................................................. 21
..
Title of Parts and Sections ......................................................................... 21
Entire Understanding of the Parties ........................................................... 21
Multiple Ongmals; Counterpart ................................................................ 22
Time of the Essence .................................................................................. 22
..
1010\03\111527.3 ... 111
$105,000
PROMISSORY NOTE
Carlsbad, California
,2003
FOR VALUE RECEIVED, the undersigned Wave Crest Resorts II, Inc., a California
corporation, (the "Developer"), hereby promises to pay to the order of the Carlsbad
Redevelopment Agency, a body corporate and politic (the "Holder"), a principal amount equal to
One Hundred Five Thousand Dollars ($lOS,OOO), or so much thereof as is advanced by the
Holder to the Developer pursuant to the Loan Agreement between the Developer and the Holder
dated as of , 2003 (the "Agreement"). All capitalized terms not otherwise
defined in this Note shall have the meanings set forth in the Agreement. ,
1. Interest; Repayment Terms. The indebtedness evidenced by this Note
shall not bear interest; provided, however, if a default occurs hereunder, the principal amount of
this Note shall bear interest commencing on the date of default at the default rate equal to the
lesser of (i) ten percent (10%) per annum, compounded annually, or (ii) the maximum interest
rate permitted by law. The Note shall be due and payable at the times and in the manner set forth
in Section 2.8 of the Agreement.
2. No Assumption. ' Except as provided in Section 4.9 of the Agreement,
this Note shall not be assumable by the successors and assigns of Developer without the prior
written consent of the City.
3. Terms of Payment.
a. All payments due under this Note shall be paid in currency of the
United States of America, which at the time of payment is lawful for the payment of public and
private debts.
b. All payments on this Note shall be paid to Holder at the Housing
and Community Development Department, City of Carlsbad, 2965 Roosevelt Street, Suite B,
Carlsbad, CA 92008, Attn: Housing and Redevelopment Director, or to such other place as the
Holder of this Note may from time to time designate.
c. All payments ,on this Note shall be without expense to the Holder,
and the Developer agrees to pay all costs and expenses, including re-conveyance fees and
reasonable attorney's fees of the Holder, incurred in connection with the payment of this Note
and the release of any security hereof.
4. Acceleration. Upon the occurrence of a Default (as defined in the
Loan Agreement), the City shall have the right to accelerate the debt evidenced by this Note and
declare all of the unpaid principal and interest, if any, immediately due and payable. Upon the
1 53
occurrence of a Default, the outstanding portion of the principal shall bear interest at the rate of
the lesser of (i) ten percent (10%) per annum, compounded annually, or (ii) the maximum interest
rate permitted by law. Any failure by the City to pursue its legal and equitable remedies upon
Default shall not constitute a waiver of the City's right to declare a Default and exercise all of its
rights under this Note, the Deed of Trust, and the Loan Agreement. Nor shall acceptance by the
City of any payment provided for herein constitute a waiver of the City's right to require prompt
payment of any remaining balance owed.
5. No Offset. The Developer hereby waives any rights of offset it now
has or may hereafter have against the City, its successors and assigns, and agrees to make the
payments called for herein in accordance with the terms of this Note and the Loan Agreement.
6. Waiver; Attorneys' Fees. Developer, for itself, its heirs, legal
representatives, successors and assigns, respectively, waives diligence, presentment, protest, and
demand, and notice of protest, dishonor and non-payment of this Note, and expressly waives any
rights to be released by reason of any extension of time or change in terms of payment, or
change, alteration or release of any security given for the payments hereof, and expressly waives
the right to plead any and all statutes of limitations as a defense to any demand on this Note or
agreement to pay the same, and agrees to pay all costs of collection when incurred, including
reasonable attorneys' fees. If an action is instituted on this Note, the undersigned promises to
pay, in addition to the costs and disbursements allowed by law, such sum as a court may adjudge
reasonable as attorneys' fees in such action.
7. Security. This Note is secured by a Deed of Trust and Security
Agreement (the "Developer Deed of Trust"), of even date herewith, wherein the Developer is the
Trustor and the Holder is the Beneficiary, constituting a lien against the Affordable
Development.
8. Miscellaneous Provisions.
a. All notices to the Holder or the Developer shall be given in the
manner and at the addresses set forth in the Agreement, or to such addresses as the Holder and
the Developer may hereinafter designate.
b. 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.
c. This Note shall be governed by and construed in accordance with
the laws of the State of California.
d. The times for the performance of any obligations hereunder shall
be strictly construed, time being of the essence.
2
e. This document, together with the other Loan Documents, contains
the entire agreement between the parties as to the City Loan. It may not be modified except upon
written consent of the parties.
Developer:
Wave Crest Resorts II, Inc., a California corporation
By:
Name Bill Canepa
(print or type)
Title: President
By:
Name
(print or type)
Title:
(Chairman, president or vice-president and secretary, assistant secretary, CFO or assistant treasurer must sign for corporations. Otherwise, the corporation must attach a resolution certified by the
secretary or assistant secretary under corporate seal empowering the officer(s) signing to bind the corporation.)
3
STATE OF CALIFORNIA )
COUNTY OF .......... 1 ) ss
On , before me, , personally appeared
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in hishedtheir
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person@) or
the entity upon behalf of which the person(s) acted, executed the instrument.
, personally known to me (or proved to me on the basis
WITNESS my hand and official seal.
4
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Carlsbad
City Clerk's Office
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Attention: City Clerk
No fee for recording pursuant to
Government Code Section 27383
(Space above for Recorder's Use)
DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust") is made as
of this day of ,2003, by and among Wave Crest Resorts 11, Inc., a
California corporation, ("Trustor"), ,a
corporate and politic ("Beneficiary").
("Trustee"), and the Carlsbad Redevelopment Agency, a body
FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein
recited and the trust herein created, the receipt of which is hereby'acknowledged, Trustor hereby
irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF
SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions
hereinafter set forth, Trustor's fee interest in the property located in the City of Carlsbad, County
of San Diego, State of California, that is described in the attached Exhibit A, incorporated herein
by this reference (the "Property").
TOGETHER WITH all interest, estates or other claims, both in law and in equity which
Trustor now has or may hereafter acquire in the Property and the rents;
TOGETHER WITH all easements, rights-of-way and rights used in connection therewith
or as a means of access thereto, including (without limiting the generality of the foregoing) all
tenements, hereditaments and appurtenances thereof and thereto;
TOGETHER WITH any and all buildings and improvements of every kind and
description now or hereafter erected thereon, and all property of the Trustor now or hereafter
affixed to or placed upon the Property;
TOGETHER WITH all building materials and equipment now or hereafter delivered to
said property and intended to be installed therein;
TOGETHER WITH all estate, interest, right, title, other claim or demand, of
every nature, in and to such property, including the Property, both in law and in equity,
including, but not limited to, all deposits made with or other security given by Trustor to utility
companies, the proceeds from any or all of such property, including the Property, claims or
demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor
1 57
now has or may hereafter acquire, any and all awards made for the taking by eminent domain or
by any proceeding or purchase in lieu thereof of the whole or any part of such property,
including without limitation, any awards resulting from a change of grade of streets and awards
for severance damages to the extent Beneficiary has an interest in such awards for taking as
provided in Paragraph 4.1- herein; and
TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures
now or hereafter attached to or used in and about the building or buildings now erected or
hereafter to be erected on the Property which are necessary to the complete and comfortable use
and occupancy of such building or buildings for the purposes for which they were or are to be
erected, including all other goods and chattels and personal property as are ever used or
furnished in operating a building, or the activities conducted therein, similar to the one herein
described and referred to, and all renewals or replacements thereof or articles in substitution
therefor, whether or not the same are, or shall be attached to said building or buildings in any
manner.
TOGETHER WITH all of Trustor's interest in all building materials, fixtures, equipment,
work in process and other personal property to be incorporated into the Property; all goods,
materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other
personal property now or hereafter appropriated for use on the Property, whether stored on the
Property or elsewhere, and used or to be used in connection with the Property; all rents, issues
and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles,
chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance
and condemnation awards and proceeds, trade names, trademarks and service marks arising from
or related to the Property and any business conducted thereon by Trustor; all replacements,
additions, accessions and proceeds; and all books, records and files relating to any of the
foregoing.
All of the foregoing, together with the Property, is herein referred to as the "Security."
To have and to hold the Security together with acquittances to the Trustee, its successors and
assigns forever.
FOR THE PURPOSE OF SECURING:
(a) Payment of the indebtedness of Trustor to Beneficiary as set forth in the Note
(defined in Article 1 below) until paid or canceled. 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
(b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to
the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to
advance said sums and the expiration of any applicable cure period, with interest thereon as
provided herein; and
2 58
(c) Performance of every obligation, covenant or agreement of Trustor contained
herein and in the Loan Documents (defined in Section 1.3 below).
AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR
COVENANTS AND AGREES:
ARTICLE 1
DEFINITIONS
In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall
have the following meanings in this Deed of Trust:
Section 1.1 The term "Affordable Housing Agreement" means that certain Affordable
Housing Agreement Imposing Restrictions on Real Property between the City of Carlsbad and
Wave Crest Resorts II., dated and recorded as Document No.
in the Official Records of San Diego County,.
Section 1.2 The term "Loan Agreement" means that certain Loan Agreement between
Trustor and Beneficiary, dated ,2003 providing for the Beneficiary to loan to the
Trustor One Hundred Five Thousand Dollars ($105,000) for the construction of improvements
on the Property.
Section 1.3 The term "Loan Documents" means this Deed of Trust, the Note, the Loan
Agreement, and the Affordable Housing Agreement and any other debt, loan or security
instruments between Trustor and the Beneficiary relating to the Property.
Section 1.4 The term "Note" means the promissory note in the principal amount of
One Hundred Five Thousand Dollars ($105,000) of even date herewith executed by the Trustor
in favor of the Beneficiary, the payment of which is secured by this Deed of Trust. (A copy of
the Note is on file with the Beneficiary and terms and provisions of the Note are incorporated
herein by this reference.)
Section 1.5 The term "Principal" means all amounts (including interest) required to be
paid under the Note.
3
ARTICLE 2
MAINTENANCE AND MODIFICATION OF THE PROPERTY
AND SECURITY
Section 2.1 Maintenance and Modification of the Property by Trustor.
The Trustor agrees that at all times prior to full payment of the sum owed under the Note,
the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause
the Security to be maintained and preserved in good condition. The Trustor will from time to
time make or cause to be made all repairs, replacements and renewals deemed proper and
necessary by it. The Beneficiary shall have no responsibility in any of these matters or for the
making of improvements or additions to the Security.
Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all
claims for labor done and for material and services furnished in connection with the Security,
diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation
of labor on the work or construction on the Security for a continuous period of thirty (30) days or
more, and to take all other reasonable steps to forestall the assertion of claims of lien against the
Security or any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary
as its agent (said agency being coupled with an interest) with the authority, but without any
obligation, to file for record any notices of completion or cessation of labor or any other notice
that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the
Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Trustor
only in the event that Trustor shall fail to take, or shall fail to diligently continue to take, those
actions as hereinbefore provided.
Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or
claims as Beneficiary shall specify upon laborers, materialmen, subcontractors or other persons
who have furnished or claim to have furnished labor, services or materials in connection with the
Security. Nothing herein contained shall require Trustor to pay any claims for labor, materials or
services which Trustor in good faith disputes and is diligently contesting provided that Trustor
shall, within thirty (30) days after the filing of any claim of lien, record in the Office of the
Recorder of San Diego County, a surety bond in an amount 1 and 1/2 times the amount of such
claim item to protect against a claim of lien.
Section 2.2 Granting of Easements.
Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in
the nature of easements with respect to any property or rights included in the Security except
those required or desirable for installation and maintenance of public utilities including, without
limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law. As to
these exceptions, Beneficiary will grant and/or direct the Trustee to grant such easements.
4
ARTICLE 3
TAXES AND INSURANCE; ADVANCES
Section 3.1 Taxes, Other Governmental Charges and Utility Charges.
Trustor shall pay, or cause to be paid, at least fifteen (15) days prior to the date of
delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility
company which are or may become a lien affecting the Security or any part thereof; provided,
however, that Trustor shall not be required to pay and discharge any such tax, assessment, charge
or levy so long as (a) the legality thereof shall be promptly and actively contested in good faith
and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities
contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar
governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien
therefor on any part of the Security; provided, however, if such taxes, assessments or charges
may be paid in installments, Trustor may pay in such installments. Except as provided in clause
(b) of the first sentence of this paragraph, the provisions of this Section 3.1 shall not be construed
to require that Trustor maintain a reserve account, escrow account, impound account or other
similar account for the payment of future taxes, assessments, charges and levies.
In the event that Trustor shall fail to pay any of the foregoing items required by this
Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the
same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to
fully pay such items within seven (7) business days after receipt of such notice. Any amount so
advanced therefore by Beneficiary, together with interest thereon from the date of such advance
at the maximum rate permitted by law, shall become an additional obligation of Trustor to the
Beneficiary and shall be secured hereby, and Trustor agrees to pay all such amounts.
Section 3.2 Provisions Respecting Insurance.
Trustor agrees to provide insurance conforming in all respects to that required under the
Loan Documents during the course of construction and following completion, and at all times
until all amounts secured by this Deed of Trust have been paid and all other obligations secured
hereunder fulfilled, and this Deed of Trust reconveyed.
All such insurance policies and coverages shall be maintained at Trustor's sole cost and
expense. Certificates of insurance for all of the above insurance policies, showing the same to be
in full force and effect, shall be delivered to the Beneficiary upon demand therefore at any time
prior to the Beneficiary's receipt of the entire Principal and all amounts secured by this Deed of
Trust.
Section 3.3 Advances.
In the event.the Trustor shall fail to maintain the full insurance coverage required by this
Deed of Trust 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
5
may make such repairs or replacements as are necessary and provide for payment thereof; and all
amounts so advanced therefore by the Beneficiary shall become an additional obligation of the
Trustor to the Beneficiary (together with interest as set forth below) and shall be secured hereby,
which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid,
shall bear interest from the date of the advance at the lesser of (i) ten percent (10%) per annum or
(ii) the maximum rate permitted by law.
ARTICLE 4
DAMAGE, DESTRUCTION OR CONDEMNATION
Section 4.1 Awards and Damages.
All judgments, awards of damages, settlements and compensation made in connection
with or in lieu of (1) taking of all or any part of or any interest in the Property by or under
assertion of the power of eminent domain, (2) any damage to or destruction of the Property or in
any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the
Property (collectively "Funds") are hereby assigned to and shall be paid to the Beneficiary by a
check made payable to the Beneficiary. The Beneficiary is authorized and empowered (but not
required) to collect and receive any Funds and is authorized to apply them in whole or in part
upon any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary
shall determine at its sole option. The Beneficiary shall be entitled to settle and adjust all claims
under insurance policies provided under this Deed of Trust and may deduct and retain from the
proceeds of such insurance the amount of all expenses incurred by it in connection with any such
settlement or adjustment. All or any part of the amounts so collected and recovered by the
Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for
its disposition. Application of all or any part of the Funds collected and received by the
Beneficiary or the release thereof shall not cure or waive any default under this Deed of Trust.
The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior
mortgage lender.
ARTICLE 5
AGREEMENTS AFFECTING THE PROPERTY; FURTHER
ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.1 Other Agreements Affecting Property.
The Trustor shall duly and punctually perform all terms, covenants, conditions and
agreements binding upon it under the Loan Documents and any other agreement of any nature
whatsoever now or hereafter involving or affecting the Security or any part thereof.
Section 5.2 Agreement to Pay Attorneys' Fees and Expenses.
In the event of any Event of Default (as defined below) hereunder, and if the Beneficiary
should employ attorneys or incur other expenses for the collection of amounts due or the
enforcement of performance or observance of an obligation or agreement on the part of the
Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefore, pay to the
6
Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so incurred
by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the
indebtedness secured by the lien of this Deed of Trust, and shall bear interest from the date such
expenses are incurred at the lesser of ten percent (10%) per annum or the maximum rate
permitted by law.
Section 5.3 Payment of the Principal.
The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth
in the Note in the amounts and by the times set out therein.
Section 5.4 Personal Property.
To the maximum extent permitted by law, the personal property subject to this Deed of
Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall
constitute a fixtures filing under the California Commercial Code. As to any personal property
not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement
under the California Commercial Code.
Section 5.5 Financing Statement.
The Trustor shall execute and deliver to the Beneficiary such financing statements
pursuant to the appropriate statutes, and any other documents or instruments as are required to
convey to the Beneficiary a valid perfected security interest in the Security. The Trustor agrees
to perform all acts which the Beneficiary may reasonably request so as to enable the Beneficiary
to maintain such valid perfected security interest in the Security in order to secure the payment of
the Note in accordance with its terms. The Beneficiary is authorized to file a copy of any such
financing statement in any jurisdiction(s) as it shall deem appropriate from time to time in order
to protect the security interest established pursuant to this instrument.
Section 5.6 Operation of the Security.
The Trustor shall operate the Security (and, in case of a transfer of a portion of the
Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in
full compliance with the Loan Documents.
Section 5.7 Inspection of the Security.
At any and all reasonable times upon seventy-two (72) hours' notice to Trustor, the
Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and
representatives, shall have the right, without payment of charges or fees, to inspect the Security.
Section 5.8 Nondiscrimination.
The Trustor herein covenants by and for itself, its heirs, executors, administrators, and
assigns, and all persons claiming under or through them, that there shall be no discrimination
7
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,
transfer, use, occupancy, tenure or enjoyment of the Security, nor shall the Trustor itself or any
person claiming under or through it establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location, number, use or occupancy
of transferees or vendees in the Security. The foregoing covenants shall run with the land.
ARTICLE 6
HAZARDOUS WASTE
Trustor shall keep and maintain the Property in compliance with, and shall not cause or
permit the Property to be in violation of any federal, state or local laws, ordinances or regulations
relating to industrial hygiene or to the environmental conditions on, under or about the Property
including, but not limited to, soil and ground water conditions. Trustor shall not use, generate,
manufacture, store or dispose of on, under, or about the Property or transport to or from the
Property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or
related materials, including without limitation, any substances defined as or included in the
definition of "hazardous substances," hazardous wastes," "hazardous materials," or "toxic
substances'' under any applicable federal or state laws or regulations (collectively referred to
hereinafter as "Hazardous Materials") except such of the foregoing as may be customarily kept
and used in and about multifamily residential property.
Trustor shall immediately advise Beneficiary in writing if at any time it receives written
notice of (i) any and all enforcement, cleanup, removal or other governmental or regulatory
actions instituted, completed or threatened against Trustor or the Property pursuant to any
applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous
Materials, ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party
against Trustor or the Property relating to damage, contribution, cost recovery compensation,
loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii)
above hereinafter referred to as "Hazardous Materials Claims"); and (iii) Trustor's discovery of
any occurrence or condition on any real property adjoining or in the vicinity of the Property that
could cause the Property or any part thereof to be classified as "border-zone property" under the
provision of California Health and Safety Code, Sections 25220 et seq. or any regulation adopted
in accordance therewith, or to be otherwise subject to any restrictions on the ownership,
occupancy, transferability or use of the Property under any Hazardous Materials Law.
Beneficiary shall have the right to join and participate in, as a party if it so elects, any
legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to
have its reasonable attorneys' fees in connection therewith paid by Trustor. Trustor shall
indemnify and hold harmless Beneficiary and its councilmembers, supervisors, directors,
officers, employees, agents, successors and assigns from and against any loss, damage, cost,
expense or liability directly or indirectly arising out of or attributable to the use, generation,
storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on,
under, or about the Property including without limitation: (a) all foreseeable consequential
damages; (b) the costs of any required or necessary repair, cleanup or detoxification of the
Property and the preparation and implementation of any closure, remedial or other required
8
plans; and (c) all reasonable costs and expenses incurred by Beneficiary in connection with
clauses (a) and (b), including but not limited to reasonable attorneys' fees.
Without Beneficiary's prior written consent, which shall not be unreasonably withheld,
Trustor shall not take any remedial action in response to the presence of any Hazardous
Materials on, under or about the Property, nor enter into any settlement agreement, consent
decree, or other compromise in respect to any Hazardous Material Claims, which remedial
action, settlement, consent decree or compromise might, in Beneficiary's reasonable judgement,
impair the value of the Beneficiary's security hereunder; provided, however, that Beneficiary's
prior consent shall not be necessary in the event that the presence of Hazardous Materials on,
under, or about the Property either poses an immediate threat to the health, safety or welfare of
any individual or is of such a nature that an immediate remedial response is necessary and it is
not reasonably possible to obtain Beneficiary's consent before taking such action, provided that
in such event Trustor shall notify Beneficiary as soon as practicable of any action so taken.
Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if
either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Trustor
will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required
action; (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no
reasonable alternative to such remedial action which would result in less impairment of
Beneficiary's security hereunder; or (iv) the action has been agreed to by Beneficiary.
The Trustor hereby acknowledges and agrees that (i) this Article is intended as the
Beneficiary's written request for information (and the Trustor's response) concerning the
environmental condition of the Property as required by California Code of Civil Procedure
Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other
Loan Documents (together with any indemnity applicable to a breach of any such representation
and warranty) with respect to the environmental condition of the property is intended by the
Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code
of Civil Procedure Section 736.
In the event that any portion of the Property is determined to be "environmentally
impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or
to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section
726.5(e)(l)), then, without otherwise limiting or in any way affecting the Beneficiary's or the
Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its
rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such
environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and
remedies of an unsecured creditor, including reduction of its claim against the Trustor to
judgment, and (b) any other rights and remedies permitted by law. For purposes of determining
the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil
Procedure Section 726.5(a), the Trustor shall be deemed to have willfully permitted or
acquiesced in a release or threatened release of hazardous materials, within the meaning of
California Code of Civil Procedure Section 726S(d)(l), if the release or threatened release of
hazardous materials was knowingly or negligently caused or contributed to by any lessee,
occupant, or user of any portion of the Property and the Trustor knew or should have known of
the activity by such lessee, occupant, or user which caused or contributed to the release or
9
threatened release. All costs and expenses, including (but not limited to) reasonable attorneys'
fees, incurred by the Beneficiary in connection with any action commenced under this paragraph,
including any action required by California Code of Civil Procedure Section 726.5(b) to
determine the degree to which the Property is environmentally impaired, plus interest thereon at
the rate specified in the Note until paid, shall be added to the indebtedness secured by this Deed
of Trust and shall be due and payable to the Beneficiary upon its demand made at any time
following the conclusion of such action.
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default.
The following shall constitute Events of Default following the expiration of any
applicable notice and cure periods: (1) failure to make any payment to be paid by Trustor under
the Loan Documents; (2) failure to observe or perform any of Trustor's other covenants,
agreements or obligations under the Loan Documents, including, without limitation, the
provisions concerning discrimination; or (3) failure to make any payment or perform any of
Trustor's other covenants, agreements, or obligations under any other debt instruments or
regulatory agreement secured by the Property, which default shall not be cured within the times
and in the manner provided therein.
Section 7.2 Acceleration of Maturity.
If an Event of Default shall have occurred and be continuing, then at the option of the
Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal
of the Note shall immediately become due and payable, upon written notice by the Beneficiary to
the Trustor (or automatically where so specified in the Loan Documents), and no omission on the
part of the Beneficiary to exercise such option when entitled to do so shall be construed as a
waiver of such right.
Section 7.3 The Beneficiary's Right to Enter and Take Possession.
If an Event of Default shall have occurred and be continuing, the Beneficiary may:
(a) Either in person or by agent, with or without bringing any action or proceeding, or by
a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the
Security and take possession thereof (or any part thereof) and of any of the Security, in its own
name or in the name of Trustee, and do any acts which it deems necessary or desirable to
preserve the value or marketability of the Property, or part thereof or interest therein, increase the
income therefrom or protect the security thereof. The entering upon and taking possession of the
Security shall not cure or waive any Event of Default or Notice of Default (as defined below)
hereunder or invalidate any act done in response to such Default or pursuant to such Notice of
Default and, notwithstanding the continuance in possession of the Security, Beneficiary shall be
entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of
any Event of Default, including the right to exercise the power of sale;
10
(b) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a
receiver, or specifically enforce any of the covenants hereof;
(c) Deliver to Trustee a written declaration of default and demand for sale, and a written
notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of
Default and Election to Sell"), which notice Trustee or Beneficiary shall cause to be duly filed
for record in the Official Records of San Diego County; or
(d) Exercise all other rights and remedies provided herein, in the instruments by which
the Trustor acquires title to any Security, or in any other document or agreement now or
hereafter evidencing, creating or securing all or any portion of the obligations secured hereby, or
provided by law.
Section 7.4 Foreclosure By Power of Sale.
Should the Beneficiary elect to foreclose by exercise of the power of sale herein
contained, the Beneficiary shall give notice to the Trustee (the "Notice of Sale") and shall deposit
with Trustee this Deed of Trust which is secured hereby (and the deposit of which shall be
deemed to constitute evidence that the unpaid principal amount of the Note is immediately due
and payable), and such receipts and evidence of any expenditures made that are additionally
secured hereby as Trustee may require.
(a) Upon receipt of such notice from the Beneficiary, Trustee shall cause to be
recorded, published and delivered to Trustor such Notice of Default and Election to Sell as then
required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse
of such time as may then be required by law and after recordation of such Notice of Default and
Election to Sell and after Notice of Sale having been given as required by law, sell the Security,
at the time and place of sale fixed by it in said Notice of Sale, whether as a whole or in separate
lots or parcels or items as Trustee shall deem expedient and in such order as it may determine
unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at
public auction to the highest bidder, for cash in lawful money of the United States payable at the
time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient
deed or deeds conveying the property so sold, but without any covenant or warranty, express or
implied. The recitals in such deed or any matters of facts shall be conclusive proof of the
truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary,
may purchase at such sale, and Trustor hereby covenants to warrant and defend the title of such
purchaser or purchasers.
(b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of
evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to
payment of (i) the unpaid Principal amount of the Note; (ii) all other amounts owed to
Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the
remainder, if any, to Trustor.
11 b7
(c) Trustee may postpone sale of all or any portion of the Property by public
announcement at such time and place of sale, and from time to time thereafter, and without
further notice make such sale at the time fixed by the last postponement, or may, in its discretion,
give a new Notice of Sale.
Section 7.5 Receiver.
If an Event of Default shall have occurred and be continuing, Beneficiary, as a matter of
right and without further notice to Trustor or anyone claiming under the Security, and without
regard to the then value of the Security or the interest of Trustor therein, shall have the right to
apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part
thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice
of any application therefor. Any such receiver or receivers shall have all the usual powers and
duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of
entry as provided herein, and shall continue as such and exercise all such powers until the date of
confirmation of sale of the Security, unless such receivership is sooner terminated.
Section 7.6 Remedies Cumulative.
No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of
Trust is intended to be exclusive of any other right, power or remedy, but each and every such
right, power and remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law or in equity.
Section 7.7 No Waiver.
(a) No delay or omission of the Beneficiary to exercise any right, power or remedy
accruing upon any Event of Default shall exhaust or impair any such right, power or remedy, or
shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every
right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from
time to time and as often as may be deemed expeditious by the Beneficiary. No consent or
waiver, expressed or implied, by the Beneficiary to or any breach by the Trustor in the
performance of the obligations hereunder shall be deemed or construed to be a consent to or
waiver of obligations of the Trustor hereunder. Failure on the part of the Beneficiary to
complain of any act or failure to act or to declare an Event of Default, irrespective of how long
such failure continues, shall not constitute a waiver by the Beneficiary of its right hereunder or
impair any rights, power or remedies consequent on any Event of Default by the Trustor.
(b) If the Beneficiary (i) grants forbearance or an extension of time for the payment of
any sums secured hereby, (ii) takes other or additional security or the payment of any sums
secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv)
releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of
the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the
granting of any easement or other right affecting the Security, or (vi) makes or consents to any
agreement subordinating the lien hereof, any such act or omission shall not release, discharge,
modify, change or affect the original liability under this Deed of Trust, or any other obligation of
12
the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co-
signer, endorser, surety or guarantor (unless expressly released); nor shall any such act or
omission preclude the Beneficiary from exercising any right, power or privilege herein granted
or intended to be granted in any Event of Default then made or of any subsequent Event of
Default, nor, except as otherwise expressly provided in an instrument or instruments executed by
the Beneficiary shall the lien of this Deed of Trust be altered thereby.
Section 7.8 Suits to Protect the Security.
The Beneficiary shall have power to (a) institute and maintain such suits and proceedings
as it may deem expedient to prevent any impairment of the Security and the rights of the
Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its
interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or
compliance with any legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment,
rule or order would impair the Security thereunder or be prejudicial to the interest of the
Beneficiary.
Section 7.9 Trustee May File Proofs of Claim.
In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition or other proceedings affecting the Trustor, its creditors or its property,
the Beneficiary, to the extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have the claims of the Beneficiary
allowed in such proceedings and for any additional amount which may become due and payable
by the Trustor hereunder after such date.
Section 7.10 Waiver.
The Trustor waives presentment, demand for payment, notice of dishonor, notice of
protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in
taking any action to collect any sums owing under the Note or in proceedings against the
Security, in connection with the delivery, acceptance, performance, default, endorsement or
guaranty of this Deed of Trust.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Amendments.
This instrument cannot be waived, changed, discharged or terminated orally, but only by
an instrument in writing signed by Beneficiary and Trustor.
13 b9
Section 8.2 Reconveyance by Trustee.
Upon written request of Beneficiary stating that all sums secured hereby have been paid
or forgiven, and upon surrender of this Deed of Trust to Trustee for cancellation and retention,
and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to
Trustor, or to the person or persons legally entitled thereto.
Section 8.3 Notices.
If at any time after the execution of this Deed of Trust it shall become necessary or
convenient for one of the parties hereto to serve any notice, demand or communication upon the
other party, such notice, demand or communication shall be in writing and shall be served
personally or by depositing the same in the registered United States mail, return receipt
requested, postage prepaid and (1) if intended for Beneficiary shall be addressed to:
City of Carlsbad
Housing and Community Development Department
2965 Roosevelt Street
Carlsbad, CA 92008-2389
Attn: Housing and Redevelopment Director
and (2) if intended for Trustor shall be addressed to:
Wave Crest Resorts 11.
Attn: Bill Canepa
829 Second Street #A
Encinitas, CA 92024
Any notice, demand or communication shall be deemed given, received, made or communicated
on the date personal delivery is effected or, if mailed in the manner herein specified, on the
delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either
party may change its address at any time by giving written notice of such change to Beneficiary
or Trustor as the case may be, in the manner provided herein, at least ten (10) days prior to the
date such change is desired to be effective.
Section 8.4 Successors and Joint Trustors.
Where an obligation is created herein binding upon Trustor, the obligation shall also
apply to and bind any transferee or successors in interest. Where the terms of the Deed of Trust
have the effect of creating an obligation of the Trustor and a transferee, such obligation shall be
deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is
more than one entity or person, all obligations of Trustor shall be deemed to be a joint and
several obligation of each and every entity and person comprising Trustor.
14
Section 8.5 Captions.
The captions or headings at the beginning of each Section hereof are for the convenience
of the parties and are not a part of this Deed of Trust.
Section 8.6 Invalidity of Certain Provisions.
Every provision of this Deed of Trust is intended to be severable. In the event any term
or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or
other body of competent jurisdiction, such illegality or invalidity shall not affect the balance of
the terms and provisions hereof, which terms and provisions shall remain binding and
enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the
debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or
partially secured portion of the debt, and all payments made on the debt, whether voluntary or
under foreclosure or other enforcement action or procedure, shall be considered to have been
first paid or applied to the full payment of that portion of the debt which is not secured or
partially secured by the lien of this Deed of Trust.
Section 8.7 Governing Law.
This Deed of Trust shall be governed by and construed in accordance with the laws of the
State of California.
Section 8.8 Gender and Number.
In this Deed of Trust the singular shall include the plural and the masculine shall include
the feminine and neuter and vice versa, if the context so requires.
Section 8.9 Deed of Trust, Mortgage.
Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and
any reference to a deed of trust shall also refer to a mortgage.
Section 8.10 Actions.
Trustor agrees to appear in and defend any action or proceeding purporting to affect the
Security.
Section 8.11 Substitution of Trustee.
Beneficiary may from time to time substitute a successor or successors to any Trustee
named herein or acting hereunder to execute this Trust. Upon such appointment, and without
conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties
conferred upon any Trustee herein named or acting hereunder. Each such appointment and
substitution shall be made by written instrument executed by Beneficiary, containing reference to
this Deed of Trust and its place of record, which, when duly recorded in the proper office of the
15
county or counties in which the Property is situated, shall be conclusive proof of proper
appointment of the successor trustee.
Section 8.12 Statute of Limitations.
The pleading of any statute of limitations as a defense to any and all obligations secured
by this Deed of Trust is hereby waived to the full extent permissible by law.
Section 8.13 Acceptance by Trustee.
Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is
made public record as provided by law. Except as otherwise provided by law the Trustee is not
obligated to notify any party hereto of pending sale under this Deed of Trust or of any action or
proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and
year first above written.
TRUSTOR:
Wave Crest Resorts 11, Inc., a California corporation
By:
Name Bill Canepa
(print or type)
Title:
By:
Name
(print or type)
Title:
(Proper notarial acknowledgment of execution by Trustor must be attached)
Chairman, president or vice-president and secretary, assistant secretary, CFO or assistant treasurer
must sign for corporations. Otherwise, the corporation must attach a resolution certified by the secretary or assistant secretary under corporate seal empowering the officer@) signing to bind the corporation.)
STATE OF CALIFORNIA )
16 32
COUNTY OF
On , before me, , personally
appeared , personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) idare subscribed to the
within instrument and acknowledged to me that he/she/they executed, the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
17 73
EXHIBIT A
(Legal Description)
The land is situated in the State of California, City of Carlsbad, County of San Diego, and
is described as follows:
18
NOTICE TO BORROWER:
THIS NOTE CONTAINS PROVISIONS RESTRICTING ASSUMPTION
Laguna Point
PROMISSORY NOTE
Secured by Deed of Trust
Carlsbad, California
I 200-
FOR VALUE RECEIVED, the undersigned
(the "Borrower") promises to pay to the Carlsbad Redevelopment
Agency, a body corporate and politic (the "Agency"), or order, at the Housing and
Redevelopment Department, 2965 Roosevelt Street, Suite B, Carlsbad, California 92008, or such
other place as the Agency may designate in writing, the principal sum of $ 9 plus
Contingent Interest calculated pursuant to Section 4 below.
1. Purpose of Loan. Borrower is purchasing the Residence located at
in the City of Carlsbad. This Note evidences a loan made by the Seller of
the Residence (the "Seller") to the Borrower, utilizing subsidy funds provided by the Agency and
the Seller, and assigned by the Seller to the Agency (the "Agency/Seller Loan"). The
Agency/Seller Loan is in the amount determined by the Agency to be necessary for the Borrower
to afford to purchase the Residence making a reasonable downpayment and using conventional
first mortgage financing for the balance of the purchase price not financed by the AgencyBeller
Loan. The Seller made the AgencyBeller Loan to the Borrower and assigned the AgencyEeller
Loan to the Agency in fulfillment of certain inclusionary housing obligations pursuant to City of
Carlsbad Municipal Code Chapter 21.85 and an Affordable Housing Agreement between the
Seller and the Agency dated and recorded as Document No.
in the Official Records of San Diego County.
2. Definitions. The terms set forth in this Section shall have the following
meanings in this Note.
subtracting the total original purchase price of the Residence paid by the Borrower, which was
Dollars ($ ), from one of the following amounts, as
applicable: (i) in the event of a sale of the Residence, the amount received by the Borrower as
the sale price of the Residence, as certified by the Borrower pursuant to Section 13 below; or (ii)
in the event of a prepayment of this Note, a Transfer other than sale of the Residence, or in the
event of a default, the Fair Market Value of the Residence; or (iii) in the event a creditor acquires
title to the Residence through a deed in lieu of foreclosure, a trustee's deed upon sale, or
otherwise, the amount paid for the Residence at a creditor's sale of the Residence.
a. "Appreciation Amount" shall mean the amount calculated by
1
b. "Contingent Interest" shall mean the percentage of the
Appreciation Amount set out in Section 4.
C. "Fair Market Value" shall be determined by a real estate appraisal
made by an independent residential appraiser designated by the Agency. If possible, the
appraisal shall be based upon the sales prices of comparable properties sold in the market area
during the preceding three-month period. The cost of the appraisal shall be paid by the
Borrower. Nothing in this subparagraph shall preclude the Borrower and the Agency from
establishing the Fair Market Value of the Residence by mutual agreement in lieu of an appraisal.
d. "First Mortgage" shall mean the promissory note and deed of trust
evidencing and securing the first mortgage loan for the Residence.
e. "Residence" shall mean the housing unit and land encumbered by
the deed of trust executed in connection with this Note.
f. "Transfer" shall mean any sale, assignment or transfer, voluntary or
involuntary, of any interest in the Residence, including, but not limited to, a fee simple interest, a
joint tenancy interest, tenancy in common interest, a life estate, a leasehold interest, or an interest
evidenced by a land contract by which possession of the Residence is transferred and the
Borrower retains title. Any Transfer without satisfaction of the provisions of this Note is
prohibited. A transfer: (i) to an existing spouse who is also an obligor under the Note; (ii) by a
Borrower to a spouse where the spouse becomes the co-owner of the Residence; (iii) between
spouses as part of a marriage dissolution proceeding; (iv) to an existing spouse or child of the
Borrower by devise or inheritance following the death of the Borrower; (v) by the Borrower into
an inter vivos trust in which the Borrower is the beneficiary; or (vi) by deed of trust or imposition
of a lien subordinate to the Deed of Trust, shall not be considered a Transfer for the purposes of
this Note; provided, however, that the Borrower shall continue to occupy the Residence as his or
her principal place of residence and the Borfower shall provide written notice of such transfer to
the Agency pursuant to Section 14 below.
3. Security. This Note is secured by a second deed of trust dated the same
date as this Note (the "Deed of Trust").
4. Contingent Interest. The Borrower shall pay contingent interest equal to
percent ( %) ("Contingent Interest Percentage Amount") [seller to insert
appropriate percentage which shall in no event exceed (50%)] of the Appreciation Amount
(the "Contingent Interest"). No interest other than Contingent Interest shall be due hereunder.
The Contingent Interest shall be paid to the Agency at the time set forth in Section 7(a) below,
unless forgiven by the Agency pursuant to Section 7(b) below. Borrower acknowledges that the
Contingent Interest Percentage Amount is equal to the Agency/Seller Loan principal amount as a
percentage of the total purchase price of the Residence paid by the Borrower at the time of
purchase, multiplied by seventy-five one hundredths (.75). Borrower acknowledges that this
calculation of the percentage of the Appreciation Amount due to the Agency as Contingent
Interest includes a twenty-five percent (25%) discount to Borrower to account for any capital
improvements Borrower may make to the Residence.
2
5. Term. The Term of this Note shall mean the period commencing on the
date of this Note and expiring on the date thirty (30) years thereafter.
6. Owner-Occupancy Reauired;'Representations Regarding Income.
a. The Borrower is required to occupy the Residence as his or her
principal place of residence, and failure by the Borrower to comply with this requirement shall be
a default under this Note. The Borrower shall be considered as occupying the Residence if the
Borrower is living in the Residence for at least ten (10) months out of each calendar year. The
Borrower shall provide an annual written certification to the Agency that the Borrower is
occupying the Residence as his or her principal place of residence. The Borrower shall not lease
the Residence to another party. Any lease of the Residence shall be a default under this Note.
b. Borrower hereby certifies that all income information previously
submitted to the Seller andor the Agency is true and correct. Misrepresentation by Borrower of
income information provided to the Seller andor the Agency shall be a default under this Note.
7. Resale Restriction The Agency and the Developer have provided financial
assistance to the developer to assist in making the Laguna Point homes affordable. Your new
home is affordable to you because the Agency and the developer are providing you with second
mortgage financing through the Laguna Point Homebuyer Assistance Program (the "Program1')
so that you will be able to buy your home. As such, there are restrictions in your Deed of
Trust and Promissory Note that limit your ability to sell your home, the sales price at which
you are able to sell your home, and of the amount of income the purchaser of the home may
earn in a year.
Beginning on the date you purchase your home (close escrow) and for 'fifteen years
thereafter, you may only sell your home to a qualified lower income household. A lower income
household is one in witch the households gross annual income does not exceed 80% of the
median income for San Diego County, adjusted for assumed household size. Further, the sales
price can increase above the original sales price by an amount that is equal to the increase annual
increase in the San Diego Area Median Income. Median income figures shall be those published
annually by the United States Department of Housing and Urban Development. 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 Owner with other income determinations which
are reasonably similar with respect to methods of calculation to those previously published by the
Department of Housing and Urban Development. Assumed household size figures shall be
provided by the Agency. Fifteen (15) business days prior to the completion of the sales
transaction (close of escrow), the seller must provide documentation to the satisfaction of the
Agency that the new home buyer is in fact a lower income household and the sales price is
affordable to that lower income household.
Beginning sixteen (16) years after the initial purchase of the home, the home units may be
sold at a market price to non low income households provided that the sale shall result in the
recapture by the City or its designee of a financial interest in the units equal to the amount of
3
subsidy necessary to make the unit affordable to the designated income group and a proportionate
share of any appreciation. The repayment process of the Agency loan is explained below.
7. Repayment.
a. The total amount of the principal and any Contingent Interest owed
under this Note shall immediately become due and payable (i) in the event of a default by the
Borrower under this Note, the Deed of Trust, or the First Mortgage, (ii) on the date Transfer is
made whether voluntarily, involuntarily, or by operation of law and whether by deed, contract of
sale, gift, devise, bequest or otherwise, (iii) in the event Borrower ceases to occupy the Residence
as his or her principal place of residence; or (iv) at the end of the Term of this Note as described
above in Section 5. Failure to declare such amounts due shall not constitute a waiver on the part
of the Agency to declare them due in the event of a subsequent Transfer.
b. In the event, upon expiration of the Term, (i) no Transfer has
occurred, (ii) Borrower has repaid all principal pursuant to subsection (a) above, (iii) Borrower
continues to owner-occupy the Residence, and (iv) Borrower is not in default hereunder or under
the Deed of Trust, the Agency shall forgive repayment of all Contingent Interest due hereunder.
8. Late Payment Fees. If any payment due hereunder is not paid within five
(5) days from the date it is due, Borrower shall pay a reasonable late or collection charge equal to
five percent (5%) of the amount so unpaid. The Agency and Borrower agree that the actual
damages and costs sustained by the Agency due to the failure to make timely payments would be
extremely difficult to measure and that the charges specified in this paragraph represent a
reasonable estimate by Borrower and the Agency of a fair average compensation for such
damages and costs. Such charges shall be paid by Borrower without prejudice to the right of the
Agency to collect any other amounts provided to be paid under this Note or the Deed of Trust or,
with respect to late payments, to declare a default.
9. Prepayments. The Borrower may prepay all or part of the balance due
under this Note including principal and Contingent Interest. In the event the entire amount of
principal due under this Note is prepaid, all Contingent Interest, calculated as of the date of
prepayment, shall also be due at the time of prepayment.
10. No Assumption of Note. The Borrower acknowledges that this Note is
given in connection with the purchase of property (the "Residence") as part of a program of the
Agency to assist in the purchase of homes by lower income persons. Consequently, this Note
may be assumed or will be due in full upon Transfer per the requirements of Section 7.
11. Maintenance; Taxes; Insurance. Borrower shall maintain the Residence in
good repair and in a neat, clean and orderly condition. Borrower shall promptly pay all property
taxes due on the Residence prior to any delinquency and shall comply with the insurance
requirements set forth in the Deed of Trust.
12. Refinance of First Mortgage Loan. The outstanding principal and interest
on this Note shall not be due upon prepayment and refinance of the First Mortgage, and the Deed
4
78
of Trust shall be subordinated to the refinanced loan, provided that (i) such refinancing is
approved by the Agency, (ii) the amount refinanced does not exceed the outstanding principal
balance of the First Mortgage at the time of refinance plus reasonable costs of refinance, and (iii)
the refinance does not result in higher monthly payments on the First Mortgage Loan than were
due prior to the refinance.
13. Certification of Purchase Price on Transfer. Upon any sale of the
Residence, the Borrower shall submit to the Agency at least fifteen (15) days prior to the close of
escrow, a copy of the sales contract and a written declaration, under penalty of perjury, from the
Borrower and the proposed purchaser in a form acceptable to the Agency stating the gross sales
price of the Residence. The certification shall also provide that the proposed purchaser or any
other party has not paid and will not pay to the Borrower, and the Borrower has not received and
will not receive from the proposed purchaser or any other party, money or other consideration,
including personal property, in addition to what is set forth in the sales contract.
14. Notice to Agency of Transfers. Borrower shall provide the Agency with
written notice of any Transfer of the Residence or of any interest in the Residence (including, but
not limited to, encumbrance of the Residence with a junior deed of trust or transfer of the
Residence to a spouse or trust). Borrower shall provide this notice to the Agency no later than
fifteen (15) days before the Transfer occurs, except where the Transfer is by devise or inheritance
after death of the Borrower in which event notice shall be provided within thirty (30) days of the
date of Transfer.
15. Default.
a. The Borrower shall be in default under this Note if he or she is in
default under the First Mortgage following the expiration of First Mortgage cure periods, or if,
after the notice and cure period provided by the Agency to the Borrower pursuant to the notice
and cure provisions of the Deed of Trust, the Borrower (i) fails to pay any money when due
under this Note; (ii) breaches any representation or covenant made in this Note in any material
respect; or (iii) breaches any provision of the Deed of Trust.
b. Upon the Borrower's breach of any covenant or agreement of the
Borrower in this Note or the Deed of Trust, including, but not limited to, the covenants to pay,
when due, any sums secured by the Deed of Trust, the Agency, prior to acceleration, will send, in
the manner set forth in Section 20 notice to the Borrower specifying: (1) the breach; (2) if the
breach is curable, the action required to cure such breach; (3) a date, not less than thirty (30) days
from the date the notice is effective, by which such breach, if curable, is to be cured and (4) if the
breach is curable, that failure to cure such breach on or before the date specified in the notice
may result in acceleration of the sums secured by the Deed of Trust and foreclosure by the
Agency. The notice will also inform the Borrower of the Borrower's right to reinstate after
acceleration and the right to bring a court action to assert the nonexistence of default or any other
defense of the Borrower to acceleration and sale.
16. Acceleration. -Upon the occurrence of a default under this Note, the Deed
of Trust, or the First Mortgage, the Agency shall have the right to declare the full amount of the
5
principal along with any Contingent Interest under this Note immediately due and payable. Any
failure by the Agency to pursue its legal and equitable remedies upon default shall not constitute
a waiver of the Agency's right to declare a default and exercise all of its rights under this Note
and the Deed of Trust. Nor shall acceptance by the Agency of any payment provided for herein
constitute a waiver of the Agency's right to require prompt payment of any remaining principal
and interest owed.
17. No Offset. The Borrower hereby waives any rights of offset it now has or
may later have against the Agency, its successors and assigns, and agrees to make the payments
called for in this Note in accordance with the terms of this Note.
18. Waiver; Attorney Fees and Costs. The Borrower and any endorsers or
guarantors of this Note, for themselves, their heirs, legal representatives, successors and assigns,
respectively, severally waive diligence, presentment, protest, and demand, and notice of protest,
dishonor and non-payment of this Note, and expressly waive any rights to be released by reason
of any extension of time or change in terms of payment, or change, alteration or release of any
security given for the payments hereof, and expressly waive the right to plead any and all statutes
of limitations as a defense to any demand on this Note or agreement to pay the same, and jointly
and severally agree to pay all costs of collection when incurred, including reasonable attorney
fees. If an action is instituted on this Note, the Borrower promises to pay, in addition to the costs
and disbursements allowed by law, such sum as a court may adjudge reasonable as attorneys' fees
in such action.
19. No Waiver by the Agency. No waiver of any breach, default or failure of
condition under the terms of this Note shall be implied from any failure of the Agency to take
action with respect to such breach, default or failure or from any previous waiver of any similar
or unrelated breach, default or failure.
20. Notices. All notices required in this Note shall be sent by certified mail,
return receipt requested, or express delivery service with a delivery receipt, or personally
delivered with a delivery receipt obtained and shall be deemed to be effective as of the date
shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date
the notice was returned as undeliverable as follows:
To the Borrower:
At the address of the Residence.
To the Agency:
Carlsbad Redevelopment Agency
Housing and Redevelopment Department
Attention: Housing and Redevelopment Director
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008-2389
6
The parties may subsequently change addresses by providing written notice of the change
in address to the other parties in accordance with this Section 20.
21. Joint and Several Obligations. This Note is the joint and several
obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and
their successors and assigns.
22. Nonliabilitv for NeFligence, Loss, or Damage. Borrower acknowledges,
understands and agrees that the relationship between Borrower and the Agency is solely that of
borrower and lender, and that the Agency does not undertake or assume any responsibility for or
duty to Borrower to select, review, inspect, supervise, pass judgment on, or inform Borrower of
the quality, adequacy or suitability of the Residence or any other matter. The Agency owes no
duty of care to protect Borrower against negligent, faulty, inadequate or defective building or
construction or any condition of the Residence and Borrower agrees that neither Borrower, or
Borrower's heirs, successors or assigns shall ever claim, have or assert any right or action against
the Agency for any loss, damage or other matter arising out of or resulting from any condition of
the Residence and will hold the Agency harmless from any liability, loss or damage for these
things.
23. Indemnity. Borrower agrees to defend, indemnify, and hold the Agency
harmless from all losses, damages, liabilities, claims, actions, judgments, costs, and reasonable
attorneys fees that the Agency may incur as a direct or indirect consequence of
a. the making of the loan to Borrower;
b. Borrower's failure to perform any obligations as and when required
by the Note or the Deed of Trust; or
c. the failure at any time of any of Borrower's representations to the
Seller or the Agency to be true and correct.
24. Termination of Restrictions. Any legal restrictions on conveyance of the
Residence (as defined in 24 CFR 203.41(a)(3)(u)) included in this Note shall terminate upon
transfer of the Residence by foreclosure, deed in lieu of foreclosure, or assignment to the
Secretary of the United States Department of Housing and Urban Development.
25. Controlling Law. This Note shall be construed in accordance with and be
governed by the laws of the State of California.
26. Assimment bv Agency. The Agency may assign its right to receive the
proceeds under this Note to any person and upon notice to the Borrower by the Agency all
payments shall be made to the assignee.
27. Invalid Provisions. If any one or more of the provisions contained in this
Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such
provision or provisions shall be deemed severable from the remaining provisions contained in
7
this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision
had never been contained in this Note.
28. Entire Agreement. This Note (along with the Deed of Trust) sets forth the
entire understanding and agreement of the Agency and the Borrower and any amendment,
alteration or interpretation of this Note must be in writing signed by both the Agency and the
Borrower.
Borrower
Borrower:
(Print Name)
8
RECORDING REQUESTED BY
AND WHEN RECORDED MAL TO:
Agency of Carlsbad
Agency Clerk's Office
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Attention: Agency Clerk
No fee for recording pursuant to
783
(Space above for Recorder's Use)
NOTE TO BORROWER:
THIS DEED OF TRUST CONTAINS
PROVISIONS PROHIBITING ASSUMPTIONS
THIS DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust") made as of
this day of ,2003, among
("Borrower") as trustor, and ("Trustee"), and
the Carlsbad Redevelopment Agency, a body corporate and politic (the "Agency"), as
beneficiary.
The Borrower, in consideration of the promises herein recited and the trust herein created,
irrevocably grants, transfers, conveys and assigns to the Trustee, in trust, with power of sale, the
property located in the Agency of Carlsbad, State of California, described in the attached Exhrhit
X! (the "Property").
TOGETHER with all the improvements now or hereafter erected on the property, and all
easements, rights, appurtenances, and all fixtures now or hereafter attached to the property, all of
which, including replacements and additions thereto, shall be deemed to be and remain a part of
the property covered by this Deed of Trust; and
TOGETHER with all articles of personal property or fixtures now or hereafter attached to
or used in and about the building or buildings now erected or hereafter to be erected on the
Property which are necessary to the complete and comfortable use and occupancy of such
building or buildings for the purposes for which they were or are to be erected, including all other
goods and chattels and personal property as are ever used or furnished in operating a building, or
the activities conducted therein, similar to the one herein described and referred to, and all
renewals or replacements thereof or articles in substitution therefore, whether or not the same
are, or shall be attached to said building or buildings in any manner; and all of the foregoing,
together with the Property, is herein referred to as the "Security";
1
To have and to hold the Security together with acquittances to the Trustee, its successors
and assigns forever;
TO SECURE to the Agency the repayment of the sums evidenced by a promissory note
executed by the Borrower to the Agency dated , 2003, in the amount of
Dollars ($ ) (the "Note");
TO SECURE to the Agency the payment of all other sums, with interest thereon,
advanced in accordance herewith to protect the security of this Deed of Trust; and the
performance of the covenants and agreements of the Borrower herein contained; and
TO SECURE the performance of any obligations of Borrower in any other agreements
with respect to the financing of the Property or the Security the failure of which would adversely
affect Beneficiary, whether or not Beneficiary is a party to such agreements.
BORROWER AND AGENCY COVENANT AND AGREE AS FOLLOWS:
1. wer's Estate. That the Borrower is lawfully seized of the estate hereby
conveyed and has the right to grant and convey the Security, that other than this Deed of Trust,
the Security is encumbered only by that deed of trust executed by the Borrower in connection
with a loan made to the Borrower by or its successors and assigns
(the "First Lender"), dated ,2003, executed by the Borrower in favor of First
Lender, and recorded in the County of San Diego on ,2003, and as Document No.
(the "First Lender Deed of Trust"), securing a promissory note executed
by the Borrower in favor of the First Lender ("First Lender Note"), to assist in the purchase of the
Property. The Borrower agrees to warrant and defend generally the title to the Security against
all claims and demands, subject to any declarations, easements or restrictions listed in a schedule
of exceptions to coverage in any title insurance policy insuring the Agency's interest in the
Security. (As used in this Deed of Trust, the term "First Lender" shall include all successors and
assigns of the First Lender.)
2. kpgmmlof~nan. The Borrower will promptly repay, when due, the principal
and interest required by the Note. The Note contains the following provisions concerning
repayment of the loan under certain conditions:
3. of Nok. The Borrower acknowledges that this
Note is given in connection with the purchase of property (the "Residence") as part of a program
of the Agency to assist in the purchase of homes by lower income persons. Consequently, this
Note may be transferred under certain circumstances as permitted by the Note or due in full upon
a Transfer as defined in the Note.
3. First TmdfxLmn. The Borrower will observe and perform all of the covenants
and agreements of the First Lender Note, First Lender Deed of Trust, and related First Lender
loan documents.
2
4. vR +. The Borrower shall occupy the Property as his or
her principal place of residence. The Borrower shall be considered as occupying the Property if
the Borrower is living in the unit for at least ten (10) months out of each calendar year. The
Borrower shall provide an annual written certification to the Agency that the Borrower is
occupying the Property as his or her principal place of residence.
5. Chzgdam. The Borrower will pay all taxes, assessments and other charges,
fines and impositions attributable to the Security which may attain a priority senior to this Deed
of Trust, by the Borrower malung any payment, when due, directly to the payee thereof. The
Borrower will promptly furnish to the Agency all notices of amounts due under this paragraph,
and in the event the Borrower makes payment directly, the Borrower will .promptly discharge any
lien which has priority senior to this Deed of Trust; provided, that the Borrower will not be
required to discharge the lien of the First Lender Deed of Trust or any other lien described in this
paragraph so long as the Borrower will agree in writing to the payment of the obligation secured
by such lien in a manner acceptable to the Agency, or will, in good faith, contest such lien by, or
defend enforcement of such lien in, legal proceedings which operate to prevent the enforcement
of the lien or forfeiture of the Security or any part thereof.
6. Hazard. The Borrower will keep the Security insured by a standard fire
and extended coverage insurance policy in at least an amount equal to the replacement cost of the
Security, but in no event less than the amount necessary to prevent the Borrower from becoming
a co-insurer under the terms of the policy.
The insurance carrier providing this insurance shall be licensed to do business in the State
of California and be chosen by the Borrower subject to approval by the Agency; provided, that
such approval will not be withheld if the insurer is also approved by the First Lender, the Federal
Home Loan Mortgage Corporation, Fannie Mae, Freddie Mac, the United States Department of
Housing and Urban Development, the United States Department of Veterans Affairs, or
successors thereto.
All insurance policies and renewals thereof will be in a form acceptable to the Agency
and will include a standard mortgagee clause with standard lender's endorsement in favor of the
holder of the First Lender Note and the Agency as their interests may appear and in a form
acceptable to the Agency. The Agency shall have the right to hold, or cause its designated agent
to hold, the policies and renewals thereof, and the Borrower shall promptly furnish to the
Agency, or its designated agent, the original insurance policies or certificates of insurance, all
renewal notices and all receipts of paid premiums. In the event of loss, the Borrower will give
prompt notice to the insurance carrier and the Agency or its designated agent. The Agency, or its
designated agent, may make proof of loss if not made promptly by the Borrower. The Agency
shall receive thirty days advance notice of cancellation of any insurance policies required under
this section.
Unless the Agency and the Borrower otherwise agree in writing, insurance proceeds,
subject to the rights of the First Lender, will be applied to restoration or repair of the Security
damaged, provided such restoration or repair is economically feasible and the Security of this
Deed of Trust is not thereby impaired. If such restoration or repair is not economically feasible
or if the security of this Deed of Trust would be impaired, the insurance proceeds will be used,
3
subject to the rights of the First Lender, to repay the Note and all sums secured by this Deed of
Trust, with the excess, if any, paid to the Borrower. If the Security is abandoned by the
Borrower, or if the Borrower fails to respond to the Agency, or its designated agent, within thirty
(30) days from the date notice is mailed by either of them to the Borrower that the insurance
carrier offers to settle a claim for insurance benefits, the Agency, or its designated agent, is
authorized, subject to the rights of the First Lender, to collect and apply the insurance proceeds at
the Agency's option either to restoration or repair of the Security or to repay the Note and all
sums secured by this Deed of Trust.
If the Security is acquired by the Agency, all riglit, title and interest of the Borrower in
and to any insurance policy and in and to the proceeds thereof resulting from damage to the
Security prior to the sale or acquisition will pass to the Agency to the extent of the sums secured
by this Deed of Trust immediately prior to such sale or acquisition subject to the rights of the
First Lender.
7. of L 'kcrmlg. The Borrower will keep the Security
in good repair and will not commit waste or permit impairment or deterioration of the Security.
8. the Avencv's ,';eclln. If the Borrower fails to perform the
covenants and agreements contained in this Deed of Trust, the First Lender Note, the First Lender
Deed of Trust, or if any action or proceeding is commenced which materially affects the
Agency's interest in the Security, including, but not limited to, default under the First Lender
Deed of Trust, the First Lender Note or any other deed of trust encumbering the Property,
eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a
bankrupt or decedent, then the Agency, at the Agency's option, upon notice to the Borrower, may
make such appearances, disburse such sums and take such action as it determines necessary to
protect the Agency's interest, including but not limited to, disbursement of reasonable attorney's
fees and entry upon the Security to make repairs.
Any amounts disbursed by the Agency pursuant to this paragraph, with interest thereon,
will become an indebtedness of the Borrower secured by this Deed of Trust. Unless the
Borrower and Agency agree in writing to other terms of payment, such amount will be payable
upon notice from the Agency to the Borrower requesting payment thereof, and will bear interest
from the date of disbursement at the lesser of (1) ten percent (10%) per annum or (2) the highest
interest rate permissible under applicable law. Nothing contained in this paragraph will require
the Agency to incur any expense or take any action hereunder.
9. hqxctmn. ,The Agency may make or cause to be made reasonable entries upon
and inspections of the Security; provided that the Agency will give the Borrower reasonable
notice of inspection.
10. e hv the Avenq " Not a Wniver. Any forbearance by the Agency in
exercising any right or remedy will not be a waiver of the exercise of any such right or remedy.
The procurement of insurance or the payment of taxes or other liens or charges by the Agency
will not be a waiver of the Agency's right to accelerate the maturity of the indebtedness secured
by this Deed of Trust.
4
11. Remedies. All remedies provided in this Deed of Trust are distinct
and cumulative to any other right or remedy under this Deed of Trust or any other document, or
afforded by law or equity, and may be exercised concurrently, independently or successively.
12. i. The covenants and agreements herein contained
shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the
Agency and the Borrower subject to the provisions of this Deed of Trust.
13. '3everal T nbdQ. All covenants and agreements of the Borrower shall
be joint and several.
14. Nnti. Except for any notice required under applicable law to be given in
another manner, all notices required in this Deed of Trust shall be sent by certified mail, return
receipt requested or express delivery service with a delivery receipt, or personally delivered with
a delivery receipt obtained, and shall be deemed to be effective as of the date shown on the
delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was
returned as undeliverable as follows:
To the Owner:
At the address of the Borrower.
To the Agency:
Carlsbad Redevelopment Agency
Housing and Redevelopment Department
Attn: Housing and Redevelopment Director
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008-2389
The parties may subsequently change addresses by providing written notice of the change
in address to the other parties in accordance with this section.
15. TAW. This Deed of Trust shall be construed in accordance with and
be governed by the laws of the State of California.
16. .. mvlsums. If any one or more of the provisions contained in this Deed of
Trust or the Note shall for any reason be held to be invalid, illegal or unenforceable in any
respect, then such provision or provisions shall be deemed severable from the remaining
provisions, and this Deed of Trust and the Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained in this Deed of Trust or the Note.
17. (lantl. The captions and headings in this Deed of Trust are for convenience
only and are not to be used to interpret or define the provisions hereof.
5 7
18. Defalllt.. Upon the Borrower's breach of any covenant or agreement of
the Borrower in this Deed of Trust, including, but not limited to, the covenants to pay, when due,
any sums secured by this Deed of Trust, the Agency, prior to acceleration, will send, in the
manner set forth in Section 14 of this Deed of Trust, notice to the Borrower specifying: (1) the
breach; (2) if the breach is curable, the action required to cure such breach; (3) a date, not less
than thirty (30) days from the date the notice is effective as set forth in Section 14 of this Deed of
Trust, by which such breach, if curable, is to be cured; and (4) if the breach is curable, that failure
to cure such breach on or before-the date specified in the notice may result in acceleration of the
sums secured by this Deed of Trust and sale of the Security. Notice shall be effective as of the
date shown on the delivery receipt as the date of delivery, the date delivery was refused or the
date the notice was returned as undeliverable. The notice will also inform the Borrower of the
Borrower's right to reinstate after acceleration and the right to bring a court action to assert the
nonexistence of default or any other defense of the Borrower to acceleration and sale. If the
breach is not curable or is not cured on or before the date specified in the notice, the Agency, at
the Agency's option, may: (a) declare all of the sums secured by this Deed of Trust to be
immediately due and payable without further demand and may invoke the power of sale and any
other remedies permitted by California law; (b) 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 the Trustee, and do any acts
which it deems necessary or desirable to preserve the value or marketability of the Security, or
part thereof or interest therein, increase the income therefrom or protect the security thereof. The
entering upon and taking possession of the Security shall not cure or waive any breach hereunder
or invalidate any act done in response to such breach and, notwithstanding the continuance in
possession of the Security, the Agency shall be entitled to exercise every right provided for in
this Deed of Trust, or by law upon occurrence of any uncured breach, including the right to
exercise the power of sale; (c) commence an action to foreclose this Deed of Trust as a mortgage,
appoint a receiver, or specifically enforce any of the covenants hereof; (d) deliver to the Trustee a
written declaration of default and demand for sale, pursuant to the provisions for notice of sale
found at California Civil Code Sections 2924, ct seq., as amended from time to time; or (e)
exercise all other rights and remedies provided herein, in the instruments by which the Borrower
acquires title to any Security, or in any other document or agreement now or hereafter
evidencing, creating or securing all or any portion of the obligations secured hereby, or provided
by law.
The Agency shall be entitled to collect all reasonable costs and expenses incurred in
pursuing the remedies provided in this paragraph, including, but not limited to, reasonable
attorney's fees.
19. ,&x&mkm. Upon the occurrence of a default under the Note, this Deed of
Trust, the First Lender Note, or the First Lender Deed of Trust, the Agency shall have the right to
declare the full amount of the principal along with any interest under the Note immediately due
and payable. Any failure by the Agency to pursue its legal and equitable remedies upon default
shall not constitute a waiver of the Agency's right to declare a default and exercise all of its rights
under the Note and this Deed of Trust. Nor shall acceptance by the Agency of any payment
provided for in the Note constitute a waiver of the Agency's right to require prompt payment of
any remaining principal and interest owed.
b
20. . Notwithstanding the Agency’s acceleration of the
sums secured by this Deed of Trust, the Borrower will have the right to have any proceedings
begun by the Agency to enforce this Deed of Trust discontinued at any time prior to five (5) days
before sale of the Security pursuant to the power of sale contained in this Deed of Trust or at any
time prior to entry of a judgment enforcing this Deed of Trust if (a) the Borrower pays Agency
all sums, if any, which would be then due under this Deed of Trust as if acceleration under the
Note has occurred; (b) the Borrower cures all breaches of any other covenants or agreements of
the Borrower contained in this Deed of Trust; (c) the Borrower pays all reasonable expenses
incurred by Agency and the Trustee in enforcing the covenants and agreements of the Borrower
contained in this Deed of Trust, and in enforcing the Agency’s and the Trustee’s remedies,
including, but not limited to, reasonable attorney’s fees; and (d) the Borrower takes such action as
Agency may reasonably require to assure that the lien of this Deed of Trust, Agency’s interest in
the Security and the Borrower’s obligation to pay the sums secured by this Deed of Trust shall
continue unimpaired. Upon such payment and cure by the Borrower, this Deed of Trust and the
obligations secured hereby will remain in full force and effect as if no acceleration had occurred.
21. hmmegue. Upon payment or forgiveness of all sums secured by this Deed of
Trust, the Agency will request the Trustee to reconvey the Security and will surrender this Deed
of Trust and the Note to the Trustee. The Trustee will reconvey the Security without warranty
and without charge to the person or persons legally entitled thereto. Such person or persons will
pay all costs of recordation, if any.
22. e Tnw. The Agency, at the Agency’s option, may from time to time
remove the Trustee and appoint a successor trustee to any trustee appointed hereunder. The
successor trustee will succeed to all the title, power and duties conferred upon the Trustee herein
and by applicable law.
23. o First Mort=. Notwithstanding any other provision hereof,
the provisions of this Deed of Trust shall be subordinate to the lien of the First Lender Deed of
Trust and shall not impair the rights of the First Lender, or the First Lender’s successor or assign,
to exercise .its remedies under the First Lender Deed of Trust in the event of default under the
First Lender Deed of Trust by the Borrower. Such remedies under the First Lender Deed of Trust
include the right of foreclosure or acceptance of a deed or assignment in lieu of foreclosure.
After such foreclosure or acceptance of a deed or assignment in lieu of foreclosure, or upon
assignment of the First Lender Deed of Trust to the Secretary of the United States Department of
Housing and Urban Development (the “Secretary”), this Deed of Trust shall be forever
terminated and shall have no further effect as to the Property or any transferee thereafter;
provided, however, if the holder of such First Lender Deed of Trust acquired title to the Property
pursuant to a deed or assignment in lieu of foredosure, or if the First Lender’s Deed of Trust is
assigned to the Secretary, this Deed of Trust shall automatically terminate upon such acquisition
of title, or assignment to the Secretary provided that (i) the Agency has been given written notice
of default under such First Lender Deed of Trust and (ii) the Agency shall not have cured or
commenced to cure the default within such 30-day period and given its firm commitment to
complete the cure in the form and substance acceptable to the First Lender. Borrower agrees to
record any necessary documents to effect such termination, if applicable.
7
24. Ay's Fern. If any action or proceeding is brought to enforce this Deed of Trust
or any provision of this Deed of Trust or the Note, the prevailing party shall be entitled to its
attorney's fees and the cost of such action or proceeding.
IN WITNESS WHEREOF, the Borrower has executed this Deed of Trust as of the date
first written above.
Borrower
(Print Name)
Borrower
(Print Name)
8
EXHIBIT A
Property Description
DEED OF TRUST AND SECURITY AGREEMENT
AGENCY OF CARLSBAD
ADMINISTRATIVE CHECKLIST
(Remove Upon Completion)
KT,TNES: TIHE-
Date of Document, p. 1, first paragraph
Borrower's Name, p. 1, first paragraph
Trustee's Name, p. 1, first paragraph
Date and Amount of Promissory Note, p. 2, second full paragraph
First Lender's Name, p. 2, Section 1
Date of First Lender's Deed of Trust, p. 2, Section 1
Recording Information for First Lender's Deed of Trust, p. 2, Section 1
Signatures, p. 9
Include ExhhLA , Property Description
Notary
..
BORROWER DISCLOSURE STATEMENT
LAGUNA POINT
The Carlsbad Redevelopment Agency (the "Agency"), through the City of Carlsbad
Inclusionary Housing Ordinance, has required the developer of the Laguna Point condominium
development to sell the homes in the development to qualified households under terms that make the
home affordable to you and the other new homebuyers. The Agency has also provided financial
assistance to the developer to assist in making the Laguna Point homes affordable. Your new home is
affordable to you because the Agency and the developer are providing you with second mortgage
financing through the Laguna Point Homebuyer Assistance Program (the "Program") so that you will
be able to buy your home. The Agency offers the Program in order to enable low income households
to own their own homes in Carlsbad.
As a condition of the financing, the Agency will require you to sign a Promissory Note and a
Deed of Trust. The Deed of Trust will be recorded against your property.
This Disclosure Statement explains the major provisions of the Promissory Note and the
Deed of Trust to help you understand their requirements. You should, of course, read all of the
Agency loan documents yourself and become completely familiar with them.
A. PRIMARY RESIDENCE AND LEASING YOUR HOME
Under the terms of the Promissory Note and Deed of Trust, the home you buy with the
assistance of the Agency loan must be your main place of residence. This means you must live in the
home no less than 10 months out of each calendar year. Each year, you must certify in writing to the
Agency that you are living in your home as your main place of residence. In addition, you cannot
lease your home. If you fail to follow these provisions, you are considered to be in default, and the
Agency may declare its loan immediately due and payable.
B. RESALE RESTRICTIONS
The Agency and the Developer have provided financial assistance to the developer to assist in
making the Laguna Point homes affordable. Your new home is affordable to you because the Agency
and the developer are providing you with second mortgage financing through the Laguna Point
Homebuyer Assistance Program (the "Program") so that you will be able to buy your home.
such, there are restrictions in your Deed of Trust and Promissory Note that limit your ability.
to sell your home, the sales price at which you are able to sell your home, and of the amount of
income the purchaser of the home mav earn in a year.
Beginning on the date you purchase your home (close escrow) and for fifteen years thereafter,
you may only sell your home to a qualified lower income household. A lower income household is
one in witch the households gross annual income does not exceed 80% of the median income for San
Diego County, adjusted for assumed household size. Further, the sales price can increase above the
original sales price by an amount that is equal to the increase annual increase in the San Diego Area
Median Income. Median income figures shall be those published annually by the United States
-1 - 43
$ You default under the Agency loan or the First Mortgage, or
$ You sell or transfer title to your home, or
$ The end of the term of your loan is reached, with exceptions (see section E.
below)
The contingent interest on your Agency loan has three (3) parts:
(1) Appreciation Amount;
(2) Contingent interest percentage; and
(3) Automatic 25% discount to account for any improvements you may make to
the home.
An example is used to show each of the three (3) parts and how each would be calculated.
Example 1 Your loan from the Agency is $18,200. The original sales price you paid for your
home was $140,000. When you sell, the sales price is $173,600.
1. Appreciation Amount. The appreciation amount is generally the difference between
the original sales price you paid for the home and the price at which you sell it. For example:
Price of Home When You Sell: $173,600
Price of Home When You Bought: - $140,000
Appreciation Amount: $33,600
Minus
The appreciation amount is calculated differently under certain circumstances. If you (a) prepay your
Agency loan, or (b) transfer your home by means other than selling it, or (c) are in default under the
terms of the Agency loan, the appreciation amount will be figured by using the Fair Market Value of
the home (instead of the price of the home when you sell, as above). Fair Market Value is the value
of the home as determined by an independent appraiser chosen by the Agency. If such an appraisal is
necessary, the cost of the appraisal will be paid by you. If a creditor takes title to your home, the
appreciation amount will be figured by using the amount paid for the home at the creditor's sale.
2. Contingent Interest Percentage. The contingent interest percentage is the percentage
of the sales price that the Agency loaned to you. This percentage is figured by dividing the amount of
the Agency loan by the purchase price you paid for the home. Continuing with the example:
Agency Loan Amount:
Divided By
$ 18,200
Price of Home When You Bought: i $140.000
Contingent Interest Percentage - = 13.00%
Equals
3. Automatic Discount For Possible Capital Improvements. During the time that you
-3-
2. When You Sell Your Home.
Per Section B above, when you sell, transfer, or assign your home or any interest in it, the
principal and contingent interest owing is immediately due and payable. The only times when this is
not the case is when a transfer is to an existing husband or wife who signed the Promissory Note, to a
husband or wife who then becomes a co-owner of the home, to a husband or wife as part of a
marriage or a divorce, to an inter vivos trust in which you are the beneficiary, or to a husband, wife,
or child upon death of the borrower.
Example 2 shows the repayment process for the Agency loan when the home is sold.
Example 2 You have lived in your home for 8 full years and now must sell it because you
received a promotion to a job in another state. You bought your home for $140,000.
The Agency provided you with a loan of $1 8,200 to help you buy your house. The
sales price of your home is $200,000.
(a) Amount of Principal Owed Upon Sale. Since the Agency Loan is a
deferred loan, and you have made no payments during the time you have held the loan, the full
amount of principal must be repaid to the Agency at the time of sale. In this example, the principal
amount due is $1 8,200.
(b) Amount of Contingent Interest Owed. To figure out the amount of
contingent interest you owe the Agency, we need to calculate the appreciation amount and the
contingent interest percentage, and then apply the automatic discount.
Calculating the Appreciation Amount
Sales Price of Your Home: $200,000.00
Minus Price You Originally Paid: - $140.000.00
Appreciation Amount $ 60,000.00
Calculatin~ the Contingent Interest Percentage
Your Agency Loan divided by the
Price You Originally Paid: $18,200 + $140,000 = 0.13
Contingent Interest Percentage = 13%
Calculating Contingent Interest Owed (With Discount Applied)
Appreciation Amount: $ 60,000.00
Contingent Interest Percentage X .13
$ 7,800.00
Automatic Discount X .75
Multiplied By
Multiplied By
-5-
Please sign the enclosed copy of this Borrower Disclosure Statement in the space
provided below and return it to the Agency at 2965 Roosevelt Street, Suite B, Carlsbad,
California, 92008-2389.
1 have read and understand the above Borrower Disclosure Statement.
By: By:
Signature of Borrower Signature of Borrower
-
Print Name of Borrower Print Name of Borrower
Dated: Dated:
-7-
ATTACHMENT 4
LAGUNA POINT
RP 01 -08/CT 01 -1 3
a
EXHIBIT 3
Minutes of:
Time of Meeting:
Date of Meeting:
Place of Meeting:
HOUSING COMMISSION
6:OO P.M.
March 18,2003
CITY COUNCIL CHAMBERS
CALL TO ORDER
Vice-Chairperson Scarpelli called the Special Meeting to order at 6:09 p.m.
PLEDGE OF ALLEGIANCE
Commissioner Houston led the Pledge of Allegiance.
ROLL CALL
Present:
Staff Present:
Commissioners: Renee Huston
Doris Ritchie
Edward Scarpelli
Bobbie Smith
Management Analyst: Craig Ruiz
Housing Program Manager : Bobbi Nunn
APPROVAL OF MINUTES
Minutes of November 14,2002, were approved as written.
VOTE: 4-0
AYES: 4-0
NOES: None
ABSTAIN: None
COMMENTS FROM THE AUDIENCE ON ITEMS NOT LISTED ON THE AGENDA
There was no audience in attendance, who wished to speak at ths time.
NEW BUSINESS
Vice-Chairperson Scarpelli requested nominations for Chairperson and Vice-Chairperson of the Housing
Commission.
Commissioner Doris Ritchie nominated Commissioner Edward Scarpelli. Commissioner Smith seconded
the nomination of Mr. Edward Scarpelli. Nominations were closed.
Vice-Chairperson Scarpelli accepted the nomination and asked if there was any discussion. The nomination
of Commissioner Edward Scarpelli was approved unanimously.
Chairperson Scarpelli called for nominations for the Vice-Chairperson position. Commissioner Smith
nominated Commissioner Renee Huston to be appointed Vice-Chairperson. Commissioner Doris Ritchie
seconded her nomination. The nomination of Commissioner Huston to be appointed Vice-Chairperson was
approved unanimously.
Chairperson Scarpelli stated the next item on the agenda, which is the adoption of a resolution
recommending approval of the Public Housing Agency (PHA) Plan for submittal to the Department of
Housing and Urban Development. The staff has recommended to the Commission the plan be approved,
which will be presented to the Housing and Redevelopment Commission.
HOUSING COMMISSION MINUTES
MARCH 18,2003
PAGE 6 of 16
ABSTAIN: None
Chairperson Scarpelli stated the next item on the agenda is the recommendation of approval to the City
Council to provide $105,000 in financial assistance and approval of the loan agreement and related
documents for construction of three affordable condominium units to satisfy the requirements of the
Inclusionary Housing Ordinance for the Laguna Point Project. The staff is recommending approval on this
resolution.
Mr. Craig Ruiz, Management Analyst, began his presentation to the Commission. The Laguna Point Project
is a 21-unit condominium project. A model of the proejct is before the Commission. Of that 21 units, there
will be three affordable units included within the development. Each of the affordable units will be one
bedroom in size, ranging from 830 to 850 square feet, and they will be affordable to households earning
80% or less of the area median income.
Mr. Ruiz presented an artist rendering of what the project will look like. This project is located at the
intersection of State Street and Laguna. He showed a site plan and landscaping plan, and as presented in the
staff report, there are two main buildings. There is a smaller building in the middle that houses the offices
and a breezeway with units above it. He presented a drawing of the view looking from the north as well as
the elevation traveling on Laguna toward the south. The project is going to cost roughly $9,000,000 to
produce, which includes over $5,000,000 in hard construction costs and $780,000 in soft construction costs,
sales marketing and other various costs are lumped together at a little over $1,100,000, the permit fees are
over $500,000 and the land value is $1,700,000. The sales revenue presented in the pro forma attached to
the report, states the builder estimated in the pro forma of sales revenue of about $9,860,000. With the 18
market rate units generating just under $8,600,000, which is not quite $480,000 a unit, then the three
affordable units would earn $120,000 each or $360,000 total. As presented in the report, we are
recommending $105,000 in financial assistance, which if everything went according to plan, would be about
$780,000 in profit from the sales or roughly 8% profits.
Mr. Ruiz continued it is important to note this project is the first of its kind. There are not any comparable
projects in Carlsbad. This is what we are projecting as far as sales and revenues and costs, but we do not
know exactly what the untis are going to sell for. This is what the pro forma is projecting, but it could be
more or less.
Chairperson Scarpelli inquired about the $9,800,000 again, let’s say on the $8,595,000, what does that
divide into again average value per unit?
Mr. Ruiz answered it is about $480,000 a unit.
Chairperson Scarpelli stated that is the average.
Mr. Ruiz continued the developer is requesting the financial assistance in the amount of $2 10,000. Staffs
recommendation is $35,000 per unit. As we have said in the past, we have the Housing Policy Team, which
is made up of Debbie Fountain, myself, as well the Planning Director, the Community Development
Director, Financial Director and the Assistant City Attorney. We review all these financial assistance
requests. Just like this development is unique, so is our recommendation on financial assistance. There
wasn’t a precedent that was set before this with a similar type project so we are branching out into new
ground. The financial assistance requests that you have seen in the past for “for sale projects” have been in
the amount of $15,000 each per affordable unit. We propose a recommendation that is somewhat higher for
three different reasons. First was the developer did not request any type of development standards
modifications or waivers or any type of density bonuses. Other projects in the past have requested
variances from our standards or higher density to offset some of these costs. That is a non-monetary value
that can be given to a project, but it is not part of this project. Second, it is only 21 units. It is a very small
HOUSING COMMISSION MINUTES
MARCH 18,2003
PAGE 7 of 16 T
project. With smaller projects, there is a cost of doing business that is higher. There aren’t as many units to
spread the cost over. Finally this project is in the Redevelopment Area and there is a benefit to having
housing, let alone affordable housing in the Redevelopment Area. One of our primary goals is that people
live, work, shop all in the Redevelopment Area. This will be one of two housing projects in the
Redevelopment Area. We are hoping it will spur hture developments of its type in the area.
Mr. Ruiz continued as stated in the report, there is a $15,000 a unit value for the affordable housing value
this project will provide. On top of that, $20,000 per unit in value for the Redevelopment value that is
offered. Along with the financial assistance, there are also loan documents that were included for your
review, the loan agreement, the note, the deed of trust, and regulatory agreement that the developer and the
City will enter into as part of this financial assistance. Our recommendation to the Commission is to
recommend to the City Council approval of the financial assistance in the amount of $105,000. Then
recommend approval of the loan documents, including the loan agreement, note, deed of trust, and
regulatory agreement.
Commissioner Huston commented on the artist rendering and admired the sidewalk setback with the
vegetation. It lends itself to the redevelopment. She asked if that would really happen?
Mr. Ruiz stated the builder will address this in his presentation. He did say the picture is a projection.
There is an elevation difference from the drawing, so it will not look exactly like the drawing.
Commissioner Huston commented about wanting to make the village walkable. She asked Mr. Ruiz if
initially the developer asked for $70,000 per unit?
Mr. Ruiz said correct.
Commissioner Huston inquired as to what the developer’s justification was for that amount?
Mr. Ruiz answered that the developer answer that question also.
Commissioner Huston asked what the interest rate is on this? Exactly what pool of money does this come
out of?
Mr. Ruiz said the Redevelopment Agency is part of our money and 20% of that money has to go into
affordable housing. It is called our low and moderate income-housing fund. That would be the source of
the money, and that is specifically what it is earmarked for. Typically, we lend the money to the builder to
reimburse for construction costs. Then the project is built and the three units are sold to low-income
households. The money for each unit will be recorded in the form of a note and a grant deed against each of
those affordable units.
Commissioner Huston asked if it is like a second trust deed?
Mr. Ruiz said correct. With the sale of each affordable unit, the builder is credited with repayment of the
loan and no longer has that obligation. It transfers from him to each homeowner. When the homeowner
sells the property, after 15 years, they can sell it on the open market. At that point, that note plus any other
developer subsidy, plus a share in the appreciation comes back to the Redevelopment Agency where we
would then take that money and put it into another affordable project.
Commissioner Huston asked if in the interim is there interest that rolls over?
HOUSING COMMISSION MINUTES
MARCH 18,2003
PAGE 8 of 16
Mr. Ruiz answered we do not do a straight interest rate like a traditional first mortgage. We do a shared
appreciation so if that loan represented 10% of the purchase price, when it is sold; we take roughly 10% of
any appreciation.
Commissioner Huston reiterated then the loan is paid back out of the appreciation. So there really isn’t an
interest rate associated with it?
Mr. Ruiz said correct.
Commissioner Huston asked if that was standard procedure?
Mr. Ruiz said in affordable housing, it is standard.
Commissioner Smith asked if the person will have to wait 15 years before they can sell the home?
Mr. Ruiz answered they can sell it at any time, but if they were to sell it prior to the 15 years form the date it
was constructed, they would have to sell it to another low income homeowner and then that loan would
travel to the new buyer. They would be restricted on the amount they could sell it for, and that loan travels
with the new buyer. Whoever owns it at the end of the 15 years, then it would be recaptured.
Chairperson Scarpelli asked Mr. Ruiz to get a little more involved with the no windfall the Commissioners
might have for a low-income buyer. He asked the other Commissioners if they are aware that someone else
cannot come in and make a windfall on this? He asked if the Commissioners needed further detail on it.
Commissioner Smith asked if the homebuyer would have to pay a certain amount of money and would be
locked into this for the next 15 years? Is that what you are saying?
Mr. Ruiz said no. They are free to sell the unit at any time. They are going to have to come up with the
down payment and closing costs, so they will have money into this project, but when they go to sell the unit,
the second trust deed in whatever amount it turns out to be, gets transferred to the new buyer so they are not
repaying that, but the sales price they bought it at versus what they are going to sell it for later will only
appreciate 3 or 4% a year; it will be tied to the increase of the median income.
Commissioner Huston asked about the possibility of a person buying this unit and renting it out?
Mr. Ruiz said one of the conditions that will be in our loan documents on that second is that it has to be the
person’s primary residence. They have to live in the unit 10 months a year. We research the tax records to
verify they are still getting their tax bill at that address. They also have to fill out an affidavit every year
that states they still live there. If they for some reason tried to rent it out, we would find out about it, then
they would be in default. If it was after 15 years, we would force them to repay the loan. If it was before
the 15 years, they would have to remove the renter and move back into the unit or they would have to sell it
to another low-income homebuyer.
Commissioner Huston questioned if they default on their loan, repossession, is that part of the package?
Mr. Ruiz answered something that will be included in the loan documents is a “right to cure.” If they were
to default on the loan, we would review if it is in our best interest to let the person who holds the first to
foreclose on this person or it is it in our interest to cure the default by paying the loan current, take over
ownership and get another person who is a low income home owner to buy it.
Commissioner Smith asked if the person will be paying the same amount of money for the next fifteen
years?
HOUSING COMMISSION MINUTES
MARCH 18,2003
PAGE 9 of 16
Mr. Ruiz replied yes, that would be if they did get a fixed-rate loan.
Commissioner Huston asked if that would be true even if their income changes over that period of time?
Mr. Ruiz said correct.
Chairperson Scarpelli asked if the low-income buyer has rights to refinance on the first loan? Do they
maintain all the normal rights as an owner as far as refinancing to acheve a lower interest rate? Does the
secondary holder have some approval of a refinance of a first loan?
Mr. Ruiz answered that in the loan documents it states the second is subordinated to the first loan, which
means the City is in second position behind the primary lender. The City agrees to resubordinate to a
refinanced loan if they are lowering their interest rate and lowering their monthly payment. The City will
not subordinate if they are trying to cash out.
Commissioner Ritchie asked if there would be a difference in the appearance of the subsidized units?
Mr. Ruiz replied the architecture is all the same. The location would be that they are first floor units so they
will not have the views the other units will have. Certainly, from the exterior there is no difference. The
archtecture is the same throughout.
Commissioner Ritchie stated we would not want them to stand out since there will be people paying that
kind of money for a condominium.
Chairperson Scarpelli asked if there were any further questions. He asked the applicant to step up to the
podium.
Bill Canepa, Wave Crest Resorts, 829 Second Street, Encinitas. Mr. Canepa has been developing
exclusively in the coastal area from Del Mar to Carlsbad since 1972. The developments include some
waterfront developments. This development has been the most challenging development. About 70% of
the property was acquired about four years ago. The neighboring property owner went before City Council
with a recommendation of staff for approval on a ten-unit project on the comer and then was turned down.
Our neighbor worked with us and suggested we buy his property since he was discouraged. Mr. Canepa
said he understood at that time there was a recommendation of a $70,000 subsidy for that one unit, and I
would like to clarify if that was a staff recommendation or if it was a recommendation that went to the
Housing Commission?
Mr. Ruiz stated it was staff who recommended the $70,000 subsidy for the one unit.
Mr. Canepa continued that his company was involved in this project and knew City Council considered this
a gateway to the northern portion of the downtown Carlsbad, and they wanted to see a nice project on this
site. Despite staffs recommendation, they turned down a previous project, which was bulkier and was not
as architecturally sound as this one. The City Council and the Design Review Board unanimously approved
us. Yes, the project will look as close as possible to that rendering showed earlier. The City Council and
staff were very particular to make sure the trees, landscaping and the bushes were all the type specified in
the landscape drawings, except the landscaping is a little more mature. There is a requirement that the
average trunk height for the palm trees be an average of 15 feet. That is exactly what the project will look
like. An architectural student who works for the architect did the drawing and model. That model really
wasn’t intended for public consumption. When the project is sold, we will build a more handsome model
depicting the tile roof and other details. As far as the setback md the elevations of the building, the model
is about as exact as possible. The project was challenging from the affordable housing standpoint. Our
HOUSING COMMISSION MINUTES
MARCH 18,2003
PAGE 10 of 16
much greater preference was to pay an in-lieu fee. Most projects in the City of Carlsbad, I think, can pay an
in-lieu fee. Debbie, what is the fee?
Ms. Debbie Fountain, Director of Housing and Redevelopment, answered that in-lieu fees are not allowed.
There are in-lieu fees, but the project has to be six units or less to be able to pay an in-lieu fee. I think you
are talking about going off site and buying credits in another project.
Mr. Canepa said right and what are those fees typically?
Ms. Fountain said the credit for Villa Loma is $42,000 a unit now.
Mr. Canepa said he had a conversation with Debbie Fountain and Lori Rosenstein, the planner, about three
years ago and stated he would gladly pay a fee. At that time, he thought it averaged $34,000 or $35,000.
He would gladly pay a $50,000 fee for each affordable unit. Our company needs a larger subsidy then
$35,000 a unit or this project probably will not be able to go forward. The other possibility we hoped for
was that Housing would acquire some apartments in the village of Carlsbad. This goes back three years
ago. There was some talk about Tyler apartments, I believe, but that never materialized. We looked at the
possibility of buying other units, but we had to buy them in the quadrant, but there aren’t any units that have
been built in this area since 1985. He did look at some units adjacent to the project, but after talking with
staff, those were built in 1953 and those would have serious problems as far as bringing them up to code.
Coming up with the estimates of the profitability of this project, it was kept in mind that what we submit to
your staff is what we need to submit to our lender. It may differ a little because costs are still coming in.
We knew there is not a lender in the world who will lend on a condominium project where the developer
does not have a chance of making a 10% profit. This is different then if we were a contractor and we were
signing a contract and were going to make X number of dollars for building this project. It is a speculative
project. No condominium units have ever been sold in the Village of Carlsbad for the price we are
anticipating these will need to be sold if we were to make a 10% profit. We used the best comparable we
could find, the Ocean Point Condominiums, which were beirig built on Tamarack, they have much better
views and they have sound factors. They are not going to be as handsome architecturally as our units.
Nevertheless, those units sold for a lower price. In the report submitted to Craig Ruiz, it stated we used
Ocean Point Condominiums as a comparable, but hopefully will be able to sell th~s project at a greater
price.
Mr. Canepa continued, as far as construction costs, we have several estimates from contractors. The best
estimate received to date is $287,000 higher then the figure used in the report given to Craig Ruiz. Mr.
Ruiz is aware of that, and I subtracted that amount. It was the contractor’s contingency. I do need to have
final working drawings. I hope to be able to reduce the contractor’s profit or be able to reduce their
overhead so that I am able to build this project without that contingency. Unfortunately, from having been
in this business for thirty years, I know as working drawings are done, rather then getting less expensive,
things tend to get more expensive. I am proceeding with the hope I will be able to complete this for
$287,000 less then the best bid I have received so far. Incidentally, another bid I received was $1,250,000
higher then that figure, which is the second best bid I have received. This will be an expensive project to
build, but a handsome project. We estimate our cost per unit is about $270,000 per one-bedroom unit. In
contrast, we will need to sell these in the $120,000 range, hopefully higher, but we don’t have all the
maintenance fees calculated yet. It is just too great a cost of $150,000 for us to bear, and I don’t feel it is
realistic to pass it on. It is not a project meant for really wealthy people even though the units are going to
sell for in the vicinity for $500,000 per unit. Hopefully, people who buy will have a lot of equity in their
other home to use as a down payment. We need that $70,000 per unit. As I stated earlier, we would gladly
contribute $42,000 or even more if that option were available to us, but it is our understanding the City
Council would like to see condominiums built in the Redevelopment Area.
HOUSING COMMISSION MINUTES
MARCH 18,2003
PAGE 1 1 of 16 D T
Mr. Canepa also said he acquired this property, some of it four years ago, some of the property he acquired
two and a half years ago. The $1,725,000 is not the value of the property. That is our cash purchase price
of the property plus the plans, drawings, the entitlements, which are expenses incurred to date. We paid
cash for the property. Mr. Scarpelli mentioned about the land next to his had appreciated at a high rate. We
have actually had an appraisal of $2,700,000 for the property. I think that may be on the hgh side, but that
is what an independent appraiser came up with. Again, $1,725,00 was our cash purchase price. We are not
adding anything for our money, which we have tied up for four years in this project when we came up with
that cost. We are looking for at least a 10% profit on this project. That is contingent on the market place
staying good, interest rates staying down, and being able to bring this in at a better price then my best
construction estimate has been. We don’t intend to lessen the quality of the project. The City Council is
counting on this project being what we have shown them to be. We built the Tamarack Beach Resort, we
developed the Hilton Hotel here in Carlsbad, and we are working on another hotel project. We are going to
build what we were approved for if we are able to move ahead.
Chairperson Scarpelli said he needs clarification. Was the purchase price plus the entitlements out of
pocket?
Mr. Canepa said the exact purchase price of the first piece of property was $1,000,000. That was
approximately 30,000 square feet, and that was the property that fronted on Roosevelt and Laguna. The
second purchase price was $589,000 even though he was originally asking $850,000. The seller was
discouraged since he had staffs recommendations of approving a ten-unit project, he had designed the
project, done the working drawings, he was optimistic he would get it approved by the City Council, but he
was turned down. We did not buy it from him immediately. He had it on the market for a while, and we
purchased it for $589,000. Added to that at the time when we were putting this information together, we
had spent $1,725,000 with the plans and the applications that we had made to date. Since that day, that
figure has increased, but that is part of the soft costs I am showing you. As of today, we have $1,864,000 in
the property. It was $1,725,00 when I gave Craig Ruiz all the figures. Again, any money we spend from
that day forward would be part of the calculations that came up to $9,100,000 total cost.
Chairperson Scarpelli asked if anyone has any questions of the applicant at this point?
Commissioner Ritchie asked if Mr. Canepa had any other amenities on the property, like pools and tennis
courts?
Mr. Canepa said they do not have tennis courts, but they do have a pool and a spa. There is a recreation
room, men’s and women’s bathrooms, every unit has a deck, every unit has more storage space then what is
required by code, although code does require every unit has storage space, the parking spaces are all nine
foot wide, whereas we could have gotten by with eight and a half foot wide spaces, but then you start having
doors getting dinged. Every unit, including the affordable units, has two parking spaces, which are enclosed
parking. The first floor is parking, but it is enclosed and the second and third floor are where the units are.
In the front, there is some guest parlung.
Commissioner Huston asked since it is in the Redevelopment Area, will your company be subject to
prevailing wages during construction costs?
Mr. Canepa said no, because if they were, they definitely would not be building the project.
Commissioner Huston said she knows they are building another condominium project just west of the
railroad tracks. Is that equivalent to this in size or is it a comparative project?
Mr. Canepa asked if she was talking about Village by the Sea?
HOUSING COMMISSION MINUTES
MARCH 18,2003
PAGE 12 of 16
Debbie Fountain answered that it is actually larger. It is a 65-unit condominium project and it has retail as
part of it. They actually are doing their affordable housing on site as well. They have eleven units they are
required to provide so they are doing that on-site within their project.
Commissioner Huston asked if they are requesting a subsidy like this as well?
Ms. Fountain said no, they did not request a subsidy. Theirs is a little larger project plus they did get a
density bonus, and they had some minor standard modifications, but they have been able to make it work
without any assistance.
Commissioner Huston asked if staff has any rebuttal to the things Mr. Canepa said other then what you have
already said; the three criteria.
Commissioner Smith asked if this project would be gated?
Mr. Canepa said yes, the parking structures are gated. I would also like to add something. There are a
couple of things if you do approve the request. With our hotel project, it was required we form a Single
Purpose Entity. Lenders have done this ever since Donald Trump failed and almost brought a bunch of
lenders down with hlm. It is preferred to form an entity that exclusively owns and develops one property,
and that may or may not be a requirement. The agreement would have to be between Wave Crest Resorts
11, which was formed because Wave Crest Resorts had to become a single purpose entity. If you approve
this request, I would request staff be given the discretion to continue to honor it if we are forced to form
another mirror entity which would have the same participants as the first one, but for legal reasons we may
need to put it into a separate entity.
Mr. Canepa added he doesn’t necessarily want the City to lend him the money. He is willing to take the
money if and when he successfully builds the project and the units are sold. He is not requesting to get paid
ahead of time, but does need the $70,000. If the City wants to put off giving the $70,000 until the units are
sold to the affordable people, and then the loan is made to them, that would be acceptable to receive the
money when it is earned which would be when the units are delivered to the affordable buyers.
Commissioner Smith asked if it is usually done that way? How does the City usually do this?
Mr. Canepa stated this has changed because initially when talking with Craig Ruiz, the money would be
given at the beginning when the construction loan is made. It looks like the money will be given as the
project is being built. He is satisfied to receive the money after the project is built and sold. He stated his
concern is how the lender will view getting a second trust deed on the property, even if it is subordinate to
them.
Mr. Canepa said further he does not want to complicate things, but he wants to make sure the City has
looked into the legality of someone buying the unit, they intend to occupy the unit, but thmgs change such
as more children and they can no longer occupy the unit. He hopes they would have an option besides
having to be forced to sell it, that they could rent it to someone who may qualify for an affordable unit if
they didn’t want to be forced to sell the unit. If they had to sell it, he doesn’t have a problem with that. He
is concerned about the enforceability of that. Would that stand up in a court of law? While the units are
being sold, he doesn’t want to start facing a lot of legal issues. Another question would be what if the City
did not give me a subsidy, is there still going to be a lean put on these units?
Commissioner Smith said her understanding was that when a person goes to purchase the one-bedroom unit,
they purchase the unit as long as they live in there for ten months out of the year. They cannot rent it out,
but if they have to sell the property, they can sell it again to a low-income person, not for profit, but they
can sell it. I don’t see anything wrong with that.
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Mr. Canepa said it won’t really affect him once he has sold it to them if five years from now they have
another child and there are two children and they can no longer live there, and they have to sell it and they
don’t want to sell it. I guess that would be between them and the Housing Authority at that point.
Chairperson Scarpelli said that the chances of that particular type of person, unless they had just won the
California State Lottery or they just got involved with an IPO that was successful, they probably wouldn’t
have been able to move out of that into something else without taking their equity with them.
Commissioner Huston asked Mr. Canepa what the homeowner association fees are going to be?
Mr. Canepa said that is still being worked on. At Ocean Point, the fees were around $350 a piece. The fees
will be based to some extent on the square footage of the unit. He anticipates the one-bedroom fees will be
less, but that is why the sales price hasn’t really been completely worked out because we have to sell them
to people who make 80% of the median income, so we know what their payments can be, but then it
depends what the interest rate is once we sign our agreement with the City, and then also what the
maintenance fees are. The fees will probably be around $250.00.
Commissioner Smith asked if that was per month or per year.
Mr. Canepa answered that would be per month. The Ocean Point project is $350 average for those units,
and those units average around 1,600 square feet so the one-bedrooms will probably be maybe $200 to
$250 a month maintenance fee. Again, the total payment they can make is around $1,100 per month and
that includes the maintenance fees. So the higher the maintenance fees, the less we can sell the units for. At
the same time, we need to have maintenance fees that are appropriate to maintain the building for replacing
the roof when it needs to be replaced so we would like them to be as low as possible, but at the same time,
they need to be realistic.
Chairperson Scarpelli thanked Mr. Canepa. He asked if the other Commissioners had any questions.
He continued that this Commission had indicated to staff before their disenchantment with a project that
came to them prior to where it was felt the developer’s request for an amount of money was greater then
what the staff had recommended, and we realized at that time, that we have this committee made up of.. . ..
What is the name of the committee?
Mr. Ruiz answered it is the Affordable Housing Policy Team.
Chairperson Scarpelli said he would like to recommend to Debbie Fountain that a member of the Housing
Commission be placed on that team. There seems to be a problem in this area. He feels the developer’s
request for a 10% profit on a project of this size is not extravagant. With the amount of risk taken in the
work that is going to be done, there probably aren’t a lot of people willing to work on a 10% profit. Again,
he thinks the Housing Policy Team is overlooking this major issue of a fair profit to be made on a particular
project, especially when it enhances to the extent that this particular project would enhance our north end
vision of the City of Carlsbad and the northern gateway to the City of Carlsbad. It has been in need of a
major overhaul for well over twenty years, since Hawthorn moved out of that site at least, and even before
while they were in that site. He thinks staff needs to look at this and the Committee needs to look at the
advantage of the development .to the City and to the people of this community. This project would improve
the downtown area, and therefore the real estate values, the commercial values of the businesses doing
business downtown. Those are the issues that really need to be approached, in my opinion, when evaluating
a request such as the developer’s request of $70,00 a unit versus the approach that was being used by the
Committee to come up with it’s $35,000 per unit. As a member of this Commission and as a member of this
community, he does not want to see this site left idol. He recommends the approval of the developer’s
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MARCH 18,2003
PAGE 14 of 16 FT
request for what might be a 10% profit by providing a $70,000 per unit subsidy to this project versus the
staffs $35,000 recommendation. Again, I would like to chide the staff. It knows the Commission’s
position on this as we have gone through this one time not too many months ago. But it doesn’t appear
from what is occurring here, that was taken into consideration. It is not this Commission’s desire to
overrule staffs recommendations, but again, I feel compelled to do it again. I wish I wasn’t put into a
position to have to do it, but as one Commissioner, I would not accept the recommendation of staff and I
would recommend to the rest of my Commissioners that we recommend the subsidy be at the developer’s
request for the reasons he has requested it.
Commissioner Huston said she would like to respond to Chairperson Scarpelli’s comments. She differs as
she feels staff has given considerable allowance because it is in the Redevelopment Area and the amount
they are recommending is double so I think that has been taken into consideration by doubling the amount.
I would beg to differ with you on that point.
Commissioner Smith said she would agree with Commissioner Huston. Because staff has placed a lot of
input and because they have the know how redevelopment is run and how the projects are going, I think we
should leave it like it is.
Commissioner Ritchie said she would hate to lose this project because that is a significant corner. I think it
will encourage upgrading a lot of other properties that are along Roosevelt and State Street. So I would
agree with Chairperson Scarpelli. I think we should approve the developer’s request.
Chairperson Scarpelli said that he is looking at a fair profit for the developer and the advantage received
from this particular project. Our policy or our formula is faulted. That is the problem. He is not criticizing
the way they came up with the figure. His concern is with the formula in which the committee is working,
because if the formula which the committee is working with is creating something less then an anticipated
profit of 10% to a developer for a project of this size, that is going to enhance our City, and particularly the
downtown community of this City to the extent this would be. I am suggesting that possibly one member of
this Commission be appointed to the Housing Committee for future projects of this type that come before
us. I’d like to make a motion that we grant the developer financial assistance in the amount of $210,000
and also for the Laguna Point and that we approve the loan agreements, related documents, for construction
of three affordable condominium units to satisfy the requirements of the Inclusionary Housing Ordinance
for the Laguna Point project.
Commissioner Brown seconded the motion.
Chairperson Scarpelli asked for a vote in the motion
VOTE: 3-1
AYES: Ritchle, Scarpelli and Smith
NOES: Huston
ABSTAIN: None
Ms. Fountain recommended Chairperson Scarpelli issue a minute order to request to have somebody on the
Policy Team, that should be done as a Commission. She does not know what will happen with that, but it
should be a motion of the whole Commission.
Chairperson Scarpelli made a motion that the City Council appoint a member of the Housing Commission
to the Affordable Housing Policy Team of the City of Carlsbad.
Commissioner Ritchie seconded the motion.
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MARCH 18,2003
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Chairperson Scarpelli asked if there was a discussion on the motion.
Commissioner Smith asked if Chairperson Scarpelli could state why we are appointing a member of the
Housing Commission to the Affordable Housing Policy Team?
Chairperson Scarpelli believes that with the two most recent significant projects that were brought to hs
Commission, the Team used a formula in the past to come up with a solution for subsidy for affordable
housing projects such as this. They were below what would have fairly and mutually beneficially been
acceptable. In fact, in the last project, this Commission unanimously approved the developer’s
recommendation versus the staffs recommended amount. Therefore, if a member of this Commission were
appointed to the Affordable Housing Policy Team, then our insight could be considered in coming up with
an adjustment to the formula being used. So we don’t put staff through the embarrassment of turning down
their very studied recommendation. Again, this Commission’s problem is not with staff. The staff is held in
very high regard, all of them. This Commission’s concern is with the way in which the policy is being
implemented and the results we are getting that are bad.
VOTE: 4-0
AYES: Huston, Ritchie, Scarpelli and Smith
NOES: None
ABSTAIN: None
Ms. Fountain said she will take Chairperson Scarpelli’s comments back to the Affordable Housing Policy
Team and let them know what the concerns are then report back to the Commission at the next Housing
Commission Meeting. She shared that typically the way these recommendations come forward, and it is the
same way with the City Council or Planning Commission or anyone else, the City staff makes what they
think is its best professional recommendation to the Housing Commission or to the City Council. It does
not bother us, from a staffs standpoint, if you do not go with our recommendation. I understand what the
issue is that you are concerned about how the formula is developed by staff, but I want you to know we are
okay if you want to make an alternate recommendation. That is why it comes to you. Staff makes a
recommendation to the Housing Commission, if the Commission doesn’t agree with that recommendation, it
is fine for you to make an alternate recommendation to the City Council. That doesn’t hurt our feelings.
That is how the process should work. That is what you’ve been directed by the City Council to review is all
financial assistance requests. If they did not want you in that capacity, you would not be reviewing those
financial assistance requests, and they would be going directly from staff to the City Council. If you get
three votes to change the recommendation, then the recommendation changes. One of the things that Mr.
Canepa mentioned is we have taken recommendations forward to the Council as an example, and they have
not gone with staffs recommendation. That doesn’t mean that they sit with staff when we make our
recommendations, but they recognized we made our best professional recommendation, but we don’t agree
with it for whatever reasons and all the reasons stated are good reasons why you had a difference of
opinion.
Ms. Fountain said she just wanted to share that with the Commission. She will take the comments back to
the Affordable Housing Policy Team and let them know what the concerns of the Housing Commission are
and then she will report back to the Commission on what action is taken.
Chairperson Scarpelli asked if Ms. Debbie Fountain, Director of Housing and Redevelopment, had any
announcements.
DIRECTOR REPORT:
Ms. Fountain said there are quite a few projects going on right now. One of the projects mentioned tonight
was the Village by the Sea Project which is the condominium project downtown, and it will have eleven
affordable units affordable to households at 80% or below the area median income. That is an exciting