HomeMy WebLinkAboutAffordabe Housing Loan AgreementAFFORDABLE HOUSING LOAN AGREEMENT
[LAKEVIEW APARTMENTS II]
by and between the
REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE
and
LMV II AFFORDABLE, L.P.
TABLE OF CONTENTS
Page
1. DEFINITIONS ........................................................................................ ..............................2
1.1.
Defined Terms ........................................................................... ..............................2
1.2.
Singular and Plural Terms ......................................................... ..............................8
1.3.
Accounting Principles ................................................................ ..............................8
1.4.
References and Other Terms ..................................................... ..............................8
1.5.
Attachments Incorporated .......................................................... ..............................8
2. REPRESENTATIONS AND TRANSFERS ........................................ ..............................8
2.1.
Representations by the Developer ............................................. ..............................8
2.1.1. Organization .............................................................. ..............................8
2.1.2. Authority .................................................................... ..............................9
2.1.3. Valid Binding Agreements ........................................ ..............................9
2.1.4. Contingent Obligations .............................................. ..............................9
2.1.5. Litigation .................................................................... ..............................9
2.1.6. No Conflict ................................................................ ..............................9
2.1.7. No Developer Bankruptcy ........................................ .............................10
2.2.
Limitation Upon Change in Ownership, Management and Control of Developer
10
2.2.1. Prohibition ................................................................ .............................10
2.2.2. Permitted Transfers by Developer ............................ .............................10
2.2.3. Agency Consideration of Requested Transfer .......... .............................11
2.2.4. Successors and Assigns ............................................ .............................11
3. FINANCING .......................................................................................... .............................12
3.1.
Sources of Financing ................................................................ .............................12
3.2.
Agency Loan ............................................................................. .............................12
3.2.1. Housing Fund ............................................................ .............................12
3.2.2. Security for Agency Loan; Nonrecourse Obligation After Completion of
Construction............................................................. .............................12
3.2.3. Subordination of the Deed of Trust .......................... .............................12
3.2.4. Disbursement of Agency Loan Proceeds .................. .............................12
3.2.5. Retention ................................................................... .............................13
3.3.
Conditions Precedent to Disbursement of the Loan Proceeds .. .............................13
3.3.1. Execution and Delivery of Agency Loan Documents ............................13
3.3.2. Evidence of Financing .............................................. .............................14
3.3.3. Insurance ................................................................... .............................14
3.3.4. Title to Land ............................................................. .............................16
3.3.5. Recordation and Priority of Regulatory Agreement (Phase 1I) ..............16
3.3.6. Recordation of the Agency Deed of Trust ................ .............................17
3.3.7. Recordation of the Notice of Affordability Restrictions .......................17
3.3.8. Construction Contracts ............................................. .............................17
3.3.9. Construction Bonds; Completion Guaranty .............. .............................17
3.3.10. Environmental Compliance ...................................... .............................18
3.3.11. No Default ................................................................ .............................18
3.3.12. Representations and Warranties ............................... .............................18
3.3.13. Regulatory Agreement (Phase I) ............................... .............................18
TABLE OF CONTENTS (CONT.)
Page
ii
3.3.13.1. Execution of Regulatory Agreement (Phase I) ......... .............................18
3.3.13.2. Title to Land ............................................................. .............................18
3.3.13.3. Recordation and Priority of Regulatory Agreement (Phase I) ...............18
3.3.13.4. Recordation of the Notice of Affordability Restrictions .......................19
3.4.
Conditions Precedent to Disbursement of Retention ................ .............................19
3.4.1. Compliance With Previous Conditions .................... .............................19
3.4.2. Completion of Construction ..................................... .............................19
3.4.3. Management Plan ..................................................... .............................20
3.5.
Release and Reconveyance ....................................................... .............................20
3.6.
Other Sources of Financing ...................................................... .............................20
3.6.1. Permanent Loan ........................................................ .............................20
3.6.2. Tax Credits ............................................................... .............................20
3.6.3. General Partner Equity .............................................. .............................21
3.6.4. Additional Sources of Financing .............................. .............................21
3.6.5. Rights of Termination in the Event of Insufficiency of Funds ..............21
3.6.6. Obligation to Update Project Budget ........................ .............................22
4. DEVELOPMENT
OF THE PHASE II SITE ..................................... .............................22
4.1.
Scope of Work .......................................................................... .............................22
4.2.
Cost of Development ................................................................ .............................22
4.3.
Permits and Entitlements .......................................................... .............................22
4.4.
Defects in Plans ........................................................................ .............................22
4.5.
Design ....................................................................................... .............................23
4.6.
Construction Schedule .............................................................. .............................23
4.7.
Bodily Injury and Property Damage Insurance; Indemnity ...... .............................23
4.7.1. Insurance ................................................................. ...............................
23
43.2. Developer's Indemnity .............................................. .............................23
4.8.
Other Governmental City Permits and Environmental Compliance .....................24
4.9.
Rights of Access ....................................................................... .............................24
4.10.
Federal, State and Local Laws .................................................. .............................25
4.10.1. Labor Standards ........................................................ .............................25
4.10.2. General ...................................................................... .............................25
4.11.
Nondiscrimination During Construction .................................. .............................25
4.12.
Taxes and Assessments ............................................................ .............................25
4.13.
Liens and Stop Notices ............................................................. .............................25
4.14.
Mortgage Deed of Trust, Sale and Lease -Back Financing; Rights of Holders......
26
4.14.1. No Encumbrances Except Mortgages, Deeds of Trust ..........................
26
4.14.2. Holder Not Obligated to Construct Improvements ... .............................26
4.14.3. Notice of Default to Mortgagee or Deed of Trust Holders, Right to Cure26
4.14.4. Reserved ................................................................... .............................27
4.14.5. Right of the Agency to Cure Mortgage or Deed of Trust Default .........27
4.14.6. Right of the Agency to Satisfy Other Liens on the Phase II Site After Title
Passes....................................................................... .............................27
4.15.
Release of Construction Covenants .......................................... .............................27
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TABLE OF CONTENTS (CONT.)
Page
5. COVENANTS AND RESTRICTIONS ............................................... .............................28
5.1.
Use Covenants .......................................................................... .............................28
5.2.
Affordable Housing Requirements ........................................... .............................28
5.2.1. Number of Units ....................................................... .............................28
5.2.2. Duration of Affordability Requirements ................... .............................29
5.2.3. Tenant Eligibility and Selection Criteria .................. .............................29
5.2.4. Household Income Requirements. .........................................................
29
5.2.5. Annual Reporting Requirement ................................ .............................29
5.2.6. Relationship to Tax Credit Requirements ................ .............................30
5.3.
Lease Requirements .................................................................. .............................30
5.4.
Capital Replacement Reserve ................................................... .............................30
5.5.
Operating Reserve .................................................................... .............................30
5.6.
Marketing Plan ..................................... .................................................................
31
5.7.
Long Term Management .......................................................... .............................31
5.8.
Regulatory Agreement (Phase II) ............................................. .............................32
5.9.
Maintenance of Phase II Site .................................................... .............................32
5.10.
Nondiscrimination Covenants .................................................. .............................32
5.11.
Effect of Violation of the Terms and Provisions of this Agreement After
Completion of
Construction.............................................................................. .............................34
6. DEFAULTS,
REMEDIES AND TERMINATION ............................ .............................34
6.1.
Defaults - General ..................................................................... .............................34
6.2.
Legal Actions ............................................................................ .............................35
6.2.1. Institution of Legal Actions ...................................... .............................35
6.2.2. Applicable Law ......................................................... .............................35
6.2.3. Acceptance of Service of Process ............................. .............................35
6.3.
Rights and Remedies are Cumulative ....................................... .............................36
6.4.
Inaction Not a Waiver of Default ............................................. .............................36
6.5.
Specific Performance ................................................................ .............................36
6.6.
Reserved ................................................................................... .............................36
6.7.
Limitation on Damages ............................................................. .............................36
6.8.
Rights of Limited Partners ........................................................ .............................36
7. GENERAL PROVISIONS .................................................................... .............................37
7.1.
Notices, Demands and Communications Between the Parties . .............................37
7.2.
Subordination of Indebtedness ................................................. .............................38
7.3.
Conflicts of Interest .................................................................. .............................38
7.4.
Warranty Against Payment of Consideration for Agreement ... .............................38
7.5.
Nonliability of Agency Officials and Employees ..................... .............................38
7.6.
Approval by Agency and Developer ......................................... .............................38
7.7.
Plans and Data .......................................................................... .............................39
7.8.
Force Majeure ........................................................................... .............................39
7.9.
Applicable Law; Interpretation ................................................. .............................39
7.10.
Inspection of Books and Records, Reports ............................... .............................40
7.11.
Administration .......................................................................... .............................40
7.12.
Mutual Cooperation .................................................................. .............................40
iii
TABLE OF CONTENTS (CONT.)
Page
7.13. Ground Breaking and Grand Openings .................................... .............................40
7.14. Independent Contractor ............................................................ .............................40
8. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS .......... .............................41
iv
ATTACHMENTS
ATTACHMENT NO. I MASTER SITE PLAN
ATTACHMENT NO. 2 PHASE I SITE LEGAL DESCRIPTION
ATTACHMENT NO. 3 PHASE II SITE LEGAL DESCRIPTION
ATTACHMENT NO. 4 SCOPE OF DEVELOPMENT
ATTACHMENT NO. 5 PROJECT BUDGET
ATTACHMENT NO. 6 SCHEDULE OF PERFORMANCE
ATTACHMENT NO. 7 AGENCY PROMISSORY NOTE
ATTACHMENT NO. 8 AGENCY DEED OF TRUST
ATTACHMENT NO. 9 REGULATORY AGREEMENT (PHASE I)
ATTACHMENT NO. 10 REGULATORY AGREEMENT (PHASE II)
ATTACHMENT NO. 11 NOTICE OF AFFORDABILITY RESTRICTIONS
ATTACHMENT NO. 12 RELEASE OF CONSTRUCTION COVENANTS
ATTACHMENT NO. 13 REQUEST FOR NOTICE OF DEFAULT
ATTACHMENT NO. 14 ASSIGNMENT OF PLANS, REPORTS AND DATA
ATTACHMENT NO. 15 SUBORDINATION AGREEMENT
v
AFFORDABLE HOUSING LOAN AGREEMENT
THIS AFFORDABLE HOUSING LOAN AGREEMENT ( "Agreement ") dated for
identification purposes only as of October 12, 2010, is made and entered into by and between the
REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE, a public body, corporate
and politic ( "Agency "), and LMV II AFFORDABLE, L.P., a California limited partnership
( "Developer "), with reference to the following:
RECITALS
The following Recitals are a substantive part of this Agreement. Capitalized terms used in these
Recitals and not otherwise defined shall have the meaning set forth in Section I.1.
A. The Agency is a redevelopment agency duly established by action of the City Council of
the City of Lake Elsinore and exercising governmental functions and powers pursuant to Chapter 2 of the
California Community Redevelopment Law (California Health & Safety Code § 33000, el seq.)
( "Community Redevelopment Law ").
B. Pursuant to Community Redevelopment Law Section 33334.2, et seq., the Agency has
established a Low and Moderate Income Housing Fund ( "Housing Fund ") for the purpose of increasing,
improving and preserving the community's supply of housing available to low and moderate income
households at an affordable housing cost.
C. The Developer is a California limited partnership and is an experienced affordable housing
developer.
D. The Developer (i) has acquired the real property in the vicinity of 32211 Riverside Drive
within the City of Lake Elsinore as depicted on the Master Site Plan (Attachment No. 1) and described in
the Phase II Site Legal Description (Attachment No. 3) and referred to herein as the "Phase II Site ", (ii)
intends to acquire and improve the Phase II Site by rehabilitating sixty -four (64) rental units and related
amenities thereon, and (iii) operate and maintain the Phase II Site as an affordable housing project in
accordance with this Agreement (the "Phase II Project ").
E. Developer's affiliate, LMV I, L.P., ( "Developer's Affiliate ") (i) has acquired the real
property in the vicinity of 32209 Riverside Drive within the City of Lake Elsinore as depicted on the
Master Site Plan (Attachment No. 1) and described in the Phase I Site Legal Description (Attachment No.
2) and referred to herein as the "Phase I Site ", (ii) intends to acquire and improve the Phase I Site by
rehabilitating eighty -eight (88) rental units and related amenities thereon, and (iii) operate and maintain
the Phase I Site as an affordable housing project in accordance with this Agreement (the "Phase I
Project ").
F. Developer requires the financial assistance of the Agency to accomplish its activities.
G. By this Agreement and in furtherance of the Agency's affordable housing goals and
activities to increase and preserve the community's supply of affordable housing and to encourage the
coordinated and comprehensive development, uniform operation and management, and the long tern
affordability of the Phase II Project, the Agency desires to loan the Developer an aggregate amount not to
amount not to exceed One Million One Hundred Thousand Dollars ($1,100,000) for expenses pursuant to
and in accordance with this Agreement.
H. The provision of financial assistance to the Developer and the development of the Phase II
Project pursuant to the terms and conditions of this Agreement are in the vital and best interest of the City
and the Agency and the health, safety and welfare of its residents, and in accord with the public purposes
and provisions of applicable federal, state and local laws, including (without limitation) the Agency's
housing obligations pursuant to Section 33413 of the Community Redevelopment Law.
NOW, THEREFORE, the Agency and the Developer hereby agree as follows:
1. DEFINITIONS
1.1. Defined Terms
As used in this Agreement, the following capitalized terms shall have the following
meanings:
"Affordable Rent" means the amount of monthly rent, including a reasonable utility
allowance, that does not exceed the lesser of the maximum allowable rent to be charged by Developer and
paid by Very Low Income Households or Low Income Households, as the case may be, occupying the
Affordable Units as determined pursuant to (a) any applicable Tax Credit Regulatory Agreement, (b)
Section 50053 of the California Health & Safety Code or successor statute, or (c) applicable Section 8
Program regulations as to any Unit designated as a project -based Section 8 unit or otherwise occupied by
a holder of a rental voucher or rental certificate evidencing participation in the Section 8 Program. For
purposes of calculating Affordable Rent, a "reasonable utility allowance" shall be the allowance
established by the TCAC Rules or such lesser allowance reasonably permitted by the Agency, which
Agency allowance shall be not be less than the utility allowance for apartments established by the
Housing Authority of the County of Riverside for the "West County" area.
"Affordable Units" means the twenty -seven (27) Units required to be maintained on the
Phase II Site and available to, occupied by, or held vacant for occupancy by Very Low Income
Households and the thirty -six (36) Units required to be maintained on the Phase II Site and available to
for occupancy by Low Income Households which comprise an aggregate of sixty -three (63) Affordable
Units.
"Affordability Period" means the period commencing upon the recordation of the Release
of Construction Covenants as to the Affordable Unit and terminating on the fifty -fifth (55`h) anniversary
thereof.
"Agency" means the Redevelopment Agency of the City of Lake Elsinore, a public body,
corporate and politic, exercising governmental functions and powers and organized and existing under
Chapter 2 of the Community Redevelopment Law and any assignee of or successor to its rights, powers
and responsibilities.
"Agency Deed of Trust" means the Deed of Trust, Fixture Filing and Assignment of Rents
Rents in substantially the form attached as Attachment No. 8 to be executed by the Developer as Trustor,
in favor of the Agency, as Beneficiary, and to be recorded as a lien against the Phase II Site securing the
Agency Loan in accordance with the terms and conditions of this Agreement.
"Agency Loan" means the loan from the Agency's Housing Fund to the Developer in an
amount not to exceed One Million One Hundred Thousand Dollars ($1,100,000).
"Agency Loan Documents" means the following documents evidencing the Agency Loan
and required as consideration for the Agency to make the Agency Loan: (i) the Agency Promissory Note;
(ii) the Agency Deed of Trust; (iii) the Regulatory Agreement (Phase II); (iv) the Assignment of Plans,
Reports and Data; and (v) this Agreement.
"Agency Promissory Note" means the residual receipts promissory note evidencing the
Agency Loan in substantially the form shown in Attachment No. 7.
"Agreement" means this Affordable Housing Loan Agreement, including all of the
Attachments hereto, by and between the Parties.
"Assignment of Plans, Reports and Data" means that assignment attached hereto as
Attachment No. 14.
"Capital Replacement Reserve" is defined in Section 5.4.
"City" means the City of Lake Elsinore, a California municipal corporation.
"County" means the County of Riverside, California.
"Developer" means LMV II Affordable, L.P., a California limited partnership, and any
permitted successors and assigns pursuant to Section 2.2 of this Agreement.
"Effective Date "means the date upon which this Agreement was approved by the Agency.
"Eligible Project Costs" means all costs and expenses approved pursuant to this
Agreement and which are customarily incurred and shall have been actually incurred by the Developer in
connection with the acquisition of the Phase II Site and completion of the Phase II Project, including
(without limitation), the purchase price of the Phase 11 Site, actual "hard" costs of rehabilitating the Units
and other improvements on the Phase II Site and "soft costs" associated therewith including (without
limitation) construction and design fees; architectural, engineering or related professional services costs
and fees required to prepare plans, specifications or work write -ups; construction financing interest, fees,
and "points"; permanent financing costs, fees and "points" in connection with any loan contemplated by
this Agreement or otherwise approved in writing by the Agency; insurance; legal and accounting fees;
consultants' fees, title and title insurance; escrow fees and closing costs; bonds; appraisals; costs of
environmental review; tests to determine the condition of the Phase II Site and costs of Hazardous
Materials remediation, if any; and such other costs, fees and expenses, and costs identified in the Project
Budget attached hereto as Attachment No. 5 or otherwise agreed to by the Agency provided, however, that
payment to parties related to Developer for Eligible Project Costs must not exceed reasonable and
customary market rates.
"Environmental Laws "means any and all present and future federal, state and local laws
(whether under common law, statute, ordinance, rule, regulation or otherwise), court or administrative
orders or decrees, requirements of permits issued with respect thereto, and other requirements of
governmental authorities relating to the environment or to any Hazardous Substance or Hazardous
Substance Activity (including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. § 9601, et seq.), as heretofore or hereafter amended
from time to time ( "CERCLA "), and the applicable provisions of the California Health and Safety Code
and the California Water Code, and any and all successor statutes and regulations, orders, decrees,
guidelines, or pronouncements promulgated thereunder).
"Escrow" means the escrow, as shall be reasonably determined by the Parties, in order to
facilitate the recordation of the Regulatory Agreement (Phase I), the Regulatory Agreement (Phase II), the
Agency Deed of Trust, the Request for Notice of Default and the Notices of Affordability Restrictions.
"Event of Default" means the failure of a party to perform any action or covenant required
by this Agreement within the time periods provided herein following notice and opportunity to cure, as set
forth in Section 6.1.
"Executive Director" means the Executive Director of the Agency or his /her designated
representative.
"Governmental Regulations" means any local, state, and federal laws, ordinances, rules,
requirements, resolutions, policy statements and regulations (including, without limitation, those relating
to land use, subdivision, zoning, environmental, labor relations, prevailing wage, immigration and legal
residency, notification of sale to employees, Hazardous Substance, occupational health and safety, water,
earthquake hazard reduction and building and fire codes) bearing on the demolition, alteration,
replacement, repair, refurbishing, improvement, construction, maintenance, management, use, or
operation of the Phase II Project.
"Hazardous Substance" means (i) any chemical, compound, material, mixture or
substance that is now or hereafter defined or listed in the United States Department of Transportation
Hazardous Materials Table (49 CFR 172.101), as amended from time to time, or now or hereafter
otherwise classified or regulated pursuant to any Environmental Laws as a "hazardous substance ",
"hazardous material ", "hazardous waste ", "extremely hazardous waste ", "infectious waste ", "toxic
substance ", "toxic pollutant" or any other formulation intended to define, list, or classify substances by
reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, or "EP toxicity ", (ii) any asbestos or asbestos containing material, (iii) any
polychlorinated biphenyls (PCB's), (iv) any ureafonnaldehyde, and (v) any petroleum, natural gas, natural
gas liquid, liquefied natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such
synthetic gas), ash produced by a resource recovery facility utilizing a municipal solid waste stream, and
drilling fluids, produced waters, and other wastes associated with the exploration, development or
production of crude oil, natural gas, or geothermal resources. Notwithstanding the foregoing, "Hazardous
Substances" shall not include any chemical, compound, material, mixture or substance used in the normal
11
material, mixture or substance used in the normal course of developing, operating and maintaining an
apartment complex, so long as such chemical, compound, material, mixture or substance is used in
accordance with Environmental Laws.
"Hazardous Substance Activity" means any actual, proposed or threatened storage,
holding, existence or suspected existence, release or suspected release, emission, discharge, generation,
processing, abatement, removal, disposition, treatment, handling or transportation of any Hazardous
Substance from, under, into, on, above, around or across the Phase II Site or surrounding property or any
other use of or operation on the Phase II Site or the surrounding property that creates a risk of Hazardous
Substance contamination of the Phase II Site.
"Household" means one or more persons occupying an Affordable Unit.
"Housing Fund" means the Agency's Low and Moderate Income Housing Fund,
established pursuant to Sections 33334.2, 33334.3 and 33334.6 of the Community Redevelopment Law.
"Housing Project Manager" means the Executive Director or that person designated by
the Executive Director Manager to manage affordable housing projects within the City of Lake Elsinore.
"Investor" shall mean Union Bank, N.A., and its successors and assigns. Agency-shall
have the right to reasonable prior written approval of the terms and conditions of the limited partnership
agreement or other agreement specifying the terms and conditions, including but not limited to terms and
conditions concerning timing and amounts of cash contributions toward Phase II Project development
costs and the right to receive Tax Credits.
"Loan Proceeds" is defined in Section 3.2.4.
"Low Income Household" means a Household who qualifies as a "lower income
household" pursuant to the Health and Safety Code Section 50079.5 or any successor statute.
"Management Plan" means the plan for the management of the Phase II Project in
substantially the form provided in the "Management Plan Lakeview Apartments An Affordable Multi -
Housing Community" submitted pursuant to Section 5.7 and in such final form as approved by the
Agency.
"Manager Unit" mean the one (1) Unit in the Phase II Project reserved for occupancy by
an on -site manager of the Project who performs substantial duties directly related to the management
and /or the maintenance of the Phase II Project.
"Marketing Plan" means the plan for the marketing of the Units to be submitted by the
Developer and approved by the Agency, as set forth in Section 5.6 hereof.
"Master Site" means the Phase I Site and the Phase II Site.
"Master Site Plan" means the map of the Phase I Site and the Phase II Site which is
attached hereto as Attachment No. 1.
"Notice" means a notice in the form prescribed by Section 7.1.
"Notice ofAffordability Restrictions" means the Notice of Affordability Restrictions on
Transfer of Property required pursuant to Health and Safety Code Section 33334.3(f)(3)(B) and
substantially in the form of Attachment No. 11.
"Operating Reserve" is defined in Section 5.5.
"Parties" means the Agency and Developer; "Party" means the Agency or the Developer.
"Permanent Loan" is defined in Section 3.6.1.
"Phase I Project" means predevelopment activities related to the Phase I Site, the
rehabilitation of the Units and any improvements appurtenant thereto, and the operation of a affordable
rental project consisting of eight -eight (88) rental units and by the Developer upon the Phase I Site in
accordance with Governmental Regulations and all applicable permits and entitlements.
"Phase II Project" means predevelopment activities related to the Phase II Site, the
rehabilitation of the Units and any improvements appurtenant thereto, and the operation of a affordable
rental project consisting of sixty four (64) Units by the Developer upon the Phase II Site in accordance
with Governmental Regulations and all applicable permits and entitlements and as described in Section 4.
"Phase I Site" means that certain real property delineated on the Master Site Plan
(Attachment No. 1) and more particularly described in the Phase I Site Legal Description (Attachment No.
2).
"Phase II Site" means that certain real property delineated on the Master Site Plan
(Attachment No. 1) and more particularly described in the Phase II Site Legal Description (Attachment
No. 3).
"Phase I Site Legal Description" means the legal description of the Phase I Site attached
hereto as Attachment No. 2.
"Phase II Site Legal Description" means the legal description of the Phase II Site attached
hereto as Attachment No. 3.
"Project" means the Phase I Project and the Phase II Project.
"Project Budget" means the budget and financial information attached hereto as
Attachment No. 5 and incorporated herein by reference which identifies the Developer's estimate of the
costs of the Phase II Project, the categories or components of such costs and the sources and uses of funds
applicable thereto; provided however, that the Project Budget is Developer's best estimate of Project costs
based upon the information available to it as of the Effective Date.
"Property Manager" means the manager of the Project, as set forth in Section 5.7.
"Regulatory Agreement (Please I) "means the Affordable Housing Regulatory Agreement
(Phase I) which is to be recorded against the Phase I Site in substantially the form of Attachment No. 9.
"Regulatory Agreement (Phase 77)" means the Affordable Housing Regulatory
Agreement (Phase II) which is to be recorded against the Phase II Site in substantially the form of
Attachment No. 10.
"Release of Construction Covenants" means the document which evidences the
Developer's satisfactory completion of the Phase II Project, as set forth in Section 4.15, in substantially
the form of Attachment No. 12.
"Request For Notice of Default" means a request for notice of default to be recorded in
accordance with Section 3.2.3 against the Phase II Site in substantially in the form shown in Attachment
No. 13.
"Schedule of Performance" means that certain Schedule of Performance attached hereto
as Attachment No. 6, setting out the dates and /or time periods by which certain obligations set forth in
this Agreement must be accomplished. The Schedule of Performance is subject to revision from time to
time as mutually and reasonably agreed upon in writing between the Developer and the Agency. The
Agency authorizes the Executive Director to make such revisions to the Schedule of Performance as he
deems reasonably necessary to effectuate the purposes of this Agreement.
"Subordination Agreement" means the Subordination Agreement FHLMC Form —JULY
2006 (Governmental Entity) substantially in the form of Attachment No. 15.
"TCAC" means the California Tax Credit Allocation Committee.
"Tax Credits" means Low Income Housing Tax Credits granted pursuant to Section 42 of
the Internal Revenue Code and /or California Revenue and Taxation Code Sections 17057.5, 17058,
23610.4 and 23610.5 and California Health and Safety Code Section 50199, et seq.
"Tax Credit Rules" means Section 42 of the Internal Revenue Code and /or California
Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and
Safety Code Section 50199, et seq., and the rules and regulations implementing the foregoing.
"Tax Credit Regulatory Agreement" means the regulatory agreement which may be
required to be recorded against the Phase II Site with respect to the issuance of Tax Credits, as set forth in
Section 3.6.2.
"Title Company" is Street, , CA or
other qualified title company approved in writing by the Parties.
"Unit" or "Units "means the individual dwelling apartments within the Phase II Project to
be constructed and operated by the Developer on the Phase II Site, in accordance with the terms and
conditions of this Agreement.
"Very Low Income Household" means a Household whose gross household income does
not exceed the qualifying limits for very low income families as established from time to time pursuant to
Section 8 of the United States Housing Act of 1937, as required by Health and Safety Code Section 50105
or any successor statute.
1.2. Singular and Plural Terms
Any defined term used in the plural herein shall refer to all members of the relevant class
and any defined term used in the singular shall refer to any number of the members of the relevant class.
1.3. Accounting Principles
Any accounting term used and not specifically defined herein shall be construed in
conformity with, and all financial data required to be submitted herein shall be prepared in conformity
with, generally accepted accounting principles applied on a consistent basis or in accordance with such
other principles or methods as are reasonably acceptable to the Executive Director.
1.4. References and Other Terms
Any reference to any document shall include such document both as originally executed
and as it may from time to time be modified. References herein to Sections and Attachments shall be
construed as references to this Agreement unless a different document is named. References to
subparagraphs shall be construed as references to the same Section in which the reference appears. The
tern "document' is used in its broadest sense and encompasses agreements, certificates, opinions,
consents, instruments and other written material of every kind. The terms "including" and "include"
mean "including (include), without limitation."
1.5. Attachments Incorporated
All attachments to this Agreement, as now existing and as the same may from time to time
be modified, are incorporated herein by this reference.
2. REPRESENTATIONS AND TRANSFERS
2.1. Representations by the Developer
The Developer hereby represents and warrants to the Agency as follows:
2.1.1. Organization
Developer is a duly organized, validly existing limited partnership in good standing
under the laws of the State of California and has the power and authority to own and lease property and
carry on its business as now being conducted. The copies of the documents evidencing the organization
of Developer delivered to the Agency are true and correct copies of the originals as of the Effective Date.
2.1.2. Authority
The Developer has the legal power, right and authority to execute, deliver and enter
into this Agreement and any and all other agreements and documents required to be executed and
delivered by the Developer in order to carry out, give effect to, and consummate the transactions
contemplated by this Agreement, and to perform and observe the terms and provisions of all of the above.
The parties who have executed this Agreement and all other documents or instruments executed and
delivered, or to be executed and delivered, pursuant to this Agreement are authorized to execute and
deliver the same on behalf of the 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 all other documents or instruments executed and delivered, or to be executed and
delivered pursuant hereto, have been duly taken.
2.1.3. Valid Binding Agreements
This Agreement 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 constitute when so executed and delivered, legal, valid and binding obligations of
Developer enforceable against it in accordance with their respective terms.
2.1.4. Contingent Obligations
The Developer does not have any material contingent obligations or any material
contractual agreements (other than in connection with the development of the Phase II Project) which
could materially adversely affect the ability of the Developer to carry out its obligations hereunder.
2.1.5. Litigation
To the Developer's best knowledge, no action, suit or proceedings are pending or
threatened before any governmental department, commission, board, bureau, agency or instrumentality to
which the Developer is or may be made a party or to which any of its property is or may become subject,
which has not been disclosed to the Agency which could materially adversely affect the ability of the
Developer to carry out its obligations hereunder.
2.1.6. No Conflict
Developer's execution and delivery of this Agreement and any other documents or
instruments executed and delivered, or to be executed or delivered, pursuant to this Agreement, and the
performance of any provision, condition, covenant or other term hereof or thereof, do not or will not
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.
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2.1.7. No Developer Bankruptcy
No attachments, execution proceedings, assignments for the benefit of creditors,
insolvency, bankruptcy, reorganization, receivership or other proceedings are pending or, to the best of
Developer's knowledge, threatened against the Developer or any parties affiliated with Developer, nor are
any of such proceedings contemplated by Developer or any parties affiliated with Developer.
Each of the foregoing representations shall be deemed to be an ongoing
representation and warranty. The Developer shall advise the Agency in writing if there is any change
pertaining to any matters set forth or referenced in the foregoing representations.
2.2. Limitation Upon Change in Ownership, Management and Control of Developer
2.2.1. Prohibition
The identity and qualifications of Developer as an experienced and successful
developer and operator /manager of affordable housing are of particular concern to the Agency. It is
because of this identity and these qualifications that Agency has entered into this Agreement with the
Developer. Prior to the expiration of the Affordability Period, no voluntary or involuntary successor in
interest of Developer shall acquire any rights or powers under this Agreement by assignment or otherwise,
nor shall Developer make any total or partial sale, transfer, conveyance, encumbrance to secure financing
(including, without limitation, the grant of a deed of trust to secure funds necessary for construction and
permanent financing of the Phase II Project), distribution, assignment or lease of the whole or any part of
the Phase II Site or any material change in the management or control of Developer without the prior
written approval of Agency, except as expressly set forth herein. Any purported transfer, voluntary or by
operation of law, in violation of this Section 2.2 shall constitute a default hereunder and shall be void and
Agency shall have the cumulative options to terminate this Agreement and to seek all remedies available
at law or equity.
2.2.2. Permitted Transfers by Developer
Notwithstanding any other provision of this Agreement to the contrary, Agency
approval of an assignment of this Agreement or conveyance of the Phase II Site or any part thereof shall
not be required in connection with any of the following:
i. the conveyance or dedication of any portion of the Phase II Site to the City
or other appropriate governmental agencies, or the granting of easements or permits to public utilities to
facilitate the development of the Phase II Project;
ii. subject to the restrictions of Section 6.2 hereof and as set forth in the
Regulatory Agreement (Phase II), the rental of the Units to Low and Very Low Income Household and the
rental of the Manager Units to management or maintenance personnel;
iii. any requested assignment for financing purposes (subject to such financing
being considered and approved by the Agency pursuant to Section 2.2 herein), including the grant of a
deed of trust to secure funds necessary for construction and permanent financing of the Phase II Project as
set forth in the Project Budget;
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iv. any transfer of the Site or limited partnership interests in the Developer to
Investor;
V. any transfer to another limited partnership in which Bentall Residential,
L.P. or an entity controlled by Bentall Residential, L.P., is a general partner or managing member. The
term "control" as used in the immediately preceding sentence, means, with respect to an entity that is a
corporation, the right to the exercise, directly or indirectly, of more than 50% of the voting rights
attributable to the shares of the controlled corporation, and, with respect to an entity that is not a
corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of the controlled person;
vi. any transfer of any limited partnership interest in the Developer; and
vii. the removal and replacement of any of the general partners of the Developer
by the limited partners of the Developer pursuant to the terms and conditions of the Developer's Limited
Partnership Agreement.
2.2.3. Agency Consideration of Requested Transfer
Except for a transfer permitted pursuant to Section 2.2.2, Developer shall provide
Agency with thirty (30) calendar days' prior written notice of its intent to assign or transfer and shall
request any approval sought for such assignment or transfer described in Section 2.2.1 above. Such notice
shall be accompanied by evidence regarding the proposed assignee's or purchaser's development,
operation and management qualifications and experience and its financial commitments and resources
sufficient to enable the Agency to evaluate the proposed assignee or purchaser is qualified and capable to
perform the Developer's obligations pursuant to this Agreement.
Within thirty (30) calendar days, or, if board or council approval is required, forty -
five (45) calendar days, after the receipt of Developer's written request for Agency approval of an
assignment or transfer pursuant to this Section 2.2.3, Agency shall respond in writing either approving the
proposed assignee or transferee or requesting further information required by Agency in order to
determine whether or not to grant the requested approval. Upon receipt of such a request for further
information, Developer shall promptly furnish to Agency such requested information.
An assignment or transfer approved by the Agency pursuant to this Section 2.2.3
shall not be effective unless and until the proposed assignee or transferee executes and delivers to the
Agency an agreement in form reasonably satisfactory to Agency's legal counsel assuming the obligations
of Developer under the Agency Loan Documents. Thereafter, the assignor shall remain responsible to
Agency for performance of the obligations assumed by the assignee unless the Agency releases the
assignor in writing.
2.2.4. Successors and Assigns
All of the terms, covenants and conditions of this Agreement shall be binding upon
Developer and the permitted successors and assigns of Developer.
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3. FINANCING
3.1. Sources of Financing
As set forth in the Project Budget which is hereby approved by the Agency, the Phase II
Project costs shall be financed with a combination of funds from the proceeds of the Agency Loan, the
Permanent Loan, Developer's equity contribution to be obtained though the syndication of Tax Credits,
and such other financing sources as secured pursuant to Section 3.6.
3.2. Agency
Agency hereby agrees to loan to Developer and Developer hereby agrees to borrow from
the Agency, in such allocation and amounts as may be determined by the Agency, but in no event shall
such loan exceed One Million One Hundred Thousand Dollars ($1,100,000).
3.2.1. Housing Fund
Agency shall make the Agency Loan to Developer as reasonably determined by the
Agency from available funds allocated to the Agency's Housing Fund. The Agency Loan shall be made
in accordance with and subject to the terms and conditions set forth in the Agency Promissory Note, the
Agency Deed of Trust and the Regulatory Agreement (Phase II). Agency represents that Agency has
sufficient funds to make the Agency Loan.
3.2.2. Security for Agency Loan; Nonrecourse Obligation After Completion of
Construction
The Agency Loan shall be evidenced by the Agency Promissory Note and shall be
secured by the Agency Deed of Trust. In addition, Developer shall assign certain documents and
agreements to Agency as collateral for the Agency Loan by executing the Assignment of Plans, Reports
and Data. The Agency Loan shall constitute a nonrecourse obligation of Developer such that the Agency
shall resort only to the Phase II Site for repayment in the Event of Default by Developer and Developer
shall have no further liability for repayment in the event the Phase II Site is foreclosed upon by Agency.
3.2.3. Subordination of the Deed of Trust
The Agency Deed of Trust shall be subordinate to the liens of the Regulatory
Agreement (Phase II). The Agency Regulatory Agreement and Deed of Trust shall be subordinate to the
deeds of trust and related documents securing the Permanent Loan (as such term is defined in Section
3.6. 1) as provided in the Subordination Agreement. In addition, Agency agrees to consider in good faith
any other reasonable request by Developer for subordination of the Agency Deed of Trust to other loans
obtained by Developer pursuant to Section 3.6 where Agency's interests are protected and secure. A
Request for Notice of Default shall be recorded in the official records of Riverside County concurrent
with any documents evidencing the subordination of the Agency Loan.
3.2.4. Disbursement of Agency Loan Proceeds
The Agency Loan proceeds (the "Loan Proceeds ") shall be used for Eligible Project
Costs in connection with the development of the Phase II Project.
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Upon satisfaction of the conditions precedent to the disbursement of the Loan
Proceeds set forth in Section 3.3, the proceeds shall be disbursed to Developer not later than thirty (30)
days after receipt by the Housing Project Manager of a written disbursement request from the Developer
(each, a "Disbursement Request "). The Disbursement Request shall set forth the amount of the requested
disbursement of Loan Proceeds and shall certify that (a) all conditions precedent to disbursement of the
Loan Proceeds set forth in Section 3.3 have been and remain satisfied and (b) no Event of Default has
occurred and is continuing under the Agency Loan Documents. The Agency shall use their best
commercially reasonable efforts to wire transfer such disbursements when requested by Developer.
3.2.5. Retention
Except as provided herein, as to each Disbursement Request made to Agency for
Eligible Project Costs, disbursements of Loan Proceeds shall be made for such item in the amount of
ninety percent (90 %) of the costs for such item properly incurred and substantiated by Developer during
the course of the Phase II Project. Upon satisfaction of the conditions set forth in Section 3.3, Agency
shall disburse Loan Proceeds in the amount of Ninety Percent (90 %) of each Disbursement Request for
Eligible Project Costs. Notwithstanding the foregoing, as to each Disbursement Request made to Agency
for Eligible Project Costs related to Developer's purchase price of the Phase II Site or City permits and
development impact fees related to the Phase II Project, disbursements of Loan Proceeds shall be made
for such item in the amount of one - hundred percent (100 %) of the costs for such item properly incurred
and substantiated by Developer during the course of the Phase II Project.
Upon satisfaction of the conditions precedent to the disbursement of the Retention
set forth in Section 3.4, the proceeds shall be disbursed to Developer not later than thirty (30) days after
receipt by the Housing Project Manager of a written disbursement request from the Developer (the "Final
Disbursement Request "). The Final Disbursement Request shall set forth the amount of the requested
disbursement of Loan Proceeds and shall certify that (a) all conditions precedent to disbursement of the
Loan Proceeds set forth in Section 3.3 have been and remain satisfied and (b) all conditions precedent to
disbursement of the Retention set forth in Section 3.4 have been and remain satisfied. The Agency shall
use their best commercially reasonable efforts to wire transfer such disbursement when requested by
Developer.
3.3. Conditions Precedent to Disbursement of the Loan Proceeds
All disbursements of Loan Proceeds shall be recorded by the Housing Project Manager and
acknowledged by the Developer on "Exhibit `A "' to the Agency Promissory Note. Agency shall authorize
the disbursement of Loan Proceeds to or on behalf of Developer for Eligible Project Costs only upon
satisfaction of the conditions precedent set forth in this Section 3.3.
3.3.1. Execution and Deliver of Agency Loan Documents
Developer shall have executed and delivered to the Agency this Agreement, the
Agency Deed of Trust, the Agency Promissory Note, the Regulatory Agreement (Phase II) and the
Assignment of Plans, Reports and Data.
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3.3.2. Evidence of Financing
Developer shall submit to Agency evidence that Developer has obtained sufficient
equity capital and firm and binding commitments for financing necessary to undertake the development of
the Phase II Project in accordance with this Agreement. Such evidence of financing shall include all of
the following:
a. A final Project Budget showing all costs of the Phase II Project together
with firm commitments of the funds necessary to pay when due the costs shown in the final Project
Budget.
b. A copy of the commitment obtained by Developer for the Permanent Loan
and, when available, copies of the loan documents evidencing any other permanent financing. The
commitments for financing shall be in such form and content acceptable to the Agency as reasonably
evidences a legally binding, firm and enforceable commitment, subject only to the lender's customary and
normal conditions and terms. Developer shall provide written certification to the Agency that the loan
documents submitted are correct copies of the actual loan documents to be executed by Developer.
C. A financial statement of Developer and /or other documentation satisfactory
to the Agency as evidence of other sources of capital sufficient to demonstrate that Developer has
adequate funds to cover the difference, if any, between the Phase II Project costs and the financing
provided for herein.
d. Other documentation as requested by and satisfactory to the Agency as
evidence of other sources of capital, if any, available to pay for Phase II Project costs.
The Agency shall approve or disapprove such evidence of financing within fifteen (15)
days of a complete submission by Developer of all items required by this Section 3.3.2. If Agency
disapproves any such evidence of financing, Agency shall do so by written notice to Developer stating the
reasons for such disapproval and Developer shall promptly obtain and submit to Agency new evidence of
financing. Agency shall approve or disapprove such new evidence of financing in the same manner and
within the same times established herein for the approval or disapproval of the evidence of financing as
initially submitted to Agency.
3.3.3. Insurance
Developer shall have furnished Agency with proper evidence of the following
forms of insurance coverage:
Workers' Compensation insurance which complies with all applicable state
laws and requirements.
ii. Comprehensive General Liability insurance with limits not less than One
Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) general aggregate for
bodily injury and property damage, including coverages for contractual liability, personal injury, broad
form property damage, products and completed operations.
iii. Property insurance covering all real and personal (non - expendable) property
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property leased or purchased in connection with the completion of the Phase II Project in a form
appropriate for the nature of such property, covering all risks of loss, excluding earthquake and flood, for
100% of the replacement value, with deductible, if any, acceptable to Agency, naming Agency as loss
payee.
iv. Developer shall cause any general contractor or agent working on the Phase
II Site raider direct contract with Developer to maintain insurance of the types and in at least the minimum
amounts described in subsections i. and ii. above, and shall require that such insurance shall meet all of
the general requirements of subsections v., vi. and vii. below. Subcontractors working on the Phase II
Site under indirect contract with Developer shall be required to maintain the insurance described in
subsections i. and ii. above. Unless waived by Agency, liability insurance to be maintained by such
contractors and agents pursuant to this subsection shall name as additional insured Agency, and its
officers, agents, employees and representatives.
V. The required insurance shall be provided under an occurrence form, and
Developer shall maintain such coverage continuously throughout the term of this Agreement. Should any
of the required insurance be provided under a form of coverage that includes an annual aggregate limit or
provides that claims investigation or legal defense costs be included in such annual aggregate limit, such
annual aggregate limit shall be three times the occurrence limits specified above.
vi. Each insurance policy required by this Agreement shall contain the
following clauses
(1) "This insurance shall not be canceled, limited in scope or coverage, or
non - renewed until after thirty (3 0) days prior written notice has been given to the Redevelopment Agency
of the City Lake Elsinore."
(2) "It is agreed that the Redevelopment Agency of the City of Lake
Elsinore is self - insured and any insurance maintained by it shall apply in excess of and not contribute with
insurance provided by this policy."
(3) "The Redevelopment Agency of the City of Lake Elsinore and its
officers, agents, employees, representatives and volunteers are added as additional insureds as respects
operations and activities of, or on behalf of the named insured, performed under contract with the
Redevelopment Agency of the City of Lake Elsinore."
vii. Prior to the disbursement of any portion of the Agency Loan, Developer
shall deliver to Agency insurance endorsements evidencing the existence of the insurance policies
required by this Agreement, and including the applicable clauses referenced above. Such endorsements
shall be signed by an authorized representative of the insurance company and shall include the signator's
company affiliation and title. Should it be deemed necessary by Agency, it shall be Developer's
responsibility to see that Agency receive documentation acceptable to Agency which demonstrates that
the individual signing said endorsements is indeed authorized to do so by the insurance company. Also,
Agency has the right to demand, and to receive within a reasonable time period, copies of any insurance
policies required under this Agreement.
viii. In addition to any other remedies Agency may have if Developer fails to
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to provide or maintain any insurance policies or policy endorsements to the extent and within the time
herein required, Agency may at its sole option:
(1) Obtain such insurance and deduct and retain the amount of the
premiums for such insurance from the Agency Loan.
(2) Withhold any disbursement of the Agency Loan until Developer
demonstrates compliance with the requirements hereof.
(3) In the event Developer has failed to commence curing such default
within thirty (30) days of notice or thereafter fails to diligently pursue such cure, declare Developer to be
in default, terminate this Agreement and declare the Agency Promissory Note due and payable.
Exercise of any of the above remedies, however, is an alternative to other remedies
Agency may have and is not the exclusive remedy for Developer's failure to maintain insurance or secure
appropriate endorsements. Nothing herein contained shall be construed as limiting in any way the extent
to which Developer may be held responsible for payments of damages to persons or property resulting
from Developer's performance of the work covered under this Agreement.
ix. Lender's Policy of Title Insurance. An extended American Land Title
Association policy of lender's title insurance with mechanic's lien coverage for liens arising on or before
the close of Escrow, together with such endorsements as Agency may reasonably require, has been issued
by the Title Company, which shall insure the Agency Deed of Trust as liens upon the Phase II Site subject
only to liens for current real property taxes and assessments not yet due and payable and the liens
contemplated by Section 3.2.3 of this Agreement.
3.3.4. Title to Land
Developer has good and marketable fee title to the Phase II Site and there will exist
thereon or with respect thereto no mortgage, lien, pledge or other encumbrance of any character
whatsoever other than liens for current real property taxes and assessments not yet due and payable, the
deeds of trust approved by the Agency and any other matters approved in writing by the Agency.
3.3.5. Recordation and Priority of Regulatory Agreement (Phase II)
The Regulatory Agreement (Phase II) shall have been executed and recorded as a
lien against the Phase II Site before the lien of the Agency Loan. So long as the conditions set forth in
this Section 3.3.5 are satisfied, the Regulatory Agreement (Phase II) shall be subordinate to the lien of any
construction financing during the construction and stabilization phase of the Phase II Project, and such
exceptions to title as are approved by the Agency in writing.
The Regulatory Agreement (Phase II) shall not be subordinated to any approved
sources of permanent financing (other than the deeds of trust and related documents securing the
Permanent Loan) unless the Developer demonstrates to the reasonable satisfaction of the Executive
Director that an economically feasible alternative method of financing on substantially comparable terms
and conditions, but without subordination, is not reasonably available.
Wi
The subordination by the Agency to this Section 3.3.5 shall be made in accordance
with the Subordination Agreement or such other agreement in the form and substance approved by the
Agency's legal counsel. In the event that the Subordination Agreement is not utilized, Developer shall
use its best commercially reasonable efforts to cause such subordination agreement to include (without
limitation) acknowledgments by the senior lien holder that in the event the Agency acquires title to the
Phase II Site from Developer pursuant to any provision of the Agency Loan Documents, Agency may
assume and succeed to Developer's obligations under the senior lien without acceleration of such senior
loan and without requiring any transfer fee, application fee or costs associated therewith, and that such
senior lien holder will recognize the Agency as Developer, so long as the Agency assumes, by a writing in
form and substance reasonably satisfactory to the senior lien holder and its legal counsel, all of
Developer's obligations under the senior loan.
3.3.6. Recordation of the Agency Deed of Trust
The Agency Deed of Trust shall have been recorded as a lien against the Phase II
Site and subordinate only to those liens permitted pursuant to Section 3.2.3.
Site.
3.3.7. Recordation of the Notice of Affordability Restrictions
A Notice of Affordability Restrictions shall have been recorded against the Phase II
3.3.8. Construction Contracts
Developer shall have submitted to Agency and Agency shall have approved all
construction contracts entered into in connection with the development of the Phase II Project. All such
contracts shall be entered into with a duly licensed and insured contractor or contractors. All such
contract(s) entered into on or after the Effective Date shall include: (i) reference to this Agreement; and
(ii) contractor's specific obligation to carry out the construction and completion of the construction of the
Phase II Project.
Developer shall utilize in good faith and as practicable, and shall require its
contractors and subcontractors to utilize in good faith and as practicable, lower income persons residing in
the Agency's redevelopment project areas in their hiring programs, in the construction and development
of the Phase II Project consistent with the hiring preference authorization and $100,000 contract threshold
set forth Health & Safety Code Section 33422.3. The ultimate determination of employment or
contracting, however, shall remain with Developer and its contractors and subcontractors in their
reasonable discretion.
3.3.9. Construction Bonds; Completion Guaranty
Developer, shall have obtained and delivered to the Agency (a) payment and
performance bonds from responsible sureties admitted in the State of California in the amount of 100% of
the construction costs of the Phase II Project and naming the Agency as co- obligees, or (b) such other
evidence satisfactory to the Agency such as the two most recent audited financial statements,
demonstrating Contractor's financial strength and reputation for quality and timely work and performance
necessary to complete the construction of the Phase II Project in accordance with this Agreement. In the
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this Agreement. In the event payment and performance bonds are obtained and delivered, the payment
bond shall remain in full force until thirty-five (35) days after the date of recordation of the Certificate of
Completion and the performance bond will be released one (1) year after said date.
3.3.10. Environmental Compliance
All federal, state and local environmental requirements applicable to the Phase II
Project, including without limitation, the National Environmental Policy Act of 1969, Public Law 91 -190
as amended, 42 U.S.C. Sections 4321 -4347 and the California Environmental Quality Act California
Public Resources Code Section 21000, et seq., have been satisfied.
3.3.11. No Default
There shall exist no condition, event or act which would constitute an Event of
Default by Developer (as defined in Section 6.1) hereunder or which, upon the giving of notice or the
passage of time, or both, would constitute an Event of Default by Developer.
3.3.12. Representations and Warranties
All representations and warranties of Developer herein contained shall be true and
correct in all material respects.
3.3.13. Regulatory Agreement (Phase I)
3.3.13.1. Execution of Regulatory Agreement (Phase I)
Developer shall have caused Regulatory Agreement (Phase I) to be
executed by Developer's Affiliate.
3.3.13.2. Title to Land
Developer's Affiliate shall have good and marketable fee title to the
Phase I Site and there will exist thereon or with respect thereto no mortgage, lien, pledge or other
encumbrance of any character whatsoever other than liens for current real property taxes and assessments
not yet due and payable, the deeds of trust approved by the Agency and any other matters approved in
writing by the Agency.
3.3.13.3. Recordation and Priority of Regulatory greement (Phase I)
The Regulatory Agreement (Phase I) shall have been recorded as a lien
against the Phase I Site. The Developer and Developer's Affiliate have demonstrated to the reasonable
satisfaction of the Agency that an economically feasible alternative method of financing on substantially
comparable terms and conditions, but without subordination of the Regulatory Agreement (Phase I), is not
reasonably available. Accordingly, so long as the conditions set forth in this Section 3.3.13 are satisfied,
the Regulatory Agreement (Phase I) shall be subordinate to the lien of any construction loan and
reasonable sources of permanent financing.
The subordination by the Agency to this Section 3.3.5 shall be made in
accordance with the Subordination Agreement or such other agreement in the form and substance
approved by the Agency's legal counsel.
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3.3.13.4. Recordation of the Notice of Affordability Restrictions
A Notice of Affordability Restrictions shall have been recorded against
the Phase I Site.
3.4. Conditions Precedent to Disbursement of Retention
Upon satisfaction or waiver of the conditions precedent set forth below, as reasonably
determined by the Executive Director, Agency shall disburse the Retention, if any.
No disbursement of the Loan Proceeds shall be made for the Retention until all of the
following conditions precedent have been satisfied (as determined by Agency in its discretion) or waived:
3.4.1. Compliance With Previous Conditions
Developer shall be in compliance with the conditions precedent to disbursement of
the Loan Proceeds set forth in Section 3.3.
3.4.2. Completion of Construction
a. The construction of the Phase II Project shall be complete. The
construction of the Phase II Project shall be considered complete for purposes of this Agreement only
when (a) the construction of the Improvements has been completed in accordance with the Plans and
Specifications and has been fully paid for and is lien free, (b) all work requiring inspection or certification
by any governmental agency has been completed and all requisite certificates, approvals and other
necessary authorizations have been obtained (including, without limitation, temporary certificate(s) of
occupancy for the Improvements which shall be subject only to conditions reasonably acceptable to
Agency), and (c) streets and offsite utilities located within or pertaining to the Phase II Project have been
completed to the satisfaction of all applicable authorities.
b. Any portion of the Phase II Project requiring inspection or certification
by any governmental agency shall have been inspected and certified as complete, a final certificate of
occupancy shall have been issued covering the Phase II Project and all other necessary approvals, licenses,
exemptions and other authorizations of governmental agencies shall have been duly obtained.
C. At least one of the following shall have occurred:
(i) 65 days shall have passed since the recording of a valid notice of
completion for the construction of the Phase II Project and no mechanic's or materialman's lien
shall be outstanding; or
(ii) 95 days shall have passed since actual completion of the
construction of the Phase II Project and no mechanic's or materiahnan's lien shall be outstanding;
or
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(iii) Agency shall be satisfied that no mechanic's or materialman's lien
will impair its interest in the Phase II Site, Agency hereby agrees to consider that a CLTA Form
No. 101.1 Endorsement to the Title Policy, in form and substance reasonably satisfactory to
Agency, may satisfy the requirement of this subparagraph (iii).
d. Agency shall be reasonably satisfied that the Phase II Project was
completed in accordance with all Governmental Regulations, including, without limitation, all laws
described in any Prevailing Wage Clause.
All requirements for release of retention set forth in this Agreement
have been met.
Agency has issued and Developer has recorded a Release of
Construction Covenants.
3.4.3. Management Plan
Developer shall have submitted and Agency shall have approved any amendments
or modifications to the Management Plan.
3.5. Release and Reconveyance
Upon repayment of the Agency Loan in full, the Agency shall reconvey the Agency Deed
of Trust.
3.6. Other Sources of Financing
3.6.1. Permanent Loan
Developer anticipates permanent financing by way of bonds issued by the
California Housing Finance Agency (the "Permanent Lender ") in an amount set forth in the Project
Budget (the "Permanent Loan "). The Parties acknowledge that in order to receive the Permanent Loan,
the Developer must satisfy certain conditions established by the Permanent Lender and must subject the
Phase II Site to certain covenants and restrictions pursuant thereto. Agency hereby acknowledges that the
Permanent Loan will be cross - defaulted with financing secured by real property other than the Phase II
Site and certain financing in which LMV I Affordable, L.P. is the borrower, and hereby consents to such
cross - defaults.
3.6.2. Tax Credits
Developer has received an award from TCAC of four percent (4 %) Low Income
Housing Tax Credits pursuant to Section 42 of the Internal Revenue Code and /or California Revenue and
Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and Safety Code
Section 50199, et seq., for the Phase II Project. The Developer anticipates the Tax Credits syndication
proceeds will be in an amount set forth in the Project Budget. The Parties acknowledge that in order to
receive the allocation of Tax Credits for the Phase II Project, the Developer must satisfy certain conditions
established by TCAC and must subject the Phase II Site to certain covenants and restrictions pursuant
thereto as set forth in the Tax Credit Regulatory Agreement to be recorded against the Phase II Site.
3.6.3. General Partner Equity
Developer's general partner anticipates receiving capital contributions from
Investor as set forth in the Project Budget, which shall be available to the Phase II Project.
3.6.4. Additional Sources of Financing
The Developer and Agency agree to work together to obtain additional sources of
financing for unfunded budgeted project costs, if any, and /or reduce the total amount of the Agency Loan.
Developer agrees to exercise diligent efforts to identify and obtain additional sources of financing. If and
to the extent that the Parties successfully obtain additional sources of financing, such funds shall be
allocated first to fund Eligible Project Costs, if any, in excess of the costs identified in the final Project
Budget, and second to reduce the amount of the Agency Loan.
3.6.5. Rights of Termination in the Event of Insufficiency of Funds
If at any time prior to the funding of the Permanent Loan, the Parties estimate that
the aggregate amount of the sources of funds set forth in Section 3, et seq., is less than the costs necessary
to complete the Phase II Project, the Parties shall meet to identify potential supplemental funding sources
and shall diligently pursue such additional funds.
So long as the Developer demonstrates to the satisfaction of the Executive Director
that the Developer is diligently pursuing additional funds to complete the Phase II Project, times for
performance as set forth in the Schedule of Performance shall automatically extend up to twelve (12)
months (the "Extension Period "). During the Extension Period, the Developer shall continue to maintain
the Phase II Site in accordance with the requirements of this Agreement.
In the event the Parties are unsuccessful in securing additional funds necessary for
the Phase II Project, the Parties shall meet and confer in good faith to modify the Phase II Project to allow
partial completion with available funding sources. If the Parties reasonably determine that modification
and partial completion of the Phase II Project renders the Phase II Project financially infeasible, Developer
may request that Agency provide additional funding for completion of the Phase II Project.
Agency shall have 45 days to consider and act upon such additional funding
request. In the event that the Agency declines to provide a firm commitment by way of formal resolution
to commit the necessary additional funds, Developer may terminate this Agreement.
In the event that Developer desires to terminate the Agreement, Developer shall
promptly notify the Agency in writing of its intent. Notwithstanding the foregoing, Developer's
indemnification obligations under this Agreement shall remain in force following such termination with
respect to any events occurring or claims accruing prior to the date of termination.
After the funding of the Agency Loan, Developer shall be solely responsible for all
remaining costs and shall be obligated to complete the Phase II Project substantially in accordance with
this Agreement.
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3.6.6. Obligation to Update Project Budget
Until the recordation of the Release of Construction Covenants, Developer shall
update the Project Budget at least annually but also in the event of a proposed material change to the
Project Budget. In the event of a proposed material change to the Project Budget, Developer shall notify
Agency in writing of the nature of the proposed change, including a detailed description of the effect of
such change, and submit a revised, pro forma Project Budget reflecting such change to Agency. Agency
shall have the right to approve such change prior to Developer taking any action in furtherance of such
change.
4. DEVELOPMENT OF THE PHASE II SITE
4.1. Scope of Work
The Developer shall construct the Phase II Project substantially in accordance with the
attached Scope of Development (Attachment No. 4), applicable Governmental Regulations, including
(without limitation) all applicable zoning, planning and design review requirements of the City and all
permits and entitlements issued for the Phase II Project. Subject to Section 7.8, the Developer shall, by
the respective times established therefor in the Schedule of Performance, obtain the necessary permits and
commence and complete (or cause to be commenced and completed) the improvements on the Phase II
Site and construction of the Phase II Project.
The Phase II Project construction may be phased. Notwithstanding the foregoing, the
Phase II Project shall be completed by the time established therefor in the Schedule of Performance.
4.2. Cost of Development
The cost of planning, designing, developing and rehabilitating the Phase II Project, and any
demolition and removal of any existing structure or Phase II Site improvements, Phase II Site remediation
and Phase II Site preparation costs, shall be borne solely by the Developer.
4.3. Permits and Entitlements
Before commencement of construction of the Phase II Project or other works of
improvement upon the Phase II Site, the Developer shall, at its own expense, secure or cause to be secured
any and all permits, entitlements or approvals which may be required by the City in accordance with its
Municipal Code and land use entitlement process and by any other governmental entity with jurisdiction
over the Phase II Site and /or the Phase II Project in accordance with applicable Governmental
Regulations. Such expenses shall be deemed Eligible Project Costs. The Agency shall reasonably
cooperate and assist Developer's efforts to comply with this Section 4.3, provided, however that the
execution of this Agreement does not constitute the granting of or a commitment to obtain any required
land use entitlements or approvals required by the City.
4.4. Defects in Plans
The Agency shall not be responsible to the Developer or to third parties in any way for any
defects in the design of the Phase II Project, nor for any structural or other defects in any work done
according to the approved design of the Phase II Project, nor for any delays reasonably caused by the
review and approval processes established by this Section 4.4. The Developer shall hold harmless,
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hold harmless, indemnify and defend the Agency and its respective officers, employees, agents and
representatives from and against any claims, suits for damages to property or injuries to persons arising
out of or in any way relating to defects in the design of the Phase II Project, including (without limitation)
the violation of any laws, and for defects in any work.
4.5. Design
The Developer assumes the responsibility for the design and construction of, and shall let
contracts for (or cause contracts to be let for) the construction of the Phase II Project. All additional costs
incurred for any reason in constructing the Phase II Project shall be at the sole cost and expense of the
Developer. The Developer assumes all obligation for ensuring conformity with all applicable Federal,
State and local nondiscrimination, labor standards, prevailing wage rate requirements and competitive
bidding requirements with respect to the Phase II Project.
4.6. Construction Schedule
Subject to Section 7.8, the Developer shall commence and complete all development
activities substantially within the times established therefor in the Schedule of Performance.
4.7. Bodily Injury and Property Damage Insurance; Indemnity
4.7.1. Insurance
The Developer shall maintain or shall cause its contractor(s) to maintain until the
completion of the Phase II Project as determined by the Agency pursuant to Section 3.3.3, insurance in
accordance with the Agency's uniform insurance requirements or as otherwise approved in writing by the
Executive Director.
The obligations set forth in this Section 4.7.1 shall remain in effect only until a
Release of Construction Covenants has been furnished to the Developer as provided in Section 4.15.
4.7.2. Developer's Indemnity
To the full extent permitted by law, Developer shall indemnify, defend and hold
harmless Agency, and any and all of its employees, officials and agents (the Indemnitees) from and
against any liability (including liability for claims, suits, actions, arbitration proceedings, administrative
proceedings, compliance with applicable federal and state labor standards, regulatory proceedings, losses,
expenses or cost of any kind, whether actual, alleged or threatened, including attorneys fees and costs,
court costs, interest or defense costs, including expert witness fees), where the same arise out of, are a
consequence of, or are in any attributable to, in whole or in part, the performance of this Agreement by
Developer, or by any individual or entity that Developer shall bear the legal liability thereof including but
not limited to officers, agents, employees or contractors of Developer.
Without affecting the rights of Indemnitees under any provisions of this
Agreement, Developer shall not be required to indemnify and hold harmless Indemnitees for liability
attributable to the active negligence or willful misconduct of Indemnitees. In instances where
Indemnitees have been actively negligent or engaged in willful misconduct and where Indemnitees' active
negligence or willful misconduct accounts for only a percentage of the liability involved, the obligation of
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obligation of Developer will be for that entire portion or percentage of liability not attributable to the
active negligence or willful misconduct of Indemnitees.
Developer agrees to obtain executed indemnity agreements with provisions
identical to those set forth here in this section from its general contractor. In the event Developer fails to
obtain such indemnity obligations from the general contractor as required here, Developer agrees to be
fully responsible according to the terms of this Section 4.7.2.
Failure of Indemnitees to monitor compliance with these requirements imposes no
additional obligations on Indemnitees and will in no way act as a waiver of any rights hereunder. This
obligation to indemnify and defend Indemnitees as set forth here is binding on the successors, assigns or
heirs of Developer and shall survive the termination of this Agreement or this Section 4.7.2.
4.8. Other Governmental City Permits and Environmental Compliance
Before commencement of demolition activities or construction or other works of
improvement upon the Phase II Site, the Developer shall, at its own expense, secure or cause to be secured
any and all land use and other entitlements or approvals, if any, which may be required by any other
governmental agency affected by such construction or work.
The parties acknowledge and agree the California Environmental Quality Act, Public
Resources Code Section 21000, et seq., ( "CEQA ") and National Environmental Policy Act of 1969,
Public Law 91 -190 as amended, 42 U.S.C. Sections 4321 -4347 ( "NEPA ") may become applicable to the
Phase II Project as a result of processing Developer's entitlement requests. Pursuant to CEQA and
NEPA, certain environmental documents may be required to be prepared. The Developer agrees to
cooperate with the City in obtaining information to determine environmental impact associated with such
entitlements. The Developer shall be responsible to pay all costs incurred by the City to prepare or cause
to be prepared such environmental documents with respect to any land use entitlements affecting the
Phase II Site and to comply with any required mitigation measures imposed pursuant thereto.
Should the CEQA or NEPA reviews reveal environmental impacts from the Phase II
Project which cannot be sufficiently mitigated, Developer and Agency shall then negotiate in good faith to
restructure the Phase II Project in a manner that may reduce the environmental impacts of the Phase II
Project.
4.9. Rights of Access
Prior to the issuance of a Release of Construction Covenants (as specified in Section 4.15),
for purposes of assuring compliance with this Agreement, representatives of the Agency shall have the
right of access to the Phase II Site, without charges or fees, at normal construction hours during the period
of construction for the purposes of this Agreement, including but not limited to, the inspection of the
work being performed in constructing the Phase II Project so long as Agency representatives comply with
all safety rules. Agency representatives shall, except in emergency situations, notify the Developer prior
to exercising its rights pursuant to this Section 4.9.
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4. 10. Federal, State and Local Laws
4.10.1. Labor Standards
Developer shall carry out the construction of the improvements on the Phase II Site
in conformance with all applicable laws, including any and all applicable federal and state labor standards.
4.10.2. General
Developer shall comply with all Governmental Regulations in the construction, use and
operation of the Phase II Project, including all applicable federal, state and local statutes, ordinances,
regulations and laws, including without limitation, all applicable federal, state, and local labor standards,
City zoning and development standards, building, plumbing, mechanical and electrical codes, and all
other provisions of the Lake Elsinore Municipal Code, and all applicable disabled and handicapped access
requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C. § 12101, et
seq., Government Code § 4450, et seq., and Government Code § 11135, et seq.
4.11. Nondiscrimination During Construction
The Developer, for itself and its successors and assigns, agrees that, in the construction of
the Phase II Project provided for in this Agreement, the Developer will not discriminate against any
employee or applicant for employment because of race, color, creed, religion, sex, marital status, national
origin or ancestry.
4.12. Taxes and Assessments
The Developer shall pay prior to delinquency all ad valorem real estate taxes and
assessments on the Phase II Site during Developer's ownership thereof, subject to the Developer's right to
contest in good faith any such taxes. The Developer shall remove or have removed any levy or
attachment made on the Phase II Site or any part thereof, or assures the satisfaction thereof within a
reasonable time.
4.13. Liens and Stop Notices
The Developer shall not allow to be placed on the Phase II Site or any part thereof any lien
or stop notice. If a claim of a lien or stop notice is given or recorded affecting the Phase II Project, the
Developer shall within thirty (30) days of such recording or service or within five (5) days of the
Agency's demand, whichever last occurs:
a. pay and discharge the same; or
b. effect the release thereof by recording and delivering to the Agency a surety bond in
sufficient form and amount, or otherwise; or
c. provide such other assurances which the Agency deems, in its sole discretion, to be
satisfactory for the payment of such lien or bonded stop notice and for the full and continuous protection
of Agency from the effect of such lien or bonded stop notice.
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4.14. Mortgage Deed of Trust, Sale and Lease -Back Financing; Rights of Holders
4.14.1. No Encumbrances Except Mortgages, Deeds of Trust
Subject to Sections 2.2 and 3.2.3, and excluding documents securing the Permanent
Loan (as such term is defined in Section 3.6. 1) mortgages, deeds of trust, sales and leases -back shall be
permitted before completion of the construction of the Phase II Project with the Agency's prior written
approval, which shall not be unreasonably withheld or delayed, but only for the purpose of securing loans
of funds to be used for financing the construction of the Phase II Project, and any other purposes
necessary for the construction of the Phase II Project, and necessary and appropriate under this
Agreement. The Developer shall notify the Agency in advance of any mortgage, deed of trust or sale and
lease -back financing, if the Developer proposes to enter into the same before completion of the
construction of the Phase II Project. The Developer shall not enter into any such conveyance for financing
without the prior written approval of the Agency, which approval the Agency shall not unreasonably
withhold provided that (i) such conveyance for financing is given to a responsible financial or lending
institution, person or entity, and (ii) the Developer has commenced or is prepared to commence
construction of the Phase II Project, The Agency's approval shall not be required for any financing after
the issuance of a Release of Construction Covenants for the construction of the Phase II Project as
specified in Section 4.15.
4.14.2. Holder Not Obligated to Construct Improvements
The holder of any mortgage or deed of trust authorized by this Agreement shall not
be obligated by the provisions of this Agreement to construct or complete the Phase II Project or to
guarantee such construction or completion. Nothing in this Agreement shall be deemed to construe,
permit or authorize any such holder to devote the Phase II Site to any uses or to construct any
improvements thereon, other than those uses or improvements provided for or authorized by this
Agreement.
4.14.3. Notice of Default to Mortgagee or Deed of Trust Holders, Right to Cure
Whenever the Agency delivers any notice or demand to Developer with respect to
any breach or default by the Developer in completion of construction of the Phase II Project and the
Developer fails to cure or commence to cure to the Agency's satisfaction within sixty (60) days from the
date of such notice, the Agency shall at the same time deliver to each holder of record of any mortgage or
deed of trust authorized by this Agreement and granted by Developer, a copy of such notice or demand.
Each such holder shall (insofar as the rights granted by the Agency are concerned) have the right, at its
option, within sixty (60) days after the receipt of the notice, to cure or remedy or commence to cure or
remedy and diligently prosecute such cure or remedy to completion any such default and to add the cost
thereof to the mortgage debt and the lien of its mortgage. Written notice of such holder's intention to cure
Developer's default shall be deemed to be commencement of cure. Nothing contained in this Agreement
shall be deemed to permit or authorize such holder to undertake or continue the construction or
completion of the Phase II Project (beyond the extent necessary to conserve or protect the improvements
or construction already made) without first having expressly assumed the Developer's obligations under
this Agreement by written agreement satisfactory to the Agency. The holder, in that event, must agree to
complete, in the manner provided in this Agreement, the Phase II Project to which the lien or title of such
holder relates, and submit evidence satisfactory to the Agency that it has the qualifications and financial
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relates, and submit evidence satisfactory to the Agency that it has the qualifications and financial
responsibility necessary to perform such obligations. Any such holder properly completing the Phase II
Project shall be entitled, upon compliance with the requirements of this Agreement, to a Release of
Construction Covenants as specified in Section 4.15.
4.14.4. Reserved.
4.14.5. Right of the Agency to Cure Mortgage or Deed of Trust Default
In the event of a mortgage or deed of trust default or breach by the Developer prior
to the issuance by the Agency of the Release of Construction Covenants in accordance with Section 4.15,
the Developer shall immediately deliver to the Agency a copy of any mortgage holder's notice of default.
If the holder of any mortgage or deed of trust has not exercised its option to construct, the Agency shall
have the right, but not the obligation to cure the default. In such event, the Agency shall be entitled to
reimbursement from the Developer of all proper costs and expenses incurred by the Agency in curing
such default. Such costs and expenses incurred by the Agency shall accrue interest until paid by the
Developer at the rate often percent (10 %) per annum or the maximum allowable interest rate permitted
by applicable law, whichever is lower. Such costs and expenses and any interest accrued thereon shall be
secured as additional advances by and pursuant to the Deed of Trust and the Assignment of Rents.
In furtherance of this Section 4.14.5, every subordination agreement entered into
by and between the Agency and a senior lien holder pursuant to Section 3.2.3 shall include an
acknowledgment and agreement by the senior lien holder to provide notice of Developer's default to the
Agency and to accept the Agency's cure as set forth herein.
4.14.6. Right of the Agency to Satisfy Other Liens on the Phase II Site After Title Passes
Prior to the issuance by the Agency of the Release of Construction Covenants in
accordance with Section 4.15 and after the Developer has had written notice and has failed after a
reasonable time (but in any event not less than thirty (30) days) to challenge, cure, adequately bond
against, or satisfy any liens or encumbrances on the Phase II Site which are not otherwise permitted
under this Agreement, the Agency shall have the right (but not the obligation) to satisfy any such liens or
encumbrances. The costs and expenses of such cure shall accrue interest until paid by the Developer at
the rate of ten percent (10 %) per annum or the maximum allowable interest rate provided by applicable
law, whichever is lower. Such costs and expenses and any interest accrued thereon shall be secured as
additional advances by and pursuant to the Deed of Trust and the Assignment of Rents.
4.15. Release of Construction Covenants
Promptly after completion of the Phase II Project in conformity with this Agreement, the
Agency shall furnish the Developer with a "Release of Construction Covenants" upon written request
therefor by the Developer. The Agency shall not unreasonably withhold such Release of Construction
Covenants. The Release of Construction Covenants shall be substantially in the form of the "Release of
Construction Covenants" (Attachment No. 12). The Release of Construction Covenants shall be a
conclusive determination of satisfactory completion of the Phase II Project and the Release of
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the Release of Construction Covenants shall so state. Except as provided in the Regulatory Agreement
(Phase II), any parry then owning or thereafter purchasing, leasing or otherwise acquiring any interest in
the Phase II Site shall not (because of such ownership, purchase, lease or acquisition) incur any obligation
or liability under this Agreement except for those continuing covenants as set forth in Section 5, et seq.
If the Agency refuses or fails to furnish the Release of Construction Covenants, after
written request from the Developer, the Agency shall, within thirty (30) days of written request therefor,
provide the Developer with a written statement of the reasons the Agency refused or failed to furnish the
Release of Construction Covenants. The statement shall also contain the Agency's opinion of the actions
the Developer must take to obtain the Release of Construction Covenants. If the Agency shall have failed
to provide such written statement within said thirty (30) day period, and on the condition that the City has
issued a certificate of occupancy or equivalent document for the Phase II Project, the Phase II Project shall
thereafter be deemed approved by the Agency and the Agency shall promptly issue the Release of
Construction Covenants.
The Release of Construction Covenants shall not constitute evidence of compliance with or
satisfaction of any obligation of the Developer to any holder of any mortgage, or any insurer of a
mortgage securing money loaned to finance the Phase II Project, or any part thereof. The Release of
Construction Covenants is not a notice of completion as referred to in Section 3093 of the California Civil
Code.
5. COVENANTS AND RESTRICTIONS
5.1. Use Covenants
Developer covenants and agrees for itself, its successors, its assigns, and every successor in
interest to the Phase II Site or any part thereof, the Developer shall devote the Phase II Site to the uses
specified in the Regulatory Agreement (Phase II). All uses conducted on the Phase II Site, including,
without limitation, all activities undertaken by the Developer pursuant to this Agreement, shall conform to
all applicable provisions of the Lake Elsinore Municipal Code.
5.2. Affordable Housing Requirements
5.2.1. Number of Units
The Developer covenants and agrees for itself, its successors, its assigns and every
successor in interest to the Phase II Site or any part thereof, that the Developer, and such successors and
assigns, shall use, maintain and operate the Phase II Site as a housing development containing sixty -three
(63) Affordable Units, including sixteen (16) one - bedroom Affordable Units, thirty one (3 1) two - bedroom
Affordable Units, and sixteen (16) three - bedroom Affordable Units, and one Manager Unit in accordance
with and as specified in the Regulatory Agreement (Phase II). During the Affordability Period, all uses
undertaken by the Developer on the Phase II Site shall conform to all applicable provisions of the Lake
Elsinore Municipal Code and Governmental Regulations.
►:
5.2.2. Duration of Affordability Requirements
The Affordable Units shall be subject to the requirements of Section 5.2
throughout the Affordability Period.
5.2.3. Tenant Eligibility and Selection Criteria
Developer shall be responsible for determining the eligibility of existing tenants
and selecting tenant applicants to rent the Affordable Units in compliance with applicable Governmental
Regulations, the Regulatory Agreement (Phase II) and such lawful and reasonable criteria and procedures
as set forth in the Management Plan which shall be submitted to the Agency for approval pursuant to
Section 5.7. All tenants will be required to submit written documentation evidencing income eligibility
as a qualified Low Income Household or a Very Low Income Household in accordance with Section
5.2.4 and legal presence in the United States consistent with the criteria established by 24 CFR Section
5.508. In addition to income and legal residency verification, tenant selection criteria for all tenant
applicants shall include a credit check, criminal background check and references establishing rent
payment history and personal conduct. Preference shall be given to tenant applicants who have been
displaced by redevelopment activities of the Agency in connection with this Phase II Project and in the
implementation of the Agency's Redevelopment Plans.
5.2.4. Household Income Requirements
In order to assure compliance with the rent and occupancy restrictions set forth in
this Agreement and the Regulatory Agreement (Phase II), the Developer shall, prior to the initial leasing
of an Affordable Unit and on an annual basis thereafter throughout the Affordability Period, obtain and
cause to be submitted to the Agency, at Developer's expense, a verification of all household sources of
income demonstrating that such household is a Very Low Income Household or Low Income Household,
as applicable, and meets the eligibility requirements established for the Unit. Such income verification
shall be submitted on such form as prepared and submitted in accordance with the Tax Credit Rules or
such other form approved by the Agency.
5.2.5. Annual Reporting Requirement
In order to satisfy the monitoring requirements of the Agency, the Developer shall,
following the issuance of the Release of Construction Covenants, and on or before June 30 of each year,
submit to the Agency a certification of compliance with the terms and conditions of this Agreement and
the Regulatory Agreement (Phase II) and such other reports as required thereby on forms prescribed by the
Agency. Each annual report shall cover the immediately preceding fiscal year. Developer further agrees
to provide true and accurate copies of all reports, audits and compliance forms prepared in accordance
with applicable Tax Credit Rules.
Additionally, Developer shall determine and submit a report to the Agency showing
the proposed Affordable Rent amount for the Affordable Units for the proceeding 12 months with
supporting documentation.
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5.2.6. Relationship to Tax Credit Requirements
Notwithstanding any other provisions of this Agreement, to the extent the
regulatory agreement executed by the Developer as a requirement of receiving the Tax Credits (that is, the
Tax Credit Regulatory Agreement) and/or the Permanent Loan are less restrictive with respect to the
requirements applicable to tenant selection, tenant income levels and unit levels than as provided in this
Agreement and the Regulatory Agreement (Phase II), this Agreement and the Regulatory Agreement
(Phase II) shall control as to the Affordable Units.
5.3. Lease Requirements
Prior to rental of any of the Affordable Units, the Developer shall submit a standard lease
form to the Agency for the Agency's approval, which approval shall not unreasonably be withheld or
delayed. The Developer shall enter into a lease with each tenant of an Affordable Unit, in substantially
the form of the California Housing Finance Agency Model Form Lease and Tax Credit Addendum and in
such final form as approved by the Agency.
5.4. Capital Replacement Reserve
The Developer shall, or shall cause the Property Manager to, set aside the greater of (a) an
amount equal to Three Hundred Fifty Dollars ($300.00) per Unit per year or (b) the minimum amount
required by TCAC into a separate interest - bearing trust account (the "Capital Replacement Reserve ").
The amount required to be placed into the Capital Replacement Reserve shall increase at the rate
determined by Permanent Lender or Investor. Funds in the Capital Replacement Reserve shall be used for
capital replacements to the Phase II Project fixtures and equipment which are normally capitalized under
generally accepted accounting principles. Interest on funds in the Capital Replacement Reserve shall
remain in the Capital Replacement Reserve. The non - availability of funds in the Capital Replacement
Reserve does not in any manner relieve the Developer of the obligation to undertake necessary capital
repairs and improvements and to continue to maintain the Phase II Project in the manner prescribed
herein. Not less than once per year, Developer, at its expense, shall submit to the Agency an accounting
for the Capital Replacement Reserve. Agency approval is not required for withdrawals from the Capital
Replacement Reserve in accordance with this Agreement.
5.5. Operating Reserve
Developer shall, or shall cause the Property Manager to set aside at the time the Release of
Construction Covenants is recorded in a separate interest- bearing trust account held by the Developer with
an initial amount equal to three (3) months of the projected annual Operating Expenses for the
Development (the "Operating Reserve "). Interest earned on funds in the Operating Reserve shall remain
in the Operating Reserve. Developer may withdraw from the Operating Reserve those amounts exceeding
the current year budget for operating expenses. Agency approval is not necessary for withdrawals made in
accordance with this Agreement. Funds may be disbursed from the Operating Reserve to cover shortfalls
between the income and actual Operating Expenses and Debt Service of the Development.
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5.6. Marketing Plan
By the time specified therefor in the Schedule of Performance, Developer shall submit for
the approval of the Agency, which approval shall not unreasonably be withheld, a plan for marketing the
rental of the Affordable Units (the "Marketing Plan "). The Marketing Plan shall include affirmative
marketing procedures and requirements consistent with the provisions of Section 5.A. of the Regulatory
Agreement (Phase II). The Marketing Plan shall include a plan for publicizing the availability of the
Affordable Units within the City in a manner which gives notice to existing residents, such as notices in
any City sponsored newsletter, newspaper advertising in local newspapers and notices in City offices and
community centers. The Marketing Plan shall require Developer to obtain from the Agency the names of
Very Low and Low Income Households who have been displaced by the Phase II Project and other
persons who have indicated to the Agency their interest in the Affordable Units, and to notify persons on
such list of availability of units in the Phase II Project prior to undertaking other forms of marketing. The
Marketing Plan shall provide that the persons on such list be given not fewer than ten (10) days after
receipt of such notice to respond by completing application forms for rental of Affordable Units, as
applicable.
5.7. Long Term Management
The management of the Phase II Project shall be in compliance with the Management Plan.
The Developer may from time to time submit amendments and modifications to the Management Plan for
the reasonable approval of the Agency. The parties acknowledge that the Agency is interested in the long
term management and operation of the Phase II Project and in the qualifications of any person or entity
retained by the Developer for that purpose (the "Property Manager "). Prior to the issuance of a Release of
Construction Covenants by the Agency and the initial rental of the Units in accordance with this
Agreement, the Developer shall confirm its intent to utilize the approved Management Plan or submit for
the reasonable approval of the Agency any modifications or amendments to the Management Plan.
The Developer shall, prior to the rental of the first Affordable Unit, contract with a
Property Manager, subject to the reasonable approval of the Agency. During the term of the Affordability
Period, such Property Manager may subcontract for property management services with an experienced
and qualified property management entity (based upon the criteria set forth hereinbelow) only upon prior
written approval by the Agency which approval shall not be unreasonably withheld. The Agency hereby
approves CBR Property Management, LLC as the Property Manager.
During the Affordability Period, the Agency may from time to time review and evaluate
the identity and performance of the Property Manager of the Phase II Project as it deems appropriate in its
reasonable judgment. If the Agency reasonably determines that the performance of the Property Manager
is deficient based upon the standards and requirements set forth in this Agreement, the Agency shall
provide notice to the Developer of such deficiencies and the Developer shall use its best efforts to correct
such deficiencies. Upon default of the terms of this Agreement by the Property Manager, the Agency
shall have the right to require the Developer, with the consent of Investor and upon 30 days prior written
Notice, to immediately remove and replace the Property Manager with another property manager or
property management company who is reasonably acceptable to the Agency, and who has not less than
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acceptable to the Agency, and who has not less than five (5) years experience in property management,
including experience managing multifamily residential developments of the size, quality and scope of the
Phase II Project. If the entity removed is related to or affiliated with the Developer, the Agency may
replace the Property Manager with another entity that is not related to or affiliated with the Developer.
In addition, during the term of the Affordability Period, the Developer shall annually
submit to the Agency for its reasonable approval a budget for the operation of the Phase II Project. The
fee paid to Property Manager shall not exceed the greater of (a) eight percent (8 %) of the Phase II
Project's gross rental receipts or (b) the reasonable and customary fees paid to such property managers for
similar rental properties in Riverside County. Other fees and payments shall be consistent with prevailing
market rates for the services performed and goods provided in consideration for such fees and payments.
The Developer shall ensure that the reasonably foreseeable expenses of operating the Phase II Project do
not materially exceed the budget which has been approved by the Agency. The Developer shall annually
provide to the Agency a detailed accounting of operating expenses and shall make available its books and
records to the Agency for inspection and copying, upon reasonable advance notice during its normal hours
of business.
5.8. Regulatory Agreement (Phase II)
The Developer shall execute, acknowledge, and deliver to Agency the Regulatory
Agreement (Phase II) to be recorded with respect to the Phase II Site in the official records of Riverside
County. The Regulatory Agreement (Phase II) shall contain those portions of this Agreement relating to
affordable housing requirements, and other provisions which are intended to survive the completion of
construction of the Phase II Project.
5.9. Maintenance of Phase II Site
During construction of the Phase II Project and throughout the Affordability Period, the
Developer shall maintain the Phase II Site and the improvements thereon in conformity with the
Regulatory Agreement (Phase II).
5.10. Nondiscrimination Covenants
Developer covenants by and for itself and any successors in interest that there shall be no
discrimination against or segregation of, any person or group of persons on account of any basis listed in
subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections
12926, 12926. 1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section
12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or
enjoyment of the Phase II Site, or any part of it, nor shall the Developer or any person claiming under or
through it, establish or permit any practice or practices of discrimination or segregation with reference to
the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in
the Phase II Site, including the Units, or any portion thereof. The foregoing covenants shall run with the
land.
Notwithstanding the foregoing paragraph, with respect to familial status, the foregoing
paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of
the Government Code. With respect to familial status, nothing in the foregoing paragraph shall be
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paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code,
relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code
and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to the foregoing
paragraph.
Developer shall refrain from restricting the sale, lease or any transfer of the Phase II Site,
including the Units, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the
Government Code, as those bases are defined in Sections 12926,12926. 1, subdivision (m) and paragraph
(1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code. All such deeds,
leases, contracts or subcontracts shall contain or be subject to substantially the following
nondiscrimination and nonsegregation clauses:
a. In deeds: "The grantee herein covenants by and for himself or herself, his or her
heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there
shall be no discrimination against or segregation of, any person or group of persons on account of any
basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined
in Sections 12926, 12926. 1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and
Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or
enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through
him or her, establish or permit any practice or practices of discrimination or segregation with reference to
the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in
the premises herein conveyed. The foregoing covenants shall run with the land."
Notwithstanding the foregoing paragraph, with respect to familial status, the foregoing
paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of
the Government Code. With respect to familial status, nothing in the foregoing paragraph shall be
construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to
housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and
subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to the foregoing
paragraph.
b. In leases: "The lessee herein covenants by and for himself or herself, his or her
heirs, executors, administrators and assigns, and all persons claiming under or through him or her, and
this lease is made and accepted upon and subject to the following conditions: That there shall be no
discrimination against or segregation of any person or group of persons, on account of any basis listed in
subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections
12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section
12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or
enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming
under or through him or her, establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees,
sublessees, subtenants, or vendees in the premises herein leased."
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Notwithstanding the foregoing paragraph, with respect to familial status, the foregoing
paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of
the Government Code. With respect to familial status, nothing in the foregoing paragraph shall be
construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to
housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and
subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to the foregoing
paragraph.
C. In contracts: "There shall be no discrimination against or segregation of any person
or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the
Government Code, as those bases are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph
(1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in connection with
the performance of this contract nor shall the contracting party himself or herself, or any person claiming
under or through him or her, establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees,
sublessees, subtenants, contractors, subcontractors or vendees with respect to the premises."
Notwithstanding the foregoing paragraph, with respect to familial status, the foregoing
paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of
the Government Code. With respect to familial status, nothing in the foregoing paragraph shall be
construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to
housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and
subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to the foregoing
paragraph.
5.11. Effect of Violation of the Terms and Provisions of this Agreement After Completion of
Construction
The Agency is deemed the beneficiary of the terms and provisions of this Agreement and
of the covenants running with the land, for and in its own right and for the purposes of protecting the
interests of the community and other parties, public or private, in whose favor and for whose benefit this
Agreement and the covenants running with the land have been provided, without regard to whether the
Agency has been, remain or is an owner of any land or interest therein in the Phase II Site. The Agency
shall have the right, if this Agreement or any covenants in any agreement pursuant to this Agreement,
including the Regulatory Agreement (Phase II), are breached, following notice and expiration of all
applicable cure periods, to exercise all rights and remedies, and to maintain any actions or suits at law or
in equity or other proper proceedings to enforce the curing of such breaches to which it or any other
beneficiaries of this Agreement and such covenants may be entitled.
6. DEFAULTS, REMEDIES AND TERMINATION
6.1. Defaults - General
Subject to the extensions of time set forth in Section 7.8, failure or delay by either party to
perform, comply with or observe any of the material conditions, provisions, terms, covenants or
representations of this Agreement, including any of the Attachments hereto, constitutes a default under
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under this Agreement. As provided hereinbelow, the party who so fails or delays must iminediately
commence to cure, correct or remedy such failure or delay, and shall complete such cure, correction or
remedy with diligence. The injured party shall give written notice of default to the party in default,
specifying the default complained of by the injured party. Failure or delay in giving such notice shall not
constitute a waiver of any default, nor shall it change the date of default.
Except as required to protect against further damages, the injured party may not institute
legal proceedings against the party in default until an "Event of Default" (as such term is hereinafter
defined) has occurred. For purposes of this Agreement, an "Event of Default" for purposes of instituting
legal proceedings by a non - defaulting party against the defaulting party shall mean a failure to satisfy,
perform, comply with or observe any of the material conditions, provisions, terms, covenants or
representations contained in this Agreement, including any Attachment hereto, and such failure having
continued uncured or without the defaulting party commencing to diligently cure for thirty (30) days after
notice thereof in writing is mailed by the injured party to the defaulting party; provided, however, that if
such event of default cannot be cured within such thirty (30) day period and Developer has diligently
commenced efforts to cure, the Developer shall have such reasonable time to diligently prosecute such
cure to completion. If a different period or notice requirement is specified for any particular default under
any other provision of this Agreement, including any of the Attachments hereto, the specific provision
shall control.
6.2. Legal Actions
6.2.1. Institution of Legal Actions
In addition to any other rights or remedies and subject to the restrictions otherwise
set forth in this Agreement, either party may institute an action at law or equity to cure, correct or remedy
any Event of Default, to recover damages as provided herein for any Event of Default, or to obtain any
other remedy consistent with the purpose of this Agreement, subject to the nonrecourse nature of the loans
after recordation of the Release of Construction Covenants. Such legal actions may be instituted in the
Superior Court of the County of Riverside, State of California, in an appropriate municipal court in that
County, or in the Federal District Court in the Central District of California.
6.2.2. Applicable Law
The laws of the State of California shall govern the interpretation and enforcement
of this Agreement.
6.2.3. Acceptance of Service of Process
In the event that any legal action is commenced by Developer against Agency,
service of process on Agency shall be made by personal service upon the Agency's Secretary, or in such
other manner as may be provided by law.
In the event that any legal action is commenced by Agency against Developer,
service of process on Developer shall be made by personal service upon any owner, general partner,
officer or manager of Developer or in such other manner as may be provided by law, whether made within
or without the State of California.
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6.3. Rights and Remedies are Cumulative
To the extent permitted by law and except with respect to rights and remedies expressly
declared to be exclusive in this Agreement, the rights and remedies of the parties are cumulative, and the
exercise by either party of one or more of such rights or remedies shall not preclude the exercise by it, at
the same time or different times, of any other rights or remedies for the same Event of Default or any
other Event of Default by the other party.
6.4. Inaction Not a Waiver of Default
Any failures or delays by either party in asserting any of its rights and remedies as to any
default shall not operate as a waiver of any default or of any such rights or remedies, or deprive either
such party of its right to institute and maintain any actions or proceedings which it may deem necessary to
protect, assert or enforce any such rights or remedies.
6.5. Specific Performance
Upon an Event of Default, the non - defaulting party, at its option, may thereafter (but not
before) commence an action seeking specific performance and /or other equitable relief to enforce the
terms of this Agreement pertaining to such default.
6.6. Reserved
6.7. Limitation on Damages
Without limiting the generality of the foregoing, the Parties shall not in any event be
entitled to, and the Parties hereby waive, any right to seek consequential damages of any kind or nature
from any other Party or Parties arising out of or in connection with this Agreement, and in connection
with such waiver, the Parties are familiar with and hereby waive the provision of Section 1542 of the
California Civil Code which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OF HER FAVOR
AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM OR
HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR."
6.8. Rights of Limited Partners
Notwithstanding anything to the contrary contained herein, the Agency hereby agrees that
any cure of any default made or tendered by any limited partner of the Developer shall be deemed to be a
cure by the Developer, and shall be accepted or rejected on the same basis as if made or tendered by the
Developer; provided, however, that no limited partner shall have any obligation or duty to take any action
to cure any default or to cause any default to be cured. The Agency shall not commence any action
against the Developer under any of the Agency Loan Documents without first providing the limited
partner of the Developer with ninety (90) days prior notice (or such longer period as the limited partner
may need if the limited partner has commenced and is diligently prosecuting the process of removing the
general partner of the Developer in connection with curing said default) in which time the limited partners
36
said default) in which time the limited partners of the Developer shall have the right, but not the
obligation, to cure any default of the Developer under the Agency Loan Documents.
GENERAL PROVISIONS
7.1. Notices, Demands and Communications Between the Parties
Unless otherwise specified in this Agreement, it shall be sufficient service or giving of any
notice, request, certificate, demand or other communication if the same is sent by (and all notices required
to be given by mail will be given by) first -class registered or certified mail, postage prepaid, return receipt
requested, or by private courier service which provides evidence of delivery. Unless a different address is
given by any party as provided in this Section, all such communications will be addressed as follows:
To Agency: Redevelopment Agency of the City of Lake Elsinore
Attn: Executive Director
130 S. Main Street
Lake Elsinore, California 92530
Copy to: Barbara Leibold, City Attorney /Agency Counsel
Leibold McClendon & Mann
23422 Mill Creek Drive, Suite 105
Laguna Hills, California 92653
To Developer: LMV II Affordable, L.P.
c/o Bentall Residential
Attn: Kenneth J. Reiner
8105 Irvine Center Drive, Suite 830
Irvine, California 92618
Copies to: AHCDC Lake View Meadow, LLC
Attn: Joe Stalzer
9 Cushing Street, Suite 275
Irvine, California 92618
FEW
Bocarsly Emden Cowan Esmail & Arndt LLP
Attn: Lance Bocarsly, Esq.
633 W. 5 °i Street, 70`x' Floor
Los Angeles, California 90071
And
37
Union Bank, N.A.
Attn: CDF Division Heal
200 Pringle Avenue
Walnut Creek, California 94596
Any Notice shall be deemed received immediately if delivered by hand and shall be deemed
received on the third day from the date it is postmarked if delivered by registered or certified mail.
7.2. Subordination of Indebtedness
Any indebtedness of the Agency to the Developer created by this Agreement is subordinate
to any pledge of tax increments to the bondholders of any tax increment bonds which have been or may
hereafter be issued by the Agency. The Parties hereby agree to execute any and all ancillary documents as
may reasonably be requested by any bondholder or other purchaser of bonds, notes or other forms of
indebtedness of the Agency entitled to receive the tax increment revenues for the repayment of any other
indebtedness of the Agency for which the tax increment revenues have been or may hereafter be pledged.
7.3. Conflicts of Interest
No member, official or employee of the Agency shall have any direct or indirect interest in
this Agreement, nor participate in any decision relating to the Agreement which is prohibited by law.
7.4. Warranty Against Payment of Consideration for Agreement
Developer warrants that it has not paid or given and will not pay or give, any third person
any money or other consideration for obtaining this Agreement, other than normal costs of conducting
business and costs of professional services such as project managers, architects, engineers, attorneys, and
public relations consultants.
7.5. Nonliability of Agency Officials and Employ
No member, official, employee, representative or agent of the Agency shall be personally
liable to Developer, or any successor in interest, in the event of any default or breach by Agency or for any
amount which may become due to Developer or successor, or on any obligation under the terms of this
Agreement.
7.6. Approval by gency and Developer
Approvals required of the Parties shall be given within the time set forth in the Schedule of
Performance or, if no time is given, within a reasonable time. Wherever this Agreement requires the
Agency or Developer to approve any contract, document, plan, proposal, specification, drawing or other
matter, such approval shall not be unreasonably withheld or delayed. In the event that a Party declines to
approve any contract, document, plan, proposal, specification, drawing or other matter, such denial shall
be in writing and shall include the reasons for such denial. The Party considering the request for such
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considering the request for such approval shall use commercially reasonable efforts to respond to such
request for approval within thirty (30) days of receipt unless expressly provided to the contrary herein.
7.7. Plans and Data
If this Agreement is terminated by the Developer pursuant to Section 3.6.5, the Agency
shall have the right but not the obligation to purchase from Developer all plans, drawings, studies and
related documents concerning the Phase II Project within Developer's possession and control, without
representation or warranty. The purchase price for all or any part of such materials shall be their cost to
Developer, less amounts already disbursed to the Developer from the Loan Proceeds for such purposes.
If this Agreement is terminated by Agency pursuant to Section 3.6.5, then, pursuant to the
exercise of Agency's rights under the Assignment of Plans, Reports and Data, Developer shall deliver to
Agency any and all plans, drawings, studies and related documents concerning the Phase II Project within
Developer's possession and control, without representation or warranty. Upon delivery to the Agency, the
Agency shall have the right to use such materials as it deems necessary and appropriate to fulfill the
purposes of this Agreement without obligation to Developer.
7.8. Force Maieure
In addition to specific provisions of this Agreement, performance by any party hereunder
shall not be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lock-
outs; riots; floods; earthquakes; fires; casualties; acts of God or any other deity; acts of the public enemy;
epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or
priority; litigation including litigation challenging the validity of this transaction or any element thereof
including the acquisition of the Phase II Site, or any portion thereof, unusually severe weather; inability to
secure necessary labor, materials or tools; delays of any contractor, subcontractor, or suppliers; acts of the
other party; acts or failure to act of the Agency or any other public or governmental agency or entity (other
than that acts or failure to act of the Agency shall not excuse performance by the Agency); or any other
causes beyond the control or without the fault of the party claiming an extension of time to perform or
relief from default, including without limitation the allocation of Agency revenues to the State of
California by a legislative act to fund deficits in the state budget. 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 notice by the party claiming such extension is sent to the other party
within thirty (30) days of the commencement of the cause. Times of performance under this Agreement
may also be extended in writing by mutual agreement among the Agency and the Developer. That
notwithstanding, if said prevention or delay extends for one (1) year, any party, by notice in writing to the
other, may terminate this Agreement.
7.9. Applicable Law; Interpretation
The laws of the State of California shall govern the interpretation and enforcement of this
Agreement. This Agreement shall be construed as a whole and in accordance with its fair meaning and as
though both of the parties participated equally in its drafting. Captions and organizations are for
39
organizations are for convenience only and shall not be used in construing meaning.
7.10. Inspection of Books and Records, Reports
The Agency or its designee has the right at all reasonable times to inspect the books and
records and other related documents of the Developer pertaining to the satisfaction of their obligations
hereunder as reasonably necessary for purposes of enforcing the provisions of this Agreement. Such
books, records and related documents shall be maintained by the Developer at locations as agreed by the
parties. Throughout the term of this Agreement, the Developer shall submit to the Agency reasonable
written progress reports as and when reasonably requested by Agency on all matters pertaining to the
Phase II Project or the Phase II Site,
7.11. Administration
This Agreement shall be administered by the Executive Director following approval of this
Agreement by the Agency. Whenever a reference is made in this Agreement to an action, finding or
approval to be undertaken by the Agency, the Executive Director is authorized to act on behalf of the
Agency unless specifically provided otherwise or the context should require otherwise. The Executive
Director shall have the authority to issue interpretations, waive provisions and enter into amendments of
this Agreement on behalf of the Agency so long as such actions do not substantially change the uses or
development permitted on the Phase II Site, or add to the costs of the Agency as specified herein or as
agreed to by the Agency Board. Notwithstanding the foregoing, the Executive Director may in his /her
sole and absolute discretion refer any matter to the Agency Board for action, direction or approval.
7.12. Mutual Cooperation
Each party agrees to cooperate with the other in this transaction and, in that regard, to sign
any and all documents which may be reasonably necessary, helpful or appropriate to carry out the
purposes and intent of this Agreement. To the extent that any lender to, or equity investor in the Phase II
Project requires modifications to this Agreement or any attachment hereto, the Agency agrees to make
such modification within a reasonable time on the condition that such modification does not materially
change the rights and obligations of the Parties as set forth herein.
7.13. Ground Breaking and Grand Openings
To insure proper protocol and recognition of the Agency Board, the Developer shall
cooperate with Agency staff in the organization of any project - related ground breaking, grand openings or
any other such inaugural events /ceremonies sponsored by the Developer and celebrating the development
which is the subject of this Agreement providing Agency staff with at least four (4) weeks prior notice of
any such event.
7.14. Independent Contractor
The parties agree that the Developer, in the performance of this Agreement shall act as and
be an independent contractor and shall not act in the capacity of an agent, employee or partner of the
Agency.
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8. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS
This Agreement includes forty -three (43) pages and Attachment Nos. 1 through 14 which
constitute the entire understanding and agreement of the Parties. Three (3) duplicate originals of this
Agreement shall be executed each of which shall be deemed to be an original. This Agreement may be
executed in counterparts, each of which shall be deemed to be an original, and such counterparts shall
constitute one and the same instrument.
Except as otherwise provided herein, this Agreement integrates all of the terms and conditions
mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the
parties with respect to all or any part of the subject matter hereof. All waivers of the provisions of this
Agreement must be in writing and signed by the appropriate authorities of Agency or Developer, and all
amendments hereto must be in writing and signed by the appropriate authorities of Agency and
Developer.
[Signatures on Next Page]
KM
IN WITNESS WHEREOF, Agency and Developer have signed this Agreement as of the date set
opposite their signatures.
Dated:
Dated:
Dated:
"DEVELOPER"
LMV II AFFORDABLE, L.P., a California limited
partnership
By: LMV II AGP, LP, a California limited
partnership, its administrative general partner
By: LMV II GP, LLC, a California limited liability
company, its general partner
Kenneth J. Reiner, Manager
By: AHCDC Lake Meadow, LLC, a California
limited liability company, its managing general
partner
By: Affordable Housing CDC, Inc., a
California nonprofit public benefit
corporation, its sole member and manager
in
"AGENCY"
Joseph A. Stalzer,
Executive Director
REDEVELOPMENT AGENCY OF THE CITY OF
LAKE ELSINORE, a public body, corporate and politic
In
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Executive Director
ATTEST:
Agency Secretary
LEIBOLD McCLENDON & MANN, P.C.
Agency Counsel
43