HomeMy WebLinkAboutItem 21 - Affordable Housing Project at 1108 N. Harbor Blvd Community Development Agency
https://www.santa-ana.org/cd
Item # 21
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
April 20, 2021
TOPIC: Affordable Housing Project at 1108 N. Harbor Blvd
AGENDA TITLE:
Approve a $1,687,047 loan agreement with North Harbor Housing Partners LP for a 55-
year term for the development of the North Harbor Village affordable housing project;
approve a future Subordination Agreement with JP Morgan Chase Bank, N.A.; approve
a future subordination agreement with the State of California Department of Housing and
Community Development (Non-General Fund)
RECOMMENDED ACTION
1. Authorize the City Manager to execute a loan agreement with North Harbor Housing
Partners LP (c/o Jamboree Housing Corporation) for $1,687,047 in Community
Development Block Grant funds for the development of the North Harbor Village
affordable housing project located at 1108 N Harbor Boulevard, Santa Ana, CA 92701,
subject to non-substantive changes approved by the City Manager and City Attorney.
2. Authorize the City Manager to execute two future Subordination Agreements with
Union Bank and Jamboree Housing for the City’s Community Development Block
Grant loan agreement with North Harbor Housing Partners LP, prior to the execution
of the loan agreement, subject to non-substantive changes approved by the City
Manager and City Attorney.
3. Authorize the City Manager to execute a future Subordination Agreement with the
State of California Department of Housing and Community Development, for the City’s
Community Development Block Grant loan agreement with North Harbor Housing
Partners LP, after the North Harbor Village affordable housing project is complete,
subject to non-substantive changes approved by the City Manager and City Attorney.
DISCUSSION
On March 5, 2019, the City Council approved a pre-loan commitment letter with Jamboree
for $1,687,047 in Community Development Block Grant (CDBG) funds for the
development of the North Harbor Village affordable housing project located at 1108 N.
Harbor Blvd, by a unanimous vote (Exhibit 1). On March 2, 2021, the City Council
Affordable Housing Project at 1108 N. Harbor Blvd.
April 20, 2021
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approved a two-year extension of the pre-loan commitment letter with Jamboree for the
development of the project by a unanimous vote (Exhibit 2).
After the approval of the two-year extension of their pre-loan commitment letter,
Jamboree informed the City that they would not be able to determine if they could decline
the City’s funds until after the project is complete. The details of that matter are discussed
in the Staff Report attached as Exhibit 2. Specifically, Jamboree and their senior lender
at JP Morgan Chase Bank will not know how the Internal Revenue Service (IRS) is going
to allocate the 4% low-income housing tax credits for the project until a Form 8609 is
approved by the IRS when the project’s construction loan is converted to a permanent
loan. This IRS Form 8609 is submitted to the IRS for approval no more than 12 months
after the project receives a Certificate of Occupancy from the City. If the IRS does not
allocate 100% of the 4% low-income housing tax credits that Jamboree will be submitting
on the IRS Form 8609, then Jamboree will need the entire $1.6 million from the City. On
the other hand, if the IRS approves all of the 4% tax credits for the project than Jamboree
will be able to return all or a portion of the $1.6 million of the City’s funds. The IRS
determination on the final value of the project’s tax credits dictates whether or not the
project will need our City’s $1.6 million. The reason why Jamboree does not have this
information now is because the review of the IRS Form 8609 cannot be done until it is
submitted to the IRS and the California Tax Credit Allocation Committee is unable to opine
on financial matters pertaining to the IRS.
Therefore, staff is recommending approval of the Community Development Block Grant
loan agreement attached as Exhibit 3. The following loan terms are incorporated into the
loan agreement:
Borrower: North Harbor Housing Partners LP (c/o Jamboree Housing
Corporation)
Loan Amount: $1,687,047 principal amount from the Community Development
Block Grant program
Interest Rate: 3% simple interest compounded annually
Term: 55 years from the date of issuance of the Certificate of Occupancy for the
Project
Terms of Repayment: Repaid from 50% of residual receipts (pro-rata with
payments due in connection with other financing provided) calculated after
payment of operating expenses including debt service on the senior loan, property
management fee, owner administration fee, required reserves, and any deferred
developer fee. The borrower shall retain the other 50% of the residual receipts.
Disbursement Schedule: 90% of the funds will be disbursed upfront for the
construction, with a 10% contingency after construction is complete.
Selection of Tenants: The Developer shall give preference in leasing units to
households that live and/or work in the City of Santa Ana. Implementation of the
preference will be monitored by staff in the Community Development Agency.
Affordable Housing Project at 1108 N. Harbor Blvd.
April 20, 2021
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Regarding the two Subordination Agreements with Union Bank and Jamboree Housing,
the City’s total loan for this project is $1,687,047 compared to Union Bank’s loan of
$890,000 and Jamboree Housing’s loan from Home Depot of $500,000. The City’s loan
is larger than the two loans from Union Bank and Home Depot and therefore we need
Union Bank and Jamboree Housing to subordinate their loans to our larger City loan. The
two Subordination Agreements will be drafted and finalized prior to executing and
recording the City’s loan agreement. However, the State of California Department of
Housing and Community Development (HCD) requires the City to subordinate our smaller
loan to HCD’s larger Veterans Housing and Homelessness Prevention program loan. The
Subordination Agreement with HCD will be executed at the time of permanent loan
conversion after the project is complete.
If the loan agreement is not approved by City Council, the City will be held liable under
our enforceable funding commitment that the City issued and extended in our pre-loan
commitment letter.
Project Description
The North Harbor Village project is a motel rehabilitation project that will provide eighty-
nine units of permanent supportive housing for homeless individuals in the City of Santa
Ana. This will be the City’s third motel conversion project in the last five years for people
experiencing homelessness following the development of the Orchard and Casa
Querencia. The Orchard project converted the former Guest House motel into 72 units
of permanent supportive housing and the Casa Querencia project converted the former
Aqua Motel. Similar to the conversion of this motel, the the Guest House and Aqua Motel
were high-crime, short-term use motels prior to their conversion into permanent
supportive housing with wrap-around supportive services.
Fifty-one of the units at North Harbor Village will be designated for chronically homeless
individuals and thirty-eight units will be designated for homeless veterans. There will be
a local preference for residents of Santa Ana who live or work in the City. The unit mix
and rent restrictions are as follows:
Unit Size No. Units AMI
Studio 89 30%
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action.
FISCAL IMPACT
Funds for the loan agreement in the amount of $1,518,342.30 (90% of the total) are
available in the Community Development Block Grant, Loans and Grants account (no.
13518782-69152) for expenditure in the current fiscal year. The remaining $168,704.70
(10%) will be budgeted and included in the FY 2021-22 annual budget.
Affordable Housing Project at 1108 N. Harbor Blvd.
April 20, 2021
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EXHIBIT(S)
1. Staff Report from March 5, 2019
http://publicdocs.santa-
ana.org/WebLink/DocView.aspx?dbid=1&id=106298&page=1&cr=1
2. Staff Report from March 2, 2021
https://santa-ana.primegov.com/portal/item?id=45685
3. Community Development Block Grant Loan Agreement
Submitted By: Steven Mendoza, Assistant City Manager
Approved By: Kristine Ridge, City Manager
1
FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 6103 & 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, California 92702
Attention: Clerk of the Council
SPACE ABOVE THIS LINE FOR RECORDING USE
FREE RECORDING REQUESTED
[Government Code Section 6103]
CDBG LOAN AGREEMENT
by and between the
CITY OF SANTA ANA
And
NORTH HARBOR HOUSING PARTNERS LP
a California limited partnership
(1108 North Harbor Boulevard, Santa Ana, California)
Dated: April 20, 2021
EXHIBIT 3
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LOAN AGREEMENT
CDBG PROGRAM
THIS LOAN AGREEMENT (the "Agreement") dated, for identification purposes only,
as of April 20, 2021, is made and entered into by and between the City of Santa Ana, a
charter city and municipal corporation (referred to herein as “City”) and North Harbor
Housing Partners LP, a California limited partnership, with reference to the following:
RECITALS:
A. City has received an allocation of funds from the United States Department of
Housing and Urban Development ("HUD") under the Community Development Block
Grant program pursuant to Title I of the Housing and Community Development Act of
1974, as amended (the "CDBG Program") (42 U.S.C. §530.1, et seq.) to be used in
accordance with applicable statutory requirements and regulations (the "CDBG
Regulations") (24 CFR Part 570);
B. Among the purposes of the CDBG Program are (1) provide decent
housing and a suitable living environment; and (2) expand economic opportunities for
low- and moderate-income persons;
C. Developer is the owner of that certain property commonly known as 1108
North Harbor Boulevard, within the City of Santa Ana, California, and legally described
in Exhibit A attached hereto (the “Property”). The loans referenced herein shall assist in
the acquisition and rehabilitation of said Property for a multifamily residential housing
development.
D. In furtherance of the CDBG Program, Developer has applied to City for a
loan with which to:
1. provide deeper affordability for a longer term, as well as acquire and
rehabilitate the Property, and
2. thereafter to maintain, operate and professionally manage the Property
as decent, safe, sanitary and affordable rental housing.
E. City, on certain terms and conditions, desire to make such loan to Developer
in order to make possible the acquisition and rehabilitation of the Property, to expand the
supply of decent, safe, sanitary and affordable housing.
F. If there is any discrepancy between Federal and State guidelines with regard
to any of the terms and conditions contained herein, the more stringent shall apply.
G. The Loan Agreement and all of its attachments shall be enforceable by City
in accordance with the terms thereof. Each of the Loan Agreement, the Affordability
Restrictions on Transfer of Property, the City/CDBG Loan Note and the City/CDBG
Deed of Trust provide a means of enforcement by the City if Developer is in breach of its
EXHIBIT 3
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obligations hereunder and thereunder, including liens on the Property, use and deed
restrictions and covenants running with the land.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, City and Developer agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. All capitalized terms used herein, including, without
limitation, in the Recitals above and in all other Project Documents, unless otherwise
expressly defined, are defined where first used in this Agreement and/or as set forth in
this Article 1.
"Affordable Housing" means housing operated in accordance with the
requirements of 24 CFR part 570, and utilizing the standards of the HOME Investment
Partnerships Program (HOME) at 24 CFR 92.252and 24 CFR 92.253, and the rents issued
by the Tax Credit Allocation Committee.
"Affordability Restrictions on Transfer of Property" means that
certain document affecting real property benefiting the City, attached hereto as Exhibit F.
“Affordable Rent” means the monthly rents that are set forth in more detail
in Section 7 of this Agreement.
"Building Permit" means the building permit(s) issued by City and
required for the construction, if any.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or
Friday on which Santa Ana City Hall is open to the public for the conduct of City affairs.
"Calendar Year" means each consecutive twelve (12) month period from
January 1 to December 31.
“CDBG Compliance Period” is for a period of fifteen (15) years.
"CDBG Program" has the meaning set forth in Recital "A" above.
"CDBG Regulations" has the meaning set forth in Recital "A" above.
"Certificate of Completion" has the meaning set forth in Article 17.
"City" means the City of Santa Ana, California, a charter city and
municipal corporation.
"City/CDBG Loan" means the loan to be made to Developer by City
from CDBG funds pursuant to Article 5 of this Agreement.
"City/CDBG Loan Deed of Trust" means the deed of trust encumbering
EXHIBIT 3
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the Property, in the form attached hereto as Exhibit D, to be executed by Developer
pursuant to Section 5.B.2 in order to secure the Loan Note.
"City/CDBG Loan Note" means that certain promissory note in the
original principal amount of $1,687,047, in the form attached hereto as Exhibit E, and to
be executed by Developer in favor of City to evidence the obligation of Developer to repa y
the City/CDBG Loan.
"Close of Escrow" shall mean the date upon which the City/CDBG Loan
Deed of Trust is recorded in the Official Records of the County.
"Closing Statement" means the final statement of Developer's
Escrow account for the purchase and sale of the Property pursuant to the Purchase Contract.
“Community Development Block Grant” or “CDBG” has the meaning
set forth in Recital "A" above.
"County" means the County of Orange, California.
“Developer” means North Harbor Housing Partners LP , a California
limited partnership, its successors and assigns.
"Developer's Representative" shall mean John Witkowski of the
Managing General Partner of Developer or his/her designee.
"Escrow Holder" means First American Title Insurance Company,
18500 Von Karman Avenue, Suite 600, Irvine, CA 92612.
"Event of Default" has the meaning set forth in Section 20.1.
"Executive Director" means the Executive Director of the Community
Development Agency, or his/her designee.
"Extremely Low Income" an adjusted income which does not exceed
thirty percent (30%) of the area median income for the Orange County, California PMSA,
adjusted for household size, as published by HUD.
“General Partner(s)” means the General Partner of Developer, JHC-North
Harbor LLC, and their respective successors and assigns.
"Governmental Authority" means any governmental or quasi
governmental agency, board, bureau, commission, department, court, administrative
tribunal or other instrumentality or authority, and any public utility.
"Hazardous Materials" means flammable materials, explosives,
radioactive materials, hazardous wastes, toxic substances and similar substances and
materials, including all substances and materials defined as hazardous or toxic wastes,
substances or materials under any applicable law, including without limitation the
EXHIBIT 3
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Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., and the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. §§ 9601, et seq., as amended.
"HUD" means the United States Department of Housing and Urban
Development and any successors or assigns thereof.
"Improvements" means all improvements and fixtures now and hereafter
comprising any portion of the Property, including, without limitation, landscaping, trees
and plant materials; and offsite improvements (including, without limitation, streets,
curbs, storm drains, and adjacent street lighting).
"Indebtedness" of a person means (a) all indebtedness for borrowed
money, (b) notes payable and drafts accepted representing extensions of credit, whether
or not representing obligations for borrowed money, (c) any obligation for the purchase
of property or services in excess of $10,000 in the aggregate that is (i) deferred for more
than six (6) months, or (ii) evidenced by a note or similar instrument, and ( d) all recourse
and all non-recourse indebtedness secured by any Lien on any property or asset of such
person (whether or not assumed by such person).
"Indemnitees" has the meaning set forth in Section 14.5.
"Laws" means all statutes, laws, ordinances, regulations, orders, writs,
judgments, injunctions, decrees or awards of the United States or any state, county,
municipality or other Governmental Authority.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any lien or security
interest).
“Limited Partner” means the Limited Partners of Developer, and their
successors and assigns.
“Loan Documents” means, collectively, this Agreement, the City/CDBG
Loan Note, the City/CDBG Deed of Trust, the Affordability Restrictions on Transfer of
Property, and any other agreement, document, or instrument that the City requires in
connection with the execution of this Agreement or from time to time to effectuate the
purposes of this Agreement.
“Low Income” means an adjusted income which does not exceed eighty
percent (80%) of the area median income for the Orange County, California PMSA,
adjusted for household size, as published by HUD.
“Median Income for the Area” means the median income for the Orange
County, California PMSA as most recently determined by HUD. Also may be referred to
interchangeably in the Loan Documents as “Area Median Income” or “AMI”.
EXHIBIT 3
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“Partnership Agreement” means the Amended and Restated Agreement
of Limited Partnership for North Harbor Housing Partners LP dated March 1, 2021, as
said Partnership Agreement may be amended from time to time.
"Permitted Encumbrances for the Affordable Housing Restrictions"
means, collectively, the Senior Loan Deed of Trust and all other title exceptions and
limitations with respect to the Property hereafter approved by the Executive Director in
writing.
"Permitted Encumbrances for the City Loan Deed of Trust"
means, collectively, the Senior Loan Deed of Trust and all other title exceptions and
limitations with respect to the Property hereafter approved by the Executive Director in
writing.
"Project" means the acquisition and rehabilitation of the Property by
Developer pursuant to this Agreement.
"Project Budget" means the line-item budget for the Project
attached hereto as Exhibit C, as modified from time to time in accordance with this
Agreement.
"Project Costs" means all costs of any nature incurred in connection with
the Project in accordance with generally accepted accounting principles.
"Property" means the Property that is located at 1108 North Harbor
Boulevard, within the City of Santa Ana, and is more fully described in the “Legal
Description” of the Property attached hereto as Exhibit A and incorporated herein by
reference.
"Senior Lender" means each of JPMorgan Chase Bank, N.A., and the
Department of Housing and Community Development. or any other holder of either
Senior Loan Note or any refinancing of either Senior Loan Note.
"Senior Loan" shall mean the senior loan made by (i) JPMorgan Chase
Bank, N.A. prior to the City Loan for payment of a portion of the acquisition and
rehabilitation costs, and (ii) the senor loan that will be made by the Department of
Housing and Community Development for a portion of the operating costs, and shall
include any subsequent loan that refinances an initial Senior Loan.
"Senior Loan Deed of Trust" means a deed of trust securing a
Senior Loan by encumbering the Property.
"Senior Loan Documents" means, collectively, the loan agreement
governing a Senior Loan, a Senior Loan Note, a Senior Loan Deed of Trust, and any
other agreement, document or instrument that a Senior Lender requires in connection
with a Senior Loan.
"Senior Loan Note" means a promissory note evidencing a
EXHIBIT 3
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Senior Loan from a Senior Lender.
“Term” the terms and conditions contained herein shall remain in effect
for fifty-five (55) years. The Affordability Restrictions on Transfer of Property shall also
remain in effect for fifty-five (55) years.
“Very Low Income” means an adjusted income which does not exceed
fifty percent (50%) of the area median income for the Orange County, California PMSA,
adjusted for household size, as published by HUD.
1.2 Singular and Plural Terms. Any defined term used in the plural in this
Agreement or any other City Loan Document 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 References and Other Terms. Any reference to this Agreement or any
Loan Document shall include such document both as originally executed and as it may
from time to time be modified. References herein to Articles, Sections and Exhibits 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 term "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."
1.4 Exhibits Incorporated. All attachments and exhibits to this Agreement,
as now existing and as the same may from time to time be modified, are incorporated
herein by this reference.
2. [RESERVED]
3. SCOPE OF WORK/ PROJECT BUDGET
Developer shall comply with this Section until the Certificate of Completion is
issued.
A “Scope of Work” for the Property is attached hereto as Exhibit B. Any change
to the Scope of Work requested by the Developer, which would result in a change
to the Project Budget in excess of ten percent (10%) of any individual line item or in
excess of five percent (5%) of the aggregate budget, shall be subject to the prior written
approval of the Executive Director.
A line-item budget for the Project, including a summary statement of sources and
uses of funds, is incorporated into Exhibit C (the "Project Budget"). Any material change
to the Project Budget in excess of ten percent (10%) of any individual line item or in
excess of five percent (5%) of the aggregate budget shall be subject to the prior written
approval of the Executive Director which if not granted or denied within five (5)
Business Days, shall be deemed approved; provided, however, that in all events,
EXHIBIT 3
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Developer shall at all times obtain and maintain all required permits and approvals from
the City’s Planning and Building Agency. Notwithstanding the foregoing, the City’s
approval of a change order shall not be required unless the approval of a Senior Lender is
required with respect to such change order.
4. [RESERVED]
5. LOANS
A. CITY LOAN:
1. Amount and Purpose. Subject to the terms and conditions of this Agreement,
City agrees to make a loan of CDBG funds to Developer in the principal amount of up to
$1,687,047 (the "City/CDBG Loan") for the acquisition of the Property to provide for an
adaptive reuse as affordable housing.
2. City/CDBG Note and Deed of Trust. The City/CDBG Loan shall be
evidenced by the City/CDBG Loan Note in the form attached hereto as Exhibit E. The
City Loan shall be secured by the City/CDBG Loan Deed of Trust in the form attached
hereto as Exhibit D. The City/CDBG Deed of Trust shall be a deed of trust encumbering
the Property, subordinate to the Senior Loan(s) made to Developer and the Senior Loan
Documents.
3. City/CDBG Loan Terms. The terms and conditions of the City/CDBG
Loan are as set forth in the City/CDBG Loan Note which is a residual receipts note. The
CDBG Compliance Period is fifteen (15) years, commencing on the date that all work is
complete and the Property is fully occupied.
6. CONDITIONS TO DISBURSEMENT OF LOAN PROCEEDS
Developer shall comply with this Section until the Certificate of Compliance is issued.
6.1 Conditions Precedent. City's obligation to disburse the Loan Amount is subject
to the satisfaction, or waiver by the Executive Director, of the following conditions
precedent:
(a) Loan Documents. Developer shall have delivered to the
Escrow Holder, signed by the authorized officer or officers of Developer, with such
signature(s) acknowledged where necessary, each of the following documents:
(i) the Loan Agreement;
(ii) The City/CDBG Loan Note;
(iii) The City/CDBG Deed of Trust, and
(iv) The Affordability Restrictions on Transfer of Property.
EXHIBIT 3
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(b) Title Insurance. City shall have received an LP-10 ALTA Lender’s
loan policy of title insurance (2006 edition), or evidence of a commitment therefore
satisfactory to City, issued by First American Title Insurance Company and in form and
substance satisfactory to City, together with all endorsements and binders required,
naming City as the insured, in a policy amount of not less than the City/CDBG Loan
Amount, showing Developer as the fee owner of the Property and insuring the
City/CDBG Deed of Trust to be a valid lien on the Property. This Agreement, the
City/CDBG Loan Note, and City/CDBG Deed of Trust shall be subordinate to each
Senior Loan Note and each Senior Loan Deed of Trust.
(c) Affordability Restrictions on Transfer of Property. Developer
shall have delivered to the Escrow Holder, in the form attached hereto as Exhibit F, the
Affordability Restrictions on Transfer of Title pursuant to which, among other things,
Developer agrees that the Property shall be used only for decent, safe, sanitary and
affordable rental housing pursuant to the affordability requirements of Code of Federal
Regulations (“CFR”) section 92.252 , as applicable.
(d) Documents Recorded. This Agreement, the City/CDBG Loan Deed
of Trust and the Affordability Restrictions on Transfer of Property shall have been
recorded in the Official Records of the County. This Agreement, and the City/CDBG
Loan Deed of Trust shall be subordinate to each Senior Loan Note and each Senior Loan
Deed of Trust.
(e) Request for Notice. For the benefit of City, Escrow Holder shall
have recorded a request for notice of default of Senior Loan made by JPMorgan Chase
Bank, N.A. (the "Request for Notice of Default").
(f) Insurance. City shall have received evidence satisfactory to the City
Attorney that all of the policies of insurance required by Section 19 of this Agreement are
in full force and effect.
(g) Representations and Warranties. The representations and
warranties of Developer contained in this Agreement and the other Loan Documents shall
be correct in all material respects as of the Close of Escrow as though made on and as of
that date, and if requested by the Executive Director, City shall have received a certificate
to that effect signed by Developer's Representative.
(h) No Default. No Event of Default by Developer shall have occurred,
and no event shall have occurred which, with the giving of notice or the passage of time
or both, would constitute an Event of Default by Developer under this Agreement, and if
requested by the Executive Director, City shall have received a certificate to that effect
signed by Developer's Representative.
6.2 Disbursement Procedures for Loan.
The Loan proceeds shall be disbursed to Borrower’s account at the JPMorgan Chase Bank,
N.A. to finance the acquisition of the Property, with other proceeds being used for the
rehabilitation (as evidenced in Exhibit C). The Loan proceeds shall not be used for any
EXHIBIT 3
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purpose other than for acquisition costs of the Property and/or rehabilitation costs, including
a Developer fee and soft costs related to development of the Project (costs all subject to
City’s prior review). 90% of the Loan proceeds will be disbursed by City to Borrower after
execution and recording of the Loan Agreement, with 10% held back by the City and not
disbursed to Borrower until after completion of construction on the Project and issuance of a
Certificate of Occupancy.
6.3 First Disbursement. The City's obligation to approve the first disbursement of
the Construction Portion is subject to satisfaction of the following conditions precedent:
(a) General Contractor. If the Executive Director has not yet approved
the General Contractor, the Executive Director shall have approved the identity and
qualifications of the General Contractor.
(b) Construction Contract. If the Executive Director has not yet
approved the Construction Contract, the Executive Director shall have approved the
Construction Contract.
(c) Relocation Plan. If the relocation of any existing tenants is
contemplated by the parties, the Executive Director shall have approved a plan for the
relocation of such tenants of the Property determined by the Executive Director to be
eligible for relocation assistance.
6.4 Termination for Failure of Condition. If (a) any of the conditions set forth
herein are not timely satisfied or waived by the Executive Director, and (b) City is not in
default under this Agreement, City may terminate this Agreement without any further
liability on its part by giving written notice of termination to Developer. Upon the giving
of such notice, all principal, interest and other amounts owing under the City Loan Note
shall be immediately due and payable, regardless of any other specified due date.
6.5 [Reserved.]
6.6 [Reserved.]
6.7 Waiver of Conditions. The conditions set forth pertaining to City’s
obligation to approve disbursements of the rehabilitation or construction portion are for
City's benefit only and the Executive Director may waive all or any part of such rights by
written notice to Developer.
6.8 Waiver of Disbursement Conditions. Unless City otherwise agrees in
writing, the approval by City of any disbursement with knowledge that any condition to
such disbursement is not fulfilled shall constitute a waiver of such condition only with
respect to the particular disbursement made.
6.9 Modification of Disbursement Conditions and Procedures. The
Executive Director shall have the authority to modify the disbursement conditions and
procedures set forth herein in order to conform them to the payment provisions of the
Construction Contract.
EXHIBIT 3
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6.10 Other Terms and Conditions of Loan.
A. The Note shall become immediately due and payable, in the event of any
of the following:
(1) failure to complete the Project within four (4) years of the
recording date;
(2) all CDBG rental units do not achieve initial occupancy within 6
months of project completion.
(3) violation of any of the use covenants and restrictions contained in
this Agreement after the expiration of any applicable notice and cure
periods;
(4) an Event of Default by Developer which is not timely cured after
expiration of any applicable notice and cure periods pursuant to the
terms of this Agreement.
6.11 Closing Costs and Fees. Developer shall pay (a) all escrow fees and charges,
(b) all recording fees and charges on any document recorded pursuant to this Agreement,
and (c) the premium for the title insurance required hereunder.
7. AFFORDABILITY REQUIREMENTS, USE AND MAINTENANCE OF THE
PROPERTY
7.1 Use Covenants and Restrictions.
A. Developer agrees and covenants, which covenants shall run with the land and bind
Developer, its successors, its assigns and every successor in interest to the Property that
Developer will make all rental units on the Property available to extremely low-income
households at rents affordable to such households for fifty-five (55) years from the issuance of
the Certificate of Completion. The CDBG restrictions shall be enforced until the date that is
fifteen (15) years after the date on which the Certificate of Completion is issued or until
repayment of principal and all accrued interest on the CDBG Loan, whichever comes last.
The City permits the Developer to limit the eligibility and/or give preference to a particular
segment of the population in accordance with 24 CFR 92.253(d).
B. The Project shall consist of ninety-one (91) units, two (2) of which shall be on-site
manager units.
C. At initial lease up, households in the units cannot earn more than 30% of AMI.
Rental increases shall be in conformance with federal and state law. After the fifteen (15)
year CDBG Compliance Period, the City shall require that the units remain affordable for
the Term of this Agreement, with rents calculated based on assumed household size at the
same income levels.
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D. All of the units will be restricted to occupancy by families earning no more than thirty
(30%) of the Area Median Income (AMI).
E. Maximum Occupancy will be two (2) people per bedroom plus one (1). Example for a
two-bedroom unit, five (5) people would be maximum occupancy.
F. Affordable rents shall be governed by the Tax Credit Allocation Committee.
G. Developer must have a written lease between tenant and owner for a period of at least
one year, unless a shorter period is mutually agreed upon. Leases must be consistent with
the HOME Program regulations at 24 CFR 92.253(a) and (b).
7.2 Affordability Levels/Unit Mix:
The affordability levels/unit mix for the Project is as follows:
Unit Size No. Units AMI
Studio 89 30%
The remaining two (2) units will be reserved for onsite management.
(1) In no event shall the rent charged to the units be more than that amount of the rent
affordable to a family at 30% Area Median Income as published by the Tax Credit
Allocation Committee, as amended from time to time.
(2) Annually with the financial statements, the Developer shall provide an annual report
of rents and occupancy of all units, to verify compliance with affordability
requirements.
The affordable rents charged at the Project must comply with the standards set forth by the
California Tax Credit Allocation Committee (TCAC). Notwithstanding anything to the
contrary contained in this Agreement or the Affordability Restrictions on Transfer of
Property, in the event of a foreclosure, or delivery of a deed in lieu of foreclosure, of any
Senior Loan, (1) the maximum qualifying tenant household income shall be increased to
60% of Area Median Income adjusted for family size appropriate to the unit, and (2) the
maximum annual affordable rent shall be increased to comply with the rent limits set forth
by California Tax Credit Allocation Committee (TCAC) for households at 60% Area
Median Income.
Utility allowances must be deducted from the Maximum Gross Monthly Rent. The Housing
Authority of the City of Santa Ana publishes the Utility Allowance Schedule.
Initial rents may be recalculated to allowable rental amounts at the time of initial lease-up
following completion of construction in accordance with any changes in allowable rent and
income tables as published by HUD.
7.3 Rent Increases: On an annual basis, the City shall provide Developer with the
maximum allowable schedule of rents for the Property in accordance with changes in
allowable rent and income tables published by the California Tax Credit Allocation
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Committee (TCAC), provided however that the rent for the CDBG units shall in no event be
higher than the rent for the equivalent non-CDBG assisted units within the Project. In no
event can Developer charge any tenant more than such amount. The City will make all best
efforts to provide Developer with the maximum allowable schedule of rents within no more
than 30 calendar days after the date TCAC publishes the allowable rent and income tables.
7.4 Prohibited Fees. The Developer and subsequent owner is prohibited from charging
fees that are not customarily charged in rental housing such as laundry room access fees, and
other fees. However, may charge reasonable application fees to prospective tenants, may
charge parking fees to tenants only if such fees are customary for rental housing projects in
the neighborhood; and may charge fees for services such as bus transportation or meals, as
long as such services are voluntary. The Developer and subsequent owner can charge
reasonable application fees to prospective tenants; other fees only to the extent that they are
reasonable and customary for the project area; and fees for services provided to tenants,
provided that these services are not mandatory.
7.5 Maintenance of the Property. Solely at Developer’s expense, Developer agrees to
maintain the Property in a clean and orderly condition and in good condition and repair and
keep the Property free from any accumulation of debris and waste materials. If at any time
Developer fails to maintain, or cause to be maintained, the Property as required by this
section, and said condition is not corrected after the expiration of a reasonable period of time
not to exceed thirty (30) days from the date of written notice from the City, unless such
condition cannot reasonably be cured within thirty (30) days, in which case Developer shall
have such additional time as reasonably necessary to complete such cure, the City may
perform the necessary maintenance and Developer shall pay all reasonable costs incurred for
such maintenance. The City shall inspect the Property annually after the date of issuance of
the Certificate of Completion as described in Article 17 of this Agreement. During the
CDBG Compliance Period, the Property must meet all applicable State and local codes. The
Property must be free of all health and safety defects during the CDBG Compliance Period.
7.6 Obligation to Refrain from Discrimination. Developer covenants and agrees for
itself, its successors, its assigns and every successor in interest to the Property or any part
thereof, that there shall be no discrimination against or segregation of any person or group of
persons on account of race, color, creed, religion, sex, mental or physical disability, marital
status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure
or enjoyment of the Property nor shall Developer itself or any person claiming under or
through him establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees or vendees of the Property. The foregoing covenants shall
run with the land and shall remain in effect for the term of the Agreement.
7.7 Increase in Rent and Occupancy Restrictions upon Termination of Rental
Subsidies. The parties acknowledge that Developer is only able to rent units to
Extremely Low Income Households because the City is providing 89 Project-Based
Vouchers for Permanent Supportive Housing (“PBV Vouchers”). In the event the PBV
Vouchers expire, terminate, are not renewed or are reduced for any reason other than a
default by Developer under the PBV Vouchers, then the occupancy requirements for all
of the units shall automatically increase to 60% of the Area Median Income and the
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Affordable Rent shall increase to Affordable Rents for households earning 60% of the Area
Median Income in accordance with the rent limits set forth by the California Tax Credit
Allocation Committee (TCAC) for households earning 60% of the Area Median Income.
8. RESERVED.
9. GENERAL PROVISIONS AND WARRANTIES
As a material inducement to City to enter into this Agreement, Developer
represents and warrants as follows:
9.1 Formation, Qualification and Compliance. JHC-North Harbor LLC, the
managing general partner of Developer (a) is a limited liability company, validly existing
and in good standing under the laws of the State of California, (b) has all requisite
authority to conduct its business and own and lease its properties, and (c) is qualified and
in good standing in every jurisdiction in which the nature of its business makes
qualification necessary or where failure to qualify could have a material adverse effect on
its financial condition or the performance of its obligations under the Loan Documents.
Developer is in compliance with all laws applicable to its business and has obtained all
approvals, licenses, exemptions and other authorizations from, and has accomplished all
filings, registrations and qualifications with, any Governmental Authority that are
necessary for the transaction of its business.
9.2 Execution and Performance of Loan Documents.
9.2.1 Developer has all requisite authority to execute and perform its
obligations under the Loan Documents.
9.2.2 The execution and delivery of Developer of, and the performance
by Developer of its obligations under, each Loan Document has been authorized by all
necessary action and does not and will not:
(a) require any consent or approval not heretofore
obtained of any person having any interest in Developer;
(b) violate any provision of, or require any consent or
approval not heretofore obtained under, any articles of incorporation, by-laws or other
governing document applicable to Developer;
(c) result in or require the creation of any lien, claim,
charge or other right of others of any kind (other than under the City Loan Documents)
on or with respect to any property now or hereafter owned or leased by Developer;
(d) violate any provision of any law presently in effect;
or
(e) constitute a breach or default under, or permit the
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acceleration of obligations owed under, any contract, loan agreement, lease or other
agreement or document to which Developer is a party or by which Developer or any of its
property is bound.
9.2.3 Developer is not in default in any respect that is materially adverse
to the interests of City under the Loan Documents or that would have any material
adverse effect on the financial condition of Developer or the conduct of its business,
under any law, contract, lease or other agreement or document described in sub-
paragraph (d) or (e) of the previous subsection.
9.2.4 No approval, license, exemption or other authorization from, or
filing, registration or qualification with, any Governmental Authority is required which
has not been previously obtained in connection with:
(a) the execution of Developer of, and the performance
by Developer of its obligations under, the Loan Documents; and
(b) the creation of the liens described in the Loan
Documents.
9.3 Financial and Other Information. To the best of Developer’s knowledge,
all financial information furnished to City with respect to Developer in connection with
the Loan (a) is complete and correct in all material respects as of the date of preparation
thereof, (b) accurately presents the financial condition of Developer, and (c) has been
prepared in accordance with generally accepted accounting principles consistently
applied or in accordance with such other principles or methods as are reasonably
acceptable to City. To the best of Developer’s knowledge, all other documents and
information furnished to City with respect to Developer, in connection with the Loans,
are correct and complete in all material respects insofar as completeness is necessary to
give the City accurate knowledge of the subject matter. To the best of Developer’s
knowledge Developer has no material liability or contingent liability not disclosed to City
in writing and there is no material lien, claim, charge or other right of others of any kind
(including liens or retained security titles of conditional vendors) on any property of
Developer not disclosed in such financial statements or otherwise disclosed to City in
writing.
9.4 No Material Adverse Change. There has been no material adverse change in
the condition, financial or otherwise, of Developer since the dates of the latest financial
statements furnished to City. Since those dates, Developer has not entered into any
material transaction not disclosed in such financial statements or otherwise disclosed to
City in writing.
9.5 Tax Liability. Developer has filed all required federal, state and local tax returns
and has paid all taxes (including interest and penalties, but subject to lawful extensions
disclosed to City in writing) other than taxes being promptly and actively contested in
good faith and by appropriate proceedings. Developer is maintaining adequate reserves
for tax liabilities (including contested liabilities) in accordance with generally accepted
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accounting principles or in accordance with such other principles or methods as are
reasonably acceptable to City.
9.6 Governmental Requirements. To the best of Developer’s knowledge, Developer
is in compliance with all laws relating to the Property and all Governmental Authority
approvals, including zoning, land use, planning requirements, and requirements arising
from or relating to the adoption or amendment of, any applicable general plan,
subdivision and parcel map requirement; environmental requirements, including the
requirements of the California Environmental Quality Act and the National
Environmental Policy Act and the preparation and approval of all required environmental
impact statements and reports; use, occupancy and building permit requirements; and
public utilities requirements.
9.7 Rights of Others. Developer is in compliance with all covenants, conditions,
restrictions, easements, rights of way and other rights of third parties relating to the
Property.
9.8 Litigation. There are no material actions or proceedings pending or, to the best of
the Developer’s knowledge, threatened against or affecting Developer or any property of
Developer before any Governmental Authority, except as disclosed to City in writing
prior to the execution of this Agreement.
9.9 Bankruptcy. To the best of Developer’s knowledge, no attachments, execution
proceedings, assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other proceedings are pending or threatened against Developer, nor are
any of such proceedings contemplated by Developer.
9.10 Information Accurate. To the best of Developer’s knowledge, all information,
regardless of its form, conveyed by Developer to City, by whatever means, is accurate,
correct and sufficiently complete to give City true and accurate knowledge of its subject
matter, and does not contain any material misrepresentation or omission.
9.11 Conflicts of Interest. No member, official or employee of the City shall have any
personal interest, direct or indirect, in this Agreement, nor shall any such member, official or
employee participate in any decision relating to this Agreement which affects his/her
personal interests or the interests of any corporation, partnership or association in which
he/she has a direct or indirect financial interest. The Developer warrants that it neither has
paid nor given, nor will pay or give, any third party any money or other consideration for
obtaining this Agreement.
9.12 Non-liability of City Officials and Employees. No member, official or employee of
the City shall be personally liable to the Developer in the event of any default or breach by
the City or for any amount which may become due to Developer or on any obligations under
the terms of this Agreement.
9.13 No Assignment. Developer expressly acknowledges and agrees that the City has
only agreed to assist the Developer as a means by which to induce the
acquisition/rehabilitation/development of the Property. Accordingly, Developer further
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expressly acknowledges and agrees that this Agreement is a personal right of Developer that
is neither negotiable, transferable, nor assignable except as set forth herein. Developer may
assign some or all of its rights under the Agreement only with the prior written consent of
the Executive Director (such consent not to be unreasonably withheld), except that no prior
consent is necessary for an assignment by a limited partner of Developer to an affiliate, or as
otherwise provided in the Deed of Trust.
9.14 Applicable Law. This Agreement shall be interpreted, governed and enforced under
federal and state laws.
9.15 Third Parties. This Agreement is made for the sole benefit of Developer and the
City and their successors and assigns, and no other person or persons shall have any rights
or remedies under or by reason of this Agreement or any right to the exercise of any right or
power of the City hereunder or arising from any default by Developer, nor shall the City
owe any duty whatsoever to any claimant for labor performed or materials furnished in
connection with the construction of the Property.
9.16 Control of Property. The parties acknowledge that the City has not at any time
participated in any manner in the management or operation of the Property, and will not so
participate at any time hereafter.
10. CONDITIONS FOR CONSTRUCTION
Developer shall comply with this Section until the Certificate of Completion is issued.
10.1 Permits and Approvals. Developer shall diligently obtain all permits,
including all building permits, licenses, approvals, exemptions and other authorizations
of Governmental Agencies required in connection with the construction of the Property.
10.2 Commencement and Completion of Construction.
The construction shall be considered complete for purposes of this Agreement
only when (a) all work described has been completed and fully paid for, and (b) all work
requiring inspection or certification by Governmental Authority has been completed and
all requisite certificates, approvals and other necessary authorizations (including required
final certificates of occupancy) have been obtained.
10.3. RESERVED.
10.4 Entry and Inspection. At all times prior to completion of the
construction, upon not less than forty-eight (48) hours’ prior written notice, City and their
agents shall have (a) the right of free access to the Property and all sites away from the
Property where materials for the construction are stored, (b) the right to inspect all labor
performed and materials furnished for the construction, and (c) the right to inspect and
copy all documents pertaining to the construction; provided, however, that if any such
entry shall occur while construction activities are occurring, a representative of
Developer shall accompany City and/or its agents during such entry.
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10.5 Compliance with Section 3 Clause. Section 3 of the Housing and
Urban Development Act of 1968, 12 U.S.C. 170lu, as amended by Section 915 of the
Housing and Community Development Act of 1992 requires that economic opportunities
generated by HUD financial assistance for housing and community development
programs be targeted toward low- and very low- income persons. Whenever HUD
assistance generates opportunities for employment or contracting, state and local
grantees, as well as other recipients of HUD housing assistance funds must, to the
greatest extent feasible, provide these opportunities to low- and very low- income persons
and to businesses owned by or employing low- and very low- income persons. Section 3
applies to projects for which HUD’s share of project costs exceeds $200,000 and
contracts and subcontracts awarded on projects for which HUD’s share or project costs
exceeds $200,000 and the contract or subcontract exceeds $100,000.
For purposes of this Section 3 Clause and compliance thereto, whenever
the word “contractor” is used it shall mean and include, as applicable, the Developer, and
its contractor and subcontractor(s), if any. The particular text to be utilized in any and all
contracts of any contractor doing work covered by Section 3 shall be in substantially the
form of the following, as reasonably determined by the City, or as directed by HUD or its
representative, and shall be executed by the applicable contractor under penalty of
perjury:
“(a) The work to be performed under this contract is subject to the
requirements of Section 3 of the Housing and Urban Development Act of 1968, as
amended, 12 U.S.C. 1701u (“Section 3”). The purpose of Section 3 is to ensure
that employment and other economic opportunities generated by HUD assistance
or HUD-assisted projects covered by Section 3, shall, to the greatest extent
feasible, be directed to low- and very low-income persons [inclusive of Very Low
Income Persons, Very Low Income Households, and Very Low Income Tenants
served by the Project], particularly persons who are recipients of HUD assistance
for housing.
(b) The parties to this contract agree to comply with HUD’s
regulations in 24 CFR part 135, which implement Section 3. As evidenced by
their execution of this contract, the parties to this contract certify that they are
under no contractual or other impediment that would prevent them from
complying with the part 135 regulations.
(c) The contractor agrees to send to each labor organization or
representative of workers with which the contractor has a collective bargaining
agreement or other understanding, if any, a notice advising the labor organization
or workers’ representative of the contractor’s commitments under this Section 3
clause, and will post copies of notices in conspicuous places at the work site
where both employees and applicants for training and employment positions can
see the notice. The notice shall describe the Section 3 preference, shall set forth
minimum number of job titles subject to hire, availability of apprenticeship and
training positions, the qualifications for each; and the name and location of
person(s) taking applications for each of the position; and the anticipated date the
work shall begin.
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(d) The contractor agrees to include this Section 3 clause in every
subcontract subject to compliance with regulations in 24 CFR part 135, and
agrees to take appropriate action, as provided in an applicable provision of the
subcontract or in this Section 3 clause, upon a finding that the subcontractor is in
violation of the regulations in 24 CFR part 135. The contractor will not
subcontract with any subcontractor where the contractor has notice or knowledge
that the subcontractor has been found in violation of the regulations in 24 CFR
part 135.
(e) The contractor will certify that any vacant employment positions,
including training positions, that are filled (a) after the contractor is selected but
before the contract is executed, and (b) with persons other than those to whom the
regulations of 24 CFR part 135 require employment opportunities to be directed,
were not filled to circumvent the contractor’s obligations under 24 CFR part 135.
(f) Noncompliance with HUD’s regulations in 24 CFR part 135 may
result in sanctions, termination of this contract for default, and debarment or
suspension from future HUD assisted contracts.”
After the foregoing Section 3 Clause, there shall be a signature block for
the contractor, as applicable, the following text shall be included immediately above the
signature block: “The contractor/provider by his/her signature affixed hereto declares
under penalty of perjury that contractor has read the requirements of the Section 3 Clause
and accepts all its requirements contained therein for all of his/her operations related to
this contract.”
To the extent applicable, the Developer shall comply and/or cause
compliance with Section 3 Clause requirements for the Project. For example, when and
if Developer or its contractor(s)/subcontractor(s) hire(s) full time employees, rather than
volunteer labor or materials, Section 3 is applicable and all disclosure and reporting
requirements apply.
10.6 Construction Information. From time to time during the course of the
construction, within ten (10) Business Days following City’s written demand therefore,
Developer shall furnish requested reports of project costs, progress schedules and
contractors’ costs breakdowns for the construction, itemized as to trade description and
item, showing the name of the contractor(s) and/or subcontractor(s), and including such
indirect costs as real estate taxes, legal and accounting fees, insurance, architects’ and
engineers’ fees, loan fees, interest during construction and contractors’ overhead.
10.7 Protection Against Liens. Developer shall diligently file a valid
Notice of Completion upon completion of the construction, diligently file a notice of
cessation in the event of a cessation of labor on the construction for a period of thirty (30)
days or more, and take all actions reasonably required to prevent the assertion of claims
of lien against the Property. In the event that any claim of lien is asserted against the
property or any stop notice or claim is asserted against the City by any person furnishing
labor or materials to the Property, Developer shall promptly give written notice of the
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same to City and shall, promptly and in any event within ten (10) Business Days after
written demand therefor, (a) pay and discharge the same, (b) effect the release thereof by
delivering to City a surety bond complying with the requirement of applicable laws for
such release, or (c) take such other action as City may reasonably require to release City
from any obligation or liability with respect to such stop notice or claim.
10.8 General Contractors who are Related Parties to the Developer. If the
Project is developed with general contractors who are Related Parties to the Developer,
the Developer must be audited to the subcontractor level by an outside auditing firm
approved by the City. The Developer shall pay for the audit to the subcontractor level by
an outside auditing firm.
10.9 Labor Standards. Developer shall comply with the provisions of 24 CFR
570.603 and related requirements. Developer shall include in all applicable construction
contracts the provisions of federal law imposing labor standards on federally assisted
contracts. Developer shall comply with the requirements of the Secretary of Labor in
accordance with the Davis-Bacon Act as amended (40 U.S.C. 3141 through 3148), the
provisions of Contract Work Hours and Safety Standards Act (40 U.S.C. 327 et seq. and
implementing regulations), the Copeland Anti-Kick Back Act (40 U.S.C. 276c and 18
U.S.C. 874 et seq.), the implementing regulations of the U.S. Department of Labor
including 29 CFR Parts 1, 3, 5, 6 and 7, and all other applicable Federal, state and local
laws and regulations pertaining to labor standards insofar as those acts apply to the
performance of the Agreement. Developer shall maintain documentation that demonstrates
compliance with these provisions and such documentation shall be made available to City
and HUD for review upon request. Developer shall cause or require to be inserted in full,
in all such contracts subject to such regulations, provisions meeting the requirements of
this paragraph.
10.10 HUD Form 4010. Developer shall comply and cause Developer personnel
to comply with the provisions of HUD Form 4010. HUD Form 4010 must be included in
the bid packet and construction contract and subcontracts for the Project.
11. FEDERAL (CDBG PROGRAM) COVENANTS
Developer shall comply with this Section during the CDBG Compliance Period.
11.1 Qualification as Affordable Housing. As more particularly provided in
the Affordability Restrictions on Transfer of Property, Developer shall use, manage and
operate the Property in accordance with the requirements of this Agreement so as to
qualify the housing on the Property as Affordable Housing with affordable rents.
11.2 Tenant and Participant Protection. Developer shall comply with the
requirements of 24 CFR 92.253.
11.3 Local Preference. Subject to compliance with the CDBG Regulations, the
HUD-Veterans Affairs Supportive Housing referral program requirements, the County of
Orange coordinated entry system and applicable California and federal fair housing laws,
local preference for Santa Ana residents and workers in tenant selection shall be a
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requirement of the Project. Subject to applicable laws and regulations governing
nondiscrimination and preferences in housing occupancy required by HUD or the State of
California, as well as the City of Santa Ana Affordable Housing Funds Policies and
Procedures, the Developer shall give preference in leasing units in the following order of
priority:
1. First priority shall be given to persons who have been permanently displaced or
face permanent displacement from housing in Santa Ana as a result of any of the
following:
a. A redevelopment project undertaken pursuant to California’s Community
Redevelopment Law (Health & Safety Code Sections 33000, et seq.) --
applicable only to projects funded by the Low and Moderate Income
Housing Asset Fund.
b. Ellis Act, owner-occupancy, or removal permit eviction;
c. Earthquake, fire, flood, or other natural disaster;
d. Cancellation of a Housing Choice Voucher HAP Contract by property
owner; or
e. Governmental Action, such as Code Enforcement.
2. Second priority shall be given to persons who are either:
a. Residents of Santa Ana and/or
b. Working in Santa Ana at least 32 hours per week for at least the last 6
months.
11.4 Handicapped Accessibility. Developer shall comply with (a) Section
504 of the Rehabilitation Act of 1973, and implementing regulations at 24 CFR Part 8
governing accessibility of projects assisted under the CDBG Program; and (b) the
Americans with Disabilities Act of 1990, and implementing regulations at 28 CFR Parts
35-36, as applicable in order to provide handicapped accessibility to the extent readily
achievable.
11.5 Use of Debarred, Suspended, or Ineligible Participants. Developer shall
comply with the provisions of 24 CFR Part 5 relating to the employment, engagement of
services, awarding of contracts, or funding of any contractor or subcontractor during any
period of debarment, suspension, or placement in ineligibility status. Developer shall
maintain documentation verifying performance of clearance reviews through the General
Services Administration – System for Award Management (SAM), dated prior to the
employment, engagement of services, awarding of contracts, or funding of any contractor
or subcontractor.
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11.6 Maintenance of Drug-Free Workplace. Developer shall certify that
Developer will provide a drug-free workplace in accordance with The Drug Free
Workplace Act of 1988 and agrees to comply with and be subject to its requirements,
which include:
(a) Publishing a statement notifying employees that the unlawful
manufacture, distribution, dispensing, possession, or use of a
controlled substance is prohibited in the grantee’s workplace and
specifying the actions that will be taken against employees for
violation of such prohibition.
(b) Establishing an ongoing drug-free awareness program to inform
employees about: (a) the dangers of drug abuse in the work place;
(b) the grantee’s policy of maintaining a drug-free workplace; (c)
any available drug counseling, rehabilitation, and employee
assistance programs; and (d) the penalties that may be imposed upon
employees for drug abuse violations occurring in the workplace.
(c) Making it a requirement that each employee to be engaged in the
performance of the grant be given a copy of the statement required
by paragraph (i).
(d) Notifying the employee in the statement required by paragraph (i)
that, as a condition of employment under the grant, the employee
will: (a) abide by the terms of the statement; and (b) notify the
employer in writing of his or her conviction for a violation of a
criminal drug statute occurring in the workplace no later than five
(5) calendar days after such conviction.
(e) Notifying the agency in writing, within ten (10) calendar days after
receiving notice under sub-paragraph (iv)(b) from an employee or
otherwise receiving actual notice of such conviction. Employers of
convicted employees must provide notice, including position title,
to every grant officer or other designee on whose grant activity the
convicted employee was working, unless the Federal agency has
designated a central point for the receipt of such notices. Notice
shall include the identification number(s) of each affected grant.
(f) Taking one of the following actions, within thirty (30) calendar days
of receiving notice under subparagraph (iv)(b), with respect to any
employee who is so convicted: (a) taking appropriate personnel
action against such an employee, up to and including termination,
consistent with the requirements of the Rehabilitation Act of 1973,
as amended; or (b) requiring such employee to participate
satisfactorily in a drug abuse assistance or rehabilitation program
approved for such purposes by a Federal, State or local health, law
enforcement, or other appropriate agency.
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(g) Making a good faith effort to continue to maintain a drug-free
workplace through implementation of paragraphs (i), (ii), (iii), (iv),
(v), and (vi).
11.7 Environmental. Developer shall comply with and cause personnel,
contractors and agents to comply with the following requirements as they are applicable
to the performance of this Agreement:
(a) Air and Water. Developer shall comply with the following
regulations insofar as they apply to the performance of the
Agreement: Clean Air Act, 42 U.S.C. 7401, et seq.; Federal Water
Pollution Control Act, as amended, 33 U.S.C. 1251, et seq., as
amended, 1318 relating to inspection, monitoring, entry, reports,
and information, as well as other requirements specified in said
Section 114 and Section 308, and all regulations and guidelines
issued thereunder; and the U.S. Environmental Protection City
regulations pursuant to 40 CFR Part 50, as amended.
(b) Flood Disaster Protection Act of 1973. Developer shall assure that
for activities located in an area identified by FEMA as having
special flood hazards, flood insurance under the National Flood
Insurance Program is obtained and maintained.
(c) Lead-Based Paint. Developer shall comply with the Lead-Based
Paint Regulations referenced in 24 CFR 570.608, including 24 CFR
Part 35, et. al.
(d) Historic Preservation. Developer shall comply with the historic
preservation requirements set forth in the National Historic
Preservation Act of 1966, as amended (16 U.S.C. 470) and the
procedures set forth in 36 CFR Part 800, Advisory Council on
Historic Preservation Procedures for Protection of Historic
Properties and related laws and Executive Orders, insofar as they
apply to the performance of the Agreement. In general, this requires
concurrence from the State Historic Preservation Officer for all
rehabilitation and demolition of historic properties that are fifty
years old or older or that are included on a federal, state, or local
historic property list.
(e) Limitation on Activities Pending Clearance. In accordance with
24 C.F.R. § 58.22 entitled “Limitations on activities pending
clearance, “neither a recipient nor any participant in the
development process, including public or private nonprofit or for-
profit entities, or any of their contractors, may commit HUD
assistance under a program listed in 24 CFR 58.1(b) on an activity
or project until HUD or the state has approved the recipient’s
Request for Release of Funds (RROF) and the related certifications
have been approved. Neither a recipient nor any participant in the
EXHIBIT 3
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development process may commit non-HUD funds or undertake an
activity or project that would have an adverse environmental
impact or limit the choice of reasonable alternatives. Upon
completion of environmental review or receipt of environmental
clearance, City shall notify Developer. HUD funds shall not be
utilized before this requirement is satisfied. The environmental
review or violation of the provisions may result in approval,
modification of cancellation of the City Grant. If a project or
activity is exempt under 24 CFR 58.34, or is categorically
excluded (except in extraordinary circumstances) under 24 CFR
58.35(b), no RROF is required and the recipient may undertake the
activity immediately after the City has documented its
determination that each activity or project is exempt and meets the
conditions specified for such exemption under this section by
issuing a Notice to Proceed.
11.8 Affirmative Marketing. Developer shall implement and perform such
affirmative marketing procedures and requirements for the Property in compliance with
the City’s adopted Program.
11.9 Equal Opportunity and Nondiscrimination. Developer shall comply
with and cause personnel, contractors and agents to comply with the following
requirements as they are applicable to the performance of this Agreement:
(a) Title VI of the Civil Rights Act of 1964, as amended, including
Public Law 88-352 implemented in 24 C.F.R. Part 1. This law
provides in part that no person shall, on the grounds of race, color,
or national origin be excluded from participation in, be denied the
benefits of, or be subjected to discrimination under any program or
activity receiving federal financial assistance. In regard to the sale
or lease of the Site, Developer shall cause or require a covenant
running with the land to be inserted in the deed and leases
prohibiting discrimination under this Title, and providing that City
and the United States are beneficiaries of and entitled to enforce
such covenants. Developer shall enforce such covenant and shall
not itself so discriminate.
(b) Fair Housing Act, Title VIII of the Civil Rights Act of 1968, as
amended, including Public Law 90-234. The Fair Housing Act
provides in part that there shall be no discrimination in housing
practices on the basis of race, color, religion, sex, and national
origin. The Fair Housing Act was amended in 1988 to provide
protections from discrimination in any aspect of the sale or rental
of housing for families with children and persons with disabilities.
The Fair Housing Act also establishes requirements for the design
and construction of new rental or for-sale multi-family housing to
ensure a minimum level of accessibility for persons with
disabilities.
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(c) Section 109 of Title I of the Housing and Community
Development Act of 1974, as amended, including 42 U.S.C.
5301 et. seq., 42 U.S.C. 6101 et. seq., and 29 U.S.C. 794. This
law provides in part that no person on the grounds of race, color,
national origin, sex, or religion shall be excluded from
participation in, be denied the benefits of, or otherwise be subject
to discrimination under any activity funded in whole or part with
funds under this Title.
(d) Section 104(b) of Title I of the Housing and Community
Development Act of 1974, as amended, including 42 U.S.C.
5301 et. seq. This law provides in part that any grant under
Section 106 shall be made only if the grantee certifies to the
satisfaction of the Secretary of HUD that the grantee will, among
other things, affirmatively further fair housing.
(e) Executive Order 11246, as amended. This order includes a
requirement that grantees and subrecipients and their contractors
and subcontractors not discriminate against any employee or
applicant for employment because of race, color, religion, sex, or
national origin.
(f) Executive Order 11063, as amended, including 24 CFR Part
107. This order and its implementing regulations include
requirements that all actions necessary be taken to prevent
discrimination because of race, color, religion, sex, or national
origin in the use, occupancy, sale, leasing, rental, or other
disposition of property assisted with Federal loans, advances,
grants, or contributions.
(g) Section 504 of the Rehabilitation Act of 1973, as amended.
This Act specifies in part that no otherwise qualified individual
shall solely by reason of his or her disability or handicap be
excluded from participation (including employment), denied
program benefits, or subjected to discrimination under any
program or activity receiving Federal assistance. Developer must
ensure that its programs are accessible to and usable by persons
with disabilities.
(h) The Americans with Disabilities Act (ADA) of 1990, as
amended. This Act prohibits discrimination on the basis of
disability in employment by state and local governments and in
places of public accommodation and commercial facilities. The
ADA also requires that facilities that are newly constructed or
altered, by, on behalf of, or for use of a public entity, be designed
and constructed in a manner that makes the facility readily
accessible to and usable by persons with disabilities. The Act
defines the range of conditions that qualify as disabilities and the
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reasonable accommodations that must be made to assure equality
of opportunity, full participation, independent living, and economic
self-sufficiency for persons with disabilities.
(i) The Age Discrimination Act of 1975, as amended. This law
provides in part that no person shall be excluded from participation
in, be denied program benefits, or subjected to discrimination on
the basis of age under any program or activity receiving federal
assistance.
(j) EEO/AA Statement. Developer shall, in all solicitations or
advertisements for employees placed by or on behalf of Developer,
state that it is an Equal Opportunity or Affirmative Action
employer.
(k) Minority/Women Business Enterprise. Developer will use its
best efforts to afford small businesses and minority and women-
owned business enterprises the maximum practicable opportunity
to participate in the performance of the Agreement. As used in the
Agreement, the term “small business” means a business that meets
the criteria set forth in Section 3(a) of the Small Business Act, as
amended (15 U.S.C. 632), and “minority and women-owned
business enterprise” means a business at least fifty-one percent
(51%) owned and controlled by minority group members or
women. For the purpose of this definition, “minority group
members” are Afro-Americans, Spanish-speaking, Spanish-
surnamed or Spanish-heritage Americans, Asian-Americans, and
American Indians. Developer may rely on written representations
by businesses regarding their status as minority and female
business enterprises in lieu of an independent investigation.
(l) Violence Against Women Act (VAWA). Developer will
implement the VAWA protections for victims of domestic
violence, dating violence, sexual assault, or stalking who are
applying for, or are the beneficiaries of assistance under this
CDBG assisted Property in accordance with the requirements of 24
CFR Part 5 – Subpart L. Notwithstanding the title of the statute,
protections are not limited to women but cover victims of domestic
violence, dating violence, sexual assault, and stalking, regardless
of sex, gender identity, or sexual orientation.
11.10 Property Standards. Developer shall cause the Property to meet the
City’s housing quality standards, as well as all applicable local, state and federal codes
and ordinances, including zoning ordinances. Developer shall also cause the Property to
meet the current edition of the Model Energy Code published by the Council of American
Building Officials.
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11.11 Displacement and Relocation. Developer acknowledges and agrees
that, pursuant to 24 CFR 570.606 and consistent with the other goals and objectives of
this part, City must ensure that it has taken all reasonable steps to minimize the
displacement of persons as a result of the Project. Furthermore, to the extent feasible,
residential tenants must be provided a reasonable opportunity to lease and occupy a
suitable, decent, safe, sanitary and affordable dwelling unit on the Property upon
completion of the construction. Developer agrees to cooperate fully and completely with
City in meeting the requirements of 24 CFR 570.606 and shall take all actions and
measures reasonably required by the Executive Director in connection therewith. All
applicable state guidelines must also be followed.
(a) City shall not be responsible for relocating any occupants from the
Site in connection with the Project. If required, Developer shall
have the sole and exclusive responsibility for providing relocation
assistance and paying all relocation costs required to comply with
all applicable federal and state laws, rules, and regulations.
(b) Developer acknowledges and agrees to hire a Relocation
Consultant to provide relocation services, pursuant to the Uniform
Relocation Act and Real Property Acquisition Policies Act of 1970
(42 U.S.C. 4601-4655) and its implementing requirements at 49
CFR part 24 (“URA”) and 24 CFR 570.606.
(c) The City, Developer, and Relocation Consultant will meet
periodically during the relocation to provide updates and review
tenant files, including at Project approval and prior to final benefit
calculations. The Developer and Relocation Consultant shall carry
out activity in compliance with URA and the City’s Acquisition
and Relocation Policy and Procedures Manual (“Manual”).
(d) The Developer and Relocation Consultant shall maintain accurate
records and files pertaining to the temporary and permanent
relocation of tenants, in accordance with URA and the City’s
Manual.
(e) The Developer and Relocation Consultant shall provide all
relocation and tenant files to the City once relocation is complete
at the Project.
11.12 Reversion of Assets. Upon the expiration of the funding period or
sooner termination of the Agreement, Developer shall transfer to City (a) any and all
CDBG Funds, (b) any accounts receivable attributable to the use of CDBG Funds. In all
cases in which equipment acquired, in whole or in part, with funds under the Agreement
is sold, the proceeds shall be program income (prorated to reflect the extent to that funds
received under the Agreement were used to acquire the equipment). Equipment not
needed by Developer for activities under the Agreement shall at the election of City
either be (a) transferred to City for the CDBG program, or (b) retained by Developer after
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compensating City an amount equal to the current fair market value of the equipment less
the percentage of non-CDBG Funds used to acquire the equipment.
11.13 Other Program Requirements. Developer shall carry out each activity in
compliance with all federal laws and regulations described in subpart K of 24 CFR part
570, except that Developer does not assume City's responsibilities for environmental
review in 24 CFR 570.604 and 24 CFR 570.200, or the intergovernmental review process
in 24 CFR 570.612 and 24 CFR part 52.
11.14 Procurement. Developer will comply with the procurement standards
under 2 CFR Sections 200.317-200.326. Participant shall comply with all applicable
existing and future City policies concerning the purchase of equipment.
11.15 Request for Disbursements of Funds. Notwithstanding anything
contained in this Agreement to the contrary, Developer may not request disbursements of
funds under this Agreement until the funds are needed for payment of eligible costs (such
funds shall be used solely towards the acquisition and rehabilitation of the Property). The
amount of each request shall be limited to the amount needed.
11.16 Allowable Costs and Audits. Developer shall use CDBG Funds to pay
costs defined as "eligible costs" pursuant to 2 CFR part 200 – Subpart E. Developer shall
comply with and administer the Project and Program in accordance with the requirements
of 2 CFR part 200.
11.17 Records and Reports. Developer shall maintain and from time to time
submit to City such records, reports and information as the Executive Director may
reasonably require in order to permit City to meet the record keeping and reporting
requirements required of it pursuant to 24 CFR 570.506.
11.18 Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards. Developer shall comply with the Uniform
Administrative Requirements of 24 CFR 570.502 and the requirements and standards of 2
CFR part 200.
11.19 Political Activity. Developer is prohibited from using CDBG Funds to
finance the use of facilities or equipment for political purposes or to engage in other
partisan political activities, such as sponsoring candidate forums, distributing brochures,
voter transportation, or voter registration (24 CFR 570.207(a)(3).
11.20 Anti-Lobbying Certification. By its execution of the Agreement,
Developer hereby certifies that:
(a) No Federal appropriated funds have been paid or will be paid, by or
on behalf of it, to any person for influencing or attempting to
influence an officer or employee of any agency, a Member of
Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with the awarding of any Federal
contract, the making of any Federal grant, the making of any Federal
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loan, the entering into of any cooperative agreement, and the
extension, continuation, renewal, amendment, or modification of
any Federal contract, grant, loan, or cooperative agreement.
(b) If any funds other than Federal appropriated funds have been paid
or will be paid to any person for influencing or attempting to
influence an officer or employee of any agency, a Member of
Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with this Federal contract, grant,
loan, or cooperative agreement, it will complete and submit
Standard Form-LLL, “Disclosure Form to Report Lobbying,” in
accordance with its instructions.
(c) It will require that the language of this certification be included in
the award documents for all sub-awards at all tiers (including
subcontracts, sub-grants, and contracts under grants, loans, and
cooperative agreements) and that all subrecipients shall certify and
disclose accordingly.
This certification is a material representation of fact upon which reliance was
placed when this transaction was made or entered into. This certification is a prerequisite
for making or entering into this transaction imposed by Section 1352, Title 31, U.S.C. Any
person who fails to file the required certification shall be subject to a civil penalty of not
less than $10,000 and not more than $100,000 for each such failure. At the request of City,
Developer shall execute a separate document that contains the certifications set forth above.
11.21 Conflict of lnterest. Developer shall comply with and be bound by the
conflict of interest provisions set forth at 24 CFR 570.611 regarding the avoidance of
conflict of interest, as well as state regulations pertaining to conflict of interest, which
provisions generally include, but are not limited to:
(a) Developer shall maintain a written code or standards of conduct that
shall govern the performance of its officers, employees or agents
engaged in the award and administration of contracts supported by
Federal funds.
(b) No employee, officer or agent of the Developer shall participate in
the selection, or in the award, or administration of, a contract
supported by Federal funds if a conflict of interest, real or apparent,
would be involved.
(c) No covered persons who exercise or have exercised any functions
or responsibilities with respect to CDBG-assisted activities, or who
are in a position to participate in a decision-making process or gain
inside information with regard to such activities, may obtain a
financial interest in any contract, or have a financial interest in any
contract, subcontract, or agreement with respect to the CDBG-
assisted activity, or with respect to the proceeds from the CDBG-
assisted activity, either for themselves or those with whom they have
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business or immediate family ties, during their tenure or for a period
of one (1) year thereafter. For purposes of this paragraph, a
“covered person” includes any person who is an employee, agent,
consultant, officer, or elected or appointed official of the Grantee,
the Developer, or any designated public agency.
11.22 Monitoring. Developer shall allow the City to conduct periodic
inspections of the CDBG-assisted units on the Property as required by the Program after
the date of construction completion, upon not less than seventy-two (72) hours’ advance
written notice. Developer shall cure any defects or deficiencies found by the City while
conducting such inspections within two weeks of written notice thereof, or such longer
period as is reasonable within the sole discretion of the City.
11.23 Recertification of Tenant Income.
(A) Developer shall take all necessary steps to review the income of all tenants
prior to renting to them, as well as reviewing current tenants on an annual basis, in
accordance with CDBG regulations and guidelines. Every fifth (5th) year, Developer
shall require new original income documents to be submitted by tenants. Subject to any
restrictions imposed by TCAC, Tenants in CDBG-assisted units whose incomes no
longer comply with federal income guidelines shall have their rents adjusted in
accordance with federal HOME guidelines (24 CFR 92.252-92.253).
(B) CDBG-assisted units continue to qualify as affordable housing despite a
temporary non-compliance caused by increases in the incomes of existing tenants if
actions satisfactory to HUD are being taken to ensure that all vacancies are filled in
accordance with this section until the non-compliance is corrected.
11.24 Other CDBG Program Requirements. Developer shall comply with all
other applicable requirements of the CDBG Program.
11.25 Controlling Covenants. If there is a discrepancy between State and
Federal law with regard to any of the aforementioned covenants, the more stringent shall
apply.
11.26 Faith Based Activities. To the extent applicable to the Project, in
accordance with 24 CFR 5.109, Developer will comply with the restrictions on the use of
CDBG funds for faith based activities as set forth in 24 CFR 5.109.
12. MAINTENANCE, MANAGEMENT, OPERATION, PRESERVATION
AND REPAIR OF PROPERTY
12.1 Maintenance. Developer shall maintain the Property (and all abutting
grounds, sidewalks, roads, parking and landscape areas which Developer is otherwise
required to maintain) in good condition and repair; shall operate the Property in a
businesslike manner; shall prudently preserve and protect its own as well as the City's
interests in connection with the Property; shall not commit or permit any waste or
deterioration of the Property (except for normal wear and tear); shall not abandon any
EXHIBIT 3
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portion of the Property or leave the Property unguarded or unprotected; and shall not
otherwise act, or fail to act, in such a way as to unreasonably increase the risk of any
damage to the Property or of any other impairment of City's interests under the Loan
Documents. Without limiting the generality of the foregoing, and except as otherwise
agreed by City in writing from time to time, Developer shall promptly and faithfully
perform and observe each of the following provisions:
12.1.1 Alterations and Repair. Developer shall not remove, demolish
or materially alter any Improvement without City’s prior consent, except to make non-
structural repairs which preserve or increase the Property's value, and shall promptly
restore, in a good and professional manner, any Improvement (or other aspect or portion
of the Property) that is damaged or destroyed from any cause.
12.2 Compliance. Developer shall comply with all laws and requirements of
Governmental Authority (including, without limitation, all requirements relating to the
obtaining of Governmental Authority approvals), all Governmental Authority approvals
and all rights of third parties, relating to Developer, the Property or Developer's business
thereon.
12.3 Taxes and Impositions. Developer shall pay, prior to delinquency,
all of the following (collectively, the "Impositions"): (a) all general and special real
property taxes and assessments imposed on the Property; (b) all other taxes and
assessments and charges of every kind that are assessed upon the Property (or upon the
owner and/or operator of the Property) and that create or may create a lien upon the
Property (or upon any personal property or fixtures used in connection with the Property),
including, without limitation, non-governmental levies and assessments pursuant to
applicable covenants, conditions or restrictions; and (c) all license fees, taxes and
assessments imposed on City (other than City's income or franchise taxes) which are
measured by or based upon (in whole or in part) the amount of the obligations secured by
the Property. If permitted by law, Developer may pay any Imposition in installments
(together with any accrued interest).
12.3.1 Right to Contest. Developer shall not be required to pay any
Imposition so long as (a) its validity is being actively contested in good faith and by
appropriate proceedings, (b) Developer has demonstrated to City's reasonable satisfaction
that leaving such Imposition unpaid pending the outcome of such proceedings could not
result in conveyance of the Property in satisfaction of such Imposition or otherwise
impair City’s interests under the Loan Documents, and (c) Developer has furnished City
with a bond or other security satisfactory in an amount not less than 100% of the
applicable claim (including interest and penalties).
12.3.2 Evidence of Payment. Upon demand by City from
time to time, Developer shall deliver to City, within thirty (30) days following the due
date of any Imposition, evidence of payment reasonably satisfactory to City.
12.3.3 Books and Records. Developer shall maintain complete books of
account and other records reflecting its operations (in connection with any other
businesses as well as with respect to the Property), in accordance with generally accepted
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accounting principles applied on a consistent basis or in accordance with such other
principles or methods as are reasonably acceptable to City, in accordance with 2 CFR
part 200 and 24 CFR 570.506.
12.4 Project Operating Account. Subject to the requirements of a Senior
Lender, Developer must promptly deposit all project income directly into a segregated
depository account established exclusively for the Project (“Project Operating Account”).
Withdrawals from this account may be made only in accordance with the provisions of
this Agreement and the approved Project Budget, as it may be revised from time to time
with City approval. Prior to the repayment of the City/CDBG Loan in full, Developer
may make withdrawals from this account solely for the payment of project expenses
(including, without limitation, funding reserves and the making of debt service
payments), project fees and permitted distributions to the partners of the Developer.
Withdrawals from this account for other purposes may be made only with the prior
written approval of the City.
12.5 Replacement Reserve Account. Developer must establish or cause to be
established with JPMorgan Chase Bank, N.A., a segregated interest-bearing replacement
reserve depository account (“Replacement Reserve Account”) no later than the date the
JPMorgan Chase Bank, N.A. loan converts from a construction loan to a permanent loan.
Developer must make monthly deposits from project income into the Replacement
Reserve in the amount of $500 per unit per year. Developer may withdraw funds from
the Replacement Reserve Account solely to fund capital improvements for the Project,
such as replacing or repairing structural elements, furniture, fixtures or equipment of the
Project that are reasonably required to preserve the Project. Developer may not withdraw
funds from the Replacement Reserve Account for any other purpose without the prior
written approval of the City.
13. NONDISCRIMINATION COVENANTS
13.1 Obligation to Refrain from Discrimination. Developer covenants and
agrees that:
A. In Use of Property. There shall be no discrimination
against or segregation of any person, or group of persons, on account of race, color,
creed, religion, sex, mental or physical disability, marital status, national origin, or
ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the
Property, nor shall Developer or any person claiming under or through it, establish or
permit any such practice or practices of discrimination or segregation with reference to
the selection, location, number, use or occupancy of tenants, lessees, subtenants,
sublessees, or vendors of the Property.
B. In Affordable Housing Restrictions. The foregoing
covenant shall (a) be included in the Affordability Restrictions on Transfer of Property,
(b) run with the land, and (c) remain effective for the term of the contract (for 55 years).
C. In Employment. In construction of the
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Property, Developer shall not discriminate against any employee or applicant because of
race, color, creed, religion, sex, marital status, mental or physical disability, national
origin, or ancestry. Developer shall take affirmative action to ensure that applicants are
employed, and that employees are treated during employment, without regard to their
race, color, creed, religion, sex, marital status, national origin, or ancestry.
D. In all Contracts. Developer shall cause the foregoing
covenants to be inserted in all contracts for any work covered by this Agreement so that
such provisions will be binding upon each contractor and subcontractor for the benefit of
City, provided that the foregoing covenant shall not apply to contracts or subcontracts for
standard commercial supplies or raw materials.
14. ENVIRONMENTAL MATTERS
14.1 Representation and Warranty. Except as disclosed in writing to the
City including the environmental site assessments prepared on behalf of Developer and
delivered to the City, Developer has no knowledge (a) of the presence on, under or about
the Property, now or in the past, of any Hazardous Materials in violation of applicable
law, or of the transportation to or from the Property of any Hazardous Materials, (b) that
asbestos or polychlorinated biphenyls (PCBs) are contained in or stored on the Property,
or (c) that there are any underground storage tanks located in, on or under the Property.
14.2 Compliance with Environmental Laws. Developer shall (a) comply with
all environmental laws and environmental permits applicable to the Construction of the
Property, (b) immediately pay or cause to be paid all costs and expenses incurred by
reason of such compliance, (c) keep the Property free and clear of any environmental
claims or liens imposed pursuant to any environmental law, and (d) obtain and renew all
environmental permits required for ownership or use of the Property.
14.3 Presence of Hazardous Materials. Developer shall not, and shall not
permit anyone else to, generate, use, treat, store, handle, release, or dispose of Hazardous
Materials on the Property, or transport or permit the transportation of Hazardous
Materials to or from the Property except for de minimis quantities used at the Property in
compliance with all applicable environmental laws and required in connection with the
routine construction, operation and maintenance of the Property.
14.4 Notice of Environmental Matters. Developer shall promptly advise City
in writing of any of the following: (a) any pending or threatened environmental claim
against Developer or the Property, (b) any condition or occurrence that (i) results in
noncompliance with any applicable environmental law, (ii) could reasonably be
anticipated to cause the Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of the Property under any environmental law, or (iii)
could reasonably be anticipated to form the basis of an environmental claim against the
Property or Developer.
14.5 Environmental Indemnification by the Developer. Developer agrees to
defend, indemnify and hold harmless the City and their respective officers, directors,
employees and agents (collectively the "Indemnitees") from and against any and all
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obligations (including removal and remediation), losses, claims (including third party
claims), suits, judgments, liabilities, penalties, damages (including consequential and
punitive damages), costs and expenses (including consultants, and attorneys' fees) of
whatever kind or nature whatsoever that may at any time be incurred by, imposed on, or
asserted against the Indemnitees directly or indirectly based on, or arising or resulting
from the actual or alleged presence of Hazardous Materials on the Property other than
arising from the gross negligence, willful misconduct and/or illegal actions of any
Indemnitee.
15. OTHER AFFIRMATIVE COVENANTS
While any obligation of Developer under the City Loan Note or City Deed of
Trust remain outstanding, the following provisions shall apply, except to the extent that
Executive Director otherwise consents in writing:
15.1 Existence. Developer’s Managing General Partner shall maintain its
existence in good standing under the laws of the State of California, and Developer shall
provide documentation of such status annually to the City.
15.2 Protection of Lien. Developer shall maintain the lien of the City Deed of
Trust, during construction and lease-up as a valid second priority, and during the
permanent phase of the Project as a valid third priority, deed of trust on the Property and
take all actions, and execute and deliver to City all documents, reasonably required by
City from time to time in connection therewith.
15.3 Notice of Certain Matters. Developer shall give notice to City, within ten
(10) days of Developer's learning thereof, of each of the following:
(a) any filed litigation or claim affecting or relating to the
Property and involving an amount in excess of $5,000; and any litigation or claim that
might subject Developer or any general partner to liability in excess of $5,000, whether
covered by insurance or not;
(b) any material dispute between Developer and a
Governmental Authority relating to the Property, the adverse determination of which
might materially affect the Property;
(c) any change in Developer's principal place of business;
(d) any aspect of the Improvements that is not in
substantial conformity with the plans or code;
(e) any Event of Default or event which, with the giving of
notice or the passage of time or both, would constitute an Event of Default;
(f) any material default by Developer or any other party under
any Senior Loan document, or the receipt by Developer of any notice of default under
any Senior Loan document;
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(g) the creation or imposition of any mechanics’ or
materialmans’ lien or other lien against the Property which might materially affect the
Property; and/or
(h) any material adverse change in the financial condition of
Developer.
15.4 Further Assurances. Developer shall execute and acknowledge (or cause
to be executed and acknowledged) and deliver to City all documents, and take all actions,
reasonably required by City from time to time to confirm the rights created or now or
hereafter intended to be created under the Loan Documents; to protect and further the
validity, priority and enforceability of the City Deed of Trust; to subject to the Deed of
Trust any property intended by the terms of any Loan Document(s) to be covered by the
City Deed of Trust or otherwise to carry out the purposes of the Loan Documents and the
transactions contemplated thereunder. Notwithstanding anything to the contrary set forth
herein, the Developer shall have no obligation to execute any document, or take any
action, which would (i) change a material term of any Loan Document, (ii) change or
impair any material right of Developer and/or (iii) increase the liability of Developer or
any partner thereof.
15.5 Annual Financial Statements. Developer shall deliver to City, within
one hundred twenty (120) days after the end of each Calendar Year following issuance of
a Certificate of Completion, (a) a certified public accountant reviewed balance sheet for
Developer as of the end of such Calendar Year and a certified public accountant reviewed
statement of profit and loss for Developer and for Developer's operations in connection
with the Property for such Calendar Year, together with all supporting schedules, (b) a
certificate of such certified public accountant that such documents were reviewed by such
certified public accountant in accordance with generally accepted accounting principles
and otherwise comply with generally accepted accounting principles review
requirements, and (c) a certificate of Developer's Managing General Partner that such
documents: (i) were prepared in accordance with generally accepted accounting
principles applied on a consistent basis or in accordance with such other principles or
methods as are reasonably acceptable to City, (ii) fairly present Developer's financial
condition, (iii) show all material liabilities, direct and contingent, and (iv) fairly present
the results of Developer's operations. Developer shall also provide the City with any
other annual audit reports issued by other monitoring agencies upon written request.
15.6 Audits and Access to Records. Developer agrees that City, the U.S.
Department of Housing and Urban Development, the Comptroller General of the United
States or any of their authorized representatives shall have the right of access, upon
reasonable notice, to any books, documents, papers, or other records of Developer which
are pertinent to this Agreement in order to make audits, examinations, abstracts, excerpts
or transcripts. Developer will maintain all books and records pertaining to this Agreement
for a period of not less than five (5) years after all matters pertaining to this Agreement
(i.e., audit, disputes or litigation) are resolved in accordance with applicable federal or
state laws, regulations or policies, and when a period of affordability or recapture applies
EXHIBIT 3
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to Developer's activities, for a period of not less than five (5) years after the affordability
period ends.
16. OTHER COVENANTS
While any obligation of Developer under the City Note or City Deed of Trust
remain outstanding, the following provisions shall apply, except to the extent that
Executive Director otherwise consents in writing:
16.1 Default on Senior Loan. Developer shall not default on any of the
Senior Loan documents, provided however, that Developer shall have such period as is
provided in the Senior Loan Documents during which to effectuate a cure.
16.2 Sale or Lease of Property. Unless and until Developer has received a
Certificate of Completion for the construction from City, Developer shall not sell, lease,
sublease or otherwise transfer all or any part of the Property or any interest therein
without the prior written consent of the Executive Director, which consent may be
withheld in the Executive Director's reasonable discretion. In connection with the
foregoing consent requirements, Developer acknowledges that City relied upon
Developer's particular expertise in entering into this Agreement and continues to rely on
such expertise to ensure the satisfactory completion of the construction.
Notwithstanding anything to the contrary contained herein, a "transfer” shall not
include (i) a transfer of any general partner’s interest in Developer when made in
connection with the exercise by the Developer’s limited partner (the "Limited Partner")
of its rights upon a default by a general partner under the Developer’s Partnership
Agreement or upon a general partner’s withdrawal in violation of the Partnership
Agreement, so long as the removal and substitution of the defaulting general partner is
made within thirty (30) days of such default or, if such removal and substitution cannot
reasonably be completed within thirty (30) days, so long as the Limited Partner
commences to take action to remove and substitute the general partner with a reasonable
period and thereafter diligently proceeds to complete such substitution; (ii) any transfer of
the Property to the managing general partner of Developer pursuant to the right of first
refusal or to the general partners of Developer pursuant to the purchase option, as
provided for in the Partnership Agreement; (iii) any transfer of the Limited Partner’s
interest in accordance with the Partnership Agreement; and (iv) any sale, transfer or other
disposition of an interest in a limited partner of the Developer.
17. CERTIFICATE OF COMPLETION
Upon satisfactory completion of the construction and upon the request of
Developer, or at its own election, the City of Santa Ana shall issue a Certificate of
Completion. Such Certificate of Completion shall be, and shall so state, conclusive
determination of satisfactory completion of the construction.
If City declines to furnish a Certificate of Completion after written request from
Developer, the Executive Director shall, within thirty (30) days after receipt of the
request, provide Developer with a written statement of the reasons therefore. The
EXHIBIT 3
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statement shall contain a description of the action Developer must take to obtain a
Certificate of Completion. If the reason therefore is that the Developer has not completed
a minor portion of the Construction, City may, in its reasonable discretion, issue the
Certificate of Completion upon the posting with City of a bond or other form of securit y
acceptable to the Executive Director in the amount of the fair value of the uncompleted
work.
A Certificate of Completion is not evidence of compliance with or satisfaction of
the Loan Documents or any obligation of Developer to any other party whatsoever,
including any holder of a mortgage or deed of trust. A Certificate of Completion is not
"notice of completion” referred to in Section 8182 of the California Civil Code.
18. INDEMNIFICATION
18.1 Nonliability of City. Developer acknowledges and agrees that:
(a) The relationship between Developer and City is and
shall remain solely that of borrower and lender, City neither undertakes nor assumes any
responsibility to review, inspect, supervise, approve (other than for aesthetics) or inform
Developer of any matter in connection with the construction, including matters relating
to: (i) the performance of the construction work, (ii) architects, contractors,
subcontractors and materialmen, or the workmanship of or materials used by any of them,
or (iii) the progress of the construction; and Developer shall rely entirely on its own
judgment with respect to such matters and acknowledges that any review, inspection,
supervision, approval or information supplied to Developer by City in connection with
such matters is solely for the protection of City and that neither Developer nor any third
party is entitled to rely on it;
(b) Notwithstanding any other provision of any Loan Document: (i)
the City is not a partner, joint venture, alter-ego, manager, controlling person or other
business associate or participant of any kind of Developer and City does not intend to
ever assume any such status; (ii) City’s activities in connection with the Loan(s) shall not
be “outside the scope of the activities of a lender of money” within the meaning of
California Civil Code Section 3434, as modified or recodified from time to time, and City
does not intend to ever assume any responsibility to any person for the quality or safety
of the Property; and (iii) City shall not be deemed responsible for or a participant in any
acts, omissions or decisions of Developer;
(c) City shall not be directly or indirectly liable or responsible for any
loss or injury of any kind to any person or property resulting from any construction on, or
occupancy or use of, the Property, whether arising from: (i) any defect in any building,
grading, landscaping or other onsite or offsite improvement; (ii) any act or omission of
Developer or any of Developer’s agents, employees, independent contractors, licensees
or invitees; or (iii) any accident on the Property or any fire or other casualty or hazard
thereon; and
(d) By accepting or approving anything required to be performed or
given to City under the Loan Documents, including any certificate, financial statement,
EXHIBIT 3
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survey, appraisal or insurance policy, City shall not be deemed to have warranted or
represented the sufficiency or legal effect of the same, and no such acceptance or
approval shall constitute a warranty or representation by City to anyone.
18.2 Indemnity. Developer shall defend (by counsel reasonably satisfactory
to City), indemnify and save and hold harmless the Indemnitees from and against all
claims, damages, demands, actions, losses, liabilities, costs and expenses (including,
without limitation, reasonable attorneys' fees and court costs) arising from or relating to
(i) a breach of this Agreement by Developer; (ii) the making of the Loan(s); (iii) a claim,
demand or cause of action that any person has or asserts against Developer; (iv) any act
or omission of Developer, any contractor, subcontractor or material supplier, engineer,
architect or other person with respect to the Property; or (vi) the ownership, occupancy or
use of the Property. Notwithstanding the foregoing, Developer shall not be obligated to
indemnify City with respect to the consequences of any act of illegal conduct, gross
negligence or willful misconduct of City. Developer's obligations under this Section shall
survive the cancellation of the City Loan Note, release and reconveyance of the City
Deed of Trust, issuance of the Certificate of Completion, and termination of this
Agreement.
18.2.1 Notwithstanding the foregoing, neither Developer, nor any of its
partners, shall be personally liable for any indemnification
obligation hereunder which would result as the repayment of
principal and/or interest under the Loan.
18.3 Reimbursement of City. Developer shall reimburse City promptly upon
written demand for all costs reasonably incurred by City (including the reasonable fees
and expenses of attorneys, accountants, appraisers and other consultants, whether the
same are independent contractors or employees of City) in connection with the
enforcement of the Loan Documents and all related matters including all claims,
demands, causes of action, liabilities, losses, commissions and other costs against which
City is indemnified under the Loan Documents. Such reimbursement obligations shall
bear interest at the maximum rate allowed by law from the date occurring twenty (20)
days after City gives written demand to Developer and shall be secured by the City Deed
of Trust. Such reimbursement obligations shall survive the cancellation of the Loan Note,
release and reconveyance of the City Deed of Trust, issuance of a Certificate of
Completion, and termination of this Agreement.
19. INSURANCE, CASUALTY AND CONDEMNATION
19.1 Policies Required. While any obligation of Developer under the Loan
Documents remains outstanding, Developer shall maintain at Developer's sole expense,
with insurers either (i) admitted in California or (ii) are not admitted to California but
have an A.M. Best Rating of “A” or above and reasonably approved by the City, the
following policies of insurance in form and substance reasonably satisfactory to the City
Attorney:
(a) worker’s compensation insurance and any other insurance required
by law in connection with the construction;
EXHIBIT 3
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(b) prior to commencement and following completion of the
construction, fire and hazard "all risk" insurance covering 100% of the replacement cost
of the Improvements in the event of fire, lightning, windstorm, vandalism, malicious
mischief and all other risks normally covered by "all risk" coverage policies in the area
where the Property is located (including loss by flood if the Property is in an area
designated as subject to the danger of flood);
(c) upon commencement of the construction and at all times prior to
completion of the construction, builder's risk-all risk insurance covering 100% of the
replacement cost of all Improvements (including offsite materials) during the course of
construction in the event of fire, lightning, windstorm, vandalism, earthquake, malicious
mischief and all other risks normally covered by "all risk" coverage policies in the area
where the Property is located (including loss by flood if the Property is in an area
designated as subject to the danger of flood);
(d) public liability insurance in the amount of $1,000,000 for "single
occurrence";
(e) property damage insurance in amounts reasonably
required by City from time to time, and in no event less than $1,000,000; and
(f) any other insurance reasonably required by City.
All such insurance shall provide that it may not be canceled or materially modified
without thirty (30) days (ten (10) days for nonpayment of premium) prior written notice
to City. The policies required under subparagraphs (b) and (c) shall include a "lender's
loss payable endorsement" in form and substance satisfactory to City, showing the City
as encumbrance. The City shall be named as an additional insured(s) in the policies
required under subparagraphs (d) and (e) with primary coverage. Certificates of insurance
for the above policies (and/or original policies, if required by City) shall be delivered
within ten (10) days after demand therefore, and prior to start of any construction work.
All policies insuring against damage to the Improvements shall contain an agreed value
clause sufficient to eliminate any risk of co-insurance. No less than ten (10) days prior to
the expiration of each policy, Developer shall deliver to City evidence of renewal or
replacement of such policy reasonably satisfactory to City Attorney.
19.2 RESERVED.
19.3 Claims and Proceedings. Developer shall give City
immediate notice of any material casualty to any portion of the Property, whether or not
covered by insurance, and of the initiation or threatened initiation of any proceeding for
the condemnation or other taking for public or quasi-public use of any portion of the
Property (collectively, "Condemnation"), and shall provide City with copies of all
documents which pertain to any such casualty or Condemnation. Developer shall take all
action reasonably required by City in connection therewith to protect the interests of
Developer and/or City, and City shall be entitled (without regard to the adequacy of its
security) to participate in any action, claim, adjustment or proceeding and to be
EXHIBIT 3
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represented therein by counsel of its choice. Developer shall not settle, adjust, or
compromise any claim, action, adjustment or proceeding without prior written approval,
which approval shall not be unreasonably withheld or delayed.
19.4 Delivery of Proceeds to City. In the event that,
notwithstanding the "lender's loss payable endorsement" requirement set forth above, the
proceeds from any casualty insurance is in excess of $500,000, Developer shall, subject
to any superior rights of a Senior Lender, deliver such proceeds to the City promptly
upon receipt.
19.5 Application of Casualty Insurance Proceeds. Subject to the
rights of a Senior Lender, any proceeds collected (the "Proceeds") under any casualty
insurance policy described in this Agreement shall be disbursed to Developer as provided
below, but only upon fulfillment of each of the following conditions (the "Restoration
Conditions") within ninety (90) days (unless extended by mutual agreement of Developer
and City) following the occurrence of the damage for which the Proceeds are collected:
(a) Developer shall demonstrate to City's reasonable
satisfaction that the Proceeds (together with amounts deposited by Developer pursuant to
subparagraph (b)) will be adequate to repair the Improvements and to restore the fair
market value of the Property, within two years (or such longer time period reasonably
determined by City), to at least the value it had immediately prior to sustaining the
damage. Such demonstration shall include delivery to City of (i) plans and specifications
reasonably satisfactory to City, and (ii) a construction contract in form and content, and
with a contractor, reasonably satisfactory to City.
(b) To the extent that the Proceeds are insufficient to
accomplish the restoration required above, Developer shall deliver to City (the "Shortfall
Funds") in the amount of such shortfall, which funds shall be assigned to City as security
for Developer's obligation hereunder and held and disbursed in the same manner as the
Proceeds.
(c) Developer shall execute such documents as City reasonably
requires to evidence and secure Developer's obligation to use all amounts disbursed for
the diligent restoration of the Property.
(d) No Event of Default shall remain uncured.
19.6 Method of Disbursement and Undisbursed Funds.
Any Proceeds and Shortfall Funds to be disbursed to Developer shall be held by City and
disbursed in accordance with then customary disbursement procedures and related
provisions. Any amounts remaining undisbursed following completion of such restoration
shall be returned to Developer up to the amount of any Shortfall Funds deposited by
Developer, and any other amounts remaining shall either be paid to Developer or applied
by City against any obligations to City that are secured by a lien on the Property, as they
elect in their sole and absolute discretion.
19.7 Failure to Satisfy Conditions. In the event that Developer
EXHIBIT 3
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fails to fulfill the Restoration Conditions within ninety (90) days (unless extended
pursuant to Section 19.5) following the date on which the damage occurs, the Proceeds
shall be applied by City against any obligations to City that are secured by a lien on the
Property, and the selection of which such obligations to apply the Proceeds against shall
be made by City in their sole and absolute discretion, subject to the rights of a Senior
Lender.
19.8 Reserved.
19.9 Condemnation; Treatment of Compensation. Subject to any
superior rights of a Senior Lender, Developer hereby assigns to the City, as security for
all obligations to City secured by a lien on the Property, all amounts payable to
Developer in connection with any Condemnation, and any proceeds of any related
settlement (collectively, "Compensation"). Subject to any superior rights of a Senior
Lender, Developer shall deliver such remaining Compensation to City promptly upon
receipt. If the taking results in a loss of the Property to an extent that, in the reasonable
opinion of City, renders or is likely to render the Property not economically viable or if,
in City’s reasonable judgment Developer’s security is otherwise impaired, City may
apply the Compensation received due to judgment or settlement in connection with any
condemnation or other taking to reduce the unpaid obligations secured in such order as
City may determine, and without any adjustment in the amount or due dates of payments
due under the Note. If so applied, any award in excess of the unpaid balance of the Note
and other sums due to City shall be paid to Developer or Developer’s assignee. City shall
have no obligation to take any action in connection with any actual or threatened
condemnation or other proceeding.
19.9.1 Notwithstanding the foregoing, as long as the value of
City’s liens are not impaired, any condemnation proceeds may be used by the Borrower
for repair and/or restoration of the Project.
19.10 Waiver of Subrogation. Developer hereby waives all rights to
recover against the City (or any officer, employee, agent or representative of the City) for
any loss incurred by Developer from any cause insured against or required by any Loan
Document, to be insured against; provided, however, that this waiver of subrogation shall
not be effective with respect to any insurance policy if the coverage thereunder would be
materially reduced or impaired as a result. Developer shall use its best efforts to obtain
only policies which permit the foregoing waiver of subrogation.
20. DEFAULTS AND REMEDIES
20.1 Events of Default. The occurrence of any of the following, whatever the
reason therefore, shall constitute an Event of Default by Developer:
(a) Developer fails to make any payment of principal or
interest under the City Loan Note when due, and such failure is not cured within fifteen
(15) Business Days after Developer's receipt of written notice that such payment was not
received when due;
EXHIBIT 3
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(b) Developer fails to perform any other obligation for the
payment of money under any Loan Document, and such failure is not cured within fifteen
(15) Business Days after Developer's receipt of written notice that such obligation was
not performed when due;
(c) Developer fails to perform any obligation (other than the
obligations described in subparagraphs (a) and (b) above under any Loan Document, and
such failure is not cured within thirty (30) days after Developer's receipt of written notice
that such obligation was not performed; provided that, if cure cannot reasonably be
effected within such thirty (30)-day period, such failure shall not be an Event of Default
so long as Developer (in any event, within ten (10) days after receipt of such notice)
commences to cure, and thereafter diligently (in any event within ninety (90) days after
receipt of such notice) prosecutes such cure to completion;
(d) Any representation or warranty in any Loan Document proves to
have been incorrect in any material respect when made;
(e) Reserved;
(f) Work on the construction ceases for ninety (90) consecutive days
for any reason (other than governmental orders, decrees or regulations,
acts of God or any other deity, strikes or other causes beyond Developer's
reasonable control), provided that the same do not, in the aggregate and in
the City’s reasonable judgment, threaten to delay the completion of the
construction beyond the required completion date set forth in this
Agreement;
(g) Developer is enjoined or otherwise prohibited by any
Governmental Authority from constructing and/or occupying the improvements and such
injunction or prohibition continues unstayed for ninety (90) days or more for any reason;
(h) Developer is dissolved, liquidated or terminated, or all or
substantially all of the assets of Developer are sold or otherwise transferred without the
Executive Director's prior written consent; or
(i) Developer is the subject of an order for relief by a bankruptcy
court, or is unable or admits its inability to pay its debts as they mature, or makes an
assignment for the benefit of creditors; or Developer applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer for it or any part of its property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed without the
application or consent of Developer and the appointment continues undischarged or
unstayed for ninety (90) days; or Developer institutes or consents to any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship,
conservatorship, liquidation, rehabilitation or similar proceeding relating to it or any part
of its property; or any similar proceeding is instituted without the consent of Developer
and continues undismissed or unstayed for ninety (90) days; or any judgment, writ,
warrant of attachment or execution, or similar process is issued or levied against any
EXHIBIT 3
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property of Developer and is not released, vacated or fully bonded within ninety (90)
days after its issue or levy.
(j) Any of the Senior Loan documents is amended, supplemented or
otherwise modified without City's prior written consent, which consent shall not be
unreasonably withheld, to the extent the City’s consent is required pursuant to any
subordination agreement between the City and a Senior Lender.
20.2 Remedies Upon Default. Upon the occurrence and during the
continuance of any Event of Default, City may, at its option and in its absolute discretion,
do any or all of the following:
(a) By written notice to Developer, declare the principal of all
amounts owing under the Loan Documents, together with all accrued interest and other
amounts owing in connection therewith, to be immediately due and payable, regardless of
any other specified due date; provided that any Event of Default described in Section
20.1 shall automatically, without notice or other action on City's part, cause all such
amounts to be immediately due and payable;
(b) In its own right or by a court-appointed receiver, take
possession of the Property, enter into contracts for and otherwise proceed with the
completion of the construction by expenditure of its own funds;
(c) Exercise any of its rights under the Loan Documents and any rights
provided by law, including, without limitation, the right to seek specific performance and
the right to foreclose on any security and exercise any other rights with respect to any
security, all in such order and manner as City elects in its sole and absolute discretion;
and,
(d) Suspend or terminate the award of CDBG funds if Developer fails
to comply with any term of that award.
20.3 Cumulative Remedies: No Waiver. City's rights and remedies under the
Loan Documents are cumulative and in addition to all rights and remedies provided by
law. The exercise by City of any right or remedy shall not constitute a cure or waiver of
any default, nor invalidate any notice of default or any act done pursuant to any such
notice, nor prejudice the City in the exercise of any other right or remedy. No waiver of
any default shall be implied from any omission by City to take action on account of such
default if such default persists or is repeated. No waiver of any default shall affect any
default other than the default expressly waived, and any such waiver shall be operative
only for the time and to the extent stated. No waiver of any provision of any Loan
Document shall be construed as a waiver of any subsequent breach of the same provision.
City's consent to or approval of any act by Developer requiring further consent or
approval shall not be deemed to waive or render unnecessary City's consent to or
approval of any subsequent act. The City's acceptance of the late performance of any
obligation shall not constitute a waiver by City of the right to require prompt performance
of all further obligations; City's acceptance of any performance following the sending or
filing of any notice of default shall not constitute a waiver of either party's right to
EXHIBIT 3
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proceed with the exercise of its remedies for any unfulfilled obligations; and City's
acceptance of any partial performance shall not constitute a waiver by City of any rights.
20.4 Nonrecourse Liability. Neither Developer, nor any partner of Developer,
shall have any personal liability under this Agreement, or the attached Note and Deed of
Trust, and any judgment, decree or order for the payment of money obtained in any action to
enforce the obligation of Developer to repay the loan evidenced by such documents shall be
enforceable against Developer only to the extent of Developer’s interest in the Property.
20.5 Limited Partner Right to Cure. Notwithstanding anything to the
contrary herein, City shall provide Developer’s limited partner with a copy of any notice
of default delivered to Developer hereunder, and acknowledges and agrees that
Developer’s limited partner shall have a right to cure any such default on the same basis
as Borrower.
21. MISCELLANEOUS
21.1 Obligations Unconditional and Independent. Notwithstanding the
existence at any time of any obligation or liability of City to Developer, or any other
claim by Developer against City, in connection with the Loan or otherwise, Developer
hereby waives any right it might otherwise have (a) to offset any such obligation, liability
or claim against Developer's obligations under the Loan Documents, or (b) to claim that
the existence of any such outstanding obligation, liability or claim excuses the
nonperformance by Developer of any of its obligations under the Loan Documents.
21.2 Notices. All notices, demands, approvals and other communications
provided for in the Loan Documents shall be in writing and be delivered to the
appropriate party by personal service or certified U.S. mail at its address as follows:
If to Developer: North Harbor Housing Partners LP
c/o Jamboree Housing Corporation
17701 Cowan Avenue, Suite 200
Irvine, CA 92614
Attn: John Witkowski
With a copy to: Rutan & Tucker, LLP
18575 Jamboree Road, 9th Floor
Irvine, CA 92612
Attn: Patrick D. McCalla
And a copy to: Red Stone Equity
2020 CA Regional Fund, L.P.
1100 Superior Boulevard, Suite 1640
Cleveland, OH 44114
Attention: General Counsel.
If to City: City of Santa Ana
Executive Director (CDA)
EXHIBIT 3
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20 Civic Center Plaza (M-26)
P .0. Box 1988
Santa Ana, California 92702
With a copy to: City Attorney
City of Santa Ana
20 Civic Center Plaza, 7th Floor (M-29)
Santa Ana, California 92702
Addresses for notice may be changed as required by written notice to all other parties.
All notices personally served shall be effective when actually received. All notices
mailed shall be effective three (3) days after deposit in the U.S. Mail, postage prepaid.
The foregoing notwithstanding, the non-receipt of any notice as the result of a change of
address of which the sending party was not notified or as the result of a refusal to accept
delivery shall be deemed receipt of such notice.
21.3 Survival of Representations and Warranties. All representations and
warranties in the Loan Documents shall survive the making of the Loan described herein
and have been or will be relied on by City notwithstanding any investigation made by
either party.
21.4 No Third Parties Benefited. This Agreement is made for the purpose of
setting forth rights and obligations of Developer and the City, and no other person shall
have any rights hereunder or by reason hereof.
21.5 Binding Effect; Assignment of Obligations. This Agreement shall bind,
and shall inure to the benefit of, Developer and City and their respective successors and
assigns.
21.6 Prior Agreements; Amendments; Consents. This Agreement (together
with the other Loan Documents) contains the entire agreement between the City and
Developer with respect to the Loan and the Property, and all prior negotiations,
understandings and agreements are superseded by this Agreement and such other Loan
Documents. No modification of any Loan Document (including waivers of rights and
conditions) shall be effective unless in writing and signed by the party against whom
enforcement of such modification is sought, and then only in the specific instance and for
the specific purpose given.
21.7 Governing Law. All of the Loan Documents shall be governed by, and
construed and enforced in accordance with, the laws of the State of California and
Federal law, whichever is more stringent. Developer irrevocably and unconditionally
submits to the jurisdiction of the Superior Court of the State of California for the County
of Orange or the United States District Court of the Central District of California, as City
may deem appropriate, in connection with any legal action or proceeding arising out of or
relating to this Agreement or the Loan Documents. Assuming proper service of process,
Developer also waives any objection regarding personal or in rem jurisdiction or venue.
EXHIBIT 3
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21.8 Severability of Provisions. No provision of any Loan Document that is
held to be unenforceable or invalid shall affect the remaining provisions, and to this end
all provisions of the Loan Documents are hereby declared to be severable.
21.9 Headings. Article and section headings are included in the Loan
Documents for convenience of reference only and shall not be used in construing the
Loan Documents.
21.10 Conflicts. In the event of any conflict between the provisions of this
Agreement and those of any other Loan Document, this Agreement, unless otherwise
expressly provided, shall prevail; provided however that, with respect to any matter
addressed in both such documents, the fact that one document provides for greater, lesser
or different rights or obligations than the other shall not be deemed a conflict unless the
applicable provisions are inconsistent and could not be simultaneously enforced or
performed.
21.11 Time of the Essence. Time is of the essence under this Agreement and in
the performance of every term, covenant, and obligation contained herein.
21.12 Conflict of Interest. No member, official or employee of the City shall
have any direct or indirect interest in this Agreement, nor participate in any decision
relating to the Agreement which is prohibited by law.
21.13 Warranty Against Payment of Consideration. 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.
21.14 Nonliability of City Officials and Employees. No member, official or
employee of City shall be personally liable to Developer, or any successor in interest, in
the event of any default or breach by City or for any amount which may become due to
Developer or successor, or on any obligation under the terms of this Agreement.
21.15 Plans and Data. As additional collateral for the Loan, Developer hereby
grants to the City a security interest in all plans and data concerning the Property, subject
to the rights of any Senior Lender. Such right of City shall be subject to any right of the
preparer of the plans to their use.
21.16 Authority to Enter Agreement. Each undersigned represents and warrants
that its signature hereinbelow has the power, authority and right to bind their respective
parties to each of the terms of this Agreement, and shall indemnify the City fully, including
reasonable costs and attorney’s fees, for any injuries or damages to City in the event that the
signatory had actual knowledge that such authority or power was not, in fact, held by the
signatory or that it would be imminently withdrawn.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the date set forth at the beginning of this Agreement.
DEVELOPER
NORTH HARBOR HOUSING PARTNERS LP,
a California limited partnership
By: JHC-North Harbor LLC,
a California limited liability company,
Managing General Partner
By: Jamboree Housing Corporation,
a California nonprofit public benefit corporation,
Manager
By:
Name:
Title:
Acknowledged:Tung Tran, Senior DirectorJamboree Housing Corporation4/12/2021
EXHIBIT 3
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ATTEST: CITY OF SANTA ANA
___________________________ _______________________
Daisy Gomez Kristine Ridge
Clerk of the Council City Manager
Dated: Dated:
APPROVED AS TO FORM:
SONIA R. CARVALHO, City Attorney
By: ________________________
Ryan O. Hodge
Assistant City Attorney
Dated:
RECOMMENDED FOR APPROVAL:
_______________________________
Steven A. Mendoza
Executive Director
Community Development Agency
April 12, 2021
EXHIBIT 3
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EXHIBITS
A. Legal Description
B. Scope of Work
C. Project Budget
D. City/CDBG Loan Deed of Trust
E. City/CDBG Loan Note
F. Affordability Restrictions on Transfer of Property
EXHIBIT 3
Exhibit A:
Legal Description
EXHIBIT 3
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PROPERTY
That certain real property situated in the City of Santa Ana, County of Orange, State of California,
more particularly described as follows:
THE SOUTH 135 FEET OF THE NORTHEAST QUARTER OF THE SOUTHEAST QUARTER
OF THE NORTHEAST QUARTER OF SECTION 9, TOWNSHIP 5 SOUTH, RANGE 10 WEST,
SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF ORANGE, STATE OF
CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT THEREOF.
EXCEPT THE WEST 20 FEET THEREOF.
APN: 198-011-05
EXHIBIT 3
Exhibit B:
Scope of Work
EXHIBIT 3
North Harbor Village (Budget Inn)
Scope of Work
03-23-2021
Site
Update parking lot per plan with new curb, gutters, drainage, asphalt paving
Path of travel upgrades
New landscaping
New half size basketball court
New trash enclosures
New community garden, BBQ area, dog park, fitness equipment
Add security gate to parking area
Site demolition (ex. Pool area), abatement, new driveway
Structure Frames and Envelopes
Replace apartment building fascia fronting N. Harbor.
Rehab leasing office spaces
Repair Doors and Frame as needed
Upgrade south facing exterior elevation.
Paint mansard roof materials.
Assume existing windows to remain
Solar PV
New Community Building
A 4,497 sf community building with dedicated service and amenity spaces for
residents include the following: counseling rooms for individual meetings, a small
group counseling room, a computer room, a community kitchen, and a multi-
purpose room for group meetings and activities, lounge area for residents, and
offices for services staff.
Mechanical/Electrical/Plumbing for New Community Building
New community kitchen and bath GFCI
New interior stair and elevator
New accordion glass door open to exterior space
New partition wall separating community kitchen and multipurpose room
New heating and cooling equipment
New restroom exhaust fans
Assume all utilities connections to existing building master meters.
EXHIBIT 3
ADA Compliance
Upgrades for hearing impaired units (4% of 89 units) – 4 Units
Upgrades for mobility units (5% of 89 units) – 5 Units. TCAC approved waiver
request reducing from 10% to 5%.
PNA Report date 5/15/2020 with both Long Term Work and Short Term Work and Rehab Repairs
are included and will be completed during construction.
EXHIBIT 3
North Harbor Village – Unit Scope
Unit Demolition/Remodel – Building A (No existing Kitchenettes) Building B (Existing Kitchenettes)
Demolition
Demo Flooring
Demo Entry Door, Frame and Hardware
Demo Window
Demo Existing Kitchenettes (Building B)
Demo Vanity and Sink
Demo Plumbing Fixtures, Sink, Tub/Shower as required
Demo Interior Wall @ Vanity and Tub/Shower
Demo Interior Bathroom Walls ((A‐101‐106, 201‐206, 301‐306)(B‐118‐128, 220‐230, 322‐333)
Patch and Repair existing drywall to receive new texture
o Will Bid Alternate to Overlap existing drywall with New ¼” Drywall
Remodel
New Vinyl Plank Flooring
New Entry Door with Peep Hole and Doorbell
New Kitchenette
o Cabinets – Uppers and Lowers
o Countertops and 4” Back Splash
o Appliances
12cf Refrigerator
15” Electric Cooktop
24” Hood
0.7cf Microwave
New Bathroom
o Vanity
o Countertop
o Sink, Faucet and Garbage Disposal
o Medicine Cabinet
o Mirror
o Water Closet
o Tub/Shower Surround
o Bath Accessories
TP Dispenser
Towel Bar – 24”
o Vanity Light
New Texture and Paint
New Electrical Lighting and Power as required
New Mechanical
o New PTAC
o New Kitchen Exhaust Fan (Hood)
o New Bathroom Exhaust Fan
New Plumbing Fixtures with associated Piping
o Water Closet
o Lavatory
o Kitchen Sink and Faucet
o Tub/Shower Enclosure
EXHIBIT 3
Exhibit C:
Project Budget
EXHIBIT 3
North Harbor Village
Sources & Uses City of Santa Ana
Version:4% - PSH & VHHP
Revised:03/24/21
BEGINNING BALANCE ENDING BALANCE
PERMANENT SOURCES PERCENT TOTAL PER UNIT TOTAL PER UNIT CONSTRUCTION SOURCES TOTAL
1 Net Investor Equity (Federal)27% 10,967,187.00 120,519 0 0 1 Equity (Fed + State)3,141,944.75
2 Permanent Loan 28%11,075,000.00 121,703 8,799,321 96,696 2 Construction Loan 32,700,000.00
3 Tranche B - Loan 0%0.00 0 0 0 3 Tranche B - Loan 0.00
4 Net Investor Equity (State)4%1,600,592.00 17,589 0 0 4 Other 0.00
5 Accrual Mortgage 0%0.00 0 0 0 5 Accrual Mortgage 0.00
6 GP Loan (Home Depot)1%500,000.00 5,495 0 0 6 GP Loan (Home Depot)500,000.00
7 Fixed Rate Mortgage 0%0.00 0 309,463 3,401 7 Costs Deferred to Conversion 0.00
8 City CDBG Loan 4%1,687,047.00 18,539 2,432,754 26,734 8 City CDBG Loan 0.00
9 VHHP 25% 10,000,000.00 109,890 14,420,192 158,464 9 VHHP 0.00
10 OCHFT 6% 2,217,769.14 24,371 3,198,066 35,144 10 OCHFT 0.00
11 Deferred Developer Fee 3% 1,062,321.23 11,674 0 0 11 Deferred Developer Fee 2,041,531.82
12 General Partner Equity 0%0.00 0 0 0 12 General Partner Equity 0.00
13 Land Donation 0%0.00 0 0 0 13 Land Donation 0.00
14 AHP Loan 2% 890,000.00 9,780 0 0 14 AHP Loan 890,000.00
15 Interest on Surplus Funds 0%0.00 0 0 0 15 Interest on Surplus Funds 0.00
16 NOI During Construction 0%0.00 0 0 0 16 NOI During Construction 726,439.79
TOTAL SOURCES 100%39,999,916.37 439,560 29,159,796 320,437 TOTAL SOURCES 39,999,916.37
RESIDENTIAL (NEW OR COMMERCIAL ELIGIBLE NOT TOTAL
USES OF FUNDS TOTAL ACQUISITION REHAB COST)STATE ELIGIBLE PER UNIT
1 Land at $2,178,771 Per Acre or $50.02 Per SF 25.85%3,900,000.00 0 0 0 0 3,900,000.00 42,857
2 Existing Structure 15,738,582 74.15%11,188,888.00 11,160,838 0 0 0 28,050.00 122,955
3 Other Acquisition Costs 649,694.41 0 537,569 0 0 112,125.00 7,139
4 Hard Cost Residential 12,403,740.00 134,552 8,570,347.67 0 8,570,348 0 0 0.00 94,180
5 Site Improvements 2,170,169.00 0 2,170,169 0 0 0.00 23,848
6 General Conditions, Profit & Overhead 14.00%1,503,672.33 0 1,503,672 0.00 0 0.00 16,524
7 GC Bond / Insurance / Letter of Credit 1.49%159,551.00 0 159,551 0 0 0.00 1,753
8 Hard Cost Contingency 12.96%1,586,953.00 0 1,384,610 0 0 202,343.00 17,439
9 Construction Interest (2.515531%) at Perm. Rate + -169.4bp 2.52%1,745,486.46 0 939,882 0 0 805,604.29 19,181
10 Bridge Interest at 10.00%0.00 0 0 0 0 0.00 0
11 Construction Loan Fees 245,250.00 0 245,250 0 0 0.00 2,695
12 Permanent Loan Fees 0.00 0 0 0 0 0
13 Bridge Loan Fees 0.00 0 0 0 0 0.00 0
14 4% Related Costs / Cost of Issuance 349,907.00 0 89,425 0 0 260,482.00 3,845
15 Accounting & Audit 25,000.00 0 25,000 0 0 0.00 275
16 Appraisal / Market Study 12,800.00 0 12,800 0 0 0.00 141
17 Architecture (Architect, Landscape Architect)450,000.00 0 450,000 0 0 0.00 4,945
18 Civil Engineering 150,000.00 0 150,000 0 0 0.00 1,648
19 Construction Manager 0.00 0 0 0 0 0.00 0
20 Consultants ( CM, Geo, LEED, Utilities, exc.)205,000.00 0 205,000 0 0 0.00 2,253
21 Environmental (EIR, Phase I, Asbestos, exc.)30,000.00 0 30,000 0 0 0.00 330
22 Financial Advisor / Syndication Consultant 0.00 0 0 0 0 0.00 0
23 Furnishings 461,500.00 0 461,500 0 0 0.00 5,071
24 Impact Fees 779,416.73 0 779,417 0 0 0.00 8,565
25 Lease-up & Marketing Expenses 210,000.00 0 0 0 0 210,000.00 2,308
26 Legal 250,000.00 0 40,000 0 0 210,000.00 2,747
27 MHSA Construction Period Fees 0.00 0 0 0 0 0.00 0
28 Operating & Debt Service Reserve (6-mo's / debt)6 750,745.00 0 0 0 0 750,745.00 8,250
29 Other (Admin, Repro. & Reimb.)35,000.00 0 35,000 0 0 0.00 385
30 Other (Bank Inspections)40,200.00 0 40,200 0 0 0.00 442
31 Other (Redstone Due Diligence)55,000.00 0 0 0 55,000.00 604
32 Other (Security System)55,000.00 0 55,000 0 0 0.00 604
33 Other (Reserves)0.00 0 0 0 0
34 Other (Specify)0.00 0 0 0 0 0.00 0
35 Other (Specify)0.00 0 0 0 0 0.00 0
36 Other (Specify)0.00 0 0 0 0 0.00 0
37 Other (Specify)0.00 0 0 0 0 0.00 0
38 Relocation 0.00 0 0 0 0.00 0
39 Permit Fees 298,074.80 0 298,075 0 0 0.00 3,276
40 Property Taxes and Insurance 446,930.00 0 446,930 0 0 0.00 4,911
41 Relocation 167,825.76 0 0 0 0 167,825.76 1,844
42 Replacement Reserve 0.00 0 0 0 0 0.00 0
43 Soft Cost Contingency 6.06%312,183.93 0 312,183.93 0 0 0.00 3,431
44 Tax Credit Fees (App., Mon., & Res.)103,000.00 0 2,000 0 0 101,000.00 1,132
45 Title & Recording 30,000.00 0 20,000.00 0.00 0 10,000.00 330
46 Developer Overhead 0.00 0 0 0 0 0.00 0
47 Developer Fee 3,062,321.28 413,806 2,504,279.38 0 0 144,236.17 33,652
TOTAL USES 39,999,916.37 11,574,644 21,467,861.42 0 0 6,957,411.22 439,560
EXHIBIT 3
Exhibit D:
City/CDBG Loan
Deed of Trust
EXHIBIT 3
FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, California 92702
Attention: Clerk of the Council
CITY CDBG DEED OF TRUST
AND ASSIGNMENT OF RENTS
(1108 North Harbor Boulevard, Santa Ana, California)
THIS CITY DEED OF TRUST AND ASSIGNMENT OF RENTS (the “City Deed
of Trust") made this 20th day of April, 2021 by North Harbor Housing Partners LP, a
California limited partnership (the "Trustor"), AmeriNat, a Minnesota corporation (the
“Trustee"), and the City of Santa Ana, a charter city and municipal corporation (the
"Beneficiary").
Trustor, in consideration of the promises herein recited and the trust herein created,
irrevocably grants, transfers, conveys and assigns to Trustee, in trust, with power of sale, the
property located in the City of Santa Ana, County of Orange, State of California, described
in the attached Exhibit A and more commonly known as 1108 North Harbor Boulevard
(the "Property");
TOGETHER with all the improvements now or hereafter erected on the Property,
and all easements, rights, appurtenances and all fixtures now or hereafter attached to the
Property, all of which, including replacements and additions thereto, shall be deemed to be
and remain a part of the Property covered by this City Deed of Trust;
TOGETHER with the right, power and authority during the continuance of these
Trusts, to collect the rents, issues, and profits of the Property, reserving unto the Trustor the
right, prior to any default by Trustor in payment of the indebtedness secured by this City
Deed of Trust or in the performance of any agreement under this City Deed of Trust, to
collect and retain these rents, issues and profits as they become due and payable; and,
TOGETHER with all articles of personal property or fixtures now or hereafter
attached to or used in and about the building or buildings now erected, or hereafter to be
erected, on the Property which are necessary to the complete and comfortable use and
occupancy of such building or buildings for the purposes for which they were or are to be
EXHIBIT 3
2
erected, including all other goods and chattels and personal property as are ever used or
furnished in operating a building, or the activities conducted therein, similar to the one
herein described and referred to, and all renewals or replacements thereof or articles in
substitution therefor, whether or not the same are, or shall be attached to said building or
buildings in any manner; and all of the foregoing, together with the Property, is herein
referred to as the "Security";
To have and to hold the Security together with acquittances to the Trustee, its
successors and assigns forever;
TO SECURE to the Beneficiary (a) the repayment of the sums evidenced by a
promissory note to the Beneficiary executed by Trustor of even date herewith in the
principal amount of ONE MILLION, SIX HUNDRED EIGHTY-SEVEN THOUSAND,
AND FORTY-SEVEN DOLLARS ($1,687,047) (the “City CDBG Loan Note”); (b) the
performance of the covenants and agreements of Borrower contained in a certain Loan
Agreement and attached exhibits, including the Affordability Restrictions, as hereinafter
defined; and (c) the payment of all other sums, with interest thereon, advanced in
accordance herewith to protect the security of this City Deed of Trust; and the performance
of the covenants and agreements of Trustor contained herein.
TRUSTOR AND THE BENEFICIARY COVENANT AND AGREE AS FOLLOWS:
1. The Loan Agreement. This City Deed of Trust is executed and delivered,
along with the City Loan Note and the Loan Agreement, to benefit the Property. A copy of
said Loan Agreement is on file as a public record with the Beneficiary and is incorporated
herein by reference (the “Agreement”). Trustor acknowledges that but for the execution of
this City Deed of Trust, the Beneficiary would not enter into the Agreement or City Loan
Note secured by this City Deed of Trust.
2. Trustor's Estate. Trustor is lawfully seized of the estate hereby conveyed and
has the right to grant and convey the Security; that except as disclosed on the Title Policy
insuring the City Deed of Trust, the Security is not encumbered except for obligations
secured by deeds of trust, or any other security agreement, to secure financing or refinancing
for the purchase and rehabilitation of the Property.
3. Repayment of the Loan. Trustor will promptly repay, when due, the
principal and interest, as required by the City Loan Note secured by this City Deed of Trust.
4. Subordination. This obligation secured by this City Deed of Trust shall be
subordinated to the Senior Loan.
5. Prior Mortgages and Deeds of Trust; Charges; Liens. Trustor shall perform
all of Trustor’s obligations under any mortgage, deed of trust or other security agreement
with a lien which has priority over this Instrument, including Trustor’s covenants to make
payments when due (subject to an applicable notice and cure provisions). Trustor will pay
all taxes, assessments and other charges, fines and impositions attributable to the Security
EXHIBIT 3
3
which may attain a priority over this Deed of Trust, by Trustor making any payment, when
due, directly to the payee thereof. Trustor will promptly furnish to the Beneficiary all
notices of amounts due under this paragraph, and in the event Trustor makes payment
directly, Trustor will promptly discharge any lien which has priority over this Deed of Trust;
provided that Trustor will not be required to discharge the lien of the Deed of Trust securing
any senior lender or any other lien described in this paragraph so long as Trustor will agree
in writing to the payment of the obligation secured by such lien in a manner acceptable to
the Beneficiary, or will, in good faith, contest such lien by, or defend enforcement of such
lien in, legal proceedings which operate to prevent the enforcement of the lien or forfeiture
of the Security or any part thereof.
6. Hazard Insurance. Trustor will keep the Security insured by such insurance
policies in such amounts and for such periods as called for in the Agreement. All insurance
policies and renewals thereof will include a standard mortgagee clause with standard
lender's endorsement in favor of the holder of any senior lender and the Beneficiary as their
interests may appear and in a form acceptable to the Beneficiary. Trustor shall promptly
furnish to the Beneficiary, or its designated agent, certificates of insurance, copies of all
renewal notices and copies of all receipts of paid premiums. In the event of loss, Trustor
will give prompt notice to the insurance carrier and the Beneficiary or its designated agent.
The Beneficiary, or its designated agent, may make proof of loss if not made promptly by
Trustor. The Beneficiary shall receive 30 days (10 days for nonpayment of premium)
advance notice of cancellation of any insurance policies required under this Section.
Unless the Beneficiary and Trustor otherwise agree in writing, insurance proceeds,
subject to the rights of any senior lender, will be applied to restoration or repair of the
Security damaged, provided such restoration or repair is economically feasible and the
security of this City Deed of Trust is not thereby impaired. If such restoration or repair is
not economically feasible or if the security of this City Deed of Trust would be impaired,
again, subject to the rights of any senior lender, the insurance proceeds will be used to repay
the loan secured by this Deed of Trust, with the excess, if any, paid to Trustor. If the
Security is abandoned by Trustor, or if Trustor fails to respond to the Beneficiary, or its
designated agent within 30 days from the date notice is mailed by either of them to Trustor
that the insurance carrier offers to settle a claim for insurance benefits, the Beneficiary, or its
designated agent, is authorized to collect and apply the insurance proceeds at the
Beneficiary's option either to restoration or repair of the Security or to repay the loan.
If the Security is acquired by the Beneficiary, all right, title and interest of Trustor in
and to any insurance policy and in and to the proceeds thereof resulting from damage to the
Security prior to the sale or acquisition will pass to the Beneficiary to the extent of the sums
secured by this City Deed of Trust immediately prior to such sale or acquisition subject to
the rights of any senior lender.
7. Preservation and Maintenance of Security. Trustor will keep the Security in
good repair and will not commit waste or permit impairment or deterioration of the Security.
EXHIBIT 3
4
8. Protection of the Beneficiary's Security. If Trustor fails to perform the
covenants and agreements contained in this City Deed of Trust or if any action or
proceeding is commenced which materially affects the Beneficiary's interest in the Security,
including, but not limited to, default under the City Deed of Trust securing any senior
lender, eminent domain, insolvency, code enforcement, or arrangements or proceedings
involving a bankrupt or decedent, then the Beneficiary, at the Beneficiary's option, upon
notice to Trustor, may make such appearances, disburse such sums and take such action as it
determines necessary to protect the Beneficiary's interest, including, but not limited to,
disbursement of reasonable attorneys' fees and entry upon the Security to make repairs.
Any amounts disbursed by the Beneficiary pursuant to this paragraph, with interest
thereon, will become an indebtedness of Trustor secured by this City Deed of Trust. Unless
Trustor and the Beneficiary agree to other terms of payment, such amount will be payable
upon notice from the Beneficiary to Trustor requesting payment thereof, and will bear
interest from the date of disbursement at the rate payable from time to time on outstanding
principal under the City Loan Note unless payment of interest at such rate would be contrary
to applicable law, in which event such amounts will bear interest at the highest rate
permissible under applicable law. Nothing contained in this paragraph will require the
Beneficiary to insure any expense or take any action hereunder.
9. Inspection. The Beneficiary may make, or cause to be made, reasonable
entries upon and inspections of the Security during normal business hours; provided that the
Beneficiary will give Trustor not less than forty-eight (48) hours’ prior written notice of
inspection.
10. Forbearance by the Beneficiary Not a Waiver. Any forbearance by the
Beneficiary in exercising any right or remedy will not be a waiver of the exercise of any
such right or remedy. The procurement of insurance or the payment of taxes or other liens
or charges by the Beneficiary will not be a waiver of the Beneficiary's right to accelerate the
maturity of the indebtedness secured by this City Deed of Trust.
11. Remedies Cumulative. All remedies provided in this City Deed of Trust are
distinct and cumulative to any other right or remedy under this City Deed of Trust or any
other document, or afforded by law or equity, and may be exercised concurrently,
independently or successively.
12. Successors and Assigns Bound. The covenants and agreements herein
contained shall bind, and the rights hereunder shall inure to, the respective successors and
assigns of the Beneficiary and Trustor subject to the provisions of this City Deed of Trust.
13. Joint and Several Liability. All covenants and agreements of Trustor shall be
joint and several.
14. Notice. Except for any notice required under applicable law to be given in
another manner, (a) any notice to Trustor provided for in this City Deed of Trust will be
given by certified mail, return receipt requested, addressed to Trustor at 17701 Cowan
EXHIBIT 3
5
Avenue, Suite 200, Irvine, CA 92614, Attn: President, with copies to JPMorgan Chase
Bank, N.A., Community Development Banking, 300 Grand Avenue, Los Angeles,
California 90071, Attention: Doug Leezer, JPMorgan Chase Bank, N.A, Legal
Department, Mail Code: NY1-R066, 4 New York Plaza, 21st Floor
Mail Code: NY1-E089, New York, New York 10004-2413, and Red Stone Equity – 2020
CA Regional Fund, L.P., 1100 Superior Boulevard, Suite 1640, Cleveland, OH 44114,
Attention: General Counsel, (b) any notice to the Beneficiary will be given by certified
mail, return receipt requested, to the Beneficiary at 20 Civic Center Plaza, P.O. Box 1988,
Santa Ana, California 92702, Attention: Housing Division Manager, or at such other address
as the Beneficiary may designate by notice to Trustor as provided above, and (c) to Trustee
at 8121 E. Florence Avenue, Downey, California 90240. Notice shall be effective as of
the date received as shown on the return receipt.
15. Governing Law. This City Deed of Trust shall be governed by the laws of
the State of California.
16. Severability. In the event that any provision or clause of this City Deed of
Trust or the City Loan Note conflicts with applicable law, such conflict will not affect other
provisions of this City Deed of Trust or the City Loan Note which can be given effect
without the conflicting provision, and to this end the provisions of the City Deed of Trust
and the City Loan Note are declared to be severable.
17. Captions. The captions and headings in this City Deed of Trust are for
convenience only and are not to be used to interpret or define the provisions hereof.
18. Default in Foreclosure; Remedies. Upon Trustor's breach of any covenant or
agreement of Trustor in this City Deed of Trust or the City Loan Note secured by this City
Deed of Trust, including, but not limited to, the covenants to pay, when due, any sums
secured by this City Deed of Trust, the Beneficiary may declare all sums secured by this
City Deed of Trust immediately due and payable by delivering to Trustor notice thereof
specifying: (1) The breach; (2) the action required to cure such breach; (3) a date not less
than 30 days from the date the notice is received by Trustor as shown on the return receipt,
by which such breach is to be cured provided, however, that if such default is not reasonable
susceptible to being cured within 30 days, Trustor shall have a reasonable period to cure the
defect so long as Trustor is diligently prosecuting the cure to completion; and (4) that failure
to cure such breach on or before the date specified in the notice may result in acceleration of
the sums secured by this City Deed of Trust and sale of the Security. The notice will also
inform Trustor of Trustor's right to reinstate after acceleration and the right to bring a court
action to assert the non-existence of default or any other defense of Trustor to acceleration
and sale.
The City Note contains additional cure periods granted to Trustor’s limited
partner and no event of default shall have occurred until and unless the Trustor’s limited
partner fails to cure such breach during such cure period.
EXHIBIT 3
6
If the breach is not cured on or before the date specified in the notice or such longer
period as provided above or in the City Loan Note or the Agreement, the Beneficiary, at the
Beneficiary's option, may: (a) declare all of the sums secured by this City Deed of Trust to
be immediately due and payable without further demand and may invoke the power of sale
and any other remedies permitted by California law; (b) either in person or by agent, with or
without bringing any action or proceeding, or by a receiver appointed by a court, and
without regard to the adequacy of its security, enter upon the Security and take possession
thereof (or any part thereof) and of any of the Security, in its own name or in the name of the
Trustee, and do any acts which it deems necessary or desirable to preserve the value or
marketability of the Property, or part thereof or interest therein, increase the income
therefrom or protect the security thereof. The entering upon and taking possession of the
Security shall not cure or waive any breach hereunder or invalidate any act done in response
to such breach and, notwithstanding the continuance in possession of the Security, the
Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust, or by
law upon occurrence of any uncured breach, including the right to exercise the power of
sale; (c) commence an action to foreclose this Deed of Trust as a mortgage, appoint a
receiver, or specifically enforce any of the covenants hereof; (d) deliver to the Trustee a
written declaration of default and demand for sale, pursuant to the provisions for notice of
sale found at California Civil Code Sections 2924, et seq., as amended from time to time; or
(e) exercise all other rights and remedies provided herein, in the instruments by which
Trustor acquires title to any Security, or in any other document or agreement now or
hereafter evidencing, creating or securing all or any portion of the obligations secured
hereby, or provided by law.
Notwithstanding anything to the contrary herein, Beneficiary hereby agrees that any
cure of any default made or tendered by Trustor’s limited partner shall be deemed to be a
cure by Trustor and shall be accepted or rejected on the same basis as if made or tendered by
Trustor.
The Beneficiary shall be entitled to collect all reasonable costs and expenses
incurred in pursuing the remedies provided in this paragraph, including, but not limited to,
reasonable attorneys' fees.
19. Trustor's Right to Reinstate. Notwithstanding the Beneficiary’s acceleration
of the sums secured by this City Deed of Trust, Trustor will have the right to have any
proceedings begun by the Beneficiary to enforce this City Deed of Trust discontinued at any
time prior to 5 days before sale of the Security pursuant to the power of sale contained in
this City Deed of Trust or at any time prior to entry of a judgment enforcing this City Deed
of Trust if: (a) Trustor pays the Beneficiary all sums which would be then due under this
City Deed of Trust and no acceleration under the City Loan Note has occurred; (b) Trustor
cures all breaches of any other covenants or agreements of Trustor contained in this Deed of
Trust and the Affordability Restrictions on Transfer of Property; (c) Trustor pays all
reasonable expenses incurred by the Beneficiary and the Trustee in enforcing the covenants
and agreements of Trustor contained in this City Deed of Trust and the Affordability
Restrictions, and in enforcing the Beneficiary’s and the Trustee's remedies, including, but
not limited to, reasonable attorneys' fees; and (d) Trustor takes such action as the
EXHIBIT 3
7
Beneficiary may reasonably require to assure that the lien of this City Deed of Trust, the
Beneficiary’s interest in the Security and Trustor's obligation to pay the sums secured by this
City Deed of Trust shall continue unimpaired. Upon such payment and cure by Trustor, this
City Deed of Trust and the obligations secured hereby will remain in full force and effect as
if no acceleration had occurred.
20. Acceptance by Trustee. Trustee accepts this Trust when this City Deed of
Trust, duly executed and acknowledged, is made a public record as provided by law.
Trustee is not obligated to notify any party to this City Deed of Trust of pending sale under
any other deed of trust or any action or proceeding in which Trustor, Beneficiary, or Trustee
shall be a party unless brought by Trustee.
21. Reconveyance. Upon payment or forgiveness of all sums secured by this
City Deed of Trust, the Beneficiary will request the Trustee to reconvey the Security and
will surrender this City Deed of Trust and the City Loan Note to the Trustee. The Trustee
will reconvey the Security without warranty and without charge to the person or persons
legally entitled thereto. Such person or persons will pay all costs of recordation, if any.
22. Substitute Trustee. The Beneficiary, at the Beneficiary’s option, may from
time to time remove the Trustee and appoint a successor trustee to any Trustee appointed
hereunder. The successor trustee will succeed to all the title, power and duties conferred
upon the Trustee herein and by applicable law.
23. Request for Notice. Trustor requests that copies of the notice of default and
notice of sale be sent to Trustor and Trustee at the address set forth in Section 14 above.
24. Nonrecourse Liability. Neither Trustor nor any partner of Trustor shall
have any personal liability under the Loan Agreement, City Loan Note, and this City Deed
of Trust and any judgment, decree or order for payment of money obtained in any action to
enforce the obligation of Trustor to repay the loan evidenced by such documents shall be
enforceable against Trustor only to the extent of Trustor’s interest in the Property.
25. Extended Use Agreement. Beneficiary acknowledges that Trustor and
the California Tax Credit Allocation Committee have or intend to enter into an extended
use agreement. Beneficiary acknowledges and agrees that, in the event of a foreclosure
of its interest under this Deed of Trust or delivery by Trustor of a deed in lieu thereof
(collectively, a “Foreclosure”), the following rule contained in Section 42(h)(6)(E)(ii) of
the Internal Revenue Code shall apply:
For a period of three (3) years from the date of Foreclosure, with
respect to any unit that had been regulated by the extended use agreement,
(i) none of the eligible tenants occupying those units at the time of
Foreclosure may be evicted or their tenancy terminated (other than for
good cause, including but not limited to, the tenants’ ineligibility pursuant
to Section 42 of the Code), (ii) nor may any rent be increased except as
otherwise permitted under Section 42 of the Code.
EXHIBIT 3
8
IN WITNESS WHEREOF, Trustor has executed this City Deed of Trust as of the date first
written above.
DEVELOPER
NORTH HARBOR HOUSING PARTNERS LP,
a California limited partnership
By: JHC Santa Ana Village LLC,
a California limited liability company,
Managing General Partner
By: Jamboree Housing Corporation,
a California nonprofit public benefit corporation,
Manager
By:
Name:
Title:
EXHIBIT 3
Exhibit E:
City/CDBG Loan Note
EXHIBIT 3
CITY CDBG LOAN NOTE
SECURED BY SUBORDINATED DEED OF TRUST
TO THE CITY OF SANTA ANA, CALIFORNIA
(1108 N Harbor Blvd, Santa Ana, California)
$1,687,047 April 20, 2021
Santa Ana, California
1. Principal Amount of Loan
For value received, NORTH HARBOR HOUSING PARTNERS LP, a California limited
partnership (“Borrower”) promises to pay to the order of THE CITY OF SANTA ANA (“City"),
at 20 Civic Center Plaza, 6th Floor, Santa Ana, California 92701, or at such other place as the
City may from time to time designate in writing, or to the assignee of the City, the principal sum
of ONE MILLION, SIX HUNDRED EIGHTY-SEVEN THOUSAND, AND FORTY-SEVEN
DOLLARS ($1,687,047) or so much thereof as shall be disbursed hereunder, with three percent
simple interest (3%) commencing upon filing of Notice of Completion.
City and Borrower have heretofore entered into that certain Loan Agreement dated
concurrently herewith (the "Loan Agreement"), pertaining to the acquisition and rehabilitation of
certain real property described in the Loan Agreement as the "Property," commonly known as
1108 N Harbor Blvd, Santa Ana, California, and the operation of the Property as affordable
housing for Extremely-Low, Very-Low and Low Income households. This City CDBG Loan
Note (the “Note”) is made pursuant to, entitled to the benefits of and referred to as the City Loan
Note in the Loan Agreement; that certain “Affordability Restrictions on Transfer of Property”
between Borrower and City, dated on or about the date hereof; and that certain Subordinated City
Deed of Trust and Assignment of Rents between Borrower and City, dated on or about the date
hereof (the "City Deed of Trust"). This Note, the Loan Agreement, the Affordability Restrictions
on Transfer of Title, and the Deed of Trust are sometimes collectively referred to herein as the
"Loan Documents." The Loan Documents and the rights and responsibilities inure to the benefit
of the City of Santa Ana. Any capitalized term which is not otherwise defined herein shall have
the meaning ascribed to such term in the Loan Agreement.
2. Definitions.
For the purpose of calculating the payments to be made by Borrower to City pursuant to
this Note, the following terms shall have the following respective meanings:
"Acquisition Costs" shall mean the costs and expenses of Borrower to acquire the
Property, as set forth in the Project Budget attached to the Loan Agreement.
“Borrower” means North Harbor Housing Partners LP, a California limited partnership.
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“Calendar Year” means each consecutive twelve (12) month period from January 1 to
December 31.
“CDBG Deed of Trust” shall mean the CDBG Deed of Trust in favor of the City,
securing the CDBG Loan, substantially in the form attached to the Loan Agreement as Exhibit
D, which is incorporated herein by this reference.
“CDBG Loan” shall mean the loan evidenced by this Note repayable to the City in
accordance with the terms of this Note and secured by the CDBG Deed of Trust.
"CDBG Program" (CDBG) means the Community Development Block Grant program
conducted pursuant to Title I of the Housing and Community Development Act of 1974, as
amended by the United States Department of Housing and Urban Development ("HUD").
"City Loan" shall mean the loan evidenced by this Note funded in whole or in part with
CDBG funds.
"City’s Percentage" with reference to the Residual Receipts, shall mean 50% or the
prorated percentage of the total amount of funds contributed after North Harbor Housing
Partners LP, retains fifty percent of the Residual Receipts, whichever is less, of the City’s share
of the total Residual Receipts from the Property as further described in Section 5 hereof. If other
lenders to the Property are also repaid from Residual Receipts, City’s Percentage shall be
reduced proportionally to the ratio that the original principal amount of the Loan bears to the
original principal amount of all loans being repaid from Residual Receipts multiplied by 50%.
"Closing Costs" shall mean:
(i) In the case of a Sale, reasonable brokerage commissions payable to a broker as a
result of the Sale, which shall not in any event exceed the customary amount charged -for similar
transactions in the immediate market place, costs of title insurance premiums, documentary
stamp taxes, escrow fees, recording charges, loan repayment charges and other costs reasonably
incurred with respect to the Property, in each case actually paid by Borrower as a condition of
the Sale.
(ii) In the case of a Refinancing, the reasonable and necessary costs of
consummating such Refinancing, including, without limitation, loan fees, loan repayment
charges, costs of title insurance premiums, escrow fees, recording fees, attorneys' fees and costs
of Lender required repairs or reserves.
"Gross Revenues" shall mean all revenues and receipts of every kind actually received
by Borrower from operating the Property, and all parts thereof, including, but not limited to,
income from both cash and credit transactions, rental from leased and/or subleased spaces and
parking fees and charges (but not including security deposits and other tenant deposits, except to
the extent such deposits are forfeited to the Borrower under the tenant's lease). Gross Revenues
EXHIBIT 3
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does not include any insurance proceeds other than any rental interruption insurance proceeds.
Any credit consideration shall be included in Gross Revenues at the time cash proceeds
(principal, interest and/or other) are received. Borrower shall establish and maintain accounts for
the Gross Revenues (the '"Project Accounts") that are segregated from revenues and income
received by Borrower from all other projects. Gross Revenues shall also include all interest
earned on the Project Accounts to the extent interest is released from the Project Accounts.
Gross Revenues do not include the proceeds of any loans or capital contributions made to
Borrower, Refinancing Proceeds or Sale Proceeds.
“Operating Expenses” shall mean the sum of the following:
(i) payments of principal and interest and all other charges relating to the Senior
Loan(s), exclusively including required payments under the Chase Bank, N.A. Loan, and the
VHHP Loan (any additional loans to the project must be approved by the City);
(ii) a property management fee no greater than 8% of gross rents;
(iii) Owner Partnership Management and Asset Management Fees not to exceed 5%
of gross rents;
(iv) Deposits into required reserves required by any lender or Borrower’s
Partnership Agreement;
(v) all other actual, reasonable cash operating costs and expenses, calculated on an
annual basis, that are directly attributable to managing and operating the Property and the
Borrower, including, without limiting the generality of the foregoing, the following: costs and
expenses for real and personal property taxes, special assessments or similar charges; water, fuel,
electricity and other utilities; heating, ventilation and air conditioning expenses; labor; supplies;
tools; equipment; insurance; advertising and marketing; accounting and legal fees; brokerage
commissions and other leasing expenses; reasonable reserves for all anticipated expenses as
approved by the City; and other such items constituting operation, maintenance and repair costs
actually paid by the Borrower, subject to the following conditions:
(a) Depreciation and amortization expenses shall not be considered
Operating Expenses, except as otherwise provided herein.
(b) Reserved.
(c) Any expenses, compensation or fees paid to any affiliate of Borrower
shall only be included as Operating Expenses to the extent they are not in excess of the
reasonable expenses, compensation or fees which would be payable to unrelated third parties in
arms-length transactions for similar services in the Santa Ana, California area.
(vi) Any other expenses necessary to meet senior lender requirements and requirements
of Borrower’s limited partner, or its assignee, as set forth in Borrower’s Amended and Restated
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Agreement of Limited Partnership (the “Partnership Agreement”), including, without limitation,
repayment of any loans to the Borrower by a partner or tax credit recapture o r deficiency
payments.
(vii) Deferred Developer Fees.
(viii) A social services administrative fee.
"Project" shall mean the acquisition and rehabilitation of the Property by Borrower
pursuant to the Loan Agreement.
"Property" shall mean the real property located at 1108 N Harbor Blvd, Santa Ana,
California described in the City Deed of Trust.
"Refinancing" shall mean changing the then existing financing on the Property by,
without limitation, modifying final maturity date of an existing Senior Loan, increasing the
stated maximum principal amount of an existing Senior Loan, paying off an existing Senior
Loan in full and obtaining a new Senior Loan.
"Refinancing Proceeds" shall be disbursed as set forth in Section 7 hereof.
"Residual Receipts" shall mean the Gross Revenues from the Property, for each year,
less deductions for Operating Expenses from the Property, applicable to each such year to the
extent not already deducted as an Operating Expense.
"Sale" shall mean any transfer, assignment, conveyance or lease (other than to a tenant
for occupancy or a transaction set forth in Section 15(c) hereof) of the Property or any portion
thereof, or any interest therein by the Borrower, and includes any transfer, assignment or sale of
any partnership interest in the Borrower by an individual or entity which is a general partner in
the Borrower, or any interest by any individual or entity which holds an interest in any such
general partner in the Borrower, which brings the cumulative total of all such direct and indirect
transfers, assignments and sales during the term of this Note to more than forty-nine percent
(49%) of the ownership interests in the Borrower, and any such transfer, assignment or sale of a
direct or indirect partnership interest thereafter. Sale includes a sale in condemnation or under
threat thereof. Sale does not include dedications and grants of easements to public and private
utility companies of the kind customary in real estate development, nor transfers of Limited
Partnership interests or transfers of General Partner interests caused by the removal of the
General Partner pursuant to the terms of the Partnership Agreement.
"Sale Proceeds" shall be disbursed as set forth in Section 8 hereof.
"Senior Loan" shall mean (i) the senior loan made by JPMorgan Chase Bank, N.A. (the
“Chase Loan”), prior to the City Loan for payment of a portion of the Acquisition and
Rehabilitation Costs, and (ii) the senior loan from the Veteran Homelessness Prevention Program
(the “VHHP Loan”) that will be made at permanent loan conversion by the Department of
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Housing and Community Development. The term “Senior Loan” shall include any subsequent
loan that refinances an initial Senior Loan.
"Term" the term for repayment of this Note shall mean fifty-five (55) years from the
date of recording.
3. Loan Repayment.
Borrower shall make payments to the City as provided in Sections 5 (Residual Receipts),
7 (Refinancing Proceeds), 8 (Sale Proceeds) and 10 (Accelerated Loan Repayment).
4. Operating Capital Improvement Loan.
If the replacement reserve account (“reserves”) is depleted due to unforeseen repairs and
the General Partner makes a loan to the Partnership, the reserves must be fully funded to their
original level prior to repayment of said loan. Such loan shall be repaid with net cash flow prior
to the residual receipt split. The outstanding loan balance will be reflected in the annual report.
5. Annual Loan Repayment.
a. After any deferred Developer Fee has been paid, as set forth hereinabove, the
Borrower shall thereafter make a loan payment to the City annually, in the amount of the lesser
of the outstanding balance due under this Note or the City’s Percentage of the Residual Receipts,
as provided in this Section 5.
b. Within one hundred twenty (120) days after the year in which the rehabilitation of
the Project is completed, and on or before the 120th day of each Calendar Year thereafter, the
Borrower shall submit to the City a detailed statement of Gross Revenues and Operating
Expenses attributable to the Property for the applicable Calendar Year, along with a computation
of the amount of the Residual Receipts applicable to such Calendar Year with which to make a
City Loan payment then due.
c. Except as otherwise provided in Section 4, (i) the Borrower shall pay to the City
City’s Percentage of the Residual Receipts as payment of principal and interest under its loan;
and (ii) Borrower shall retain Borrower’s fifty percent (50%) share of the Residual Receipts to
be used by Borrower as determined by the General Partners of Borrower, including, without
limitation, for distribution to the partners of the Borrower.
d. The Residual Receipts payment shall be made not later than one hundred fifty (150)
days after the close of the Calendar Year. Such payment shall be applied first to any accrued but
unpaid interest, if any, then to reduce the principal balance of the City Loan.
6. Reserved.
7. Loan Repayment from Refinancing Proceeds.
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The Borrower shall make a loan payment to the City from every Refinancing that occurs
during the term of this Note not to exceed the outstanding balance of principal and interest on
this Note, to the extent of the City’s Percentage of the Refinancing Proceeds (if any), as follows:
the cash proceeds from such Refinancing (i.e., the proceeds less the costs of such Refinancing,
any amounts required for repairs, and any amounts required to be set aside as reserves) shall be
applied first to pay Closing Costs; next, the amount necessary to pay in full all amounts owing on
the Senior Loans; next, the Borrower shall pay to the City fifty percent (50%) of the then
remaining unapplied Refinancing Proceeds not to exceed the outstanding balance on this Note.
The remaining Refinancing proceeds shall remain with Borrower to be used by Borrower as
determined by the General Partners of Borrower, including, without limitation, for distribution to
the partners of the Borrower. Such payment shall be due within 30 days of the date of such
Refinancing, and shall be applied first to any accrued but unpaid interest, then to reduce the
principal balance of the Loans. The City shall not be required to reconvey the lien of the Deed of
Trust if Sale Proceeds are insufficient to repay the City Loan in full.
8. Loan Repayment from Sale Proceeds.
The Borrower shall make a loan payment, not to exceed the outstanding balance of
principal and interest on this Note, to the City from any Sale that occurs during the term of the
City Loan, to the extent of the City’s Percentage of the Sale Proceeds, as follows: gross sale
proceeds are applied first to pay Closing Costs, next to pay in full all amounts owing on the
Senior Loans; next to pay for any necessary repairs and any amounts required to be set aside as
reserve; next the Borrower shall pay to the City fifty percent (50%) of the then remaining
unapplied Sale Proceeds, not to exceed the outstanding amount of principal and interest due on
this Note. This fifty percent (50%) represents the total payment due under the City Note. The
remaining Sale Proceeds shall remain with Borrower. Such payment shall be due on the date of
such Sale, and shall be applied first to any accrued but unpaid interest, then to reduce the
principal balance of the Loans. The City shall not be required to reconv ey the lien of the Deed of
Trust if Sale Proceeds are insufficient to repay the City Loan in full.
9. Reserved.
10. Accelerated Loan Payment.
The full principal amount outstanding plus accrued but unpaid interest thereon, shall be
due and payable on the earlier to occur of the following:
a. Sale or Refinancing of the Property as provided further in Section 15 hereof;
unless: (i) in the case of a Sale in which the City’s Percentage of the Sale Proceeds are
insufficient to repay in full the City Loan, the City approves such sale-and the purchaser assumes
the balance of the City Loan in accordance with the terms of this Note; or (ii) in the case of a
Refinancing in which the City’s Percentage of the Refinancing Proceeds are insufficient to repay
in full the City Loan, the City approves such Refinancing and the Borrower remains obligated
pursuant to the terms of this Note.
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b. if an Event of Default occurs pursuant to Section 16 hereof.
or
c. The date that is fifty five (55) years after the date of completion of the Project.
On
that date, the City agrees to review the performance of the Property and consider in good faith
any reasonable request by Borrower to modify the terms or extend the Term of this Note.
11. Prepayment
Borrower may prepay the outstanding principal balance under this Note, in whole or in
part, together with any accrued but unpaid interest, if any, and other sums owed to the City under
this Note, if any, at any time without penalty.
12. Lawful Money.
Principal and interest are payable in lawful money of the United States of America.
13. Application of Payments; Late Charges.
a. Any payments received by the City pursuant to the terms hereof shall be applied
first to sums, other than principal and interest, due the City pursuant to this Note, next to the
payment of all interest accrued to the date of such payment, and the balance, if any, to the
payment of principal.
b. If any payment is not received by the City within fifteen (15) days following the
due date thereof, then in addition to the remedies conferred upon the City pursuant to this Note
and the other Loan Documents, (i) a late charge of four percent (4%) of the amount due and
unpaid will be added to the delinquent amount to compensate the City for the expense of
handling the delinquency and (ii) the amount due and unpaid, excluding the late charge, shall
bear interest at ten percent (10%) per annum, computed from the date on which the amount was
due and payable until paid. Without prejudice to the rights of the City hereunder or under any of
the other Loan Documents, Borrower shall indemnify the City against, and shall pay the City on
demand, any expense or loss which it may sustain or incur as a result of the failure by Borrower
to pay when due any installment of interest and/or principal, fees, or other amounts payable to
the City under this Note or any other Loan Document, to the extent that any such expense or loss
is not recovered pursuant to such foregoing provisions. A certificate of the City setting forth the
basis for the determination of the amounts necessary to indemnify the City in respect of such
expenses or direct loss, submitted to Borrower by the City, shall be conclusive and binding for
all purposes except as immediately corrected by Borrower notice to City.
14. Security
This Note is secured by the City Deed of Trust.
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15. Acceleration by Reason of Transfer or Financing.
a. In order to induce City to make the loan evidenced hereby, Borrower agrees that
in the event of any transfer of the Property without the prior written consent of City (other than a
transfer resulting from a foreclosure, or conveyance by deed in lieu of foreclosure , by the holder
of a Senior Loan Deed of Trust), City shall have the absolute right at its option, upon at least 30
days’ prior written notice to Borrower, to declare all sums secured hereby immediately due and
payable. Such consent will not be unreasonabl y withheld. Consent to one such transaction shall
not be deemed to be a waiver of the right to require consent to future or successive transactions.
City may grant or deny such consent in its reasonable discretion and, if consent should be given,
any such transfer shall be subject to this Section 12, and any such transferee shall assume all
obligations hereunder and agree to be bound by all provisions contained herein. Such assumption
shall release Borrower from all liability thereunder from and after the date of such assumption.
b. As used herein, "transfer" includes the Sale, agreement to sell, transfer or
conveyance of the Property, or any portion thereof or interest therein, whether voluntary,
involuntary, by operation of law or otherwise, the execution of any installment land sale contract
or similar instrument affecting all or a portion of the Property, or the lease of all or substantially
all of the Property. 'Transfer' shall not include the leasing of individual residential units on the
Property, so long as Borrower complies with the provisions of the Loan Agreement and the
Affordable Housing Restrictions relating to such leasing activity, nor shall it include a
conveyance of the Property to a limited partnership in which the general partner of Borrower or
an affiliate is a general partner, or to a corporation that is wholly owned by the Borrower and that
is formed for the sole purpose of owning and operating the Property, or the sale back to the
Borrower. In the event of any Refinancing or partial Refinancing in an amount in excess of the
balance of a Senior Loan, without the prior written consent of City (which consent City may
grant or deny in its sole discretion), then the entire outstanding balance of the City Loan together
with all accrued and unpaid interest, shall be repaid to the City at the time of each Refinancing or
partial Refinancing.
c. For the avoidance of doubt, a "transfer” shall not include (i) a transfer of any
general partner’s interest in Borrower when made in connection with the exercise by the
Borrower’s limited partner (the "Limited Partner") of its rights upon a default by a general
partner under the Borrower’s Partnership Agreement or upon a general partner’s withdrawal in
violation of the Partnership Agreement, so long as the removal and substitution of the defaulting
general partner is made within thirty (30) days of such default or, if such removal and
substitution cannot reasonably be completed within thirty (30) days, so long as the Limited
Partner commences to take action to remove and substitute the general partner with a reasonable
period and thereafter diligently proceeds to complete such substitution; (ii) any transfer of the
Property to the managing general partner of Borrower pursuant to the right of first refusal or to
the general partners of Borrower pursuant to the purchase option, as provided for in the
Partnership Agreement; (iii) any transfer of the Limited Partner’s interest in accordance with the
Partnership Agreement; and (iv) any sale, transfer or other disposition of an interest in a limited
partner of the Borrower.
EXHIBIT 3
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16. Event of Default.
Subject to the provisions of Section 25 hereof, the occurrence of any of the following
shall be deemed to be an event of default ("Event of Default'') hereunder: (a) failure by Borrower
to make any payments provided for herein, and if such default is not made good within fifteen
(15) days of written notice to Borrower of such default; or (b) failure by Borrower to perform
any covenant or agreement in the Deed of Trust, the Loan Agreement, or the Affordability
Restrictions on Transfer of Property within thirty (30) days after written demand therefor by City
(or, in the event that more than thirty (30) days is reasonably required to cure such default,
should Borrower fail to promptly commence such cure, and diligently and continuously
prosecute same to completion). Notwithstanding the foregoing, if Borrower fails to cure such
breach during the time set forth herein for such cure, City shall provide written notice of such
failure to Limited Partner and no Event of Default shall be deemed to occur unless Limited
Partner fails to cure such breach within 30 days following delivery of such notice; provided,
however, if in order to cure such breach Limited Partner determines that it must remove the
General Partner pursuant to the terms of the Partnership Agreement, then no Event of Default
shall occur until 30 days following the effective date of such removal.
17. Remedies.
Upon the occurrence and during the continuance of an Event of Default, after any
applicable notice has been provided and the expiration of any applicable cure period therefore,
City may declare all sums evidenced hereby immediately due and payable by delivery to the
Trustee named in the City Deed of Trust securing this Note, and to Borrower, written declaration
of default and demand for sale, and written notice of default and of election to cause the Property
to be sold, which notice Trustee shall cause to be duly filed for record and City may foreclose on
the City Deed of Trust. City shall also deposit with Trustee the Deed of Trust, this Note and all
documents evidencing expenditures secured thereby and evidenced hereby. No delay or
omission on the part of the City in exercising any right under this Note or under any of the other
Loan Documents shall operate as a waiver of such right.
18. Attorneys' Fees.
If this City Loan Note is not paid when due or if any Event of Default occurs, Borrower
promises to pay all costs of enforcement and collection, including but not limited to, reasonable
attorneys' fees, whether or not any action or proceeding is brought to enforce the provisions
hereof.
19. Severability.
Every provision of this Note is intended to be severable. In the event any term or
provision hereof is declared by a court of competent jurisdiction, to be illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and enforceable.
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20. Number and Gender.
In this Note the singular shall include the plural and the masculine shall include the
feminine and neuter gender, and vice versa, if the context so requires.
21. Non-recourse.
The City Loan is a nonrecourse obligation of the Borrower. Neither Borrower nor any
other party, including Borrower’s partners, shall have any personal liability for repayment of the
City Loan or for any other amounts under any of the documentation evidencing, securing or
describing the City Loan. The sole recourse of City under this Note and the Deed of Trust for
repayment of the City Loan and for such other amounts arising therefrom shall be the exercise of
its rights against the Property and related security thereunder.
22. Subordination.
It is hereby expressly agreed and acknowledged by Borrower and City that the City Deed
of Trust is a subordinate deed of trust, and that this Note is subject and subordinate to the Senior
Loan Deed of Trust held by JPMorgan Chase Bank, N.A., and the Senior Loan Deed of Trust to
be held by the Department of Housing and Community Development.
23. Reserved.
24. Reserved.
25. Force Majeure.
Notwithstanding specific provisions of this Note, performance 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 other deities; acts of the public enemy;
epidemics; pandemics; quarantine restrictions; freight embargoes; lack of transportation;
governmental restrictions or priority; litigation; unusually severe weather; inability to secure
necessary labor, materials or tools; delays of any contractor or supplier; acts of the other party;
acts or failure to act of the City or any othe r public or governmental City or entity (except that
any act or failure to act of City shall not excuse performance by City); or any other causes
beyond the reasonable control or without the fault of the party claiming an extension of time to
perform. 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 the party claiming such extension gives notice to the
other party, provided notice by the party claiming such extension is given withi n thirty (30) days
after the commencement of the cause. Times of performance under this Note may also be
extended in writing by the City and the Borrower.
26. Assignments.
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The City, and the assignee of the City, shall have the right to assign this Note a nd the
City Deed of Trust securing this Note, without any further act of Borrower. The assignee shall
give notice to Borrower and its limited partner as soon as practicable after such assignment.
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This Note is hereby agreed to and executed on the date first set forth above.
“BORROWER”
NORTH HARBOR HOUSING PARTNERS LP,
a California limited partnership
By: JHC-North Harbor LLC,
a California limited liability company,
Managing General Partner
By: Jamboree Housing Corporation,
a California nonprofit public benefit corporation,
Manager
By:
Name:
Title:
EXHIBIT 3
Exhibit F:
Affordability
Restrictions on
Transfer of Property
EXHIBIT 3
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, California 92702
Attention: Clerk of the Council
SPACE ABOVE THIS LINE FOR RECORDING USE
FREE RECORDING REQUESTED
[Government Code Section 6103]
AFFORDABILITY RESTRICTIONS
ON TRANSFER OF PROPERTY
(1108 North Harbor Boulevard, Santa Ana, California)
THESE AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY
(the “Restrictions”) are entered into as of April 20, 2021, by and among and North Harbor
Housing Partners LP, (referred to herein as the “Developer”) a California limited
partnership, and the City of Santa Ana, a charter city and municipal corporation (the
“City”).
RECITALS:
A. Developer is the owner of that certain real property located at 1108 North
Harbor Boulevard, (the “Property”) located in the City of Santa Ana more particularly
described in Exhibit A, which is attached hereto and incorporated herein by this reference.
B. The City is the recipient of Community Development Block Grant
(“CDBG”) funds from HUD pursuant to Tile I of the Housing and Community
Development Act of 1974, as amended ("Act") and 24 CFR Part 570 (“CDBG
Regulations”).
C. The City is authorized by the CDBG Regulations to expend funds to increase
the supply of low- and moderate-income housing available at affordable housing costs.
D. Developer is entering into this agreement to acquire and, subject to
entitlement approvals, rehabilitate an adaptive reuse project for the purpose of providing
eight y-nine (89) units of housing that will be affordable to Extremely-Low Income
households (“Assisted Units”), the Developer and the City have entered into that certain
Loan Agreement, dated on or about the date hereof (the “Loan Agreement”) to which
these Restrictions are attached as Exhibit F, which, along with all of its attachments, is
incorporated herein by this reference (any capitalized term that is not otherwise defined in
these Restrictions shall have the meaning ascribed to such term in the Loan Agreement).
EXHIBIT 3
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E. The Loan Agreement provides, among other things, for the use of the Property
for affordable housing with all Assisted Units being restricted to Extremely-Low Income
households, at Affordable Rent(s).
F. The Loan Agreement contains certain provisions relating to the use of the
Property.
NOW, THEREFORE, CITY AND DEVELOPER COVENANT AND AGREE AS
FOLLOWS:
1. Developer covenants and agrees (for itself, its successors, its assigns, and
every successor in interest to the Property or any part thereof) that Developer, such
successors, and such assigns shall use the Property exclusively to provide affordable
housing for Extremely-Low Income households, as provided in these Restrictions and in
the Loan Agreement.
2. Developer, for itself and its successors and assigns, hereby covenants and
agrees that all of the units in the Property (less two managers’ units) (the “Units”) shall be
rented exclusively, at Affordable Rent, to Extremely-Low Income households to the extent
provided for herein. Area median income levels and Affordable Rents are subject to
adjustment from time to time as provided in Section 3 below.
3. AFFORDABILITY REQUIREMENTS, USE AND MAINTENANCE OF
THE PROPERTY
3.1 Use Covenants and Restrictions.
A. Developer agrees and covenants, which covenants shall run with the land and bind
Developer, its successors, its assigns and every successor in interest to the Property that
Developer will make all rental units on the Property available to extremely low-income
households at rents affordable to such households for fifty-five (55) years from the issuance of
the Certificate of Completion. The CDBG restrictions shall be enforced until the date that is
fifteen (15) years after the date on which the Certificate of Completion is issued or until
repayment of principal and all accrued interest on the CDBG Loan, whichever comes last. The
City permits the Developer to limit the eligibility and/or give preference to a particular segment
of the population in accordance with 24 CFR 92.253(d).
B. The Project shall consist of ninety-one (91) units, two (2) of which shall be on-site
manager’s units.
C. At initial lease up, households in the units cannot earn more than 30% of AMI.
Rental increases shall be in conformance with federal and state law. After the fifteen (15)
year CDBG Compliance Period, the City shall require that the units remain affordable for
the Term of this Agreement, with rents calculated based on assumed household size at the
same income levels.
D. All of the units will be restricted to occupancy by families earning no more than thirty
(30%) of the Area Median Income (AMI), adjusted for household size.
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E. Maximum Occupancy will be two (2) people per bedroom plus one (1). Example for a
two-bedroom unit, five (5) people would be maximum occupancy.
F. Affordable rents shall be governed by the Tax Credit Allocation Committee.
G. Developer must have a written lease between tenant and owner for a period of at least
one year, unless a shorter period is mutually agreed upon. Leases must be consistent with the
HOME Program regulations at 24 CFR 92.253(a) and (b).
3.2 Affordability Levels/Unit Mix:
The affordability levels/unit mix for the Project is as follows:
Unit Size No. Units AMI
Studio 89 30%
The remaining units will be one (1) two-bedroom unit and one (1) three-bedroom unit
reserved for the onsite managers.
(1) In no event shall the rent charged to the units be more than that amount of the rent
affordable to a family at 30% Area Median Income as published by the Tax Credit
Allocation Committee, as amended from time to time.
(2) Annually with the financial statements, the Developer shall provide an annual report
of rents and occupancy of all units, to verify compliance with affordability
requirements.
The affordable rents charged at the Project must comply with the standards set forth by the
California Tax Credit Allocation Committee (TCAC). Notwithstanding anything to the
contrary contained in the Loan Agreement or these Restrictions, in the event of a foreclosure,
or delivery of a deed in lieu of foreclosure, of any Senior Loan, (1) the maximum qualifying
tenant household income shall be increased to 60% of Area Median Income adjusted for
family size appropriate to the unit, and (2) the maximum annual affordable rent shall be
increased to comply with the rent limits set forth by California Tax Credit Allocation
Committee (TCAC) for households at 60% Area Median Income.
Utility allowances must be deducted from the Maximum Gross Monthly Rent. The Housing
Authority of the City of Santa Ana publishes the Utility Allowance Schedule.
Initial rents may be recalculated to allowable rental amounts at the time of initial lease-up
following completion of construction in accordance with any changes in allowable rent and
income tables as published by HUD.
3.3 Rent Increases: On an annual basis, the City shall provide Developer with the
maximum allowable schedule of rents for the Property in accordance with changes in
allowable rent and income tables published by the California Tax Credit Allocation
Committee (TCAC), provided however that the rent for the CDBG units shall in no event be
higher than the rent for the equivalent non-CDBG assisted units within the Project. In no
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event can Developer charge any tenant more than such amount. The City will make all best
efforts to provide Developer with the maximum allowable schedule of rents within no more
than 30 calendar days after the date TCAC publishes the allowable rent and income tables.
3.4 Increase in Rent and Occupancy Restrictions upon Termination of Rental
Subsidies. The parties acknowledge that Developer is only able to rent units to Extremely
Low Income Households because the City is providing 89 Project-Based Vouchers for
Permanent Supportive Housing (“PBV Vouchers”). In the event the PBV Vouchers
expire, terminate, are not renewed or are reduced for any reason other than a default by
Developer under the PBV Vouchers, then the occupancy requirements for all of the Units
shall automatically increase to 60% of the Area Median Income and the Affordable Rent
shall increase to Affordable Rents for households earning 60% of the Area Median Income
in accordance with the rent limits set forth by the California Tax Credit Allocation
Committee (TCAC for households earning 60% of the Area Median Income.
3.5 Reserved.
4. Maximum Rents. Developer, its successors and assigns shall not charge
rents for the Units in excess of the amounts set forth herein, as adjusted on the basis of the
revised schedules of area median incomes issued from time-to-time by HUD. The City
shall notify Developer in writing of the adjusted allowable maximum incomes and rents.
5. Tenant Selection Plan. Developer shall adopt and include as part of its
Management Plan (described in Section 11 below), written tenant selection policies and
criteria for the Units, that meet the following requirements:
(a) Are consistent with the purpose of providing housing for Extremely
Low Income households;
(b) Are reasonably related to program eligibility and the applicants’
ability to perform the obligations of the lease;
(c) Give reasonable consideration to the housing needs of households
that would have a preference under 24 CFR 960.206 (Federal selection preferences for
admission to Public Housing);
(d) Provide for:
i. The selection of tenants from a written waiting list in the
chronological order of their application, insofar as is practicable; and
ii. The selection of tenants for accessible units; and
iii. The prompt written notification to any rejected applicant of
the grounds for any rejection;
(e) Subject to compliance with the CDBG Regulations, the HUD-
Veterans Affairs Supportive Housing referral program requirements, the County of Orange
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coordinated entry system and applicable California and federal fair housing laws, local
preference for Santa Ana residents and workers in tenant selection shall be a requirement
of the Project. Subject to applicable laws and regulations governing nondiscrimination
and preferences in housing occupancy required by HUD or the State of California, as well
as the City of Santa Ana Affordable Housing Funds Policies and Procedures, the
Developer shall give preference in leasing units in the following order of priority:
i. First priority shall be given to persons who have been
permanently displaced or face permanent displacement from
housing in Santa Ana as a result of any of the following:
a. A redevelopment project undertaken pursuant to
California’s Community Redevelopment Law (Health &
Safety Code Sections 33000, et seq.) -- applicable only
to projects funded by the Low and Moderate Income
Housing Asset Fund.
b. Ellis Act, owner-occupancy, or removal permit eviction;
c. Earthquake, fire, flood, or other natural disaster;
d. Cancellation of a Housing Choice Voucher HAP
Contract by property owner; or
e. Governmental Action, such as Code Enforcement.
ii. Second priority shall be given to persons who are either:
a. Residents of Santa Ana and/or
b. Working in Santa Ana at least 32 hours per week for at
least the last 6 months.
; and
(f) Carry out the Affirmative Marketing procedures of the City of Santa
Ana, which are designed to provide information and otherwise attract eligible persons
from all racial, ethnic and gender groups in the housing market area to the units.
Developer shall cooperate with the City to effectuate this provision prior to the initial
renting, or upon occurrence of a vacancy, and the re-renting of any Restricted Units (24
CFR 92.351).
6. Housing Choice Voucher Program. Developer, its successors and
assigns, shall not refuse to lease a unit to a holder of a rental voucher under 24 CFR part
982 (Housing Choice Voucher Program) or to a holder of a comparable document
evidencing participation in a HOME tenant-based assistance program because of the status
of the prospective tenant as a holder of such certificate of family participation, rental
voucher, or comparable HOME tenant-based assistance document. Total rents charged to
the tenant for the tenant’s share of rent shall not exceed the allowable rents as described
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above.
7. Lease Provisions. Any lease of any of the units must be for not less than
one year, unless by mutual agreement between the tenant and the Developer. Should the
tenant and Developer agree to a term of less than one year, said agreement shall be
expressed in some type of written form, signed by the tenant, and maintained in the
tenant’s rental file held by the Developer. The lease may not contain any of the following
provisions (in which references to “owner” shall mean the Developer, its successors or
assigns):
(a) Agreement by the tenant to be sued, to admit guilt, or to a judgment
in favor of the owner in a lawsuit brought in connection with the lease;
(b) Agreement by the tenant that the owner may take, hold, or sell
personal property of household members without notice to the tenant and a court decision
on the rights of the parties. This prohibition, however, does not apply to an agreement by
the tenant concerning disposition of personal property remaining in the housing Unit after
the tenant has moved out of the Unit. The owner may dispose of this personal property in
accordance with state law;
(c) Agreement by the tenant not to hold the owner or the owner’s agent
legally responsible for any action or failure to act, whether intentional or negligent;
(d) Agreement of the tenant that the owner may institute a lawsuit
without notice to the tenant;
(e) Agreement by the tenant that the owner may evict the tenant or
household members without instituting a civil court proceeding in which the tenant has the
opportunity to present a defense, or before a court decision on the rights of the parties;
(f) Agreement by the tenant to waive any right to a trial by jury;
(g) Agreement by the tenant to waive the tenant’s right to appeal, or to
otherwise challenge in court, a court decision in connection with the lease;
(h) Agreement by the tenant to pay attorney’s fees or other legal costs
even if the tenant wins in a court proceeding by the owner against the tenant. The tenant,
however, may be obligated to pay costs if the tenant loses; or,
(i) Agreement by the tenant (other than a tenant in transitional housing)
to accept supportive services that are offered.
8. Lease Termination. Developer, its successors or assigns, may not
terminate the tenancy or refuse to renew the lease of a tenant of rental housing assisted
with CDBG funds, except for serious or repeated violation of the terms and conditions of
the lease; for violation of applicable Federal, State, or local law; for completion of the
tenancy period for transitional housing or failure to follow any required transitional
housing supportive services plan; or for other good cause. Good cause does not include an
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increase in the tenant's income or refusal of the tenant to purchase the housing. To
terminate or refuse to renew tenancy, the owner must serve written notice upon the tenant
specifying the grounds for the action at least 30 days before the termination of tenancy.
9. Property Maintenance. Developer shall continuously maintain the
improvements on the Property in compliance with all applicable City housing quality
standards [24 CFR 92.251] and state and local code requirements and shall keep the
Property free from any unreasonable accumulation of debris or waste materials.
Developer shall also maintain in a healthy condition any landscaping planted on the
Property.
10. Obligation to Refrain from Discrimination. Developer covenants and
agrees for itself, its successors, its assigns and every successor in interest to the Property
or any part thereof, there shall be no discrimination against or segregation of any person,
or group of persons, on account of race, color, creed, religion, sex, mental or physical
disability, marital status, national origin or ancestry in the sale, lease, transfer, use,
occupancy, tenure or enjoyment of the Property nor shall the Developer itself or any
person claiming under or through it establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location, number, use or
occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property, as
required by the Title VI of the Civil Rights Act of 1964, the Fair Housing Act (42 U.S.C.
3601-20) and all implementing regulations, and the Age Discrimination Act of 1975, and
all implementing regulations.
11. Management Plan. Not later than five (5) business days prior to the
execution of the documents, Developer shall submit to the Executive Director a
Management Plan in a form that is acceptable to the Executive Director, including, but not
limited to, the components listed below. Approval of the Management Plan must be
obtained from the Executive Director not later than the time for the Close of Escrow.
Developer shall manage the Assisted Units in accordance with the approved Management
Plan, including such amendments as may be approved in writing from time to time by the
Executive Director, for the term of the income and rent restrictions contained in these
Restrictions. City hereby acknowledges that City has approved Developer’s proposed
Management Plan. The components of the Management Plan shall include:
(a) Management Agent. Developer shall submit the name and
qualifications of the proposed Management Agent. The Executive Director shall approve
or disapprove the proposed Management Agent in writing based on the experience and
qualifications of the Management Agent. City hereby approves Quality Management
Group as the initial Management Agent.
(b) Management Agreement. Developer shall submit a copy of the
proposed management agreement specifying the amount of the management fee, and the
relationship and division of responsibilities between Developer and Management Agent.
City hereby acknowledges that City has approved the form of Developer’s proposed
management agreement.
(c) Annual Budget and Projected Cash Flows. Prior to the Close of
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Escrow, and annually thereafter not later than ninety (90) days after the close of each
calendar year thereafter until the Loan is repaid in full, Developer shall submit a projected
operating budget and cash flow to the Executive Director. The budget and cash flow shall
be in a form that is reasonably acceptable to the Executive Director.
(d) Tenant Selection Policies. Developer shall include in the
Management Plan the tenant selection policies in accordance with Section 5, above.
12. Management and Maintenance Deficiencies. If at any time the City
determines that the units are not being managed or maintained in accordance with the
approved Management Plan, the City shall send the Developer a detailed description of the
management deficiencies (a “Deficiency Notice”). If the deficiencies set forth in the
Deficiency Notice are not cured within thirty (30) days (or such longer period as may be
reasonably required to cure the deficiency), with the exception of CDBG regulations that
require a shorter period, the Executive Director may require Developer to change
management practices or to terminate the management contract and designate and retain a
different management agent. The management agreement shall provide that it is subject to
termination by Developer without penalty, upon thirty (30) days prior written notice, at the
direction of the Executive Director upon failure to cure a Deficiency Notice within the
time period specified above. Within ten (10) days following a direction of the Executive
Director to replace the management agent in accordance with the terms hereof, the
Developer shall select another management agent or make other arrangements satisfactory
to the Executive Director or designee for continuing management of the units.
13. Restriction Term. The covenants established in these Restrictions and
any amendments hereto approved by the City and Developer shall, without regard to
technical classification and designation, be binding for the benefit and in favor of the City
and their respective successors and assigns. These Restrictions shall remain in effect for
fifty-five (55) years. In its discretion, the City may defer repayment of the CDBG Loan or
the City may agree to such reasonable modifications to the requirements of these
Restrictions, as they may determine are necessary for the continued maintenance and
operation of the Assisted Units. The covenants against discrimination shall remain in
effect for the period of these Restrictions.
14. CDBG Disbursements. Developer shall not request disbursement of
CDBG funds until the funds are needed to pay eligible costs. The City reserves the right
to inspect records and the Project site to determine that reimbursement and compensation
requests are reasonable, and shall have the right to disapprove any request if the City
determines the request is for an ineligible item or is otherwise not in compliance with or
inconsistent with the Loan Agreement and these Restrictions.
15. Records and Reports. Developer shall prepare, maintain and submit to
the City, as appropriate, the following records and reports:
a. Annual Reports. Developer shall file with the City an Annual Report
(herein referred to as the “Annual Report”) within one hundred twenty (120) days
following the end of each calendar year, commencing with the end of the calendar year (or
portion thereof) in which the Real Estate Closing occurs. The Annual Report shall contain
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a certification by Developer as to such information as the City Executive Director may
then require, including, but not limited to, the following:
(1) The fiscal condition of the Project, including the Annual Budget and
Project Cash Flow report required by Section 11 (c) of the Affordable Housing
Restrictions which shall include a financial statement for the previous calendar year that
includes a balance sheet and a profit and loss statement indicating any surplus or deficit in
operating accounts; a detailed itemized listing of income and expenses; and the amounts of
any fiscal reserves. Such Annual Budget and financial statement shall be prepared in
accordance with generally accepted accounting practices. The City Executive Director
may require that the financial statement be audited at Developer’s expense by an
independent certified public accountant acceptable to the Executive Director.
(2) Any substantial physical defects in the Project, including a
description of any major repair or maintenance work undertaken or needed in the previous
and current years. Such statement shall describe what steps Developer has taken in order
to maintain the Project in a safe and sanitary condition in accordance with applicable
housing and building codes and the property standards set forth in 24 CFR 92.251.
(3) The occupancy of the units indicating the income of each current
resident and the current rents charged each resident and whether those rents include
utilities, including records that demonstrate that the Project meets the requirements of for
tenant and participant protections specified in Section 7 of these Restrictions.
(4) General management performance, including tenant relations and
other relevant information.
(5) Records that demonstrate that the units meet the affordability
requirements of 24 CFR 92.252 and these Restrictions .
(6) Evidence of a currently paid hazard insurance policy in accordance
with the requirements of Section 6 of the City/CDBG Deed of Trust, with a loss payable
endorsement naming the City as a loss payee(s) together with other approved lenders (as
their interests may appear), with a “Replacement Cost Endorsement” in amount sufficient
to prevent Developer or City from becoming a co-insurer under the terms of the policy, but
in any event in an amount not less than 100% of the then full replacement cost, to be
determined at least once annually and subject to reasonable approval by the Executive
Director.
(7) Evidence of a currently paid liability insurance policy, naming the
City as additional insured and in a form approved by the City Attorney with coverage as
described in the Loan Agreement.
(8) Termite reports pertaining to the Property every fifth (5th) year.
(9) Such other information as may be reasonably required by the
Executive Director or his/her designee.
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b. Records and Audits. During the CDBG Compliance Period, Developer
shall maintain the following general program records, and make them available for
inspection by the City or HUD:
(1) records which demonstrate that the project meets the property
standard specified in 24 CFR 92.251;
(2) records, for each CDBG Assisted Unit, which demonstrates that the
project meets the income requirements of the CDBG Program and rent requirements of 24
CFR 92.252 and these Restrictions.
(3) records which demonstrate compliance with the tenant and
participant protections, as specified in Section 7 of these Restrictions;
(4) records which demonstrate compliance with the Equal Opportunity
and Fair Housing requirements outlined in these Restrictions, including:
(A) data on the extent to which each racial and ethnic group and
single head of household (by gender of head of household) have applied for, participated
in, or benefited from, any program or activity funded in whole or in part with CDBG
funds;
(B) documentation of actions undertaken to meet the equal
opportunity requirements of 24 CFR part 5, Subpart A, and 24 CFR part 135 which
implements Section 3 of the Housing Development Act of 1968, as amended (12 U.S.C.
1701u);
(C) documentation and data on the steps taken to implement
Developer’s outreach programs to minority-owned and women-owned businesses to meet
the minority outreach requirements of 2 CFR 200.321;
(5) documentation of the steps taken to carry out an affirmative
marketing program in accordance with procedures specified in 24 CFR 92.351, if
applicable;
(6) if applicable, records which demonstrate compliance with the
requirements relating to relocation of displaced persons, as described in 49 CFR part 24.
At a minimum, these shall include project occupancy lists identifying the name and
address of all persons occupying the project property up until the date of the Real Estate
Closing (i.e., the date on which Developer obtained site control);
(7) records concerning lead-based paint in accordance with 24 CFR
570.608;
(8) if applicable, records which support any requests for waivers of the
conflict of interest prohibition as stated in 24 CFR 570.611;
(9) records of certifications of contractor qualifications as they relate to
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the debarment and suspension requirement as stated in 2 CFR 2424 and 24 CFR Part 24;
and
(10) any other reports issued by other monitoring agencies.
c. All records related to CDBG funds as required under the provisions of 24
CFR 570.506 must be retained for the most recent five year period, except that for rental
housing projects, records shall be retained for five years after the project completion date;
except that records of individual tenant income verifications, project rents and project
inspections must be retained for the most recent five year period, until five years after the
affordability period terminates. Developer shall cooperate with the City to retain all books
and records relevant to the Loan Agreement for a minimum of five years after the
expiration of the Loan Agreement and any and all amendments hereto, or for five years
after the conclusion or resolution of any and all audits or litigation relevant to the Loan
Agreement, whichever is later. The City, the State, the Office of the Auditor General of
HUD, and/or their representatives shall have unrestricted reasonable access to all
locations, books, and records for the purpose of monitoring, auditing, or otherwise
examining said locations, books, and records with or without prior notice.
d. If so directed by the City, the State or HUD upon termination of the Loan
Agreement, Developer shall cause all records, accounts, documentation and all other
materials relevant to the work to be delivered to the City, the State or HUD, as depository.
e. All records, accounts, documentation and other materials relevant to the
Project shall be accessible at any time to the authorized representatives of the City, the
State or HUD, on reasonable prior notice, for the purpose of examination or audit.
f. The City shall perform an annual audit at the close of each calendar year in
which these Restrictions are in effect. Developer shall reasonably cooperate with City in
performing such audit.
16. Defaults. If an event of default occurs under the terms of these
Restrictions, prior to exercising any remedies hereunder, City shall give Developer and its
limited partner written notice of such default. If the default is reasonably capable of being
cured within thirty (30) days, Developer and its limited partner shall have such period to
effect a cure prior to exercise of remedies by the City under these Restrictions. If the
default is such that it is not reasonably capable of being cured within thirty (30) days, and
Developer or its limited partner (i) initiates corrective action within said period, and (ii)
diligently, continually, and in good faith works to effect a cure as soon as possible, then
Developer and its limited partner shall have such additional time as is reasonably
necessary to cure the default prior to exercise of any remedies by City.
The City is a beneficiary of the terms and provisions of these Restrictions
and the covenants herein, both for and in their own right and for the purposes of protecting
the interests of the community and other parties, public or private, for whose benefit these
Restrictions and the covenants running with the land have been provided. Upon the
occurrence of an event of default and the expiration of the notice and cure period specified
above, the City shall have the right to exercise all rights and remedies, and to maintain any
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actions or suits at law or in equity or other proper proceedings to enforce the curing of
such breaches to which they or any other beneficiaries of these Restrictions and covenants
are entitled.
17. Developer Liability for Performance. The covenants and agreements
contained herein shall run with the land and not be personal obligations of Developer.
Upon the sale, conveyance or other transfer of the Property (a “Transfer”) and the
assumption of the obligations hereunder by a transferee, Developer’s liability for
performance shall be terminated as to any obligation to be performed hereunder after the
date of such Transfer.
18. Enforcement. The Loan Agreement and all of its attachments shall be
enforceable by
City in accordance with the terms thereof. Each of the Loan Agreement, these
Restrictions, the City CDBG Loan Note and the City CDBG Deed of Trust provide a
means of enforcement by the City if Developer is in breach of its obligations hereunder
and thereunder, including liens on the Property, use and deed restrictions and covenants
running with the land [24 CFR 92.504(c)(3)].
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IN WITNESS WHEREOF, the parties hereto have caused these Affordability
Restrictions on Transfer of Property to be executed on the date set forth hereinabove.
ATTEST: CITY OF SANTA ANA
___________________________ _______________________
Daisy Gomez Kristine Ridge
Clerk of the Council City Manager
Dated: Dated:
APPROVED AS TO FORM:
SONIA R. CARVALHO, City Attorney
By: ________________________
Ryan O. Hodge
Assistant City Attorney
Dated:
RECOMMENDED FOR APPROVAL:
_______________________________
Steven A. Mendoza
Executive Director
Community Development Agency
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DEVELOPER
NORTH HARBOR HOUSING PARTNERS LP,
a California limited partnership
By: JHC Santa Ana Village LLC,
a California limited liability company,
Managing General Partner
By: Jamboree Housing Corporation,
a California nonprofit public benefit corporation,
Manager
By:
Name:
Title:
EXHIBIT 3