HomeMy WebLinkAboutRES HA-127RESOLUTION NO. HA-127
A RESOLUTION OF THE PALM DESERT HOUSING AUTHORITY
APPROVING A THIRD “AMENDED AND RESTATED DISPOSITION,
DEVELOPMENT AND LOAN AGREEMENT” REGARDING “PALM VILLAS
AT MILLENIUM” AMONG THE AUTHORITY, AS LENDER, THE CITY OF
PALM DESERT, AS SELLER, AND PALM COMMUNITIES, A
CALIFORNIA LIMITED COMPANY, AS
PURCHASER/BORROWER/DEVELOPER, IN CONNECTION WITH
APPROXIMATELY 10.49 ACRES OF PROPERTY OWNED BY THE CITY,
APPROPRIATING FUNDS IN CONNECTION THEREWITH, AND TAKING
RELATED ACTIONS
RECITALS:
A. Pursuant to AB X1 26 (enacted in June 2011) and the California Supreme
Court’s decision in California Redevelopment Association, et al. v. Ana Matosantos, et
al., 53 Cal. 4th 231 (2011), the former Palm Desert Redevelopment Agency (“Former
Agency”) was dissolved as of February 1, 2012.
B. Pursuant to Health and Safety Code Section 34176(b), the City Council of
the City of Palm Desert (“City”) adopted Resolution No. 2012 -07, electing for the City to
not retain the responsibility for performing housing functions previously performed by the
Former Agency, and determining that all of the assets, as allowed by law, and all rights,
powers, liabilities, duties, and obligations associated with the housing activities of the
Former Agency be transferred to the Palm Desert Housing Authority (“Authority”).
C. The City owns that approximately ten and one-half (10.49) acre site located
in the City, identified as APN 694-120-028 and a portion of APN 694-120-029, as more
particularly described in Exhibit A to the form of the Amended and Restated Di sposition,
Development and Loan Agreement, dated as of October 10, 2024 (“Third Amended and
Restated DDLA”) by and among the City, the Authority and Palm Communities
(“Developer”) attached hereto as Exhibit “A” (“Property”).
D. The City, Authority and Developer previously entered into a Disposition,
Development and Loan Agreement, dated November 23, 2022, the Amended and
Restated Disposition and Development Agreement, dated June 22, 2023 (the “First
Amended and Restated DDLA”), and the Amended and Restated Disposition and
Development Agreement, dated April 11, 2024 (the “Second Amended and Restated
DDLA”), to provide for the conveyance of the Property to the Developer and the
construction by the Developer of 239 affordable housing units, which shall be made
available to and occupied by low and extremely low income households, and two on -site
manager units (“Project”).
E. The City Council, Authority Board and Developer desire to enter into
the Third Amended and Restated DDLA, dated April 11, 2024 to replace t he Second
Amended and Restated DDLA and provide, subject to the terms and conditions of the
Third Amended and Restated DDLA, for: (i) the City to process a Parcel Map to divide
the Property into the Phase I Parcel (consisting of approximately 6.02 acres) and Phase
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II Parcel (consisting of approximately 4.47 acres) and to convey the Property to the
Developer in two phases; (ii) the Developer to construct 121 units on the Phase I Parcel
and 120 units on the Phase II Parcel; (iii) the Authority to make a purc hase money/
acquisition loan to the Developer in the amount of $1,965,539 to purchase the Phase I
Parcel and a purchase money/ acquisition loan to the Developer in the amount of
$4,789,461 to purchase the Phase II Parcel; (iv) concurrently with the conveya nce of the
Phase I Parcel to the Developer, the City and Developer to grant to each other reciprocal
easements over the Phase I and Phase II Parcel for ingress and egress; and (v)
concurrently with the conveyance of the Phase I Parcel to the Developer, the City to grant
an easement over Parcel 9, an adjacent City-owned parcel, to allow ingress and egress
to the Phase I Parcel through the Phase II Parcel, and an access easement over Parcel
9 to allow the Developer to clear any accumulated sand against the Ph ase I and Phase
II boundary wall.
NOW, THEREFORE, THE PALM DESERT HOUSING AUTHORITY DOES
HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS:
SECTION 1. The above recitals, and each of them, are true and correct and are a
substantive part of this Resolution.
SECTION 2. The Third Amended and Restated DDLA, in the form attached hereto
as Exhibit “A”, is hereby approved. The Executive Director of the Authority is hereby
authorized to execute and deliver the Third Amended and Restated DDLA, for and in the
name of the Authority, in substantially such form, with such changes thereto as the
Executive Director may deem appropriate or necessary and consistent with the purposes
of this Resolution (such approval to be conclusively evidenced by the execution and
delivery thereof).
SECTION 3. The Developer is hereby authorized to submit an application,
including the Third Amended and Restated DDLA, to the California Tax Credit Allocation
Committee for tax credits as contemplated by the Third Amended and Restated DDLA.
SECTION 4. The Director of Finance is hereby authorized to appropriate
$6,755,000 from the Unobligated Housing Asset Fund Balance to the appropriate budget
line item(s) as previously contemplated by the Second Amended and Restated DDLA.
The Board hereby finds that the use of the Housing Fund moneys in accordance with the
Third Amended and Restated DDLA is of benefit to the project areas of the Former
Agency.
SECTION 5. The Third Amended and Restated DDLA does not bind the Authority
to make the Authority loans unless the applicable tax credits and other debt and equity
necessary to complete the Project shall have been awarded/committed, and all other
conditions described in the Third Amended and Restated DDLA to the closing shall have
been satisfied.
SECTION 6. The members of this Board and the officers and staff of the Authority
are hereby authorized, jointly and severally, to take any other such actions as they deem
necessary or proper to effectuate the purposes of this Resolution and the Second
Amended and Restated DDLA, including the exhibits thereto. Such actions include
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negotiating and preparing agreements and documents, and any such actions previously
taken are hereby ratified and confirmed. The Executive Director of the Authority is
authorized to execute, deliver and record, on behalf of the Authority, all documents
contemplated by the Second Amended and Restated DDLA.
SECTION 7. The Secretary shall certify to the adoption of this Resolution and
the same shall take effect and be in force.
ADOPTED ON OCTOBER 10, 2024.
_________________________
KARINA QUINTANILLA
CHAIRPERSON
ATTEST:
___________________________
ANTHONY J. MEJIA
SECRETARY
PALM DESERT HOUSING AUTHORITY
I, Anthony J. Mejia, City Clerk of the City of Palm Desert, hereby certify that
Resolution No. 2024-074 is a full, true, and correct copy, and was duly adopted at a
regular meeting of the City Council of the City of Palm Desert on October 10, 2024, by
the following vote:
AYES: HARNIK, KELLY, NESTANDE, TRUBEE, AND QUINTANILLA
NOES: NONE
ABSENT: NONE
ABSTAIN: NONE
RECUSED: NONE
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the
City of Palm Desert, California, on ___________________.
_________________________
ANTHONY J. MEJIA
CITY CLERK
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Resolution No. HA-127 Page 4
EXHIBIT “A”
FORM OF THIRD AMENDED AND RESTATED DDLA
(Attached.)
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THIRD AMENDED AND RESTATED DISPOSITION, DEVELOPMENT
AND LOAN AGREEMENT
AMONG
CITY OF PALM DESERT
PALM DESERT HOUSING AUTHORITY
AND
PALM COMMUNITIES
(PALM VILLAS AT MILLENNIUM)
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TABLE OF CONTENTS PAGE
Section 1.1 Definitions ................................................................................................................... 3
Section 1.2 Exhibits ........................................................................................................................ 8
ARTICLE 2. PREDISPOSITION CONDITIONS FOR CONVEYANCE OF EACH PHASE 9
Section 2.1 City Right to Terminate for Failure to Timely Obtain Tax
Credits .......................................................................................................................... 9
Section 2.2 City Approvals ........................................................................................................... 9
Section 2.3 Parcel Map .................................................................................................................. 9
Section 2.4 Financing ..................................................................................................................... 9
Section 2.5 Permits.......................................................................................................................... 9
Section 2.6 Tax Credits .................................................................................................................. 9
Section 2.7 Loan Closings ............................................................................................................ 9
Section 2.8 Construction Plans .................................................................................................. 10
Section 2.9 Construction Contract ............................................................................................ 10
Section 2.10 Cost Estimate............................................................................................................ 10
Section 2.11 Construction Bonds ................................................................................................ 10
Section 2.12 Developer Organizational Documents .............................................................. 11
Section 2.13 Authority Loan ......................................................................................................... 11
Section 2.14 Tax Credit Equity .................................................................................................... 11
Section 2.15 City Easements ........................................................................................................ 11
Section 2.16 Phase II Conveyance .............................................................................................. 11
Section 2.17 HCD Confirmation of Exemption ...................................................................... 11
Section 2.18 AHAP ......................................................................................................................... 11
Section 2.19 Title Report ............................................................................................................... 11
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ARTICLE 3. DISPOSITION OF PROPERTY ...................................................................................... 11
Section 3.1 Conveyance of Phase I Parcel and Phase II Parcel ....................................... 11
Section 3.2 Purchase Prices ........................................................................................................ 11
Section 3.3 Deposit ....................................................................................................................... 11
Section 3.4 Opening Escrow ...................................................................................................... 12
Section 3.5 Close of Escrow ....................................................................................................... 13
Section 3.6 Costs of Escrow and Closing ............................................................................... 14
Section 3.7 Condition of Title .................................................................................................... 14
Section 3.8 Condition of Property ............................................................................................ 14
ARTICLE 4. CONSTRUCTION OF DEVELOPMENT .................................................................... 17
Section 4.1 Construction and Operation Consistent with Agreements .......................... 17
Section 4.2 Commencement of Development ....................................................................... 17
Section 4.3 Completion of the Development ......................................................................... 17
Section 4.4 Equal Opportunity................................................................................................... 17
Section 4.5 Construction Under Laws ..................................................................................... 17
Section 4.6 Progress Reports ...................................................................................................... 18
Section 4.7 Construction Responsibilities .............................................................................. 18
Section 4.8 Mechanics Liens, Stop Notices, and Notices of Completion ..................... 18
Section 4.9 Inspections ................................................................................................................ 19
Section 4.10 Records ...................................................................................................................... 19
Section 4.11 Certificate of Completion ..................................................................................... 19
ARTICLE 5. AUTHORITY LOAN PROVISIONS ............................................................................. 19
Section 5.1 Authority Loans ....................................................................................................... 19
Section 5.2 Use of Authority Loan ........................................................................................... 20
Section 5.3 Delivery of Promissory Notes ............................................................................. 20
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Section 5.4 Term of the Authority Loan ................................................................................. 20
Section 5.5 Interest ........................................................................................................................ 20
Section 5.6 Disbursement of Authority Loans ...................................................................... 20
Section 5.7 Repayment Schedule .............................................................................................. 21
Section 5.8 Reports and Accounting of Residual Receipts ............................................... 21
Section 5.9 Non-Recourse ........................................................................................................... 22
ARTICLE 6. ONGOING DEVELOPER OBLIGATIONS ................................................................ 22
Section 6.1 Applicability ............................................................................................................. 22
Section 6.2 Use of Development ............................................................................................... 22
Section 6.3 Maintenance.............................................................................................................. 23
Section 6.4 Taxes and Assessments ......................................................................................... 23
Section 6.5 Mandatory Language in All Subsequent Deeds, Leases and
Contracts .................................................................................................................... 23
Section 6.6 Management Agent ................................................................................................ 25
Section 6.7 Insurance Requirements ........................................................................................ 26
Section 6.8 Audits ......................................................................................................................... 29
ARTICLE 7. ASSIGNMENTS AND TRANSFERS ........................................................................... 29
Section 7.1 Definitions ................................................................................................................. 29
Section 7.2 Purpose of Restrictions on Transfer .................................................................. 29
Section 7.3 Prohibited Transfers ............................................................................................... 30
Section 7.4 Permitted Transfers ................................................................................................ 30
Section 7.5 Other Transfers with City Consent .................................................................... 31
Section 7.6 Termination of Limitations on Transfers ......................................................... 31
ARTICLE 8. DEFAULT AND REMEDIES .......................................................................................... 31
Section 8.1 General Applicability ............................................................................................. 31
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Section 8.2 Fault of City .............................................................................................................. 31
Section 8.3 Fault of Authority ................................................................................................... 31
Section 8.4 Fault of Developer .................................................................................................. 31
Section 8.5 Notice and Cure Period Regarding City/Authority Defaults ...................... 33
Section 8.6 Remedies ................................................................................................................... 33
Section 8.7 Rights of Mortgagees ............................................................................................. 34
Section 8.8 Remedies Cumulative ............................................................................................ 34
ARTICLE 9. SECURITY FINANCING AND RIGHTS OF HOLDERS ..................................... 34
Section 9.1 No Encumbrances Except for Development Purposes ................................. 34
Section 9.2 Holder Not Obligated to Construct .................................................................... 34
Section 9.3 Notice of Default and Right to Cure .................................................................. 34
Section 9.4 Failure of Holder to Complete Development .................................................. 35
Section 9.5 Right of Cure ............................................................................................................ 35
Section 9.6 Right of City to Satisfy Other Liens .................................................................. 35
Section 9.7 Holder to be Notified ............................................................................................. 36
Section 9.8 Estoppel Certificates .............................................................................................. 36
ARTICLE 10 GENERAL PROVISIONS ................................................................................................. 36
Section 10.1 Notices, Demands and Communications ......................................................... 36
Section 10.2 Non-Liability of Officials, Employees and Agents ....................................... 36
Section 10.3 Forced Delay ............................................................................................................ 37
Section 10.4 Inspection of Books and Records ....................................................................... 37
Section 10.5 Title of Parts and Sections .................................................................................... 37
Section 10.6 No Third-Party Beneficiaries ............................................................................... 37
Section 10.7 Applicable Law ........................................................................................................ 37
Section 10.8 No Brokers ................................................................................................................ 37
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Section 10.9 Legal Actions ........................................................................................................... 37
Section 10.10 Severability ............................................................................................................... 38
Section 10.11 Binding Upon Successors ..................................................................................... 38
Section 10.12 Parties Not Co-Venturers ...................................................................................... 38
Section 10.13 Discretion Retained by City ................................................................................. 38
Section 10.14 Time of the Essence ............................................................................................... 38
Section 10.15 Representation and Warranties of Developer ................................................. 38
Section 10.16 Entire Understanding of the Parties ................................................................... 39
Section 10.17 Amendments ............................................................................................................. 39
Section 10.18 Approvals .................................................................................................................. 39
Section 10.19 Counterparts ............................................................................................................. 39
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THIRD AMENDED AND RESTATED DISPOSITION, DEVELOPMENT, AND LOAN
AGREEMENT
(Palm Villas at Millennium)
This THIRD AMENDED AND RESTATED DISPOSITION, DEVELOPMENT AND
LOAN AGREEMENT (the “Agreement”) is dated as of October 10, 2024, and is entered into by
and among the CITY OF PALM DESERT, a municipal corporation (the “City”), the PALM
DESERT HOUSING AUTHORITY, a public body corporate and politic (the “Authority”) and
PALM COMMUNITIES, a California corporation (the “Developer”), each individually a “Party”
and collectively the “Parties,” with reference to the following facts, understandings and intentions
of the Parties:
RECITALS
A. Defined terms used but not defined in these recitals are as defined in Article 1 of
this Agreement.
B. The City owns that approximately ten and one-half (10.49) acre site located in the
City of Palm Desert as more particularly described in Exhibit A (the “Property”). The City intends
to process a Parcel Map to divide the Property into the Phase I Parcel (consisting of approximately
6.02 acres) and Parcel II Parcel (consisting of approximately 4.47 acres); the Phase I Parcel and
Phase II Parcel are described on Exhibits A-1 and A-2.
C. The Property has been declared exempt surplus land by the City Council of the City
under Government Code Section 54221(f)(1)(A) and has concluded based on the Developer’s site
plan and proposed affordability that proposed Development meets the affordability and design
requirements of Government Code Section 37364. The California Department of Housing and
Community Development has confirmed such exemption in writing.
D. The City, the Authority and the Developer previously entered into that certain
Disposition, Development and Loan Agreement dated November 23, 2022, as amended by that
certain Amended and Restated Disposition, Development and Loan Agreement dated June 22,
2023, as amended by that certain Second Amended and Restated Disposition, Development and
Loan Agreement dated April 11, 2024 (the “Existing DDLA”); this Agreement replaces the
Existing DDLA.
E. The Developer intends to construct in two phases at least two hundred forty-one
(241) units of housing, two hundred thirty-nine (239) of which shall be made available to and
occupied by low-income households, very low-income households, and extremely low-income
households, and two (2) of which shall be on-site manager’s units.
F. The Developer intends to construct one hundred twenty-one (121) units on the
Phase I Parcel, with one hundred twenty (120) of the units restricted to Extremely-Low
Households, Very-Low Income Households and Low Income Households, at affordable rents, and
the other unit used as an on-site manager’s unit. The Phase I Development will be composed of
one, two and three bedroom units.
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G. The Developer intends to construct one hundred twenty (120) units on the Phase II
Parcel, with one hundred nineteen (119) of the units restricted to Extremely-Low Households,
Very-Low Income Households and Low Income Households, at affordable rents, and the other
unit used as an on-site manager’s unit. The Phase II Development will also be composed of one,
two and three bedroom units.
H. To effectuate this purpose, the City will convey the Property to the Develop er in
two phases, subject to the terms and conditions of this Agreement.
I. To assist the Developer in acquiring the Phase I Parcel from the City, the Authority
intends to make a purchase money/acquisition loan to the Developer in the amount of
$1,965,539.00, subject to the terms and conditions of this Agreement. To assist the Developer in
acquiring the Phase II Parcel from the City and developing/construction the Phase II Development,
the Authority intends to make a purchase money and construction loan to the Developer in the
amount of $4,789,461, subject to the terms and conditions of this Agreement.
J. The Authority shall disburse the construction loan portion of the Phase II loan by
Authority itself, but upon request of Developer, will consider entering into an agreement with the
Developer’s construction lender for the Phase II Development providing that the construction
lender will disburse the remaining proceeds of the Authority’s loan following the Close of Escrow
to the construction lender for the payment of construction costs of the Phase II Development. The
agreement will provide that the Authority Loan funds will be disbursed pari-passu with the
construction lender’s loan. The construction lender shall not have a security interest in such
Authority funds.
K. Concurrently with the conveyance of the Phase I Parcel to the Developer, the
Developer and City intend to grant to each other reciprocal easements over the Phase I and Phase
II Parcel for ingress and egress. The Developer also intends to grant the Phase II Parcel owner
reasonable rights to use the Phase I Development’s common area facilities upon the completion of
the Phase II Development (the “Phase I and Phase II Access Easement”). The Parties intend that
the Phase I and Phase II Access Easement will include a provision that the Phase I and Phase II
Access Easement may be amended by the Parties if the City intends to convey the Phase II Parcel
to a party that is not affiliated with the Developer.
L. Concurrently with the conveyance of the Phase I Parcel to the Developer, the City
intends to grant (i) an easement over the Parcel 9, an adjacent City-owned parcel, to allow ingress
and egress to the Phase I Parcel through the Phase II Parcel (the “Parcel 9 Easement”); and (ii) an
access easement over Parcel 9 to allow the Developer and the Phase II Parcel owner to clear any
accumulated sand against the Phase I and the Phase II boundary wall (the “Maintenance
Easement”).
M. The City has determined that the Developer has the necessary expertise, skill and
ability to carry out the commitments set forth in this Agreement and that this Agreement is in the
best interests of, and will materially contribute to the implementation of, the City’s affordable
housing goals through the development of the Property.
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N. Developer has applied for and received a density bonus (including reduced parking
and increased density) for both the Phase I Development and the Phase II Development.
In consideration of the foregoing, and the mutual terms and conditions herein, the Parties
agree as follows:
AGREEMENT
The foregoing recitals are hereby incorporated by reference and made part of this
Agreement.
A.
DEFINITIONS AND EXHIBITS
a. Definitions. In addition to the terms defined elsewhere in
this Agreement, the following definitions apply throughout this Agreement.
“Affordable Units” means the Two Hundred Thirty-Nine (239) Units restricted by
the Housing Agreements to be developed on the Property to be occupied by
Extremely-Low, Very-Low and Low-Income Households and to be available at
affordable rent as defined in accordance with Health & Safety Code Section 50053.
“Annual Financial Statement” means for any calendar year: (i) the financial statement
of operating expenses and revenues for a Phase, prepared at the Developer’s expense, by an
independent certified accountant reasonably acceptable to the Authority, and showing the Residual
Receipts for the applicable calendar year; (ii) sufficient back-up data to support the revenues and
expenses claimed on the statement; and (iii) such additional information reasonably requested by
the Authority, all of which shall form the basis for determining Residual Receipts.
“Approved Financing” means the loans, equity, and other financing obtained by the
Developer for the purpose of financing the costs of the Development that are approved by the City
and consistent with the Financing Proposal.
“Approved Plans” means all designs for the Development approved by the City in
conjunction with the City Approvals prior to or concurrent with the Effective Date.
“Authority” is defined in the introductory paragraph of this Agreement.
“Authority Loans” or “Authority Loan”, as applicable, mean loans by the Palm Desert
Housing Authority to the Developer in the amount of: (i) $1,965,539 to pay the purchase price for
the Phase I Parcel and (ii) $4,789,461 to pay the purchase price for the Phase II Parcel and
construction costs for the Phase II Development.
“Building Permit” means the building permit and all other ministerial construction permits
required from the City to construct the Development.
“Certificate of Completion” is defined in Section 4.11.
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“Certificate of Occupancy” means a final certificate of occupancy issued by the City for
the Development, or equivalent final inspection.
“City” is defined in the introductory paragraph of this Agreement.
“City/Authority Documents” means, collectively, this Agreement, the Promissory Notes,
the Deed of Trusts, the Housing Agreements, the Notice of Restrictions for each phase of the
Development and any other documents executed by the City and/or the Authority and Developer.
“City Approvals” means the permits and entitlements issued by the City to allow for the
commencement of construction for the respective Phase.
“City Event of Default” is defined in Section 8.3.
“Close of Escrow” means the date on which a fee interest in each of the Phase I Parcel and
the Phase II Parcel is conveyed to the Developer, as appropriate.
“Construction Plans” means the final construction plans for the construction of the
Development as approved by the City in accordance with Section 2.5.
“Control” means the power to direct the day-to-day management responsibilities for the
activities of Developer, and, with respect to a limited liability company, means the: (1) managing
member or members; or (2) the right to exercise, directly or indirectly, more than fifty percent
(50%) of the voting rights attributable to the limited liability company.
“Declaration of Default” is defined in Section 8.5.
“Deeds of Trust” shall mean the deeds of trust, assignment of rents, and security
agreement placed on the Developer’s interest in the Phase I Parcel and Phase II Parcel, as security
for the Authority Loans by the Developer as trustor with the Authority as beneficiary, as well as
any amendments to, modifications of, and restatements of said deed of trusts, in the forms attached
hereto as Exhibit F.
“Defaulting Party” is defined in Section 8.5.
“Density Bonus Agreement” shall mean the Density Bonus Agreement for each Phase in
the form attached hereto as Exhibits D-1 and D-2
“Deposit” is defined in Section 3.3.
“Developer” has the meaning in the introductory paragraph of this Agreement.
“Developer Event of Default” is defined in Section 8.4.
“Development” means the development of two hundred forty-one (241) apartment units
to be developed on the Property.
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“Effective Date” shall mean the later of: (i) the date the Developer has executed this
Agreement; (ii) the date the Authority has executed this Agreement and (iii) the date the City has
executed this Agreement.
“Escrow” means the escrow opened with the Title Company to accomplish the transfer of
Phase I and Phase II, respectively, from the City to the Developer.
“Extremely Low Income” means a household with an income that does not exceed the
qualifying limits for extremely low-income households, adjusted for actual household size, for
Riverside County, as published and periodically updated by HCD under Section 50106 of the
California Health and Safety Code, or successor provision.
“Financing Proposal” means the Developer’s initial proposal for financing the acquisition
of the Property and the construction of the Development, including an estimate of the sources and
uses of funds, which is attached hereto as Exhibit K.
“Grading Permit” means the permit to commence grading on the Phase I Parcel and the
permit for the Phase II Parcel.
“Hazardous Materials” means any substance, material, or waste which is: (1) defined as
a “hazardous waste”, “hazardous material,” “hazardous substance,” “extremely hazardous waste,”
“restricted hazardous waste,” “pollutant” or any other terms comparable to the foregoing terms
under any provision of California law or federal law; (2) petroleum; (3) asbestos;
(4) polychlorinated biphenyls; (5) radioactive materials; (6) MTBE; or (7) determined by
California, federal or local government authority to be capable of posing a risk of injury to health,
safety or property. Without limiting the foregoing, Hazardous Materials means and includes any
substance or material defined or desi gnated as hazardous or toxic waste, hazardous or toxic
material, a hazardous, toxic or radioactive substance, or other similar term, by any Hazardous
Materials Laws including any federal, state or local environmental statute, regulation or ordinance
presently in effect that may be promulgated in the future, as such statutes, regulations and
ordinances may be amended from time to time.
The term “Hazardous Materials” does not include: (1) construction materials, gardening
materials, household products, office supply products or janitorial supply products customarily
used in the construction or maintenance, of residential developments, or typically used in office or
residential activities; or (2) certain substances which may contain chemicals listed by the State of
California under California Health and Safety Code Sections 25249.8 et seq., which substances
are commonly used by a significant portion of the population living within the region of the
Development, including, but not limited to, alcoholic beverages, aspirin, tobacco products,
nutrasweet and saccharine, so long as such materials and substances are stored, used and disposed
of in compliance with all applicable Hazardous Materials Laws.
“Hazardous Materials Laws” means all federal, state, and local laws, ordinances,
regulations, orders and directives pertaining to Hazardous Materials in, on or under the
Development or any portion thereof.
“Housing Agreements” or “Housing Agreement”, as applicable, means the Housing
Agreements between the Developer and the Authority in the form of Exhibit H that will be
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recorded against the Developer’s fee interest in the Phase I Parcel and Phase II Parcel and all
improvements thereon, and will restrict the household income levels for occupancy of the Units
thereon to Extremely Low, Very-Low and Low Income Households and will restrict the rent to
affordable rent.
“Initial Deposit” is defined in Section 3.3.
“Low Income Household” means a household with an income that does not exceed the
qualifying limits for lower income households, adjusted for actual household size, for Riverside
County, as published and periodically updated by HCD under Section 50079.5 of the California
Health and Safety Code, or successor provision.
“Maintenance Easement” means an easement over Parcel 9 prepared by the Developer
and approved by the City granting the Developer and the Phase II Parcel owner the right of access
to clear sand from the outside of the Phase I Wall and the Phase II Wall abutting the Maintenance
Easement area, substantially in the form of Exhibit B-3.
“Notices of Restrictions” or “Notice of Restrictions”, as applicable, shall mean the
Notices of Affordability Restrictions in the form attached hereto as Exhibit G, which are to be
recorded against the Phase I Parcel and the Phase II Parcel upon the closing of the sales thereof.
“Notice of Default” is defined in Section 8.5.
“Official Records” means the official land records of Riverside County.
“Parcel” means either the Phase I Parcel or the Phase II Parcel, as the context requires.
“Parcel Map” means the Parcel Map prepared by the Developer and approved by the City
subdividing the Property into the two Phases and recorded in the Official Records of the County
of Riverside with any recording costs paid by the Developer.
“Parcel 9” means the City-owned parcel abutting the Phase I Parcel and the Phase II Parcel
described in Exhibit A-3.
“Parcel 9 Easement” means the easement for ingress and egress of over a portion of Parcel
9 prepared by the Developer and approved by the City benefiting Parcel I and granting the right to
the Developer to improve the easement with street improvements, substantially in the form of
Exhibit B-2.
“Parties” means collectively the City, the Authority and the Developer and the term Party
refers to each of them individually.
“Phase” shall mean the Phase I Development or the Phase II Development, as the context
requires.
“Phase I Development” means the development of at least one hundred twenty-one (121)
units of housing, required offsite infrastructure improvements and parking constructed on the
Phase I Parcel, all as more fully set forth in the Scope of Development.
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“Phase II Development” means the development of at least one hundred twenty (120)
units of housing, required offsite infrastructure improvements and parking constructed on the
Phase II Parcel, all as more fully set forth in the Scope of Development.
“Parcel I and Parcel II Access Easement” means the reciprocal easement prepared by
the Developer and approved by the City for ingress and egress of over Parcel I and Parcel II and
granting the Phase II Parcel owner the right of reasonable access to the Phase I Development
common facilities, substantially in the form of Exhibit B-1.
“Phase I Parcel” means the property generally described in Exhibit A-1.
“Phase II Parcel” means the property generally described in Exhibit A-2.
“Promissory Notes” or “Promissory Note”, as applicable, shall mean the promissory
notes that will evidence the Developer’s obligation to repay the applicable Authority Loan for a
Phase as set forth in this Agreement, and shall be in the form of Exhibit E. Each Phase of the
Development will have its own Promissory Note and shall not be cross-collateralized.
“Property” means the property generally described in the legal description attached as
Exhibit A, consisting of the Phase I Parcel and the Phase II Parcel.
“Residual Receipts” in a particular calendar year for a Phase shall mean the cash (without
regard to the source) derived from the operation of such Phase of the Development minus the
following for that Phase, determined on a cash basis: (i) all real estate and personal property taxes
and assessments, insurance premiums and reasonable costs of maintenance, operation and
management incurred by the Developer in connection with the operation and maintenance,
(ii) property management fees not to exceed four and one-half percent (4.5%) of the gross revenue
of the Phase, (iii) the costs of servicing the senior construction loan/financing (and any approved
refinancing thereof) and other sources of permitted financing; (iv) amounts necessary to maintain
a guaranty or other form of security or bond for an operation reserve account, (v) amounts
deposited into a replacement initially capitalized reserve account in the minimum sum of Three
Hundred Twenty-Five Dollars ($325.00) per unit per annum, (vi) the repayment of any amounts
loaned by the Developer for material development costs which costs were not reasonably
foreseeable, (vii) deferred developer fees (viii) a limited partner monitoring fee in the annual
amount of Five Thousand Dollars ($5,000.00) per year unless fully paid a permanent loan
conversion; (ix) a managing general partner fee in the annual amount of Fifteen Thousand Dollars
($15,000.00), increasing three percent (3%) annually; and (xi) an administrative general partner
fee in the annual amount of Ten Thousand Dollars ($10,000.00), increasing three percent (3%)
annually. In no event shall depreciation/amortization be deducted from cash revenues. Residual
Receipts shall be determined by Developer and Authority on a cash basis without regard to any
carry-over profit or loss from any prior calendar year, and shall be determined annuall y, on or
before June 1st for the preceding calendar year. Any deferred developer fee, limited partner
monitoring fee, managing general partner fee, and administrative general partner fee may not
accrue interest.
“Schedule of Performance” means the schedule attached as Exhibit J setting forth the
schedule for the Developer’s acquisition and development of the Phase I Parcel and the acquisition
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and development of the Phase II Parcel and the construction of the Phase I Development and the
Phase II Development and other deadlines.
“Scope of Development” shall mean the description of the Development, including a basic
site plan, which will serve as a basis for the Developer’s application for the City Approvals. The
Scope of Development is attached to this Agreement as Exhibit I.
“Security Financing Interest” means a mortgage, deed of trust, or other reasonable
method of security encumbering the Developer’s fee interest in the Phase I Parcel and the Phase
II Parcel that: (i) meets the requirements of this Agreement; and (ii) secures any construction or
permanent loan shown on the Financing Proposal, or any refinancing approved by the Authority.
“TCAC” means the California Tax Credit Allocation Committee.
“TCAC Regulatory Agreement” means the regulatory agreement entered into between
the Developer and TCAC regulating the affordability of each Phase to be recorded as an
encumbrance on the Property.
“Title Company” means First American Title Company, or such other title company as
the Parties may mutually select.
“Title Report” is defined in Section 2.19.
“Transfer” has the meaning set forth in Section 7.1.
“Unit” means one of the residential units to be constructed on the Property.
“Very Low Income Household” means a household with an income that does not exceed
the qualifying limits for very low income households, adjusted for actual household size, for
Riverside County, as published and periodically updated by HCD under Section 50105 of the
California Health and Safety Code, or successor provision.
Exhibits. The following exhibits are attached to and incorporated in this Agreement:
Exhibit A: Legal Description of the Property
Exhibit A-1: Legal Description of Phase I Parcel
Exhibit A-2: Legal Description of Phase II Parcel
Exhibit A-3: Depiction of Parcel 9
Exhibit B-1: Phase I and Phase II Access Easement
Exhibit B-2: Parcel 9 Easement
Exhibit B-3: Maintenance Easement
Exhibit C: Form of Grant Deed
Exhibit D-1: Form of Phase I Density Bonus Agreement
Exhibit D-2: Form of Phase II Density Bonus Agreement
Exhibit E: Form of Promissory Note
Exhibit F: Form of Deed of Trust
Exhibit G-1: Form of Phase I Notice of Affordability Restrictions
Exhibit G-2: Form of Phase II Notice of Affordability Restrictions
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Exhibit H-1: Form of Phase I Housing Agreement
Exhibit H-2: Form of Phase II Housing Agreement
Exhibit I: Scope of Development (Phase I and Phase II)
Exhibit J: Schedule(s) of Performance (Phase I and Phase II)
Exhibit K-1: Financing Plan – Phase I
Exhibit K-2: Financing Plan – Phase II
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B.
CONDITIONS FOR
CONVEYANCE OF EACH PHASE
a. City Right to Terminate for Failure to Timely Obtain Tax
Credits; Other City Conditions Precedent to Conveyance. The City Manager may
terminate this Agreement on behalf of the City in his or her sole and absolute
discretion if Developer fails to obtain by December 31, 2024 an award of tax credits
that is materially consistent with the Financing Proposal. The requirements set
forth in this Article 2 are conditions precedent to the City’s obligation to convey a
Phase to the Developer. The City has no obligation to convey a Phase to the
Developer unless the conditions precedent set forth in this Article 2 have been
satisfied in the manner set forth below and within the timeframe set forth in the
Schedule of Performance. The closing of the conveyance of the Phase I Parcel must
occur on or before August 31, 2025 (or either party who is not in default may
terminate this Agreement by written notice to the other). The closing of the
conveyance of the Phase II Parcel must occur on or before August 31, 2028 (or
either party who is not in default may terminate this Agreement by written notice
to the other).
b. City Approvals. Prior to or concurrently with the
conveyance of a Phase, the Developer must have obtained the City Approvals for
the Phase and the Developer must have paid the required fees to the City and must
have provided letters from the applicable bonding company(s) agreeing to issue the
required improvement bonds upon the Close of Escrow.
c. Parcel Map. The Parcel Map subdividing the Property into
the Phase I Parcel and the Phase II Parcel must be approved by the City, in its sole
and absolute discretion, and the Developer; the Parcel Map must be been recorded
prior to the Close of Escrow for the conveyance of Phase I; and the Developer must
have paid the costs related to recording the Parcel Map. All applicable subdivision
improvement agreements and “CC&Rs” and the like that are conditions of approval
of the Parcel Map must be executed and delivered/recorded prior to or concurrently
with the applicable Close of Escrow.
d. Financing Proposal Update; Budget. The Developer shall
have submitted a revised Financing Proposal and a comprehensive project budget
for the appropriate Phase.
e. Permits. The City must have issued a “Ready to Issue” letter
regarding the Building Permit, and the Developer must have paid the Building
Permit fees prior to or concurrently with the applicable Close of Escrow, and must
have executed and delivered all agreements and other documents required in
connection with the Building Permit (such as a grading agreement).
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f. Tax Credits. The tax credits necessary to help finance the
applicable development must have been awarded, and Developer shall have
provided evidence thereof to City, together with reasonable evidence that tax credit
investors shall have legally committed to provide equity funds sufficient to pay all
development costs not being paid with loans/debt.
g. Loan Closings. All loans necessary to finance costs in the
City-approved revised Financing Proposal and pay the costs in the updated project
budget not being paid with equity funds shall have closed (or shall close
concurrently with the applicable Close of Escrow) such that the lenders are
conditionally obligated to disburse their loan funds (so that the applicable
development can be completed), and copies of the applicable loan documents (or
drafts that are final in all material respects) shall have been provided to City.
h. Construction Plans. The Developer shall prepare
construction plans for the construction of the development of each Phase. The final
construction plans for the development of each submitted by the Developer for City
approval shall consist of all construction documentation upon which the Developer
and its contractors shall rely in building the Phase I Development and the Phase II
Development. Such construction plans shall include (without limitation) final
architectural drawings, landscaping plans and specifications, final elevations,
building plans and specifications (also known as “working drawings”). The
construction plans shall be based upon the Approved Plans and shall not materially
deviate from them without the written consent of the City. As set forth in Section
10.14, the Developer acknowledges that execution of this Agreement by the City
does not constitute approval by the City of any required permits and in no way
limits the discretion of the City in the permit approval process.
As part of the Developer’s application for a Building Permit, the City shall also have the
right to review and approve the proposed construction plans for conformance with the Approved
Plans and the other commitments made by the Developer to the City. The Developer
acknowledges that the City’s right to review and approve the proposed construction plans as
allowed by this paragraph is in addition to, and shall not be limited by, the City’s obligation to
review the Developer’s proposed construction plans for consistency with applicable building and
construction code requirements.
As approved, these construction plans for the applicable component of the Development
shall be referred to as the “Construction Plans”.
i. Construction Contract. Developer shall have delivered to
City a copy of an executed Guaranteed Maximum Price or Stipulated Sum
construction contract for the applicable Phase, which shows a development cost
consistent with the revised Financing Proposal/Plan and updated budget, and the
equity and debt funds committed to the applicable development.
j. Cost Estimate. The Developer’s construction lender must
have shared its construction cost estimate with the City or, in the alternative, if the
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construction lender is unwilling to share its cost estimate, the City has obtained an
independent cost estimate at the Developer’s cost to confirm the reasonableness of
the construction costs.
k. Construction Bonds. At least seven (7) days prior to Close
of Escrow, the Developer shall deliver to the City forms of one (1) labor and
material bond and one (1) performance bond for the Development issued by a
reputable insurance company licensed to do business in California, and named in
the current list of “Surety Companies Acceptable on Federal Bonds” as published
in the Federal Register by the Audit Staff Bureau of Accounts, U.S. Treasury
Department, and reasonably acceptable to the City, each in a penal sum of not less
than one hundred percent (100%) of the scheduled cost of construction of the Phase
for the City’s review and approval. The bonds shall name the City as co-obligee.
Upon receipt by the City of the proposed payment and performance bonds, the City
shall promptly review such bonds and approve them if they satisfy the criteria set
forth above and include any other modification reasonably requested by the City.
If the payment and performance bonds are not approved by the City, the City shall
set forth in writing and notify the Developer of the City’s reasons for withholding
such approval. The Developer shall thereafter submit revised payment and
performance bonds for City approval, which approval shall be granted or denied in
five (5) business days in accordance with the criteria and procedures set forth
above.
l. Developer Organizational Documents. The Developer has
provided the Developer organizational documents to the City for its review and the
City has approved the documents.
m. Authority Loans. The Authority must be ready to make the
applicable Authority Loan in the amount necessary to acquire the Phase I Parcel or
Phase II Parcel, as appropriate, and the Developer shall have delivered the
applicable City/Authority Documents, duly executed, to the Authority.
n. Tax Credit Equity. The City has approved the Developer’s
proposed uses of any tax credit equity paid as of the Close of Escrow to the
Developer.
o. City Easements. The Developer and City have agreed upon
the final forms of the Phase I and Phase II Access Easement, the Parcel 9 Easement
and the Maintenance Easement.
p. Phase II Conveyance. As a condition to the Close of Escrow
for the Phase II Parcel only, the Close of Escrow for the Phase I Parcel shall have
occurred, and Developer shall not be in default under this DDLA or under the
Authority loan relating to the Phase I Parcel.
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q. AHAP. The Developer and the Housing Authority of the
County of Riverside have entered into an Agreement to Enter into a Housing
Assistance Payments Contract.
r. Title Report Approved. The Developer has approved the
following preliminary report and the title exceptions therein (the “Title Report”)
from the Title Company: Amended Preliminary Report issued on August 22, 2022
under Order Number 997-30064151-A-TC1. City shall not further encumber the
Property after the date hereof without the prior written consent of Developer.
C.
DISPOSITION OF PROPERTY
a. Conveyances of Phase I Parcel and Phase II Parcel. Subject
to the satisfaction of the conditions to closing set forth above (which apply to each
Phase, except as noted in Section 2.15), the City will sell to the Developer, and the
Developer will purchase from the City, the Property under the terms, covenants,
and conditions of this Agreement.
b. Purchase Prices. The Purchase Price for the Phase I Parcel
shall be One Million Nine Hundred Sixty-Five Thousand Five Hundred Thirty-
Nine Dollars ($1,965,539.00). The Purchase Price for the Phase II Parcel shall be
One Million Four Hundred Fifty-Nine Thousand Four Hundred Sixty-One Dollars
($1,459,461.00).
c. Deposits.
The parties acknowledge and agree that the City will expend, and has expended, considerable
resources in the negotiation and review of the proposed development of the Phase I Parcel and
Phase II Parcel. To offset a portion of the staff, legal and other consulting costs that the City has
incurred with respect to this Agreement and/or will incur under or in connection with this
Agreement and the projects described herein until completion of the Phase II Development, and in
consideration of this Agreement, the Developer has previously deposited with City the sum of
Twelve Thousand Dollars ($12,000.00) (the "Initial Deposit"). No interest shall be payable on the
Initial Deposit. The Initial Deposit shall be used by the City solely for the purpose of reimbursing
the City for reasonable costs it incurs during the course of negotiating this Agreement and
administering this Agreement, including attorneys’ fees and consultant costs. The City may from
time to time withdraw monies from the Initial Deposit to reimburse it for such costs and expenses
incurred and paid by the City. Prior to the date of such withdrawal, the City shall notify the
Developer in writing no less than five (5) business days prior to each such withdrawal/application
and include with such notice a copy of invoices and if applicable, statement of staff time/charges
to be paid with the proceeds of each such withdrawal/application. The Developer further agrees
and acknowledges that if the amount of the Initial Deposit shall be reduced to an amount less than
Two Thousand Five Hundred Dollars ($2,500.00) as a result of such periodic reimbursement
withdrawals, the Developer shall within five (5) business days of delivery of written notice from
the City deposit such additional monies with the City as shall replenish the amount of the Initial
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Deposit being held by the City to Twelve Thousand Dollars ($12,000.00). In the event of
termination of this Agreement for any reason other than uncured default of the Developer, or
completion of the Phase II Development (or if the Phase II Parcel is not sold to Developer, then
the completion of the Phase I Development), the City shall promptly return to Developer the
remainder of the Initial Deposit not needed for theretofore-accrued City costs and expenses.
Additionally, within thirty (30) days following the Effective Date,
Developer shall deposit $58,966.00 into Escrow as a good faith deposit for the acquisition of the
Phase I Parcel (the “Phase I Deposit”). Upon the Close of Escrow for Phase I, the Phase I Deposit
shall not be applied to the purchase price for the Phase II Parcel, but shall be returned to Developer,
as the Purchase Price is being paid by the loan from the Authority. If this Agreement is terminated
prior to the Close of Escrow for the Phase I Parcel for any reason other than a default by the
Developer, the Phase I Deposit and any portion of the Initial Deposit not needed to pay accrued
City costs shall be immediately refunded to the Developer upon the date the Agreement is
terminated, and City shall have no obligations with respect to the Phase II Parcel.
Additionally, within thirty days after the Close of Escrow for Phase I Parcel, the Developer
shall deposit $43,784 into a Phase II Escrow as a good faith deposit for the acquisition of the Phase
II Parcel (the “Phase II Deposit”). Upon the Close of Escrow for Phase II, the Phase I Deposit
shall not be applied to the purchase price for the Phase II Parcel, but shall be returned to Developer,
as the Purchase Price is being paid by the loan from the Authority. If this Agreement is terminated
as to Phase II, and the termination is not due to a default by the Developer, the Phase II Deposit
shall be immediately refunded to the Developer upon the date the Agreement is terminated. The
Phase I Deposit and the Phase II Deposit shall each constitute liquidated damages to the City upon
a termination of this Agreement as to the applicable Phase/parcel due to a default by Developer.
BUYER ACKNOWLEDGES THAT BY ENTERING INTO THIS AGREEMENT,
SELLER MAY REMOVE THE PROPERTY FROM THE ACTIVE REAL ESTATE MARKET
AND THUS SUSTAIN MISSED OPPORTUNITIES AND EXTENDED CARRYING COSTS,
AS WELL AS OTHER DAMAGES. IN THE EVENT THAT THE ESCROW AND THIS
TRANSACTION FAIL TO CLOSE AS A RESULT OF THE DEFAULT OF BUYER IN THE
PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, BUYER AND
SELLER AGREE THAT SELLER WILL SUSTAIN THESE AND OTHER DAMAGES, AND
THAT SELLER’S ACTUAL DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY
DIFFICULT TO DETERMINE. THE PARTIES THEREFORE AGREE THAT IN THE EVENT
THAT ESCROW AND THIS TRANSACTION FAIL TO CLOSE AS A RESULT OF A
MATERIAL DEFAULT OF BUYER, AND SELLER IS READY, WILLING AND ABLE TO
PERFORM ITS OBLIGATIONS HEREUNDER, SELLER, AS SELLER’S SOLE AND
EXCLUSIVE REMEDY, IS ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF
THE INITIAL DEPOSIT THERETOFORE MADE. IN THE EVENT ESCROW FAILS TO
CLOSE SOLELY AS A RESULT OF BUYER’S DEFAULT AND SELLER IS READY,
WILLING AND ABLE TO PERFORM ITS OBLIGATIONS HEREUNDER, THEN (A) THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF BUYER AND SELLER
HEREUNDER AND THE ESCROW CREATED HEREBY SHALL TERMINATE, AND (B)
ESCROW AGENT SHALL, AND IS HEREBY AUTHORIZED AND INSTRUCTED TO,
RETURN PROMPTLY TO BUYER AND SELLER ALL DOCUMENTS AND INSTRUMENTS
TO THE PARTIES WHO DEPOSITED THE SAME. THE PAYMENT OF SUCH AMOUNT
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AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY
WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369 BUT IS
INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO
CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. SELLER HEREBY WAIVES
THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. SELLER AND BUYER
ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF
THIS SECTION 3.3(b), AND BY THEIR INITIALS IMMEDIATELY BELOW, AGREE TO BE
BOUND BY ITS TERMS.
SELLERS’ INITIALS:
__________________________
BUYER’S INITIALS
_________________
d. Opening Escrow. To accomplish the transfer of the Phase I
Parcel and the Phase II Parcel from the City to the Developer, the Parties will
promptly establish an escrow for each transfer with the Title Company after the
Effective Date. The Parties will execute and deliver reasonable written instructions
to the Title Company to accomplish the terms hereof, which instructions must be
consistent with this Agreement.
e. Close of Escrow. The Close of Escrow shall occur within
thirty (30) days after the Developer has met all of the closing conditions as set forth
in Article 2 above for a particular Parcel, but in no event shall the Close of Escrow
occur later than August 31, 2025 for the Phase I Parcel, and in no event shall the
Close of Escrow occur later than August 31, 2028 for the Phase II Parcel. At the
applicable Close of Escrow, the City shall convey a fee interest in the applicable
Parcel to the Developer by the delivery of a Grant Deed to Escrow in the form set
forth in the attached Exhibit C for recording at the Close of Escrow.
At the Close of Escrow for Phase I, the Developer shall execute and deliver to Escrow for
recording at the Close of Escrow, the Phase I and Phase II Access Easement, the Parcel 9 Easement
and the Maintenance Easement.
Developer’s obligation to proceed with the acquisition of the Property from the City
pursuant to the terms of this Agreement is subject to the fulfillment or waiver by Developer of
each and all of the conditions precedent described below (“Developer Conditions Precedent”). The
Developer Conditions Precedent are solely for the benefit of the Developer and shall be fulfilled
or waived within the time periods provided for herein, and in any event, no later than the date
specified in the Schedule of Performance.
There exists no condition, event or act which would constitute a breach or default under
this Agreement, the City Documents, the Development Approvals, or under any other project
financing agreements or contracts related to the Development, or which, upon the giving of notice
or the passage of time, or both, would constitute such a breach or default by the City.
Subject to payment of the applicable fees, City shall be ready to issue the building permit(s)
necessary for the Developer to Commence Construction of the Development.
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The Title Company shall, upon payment of Title Company’s regularly scheduled premium,
be irrevocably committed to issue an owner’s title policy upon recordation of the applicable Grant
Deed insuring Developer’s interest in the Property, subject only to the exceptions in Section 3.7
below.
The Parcel Map has been approved by the City and the Developer and has been recorded
or is ready to be recorded currently with the Close of Escrow in the Official Records of Riverside
County.
There shall be an absence of any condemnation, environmental or other pending
governmental or any type of administrative or legal proceedings with respect to the Property which
would materially and adversely affect Developer’s intended uses of the Property or the value of
the Property.
The City has executed and delivered to Escrow (x) the Phase I and Phase II Access
Easement, (y) the Parcel 9 Easement and (z) the Maintenance Easement.
The City has executed and delivered to Escrow applicable Housing Agreement and Notice
of Affordability Restrictions, duly executed and acknowledged.
There shall not have occurred between the Effective Date and the Closing a material
adverse change to the physical condition of the Property.
There is no existing, pending or threatened litigation, suit, action or proceeding before any
court or administrative agency affecting the City or the Developer or the Property that would, if
adversely determined, materially adversely affect the Development or the Developer’s or the
City’s ability to perform their obligations under this Agreement or the Developers’ ability to
develop and operate the Development.
f. Costs of Escrow and Closing. The Developer must pay all
of the City’s and Authority’s legal fees and costs, the cost of title insurance, transfer
tax, Title Company document preparation, recordation fees, and the escrow fees of
the Title Company, if any, and any additional costs to close the applicable escrow.
The costs borne by the Developer are in addition to the Purchase Prices of the
Parcels.
g. Condition of Title. Upon the Close of Escrow for each
Phase, the Developer will take title subject to all title exceptions in the Title Report
and all other liens, encumbrances, clouds and conditions, rights of occupancy or
possession, except, applicable building and zoning laws and regulations;
i. The conditions and easements on the Parcel
Map;
ii. the Phase I and Phase II Access Easement;
iii. the applicable Housing Agreement;
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iv. the applicable Density Bonus Agreement;
v. the applicable Deed of Trust and Notice of
Restrictions;
vi. any lien for current taxes and assessments or
taxes and assessments accruing subsequent to Close of Escrow;
vii. the liens of any Approved Financing
(approved by the City);
viii. any other matters created by or with the
consent of Developer.
h. Condition of Property; City Information. In fulfillment of
the purposes of Health and Safety Code Section 25359.7(a), to the City’s Current
Actual Knowledge, no release of Hazardous Materials has come to be located on or
beneath the Property except as previously disclosed by the City to the Developer.
The Developer has completed all due diligence activities, including but not limited
to a physical adequacy determination of the Property, and may not terminate this
Agreement as a result of the purported physical unsuitability of the Property. As
used in this Agreement, the phrase “to the City’s Current Actual Knowledge” and
words of similar import shall mean the actual knowledge of the City Manager (the
“City Representative”), on behalf of the City, as of the Effective Date, without any
duty of separate inquiry and investigation. The City represents and warrants that
the City Representative is that person affiliated with the City most knowledgeable
regarding the ownership and operation of the Property. Developer hereby agrees
that the foregoing person shall not have or incur any personal liability for the breach
of any representation or warranty in this Agreement, and that Developer’s sole
remedy for any such breach shall be against the City.
i. “As is” Conveyance. Prior to the effective date, the
Developer was provided the opportunity to investigate the Property and has
approved the physical condition of the Property. The Developer specifically
acknowledges and agrees that the City is selling each Phase of the Property to the
Developer and the Developer is buying each Phase of the Property from the City
(and all thereon) on an “as is with all faults” basi s and that the Developer is not
relying on any representations or warranties of any kind whatsoever, express
(except as expressly set forth in this agreement) or implied, from the City as to any
matters concerning the Property, including without limitation: (1) the quality,
nature, adequacy and physical condition of the Property (including, without
limitation, topography, climate, air, water rights, water, gas, electricity, utility
services, grading, drainage, sewers, access to public roads and related conditions);
(2) the quality, nature, adequacy, and physical condition of soils, geology, and
groundwater; (3) the existence, quality, nature, adequacy and physical condition of
utilities serving the Property; (4) the development potential of the Property, and the
Property’s use, habitability, merchantability, or fitness, suitability, value or
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adequacy of the Property for any particular purpose; (5) public or private
restrictions on the use of the Property; (6) the compliance of the Property or its
operation with any applicable codes, laws, regulations, statutes, ordinances,
covenants, conditions and restrictions of any governmental or quasi-governmental
entity or of any other person or entity; (7) the presence or absence of hazardous
materials on, under or about the Property or the adjoining or neighboring property;
and (8) the condition of title to the Property. The Developer affirms that the
Developer has not relied on the skill or judgment of the City or any of its agents,
employees or contractors to select or furnish the Property for any particular
purpose, and that the City makes no warranty that the Property is fit for any
particular purpose. The Developer acknowledges that it shall use its independent
judgment and make its own determination as to the scope and breadth of its due
diligence investigation which it shall make relative to the Property and shall rely
upon its own investigation of the physical, environmental, economic, and legal
condition of the Property (including, without limitation, whether the Property is
located in any area which is designated as a special flood hazard area, dam failure
inundation area, earthquake fault zone, seismic hazard zone, high fire severity area
or wildland fire area, by any federal, state or local agency). The Deve loper
undertakes and assumes all risks associated with all matters pertaining to the
Property’s location in any area designated as a special flood hazard area, dam
failure inundation area, earthquake fault zone, seismic hazard zone, high fire
severity area or wildland fire area by any federal, state or local agency.
j. Survival. The terms and conditions of this Section expressly
survive the Close of Escrow. The City is not liable or bound in any manner by any
oral or written statements, representations, or information pertaining to the Property
furnished by any contractor, agent, employee, servant, or other person. The
Developer acknowledges that the lease price will reflect the “as is” nature of this
sale and any faults, liabilities, defects, or other adverse matters that may be
associated with the Property. The Developer has fully reviewed the disclaimers
and waivers set forth in this Agreement with the Developer’s counsel and
understands the significance and effect thereof.
k. Acknowledgment. The Developer acknowledges and agrees
that: (1) to the extent required to be operative, the disclaimers of warranties
contained in this Section are “conspicuous” disclaimers for purposes of all
applicable laws and other legal requirements; and (2) the disclaimers and other
agreements set forth in such sections are an integral part of this Agreement, that the
lease price will be adjusted to reflect the same and that the City would not have
agreed to lease the Property to the Developer without the disclaimers and other
agreements set forth in this Section.
l. Developer’s Release. The Developer, on behalf of itself and
anyone claiming by, through or under the Developer hereby waives its right to
recover from and fully and irrevocably releases the City and the Authority, and City
Council members, Authority board members and the officers, directors,
representatives, consultants, employees and agents of City and/or Authority (the
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“Released Parties”) from any and all claims, responsibility, and/or liability that the
Developer may have or hereafter acquire against any of the Released Parties for
any costs, loss, liability, damage, expenses, demand, action or cause of action
arising from or related to: (1) the condition (including any construction defects,
errors, omissions or other conditions, latent or otherwise), valuation, salability or
utility of the Property, or its suitability for any purpose whatsoever; (2) any
presence of Hazardous Materials; and (3) any information furnished by the
Released Parties under or in connection with this Agreement.
m. Scope of Release. The release set forth in Section 3.7(e)
above includes claims of which the Developer is presently unaware or which the
Developer does not presently suspect to exist which, if known by the Developer,
would materially affect the Developer’s release of the Released Parties. The
Developer specifically waives the provision of any statute or principle of law that
provides otherwise. In this connection and to the extent permitted by law, the
Developer agrees, represents and warrants that the Developer realizes and
acknowledges that factual matters now unknown to the Developer may have given
or may hereafter give rise to causes of action, claims, demands, debts,
controversies, damages, costs, losses and expenses which are pres ently unknown,
unanticipated and unsuspected, and the Developer further agrees, represents and
warrants that the waivers and releases herein have been negotiated and agreed upon
in light of that realization and that the Developer nevertheless hereby intends to
release, discharge and acquit the Released Parties from any such unknown causes
of action, claims, demands, debts, controversies, damages, costs, losses and
expenses. Accordingly, the Developer, on behalf of itself and anyone claiming by,
through or under the Developer, hereby assumes the above-mentioned risks and
hereby expressly waives any right the Developer and anyone claiming by, through
or under the Developer, may have under Section 1542 of the California Civil Code,
which reads as follows:
“A general release does not extend to claims which the creditor
or released party does not know or suspect to exist in his or her
favor at the time of executing the release, which if known by him
or her must have materially affected his or her settlement with
the debtor or released party.”
Developer’s Initials: __________
Notwithstanding the foregoing, this release does not apply to, nor will the City be released from,
the City’s actual fraud or misrepresentation.
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D.
CONSTRUCTION OF DEVELOPMENT
a. Construction and Operation Consistent with Agreements.
Unless modified by operation of Section 4.2, the Development must be constructed
in accordance with the Scope of Development, the Construction Plans and the terms
and conditions of the Approved Plans and the City Approvals. The Developer shall
comply with all standards and requirements for construction, use, operation,
maintenance, management and encumbrance of the Development which are set
forth in this Agreement and the City Approvals. As between the City and the
Developer, the Developer shall be solely responsible for all costs necessary for the
construction and operation of the Development, including, but not limited to, any
construction cost overruns. Developer shall defend, indemnify and hold City
harmless from and against any and all claims, liabilities, damages, losses, costs and
expenses arising directly or indirectly from or relating to any allegations that City
is liable for failure by Developer to pay prevailing wages and/or comply with
California Labor Code Sections 1720 et seq. (The foregoing is not an admission by
Developer or City that prevailing wages are required in connection with any
development on either Phase.)
b. Commencement of Developments; Interim Deadlines. The
Developer must commence construction of the Phase I Development no later than
ninety (90) days after closing of the conveyance of the Phase I Parcel]. The
Developer must commence construction of the Phase II Development no later than
ninety (90) days after closing of the conveyance of the Phase II Parcel. For
purposes of this Section 4.2, commencement of construction means the material
commencement of grading of the Phase.
c. Completion of the Developments. Subject to Section 10.3
below, the Developer must diligently prosecute to completion the construction of
each Phase, and the Phase I Development must be completed no later than February
29, 2028, and the Phase II Development must be completed no later than February
28, 2031.
d. Equal Opportunity. During the construction of the
Development, the Developer, and its successors, assigns, and subcontractors must
not discriminate against any employee or applicant for employment in connection
with the construction of the Development on any basis listed in Section 12940 of
the Government Code. Each of the following activities must be conducted in a non-
discriminatory manner: hiring; upgrading; demotion and transfers; recruitment and
recruitment advertising; layoff and termination; rate of pay and other forms of
compensation; and selection for training including apprenticeship.
e. Construction Under Laws.
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i. Compliance with Project Documents.
Developer shall construct the Development in conformance with the
Approved Plans, Approved Financing, and Financing Proposal and
consistent with the City Approvals. Developer shall notify the City in a
timely manner of any changes in the work required to be performed under
this Agreement, including any additions, changes, or deletions to the plans
and specifications approved by the City.
ii. Compliance with Laws. Developer shall
cause all construction work to be performed in compliance with, without
limitation: (1) all applicable laws, ordinances, rules and regulations of
federal, state, county or municipal governments or agencies now in force or
that may be enacted hereafter, including without limitation state prevailing
wages pursuant to Labor Code Sections 1770 et seq., and the regulations
pursuant thereto; (2) all applicable federal and state accessibility
requirements; and (3) all directions, rules and regulations of any fire
marshal, health officer, building inspector, or other officer of every
governmental agency now having or hereafter acquiring jurisdiction. The
work shall proceed only after procurement of each permit, license, or other
authorization that ma y be required by any governmental agency having
jurisdiction, and Developer shall be responsible to the City for the
procurement and maintenance thereof, as may be required of Developer and
all entities engaged in work on the construction.
iii. Prevailing Wage Laws. The Project is a work
of public improvement such that Developer shall pay prevailing wages
under California Labor Code Sections 1770 et seq. and shall comply with
the other requirements of such statutes. Developer shall defend, indemnify
and hold City and Authority harmless from and against any and all claims,
liabilities, losses, damages, costs and expenses arising from or relating to
any failure by Developer to do so.
f. Progress Reports. Until such time as the Developer has completed construction of
the Development, as evidenced by the Certificate of Completion, the Developer
must provide the City with quarterly progress reports regarding the status of the
construction of the Development.
g. Construction Responsibilities. The Developer shall comply
with the Schedule of Performance.
i. The Developer is solely responsible for all
aspects of the Developer’s conduct in connection with the Development,
including but not limited to the quality and suitability of the Construction
Plans, the supervision of construction work, and the qualifications, financial
condition, and performance of all architects, engineers, contractors,
subcontractors, suppliers, consultants, and property managers. Any review
or inspection undertaken by the City with reference to the Development is
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solely for the purpose of determining whether the Developer is properly
discharging its obligations to the City and should not be relied upon by the
Developer or by any third parties as a warranty or representation by the City
as to the quality of the design or construction of the Development.
h. Mechanics Liens, Stop Notices, and Notices of Completion.
If any claim of lien is filed against the Property or the Development or a stop notice
is served on any lender or other third party in connection with the Development,
then the Developer must, within twenty (20) days after such filing or service, either
pay and fully discharge or cause the Developer’s contractor to pay and fully
discharge, the lien or stop notice, effect the release of such lien or stop notice by
delivering to the City a surety bond from a surety reasonably acceptable to the City
in sufficient form and amount, or provide the City with other assurance reasonably
satisfactory to the City that the claim of lien or stop notice will be paid or
discharged.
i. If the Developer fails to discharge any lien,
encumbrance, charge, or claim in the manner required in this Section or
obtain a surety bond, then in addition to any other right or remedy, the City
may (but is under no obligation to) discharge such lien, encumbrance,
charge, or claim at the Developer’s expense. Alternatively, the City may
require the Developer to immediately deposit with the City the amount
necessary to satisfy such lien or claim and any costs, pending resolution
thereof. The City may use such deposit to satisfy any claim or lien that is
adversely determined against the Developer.
ii. The Developer must file a valid notice of
cessation or notice of completion upon cessation of construction of the
Development for a continuous period of thirty (30) days or more and take
all other reasonable steps to forestall the assertion of claims of lien against
the Property or the Development. The Developer authorizes the City, bu t
without any obligation, to record any notices of completion or cessation of
labor, or any other notice that the City deems necessary or desirable to
protect its interest in the Development and Property.
i. Inspections. The Developer must permit and facilitate, and
require its contractors to permit and facilitate, observation and inspection at the
Development by the City and the Authority during business hours with reasonable
notice.
j. Records. The Developer must maintain complete, accurate,
and current records pertaining to the Development for a period of seven (7) years
after the creation of such records, and permit any duly authorized representative of
the City to inspect and copy records during regular business days/hours. Records
must be kept accurate and current, and shall be kept at Developer’s corporate office
at 100 Pacifica, Suite 203, Irvine, California. Upon reasonable written notice from
the City requesting to review specified Developer records, the Developer shall
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deliver the records to the City’s offices within fifteen (15) days following the City’s
request.
i. The City will notify the Developer of any
records it deems insufficient. The Developer will have thirty (30) days after
delivery of such a notice to correct any deficiency in the records specified
by the City in such notice, or if a period longer than thirty (30) days is
reasonably necessary to correct the deficiency, then the Developer must
begin to correct the deficiency within thirty (30) days and complete the
correction of the deficiency as soon as reasonably possible.
k. Certificate of Completion. Promptly after completing the
Development on a Parcel (Phase I or II) in accordance with those provisions of this
Agreement that relate solely to the obligations of Developer to construct the
Development (including the dates for beginning and completion thereof), the City
will provide a Certificate of Completion so certifying (the “Certificate of
Completion”). The Certificate of Completion will be the conclusive determination
that certain covenants in this Agreement with respect to the obligations of the
Developer to construct the Development (excluding the Developer’s compliance
with Section 4.6) and the dates for the beginning and completion thereof have been
met. The Certificate of Completion shall be in such form as will enable such
certificate to be recorded in the Official Records. The Certificate of Completion
will not constitute evidence of compliance with or satisfaction of any obligation of
the Developer to: (a) any holder of a Securit y Financing Interest. The Certificate
of Completion may not be deemed a notice of completion under the California Civil
Code.
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E.
AUTHORITY LOAN PROVISIONS
a. Authority Loans. Subject to the terms and conditions set
forth in this Agreement, the Authority shall make a loan to the Developer for the
Phase I Development in the original principal amount of $1,965,539 and a loan for
the Phase II Development in the original principal amount of not less than
$4,789,461. The Authority Loan shall be evidenced by two promissory notes: (a)
a Promissory Note for the Phase I Development executed by Developer in favor of
City in the amount of $1,965,539 secured by the Deed of Trust executed by the
Developer as trustor in favor of the City as beneficiary and recorded against the
Developer’s fee interest in the Phase I Parcel. and (b) a Promissory Note for the
Phase II Development executed by Developer in favor of City in the amount not
less than $4,789,461 secured by the Deed of Trust executed by the Developer as
trustor in favor of the City as beneficiary and recorded against the Developer’s fee
interest in the Phase II Parcel.
b. Use of Authority Loan. The proceeds of the Authority Loans
shall be used to fund the acquisition (pay the purchase prices) of the Parcels, and
the remainder of the Authority Loan for the Phase II Development shall be used for
construction costs of the Phase II Development.
c. Delivery of Promissory Notes; Recording of Housing
Agreements; Deeds of Trust; Notices of Restrictions. Prior to the Close of Escrow
and in accordance with the Schedule of Performance, the City shall cause escrow
holder to first record the Subdivision Map. Upon and as a condition to the Close
of Escrow for a Parcel, the escrow holder shall first record the applicable grant
deed, and then the applicable Housing Agreement and Density Bonus Agreement
for that Phase, the applicable Notice of Restrictions and then the applicable Deed
of Trust for the applicable Agency Loan (with no intervening recordings). The
Housing Agreement and Notice of Restrictions shall remain in full force and effect
for fifty-five (55) years after the issuance of the final Certificate of Occupancy for
the Development on the applicable Phase, regardless of any repayment of the
applicable Authority Loan following a Developer Event of Default or otherwise.
The Executive Director of the Authority shall have the authority to execute
reasonable subordination agreements subordinating the Authority Deed of Trust for
a Phase to the deeds of trust securing other construction and permanent financing,
provided copies of the senior loan documents shall have been provided for the
City’s reasonable review.
d. Term of the Authority Loan. Unless sooner due under the
terms of the applicable Note, all principal and interest on the applicable Authority
Loan shall be due upon the earliest of: a Transfer of any portion of the applicable
collateral Property or the Developer’s interest in such Property other than a Transfer
permitted or approved by the Authority as provided in Section 10.6;
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i. the occurrence of a Developer Event of
Default for which the Authority exercises its right to cause the Authority
Loan indebtedness to become immediately due and payable, or
ii. a default under the Housing Agreement
which has not been cured within the time periods specified therein.
iii. Fifty-five (55) years from the date of the
applicable final Certificate of Occupancy.
e. Interest; Payments. Simple interest at three percent (3%) per
annum shall accrue on the outstanding principal amount of the applicable Authority
Loan except in a Developer Event of Default, whereupon interest shall accrue from
and after the date of the applicable Promissory Note until paid at the rate of ten
percent (10%) or the highest rate permitted by law. Payments shall be structured
as residual receipts payments over the course of the applicable Authority Loan and
shall first be applied to interest then to principal.
f. Disbursement of Authority Loans; Disbursement of
Authority Loan for Phase I. The Authority shall deposit into Escrow the Phase I
loan. The Phase I funds shall be disbursed by escrow holder to pay the Phase I
Purchase Price.
g. Disbursement of Authority Loan for Phase II. The Authority
shall deposit into Escrow the Phase II loan in the amount of the Phase II Parcel
purchase price. The Authority shall also deposit into Escrow the remainder of such
loan together with a counterpart of the agreement with the primary construction
lender governing that lender’s holding and disbursement of the City’s construction
loan funds, with instructions to deliver such funds to such lender provided Escrow
has an executed counterpart of such agreement from such lender that is to be
delivered to the Authority. If no such agreement is reached or executed and
delivered, then Authority shall disburse the construction loan portion of its Phase
II loan, not more often that once every thirty (30) days, pursuant to normal and
reasonable construction loan disbursement conditions, including that Developer not
be in default under the applicable loan documents, that Developer shall have
submitted a draw request certifying that the Authority loan is “in balance” (enough
undisbursed funds from committed loans exist to pay all Project construction costs)
and specifying the costs to be paid (by line item in the budget) with reasonable
evidence of such costs, conditional partial mechanics lien releases from payees of
the current draw and unconditional partial mechanics lien releases for the
costs/work paid with the previous draw of construction loan funds.
h. Repayment Schedule. The Authority Loans shall be repaid
as follows:
i. Payments. Commencing on the first June 1st
following the completion of the Phase, and on each June 1st thereafter until
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the applicable Promissory Note is paid in full, the Developer shall make
repayments of the applicable Authority Loan from fifty percent (50%) of
Residual Receipts. The Authority will share the fifty percent (50%) of
Residual Receipts payment with the other public entities providing loans to
the Developer for the respective Phase. The Authority’s percentage share
of fifty percent (50%) of Residual Receipts shall be equal to the percentage
derived by dividing the Authority loan amount by the combined total of the
Authority Loan and the other public entity loans committed to the
Developer. The Developer shall provide the Authority, within one hundred
eighty (180) days following the end of each calendar year, an Annual
Financial Statement showing the actual income and expenditures with
respect to the Development for the immediately preceding calendar year.
Payments made shall be credited first against accrued interest and then
against outstanding principal.
ii. Payment in Full. All principal and interest, if
any, on the applicable Authority Loan shall, at the option of the Authority,
be due and payable upon the earliest of: (1) a Transfer other than a Transfer
permitted or approved by the Authority as provided in Article 7 below; (2)
the occurrence of an Event of Default for which the Authority exercises its
right to cause the applicable Authority Loan indebtedness to become
immediately due and payable; or (3) the maturity date of the applicable
Promissory Note.
iii. Prepayment. The Developer shall have the
right to prepay the Authority Loans at any time.
i. Reports and Accounting of Residual Receipts; Audited
Financial Statement. In connection with the annual repayment of the Authority
Loans, the Developer shall furnish to the Authority an Annual Financial Statement.
j. Books and Records. The Developer shall keep and maintain
full, complete and appropriate books, record and accounts relating to the
Development, including all such books, records and accounts necessary or prudent
to evidence and substantiate in full detail the Developer’s calculation of the
applicable Residual Receipts, at the Developer’s corporate office currently at 100
Pacifica, Suite 203 in the City of Irvine. Books, records and accounts relating to the
Developer’s compliance with the terms, provisions, covenants and conditions of
this Agreement shall be kept and maintained in accordance with generally accepted
accounting principles consistently applied and shall be consistent with
requirements of this Agreement which provide for the calculation of Residual
Receipts on a cash basis. All such books, records, and accounts shall be open to
and available for inspection by the Authority, its auditors or other authorized
representatives at reasonable intervals during normal business hours on reasonable
prior notice to the Developer. Copies of all tax returns and other reports that the
Developer may be required to furnish any governmental agency shall at all
reasonable times be open for inspection by the Authority at the place that the books,
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records and accounts of the Developer are kept. The Developer shall preserve
records on which any statement of Residual Receipts is based for a period of not
less than five (5) years after such statement is rendered.
k. Non-Recourse. Following recordation of the applicable
Deed of Trust, and except as provided below, the Developer shall not have any
direct or indirect personal liability for payment of the principal of, or interest on,
the applicable Authority Loan or the performance of the covenants of the Developer
under the applicable Deed of Trust. The sole recourse of the Authority with respect
to the principal of, or interest on, the applicable Promissory Note and defaults by
the Developer in the performance of its covenants under the applicable Deed of
Trust shall be to the property described in such Deed of Trust; provided, however,
that nothing contained in the foregoing limitation of liability shall: (a) limit or
impair the enforcement against all such security for the applicable Promissory Note
of all the rights and remedies of the Authority thereunder; or (b) be deemed in any
way to impair the right of the Authority to assert the unpaid principal amount of the
applicable Promissory Note as demand for money within the meaning and
intendment of Section 431.70 of the California Code of Civil Procedure or any
successor provision thereto.
The foregoing limitation of liability is intended to apply only to the obligation for the
repayment of the principal of, and payment of interest on the applicable Promissory Note, except
as hereafter set forth; nothing contained herein is intended to relieve the Developer of personal
liability for (1) fraud or willful misrepresentation; (2) the failure to pay taxes, assessments or other
charges (which are not contested by Developer in good faith) which may create liens on the
Property or Phase that are payable or applicable prior to any foreclosure under the applicable Deed
of Trust (to the full extent of such taxes, assessments or other charges); (3) the Developer’s
indemnification obligations under this Agreement; (4) misappropriation of any rents, security
deposits, insurance proceeds, condemnation awards or any other proceeds derived from the
collateral security and (5) payment to the Authority of any rental income or other income arising
with respect to the Property received by the Developer after the Authority has given notice to the
Developer of the occurrence of an Event of Default, subject to the rights of any lender providing
a loan secured by the Property to which Authority has subordinated the Deed of Trust.
F.
ONGOING DEVELOPER OBLIGATIONS
a. Applicability. The conditions and obligations set forth in
this Article 6 apply throughout the term of the Regulatory Agreement, unless a
different period of applicability is specified for a particular condition or obligation.
b. Use of Development. The Developer hereby agrees that, for
the entire Term, the Development will be used and continuously operated only as
affordable housing in accordance with all applicable requirements of the California
Community Redevelopment Law (the “Law”), including, but not limited to, the
requirement that such housing be provided to households described in Section
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50079.5 of the Law, at rents not exceeding the amounts set forth in Section
50053(b)(3). In the event of any conflict between the terms of this Agreement and
the Regulatory Agreement, the Developer shall comply with the stricter
requirement. In addition, the Developer shall comply with the TCAC Regulatory
Agreement (each while they are in effect) all other applicable laws, statutes, and
regulations governing the Development, including, but not limited to affordability
restrictions of all other public entities encumbering the Phase and the applicable
requirements of Code Section 42, and all TCAC regulations, for such time that the
Development is subject to such regulations.
c. Maintenance. The Developer agrees to maintain all interior
and exterior portions of the Development, including landscaping, of the
Development in first-class condition and repair and in a sanitary condition (and, as
to landscaping, in a healthy condition, subject to any restrictions on water use) and
all applicable laws, rules, ordinances, orders, and regulations of all federal, state,
municipal, and other governmental agencies and bodies having or claiming
jurisdiction and all their respective departments, bureaus, and officials.
i. The Developer acknowledges the great
emphasis the City places on quality maintenance to protect its investment
and to provide quality affordable and market-rate housing for area residents.
In addition, the Developer must keep the Development free from all graffiti,
and any accumulation of shopping carts, debris or waste material. The
Developer must promptly make all repairs and replacements necessary to
keep the Development in first-class condition and repair and promptly
eliminate all graffiti and replace dead and diseased plants and landscaping
with comparable approved materials.
ii. In the event that the Developer breaches any
of the covenants contained in this Section and such default continues for a
period of seven (7) days after written notice from the City with respect to
graffiti, debris, waste material, and general maintenance or thirty (30) days
after written notice from the City with respect to landscaping and building
maintenance, then the City, in addition to whatever other remedy it may
have at law or in equity, will have the right to enter upon the Property and
perform or cause to be performed all such acts and work necessary to cure
the default. Under such right of entry, the City will be permitted (but is not
required) to enter upon the Property and perform all acts and work necessary
to protect, maintain, and preserve the Development and landscaped areas on
the Property, and Developer shall reimburse City for the costs thereof and a
ten percent (10%) administrative charge within ten (10) days after written
demand with evidence of the costs.
d. Taxes and Assessments. The Developer must pay all real
and personal property taxes, assessments and charges and all franchise, income,
employment, social security benefit, withholding, sales, and other taxes assessed
against it, or payable by it, at such times and in such manner as to prevent any
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penalty from accruing, or an y lien or charge from attaching to the Property;
provided, however, that the Developer has the right to contest in good faith, any
such taxes, assessments, or charges. In the event the Developer exercises its right
to contest any tax, assessment, or charge against it, the Developer, on final
determination of the proceeding or contest, must immediately pay or discharge any
decision or judgment rendered against it, together with all costs, charges and
interest.
e. Mandatory Language in All Subsequent Deeds, Leases and
Contracts; Basic Requirement. The Developer may not restrict the rental, sale,
lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Development
on any basis listed in subdivision (a) or (d) of Section 12955 of the Government
Code. Developer or any person claiming under or through the Developer may not
establish or permit any such practice or practices of discrimination or segregation
with reference to the selection, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees or vendees in the Development. The foregoing
covenant runs with the land.
f. Provisions in Conveyance Documents. All deeds, leases or
contracts made or entered into by Developer, and its successor and assigns
permitted under this Agreement, as to any portion of the Property must contain
therein the following language:
1. In Deeds:
“(1) Grantee herein covenants by and for itself, its successors and
assigns, and all persons claiming under or through them, that there shall be no discrimination
against or segregation of, any person or group of persons on account of any basis listed in
subdivision (a) and (d) of Section 12955 of the Government Code, as those bases are defined in
Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955
and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy,
tenure or enjoyment of the property herein conveyed, nor shall the grantee or any person claiming
under or through the grantee, establish or permit any practice or practices of discrimination or
segregation with reference to the selection, location, number, use or occupancy of tenants, lessees,
subtenants, sublessees or vendees in the property herein conveyed. The foregoing covenant shal l
run with the land.
(2) Notwithstanding paragraph (1), with respect to familial
status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in
Section 12955.9 of the Government Code. With respect to familial status, no thing in paragraph
(1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code,
relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil
Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to
paragraph (1).”
2. In Leases:
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“(1) Lessee herein covenants by and for itself, its successors and
assigns, and all persons claiming under or through them, that there shall be no discrimination
against or segregation of, any person or group of persons on account of any basis listed in
subdivision (a) and (d) of Section 12955 of the Government Code, as those bases are defined in
Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955
and Section 12955.2 of the Government Code in the leasing, subleasing, transferring, use,
occupancy, tenure or enjoyment of the premises herein leased nor shall the lessee or any person
claiming under or through the lessee, establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location, number, use or occupancy
of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased.
(2) Notwithstanding paragraph (1), with respect to familial
status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in
Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph
(1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code,
relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil
Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to
paragraph (1).”
3. In Contracts:
“(1) There shall be no discrimination against or segregation of,
any person or group of persons on account of any basis listed in subdivision (a) and (d) of Section
12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision
(m) and paragraph (1) of subdivision (p) of Section 12955 and Section 12955.2 of the Government
Code in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor
shall the transferee or any person claiming under or through the transferee 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 land.
(2) Notwithstanding paragraph (1), with respect to familial
status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in
Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph
(1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code,
relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil
Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to
paragraph (1).”
g. Management Agent. The Developer shall manage or cause
the Development to be managed in a prudent and business-like manner, consistent
with good property management standards for other comparable high quality, well-
managed affordable rental housing projects in the City of Palm Desert. The
Developer shall be responsible for all repair and maintenance functions of the
Development, including ordinary maintenance and replacement of capital items.
The Developer shall ensure maintenance of units and common areas in accordance
with local health, building and housing codes. Developer may contract with an
experienced property management company or property manager, to operate and
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maintain the Development (“Property Manager”). The Property Management
contract shall be subject to prior written approval by the City and shall contain a
provision allowing the Developer, with the approval of the lenders and the
California Tax Allocation Committee, to terminate the contract without penalty
upon no more than thirty (30) days’ notice.
i. The Developer will develop a management
plan and deliver a copy thereof to City as a condition to the closing of each
Phase (a “Property Management Plan”). The Property Management Plan
shall include the following:
1. The role and responsibility of
the Developer and its delegation of authority, if any, to the Property
Manager;
2. Personnel policy and staffing
arrangements, including ongoing training of staff in best practices
for serving the Project tenants;
3. Plans and procedures for
publicizing and achieving early and continued occupancy;
4. Procedures for determining
tenant eligibility, and selecting tenants, and for certifying and
annually recertifying household status, income and size;
5. Plans for carrying out an
effective maintenance and repair program;
6. Rent collection policies and
procedures;
7. Plans for enhancing tenant-
management relations;
8. Appeal and grievance
procedures;
9. Description of how service
staff and property management staff will work together to prevent
evictions and to facilitate the implementation of reasonable
accommodation policies.
ii. Upon a determination by the City that the
Property Manager has failed to operate the Development in accordance with
the Management Plan, the City shall provide written notice to the Developer
specifying the Property Manager’s breach of the Management Plan and
providing the Developer at least thirty (30) days to cure the specified breach.
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Within thirty (30) days the Developer must either use good faith efforts to
cure the breach or, if such cure is of the nature to take longer than thirty (30)
days, the Developer shall commence the cure during the thirty (30) day
period and complete the cure by the conclusion of one hundred eighty (180)
days the Developer’s receipt of the City’s notice, or in such other time
period as the parties may mutually agree. If the Developer has failed to cure
the breach of the Management Plan by the expiration of the relevant cure
period, the City may immediately provide a written notice to the Developer
requiring that the Developer promptly terminate the existing Property
Manager and contract with an alternative qualified management agent to
operate the Project, each with the approval of the lenders and the California
Tax Allocation Committee, or to make such other arrangements as the City
deems reasonably necessary to ensure performance of the functions and
obligations set forth in the applicable Property Management Plan.
h. Insurance Requirements; Required Coverage. The
Developer must maintain and keep in force, at the Developer’s sole cost and
expense, the following insurance applicable to the Development:
i. Workers’ Compensation insurance, as
required by the State of California and consistent with statutory limits, and
Employers’ Liability coverage, with limits not less than One Million
Dollars ($1,000,000) each accident for bodily injury or disease.
ii. Commercial General Liability insurance with
limits not less than One Million Dollars ($1,000,000) each occurrence and
Five Million Dollars ($5,000,000) aggregate combined single limit for
Bodily Injury and Property Damage, including coverages for Contractual
Liability, Personal Injury, Broad form Property Damage, Products and
Completed Operations. Products and Completed Operations coverage must
be obtained no later than completion of construction of the Development.
The Developer shall cause the Developer’s general contractor to maintain
Commercial General Liability insurance with limits not less than Two
Million Dollars ($2,000,000) each occurrence and Four Million Dollars
($4,000,000) aggregate combined single limit for Bodily Injury and
Property Damage, including coverages for Contractual Liability, Personal
Injury, Broad form Property Damage, Products and Completed Operations.
iii. Commercial Automobile Liability insurance
with limits not less than One Million Dollars ($1,000,000) each occurrence
combined single limit for Bodily Injury and Property Damage, including
coverages for owned, non-owned and hired vehicles, as applicable;
provided, however, that if the Developer does not own or lease vehicles, or
operate any non-owned vehicles for purposes of this Agreement, then no
automobile liability insurance will be required and both Parties to this
Agreement must initial this provision signifying same.
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iv. Professional liability insurance in an amount
not less than One Million Dollars ($1,000,000) each occurrence and Two
Million Dollars ($2,000,000) aggregate policy limit. Developer may meet
this requirement by requiring any design professional retained by the
Developer or general contractor to maintain professional liability insurance
in the minimum amounts specified in this subsection.
v. Builders’ risk insurance during the course of
construction (and upon completion of construction, property insurance)
covering the Development and covering all risks of loss, excluding
earthquake and including flood (if required), for one hundred percent
(100%) of the replacement value, with deductible, if any, acceptable to the
City.
i. Subcontractor’s Insurance. Developer must require and
verify that all subcontractors and agents working on the Development maintain
Workers’ Compensation insurance meeting all the requirements stated in this
Section, and Developer must ensure that City and the Authority are both additional
insureds on insurance required from subcontractors as described in subsection
(c)(2) of this Section.
i. General Requirements.
1. Except for professional
liability, the required insurance must be provided under an
occurrence form, and the Developer must maintain such coverage
continuously throughout the Term. Should any of the required
insurance be provided under a form of coverage that includes an
annual aggregate limit or provides that claims investigation or legal
defense costs be included in such annual aggregate limit, such
annual aggregate limit must be three (3) times the occurrence limits
specified above.
2. All Commercial General
Liability, Commercial Automobile Liability and Property insurance
policies (including builders’ risk) must be endorsed to name as
additional insureds the City, the Authority and their elected officials,
officers, directors, representatives, consultants, employees, and
agents. The endorsement must include liability arising out of work
or operations performed by or on behalf of Developer including
materials, parts, or equipment furnished in connection with such
work or operations and automobiles owned, leased, hired or
borrowed by or on behalf of Developer. For commercial general
liability, the policy must be endorsed with a form at least as broad
as ISO form CG 20 10 11 85 or both CG 20 10 and CG 20 37 forms
if later revisions used.
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3. Developer’s insurance must
be primary to any other insurance (including self-insurance)
available to the City or the Authority (including elected officials,
officers, directors, representatives, consultants, employees, and
agents) with respect to any claim arising out of this Agreement. Any
insurance maintained by the City or Authority shall be excess of the
Developer’s insurance and shall not contribute with it.
4. No policy shall be canceled,
limited, or allowed to expire without renewal until after thirty (30)
days written notice has been given to the City and Authority by first
class mail.
5. Insurance is to be placed with
insurers with a current A.M. Best’s rating of no less than A:VII,
unless otherwise acceptable to the Entity. Exception may be made
for the State Compensation Insurance Fund when not specifically
rated.
ii. Deductibles. Any deductibles or self-insured
retentions must be declared to and approved by City. At the option of City,
either:
1. Developer must reduce or
eliminate such deductibles or self-insured retentions as respects the
City and its elected officials, officers, directors, representatives,
consultants, employees, and agents; or,
2. Developer must provide a
financial guarantee satisfactory to City guaranteeing payment of
losses and related investigations, claim administration, and defense
expenses.
iii. Subrogation Waiver. Developer hereby
grants to City and the Authority a waiver of any right to subrogation which
any insurer of Developer may acquire against the City by virtue of the
payment of any loss under such insurance. Developer agrees to obtain any
endorsement that may be necessary to effect this waiver of subrogation. The
Workers’ Compensation policy must be endorsed with a waiver of
subrogation in favor of City for all work performed by Developer, its
employees, agents, and subcontractors. This provision applies regardless of
whether or not the City or Authority has requested or received a waiver of
subrogation endorsement from the insurer.
j. Certificates of Insurance. As a condition to the Close of
Escrow for each Phase, the Developer must provide certificates of insurance, in
form and with insurers reasonably acceptable to the City, evidencing compliance
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with the requirements of this Section, and must provide complete copies of such
insurance policies, including endorsements as required by this Section. However,
failure to obtain the required documents before the work beginning shall not waive
Developer’s obligation to provide them. City reserves the right to require complete,
certified copies of all required insurance policies, including endorsements, required
by these specifications, at any time.
k. Additional Coverage. Developer may carry, at its own
expense, any additional insurance it deems necessary or prudent. If Developer
maintains higher levels than the minimums shown above, City requires and shall
be entitled to coverage for the higher limits maintained by Developer. Any
available insurance proceeds in excess of the specified minimum levels of insurance
and coverage shall be available to the City.
l. Audits. The Developer must make available for examination
at reasonable intervals and during normal business hours to the Authority and the
City all books, accounts, reports, files, and other papers or property with respect to
all matters covered by this Agreement, and permit the Authority and the City to
audit, examine, and make excerpts or transcripts from such records, and such
records shall be kept at 100 Pacifica, Suite 203 in the City of Irvine. The Authority
and the City may make audits of such records.
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G.
ASSIGNMENTS AND TRANSFERS
a. Definitions. As used in this Article 7, the term “Transfer”
means: Any total or partial sale, assignment or conveyance, or any trust or power,
or any transfer in any other mode or form, of or with respect to this Agreement or
of the Development or any part thereof or any interest therein or any contract or
agreement to do any of the same;
i. Any total or partial sale, assignment or
conveyance, or any trust or power, or any transfer in any other mode or
form, of or with respect to any ownership interest in Developer or any
contract or agreement to do any of the same;
ii. Any merger, consolidation, sale or lease of all
or substantially all of the assets of the Developer; or
iii. The leasing of part or all of the Development
thereon; provided, however, that leasing of the Units included within the
Development to tenant occupants in accordance with the Regulatory
Agreement or the leasing of the Commercial Space in the Development in
accordance with this Agreement shall not be deemed a Transfer for purposes
of this Article 7.
b. Purpose of Restrictions on Transfer. This Agreement is
entered into solely for the purpose of the development and operation of the
Development and its subsequent use in accordance with the terms hereof. The
Developer recognizes that the qualifications and identity of Developer are of
particular concern to the City, in view of:
i. The importance of the redevelopment of the
Property to the general welfare of the community;
ii. The land acquisition assistance and other
public aids that have been made available by law and by the government for
the purpose of making such redevelopment possible;
iii. The reliance by the City upon the unique
qualifications and ability of the Developer to serve as the catalyst for
development of the Property;
iv. The fact that a change in ownership or
Control of the Developer, or of a substantial part thereof, or any other act or
transaction involving or resulting in a significant change in ownership or
with respect to the identity of the parties in Control of the Developer is for
practical purposes a transfer or disposition of the Property;
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v. The fact that the Property is not to be
acquired or used for speculation, but only for development and operation by
the Developer in accordance with this Agreement and the Regulatory
Agreement; and
vi. The Developer further recognizes that it is
because of such qualifications and identity that the City is entering into this
Agreement with the Developer and that Transfers are permitted only as
provided in this Agreement.
c. Prohibited Transfers. Any Transfer made in contravention
of this Section and is void and are deemed to be a Developer Event of Default under
this Agreement whether or not the Developer knew of or participated in such
Transfer. Except for permitted Transfers described in Section 7.4, no Transfer shall
be permitted in the absence of specific written agreement by the City, and, unless
approved by the City in writing, no Transfer or assignment will be deemed to
relieve the Developer or any other party from any obligations under this Agreement.
d. Permitted Transfers. Notwithstanding the provisions of
Section 7.3, the following Transfers are permitted and are hereby approved by the
City without further review. Any consent by the City under this Section 7.4 shall
constitute the consent of the Authority:
i. Notwithstanding the provisions of Section
7.3, the following Transfers shall be permitted and are hereby approved by
the City:
1. Any Transfer creating a
Security Financing Interest permitted pursuant to the approved
Financing Proposal;
2. Any Transfer of an entire
Phase to a limited partnership in which the Developer or an entity
Controlled by the Developer is the administrative general partner of
such limited partnership (provided City shall have been given a copy
of the limited partnership, and copies of the organizational
documents of the general partner).
3. The Transfer of an entire
Phase to a nonprofit managing general partner pursuant to a right of
first refusal agreement given by a limited partnership owner of the
Phase.
4. The Transfer of an entire
Phase to the administrative general partner pursuant to an option
agreement given by a limited partnership owner of the Phase.
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5. The admission of a tax credit
investor limited partner to Developer, and any subsequent transfer
of investor limited partner interest thereafter.
6. Any Transfer directly
resulting from the foreclosure of a Security Financing Interest or the
granting of a deed in lieu of foreclosure of a Security Financing
Interest or as otherwise permitted under Article;
7. The leasing of residential
units within the Development in accordance with the applicable
Housing Agreement;
8. The granting of reasonable
easements or permits to facilitate the Development of the Property.
e. Other Transfers with City Consent. Any Transfers not
permitted under Section 7.4 shall require the prior written approval of the City
Manager.
i. No Transfer of this Agreement permitted
under this Section will be effective unless, at the time of the Transfer, the
transferor and transferee enter into and records an assignment and
assumption agreement in a form reasonably approved by the City Manager.
f. Termination of Limitations on Transfers. The limitations on
Transfers set forth in this Article 7 shall apply with respect to the Property or a
Phase until issuance by the City of a Certificate of Completion for the Phase.
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H.
DEFAULT AND REMEDIES
a. General Applicability. The provisions of this Article 8
govern the Parties’ remedies for breach or failure of this Agreement. If a closing
condition does not occur, then either Party shall not be obligated to convey or accept
the applicable parcel, may terminate the obligation to convey/accept and the
Deposit shall be returned to the Developer; however, the foregoing does not relieve
a party from the implied covenant of good faith and fair dealing (with the
understanding that such implied covenant does not apply to the City acting in its
governmental capacity).
b. Fault of City. Each of the following events, if uncured after
expiration of the applicable cure period in constitutes a “City Event of Default”.
The City, without good cause, fails to sell the Property to the Developer in the
manner set forth in Article 3 and the Developer is otherwise entitled by this
Agreement to such conveyance; or
i. The City breaches any other material
provision of this Agreement which is materially adverse to Developer.
c. Fault of Authority. Each of the following events, if uncured
after expiration of the applicable cure period, constitutes an “Authority Event of
Default”:
i. The Authority, without good cause, fails to
disburse the Authority Loan to the Developer in the manner set forth in
Article 5 and the Developer is otherwise entitled by this Agreement to the
disbursement; or
ii. The Authority breaches any other material
provision of this Agreement which is materially adverse to Developer.
d. Fault of Developer. Each of the following events, if uncured
after expiration of the applicable cure period, constitutes a “Developer Event of
Default”:
i. The Developer fails to exercise good faith
and diligent efforts to satisfy, within the time and in the manner set forth in
Article 3, one or more of the conditions precedent to the City’s obligation
to convey the Property to the Developer;
ii. The Developer refuses to accept conveyance
from the City of the Property within the time periods and under the terms
set forth in Article 3 and fails to cure the default within thirty (30) days after
notice of default from City or Authority;
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iii. The Developer fails to construct the
Development in violation of Article 4 cure the default within thirty (30)
days after notice of default from City or Authority;
iv. The Developer fails to comply with any
construction deadlines in the Schedule of Performance.
v. Any default by the Developer under the
Housing Agreement shall also be a Developer Event of Default under this
Agreement and the Authority Loan Documents, subject to any required
notice and cure period under the Housing Agreement;
vi. A Transfer occurs, either voluntarily or
involuntarily, in violation of Article 7;
vii. Any representation or warranty contained in
this Agreement or in any application, financial statement, certificate, or
report submitted to the City in connection with this Agreement proves to
have been incorrect in any material and adverse respect when made;
viii. A court having jurisdiction makes or enters
any decree or order: (1) adjudging the Developer to be bankrupt or
insolvent; (2) approving as properly filed a petition seeking reorganization
of the Developer, or seeking any arrangement for the Developer, under the
bankruptcy law or any other applicable debtor’s relief law or statute of the
United States or any state or other jurisdiction; (3) appointing a receiver,
trustee, liquidator, or assignee of the Developer, in bankruptcy or
insolvency or for any of their properties; or (4) directing the winding up or
liquidation of the Developer, if any such decree or order described in clauses
(1) to (4), inclusive, continued unstayed or undischarged for a period of
ninety (90) days unless a lesser time period is permitted for cure under any
other mortgage on the Property, in which event such lesser time period will
apply under this subsection (i) as well; or the Developer, admits in writing
its inability to pay its debts as they fall due or voluntarily submits to or files
a petition seeking any decree or order of the nature described in clauses (1)
to (4), inclusive;
ix. The Developer assigns its assets for the
benefit of its creditors or suffered a sequestration or attachment of or
execution on any substantial part of its property, unless the property so
assigned, sequestered, attached or executed upon have been returned or
released within ninety (90) days after such event (unless a lesser time period
is permitted for cure under any other mortgage on the Property, in which
event such lesser time period will apply under this subsection as well) or
prior to sooner sale under such sequestration, attachment, or execution;
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x. The Developer voluntarily suspends its
business or, the Developer is dissolved or terminated;
xi. There occurs any default declared by any
entity under any loan document to which City or Authority is not a
party/beneficiary, and which is related to any loans secured by a deed of
trust on the Development or any such deed of trust or any regulatory
agreement recorded against the Property (other than the Housing
Agreement), after the expiration of applicable cure periods in the applicable
documents; or
xii. The Developer breaches any other provision
of this Agreement and fails to cure the default within thirty (30) days after
notice of default from City or Authority, or the Developer breaches any
other provision of any Authority Loan Documents and fails to cure the same
within: (a) the cure period in the Authority Loan Documents, if any
applicable to the default; or (b) if no cure period applies, and the default is
not included/described in the preceding subsections, then Developer fails to
cure the default within thirty (30) days after written notice from Authority.
e. Notice and Cure Period Regarding City/Authority Defaults.
Before initiating any action for relief against City or Authority for an alleged breach
of this Agreement, Developer must deliver to City or Authority, as applicable, a
written notice of breach specifying all of the reasons for the allegation of default
with reasonable particularity. Within thirty (30) days, City or Authority (as
applicable) must either: (1) use good faith efforts to cure the breach or, if such cure
is of the nature to take longer than thirty (30) days, to follow the procedures
specified in subsection (b) below; or (2) if in the determination of the City or
Authority, the event does not constitute a breach of this Agreement, the City or
Authority, as applicable, within thirty (30) days of receipt of the Notice of Default,
must deliver to Developer a notice which sets forth with reasonable particularity
the reasons that a default has not occurred. Failure to respond within the thirty (30)
day period may not be deemed an admission of the default.
i. If the City or Authority, as applicable,
believes that the Default cannot practically be cured within the thirty (30)-
day period, it shall not be in Default provided that: (1) the cure is
commenced during the thirty (30) day period after receipt of the Notice of
Default; (2) within the thirty (30) day period, the Defaulting Party provides
a schedule to Developer for cure, ; and (3) the cure is thereafter diligently
prosecuted to completion, and City or Authority as applicable uses good
faith efforts to comply with the schedule.
f. Remedies; City Remedies. With respect to an uncured
Developer Event of Default, the City shall be entitled to take any or all of the
following remedies:
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i. Terminating this Agreement by giving
written notice to the Developer; provided, however, that the City’s remedies
under this Article 8 and the indemnification provisions of this Agreement
survive such termination. If the City elects to terminate this Agreement, the
provisions of this Agreement that are specified to survive such termination
shall remain in full force and effect.
ii. Prosecuting an action for damages (excluding
specific performance, punitive damages and indirect consequential
damages); or seeking any other remedy available at law or in equity
(excluding punitive damages and indirect consequential damages).
g. Developer Remedies. With respect to an uncured City Event
of Default or Authority Event of Default, the Developer shall be entitled to take any
or all of the following remedies:
i. Terminating this Agreement by giving
written notice to the Developer; provided, however, that the Developer’s
remedies under this Article 8 and the indemnification provisions of this
Agreement survive such termination. If the Developer elects to terminate
this Agreement, the provisions of this Agreement that are specified to
survive such termination shall remain in full force and effect.
ii. Prosecuting an action for damages (excluding
specific performance, punitive damages, lost profits and indirect
consequential damages); or seeking any other remedy available at law or in
equity (excluding punitive damages and indirect consequential damages).
h. Authority Remedies. With respect to an uncured Developer
Event of Default as to a Phase, the Authority shall be entitled to exercise any or all
remedies permitted at law or in equity, and any remedies under the Promissory Note
and Deed of Trust for that Phase (including acceleration of the applicable loan).
i. Rights of Mortgagees. Any rights of the City or Authority
under this Article 8 will not defeat, limit or render invalid any Security Financing
Interest permitted by this Agreement or any rights provided for in this Agreement
for the protection of holders of Security Financing Interests.
j. Remedies Cumulative. No right, power, or remedy given to
the City by the terms of this Agreement is intended to be exclusive of any other
right, power, or remedy; and each and every such right, power, or remedy will be
cumulative and in addition to every other right, power, or remedy given by the
terms of any such instrument, or by any statute or otherwise. Neither the failure
nor any delay to exercise any such rights and remedies will operate as a waiver
thereof, nor will any single or partial exercise of any such right or remedy preclude
any other or further exercise of such right or remedy, or any other right or remedy.
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I.
SECURITY FINANCING AND RIGHTS OF HOLDERS
a. No Encumbrances Except for Development Purposes.
Notwithstanding any other provision of this Agreement, mortgages and deeds of
trust, or any other reasonable method of security are permitted to be placed upon
the Developer’s fee interest in the Property, but only for the purpose of securing
loans approved by the City under the approved Financing Proposal. Mortgages,
deeds of trust, or other reasonable security instruments securing loans approved by
the City under the approved Financing Proposal are each referred to as a “Security
Financing Interest.” The words “mortgage” and “deed of trust” as used in this
Agreement include all other appropriate modes of financing real estate acquisition,
construction, and land development.
b. Holder Not Obligated to Construct. The holder of any
Security Financing Interest authorized by this Agreement is not obligated to
construct or complete any Development or to guarantee such construction or
completion; nor will any covenant or any other provision in conveyances from the
City to the Developer evidencing the realty com prising the Property or any part
thereof be construed so to obligate such holder. However, no such holder shall
devote the Property or any portion thereof to any uses, or to construct any
Development thereon, other than the Development provided for or authorized by
this Agreement and the Housing Agreement.
c. Notice of Default and Right to Cure. Whenever the City
under its rights set forth in Article 8 of this Agreement delivers any notice or
demand to the Developer with respect to the commencement, completion, or
cessation of the construction of the Development, the City will at the same time
deliver to each holder of record of any Security Financing Interest creating a lien
upon the Developer’s fee interest in the Property or any portion thereof, and the
Investor, a copy of such notice or demand provided City shall have been given
written notice of its address for notice by the Developer. Each such holder (insofar
as the rights of the City are concerned) has the right, but not the obligation, at its
option, within ninety (90) days after the delivery of the notice, to cure or remedy or
commence to cure or remedy any such default or breach affecting the Property
which is subject to the lien of the Security Financing Interest held by such holder
and to add the cost thereof to the security interest debt and the lien on its security
interest. Nothing contained in this Agreement is deemed to permit or authorize
such holder to undertake or continue the construction or completion of the
Development (beyond the extent necessary to conserve or protect such
Development or construction already made) without first having expressly assumed
in writing the Developer’s obligations to the City relating to such Development
under this Agreement under an assignment and assumption agreement prepared by
the City and recordable among the Official Records (the “Security Financing
Interest Assignment”). The holder in that event must agree to complete, in the
manner provided in this Agreement (or as may be amended by the Security
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Financing Interest Assignment; provided, however, the City is under no obligation
to extend the dates for performance set forth in this Agreement), the Development
to which the lien or title of such holder relates. Any such holder properly
completing such Development under this paragraph must assume all rights and
obligations of Developer under this Agreement and will be entitled, upon
completion and written request made to the City, to a Certificate of Completion
from the City.
d. Failure of Holder to Complete Development. In any case
where six (6) months after default by the Developer in completion of construction
of the Development under this Agreement, the holder of record of any Security
Financing Interest, having first exercised its option to construct under the Security
Financing Interest Assignment, has not proceeded diligently with construction (as
reasonably determined by the City), the City and Authority must be afforded those
rights against such holder it would otherwise have against Developer under this
Agreement.
e. Right of Cure. In the event of a default or breach by the
Developer of a Security Financing Interest prior to the completion of the
Development, and the holder has not exercised its option to complete the
Development on the Property, the City or Authority may cure the default, prior to
the completion of any foreclosure. In such event the City or Authority as applicable
will be entitled to reimbursement from the Developer of all costs and expenses
incurred bin curing the default. The City will also be entitled to a lien upon the
Property or any portion thereof to the extent of such costs and disbursements, or in
the case of the Authority, the Developer’s obligation to reimburse for costs and
disbursements shall be included in the obligations secured by the applicable Deed
of Trust. The City agrees that such lien will be subordinate to any Security
Financing Interest, and the City will execute from time to time any and all
documentation reasonably requested by Developer to effect such subordination.
f. Right of City to Satisfy Other Liens. After the conveyance
of title to the Property or any portion thereof and after the Developer has had a
reasonable time to challenge, cure or satisfy any liens or encumbrances on the
Property or any portion thereof, the City will have the right to satisfy any such lien
or encumbrances; provided, however, that nothing in this Agreement will require
the Developer to pay or make provision for the payment of any tax, assessment,
lien or charge so long as the Developer in good faith may contest the validity or
amount therein and so long as such delay in payment is not subject the Property or
any portion thereof to forfeiture or sale.
g. Holder to be Notified. The Developer will insert each term
contained in this Article 9 into each Security Financing Interest or will procure
acknowledgement of such terms by each prospective holder of a Security Financing
Interest prior to its coming into any security right or interest in the Property or
portion thereof.
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h. Estoppel Certificates. Any Party may at any time, and from
time to time, deliver written notice to another Party requesting such other party to
certify in writing that, to the knowledge of the certifying Party: (a) this Agreement
is in full force and effect and a binding obligation of the Parties; (b) this Agreement
has not been amended or modified either orally or in writing, or if so amended,
identifying the amendments; and (c) the requesting Party is not in default in the
performance of its obligations under this Agreement, or if in default, the notice shall
describe the nature and amount of any such default. A Party receiving a request
shall execute and return such certificate within fifteen (15) days following receipt
of the request. The City Manager is authorized to execute any estoppel certificate
requested by the Developer on behalf of the City. The Authority’s Executive
Director is authorized to execute any estoppel certificate requested by the
Developer on behalf of the Authority.
J.
GENERAL PROVISIONS
a. Notices, Demands and Communications. Formal notices,
demands, and communications between the City and the Developer will be
sufficiently given if, and not be deemed given unless, dispatched by registered or
certified mail, postage prepaid, return receipt requested, or delivered by reputable
overnight delivery service, to the principal office of the City and the Developer as
follows:
City and Authority: City of Palm Desert/Palm Desert Housing Authority
73-510 Fred Waring Drive
Palm Desert, CA 92260
Attn: Housing Division
Developer: Palm Communities
100 Pacifica, Suite 203
Irvine, CA 92618
Attn: President
Such written notices, demands and communications may be sent in the same manner to such other
addresses as the affected Party may from time to time designate by notice as provided in this
Section.
b. Non-Liability of Officials, Employees and Agents. No City
Council members, or Authority board members, or any of the officers, directors,
representatives, consultants, employees and agents of the City or Authority may be
personally liable to the Developer, or any successor in interest, in the event of any
default or breach by the City or Authority or for any amount which may become
due to the Developer or successor or on any obligation under the terms of this
Agreement. Absent fraud or willful misconduct by the responsible party, no
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members, officers, directors, representatives, consultants, employees and agents of
the Developer may be personally liable to the City or Authority, or any successor
in interest, in the event of any default or breach by the Developer or for any amount
which may become due to the City or Authority or successor or on any obligation
under the terms of this Agreement.
c. Forced Delay. In addition to specific provisions of this
Agreement, any Party hereunder shall not be deemed to be in default with respect
to a construction obligation/deadline where delays or defaults are due to war;
insurrection; strikes; lock-outs; riots; floods; earthquakes; fires; casualties; acts of
God; acts of the public enemy; epidemics; quarantine restrictions; freight
embargoes; lack of transportation; governmental restrictions or priority (except for
restrictions or priorities established by the Party required to perform the action
required under this Agreement); unusually severe weather; inability to secure
necessary labor, materials or tools; acts or the failure to act of any public or
governmental agency or entity (except that acts or the failure to act of a Party shall
not excuse performance by such Party, including without limitation the Developer’s
inability to obtain financing for the Development or the economic infeasibility of
the Development) (“Force Majeure”). An extension of time for Force Majeure shall
only be for the period of the enforced delay, which period shall commence to run
from the time of the notification of the delay by the Party requesting the extension
to the other Party. The Party requesting an extension of time under this Section
10.3 shall give notice promptly following knowledge of the delay to the other Party.
If, however, notice by the Party claiming such extension is sent to the other Party
more than thirty (30) days after knowledge of the commencement of the delay, the
period shall commence to run upon the earlier of (i) thirty (30) days prior to the
giving of such notice or (ii) the date that the other Party received knowledge of the
events giving rise to the delay.
d. Inspection of Books and Records. Upon request, the
Developer must permit the City and Authority to inspect at reasonable times and
on a confidential basis those books, records and all other documents of the
Developer necessary to determine Developer’s compliance with the terms of this
Agreement. Title of Parts and Sections. Any titles of the articles, sections or
subsections of this Agreement are inserted for convenience of reference only and
should be disregarded in construing or interpreting any part of its provision.
e. No Third-Party Beneficiaries. There are no third party
beneficiaries to this Agreement.
f. Applicable Law. This Agreement must be interpreted under
and under the laws of the State of California. Venue shall be Riverside County.
g. No Brokers. Each Party represents to the other that it has not
had any contact or dealings regarding the Property, or any communication in
connection with the subject matter of this transaction, through any real estate broker
or other person who can claim a right to a commission or finder’s fee. If any broker
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or finder makes a claim for a commission or finder’s fee based upon a contact,
dealings, or communications, the Party through whom the broker or finder makes
this claim must indemnify, defend with counsel of the indemnified Party’s choice,
and hold the indemnified Party harmless from all expense, loss, damage and claims,
including the indemnified Party’s reasonable attorneys’ fees, if necessary, arising
out of the broker’s or finder’s claim. The provisions of this Section survive
expiration of the Term or other termination of this Agreement and will remain in
full force and effect.
h. Legal Actions. In the event any legal action is commenced
to interpret or to enforce the terms of this Agreement or to collect damages as a
result of any breach thereof, each Party shall bear their own attorneys’ fees and no
attorneys’ fees may be awarded to the Party prevailing in the action.
i. Severability. If any term, provision, covenant or condition
of this Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the provisions will continue in full force and effect
unless the rights and obligations of the Parties have been materially altered or
abridged by such invalidation, voiding or unenforceability.
j. Binding Upon Successors. This Agreement is binding upon
and inures to the benefit of the heirs, administrators, executors, successors in
interest and assigns of each of the Parties hereto, except that there may be no
Transfer of any interest by any of the Parties hereto except under the terms of this
Agreement. Any reference in this Agreement to a specifically named Party is
deemed to apply to any successor, heir, administrator, executor or assignee of such
Party who has acquired an interest in compliance with the terms of this Agreement,
or under law.
k. Parties Not Co-Venturers. Nothing in this Agreement is
intended to or does establish the Parties as partners, co-venturers, or principal and
agent with one another.
l. Discretion Retained by City. The City’s execution of this
Agreement does not constitute approval by the City and in no way limits the
discretion or any governmental rights or powers of the City in the permit and
approval process in connection with construction of the Development.
m. Time of the Essence. In all matters under this Agreement,
the Parties agree that time is of the essence.
n. Representation and Warranties of Developer. The
Developer hereby represents and warrants to the City and Authority as follows:
i. Organization. The Developer is a duly
organized, validly existing corporation, is in good standing under the laws
of the State of California and has the power and authority to own its property
and carry on its business as now being conducted.
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ii. Authority of Developer. The Developer has
full power and authority to execute and deliver this Agreement and to
perform and observe the terms and provisions of all of the above.
iii. Authority of Persons Executing Documents.
This Agreement and all other documents or instruments executed and
delivered, or to be executed and delivered, under this Agreement have been
executed and delivered by persons who are duly authorized to execute and
deliver the same for and on behalf of Developer, and all actions required
under the Developer’s organizational documents and applicable governing
law for the authorization, execution, delivery and performance of this
Agreement and all other documents or instruments executed and delivered,
or to be executed and delivered, under this Agreement, have been duly
taken.
iv. Valid Binding Agreements. This Agreement
and all other documents or instruments which have been executed and
delivered under or in connection with this Agreement constitute or, if not
yet executed or delivered, will when so executed and delivered constitute,
legal, valid and binding obligations of the Developer enforceable against it
in accordance with their respective terms.
v. No Breach of Law or Agreement. Neither the
execution nor delivery of this Agreement or of any other documents or
instruments executed and delivered, or to be executed or delivered, under
this Agreement, nor the performance of any provision, condition, covenant
or other term hereof or thereof, will conflict with or result in a breach of any
statute, rule or regulation, or any judgment, decree or order of any court,
City Council, commission or agency whatsoever binding on the Developer,
or any provision of the organizational documents of the Developer, or will
conflict with or constitute a breach of or a default under any agreement to
which the Developer is a party.
o. Entire Understanding of the Parties. This Agreement
constitutes the entire understanding and agreement of the Parties. All prior
discussions, understandings and written agreements are superseded by this
Agreement.
p. Amendments. The Parties can amend this Agreement only
by means of a writing executed by the Developer, the Authority and the City.
q. Approvals. Whenever this Agreement permits City
approval, consent, or waiver, to be authorized by the City Manager, the City
Manager’s signature shall constitute the approval, consent, or waiver of the City,
without further authorization required from the City Council unless required by law
or the terms of this Agreement. Whenever this Agreement permits Authority
approval, consent, or waiver, to be authorized by the Authority’s Executive
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Director, the Authority’s Executive Director signature shall constitute the approval,
consent, or waiver of the Authority, without further authorization required from the
Authority’s governing board unless required by law or the terms of this Agreement.
r. Counterparts; Multiple Originals. This Agreement may be
executed in counterparts, each of which is deemed to be an original.
The City, the Authority and the Developer are signing this Agreement as of the Effective
Date.
[Signatures on following page]
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CITY:
CITY OF PALM DESERT,
a municipal corporation
By:
L. Todd Hileman
City Manager
DEVELOPER:
PALM COMMUNITIES,
a California corporation
By:
Danavon L. Horn
President
APPROVED AS TO FORM:
Richard, Watson & Gerson
By:
Special Counsel
AUTHORITY:
PALM DESERT HOUSING AUTHORITY
By: ___
Karina Quintanilla
Chairperson
APPROVED AS TO FORM:
Richard, Watson & Gerson
By:
Special Counsel
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