RES-2017-091RESOLUTION NO. 2 017 — 0 91
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ANAHEIM
APPROVING AN AFFORDABLE HOUSING AGREEMENT BETWEEN THE
ANAHEIM HOUSING AUTHORITY AND AVON DAKOTA HOUSING
PARTNERS II, L.P. AND MAKING CERTAIN OTHER FINDINGS IN
CONNECTION THEREWITH
WHEREAS, the Anaheim Housing Authority ("Authority") is a California housing authority
duly organized and existing under the California Housing Authorities Law, Part 2 of Division 24,
Section 34200, et seq., of the Health and Safety Code ("HAL"), and has been authorized to transact
business and exercise the power of a California housing authority pursuant to action of the City
Council ("City Council") of the City of Anaheim; and
WHEREAS, the City of Anaheim ("City") is a California municipal corporation and charter
city; and
WHEREAS, the City is a participating jurisdiction with the United States Department of
Housing and Urban Development ("HUD") that has received funds ("HOME Funds") from HUD
pursuant to Title II of the Cranston Gonzalez National Affordable Housing Act (42 U.S.C. 12701
12839) and the HOME Program regulations codified at 24 CFR Part 92, as amended by the "2013
HOME Final Rule" at 24 CFR Part 92 (Complete Rule) http://www.ecfr.gov/cgi-bin/text-
idx?tpl=/ecfrbrowse/Title24/24cfr92�main�02.tpl (together, "HOME Program"); and
WHEREAS, HOME Program has, among its purposes, the strengthening of public-private
partnerships to provide more affordable housing, and particularly to provide decent, safe, sanitary,
and affordable housing, with primary attention to housing for very low income and lower income
households in accordance with the HOME Program; and
WHEREAS, the HOME Program funds are used by the Authority, as a participating
jurisdiction, to carry out multi-year housing strategies through acquisition, rehabilitation, and new
construction of housing for target income persons and families; and
WHEREAS, there is a multifamily residential neighborhood in the City commonly called
"Avon/Dakota" that is located in an area bounded on the east by L3 Communications at 602 E.
Vermont Avenue and the development site at 700 E. South Street, on the north by South Street, on
the south by Vermont Street, and on the west by Thomas Jefferson Elementary School and Olive
Elementary School and which area is part of the Central Anaheim Policing District ("Avon/Dakota
Neighborhood"); and
WHEREAS, the Avon/Dakota Neighborhood has been identified as a Level III "challenged"
neighborhood under the City of Anaheim's Neighborhood Improvement Program; this designation is
due to evidence of moderate to substantial social, economic and physical decline, as well as increased
calls for service from the police department and code enforcement; and, further, the Avon/Dakota
Neighborhood has seen a transition from owner -occupied units to mainly tenant occupied units and
as a result, deferred maintenance is evident; and
WHEREAS, in order to eliminate deterioration and to revitalize the Avon Dakota
Neighborhood, Authority and The Related Companies of California, LLC, a California limited
liability company ("TRCC"), entered into that certain Neighborhood Revitalization Agreement for
the Avon/Dakota Neighborhood, dated as of June 1, 2010, and amended by that certain First
Amendment to the Neighborhood Revitalization Agreement for the Avon/Dakota Neighborhood,
dated as of February 1, 2011 (collectively, the "Revitalization Agreement"); and
WHEREAS, in connection with the Revitalization Agreement, the City, the former Anaheim
Redevelopment Agency (the "Agency") and the Authority entered into that certain Cooperation
Agreement dated as of June 1, 2010 and that certain amended Cooperation Agreement (Additional
Funding for Avon/Dakota Neighborhood Revitalization) dated as of January 1, 2011 dated as of
January 1, 2011 (together, "Cooperation Agreements") whereby (1) City agreed to transfer to
Authority up to Three Million Dollars ($3,000,000) in HOME Program funds, up to Ninety -Six
Thousand Dollars ($96,000) in CDBG Program funds, and up to Six Hundred Sixty -Three Thousand
Dollars ($663,000) in NSP funds (as therein described and defined); (2) Agency (now the City,
acting as the Successor Agency to the Anaheim Redevelopment Agency, referred to herein as the
"Successor Agency") agreed to transfer to Authority One Million Forty -One Thousand Dollars
($1,041,000) from the Housing Fund; (3) Authority agreed to use such transferred funds to cause
with TRCC the preparation and implementation of the Revitalization Plan (hereinafter defined) and
the Revitalization Agreement; and (4) by the amendment thereto, increased funding available to
Authority for expenditures under the Revitalization Agreement by an additional Fifteen Million
Dollars ($15,000,000) for a total of up to $19,800,000; and
WHEREAS, the Cooperation Agreements and the Revitalization Agreement, together, are
"enforceable obligations" of the Agency under Assembly Bill xl 26 which added Parts 1.8 and 1.85
to Division 24 of the Health and Safety Code ("Dissolution Act") and have been listed (by the
Agency prior to February 1, 2012 and by the Successor Agency on and after February 1, 2012) on the
"Enforceable Obligation Payment Schedule" ("EOPS") and initial "Recognized Obligation Payment
Schedule" ("ROPS) and will continue to be so listed until the Cooperation Agreements and the
Revitalization Agreement, and all implementing contracts and instruments thereto, are fully
performed and implemented; however, the California Department of Finance challenged the
characterization of these obligations as enforceable obligations and prevailed at the trial court level in
such dispute; and
WHEREAS, the Authority additionally maintains a Low and Moderate Income Housing
Asset Fund (the "Housing Asset Fund") pursuant to Health and Safety Code Section 34176 and
34176.1 and, pursuant to the Revitalization Agreement, the Authority Executive Director is
authorized to use moneys held in the Housing Asset Fund to provide assistance to the Developer in
furtherance of the revitalization of the Avon/Dakota Neighborhood; and
WHEREAS, pursuant to the Revitalization Agreement, Authority and TRCC jointly and
cooperatively prepared a revitalization plan for the Avon/Dakota Neighborhood ("Revitalization
Plan"), and agreed to implement the Revitalization Plan in the manner set forth in the Revitalization
Agreement; and
WHEREAS, pursuant to the Revitalization Agreement, the funds appropriated to Authority
pursuant to the Cooperation Agreements are and will continue to be allocated and disbursed as
Authority reasonably determines necessary for the Revitalization Plan and its implementation; and
WHEREAS, the Revitalization Agreement and Revitalization Plan set forth general
procedures whereby TRCC and/or Authority would acquire properties within the Avon -Dakota
Neighborhood for subsequent improvement as funded pursuant thereto; further, the Revitalization
Agreement authorized property acquisition by TRCC subject to the discretion and approval of the
Authority; and
2
WHEREAS, the Revitalization Plan prepared by Authority and TRCC contemplates that
limited partnerships in which affiliates of TRCC act as a general partner ("TRCC Affiliates") would
undertake a multiple phase project ("Project") expanding and improving the supply of affordable
housing for Very Low and Low Income Households to develop a viable urban community by
providing decent, safe housing and a suitable living environment. The Project is more particularly
described in Attachment No. 3 to the "Agreement", as defined below; and
WHEREAS, pursuant to the terms of the Revitalization Agreement, Authority and TRCC
agreed that the Authority and each TRCC Affiliate would enter into a separate Affordable Housing
Agreement for each phase of the Project. Avon Dakota Housing Partners Il, L.P. (Developer)
Developer is the TRCC Affiliate for the second phase of the Project, and TRCC has assigned its
right, title and interest under the Revitalization Agreement with respect to such phase of the Project
to Developer; and
WHEREAS, Authority has acquired or is under contract to acquire certain real properties
generally located at 809 S. Dakota Street, 824 S. Dakota Street, 862 S. Dakota Street, 868 S. Dakota
Street and 606 E. Avon Place in the City (together, "Site"), and Authority desires to convey a ground
leasehold interest in the Site to Developer for the rehabilitation and long term operation of an
affordable rental housing project as the second phase of the Project in accordance with the terms of
the Agreement ("Phase 11"). Phase Il is being undertaken in accordance with the Revitalization Plan
prepared in accordance with the Revitalization Agreement; and
WHEREAS, the Site is currently improved with seven buildings, including a total of twenty-
one (2 1) apartment units; and
WHEREAS, Authority's acquisition of the Site and conveyance thereof to the Developer for
rehabilitation and long-term management and operation as affordable housing shall at all times
conform to the requirements of the federal Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (URA), as amended, the implementing regulations of Handbook
1378 of the Department of Housing and Urban Development (HUD), the California Relocation
Assistance Law, Government Code Section 7260, et seq., and the Relocation Assistance and Real
Property Acquisition Guidelines adopted by the Department of Housing and Community
Development and set forth at Title 25, California Code of Regulations Section 6000, et seq.
(Guidelines) (collectively, the "Relocation Laws"); and
WHEREAS, in accordance with the Relocation Laws, Authority has caused to be prepared a
Relocation Plan with respect to each separate property comprising the Site, and has caused such
Relocation Plans to be made available to the public, specifically including tenants of the Site, prior to
the public hearing for consideration of the Agreement and the Relocation Plans; and
WHEREAS, Developer and Authority, as applicable, shall comply with the Relocation Plans
approved for the Project, as they may be amended from time to time; and
WHEREAS, Developer is experienced in the construction, development, operation and
management of high quality housing which is affordable to persons and families of low, very low and
extremely low income in Southern California, including without limitation dwelling units developed
utilizing HOME Funds and Housing Asset Funds; and
WHEREAS, Developer has proposed to enter into an agreement entitled "Affordable
Housing Agreement (Avon Dakota Neighborhood — Phase 11)" (the "Agreement") under which
3
Developer proposes to: (i) ground lease the Site from Authority pursuant to a ground lease in the
form attached to the Agreement as Attachment No. 7 ("Ground Lease"), (ii) develop the Site with
Phase II of the Project, consisting of twenty-one (21) apartment units, of which thirteen (13)
apartment units shall additionally be subject to restrictions under the HOME Program, and parking
for rental to and occupancy by qualified Very Low and Low Income Households, (iii) borrow an
amount described in Section 5. 1.1 of the Agreement for the development of Phase II at the Site from
Authority ("Authority Subordinate Loan"), which Authority Subordinate Loan shall be repaid from
eighty-five percent (85%) of the Residual Receipts from the operation of Phase Il, and (iv) operate
Phase 11 as affordable housing throughout the 55 -year "Affordability Period" pursuant to the
requirements of the Agreement; and
WHEREAS, all initially capitalized terms used in this Resolution without definition have the
meanings set forth in the Agreement; and
WHEREAS, Authority desires to (i) ground lease the Site to Developer pursuant to the
Ground Lease, and (ii) make the Authority Subordinate Loan to Developer to assist Developer in the
rehabilitation and operation of Phase II in accordance with the Agreement; and
WHEREAS, Developer (as "Applicant" to TCAC) intends to submit an application to TCAC
("Application") to obtain an allocation of federal nine percent (9%) Low Income Housing Tax
Credits ("Tax Credits") for Phase II. If Developer does not receive such allocation of 9% Tax
Credits after such first Application to TCAC, Developer shall submit an Application for 9% Tax
Credits in the next round following notification that Developer's first Application was not successful.
If Developer's second round Application is not successful, the provisions of Section 3.10.1(a)(iii) of
the Agreement shall apply; and
WHEREAS, by Authority's commitment of monies sourced in whole or in part from the
Housing Asset Fund and/or HOME Funds for the Agreement and/or the Authority Subordinate Loan,
neither Authority (or Successor Agency or City) nor Developer intends in any manner to waive any
constitutional and/or legal rights under the Dissolution Act or any other applicable laws; therefore,
Authority (and Successor Agency and City) and Developer expressly and intentionally reserve all
rights under any and all applicable laws to challenge the validity of any or all provisions of the
Dissolution Act in any legal manner or proceeding, including challenging determinations made by
the Oversight Board and/or California Department of Finance, without prejudice to the City or
Successor Agency or Authority or Developer; and
WHEREAS, Developer shall own (under a long-term ground lease from the Authority) and
shall develop and operate Phase Il and shall cause Phase II to be maintained and managed in
accordance with the Agreement and the Ground Lease to be executed by Authority and Developer
with respect to Phase II, and all other Transaction Documents, during the entire Affordability Period;
and
WHEREAS, the Project (including, without limitation, Phase 11) is vital to and in the best
interest of the City of Anaheim and the health, safety and welfare of its residents, and is in
accordance with the public purposes of applicable state and local laws and requirements; and
WHEREAS, the Authority has prepared such notices, plans and reports as may be required
prior to consideration of this matter and has made available for public inspection all such matters
prior to the public consideration of this matter; and
11
WHEREAS, the Authority and City held a public hearing to consider the Agreement and the
transaction contemplated therein in accordance with the Housing Authorities Law, the California
Community Redevelopment Law, Health and Safety Code Section 33000, et seq., and the Dissolution
Act; and
WHEREAS, the City Council has duly considered all terms and conditions of the proposed
Agreement, including all attachments thereto, and believes that the Project is in the best interests of
the City of Anaheim and the health, safety, and welfare of its residents, and in accord with the public
purposes and provisions of applicable state and local laws and requirements.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF ANAHEIM:
Section 1. The City Council finds and determines that the foregoing recitals are true and
correct and are a substantive part of this Resolution.
Section 2. The City Council hereby finds and determines, based on all documentation,
testimony and other evidence in the record before it, that (a) the proposed sale and development of
the Site will assist in the elimination of blight by allowing several parcels (the Site) previously under
separate ownership and management, to be combined under single ownership and property
management and developed with rehabilitated multifamily rental housing units which will be
affordable to persons and families of low, very low and extremely low income; and (b) the
consideration being paid to the Authority is not less than the fair reuse value at the use and with the
covenants and conditions and development costs authorized by the Affordable Housing Agreement.
Section 3. The City Council hereby approves the Affordable Housing Agreement
between the Authority and the Developer, with such changes as may be mutually agreed upon by the
Authority Executive Director (or his duly authorized representative), the City Attorney, and the
Developer, respectively, as are minor and in substantial conformance with the form of the Agreement
submitted herewith. The City Council hereby approves the Relocation Plan for the Site, with such
modifications as may be made from time to time at the direction of the Authority Executive Director,
all in accordance with the Relocation Laws.
Section 4. As a "responsible agency" under the California Environmental Quality Act
(Public Resources Code Section 21000, et seq.; herein referred to as "CEQA"), the City Council
hereby finds and determines that the proposed ground lease of the Site consists of the sale of surplus
government property (a Class 12 Project) that will not cause a significant effect on the environment
and that the Agreement and the sale of the Site pursuant to the Amended Letter is therefore
categorically exempt from CEQA pursuant to Section 15312 of Title 14 of the California Code of
Regulations. This finding is based on the Authority's determination that (a) the Site does not have
significant values for wildlife habitat or other environmental purposes, and (b) the Site is of such
size, shape, or inaccessibility that it is incapable of independent development or use. The City
Council further determines that Phase Il consists of an in -fill development project (a Class 32
Project) and is therefore categorically exempt from CEQA pursuant to Section 15332 of Title 14 of
the California Code of Regulations. This finding is based on the Authority's determination that (a)
Phase 11 is consistent with the applicable general plan designation and all applicable general plan
policies as well as with applicable zoning designation and regulations; (b) the proposed development
occurs within city limits on a project site of no more than five acres substantially surrounded by
urban uses; (c) the Site has no value as habitat for endangered, rare or threatened species; (d)
approval of the project would not result in any significant effects relating to traffic, noise, air quality,
9
or water quality; and (e) the Site can be adequately served by all required utilities and public
services.
Section 5. The City Clerk shall certify to the adoption of this Resolution.
THE FOREGOING RESOLUTION IS PASSED, APPROVED AND ADOPTED BY
THE CITY COUNCIL OF THE CITY OF ANAHEIM THIS SIXTH (6"') DAY OF JUNE,
2017, BY THE FOLLOWING ROLL CALL VOTE:
AYES: Mayor Tait and Council Members Murray, Barnes, Moreno,
Kring, and Faessel
NOES: None
ABSTAIN: None
ABSENT: Mayor Pro Tem Vanderbilt
AT EST:
'-v" ack&
City Clerk
CITY OF ANAHEIM
By: r 4
Mayor
7
ATTACHMENT TO RESOLUTION
ATTACH COPY OF AGREEMENT
ATTACHMENT TO RESOLUTION
Page I of 1
AFFORDABLE HOUSING AGREEMENT
(Avon Dakota Neighborhood - Phase II)
by and among
ANAHEIM HOUSING AUTHORITY,
a public body, corporate and politic,
and
AVON DAKOTA HOUSING PARTNERS II, L.P.,
a California limited partnership,
TABLE OF CONTENTS
Page
1. DEFINITIONS..................................................................................................................5
1.1.
Defined Terms.....................................................................................................5
2. GROUND
LEASE OF THE SITE...................................................................................24
2.1.
Ground
Lease....................................................................................................24
2.1.1
Term....................................................................................................24
2.1.2
Rent....................................................................................................25
2.1.3
Title to Improvements... .......................................................................
26
2.2.
Conditions Precedent to Commencement of Ground Lease and Authority
SubordinateLoan...............................................................................................26
2.2.1
Authority's Conditions Precedent to the Closing..................................26
2.2.2
Developer Conditions Precedent to the Closing...................................29
2.3.
Environmental
Condition of the Site...................................................................30
2.3.1
Environmental Condition of the Site.....................................................30
2.3.2
Studies and Reports............................................................................30
2.3.3
Approval of Environmental Condition of the Site..................................31
2.3.4
Indemnification....................................................................................31
2.3.5
Duty to Prevent Hazardous Material Contamination ............................32
2.3.6
Release of Authority and City by Developer........................................32
2.3.7
Environmental Inquiries.......................................................................32
2.4.
Escrow
...............................................................................................................33
2.4.1
Costs of Escrow..................................................................................34
2.4.2
Escrow Instructions.............................................................................34
2.4.3
Authority of Escrow Agent...................................................................34
2.4.4
Escrow Closing....................................................................................34
2.4.5
Termination of Escrow.........................................................................35
2.4.6
Closing Procedure...............................................................................35
2.4.7
Review of Title.....................................................................................36
2.4.8
Title Insurance.....................................................................................36
3. DEVELOPMENT OF PHASE 11......................................................................................37
3.1.
Development of Phase 11....................................................................................37
3.1.1
Developer's Obligations.......................................................................37
3.1.2
Authority Additional Subsidies.............................................................37
3.1.3
Subsidies to be Added to Authority Subordinate Loan.........................38
3.1.4
Source of Funds for Additional Subsidy...............................................38
3.2.
Design
Review of Development Plans...............................................................38
3.2.1
Basic Concept Drawings.....................................................................38
3.2.2
Construction Drawings and Related Documents..................................38
3.2.3
Standards for Disapproval...................................................................38
3.2.4
Consultation and Coordination............................................................39
3.2.5
Revisions and Change Orders.............................................................39
3.2.6
Defects in Development Plans.............................................................40
3.2.7
Selection of Subcontractors.................................................................40
3.2.8
Authority Construction Manager..........................................................40
3.3.
Timing of Development of Phase 11....................................................................41
3.4.
City and Other Governmental Permits................................................................41
3.5.
Release of Construction Covenants...................................................................41
4
TABLE OF CONTENTS
3.8. Insurance Requirements .................................................................................... 42
3]51 Minimum Cove rsenlenta........... —.................................. —42
3]5.2 Property |nsur8nC8-------------------------'/44
3.6.3 Reduction inRequirements .................................. .............................. 45
3.6.4 Obligation to Repair and Restore Damage Due to Casualty
Covered bvInsurance ............ .................... ............... ........................ 45
3.8.5 Damage nrDestruction Due toCause Not Required 0obe
OPERATION[)FHOUSING ..................... .............................................................. ..... 60
4.1. Number ofHousing Units ............................................................. ..................... 60
4.2. Affordable Rent ................................................................................... —......... 51
4.3. Duration of Affordability Requirements; Affordability Period --------.....O2
4'4. Selection OfTenants ......................................... ................................................ U2
4.5. HouSehnkj|noommRaouirennents-----------------------. 6%3
4.5.1 Income Categories .......... ............................................................... ... U4
4.8. Intentionally Omitted ........................................................................................ 04
4.7. Leases; Rental Agreements for Housing Units ..................................... ............ 04
4.8. Marketing and Tenant Selection Plan ....... —..................................................... b4
4.9. Social Services .................................................................................... ............ 05
4.9.1 Alternative Social and Supportive Services ......................................... O5
Covered bvInsurance .............. ............................................. ........ ... 45
3.7.
Indemnity ................................................................................... .......................
45
3.8.
Entry by
----------------_______________.
46
3.8.
Compliance
with Laws .......................................................................................
46
3.9]
Prevailing Wage Laws .........................................................................
17
3.9.2
Section Compliance ............................................................ .............
4D
3.9.3
Federal Program Regulations .... .......................................................
40
3.10.
Financing
ofPhase U .............................. ................. ....................................
... 51
3.10.1
Preferred Financing Structure ..............................................................
51
3.10.2
Submission OfEvidence ufFinancing ..................................................
b2
3.10.3
Alternate Financing Sources ............ ...................................................
54
310.4
Tax Credit Equity .................................................................................
55
3.10.5
Required Submissions ... ...................................... ..............................
55
3.10.6
Holder Performance nf Development 0fPhase U .................................
55
8j0.7
Notice CfDefault b}Mortgagee orDeed ofTrust Holders; Right
toCure .......... .............................................................. ......................
5b
310.8
Fai|ureofHoNertOConnpletePhooaU---------------
—hb
3.10.9
Right of Authority to Cure Mortgage VrDeed nfTrust Default ..............
57
310.10
Subordination nfAffordability Covenants; Non -Subordination nf
Authority's Fee Interest .....................................................................
.57
3]0.11
Failure b}Obtain Financing .................................................................
58
3.11.
Cost Savings Obligation .....................................................................................
58
3.11]
Audit h0Determine Cost Savings Amount ............................................
5M
311.2
Cost Savings Payment as Payment ofPrincipal onAuthority
SubordinateLoan ....................................... ........................................
58
311.3
Timing of Payment of Cost Savings .....................................................
58
3.12.
Article }(XX|VCompliance ........................ ......................... ...............................
5Q
3.13.
Estoppel
Certificates and Confirmation ................................................. ............
5H
3.13.1
EstoppelCertificate ......................... .............................. ..............
..... b9
OPERATION[)FHOUSING ..................... .............................................................. ..... 60
4.1. Number ofHousing Units ............................................................. ..................... 60
4.2. Affordable Rent ................................................................................... —......... 51
4.3. Duration of Affordability Requirements; Affordability Period --------.....O2
4'4. Selection OfTenants ......................................... ................................................ U2
4.5. HouSehnkj|noommRaouirennents-----------------------. 6%3
4.5.1 Income Categories .......... ............................................................... ... U4
4.8. Intentionally Omitted ........................................................................................ 04
4.7. Leases; Rental Agreements for Housing Units ..................................... ............ 04
4.8. Marketing and Tenant Selection Plan ....... —..................................................... b4
4.9. Social Services .................................................................................... ............ 05
4.9.1 Alternative Social and Supportive Services ......................................... O5
5.
[:t
7
TABLE OF CONTENTS
(continued)
Page
Developer..........................................................................................................80
7.4.1 Prohibition...........................................................................................80
7.4.2 Permitted Transfers.............................................................................80
7.4.3 Authority Consideration of Requested Transfer...................................81
7.4.4 Approval of Refinancing of Primary Loan.............................................82
7.5. Successors and Assigns....................................................................................83
7.6. Non -Liability of Officials and Employees of Authority or City..............................83
7.7. Relationship between Authority and Developer..................................................83
7.8. Executive Director; Authority Approvals and Actions..........................................83
7.9. Counterparts......................................................................................................83
7.10. Integration ..........................................................................................................84
4.10.1 General Maintenance..........................................................................65
4.10.2 Program Maintenance.........................................................................66
4.10.3 Occupancy Limits................................................................................67
4.11.
Management of Phase II....................................................................................67
4.11.1 Property Manager................................................................................67
4.11.2 Property Management Plan.................................................................68
4.11.3 Gross Mismanagement.......................................................................68
4.11.4 Code Enforcement..............................................................................69
4.12.
Capital Reserve Requirements..........................................................................69
4.13.
Operating Budget and Operating Reserve.........................................................70
4.14.
Non -Discrimination Covenants...........................................................................71
4.15.
Monitoring and Recordkeeping..........................................................................72
4.16.
Regulatory Agreement.......................................................................................72
AUTHORITY
SUBORDINATE LOAN............................................................................72
5.1.
Authority Subordinate Loan................................................................................72
5.1.1 Authority Subordinate Loan.................................................................72
5.1.2 Adjustment of Authority Subordinate Loan Amount at Closing.............73
5.2.
Repayment of Authority Subordinate Loan.........................................................73
5.2.1 Residual Receipts Report....................................................................73
5.2.2 Annual Financial Statement.................................................................73
5.2.3 Right to Audit.......................................................................................74
5.2.4 Assumption.........................................................................................74
5.3.
Security for Authority Subordinate Loan.............................................................74
5.4.
Conditions Precedent to Authority Subordinate Loan.........................................74
DEFAULTAND REMEDIES..........................................................................................74
6.1.
Events of Default................................................................................................74
6.2.
Remedies..........................................................................................................75
6.3.
Force Majeure....................................................................................................75
6.4.
Termination by Developer..................................................................................75
6.5.
Termination by Authority....................................................................................76
6.6.
Attorneys' Fees..................................................................................................76
6.7.
Remedies Cumulative........................................................................................77
6.8.
Waiver of Terms and Conditions........................................................................77
GENERALPROVISIONS
..............................................................................................77
7.1.
Time is of the Essence.......................................................................................77
7.2.
Notices...............................................................................................................77
7.3.
Representations and Warranties of Developer...................................................78
7.4.
Limitation Upon Change in Ownership, Management and Control of
Developer..........................................................................................................80
7.4.1 Prohibition...........................................................................................80
7.4.2 Permitted Transfers.............................................................................80
7.4.3 Authority Consideration of Requested Transfer...................................81
7.4.4 Approval of Refinancing of Primary Loan.............................................82
7.5. Successors and Assigns....................................................................................83
7.6. Non -Liability of Officials and Employees of Authority or City..............................83
7.7. Relationship between Authority and Developer..................................................83
7.8. Executive Director; Authority Approvals and Actions..........................................83
7.9. Counterparts......................................................................................................83
7.10. Integration ..........................................................................................................84
LIST OF ATTACHMENTS
ATTACHMENT NO. 1 - Avon Dakota Neighborhood Map
ATTACHMENT NO. 2 - Narrative Description of Avon Dakota Neighborhood
ATTACHMENT NO. 3 -
TABLE OF CONTENTS
ATTACHMENT NO. 4 -
Legal Description of Phase II
(continued)
Schedule of Performance
ATTACHMENT NO. 6 -
Page
ATTACHMENT NO. 7 -
7.11.
Real Estate Brokerage Commission...................................................................84
Form of Authority Promissory Note
7.12.
Titles and Captions............................................................................................84
ATTACHMENT NO. 10 -
7.13.
Interpretation......................................................................................................84
Form of Completion Guaranty
7.14.
No Waiver..........................................................................................................84
ATTACHMENT NO. 13 -
7.15.
Covenant Not to Sue..........................................................................................84
Form of Release of Construction Covenants
7.16.
Developer's Payment and Reimbursement of Authority's Post -Effective
ATTACHMENT NO. 16 -
Preliminary Financing Plan
DateThird Party Costs.......................................................................................85
Form of Operating Budget
ATTACHMENT NO. 18 -
7.16.1 Third Party Costs Defined; Obligation..................................................85
ATTACHMENT NO. 19 -
Scope of Social and Supportive Services
7.16.2 Payment of Third Party Costs..............................................................85
7.16.3 Exception to Payment of Post -Effective Date Third Party Costs ..........85
7.17.
Modifications......................................................................................................86
7.18.
Severability........................................................................................................86
7.19.
Computation of Time..........................................................................................86
7.20.
Legal Advice......................................................................................................86
7.21.
Cooperation.......................................................................................................86
7.22.
Conflicts of Interest............................................................................................86
7.23.
No Third Party Beneficiaries Except for City.......................................................86
LIST OF ATTACHMENTS
ATTACHMENT NO. 1 - Avon Dakota Neighborhood Map
ATTACHMENT NO. 2 - Narrative Description of Avon Dakota Neighborhood
ATTACHMENT NO. 3 -
Depiction of Project
ATTACHMENT NO. 4 -
Legal Description of Phase II
ATTACHMENT NO. 5 -
Schedule of Performance
ATTACHMENT NO. 6 -
Scope of Development
ATTACHMENT NO. 7 -
Form of Ground Lease
ATTACHMENT NO. 8 -
Form of Authority Promissory Note
ATTACHMENT NO. 9 -
Form of Authority Deed of Trust
ATTACHMENT NO. 10 -
Form of Regulatory Agreement
ATTACHMENT NO. 11 -
Form of Completion Guaranty
ATTACHMENT NO. 12 -
Form of Notice of Affordability Restrictions
ATTACHMENT NO. 13 -
Form of Request for Notice
ATTACHMENT NO. 14 -
Form of Release of Construction Covenants
ATTACHMENT NO. 15 -
List of Environmental Reports
ATTACHMENT NO. 16 -
Preliminary Financing Plan
ATTACHMENT NO. 17 -
Form of Operating Budget
ATTACHMENT NO. 18 -
Form of Residual Receipts Report
ATTACHMENT NO. 19 -
Scope of Social and Supportive Services
iv
AFFORDABLE HOUSING AGREEMENT
(Avon Dakota Neighborhood - Phase II)
This AFFORDABLE HOUSING AGREEMENT (Avon Dakota Neighborhood — Phase II)
("Agreement"), dated for purposes of identification only as of June _, 2017, is entered into by
and among ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic ("Authority"),
and AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership
("Developer").
RECITALS
The following recitals are a substantive part of this Agreement.
A. WHEREAS, Authority is a California housing authority duly organized and existing
under the California Housing Authorities Law, Part 2 of Division 24, Section 34200, et seq., of the
Health and Safety Code ("HAL"), and has been authorized to transact business and exercise the
power of a California housing authority pursuant to action of the City Council ("City Council") of
the City of Anaheim.
B. WHEREAS, the City of Anaheim ("City") is a California municipal corporation and
charter city.
C. WHEREAS, The City is a participating jurisdiction with the United States
Department of Housing and Urban Development ("HUD") that has received funds ("HOME
Funds") from HUD pursuant to Title II of the Cranston Gonzalez National Affordable Housing Act
(42 U.S.C. 12701 12839) and the HOME Program regulations codified at 24 CFR Part 92, as
amended by the "2013 HOME Final Rule" at 24 CFR Part 92 (Complete Rule)
http://www. ecfr.g ov/cg i-bi n/text-idx?tpl=/ecfrbrowse/Title24/24cfr92_m a i n_02.tpl
(together, "HOME Program"). The HOME Program has, among its purposes, the strengthening
of public-private partnerships to provide more affordable housing, and particularly to provide
decent, safe, sanitary, and affordable housing, with primary attention to housing for very low
income and lower income households in accordance with the HOME Program. The HOME
Program funds are used by the Authority, as a participating jurisdiction, to carry out multi-year
housing strategies through acquisition, rehabilitation, and new construction of housing for target
income persons and families.
D. WHEREAS, there is a multifamily residential neighborhood in the City commonly
called "Avon/Dakota" that is located in an area bounded on the east by L3 Communications at
602 E. Vermont Avenue and the development site at 700 E. South Street, on the north by South
Street, on the south by Vermont Street, and on the west by Thomas Jefferson Elementary School
and Olive Elementary School and which area is part of the Central Anaheim Policing District
("Avon/Dakota Neighborhood"). A map depicting the Avon/Dakota Neighborhood is attached
hereto as Attachment No. 1 and fully incorporated by this reference. The narrative description of
the Avon Dakota Neighborhood is attached as Attachment No. 2 and fully incorporated by this
reference.
E. WHEREAS, the Avon/Dakota Neighborhood has been identified as a Level III
"challenged" neighborhood under the City of Anaheim's Neighborhood Improvement Program.
This designation is due to evidence of moderate to substantial social, economic and physical
decline, as well as increased calls for service from the police department and code enforcement.
The Neighborhood has seen a transition from owner -occupied units to mainly tenant occupied
units and as a result, deferred maintenance is evident.
F. WHEREAS, in order to eliminate deterioration and to revitalize the Avon Dakota
Neighborhood, Authority and The Related Companies of California, LLC, a California limited
liability company ("TRCC"), entered into that certain Neighborhood Revitalization Agreement for
the Avon/Dakota Neighborhood, dated as of June 1, 2010, and amended by that certain First
Amendment to the Neighborhood Revitalization Agreement for the Avon/Dakota Neighborhood,
dated as of February 1, 2011 (collectively, the "Revitalization Agreement").
G. WHEREAS, in connection with the Revitalization Agreement, the City, the former
Anaheim Redevelopment Agency (the "Agency") and the Authority entered into that certain
Cooperation Agreement dated as of June 1, 2010 and that certain amended Cooperation
Agreement (Additional Funding for Avon/Dakota Neighborhood Revitalization) dated as of
January 1, 2011 dated as of January 1, 2011 (together, "Cooperation Agreements") whereby
(1) City agreed to transfer to Authority up to Three Million Dollars ($3,000,000) in HOME Program
funds, up to Ninety -Six Thousand Dollars ($96,000) in CDBG Program funds, and up to Six
Hundred Sixty -Three Thousand Dollars ($663,000) in NSP funds (as therein described and
defined); (2) Agency (now the City, acting as the Successor Agency to the Anaheim
Redevelopment Agency, referred to herein as the "Successor Agency") agreed to transfer to
Authority One Million Forty -One Thousand Dollars ($1,041,000) from the Housing Fund;
(3) Authority agreed to use such transferred funds to cause with TRCC the preparation and
implementation of the Revitalization Plan (hereinafter defined) and the Revitalization Agreement;
and (4) by the amendment thereto, increased funding available to Authority for expenditures under
the Revitalization Agreement by an additional Fifteen Million Dollars ($15,000,000) for a total of
up to $19,800,000.
H. WHEREAS, the Cooperation Agreements and the Revitalization Agreement,
together, are "enforceable obligations" of the Agency under Assembly Bill x1 26 which added
Parts 1.8 and 1.85 to Division 24 of the Health and Safety Code ("Dissolution Act") and have been
listed (by the Agency prior to February 1, 2012 and by the Successor Agency on and after
February 1, 2012) on the "Enforceable Obligation Payment Schedule" ("EOPS") and initial
"Recognized Obligation Payment Schedule" ("ROPS) and will continue to be so listed until the
Cooperation Agreements and the Revitalization Agreement, and all implementing contracts and
instruments thereto, are fully performed and implemented; however, the California Department of
Finance challenged the characterization of these obligations as enforceable obligations and
prevailed at the trial court level in such dispute.
I. WHEREAS, pursuant to the Revitalization Agreement, the Authority and City have
entered into an additional Cooperation Agreement dated concurrently herewith pursuant to which
the City agreed to contribute up to $ in moneys sourced from the City's HOME Funds
for purposes of acquiring properties and providing financial assistance to the Developer in
furtherance of Phase II (defined below) pursuant to this Agreement.
J. WHEREAS, the Authority additionally maintains a Low and Moderate Income
Housing Asset Fund (the "Housing Asset Fund") pursuant to Health and Safety Code Section
34176 and 34176.1 and may elect to use moneys held in the Housing Asset Fund to provide
assistance to the Developer in furtherance of Phase 11 (defined below) pursuant to this Agreement.
K. WHEREAS, pursuant to the Revitalization Agreement, Authority and TRCC jointly
and cooperatively prepared a revitalization plan for the Avon/Dakota Neighborhood
E
("Revitalization Plan"), and agreed to implement the Revitalization Plan in the manner set forth in
the Revitalization Agreement.
L. WHEREAS, pursuant to the Revitalization Agreement, the funds appropriated to
Authority pursuant to the Cooperation Agreements are and will continue to be allocated and
disbursed as Authority reasonably determines necessary for the Revitalization Plan and its
implementation.
M. WHEREAS, the Revitalization Agreement and Revitalization Plan set forth general
procedures whereby TRCC and/or Authority would acquire properties within the Avon -Dakota
Neighborhood for subsequent improvement as funded pursuant thereto; further, the Revitalization
Agreement authorized property acquisition by TRCC subject to the discretion and approval of the
Authority.
N. WHEREAS, the funds used or to be used by Authority for Phase II include multiple
funding sources of federal, state, and local funds.
O. WHEREAS, the Revitalization Plan prepared by Authority and TRCC contemplates
that limited partnerships in which affiliates of TRCC act as a general partner ("TRCC Affiliates")
would undertake a multiple phase project ("Project") expanding and improving the supply of
affordable housing for Very Low and Low Income Households to develop a viable urban
community by providing decent, safe housing and a suitable living environment. The Project is
depicted on Attachment No. 3 attached hereto and incorporated herein by this reference.
P. WHEREAS, pursuant to the terms of the Revitalization Agreement, Authority and
TRCC agreed that the Authority and each TRCC Affiliate would enter into a separate Affordable
Housing Agreement for each phase of the Project. Developer is the TRCC Affiliate for the second
phase of the Project, and TRCC has assigned its right, title and interest under the Revitalization
Agreement with respect to such first phase of the Project to Developer.
Q. WHEREAS, Authority has acquired or is under contract to acquire certain real
properties generally located at 809 S. Dakota Street, 824 S. Dakota Street, 862 S. Dakota Street,
868 S. Dakota Street and 606 E. Avon Place in the City (together, "Site"), and Authority desires
to convey a ground leasehold interest in the Site to Developer for the rehabilitation and long term
operation of an affordable rental housing project as the first phase of the Project in accordance
with the terms of this Agreement ("Phase II"). Phase II is being undertaken in accordance with
the Revitalization Plan prepared in accordance with the Revitalization Agreement.
R. WHEREAS, the Site is currently improved with seven buildings, including a total of
twenty-one (21) apartment units.
S. WHEREAS, Authority's acquisition, rehabilitation, and relocation for the Project
conforms and will continue to conform to the requirements of the federal Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970 (URA), as amended, the
implementing regulations of Handbook 1378 of the Department of Housing and Urban
Development (HUD), the California Relocation Assistance Law, Government Code Section 7260,
et seq. (Law), and the Relocation Assistance and Real Property Acquisition Guidelines adopted
by the Department of Housing and Community Development and set forth at Title 25, California
Code of Regulations Section 6000, et seq. (Guidelines) (collectively, the "Relocation Laws").
3
T. WHEREAS, Authority will relocate tenants at the Site prior to development of the
Site by Developer pursuant to the Relocation Laws.
U. WHEREAS, Authority and South Street Housing Partners, L.P. (the "South Street
Developer"), an affiliate of TRCC, previously entered into an Affordable Housing Agreement (700
E. South Street Project), dated as of June 1, 2010 ("South Street Agreement"), which provides for
the development of an affordable housing development at 700 East South Street in the City
("South Street Development"). Although Phase II is not within the scope of the South Street
Agreement and is not governed by its terms, the parties anticipate that the development of Phase
II pursuant to this Agreement and the revitalization activities to be undertaken pursuant to the
South Street Agreement will be mutually beneficial activities that will help to improve the living
conditions within the South Street Development and the Avon/Dakota Neighborhood.
V. WHEREAS, Developer is experienced in the construction, development, operation
and management of high quality housing which is affordable to persons and families of Low to
Moderate Income, including Very Low Income Households in Southern California.
W. WHEREAS, Developer desires to: (i) ground lease the Site from Authority
pursuant to a ground lease in the form attached hereto as Attachment No. 7 ("Ground Lease"),
(ii) develop the Site with Phase II of the Project, consisting of twenty-one (21) apartment units and
parking for rental to and occupancy by qualified Very Low and Low Income Households,
(iii) borrow an amount described in Section 5.1.1 for the development of Phase II at the Site from
Authority ("Authority Subordinate Loan"), which Authority Subordinate Loan shall be repaid from
eighty-five percent (85%) of the Residual Receipts from the operation of Phase ll, and (iv) operate
Phase II as affordable housing throughout the Affordability Period pursuant to the requirements
of this Agreement.
X. WHEREAS, Authority desires to (i) ground lease the Site to Developer pursuant to
the Ground Lease, and (ii) make the Authority Subordinate Loan to Developer to assist Developer
in the rehabilitation and operation of Phase II in accordance with this Agreement.
Y. WHEREAS, Developer (as "Applicant" to TCAC) intends to submit an application
to TCAC ("Application") to obtain an allocation of federal nine percent (9%) Low Income Housing
Tax Credits ("Tax Credits") for Phase II. If Developer does not receive such allocation of 9% Tax
Credits after such first Application to TCAC, Developer shall submit an Application for 9% Tax
Credits in the next round following notification that Developer's first Application was not
successful. If Developer's second round Application is not successful, the provisions of
Section 3.10.1(a)(iii) shall apply.
Z. WHEREAS, by Authority's commitment of monies sourced in whole or in part from
the Housing Fund hereunder and/or HOME Funds for this Agreement or the Authority Subordinate
Loan, Authority (and Successor Agency and City) and Developer do not intend in any manner to
waive any constitutional and/or legal rights hereunder or thereunder; therefore, Authority (and
Successor Agency and City) and Developer expressly and intentionally reserve all rights under
any and all applicable laws to challenge the validity of any or all provisions of the Dissolution Act
in any legal manner or proceeding without prejudice to the City or Successor Agency or Authority
or Developer.
AA. WHEREAS, Developer shall own, develop, and operate the Phase II of the Project
and shall cause Phase II of the Project to be maintained and managed in accordance with this
Agreement and the Transaction Documents during the entire Affordability Period.
0
BB. WHEREAS, the Project (including, without limitation, Phase II) is vital to and in the
best interest of the City of Anaheim and the health, safety and welfare of its residents, and is in
accordance with the public purposes of applicable state and local laws and requirements.
CC. WHEREAS, capitalized terms used in this Agreement are defined in these Recitals
and in Section 100, et seq.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and
conditions herein contained, the parties hereto agree as follows:
DEFINITIONS
1.1. Defined Terms. The defined terms set forth in this Section 101 shall be used to
interpret this Agreement and all attachments hereto except to the extent such terms are otherwise
defined in the attachments hereto.
"Additional Rent" is defined in Section 2.1.2.
"Additional Subsidy" is defined in Section 5.1.1.
"Affiliate" shall mean any person or entity directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Developer, which shall
include each of the constituent partners or members of Developer's limited partnership (but not
the Investor Limited Partner). The term "control," as used in the immediately preceding sentence,
means, with respect to a person that is a corporation, the right to exercise, directly or indirectly,
at least 50% of the voting rights attributable to the shares of the controlled corporation, and, with
respect to a person that is not a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the controlled person.
"Affordability Period" shall mean the not less than fifty-seven (57) year duration of the
affordable housing and operational covenants, conditions, restrictions, and requirements which
are set forth in this Agreement, the Ground Lease, and the Regulatory Agreement, as set forth in
Section 4.3.
"Affordable Rent" shall mean the maximum amount of out-of-pocket housing cost to be
charged monthly by Developer and paid by each of the eligible Very Low and Low Income
Households for each of the Housing Units at Phase II as determined and calculated pursuant to
the affordable rent and the rent limitations according to TCAC, the Tax Credit Rules, the HOME
Requirements and the Tax Credit Regulatory Agreement applicable to Phase II, in accordance
with Section 4.2. For purposes of Affordable Rent, the monthly housing payment shall mean the
total of monthly payments by each tenant household of a Housing Unit for use and occupancy of
a Housing Unit and facilities associated therewith, including a reasonable allowance for utilities
for an adequate level of service, as set forth in more detail in Section 4.2 hereof.
"Agreement" shall mean this Affordable Housing Agreement (Avon Dakota
Neighborhood - Phase II), including all attachments hereto, between Authority and Developer.
"Annual Financial Statement" shall mean the certified financial statement of Developer
for Phase II using generally accepted accounting principles ("GAAP"), as separately accounted
for Phase II, including Operating Expenses and Annual Project Revenue, prepared at Developer's
expense, by an independent certified public accountant reasonably acceptable to Authority, as
well as the Residual Receipts Report, the form of which is attached hereto as Attachment No. 18.
Each Annual Financial Statement submitted by Developer shall include a statement and
certification (and supporting documentation) of the total amount of the Developer Fee and
Deferred Developer Fee for Phase II, along with the cumulative amount thereof paid to date and
the amount thereof paid within the applicable reporting year as reported and certified in the Annual
Financial Statement. Once every three (3) years or sooner as and when requested by Authority
and/or Executive Director, along with and as a part of the Annual Financial Statement and
Residual Receipts Report, Developer shall submit true, legible, and complete copies of the source
documentation supporting the Annual Financial Statement and the and Residual Receipts Report.
"Annual Project Revenue" shall mean all gross income and all revenues of any kind
from Phase II in a calendar year, of whatever form or nature, whether direct or indirect, with the
exception of the items excluded below, received by, paid to, or for the account or benefit of
Developer or any Affiliate of Developer or any of their agents or employees (provided, in no event
shall amounts counted as Annual Project Revenue be double counted if paid by a Developer to
one or more of its Affiliates), from any and all sources, resulting from or attributable to the
operation, leasing and occupancy of Phase II, determined on the basis of GAAP applied on a
consistent basis, and shall include, but not be limited to: (i) gross rentals paid by tenants of Phase
II under leases, and payments and subsidies of whatever nature, including without limitation any
payments, vouchers or subsidies from HUD or any other person or organization, received on
behalf of tenants under their leases; (ii) amounts paid to Developer or any Affiliate of Developer
on account of Operating Expenses for further disbursement by Developer or such Affiliate to a
third party or parties, including, without limitation, grants received to fund social services or other
housing supportive services at Phase II; (iii) late charges and interest paid on rentals; (iv) rents
and receipts from licenses, concessions, vending machines, coin laundry, and similar sources;
(v) other fees, charges, or payments not denominated as rental but payable to Developer in
connection with the rental of office, retail, storage, or other space in Phase II; (vi) consideration
received in whole or in part for the cancellation, modification, extension or renewal of leases; and
(vii) interest and other investment earnings on security deposits, reserve accounts and other
Phase II accounts to the extent disbursed. Notwithstanding the foregoing, Annual Project
Revenue shall not include the following items: (a) security deposits from tenants (except when
applied by Developer to rent or other amounts owing by tenants); (b) capital contributions to
Developer by its members, partners or shareholders (including capital contributions required to
pay the Deferred Developer Fee; (c) condemnation or insurance proceeds; (d) there shall be no
line item, expense, or revenue shown allocable to vacant unit(s) at Phase II; (e) receipt by an
Affiliate of management fees or other bona fide arms -length payments for reasonable and
necessary Operating Expenses associated with Phase II.
"Application" and "Applications" shall mean, individually and collectively, Developer's
Tax Credit applications to be submitted to TCAC to obtain an allocation of 4% or 9% Tax Credits,
as applicable, for Phase II, and/or such other financing as may be applied for pursuant to
Section 3.10. All Applications submitted by Developer shall be consistent with the terms of this
Agreement.
"Applicable Federal Rate" shall mean the interest rate set by the United States Treasury
from time to time for the purpose of determining applicable Low Income Housing Tax Credit
interest rates. The Applicable Federal Rate is currently set at 9%.
"Area Median Income" and "AMI" shall mean the area median household income set
forth for each county in California (and for this Agreement for Orange County), as annually
determined by TCAC.
51
"Audit" is defined in Section 3.11.
"Authority" shall mean the Anaheim Housing Authority, a public body, corporate and
politic, exercising governmental functions and powers and organized and existing under the
California Housing Authorities Law, Part 2 of Division 24, Section 34200, et seq. of the Health and
Safety Code.
"Authority Deed of Trust" shall mean the leasehold deed of trust for Phase II,
substantially in the form attached hereto as Attachment No. 9. The Authority Deed of Trust shall
be executed by Developer in favor of Authority and recorded against the ground leasehold interest
of Developer in the Site at the Closing, and shall secure repayment of the Authority Subordinate
Loan.
"Authority Loan Documents" shall mean this Agreement, the Authority Promissory
Note, the Authority Deed of Trust, and any other documents reasonably required by Authority to
provide the Authority Subordinate Loan to Developer.
"Authority Promissory Note" shall mean the Authority Promissory Note for Phase II,
substantially in the form attached hereto as Attachment No. 8, which shall evidence Developer's
obligation to repay the Authority Subordinate Loan for Phase II from eighty-five percent (85%) of
Residual Receipts from Phase II.
"Authority Subordinate Loan" shall mean Authority's loan to Developer for Phase II in
an amount set forth in Section 5.1.1, which shall be subordinate to the Primary Loan. The
Authority Subordinate Loan shall be evidenced by an Authority Promissory Note and secured by
an Authority Deed of Trust, which shall be recorded against the ground leasehold interest of
Developer in the Site, and secured by Developer's leasehold interest in the Site. Developer shall
repay the Authority Subordinate Loan by making annual payments equal to eighty-five percent
(85%) of the Residual Receipts from Phase II.
"Base Rent" shall have the meaning established therefor in the Ground Lease.
"Basic Concept Drawings" shall mean the plans and drawings to be submitted and
approved by Authority, as set forth in Section 3.2.1 hereof.
"Best Knowledge" shall mean the actual knowledge or constructive knowledge of the
party's employees and agents who manage the Site or have participated in the preparation of this
Agreement, and all documents and materials in the possession of such party, and shall not impose
a duty of investigation, except as to documents of record or actually provided to such party or its
employees or agents, whether actually known or not.
"Capital Replacement Reserve" shall mean a separate reserve fund account to be
established upon closing of the permanent Primary Loan for Phase II and maintained by
Developer separately for Phase II, which shall equal not less than the greater of (a) Three
Hundred Dollars ($300) per year for each Housing Unit at Phase II (21 Housing Units times $300
equals $6,300), and (b) the amount required by Developer's Investor Limited Partner and/or
Lenders, to be used as the primary resource to fund capital improvements and replacement
improvements for Phase II. The amount of $300 for each Housing Unit that is set aside by the
Developer (or its Property Manager) shall be allocated from the gross rents received from the Site
and deposited into a separate interest bearing trust account for capital replacements to the
fixtures and equipment that are normally capitalized under generally accepted accounting
7
principles and shall include common areas. The non-availability of funds in the Capital
Replacement Reserve does not in any manner relieve or lessen Developer's obligation to
undertake any and all necessary capital repairs and improvements and to continue to maintain
Phase II in the manner prescribed herein. Upon written request of Authority, but not more than
once per year, Developer, at its expense, shall submit to Authority Executive Director an
accounting for the Capital Replacement Reserve for Phase 11. Capital repairs to and replacement
of Phase II shall include only those items with a long useful life, includinq without limitation the
following: carpet and drape replacement; appliance replacement; exterior painting, including
exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs and
showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt
repair and replacement, and seal coating; roofing repair and replacement; landscape tree
replacement; irrigation pipe and controls replacement; sewer line replacement; water line
replacement; gas line pipe replacement; lighting fixture replacement; elevator replacement and
upgrade work; miscellaneous motors and blowers; common area furniture and planters
replacement; and common area repainting. Pursuant to the procedure for submittal of each
Annual Budget for Phase II to Executive Director by Developer, Executive Director will evaluate
the cumulative amount on deposit in the Capital Replacement Reserve account for Phase II and
exercise his/her sole, reasonable discretion to determine if existing balance(s) in, proposed
deposits to, shortfalls, if any, and/or a cumulative unexpended/unencumbered account balance
in such Capital Replacement Reserve account are adequate to provide for necessary capital
repairs and improvement to the Site and Phase II (provided that required annual deposits thereto
are not required to exceed $300/per Housing Unit).
"City" shall mean the City of Anaheim, a California municipal corporation and charter city.
The City is not a party to this Agreement and shall have no obligations hereunder; provided,
however, City is an intended third -party beneficiary of the covenants and restrictions, as well as
the enforcement rights (without any obligation), set forth in this Agreement.
"Closing" shall mean the close of escrow for Phase 11, whereby Authority shall convey a
ground leasehold interest in the Site to Developer pursuant to Section 2.4.4, when the Ground
Lease for the Site shall become effective and the Term thereof shall commence.
"Closing Date" shall mean, for Phase 11, the date the Memorandum of Ground Lease and
the Grant Deed are recorded against the Site as more specifically set forth in Section 2.4.4 hereof.
"Completion Guaranty" is defined in Section 2.2.1(h).
"Conditions Precedent" shall mean the conditions precedent to the execution,
effectiveness and commencement of the Ground Lease and Authority's obligation to make the
Authority Subordinate Loan, as set forth in Section 2.2.
"Construction Contract" shall mean each and every contract between Developer, the
General Contractor, and/or any Subcontractor for the construction of Phase 11, or any part thereof,
including construction of any on-site or off-site improvements included in the Scope of
Development, the Entitlement approved by the City, and the Development Plans. The
Construction Contract between Developer and the General Contractor shall be for a fixed fee or
guaranteed maximum fee to complete all work to be performed or caused to be performed by the
General Contractor under such Construction Contract. Each Construction Contract shall be
reviewed and reasonably approved (or disapproved) by Authority Executive Director, with each
contract to include: (i) a full recitation of Section 3 and the Section 3 Clause with an express
acknowledgement and agreement by the General Contractor and each Subcontractor, as
E-1'
applicable, to fully comply with the Section 3 Clause, (ii) an express acknowledgement and
agreement by the General Contractor and each Subcontractor, as applicable, that as a condition
precedent to the final payment under its contract, the General Contractor or Subcontractor, as
applicable, shall provide written evidence, in form reasonably satisfactory to the Authority
Executive Director and/or HUD, that it and all its subcontractor(s) have complied with the
Section 3 Clause in completing the development of Phase II, and (iii) reference to all other
applicable federal regulations and laws based on the final federal funding sources, if any, to which
such General Contractor or Subcontractor, as applicable, must comply in undertaking the
construction and development of Phase II; provided it is understood by the parties that it is and
shall remain primarily Developer's obligation to obtain and submit all required Section 3 Clause
documentation.
"Construction Drawings" shall mean the construction plans and drawings to be
submitted and approved by Authority for Phase II, as set forth in Section 3.2.2 hereof.
"Cost Savings" shall mean Developer's obligation to pay, subject to the approval of
TCAC, any resulting cost savings for Phase II to Authority to the extent any cost savings are
available upon completion of construction of Phase II as more fully set forth in Sections 3.11.
"County" shall mean the County of Orange, California.
"CPI" shall mean the United States Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for Urban Wage Earners and Clerical Workers, Subgroup "All Items," for
the Los Angeles -Costa Mesa -Riverside area, 1982 — 84 = 100, or successor or equivalent index
in case such index is no longer published. CPI adjustments under this Agreement shall
commence not earlier than one year following the issuance of the temporary certificate of
occupancy for Phase II.
"Debt Service" shall mean payments made in a calendar year pursuant to the approved
Primary Loan obtained for the lease, construction/development, and operation of Phase II
pursuant to Section 3.10.
"Default" or "Event of Default" shall mean the failure of a party to perform any action or
comply with any covenant required by this Agreement, including the attachments hereto, within
the time periods provided herein following notice and opportunity to cure, as set forth in
Section 6.1 hereof.
"Deferred Developer Fee" shall mean any deferred Developer Fee to be paid from
Annual Project Revenue, which is included under the financing which has been approved by
Authority pursuant to Section 3.10. [As of the Effective Date, Developer intends to include a
Deferred Developer Fee in the amount of approximately $539,500 as a permanent source of
financing for Phase II.]
"Developer" shall mean Avon Dakota Housing Partners II, L.P., a California limited
partnership and its permitted successors and assigns. The administrative general partner of
Developer is Related/Avon Dakota Development Co., LLC, a California limited liability company,
and the managing general partner/nonprofit partner of Developer is Avon Dakota MGP, LLC, a
California limited liability company.
"Developer Fee" shall mean a fee for Phase II to be paid by Developer pursuant to the
Development Services Agreement, which fee is compensation to perform, or to engage and
E
supervise others to perform, services in connection with the negotiating, coordinating, and
supervising the planning, architectural, engineering and construction activities necessary to cause
completion and complete Phase II, including all other on-site and off-site improvements required
to be constructed in connection therewith, in accordance with the Scope of Development, the
Entitlement, and the Development Plans, as set forth in the Final Budget and approved as a part
of the evidence of financing pursuant to Section 3.10 herein. In no event shall the Developer Fee
exceed One Million Seventy-Nine Thousand Dollars ($1,079,000). From and after the Closing,
Developer shall defer the maximum amount of the Developer Fee permitted to be paid from cash
flow, as set forth in the Tax Credit Rules, if and to the extent such deferral is necessary to keep
the Final Budget in balance or to complete construction of Phase ll.
"Development Impact Fees" shall mean amounts required to be paid to or through the
City prior to and as a condition to issuance of building permits for Phase II, including, without
limitation, sanitation district, traffic signal assessment, schools, public works/drainage, public
works/sewer connection, and/or public works/sewer assessment.
"Development Plans" shall mean the Basic Concept Drawings and Construction
Drawings for Phase II to be submitted to City (and Authority staff) for review and approval,
pursuant to Section 3.2.
"Effective Date" shall mean the date the Executive Director of the Authority executes this
Agreement.
"Entitlement" shall mean and include each application and discretionary action of the
City, through its administrators and, if applicable, by its City Council, Planning Commission, or
other boards or commissions for Phase ll, and this Agreement, including the findings in
compliance with the California Environmental Quality Act ("CEQA"), Conditional Use Permits,
Reclassification No. 2006-00175, and any and all conditions of approval related thereto, as set
forth in the conditions of approval for Phase 11. Pursuant to Section 21159.23 of the Public
Resources Code, Phase I I is exempt from CEQA.
"Environmental Claims" shall mean (i) any judicial or administrative enforcement
actions, proceedings, claims, orders (including consent orders and decrees), directives, notices
(including notices of inspection, notices of abatement, notices of non-compliance or violation and
notices to comply), requests for information or investigation instituted or threatened by any
governmental authority pursuant to any Governmental Requirements, or (ii) any suits,
arbitrations, legal proceedings, actions or claims instituted, made or threatened that relate, in the
case of either (i) or (ii), to any damage, contribution, cost recovery, compensation, loss or injury
resulting from the release or threatened release (whether sudden or non-sudden or accidental or
non-accidental) of, or exposure to, any Hazardous Materials, or the violation or alleged violation
of any Governmental Requirements, or the generation, manufacture, use, storage, transportation,
treatment, or disposal of Hazardous Materials.
"Environmental Laws" shall mean all laws, ordinances and regulations relating to
Hazardous Materials, including, without limitation: the Clean Air Act, as amended, 42 U.S.C.
Section 7401, et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42
U.S.C. Section 6901, et seq.; the Comprehensive Environment Response, Compensation and
Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act
of 1986, "CERCLA"), 42 U.S.C. Section 9601, et seq.; the Toxic Substances Control Act, as
amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as amended,
10
29 U.S.C. Section 651, the Emergency Planning and Community Right to Know Act of 1986, 42
U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C.
Section 801 et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f et seq.;
all comparable state and local laws, laws of other jurisdictions or orders and regulations; and all
laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the
State, the County, City, or any other political subdivision in which the Site is located, and of any
other political subdivision, agency or instrumentality exercising jurisdiction over Authority,
Developer, or the Site.
"Environmental Reports" shall mean all existing documents, surveys, studies, and
reports relating to the physical and/or environmental condition of the Site.
"Escrow" shall have the meaning set forth in Section 2.4.
"Escrow Agent" shall have the meaning set forth in Section 2.4.
"Executive Director" shall mean and include the Authority's Executive Director and
his/her authorized designee(s). Whenever the consent, approval or other action of the "Executive
Director" is required herein, such consent may be provided by Authority's Executive Director or
his/her authorized designee(s), or the Executive Director in his/her sole discretion may submit
such request to the Authority Board for action to approve or disapprove such request.
"Federal Program Limitations" shall mean compliance with the HOME Program and
HOME Regulations, as amended by the 2013 HOME Final Rule, as applicable to the Project, and
also includes any and all other applicable federal regulations relating to fair housing and non-
discrimination applicable to the Project and rules and regulations made applicable to the Project
due to the provision of PBV Assistance to the HAP Units. Developer covenants, acknowledges,
and agrees it is subject to the HAL and all Federal Program Limitations, including (with respect to
the HOME Units) the HOME Program and HOME Regulations (whichever are most restrictive and
to the extent applicable to the Project), in connection with its performance under this Agreement,
and agrees it shall endeavor to cause the use and operation of the Properties to conform to the
Federal Program Limitations.
"Final Budget" shall mean the final budget for the construction and development of
Phase II, as approved by Authority pursuant to Section 3.10 hereof.
"General Contractor" shall mean the general contractor to be hired by Developer to
engage and supervise the subcontractors in the performance and completion of the construction
of Phase II and all other on-site and off-site improvements required to be constructed in
connection with Phase 11, all in accordance with the Scope of Development, the Entitlement to be
approved by City, and the Development Plans. The General Contractor shall be reasonably
acceptable to and approved by Authority Executive Director, in his/her reasonable discretion;
provided, that, Portrait Homes, Inc., a California corporation, or its affiliate, is hereby pre -approved
to act as the General Contractor for the development of Phase 11. The parties acknowledge that
the General Contractor will not be performing actual construction work for any portion of Phase
11, but instead shall hire Subcontractors (after competitive bidding pursuant to Section 3.2.7) who
shall be reasonably approved by Authority Executive Director in accordance with this Agreement.
"Governmental Requirements" shall mean all laws, ordinances, statutes, codes, rules,
regulations, orders, and decrees of the United States, the State of California, the County, City, or
any other political subdivision in which the Site is located, and of any other political subdivision,
11
agency, or instrumentality exercising jurisdiction over Developer or the Site, as may be amended
from time to time.
"Grant Deed" shall mean the grant deed to be executed by the Authority in favor of
Developer at the Closing Date, conveying fee title to the Improvements to Developer.
"Ground Lease" shall mean the Ground Lease to be entered into for Phase II by Authority
and Developer, which shall be substantially in the form attached hereto as Attachment No. 7.
"Guarantor" shall mean The Related Companies, L.P., a New York limited partnership,
and which shall also be the "Guarantor" under the Completion Guaranty, Attachment No. 11
hereto.
"HAL" shall mean the Housing Authorities Law, Health and Safety Code Section 34200,
et seq.
"Hazardous Materiar' or "Hazardous Materials" shall mean and include any substance,
material, or waste which is or becomes regulated by any local governmental authority, including
the County, Orange County Health Care Agency, the Regional Water Quality Control Board, the
State of California, or the United States Government, including, but not limited to, any material or
substance which is: (i) defined as a "hazardous waste," "acutely hazardous waste," "restricted
hazardous waste," or "extremely hazardous waste" under Sections 25115, 25117 or 25122.7, or
listed pursuant to Section 25140, of the California Health and Safety Code, Division 20,
Chapter 6.5 (Hazardous Waste Control Law); (ii) defined as a "hazardous substance" under
Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter
Presley Tanner Hazardous Substance Account Act); (iii) defined as a "hazardous material,"
"hazardous substance," or "hazardous waste" under Section 25501 of the California Health and
Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and
Inventory); (iv) defined as a "hazardous substance" under Section 25281 of the California Health
and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances);
(v) petroleum; (vi) asbestos and/or asbestos containing materials; (vii) lead based paint or any
lead based or lead products; (viii) polychlorinated biphenyls, (ix) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317); (x) defined
as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); (xi) Methyl tertiary Butyl Ether;
(xii) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601, et seq.
(42 U.S.C. Section 9601); (xiii) any other substance, whether in the form of a solid, liquid, gas or
any other form whatsoever, which by any Governmental Requirements either requires special
handling in its use, transportation, generation, collection, storage, handling, treatment or disposal,
or is defined as "hazardous" or harmful to the environment; and/or (xiv) lead based paint pursuant
to and defined in the Lead Based Paint Poisoning Prevention Act, Title X of the 1992 Housing
and Community Development Act, 42 U.S.C. § 4800, et seq., specifically §§ 4821-4846, and the
implementing regulations thereto. Notwithstanding the foregoing, "Hazardous Materials" shall not
include such products in quantities as are customarily used in the construction, maintenance,
rehabilitation, management, operation and residence of residential developments or associated
buildings and grounds, or typically used in residential activities in a manner typical of other
comparable residential developments, or substances commonly ingested by a significant
population living within Phase II, including without limitation alcohol, aspirin, tobacco and
saccharine.
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"HOME Amount" means Dollars ($ ) or such greater amount
as may be provided by City as the HOME Amount in implementation of the Phase II Cooperation
Agreement and this Agreement.
"HOME Funds" is defined in the Recitals hereto.
"HOME Program" is defined in the Recitals hereto.
"HOME Regulations" shall mean the implementing regulations of the HOME Program
set forth at 24 CFR §92.1, et seq. as such regulations now exist (as amended by the 2013 HOME
Final Rule) and as they may hereafter be amended, to the extent applicable to the Project.
Developer covenants hereunder to comply with the HAL and all applicable HOME Regulations in
the performance of this Agreement, whichever are more restrictive. In implementation of these
requirements, this Agreement, the Project, and all eligible contributions and expenditures
hereunder shall conform to the following:
(a) The housing developed hereunder does and shall qualify as affordable
housing under 24 CFR §92.252 because each Housing Unit shall be rented at an Affordable Rent;
and
(b) This Agreement serves as the written agreement that imposes and
enumerates (by meeting or exceeding) all of the affordability requirements from 24 CFR §92.252;
the property standards requirements of 24 CFR §92.251; and income determinations made in
accordance with 24 CFR §92.203.
"HOME Requirements" means limitations on household income and/or household size
as established by the HOME Regulations.
"HOME Units" shall mean thirteen (13) of the Housing units as follows: (a) at 809 Dakota
Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units,
and (ii) two (2) of the two (2) bath Housing Units shall be High HOME Units; (b) at 868 Dakota
Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units,
and (ii) three (3) of the two (2) bath Housing Units shall be High HOME Units; and (c) at 606 Avon
Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units shall be a Low HOME Unit,
(ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall be High HOME Units, and
(iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be High HOME Units. The
designation of Housing Units as HOME Units shall terminate at the end of the HOME Compliance
Period, unless extended by agreement of the Authority and the Developer.
"Housing Asset Fund" is defined in the Recitals hereto.
"Housing Asset Fund Requirements" means the requirements of Health and Safety
Code Section 34176 and 34176.1 and all requirements of the California Community
Redevelopment Law, Health and Safety Code Section 33000, et seq., that apply to the use of
Housing Asset Funds by the Authority, as successor to the former Anaheim Redevelopment
Agency's housing functions.
"Housing Unit" and "Housing Units" shall mean, individually and collectively, the
twenty-one (21) individual apartment units in Phase II to be constructed and operated by
Developer on the Site as affordable rental housing for the Affordability Period.
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"HUD" shall mean the United States Department of Housing and Urban Development.
"Improvements" shall mean the apartment complex and any other improvements to be
constructed on the Site as part of Phase II pursuant to this Agreement and as approved by the
Executive Director and City.
"Indemnitees" is defined in Section 2.3.4.
"Investor Limited Partner" shall mean each Tax Credit limited partner of Developer for
Phase II.
"Land Subsidy" is defined in Section 5.1.1.
"Legal Description" shall mean the description of the Site which is attached hereto as
Attachment No. 4 and incorporated herein.
"Lender" shall mean each of the responsible financial lending institutions or persons or
entities approved by Authority in its reasonable discretion, which provide the Primary Loans,
including acquisition loan(s), construction loan(s) or permanent loan(s) for the construction,
development, and/or operation of Phase II, as set forth in Section 3.10 hereof.
"Low Income," "Lower Income," "Low Income Households" or "Lower Income
Households" shall have the same meaning as prescribed in Section 4.5.1(f) hereof and shall
mean and include both: (i) lower income households as defined in the Tax Credit Rules and (ii)
60% AMI Low Income Households. Lower Income Households include Very Low Income
Households and Extremely Low Income Households, as defined in the Tax Credit Rules.
"Marketing and Tenant Selection Plan" shall mean the marketing and tenant selection
plan to be prepared by Developer and submitted to Authority for its review and approval as a
Condition Precedent to Closing, as further described in Section 4.8.
"Material Adverse Change" means any event the occurrence of which is reasonably likely
to have a material adverse effect on Developer's ability to fulfill its obligations under any
Transaction Document, including without limitation:
(a) a voluntary or involuntary bankruptcy of Developer (which is not dismissed
within ninety (90) days of institution);
(b) a court order placing Developer under receivership;
(c) a sale of all or substantially all of the assets held by Developer;
(d) any violation of Developer or other failure of Developer to comply at all
times with any applicable law, statute, ordinance, code, rule, regulation, judgment, order, ruling,
condition or other requirement of a statutory, regulatory, administrative, judicial or quasi-judicial
nature or any other legal or governmental requirement of whatever kind or nature related to Phase
II, which violation is likely to have a material adverse effect on the ability of Developer to perform
its duties and obligations under any Transaction Document; and/or
(e) Developer incurs one or more liabilities, contingent or otherwise, or pending
or threatened litigation or any asserted or unasserted claim exists against Developer with respect
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to Phase II, which would have a material adverse effect on its ability to perform its duties and
obligations under any Transaction Document.
"Memorandum of Ground Lease" shall mean the Memorandum of Ground Lease for
Phase II to be executed by Developer and Authority in a form to be reasonably approved by
Authority Executive Director in his/her reasonable discretion, which Memorandum of Ground
Lease shall include notice of the Ground Lease for Phase II and the terms and provisions
contained therein, and shall state that in no event shall Authority's fee interest in the Site be
subordinated to deeds of trust or any other liens for financing recorded against the Site.
"Notice" shall mean a notice in the form prescribed by Section 7.2 hereof.
"Notice of Affordability Restrictions" shall mean the notice to be executed by the
parties in substantially the form attached hereto as Attachment No. 12 and incorporated herein,
which shall recite the affordability restrictions and restrictions on transfer imposed on the Site by
this Agreement, the Ground Lease, and the Regulatory Agreement, and which shall be recorded
against the Site at the Closing for Phase II, all as required by and in compliance with Health and
Safety Code Section 33334.3(f)(3)(B).
"Official Records" shall mean the official land records of the County Recorder of the
County.
"Operating Budget" and "Annual Budget" shall mean the annual operating budget for
Phase I I that sets forth the projected Operating Expenses for the upcoming year that is subject to
and shall be submitted for review and approval by Executive Director, in his/her reasonable
discretion, each year during the Affordability Period as set forth in Section 4.13 hereof. The
Operating Budget shall be in substantially the form attached hereto as Attachment No. 17 and
incorporated herein, or such other form as may be required by Authority from time to time.
"Operating Expenses" shall mean actual, reasonable and customary (for comparable
high quality rental housing developments in Orange County) costs, fees and expenses directly
incurred, paid, and attributable to the operation, maintenance and management of Phase II in a
calendar year, which is reasonably consistent with the annual Operating Budget for Phase II
approved by Authority pursuant to Section 4.13 hereof, including: painting, cleaning, repairs,
alterations, landscaping, utilities, refuse removal, certificates, permits and licenses, sewer
charges, real and personal property taxes, assessments, insurance, security, advertising and
promotion, janitorial services, cleaning and building supplies, purchase, repair, servicing and
installation of appliances, equipment, fixtures and furnishings, fees and expenses of property
management, fees and expenses of accountants, attorneys and other professionals, the cost of
social services and other housing supportive services provided at Phase II consistent with
Developer's approved Application(s) to TCAC for the Site, repayment of any completion or
operating loans made to Developer, and other actual, reasonable and customary operating costs
and capital costs which are directly incurred and paid by Developer, but which are not paid from
or eligible to be paid from the Capital Replacement Reserve or any other reserve accounts for
Phase ll. To the extent the Operating Expenses for Phase II deviate from the approved annual
Operating Budget for a given year by more than ten percent (10%) in aggregate for that year, the
Authority Executive Director shall reasonably review and approve to confirm such Operating
Expenses are reasonable and actually incurred; provided, no approval shall be required for
emergency expenditures reasonably necessary or appropriate to preserve life, limb, or property.
15
Operating Expenses shall exclude all of the following: (i) salaries of employees of
Developer or Developer's general overhead expenses, or expenses, costs and fees paid to an
Affiliate of Developer, to the extent any of the foregoing exceed the expenses, costs or fees that
would be payable in a bona fide arms' length transaction between unrelated parties in the Orange
County area for the same work or services; (ii) any amounts paid directly by a tenant of Phase II
to a third party in connection with expenses which, if incurred by Developer, would be Operating
Expenses; (iii) optional or elective payments with respect to the Primary Loan (unless made with
the consent of the Executive Director in her reasonable discretion); (iv) any payments with respect
to any project -related loan or financing other than the Primary Loan (unless made with the consent
of the Executive Director in his/her reasonable discretion); (v) expenses, expenditures, and
charges of any nature whatsoever arising or incurred by Developer prior to completion of Phase
II with respect to the development, maintenance and upkeep of Phase ll, or any portion thereof,
including, without limitation, all costs and capitalized expenses incurred by Developer in
connection with the lease of the Site from the Authority (e.g. not leasing to low income tenants),
all predevelopment and preconstruction activities conducted by Developer in connection with
Phase Il, including, without limitation, the preparation of all plans and the performance of any
tests, studies, investigations or other work, and the construction of Phase II and any on-site
or off-site work in connection therewith; (vi) depreciation, amortization, and accrued principal and
interest expense on deferred payment debt; and (vii) any Partnership Related Fees to the extent
they are not paid as capitalized expenses.
"Operating Reserve" shall mean the Operating Reserve for Phase ll, which shall be
funded by an installment of Tax Credit equity in a target amount equal to three (3) months of
(i) Debt Service on the permanent Primary Loan and (ii) Operating Expenses pursuant to an
approved Annual Budget for Phase II ("Target Amount"); provided, a larger Operating Reserve
may be maintained if required by the Lender or Tax Credit Investor for Phase 11. The Operating
Reserve shall thereafter be replenished from Annual Project Revenue to maintain the Operating
Reserve balance of the Target Amount.
"Partnership Agreement" shall mean the agreement(s) which set(s) forth the terms of
Developer's (or its approved Affiliate(s)) limited partnership, as such agreement(s) may be
amended from time to time, so long as consistent with the requirements of this Agreement. The
Partnership Agreement shall reference and acknowledge Developer's obligation to repay the
Authority Subordinate Loan in accordance with the terms of this Agreement. Developer shall
provide copies of any amendments or modifications to the Partnership Agreement to the Authority
within fifteen (15) days following execution thereof.
"Partnership Related Fees" shall mean the following fees of Developer (or partners
thereof pursuant to the Partnership Agreement) which are actually paid in the following order of
priority:
(i) a limited partner asset management fee payable to the Investor Limited
Partner of Developer in the amount of $5,000 (increased annually by the greater of CPI or 3%);
and
(ii) a general partner(s) (administrative and/or managing partner(s))
partnership management fee payable to the general partner(s) of Developer in the amount of
$10,000 (increased annually by the greater of CPI or 3%).
In no event shall the fees for Phase II described in (i) and (ii) above together cumulatively
exceed Fifteen Thousand Dollars ($15,000), increased annually by CPI (but in no event by more
16
than CPI). In the event insufficient Annual Project Revenues exist to provide for payment of all
or part of the specific Partnership Related Fees listed above, no interest shall accrue on the
unpaid portions of such Partnership Related Fees, but the unpaid balance will be added to the
Partnership Related Fees due in the next following years.
"Phase ll" shall mean the rehabilitation of the interior and exterior of the Site of twenty-
one (21) Housing Units in seven buildings, including providing trash enclosures, laundry facilities,
demolition of existing garages and construction of new carports if space permits and incorporation
of landscaping at the Site.
"Phase 11 Cooperation Agreement" means that certain agreement between City and
Authority entitled and dated concurrently herewith under which the City has agreed
to make HOME Funds available to Authority for the Phase II Project. A copy of the Phase II
Cooperation Agreement is on file with City as a public record.
"Phase 11 Amended and Restated Joint Use Agreement" means a recordable
instrument acceptable to Authority to be recorded among Official Records that allows the
residents of the development known as Avon Dakota Phase I and the Project to utilize the
community center facilities located in the Vintage Crossings project owned and operated by South
Street Anaheim Housing Partners, L.P. ("South Street"). This agreement to use the South Street
facilities must extend to Project Access, the entity contracted to provide such social services to
the residents. In addition, South Street will agree to allow Related Management Company
("RMC"), the property manager for Vintage Crossings, Avon Dakota Phase I and the Project, to
utilize the management/leasing offices located in the Vintage Crossings project for the purpose
of conducting management activities for the Project.
"Phase 11 Reciprocal Easement Agreement" means an instrument acceptable to
Authority to be recorded among Official Records pertaining to 815 S. Dakota Street (owned and
operated by Avon Dakota Housing Partners II, L.P.) and 809 S. Dakota Street. As part of the
Project improvements, street access for 809 S. Dakota Street will be removed and tenant parking
for 809 S. Dakota Street will only be accessible through 815 S. Dakota Street's parking lot.
"Portable Voucher" shall mean Section 8 tenant -based vouchers, certificates of family
participation under 24 CFR part 882 (Rental Certificate Program), rental vouchers under 24 CFR
part 887 (Rental Voucher Program), and comparable documents evidencing participation in a
program pursuant to the HOME Investment Partnership Act, 42 U.S.C. §12701, et seq. and the
implementing regulations located at 24 CFR part 92, as such now exist and as may hereafter be
amended, or other tenant -based rental assistance programs.
"Preliminary Financing Plan" shall mean the preliminary budget for the construction and
development of Phase II and the proforma showing the preliminary estimated sources and uses
and the 57 year cash flow for Phase II, which is attached hereto as Attachment No. 16 and
incorporated herein.
"Primary Loan" and "Primary Loans" shall mean, individually and collectively, the
permanent and construction financing obtained by Developer for Phase II from one or more
institutional lender(s) other than an Affiliate of Developer, as approved by Authority Executive
Director, which loan(s) shall be senior to Authority's Regulatory Agreement, but subordinate to
Authority's fee interest in the Site and the Entitlement for Phase Il.
17
"Project" shall mean a multiple phase affordable housing project on real property
depicted on Attachment No. 3 attached hereto. Phase II is the first phase of the Project.
"Property Management Fee" shall mean the fee to be paid by Developer to the Property
Manager for property management services performed at Phase II, which fee shall not exceed
six percent (6%) of effective gross income attributable to the Housing Units at Phase II. Developer
shall notify Authority in writing of any change in the formula for the Property Phase I I Management
Fee.
"Property Management Plan" shall mean the management plan required to be created
by Developer and submitted to Executive Director for approval, which approval shall not be
unreasonably withheld, which shall include a detailed plan and strategy for long term marketing
(consistent with the Marketing and Tenant Selection Plan), operation, maintenance, repair and
security of Phase II, inclusive of on-site social services to the residents of Phase II, and the
method of selection of tenants, rules and regulations for tenants, and other rental policies and
procedures for Phase II as set forth in Section 4.11.2.
"Property Manager" is defined in Section 4.11.1.
"Refinancing Net Proceeds" shall mean the proceeds of any approved refinancing of
any of the Primary Loans or other approved financing secured by the Site, net of: (i) the amount
of the financing which is satisfied out of such proceeds; (ii) reasonable and customary costs and
expenses incurred in connection with the refinancing; (iii) the balance, if any, of the Deferred
Developer Fee; (iv) the balance of loans to Developer made by the limited partners of Developer
for development or operating deficits, amounts expended to maintain compliance with the Tax
Credit Regulatory Agreement, or contributions for capital expenditures in excess of available
Phase II revenues, if any, including interest at the Applicable Federal Rate; (v) the balance, if any,
of operating loans or development loans made by the general partners of Developer, including
interest at the Applicable Federal Rate; (vi) the return of capital contributions or loans, if any, to
Developer made by the general partners of Developer that were used to pay the Deferred
Developer Fee; (vii) payment of unpaid Tax Credit adjustment amounts or reimbursement of Tax
Credit adjustment amounts paid by the administrative and/or managing general partners and/or
the guarantors to Developer pursuant to the Partnership Agreement, if any; and (viii) the payment
to the administrative general partner of Developer of a refinancing fee, which fee is and shall be
subject to the approval of the Executive Director at the time of each refinancing and which shall
not exceed six percent (6%) of the amount of the approved refinancing.
"Regulatory Agreement" or "Authority Regulatory Agreement" shall mean the
Authority Regulatory Agreement for Phase II, which shall be entered into by Authority and
Developer concurrently with the Closing for Phase II and which shall be recorded as an
encumbrance to the Site in substantially the form attached hereto as Attachment No. 10 and
incorporated herein, in accordance with Section 4.16 hereof. The Authority Regulatory
Agreement for Phase II may be subordinate to the Primary Loan, and the Tax Credit Regulatory
Agreement for Phase II subject to the requirements of this Agreement.
"Release of Construction Covenants" shall mean the document which shall evidence
Developer's satisfactory completion of Phase II, as set forth in Section 3.5 hereof, substantially in
the form of Attachment No. 14 hereto.
"Rent" is defined in Section 2.1.2.
18
"Request for Notice" or "Request for Notice of Default" shall mean the request for
notice of default pursuant to Civil Code Section 2924b to be recorded against the Site in
connection with the Escrow for Phase II substantially in the form attached hereto as Attachment
No. 13 and fully incorporated by this reference.
"Reservation" and "Reservations" mean, individually and collectively, the reservation
of Tax Credits by TCAC for Phase II.
"Reserve Deposits" shall mean any payments to the Capital Replacement Reserve and
Operating Reserve accounts pursuant to Sections 4.12 and 4.13 hereof.
"Residual Receipts" shall mean Annual Project Revenue for Phase II less the sum of:
(i) Operating Expenses, including payment of Rent and Additional Rent under
the Ground Lease;
(ii) Debt Service;
(iii) Reserve Deposits in accordance with the requirements of the Investor
Limited Partner and the Partnership Agreement, and the Lender of the Primary Loan in its
transaction documents, but in no event less than as required by this Agreement and the Ground
Lease;
(iv) Partnership Related Fees (including accrued but unpaid Partnership
Related Fees from the prior year or prior years, as applicable);
(v) payment of unpaid Tax Credit adjustment amounts or reimbursement of
Tax Credit adjustment amounts paid by the administrative and/or managing general partners
and/or the guarantors to Developer pursuant to the Partnership Agreement, if any;
(vi) repayment of loans, if any, made by the limited partner(s) of Developer,
including interest at the interest rate provided in the Partnership Agreement, for development
and/or operating expense deficits or other loans directly and reasonably related to Phase II and
operation thereof as provided hereunder;
(A) provided, that, the propriety of any such loans to Phase II, if any,
made by the limited partner(s) of Developer pursuant to the Partnership Agreement (and during
the term thereof) shall be subject to the reasonable prior consent of and reasonably verified by
the Executive Director; and
(B) provided, further, that the propriety of any such loans made by the
limited partner(s) of Developer shall be deemed to be reasonable and may be made without the
prior consent of the Executive Director if such loans are made to pay any expense or obligation
of Developer relating to the physical condition and/or operation of Phase II and for which Annual
Project Revenue, reserves or other funds of Developer are not otherwise available (but Developer
shall submit evidence and documentation to the Executive Director showing that such loans are
made to pay expenses relating to the physical condition and/or operation of Phase II and that
Annual Project Revenue, reserves or other funds of Developer are not available to pay such
expenses);
19
(vii) Property Management Fee for Phase II which remains unpaid after
payment of Operating Expenses, if any;
(vii) Deferred Developer Fee for Phase II which remains unpaid, if any,
including interest at the Applicable Federal Rate;
(ix) repayment of outstanding development and operating loans or credit
adjustor advances or development fee advances, if any, made by the administrative and/or
managing general partners and/or the Guarantor (or any other guarantor required by the Investor
Limited Partner or the Primary Lender) to Developer, with all such loans to be repaid without
interest; provided, that, as a condition to use of any Annual Project Revenue to repay such loan(s)
pursuant to this subparagraph (ix), Developer shall submit evidence and documentation to the
Executive Director showing that such loans are required to be made pursuant to the terms of the
Partnership Agreement; and
(x) capital contributions or loans to Developer, if any, made by the general
partners of Developer that were used to pay the Developer Fee.
Residual Receipts shall be calculated on a cash basis. Developer's annual loan payments
on the Authority Subordinate Loan shall be paid by Developer to Authority under the Authority
Subordinate Loan and shall include:
Eighty-five percent (85%) of the Residual Receipts received from operation of Phase II
until payment in full of the Authority Subordinate Loan. The remaining fifteen percent (15%) of
the Residual Receipts received from the operation of Phase II shall be retained by Developer or
used by Developer to pay any fees or charges not specifically deducted from Annual Project
Revenues above.
In the event any calculation of Annual Project Revenue less subsections (i) through
(xi) inclusive above results in a negative number, then Residual Receipts shall be zero ($0) for
that year.
In addition, none of the fees, costs, expenses, or items described above in calculation of
Residual Receipts shall include any duplicate entry/item, or double accounting for a cost item.
For example, an audit fee incurred by Developer (or any partner of Developer or an Affiliate) and
deducted or included above in category/subsection (i) Operating Expenses shall not also be
deducted or included in category/subsection (v) Partnership Related Fees in the calculation of
Residual Receipts.
"Residual Receipts Report" shall mean the report in substantially the form attached
hereto as Attachment No. 18 and incorporated herein, which shall be completed by Developer
and submitted to Authority annually for Phase II in accordance with Section 5.2.1. Residual
Receipts shall be calculated using cash basis accounting.
It is understood the Residual Receipts Report is subject to all of the terms and conditions
set forth in this Agreement. The summary of the items in the Residual Receipts Report is not
intended to supersede or modify the more complete description in this Agreement; in the event of
any inconsistency between the Residual Receipts Report and this Agreement, this Agreement
shall govern.
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"RMC" shall mean Related Management Company, L.P., which has been pre -approved
as the Property Manager for Phase II, subject to the provisions of Section 4.11 herein.
"Schedule of Performance" shall mean each Schedule of Performance attached hereto
as Attachment No. 5.
"Scope of Development" shall mean that certain Scope of Development attached hereto
as Attachment No. 6 and incorporated herein, which describes the scope and quality of the
apartment complex to be constructed by Developer at the Site pursuant to the terms and
conditions of this Agreement.
"Section 3" shall mean and refer to Section 3 of the Housing and Urban Development
Act of 1968, 12 U.S.C. § 1701 u, as amended. Authority has prepared a Section 3 "checklist" and
other forms related to Section 3 compliance; and as provided by Authority to Developer, its
General Contractor, Subcontractors, or other contractor(s) or subcontractor(s), as applicable,
such forms shall be utilized in all contracts and subcontracts to which Section 3 applies.
"Section 3 Clause" shall mean the language, set forth below, which is required to be
included in each and every Construction Contact entered into by Developer, the General
Contractor, each Subcontractor and/or any other contractor(s) or subcontractor(s), as applicable,
for the development of Phase II. For purposes of this Section 3 Clause and compliance therewith,
whenever the word "contractor" is used it shall mean and include, as applicable, Developer,
General Contractor, any and all Subcontractors, and any other contractor(s) and subcontractor(s)
performing work on Phase II.
Developer hereby acknowledges and agrees to take all responsibility for compliance with
all Section 3 Clause federal requirements applicable to Phase II and further acknowledges and
agrees that compliance with all Section 3 Clause requirements for Phase II by Developer, the
General Contractor, all Subcontractors, and/or other contractor(s), subcontractor(s), and other
agents, is the primary obligation of Developer. Developer shall provide or cause to be provided
to its General Contractor and each Subcontractor, and each of its other contractor(s),
subcontractor(s) and agents, a checklist for compliance with the Section 3 Clause federal
requirements, to obtain from the General Contractor, each Subcontractor, and other contractor(s),
subcontractor(s), and agents, all applicable items, documents, and other evidence of compliance
with the items, actions, and other provisions within the checklist, and to submit all such completed
Section 3 Clause documentation and proof of compliance to the Executive Director.
The particular text to be utilized in any and all contracts of the General Contractor or any
Subcontractor doing work covered by Section 3 shall be in substantially the form of the following
Section 3 Clause, as reasonably determined by Authority, or as directed by HUD or its
representative, and shall be executed by the applicable contractor under penalty of perjury:
"(i) The work to be performed under this contract is subject to the requirements
of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701 u
("Section 3"). The purpose of Section 3 is to ensure that employment and other economic
opportunities generated by HUD assistance or HUD assisted projects covered by Section 3, shall,
to the greatest extent feasible, be directed to low and very low income persons (inclusive of Very
Low and Low Income Persons, Very Low and Low Income Households, and Very Low and Low
Income Tenants served by Phase II), particularly persons who are recipients of HUD assistance
for housing.
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"(ii) The parties to this contract agree to comply with HUD's regulations in 24
CFR Part 135, which implement Section 3. As evidenced by their execution of this contract, the
parties to this contract certify that they are under no contractual or other impediment that would
prevent them from complying with the Part 135 regulations.
"(iii) The contractor agrees to send to each labor organization or representative
of workers with which the contractor has a collective bargaining agreement or other
understanding, if any, a notice advising the labor organization or workers' representative of the
contractor's commitments under this Section 3 clause, and will post copies of notices in
conspicuous places at the work site where both employees and applicants for training and
employment positions can see the notice. The notice shall describe the Section 3 preference,
shall set forth minimum number of job titles subject to hire, availability of apprenticeship and
training positions, the qualifications for each; and the name and location of person(s) taking
applications for each of the positions; and the anticipated date the work shall begin.
"(iv) The contractor agrees to include this Section 3 clause in every subcontract
subject to compliance with regulations in 24 CFR Part 135, and agrees to take appropriate action,
as provided in an applicable provision of the subcontract or in this Section 3 clause, upon a finding
that the subcontractor is in violation of the regulations in 24 CFR Part 135. The contractor will not
subcontract with any subcontractor where the contractor has notice or knowledge that the
subcontractor has been found in violation of the regulations in 24 CFR Part 135.
"(v) The contractor will certify that any vacant employment positions, including
training positions, that are filled (a) after the contractor is selected but before the contract is
executed, and (b) with persons other than those to whom the regulations of 24 CFR Part 135
require employment opportunities to be directed, were not filled to circumvent the contractor's
obligations under 24 CFR Part 135.
"(vi) Noncompliance with HUD's regulations in 24 CFR Part 135 may result in
sanctions, termination of this contract for default, and debarment or suspension from future HUD
assisted contracts.
"(vii) With respect to work performed in connection with Section 3 covered Indian
Housing assistance, section 7(b) of the Indian Self Determination and Education Assistance Act
(25 U.S.C. 450e) also applies to the work to be performed under this contract. Section 7(b)
requires that to the greatest extent feasible, (a) preference and opportunities for training and
employment shall be given to Indians, and (b) preference in the award of contracts and
subcontracts shall be given to Indian organizations and Indian owned Economic Enterprises.
Parties to this contract that are subject to the provisions of Section 3 and section 7(b) agree to
comply with Section 3 to the maximum extent feasible, but not in derogation of compliance with
section 7(b)."
After the foregoing Section 3 Clause, Developer shall add the
signature block of the General Contractor, Subcontractor, or
other contractor(s) and subcontractor(s), as applicable, and
shall add the following text immediately above the signature
block: "The contractor/provider by this his signature affixed
hereto declares under penalty of perjury that contractor has
read the requirements of this Section 3 Clause and accepts all
its requirements contained therein for all of his operations
related to this contract."
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"Site" shall mean the real property, generally located at 809 South Dakota Street, 824
South Dakota Street, 862 South Dakota Street, 868 South Dakota Street and 606 E. Avon Place
in the City of Anaheim, as more particularly described in the Legal Description, which shall be
ground leased by Authority to Developer pursuant to the Ground Lease for Phase II. After
completion of the construction of Phase II, the Improvements shall be deemed a part of the Site
and whenever the term "Site" is used in this Agreement it shall mean and include the land and all
Improvements.
"South Street Agreement" shall have the meaning set forth in the Recitals hereto.
"South Street Developer" shall have the meaning set forth in the Recitals hereto.
"South Street Development" shall have the meaning set forth in the Recitals hereto.
"Subcontractor" and "Subcontractors" shall mean, individually and collectively, one or
more subcontractors hired by Developer's General Contractor for Phase II to perform and
complete, or to engage and supervise others to perform and complete, the construction and
rehabilitation of Phase II and all other on-site and off-site improvements required to be constructed
in connection with Phase Il, all of which shall be in accordance with the Scope of Development,
the Entitlement, and the Development Plans. Each of the Subcontractors shall be selected after
competitive bidding in accordance with Section 3.2.7, and Authority shall have every reasonable
right and opportunity to observe and review all material stages of such competitive bidding
process, including a right to review the invitation to bidders, each bid package, each responsive
bid form, each submitted bid package and the right to be present when each bid is opened by
Developer and/or the General Contractor. Developer shall submit to Authority information
regarding the entity serving as the Subcontractor for any portion of the construction of Phase II
and all other on-site and off-site improvements required to be constructed in connection therewith
in accordance with the Scope of Development, the Entitlement, and the Development Plans,
including all required licenses, certifications, insurance, etc., as reasonably requested by Authority
Executive Director.
"Substantial Damage" is defined in Section 3.6.4 hereof.
"Tax Credit Regulatory Agreement" shall mean the regulatory agreement(s) which may
be required to be recorded against the Site with respect to the issuance of Tax Credits for Phase
II. The Tax Credit Regulatory Agreement shall be subordinate and junior to the Ground Lease
and Entitlement.
"Tax Credit Rules" shall mean Section 42 of the Internal Revenue Code and/or California
Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California
Health and Safety Code Section 50199, et seq., as applicable, as the foregoing may be amended
from time to time, and the rules and regulations implementing the foregoing, including Title 4 Cal.
Code Regs. Section 10300, et seq.
"Tax Credits" shall mean federal 9% or 4% (as applicable) Low Income Housing Tax
Credits granted pursuant to Section 42 of the Internal Revenue Code and/or California Revenue
and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and
Safety Code Section 50199, et seq., as applicable.
"TCAC" shall mean the California Tax Credit Allocation Committee, the allocating agency
for Tax Credits in California.
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"Term" shall mean the 57 -year Term of the Ground Lease, as defined therein, as it may
be earlier terminated or extended according to the terms thereof.
"Third Party Costs" is defined in Section 716.
"Transaction Documents" shall mean this Affordable Housing Agreement, the Ground
Lease, the Notice of Affordability Restrictions, the Authority Regulatory Agreement, the Authority
Promissory Note, and the Authority Deed of Trust, to the extent such documents continue to
encumber Phase II. The Cooperation Agreements referenced in the recitals of this Affordable
Housing Agreement do not constitute Transaction Documents.
"Transfer Net Proceeds" shall mean the proceeds of any transfer, in whole or in part, of
Developer's leasehold interest in the Site or any sale, assignment, sublease, or other transfer, in
whole or in part of Developer's interests in the Site, net reasonable and customary costs and
expenses incurred in connection with such transfer.
"Very Low Income" and/or "Very Low Income Households" shall have the same
meaning as prescribed in Section 4.5.1(e) hereof and shall mean and include: (i) very low income
households as defined in the Tax Credit Rules; (ii) 30% AMI Very Low Income Households; (iii)
40% AMI Very Low Income Households; and (iv) 50% AMI Very Low Income Households. Very
Low Income Households include Extremely Low Income Households, as defined in the Tax Credit
Rules.
"30% AMI Very Low Income Households" shall mean those households earning not
greater than thirty percent (30%) of Orange County Area Median Income, adjusted for household
size, which is set forth by regulation of TCAC.
"40% AMI Very Low Income Households" shall mean those households earning not
greater than forty percent (40%) of Orange County Area Median Income, adjusted for household
size, which is set forth by regulation of TCAC.
"50% AMI Very Low Income Households" shall mean those households earning not
greater than fifty percent (50%) of Orange County Area Median Income, adjusted for household
size, which is set forth by regulation of TCAC.
"60% AMI Low Income Households" shall mean those households earning not greater
than sixty percent (60%) of Orange County Area Median Income, adjusted for household size,
which is set forth annually by regulation of TCAC.
"2013 HOME Final Rule" is defined in the Recitals hereto.
2. GROUND LEASE OF THE SITE.
2.1. Ground Lease. Subject to the terms and conditions set forth in this Agreement,
Authority agrees to lease the Site to Developer, and Developer agrees to lease the Site from
Authority pursuant to the terms of the Ground Lease, which shall be substantially in the form
attached hereto as Attachment No. 7.
2.1.1 Term. The Term of the Ground Lease shall commence on the date of
recordation of the Memorandum of Ground Lease in the Official Records ("Commencement
Date"), and shall continue thereafter until the earlier to occur of (a) the fifty-seventh (57th)
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anniversary of the recordation of the Release of Construction Covenants for Phase II in the Official
Records or (b) December 31, 2078. The Term of the Ground Lease shall not commence in any
event until the Conditions Precedent set forth in Section 2.2 have been satisfied and the Closing
shall have occurred.
2.1.2 Rent. Prior to or concurrently with the Commencement Date (defined in
the Ground Lease) and on each anniversary thereof during the Term of the Ground Lease,
Developer shall pay to Authority the Base Rent. In addition, Developer shall pay Additional Rent
pursuant to this Section 2.1.2 and the Ground Lease and shall be subject to adjustment pursuant
to the Rent adjustment provisions set forth in subdivision (b) of this Section 2.1.2. The Base Rent
and the Additional Rent together constitute the "Rent"; provided that the Rent shall be subject to
adjustment as provided in subdivision (b) of this Section 2.1.2.
(a) Additional Rent. In addition to the Rent required by this
Section 2.1.2, Developer shall also pay to Authority as "Additional Rent' under the Ground Lease
any amounts required to be paid by Developer to Authority to reimburse Authority for any
payments made by Authority that are required to be paid by Developer pursuant to the Ground
Lease, such as taxes and other impositions, insurance premiums, or costs of maintaining the Site
and Phase II, all with interest, as shall be set forth in more detail in the Ground Lease.
(b) Rent Adjustment upon Full Payment of Authority Promissory
Note or 20th Anniversary of Commencement Date. In the event of and upon the later to occur
of (i) full payment of the Authority Promissory Note or (ii) the twentieth (20th) anniversary of the
Commencement Date for the Ground Lease, the annual Rent due under the Ground Lease shall
be reset based on the fair market value of the remaining leasehold interest under the Ground
Lease (taking into account the restrictions contained in the Ground Lease and recorded against
Phase ll, including the Tax Credit Regulatory Agreement, hereinafter referred to as the "Recorded
Restrictions," to the extent the Recorded Restrictions remain applicable and enforceable) as
independently appraised and at an annual rental based on a percentage of such appraised value
as determined by a qualified, independent appraiser (conducted by a certified appraiser
reasonably acceptable to Executive Director and Developer), who shall take into account the
cumulative amounts which have been actually paid to Authority as Rent under the Ground Lease,
including without limitation taking into consideration the remaining balance, if any, on the Authority
Subordinate Loan as of the time of the appraisal, and including a reasonable return on investment
of between eight percent (8%) and ten percent (10%). Such independent appraisal(s) shall
determine the fair market value of Phase II, at its highest and best use (but taking the Recorded
Restrictions into account, to the extent the Recorded Restrictions remain applicable and
enforceable) at the time of such appraisal but shall also take into consideration an overall fair
market ground lease rent over the 57 -year term of the Ground Lease with an objective that
Authority receive over such 57 -year term cumulatively a fair market value ground lease rent
(taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain
applicable and enforceable) under the Ground Lease. In such regard, if the Rent paid to date has
underpaid, cumulatively, toward achieving a fair market ground lease rent (taking the Recorded
Restrictions into account, to the extent the Recorded Restrictions remain applicable and
enforceable) over the 57 -year Term of the Ground Lease, then the appraiser shall take that fact
into consideration when determining an adjusted fair market Rent for the remainder of the Term.
Likewise, if the Rent paid to date has been overpaid, cumulatively, toward achieving a fair market
Ground Lease rent (taking the Recorded Restrictions into account, to the extent the Recorded
Restrictions remain applicable and enforceable) over the 57 -year Term, then the appraiser shall
take that fact into consideration when determining the adjusted Rent for the remainder of the
Term.
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In the event the Rent under the Ground Lease is reset pursuant to the foregoing
paragraph, this adjusted annual Rent for the remaining Term of the Ground Lease, as determined
by the independent appraiser as described above, shall be used to adjust the Rent due and
required to be paid annually under the Ground Lease to the lesser of (1) such appraised rent for
Phase II (to be increased by 20% every five (5) years to account for inflation), or (2) eighty-five
percent (85%) of the Remaining Residual Receipts for Phase 11. In any year, if the appraised
value rent (to be increased by 20% every five (5) years to account for inflation) exceeds eighty-five
percent (85%) of the Remaining Residual Receipts for Phase ll, the amount by which such
appraised value rent (increased by 20% every five (5) years to account for inflation) exceeds
eighty-five percent (85%) of the Remaining Residual Receipts for Phase 11 to be paid pursuant to
this subdivision (b) in a given year shall accrue and be carried over and added to the amount of
the Rent to be paid in later years for Phase 11 by Developer.
2.1.3 Title to Improvements. Upon execution of the Ground Lease for the
Site, fee title to all Improvements located at the Site shall be conveyed to Developer for Phase 11
pursuant to the Grant Deed. Upon expiration or earlier termination of the Ground Lease, the
Improvements located on the Site shall automatically vest in Authority; provided, in the event of a
foreclosure of Developer's interest in the Ground Lease, title to the Improvements shall vest in
the successor tenant under the Ground Lease, subject to the terms of the Ground Lease (or a
new Ground Lease approved by Authority) entered into after such foreclosure, which shall provide
that upon ultimate termination or expiration of the Ground Lease or such new Ground Lease
entered into upon foreclosure or deed in lieu of foreclosure, title to such Improvements shall
automatically vest in Authority.
2.2. Conditions Precedent to Commencement of Ground Lease and Authority
Subordinate Loan. The commencement of the Term of the Ground Lease for the Site and
Authority's obligation to make the Authority Subordinate Loan relating to Phase II, is conditioned
upon the satisfaction (or waiver by the benefited party) of the following terms and conditions within
the times designated below (each, a "Condition Precedent," collectively, "Conditions Precedent").
2.2.1 Authority's Conditions Precedent to the Closing. Authority's
obligations to make the Authority Subordinate Loan and the commencement of the Term and
effectiveness of the Ground Lease for the Site, are each subject to the fulfillment by Developer
(or written waiver by Authority) of each and every one of the Conditions Precedent (a) through
(o), inclusive, described below, which are solely for the benefit of Authority, and which shall be
fulfilled by Developer or waived by Authority within the time periods provided herein:
(a) Execution and Recording of Documents. Developer shall have
duly executed and delivered to Escrow Agent the Authority Promissory Note, Authority Deed of
Trust, Regulatory Agreement, Ground Lease, Memorandum of Ground Lease, Notice of
Affordability Restrictions, Request for Notice, the Phase II Amended and Restated Joint Use
Agreement, the Phase 11 Reciprocal Easement Agreement and any other documents required
hereunder for Phase 11, and such documents shall be ready for and meet all conditions to the
Closing pursuant to the requirements of this Agreement. The Authority Deed of Trust, Regulatory
Agreement, Memorandum of Ground Lease, Notice of Affordability Restrictions and Request for
Notice shall be ready to record in the Official Records at Closing.
(b) Grading Permits and Building Plans/Permits. Developer shall
have obtained City and Authority approval of its Construction Drawings and all final grading and
building plans for all of the Improvements to be constructed during Phase 11 as required by
Section 3.4. Grading permits shall be ready to issue upon payment of fees and any and all
26
conditional building permits shall be ready to be issued concurrently with the grading permits upon
payment of all necessary fees and all required security shall have been posted in order to
commence and complete construction of Phase 11. The conditional building permits shall state
that final unconditional building permits shall be issued upon satisfactory completion of grading,
subject to the sole discretion of City's Building and Planning Departments.
(c) Entitlement. Developer shall have obtained City and Authority
approval of the Basic Concept Drawings pursuant to Section 3.2 herein, and shall have received
all Entitlements for Phase II (but for payment of fees associated therewith) from the City, including
administrative adjustment(s), conditional use permit(s) or variance(s), if required, density bonus
incentives, and compliance with and/or preparation of documentation, studies, and other reports
as required by the California Environmental Quality Act and the National Environmental Policy
Act, as applicable.
(d) Final Budget. Developer shall have submitted to Authority for its
approval the detailed Final Budget for the construction and development of Phase 11, and Authority
shall have approved the Final Budget for Phase II in its reasonable discretion.
(e) Evidence of Financing. Developer shall have provided written
proof reasonably acceptable to Authority that Developer has obtained commitments for equity
contributions, reservation of Tax Credits, and other approved affordable housing subsidies and/or
loans, and the Primary Loan (including the construction and permanent financing) for Phase 11, all
subject to customary conditions, and Authority shall have reasonably approved such financing
commitments pursuant to Section 3.10, The Primary Loan construction financing for Phase II
shall have closed and funded prior to or be ready to close and fund concurrently with the Closing
for the Authority Subordinate Loan for Phase 11.
(f) Partnership Agreement; Organizational Documents;
Resolution. Developer shall have duly executed or, shall execute concurrently with Closing, a
Partnership Agreement reasonably acceptable to Authority in accordance with Section 3.10 and
a Certificate of Limited Partnership shall have been filed with the California Secretary of State,
under which the limited partners are committed to make equity contributions in an amount, which
together with the proceeds of the Primary Loan, the Tax Credits, the Authority Subordinate Loan,
and any additional affordable housing subsidies and loans are sufficient to finance the
construction and development of Phase II. In addition, Developer shall have certified in writing to
Authority that the Primary Loan, Tax Credits, Authority Subordinate Loan, any additional
affordable housing subsidies, Deferred Developer Fee, and required equity contributions, are
together projected to be sufficient to pay for the completion of development of Phase 11. Authority
shall have received and approved the Partnership Agreement and any other relevant
organizational documents of Developer, including a resolution authorizing a representative of
Developer to enter into this Agreement, the Regulatory Agreement, the Ground Lease, and to
execute all of their documents required under the terms of this Agreement, all on behalf of
Developer.
(g) Construction Contract. Developer shall have provided to
Authority (not later than ten (10) days prior to the Closing to enable Authority Executive Director
to review, comment and approve or disapprove) a signed copy of the Construction Contracts
between Developer and the General Contractor and Developer shall also deliver to Authority (not
later than ten (10) days prior to the Closing), signed copies of all subcontracts between
Developer's General Contractor and any subcontractor that have been executed prior to the
Closing and, from and after the Closing, Developer shall deliver to the Authority copies of any
27
additional subcontracts between the General Contractor and any subcontractors executed after
the Closing. All such Construction Contracts and subcontracts shall be certified by the General
Contractor to be a true and correct copy thereof. Authority Executive Director shall have
reasonably approved such General Contractor and all Subcontractors selected prior to the
Closing (which Subcontractors shall be selected after competitive bidding pursuant to
Section 3.2.7) as having the experience and financial resources (based on audited or unaudited
financial statements submitted to Authority) necessary to construct and complete Phase II;
provided, however, Portrait Homes, Inc. (or its affiliate), is pre -approved to act as the General
Contractor for the construction of Phase II. Developer shall submit to Authority evidence
regarding each entity serving as a Subcontractor for the construction of each portion of Phase ll,
along with satisfactory evidence of necessary license(s), certification(s), bonding and insurance,
as well as documentation associated with the competitive solicitation required by Section 3.2.7
(with respect to the General Contractor's license bond required by the State of California) and
insurance, all as required by this Agreement and as reasonably requested by Authority Executive
Director. Each Construction Contract (and all subcontracts) shall include the Section 3 Clause.
The Construction Contract with the General Contractor shall be for a fixed, all-inclusive fee or
guaranteed maximum fee to complete all work to be performed by the General Contractor to
construct Phase II, subject to approved change orders.
(h) Completion Guaranty. Developer shall obtain and provide for the
benefit of Authority and City, a completion guaranty ("Completion Guaranty"), in substantially the
form set forth in Attachment No. 11 and incorporated herein, pursuant to which The Related
Companies, L.P., a New York limited partnership as guarantor ("Guarantor"), shall be the
guarantor, legally and financially, to cause completion of the construction of Phase II
(1) substantially within the time limits set forth in the Schedule of Performance attached hereto as
Attachment No. 5, (2) substantially in accordance with the Scope of Development, the
Entitlement, and the Development Plans, as the same may be modified from time to time in
accordance with the terms of this Agreement, (3) free and clear of any mechanics liens,
materialmen's liens and equitable liens, and (4) all costs of construction shall be paid prior to
delinquency. In addition, each Completion Guaranty will provide for the waiver by Guarantor of
any and all rights, waivers and defenses which may otherwise be available under state or federal
law to prevent Authority's (or City's) enforcement of Guarantor's obligations under the Completion
Guaranty.
(i) Review and Approval of Title. Developer shall not have elected
to terminate this Agreement due to the condition of title to the Site pursuant to Section 2.4.7.
(j) Authority's Title Policy. The Title Company (as hereinafter
defined) shall have unconditionally committed to issue the Authority Title Policy for the Site to
Authority pursuant to Section 2.4.8.
(k) Environmental Condition of the Site. The environmental
condition of the Site shall be reasonably acceptable to Developer, and Developer shall not have
elected to terminate this Agreement pursuant to Section 2.3.3.
(1) Proof of Insurance. Developer shall have provided to Authority
certificates of insurance and endorsements which satisfy all requirements of Section 3.6 hereof
as to Phase Il.
(m) Property Management Plan. Developer shall have submitted to
Authority, and Authority shall have reasonably approved, the Property Management Plan for
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Phase II, including a copy of one or more agreements with social services providers for Phase II,
in accordance with Section 4.9.
(n) Marketing and Tenant Selection Plan. Developer shall have
submitted to Authority, and Authority shall have reasonably approved, the Marketing and Tenant
Selection Plan for Phase II and which shall evidence and include the tenant selection criteria
provided for herein.
(o) No Default; Representations and Warranties. Developer shall
not be in Default of any of its obligations under the terms of this Agreement. All representations
and warranties of Developer contained herein shall be true and correct in all material respects on
and as of the Closing Date for Phase II as though made at that time, and all covenants of
Developer which are required to be performed prior to the Closing shall have been performed by
such date.
2.2.2 Developer Conditions Precedent to the Closing. Developer's
obligations to proceed with the commencement of the Term and effectiveness of the Ground
Lease are subject to the fulfillment or waiver by Developer of each and all of the Conditions
Precedent (a) through (j), inclusive, described below, which are solely for the benefit of Developer,
and which shall be fulfilled or waived by the time periods provided for herein:
(a) Execution and Recording of Documents. Authority shall have
duly executed and delivered to Escrow Agent the Grant Deed, Ground Lease, Memorandum of
Ground Lease, Notice of Affordability Restrictions, Request for Notice, and any other documents
required hereunder for Phase Ii, and such documents shall be ready for and meet all conditions
to the Closing pursuant to the requirements of this Agreement. The Grant Deed, Memorandum
of Ground Lease, Notice of Affordability Restrictions and Request for Notice, shall be ready to
record in the Official Records at Closing.
(b) Land Use Entitlement. Developer shall have obtained City and
Authority approval of the Basic Concept Drawings, and shall have received the necessary
Entitlement for Phase II from City, including conditional use permit(s) or variance(s), if any are
required.
(c) Grading Permits and Building Plans/Permits. Developer shall
have obtained City and Authority approval of its Construction Drawings and all final grading and
building plans for Phase II. Initial rough grading as well as complete grading permits shall be
ready to issue upon payment of fees and any and all conditional building permits shall be ready
to be issued concurrently with such grading permits upon payment of all necessary fees and all
required security shall have been posted in order to commence and complete construction of
Phase II. The conditional building permits shall state that final unconditional building permits shall
be issued upon satisfactory completion of all rough and complete grading subject to the sole
discretion of City's Building and Planning Departments.
(d) Condition of Site. Authority shall have fulfilled its obligations
pursuant to Section 3.1.2 hereof to deliver the Site to Developer clear of occupants.
(e) Final Budget. Authority shall have approved a detailed Final
Budget for the construction and development of Phase II, and Authority shall have approved the
Final Budget for Phase II in its reasonable discretion.
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M Evidence of Financing. Developer shall have obtained, and
Authority shall have approved, a commitment for equity contributions, a reservation of Tax
Credits, and other affordable housing subsidies and/or loans, and the Primary Loan, including the
construction financing and permanent financing commitment for Phase II in form and substance
acceptable to Developer, all subject to customary conditions, and Authority shall have reasonably
approved such financing pursuant to Section 3.10. The Primary Loan construction financing for
Phase I I shall have closed prior to or be ready to close concurrently with the Closing for Phase Il.
(g) Review and Approval of Title. Developer shall have reviewed and
approved the condition of title to the Site as provided herein.
(h) Developer's Title Policy. The Title Company shall have
unconditionally committed to issue the Developer Title Policy for Phase II to Developer pursuant
to Section 2.4.8.
(i) Environmental Condition of the Site. The environmental
condition of the Site and Improvements shall be reasonably acceptable to Developer and
Developer shall not have elected to terminate this Agreement pursuant to Section 2.3.3.
Q) Relocation. Authority shall have relocated tenants at the Site
pursuant to the Relocation Laws.
(k) No Default; Representations and Warranties. Authority shall not
be in Default of any of its obligations under the terms of this Agreement. All representations and
warranties of Authority contained herein shall be true and correct in all material respects on and
as of the Closing Date for Phase 11 as though made at that time, and all covenants of Developer
which are required to be performed prior to Closing shall have been performed by such date.
2.3. Environmental Condition of the Site.
2.3.1 Environmental Condition of the Site. Authority has delivered to
Developer any and all Environmental Reports relating to the Site and the Improvements in the
Authority's possession. A list of the Environmental Reports delivered to Developer and
Environmental Reports to be prepared, copies of which shall be delivered to Developer promptly
upon receipt and approval thereof by Authority, is set forth in Attachment No. 15, which is attached
hereto and incorporated herein. Except as disclosed in the Environmental Reports delivered to
Developer, Authority represents to Developer that it is not aware of, to its Best Knowledge, and it
has not received any additional or unrelated notice or communication from any governmental
agency having jurisdiction over the Site or Improvements, notifying it of the presence of
Hazardous Materials in, on, or under the Site or Improvements, or any portion thereof. At all times
relevant to this Agreement or the Ground Lease, Developer agrees to provide Authority with any
additional supplemental or updated documents relating to the physical and/or environmental
condition of the Site and Improvements, including those relating to the soils and groundwater,
which are received by Developer.
2.3.2 Studies and Reports. Prior to the commencement of the Ground Lease,
Developer may obtain data and make any other or additional surveys, tests, studies, and reports
necessary to evaluate the suitability of the Site and Improvements for Phase II, including the
investigation of the environmental condition of the Site and Improvements (collectively, the
"Studies"). Any studies undertaken on the Site by Developer prior to the commencement of the
Ground Lease shall be done at the sole expense of Developer, and Developer shall execute a
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Right of Entry and License Agreement in a form reasonably acceptable to Authority prior to
undertaking any such work and/or entering the Site. Any studies shall be undertaken only after
all insurance required by and conforming to the requirements of such Right of Entry and License
Agreement has been issued and is in full force and effect, and Developer has secured any
necessary permits therefor from the appropriate governmental agencies. Developer hereby
agrees to promptly provide Authority with any and all Studies relating to the environmental
condition of the Site upon Developer's acquisition thereof.
2.3.3 Approval of Environmental Condition of the Site. Prior to the Closing,
and within the time set forth in the Schedule of Performance, Developer shall approve or
disapprove the environmental condition of the Site by written notice to Authority. In the event that
Developer disapproves the environmental condition of the Site, this Agreement shall be
terminated as provided in Section 6.4 hereof prior to the Closing for Phase Il. In the event
Developer disapproves the condition of the Site or Improvements because it determines that
environmental remediation is required to place the Site and/or Improvements in a condition
suitable for use as required hereunder and subject to Developer's termination right set forth in the
immediately preceding sentence, Authority and Developer shall negotiate in good faith regarding
the remediation of the Site and Improvements, and the allocation of the cost of performing such
environmental remediation. If after such negotiation the parties are unable to reach agreement
upon the remediation of the Site and Improvements, any party may terminate this Agreement as
provided herein prior to the Closing.
2.3.4 Indemnification. Developer shall save, protect, pay for, defend
(with counsel acceptable to Authority and/or City, as applicable), indemnify and hold harmless
Authority, City, and their respective elected and appointed officials, officers, employees,
attorneys, representatives, volunteers, contractors and agents (collectively, "Indemnitees") from
and against any and all Environmental Claims and any and all liabilities, suits, actions, claims,
demands, penalties, damages (including, without limitation, penalties, fines and monetary
sanctions), losses, costs or expenses (including, without limitation, consultants' fees, investigation
and laboratory fees, attorneys' fees and remedial and response costs and third -party claims or
costs) (the foregoing are hereinafter collectively referred to as "Liabilities") that may now or in the
future be incurred or suffered by Indemnitees by reason of, resulting from, in connection with or
arising in any manner whatsoever as a direct or indirect result of: (i) the presence, use, release,
escape, seepage, leakage, spillage, emission, generation, discharge, storage, or disposal of any
Hazardous Materials in, on, under, or about, or the transportation of any such Hazardous
Materials to or from, the Site; (ii) the violation, or alleged violation, of any statute, ordinance, order,
rule, regulation, permit, judgment, or license relating to the use, generation, release, leakage,
spillage, emission, escape, discharge, storage, disposal, or transportation of Hazardous Materials
in, on, under, or about, or to or from, the Site; (iii) the physical and environmental condition of the
Site, (iv) any Liabilities relating to any Environmental Laws and other Governmental
Requirements relating to Hazardous Materials and/or the environmental and/or physical condition
of the Site, and (v) any Environmental Claims relating to Phase II or the Site; provided, however,
that the foregoing indemnity shall not apply to any Liabilities arising or occurring (a) prior to the
commencement of the Ground Lease, (b) after the expiration or earlier termination of the Term of
the Ground Lease or the date Developer vacates the property, whichever occurs later, or (c) as a
result of the grossly negligent or wrongful acts or omissions of Authority or City. The foregoing
indemnification shall continue in full force and effect regardless of whether such condition, liability,
loss, damage, cost, penalty, fine, and/or expense shall accrue or be discovered before or after
the termination of the Ground Lease. This indemnification supplements and in no way limits the
indemnification set forth in Section 3.7.
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2.3.5 Duty to Prevent Hazardous Material Contamination. During the
construction, development, operation and management of Phase II, Developer shall take all
necessary precautions to prevent the release of any Hazardous Materials into the environment
on or under the Site. Such precautions shall include, but not be limited to, compliance with all
Environmental Laws and other Governmental Requirements. Developer shall notify Authority,
and provide to Authority a copy or copies of any notices of violation, notices to comply, citations,
inquiries, clean-up or abatement orders, cease and desist orders, reports filed pursuant to
self -reporting requirements and reports filed or applications made pursuant to all Environmental
Laws and other Governmental Requirements, and Developer shall report to Authority, as soon as
possible after each incident, any unusual or potentially important incidents in the event of a
release of any Hazardous Materials into the environment.
2.3.6 Release of Authority and City by Developer. With the exception of the
obligations of Authority (and City as beneficiaries of the covenants thereunder) under the Ground
Lease, the Entitlement, Environmental Laws and Governmental Requirements (except to the
extent the responsibility for compliance with Environmental Laws and Governmental
Requirements has been assumed by Developer hereunder), Developer hereby waives, releases
and discharges forever the Indemnitees from all present and future claims, demands, suits, legal
and administrative proceedings and from all liability for damages, losses, costs, liabilities, fees
and expenses, including attorneys' fees, court and litigation costs and fees of expert witnesses,
present and future, arising out of or in any way connected with Developer's possession or use of
the Site pursuant to the Ground Lease, improvement of the Site in accordance with this
Agreement, the Scope of Development, and the Entitlement, and for the operation of Phase II at
the Site, of any Hazardous Materials on the Site, or the existence of Hazardous Materials
contamination in any state on, under, or about the Site, however they came to be located there.
In connection with the foregoing, Developer acknowledges that it is aware of and
familiar with the provisions of Section 1542 of the California Civil Code that provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR 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."
As such relates to this Section 2.3.6, Developer hereby waives and relinquishes
all rights and benefits that it may have under Section 1542 of the California Civil Code.
Notwithstanding the foregoing, this waiver, discharge, and release shall not be
effective in the event the presence or release of Hazardous Materials on the Site occurs as a
result of the gross negligence or willful misconduct of Authority or City or their officers, employees,
representatives and agents.
2.3.7 Environmental Inquiries. Developer shall notify Authority upon receipt,
and provide to Authority a copy or copies, of the following environmental permits, disclosures,
applications, entitlements or inquiries relating to the Site and Phase II: notices of violation, notices
to comply, citations, inquiries, clean up or abatement orders, cease and desist orders, reports
filed pursuant to self -reporting requirements and reports filed or applications made pursuant to
any Environmental Laws and other applicable Governmental Requirements relating to Hazardous
Materials and underground tanks, and Developer shall report to Authority, as soon as possible
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after each incident, all material information relating to or arising from such incident, including, but
not limited to, the following:
(a) All required reports of releases of Hazardous Materials, including
notices of any release of Hazardous Materials as required by any Governmental Requirements;
(b) All notices of suspension of any permits relating to Hazardous
Materials;
(c) All notices of violation from federal, state or local environmental
authorities relating to Hazardous Materials;
(d) All orders under the State Hazardous Waste Control Act and the
State Hazardous Substance Account Act and corresponding federal statutes, concerning
investigation, compliance schedules, clean up, or other remedial actions;
(e) All orders under the Porter Cologne Act, including corrective action
orders, cease and desist orders, and clean up and abatement orders;
(f) Any notices of violation from OSHA or Cal OSHA concerning
employees' exposure to Hazardous Materials;
(g) All complaints and other pleadings filed against Developer relating
to Developer's storage, use, transportation, handling or disposal of Hazardous Materials on or
about the Site; and
(h) Any and all other notices, citations, inquiries, orders, filings or any
other reports containing information which would have a materially adverse effect on the Site or
Authority's liabilities or obligations relating to Hazardous Materials.
In the event of a release of any Hazardous Materials into the environment, Developer
shall, as soon as possible after the release, furnish to Authority a copy of any and all reports
relating thereto and copies of all correspondence with governmental agencies relating to the
release. Upon request of Authority, but subject to any limitations imposed by law or by court
order, Developer shall furnish to Authority a copy or copies of any and all other environmental
entitlements or inquiries relating to or affecting the Site in Developer's possession and/or shall
notify Authority of any environmental entitlements or inquiries relating to or affecting the Site within
Developer's actual or constructive knowledge if Developer is not in possession of same, including,
but not limited to, all permit applications, permits and reports including, without limitation, those
reports and other matters which may be characterized as confidential.
2.4. Escrow. Within the time set forth in the Schedule of Performance, the parties shall
open an escrow ("Escrow") for the Closing for the conveyance by Authority to Developer of a
ground leasehold interest in the Site and the disbursement of the Authority Subordinate Loan for
Phase ll, with First American Title Company or another escrow company mutually satisfactory to
both parties ("Escrow Agent"). As used herein, "Closing" refers to the close of Escrow for the
conveyance of the Site pursuant to the Ground Lease, including the execution of the Authority
Promissory Note and Ground Lease and the execution and recordation of the Grant Deed,
Authority Deed of Trust, Regulatory Agreement, Memorandum of Ground Lease, Notice of
Affordability Restrictions and Request for Notice of Default and the commencement of the Ground
Lease Term.
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2.4.1 Costs of Escrow. Developer shall pay all Escrow charges, the premium
for Developer's Title Policy, Authority's Title Policy (including both an owner's policy and a lender's
policy, both with requested endorsements), all recording fees and documentary transfer taxes, if
any, due with respect to the Closing, and all other fees, charges, and costs which arise from
Escrow.
2.4.2 Escrow Instructions. This Agreement constitutes the joint escrow
instructions of Developer and Authority, and the Escrow Agent to whom these instructions are
delivered is hereby empowered to act under this Agreement. The parties agree to do all acts
reasonably necessary to close each Escrow within the time set forth in the Schedule of
Performance. All funds received in each Escrow shall be deposited with other escrow funds in a
general escrow account(s) and may be transferred to any other such escrow trust account in any
state or national bank doing business in the State of California.
If in the opinion of any party it is necessary or convenient in order to accomplish
the Closing of the Escrow, a party may require that the parties sign supplemental escrow
instructions; provided that if there is any inconsistency between this Agreement and the
supplemental escrow instructions, then the provisions of this Agreement shall control, unless the
supplemental escrow instructions expressly state the intent to amend this Agreement. The parties
agree to execute such other and further documents as may be reasonably necessary, helpful or
appropriate to effectuate the provisions of this Agreement. The Closing shall take place within
five (5) days after the date when the Conditions Precedent set forth in Section 2.2 have been
satisfied or waived by the respective parties as to Phase 11. Escrow Agent is instructed to release
Authority's Escrow Closing statement and Developer's Escrow Closing statement to the
respective parties.
2.4.3 Authority of Escrow Agent. Escrow Agent is authorized to, and shall:
(a) Pay and charge Developer for the premium of the Developer's Title
Policy and the Authority's Title Policy (including both an owner's policy and a lender's policy, both
with requested endorsements), and any endorsements thereto requested by Developer and/or
Authority and any amount necessary to place title in the condition necessary to satisfy this
Agreement;
(b) Pay and charge Developer for one-half of all Escrow fees
(c) Pay and charge Authority for one-half of all Escrow fees and
charges and all documentary transfer taxes associated with the Ground Lease for Phase 11;
(d) Verify proper and complete execution of the Authority Promissory
Note and verify proper and complete execution of and record the Authority Deed of Trust, Grant
Deed, Memorandum of Ground Lease, Regulatory Agreement, Notice of Affordability Restrictions,
and Request for Notice of Default upon Closing; and
(e) Do such other actions as necessary, including obtaining any
Developer and Authority title insurance, required to fulfill the parties' obligations under this
Agreement.
2.4.4 Escrow Closing. Subject to Section 3.10, et seq., regarding financing
for Phase II and the discretionary consents, including approvals and/or disapprovals, and timing
therefor, the Closing for the conveyance of the ground leasehold estate in the Site by Authority to
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Developer, and the commencement of the Term of the Ground Lease for the Site shall occur
within five (5) days of the parties' satisfaction of all of the Conditions Precedent set forth in
Section 2.2 hereof, but in no event later than the times set forth in the Schedule of Performance
(collectively, the "Closing Date"). The Closing Date may be extended by the mutual written
agreement of Developer and the Executive Director. The Closing shall occur at a location within
Orange County at a time and place reasonably agreed on by the parties.
2.4.5 Termination of Escrow. If Escrow is not in condition to close by the
Closing Date, then any party who is not in material default under this Agreement may, in writing,
demand the return of money or property and proceed under the default and/or termination
provisions of this Agreement. If any party makes a written demand for return of documents or
properties, the Escrow shall not cancel until five (5) days after Escrow Agent shall have delivered
copies of such demand to all other parties at the respective addresses shown in this Agreement.
If any objections are raised within said five (5) day period, Escrow Agent is authorized to hold all
papers and documents until instructed by a court of competent jurisdiction or by mutual written
instructions of the parties. Developer, however, shall have the sole option to withdraw any money
deposited by it with Escrow Agent or Authority less Developer's liability for costs of Escrow.
Termination of this Agreement shall be without prejudice as to whatever legal rights any party
may have against the other arising from this Agreement. If no demands are made, the Escrow
Agent shall proceed with the Closing as soon as possible.
2.4.6 Closing Procedure. Escrow Agent shall close the Escrow as follows:
(a) Accept receipt of fully and duly executed Authority Promissory Note,
Authority Deed of Trust, Grant Deed, Ground Lease, Memorandum of Ground Lease, Regulatory
Agreement, Notice of Affordability Restrictions, and Request for Notice of Default;
(b) Record documents in the following order:
(i) Record first the Memorandum of Ground Lease in the
Official Records, with instructions for the Recorder of Orange County, California to deliver the
Memorandum of Ground Lease to Authority;
(ii) Record the Grant Deed in the Official Records with
instructions for the Recorder of Orange County, California, to deliver the Grant Deed to Developer;
(iii) Record the Primary Loan lien instrument, including the deed
of trust securing the Primary Loan, in the Official Records;
(iv) Record the Regulatory Agreement in the Official Records,
with instructions for the Recorder of Orange County, California to deliver the Regulatory
Agreement to Authority;
(v) Record the Notice of Affordability Restrictions in the Official
Records, with instructions for the Recorder of Orange County, California to deliver the Notice of
Affordability Restrictions to Authority;
(vi) Record the Authority Deed of Trust in the Official Records,
with instructions for the Recorder of Orange County, California to deliver the Authority Deed of
Trust to Authority;
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(vii) Record the Request for Notice of Default in the Official
Records, with instructions for the Recorder of Orange County, California to deliver the Request
for Notice of Default to Authority;
(c) Instruct the Title Company to deliver Developer's Title Policy to
Developer and Authority's Title Policy to Authority;
(d) File any informational reports required by Internal Revenue Code
Section 6045(e), as amended, and any other applicable requirements; and
(e) Forward to both Developer and Authority a separate accounting of
all funds received and disbursed for each party and copies of all executed and recorded or filed
documents deposited into Escrow, with such recording and filing date and information endorsed
thereon.
2.4.7 Review of Title. Authority shall be responsible for obtaining a
preliminary title report ("Title Report") from First American Title Insurance Company or another
title company mutually satisfactory to both parties ("Title Company") with respect to the title to the
Site. Developer and Authority each shall have the right to reasonably approve or disapprove the
exceptions to title set forth in the Title Report ("Exceptions"); provided, however, that the following
Exceptions are hereby approved by the parties:
(a) The lien of any non -delinquent property taxes and assessments (to
be prorated at the time of Closing); and
(b) The provisions to be set forth in the Grant Deed, Memorandum of
Ground Lease (which shall incorporate by reference the terms of the Ground Lease), Regulatory
Agreement, and Notice of Affordability Restrictions.
Each party shall have thirty (30) days from the date of its receipt of the Title Report
and legible copies of all back-up documents listed as Exceptions therein or shown on any Survey
to give written notice to the other party and to Escrow Agent of approval or disapproval of any of
such Exceptions; provided, however, that if following review of the Title Report, the Title Company
adds additional exceptions to coverage for matters not caused by a party, each party shall have
the right to approve or disapprove any such exceptions (such new exceptions shall likewise be
included within the definition of the term "Exceptions"). Except for deed(s) of trust and regulatory
agreement(s) approved as part of the financing for Phase II pursuant to Section 3.10, Authority
and Developer shall not voluntarily create any new exceptions to title following the Effective Date
and prior to the Closing, including without limitation, any liens or stop notices related to any studies
or other work at the Site. Authority and Developer shall use good faith efforts to attempt to remove
or modify any Exceptions which are unacceptable. If any Exceptions disapproved by Developer
are not removed, insured, or endorsed around by the Title Company, each party shall have the
option to either proceed to Closing and accept title in its existing condition, or to terminate this
Agreement.
2.4.8 Title Insurance. Concurrently with the Closing for Phase II, there shall
be issued to Developer at Developer's sole cost, a CLTA or, if requested by Developer, an ALTA
leasehold policy of title insurance, together with all endorsements Developer may reasonably
require (collectively, the "Developer Title Policy"), issued by the Title Company insuring that
Developer holds proper interest in the Site as tenant under the Ground Lease and holds fee title
to the Improvements under the Grand Deed, and that the title to the Site is vested in Authority in
36
the condition required by this Agreement. The Title Company shall provide Developer and
Authority with copies of the Developer Title Policy.
Concurrently with the Closing for Phase II, there shall be issued to Authority an ALTA
extended coverage lender's policy of title insurance, together with all endorsements Authority may
reasonably require (collectively, the "Authority Title Policy"), issued by the Title Company insuring
that the lien of the Authority Deed of Trust against the Site is subordinate only to the Primary Loan
for Phase II and to no other monetary encumbrance against the Site. The Title Company shall
provide Developer and Authority with copies of the Authority Title Policy. The Authority Title Policy
insuring the priority of the Authority Subordinate Loan shall be for the full amount of the Authority
Subordinate Loan for Phase ll.
3. DEVELOPMENT OF PHASE II.
3.1. Development of Phase II.
3.1.1 Developer's Obligations. Subject to the terms of this Agreement,
Developer agrees to construct and develop or cause construction and development through
completion of Phase II, including all on-site and off-site improvements required to be constructed
in accordance with the Scope of Development and in compliance with the Entitlement approved
by the City and all applicable local codes, development standards, ordinances and zoning
ordinances, other applicable Governmental Requirements, and the Development Plans which are
approved by the City and Authority pursuant to Section 3.2 hereof.
(a) Scope of Development. "Phase II" is described in more detail on
the Scope of Development attached hereto as Attachment No. 6.
3.1.2 Authority Additional Subsidies. [Anaheim/Related Staff to
revise/comment.]
(a) Delivery of Site.
(i) Relocation Costs. Authority shall relocate the tenants
currently occupying the Site. Such relocation shall be conducted in accordance with all applicable
federal, state, and local laws, rules and regulations. Such relocation is anticipated to cost
approximately $[ ].
(ii) Miscellaneous Site Assembly and Maintenance Costs.
Authority will incur costs in an approximate amount of $[ ] in connection with
miscellaneous Site preparation activities and property management and maintenance of the Site.
(iii) Timing. Authority will use reasonable efforts to complete
the work described in subdivisions (i) and (ii) of this Section 3.1.2(a) prior to Closing.
(b) Energy -Efficient Appliance Rebate. The City will provide $1,500
per Housing Unit, for a total of approximately $31,500, as a rebate for Developer's installation of
eligible energy-efficient appliances in the Housing Units at Phase II; provided, payment of such
amounts by Authority (or Authority causing City or another entity to pay) is expressly conditioned
upon completion of construction of Phase II and installation of such eligible energy-efficient
appliances by Developer at Phase II and the confirmation and issuance by the City (or other
authorized entity) of the applicable certification relating to installation of such eligible
37
energy-efficient appliances by Developer for Phase II. The selection of specific energy-efficient
appliances to be installed at Phase II shall be subject to the reasonable approval of Authority
Executive Director and City Building, Public Utilities and Planning departments.
3.1.3 Subsidies to be Added to Authority Subordinate Loan. The
cumulative value of all improvements to be constructed and the cumulative amount of all rebates,
waivers, and other subsidies to be provided by Authority and/or City pursuant to Section 3.1.2
shall be added to the principal balance owing under the Authority Subordinate Loan for Phase II.
3.1.4 Source of Funds for Additional Subsidy. Authority Executive Director
may elect to use a variety of funding sources to provide and pay for the Additional Subsidy
amounts listed above in Section 3.1.2, including the federal HOME Investment Partnership Act
funds and any and all other funding sources available to the Authority. Developer acknowledges
that these and other sources of Phase II funding may impose and require compliance with
additional federal, state, and/or local requirements and Developer hereby agrees to comply with
any and all such requirements to the extent applicable to Phase II.
3.2. Design Review of Development Plans.
3.2.1 Basic Concept Drawings. Within the time set forth in the Schedule of
Performance, Developer shall submit to Authority, and Authority shall review and approve,
disapprove, or conditionally approve basic concept drawings for Phase II and all appurtenant
improvements, including elevations of all four sides of Phase ll, preliminary landscape plans (both
hardscape and softscape and other amenities of common areas) consistent with the City of
Anaheim Residential Design Guidelines for Affordable Housing Developments, a traffic and
circulation plan as applicable or as may be required, and a rendered perspective, and all
appurtenant improvements (collectively, "Basic Concept Drawings"). In the event Developer
wishes to in any way alter or modify such Basic Concept Drawings, Developer shall re -submit
such modified Basic Concept Drawings to both Authority and City for their reasonable review and
approval of such modifications.
3.2.2 Construction Drawings and Related Documents. Within the time set
forth in the Schedule of Performance, Developer shall submit to Authority, and Authority shall
review and approve, disapprove, or conditionally approve, detailed construction plans/working
drawings with respect to Phase II, prepared by the architect for Phase II, and the components
described in (a) through (c) below (together, "Construction Drawings").
(a) Signage plans, materials and color board.
(b) Common area amenities, including all recreational or leisure areas
or improvements.
(c) Lighting schedules including a photo illumination plan, to determine
if there is adequate lighting within Phase II, with samples or manufacturer's literature for exterior
lighting. Lighting locations are to be shown on landscape plans and elevations.
3.2.3 Standards for Disapproval. Authority Executive Director shall have the
right to disapprove the Basic Concept Drawings in his/her reasonable and complete discretion.
Authority Executive Director shall have the right to disapprove in her reasonable discretion any of
the Construction Drawings if (a) the Construction Drawings do not conform to the approved Basic
Concept Drawings, or (b) the Construction Drawings do not conform to the Scope of Development
or this Agreement, or (c) the Construction Drawings are incomplete. Authority review and
subsequent approval or disapproval shall be conducted within the time periods set forth in the
Schedule of Performance, and an Authority disapproval, if any, shall include a written statement
of the reasons for such disapproval. Developer, upon receipt of any such disapproval, shall revise
such portions and resubmit the disapproved Basic Concept Drawings or Construction Drawings,
as the case may be, by the time established therefor in the Schedule of Performance; provided,
however, in no event shall any such drawings be deemed approved.
Developer acknowledges and agrees that Authority is entitled to approve or
disapprove the Basic Concept Drawings and Construction Drawings (collectively, "Development
Plans") in order to satisfy Authority's obligation to promote the sound development and
redevelopment of the Site, to promote a high level of design which will impact the surrounding
development, and to provide an environment for the social, economic and psychological growth
and well-being of the citizens of the City and all residents of Phase II.
3.2.4 Consultation and Coordination. During the preparation of the
Development Plans and throughout construction of Phase II, City Community Development staff
and authorized representatives of Developer shall hold joint progress meetings with City staff to
coordinate the preparation of, submission to, and review of the Development Plans by Authority
Executive Director and City. City Community Development staff and authorized Developer
representatives shall communicate and consult informally as frequently as is necessary to ensure
that the formal submittal of any documents to Authority and/or City can receive prompt and
thorough consideration. Authority shall designate a City Community Development staff member
to serve as the project manager for Phase II, who shall be responsible for the coordination of
Authority's activities under this Agreement and for coordinating the permitting process.
3.2.5 Revisions and Change Orders. In the event Authority disapproves or
conditionally approves the Development Plans, or any part(s) thereof, or if Developer desires to
propose any substantial revisions to the approved Development Plans, or any part(s) thereof,
Developer shall submit its revisions or proposed changes thereto to Authority Executive Director
and City, and shall also proceed in accordance with any and all Governmental Requirements
regarding such revisions, within the time frame set forth in the Schedule of Performance for the
resubmittal of such Development Plans, or any part(s) thereof. Any revision or change to such
Development Plans proposed by Developer may be disapproved by Authority through its
Executive Director in his/her reasonable discretion pursuant to subdivision (a) below. Any and all
change orders or revisions required by the City and its inspectors that are required under the
Anaheim Municipal Code and all other applicable Uniform Codes (e.g. Building, Plumbing, Fire,
Electrical, etc.) and under other Governmental Requirements shall be included by Developer in
its Development Plans and completed during the construction of Phase II. In the event Developer
requests revisions, alterations, or modifications to the Development Plans, or any part(s) thereof,
for any reason including increased construction costs because of unforeseen occurrences or
conditions relating to the construction of Phase ll, any revisions, alterations, or modifications shall
be subject to the approval of Authority in its reasonable discretion (and the City's
Planning/Building Department in its discretion) pursuant to subdivision (a) below. Developer shall
be required to pay any and all increased costs of construction due to any such revisions,
alterations, or modifications of the Development Plans, or any part(s) thereof.
(a) Approval of Change Orders. Developer shall not be required to
obtain Authority Executive Director approval of any change orders or other revisions or
modifications to the Construction Drawings, so long as each change order, revision, or
modification is consistent with the approved Basic Concept Drawings does not cause any value
M
engineering not previously authorized by Authority and does not affect materially the design,
materials, and architectural quality and integrity of Phase II, except that Developer shall be
required to obtain Authority Executive Director approval to the extent such change order, revision,
or modification will result in a cost adjustment which, cumulatively with all other change orders,
revisions, and modifications, exceeds the amount set forth as the contingency line item in the
approved Final Budget for Phase ll. Notwithstanding the immediately preceding sentence,
Authority shall have the right to review any and all material changes, revisions or modifications to
the Construction Drawings and/or any and all material change orders to the Construction Contract
with the General Contractor which are approved by Developer.
3.2.6 Defects in Development Plans. Neither Authority nor City shall be
responsible to Developer or to any third parties in any way for (a) any defects in the Development
Plans, (b) any structural or other defects in any work done according to the approved
Development Plans, nor (c) any delays caused by the review and approval processes established
by this Section 3.2. Developer shall hold harmless, indemnify and defend the Indemnitees from
and against any claims or suits for damages to property or injuries to persons (including death)
arising out of or in any way relating to defects, latent or patent, in the Development Plans, or the
actual construction work and improvements comprising Phase ll, including, without limitation, the
violation of any Governmental Requirements, or arising out of or in any way relating to any defects
in any work done and/or improvements completed according to the approved Development Plans.
3.2.7 Selection of Subcontractors. Developer or the General Contractor, as
applicable, shall solicit no fewer than three (3) competitive bids from qualified, licensed, insured,
and bonded Subcontractors for each portion of the construction work to be separately contracted
for by each Developer or the General Contractor, as applicable, and Developer shall select the
Subcontractor(s) that have submitted the lowest responsible and responsive bid for each such
separately contracted -for portion of Phase ll. Authority shall have every reasonable right and
opportunity to review all materials, bid packages, and related documents and to observe and
attend all stages of and meetings related to such competitive bidding process, including, without
limitation, a right to review the invitation to bidders and each submitted bid package and the right
to be present when each bid is opened by Developer and/or the General Contractor and all
selected Subcontractors shall be reasonably acceptable to Authority Executive Director.
Developer shall provide copies of all documents and other information reasonably necessary or
appropriate to permit Authority to verify that Developer has solicited competitive bids from such
qualified contractors pursuant to this Section 3.2 and selected the lowest responsible and
responsive Subcontractors as required herein, including copies of the invitation to bidders, all
documents distributed to potential bidders by Developer, and all submissions received from
bidding contractors in response thereto. Developer shall also submit to Authority evidence
regarding each entity serving and/or contracting as the Subcontractor for each portion of the
construction of Phase II and all other on-site and off-site improvements required to be constructed
in connection therewith in accordance with the Scope of Development, the Entitlement to be
approved by City, and the Development Plans, including all required licenses, certifications,
insurance, etc., as reasonably requested by Authority Executive Director.
3.2.8 Authority Construction Manager. Authority shall have the right to
employ (at its sole cost and expense) a construction manager of its choosing ("Construction
Manager") to oversee the competitive bidding and selection of all Subcontractors in accordance
with Section 3.2.7 above and the construction and other development work performed at the Site
pursuant to this Agreement. The Construction Manager shall be retained to provide Authority with
assurances that all work is performed in a timely and safe manner and in accordance with this
Agreement, the Scope of Development, the Development Plans, the approved Construction
40
Contracts, any approved change orders and other legal requirements. Authority may also direct
the Construction Manager (or another consultant selected by Authority, in Authority's sole
discretion) to evaluate the Development Plans and prepare an independent development cost
estimate to assist Authority in determining whether Developer (or General Contractor, as
applicable) is obtaining commercially reasonable bids for Phase II from Subcontractors.
Developer shall ensure that Authority's Construction Manager shall have full access to the Site
and to all records of Developer, the General Contractor, and each and all Subcontractors relating
to Phase II to permit the Construction Manager to perform its duties as described in this
Section 3.2.8, and each Construction Contract shall provide appropriate provisions to effectuate
this Section 3.2.8.
3.3. Timing of Development of Phase II. Developer hereby covenants and agrees to
commence the construction and development of Phase II within the time set forth in the Schedule
of Performance (subject to force majeure pursuant to Section 6.3 hereof). Developer further
covenants and agrees to diligently prosecute to completion the construction and development of
Phase II in accordance with the approved Development Plans (as the same may be modified in
accordance herewith) and to file a notice of completion therefor pursuant to California Civil Code
Section 3093 within the time set forth in the Schedule of Performance.
3.4. City and Other Governmental Permits. As a Condition Precedent to Closing for
Phase I I pursuant to Section 2.2, Developer shall have received, or shall be ready to receive upon
payment of required fees, all required final grading permits and conditional building permits for
the construction of Phase II. Before commencement of construction of Phase 11 Developer shall
secure or cause its General Contractor (and subcontractors) to secure any and all permits and
approvals which may be required by City or any other governmental agency affected by such
construction, including, without limitation, rough grading permits, final grading permits, conditional
building permits, and final building permits. The conditional building permits may state that the
final unconditional building permits shall be issued upon satisfactory completion of rough and
complete grading, subject to the sole discretion of the City's Building and Planning Departments.
Developer shall pay all necessary fees and timely submit to the City final drawings with final
corrections to the Development Plans to obtain any and all such permits. City Community
Development staff will, without obligation to incur liability or expense therefor, use their reasonable
efforts to expedite the City's issuance of final building permits and certificates of occupancy that
meet Governmental Requirements and this Agreement.
3.5. Release of Construction Covenants. Promptly after the completion of the
development of Phase II in conformity with this Agreement (as reasonably determined by
Authority Executive Director or her designee) and as determined completed by the City's building
official, upon the written request of Developer, Authority shall furnish Developer with a Release
of Construction Covenants for Phase II (substantially in the form attached hereto as Attachment
No. 14, and incorporated herein) which evidences and determines the satisfactory completion of
the construction and development of Phase II in accordance with this Agreement. The issuance
and recordation of the Release of Construction Covenants with respect to Phase II shall not
supersede, cancel, amend or limit the continued effectiveness of any obligations relating to the
maintenance, operation, uses, payment of monies, or any other obligations, except for the
obligation to complete the development of Phase II as of the time of the issuance of the Release
of Construction Covenants for Phase 11. Upon receipt of a request for the issuance of a Release
of Construction Covenants for Phase 11, the Authority shall, within thirty (30) days, either issue the
Release of Construction Covenants as requested or provide a detailed written explanation of the
remaining work which must be performed or other requirements for the issuance of such Release
of Construction Covenants. If Authority fails to issue a Release of Construction Covenants without
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providing such detailed written explanation as to what actions Developer must take to obtain such
Release of Construction Covenants within such thirty (30) day period, Developer shall be deemed
to be entitled to such Release of Construction Covenants, and Authority shall, within three (3)
days of demand by Developer, issues such Release of Construction Covenants to Developer.
3.6. Insurance Requirements. Developer shall secure from a company or companies
licensed to conduct insurance business in the State of California, pay for, and maintain in full force
and effect from and after the Closing, and continuing for the Term of the Ground Lease, insurance
for Phase II as required herein, issued by an "A:VI" or better rated insurance carrier as rated by
A.M. Best Company. Developer shall furnish certificates of insurance and endorsements to
Authority not fewer than fifteen (15) days prior to the Closing and shall furnish complete copies of
such policy or policies upon request by Authority or City. [Please confirm insurance language
with Dave Nunley.]
3.6.1 Minimum Coverage/Endorsements. Notwithstanding any inconsistent
statement in the policy or any subsequent endorsement attached hereto, the protection afforded
by these policies shall be written on an occurrence basis in which Authority, City, and their
respective elected and appointed officials, officers, employees, agents and representatives
(together, "Additional Insureds") are named as additional insureds on all coverage, except for
Workers' Compensation coverage, but including Employers Liability coverage, and shall:
(a) Name the Additional Insureds (from above) as additional insureds
on a Commercial General Liability ("CGL") policy;
(b) Include an endorsement to the CGL policy naming the Additional
Insureds as additional insureds, and said endorsement shall be delivered to Authority Executive
Director prior to and as a Condition Precedent to the Closing (and maintained as required herein);
provided, however, that an individual endorsement specifically naming the Additional Insureds
shall not be required if Developer provides documentation which, in the sole discretion of
Authority, demonstrates that the Additional Insureds are otherwise automatically covered under
some sort of blanket policy language that clearly establishes the Additional Insureds' status as
additional insureds under the policy, without the need for a separate endorsement in favor of the
Additional Insureds;
(c) Provide a broad form commercial general liability insurance in the
amount of Twenty Million Dollars ($20,000,000) per occurrence, which will be considered
equivalent to the required minimum limits, and such insurance shall (i) be written on an occurrence
form, (ii) be written with a primary policy form with limits of not less than $1,000,000 per
occurrence; (iii) be written with one or more excess layers to bring the total of primary and excess
coverage limits to not less than $20,000,000 per occurrence, (iv) not be written with a deductible
greater than $20,000 per occurrence (without prior written approval by Authority, which approval
shall be granted or denied in Authority's sole and absolute discretion), (v) not be written with a
self-insured retention (without prior written approval by Authority, which approval shall be granted
or denied in Authority's sole and absolute discretion), and (vi) contain a waiver of subrogation in
favor of the Authority and City. Such insurance shall include independent contractor coverage
and shall cover the acts, errors, omissions, or works of any of Developer's subcontractors and
any other person(s) acting on behalf of Developer, as respects any liability that may occur to
Developer and/or any Additional Insureds from such acts, errors, omissions or work;
(d) Provide primary Automobile Liability insurance for owned, non -
owned, and hired vehicles, as applicable to, or for any use related to, Phase ll, in an amount not
!A
less than One Million Dollars ($1,000,000) combined single limit, with excess insurance coverage
to bring the total amount of Automobile Liability insurance coverage to an amount not less than
Five Million Dollars ($5,000,000) per accident for bodily injury and property damage;
(e) Bear an endorsement or shall have attached a rider providing that
Authority shall be notified not less than thirty (30) days before any expiration, cancellation,
non -renewal, reduction in coverage, increase in deductible, or other material modification of such
policy or policies, and shall be notified not less than ten (10) days after any event of nonpayment
of premium (collectively, "Cancellation Notice"), provided, however, that an individual
endorsement specifically naming the Authority shall not be required if Developer provides
documentation which, in the sole discretion of Authority, demonstrates that the Authority will
automatically receive such Cancellation Notice under some sort of blanket policy language,
without the need for a separate endorsement in favor of the Authority; and
certification:
(f) Developer shall also file with Authority the following signed
"I am aware of, and will comply with, Section 3700 of the Labor
Code, requiring every employer to be insured against liability of
Workers' Compensation or to undertake self-insurance before
commencing any of the work."
Developer shall comply with Sections 3700 and 3800 of the Labor Code by
securing, paying for and maintaining in full force and effect from and after the Closing of Escrow,
and continuing for the Term of the Ground Lease, complete Workers' Compensation insurance,
to statutory limits, with Employers Liability limits not less than One Million Dollars ($1,000,000)
per occurrence, and shall furnish a Certificate of Insurance to Authority before the commencement
of construction. Every Workers' Compensation insurance policy shall bear an endorsement or
shall have attached a rider providing that, in the event of expiration, proposed cancellation, or
reduction in coverage of such policy for any reason whatsoever, Authority shall be notified, giving
Developer a sufficient time to comply with applicable law, but in no event less than thirty (30) days
before such expiration, cancellation, or reduction in coverage is effective or ten (10) days in the
event of nonpayment of premium.
(g) All Additional Insureds shall not be responsible for any claims in law
or equity occasioned by the failure of Developer to comply with this Section 3.6.1. Authority shall
have the right, but not the obligation, to pay a premium on behalf of Developer
(h) Should any of the insurance coverage required herein be written
with an annual aggregate: (i) such aggregate shall be disclosed in writing to Authority, (ii) should
total incurred claims (paid plus reserves) against such insurance exceed fifty percent (50%) of
the applicable aggregate, Developer shall prompt notify Authority in writing, and (iii) should total
incurred claims (paid plus reserves) against such insurance exceed seventy-five percent (75%)
of the applicable aggregate, Developer shall promptly notify Authority in writing and promptly take
whatever action is necessary to have the aggregate reinstated to an amount not less than fifty
percent (50%) of the original aggregate amount.
(i) For all insurance required under this subsection 3.6.1, Authority
shall have the right, at every ten (10) year period of the Ground Lease, to review the types and
limits of insurance coverage required herein and to make reasonable adjustments, provided that
such types and limits shall not exceed that typically carried by the owner and operator of a first
43
class apartment complex, of approximately the same size, in Orange County, California, based
on reasonable research and investigation by Authority.
3.6.2 Property Insurance. Commencing upon the Closing and continuing until
the later of (i) the expiration or earlier termination of the Term of the Ground Lease or (ii) the date
Developer vacates the Site, Developer shall secure, maintain, and pay for the following all-risk
Property Insurance for Phase II; provided, however, in the case of Builder's Risk insurance where
Developer is not the general contractor, Developer may cause the required Builder's Risk
insurance to be secured, maintained, and paid for by the general contractor:
(a) Prior to the start of construction and continuing until the completion
of construction (the latter of final acceptance of Phase II or issuance of the final certificate of
occupancy for Phase II): all-risk Builder's Risk (course of construction) insurance coverage but
excluding the perils of earthquake (land movement) and flood, in an amount equal to the full cost
of the hard construction costs of Phase II. Such insurance shall be written on an all-risk form,
and shall cover, at a minimum: all work, materials, and equipment to be incorporated into Phase
II; Phase II during construction; the completed Phase II until such time as it is accepted by the
City; and storage and transportation risks; and such coverage shall not be terminated until
permanent Property Insurance is in place, as required in Section 3.6.2(b). Such insurance shall
protect/insure the interests of Developer/owner and the General Contractor, and other
contractor(s), and all subcontractors, as each of their interests may appear. If such insurance
includes an exclusion for "design error," such exclusion shall only be for the object or portion
which failed. Such insurance shall include an insurer's waiver of subrogation in favor of each
protected/insured party thereunder and the Authority and City. Authority shall be named as an
additional loss payee, as its interests may appear, with a Lenders Loss Payable endorsement,
which shall be delivered to Authority prior to the start of construction.
(b) Commencing with the completion of construction and continuing
until the later of (i) the expiration or earlier termination of the Term of the Ground Lease or (ii) the
date Developer vacates the Site: (a) all-risk physical damage insurance coverage ("Property
Insurance"), on an all-risk basis, covering all insurable structures and equipment, including
coverage for building code changes, but excluding the perils of earthquake (land movement) and
flood, in an amount not less than 100% of the replacement cost of the total values at risk, which
shall be adjusted for increased costs of construction and replacement on an annual basis, to
protect against loss of, damage to, or destruction of Phase II; such insurance shall not contain a
coinsurance clause; (b) business interruption and extra expense insurance to protect Developer
and all additional loss payees covering loss of revenues and/or extra expense incurred by reason
of the total or partial suspension or delay of, or interruption in, the operation of Phase Il, or any
portion thereof, caused by loss or damage to or destruction of any part of the insurable real
property structures or equipment as a result of the perils insured against under such Property
Insurance, covering a period of suspension, delay or interruption of at least eighteen (18) calendar
months, in an amount not less than the amount required to cover such business interruption
and/or extra expense loss during any such period; such insurance shall not contain a deductible
in an amount in excess of a thirty (30) day period; and (c) as applicable, boiler and machinery
insurance in the aggregate amount of the full replacement value of the equipment typically
covered by such insurance. On the coverage required underthis subparagraph 3.6.2(b), Authority
shall be named as an additional loss payee, as its interests may appear, with a Lenders Loss
Payable endorsement whenever possible, and if not attainable for Additional Insured other than
Authority, then a loss payable endorsement may be utilized, which shall be delivered to Authority
at the completion of construction and prior to the expiration of the Builders Risk insurance
coverage required herein.
(c) For all insurance required under this subsection 3.6.2, said polices
shall provide, by endorsement, that they will not be cancelled, non -renewed or reduced in scope
or coverage, without at least thirty (30) days prior written notice to Authority, except in the event
of non-payment of premium which shall provide for at least ten (10) days prior written notice to
Authority.
3.6.3 Reduction in Requirements. Authority's Risk Manager is hereby
authorized to reduce the requirements set forth herein, on a temporary or permanent basis, in the
event he determines, in his sole discretion, that such reduction is in Authority's best interest.
3.6.4 Obligation to Repair and Restore Damage Due to Casualty Covered
by Insurance. Subject to Section 3.6.5 below, if Phase 11 shall be totally or partially destroyed or
rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by
Developer, Developer shall promptly proceed to obtain insurance proceeds and take all steps
necessary to begin reconstruction and, immediately upon receipt of insurance proceeds, to
promptly and diligently commence the repair or replacement of Phase II to substantially the same
condition as Phase 11 is required to be constructed pursuant to this Agreement, if and to the extent
the insurance proceeds are sufficient to cover the actual cost of repair, replacement, or
restoration, and Developer shall complete the same as soon as possible thereafter so that Phase
II can be occupied in accordance with this Agreement. Subject to force majeure delays pursuant
to Section 6.3 hereof, in no event shall the repair, replacement, or restoration period exceed one
(1) year from the date Developer obtains insurance proceeds unless Authority's Executive
Director, in his/her reasonable discretion, approves a longer period of time. Authority shall
cooperate with Developer, at no expense to Authority, in obtaining any governmental permits
required for the repair, replacement, or restoration. If, however, the then -existing laws of any
other governmental agencies with jurisdiction over the Site do not permit the repair, replacement,
or restoration, Developer may elect not to repair, replace, or restore Phase II by giving notice to
Authority (in which event Developer will be entitled to all insurance proceeds but Developer shall
be required to remove all debris from the Site) or Developer may reconstruct such other
improvements on the Site as are consistent with applicable land use regulations and approved by
the Authority and the other governmental agency or agencies with jurisdiction.
3.6.5 Damage or Destruction Due to Cause Not Required to be Covered
by Insurance. If Phase 11 is completely destroyed or suffers Substantial Damage (as hereinafter
defined) caused by a casualty for which Developer is not required to (and has not) insured against,
or if insurance proceeds are insufficient to rebuild then Developer shall not be required to repair,
replace, or restore such improvements and may elect not to do so by providing Authority with
written notice of election not to repair, replace, or restore within ninety (90) days after such
substantial damage or destruction. In such event, the Ground Lease shall be automatically
terminated and Developer shall immediately tender possession of the Site to Authority. As used
in this Section 3.6.5, "Substantial Damage" caused by a casualty not required to be (and not)
covered by insurance shall mean damage or destruction which is fifteen percent (15%) or more
of the replacement cost of the improvements comprising Phase 11. In the event Developer does
not timely elect not to repair, replace, or restore Phase 11 as set forth in the first sentence of this
Section 3.6.5, Developer shall be conclusively deemed to have waived its right not to repair,
replace, or restore Phase 11 and thereafter Developer shall promptly commence and complete the
repair, replacement, or restoration of the damaged or destroyed Phase 11 in accordance with
Section 3.6.4 above.
3.7. Indemnity. Developer shall defend, indemnify, pay for, assume all responsibility
for, and hold the Indemnitees, harmless from all claims, demands, damages, defense costs or
45
liability of any kind or nature relating to the subject matter of this Agreement or the validity,
applicability, interpretation or implementation hereof and for any damages to property or injuries
to persons, including accidental death (including attorneys' fees and costs), which may be caused
by any acts or omissions of Developer under this Agreement, whether such activities or
performance thereof be by Developer or by anyone directly or indirectly employed or contracted
with by Developer and whether such damage shall accrue or be discovered before or after
termination of this Agreement and arising prior to the later of (i) the expiration or earlier termination
of the Term of the Ground Lease or (ii) the date Developer vacates the Site. Developer shall not
be liable for property damage or bodily injury to the extent occasioned by the gross negligence or
willful misconduct of Authority or City or their agents or employees. Developer shall have the
obligation to defend any such action; provided, however, that this obligation to defend shall not
be effective if and to the extent that Developer determines in its reasonable discretion that such
action is meritorious or that the interests of the parties justify a compromise or a settlement of
such action, in which case Developer shall compromise or settle such action in a way that fully
protects Indemnitees from any liability or obligation. In this regard, Developer's obligation and
right to defend shall include the right to hire (subject to written reasonable approval by Authority
and City) attorneys and experts necessary to defend, the right to process and settle reasonable
claims, the right to enter into reasonable settlement agreements and pay amounts as required by
the terms of such settlement, and the right to pay any judgments assessed against Indemnitees.
If Developer defends any such action, as set forth above, (i) Developer shall indemnify and hold
harmless Indemnitees from and against any claims, losses, liabilities, or damages assessed or
awarded against either of them by way of judgment, settlement, or stipulation and (ii) Authority
shall be entitled to settle any such claim only with the written consent of Developer and any
settlement without Developer's consent shall release Developer's obligations under this
Section 3.7 with respect to such settled claim.
3.8. Entry by Authority. From the date of the Closing and thereafter, Developer (and
its successor and assigns) shall permit Authority, City, and their officers, employees, consultants,
and agents at all reasonable times, and in compliance with the reasonable safety policies and
procedures of Developer and its contractor, to enter onto the Site and inspect the work of
development of Phase II to determine that the same is in conformity with the Development Plans
and all the requirements hereof. Developer acknowledges that Authority and City are under no
obligation to supervise, inspect, or inform Developer of the progress of construction, and
Developer shall not rely upon Authority or City therefor. Any inspection by Authority and/or City
is entirely for their purposes in determining whether Developer is in compliance with this
Agreement and is not for the purpose of determining or informing Developer of the quality or
suitability of construction or any other work at the Site. Developer shall rely entirely upon its own
supervision and inspection in determining the quality and suitability of the materials and work, and
the performance of architects, subcontractors, and material suppliers.
3.9. Compliance with Laws. Developer shall carry out the design, construction,
development and operation of Phase II in conformity with all applicable federal, state and local
laws, including, without limitation, all applicable state labor standards, City zoning and
development standards, building, plumbing, mechanical and electrical codes, and all other
provisions of the Anaheim Municipal Code, and all applicable disabled and handicapped access
requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C.
Section 12101, et seq., Government Code Section 4450, et seq., Government Code
Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq., and any
other applicable Governmental Requirements. Developer (and its Affiliates and successors and
assigns) shall pay prior to delinquency all ad valorem real estate taxes, possessory interest taxes,
and assessments as to Phase ll, subject to Developer's (and its Affiliates and successors and
ku
assigns) right to contest in good faith any such taxes. Developer may apply for and receive any
exemption from the payment of property taxes or assessments on any interest in or as to Phase
II without the prior approval of Authority.
3.9.1 Prevailing Wage Laws. Developer shall carry out the construction
through completion of Phase II and the overall development of the Site in conformity with all
applicable federal, state and local labor laws and regulations, including, without limitation, as
applicable, the requirements to pay prevailing wages under federal law (the Davis -Bacon Act,
40 U.S.C. Section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR
Part 1 (collectively, "Davis -Bacon")) and California law (Labor Code Section 1720, et seq.). The
parties acknowledge that federal and/or state funding sources and financing scenarios may trigger
compliance with applicable state and federal prevailing wage laws and regulations. The
applicability of federal, state and local prevailing wage laws will be determined based upon the
final financing structure and sources of funding of Phase II, as approved by Authority Executive
Director pursuant to Section 3.10.
Developer shall be solely responsible, expressly or impliedly, for determining and
effectuating compliance with all applicable federal, state and local public works requirements,
prevailing wage laws, labor laws and standards, and Authority (and City) makes no
representation, either legally and/or financially, as to the applicability or non -applicability of any
federal, state and local laws to Phase II, either onsite or offsite. Developer expressly, knowingly
and voluntarily acknowledges and agrees that Authority (and City) has not previously represented
to Developer or to any representative, agent or Affiliate of Developer, or its General Contractor or
any subcontractor(s) for the construction or development of Phase ll, in writing or otherwise, in a
call for bids or otherwise, that the work and construction undertaken pursuant to this Agreement
is (or is not) a "public work," as defined in Section 1720 of the Labor Code or under Davis -Bacon.
Developer knowingly and voluntarily agrees that Developer shall have the
obligation to provide any and all disclosures or identifications with respect to Phase II as required
by Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to
time, or any other similar law or regulation. Developer shall indemnify, protect, pay for, defend
(with legal counsel acceptable to Authority and City) and hold harmless the Indemnitees, from
and against any and all loss, liability, damage, claim, cost, expense and/or "increased costs"
(including reasonable attorneys' fees, court and litigation costs, and fees of expert witnesses)
which, in connection with the development, construction (as defined by applicable law) and/or
operation of Phase II, including, without limitation, any and all public works (as defined by
applicable law), results or arises in any way from any of the following: (i) the noncompliance by
Developer with any applicable local, state and/or federal law or regulation, including, without
limitation, any applicable federal and/or state labor laws or regulations (including, without
limitation, if applicable, the requirement to pay state and/or federal prevailing wages); (ii) the
implementation of Section 1781 of the Labor Code and/or of Davis -Bacon, as the same may be
amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer
to provide any required disclosure or identification as required by Labor Code Section 1781 and/or
by Davis -Bacon, as the same may be amended from time to time, or any other similar law or
regulation. It is agreed by the parties that, in connection with the development and construction
(as defined by applicable law or regulation) of Phase ll, including, without limitation, any and all
public works (as defined by applicable law or regulation), Developer shall bear all risks of payment
or non-payment of prevailing wages under applicable federal, state and local law or regulation
and/or the implementation of Labor Code Section 1781 and/or by Davis -Bacon, as the same may
be amended from time to time, and/or any other similar law or regulation. "Increased costs," as
used in this Section 3.9.1, shall have the meaning ascribed to it in Labor Code Section 1781, as
M
the same may be amended from time to time. The foregoing indemnity shall survive termination
of this Agreement and shall continue after completion of the construction and development of
Phase II by Developer.
3.9.2 Section 3 Compliance. Developer agrees to comply with and to cause
the General Contractor, each Subcontractor, and any other contractors and/or subcontractors or
agents of Developer to comply with the requirements of Section 3 of the Housing and Urban
Development Act of 1968, as amended, 12 U.S.C. § 1701 u, and the implementing regulations, in
connection with the construction of Phase II. Developer shall submit to Authority each
Construction Contract with appropriate provisions providing for the construction of Phase II in
conformance with the terms of this Agreement, including the Section 3 Clause. The General
Contractor, each Subcontractor, and any other contractors or subcontractors or agents of
Developer shall have provided to Authority the certification in appendix B of 24 CFR Part 24 that
neither it nor its principals is presently debarred, suspended, proposed for debarment, declared
ineligible, or voluntarily excluded from participation from Phase II, and Authority shall be
responsible for determining whether each contractor has been debarred.
3.9.3 Federal Program Regulations. Developer acknowledges that Authority
used HOME Funds to acquire some of the properties comprising the Site. Therefore, Developer
shall carry out the Rehabilitation of the Housing Units and the operation of Phase II in conformity
with all requirements of the HOME Program (including the 2013 Final Rule) to the extent
applicable to Phase II. In the event Developer desires to change the affordable housing or
maintenance requirements for the Site from the specific requirements set forth in this Agreement
in order to comply with a subsequently enacted amendment to the HOME Program, Developer
shall notify Authority in writing of such proposed change and the amendment related thereto at
least thirty (30) days prior to implementing such change. In the event Authority disapproves of
such change and Developer's interpretation of the amendment related thereto, Authority shall
notify Developer of its disapproval in writing and the parties shall seek clarification from the
appropriate HUD Field Office. Only if HUD concurs with Developer's interpretation of the HOME
Program shall Developer be permitted to implement the proposed change.
(a) Property Standards. Developer agrees to ensure that
Rehabilitation of Phase II will comply with all applicable requirements of the HOME Regulations,
including 24 CFR §92.251, including the following requirements:
(i) State and Local Requirements. Phase II and all Housing
Units and common areas at the Site shall meet all applicable State and local codes, ordinances,
and zoning requirements, including all applicable requirements set forth in the Anaheim Municipal
Code and all applicable State and local residential and building codes. Phase II and all Housing
Units and common areas at the Site must meet all such applicable requirements upon Project
completion.
(ii) HUD Requirements. Phase II and all Housing Units and
common areas at the Site shall also meet the requirements described in paragraphs (i) through
(iv) of this Section 1302.1(b):
(A) Accessibility. Phase II and all Housing Units and
common areas at the Site shall meet the accessibility requirements of 24 CFR part 8, which
implements Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and Titles II and III of
the Americans with Disabilities Act (42 U.S.C. 12131-12189) implemented at 28 CFR parts 35
and 36, as applicable. Covered multifamily dwellings, as defined at 24 CFR 100.201, must also
meet the design and construction requirements at 24 CFR 100.205, which implements the Fair
Housing Act (42 U.S.C. 3601-3619).
(B) Disaster Mitigation. Where relevant, Phase II must
be constructed to mitigate the impact of potential disasters (e.g., earthquakes, hurricanes,
flooding, and wildfires), in accordance with State and local codes, ordinances, or other State and
local requirements, or such other requirements as HUD may establish.
(C) Written Cost Estimates, Construction Contracts and
Construction Documents. The Construction Contract(s) and Development Plans must describe
the Rehabilitation work to be undertaken in adequate detail so that the Authority can conduct
inspections in accordance with the HOME Regulations. The Developer shall also provide written
cost estimates for Rehabilitation for Authority's review; Authority shall determine whether such
cost estimates are reasonable.
(D) Rehabilitation Progress Inspections. Developer
shall permit and facilitate progress and final inspections of Rehabilitation by the Authority to
ensure that work is done in accordance with the applicable codes, the Construction Contract(s),
and Development Plans.
(iii) Ongoing Property Condition Standards: Rental Housing.
Authority has established property standards for rental housing ("Authority's Property
Standards"), which standards include all inspectable items and inspectable areas specified by
HUD based on the HUD physical inspection procedures (Uniform Physical Condition Standards
(UPCS)) prescribed by HUD pursuant to 24 CFR 5.705. Developer shall ensure that Phase II,
including all Housing Units and common areas at the Site, shall comply with the Authority's
Property Standards throughout the Affordability Period. In accordance with the Authority's
Property Standards, Developer shall maintain Phase II, including all Housing Units and common
areas at the Site: (i) as decent, safe, and sanitary housing in good repair, (ii) free of all health
and safety defects and life-threatening deficiencies, and (iii) in compliance with the lead-based
paint requirements in 24 CFR Part 35.
(iv) Inspections: Corrective and Remedial Actions. In
accordance with the HOME Regulations, Authority shall undertake ongoing inspections of Phase
II in accordance with §92.504(d). Authority has developed written inspection procedures and
procedures for ensuring that timely corrective and remedial actions are taken by the Developer to
address identified deficiencies.
(b) Labor Standards. In addition to compliance with Section 1303.1,
the Construction Contract for Phase ll, as well as any other contract for the Rehabilitation work,
shall contain a provision requiring that not less than the wages prevailing in the locality, as
predetermined by the Secretary of the United States Department of Labor pursuant to the Davis -
Bacon Act (40 U.S.C. §276a -276a-5), will be paid to all laborers and mechanics employed in the
Rehabilitation work, and such contract(s) shall also be subject to the overtime provisions, as
applicable, of the Contract Work Hours and Safety Standards Act (40 U.S.C. §3701, et seq.).
Participating contractors, subcontractors, and other participants must comply with regulations
issued under these Acts and with other federal laws and regulations pertaining to labor standards
and HUD Handbook 1344.1 (Federal Labor Standards Compliance in Housing and Community
Development Programs), as applicable. Developer shall supply to Authority certification, in form
and substance satisfactory to HUD and Executive Director, as to compliance with the provisions
of this Section before receiving any disbursement of federal funds for the Rehabilitation work.
Developer shall require the General Contractor to implement and enforce all applicable prevailing
wage and labor laws, including California Labor Code Section 1720, Davis -Bacon, and other
applicable labor laws and regulations including, e.g., the requirement that all workers sign in and
sign out of the job site.
(c) Handicapped Accessibility. Developer shall comply with
(a) Section 504 of the Rehabilitation Act of 1973, and implementing regulations at 24 CFR 8C
governing accessibility of projects assisted with federal funds; and (b) the Americans with
Disabilities Act of 1990, and implementing regulations at 28 CFR 35-36 in order to provide
handicapped accessibility to the extent readily achievable; and (c) the Uniform Federal
Accessibility Standards (UFAS) pursuant to the Architectural Barriers Act of 1968, 42 U.S.C.
4151-4157, as amended.
(d) Use of Debarred, Suspended, or Ineligible Participants.
Developer shall comply (and cause the General Contractor to comply) with the provisions of
24 CFR 24 relating to the employment, engagement of services, awarding of contracts, or funding
of any contractor or subcontractor during any period of debarment, suspension, or placement in
ineligibility status. The Contractor, each subcontractor, and any other contractors or
subcontractors or agents of Developer (subject to compliance with 24 CFR part 135) shall have
provided to Authority the certification in appendix B of 24 CFR Part 24 that neither it nor its
principals is presently debarred, suspended, proposed for debarment, declared ineligible, or
voluntarily excluded from participation from this Project, and Authority shall be responsible for
determining whether each contractor has been debarred.
(e) Maintenance of Drug -Free Workplace. Developer shall certify
that Developer will provide a drug-free workplace in accordance with 2 CFR 2429.
(f) Lead -Based Paint. Authority, as a recipient of federal funds, has
modified and conformed all of its federally funded housing programs to the Lead -Based Paint
Poisoning Prevention Act, Title X of the 1992 Housing and Community Development Act,
42 U.S.C. §4800, et seq., specifically §§4821 4846, and the implementing regulations thereto. In
this regard, Developer shall comply with all applicable federal requirements relating to lead-based
paint.
(g) Affirmative Marketing. Developer shall adopt and implement
affirmative marketing procedures and requirements at the Site in accordance with Section 92.351
of the HOME Regulations.
(h) Nondiscrimination, Equal Opportunity and Fair Housing.
Developer shall carry out Phase 11 and perform its obligations under this Agreement in compliance
with all of the federal laws and regulations regarding nondiscrimination equal opportunity and fair
housing described in 24 CFR 92.350 and 24 CFR 5.105.
(i) Energy Conservation Standards. As applicable to Phase 11,
Developer shall cause the Site to meet the cost-effective energy conservation and effectiveness
standards in 24 CFR 965 and 24 CFR 990.185.
(j) Displacement and Relocation. Developer acknowledges and
agrees that, pursuant to Federal Program Limitations and consistent with the other goals and
objectives of that part and pursuant to the adopted relocation plan, Authority must ensure that it
has taken all reasonable steps to minimize the displacement of persons as a result of the
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Rehabilitation work. Furthermore, to the extent feasible, and subject to the tenant screening
criteria set forth in the Management Plan, residential tenants must be provided a reasonable
opportunity to lease and occupy a suitable, decent, safe, sanitary and affordable Housing Unit at
the Site or comparable outside property upon completion of the Rehabilitation work. Developer
shall cause all Relocation of tenants and occupants of the Site to be conducted in accordance
with the Relocation Laws and all Federal Program Limitations. Developer further agrees to
cooperate with Authority in meeting the requirements of the Federal Program Limitations and shall
take all actions and measures reasonably required by Executive Director (or his duly authorized
representative) in connection therewith.
(k) Requests for Disbursements of Funds. Developer may not
request disbursements of funds hereunder until the funds are needed for payment of eligible costs
of Phase 11. The amount of each request shall be limited to the amount needed for the acquisition
of the Site and the Rehabilitation as set forth in the Final Budget.
(1) Eligible Costs. Developer shall only use HOME Program funds to
pay costs defined as "eligible costs" under Federal Program Limitations.
(m) Records and Reports. Developer shall maintain and from time to
time submit to Authority such records, reports and information as Executive Director may
reasonably require in order to permit Authority to meet the recordkeeping and reporting
requirements required of them pursuant to 24 CFR 92.508. Without limiting the following,
Developer shall maintain records and submit annual reports as required by this Agreement and
Attachment No. 19.
(n) Conflict of Interest. Developer shall comply with and be bound by
the conflict of interest provisions set forth at 24 CFR 570.611.
(o) Conflicts between and among Federal Program Limitations,
Housing Asset Fund Requirements and the HAL. If and to the extent applicable for any source
of federal revenue expended to implement Phase II and in the event of any conflict or
inconsistency between applicable Federal Program Limitations, Housing Asset Fund
Requirements and/or the HAL, then the more stringent requirement(s) shall control.
(p) Layering Review. Developer acknowledges that a layering review
will be performed in accordance with Federal Program Limitations. In connection with such review
Developer acknowledges and agrees it shall be required to represent and certify to Authority that
no government assistance other than the HOME Loan, the Tax Credits, the MHSA Loan and/or
PBV Assistance, has been obtained or is contemplated to be obtained for the acquisition,
Rehabilitation and operation of the Site. If such layering review is conducted, Developer agrees
to notify Authority in the event that it applies for or proposes to use governmental funds, other
than as listed in the previous sentence, for the Site or the Improvements thereto.
3.10. Financing of Phase II.
3.10.1 Preferred Financing Structure. Developer shall use its reasonable and
best efforts to apply for and secure an allocation of 9% Tax Credits for Phase 11.
(a) Potential Multiple Tax Credit Applications. The parties
acknowledge and agree that the specific financing for Phase II is not assured, and that the
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possible financing structures and varied funding sources and scenarios for Phase II shall be
pursued in the following order of preference and priority:
(i) Developer shall use best efforts to submit a complete 9%
Tax Credit Application for Phase II (which Application shall be consistent with the terms of this
Agreement) to TCAC on or before the first TCAC deadline which occurs after the Effective Date,
which deadline is currently set at [June 28, 2017].
(ii) In the event Developer does not receive an allocation of 9%
Tax Credits for Phase II based on its first Application submittal to TCAC, Developer shall use best
efforts to submit a complete 9% Tax Credit Application for Phase II (which Application shall be
consistent with the terms of this Agreement) to TCAC on or before the second TCAC deadline
which occurs after the Effective Date, and the two following TCAC deadlines if no Allocation is
received as a result of the prior Tax Credit Application, for a total of four Tax Credit Applications
with respect to Phase ll.
(iii) In the event Developer does not receive an allocation of 9%
Tax Credits for Phase II based on its first four (4) Applications to TCAC (as described in
subdivisions (i) and (ii) of this Section 3.10.1(a)), Authority and Developer shall meet and confer
in good faith to determine if another method of financing Phase II is available and preferable to
the method set forth herein which may include, without limitation, financing Phase II with tax
exempt bonds and 4% Tax Credits. After such meeting(s) with Developer, Authority shall, at its
reasonable discretion but sole option, either: (i) negotiate with Developer regarding alternative
financing methods and sources of funding for Phase II and Authority and Developer shall amend
this Agreement to provide for such alternative financing methods for Phase Il, or (ii) terminate this
Agreement pursuant to Section 6.5. The obligation of Authority to meet and confer does not
create any inference that Authority or City will infuse any moneys other than those moneys
explicitly committed by the express terms of this Agreement.
(iv) In the event Authority terminates this Agreement as
permitted by subdivision (iv) above, Developer shall deliver, convey and assign to Authority all of
Developer's right and interest in and to all Development Plans and all planning, architectural,
design and construction plans, drawings, specifications and all other related documents prepared
for or caused to be prepared related in any manner to Phase II pursuant to the terms of an
assignment agreement in form and content reasonably acceptable to Authority and Developer
and their respective legal counsel. In such event, Authority shall reimburse Developer for the
third party costs actually, reasonably, and directly incurred by Developer after the Effective Date
and up to the date of termination of this Agreement for preparation of the Development Plans and
planning, architectural, design, and construction plans, drawings, specifications and related
documents actually delivered, conveyed, and assigned to Authority pursuant to this
Section 3.10.1(a)(iv) (and expressly excluding attorneys' fees, accounting fees, in-house staff
time, and Developer overhead, as the parties intend such reimbursement to be directly related to
production of such Development Plans); provided, in no event shall Authority be obligated to
reimburse Developer for more than Two Hundred Twenty-Five Thousand Dollars ($225,000.00)
pursuant to this Section 3.10.1(a)(iv).
3.10.2 Submission of Evidence of Financing. Prior to and as a Condition
Precedent to the Closing, Developer shall submit to Authority, and Authority (and its financial
consultant(s) and legal counsel(s)) shall review and approve (or disapprove) evidence that
Developer has obtained sufficient equity capital and firm and binding commitments for financing
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necessary to undertake the construction, completion and operation of Phase II, in accordance
with this Agreement.
(a) Required Financing Submittals; Submittal of Construction
Contract. Such evidence of financing for Phase II and readiness to commence construction of
Phase II shall include all of the following:
(i) An updated proforma and Final Budget for Phase II showing
the projected costs of construction of Phase II, including all onsite and offsite improvements to be
constructed in connection therewith.
(ii) A copy of the Lender's binding commitment obtained by
Developer for the Primary Loan for Phase II and, when available, copies of all loan documents
evidencing the Primary Loan therefor. The Primary Loan commitments for financing shall be in
such form and content acceptable to Authority and its financial advisor(s) and its legal advisor(s)
and as such reasonably evidences a legally binding, firm and enforceable commitment, subject
only to the Lender's customary and normal conditions and terms and subject to the requirements
of this Section 3.10. The commitment also shall state the specific terms and requirements, if any,
by the Lender relating to subordination of the Regulatory Agreement and the Authority
Subordinate Loan (but in no event the Ground Lease). Developer shall provide written
certification to Authority that the loan documents submitted are correct copies of the actual loan
documents to be executed by Developer concurrently with the Closing. If the Lender requires a
subordination agreement between or among Lender, Authority and/or Developer, Authority shall
review the form of subordination subject to the reasonable review and approval of Authority
Executive Director and legal counsel(s), subject to one or more of the conditions set forth in
Section 3.10.10 necessary for the Primary Loan to be a title insured first monetary lien on Phase
II; provided, however, in no event shall Authority's fee interest in the Site be subordinated to the
Primary Loan or any other financing obtained by Developer or any other encumbrance or lien
against the Site. All costs incurred for the review and completion of each subordination agreement
(except and excluding the first subordination agreement entered into at the Closing for Phase II)
and any amendment, modification or other reaffirmation thereof shall be expressly subject to
Developer (or another person or entity other than Authority or City) paying all Third Party Costs
(as defined in Section 716) incurred by Authority (or City) in connection therewith, with payment
of such incurred costs a condition precedent to any obligation of Authority to sign such
subordination or reaffirmation document, except as to the first subordination agreement pre -
Closing for Phase II for which Authority will assume Authority's own costs.
(iii) A current certified financial statement of Developer (and all
partners and members thereof, except the Investor Limited Partner) and/or other documentation
satisfactory to Authority as evidence of other sources of capital sufficient to demonstrate that
Developer has adequate funds to cover the difference, if any, between construction and
completion costs, and the financing authorized by the Tax Credits, Primary Loan, and any
additional subsidies, sources of funding, or financing obtained by Developer for the development
of Phase II.
(iv) Copies of the Construction Contract(s) and all other
contracts between Developer and its General Contractor (and all available contracts with
Subcontractors) for the construction of Phase II and any other on-site or off-site improvements
required to be constructed for Phase II, certified by Developer to be a true, correct, and fully
executed copy thereof, and which shall include reference to this Agreement and General
Contractor's (and all Subcontractors') specific obligation to carry out the construction and
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completion of Phase II (or part thereof) in conformity with the approved Development Plans, the
HAL, Section 3, all applicable federal and state prevailing wage laws, applicable Environmental
Laws, and all applicable Governmental Regulations. The scope of work in the Construction
Contracts shall conform in all respects to the Scope of Development, the Entitlement, and the
approved Development Plans, and such scope of work shall be subject to the Executive Director's
sole and absolute approval.
(v) Authority shall have the right to approve or disapprove such
evidence of financing within thirty (30) days of submission by Developer to Authority of all
complete items required by this Section 3.10 or as otherwise reasonably imposed by Developer's
financing and such approval or disapproval shall be not less than ten (10) days prior to the date
scheduled for the Closing (so long as Authority has had not fewer than fifteen (15) days for review
of a complete submittal). In this regard, Developer agrees it shall use best efforts to cause its
Lender to timely provide complete drafts of documents for review by Authority and its legal
counsel(s) to perform within such time frames. Approval shall not be unreasonably withheld or
conditioned. If Authority disapproves any such evidence of financing, Authority shall do so by
written notice to Developer stating the reasons for such disapproval and Developer shall promptly
obtain and submit to Authority new evidence of financing within reset but equal time periods. If
Developer's submission of new evidence of financing is timely and complete and provides
Authority with adequate time to review such evidence within the times established in this
Section 3.10, Authority shall approve or disapprove such new evidence of financing in the same
manner and within the same times established in this Section 3.10 for the approval or disapproval
of the evidence of financing as submitted to Authority initially.
The evidence of financing shall be deemed to be an ongoing representation by
Developer that the sum total of all sources of financing are equal to and not greater than the
amount of Phase II costs as set forth in the Final Budget for Phase II and that such Final Budget
is consistent with the Tax Credit Application, Tax Credit Reservation, and any and all updates
thereto submitted by Developer to TCAC. Once the complete evidence of financing is approved
by Authority, Developer shall promptly notify Authority in writing of any change in, additional
conditions to, or additional sources of financing, including, without limitation, the award of state or
federal Tax Credits, and any updates or additional information material or relevant to such
financing and/or the Tax Credits. The representations made by Developer with respect to the
budgets and costs for Phase II and the sources of funding and method of financing for Phase II,
inclusive of all submittals and information related to the Tax Credits, were and remain the basis
used by Authority to negotiate the financial terms of this Agreement and any change in such
budgets and sources of Phase II funding or financing for Phase II shall, at the sole discretion of
Authority, be cause to renegotiate the financial terms hereof for Phase II.
3.10.3 Alternate Financing Sources. It is the intent of the parties to maximize
the leverage of Authority funds and to this end, Developer shall use commercially reasonable
efforts to secure sources of non -local subsidies for Phase II, including an allocation of federal Tax
Credits for Phase Il, in accordance with Section 3.10.1(a), other local, state, and federal loans
and grants, and federal credits and rebates for energy efficient appliances to be installed at Phase
II in accordance with the Scope of Development and the approved Development Plans.
Developer acknowledges that other sources of Phase II funding may impose and require
compliance with additional federal, state, and/or local requirements, such as requirements relating
to the HOME Investment Partnerships Act and other HUD requirements, and Developer hereby
agrees to comply with any and all such requirements to the extent applicable to Phase II.
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3.10.4 Tax Credit Equity. The following requirements must be satisfied in order
for the equity financing for Tax Credit funding for Phase II to be approved by Authority pursuant
to this Section 3.10:
(a) Developer shall have solicited no less than three (3) competitive
bids from Tax Credit investors for Phase II and shall have selected the Tax Credit investor(s)
offering the most beneficial rates and terms, as reasonably approved by Authority Executive
Director. Developer shall submit complete documentation relating to such competitive solicitation
to Authority, including true copies of the invitation to bidders and each full bid package submitted
by bidding Tax Credit investors, in order to permit Authority to evaluate the Tax Credit Investor
proposed by Developer and the terms of financing and Tax Credit equity offered by such Tax
Credit investor. All such documentation shall be submitted no less than thirty (30) days prior to
Closing. Within ten (10) business days of delivery to Authority of such documentation, Authority
and Developer shall meet and confer in good faith to select jointly and reasonably the Tax Credit
Investor for Phase II based on the proposal which provides the greatest benefit to Phase II, as a
whole.
(b) The equity investment of the Tax Credit Investor shall not be less
than the approximate prevailing price for 9% Tax Credits at such time, taking into consideration
all relevant factors such as timing of required payments and amount of the Tax Credits.
(c) The identity of the Tax Credit Investor shall be reasonably
acceptable to Authority Executive Director, Authority financial advisor(s), and legal counsel(s).
3.10.5 Required Submissions. Developer shall submit the following
documents as evidence of Tax Credit financing:
(a) The Partnership Agreement or equivalent funding commitment
letter from the equity investors in Phase II which demonstrates that Developer has sufficient funds
and committed capital/equity for commencement through completion of construction, and that
such funds have been committed to construction of Phase II, and a current financial statement of
Developer.
(b) A complete copy of each Application and supporting documentation
submitted to TCAC by Developer, within five (5) days following Developer's submission thereof
to TCAC.
(c) A copy of a preliminary Reservation letter from TCAC notifying
Developer that an allocation of 9% Tax Credits, has been reserved for Phase II, along with
certification that there have not been any material changes to the information provided by
Developer in the Applications, as defined and referenced in such Reservation letters, and that if
there are material changes then such information will be provided to TCAC (and Authority)
forthwith.
3.10.6 Holder Performance of Development of Phase II. The holder of any
mortgage or deed of trust authorized by this Agreement shall not be obligated by the provisions
of this Agreement to develop Phase II or any portion thereof, or to guarantee such construction
or completion; nor shall any covenant or any other provision in this Agreement be construed so
to obligate such holder.
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3.10.7 Notice of Default to Mortgagee or Deed of Trust Holders; Right to
Cure. With respect to any mortgage or deed of trust granted by Developer as provided herein,
whenever Authority may deliver any notice or demand to Developer with respect to any breach or
default by Developer hereunder or under any other document executed pursuant to this
Agreement, Authority shall at the same time deliver to each holder of record of any mortgage or
deed of trust authorized by this Agreement a copy of such notice or demand. Each holder shall
(insofar as the rights granted by Authority are concerned) have the right, but not the obligation, at
its option, within sixty (60) days after the receipt of the notice, to cure or remedy or commence to
cure or remedy and thereafter to pursue with due diligence the cure or remedy of any default and
to add the cost thereof to the mortgage debt and the lien of its mortgage. Nothing contained in
this Agreement shall be deemed to permit or authorize any holder to undertake or continue the
construction or completion of Phase II, or any portion thereof (beyond the extent necessary to
conserve or protect the improvements or construction already made) without first having expressly
assumed Developer's obligations to Authority under this Agreement by a written assumption
agreement reasonably satisfactory to Authority and its legal counsel(s). The holder, in that event,
must agree to complete, or cause to be completed by a party which is reasonably acceptable to
Authority, in the manner provided in this Agreement, the improvements to which the lien or title of
holder relates. Any holder (or assignee approved by Authority) properly completing the
improvements for Phase II shall be entitled, upon compliance with the requirements of Section 3.5
of this Agreement, to a Release of Construction Covenants as to Phase II. It is understood that
a holder (or assignee approved by Authority) shall be deemed to have satisfied the sixty (60) day
time limit set forth above for commencing to cure or remedy a Developer default which requires
possession of the Site (or portion thereof), if and to the extent any holder (or assignee approved
by Authority) has within the sixty (60) day period commenced proceedings to obtain possession
and thereafter the holder diligently pursues such proceedings to completion and cures or
remedies the default.
Notwithstanding anything to the contrary contained herein, Authority agrees that
any cure of any default made or tendered by one or more of Developer's limited partners shall be
deemed to be a cure by Developer and shall be accepted or rejected on the same basis as if
made or tendered by Developer. Copies of all notices which are sent to Developer under the
terms of this Agreement shall also be sent to all approved limited partners who have requested
such notice.
3.10.8 Failure of Holder to Complete Phase II. In any case where,
ninety (90) days after the holder of any mortgage or deed of trust creating a lien or encumbrance
upon the Site, or any part thereof, receives a notice from Authority of a default by Developer in
completion of construction of all or any part of Phase I I under this Agreement, and the holder has
not exercised the option to construct or cause to be constructed Phase II as set forth in
Section 3.10.7, or if it has exercised the option but has defaulted hereunder and failed to timely
cure such default, Authority may fully assume the mortgage or deed of trust by assuming all
payment and performance obligations due to the holder for and in the amount of the unpaid
mortgage or deed of trust debt, including principal and interest and all other sums secured by the
mortgage or deed of trust. If the possession of the Site or any part thereof has vested in the
holder, Authority, if it so desires, shall be entitled to a conveyance from the holder to Authority
upon payment to the holder of an amount equal to the sum of the following:
(a) The unpaid mortgage or deed of trust debt at the time the Ground
Lease and possession of Phase II became vested in the holder (less all appropriate credits,
including those resulting from collection and application of rentals and other income received
during foreclosure proceedings);
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(b) All reasonable and customary expenses with respect to foreclosure,
including reasonable attorneys' fees;
(c) The net expense, if any (exclusive of general overhead), incurred
by the holder as a direct result of the subsequent management of Phase 11 or part thereof;
(d) The costs of any necessary improvements made by the holder
(or assignee approved by Authority) pursuant to the requirements of this Agreement or as
otherwise approved by Authority;
(e) An amount equivalent to the interest that would have accrued on
the aggregate of such amounts had all amounts become part of the mortgage or deed of trust
debt and such debt had continued in existence to the date of payment by Authority; and
(f) Any reasonable and customary prepayment charges imposed by
the Lender pursuant to its Primary Loan documents and agreed to by Developer.
3.10.9 Right of Authority to Cure Mortgage or Deed of Trust Default. In the
event of Developer's default or breach of the Primary Loan, including the loan agreement,
promissory note, mortgage or deed of trust, or a default under the terms of Developer's
Partnership Agreement for Phase 11, Developer shall immediately deliver to Authority a copy of
any default notice pertaining thereto. If the holder of the Primary Loan, including the loan
agreement, promissory note, mortgage or deed of trust has not exercised its option to construct
prior to the issuance of the Release of Construction Covenants as to Phase 11, pursuant to
Section 3.10.7, Authority shall have the right but not the obligation to cure the default of the
Primary Loan, including the loan agreement, promissory note, mortgage or deed of trust.
Authority shall likewise have the right but not the obligation to cure any Partnership Agreement
default. In such event, Authority shall be entitled to reimbursement from Developer of all proper
costs and expenses incurred by Authority in curing any default.
3.10.10 Subordination of Affordability Covenants; Non -Subordination of
Authority's Fee Interest. In the event Authority finds that an economically feasible method of
financing for the construction and operation of Phase II without the subordination of the
Regulatory Agreement and the lien of the Authority Deed of Trust is not reasonably available,
Authority may agree to subordinate the covenants contained in the Regulatory Agreement and
the lien of the Authority Deed of Trust to the deed of trust securing the Primary Loan and/or the
Tax Credit Regulatory Agreement, subject to the terms of this Section 3.10.10. Each and any
subordination agreement evidencing or affirming Authority's subordination of the Regulatory
Agreement and the lien of the Authority Deed of Trust (but not, and in no event, Authority's fee
interest in the Site entered into by Authority shall contain written commitments which Authority
Executive Director finds are reasonably designed to protect Authority's investment in Phase II
(and Agency's investment of Housing Fund monies in the Site) in the event of default; any such
subordination agreement(s) shall contain contractual obligation of such Lender to include, without
limitation, the following: (a) concurrent delivery to Authority of a true copy of each and any notice
provided by the Lender for Phase 11 to Developer (as its borrower) during the term of the Primary
Loan for Phase 11; (b) a reasonably extended cure period and right to Authority to cure and assume
the Primary Loan, and/or other senior lien(s) for Phase 11 upon the same terms applicable to the
approved financing to Developer pursuant to the loan documents applicable thereto with such
right, but with no obligation, to the Authority being available both from the date of issuance of any
notice of default through and after the recordation of a formal Notice of Default by the Lender for
Phase 11 pursuant to applicable California Code of Civil Procedure foreclosure requirements, and
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(c) a right of Authority to cure a default on each of the senior loan(s) for Phase II prior to
foreclosure and after recordation of a Notice of Default pursuant to applicable California Code of
Civil Procedure requirements; and such cure rights may also include: (d) a right of Authority to
negotiate with the senior lender(s) for Phase II after notice of default from the senior Lender (or
lender(s)) and prior to foreclosure, (e) an agreement that if prior to foreclosure of the senior loan
for Phase II, Authority takes title to the Site and cures the default on the senior loan(s) for Phase
II, the senior Lender (or lender(s)) will not exercise any right it may have to accelerate the senior
loan by reason of the transfer of title to Authority, and (f) a right of Authority to acquire Developer's
leasehold interest in the Site from Developer at any time after a material default on the senior
loan for Phase ll. Notwithstanding the foregoing, (1) the Ground Lease shall be senior and non -
subordinate to the Primary Loan, including any and all construction and permanent financing for
Phase ll, and (2) the actual rights granted to Authority in consideration of the subordination of the
liens of its Regulatory Agreement and Authority Deed of Trust shall be set forth in an agreement
among the Authority, Developer and the Primary Lender to be dated and recorded against the
Site in the Official Records concurrently with the Authority Deed of Trust.
3.10.11 Failure to Obtain Financing. In the event Developer, despite exercising
its reasonable and best efforts to obtain required construction financing for Phase II, fails to obtain
financing as specified in the Agreement by the time required in Section 3.10.1(a) and in the
Schedule of Performance, either Developer or Authority may terminate this Agreement as
provided in Sections 6.4 and 6.5 hereof, respectively.
3.11. Cost Savings Obligation. Subject to the approval of TCAC, Developer hereby
agrees to provide and pay to Authority a Cost Savings payment for Phase II in an amount to be
determined based on the Audit to be conducted upon completion of construction for Phase II as
set forth in this Section 3.11.
3.11.1 Audit to Determine Cost Savings Amount. The actual amount of Cost
Savings to be paid to Authority shall be determined after the Audit, as hereafter defined and
described, and the amount of such Cost Savings shall be equal to the amount by which the total
sources of permanent financing for Phase II exceed the costs of development incurred for Phase
ll. Within one hundred twenty (120) days following the completion of construction of Phase ll, as
evidenced by issuance of the final certificate of occupancy by the City's building official, Developer
shall cause its certified public accountant(s) to perform a final audit of the costs of development
of Phase II in accordance with the requirements of the Tax Credits and generally accepted
accounting principles ("GAAP") and generally accepted auditing standards (herein, referred to as
"Audit"). If the Audit determines that the total sources of permanent financing for Phase II
(including long-term permanent debt and equity) exceed Developer's total costs to develop Phase
II (including, without limitation, all hard and soft costs and all on-site and off-site improvements
required in connection with the development of Phase II, excluding the demolition of buildings and
other costs which Authority is causing to be completed at no cost to Developer pursuant to
Section 3.1.2), such excess shall be considered the "Cost Savings" for Phase II; provided, that,
to the extent payment of such Cost Savings would reduce Developer's "tiebreaker" points in
Developer's Tax Credit Application, "Cost Savings" shall be reduced to the largest amount of Cost
Savings that Developer can pay to the Authority without reducing such "tiebreaker" points.
3.11.2 Cost Savings Payment as Payment of Principal on Authority
Subordinate Loan. The Cost Savings for Phase ll, once determined by the Audit pursuant to
Section 3.11.1, shall, subject to the approval of TCAC, be due and paid by Developer and
allocated and credited as a principal payment on the Authority Subordinate Loan for Phase II, as
and when paid.
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3.11.3 Timing of Payment of Cost Savings. The Cost Savings payable under
this Agreement for Phase II shall become due and payable by Developer to Authority after receipt
by Developer of the final Tax Credit equity and completion of construction, but not later than sixty
(60) days after Developer receives its final Tax Credit equity payment for Phase II, and such Cost
Savings shall be paid in a lump sum as a principal payment toward the Authority Subordinate
Loan balance for Phase II.
3.12. Article XXXIV Compliance. Authority, through the City of Anaheim, has
previously obtained the approval of the voters of the City authorizing up to a specific percentage
of housing constructed in the City to be publicly funded low -rent housing. The City voters
approved Measure G at a special municipal election on June 3, 1980, which voter approval
authorized construction of publicly funded low -rent housing in the City prospectively. The results
of this election were certified and declared by City Council Resolution No. 80R-332 on July 29,
1980, and such authorization applies to Phase II in compliance with Article XXXIV of the California
Constitution and as implemented by Health & Safety Code Section 37000, et seq.
3.13. Estoppel Certificates and Confirmation.
3.13.1 Estoppel Certificate. At the request of any Lender or Investor Limited
Partner, Authority shall promptly execute and deliver (but at no cost to Authority) one or more
estoppel certificate(s) in such form as may be reasonably requested by any Lender or Investor
Limited Partner, limited to certifying the status of this Agreement, the Authority Subordinate Loan
documents, or the Ground Lease and Developer's leasehold interest under the Ground Lease
and such matters as are reasonably requested by any Lender or Investor Limited Partner
(provided no such matters shall effect Authority's fee interest or alter or amend the terms of this
Agreement, the Authority Subordinate Loan documents, or the Ground Lease, and any such
certificate shall be subject to the terms of ABx1 26 and any amendments, successor statutes or
related statues (and interpretations thereof) in effect at the time such estoppel is to be issued).
Such estoppel certificate shall include, but not be limited to, certification by Authority that (a) this
Agreement, the Authority Subordinate Loan documents, and the Ground Lease are unmodified
and in full force and effect (or, if modified, state the nature of such modification and certify that
this Agreement, the Authority Subordinate Loan documents, and the Ground Lease, as so
modified, are in full force and effect), (b) all rents currently due under the Ground Lease have
been paid (or, if unpaid, the period and amount of any arrearages, penalties, interest and other
charges), and (c) there are not, to Authority's knowledge, any uncured Events of Default on the
part of Developer under this Agreement, the Authority Subordinate Loan documents, or the
Ground Lease or facts, acts or omissions which with the giving of notice or passing of time, or
both, would constitute an Event of Default (or, if there is a default, the nature and scope of the
Default) under this Agreement, the Authority Subordinate Loan documents, or the Ground Lease.
Any such estoppel certificate(s) (which shall be subject to the limitations of this Section 3.13.1)
may be conclusively relied upon by any Lender or Investor Limited Partner.
3.13.2 Revitalization Agreement. The Authority hereby represents, warrants,
covenants and confirms the following, each of which is true, correct and complete as of the date
of this Agreement and as of the Closing Date:
(a) This Authority and the Developer are entering into this Agreement
in implementation of the Revitalization Plan and in accordance with the terms of the Revitalization
Agreement.
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(b) No default has occurred by TRCC under the Revitalization
Agreement, and no event or occurrence has occurred that, with the giving of notice or the passage
of time, or both, would constitute a default by TRCC under the Revitalization Agreement.
(c) TRCC has properly assigned its rights with respect to Phase II
under the Revitalization Agreement to Developer and, for all purposes, the Authority consents to
approves of such assignment to Developer of all of TRCC's rights under the Revitalization
Agreement with respect to Phase 11.
(d) Developer shall have no obligations under the Revitalization
Agreement, the Revitalization Plan or otherwise with respect to any phases of the Project other
than Phase 11, and no default under any such agreement with respect to any phases of the Project
other than Phase 11 shall constitute a default by Developer under this Agreement or any other
agreements associated with Phase 11.
(e) Notwithstanding Section 14.9 of the Revitalization Agreement, in
the event of any conflict between the terms of the Revitalization Agreement and this Agreement
(or any exhibit or attachment to this Agreement), this Agreement (and its exhibits and
attachments, as applicable) shall prevail.
4. OPERATION OF HOUSING.
4.1. Number of Housing Units. Developer covenants and agrees to make available,
restrict occupancy to, and rent the Housing Units in Phase II to Very Low and Low Income
Households, in accordance with this Section 4.1 and the Regulatory Agreement for Phase II as
follows:
(a) Two (2) of the two (2) bedroom Housing
Units in Phase II to 30%
AMI Very Low Income Households at an Affordable Rent;
(b) One (1) of the three (3) bedroom Housing
Units in Phase II to 30%
AMI Very Low Income Households at an Affordable Rent;
(c) Two (2) of the one (1) bedroom Housing
Units in Phase II to 40%
AMI Very Low Income Households at an Affordable Rent;
(d) One (1) of the two (2) bedroom Housing
Units in Phase II to 40%
AMI Very Low Income Households at an Affordable Rent;
(e) Two (2) of the three (3) bedroom Housing
Units in Phase II to 40%
AMI Very Low Income Households at an Affordable Rent;
(f) One (1) of the one (1) bedroom Housing
Units in Phase II to 50%
AMI Very Low Income Households at an Affordable Rent;
(g) Six (6) of the two (2) bedroom Housing Units in Phase II to 50%
AMI Very Low Income Households at an Affordable Rent;
(h) Two (2) of the three (3) bedroom Housing
Units in Phase II to 50%
AMI Very Low Income Households at an Affordable Rent;
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(i) Three (3) of the two (2) bedroom Housing Units in Phase II to 60%
AMI Low Income Households at an Affordable Rent; and
0) One (1) of the three (3) bedroom Housing Units in Phase II to 60%
AMI Low Income Households at an Affordable Rent.
4.2. Affordable Rent. Affordable Rent shall be charged for all Housing Units
throughout the Affordability Period. The maximum Affordable Rent chargeable for the Housing
Units shall be annually determined by Authority (and as charged and implemented by Developer)
in accordance with the following requirements:
(a) The Affordable Rent for the Housing Units to be rented to 30% AMI
Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of thirty
percent (30%) of AMI for Orange County as determined and published annually by TCAC for a
family of a size appropriate to the unit.
(b) The Affordable Rent for the Housing Units to be rented to 40% AMI
Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of forty
percent (40%) of AMI for Orange County as determined and published annually by TCAC for a
family of a size appropriate to the unit.
(c) The Affordable Rent for the Housing Units to be rented to 50% AMI
Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of fifty
percent (50%) of AMI for Orange County as determined and published annually by TCAC for a
family of a size appropriate to the unit.
(d) The Affordable Rent for the Housing Units to be rented to 60% AMI
Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of sixty
percent (60%) of AMI for Orange County as determined and published annually by TCAC for a
family of a size appropriate to the unit.
Developer shall, and shall cause its Property Manager to, operate Phase II and
cause occupancy of all Housing Units thereon in conformity with these covenants and this
Agreement.
For purposes of this Agreement, "Affordable Rent" shall mean the total of monthly
payments for (a) use and occupancy of each Housing Unit and land and facilities associated
therewith, (b) any separately charged fees or service charges assessed by Developer which are
required of all tenants, other than security deposits, (c) a reasonable allowance for an adequate
level of service of utilities not included in (a) or (b) above, including garbage collection, sewer,
water, electricity, gas and other heating, cooking and refrigeration fuels, but not including
telephone service, or cable TV or internet services, and (d) possessory interest, taxes or other
fees or charges assessed for use of the land and facilities associated therewith by a public or
private entity other than Developer. No additional charge shall be assessed against tenant
households of the Housing Units for any social or supportive services provided at the Site.
In addition, thirteen (13) of the Housing Units shall constitute "HOME Units", as follows:
(a) at 809 Dakota Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be
Low HOME Units, and (ii) two (2) of the two (2) bath Housing Units shall be High HOME Units;
(b) at 868 Dakota Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units shall be
Low HOME Units, and (ii) three (3) of the two (2) bath Housing Units shall be High HOME Units;
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and (c) at 606 Avon Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units shall
be a Low HOME Unit, (ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall be High
HOME Units, and (iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be High
HOME Units. The HOME Units may be "floating" HOME Units, such that the specific Housing
Units designated as HOME Units may change as long as the requirements set forth in the
immediately preceding sentence relating to the number of two and three-bedroom Housing Units
required to be designated as HOME Units are at all times complied with. The HOME Units shall
be rented in conformity with Low HOME or High HOME rents in conformity with the HOME
Regulations consistent with the identification of such HOME Units as Low HOME or High HOME
Units, respectively, in the definition of HOME Units. The HOME Units shall be rented at the lower
of (i) rent determined for Low HOME or High HOME Units or (ii) rent as otherwise determined in
conformity with this Agreement.
4.3. Duration of Affordability Requirements; Affordability Period. Phase II and all
the Housing Units thereon shall be subject to the requirements of this Section 4, et seq. for the
full term of the Affordability Period.
4.4. Selection of Tenants.
(a) Developer shall be responsible for the selection of tenants for the
Housing Units in compliance with all lawful and reasonable criteria, and shall adopt a tenant
selection system that shall be approved (or disapproved) by Authority Executive Director in her
reasonable discretion, pursuant to which Developer shall establish and maintain a chronological
waiting list system for selection of tenants in the order of priority set forth below, and which shall
be set forth in the Marketing and Tenant Selection Plan and the Property Management Plan,
which plans are required to be submitted by Developer and approved by Authority pursuant to
Sections 2.2, 4.8 and 4.11.2 hereof and the Ground Lease for Phase II and as a Condition
Precedent to the Closing. Throughout the Affordability Period and the Term of the Ground Lease,
Developer shall establish and maintain for Phase II such waiting list of eligible, prospective
tenants to facilitate re -tenanting Housing Units in compliance with the approved Marketing and
Tenant Selection Plan, Property Management Plan and Anaheim Municipal Code. Further,
subject to applicable Fair Housing Laws and in compliance with the Anaheim Municipal Code, in
particular Section 18.52.160 thereof, Authority shall be afforded a priority marketing period for
thirty (30) days after receiving written notice from Developer that one or more Housing Units have
become vacant at Phase II, during which time Authority and Developer shall work cooperatively
to select tenants for any vacant Housing Units at Phase ll. Developer shall provide prompt written
notice to Authority when vacancies of Housing Units occur to facilitate timely re -tenanting of
Housing Units pursuant to the approved Marketing and Tenant Selection Plan, Property
Management Plan and Anaheim Municipal Code. Subject to applicable Fair Housing Laws,
Developer's waiting list of prospective, eligible tenants for Housing Units at Phase II shall include
and follow the following order of priority for selection of tenants, and Authority will follow such
order of priority:
(i) Very Low and Low Income Households, as applicable, who
have been displaced from their residences due to programs or projects implemented by the City
of Anaheim or another governmental entity;
(ii) Very Low and Low Income Households, as applicable, who
have applied for and have received rental vouchers from Authority;
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(iii) Very Low and Low Income Households, as applicable, who
are listed on Authority's waiting lists for affordable housing and who live and/or work in Anaheim;
and
(iv) Very Low and Low Income Households, as applicable, who
live and/or work in Anaheim.
(b) In the event Developer rents a Housing Unit to a household holding
a Portable Voucher, if required by the Executive Director in writing to the Developer, the rental
agreement (or lease agreement, as applicable) between Developer, as landlord, and the
subtenant shall expressly provide that monthly rent charged shall be the Affordable Rent required
hereunder for the Housing Unit (not fair market rent) and that the rent collected directly from such
subtenant holding a Portable Voucher shall be not more than 40% of subtenant's actual gross
income pursuant to the applicable voucher program regulations; i.e., the rent charged to such
subtenant under the rental agreement shall be the Affordable Rent chargeable hereunder and not
market rent for the area (as determined by a current rent reasonable review conducted in
accordance with Section 8 Federal Program Limitations applicable to Portable Vouchers), as
would otherwise be permitted under the applicable Portable Voucher program. Thus, if required
by the Executive Director in writing in accordance herewith, the subsidy payment to Developer
under any Portable Voucher shall not exceed the difference between the amount the subtenant
actually pays to Developer towards such subtenant's rent and the Affordable Rent chargeable for
the applicable Housing Unit hereunder.
(c) Developer hereby acknowledges and agrees that, upon completion
of construction of Phase II and leasing of the Housing Units to Very Low and Low Income
Households pursuant to this Agreement, Developer will have received governmental subsidies
from Authority and from TCAC through the Tax Credits allocated to Phase II (and/or other
subsidies included in the final financing sources for Phase ll, as approved by Authority pursuant
to Section 3.10) in exchange for Developer's agreement to limit the rents charged to tenants of
Phase II to an Affordable Rent and Developer further acknowledges and agrees that acceptance
of additional governmental rental subsidies resulting in total, cumulative rent payments to
Developer in excess of an Affordable Rent for any of the Housing Units at Phase II would
constitute an unjustified windfall to Developer at the expense of Authority and the federal and
state governments.
(d) In the event of a conflict between this Agreement and the approved
Marketing and Tenant Selection Plan, the Marketing and Tenant Selection Plan shall control. The
Marketing and Tenant Selection Plan shall be completed and approved by Authority prior to and
as a Condition Precedent to Closing pursuant to Section 2.2.1(n).
4.5. Household Income Requirements. On or before one hundred twenty (120) days
following the end of Developer's fiscal year, commencing the first year after issuance of the first
certificate of occupancy for Phase ll, and annually thereafter, Developer shall prepare and submit
to Authority, at Developer's expense, a written summary of the income, household size, and rent
payable by each of the tenants of the Housing Units and, upon the written request of the Authority,
copies of each and all leases or rental agreements and the current rules and regulations for Phase
II. At Authority's request, Developer shall also provide to Authority completed income
computation and certification forms, all in a form reasonably acceptable to Authority, for each and
all tenants. Developer shall obtain, or shall cause to be obtained by the Property Manager, a
certification from each household leasing a Housing Unit demonstrating that such household is a
30% AMI Very Low Income Household, 40% AMI Very Low Income Household, 50% AMI Very
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Low Income Household, or 60% AMI Low Income Household, as applicable and according to the
Area Median Income annually determined and published by TCAC for Orange County, and meets
the eligibility and occupancy requirements established for the Housing Unit. Developer shall
verify, or shall cause to be verified by the Property Manager, the income and household size
certification of the tenant household.
4.5.1 Income Categories.
(a) "30% AMI Very Low Income Households" shall mean those
households earning not greater than thirty percent (30%) of Orange County Area Median Income,
adjusted for household size, which is set forth annually by regulation of TCAC.
(b) "40% AMI Very Low Income Households" shall mean those
households earning not greater than forty percent (40%) of Orange County Area Median Income,
adjusted for household size, which is set forth annually by regulation of TCAC.
(c) "50% AMI Very Low Income Households" shall mean those
households earning not greater than fifty percent (50%) of Orange County Area Median Income,
adjusted for household size, which is set forth annually by regulation of TCAC.
(d) "60% AMI Low Income Households" shall mean those
households earning not greater than sixty percent (60%) of Orange County Area Median Income,
adjusted for household size, which is set forth annually by regulation of TCAC.
(e) "Very Low Income" and/or "Very Low Income Households"
shall mean and include: (i) very low income households as defined in the Tax Credit Rules and
(ii) 30% AMI Very Low Income Households, (iii) 40% AMI Very Low Income Households, and
(iv) 50% AMI Very Low Income Households. Very Low Income Households include Extremely
Low Income households, as defined in the Tax Credit Rules.
(f) "Low Income," "Lower Income," "Low Income Households" or
"Lower Income Households" shall mean and include both: (i) lower income households as
defined in the Tax Credit Rules and (ii) 60% AMI Low Income Households. Lower Income
Households include Very Low Income Households and Extremely Low Income Households, as
defined in the Tax Credit Rules.
4.6. Intentionally Omitted.
4.7. Leases; Rental Agreements for Housing Units. Developer shall submit a
standard lease form for use at Phase II to Authority Executive Director for approval, which lease
form shall comply with the requirements of this Agreement, including all applicable provisions of
the HAL. Authority shall reasonably approve such lease form upon finding that such lease form
is consistent with this Agreement, including all applicable provisions of the HAL. Developer shall
enter into a written lease, in the form approved by Authority, with each tenant/tenant household
of Phase Il. During the Affordability Period, any material changes to the lease form are subject
to the reasonable review and approval of the Executive Director. The lease form shall also comply
with all applicable HOME Regulations.
4.8. Marketing and Tenant Selection Plan. Prior to and as a Condition Precedent to
Closing, Developer shall prepare and obtain Authority's approval, which approval shall not be
unreasonably withheld, of the Marketing and Tenant Selection Plan, During the Affordability
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Period, any material changes to an approved Marketing and Tenant Selection Plan are subject to
reasonable review and approval by the Executive Director. The rental of the Housing Units, as
and when they are vacated by the existing tenants, shall be conducted in accordance with the
approved Marketing and Tenant Selection Plan and any affirmative marketing requirements which
have been adopted by the Authority prior to the date hereof. The availability of Housing Units
shall be marketed in accordance with the Marketing and Tenant Selection Plan as the same may
be amended from time to time with Authority's prior written approval, which approval shall not
unreasonably be withheld. Developer shall provide Authority with periodic reports with respect to
the marketing for lease of the Housing Units. Authority agrees to exercise reasonable efforts to
assist Developer in connection with the implementation of the Marketing and Tenant Selection
Plan; provided, however, Authority shall not be under any obligation to incur any out-of-pocket
expenses in connection therewith.
4.9. Social Services. Developer shall use its best efforts to create a comprehensive
social service program that is targeted to the needs of the residents at Phase II which shall, at a
minimum, include the services described in the Scope of Social and Supportive Services set forth
on Attachment No. 19, which is attached hereto and incorporated herein, and such other services
as may be approved by the Authority Executive Director, which approval shall not be
unreasonably withheld. Any change in the scope, amount, or type of supportive services to be
provided at the Site shall be subject to prior approval of Authority. Developer shall provide social
services at Phase II in accordance with this Section throughout the entire Affordability Period.
The parties shall cooperate in good faith to attempt to agree upon a budget for the social and
supportive services to be provided at Phase II; provided, the parties anticipate that Developer will
make all reasonable attempts to obtain additional funding sources for the various social services
programs required to be implemented at Phase II throughout the Affordability Period.
4.9.1 Alternative Social and Supportive Services. In the event that, despite
Developer's reasonable best efforts, Developer is unable to provide all of the social and
supportive services described in Attachment No. 19, Developer shall use reasonable best efforts
to provide comparable social and supportive services programming at Phase II that are
reasonably similar in scope and content to the Scope of Social and Supportive Services attached
hereto as Attachment No. 19, and that meet all the regulations promulgated by TCAC, during the
entire duration of the Affordability Period. Such substitute services shall be subject to the prior
written approval of the Authority Executive Director, which approval shall not be unreasonably
withheld, conditioned or delayed. In the event the characteristics of the resident population at
Phase II change substantially, Authority Executive Director shall have the authority to approve
revisions to the Scope of Social and Supportive Services attached hereto as Attachment No. 19,
in his/her reasonable discretion.
4.10. Maintenance.
4.10.1 General Maintenance. Developer shall maintain the Site and all
improvements thereon, including lighting and signage, in good condition, free of debris, waste
and graffiti, and in compliance with all applicable provisions of the Anaheim Municipal Code.
Developer shall maintain in accordance with the Maintenance Standards (as hereinafter defined)
the improvements and landscaping on the Site. Such Maintenance Standards shall apply to all
buildings, signage, common amenities, lighting, landscaping, irrigation of landscaping,
architectural elements identifying the Site and any and all other improvements on the Site and
Phase II. To accomplish the maintenance, Developer shall either staff or contract with and hire
licensed and qualified personnel to perform the maintenance work, including the provision of
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labor, equipment, materials, support facilities, and any and all other items necessary to comply
with the requirements of this Agreement.
Developer and its maintenance staff, contractors or subcontractors shall comply
with the following standards as to Phase II (collectively, "Maintenance Standards"):
(a) The Site shall be maintained in conformance and in compliance with
the approved final as -built plans, and reasonable maintenance standards which comply with the
industry standard for comparable first quality affordable housing projects in the County, including
but not limited to painting and cleaning of all exterior surfaces and other exterior facades
comprising all private improvements and public improvements to the curbline. The Site shall be
maintained in good condition and in accordance with the industry custom and practice generally
applicable to comparable first quality affordable housing projects in the County.
(b) Landscape maintenance shall include, but not be limited to:
watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning;
trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe
road conditions and visibility, and irrigation coverage; replacement, as needed, of all plant
materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas;
and staking for support of trees.
(c) Clean-up maintenance shall include, but not be limited to:
maintenance of all sidewalks, paths and other paved areas in clean and weed -free condition;
maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or
unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to
mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the
maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris
are properly disposed of by maintenance workers.
Authority agrees to notify Developer in writing if the condition of the Site does not
meet with the Maintenance Standards and to specify the deficiencies and the actions required to
be taken by Developer to cure the deficiencies. Upon notification of any maintenance deficiency,
Developer shall have thirty (30) days within which to correct, remedy or cure the deficiency. If the
written notification states the problem is urgent relating to the public health and safety, then
Developer shall have forty-eight (48) hours to rectify the problem. In the event Developer does
not maintain the Site in the manner set forth herein and in accordance with the Maintenance
Standards, Authority shall have, in addition to any other rights and remedies hereunder, the right
to maintain the Site, or to contract for the correction of such deficiencies, after written notice to
Developer, and Developer shall be responsible for the payment of all such costs incurred by
Authority.
4.10.2 Program Maintenance. In addition to the routine maintenance and
repair required pursuant to Section 4.10.1, Developer shall perform the following minimum
programmed maintenance of the Improvements to the Site:
five (5) years;
(a) Interior painting and window covering replacement at least every
(b) Exterior painting at least every ten (10) years;
(c) Repair and resurfacing of parking areas and walkways at least
every five (5) years; and
(d) Replacement of all deteriorated or worn landscaping and play
equipment at least every five (5) years.
Upon the request of Developer, the Executive Director, at her sole and absolute discretion,
may grant a waiver or deferral of any program maintenance requirement. Developer shall keep
such records of maintenance and repair as are necessary to prove performance of the program
maintenance requirements.
4.10.3 Occupancy Limits. The maximum occupancy of the Housing Units in
Phase II shall not exceed more than such number of persons as is equal to two persons per
bedroom, plus one. Thus, for the two (2) bedroom Housing Units, the maximum occupancy shall
not exceed five (5) persons. For the three (3) bedroom Housing Units, the maximum occupancy
shall not exceed seven (7) persons.
4.11. Management of Phase II.
4.11.1 Property Manager. Developer shall manage or cause Phase II, and all
appurtenances thereto that are a part of Phase II, 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 County. Developer may contract with a
property management company or property manager, to operate and maintain Phase II in
accordance with the terms of this Section 4.11 ("Property Manager"); provided, however, the
selection and hiring of the Property Manager (and each successor or assignee), including any
Affiliate, is and shall be subject to prior written approval of Authority's Executive Director (or
designee) in her sole and reasonable discretion. Related Management Company, L.P. ("RMC"),
is hereby approved to act as the Property Manager, subject to Executive Director review of the
scope of services, itemized fees, and fee contract for property management between Developer
and RMC. The Property Manager shall manage Phase II in accordance with the definitions of
Affordable Rent contained in Section 4.2 hereof, the tenant selection requirements contained in
Section 4.4, and the definitions relating to income contained in Section 4.5. Any fee paid to the
Property Manager for social services provided to the tenants shall be exclusive of the fee paid to
the Property Manager relating to the management of Phase II. Except for RMC, Developer shall
conduct due diligence and background evaluation of any potential third party property manager
or property management company to evaluate experience, references, credit worthiness, and
related qualifications as a property manager. Any proposed property manager shall have
significant and relevant prior experience with affordable housing projects and properties
comparable to Phase II and the references and credit record of such property manager/company
shall be investigated (or caused to be investigated) by Developer prior to submitting the name
and qualifications of such proposed property manager to the Executive Director for review and
approval. A complete and true copy of the results of such background evaluation shall be
provided to the Executive Director. Approval of a Property Manager by Authority's Executive
Director shall not be unreasonably delayed but shall be in his/her sole reasonable discretion, and
Authority Executive Director shall use good faith efforts to respond as promptly as practicable in
order to facilitate effective and ongoing property management of Phase II by one qualified
Property Manager. The replacement of RMC by Developer and/or the selection by Developer of
any new or different Property Manager during the Term of the Ground Lease shall also be subject
to the foregoing requirements.
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4.11.2 Property Management Plan. Prior to and as a Condition Precedent to
Closing, Developer shall prepare and submit to the Executive Director for review and approval,
which approval shall not be unreasonably withheld, a management plan for Phase II which
includes a detailed plan and strategy for long-term marketing, operation, maintenance, repair and
security of Phase Il, inclusive of social services for the residents of the Housing Units, and the
method of selection of tenants, rules and regulations for tenants, and other rental policies for
Phase II ("Property Management Plan"). Executive Director approval of the Property
Management Plan shall not be unreasonably withheld or delayed. Subsequent to approval of the
Property Management Plan by the Executive Director the ongoing management and operation of
Phase II shall be in compliance with the approved Property Management Plan. During the
Affordability Period, Developer and its Property Manager may from time to time submit to the
Executive Director proposed amendments to the Property Management Plan, the implementation
of which shall also be subject to the prior written approval of the Executive Director, which
approval shall not be unreasonably withheld.
4.11.3 Gross Mismanagement. During the Affordability Period, and in the
event of "Gross Mismanagement" (as defined below) of Phase II, Executive Director and/or
Authority shall have and retain the authority to direct and require any condition(s), acts, or
inactions of Gross Mismanagement to cease and/or be corrected immediately, and further to
direct and require the immediate removal of the Property Manager and replacement with a new
qualified and approved Property Manager, if such condition(s) is/are not ceased and/or corrected
after expiration of thirty (30) days from the date of written notice from Executive Director. If
Developer or Property Manager has commenced to cure such Gross Mismanagement
condition(s) on or before the 20th day from the date of written notice (with evidence of such
submitted to the Executive Director), but has failed to complete such cure by the 30th day (or such
longer period if the cure cannot reasonably be accomplished in thirty (30) days as reasonably
determined by the non -defaulting party), then Developer and its Property Manager shall have an
additional 10 days to complete the cure of Gross Mismanagement condition(s). In no event shall
any condition of Gross Mismanagement continue uncured for a period exceeding forty-five
(45) days from the date of the initial written notice of such condition(s), except that the condition
described in subdivision (d) below may exist for up to, but no longer than, seventy-five (75) days
without triggering Authority's right to remove the Property Manager as described in the
immediately following sentence as long as Developer is diligently working to cure such conditions
of Gross Mismanagement. If such condition(s) do persist beyond such period, Executive Director
shall have the sole and absolute right to immediately and without further notice to Developer (or
to Property Manager or any other person/entity) to remove the Property Manager and Developer
shall contract with a replacement Property Manager reasonably acceptable to Authority (in
accordance with Section 4.11. 1) within thirty (30) days following Authority's removal of the
defaulting Property Manager, If Developer takes steps to select a new Property Manager that
selection is subject to the requirements set forth above for selection of a Property Manager.
For purposes of this Agreement, the term "Gross Mismanagement" shall mean
management of Phase II in a manner which violates the terms and/or intention of this Agreement
to operate a first quality affordable housing complex, and shall include, but is not limited to, any
one or more of the following:
(a) Habitually leasing to tenants who exceed the prescribed income
levels;
(b) Habitually allowing tenants to exceed the prescribed occupancy
levels without taking immediate action to stop such overcrowding;
(c) Under -funding required reserve accounts if Annual Project
Revenues are sufficient to maintain such reserve accounts;
(d) Failing to timely maintain Phase II in accordance with the Property
Management Plan and Maintenance Standards;
(e) Fraud or embezzlement of Phase II funds, including without
limitation funds in the reserve accounts;
(f) Failing to fully cooperate with the Anaheim Police Department or
other local law enforcement agency(ies) with jurisdiction over Phase II, in maintaining a crime -
free environment within Phase 11;
(g) Failing to fully cooperate with the Anaheim Fire Department or other
local public safety agency(ies) with jurisdiction over Phase 11, in maintaining a safe and accessible
environment within Phase Il;
(h) Failing to fully cooperate with the Anaheim Planning & Building
Department, including the Code Enforcement Division, or other local health and safety
enforcement agency(ies) with jurisdiction over Phase 11, in maintaining a decent, safe and sanitary
environment within Phase II; and
(i) Spending funds from the Capital Replacement Reserve account for
items that are not defined as eligible costs, including eligible capital and/or replacement costs,
under the standards imposed by GAAP (and/or, as applicable, generally accepted auditing
principles).
Notwithstanding the requirements of the Property Manager to correct any condition
of Gross Mismanagement as described above, Developer is obligated and shall use its best
efforts to correct any defects in property management or operations at the earliest feasible time
and, if necessary, to replace the Property Manager as provided above. Developer shall include
advisement and provisions of the foregoing requirements and requirements of this Agreement
within any contract between Developer and its Property Manager for Phase 11.
4.11.4 Code Enforcement. Developer acknowledges and agrees that
Authority, City, and their employees and authorized agents, shall have the right to conduct code
compliance and/or code enforcement inspections of Phase II and the individual Housing Units for
Phase ll, both exterior and interior, at reasonable times and upon reasonable notice (not less than
48 hours prior notice, except in an emergency) to Developer and/or an individual tenant. If such
notice is provided by Authority or City representative(s) to Developer, then Developer (or its
Property Manager) shall immediately and directly advise any affected tenant of such upcoming
inspection and cause access to the area(s) and/or Housing Units at Phase 11 to be made available
and open for inspection. Developer shall include express advisement of such inspection rights
within the lease/rental agreements for each Housing Unit in t Phase II in order for each and every
tenant and tenant household to be aware of this inspection right and such inspection(s) shall not
unreasonably interfere with use and enjoyment of the site.
4.12. Capital Reserve Requirements. Commencing upon the closing for the
permanent Primary Loan for Phase 11, Developer shall annually set aside an amount of not less
than Three Hundred Dollars ($300.00) per Housing Unit (21 Housing Units times $300 equals
$6,300) or such increased amount required by TCAC or the Partnership Agreement or the Lender
under the Primary Loan for Phase II) from the gross rents received from Phase II, into a separate
interest-bearing trust account defined as the Capital Replacement Reserve. Funds in the Capital
Replacement Reserve shall be used only for capital repairs, improvements and replacements to
Phase II, including fixtures and equipment, which are normally capitalized under generally
accepted accounting principles. The non-availability of funds in the Capital Replacement Reserve
does not in any manner relieve or lessen Developer's obligation to undertake any and all
necessary capital repairs, improvements, or replacements and to continue to maintain Phase II in
the manner prescribed herein for Phase II. Not less than once per year, Developer, at its expense,
shall submit to Authority Executive Director an accounting for the Capital Replacement Reserve
for Phase II. Capital improvements and repairs to, and replacements at Phase II shall include
only those items with a long useful life, including without limitation the following: carpet and
drapery replacement; appliance replacement; exterior painting, including exterior trim; hot water
heater replacement; plumbing fixtures replacement, including tubs and showers, toilets,
lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and
replacement, and seal coating; roofing repair and replacement; landscape tree replacement;
irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line
replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous
motors and blowers; common area furniture replacement; and common area repainting. Pursuant
to the procedure for submittal of each Annual Budget for Phase II to Executive Director by
Developer, Executive Director will evaluate the cumulative amount on deposit in the Capital
Replacement Reserve account and exercise his/her sole, reasonable discretion to determine if
existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative
unexpended/unencumbered account balance in such Capital Replacement Reserve account are
adequate to provide for necessary capital repairs and improvement for Phase II (provided that
required annual deposits thereto are not required to exceed $300/per Housing Unit).
4.13. Operating Budget and Operating Reserve. Within twelve (12) months after
commencement of construction of Phase II, but in no event later than ninety (90) days prior to the
completion of construction of Phase II, and not less than annually thereafter on or before
November 1 of each year following the issuance of the first certificate of occupancy issued by the
City's building official for Phase ll, Developer shall submit to Authority on not less than an annual
basis an Operating Budget for Phase ll, which budget shall be subject to the written approval of
Executive Director or his/her designee, which approval shall not be unreasonably withheld. The
Executive Director's discretion in review and approval of each proposed annual Operating Budget
shall include, without limitation, authority to review individual categories, line items, and accounts,
such as the following: extent, type, and amount for social services at or associated with Phase
Il; existing balance(s) in and proposed deposits to the Capital Replacement Reserve for Phase II
to evaluate shortfalls and/or cumulative unexpended/unencumbered deposits (provided that
required annual deposits thereto are not required to exceed $300/per unit); conformity of any
annual increases in the Partnership Related Fees for Phase II with the increases permitted in the
definition of "Partnership Related Fees"; reasonableness and conformity to prevailing market
rates in Orange County and rates and fees for goods and services to be provided Developer or
any of its parent, affiliated, or subsidiary entities, etc. for Phase II.
Developer shall, or shall cause the Property Manager to, set aside, in an "Operating
Reserve" for Phase II in a separate interest bearing trust account, a target amount equal to three
(3) months of (i) Debt Service on the Primary Loan and (ii) Operating Expenses for Phase II
("Target Amount"), which shall be funded by Tax Credit equity; provided, a larger Operating
Reserve may be maintained if required by the approved Lender or Tax Credit Investor for Phase
ll. The Operating Reserve shall thereafter be replenished from Annual Project Revenue (net of
Operating Expenses and Debt Service) to maintain the Operating Reserve balance at the Target
Amount. The Target Amount shall be retained in the Operating Reserve to cover shortfalls
between Annual Project Revenue and actual Operating Expenses, but shall in no event be used
to pay for capital items or capital costs properly payable from the Capital Replacement Reserve.
Developer shall, not less than once per every twelve (12) months, submit to the Executive Director
evidence reasonably satisfactory to Authority of compliance herewith.
4.14. Non-Discrimination Covenants. Developer 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) or (d) of Section 12955 of the Government Code, as those bases are
defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of
Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease,
transfer, use, occupancy, tenure, or enjoyment of the Site, nor shall the grantee or any person
claiming under or through him or her, establish or permit any practice or practices of discrimination
or segregation with reference to the selection, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees, or vendees in the Site. The foregoing covenants shall run with
the land. Developer shall refrain from restricting the rental or lease of the Site on any of the bases
listed above. All leases or contracts relating to the Site shall contain or be subject to substantially
the following nondiscrimination or nonsegregation clauses:
(a) In deeds: "The grantee herein covenants by and for himself or
herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under
or through them, that there shall be no discrimination against or segregation of, any person or
group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the
Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and
paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code,
in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein
conveyed, nor shall the grantee or any person claiming under or through him or her, establish or
permit any practice or practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in
the premises herein conveyed. The foregoing covenants shall run with the land."
(b) In leases: "The lessee herein covenants by and for himself or
herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under
or through him or her, and this lease is made and accepted upon and subject to the following
conditions:
"That there shall be no discrimination against or segregation of any
person or group of persons, on account of any basis listed in
subdivision (a) or (d) of Section 12955 of the Government Code, as
those bases are defined in Sections 12926, 12926.1, subdivision
(m) and paragraph (1) of subdivision (p) of Section 12955, and
Section 12955.2 of the Government Code, in the leasing,
subleasing, transferring, use, occupancy, tenure, or enjoyment of
the premises herein leased nor shall the lessee himself or herself,
or any person claiming under or through him or her, establish or
permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use,
or occupancy, of tenants, lessees, sublessees, subtenants, or
vendees in the premises herein leased."
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(c) In contracts: "There shall be no discrimination against or
segregation of, any person or group of persons on account of any basis listed in subdivision (a)
or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926,
12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and
Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy,
tenure, or enjoyment of the premises which are the subject of this Agreement, nor shall the
grantee or any person claiming under or through him or her, establish or permit any practice or
practices of discrimination or segregation with reference to the selection, location, number, use
or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein
conveyed. The foregoing covenants shall run with the land."
The covenants established in this Section 4.14 shall, without regard to technical
classification and designation, be binding for the benefit and in favor of Authority/Agency and their
successors and assigns, and shall remain in effect in perpetuity.
4.15. Monitoring and Recordkeeping. Throughout the Affordability Period, Developer
shall comply with all applicable recordkeeping and monitoring requirements of the HAL and shall
annually complete and submit to Authority a Certification of Continuing Program Compliance in a
form provided by Authority. Representatives of Authority (and City) shall be entitled to enter the
Site upon at least forty-eight (48) hours' notice, to monitor compliance with this Agreement, to
inspect the records of the Site, and to conduct an independent audit or inspection of such records.
Developer agrees to cooperate with Authority in making all of its records for Phase II and making
the Site and all Housing Units thereon available for inspection or audit. Records shall be made
available for review and inspection and/or audit in Orange County, California. Developer agrees
to maintain all records relating to Phase II in a businesslike manner, and to maintain such records
for the term of this Agreement.
4.16. Annual Monitoring Fee. Concurrently with the delivery of each Annual Financial
Statement and Residual Receipts Report to Authority, Developer shall pay an Annual Monitoring
Fee to Authority in the amount of One Thousand Fifty Dollars ($1,050), increased annually by 3%,
which shall compensate Authority for its costs incurred to monitor Developer's compliance with
this Agreement.
4.17. Regulatory Agreement. The requirements of this Agreement that shall remain
applicable after the Closing Date for Phase II are set forth in the Authority Regulatory Agreement
for Phase II which is attached hereto as Attachment No. 10 and incorporated herein. The
execution and recordation of the Regulatory Agreement for Phase II is a Condition Precedent to
the Closing, as set forth in Section 2.2 hereof.
5. AUTHORITY SUBORDINATE LOAN.
5.1. Authority Subordinate Loan. Authority hereby agrees to make the Authority
Subordinate Loan to Developer, as described in Section 5.1.1 below and subject to the terms and
conditions set forth in this Agreement, and subject further to the terms and conditions set forth
within the documents and instruments executed by Developer in connection with Phase II
transaction, including each Regulatory Agreement.
5.1.1 Authority Subordinate Loan. Authority hereby agrees to loan to
Developer, and Developer hereby agrees to borrow from Authority, the sum of Four Million One
Hundred Forty -One Thousand Five Hundred Dollars ($4,141,500.00), consisting of: (a) Four
Million One Hundred Ten Thousand Dollars ($4,110,000.00), representing the value of the ground
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leasehold interest in the Site being provided to Developer ("Land Subsidy"), plus (b) an amount
equal to those additional subsidies described in Section 3.1.2 above in the estimated amount of
$31,500 (the "Additional Subsidy").]
5.1.2 Adjustment of Authority Subordinate Loan Amount at Closing. The
amount of the Additional Subsidy set forth in Section 5.1.1 above is based in part on estimated
costs. Thus, the final amount of the Authority Subordinate Loan for Phase II shall be adjusted at
Closing based on the actual cost incurred to relocate the occupants of the Site, and the amounts
of the various payments, fee waivers, and other local subsidies applicable to Phase II, as
described in more detail in Section 3.1.2, et seq.; provided, in no event shall the amount of the
Authority Subordinate Loan exceed the amounts set forth in Section 5.1.1 above.
5.2. Repayment of Authority Subordinate Loan. Developer's obligation to repay the
Authority Subordinate Loan for Phase II shall be set forth in the Authority Promissory Note for
Phase II, substantially in the form attached hereto as Attachment No. 8. The Authority Promissory
Note for Phase II shall be for a term of fifty-seven (57) years from the date of the Authority
Promissory Note and shall bear simple interest at the rate of one percent (1 %) per annum. The
Authority Promissory Note for Phase II shall be payable from eighty-five percent (85%) of Residual
Receipts from the operation of Phase II, until the Authority Promissory Note has been paid in full.
Developer shall also pay to Authority eighty-five percent (85%) of the Refinancing Net Proceeds
immediately upon any refinancing of Phase II (or any part thereof) and eighty-five percent (85%)
of the Transfer Net Proceeds immediately upon any transfer in whole or in part of Phase II or the
Site. Payments towards the Authority Subordinate Loan shall be applied first to accrued interest,
next to any principal amount of the Additional Subsidy owing under the Authority Promissory Note,
and finally to any principal amount of the Land Subsidy owing under the Authority Promissory
Note.
5.2.1 Residual Receipts Report. Developer shall annually, on or before one
hundred twenty (120) days after the end of Developer's fiscal year, commencing in the first year
after the issuance of the first certificate of occupancy for Phase II issued by City's building official,
submit to Authority a Residual Receipts Report for Phase II, which shall provide the basis for
Developer's payment of Residual Receipts to Authority.
5.2.2 Annual Financial Statement. Developer shall also annually submit to
Authority, on or before one hundred twenty (120) days after the end of Developer's fiscal year,
commencing in the first year after the issuance of a certificate of substantial completion for the
Project, Annual Financial Statements as to the Project that have been reviewed by an
independent certified public accountant, together with an expressed written opinion of the certified
public accountant that such Annual Financial Statement presents the financial position, results of
operations, and cash flows fairly and in accordance with GAAP, as to the Project. Each Annual
Financial Statement submitted by Developer shall include a statement and certification (and
supporting documentation) of the total amount of the Developer Fee and Deferred Developer Fee
(if any) for the Project, along with the cumulative amount thereof paid to date and the amount
thereof paid within the applicable reporting year as reported and certified in the Annual Financial
Statement for the Project. In the event of an occurrence described in Section 4.1.2 which triggers
Developer's obligation to pay an adjusted Annual Rent pursuant to that Section, Developer shall
remain obligated to submit Annual Financial Statements to Authority in accordance with this
Section and the requirements of the Affordable Housing Agreement to enable Authority to
determine the appropriate amount of adjusted Annual Rent to be paid to Authority pursuant to
Section 4.1.2 and to enable Authority to verify that Reserve Deposits are made and Operating
Expenses are incurred in accordance with this Ground Lease and the approved Operating
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Budget. Developer shall also prepare and provide to Authority, concurrently with delivery of each
Annual Financial Statement, a reconciliation from the accrual -based Annual Financial Statement
to the cash -based Residual Receipts calculation.
5.2.3 Right to Audit. Developer shall keep full and accurate books of account,
records and other pertinent data with respect to operations of Phase II. Such books of account,
records, and other pertinent data shall be kept for a period of three (3) years after the end of each
Developer's fiscal year, and shall be made available for review or audit by the Authority or its
designees with a three (3) day written notification to Developer. If any audit results in Developer
restating Residual Receipts upward for any year, then Developer shall accompany delivery of
such audit report to Authority with the additional payment to the Authority resulting from said
restatement. If any such audit report results in Developer restating Residual Receipts downward
for any year, the Developer shall carry forward the overpayment made to the Authority as a credit
against payments under the Authority Subordinate Loan in subsequent years.
(a) If any annual payment required pursuant to Section 5.2.3 above is
not received by Agency within ten (10) calendar days after payment is due, Developer shall pay
to Authority a late charge of five percent (5%) of such payment, such late charge to be immediately
due and payable without demand by Agency.
(b) Authority shall be entitled within three (3) years after the end of each
Developer fiscal year to inspect and examine all Developer's books of account, records, and other
pertinent data. Developer shall cooperate fully with Authority in making the inspection. Authority
shall also be entitled, also within three (3) years after the end of each Developer fiscal year, to an
independent audit of Developer's books of account, records, and other pertinent data; the cost of
such audit shall be an Operating Expense of Phase II.
5.2.4 Assumption. The Authority Promissory Note for Phase II shall not be
assumable by successors and assigns of Developer without the prior written consent of the
Authority pursuant to Section 7.4 hereof.
5.3. Security for Authority Subordinate Loan. The Authority Promissory Note shall
be secured by an Authority Deed of Trust to be recorded as an encumbrance to Developer's
ground leasehold interest in the Site, substantially in the form attached hereto as Attachment No.
9. The Authority Deed of Trust securing the Authority Promissory Note for Phase II shall be junior
and subordinate to the Primary Loan and the deed of trust securing the Primary Loan. The
Authority Deed of Trust shall be senior and non -subordinate to all other financing, encumbrances,
and liens, except the approved Primary Loan, and such other loan(s) as may be approved by the
Authority pursuant to Section 3.10 hereof.
5.4. Conditions Precedent to Authority Subordinate Loan. Authority's obligation to
make the Authority Subordinate Loan to Developer for Phase II is subject to the fulfillment or
waiver by Authority of each and all of the Conditions Precedent described in Section 2.2.1 above,
which are solely for the benefit of Authority, any of which may be waived by the Authority's
Executive Director in her sole and absolute discretion.
6. DEFAULT AND REMEDIES.
6.1. Events of Default. An "Event of Default" or "Default" shall occur under this
Agreement when there shall be a breach of any condition, covenant, warranty, promise or
representation contained in this Agreement and the breach shall continue for a period of thirty
74
(30) days after written notice thereof to the defaulting party without the defaulting party curing
such breach, or if the breach cannot reasonably be cured within a thirty (30) day period,
commencing the cure of the breach within the thirty (30) day period and thereafter diligently
proceeding to cure the breach; provided, however, that if a different period or notice requirement
is specified for any particular breach under any other paragraph of this Agreement, the specific
provision shall control.
6.2. Remedies. The occurrence of any Event of Default shall give the non -defaulting
party the right to proceed with any and all remedies set forth in this Agreement, including an action
for damages, an action or proceeding at law or in equity to require the defaulting party to perform
its obligations and covenants under the documents executed pursuant hereto or to enjoin acts or
things which may be unlawful or in violation of the provisions of such documents, and the right to
terminate this Agreement.
6.3. Force Majeure. Subject to the party's compliance with the notice requirements as
set forth below, performance by a party hereunder shall not be deemed to be in default, and all
performance and other dates specified in this Agreement shall be extended, where delays or
defaults are due to causes beyond the control and without the fault of the party claiming an
extension of time to perform, which may include, without limitation, the following: war, insurrection,
strikes, lockouts, riots, floods, earthquakes, fires, assaults, acts of God, acts of the public enemy,
epidemics, quarantine restrictions, freight embargoes, lack of transportation, governmental
restrictions or priority, litigation, unusually severe weather, inability to secure necessary labor,
materials or tools, acts or omissions of the other party, or acts or failures to act of any public or
governmental entity (except that Authority's acts or failure to act shall not excuse performance of
Authority hereunder). Subject to the timing and provisions of Section 3.10.1, in no event shall
Developer's difficulty or inability to obtain and secure the Primary Loan or other financing become
an event of force majeure. An extension of the time for any such cause shall be for the period of
the enforced delay and shall commence to run from the time of the commencement of the cause,
if notice by the party claiming such extension is sent to the other party within thirty (30) days of
the commencement of the cause.
6.4. Termination by Developer. Subject to the timing and provisions of
Section 3.10.1, in the event that Developer is not in Default under this Agreement and:
(a) Developer is unable to obtain sufficient financing for the
development and operation of Phase II in accordance with the provisions of Section 3.10; or
(b) Developer fails to receive an allocation of Tax Credits for Phase II;
140
(c) Developer disapproves of the environmental condition of the Site or
Improvements pursuant to Section 2.3.3; or
(d) Developer disapproves the condition of title to the Site pursuant to
Section 2.4.7; or
(e) One or more of the Conditions Precedent set forth in Section 2.2.2
is not satisfied (or waived by Developer) on or before the time set forth in the Schedule of
Performance, and such Condition Precedent is not satisfied after notice and an opportunity to
satisfy as provided in Section 6.1 hereof, and such failure is not caused by Developer; or
rV
M Authority is otherwise in Default of this Agreement and fails to cure
such Default within the time set forth in Section 6.1 hereof;
then this Agreement and any rights of Authority or any assignee or transferee with respect to or
arising out of this Agreement shall, at the option of Developer, be terminated by Developer by
written notice thereof to Authority. From the date of the written notice of termination of this
Agreement by Developer to Authority and thereafter this Agreement shall be deemed terminated,
subject to the rights of the Lender pursuant to the approved financing for the Primary Loan(s),
Developer shall have the option to terminate the Ground Lease, as provided in more detail therein,
and there shall be no further rights or obligations between the parties as to Phase 11, except that
if Authority is in default hereunder Developer, after delivery of notice of default and expiration of
the cure period provided in Section 6.1 hereof, may pursue any remedies it has at law or equity.
6.5. Termination by Authority. Subject to the timing and provisions of Section 3.10.1
(including, without limitation, the reimbursement provisions set forth therein), in the event that
Authority is not in Default under this Agreement, and:
(a) Developer is unable to obtain sufficient financing for the
development and operation of Phase 11 in accordance with the provisions of Section 3.10.1,
subject to Developer's right of reimbursement and Authority's right to all plans pursuant to Section
3.10.1(a); or
(b) Developer fails to receive an allocation of Tax Credits for Phase 11
and Authority elects to terminate this Agreement pursuant to Section 3.10.1(a), subject to the
restrictions contained in Section 3.10.1(a) and further subject to Developer's right of
reimbursement and Authority's right to all plans pursuant to Section 3.10.1(a); or
(c) One or more of the Conditions Precedent set forth in Section 2.2.1
is not satisfied (or waived by Authority) on or before the time set forth in the Schedule of
Performance, and such Condition Precedent is not satisfied after notice and an opportunity to
satisfy as provided in Section 6.1 hereof, and such failure is not caused by Authority; or
(d) Developer is otherwise in Default of this Agreement and fails to cure
such Default within the time set forth in Section 6.1 hereof;
then this Agreement and any rights of Developer or any assignee or transferee with respect to or
arising out of this Agreement shall, at the option of Authority, be terminated by Authority by written
notice thereof to Developer. From the date of the written notice of termination of this Agreement
by Authority to Developer and thereafter this Agreement shall be deemed terminated, and there
shall be no further rights or obligations between the parties as to Phase 11 (except as provided in
Section 3.10 as to Developer's delivery and assignment of Development Plans and other
materials to Authority, if applicable), except that if Developer is in default hereunder Authority,
after delivery of notice of default and expiration of the cure period provided in Section 6.1 hereof,
may pursue any remedies it has at law or equity.
6.6. Attorneys' Fees. In addition to any other remedies provided hereunder or
available pursuant to law, if any party brings an action or proceeding to enforce, protect or
establish any right or remedy hereunder or under any of the documents executed pursuant hereto,
the prevailing party shall be entitled to recover from the other party its costs of suit, including
without limitation expert witness fees, and reasonable attorneys' fees.
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6.7. Remedies Cumulative. No right, power, or remedy given to Authority 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 shall be cumulative and in addition to every other right, power,
or remedy given to Authority by the terms of any such instrument, or by any statute or otherwise
against Developer and any other person.
6.8. Waiver of Terms and Conditions. Authority may, in its sole discretion, waive in
writing any of the terms and conditions of this Agreement. Waivers of any covenant, term, or
condition contained herein shall not be construed as a waiver of any subsequent breach of the
same covenant, term, or condition.
7. GENERAL PROVISIONS.
7.1. Time is of the Essence. Time is expressly made of the essence with respect to
the performance by Authority and Developer of each and every obligation and condition of this
Agreement.
7.2. Notices. Any approval, disapproval, demand, document or other notice ("Notice")
which any party may desire to give to another party under this Agreement must be in writing and
may be given either by (i) personal service, (ii) delivery by reputable document delivery service
such as Federal Express that provides a receipt showing date and time of delivery, (iii) facsimile
transmission, or (vi) mailing in the United States mail, certified mail, postage prepaid, return
receipt requested, addressed to the address of the party as set forth below, or at any other
address as that party may later designate by Notice. Service shall be deemed conclusively made
at the time of service if personally served; upon confirmation of receipt if sent by facsimile
transmission; the next business day if sent by overnight courier and receipt is confirmed by the
signature of an agent or employee of the party served; the next business day after deposit in the
United States mail, properly addressed and postage prepaid, return receipt requested, if served
by express mail; and three (3) days after deposit thereof in the United States mail, properly
addressed and postage prepaid, return receipt requested, if served by certified mail.
Developer: Avon Dakota Housing Partners II, L.P.
18201 Von Karman Avenue, Suite 900
Irvine, California 92612
Attention: William A. Witte
Fax No.: (949) 660-7273
With a Copy to: Bocarsly Emden Cowan Esmail & Arndt LLP
633 West Fifth Street, 70th Floor
Los Angeles, California 90071
Attention: Lance Bocarsly
Fax No.: (213) 239-0410
With a Copy to: Any Lender(s) and/or the Investor Limited Partner whose name
and address is identified in a written notice sent to Authority and
referencing this Agreement.
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Authority: Anaheim Housing Authority
201 South Anaheim Boulevard, Suite 1003
Anaheim, California 92805
Attention: Linda N. Andal, Secretary
Fax No.: (714) 765-4105
With Copies To: Anaheim Housing Authority
201 South Anaheim Boulevard, Suite 1003
Anaheim, California 92805
Attention: John E. Woodhead IV, Executive Director
Fax No.: (714) 765-4630
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Celeste Brady
Fax No.: (949) 823-5141
Anaheim Housing Authority
200 South Anaheim Boulevard, Suite 356
Anaheim, California 92805
Attention: Leonie Mulvihill, Deputy City Attorney IV
Fax No.: (714) 765-5123
Such addresses may be changed by Notice to the other party(ies) given in the same
manner as provided above.
7.3. Representations and Warranties of Developer. Developer hereby represents
and warrants to Authority as follows:
(a) Organization. Developer is a California limited partnership duly
organized, validly existing, formed, and in good standing under the laws of the State of California
that has the power and authority to own property and carry on business as is now being
conducted.
(b) Authority of Developer. Developer has full power and authority to
execute and deliver this Agreement and to make and accept the borrowings contemplated
hereunder, to execute and deliver the Authority Promissory Note and Authority Deed of Trust for
the Authority Subordinate Loan, the Regulatory Agreement, Ground Lease, Memorandum of
Ground Lease, Notice of Affordability Restrictions, Request for Notice and all other documents or
instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement,
and to perform and observe the terms and provisions of all of the above.
(c) Valid Binding Agreements. This Agreement, the Authority
Promissory Note and Authority Deed of Trust for the Authority Subordinate Loan, the Regulatory
Agreement, the Ground Lease, Memorandum of Ground Lease, Request for Notice, Notice of
Affordability Restrictions, and all other documents or instruments which have been executed and
delivered pursuant to or in connection with this Agreement constitute or, if not yet executed or
delivered, will when so executed and delivered constitute, legal, valid and binding obligations of
Developer enforceable against it in accordance with their respective terms.
78
(d) Pending Proceedings. Developer is not in default under any law
or regulation or under any order of any federal, state, or local court, board, commission or agency
whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge
of Developer, threatened against or affecting Developer or the Site, at law or in equity, before or
by any federal, state, or local court, board, commission or agency whatsoever which might, if
determined adversely to Developer, materially affect Developer's ability to perform its obligations
hereunder.
(e) Tax Credits. All information included or to be included within and
provided to TCAC in the Applications submitted by Developer upon which TCAC issues its
preliminary Reservation letters shall be true and correct in all material respects as of the date of
each Application. In the event any information or representation made by Developer to TCAC
related, directly or indirectly, to the Tax Credits is not true, complete, and correct in all material
respects, Developer shall, and acknowledges it has an obligation to, inform TCAC and Authority
of such changes and to provide updated information to TCAC, Authority, and its Lender(s), as
necessary.
(f) Commercial or Private Funding Review. Developer agrees to
notify Authority in the event that it applies for or proposes to use other sources of funds for Phase
I I prior to the issuance of the Release of Construction Covenants as to Phase 11.
(g) No Material Adverse Change. Developer hereby represents and
warrants, as of the date of this Agreement, that all documents, materials and information provided
by Developer to Authority relating to Developer's qualifications, financial strength, and ability to
perform its obligations hereunder are true, correct and complete in all material respects as of their
respective dates and no Material Adverse Change has occurred or is reasonably likely to occur
that would make any such documents, materials or information incorrect, incomplete, or
misleading in any material respect.
(i) Developer shall, upon learning of any fact or condition which
would cause any of the warranties and representations in this Section 7.3 not to be true in all
material respects as of Closing, immediately give written notice of such fact or condition to the
Authority. Such exception(s) to a representation shall not be deemed a Default by the Developer
hereunder, but shall constitute an exception which the Authority shall have a right to approve or
disapprove if Authority, in its sole discretion, determines that such exception would have an effect
on the value of Phase 11 or Developer's ability to perform Developer's obligations under this
Agreement and the Ground Lease. If Authority, acting in its sole discretion, elects to close the
Escrow following disclosure of such information, Developer's representations and warranties
contained in this Section 7.3 shall be deemed to have been made as of the Closing, subject to
such exception(s). If, following the disclosure of such information, Authority elects, acting in its
sole discretion, to not close the Escrow, then Authority shall give notice to the Developer of such
election within ten (10) days after disclosure of such information and this Agreement and the
Escrow shall thereafter automatically terminate and neither party shall have any further rights,
obligations or liabilities hereunder.
(ii) The representations and warranties set forth in this
Section 7.3, subject to such exception(s), shall survive the Closing. During the entire Affordability
Period and the entire Term of the Ground Lease, within five (5) business days following a written
request from Authority or City, Developer shall either re -affirm in writing the material truth and
accuracy of the representations and warranties set forth in this Section 7.3, or identify any material
inaccuracies of such representations and warranties. The fact that a representation or warranty
79
contained in this Section 7.3 has become inaccurate or misleading shall not, in and of itself,
constitute a breach under this Agreement or the Ground Lease; however, (a) failure to notify
Authority of material inaccuracies in these representations and warranties within ten (10) business
days of Authority's request for such information, and (b) any overt material misrepresentation by
Developer relating to such representations and warranties shall each constitute an Event of
Default under this Agreement, subject to delivery of notice and expiration of the cure rights
provided in this Agreement and to Section 21.1.5 of the Ground Lease.
(iii) During the entire Affordability Period and the entire Term of
the Ground Lease, the Developer shall have the ongoing obligation to promptly (but in no event
later than five (5) business days following a Material Adverse Change) inform Authority (in writing)
of the occurrence of any Material Adverse Change.
7.4. Limitation Upon Change in Ownership, Management and Control of
Developer.
7.4.1 Prohibition. The identities and qualifications of Developer, as an Affiliate
of The Related Companies of California, LLC, and as an experienced and successful Developer
and operator of affordable apartment complexes, are of particular concern to Authority. It is
because of this identity and these qualifications that Authority has entered into this Agreement
with Developer. Except as expressly set forth in Section 7.4.2 below, no voluntary or involuntary
successor in interest of Developer shall acquire any rights or powers under this Agreement by
assignment, assumption or otherwise, nor shall Developer make any total or partial transfer,
conveyance, encumbrance to secure financing or refinancing, assignment or sublease of the
whole or any part of the leasehold interest in the Site, nor shall there be any change in the general
or limited partners of Developer, without the prior written approval of Authority Executive Director
pursuant to Section 7.4.3 below, except as expressly set forth herein, which approval shall not be
unreasonably withheld or delayed.
7.4.2 Permitted Transfers. Notwithstanding other provisions of this
Agreement to the contrary, Authority approval of an assignment or transfer of this Agreement or
conveyance of Developer's leasehold interest in the Site, or any part thereof, shall not be required
in connection with any of the following ("Permitted Transfers"):
(a) The granting of temporary easements or permits to facilitate the
construction and development of Phase II.
(b) A transfer by and/or to the Developer, as to such Developer's rights
under this Agreement to enter into a Ground Lease and thereafter develop and operate Phase II
in accordance with this Agreement as follows: Avon Dakota Housing Partners ll, L.P., a California
limited partnership, is hereby designated as the Developer entity authorized to enter into the
Ground Lease and develop Phase II on the Site.
(c) A right of first refusal and/or option to purchase Developer's interest
in this Agreement and Developer's interest in the Site or the Investor Limited Partner's interest in
Developer, from and after the fifteenth (15th) year after the issuance of a certificate of occupancy
for Phase II by City to one or more general partners of Developer.
(d) Syndication to and with the approved Investor Limited Partner(s)
selected and approved by Authority pursuant to Section 3.10.4(a) and addition of such investor(s)
W
as limited partners in the limited partnership pursuant to the Partnership Agreement, and
assignment by such entities of funds controlled by them.
(e) A transfer of a general partnership interest in Developer to a
nonprofit managing general partner entity.
(f) Notwithstanding anything to the contrary contained herein, without
the consent of Authority, each Investor Limited Partner shall have the right to assign its interests
as limited partner in Developer to an entity which is controlled by such Investor Limited Partner
or is under common control with such Investor Limited Partner.
(g) Notwithstanding anything to the contrary contained herein, Investor
Limited Partner shall have the right to remove either general partner of Developer, or both general
partners, and substitute any Investor Limited Partner or an affiliate thereof as a general partner
of Developer, pursuant to the Partnership Agreement, without Authority's consent. Any proposed
replacement of a general partner with an entity other than an Investor Limited Partner or an
affiliate thereof will be subject to Authority's prior consent, which shall not be unreasonably
withheld.
(h) Subject to the restrictions of Section 4.0, et seq., including the
Ground Lease for Phase II, the rental or lease for occupancy of each of the Housing Units in
Phase II to qualified Very Low and Low Income Households.
(i) Assignment for approved financing purposes, subject to such
financing being considered and approved by Authority pursuant to Section 3.10 hereof.
(j) In the event of a Permitted Transfer by Developer pursuant to this
Section 7.4.2 not requiring Authority's prior approval, Developer nevertheless agrees that at least
ten (10) days prior to such pre -approved assignment or transfer it shall give written notice to
Authority of such assignment or transfer along with a true and complete copy of the assignment
or transfer document conforming to the requirements of this Agreement.
(k) Notwithstanding anything to the contrary in this Agreement, the
general partners in Developer shall have the right, without the approval or consent of the Authority,
to pledge or otherwise encumber its or their partnership interests in Developer to any Lender(s)
and the foreclosure of such pledge by a Lender shall not cause an Event of Default hereunder.
7.4.3 Authority Consideration of Requested Transfer. Authority agrees that
it will not unreasonably withhold approval of a request for an assignment or transfer made
pursuant to this Section 7.4.3, provided (a) Developer delivers written notice to Authority
requesting such approval, (b) the proposed assignee or transferee possesses a reasonable level
of operational experience and capability with respect to the operation of similar types of affordable
rental housing projects in Southern California, (c) the proposed assignee or transferee possesses
a reasonable level of net worth and resources as necessary to develop, operate, and manage
Phase II, and (d) the assignee(s) or transferee(s) completely and fully assume(s) the obligations
of Developer under this Agreement pursuant to an assignment and assumption agreement(s) in
a form which is reasonably acceptable to Authority and its legal counsel(s). Such notice shall be
accompanied by evidence regarding the proposed assignee's or purchaser's qualifications and
experience and its financial commitments and resources sufficient to enable Authority to evaluate
the proposed assignee or purchaser pursuant to the criteria set forth in this Section 7.4.3 and
other criteria as reasonably determined by Authority. Authority shall approve or disapprove the
m
request within thirty (30) days of its receipt of Developer's notice and submittal of complete
information and materials required herein. Authority approval shall not be required for transfers
or assignments for Authority approved financing purposes including foreclosure or deed in lieu of
foreclosure; provided, there shall be no deemed approval of a transfer or assignment for financing
secured by Developer's ground leasehold interest in the Site that will: (a) increase the interest
rate applicable to such debt, or (b) increase the outstanding principal amount of such debt, or
(c) cause or require the release or withdrawal of cash or equity from any part of Phase II, or
(d) extend the term of repayment of such debt, or (e) otherwise increase the aggregate annual
debt service payments on such loan (and such assignments are subject to Authority approval
pursuant to Section 7.4.4 hereof). In no event, however, shall Authority be obligated to approve
the assignment or transfer of the Ground Lease or Regulatory Agreement, pursuant to this
Section 7.4.3, except to an approved transferee or assignee of Developer's rights in and to the
Site and Phase II, based on Authority's reasonable determination that such transferee or assignee
has the experience, financial strength, knowledge, and overall capability to own, operate and
manage Phase II in accordance with the terms, conditions, and restrictions contained in this
Agreement. In addition, Authority shall not be required to grant its approval of any proposed
transfer or assignment unless all information reasonably requested by Authority relating to the
proposed transferee or assignee entity and all general and limited partners of such entity,
including true and correct copies of an executed Partnership Agreement, if the proposed
assignee/transferee is a partnership, true and correct copies of articles of incorporation if the
proposed assignee/transferee is a corporation, plus current certified financial statements of the
entity and financial statements relating to other affordable rental housing projects developed
and/or operated by such entity(ies) and reporting and compliance documentation for such projects
submitted for public entities providing funding to such projects, etc., as applicable. In the event
Developer transfers all or any portion of Phase II, subject to and with Authority approval, any
Transfer Net Proceeds received by Developer shall be split between Authority and Developer in
the same manner as Residual Receipts (eighty-five percent (85%) to Authority and fifteen percent
(15%) to Developer).
(a) Addition of Limited Partner(s) to Developer Entity as Tax
Credits Investment Entity. Authority acknowledges that Developer anticipates that one of the
limited partner(s) to be added to Developer's limited partnership entity will be the Investor Limited
Partner for Phase 11. As of the Effective Date, Developer has not solicited bids for or selected its
Investor Limited Partner for Phase ll. In this regard, Developer agrees that as a Condition
Precedent to the Closing, it shall use best efforts to solicit not fewer than three (3) and use best
efforts to obtain not fewer than two (2) competitive bids from prospective, qualified Investors
Limited Partners for Phase ll. After such competitive bidding, Developer shall submit complete
documentation relating to such competitive solicitation to Authority, including true copies of the
invitation to bidders and each full bid package submitted by bidding Tax Credit investors, in order
to permit Authority to evaluate the Tax Credit Investor proposed by Developer and the terms of
financing and Tax Credit equity offered by such Tax Credit investor. All such documentation shall
be submitted no less than thirty (30) days prior to Closing. Within ten (10) days of delivery to
Authority of such documentation, Authority and Developer shall meet and confer to select jointly
the Tax Credit Investor for Phase II based on the proposal which provides the greatest benefit to
Phase II and the Avon Dakota Neighborhood, as a whole.
7.4.4 Approval of Refinancing of Primary Loan. Authority Executive
Director shall have the right to review all documents related to and to approve (which approval
shall not be unreasonably withheld) or disapprove any refinancing of the Primary Loan and any
other debt secured by Developer's ground leasehold interest in the Site, which refinancing will:
(a) increase the interest rate applicable to such debt, or (b) increase the outstanding principal
amount of such debt, or (c) cause or require the release or withdrawal of cash or equity from any
part of Phase II, or (d) extend the term of repayment of such debt, or (e) otherwise increase the
aggregate annual debt service payments on such loan. Authority Executive Director shall
reasonably consider any such proposed refinancing based on an economic evaluation conducted
by Authority's economic consultant that analyzes the effect of the proposed refinancing on (i) the
availability of Residual Receipts to repay the Authority Subordinate Loan, (ii) the availability of
Cost Savings pursuant to Section 3.11, and (iii) the ability of Developer to repay in full the Primary
Loan and any other debt or other liens against the Site as such payment becomes due. In the
event Developer refinances either or both Primary Loan(s) (or other debt), subject to and with
Authority approval, and Developer withdraws equity from Phase ll, any Refinancing Net Proceeds
shall be split between Authority and Developer in the same manner as Residual Receipts (eighty-
five percent (85%) to Authority and fifteen percent (15%) to Developer).
7.5. Successors and Assigns. This Agreement shall run with the land, and all of the
terms, covenants and conditions of this Agreement shall be binding upon Developer and the
permitted successors and assigns of Developer. Whenever the term "Developer" is used in this
Agreement, such term shall include any of Developer's approved Affiliate assignee(s) or
transferee(s), or any other permitted successors and assigns as herein provided.
7.6. Non -Liability of Officials and Employees of Authority or City. No member,
elected or appointed official, or employee of Authority or City shall be personally liable to
Developer or any successor in interest in the Event of Default or other breach by Authority or for
any amount which may become due to Developer or its successors, or for performance of any
obligations under the terms of this Agreement.
7.7. Relationship between Authority and Developer. It is hereby acknowledged and
agreed that the relationship between Authority and Developer is not that of a partnership or joint
venture or other investor partner and that Authority and Developer shall not be deemed or
construed for any purpose to be the agent of the other. Accordingly, except as expressly provided
in this Agreement, Authority shall have no rights, powers, duties or obligations with respect to the
development, operation, maintenance or management of Phase II.
7.8. Executive Director; Authority Approvals and Actions. Authority shall maintain
authority of this Agreement and the authority to implement this Agreement through Authority's
Executive Director (or her duly authorized representative). The Executive Director and his/her
duly authorized representative(s) shall have the authority to make approvals, issue
interpretations, waive provisions, request issuance of warrants and make payments authorized
hereunder, make and execute further agreements and/or enter into amendments of this
Agreement on behalf of Authority so long as such actions do not materially or substantially change
or modify the uses or development permitted on the Site, or materially or substantially add to the
costs, responsibilities, or liabilities incurred or to be incurred by Authority (or City) as specified
herein, and such interpretations, waivers and/or amendments may include extensions of time to
perform as specified in the Schedule of Performance. All material and/or substantive
interpretations, waivers, or amendments shall require the consideration, action and written
consent of the Authority Board. Further, Executive Director shall maintain the right to submit to
the Authority Board for consideration and action any non -material or non -substantive
interpretation, waiver or amendment, if in her reasonable judgment she desires to do so.
7.9. Counterparts. This Agreement may be signed in multiple counterparts all of which
together shall constitute an original binding agreement. This Agreement is executed in three
(3) originals, each of which is deemed to be an original.
RN
7.10. Integration. This Agreement contains the entire understanding between the
parties relating to the transaction contemplated by this Agreement. All prior or contemporaneous
agreements, understandings, representations and statements, oral or written, are merged in this
Agreement and shall be of no further force or effect. Each party is entering this Agreement based
solely upon the representations set forth herein and upon each party's own independent
investigation of any and all facts such party deems material. This Agreement includes pages 1
through 87, S-1 through S-3, and Attachment Nos. 1 through 18, which together constitute the
entire understanding and agreement of the parties, notwithstanding any previous negotiations,
approved terms and conditions, or agreements between the parties or their predecessors in
interest with respect to all or any part of the subject matter hereof.
7.11. Real Estate Brokerage Commission. Authority and Developer each represent
and warrant to the other that no broker or finder is entitled to any commission or finder's fee in
connection with this transaction, and Developer and Authority agree to defend and hold harmless
each other from any claim to any such commission or fee resulting from any action on its part.
7.12. Titles and Captions. Titles and captions are for convenience of reference only
and do not define, describe or limit the scope or the intent of this Agreement or of any of its terms.
References to Section and Paragraph numbers are to sections and paragraphs in this Agreement,
unless expressly stated otherwise.
7.13. Interpretation. As used in this Agreement, masculine, feminine or neuter gender
and the singular or plural number shall each be deemed to include the others where and when
the context so dictates. The word "including" shall be construed as if followed by the words
"without limitation." This Agreement shall be interpreted as though prepared jointly by both
parties.
7.14. No Waiver. A waiver by any party of a breach of any of the covenants, conditions
or agreements under this Agreement to be performed by the other party shall not be construed
as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions
or conditions of this Agreement or the Attachments hereto.
7.15. Covenant Not to Sue. The following covenant relating to Developer's obligation
not to sue regarding Phase II or the Site or any issues ancillary thereto (but excluding the specific
performance of this Agreement) is a material incentive for and a part of the consideration to
Authority to enter into this Agreement with Developer. Therefore, Authority shall have no
obligation to enter into the Ground Lease for Phase ll, and the performance obligations of
Authority under this Agreement shall automatically terminate, in the event from and after the
Effective Date and until the Closing, Developer, or any Affiliate of Developer or any of its partners,
officers, directors, employees, agents, representatives, consultants, attorneys, or any person
acting at the direction of Developer, undertakes any act to oppose, or to commence, participate
in, prosecute, or otherwise object to, or to litigate, directly or indirectly, any permit or discretionary
decision of Authority, City, City's Planning Commission, or any other City board or commission
relating to the Site and/or Phase II of whatever form or nature (but excluding the specific
performance of this Agreement).
Notwithstanding the foregoing, nothing set forth in this Section 715 shall prevent
Developer from asserting its rights relating to the performance and enforcement of this Agreement
or due to the abuse of discretion by a governmental entity considering and acting upon a future
discretionary decision related to the parameters of this covenant. Further, nothing in the foregoing
covenant shall prevent Developer from asserting Developer's rights with respect to prospective
action or future conduct by any person who interferes, opposes, or delays implementation and
completion of Phase II.
7.16. Developer's Payment and Reimbursement of Authority's Post -Effective Date
Third Party Costs.
7.16.1 Third Party Costs Defined; Obligation. Developer shall pay for and
reimburse Authority for all costs reasonably incurred by Authority and City for any and all out of
pocket, third party costs, fees, and expenses incurred by Authority or City (but not in-house staff
time) for attorneys, economic consultants, appraisers, engineers, affordable housing consultants,
escrow company fees, title company fees, and other consulting and/or professional services
incurred by Authority or City arising from and/or related in any respect to the implementation of
this Agreement or Phase II from the period of time commencing upon the Closing for Phase II
through the term of the Affordability Period (together, "Third Party Costs"). The Third Party Costs
may include costs incurred in connection with (a) post -Closing enforcement of the Regulatory
Agreement, Ground Lease, or other documents for Phase II (collectively, "Phase II Documents"),
including the following: (i) commencement of, appearance in, or defense of any action or
proceeding purporting to affect the rights or obligations of the parties to any Phase II Documents,
and (ii) all claims, demands, causes of action, liabilities, losses, commissions and other costs
against which Authority or City are indemnified under the Phase II Documents, provided as to
defense of any action which Authority or City have tendered the defense to Developer and
Developer fails to defend any such action; and (b) other costs incurred related to requests for or
provision of estoppel certificates, subordination agreements, affordable housing documents,
escrow instructions, advisory assistance, any other documentation, legal advice, affordable
housing advice, or other third party contracts for consulting or professional services necessitated
by Authority's, City's or Developer's post -Closing implementation of this Agreement, and/or
requested by Developer, and/or its Lender or other independent contractor or consultant to
Developer post -Closing arising from or related in any manner to this Agreement.
7.16.2 Payment of Third Party Costs. Within ten (10) days of the submittal by
Authority staff of copies of invoices or billings for Third Party Costs incurred, it is and shall be the
obligation of Developer to reimburse and pay to Authority one hundred percent (100%) of these
Third Party Costs, unless Developer reasonably contests such Third Party Costs.
(a) This reimbursement obligation shall bear interest from the date
occurring ten (10) days after Authority gives written demand to Developer at the rate of ten percent
(10%), or the maximum rate then permitted by law.
(b) This reimbursement obligation shall survive the issuance of the final
Release of Construction Covenants for Phase II and termination of this Agreement.
7.16.3 Exception to Payment of Post -Effective Date Third Party Costs.
Notwithstanding Section 716, 716.1, and 716.2 above, Developer shall not be responsible to pay
and reimburse for Third Party Costs if the costs incurred are attributable to one or more of the
following events:
(a) City Council, Authority Board, successor agency Board, Planning
Commission, Zoning Administrator, or other City official with discretionary approval and/or
disapproval rights over Phase II or the implementation of this Agreement disapproves, denies, or
refuses to take action on an application for a permit or other discretionary application necessary
to commence and complete Phase Il; or
M.
(b) Default by Authority under this Agreement.
7.17. Modifications. Any alteration, change or modification of or to this Agreement, in
order to become effective, shall be made in writing and in each instance signed by a duly
authorized representative on behalf of each party.
7.18. Severability. If any term, provision, condition or covenant of this Agreement or its
application to any party or circumstances or Phase II shall be held, to any extent, invalid or
unenforceable, the remainder of this Agreement, or the application of the term, provision,
condition or covenant to persons or circumstances other than those as to whom or which it is held
invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest
extent permitted by law.
7.19. Computation of Time. The time in which any act is to be done under this
Agreement is computed by excluding the first day and including the last day, unless the last day
is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall
mean all holidays as specified in Section 6700 and 6701 of the California Government Code. If
any act is to be done by a particular time during a day, that time shall be Pacific Time Zone time.
7.20. Legal Advice. Each party represents and warrants to the other the following: they
have carefully read this Agreement, and in signing this Agreement, they do so with full knowledge
of any right which they may have; they have received independent legal advice from their
respective legal counsel as to the matters set forth in this Agreement, or have knowingly chosen
not to consult legal counsel as to the matters set forth in this Agreement; and, they have freely
signed this Agreement without any reliance upon any agreement, promise, statement or
representation by or on behalf of the other party, or their respective agents, employees or
attorneys, except as specifically set forth in this Agreement, and without duress or coercion,
whether economic or otherwise.
7.21. Cooperation. Each party agrees to cooperate with the other in this transaction
and, in that regard, to sign any and all documents which may be reasonably necessary, helpful
or appropriate to carry out the purposes and intent of this Agreement including, but not limited to,
implementation agreements, releases or other agreements.
7.22. Conflicts of Interest. No member, elected or appointed public official or
employee of Authority (or City) shall have any personal interest, direct or indirect, in this
Agreement, nor shall any such member, elected or appointed public official or employee
participate in any decision relating to the Agreement which affects his personal interests, his
economic interests, or the interests of any corporation, partnership or association in which he is
directly or indirectly interested.
7.23. No Third Party Beneficiaries Except for City. City shall be a third party
beneficiary of this Agreement. Except for City, there shall be no third party beneficiaries of this
Agreement.
0
IN WITNESS WHEREOF, Authority and Developer have executed this Affordable Housing
Agreement (Avon Dakota Neighborhood - Phase II) as of the date and year first set forth above.
DEVELOPER:
AVON DAKOTA HOUSING PARTNERS II, L.P., a
California limited partnership
By: Avon Dakota MGP, LLC,
a California limited liability company, its managing
general partner
By: Affordable Housing Access, Inc., a
California nonprofit public benefit
corporation, its sole member and manager
Jonathan B. Webb, President
By: Related/Avon Dakota Development Co., LLC, a
California limited liability company, its
administrative general partner
By:
Frank Cardone, Vice President
[Signatures for Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II)
continue on following page]
S-1
[Signatures for Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II)
continued from previous page]
AUTHORITY:
ANAHEIM HOUSING AUTHORITY, a public body,
corporate and politic
-31
ATTEST:
John E. Woodhead IV, Executive Director or
Authorized Designee
LINDA N. ANDAL, AUTHORITY SECRETARY
Linda N. Andal
��;i�Z�1�J��Z_F•�t�1,7�7:7►�iA
OFFICE OF CITY ATTORNEY
Leonie Mulvihill
Deputy City Attorney IV
STRADLING YOCCA CARLSON & RAUTH
Authority Special Counsel
S-2
ATTACHMENT NO. 1
AVON DAKOTA NEIGHBORHOOD MAP
ATTACHMENT NO. 1
AVON DAKOTA NEIGHBORHOOD MAP
Page 1 of 1
ATTACHMENT NO. 2
NARRATIVE DESCRIPTION OF AVON DAKOTA NEIGHBORHOOD
The Avon Dakota Multifamily Residential Neighborhood Area is bounded by L3 Communications
(602 E. Vermont Avenue) and the South Street Development (700 E. South Street) to the east,
South Street to the north, Vermont Street to the south and Thomas Jefferson Elementary
School to the west.
ATTACHMENT NO. 2
NARRATIVE DESCRIPTION OF AVON DAKOTA NEIGHBORHOOD
Page 1 of 1
ATTACHMENT NO. 3
DEPICTION OF THE PROJECT
ATTACHMENT NO. 3
DEPICTION OF THE PROJECT
Page 1 of 1
ATTACHMENT NO. 4
LEGAL DESCRIPTION OF PHASE II
Real property in the City of Anaheim, County of Orange, State of California, described as
follows:
[to come]
ATTACHMENT NO. 4
LEGAL DESCRIPTION OF PHASE II
Page 1 of 1
ATTACHMENT NO. 5
SCHEDULE OF PERFORMANCE
(809, 824, 862 and 868 South Dakota Street and 606 E. Avon Place)
A. Approval and Execution of Agreement Not later than June—, 2017.
Authority shall execute the Agreement, if
and when approved by Authority and
Anaheim City Council.
B. Basic Concept Drawings Submitted and approved by
Developer shall prepare and submit Basic Authority.
Concept Drawings for Phase II to Authority
for review and approval.
C. Construction Drawings On or before one hundred and twenty
Developer shall submit Construction (120) days after Developer obtains a
Drawings for Phase II to Authority for review. preliminary reservation of Tax Credits
for Phase ll.
D. Approval of Construction Drawings Within 10 business days of receipt.
Authority shall review and approve, approve
with conditions or disapprove Developer's
Construction Drawings for Phase Il.
E. Conditions Precedent to Commencement At least two (2) days prior to the
of Ground Lease anticipated Closing date.
Developer and Authority shall satisfy, or
waive all Conditions Precedent to the
commencement of the Ground Lease set
forth in Section 202.
F. Close of Escrow Within two (2) days of notification by
Escrow shall close for Phase II when all Authority and Developer to Escrow
Conditions Precedent to Closing have been that all Conditions Precedent are
satisfied or waived by the benefited party. satisfied and/or waived and
Developer's financing is ready to
close.
G. Obtain Building Permits No later than ten (10) business days
Developer shall, at its own expense, secure after the Closing.
any and all permits and approvals required
for the construction of Phase 11.
H. Commence Construction No later than thirty (30) days after the
Developer shall commence construction of Closing.
Phase II.
ATTACHMENT NO. 5
SCHEDULE OF PERFORMANCE
Page 1 of 2
K.
M
Submit First Operating Budget Within nine (9) months from the
Developer shall submit to Authority the first commencement of construction for
(annual) Operating Budget for Phase 11. the Project, but in no event later than
thirty (30) days prior to the
completion of construction.
Approve First Operating Budget Within ten (10) business days after a
Authority shall review and approve, complete submittal of the first
conditionally approve, or disapprove the first Operating Budget for Phase II to
(annual) Operating Budget for Phase 11. Authority.
Complete Construction Within fifteen (15) months from the
Developer shall complete construction of commencement of construction for
Phase II. Phase II.
Notify Housing Authority At least ninety (90) days prior to
Developer shall notify Authority of impending City's issuance of the Certificate of
Certificate of Occupancy for Phase 11 and Occupancy for Phase II.
commence implementation of the approved
Marketing and Tenant Selection Plan.
Final Certificate of Occupancy Within ninety (90) days of completion
Developer shall obtain the final Certificate of of construction of Phase II.
Occupancy for Phase ll.
N. Issue Release of Construction Covenants Within thirty (30) days of receipt of a
Authority shall furnish Developer with a complete Developer request.
Release of Construction Covenants upon
completion of Phase II and satisfaction of
Section 305 of the Agreement.
ATTACHMENT NO. 5
SCHEDULE OF PERFORMANCE
Page 2 of 2
ATTACHMENT NO. 6
SCOPE OF DEVELOPMENT
[Anaheim and Related Staff to update/confirm]
The first phase of the Project will include the rehabilitation of seven (7) buildings at 809, 824, 862
and 868 S. Dakota Street and 606 E. Avon Place. The Scope of Development for this phase of
the Project shall include the rehabilitation of all twenty-one (21) apartment units, of which three
(3) shall be one bedroom units, twelve (12) shall be two bedroom units and six (6) shall be three
bedroom units. Phase I I will also include [three (3) trash enclosures and (_) parking
spaces, of which (_) spaces will be carports and (_) spaces will be
open/tandem spaces.]
TABULATIONS:
809 S. Dakota:
4 — 3 bedroom unit
Parking: _ carport spaces
Construct trash enclosure for (_) bins
824S. Dakota:
2 — 2 bedroom unit
2 — 3 bedroom units
Parking: _ [open] spaces
862S. Dakota:
2 — 2 bedroom, one bath units
2 — 2 bedroom, two bath units
Parking: _ [open] spaces
[Rehabilitate existing trash enclosure that is also used by the tenants at 516 E.
South Street]
868 S. Dakota:
4 — 2 bedroom units
Parking: [_ carports spaces and _ open/tandem spaces]
[Construct trash enclosure for (_) bins
606 E. Avon Place:
3 — 1 bedroom units
2 — 2 bedroom units
Parking: f 1
[Construct trash enclosure for (_) bins]
ATTACHMENT NO. 6
SCOPE OF DEVELOPMENT
Page 1 of 3
Construction Scope of Work:
CLASSIFICATION
Notes
QUANITY
DEMOLITION AND PREP INTERIORS
16 units
KITCHEN
Replace Kitchen Cabinets
16 units
Replace Countertops
16 units
Replace Flooring Kitchen & Dining
16 units
Replace Light Fixture
16 units
Install GFI Outlets @ Kitchen
16 units
Replace Kitchen Hood
Includes exhaust fan ducting
16 units
Replace Refrigerator
16 units
Replace Kit. Sink & Faucet includes trap/waste)
16 units
Replace Garbage Disposal (badger V 1/2 h
16 units
Replace Range labor reflects shut off & gas line
16 units
BATHROOMS
R&R Tubs & Surrounds
16 units
Repair Sub Floors
Allowance
16 units
Replace Drain
16 units
.Replace Pullman Cabinet
16 units
Replace Pullman Tops
16 units
Replace Sink & Faucet
16 units
Install New Bath Mirror
16 units
Replace Bath & Shower Fixtures
16 units
Install GFI outlet
16 units
,Replace Medicine Cabinet
16 units
Replace Bathtub Valve
16 units
Install New Flooring sheet vin ])
16 units
Replace Light Fixtures
16 units
Replace Exhaust Fan and Humistat
Need to install duct to outside
16 units
Remove and Replace Toilets as needed
16 units
LIVING AREA
Final Clean
16 units
R&R Carpet
16 units
R&R Closet Doors vin I
16 units
Install Hardwired Smoke Detectors / Carbon Monoxide
16 units
Install Ceiling Fans
16 units
Replace Switch & Plus
16 units
Wiring for Cable TV
Allowance
16 units
R&R Gas Wall Heater
16 units
Replace or Repair Interior Doors and Trim
16 units
Replace Finish Hardware
16 units
Replace Window Blinds
16 units
Replace Light Fixtures
16 units
Paint Interiors
16 units
Misc. Drywall Repair
Allowance
16 units
Mold Clean-up
Allowance
16 units
Asbestos and Lead Remediation
Allowance
16 units
Termite Treatment tent
Allowance
16 units
Drywall If Unit Remediated
1AIlowance
16 units
SCOPE OF DEVELOPMENT
Page 2 of 3
ATTACHMENT NO. 6
SCOPE OF DEVELOPMENT
Page 3 of 3
BUILDING EXTERIORS
*Assumption: Keep existing electrical panels and circuit load capacity as is
Re lace Windows
13 units
Replace Sliding Glass Doors
4 buildings
Paint Extedor
Allowance
4 buildings
Stucco Repairs
Allowance
1 project
Exterior Railings & Stairs
Allowance
4 buildings
R&R Entry Doors
16 units
R&R Deck & Balcony.Waterproofing
Allowance
1 project
Room Additions
Allowance
5 new bdrms
Site Demolition
Allowance
4 buildings
Carports
Allowance
project
Trash Enclosure
Allowance
3 units
Laundry Rooms
Allowance
1 units
ROOFING & SHEET METAL
New Roofing
4 buildings
Repair Dry Rot Facsia & Rafter Tails as needed
Allowance
4 buildings
Replace Sheet Metal
4 buildings
Replace Damaged Roof Sheeting as needed
Allowance 10 sheets
4 buildings
Repair Roof Substructure
Allowance
4 buildings
Replace Gutter & Downspout
4 buildings
COMMON AREAS
Install New Tanked Water Heater
4 buildings
ADA Compliant Access
Allowance
1 project
Camera & Snake All Sewer Lines
4 buildings
Replace Mailboxes
Allowance Per Building
4 buildin s
SITE IMPROVEMENTS
Repair Irrigation System
Allowance Per Building
4 buildings
Enhance Landscaping
Allowance Per Building
4 buildings
Replace Damaged Concrete - Walkways & Flatwork
Allowance Per Building
4 buildings
Upgrade Site Lighting
Allowance Per Building
4 buildings
Replace Exterior Wood Fencing
Allowance Per Building
4 buildin s
Replace Entry Gates
4 buildings
Dryrot Repairs
Allowance Per Building
4 buildings
OFF -SITES
* Assumption: Keep existing dry and wet utility connections to the buildings as is
ATTACHMENT NO. 6
SCOPE OF DEVELOPMENT
Page 3 of 3
ATTACHMENT NO. 7
FORM OF GROUND LEASE
GROUND LEASE
(Avon Dakota Neighborhood - Phase II)
by and between
ANAHEIM HOUSING AUTHORITY,
a public body, corporate and politic,
"Landlord"
and
AVON DAKOTA HOUSING PARTNERS II, L.P.,
a California limited partnership
"Tenant"
Dated as of
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 1 of 86
Table of Contents
Page
ARTICLE 1 LEASE OF THE PROPERTY...............................................................................1
1.1. Ground Lease of the Property; Ownership of Improvements................................1
1.2. Purpose of Ground Lease....................................................................................2
1.3. Recorded Encumbrances.....................................................................................2
1.4. Memorandum of Ground Lease...........................................................................2
ARTICLE 2 DEFINITIONS......................................................................................................2
ARTICLE3 TERM................................................................................................................21
ARTICLE4 RENT.................................................................................................................21
4.1. Rent...................................................................................................................21
4.2. Payment of Rent................................................................................................22
4.3. Reporting Requirements; Audit..........................................................................22
4.4. Utilities...............................................................................................................24
4.5. Taxes and Assessments....................................................................................24
4.6. Overdue Interest................................................................................................25
ARTICLE 5
POSSESSION OF PROPERTY.........................................................................25
5.1.
Acceptance of Premises....................................................................................25
5.2.
Ownership of Improvements..............................................................................26
5.3.
Surrender of Property........................................................................................26
5.4.
Abandonment....................................................................................................27
ARTICLE 6
REPRESENTATIONS AND WARRANTIES; MATERIAL ADVERSE
CHANGE...........................................................................................................27
6.1.
Landlord's Representations...............................................................................27
6.2.
Tenant's Representations..................................................................................28
6.3.
Tenant Obligation to Notify re Material Adverse Change....................................29
ARTICLE 7
CONSTRUCTION OF THE IMPROVEMENTS..................................................29
7.1.
Commencement and Completion of Construction..............................................29
7.2.
Construction Cost..............................................................................................29
7.3.
Diligent Prosecution to Completion....................................................................30
7.4.
Completion of Construction................................................................................30
7.5.
Changes; Landlord Consent..............................................................................30
7.6.
Landlord's Review..............................................................................................31
7.7.
Right of Access..................................................................................................31
7.8.
Governmental Approvals....................................................................................31
7.9.
Landlord's Right to Discharge Lien....................................................................31
7.10.
Notice of Non-Responsibility..............................................................................32
7.11.
Notice of Completion..........................................................................................32
7.12.
Subsequent Alterations......................................................................................32
7.13.
Force Majeure....................................................................................................32
ARTICLE 8
USE OF THE PROPERTY.................................................................................32
8.1.
Covenants re Use..............................................................................................32
8.2.
Reserved...........................................................................................................33
8.3.
Covenants Regarding Operation of Housing Units.............................................33
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page i of 86
Table of Contents
Paqe
8.4. Reserved...........................................................................................................41
8.5. Covenant to Pay Taxes and Assessments.........................................................41
8.6. Reserved...........................................................................................................41
8.7. Non -Discrimination Covenants...........................................................................41
8.8. Covenants Regarding Operating Budget and Operating Reserve ......................42
8.9. Covenants Regarding Capital Replacement Reserve........................................43
8.10. Certificate of Continuing Program Compliance...................................................43
ARTICLE 9 INSURANCE......................................................................................................44
9.1. Landlord Not Liable............................................................................................44
9.2. Indemnification...................................................................................................44
9.3. Insurance...........................................................................................................44
9.4. Other Insurance.................................................................................................48
9.5. Contractors........................................................................................................48
9.6. Waiver of Subrogation.......................................................................................48
9.7. Insurance Submissions......................................................................................49
ARTICLE 10 MAINTENANCE; REPAIRS; ALTERATIONS; RECONSTRUCTION ..................49
10.1. General Maintenance.........................................................................................49
10.2. Program Maintenance........................................................................................50
ARTICLE 11 OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS ..................50
11.1. Ownership During Term.....................................................................................50
11.2. Ownership at Expiration or Termination.............................................................51
11.3. Waste................................................................................................................52
11.4. Alteration of Improvements................................................................................52
ARTICLE 12 SIGNS AND MARKETING.................................................................................52
ARTICLE 13 INDEMNIFICATION...........................................................................................53
ARTICLE 14 DAMAGE OR DESTRUCTION OF PROPERTY OR IMPROVEMENTS ............53
14.1. Tenant's Repair Obligation.................................................................................53
14.2. Tenant's Restoration of Premises......................................................................54
14.3. Procedure for Restoring Improvements..............................................................55
14.4. Mortgagee Protection.........................................................................................56
ARTICLE 15 EMINENT DOMAIN...........................................................................................57
15.1. Notice................................................................................................................57
15.2. Representation in Proceedings or Negotiations.................................................57
15.3. Total Taking.......................................................................................................57
15.4. Substantial Taking.............................................................................................58
15.5. Tenant's Right to Revoke Notice of Termination................................................59
15.6. Partial Taking.....................................................................................................59
15.7. Obligation to Repair on Partial Taking................................................................59
15.8. Temporary Taking..............................................................................................59
15.9. Mortgagee Protection.........................................................................................60
15.10. Appraisal............................................................................................................60
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page ii of 86
Table of Contents
Paqe
ARTICLE 16 ENVIRONMENTAL............................................................................................61
16.1. No Use of Hazardous Materials on the Property................................................61
16.2. Notice and Remediation by Tenant....................................................................62
16.3. Environmental Indemnity....................................................................................62
ARTICLE17
ASSIGNMENT...................................................................................................62
17.1.
Prohibition Against Transfer: No Sale or Assignment During Term ....................63
ARTICLE 18
MORTGAGES...................................................................................................66
18.1.
Ground Leasehold Mortgages.. ..........................................................................
66
18.2.
Landlord's Forbearance and Right to Cure Defaults on Mortgages ....................67
18.3.
Limited Liability of Mortgagee for Prior Indemnified Acts....................................68
18.4.
Landlord Cooperation........................................................................................68
18.5.
No Subordination of Landlord's Fee Interest, Affordable Housing
Covenants, or Entitlements................................................................................69
18.6.
Priority...............................................................................................................69
18.7.
Claims................................................................................................................69
18.8.
Further Amendments.........................................................................................69
18.9.
Loan Obligations................................................................................................69
18.10.
Liens and Encumbrances Against Tenant's Interest in this Ground
LeaseholdEstate...............................................................................................69
18.11.
Cost of Loans to be Paid by Tenant...................................................................73
18.12.
No Merger..........................................................................................................73
18.13.
Transfer Rights..................................................................................................73
ARTICLE19
SUBLEASING....................................................................................................73
19.1.
Subleasing of Property.......................................................................................73
19.2.
Nondisturbance Agreements..............................................................................74
19.3.
Rights of Mortgagees.........................................................................................74
ARTICLE 20
PERFORMANCE OF TENANT'S COVENANTS................................................74
20.1.
Right of Performance.........................................................................................74
20.2.
Reimbursement and Damages...........................................................................75
ARTICLE 21
EVENTS OF DEFAULT; REMEDIES.................................................................75
21.1.
Events of Default................................................................................................75
21.2.
Remedies..........................................................................................................76
21.3.
Receipt of Rent, No Waiver of Default................................................................78
21.4.
Effect on Indemnification....................................................................................78
ARTICLE 22 PERMITTED CONTESTS..................................................................................78
ARTICLE 23 FORCE MAJEURE............................................................................................79
23.1. Delay of Performance........................................................................................79
23.2. Notice and Cure Requirements..........................................................................79
ARTICLE 24 CONSENT RIGHTS...........................................................................................79
ARTICLE 25 GENERAL PROVISIONS...................................................................................79
25.1. Notices...............................................................................................................79
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page iii of 86
Table of Contents
Paqe
25.2.
Certificates.........................................................................................................81
EXHIBIT B:
25.3.
No Merger of Title..............................................................................................81
INITIAL MONTHLY RENT SCHEDULE
25.4.
Utility Services...................................................................................................81
25.5.
Quiet Enjoyment................................................................................................81
25.6.
No Claims Against Landlord...............................................................................81
25.7.
Inspection..........................................................................................................82
25.8.
No Waiver by Landlord.......................................................................................82
25.9.
Holding Over......................................................................................................82
25.10.
Exculpation of Tenant's Personal Liability..........................................................82
25.11.
No Partnership...................................................................................................82
25.12.
Remedies Cumulative........................................................................................82
25.13.
Attorney's Fees..................................................................................................82
25.14.
Time Is of the Essence.......................................................................................83
25.15.
Survival of Representations, Warranties and Covenants....................................83
25.16.
Construction of Ground Lease...........................................................................83
25.17.
Severability........................................................................................................83
25.18.
Entire Agreement; Modification..........................................................................83
25.19.
Binding Effect and Benefits................................................................................83
25.20.
Further Assurances............................................................................................83
25.21.
Counterparts......................................................................................................83
25.22.
Number and Gender..........................................................................................83
25.23.
Incorporation by Reference................................................................................83
25.24.
Modification or Termination.............................................................................84
I� l:Tl lti��
EXHIBIT A:
LEGAL DESCRIPTION
EXHIBIT B:
INCOME COMPUTATION AND CERTIFICATION
EXHIBIT C:
INITIAL MONTHLY RENT SCHEDULE
EXHIBIT D:
MEMORANDUM OF GROUND LEASE
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page iv of 86
GROUND LEASE
(Avon Dakota Neighborhood - Phase II)
This GROUND LEASE (Avon Dakota Neighborhood - Phase II) ("Ground Lease") dated
as of ("Effective Date") is entered into by and between ANAHEIM HOUSING
AUTHORITY, a public body, corporate and politic ("Landlord"), and AVON DAKOTA HOUSING
PARTNERS II, L.P., a California limited partnership ("Tenant").
RECITALS
A. Landlord is a California housing authority acting under the California Housing
Authorities Law, Part 2 of Division 24 of the Health and Safety Code.
B. Tenant is controlled by an experienced owner, developer and manager of
affordable housing for low and moderate -income families.
C. Landlord is the owner of certain real property situated in the City of Anaheim,
County of Orange, State of California, and legally described in Exhibit A ("Property").
D. Landlord and Tenant have entered into that certain Affordable Housing Agreement
(Avon Dakota Neighborhood - Phase II), dated as of June _, 2017 ("Affordable Housing
Agreement") which provides for the development and operation of a twenty-one (21) unit
multifamily apartment project for Very Low Income Households and Low Income Households.
E. The Affordable Housing Agreement provides for Landlord to ground lease the
Property to Tenant, and for Tenant to plan, design, construct, develop and operate the Project
thereon.
F. All Conditions Precedent to the parties entering into this Ground Lease have been
satisfied or waived.
G. The foregoing Recitals constitute a substantive part of this Ground Lease.
H. This Ground Lease is in the vital and best interests of the City of Anaheim,
California, and the health, safety and welfare of its residents, and in accordance with the public
purposes of applicable state and local laws and requirements.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and
conditions herein contained, Landlord and Tenant agree as follows:
ARTICLE 1
LEASE OF THE PROPERTY
1.1. Ground Lease of the Property; Ownership of Improvements. Landlord hereby
leases the Property to Tenant, and Tenant hereby hires the Property from Landlord, on the terms
and conditions set forth in this Ground Lease. Subject to the provisions of Section 5.3 hereof,
Tenant will concurrent with the Effective Date of this Ground Lease and thereafter during the Term
hereof, hold fee title to all Improvements constructed on the Property during the Term hereof, and
shall continue to hold fee title to such Improvements during such Term.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 1 of 86
1.2. Purpose of Ground Lease. The purpose of this Ground Lease is to provide for
the construction, maintenance, management, and operation of the Project as a twenty-one (21)
unit affordable multifamily apartment complex to be made available for the Affordability Period at
an Affordable Rent pursuant to this Ground Lease and the City Covenants. Tenant shall not
occupy or use the Property, nor permit the Property to be occupied or used, nor do or permit
anything to be done in or on the Property, in whole or in part, for any other purpose other than
affordable housing during the Affordability Period pursuant to the terms and provisions of this
Ground Lease. The foregoing notwithstanding, after the foreclosure of a Mortgage, or acceptance
by a Mortgagee of an assignment or deed in lieu of foreclosure, the Property may be used for any
lawful purpose, so long as such use is in conformity with this Ground Lease or the New Ground
Lease between Landlord and such Mortgagee as applicable hereunder, which New Ground Lease
shall include provision for payment of adjusted Rent in an amount not less than provided in
Sections 4.1.3, as applicable.
1.3. Recorded Encumbrances. This Ground Lease, the interests of Landlord and
Tenant hereunder, and the Property, are in all respects subject to and bound by all of the
covenants, conditions, restrictions, reservations, rights, rights-of-way and easements of record,
including without limitation the City Covenants entered into between Tenant and the City of
Anaheim ("City") dated and recorded against the Property in the Official Records concurrently
herewith.
1.4. Memorandum of Ground Lease. A short form Memorandum of Ground Lease
(Avon Dakota Neighborhood - Phase II) referring to this Ground Lease, substantially in the form
attached hereto as Exhibit D and incorporated herein, shall be executed by Landlord and Tenant
concurrently herewith and recorded in the Official Records.
ARTICLE 2
DEFINITIONS
Unless otherwise defined herein, all capitalized terms shall have the same meanings
ascribed to them in the Affordable Housing Agreement. If not defined in the Affordable Housing
Agreement, capitalized terms used herein are defined where first used in this Ground Lease
and/or as set forth in this Article 2. For the purpose of supplying such definitions, the Affordable
Housing Agreement, notwithstanding anything contained therein or herein to the contrary, shall
not merge with this Ground Lease.
"Additional Rent" shall mean the additional rent which may be required to be paid by
Tenant to Landlord pursuant to Section 4.1.1.
"Affiliate" shall mean any person or entity directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Tenant, which shall include
each of the constituent partners or members of Tenant's limited partnership (but not the Investor
Limited Partner). The term "control," as used in the immediately preceding sentence, means, with
respect to a person that is a corporation, the right to exercise, directly or indirectly, at least 50%
of the voting rights attributable to the shares of the controlled corporation, and, with respect to a
person that is not a corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled person.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 2 of 86
"Affordability Period" shall mean the period commencing on the Commencement Date
and continuing thereafter until the earlier of (i) the fifty-seventh (57th) anniversary of the date the
Release of Construction Covenants (defined below) is recorded against the Property in the Official
Records, in accordance with Section 3.5 of the Affordable Housing Agreement; or
(ii) December 31, 2078.
"Affordable Housing Covenants" shall mean those covenants set forth in Article 8 of this
Ground Lease.
"Affordable Housing Agreement" shall mean the Affordable Housing Agreement, as
amended and clarified from time to time.
"Affordable Rent" shall mean the maximum amount of out of pocket housing cost to be
charged monthly by Tenant and paid by each of the eligible Very Low and Low Income
Households for each of the Housing Units at the Project as determined and calculated pursuant
to the affordable rent and the rent limitations according to TCAC, the Tax Credit Rules, the HOME
Requirements and the Tax Credit Regulatory Agreement applicable to the Project, in accordance
with Section 8.3.2 hereof and Section 4.2 of the Affordable Housing Agreement. For purposes of
Affordable Rent, the monthly housing payment shall mean the total of monthly payments by each
subtenant household (exclusive of any and all payments attributable to rental subsidies, or other
public subsidies by the Anaheim Housing Authority or any other local, state, or federal
governmental agency) of a Housing Unit for use and occupancy of a Housing Unit and facilities
associated therewith, including a reasonable allowance for utilities for an adequate level of
service.
"Annual Financial Statement" shall mean the certified financial statement of Tenant for
the Project using generally accepted accounting principles ("GAAP"), as separately accounted for
the Project, including Operating Expenses and Annual Project Revenue, prepared at Tenant's
expense, by an independent certified public accountant reasonably acceptable to Landlord, as
well as the Residual Receipts Report, the form of which is attached to the Affordable Housing
Agreement as Attachment No. 18. Each Annual Financial Statement submitted by Tenant shall
include a statement and certification (and supporting documentation) of the total amount of the
Developer Fee and Deferred Developer Fee for the Project, along with the cumulative amount
thereof paid to date and the amount thereof paid within the applicable reporting year as reported
and certified in the Annual Financial Statement. Once every three (3) years or sooner as and
when requested by Landlord and/or Executive Director, along with and as a part of the Annual
Financial Statement and Residual Receipts Report, Tenant shall submit true, legible, and
complete copies of the source documentation supporting the Annual Financial Statement and
Residual Receipts Report.
"Annual Project Revenue" shall mean all gross income and all revenues of any kind from
the Project in a calendar year, of whatever form or nature, whether direct or indirect, with the
exception of the items excluded below, received by, paid to, or for the account or benefit of Tenant
or any Affiliate of Tenant or any of their agents or employees (provided, in no event shall amounts
counted as Annual Project Revenue be double counted if paid by Tenant to one or more of its
Affiliates), from any and all sources, resulting from or attributable to the operation, leasing and
occupancy of the Project, determined on the basis of GAAP applied on a consistent basis, and
shall include, but not be limited to: (i) gross rentals paid by subtenants of the Project under leases,
and payments and subsidies of whatever nature, including without limitation any payments,
vouchers or subsidies from HUD or any other person or organization, received on behalf of
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 3 of 86
subtenants under their leases; (ii) amounts paid to Tenant or any Affiliate of Tenant on account
of Operating Expenses for further disbursement by Tenant or such Affiliate to a third party or
parties, including, without limitation, grants received to fund social services or other housing
supportive services at the Project; (iii) late charges and interest paid on rentals; (iv) rents and
receipts from licenses, concessions, vending machines, coin laundry, and similar sources; (v)
other fees, charges, or payments not denominated as rental but payable to Tenant in connection
with the rental of office, retail, storage, or other space in the Project; (vi) consideration received
in whole or in part for the cancellation, modification, extension or renewal of leases; and (vii)
interest and other investment earnings on security deposits, reserve accounts and other Project
accounts to the extent disbursed. Notwithstanding the foregoing, Annual Project Revenue shall
not include the following items: (a) security deposits from subtenants (except when applied by
Tenant to rent or other amounts owing by subtenants); (b) capital contributions to Tenant by its
members, partners or shareholders (including capital contributions required to pay the Deferred
Developer Fee; (c) condemnation or insurance proceeds; (d) there shall be no line item, expense,
or revenue shown allocable to vacant unit(s) at the Project; or (e) receipt by an Affiliate of
management fees or other bona fide arms -length payments for reasonable and necessary
Operating Expenses associated with the Project.
"Applicable Federal Rate" shall mean the interest rate set by the United States Treasury
from time to time for the purpose of determining applicable Low Income Housing Tax Credit
interest rates. The Applicable Federal Rate is published by the Internal Revenue Service in
monthly revenue rulings.
"Approved Financing" shall mean the construction and permanent financing initially
approved by Landlord for the Project pursuant to Section 3.10 of the Affordable Housing
Agreement, obtained by Tenant for the construction/development and operation of the Project
and, thereafter, in accordance with the terms of this Ground Lease.
"Area Median Income" and "AMI" shall mean the area median household income set forth
for each county in California (and for this Ground Lease for Orange County), as annually
determined by TCAC pursuant to the Tax Credit Rules.
"Authority Deed of Trust" shall mean the Authority Subordinate Loan Deed of Trust and
Assignment of Rents (Avon Dakota Neighborhood - Phase II) executed by Tenant in favor of
Landlord and recorded against the ground leasehold interest in the Property in order to secure
Tenant's obligations under the Authority Promissory Note and any other Transaction Documents.
"Authority Promissory Note" shall mean that certain Authority Subordinate Loan
Promissory Note Secured by Deed of Trust (Avon Dakota Neighborhood - Phase II) executed by
Tenant in favor of Landlord to evidence Tenant's obligation to repay the Authority Subordinate
Loan to Landlord from eighty-five percent (85%) of Remaining Residual Receipts from the Project.
"Authority Subordinate Loan" shall mean the Authority Subordinate Loan (as defined in
the Affordable Housing Agreement) to be provided to Tenant in connection with the development
of the Project, in an amount of Four Million One Hundred Forty One Thousand Five Hundred
Dollars ($4,141,500). The Authority Subordinate Loan is evidenced by the Authority Promissory
Note and secured by the Authority Deed of Trust.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 4 of 86
"Award" shall mean any compensation or payment made or paid for the Total, Partial or
Temporary Taking of all or any part of or interest in the Property and/or the Improvements,
whether pursuant to judgment, agreement or otherwise.
"Base Rent" shall mean the sum of One Dollar ($1.00) payable as of the Commencement
Date and on each anniversary of the Commencement Date which occurs during the Term.
"Capital Improvements" shall mean all work and improvements with respect to the
Property for which costs and expenses may be capitalized in accordance with GAAP.
"Capital Replacement Reserve" shall mean a separate reserve fund account to be
established upon closing of the permanent Primary Loan for the Project and maintained by Tenant
separately for the Project, which shall equal not less than Three Hundred Dollars ($300) per year
for each Housing Unit at the Project (16 Housing Units times $300 equals $6,300), to be used as
the primary resource to fund capital improvements and replacement improvements for the Project.
The amount of $300 for each Housing Unit that is set aside by the Tenant (or its Property
Manager) shall be allocated from the gross rents received from the Property and deposited into a
separate interest bearing trust account for capital replacements to the fixtures and equipment that
are normally capitalized under generally accepted accounting principles and shall include
common areas. The nonavailability of funds in the Capital Replacement Reserve does not in any
manner relieve or lessen Tenant's obligation to undertake any and all necessary capital repairs
and improvements and to continue to maintain the Project in the manner prescribed herein. Upon
written request of Landlord, but not more than once per year, Tenant, at its expense, shall submit
to Landlord's Executive Director an accounting for the Capital Replacement Reserve for the
Project. Capital repairs to and replacement of the Project shall include only those items with a
long useful life, including, without limitation, the following: carpet and drape replacement;
appliance replacement; exterior painting, including exterior trim; hot water heater replacement;
plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air
conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing
repair and replacement; landscape tree replacement; irrigation pipe and controls replacement;
sewer line replacement; water line replacement; gas line pipe replacement; lighting fixture
replacement; elevator replacement and upgrade work; miscellaneous motors and blowers;
common area furniture and planters replacement; and common area repainting. Pursuant to the
procedure for submittal of each Annual Budget for the Project to Executive Director by Tenant,
Executive Director will evaluate the cumulative amount on deposit in the Capital Replacement
Reserve account for the Project and exercise her sole, reasonable discretion to determine if
existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative
unexpended/unencumbered account balance in such Capital Replacement Reserve account are
adequate to provide for necessary capital repairs and improvement to the Property and the Project
(provided that required annual deposits thereto are not required to exceed $300/per Housing
Unit).
"Certificate of Continuing Program Compliance" shall mean the certificate to be
delivered by Tenant to Landlord annually until the expiration of the Affordability Period pursuant
to Section 8.10, in a form acceptable to and approved by the Executive Director.
"City" shall mean the City of Anaheim, a California municipal corporation and charter city.
The City is not a party to this Ground Lease and shall have no obligations hereunder; provided,
however, City is an intended third -party beneficiary of the covenants and restrictions, as well as
the enforcement rights (without any obligation), set forth in this Ground Lease.
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"Commencement Date" shall mean the date upon which the Memorandum of Ground
Lease is recorded in the Official Records.
"CPI" shall mean the United States Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for Urban Wage Earners and Clerical Workers, Subgroup "All Items," for
the Los Angeles -Costa Mesa -Riverside area, 1982 — 84 = 100, or successor or equivalent index
in case such index is no longer published. CPI adjustments under this Ground Lease shall
commence not earlier than one year following the issuance of the final certificate of occupancy
for the Project.
"Debt Service" shall mean payments (including any required reserves) made in a calendar
year pursuant to the approved Primary Loan obtained for the construction, development and
operation of the Project pursuant to Section 3.10 of the Affordable Housing Agreement and any
new financing or refinancing in accordance with this Ground Lease, but excluding Rent and
excluding payments to Landlord under the Authority Promissory Note.
"Deferred Developer Fee" shall mean any deferred Developer Fee to be paid from Annual
Project Revenue, which is included under the financing which has been approved by Landlord
pursuant to Section 3.10 of the Affordable Housing Agreement. [As of the Commencement Date,
Tenant intends to include a Deferred Developer Fee in the amount of approximately $539,500 as
a permanent source of financing for the Project.]
"Developer Fee" shall mean a fee for the Project to be paid by Tenant pursuant to the
Development Services Agreement, which fee is compensation to perform, or to engage and
supervise others to perform, services in connection with the negotiating, coordinating, and
supervising the planning, architectural, engineering and construction activities necessary to cause
completion and complete the Project, including all other on-site and off-site improvements
required to be constructed in connection therewith, in accordance with the Scope of Development,
the Entitlement, and the Development Plans, as set forth in the Final Budget and approved as a
part of the evidence of financing pursuant to Section 3.10 of the Affordable Housing Agreement.
From and after the Closing, Tenant shall defer up to the maximum amount of the Developer Fee
permitted to be paid from cash flow, as set forth in the Tax Credit Rules, if and to the extent such
deferral is necessary to keep the Final Budget in balance or to complete construction of the
Project.
"Development Plans" shall mean the Basic Concept Drawings and Construction
Drawings (as those terms are defined in the Affordable Housing Agreement) all as approved by
City and Landlord, a set of which, initialed by Tenant, and on file in the offices of Landlord.
"Entitlement" shall mean and include each application and discretionary action of the City,
through its administrators and, if applicable, by its City Council, Planning Commission, or other
boards or commissions for the Project and the Improvements, including the findings in compliance
with the California Environmental Quality Act ("CEQA"), Conditional Use Permits, Reclassification
No. 2006-00175, and any and all conditions of approval related thereto, including, without
limitation, the City Covenants and any amendments, supplements, and modifications thereto, as
set forth in the conditions of approval for the Project. Pursuant to Section 21159.23 of the Public
Resources Code, the Project is exempt from CEQA.
"Event of Default" has the meaning set forth in Article 21.
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"Executive Director" shall mean the Executive Director of Landlord or his or her designee.
"Federal Program Limitations" shall mean compliance with the HOME Program and
HOME Regulations, as amended by the 2013 HOME Final Rule, as applicable to the Project, and
also includes any and all other applicable federal regulations relating to fair housing and non-
discrimination applicable to the Project and rules and regulations made applicable to the Project
due to the provision of PBV Assistance to the HAP Units. Developer covenants, acknowledges,
and agrees it is subject to the HAL and all Federal Program Limitations, including (with respect to
the HOME Units) the HOME Program and HOME Regulations (whichever are most restrictive and
to the extent applicable to the Project), in connection with its performance under this Agreement,
and agrees it shall endeavor to cause the use and operation of the Properties to conform to the
Federal Program Limitations.
"First Mortgage -Construction Financing" shall mean a loan from an Institutional Lender
to be secured by a leasehold deed of trust in first (1st) lien position against Tenant's leasehold
interest in the Property (but not, in any event, to be secured by Landlord's fee interest in the
Property), which shall be used by Tenant to pay the cost of constructing the Project.
"First Mortgage -Permanent Financing" shall mean a loan in an amount not to exceed
the amount of the First Mortgage -Construction Financing from an Institutional Lender to be
secured by a leasehold deed of trust in first (1st) lien position against Tenant's leasehold interest
in the Property which replaces the First Mortgage -Construction Financing upon the completion of
construction of the Project or results from a conversion of the First Mortgage -Construction
Financing into the First Mortgage -Permanent Financing pursuant to the terms of such loan and
satisfaction of the applicable conversion conditions.
"Foreclosure Transferee" shall mean any Lender or other transferee of Tenant's
leasehold interest under this Ground Lease as a result of a judicial foreclosure, nonjudicial
foreclosure or assignment of the leasehold in lieu of foreclosure. Any such Foreclosure
Transferee shall operate the Property in compliance with this Ground Lease or a New Ground
Lease between Landlord and such Foreclosure Transferee pursuant to Article 18 hereof.
"General Contractor" shall mean the general contractor to be hired by Tenant to engage
and supervise the subcontractors in the performance and completion of the construction of the
Project and all other on-site and off-site improvements required to be constructed in connection
with the Project, all in accordance with the Scope of Development, the Entitlement approved by
City, and the approved Development Plans. The General Contractor shall be reasonably
acceptable to and approved by the Executive Director, in her reasonable discretion; provided,
Portrait Homes, Inc., a California corporation, or its affiliate, is hereby pre -approved to act as the
General Contractor for the development of the Project. The parties acknowledge that the General
Contractor will not be performing actual construction work for any portion of the Project, but
instead shall hire Subcontractors (after competitive bidding pursuant to Section 302.7 of the
Affordable Housing Agreement) who shall be reasonably approved by the Executive Director in
accordance with the Affordable Housing Agreement.
"Governmental Requirements" shall mean all laws, ordinances, statutes, codes, rules,
regulations, orders, and decrees of the United States, the State of California, the County, the City,
or any other political subdivision in which the Property is located, and of any other political
subdivision, agency, or instrumentality exercising jurisdiction over Tenant or the Property, as may
be amended from time to time.
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"Gross Mismanagement" is defined in Section 8.3.11.3 hereof.
"Ground Lease" shall mean this Ground Lease (Avon Dakota Neighborhood - Phase II).
"Guarantor" shall mean The Related Companies, L.P., a New York limited partnership,
and which shall also be the "Guarantor" under the Completion Guaranty, Attachment No. 11 to
the Affordable Housing Agreement.
"HAL" shall mean the Housing Authorities Law, Health and Safety Code Section 34200,
et seq.
"Hazardous Material" or "Hazardous Materials" shall mean and include any substance,
material, or waste which is or becomes regulated by any local governmental authority, including
the County, the Orange County Health Care Agency, the Regional Water Quality Control Board,
the State of California, or the United States Government, including, but not limited to, any material
or substance which is: (i) defined as a "hazardous waste," "acutely hazardous waste," "restricted
hazardous waste," or "extremely hazardous waste" under Sections 25115, 25117 or 25122.7, or
listed pursuant to Section 25140, of the California Health and Safety Code, Division 20,
Chapter 6.5 (Hazardous Waste Control Law); (ii) defined as a "hazardous substance" under
Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter
Presley Tanner Hazardous Substance Account Act); (iii) defined as a "hazardous material,"
"hazardous substance," or "hazardous waste" under Section 25501 of the California Health and
Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and
Inventory); (iv) defined as a "hazardous substance" under Section 25281 of the California Health
and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances); (v)
petroleum; (vi) asbestos and/or asbestos containing materials; (vii) lead based paint or any lead
based or lead products; (viii) polychlorinated biphenyls, (ix) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317); (x) defined
as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); (xi) Methyl tertiary Butyl Ether;
(xii) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601, et seq. (42
U.S.C. Section 9601); (xiii) any other substance, whether in the form of a solid, liquid, gas or any
other form whatsoever, which by any Governmental Requirements either requires special
handling in its use, transportation, generation, collection, storage, handling, treatment or disposal,
or is defined as "hazardous" or harmful to the environment; and/or (xiv) lead based paint pursuant
to and defined in the Lead Based Paint Poisoning Prevention Act, Title X of the 1992 Housing
and Community Development Act, 42 U.S.C. § 4800, et seq., specifically §§ 4821-4846, and the
implementing regulations thereto. Notwithstanding the foregoing, "Hazardous Materials" shall not
include such products in quantities as are customarily used in the construction, maintenance,
rehabilitation, management, operation and residence of residential developments or associated
buildings and grounds, or typically used in residential activities in a manner typical of other
comparable residential developments, or substances commonly ingested by a significant
population living within the Project, including without limitation alcohol, aspirin, tobacco and
saccharine.
"HOME Regulations" shall mean the implementing regulations of the HOME Program set
forth at 24 CFR §92.1, et seq. as such regulations now exist (as amended by the 2013 HOME
Final Rule) and as they may hereafter be amended, to the extent applicable to the Project.
Developer covenants hereunder to comply with the HAL and all applicable HOME Regulations in
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the performance of this Agreement, whichever are more restrictive. In implementation of these
requirements, this Agreement, the Project, and all eligible contributions and expenditures
hereunder shall conform to the following:
(a) The housing developed hereunder does and shall qualify as affordable
housing under 24 CFR §92.252 because each Housing Unit shall be rented at an Affordable Rent;
and
(b) This Agreement serves as the written agreement that imposes and
enumerates (by meeting or exceeding) all of the affordability requirements from 24 CFR §92.252;
the property standards requirements of 24 CFR §92.251; and income determinations made in
accordance with 24 CFR §92.203.
"HOME Units" shall mean thirteen (13) of the Housing units as follows: (a) at 809 Dakota
Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units,
and (ii) two (2) of the two (2) bath Housing Units shall be High HOME Units; (b) at 868 Dakota
Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units,
and (ii) three (3) of the two (2) bath Housing Units shall be High HOME Units; and (c) at 606 Avon
Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units shall be a Low HOME Unit,
(ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall be High HOME Units, and
(iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be High HOME Units. The
designation of Housing Units as HOME Units shall terminate at the end of the HOME Compliance
Period, unless extended by agreement of the Landlord and the Tenant.
"Housing Asset Fund" is defined in the Recitals hereto.
"Housing Asset Fund Requirements" means the requirements of Health and Safety
Code Section 34176 and 34176.1 and all requirements of the California Community
Redevelopment Law, Health and Safety Code Section 33000, et seq., that apply to the use of
Housing Asset Funds by the Authority, as successor to the former Anaheim Redevelopment
Agency's housing functions.
"Housing Unit" and "Housing Units" shall mean individually and collectively the twenty-
one (21) individual apartment units at the Project to be constructed and operated by Tenant (or
its Affiliate(s)) on the Property as affordable rental housing throughout the entire Affordability
Period.
"HUD" shall mean the United States Department of Housing and Urban Development.
"Impositions" shall mean all taxes (including, without limitation, sales and use taxes);
assessments (including, without limitation, all assessments for public improvements or benefits
whether or not commenced or completed prior to the Commencement Date and whether or not
to be completed within the Term); water, sewer or other rents, rates and charges; excises; levies;
license fees; permit fees; inspection fees and other authorization fees and other charges; in each
case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every
character (including all interests and penalties thereon), which are attributable or applicable to
any portion of the Term and may be assessed, levied, confirmed or imposed on or in respect of,
or be a lien upon (a) the Property or the Improvements, or any part thereof, or any estate, right or
interest therein, (b) any occupancy, use or possession of or activity conducted on the Property or
the Improvements, or any part thereof, or (c) this Ground Lease. The term "Impositions" shall
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also include any and all increases in the foregoing, whether foreseen or unforeseen, ordinary or
extraordinary, including, without limitation, any increase in real property taxes resulting from a
sale of the Property by Landlord.
"Improvements" shall mean the apartment complex and any other improvements,
including the building fixtures thereon, now located on the Property, if any, or hereafter
constructed on the Property as part of the Project; all landscaping, fencing, walls, paving, curbing,
drainage facilities, lighting, parking areas, roadways and similar site improvements now located
or hereafter placed upon the Property.
"Indemnitees" has the meaning set forth in Section 16.3 of this Ground Lease.
"Institutional Lender" shall mean any one of the following institutions having assets or
deposits in the aggregate of not less than One Hundred Million Dollars ($100,000,000): a
California chartered bank; a bank created and operated under and pursuant to the laws of the
United States of America; an "incorporated admitted insurer" (as that term is used in
Section 1100.1 of the California Insurance Code); a "foreign (other state) bank" (as that term is
defined in Section 1700(1) of the California Financial Code); a federal savings and loan
association (Cal. Fin. Code Section 8600); a commercial finance lender (within the meaning of
Section 2600 et seq. of the California Financial Code); a "foreign (other nation) bank" provided it
is licensed to maintain an office in California, is licensed or otherwise authorized by another state
to maintain an agency or branch office in that state, or maintains a federal agency or federal
branch in any state (Section 1716 of the California Financial Code); a bank holding company or
subsidiary of a bank holding company which is not a bank (Section 3707 of the California Financial
Code); a trust company, savings and loan association, insurance company, investment banker,
college or university, pension or retirement fund or system, either governmental or private, or any
pension or retirement fund or system of which any of the foregoing shall be trustee, provided the
same be organized under the laws of the United States or of any state thereof; and a Real Estate
Investment Trust, as defined in Section 856 of the Internal Revenue Code of 1986, as amended,
provided such trust is listed on either the American Stock Exchange or the New York Stock
Exchange. "Institutional Lender" shall specifically include
"Insurance Requirements" shall mean all terms of any insurance policy covering or
applicable to the Property or the Improvements, or any part thereof, all requirements imposed by
the issuer of any such policy, and all orders, rules, regulations and other requirements of the
National Board of Fire Underwriters (or any other body exercising similar functions) applicable to
or affecting the Property or the Improvements, or any part thereof, or any use or condition of the
Property or the Improvements, or any part thereof.
"Investor Limited Partner" shall mean each Tax Credit investor limited partner of Tenant
for the Project, specifically:
"Legal Description" shall mean the description of the Property attached hereto as
Exhibit A and incorporated herein.
"Lender" shall mean each of the responsible financial lending institutions or persons or
entities approved by Landlord in its reasonable discretion, which provide the Primary Loan,
including acquisition loan(s), construction loan(s) or permanent loan(s) for the construction,
development, and/or operation of the Project, in accordance with the Approved Financing.
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"Low Income," "Lower Income," "Low Income Households," or "Lower Income
Households" shall mean and include both: (i) lower income households as defined in the Tax
Credit Rules, and (ii) 60% AMI Low Income Households. Lower Income Households include Very
Low Income Households and Extremely Low Income Households, as defined in the Tax Credit
Rules.
"Maintenance Standards" shall mean those standards set forth in Section 10.1 hereof.
"Marketing and Tenant Selection Plan" shall mean the marketing and subtenant
selection plan to be prepared for the Project in accordance with Section 8.3.7.
"Material Adverse Change" means any event the occurrence of which is reasonably likely
to have a material adverse effect on Tenant's ability to fulfill its obligations under any Transaction
Document, including without limitation:
(a) a voluntary or involuntary bankruptcy of Tenant (which is not dismissed
within ninety (90) days of institution);
(b) a court order placing Tenant under receivership;
(c) a sale of all or substantially all of the assets held by Tenant;
(d) any violation of Tenant or other failure of Tenant to comply at all times with
any applicable law, statute, ordinance, code, rule, regulation, judgment, order, ruling, condition or
other requirement of a statutory, regulatory, administrative, judicial or quasi-judicial nature or any
other legal or governmental requirement of whatever kind or nature related to the Project, which
violation is likely to have a material adverse effect on the ability of Tenant to perform its duties
and obligations under any Transaction Document; and/or
(e) Tenant incurs one or more liabilities, contingent or otherwise, or pending or
threatened litigation or any asserted or unasserted claim exists against Tenant with respect to the
Project, which would have a material adverse effect on its ability to perform its duties and
obligations under any Transaction Document.
"Memorandum of Ground Lease" refers to the Memorandum of Ground Lease to be
recorded against the Property in the Official Records as described in Section 1.4, in the form
attached hereto as Exhibit D and incorporated herein.
"Mortgage" has the meaning set forth in Section 18.1 of this Ground Lease.
"Mortgagee" has the meaning set forth in Section 18.1 of this Ground Lease.
"Mortgagee's Notice" has the meaning set forth in Section 18.2(a) of this Ground Lease.
"New Ground Lease" is defined in Section 18.10(c)(8).
"Notice of Intended Taking" shall mean any notice or notification on which a reasonably
prudent person would rely and which said person would interpret as expressing an existing
intention of Taking as distinguished from a mere preliminary inquiry or proposal. It includes,
without limitation, the service of a condemnation summons and complaint on a party to this
Ground Lease. The notice is considered to have been received when a party to this Ground
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Lease receives from the condemning agency or entity a notice of intent to take, in writing,
containing a description or map of the taking which reasonably defines the extent of the taking.
"Official Records" shall mean the Official Records of the County Recorder of Orange
County, California.
"Operating Budget" and "Annual Budget" shall mean the annual operating budget for
the Project that sets forth the projected Operating Expenses for the upcoming year that is subject
to and shall be submitted for review and approval to and reviewed and approved by Executive
Director, in her reasonable discretion, each year during the Affordability Period as set forth in
Section 8.8 hereof. The Operating Budget shall be in substantially the form attached to the
Affordable Housing Agreement as Attachment No. 17 and incorporated herein, or such other form
as may be required by Landlord from time to time.
"Operating Expenses" shall mean actual, reasonable and customary (for comparable
high quality rental housing developments in Orange County) costs, fees and expenses directly
incurred, paid, and attributable to the operation, maintenance and management of the Project in
a calendar year, including: painting, cleaning, repairs, alterations, landscaping, utilities, refuse
removal, certificates, permits and licenses, sewer charges, real and personal property taxes,
assessments, insurance, security, advertising and promotion, janitorial services, cleaning and
building supplies, purchase, repair, servicing and installation of appliances, equipment, fixtures
and furnishings, fees and expenses of property management, fees and expenses of accountants,
attorneys and other professionals, the cost of social services and other housing supportive
services provided at the Project consistent with Tenant's approved Application(s) to TCAC for the
Property, repayment of any completion or operating loans made to Tenant, and other actual,
reasonable and customary operating costs and capital costs which are directly incurred and paid
by Tenant, but which are not paid from or eligible to be paid from the Capital Replacement
Reserve or any other reserve accounts for the Project. To the extent the Operating Expenses for
the Project deviate from the approved annual Operating Budget for a given year by more than ten
percent (10%) in aggregate for that year, the Executive Director shall reasonably review and
approve to confirm such Operating Expenses are reasonable and actually incurred; provided, no
approval shall be required for emergency expenditures reasonably necessary or appropriate to
preserve life, limb, or property.
Operating Expenses shall exclude all of the following: (i) salaries of employees of Tenant
or Tenant's general overhead expenses, or expenses, costs and fees paid to an Affiliate of
Tenant, to the extent any of the foregoing exceed the expenses, costs or fees that would be
payable in a bona fide arms' length transaction between unrelated parties in the Orange County
area for the same work or services; (ii) any amounts paid directly by a subtenant of the Project to
a third party in connection with expenses which, if incurred by Tenant, would be Operating
Expenses; (iii) optional or elective payments with respect to the Primary Loan (unless made with
the consent of the Executive Director in his/her reasonable discretion); (iv) any payments with
respect to any Project -related loan or financing other than the Primary Loan (unless made with
the consent of the Executive Director in her reasonable discretion or otherwise in accordance with
this Ground Lease); (v) expenses, expenditures, and charges of any nature whatsoever arising
or incurred by Tenant prior to completion of the Project with respect to the development,
maintenance and upkeep of the Project, or any portion thereof, including, without limitation, all
costs and capitalized expenses incurred by Tenant in connection with the lease of the Property
from Landlord (e.g. not leasing to low income subtenants), all predevelopment and
preconstruction activities conducted by Tenant in connection with the Project, including, without
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limitation, the preparation of all plans and the performance of any tests, studies, investigations or
other work, and the construction of the Project and any on site or off site work in connection
therewith; (vi) depreciation, amortization, and accrued principal and interest expense on deferred
payment debt; and (vii) any Partnership Related Fees to the extent they are not paid as capitalized
expenses.
"Operating Reserve" shall mean the Operating Reserve for the Project, which shall be
funded by an installment of Tax Credit equity in a target amount equal to three (3) months of
(i) Debt Service on the permanent Primary Loan and (ii) Operating Expenses pursuant to an
approved Annual Budget for the Project ("Target Amount"); provided, a larger Operating Reserve
may be maintained if required by the approved Lender or Tax Credit Investor for the Project.
"Partial Taking" shall mean any taking of the fee title of the Property and/or the
Improvements that is not either a Total, Substantial or Temporary Taking.
"Partnership Agreement" shall mean the agreement(s) which set(s) forth the terms of
Tenant's (or its approved Affiliate(s)) limited partnership, as such agreement(s) may be amended
from time to time, so long as consistent with the requirements of this Ground Lease.
"Partnership Related Fees" shall mean the following fees of Developer (or partners
thereof pursuant to the Partnership Agreement) which are actually paid in the following order of
priority:
(i) a limited partner asset management fee payable to the Investor Limited Partner of
Developer in the amount of $5,000 (increased annually by the greater of CPI or 3%); and
(ii) a general partner(s) (administrative and/or managing partner(s)) partnership
management fee payable to the general partner(s) of Developer in the amount of $10,000
(increased annually by the greater of CPI or 3%).
In no event shall the fees for Phase II described in (i) and (ii) above together cumulatively
exceed Fifteen Thousand Dollars ($15,000), increased annually by CPI (but in no event by more
than CPI). In the event insufficient Annual Project Revenues exist to provide for payment of all
or part of the specific Partnership Related Fees listed above, no interest shall accrue on the
unpaid portions of such Partnership Related Fees, but the unpaid balance will be added to the
Partnership Related Fees due in the next following years.
"Portable Voucher" shall mean Section 8 tenant -based vouchers, certificates of family
participation under 24 CFR part 882 (Rental Certificate Program), rental vouchers under 24 CFR
part 887 (Rental Voucher Program), and comparable documents evidencing participation in a
program pursuant to the HOME Investment Partnership Act, 42 U.S.C. §12701, et seq. and the
implementing regulations located at 24 CFR part 92, as such now exist and as may hereafter be
amended, or other tenant -based rental assistance programs.
"Potential Default" shall mean any condition or event which, with the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
"Primary Loan" or "Primary Loans" shall mean the First Mortgage -Construction
Financing and/or the First Mortgage -Permanent Financing, as the context dictates, or any
refinancing of either of them if approved by Landlord or otherwise effected in accordance with this
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Ground Lease, obtained by Tenant for the Project, from one or more Institutional Lender(s) other
than an Affiliate of Tenant, as approved by Executive Director, which loan(s) shall be senior to
the Authority Deed of Trust but subordinate to Landlord's fee interest in the Property, the
Affordable Housing Covenants and the Entitlement obtained by Tenant.
"Project" shall mean the construction or rehabilitation and development at the Property of
twenty-one (21) Housing Units) in two-story buildings.
"Property" shall mean approximately real property generally located at 809 South Dakota
Street, 824 South Dakota Street, 862 South Dakota Street, 868 South Dakota Street and 606 E.
Avon Place in the City of Anaheim, as more particularly described in the Legal Description.
"Property Management Plan" shall mean the plan for the management of the Project to
be submitted pursuant to Section 8.3.11.2 hereof.
"Property Manager" shall mean the individual property manager or property management
company contracted by and with Tenant, after obtaining Executive Director's written approval of
such individual or company, to perform the operation, maintenance, and management of the
Project. Related Management Company, L.P. is approved by the Authority as the Property
Manager
"Refinancing Net Proceeds" shall mean the proceeds of any approved refinancing of any
of the Primary Loans or other approved financing secured by the Property, net of: (i) the amount
of the financing which is satisfied out of such proceeds; (ii) reasonable and customary costs and
expenses incurred in connection with the refinancing; (iii) the balance, if any, of the Deferred
Developer Fee; (iv) the balance of loans to the Project made by the limited partners of Tenant for
development or operating deficits, amounts expended to maintain compliance with the Tax Credit
Regulatory Agreement, or contributions for capital expenditures in excess of available Project
revenues, if any, including interest as provided in the Partnership Agreement; (v) the balance, if
any, of operating loans or development loans made by the general partners of Tenant to the
Project, including interest as provided in the Partnership Agreement; (vi) the return of capital
contributions, if any, to the Project made by the general partners of Tenant that were used to pay
the Deferred Developer Fee; (vii) payment of unpaid Tax Credit adjustment amounts or
reimbursement of Tax Credit adjustment amounts paid by the administrative and/or managing
general partners and/or the guarantors to the Project pursuant to the approved Partnership
Agreement, if any; and (viii) the payment to the administrative general partner of Tenant of a
refinancing fee, which fee is and shall be subject to the approval of the Executive Director at the
time of each refinancing and which shall not exceed six percent (6%) of the amount of the
approved refinancing.
"Release of Construction Covenants" shall mean the Release of Construction
Covenants in substantially the form attached to the Affordable Housing Agreement as Attachment
No. 14, which shall be recorded against the Property upon compliance with the requirements set
forth in Section 305 of the Affordable Housing Agreement.
"Rent" shall mean the rent payable pursuant to Section 4 of this Ground Lease, including
annual rent payments provided for in Section 4.1, Additional Rent provided for in Section 4.1.1,
and adjusted Rent as provided for in Sections 4.1.2 and 4.1.3.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 14 of 86
"Remaining Residual Receipts" is defined in the definition of "Residual Receipts" set
forth below.
"Reserve Deposits" shall mean any payments to the Operating Reserve account for the
Project pursuant to Section 8.8 hereof and payments to the Capital Replacement Reserve
account for the Project pursuant to Section 8.9 hereof.
"Resident Lease" and "Resident Leases" are defined in Section 19.1.
"Residual Receipts" shall mean Annual Project Revenue for the Project less the sum of:
(i) Operating Expenses, including payment of Rent and Additional Rent under
this Ground Lease;
(ii) Debt Service;
(iii) Reserve Deposits in accordance with the requirements of the Investor
Limited Partner and the Partnership Agreement, and the Lender of the Primary Loan in its
transaction documents, but in no event less than as required by this Agreement and this Ground
Lease;
(iv) Partnership Related Fees (including accrued but unpaid Partnership
Related Fees from the prior year or prior years, as applicable);
(v) payment of unpaid Tax Credit adjustment amounts or reimbursement of
Tax Credit adjustment amounts paid by the administrative and/or managing general partners
and/or the guarantors to Developer pursuant to the Partnership Agreement, if any;
(vi) repayment of loans, if any, made by the limited partner(s) of Tenant,
including interest at the interest rate provided in the Partnership Agreement, for development
and/or operating expense deficits or other loans directly and reasonably related to Phase II and
operation thereof as provided hereunder;
(A) provided, that, the propriety of any such loans to the Project, if any,
made by the limited partner(s) of Tenant pursuant to the Partnership Agreement (and during the
term thereof) shall be subject to the reasonable prior consent of and reasonably verified by the
Executive Director; and
(B) provided, further, that the propriety of any such loans made by the
limited partner(s) of Tenant shall be deemed to be reasonable and may be made without the prior
consent of the Executive Director if such loans are made to pay any expense or obligation of
Tenant relating to the physical condition and/or operation of the Project and for which Annual
Project Revenue, reserves or other funds of Tenant are not otherwise available (but Tenant shall
submit evidence and documentation to the Executive Director showing that such loans are made
to pay expenses relating to the physical condition and/or operation of the Project and that Annual
Project Revenue, reserves or other funds of Tenant are not available to pay such expenses);
(vii) Property Management Fee for the Project which remains unpaid after
payment of Operating Expenses, if any;
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FORM OF GROUND LEASE
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(viii) Deferred Developer Fee for the Project which remains unpaid, if any,
including interest at the Applicable Federal Rate;
(ix) repayment of outstanding development and operating loans or credit
adjustor advances or development fee advances, if any, made by the administrative and/or
managing general partners and/or the Guarantor (or any other guarantor required by the Investor
Limited Partner or the Primary Lender) to Tenant, with all such loans to be repaid without interest;
provided, that, as a condition to use of any Annual Project Revenues to repay such loan(s)
pursuant to this subparagraph (ix), Tenant shall submit evidence and documentation to the
Executive Director showing that such loans are required to be made pursuant to the terms of the
Partnership Agreement; and
(x) capital contributions or loans to Tenant, if any, made by the general
partners of Tenant that were used to pay the Developer Fee.
Residual Receipts shall be calculated on a cash basis. Tenant's annual loan payments
on the Authority Subordinate Loan and adjusted Rent pursuant to Section 4.1.2 hereof shall be
paid by Tenant to Authority under the Authority Subordinate Loan and shall include:
Eighty-five percent (85%) of the Residual Receipts received from operation of the Project
until payment in full of the Authority Subordinate Loan, and thereafter as Rent hereunder pursuant
to Section 4.1.2. The remaining fifteen percent (15%) of the Residual Receipts received from the
operation of the Project shall be retained by Tenant or used by Tenant to pay any fees or charges
not specifically deducted from Annual Project Revenues above.
In the event any calculation of Annual Project Revenue less subsections (i) through
(xi) inclusive above results in a negative number, then Residual Receipts shall be zero ($0) for
that year.
In addition, none of the fees, costs, expenses, or items described above in calculation of
Residual Receipts shall include any duplicate entry/item, or double accounting for a cost item.
For example, an audit fee incurred by Tenant (or any partner of Tenant or an Affiliate) and
deducted or included above in category/subsection (i) Operating Expenses shall not also be
deducted or included in category/subsection (v) Partnership Related Fees in the calculation of
Residual Receipts.
"Residual Receipts Report" shall mean the report in substantially the form attached to
the Affordable Housing Agreement as Attachment No. 18, which shall be completed by Tenant
and submitted to Landlord annually for the Project in accordance with Section 4.3.1. It is
understood the Residual Receipts Report is subject to all of the terms and conditions set forth in
the Affordable Housing Agreement. The summary of the items in the Residual Receipts Report
is not intended to supersede or modify the more complete description in the Affordable Housing
Agreement; in the event of any inconsistency between the Residual Receipts Report and the
Affordable Housing Agreement, the Affordable Housing Agreement shall govern.
"RMC" shall mean Related Management Company, L.P., which has been pre -approved
as the Property Manager for the Project.
"Scope of Development" shall mean the Scope of Development attached to the
Affordable Housing Agreement as Attachment No. 6.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 16 of 86
"Section 3" shall mean and refer to Section 3 of the Housing and Urban Development Act
of 1968, 12 U.S.C. §1701 u, as amended. Landlord has prepared a Section 3 "checklist" and other
forms related to Section 3 compliance; and as provided by Landlord to Tenant, its General
Contractor, Subcontractors (both as defined in the Affordable Housing Agreement), or other
contractor(s) or subcontractor(s), as applicable, such forms shall be utilized in all contracts and
subcontracts to which Section 3 applies. Tenant shall be solely responsible to determine the
extent to which Section 3 applies to the Project.
"Section 3 Clause" shall mean the language, set forth below, which is required to be
included in each and every Construction Contact entered into by Tenant, the General Contractor,
each Subcontractor and/or any other contractor(s) or subcontractor(s), as applicable, for the
development of the Project. For purposes of this Section 3 Clause and compliance therewith,
whenever the word "contractor" is used it shall mean and include, as applicable, the Tenant,
General Contractor, any and all Subcontractors, and any other contractor(s) and subcontractor(s)
performing work on the Project.
Tenant hereby acknowledges and agrees to take all responsibility for compliance with all
Section 3 Clause federal requirements and further acknowledges and agrees that compliance
with all Section 3 Clause requirements by Tenant, the General Contractor, all Subcontractors,
and/or other contractor(s), subcontractor(s), and other agents is the primary obligation of Tenant.
Tenant shall provide or cause to be provided to its General Contractor and each Subcontractor,
and each of its other contractor(s), subcontractor(s) and agents a checklist for compliance with
the Section 3 Clause federal requirements, to obtain from the General Contractor, each
Subcontractor, and other contractor(s), subcontractor(s), and agents all applicable items,
documents, and other evidence of compliance with the items, actions, and other provisions within
the checklist, and to submit all such completed Section 3 Clause documentation and proof of
compliance to the Executive Director.
The particular text to be utilized in any and all contracts of the General Contractor or any
Subcontractor doing work covered by Section 3 shall be in substantially the form of the following
Section 3 Clause, as reasonably determined by Landlord, or as directed by HUD or its
representative, and shall be executed by the applicable contractor under penalty of perjury:
" (i) The work to be performed under this contract is subject to the requirements
of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C.
1701u ("Section 3"). The purpose of Section 3 is to ensure that employment and other
economic opportunities generated by HUD assistance or HUD assisted projects covered
by Section 3, shall, to the greatest extent feasible, be directed to low and very low income
persons (inclusive of Very Low Income Persons, Very Low Income Households, and Very
Low Income Tenants served by the Project), particularly persons who are recipients of
HUD assistance for housing.
"(ii) The parties to this contract agree to comply with HUD's regulations in 24
CFR Part 135, which implement Section 3. As evidenced by their execution of this
contract, the parties to this contract certify that they are under no contractual or other
impediment that would prevent them from complying with the Part 135 regulations.
"(iii) The contractor agrees to send to each labor organization or representative
of workers with which the contractor has a collective bargaining agreement or other
understanding, if any, a notice advising the labor organization or workers' representative
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FORM OF GROUND LEASE
Page 17 of 86
of the contractor's commitments under this Section 3 clause, and will post copies of notices
in conspicuous places at the work site where both employees and applicants for training
and employment positions can see the notice. The notice shall describe the Section 3
preference, shall set forth minimum number of job titles subject to hire, availability of
apprenticeship and training positions, the qualifications for each; and the name and
location of person(s) taking applications for each of the positions; and the anticipated date
the work shall begin.
"(iv) The contractor agrees to include this Section 3 clause in every subcontract
subject to compliance with regulations in 24 CFR Part 135, and agrees to take appropriate
action, as provided in an applicable provision of the subcontract or in this Section 3 clause,
upon a finding that the subcontractor is in violation of the regulations in 24 CFR Part 135.
The contractor will not subcontract with any subcontractor where the contractor has notice
or knowledge that the subcontractor has been found in violation of the regulations in 24
CFR Part 135.
"(v) The contractor will certify that any vacant employment positions, including
training positions, that are filled (a) after the contractor is selected but before the contract
is executed, and (b) with persons other than those to whom the regulations of 24 CFR
Part 135 require employment opportunities to be directed, were not filled to circumvent the
contractor's obligations under 24 CFR Part 135.
"(vi) Noncompliance with HUD's regulations in 24 CFR Part 135 may result in
sanctions, termination of this contract for default, and debarment or suspension from
future HUD assisted contracts.
"(vii) With respect to work performed in connection with Section 3 covered Indian
Housing assistance, section 7(b) of the Indian Self Determination and Education
Assistance Act (25 U.S.C. 450e) also applies to the work to be performed under this
contract. Section 7(b) requires that to the greatest extent feasible, (a) preference and
opportunities for training and employment shall be given to Indians, and (b) preference in
the award of contracts and subcontracts shall be given to Indian organizations and Indian
owned Economic Enterprises. Parties to this contract that are subject to the provisions of
Section 3 and section 7(b) agree to comply with Section 3 to the maximum extent feasible,
but not in derogation of compliance with section 7(b)."
After the foregoing Section 3 Clause, Tenant shall add the signature block of the General
Contractor, Subcontractor, or other contractor(s) and subcontractor(s), as applicable, and shall
add the following text immediately above the signature block: "The contractor/provider by this his
signature affixed hereto declares under penalty of perjury that contractor has read the
requirements of this Section 3 Clause and accepts all its requirements contained therein for all of
his operations related to this contract."
"Substantial Taking" shall mean the taking of so much of the Property and/or the
Improvements that the portion of the Property and/or the Improvements not taken cannot be
repaired or reconstructed, taking into consideration the amount of the award available for repair
or reconstruction, so as to constitute a complete, rentable structure, capable of producing a
proportionately fair and reasonable net annual income after payment of all Operating Expenses,
and all other charges payable under this Ground Lease, and after performance of all covenants
and conditions required by Tenant by law and under this Ground Lease.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 18 of 86
"Taking" shall mean a taking or damaging, including severance damage, by eminent
domain or by inverse condemnation or for any public or quasi -public use under any statute. The
taking may occur as a result of a transfer pursuant to the recording of a final order in
condemnation, a voluntary transfer or conveyance to the taking authority under threat of
condemnation, or a transfer while condemnation proceedings are pending. Unless otherwise
provided, the taking shall be deemed to occur as of the earlier of (a) the date actual physical
possession is taken by the condemnor, or (b) the date on which the right to compensation and
damages accrues under the law applicable to the Property and/or the Improvements. "Taking,"
as used in this Ground Lease does not include the voluntary dedication of any portion of the
Property necessary to obtain building permits or to comply with any other applicable governmental
rule, regulation or statute; nor does it include the enactment of any law, ordinance or regulation
which may affect the use or value of the Property but which does not involve an actual taking of
any portion thereof. Eminent domain actions filed by Landlord against former owners of portions
of the Property and pending as of the Commencement Date shall not be deemed, construed or
interpreted as a Taking under this Ground Lease.
"Target Amount" shall have the meaning set forth in the definition of "Operating Reserve.
"Tax Credit Compliance Period" shall mean the 15 -year compliance period described in
Section 42(1)(1) of the Internal Revenue Code of 1986, as amended.
"Tax Credit Regulatory Agreement" shall mean the regulatory agreement which may be
required to be recorded against the Property with respect to the issuance of Tax Credits for the
Project. The Tax Credit Regulatory Agreement is and shall remain subordinate and junior to this
Ground Lease, and the City Covenants.
"Tax Credit Rules" shall mean Section 42 of the Internal Revenue Code and/or California
Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California
Health and Safety Code Section 50199, et seq., as applicable, as the foregoing may be amended
from time to time, and the rules and regulations implementing the foregoing, including Title 4 Cal.
Code Regs. Section 10300, et seq.
"Tax Credits" shall mean federal 9% or 4% Low Income Housing Tax Credits granted
pursuant to Section 42 of the Internal Revenue Code and/or California Revenue and Taxation
Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and Safety Code
Section 50199, et seq., as applicable.
"TCAC" shall mean the California Tax Credit Allocation Committee, the allocating agency
for Tax Credits in California.
"Temporary Taking" shall mean a taking of all or any part of the Property and/or the
Improvements for a term certain which term is specified at the time of taking. Temporary Taking
does not include a taking which is to last for an indefinite period or a taking which will terminate
only upon the happening of a specified event unless it can be determined at the time of the taking
substantially when such event will occur. If a taking for an indefinite term should take place, it
shall be treated as a Total, Substantial or Partial Taking in accordance with the definitions set
forth herein.
"Tenant" shall mean Avon Dakota Housing Partners ll, L.P., a California limited
partnership, and its permitted successors and assigns, as Tenant under this Ground Lease.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 19 of 86
"Term" has the meaning set forth in Article 3 of this Ground Lease.
"Total Taking" shall mean the taking of the fee title to all of the Property.
"Transaction Documents" shall mean this Ground Lease, the Affordable Housing
Agreement the Authority Promissory Note, and the Authority Deed of Trust, to the extent such
documents continue to encumber the Project.
"Transfer Net Proceeds" shall mean the proceeds of any transfer, in whole or in part, of
Tenant's leasehold interest in the Property or any sale, assignment, sublease, or other transfer,
in whole or in part of Tenant's interests in the Property, net of: (i) the amount of the financing
which is satisfied out of such proceeds; (ii) reasonable and customary costs and expenses
incurred in connection with the transfer; (iii) the balance, if any, of the Deferred Developer Fee;
(iv) the balance of loans to the Project made by the limited partners of Tenant for development or
operating deficits, amounts expended to maintain compliance with the Tax Credit Regulatory
Agreement, or contributions for capital expenditures in excess of available Project revenues, if
any, including interest as provided in the Partnership Agreement; (v) the balance, if any, of
operating loans or development loans made by the general partners of Tenant to the Project,
including interest as provided in the Partnership Agreement; (vi) the return of capital contributions,
if any, to the Project made by the general partners of Tenant that were used to pay the Deferred
Developer Fee; (vii) payment of unpaid Tax Credit adjustment amounts or reimbursement of Tax
Credit adjustment amounts paid by the administrative and/or managing general partners and/or
the guarantors to the Project pursuant to the approved Partnership Agreement, if any; and
(viii) the payment to the administrative general partner of Tenant of a fee, which fee is and shall
be subject to the approval of the Executive Director at the time of each refinancing and which
shall not exceed six percent (6%) of the amount of the approved refinancing.
"Very Low Income" and/or "Very Low Income Households" shall mean and include:
(i) very low income households as defined in the Tax Credit Rules; (ii) 30% AMI Very Low Income
Households; (iii) 40% AMI Very Low Income Households; and (iv) 50% AMI Very Low Income
Households. Very Low Income Households include Extremely Low Income Households, as
defined in the Tax Credit Rules.
"30% AMI Very Low Income Households" shall mean those households earning not
greater than thirty percent (30%) of Orange County Area Median Income, adjusted for household
size, which is set forth annually by regulation of TCAC.
"40% AMI Very Low Income Households" shall mean those households earning not
greater than forty percent (40%) of Orange County Area Median Income, adjusted for household
size, which is set forth annually by regulation of TCAC.
"50% AMI Very Low Income Households" shall mean those households earning not
greater than fifty percent (50%) of Orange County Area Median Income, adjusted for household
size, which is set forth annually by regulation of TCAC.
"60% AMI Low Income Households" shall mean those households earning not greater
than sixty percent (60%) of Orange County Area Median Income, adjusted for household size,
which is set forth annually by regulation of TCAC.
"2013 HOME Final Rule" is defined in the Recitals hereto.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 20 of 86
ARTICLE 3
TERM
The term of this Ground Lease ("Term") shall commence on the date of recordation of the
Memorandum of Ground Lease in the Official Records ("Commencement Date"), and shall
continue thereafter until the earlier of (i) the fifty-seventh (57th) anniversary of the recordation of
the Release of Construction Covenants for the Project against the Property in the Official Records,
in accordance with the Affordable Housing Agreement; or (ii) December 31, 2078.
ARTICLE 4
RENT
4.1. Rent. Prior to or concurrently with the Commencement Date, Tenant has paid to
Landlord an amount equal to One Dollar ($1.00), thereafter, on each anniversary of the
Commencement Date which occurs during the Term (together, the "Base Rent").
4.1.1 Additional Rent. In addition to the Base Rent required by Section 4.1
above, Tenant shall also pay to Landlord as "Additional Rent" under this Ground Lease any
amounts required to be paid by Tenant to Landlord pursuant to Section 20.2. The Base Rent and
the Additional Rent together constitute the "Rent"; provided that the Rent shall be subject to
adjustment as provided in Section 4.1.2.
4.1.2 Rent Adjustment upon Full Payment of Authority Promissory Note
or 20th Anniversary of Commencement Date. In the event of and upon the later to occur of
(i) full payment of the Authority Promissory Note or (ii) the twentieth (20th) anniversary of the
Commencement Date for this Ground Lease, the annual Rent due under this Ground Lease shall
be reset based on the fair market value of the remaining leasehold interest under this Ground
Lease (taking into account the restrictions contained in this Ground Lease and recorded against
the Project, including the Tax Credit Regulatory Agreement, hereinafter referred to as the
"Recorded Restrictions," to the extent the Recorded Restrictions remain applicable and
enforceable) as independently appraised and at an annual rental based on a percentage of such
appraised value as determined by a qualified, independent appraiser (conducted by a certified
appraiser reasonably acceptable to Executive Director and Tenant), who shall take into account
the cumulative amounts which have been actually paid to Landlord as Rent under this Ground
Lease, including, without limitation, taking into consideration the remaining balance, if any, on the
Authority Subordinate Loan as of the time of the appraisal, and including a reasonable return on
investment of between eight percent (8%) and ten percent (10%). Such independent appraisal(s)
shall determine the fair market value of the Project, at its highest and best use (but taking the
Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable
and enforceable) at the time of such appraisal but shall also take into consideration an overall fair
market ground lease rent over the 57 -year term of this Ground Lease with an objective that
Landlord receive over such 57 -year term cumulatively a fair market value ground lease rent
(taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain
applicable and enforceable) under this Ground Lease. In such regard, if the Rent paid to date
has underpaid, cumulatively, toward achieving a fair market ground lease rent (taking the
Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable
and enforceable) over the 57 -year Term of this Ground Lease, then the appraiser shall take that
fact into consideration when determining an adjusted fair market Rent for the remainder of the
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FORM OF GROUND LEASE
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Term. Likewise, if the Rent paid to date has been overpaid, cumulatively, toward achieving a fair
market Ground Lease rent (taking the Recorded Restrictions into account, to the extent the
Recorded Restrictions remain applicable and enforceable) over the 57 -year Term, then the
appraiser shall take that fact into consideration when determining the adjusted Rent for the
remainder of the Term.
In the event the Rent under this Ground Lease is reset pursuant to the foregoing
paragraph, this adjusted annual Rent for the remaining Term of this Ground Lease, as determined
by the independent appraiser as described above, shall be used to adjust the Rent due and
required to be paid annually under this Ground Lease to the lesser of (1) such appraised rent for
Phase II (to be increased by 20% every five (5) years to account for inflation), or (2) eighty-five
percent (85%) of the Remaining Residual Receipts for the Project. In any year, if the appraised
value rent (to be increased by 20% every five (5) years to account for inflation) exceeds eighty-five
percent (85%) of the Remaining Residual Receipts for the Project, the amount by which such
appraised value rent (increased by 20% every five (5) years to account for inflation) exceeds
eighty-five percent (85%) of the Remaining Residual Receipts for the Project. It to be paid
pursuant to this Section 4.1.2 in a given year shall accrue and be carried over and added to the
amount of the Rent to be paid in later years for Phase II by Developer.
4.1.3 No Rent Post -Foreclosure or Affirmation of Ground Lease in
Bankruptcy. During the term of the Primary Loan and for each subsequent Approved Financing,
in the event of and upon (i) completion of judicial or nonjudicial foreclosure proceedings for any
authorized Primary Loan or any conveyance in lieu of foreclosure or (ii) execution of a New
Ground Lease, the annual Rent due under this Ground Lease (or under a New Ground Lease)
shall be reset to One Dollar ($1.00) per year for the remainder of the Term hereof.
4.2. Payment of Rent. All Rent and Additional Rent (referred to collectively as "Rent")
that becomes due and payable pursuant to this Ground Lease shall be paid to Landlord at the
address listed in Section 25.1 or such other place as Landlord may from time to time designate
by written notice to Tenant without notice or demand, and without setoff, counterclaim, abatement,
deferment, suspension or deduction. Except as expressly provided herein or in the Affordable
Housing Agreement, under no circumstances or conditions, whether now existing or hereafter
arising, or whether beyond the present contemplation of the parties, shall Landlord be expected
or required to make any payment of any kind whatsoever or to perform any act or obligation
whatsoever or be under any obligation or liability hereunder or with respect to the Property.
4.3. Reporting Requirements; Audit.
4.3.1 Residual Receipts Report. Tenant shall annually, on or before one
hundred twenty (120) days after the end of Tenant's fiscal year, commencing in the first year after
the issuance of the first certificate of occupancy for the Project issued by City's building official,
submit to Landlord a Residual Receipts Report for the Project, which shall provide the basis for
Tenant's payment of Residual Receipts to Landlord. In the event of an occurrence described in
Section 4.1.2 which triggers Tenant's obligation to pay an adjusted Rent pursuant to that Section,
Tenant shall remain obligated to submit a Residual Receipts Report annually to Landlord in
accordance with this Section and the requirements of the Affordable Housing Agreement to
enable Landlord to determine the appropriate amount of adjusted Rent to be paid to Landlord
pursuant to Section 4.1.2.
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FORM OF GROUND LEASE
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4.3.2 Annual Financial Statement. Tenant shall also annually submit to
Landlord, on or before one hundred twenty (120) days after the end of Tenant's fiscal year,
commencing in the first year after the issuance of a certificate of substantial completion for the
Project, Annual Financial Statements as to the Project that have been reviewed by an
independent certified public accountant, together with an expressed written opinion of the certified
public accountant that such Annual Financial Statement presents the financial position, results of
operations, and cash flows fairly and in accordance with GAAP, as to the Project. Each Annual
Financial Statement submitted by Tenant shall include a statement and certification (and
supporting documentation) of the total amount of the Developer Fee and Deferred Developer Fee
(if any) for the Project, along with the cumulative amount thereof paid to date and the amount
thereof paid within the applicable reporting year as reported and certified in the Annual Financial
Statement for the Project. In the event of an occurrence described in Section 4.1.2 which triggers
Tenant's obligation to pay an adjusted Annual Rent pursuant to that Section, Tenant shall remain
obligated to submit Annual Financial Statements to Landlord in accordance with this Section and
the requirements of the Affordable Housing Agreement to enable Landlord to determine the
appropriate amount of adjusted Annual Rent to be paid to Landlord pursuant to Section 4.1.2 and
to enable Landlord to verify that Reserve Deposits are made and Operating Expenses are
incurred in accordance with this Ground Lease and the approved Operating Budget. Tenant shall
also prepare and provide to Landlord, concurrently with delivery of each Annual Financial
Statement, a reconciliation from the accrual -based Annual Financial Statement to the cash -based
Residual Receipts calculation.
(a) Annual Monitoring Fee. Concurrently with the delivery of each
Annual Financial Statement and Residual Receipts Report to Landlord, Tenant shall pay an
Annual Monitoring Fee to Landlord in the amount of One Thousand Fifty Dollars ($1,050),
increased annually by 3%, which shall compensate Landlord for its costs incurred to monitor
Developer's compliance with this Ground Lease.
4.3.3 Right to Audit. Tenant shall keep full and accurate books of account,
records and other pertinent data with respect to operations of the Project. Such books of account,
records, and other pertinent data shall be kept for a period of three (3) years after the end of each
Tenant's fiscal year, and shall be made available for review or audit by the Landlord or its
designees with a three (3) day written notification to Tenant. If any audit results in a restatement
of Residual Receipts upward for any year, then Tenant shall deliver the additional required
payment resulting from said restatement to Landlord within thirty (30) days of receiving notice of
the results of the audit. If any such audit report results in Tenant restating Residual Receipts
downward for any year, the Tenant shall carry forward the overpayment made to the Landlord as
a credit against payments under the Authority Subordinate Loan in subsequent years. In the
event of an underpayment of greater than three percent (3%) of the total amount due to Landlord
in a given year, Tenant shall reimburse Landlord for the amount of the audit fee paid to the third
party auditor for the applicable audit.
(a) Concurrent with Tenant's submission of an Annual Financial
Statement in any year, Tenant shall submit to Landlord any adjusted Rent payable out of Residual
Receipts pursuant to Section 4.1.2 of this Ground Lease, in an amount consistent with such
Annual Financial Statement. If Tenant fails to pay such adjusted Rent within ten (10) calendar
days of delivery of such Annual Financial Statement to Landlord, Tenant shall pay to Landlord a
late charge of five percent (5%) of the amount of the late adjusted Rent payment, such late charge
to be immediately due and payable without demand by the Agency.
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FORM OF GROUND LEASE
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(b) Landlord shall be entitled within three (3) years after the end of each
Tenant fiscal year to inspect and examine all Tenant's books of account, records, and other
pertinent data. Tenant shall cooperate fully with Landlord in making the inspection. Landlord
shall also be entitled, also within three (3) years after the end of each Tenant fiscal year, to an
independent audit of Tenant's books of account, records, and other pertinent data; the cost of
such audit shall be an Operating Expenses of the Project.
4.3.4 After Foreclosure. After the foreclosure of a Mortgage, acceptance by
a Mortgagee of an assignment or deed in lieu of foreclosure, or appointment of a receiver at the
request or demand of a Mortgagee, the Mortgagee shall have no obligation to produce Tenant's
books and records for the periods prior to the foreclosure or appointment of the receiver.
4.4. Utilities. Tenant shall be responsible for the payment of all water, gas, electricity,
refuse collection and disposal, and all other utilities used by Tenant on the Property. Landlord
expressly has no obligation regarding provision of or payment for utilities serving the Property.
4.5. Taxes and Assessments.
4.5.1 Notice of Possessory Interest; Payment of Taxes and Assessments
on Value of Entire Property. In accordance with California Revenue and Taxation Code
Section 107.6(a), Landlord hereby notifies Tenant that by entering into this Ground Lease, a
possessory interest subject to assessment and collection of property taxes may be created.
Tenant or other party in whom the possessory interest is vested may be subject to the payment
of property taxes levied on such interest. If possessory interest taxes are assessed, Tenant
agrees it is responsible for payment thereof and Landlord has no obligation or liability of any kind
or nature relating to payment of property taxes. Tenant shall, at its sole cost and expense, seek
exemption from, or contest the payment of, assessments and the collection of property taxes
pursuant to Revenue and Taxation Code Section 214, or a successor statute. During the
pendency of such contest or request, Tenant's non-payment of assessments or taxes when due
shall not constitute a default hereunder if (i) the validity of such assessments and taxes are
actively contested in good faith and by appropriate proceedings, (ii) Tenant has demonstrated to
Landlord's reasonable satisfaction that leaving such assessments or taxes unpaid pending the
outcome of such proceedings could not result in conveyance of the Property in satisfaction of
such assessments or taxes or otherwise impair Landlord's estates in the Property, (iii) Tenant has
furnished Landlord with a bond or other security satisfactory to Landlord in an amount not less
than 120% of the applicable claim (including interest and penalties) and (iv) upon the final
disposition of such proceedings, Tenant shall promptly pay all taxes and assessments then due,
inclusive of any unpaid accrued penalties and interest. Landlord is a tax exempt public entity and
no property taxes will be or are legally assessable against its fee interest.
4.5.2 Payment of Taxes. Subject to any applicable exemptions, Tenant is
responsible for and shall pay any and all real property and/or possessory interest taxes applicable
to the Property during the term of this Ground Lease. All such payments shall be made prior to
the delinquency date of such payment. Tenant shall promptly furnish Landlord with satisfactory
evidence that such taxes have been paid or that an exemption from such taxes has been obtained.
If any such taxes paid by Tenant shall cover any period of time prior to or after the expiration of
the Term, Tenant's share of such taxes shall be equitably prorated to cover only the period of
time within the tax fiscal year during which this Ground Lease shall be in effect, and Landlord
shall reimburse Tenant to the extent required. If Tenant shall fail to pay any such taxes, Landlord
shall have the right to pay the same, in which case Tenant shall repay such amount to Landlord
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FORM OF GROUND LEASE
Page 24 of 86
within ten (10) days after demand from Landlord together with interest at the rate set forth in
Section 4.6.
4.5.3 Definition. As used herein, the term "real property tax" shall include any
form of real estate tax or assessment (including, without limitation, on possessory interests),
general, special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income, or estate taxes)
imposed on the Property or any interest (including, without limitation, possessory interests) therein
by any authority having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Landlord or Tenant in the Property or
in the real property of which the Property is a part, as against Landlord's right to rent or other
income therefrom, and as against Landlord's business of leasing the Property. The term "real
property tax" shall also include any tax, fee, levy, assessment or charge (i) in substitution of,
partially or totally, any tax, fee, levy, assessment or charge hereinabove included within the
definition of "real property tax," or (ii) the nature of which was hereinbefore included within the
definition of "real property tax," or (iii) which is imposed as a result of a transfer, either partial or
total, of Landlord's interest in the Property or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such transfer, or (iv) which is
imposed by reason of this lease transaction, any modifications or changes hereto, or any transfers
hereof.
4.5.4 Personal Property. Tenant shall pay prior to delinquency all taxes
assessed against and levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenant contained in the Property or elsewhere. When possible, Tenant shall cause
said trade fixtures, furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Landlord.
4.5.5 Apportionment. If any of Tenant's said personal property shall be
assessed with Landlord's real property, first Tenant shall advise the County of Orange Tax
Assessor and Tax Collector of the same in writing, and Tenant shall pay Landlord the taxes
attributable to Tenant not later than the later of (a) ten (10) days after receipt of a written statement
setting forth the taxes applicable to Tenant's property or (b) fifteen (15) days prior to the date said
taxes are due and payable.
4.6. Overdue Interest. Any amount due to Landlord, if not paid when due and on or
before expiration of the period for cure as set forth herein, after Landlord's delivery of notice
thereof to Tenant, shall bear interest from the date due until paid at the lower of: (a) the reference
or prime rate of Bank of America, N.A., in effect from time to time plus three percent (3%); or
(b) the highest rate of interest allowed under applicable usury law.
ARTICLE 5
POSSESSION OF PROPERTY
5.1. Acceptance of Premises. Tenant hereby accepts the Property and
acknowledges that the Property is in the condition called for by the Affordable Housing Agreement
and this Ground Lease.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 25 of 86
5.2. Ownership of Improvements. Unless otherwise provided herein, during the
Term of this Ground Lease title to all Improvements, now existing, if any, to be constructed, or
later made, on the Property are and shall be vested in Tenant as set forth in Article 11 hereof.
5.3. Surrender of Property.
5.3.1 Expiration or Termination. Tenant agrees that on the expiration or
earlier termination of the Term, which in the case of an early termination due to the occurrence of
an Event of Default is not timely cured by Tenant in accordance with the provisions of this Ground
Lease, the leasehold estate hereby granted to Tenant shall be terminated and forfeited and shall
revert to Landlord, its successors and assigns, and all Improvements on the Property shall
become the property of Landlord, its successors and assigns, free and clear from any liens or
claims whatsoever (other than non -monetary liens previously approved or otherwise accepted in
writing by Landlord), in good condition, reasonable wear and tear excepted without further
compensation therefor from Landlord to Tenant or any other person subject to the provisions of
Article 18 herein. Following any such expiration or termination, Tenant shall execute,
acknowledge and deliver to Landlord a quitclaim deed, or other document required by a reputable
title company, conveying all Tenant's right, title, and interest in and to the Property and
Improvements to Landlord. In the event Tenant receives a written default notice relating to or
arising from the Primary Loan or any other mortgage, deed of trust or security instrument secured
by the leasehold interest granted hereunder, the Property or the Improvements, or from TCAC or
the Internal Revenue Service, then Tenant shall provide written notice of such alleged default to
the Executive Director within five (5) days of receipt thereof. Tenant hereby irrevocably appoints
Landlord as Tenant's agent and attorney-in-fact (such agency being coupled with an interest),
and as such agent and attorney-in-fact Landlord may, without the obligation to do so, in Tenant's
name, or in the name of Landlord, prepare, execute and file or record such statements,
applications and other documents necessary to create, perfect or preserve any of Landlord's
interests and rights in or to the Property and any of the Improvements, and, upon the earlier
expiration or termination of the Term (including termination due to an Event of Default hereunder
after expiration of the applicable cure periods as set forth in Article 21 hereof) take any other
action required by Tenant hereunder.
5.3.2 Condition. On expiration or earlier termination of the Term and in
furtherance of the provisions relating to surrender of the Property set forth in Section 5.3.1 above,
Tenant shall peaceably and quietly leave and surrender the Property and the Improvements to
Landlord in good order, condition and repair, reasonable wear and tear and obsolescence
excepted. Tenant shall leave in place and in good order, condition and repair, all fixtures and
machinery; except (if Tenant is not then in default under this Ground Lease or the Transaction
Documents) Tenant shall have the right to remove only Tenant -owned appliances, other
unattached equipment, moveable furniture and merchandise that Tenant shall have installed,
which removal must be done without damage to the Property or Improvements. Landlord shall
have the right to have the Property and the Improvements inspected at Tenant's cost to determine
whether the Property and the Improvements have been properly maintained, repaired and
restored in accordance with the terms of this Ground Lease. That notwithstanding and subject to
the exception of the environmental indemnities which shall survive any termination in perpetuity,
Tenant shall not be responsible for the interior physical condition of individual occupied
apartments on the termination or expiration of this Ground Lease.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 26 of 86
5.3.3 Delivery of Documents. Contemporaneously with the expiration or
earlier termination of the Term and subject to the provisions of Sections 5.3.1 and 5.3.2 hereof,
Tenant shall immediately deliver to Landlord the following:
(i) Such documents, instruments and conveyances as Landlord may
reasonably request to enable Landlord's ownership of the Property and the Improvements to be
reflected of record, including, without limitation, a quitclaim deed in recordable form to the
Property and the Improvements.
(ii) If requested by Landlord, a lender's policy of title insurance, surety
bond, or other security reasonably acceptable to Landlord insuring against all claims and liens
against the Property and the Improvements other than those incurred by Landlord or accepted by
Landlord in writing.
(iii) All construction plans, surveys, permits, existing contracts for
services, maintenance, operation, and any other documents relating to use, operation,
management, and maintenance of the Improvements as may be in effect and/or in the possession
of Tenant at the time and from time to time thereafter.
(iv) All documents and instruments required to be delivered by Tenant
to Landlord pursuant to this Section shall be complete, legible, originals or true copies, and shall
otherwise be in a form reasonably satisfactory to Landlord.
5.4. Abandonment. Tenant shall not abandon or vacate the Property or the
Improvements at any time during the Term. If Tenant shall abandon, vacate or otherwise
surrender the Property or the Improvements, or be dispossessed (other than dispossession as
the result of a Substantial Taking or a Taking) thereof by process of law or otherwise, the same
shall constitute a default under this Ground Lease on the part of Tenant and, in addition to any
other remedy available on the part of Landlord, any of Tenant's property left in, upon or about the
Property or the Improvements (except for underground storage tanks) shall, at Landlord's option,
be deemed to be abandoned and shall become the property of Landlord. The appointment of a
receiver pursuant to a Mortgagee's exercise of its rights under a Mortgage, or the foreclosure of
a Mortgage, shall not be a default under this Section.
REPRESENTATIONS AND WARRANTIES; MATERIAL ADVERSE CHANGE
6.1. Landlord's Representations. Landlord represents and warrants to Tenant it
owns the Property in fee simple and has the power and authority to enter into this Ground Lease
and perform all obligations and agreements incidental or pertinent to this Ground Lease. Landlord
makes no representation or warranty with respect to the condition of the Property or its fitness or
availability for any particular use, and Landlord shall not be liable for any latent or patent defect
therein.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 27 of 86
6.2. Tenant's Representations. Tenant represents and warrants to Landlord, as of
the Commencement Date, as follows:
6.2.1 Tenant is a California limited partnership duly organized, validly existing,
formed, and in good standing under the laws of the State of California that has the power and
authority to own property and carry on business as is now being conducted.
6.2.2 Tenant has full power and authority to execute and deliver this Ground
Lease and to make and accept the borrowings contemplated hereunder, to execute and deliver
the Authority Promissory Note and Authority Deed of Trust for the Authority Subordinate Loan,
Memorandum of Ground Lease, Notice of Affordability Restrictions, Request for Notice and all
other documents or instruments executed and delivered, or to be executed and delivered,
pursuant to this Ground Lease, and to perform and observe the terms and provisions of all of the
above.
6.2.3 This Ground Lease, the Affordable Housing Agreement, the Authority
Promissory Note and Authority Deed of Trust for the Authority Subordinate Loan, Memorandum
of Ground Lease, Request for Notice, Notice of Affordability Restrictions, and all other documents
or instruments which have been executed and delivered pursuant to or in connection with this
Ground Lease constitute or, if not yet executed or delivered, will when so executed and delivered
constitute, legal, valid and binding obligations of Tenant enforceable against it in accordance with
their respective terms, subject to application of laws relating to bankruptcy, insolvency, or other
laws affecting the enforcement generally of creditors' rights and remedies.
6.2.4 Tenant is not in default under any law or regulation or under any order of
any federal, state, or local court, board, commission or agency whatsoever, and there are no
claims, actions, suits or proceedings pending or, to the knowledge of Tenant, threatened against
or affecting Tenant or the Property, at law or in equity, before or by any federal, state, or local
court, board, commission or agency whatsoever which might, if determined adversely to Tenant,
materially affect Tenant's ability to perform its obligations hereunder.
6.2.5 All information included or to be included within and provided to TCAC in
the Applications (defined in the Affordable Housing Agreement) submitted by Tenant upon which
TCAC issues its preliminary reservation letters shall be true and correct in all material respects
as of the date of each Application unless the same has otherwise been disclosed to TCAC and
Landlord. In the event any information or representation made by Tenant to TCAC related, directly
or indirectly, to the Tax Credits is not true, complete, and correct in all material respects, Tenant
shall, and acknowledges it has an obligation to, inform TCAC and Landlord of such changes and
to provide updated information to TCAC, Landlord, and its Lender(s), as necessary.
6.2.6 Tenant agrees to notify Landlord in the event that it applies for or
proposes to use other sources of funds for the Project prior to the issuance of the Release of
Construction Covenants as to the Project.
6.2.7 Tenant has examined the Property and acknowledges that it hereby
accepts possession of the Property in its "AS IS" condition, with all faults and defects, including,
without limitation, any physical condition or environmental condition of the Property.
6.2.8 All documents, materials and information provided by Tenant to Landlord
relating to Tenant's qualifications, financial strength, and ability to perform its obligations
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 28 of 86
hereunder are true, correct and complete in all material respects as of their respective dates and
no Material Adverse Change has occurred or is reasonably likely to occur that would make any
such documents, materials or information incorrect, incomplete, or misleading in any material
respect.
The representations and warranties set forth in this Section 6.2 and Section 7.3 of
the Affordable Housing Agreement shall survive the Commencement Date. During the entire
Affordability Period and the entire Term of the Ground Lease, within ten (10) business days
following a written request from Landlord or City, Tenant shall either re -affirm in writing the
material truth and accuracy of the representations and warranties set forth in this Section 6.2 and
Section 7.3 of the Affordable Housing Agreement, or identify any material inaccuracies of such
representations and warranties. The fact that a representation or warranty contained in this
Section 6.2 or Section 7.3 of the Affordable Housing Agreement has become inaccurate or
misleading shall not, in and of itself, constitute a breach under the Affordable Housing Agreement
or this Ground Lease; however, (a) failure to notify Landlord of material inaccuracies in these
representations and warranties within ten (10) business days of Landlord's request for such
information and (b) any intentional material misrepresentation by Tenant relating to such
representations and warranties shall each constitute an Event of Default hereunder, subject to
delivery of notice and expiration of the cure period provided hereunder. The provisions of this
paragraph shall be of no further force or effect upon a foreclosure, deed in lieu of foreclosure, or
execution of a New Ground Lease.
6.3. Tenant Obligation to Notify re Material Adverse Change. During the entire
Term hereof, Tenant shall have the ongoing obligation to promptly (but in no event later than five
(5) business days following a Material Adverse Change) inform Landlord (in writing) of the
occurrence of any Material Adverse Change. The provisions of this Section 6.3 shall be of no
further force or effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground
Lease.
ARTICLE 7
CONSTRUCTION OF THE IMPROVEMENTS
7.1. Commencement and Completion of Construction. Tenant shall cause the work
for construction of the Improvements to be commenced and prosecuted with due diligence and
shall plan, design, construct, and complete the Improvements in accordance with the Affordable
Housing Agreement, the Scope of Development attached to the Affordable Housing Agreement,
and all Development Plans as approved by City and Landlord. All Improvements, together with
all off-site improvements that may be made by reason of Governmental Requirements as a
condition to the construction upon the Property, shall be constructed in a good and workmanlike
manner using materials of good quality and in substantial compliance with the Affordable Housing
Agreement, and shall comply with all applicable governmental permits, laws, ordinances and
regulations. Upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease,
Tenant's obligation to construct Improvements shall be limited to constructing the Improvements
in accordance with the approved Construction Drawings.
7.2. Construction Cost. Tenant shall bear the entire and sole cost of constructing the
Improvements, including all fees and mitigation measures.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 29 of 86
7.3. Diligent Prosecution to Completion. Once the work is begun, Tenant shall, with
reasonable diligence, prosecute the Improvements to completion. The Improvements shall be
completed and ready for use within twenty-four (24) months after the Commencement Date
(subject to extensions authorized by Executive Director) provided, however, that the time for
completion shall be extended for as long as Tenant shall be prevented from completing the
Improvements by delays beyond Tenant's control, to the extent provided in the Affordable
Housing Agreement and Article 23. Additionally, upon the written request of Tenant, the
Executive Director may, at his/her sole and absolute discretion, grant one or more extensions of
the date by which the Improvements must be completed of, in the aggregate, not more than 180
days. All work shall be performed in a good and workmanlike manner, shall substantially comply
with the Development Plans, and shall comply with all applicable governmental permits, laws,
ordinances, and regulations. The provisions of this Section 7.3 shall be of no further force or
effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease.
7.4. Completion of Construction. The Improvements shall be considered complete
for purposes of this Ground Lease only when (a) all work described in the final Construction
Drawings (as defined in the Affordable Housing Agreement) has been substantially completed,
and (b) all work for the Project requiring inspection or certification by governmental agencies has
been completed and all requisite certificates, approvals and other necessary authorizations
(including any required final certificates of occupancy) have been obtained for each building.
7.5. Changes; Landlord Consent. If Tenant desires to propose any substantial
revisions to the approved Development Plans, or any part(s) thereof, Tenant shall submit its
revisions or proposed changes thereto to the Executive Director in accordance with the Affordable
Housing Agreement, and shall also proceed in accordance with any and all Governmental
Requirements regarding such revisions, within the time frame set forth in the Schedule of
Performance attached to the Affordable Housing Agreement for the resubmittal of such
Development Plans, or any part(s) thereof. Any revision or change to such Development Plans
proposed by Tenant may be disapproved by Landlord through its Executive Director in his/her
reasonable discretion pursuant to subdivision (a) below. Any and all change orders or revisions
required by the City and its inspectors that are required under the Anaheim Municipal Code and
all other applicable Uniform Codes (e.g. Building, Plumbing, Fire, Electrical, etc.) and under other
Governmental Requirements shall be included by Tenant in its Development Plans and completed
during the construction of the Project. In the event Tenant requests revisions, alterations, or
modifications to the Development Plans, or any part(s) thereof, for any reason including increased
construction costs because of unforeseen occurrences or conditions relating to the construction
of the Project, any revisions, alterations, or modifications shall be subject to the approval of
Landlord in its reasonable discretion (and the City's Planning/Building Department in its
discretion) pursuant to subdivision (a) below. Tenant shall be required to pay any and all
increased costs of construction due to any such revisions, alterations, or modifications of the
Development Plans, or any part(s) thereof.
(a) Approval of Change Orders. Tenant shall not be required to
obtain Executive Director approval of any change orders or other revisions or modifications to the
Construction Drawings, so long as each change order, revision, or modification is consistent with
the approved Basic Concept Drawings, does not cause any value engineering not previously
authorized by Landlord and does not affect materially the design, materials, and architectural
quality and integrity of the Project, except that Tenant shall be required to obtain Executive
Director approval to the extent such change order, revision, or modification will result in a cost
adjustment which, cumulatively with all other change orders, revisions, and modifications,
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 30 of 86
exceeds the amount set forth as the contingency line item in the approved Final Budget for the
Project. Notwithstanding the immediately preceding sentence, Landlord (acting through its
Executive Director) shall have the right to review any and all material changes, revisions or
modifications to the Construction Drawings and/or any and all material change orders to the
Construction Contract with the General Contractor which are approved by Tenant.
7.6. Landlord's Review. Landlord does not have, and by this Ground Lease expressly
disclaims, the duty to review the Development Plans for the purpose of determining compliance
with building codes, safety features or standards or for the purpose of determining or approving
engineering or structural design, sufficiency or integrity. Landlord's approval of a direction or
request to change the plans, specifications or drawings submitted by Tenant is not and shall not
be a review or approval of the quality, adequacy or suitability of such plans, specifications or
drawings, nor of the labor, materials, services or equipment to be furnished or supplied in
connection therewith. Landlord does not have and expressly disclaims any right of supervision
or control over the architects, designers, engineers or other draft persons and professionals
responsible for the drafting and formulation of the Plans, or any right of supervision or control of
contractors, builders, trades and other persons engaged in constructing and fabricating the
improvements pursuant to the Development Plans. Landlord further acknowledges that it shall
not have any right to disapprove any plan, specification or drawing which logically evolves from
any previously approved plan, specification or drawing or to request or require a change in any
previously approved item.
7.7. Right of Access. During normal construction hours, upon at least three (3)
business days' prior written notice to Tenant, representatives of Landlord shall have the
reasonable right of access to the Property without charges or fees for the purpose of inspecting
the work of the Improvements; provided, however, that such representatives shall present and
identify themselves at Tenant's construction office, be accompanied by a representative of Tenant
while on the Property and obey Tenant's, or its contractor's, safety rules and regulations. In
addition, Landlord shall have the right to authorize the City and other public agencies to enter the
Property, upon the same terms after reasonable prior written notice to Tenant, for the purpose of
constructing, reconstructing, maintaining or repairing any public improvements or public facilities
located on the Property. Landlord shall deliver written notice of the identity of its representatives
to Tenant before such representatives enter the Property. Landlord hereby indemnifies and holds
Tenant, and its contractors, subcontractors, agents, representatives and employees, and the
Property, harmless from and against any loss, cost, damage or liability, including, without
limitation, attorneys' fees, which results from the exercise by Landlord, or any party acting under
Landlord's authority, of the rights granted by this Section 7.7.
7.8. Governmental Approvals. If requested by Landlord in writing, Tenant covenants
and agrees to deliver to Landlord conformed copies (and certified copies of all recorded
instruments) of all governmental approvals and permits obtained by Tenant for the construction,
alteration or reconstruction of any Improvements upon the Property in accordance with the
Development Plans. In no event shall Tenant commence construction of any Improvements
pursuant to the provisions of this Article 7 until such time as Tenant shall have obtained all
necessary governmental approvals and permits to so construct such Improvements.
7.9. Landlord's Right to Discharge Lien. If Tenant does not cause to be recorded
the bond described in California Civil Code Section 3143 or otherwise protect the Property under
any alternative or successor statute, and a final judgment has been entered against Tenant by a
court of competent jurisdiction for the foreclosure of a mechanic's, materialmen's, contractor's, or
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 31 of 86
subcontractor's lien claim, and if Tenant fails to stay the execution of the judgment by lawful
means or to pay the judgment, Landlord shall have the right, but not the duty, subject to the notice
and cure rights of Mortgagees set forth elsewhere in this Ground Lease, to pay or otherwise
discharge, stay, or prevent the execution of any such judgment or lien or both. Tenant shall
reimburse Landlord for all sums paid by Landlord under this Section, together with all Landlord's
reasonable attorneys' fees and costs, plus interest on those sums, fees, and costs from the date
of payment until the date of reimbursement at the rate set forth in Section 4.6.
7.10. Notice of Non -Responsibility. After the recordation of the Certificate of
Completion for the Improvements in the Official Records, Tenant shall provide Landlord with prior
written notice of not less than fifteen (15) days before commencing construction of any structural
alteration of the Improvements, or any non-structural alteration which will cost more than
Fifty Thousand Dollars ($50,000.00), and shall permit Landlord to record and post appropriate
notices of non -responsibility on the Property. The foregoing Fifty Thousand Dollar ($50,000.00)
limitation shall be increased each calendar year by the corresponding percentage increase in CPI.
7.11. Notice of Completion. Upon completion of construction of the Improvements,
Tenant shall file or cause to be filed a notice of completion. Tenant hereby appoints Landlord as
Tenant's attorney-in-fact to file the notice of completion upon Tenant's failure to do so after the
work of improvement has been substantially completed.
7.12. Subsequent Alterations. Following the construction of the Improvements in
substantial accordance with the Development Plans, Tenant may from time to time, at its sole
expense, make improvements and other alterations to the Property which Tenant reasonably
determines to be beneficial. Tenant shall not make any alteration or improvement to the Property,
the cost of which exceeds Fifty Thousand Dollars ($50,000.00), without Landlord's prior written
consent (except that no such consent is required if such alteration or improvement is contained
in the current Operating Budget which has been approved by Landlord), which consent shall not
be unreasonably withheld or delayed. The foregoing dollar amount limitation shall be increased
each calendar year by the corresponding increase in CPI. Tenant shall timely pay any obligation
incurred by Tenant with respect to any such alterations or improvements that could become a lien
against the Property and shall defend, indemnify and hold Landlord harmless in connection
therewith.
7.13. Force Majeure. All obligations of Tenant to promptly commence and thereafter
diligently prosecute to completion the construction of the Project shall be extended by such
number of days as Tenant shall be delayed by reason of events of force majeure pursuant to
Article 23.
ARTICLE 8
X&I4ro1ay:1Q>:Z6l»14 CA
8.1. Covenants re Use. Tenant covenants and agrees for itself, its successors,
assigns, and every successor in interest to Tenant's interest in the Property or any part thereof,
that Tenant shall devote the Property to the uses specified in this Ground Lease until the
expiration or earlier termination of the Term hereof. All uses conducted on the Property, including,
without limitation, all activities undertaken by Tenant pursuant to this Ground Lease, shall conform
to all applicable provisions of the Anaheim Municipal Code. The foregoing covenants shall run
with the land.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 32 of 86
8.1.1 Covenant Regarding Specific Uses. Tenant covenants and agrees for
itself, its successors, assigns, and every successor in interest to Tenant's interest in the Property
or any part thereof, that Tenant shall use the Property to operate the affordable rental housing
project called the Project until the expiration of the Affordability Period.
(a) Affordable Housing. Tenant covenants and agrees for itself and
its successors, assigns and every successor in interest to Tenant's interest in the Property or any
part thereof, that Tenant shall use and operate the Property and the Improvements as rental
housing and for ancillary purposes for persons and households at the income levels prescribed
below in Section 8.3, including 30% AMI Very Low Income Households, 40% AMI Very Low
Income Households, 50% AMI Very Low Income Households, and 60% AMI Low Income
Households available at an Affordable Rent and for no other use pursuant to the terms and
conditions of this Ground Lease, including all terms and conditions relating to subtenant selection,
subtenant income, Affordable Rent, rent increases, property management, certifications, access
and reporting and tax credit requirements, which are then currently in effect. Income
computation(s) and certification(s) of all household/occupants of the Housing Units shall be
submitted to Landlord in accordance with this Ground Lease.
8.2. Reserved.
8.3. Covenants Regarding Operation of Housing Units. Tenant shall provide for the
rental of the Housing Units in accordance with this Section 8.3.
8.3.1 Number of Housing Units. Tenant covenants and agrees to make
available, restrict occupancy to, and rent:
(i) Two (2) of the two (2) bedroom Housing Units in Phase II to 30%
AMI Very Low Income Households at an Affordable Rent;
(ii) One (1) of the three (3) bedroom Housing Units in Phase II to 30%
AMI Very Low Income Households at an Affordable Rent;
(iii) Two (2) of the one (1) bedroom Housing Units in Phase II to 40%
AMI Very Low Income Households at an Affordable Rent;
(iv) One (1) of the two (2) bedroom Housing Units in Phase II to 40%
AMI Very Low Income Households at an Affordable Rent;
(v) Two (2) of the three (3) bedroom Housing Units in Phase II to 40%
AMI Very Low Income Households at an Affordable Rent;
(vi) One (1) of the one (1) bedroom Housing Units in Phase II to 50%
AMI Very Low Income Households at an Affordable Rent;
(vii) Six (6) of the two (2) bedroom Housing Units in Phase II to 50%
AMI Very Low Income Households at an Affordable Rent;
(viii) Two (2) of the three (3) bedroom Housing Units in Phase II to 50%
AMI Very Low Income Households at an Affordable Rent;
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(ix) Three (3) of the two (2) bedroom Housing Units in Phase II to 60%
AMI Low Income Households at an Affordable Rent; and
(x) One (1) of the three (3) bedroom Housing Units in Phase II to 60%
AMI Low Income Households at an Affordable Rent.
8.3.2 Affordable Rent.
(a) Affordable Rent shall be charged for all Housing Units (other than
one manager's unit) throughout the Affordability Period. The maximum Affordable Rent
chargeable for the Housing Units shall be annually determined by Landlord (and as charged and
implemented by Tenant) in accordance with the following requirements:
(i) The Affordable Rent for the Housing Units to be rented to
30% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%)
of thirty percent (30%) of AMI for Orange County as determined and published annually by TCAC
for a family of a size appropriate to the unit.
(ii) The Affordable Rent for the Housing Units to be rented to
40% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%)
of forty percent (40%) of AMI for Orange County as determined and published annually by TCAC
for a family of a size appropriate to the unit.
(iii) The Affordable Rent for the Housing Units to be rented to
50% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%)
of fifty percent (50%) of AMI for Orange County as determined and published annually by TCAC
for a family of a size appropriate to the unit.
(iv) The Affordable Rent for the Housing Units to be rented to
60% AMI Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of
sixty percent (60%) of AMI for Orange County as determined and published annually by TCAC
for a family of a size appropriate to the unit.
Tenant shall, and shall cause its Property Manager to, operate the Project
and cause occupancy of all Housing Units thereon in conformity with these covenants and this
Ground Lease.
(b) For purposes of this Ground Lease, "Affordable Rent" shall mean
the total of monthly payments for (a) use and occupancy of each Housing Unit and land and
facilities associated therewith, (b) any separately charged fees or service charges assessed by
Tenant which are required of all subtenants, other than security deposits, (c) a reasonable
allowance for an adequate level of service of utilities not included in (a) or (b) above, including
garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration
fuels, but not including telephone service, or cable TV or internet services, and (d) possessory
interest, taxes or other fees or charges assessed for use of the land and facilities associated
therewith by a public or private entity other than Tenant. No additional charge shall be assessed
against subtenant households of the Housing Units for any social or supportive services provided
at the Property.
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In illustration of the foregoing description of Affordable Rent, an "Initial Monthly
Rent Schedule for Avon Dakota Neighborhood - Phase II" is included in Exhibit C. The schedule
is illustrative only and in the event of any inconsistency between such schedule and the specific
provisions of this Ground Lease, the provisions of this Ground Lease shall prevail.
In addition, thirteen (13) of the Housing Units shall constitute "HOME Units", as
follows: (a) at 809 Dakota Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units
shall be Low HOME Units, and (ii) two (2) of the two (2) bath Housing Units shall be High HOME
Units; (b) at 868 Dakota Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units
shall be Low HOME Units, and (ii) three (3) of the two (2) bath Housing Units shall be High HOME
Units; and (c) at 606 Avon Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units
shall be a Low HOME Unit, (ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall
be High HOME Units, and (iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be
High HOME Units. The HOME Units may be "floating" HOME Units, such that the specific
Housing Units designated as HOME Units may change as long as the requirements set forth in
the immediately preceding sentence relating to the number of two and three-bedroom Housing
Units required to be designated as HOME Units are at all times complied with. The HOME Units
shall be rented in conformity with Low HOME or High HOME rents in conformity with the HOME
Regulations consistent with the identification of such HOME Units as Low HOME or High HOME
Units, respectively, in the definition of HOME Units. The HOME Units shall be rented at the lower
of (i) rent determined for Low HOME or High HOME Units or (ii) rent as otherwise determined in
conformity with this Ground Lease.
8.3.3 Duration of Affordability Requirement, Affordability Period. The
Project and all the Housing Units therein shall be subject to the requirements of this Section 8.3,
et seq. for the full Term of this Ground Lease. The 57 -year duration of these covenants and this
requirement shall be known as the "Affordability Period."
8.3.4 Selection of Tenants.
(a) Tenant shall be responsible for the selection of subtenants for the
Housing Units in compliance with all lawful and reasonable criteria, and shall adopt a subtenant
selection system that shall be approved (or disapproved) by Landlord Executive Director in her
reasonable discretion, pursuant to which Tenant shall establish and maintain a chronological
waiting list system for selection of subtenants in the order of priority set forth below, and which
shall be set forth in the Marketing and Tenant Selection Plan and the Property Management Plan,
which plans are required to be submitted by Tenant and approved by Landlord. Throughout the
Affordability Period and the Term of this Ground Lease, Tenant shall establish and maintain for
the Project waiting lists of eligible, prospective subtenants to facilitate re -tenanting Housing Units
in compliance with the approved Marketing and Tenant Selection Plan, Property Management
Plan and Anaheim Municipal Code. Further, subject to applicable Fair Housing Laws and in
compliance with the Anaheim Municipal Code, in particular Section 18.52.160 thereof, Landlord
shall be afforded a priority marketing period for thirty (30) days after receiving written notice from
Tenant that one or more Housing Units have become vacant at the Project, during which time
Landlord and Tenant shall work cooperatively to select tenants for any vacant Housing Units at
the Project. Tenant shall provide prompt written notice to Landlord when vacancies of Housing
Units occur to facilitate timely re -tenanting of Housing Units pursuant to the approved Marketing
and Tenant Selection Plan, Property Management Plan and Anaheim Municipal Code. Subject
to applicable Fair Housing Laws, Tenant's waiting list of prospective, eligible subtenants for
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Housing Units at the Project shall include and follow the following order of priority for selection of
subtenants, and Landlord will follow such order of priority:
(i) Very Low and Low Income Households, as applicable, who
have been displaced from their residences due to programs or projects implemented by the City
of Anaheim or another governmental entity;
(ii) Very Low and Low Income Households, as applicable, who
have applied for and have received rental vouchers from Landlord;
(iii) Very Low and Low Income Households, as applicable, who
are listed on Landlord's waiting lists for affordable housing and who live and/or work in Anaheim;
and
(iv) Very Low and Low Income Households, as applicable, who
live and/or work in Anaheim.
(b) In the event Tenant rents a Housing Unit to a household holding a
Portable Voucher, if required by the Executive Director in writing to the Tenant, the rental
agreement (or lease agreement, as applicable) between Tenant, as landlord, and the subtenant
shall expressly provide that monthly rent charged shall be the Affordable Rent required hereunder
for the Housing Unit (not fair market rent) and that the rent collected directly from such subtenant
holding a Portable Voucher shall be not more than 40% of subtenant's actual gross income
pursuant to the applicable voucher program regulations; i.e., the rent charged to such subtenant
under the rental agreement shall be the Affordable Rent chargeable hereunder and not market
rent for the area (as determined by a current rent reasonable review conducted in accordance
with Section 8 Federal Program Limitations applicable to Portable Vouchers), as would otherwise
be permitted under the applicable Portable Voucher program. Thus, if required by the Executive
Director in writing in accordance herewith, the subsidy payment to Tenant under any Portable
Voucher shall not exceed the difference between the amount the subtenant actually pays to
Tenant towards such subtenant's rent and the Affordable Rent chargeable for the applicable
Housing Unit hereunder.
(c) In the event of a conflict between this Ground Lease and an
approved Marketing and Tenant Selection Plan, the Marketing and Tenant Selection Plan shall
control.
8.3.5 Household Income Requirements. On or before one hundred twenty
(120) days following the end of Tenant's fiscal year, commencing the first year after issuance of
the first certificate of occupancy for the Project, and annually thereafter, Tenant shall prepare and
submit to Landlord, at Tenant's expense, a written summary of the income, household size, and
rent payable by each of the subtenants of the Housing Units and, upon the written request of the
Landlord, copies of each and all leases or rental agreements and the current rules and regulations
for the Project. At Landlord's request, Tenant shall also provide to Landlord completed income
computation and certification forms, all in a form reasonably acceptable to Landlord, for each and
all subtenants. Tenant shall obtain, or shall cause to be obtained by the Property Manager, a
certification from each household leasing a Housing Unit demonstrating that such household is a
30% AMI Very Low Income Household, 40% AMI Very Low Income Household, 50% AMI Very
Low Income Household, or 60% AMI Low Income Household, as applicable and according to the
Area Median Income annually determined and published by TCAC for Orange County, and meets
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the eligibility and occupancy requirements established for the Housing Unit. Tenant shall verify,
or shall cause to be verified by the Property Manager, the income and household size certification
of the subtenant household. The current form of Landlord's Income Computation and Certification
is attached hereto as Exhibit B and incorporated herein.
8.3.6 Resident Leases. Tenant shall submit a standard lease form for use at
the Project to the Executive Director for approval, which lease form shall comply with applicable
requirements of this Ground Lease, the HAL, the HOME Regulations and Tax Credit Rules, and
other applicable federal and state regulations. Landlord shall reasonably approve such Resident
Lease form upon finding that such lease form is consistent with this Ground Lease, the HAL, the
HOME Regulations and Tax Credit Rules. Tenant shall enter into a written lease, in the form of
the Resident Lease approved by Landlord, with each subtenant/subtenant household of the
Project. During the Affordability Period, any material changes to the Resident Lease form are
subject to the reasonable review and approval of the Executive Director.
8.3.7 Marketing and Tenant Selection Plan. Within the time set forth in the
Schedule of Performance attached to the Affordable Housing Agreement, Landlord shall submit
the Marketing and Tenant Selection Plan to Tenant; Landlord and Tenant shall reasonably agree
upon the form of the Marketing and Tenant Selection Plan. During the Affordability Period, any
material changes to an approved Marketing and Tenant Selection Plan are subject to reasonable
review and approval by the Executive Director. The rental of the Housing Units, as and when
they are vacated by the existing subtenants, shall be conducted in accordance with the approved
Marketing and Tenant Selection Plan and any affirmative marketing requirements which have
been adopted by the Landlord prior to the date hereof. The availability of Housing Units shall be
marketed in accordance with the Marketing and Tenant Selection Plan as the same may be
amended from time to time with Landlord's prior written approval, which approval shall not
unreasonably be withheld. Tenant shall provide Landlord with periodic reports with respect to the
marketing for lease of the Housing Units. Landlord agrees to exercise reasonable efforts to assist
Tenant in connection with the implementation of the Marketing and Tenant Selection Plan;
provided, however, Landlord shall not be under any obligation to incur any out-of-pocket expenses
in connection therewith.
8.3.8 Social Services. Tenant shall provide social services at the Project in
accordance with this Section throughout the entire Affordability Period. The parties shall
cooperate in good faith to attempt to agree upon a budget for the social and supportive services
to be provided at the Project; provided, the parties anticipate that Tenant will make all reasonable
attempts to obtain additional funding sources for the various social services programs required to
be implemented at the Project throughout the Affordability Period.
(a) Alternative Social and Supportive Services. In the event that,
despite Tenant's reasonable best efforts, Tenant is unable to provide all of the social and
supportive services described in Attachment No. 19 to the Affordable Housing Agreement, Tenant
shall use reasonable best efforts to provide comparable social and supportive services
programming at the Project that are reasonably similar in scope and content to the Scope of Social
and Supportive Services attached as Attachment No. 19 to the Affordable Housing Agreement,
and that meet all the regulations promulgated by TCAC, during the entire fifty-five (55) year
Affordability Period. Such substitute services shall be subject to the prior written approval of the
Executive Director, which approval shall not be unreasonably withheld, conditioned or delayed.
In the event the characteristics of the resident population at the Project change substantially, the
Executive Director shall have the authority to approve revisions to the Scope of Social and
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Supportive Services attached as Attachment No. 19 to the Affordable Housing Agreement, in
his/her reasonable discretion.
(b) Termination Post -Foreclosure, Deed in Lieu, or Upon
Execution of New Ground Lease. The provisions of Section 8.3.8.1 shall be of no further force
or effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease.
8.3.9 Monitoring and Record Keeping. Throughout the Affordability Period,
Tenant shall comply with all applicable recordkeeping and monitoring requirements of the HAL
and shall annually complete and submit to Landlord a Certification of Continuing Program
Compliance in a form provided by Landlord. Representatives of Landlord and City shall be entitled
to enter the Property upon at least forty-eight (48) hours' notice, to monitor compliance with this
Ground Lease, and the Affordable Housing Agreement, to inspect the records of the Property,
and to conduct an independent audit or inspection of such records. Tenant agrees to cooperate
with Landlord in making all of its records for the Project and making the Property and all Housing
Units thereon available for inspection or audit. Records shall be made available for review and
inspection and/or audit in Orange County, California. Tenant agrees to maintain all records
relating to the Project in a businesslike manner, and to maintain such records for the term of this
Ground Lease. Concurrently with Tenant's annual delivery of the Certificate of Continuing
Program Compliance to Landlord, Tenant shall deliver a report setting forth the income,
household size, and rent payable by each of the subtenants of the Housing Units at the Project
in a form acceptable to and approved by the Executive Director.
8.3.10 Intentionally Omitted.
8.3.11 Management of the Project.
(a) Property Manager. Tenant shall manage or cause the Project, and
all appurtenances thereto that are a part of the Project, 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 County. Tenant may contract with
a property management company or property manager, to operate and maintain the Project in
accordance with the terms of this Section 8.3.11 ("Property Manager"); provided, however, the
selection and hiring of the Property Manager (and each successor or assignee), including any
Affiliate, is and shall be subject to prior written approval of the Executive Director (or designee) in
her sole and reasonable discretion. Related Management Company, L.P. ("RMC"), is hereby
approved to act as the Property Manager, subject to Executive Director review of the scope of
services, itemized fees, and fee contract for property management between Tenant and RMC.
The Property Manager shall manage the Project in accordance with the income requirements
contained in Section 8.3.1, the definitions of Affordable Rent contained in Section 8.3.2 hereof,
and the subtenant selection requirements contained in Section 8.3.4. Any fee paid to the Property
Manager for social services provided to the subtenants shall be exclusive of the fee paid to the
Property Manager relating to the management of the Project. Except for RMC, Tenant shall
conduct due diligence and background evaluation of any potential third party property manager
or property management company to evaluate experience, references, credit worthiness, and
related qualifications as a property manager. Any proposed property manager shall have
significant and relevant prior experience with affordable housing projects and properties
comparable to the Project and the references and credit record of such property
manager/company shall be investigated (or caused to be investigated) by Tenant prior to
submitting the name and qualifications of such proposed property manager to the Executive
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Director for review and approval. A complete and true copy of the results of such background
evaluation shall be provided to the Executive Director. Approval of a Property Manager by the
Executive Director shall not be unreasonably delayed but shall be in her sole reasonable
discretion, and the Executive Director shall use good faith efforts to respond as promptly as
practicable in order to facilitate effective and ongoing property management of the Project by one
qualified Property Manager. The replacement of RMC by Tenant and/or the selection by Tenant
of any new or different Property Manager during the Term of this Ground Lease shall also be
subject to the foregoing requirements.
(b) Property Management Plan. Tenant shall prepare and submit to
the Executive Director for review and approval, which approval shall not be unreasonably
withheld, a management plan for the Project which includes a detailed plan and strategy for long
term marketing, operation, maintenance, repair and security of the Project, inclusive of social
services for the residents of the Housing Units, and the method of selection of subtenants, rules
and regulations for subtenants, and other rental policies for the Project ("Property Management
Plan"). Executive Director approval of the Property Management Plan shall not be unreasonably
withheld or delayed. Subsequent to approval of the Property Management Plan by the Executive
Director the ongoing management and operation of the Project shall be in compliance with the
approved Property Management Plan. During the Affordability Period, Tenant and its Property
Manager may from time to time submit to the Executive Director proposed amendments to the
Property Management Plan, the implementation of which shall also be subject to the prior written
approval of the Executive Director, which approval shall not be unreasonably withheld.
(c) Gross Mismanagement. During the Affordability Period, and in
the event of "Gross Mismanagement" (as defined below) of the Project, Executive Director and/or
Landlord shall have and retain the authority to direct and require any condition(s), acts, or
inactions of Gross Mismanagement to cease and/or be corrected immediately, and further to
direct and require the immediate removal of the Property Manager and replacement with a new
qualified and approved Property Manager, if such condition(s) is/are not ceased and/or corrected
after expiration of thirty (30) days from the date of written notice from Executive Director. If Tenant
or Property Manager has commenced to cure such Gross Mismanagement condition(s) on or
before the 20th day from the date of written notice (with evidence of such submitted to the
Executive Director), but has failed to complete such cure by the 30th day (or such longer period
if the cure cannot reasonably be accomplished in thirty (30) days as reasonably determined by
the non -defaulting party), then Tenant and its Property Manager shall have an additional 10 days
to complete the cure of Gross Mismanagement condition(s). In no event shall any condition of
Gross Mismanagement continue uncured for a period exceeding forty-five (45) days from the date
of the initial written notice of such condition(s), except that the condition described in subdivision
(d) below may exist for up to, but no longer than, seventy-five (75) days without triggering
Landlord's right to remove the Property Manager as described in the immediately following
sentence as long as Tenant is diligently working to cure such conditions of Gross
Mismanagement. If such condition(s) do persist beyond such period, Executive Director shall
have the sole and absolute right to immediately and without further notice to Tenant (or to Property
Manager or any other person/entity) to remove the Property Manager and Tenant shall contract
with a replacement Property Manager reasonably acceptable to Landlord (in accordance with
Section 8.3.11.1) within thirty (30) days following Landlord's removal of the defaulting Property
Manager. If Tenant takes steps to select a new Property Manager that selection is subject to the
requirements set forth above for selection of a Property Manager.
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For purposes of this Ground Lease, the term "Gross Mismanagement" shall
mean management of the Project in a manner which violates the terms and/or intention of this
Ground Lease to operate a first quality affordable housing complex, and shall include, but is not
limited to, any one or more of the following:
(i) Habitually leasing to subtenants who exceed the prescribed income
levels;
(ii) Habitually allowing subtenants to exceed the prescribed occupancy
levels without taking immediate action to stop such overcrowding;
(iii) Under -funding required reserve accounts if Annual Project
Revenues are sufficient to maintain such reserve accounts;
(iv) Failing to timely maintain the Project in accordance with the
Property Management Plan and Maintenance Standards;
(v) Fraud or embezzlement of Project funds, including without limitation
funds in the reserve accounts;
(vi) Failing to fully cooperate with the Anaheim Police Department or
other local law enforcement agency(ies) with jurisdiction over the Project, in maintaining a crime -
free environment within the Project;
(vii) Failing to fully cooperate with the Anaheim Fire Department or other
local public safety agency(ies) with jurisdiction over the Project, in maintaining a safe and
accessible environment within the Project;
(viii) Failing to fully cooperate with the Anaheim Planning & Building
Department, including the Code Enforcement Division, or other local health and safety
enforcement agency(ies) with jurisdiction over the Project, in maintaining a decent, safe and
sanitary environment within the Project; and
(ix) Spending funds from the Capital Replacement Reserve account for
items that are not defined as eligible costs, including eligible capital and/or replacement costs,
under the standards imposed by GAAP (and/or, as applicable, generally accepted auditing
principles).
Notwithstanding the requirements of the Property Manager to correct any
condition of Gross Mismanagement as described above, Tenant is obligated and shall use its best
efforts to correct any defects in property management or operations at the earliest feasible time
and, if necessary, to replace the Property Manager as provided above. Tenant shall include
advisement and provisions of the foregoing requirements and requirements of this Ground Lease
within any contract between Tenant and its Property Manager for the Project.
(d) Code Enforcement. Tenant acknowledges and agrees that
Landlord, City, and their employees and authorized agents, shall have the right to conduct code
compliance and/or code enforcement inspections of the Project and the individual Housing Units
for the Project, both exterior and interior, at reasonable times and upon reasonable notice (not
less than 48 hours prior notice, except in an emergency) to Tenant and/or an individual subtenant.
If such notice is provided by Landlord or City representative(s) to Tenant, then Tenant (or its
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Property Manager) shall immediately and directly advise any affected subtenant of such upcoming
inspection and cause access to the area(s) and/or Housing Units at the Project to be made
available and open for inspection. Tenant shall include express advisement of such inspection
rights within the lease/rental agreements for each Housing Unit in the Project in order for each
and every subtenant and subtenant household to be aware of this inspection right and such
inspection(s) shall not unreasonably interfere with use and enjoyment of the site.
8.3.12 Occupancy Limits. The maximum occupancy of the Housing Units in
the Project shall not exceed more than such number of persons as is equal to two persons per
bedroom, plus one. Thus, for the two (2) bedroom Housing Units, the maximum occupancy shall
not exceed five (5) persons. For the three (3) bedroom Housing Units, the maximum occupancy
shall not exceed seven (7) persons.
8.3.13 Ground Lease Prior and Senior to Mortgages. This Ground Lease is
and shall remain a senior, non -subordinate lien against the Property, and shall not be
subordinated to the Primary Loan or any Mortgages or other liens against the Property; provided,
however, that the Affordable Housing Covenants set forth herein, including without limitation all
provisions set forth in this Article 8, shall be subordinated to the lien of the Primary Loan and any
Mortgage approved by Landlord.
8.4. Reserved.
8.5. Covenant to Pay Taxes and Assessments. Tenant shall pay prior to
delinquency all ad valorem real estate taxes, special taxes, assessments and special
assessments levied against the Property, subject to Tenant's right to contest any such tax in good
faith and any property tax exemptions.
8.6. Reserved.
8.7. Non -Discrimination Covenants. Tenant 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) or (d) of Section 12955 of the Government Code, as those bases are
defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of
Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease,
transfer, use, occupancy, tenure, or enjoyment of the Property, nor shall the grantee or any person
claiming under or through him or her, establish or permit any practice or practices of discrimination
or segregation with reference to the selection, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees, or vendees in the Property. The foregoing covenants shall run
with the land. Tenant shall refrain from restricting the rental or lease of the Property on any of the
bases listed above. All leases or contracts relating to the Property shall contain or be subject to
substantially the following nondiscrimination or nonsegregation clauses:
(i) In deeds: "The grantee herein covenants by and for himself or
herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under
or through them, that there shall be no discrimination against or segregation of, any person or
group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the
Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and
paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code,
in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein
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conveyed, nor shall the grantee or any person claiming under or through him or her, establish or
permit any practice or practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in
the premises herein conveyed. The foregoing covenants shall run with the land."
(ii) In leases: "The lessee herein covenants by and for himself or
herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under
or through him or her, and this lease is made and accepted upon and subject to the following
conditions:
That there shall be no discrimination against or segregation of any person
or group of persons, on account of any basis listed in subdivision (a) or (d)
of Section 12955 of the Government Code, as those bases are defined in
Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision
(p) of Section 12955, and Section 12955.2 of the Government Code, in the
leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of
the premises herein leased nor shall the lessee himself or herself, or any
person claiming under or through him or her, establish or permit any such
practice or practices of discrimination or segregation with reference to the
selection, location, number, use, or occupancy, of tenants, lessees,
sublessees, subtenants, or vendees in the premises herein leased.
(iii) In contracts: "There shall be no discrimination against or
segregation of, any person or group of persons on account of any basis listed in subdivision (a)
or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926,
12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and
Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy,
tenure, or enjoyment of the premises which are the subject of this Ground Lease, nor shall the
grantee or any person claiming under or through him or her, establish or permit any practice or
practices of discrimination or segregation with reference to the selection, location, number, use
or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein
conveyed. The foregoing covenants shall run with the land."
8.8. Covenants Regarding Operating Budget and Operating Reserve. Within
twelve (12) months after commencement of construction of the Project, but in no event later than
ninety (90) days prior to the completion of construction of the Project, and not less than annually
thereafter on or before November 1 of each year following the issuance of the first certificate of
occupancy issued by the City's building official for the Project, Tenant shall submit to Landlord on
not less than an annual basis an Operating Budget for the Project, which budget shall be subject
to the written approval of Executive Director or her designee, which approval shall not be
unreasonably withheld. The Executive Director's discretion in review and approval of each
proposed annual Operating Budget shall include, without limitation, authority to review individual
categories, line items, and accounts, such as the following: extent, type, and amount for social
services at or associated with the Project; existing balance(s) in and proposed deposits to the
Capital Replacement Reserve for the Project to evaluate shortfalls and/or cumulative
unexpended/unencumbered deposits (provided that required annual deposits thereto are not
required to exceed $300/per unit); conformity of any annual increases in the Partnership Related
Fees for the Project with the increases permitted in the definition of "Partnership Related Fees";
reasonableness and conformity to prevailing market rates in Orange County and rates and fees
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for goods and services to be provided Tenant or any of its parent, affiliated, or subsidiary entities,
etc. for the Project.
Tenant shall, or shall cause the Property Manager to, set aside, in the Operating Reserve
for the Project the Target Amount. The Operating Reserve shall initially be funded using Tax
Credit equity and shall thereafter be replenished from Annual Project Revenue (net of Operating
Expenses and Debt Service) to maintain the Operating Reserve balance at the Target Amount.
The Target Amount shall be retained in the Operating Reserve to cover shortfalls between Annual
Project Revenue and actual Operating Expenses, but shall in no event be used to pay for capital
items or capital costs properly payable from the Capital Replacement Reserve. Tenant shall, not
less than once per every twelve (12) months, submit to the Executive Director evidence
reasonably satisfactory to Landlord of compliance herewith. The provisions of this Section 8.8
shall be of no further force or effect upon a foreclosure, deed in lieu of foreclosure, or execution
of a New Ground Lease.
8.9. Covenants Regarding Capital Replacement Reserve. Commencing upon the
closing for the permanent Primary Loan for the Project, Tenant shall annually set aside an amount
of not less than Three Hundred Dollars ($300.00) per Housing Unit (16 Housing Units times $300
equals $6,300) or such increased amount required by TCAC or the Partnership Agreement or the
Lender under the Primary Loan for the Project) from the gross rents received from the Project,
into a separate interest bearing trust account defined as the Capital Replacement Reserve.
Funds in the Capital Replacement Reserve shall be used only for capital repairs, improvements
and replacements to the Project, including fixtures and equipment, which are normally capitalized
under generally accepted accounting principles. The non-availability of funds in the Capital
Replacement Reserve does not in any manner relieve or lessen Tenant's obligation to undertake
any and all necessary capital repairs, improvements, or replacements and to continue to maintain
the Project in the manner prescribed herein for the Project. Not less than once per year, Tenant,
at its expense, shall submit to the Executive Director an accounting for the Capital Replacement
Reserve for the Project. Capital improvements and repairs to, and replacements at the Project
shall include only those items with a long useful life, including without limitation the following:
carpet and drapery replacement; appliance replacement; exterior painting, including exterior trim;
hot water heater replacement; plumbing fixtures replacement, including tubs and showers, toilets,
lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and
replacement, and seal coating; roofing repair and replacement; landscape tree replacement;
irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line
replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous
motors and blowers; common area furniture replacement; and common area repainting. Pursuant
to the procedure for submittal of each Annual Budget for the Project to Executive Director by
Tenant, Executive Director will evaluate the cumulative amount on deposit in the Capital
Replacement Reserve account and exercise her sole, reasonable discretion to determine if
existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative
unexpended/unencumbered account balance in such Capital Replacement Reserve account are
adequate to provide for necessary capital repairs and improvement for the Project (provided that
required annual deposits thereto are not required to exceed $300/per Housing Unit).
8.10. Certificate of Continuing Program Compliance. On or before one hundred
twenty (120) days following the end of Tenant's fiscal year, commencing the first year after
issuance of the first certificate of occupancy for the Project, and annually thereafter, until the
expiration of the Affordability Period, Tenant shall deliver to Landlord a Certificate of Continuing
Program Compliance in a form acceptable to Executive Director.
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ARTICLE 9
INSURANCE
[Anaheim to confirm]
9.1. Landlord Not Liable. Except as the result of any grossly negligent or
willful/intentional acts or omissions by Landlord or its representatives, employees or agents, or as
otherwise expressly set forth herein, Landlord shall not be liable for injury to Tenant's business or
any loss of income therefrom or for any damage or liability of any kind or for any injury to or death
of persons or damage to property of Tenant, or to Tenant's sublessees of each and all of the
Housing Units at the Project, or to Tenant's agents, employees, servants, contractors, subtenants,
licensees, concessionaires, customers or business invitees or any other person which occurs on
the Property during the Term.
9.2. Indemnification. Except with respect to any grossly negligent or willful/intentional
acts or omissions of Landlord or its representatives, employees or agents, Tenant shall indemnify,
defend, pay for, and hold harmless the Indemnitees from and against all liability, loss, damage,
cost or expense (including reasonable attorneys' fees and court costs) arising from or as a result
of the death of any person or any accident, injury, loss or damage whatsoever caused to any
person or to the property of any person caused by Tenant's performance of its obligations under
this Ground Lease or any actions, inactions, errors, or omissions of Tenant, whether such
performance, errors or omissions of Tenant be made by Tenant, its contractors or subcontractors,
or anyone directly or indirectly employed by Tenant, and whether such damage shall accrue or
be discovered before or after the termination of this Ground Lease. This indemnification provision
supplements and in no way limits the scope of the indemnifications in Article 13. The indemnity
obligation of Tenant under this Article shall survive the expiration or termination, for any reason,
of this Ground Lease. This Section notwithstanding, indemnification with respect to Hazardous
Materials shall be governed by Section 16.3 hereof.
9.3. Insurance. Tenant shall secure from a company or companies licensed to
conduct insurance business in the State of California, pay for, and maintain in full force and effect
from and after the Closing, and continuing for the Term of this Ground Lease, insurance for the
Project as required herein, issued by an "A:VI" or better rated insurance carrier as rated by A.M.
Best Company. Tenant shall furnish certificates of insurance and endorsements to Landlord not
fewer than fifteen (15) days prior to the Closing and shall furnish complete copies of such policy
or policies upon request by Landlord or City.
9.3.1 Minimum Coverage/Endorsements. Notwithstanding any inconsistent
statement in the policy or any subsequent endorsement attached hereto, the protection afforded
by these policies shall be written on an occurrence basis in which Landlord, City, and their
respective elected and appointed officials, officers, employees, agents and representatives
(together, "Additional Insureds") are named as additional insureds on all coverage, except for
Workers' Compensation coverage, but including Employers Liability coverage, and shall:
(i) Name the Additional Insureds (from above) as additional insureds
on a Commercial General Liability ("CGL") policy;
(ii) Include an endorsement to the CGL policy naming the Additional
Insureds as additional insureds, and said endorsement shall be delivered to the Executive
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Director prior to and as a Condition Precedent to the Closing (and maintained as required herein);
provided, however, that an individual endorsement specifically naming the Additional Insureds
shall not be required if Tenant provides documentation which, in the sole discretion of Landlord,
demonstrates that the Additional Insureds are otherwise automatically covered under some sort
of blanket policy language that clearly establishes the Additional Insureds' status as additional
insureds under the policy, without the need for a separate endorsement in favor of the Additional
Insureds;
(iii) Provide a broad form commercial general liability insurance in the
amount of Twenty Million Dollars ($20,000,000) per occurrence, which will be considered
equivalent to the required minimum limits, and such insurance shall (i) be written on an occurrence
form, (ii) be written with a primary policy form with limits of not less than $1,000,000 per
occurrence; (iii) be written with one or more excess layers to bring the total of primary and excess
coverage limits to not less than $20,000,000 per occurrence, (iv) not be written with a deductible
greater than $20,000 per occurrence (without prior written approval by Landlord, which approval
shall be granted or denied in Landlord's sole and absolute discretion), (v) not be written with a
self-insured retention (without prior written approval by Landlord, which approval shall be granted
or denied in Landlord's sole and absolute discretion), and (vi) contain a waiver of subrogation in
favor of the Landlord and City. Such insurance shall include independent contractor coverage
and shall cover the acts, errors, omissions, or works of any of Tenant's subcontractors and any
other person(s) acting on behalf of Tenant, as respects any liability that may occur to Tenant
and/or any Additional Insureds from such acts, errors, omissions or work;
(iv) Provide primary Automobile Liability insurance for owned, non -
owned, and hired vehicles, as applicable to, or for any use related to, the Project, in an amount
not less than One Million Dollars ($1,000,000) combined single limit, with excess insurance
coverage to bring the total amount of Automobile Liability insurance coverage to an amount not
less than Five Million Dollars ($5,000,000) per accident for bodily injury and property damage;
(v) Bear an endorsement or shall have attached a rider providing that
Landlord shall be notified not less than thirty (30) days before any expiration, cancellation, non-
renewal, reduction in coverage, increase in deductible, or other material modification of such
policy or policies, and shall be notified not less than ten (10) days after any event of nonpayment
of premium (collectively, "Cancellation Notice"), provided, however, that an individual
endorsement specifically naming the Landlord shall not be required if Tenant provides
documentation which, in the sole discretion of Landlord, demonstrates that the Landlord will
automatically receive such Cancellation Notice under some sort of blanket policy language,
without the need for a separate endorsement in favor of the Landlord; and
(vi) Tenant shall also file with Landlord the following signed certification:
"I am aware of, and will comply with, Section 3700 of the Labor
Code, requiring every employer to be insured against liability of
Workers' Compensation or to undertake self-insurance before
commencing any of the work."
Tenant shall comply with Sections 3700 and 3800 of the Labor Code by securing,
paying for and maintaining in full force and effect from and after the Closing of Escrow, and
continuing for the Term of this Ground Lease, complete Workers' Compensation insurance, to
statutory limits, with Employers Liability limits not less than One Million Dollars ($1,000,000) per
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occurrence, and shall furnish a Certificate of Insurance to Landlord before the commencement of
construction. Every Workers' Compensation insurance policy shall bear an endorsement or shall
have attached a rider providing that, in the event of expiration, proposed cancellation, or reduction
in coverage of such policy for any reason whatsoever, Landlord shall be notified, giving Tenant a
sufficient time to comply with applicable law, but in no event less than thirty (30) days before such
expiration, cancellation, or reduction in coverage is effective or ten (10) days in the event of
nonpayment of premium.
(vii) All Additional Insureds shall not be responsible for any claims in law
or equity occasioned by the failure of Tenant to comply with this Section 9.3.1. Landlord shall
have the right, but not the obligation, to pay a premium on behalf of Tenant.
(viii) Should any of the insurance coverage required herein be written
with an annual aggregate: (i) such aggregate shall be disclosed in writing to Landlord, (ii) should
total incurred claims (paid plus reserves) against such insurance exceed fifty percent (50%) of
the applicable aggregate, Tenant shall prompt notify Landlord in writing, and (iii) should total
incurred claims (paid plus reserves) against such insurance exceed seventy-five percent (75%)
of the applicable aggregate, Tenant shall promptly notify Landlord in writing and promptly take
whatever action is necessary to have the aggregate reinstated to an amount not less than fifty
percent (50%) of the original aggregate amount.
(ix) For all insurance required under this Section 9.3.1, Landlord shall
have the right, at every ten (10) year period of this Ground Lease, to review the types and limits
of insurance coverage required herein and to make reasonable adjustments, provided that such
types and limits shall not exceed that typically carried by the owner and operator of a first class
apartment complex, of approximately the same size, in Orange County, California, based on
reasonable research and investigation by Landlord.
9.3.2 Property Insurance. Commencing upon the Closing and continuing until
the later of (i) the expiration or earlier termination of the Term of this Ground Lease or (ii) the date
Tenant vacates the Property, Tenant shall secure, maintain, and pay for the following all risk
Property Insurance for the Project and the Property; provided, however, in the case of Builder's
Risk insurance where Tenant is not the General Contractor, Tenant may cause the required
Builder's Risk insurance to be secured, maintained, and paid for by the General Contractor:
(i) Prior to the start of construction and continuing until the completion
of construction (the latter of final acceptance of the Project or issuance of the final certificate of
occupancy for the Project): all-risk Builder's Risk (course of construction) insurance coverage but
excluding the perils of earthquake (land movement) and flood, in an amount equal to the full cost
of the hard construction costs of the Project. Such insurance shall be written on an all risk form,
and shall cover, at a minimum: all work, materials, and equipment to be incorporated into the
Project; the Project during construction; the completed Project until such time as it is accepted by
the City; and storage and transportation risks; and such coverage shall not be terminated until
permanent Property Insurance is in place, as required in Section 9.3.2(b). Such insurance shall
protect/insure the interests of Tenant/owner and the General Contractor, and other contractor(s),
and all subcontractors, as each of their interests may appear. If such insurance includes an
exclusion for "design error," such exclusion shall only be for the object or portion which failed.
Such insurance shall include an insurer's waiver of subrogation in favor of each protected/insured
party thereunder and the Landlord and City. Landlord shall be named as an additional loss payee,
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as its interests may appear, with a Lenders Loss Payable endorsement, which shall be delivered
to Landlord prior to the start of construction.
(ii) Commencing with the completion of construction and continuing
until the later of (i) the expiration or earlier termination of the Term of this Ground Lease or (ii) the
date Tenant vacates the Property: (a) all-risk physical damage insurance coverage ("Property
Insurance"), on an all-risk basis, covering all insurable structures and equipment, including
coverage for building code changes, but excluding the perils of earthquake (land movement) and
flood, in an amount not less than 100% of the replacement cost of the total values at risk, which
shall be adjusted for increased costs of construction and replacement on an annual basis, to
protect against loss of, damage to, or destruction of the Project; such insurance shall not contain
a coinsurance clause; (b) business interruption and extra expense insurance to protect Tenant
and all additional loss payees covering loss of revenues and/or extra expense incurred by reason
of the total or partial suspension or delay of, or interruption in, the operation of the Project, or any
portion thereof, caused by loss or damage to or destruction of any part of the insurable real
property structures or equipment as a result of the perils insured against under such Property
Insurance, covering a period of suspension, delay or interruption of at least eighteen (18) calendar
months, in an amount not less than the amount required to cover such business interruption
and/or extra expense loss during any such period; such insurance shall not contain a deductible
in an amount in excess of a thirty (30) day period; and (c) as applicable, boiler and machinery
insurance in the aggregate amount of the full replacement value of the equipment typically
covered by such insurance. On the coverage required under this Section 9.3.2(b), Landlord shall
be named as an additional loss payee, as its interests may appear, with a Lenders Loss Payable
endorsement whenever possible, and if not attainable for Additional Insured other than Landlord,
then a loss payable endorsement may be utilized, which shall be delivered to Landlord at the
completion of construction and prior to the expiration of the Builders Risk insurance coverage
required herein.
(iii) For all insurance required under this Section 9.3.2, said polices
shall provide, by endorsement, that they will not be cancelled, non -renewed or reduced in scope
or coverage, without at least thirty (30) days prior written notice to Landlord, except in the event
of non-payment of premium which shall provide for at least ten (10) days prior written notice to
Landlord.
9.3.3 Reduction in Requirements. Landlord's Risk Manager is hereby
authorized to reduce the requirements set forth herein, on a temporary or permanent basis, in the
event he determines, in his sole discretion, that such reduction is in Landlord's best interest.
9.3.4 Obligation to Repair and Restore Damage Due to Casualty Covered
by Insurance. Subject to Section 9.3.5 below, if the Project shall be totally or partially destroyed
or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against
by Tenant, Tenant shall promptly proceed to obtain insurance proceeds and take all steps
necessary to begin reconstruction and, immediately upon receipt of insurance proceeds, to
promptly and diligently commence the repair or replacement of the Project to substantially the
same condition as the Project is required to be constructed pursuant to this Ground Lease, if and
to the extent the insurance proceeds are sufficient to cover the actual cost of repair, replacement,
or restoration, and Tenant shall complete the same as soon as possible thereafter so that the
Project can be occupied in accordance with this Ground Lease. Subject to force majeure delays
pursuant to Article 23 hereof, in no event shall the repair, replacement, or restoration period
exceed twenty-four (24) months from the date Tenant obtains insurance proceeds unless the
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Executive Director, in her reasonable discretion, approves a longer period of time. Landlord shall
cooperate with Tenant, at no expense to Landlord, in obtaining any governmental permits required
for the repair, replacement, or restoration. If, however, the then existing laws of any other
governmental agencies with jurisdiction over the Property do not permit the repair, replacement,
or restoration, Tenant may elect not to repair, replace, or restore the Project by giving notice to
Landlord (in which event Tenant will be entitled to all insurance proceeds but Tenant shall be
required to remove all debris from the applicable portion of the Property) or Tenant may
reconstruct such other improvements on the Property as are consistent with applicable land use
regulations and approved by Landlord and City and the other governmental agency or agencies
with jurisdiction.
9.3.5 Damage or Destruction Due to Cause Not Required to be Covered
by Insurance. If the Project is completely destroyed or suffers Substantial Damage (as
hereinafter defined) caused by a casualty for which Tenant is not required to (and has not) insured
against, or if insurance proceeds are insufficient to rebuild then Tenant shall not be required to
repair, replace, or restore such improvements and may elect not to do so by providing Landlord
with written notice of election not to repair, replace, or restore within ninety (90) days after such
substantial damage or destruction. In such event, this Ground Lease shall be automatically
terminated and Tenant shall immediately tender possession of the Property to Landlord. As used
in this Section 9.3.5, "Substantial Damage" caused by a casualty not required to be (and not)
covered by insurance shall mean damage or destruction which is fifteen percent (15%) or more
of the replacement cost of the improvements comprising the Project. In the event Tenant does
not timely elect not to repair, replace, or restore the Project as set forth in the first sentence of this
Section 9.3.5, Tenant shall be conclusively deemed to have waived its right not to repair, replace,
or restore the Project and thereafter Tenant shall promptly commence and complete the repair,
replacement, or restoration of the damaged or destroyed Project in accordance with Section 9.3.4
above.
9.4. Other Insurance. Tenant shall also obtain and maintain such other insurance in
forms and amounts reasonably required from time to time by Landlord or the City Risk Manager
for protection against the same or other insurable hazards which are then typically insured against
by similar properties in Orange County, California, provided that such coverage is available at
commercially reasonable rates.
9.5. Contractors. All contractors employed by Tenant with contracts of Fifty Thousand
Dollars ($50,000.00) or more shall be required to furnish evidence of Comprehensive General
Liability insurance subject to all the requirements stated herein with limits of not less than One
Million Dollars ($1,000,000.00) combined single limit each occurrence. The Indemnitees shall
have the right to receive evidence of compliance with the foregoing by contractors at any time
upon written request therefor.
9.6. Waiver of Subrogation. Each policy of insurance procured pursuant to Article 9
shall contain, if obtainable upon commercially reasonable terms, either (i) a waiver by the insurer
of the right of subrogation against either party hereto for negligence of such party, or (ii) a
statement that the insurance shall not be invalidated should any insured waive in writing prior to
a loss any or all right of recovery against any party for loss accruing to the property described in
the insurance policy. Each of the parties hereto waives any and all rights of recovery against the
other, or against the officers, employees, agents and representatives of such other party, for loss
or damage to such waiving party or its property or the property of others under its control, arising
from any cause insured against under the form of insurance policies required to be carried
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pursuant to Article 9 of this Ground Lease or under any other policy of insurance carried by such
waiving party.
9.7. Insurance Submissions. Tenant shall deliver to Landlord (i) insurance
certificates confirming the existence of the insurance required by this Ground Lease, and including
the applicable clauses referenced above and (ii) endorsements to the above -required policies,
which add to these policies the applicable clauses and provisions referenced above. Such
endorsements shall be signed by an authorized representative of the insurance company and
shall include the signatory's company affiliation and title.
ARTICLE 10
MAINTENANCE; REPAIRS; ALTERATIONS; RECONSTRUCTION
10.1. General Maintenance. Tenant shall maintain the Property and all improvements
thereon, including lighting and signage, in good condition, free of debris, waste and graffiti, and
in compliance with the terms of the Redevelopment Plan and all applicable provisions of the City
of Anaheim Municipal Code. Tenant shall maintain in accordance with the Maintenance
Standards (as hereinafter defined) the improvements and landscaping on the Property. Such
Maintenance Standards shall apply to all buildings, signage, common amenities, lighting,
landscaping, irrigation of landscaping, architectural elements identifying the Property and any and
all other improvements on the Property and the Project. To accomplish the maintenance, Tenant
shall either staff or contract with and hire licensed and qualified personnel to perform the
maintenance work, including the provision of labor, equipment, materials, support facilities, and
any and all other items necessary to comply with the requirements of this Ground Lease.
Tenant and its maintenance staff, contractors or subcontractors shall comply with the
following standards as to the Project (collectively, "Maintenance Standards"):
(i) The Property shall be maintained in conformance and in
compliance with the approved final as -built plans, and reasonable maintenance standards which
comply with the industry standard for comparable first quality affordable housing projects in the
County, including but not limited to painting and cleaning of all exterior surfaces and other exterior
facades comprising all private improvements and public improvements to the curbline. The
Property shall be maintained in good condition and in accordance with the industry custom and
practice generally applicable to comparable first quality affordable housing projects in the County.
(ii) Landscape maintenance shall include, but not be limited to:
watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning;
trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe
road conditions and visibility, and irrigation coverage; replacement, as needed, of all plant
materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas;
and staking for support of trees.
(iii) Clean-up maintenance shall include, but not be limited to:
maintenance of all sidewalks, paths and other paved areas in clean and weed -free condition;
maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or
unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to
mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the
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maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris
are properly disposed of by maintenance workers.
Landlord agrees to notify Tenant in writing if the condition of the Property does not meet
with the Maintenance Standards and to specify the deficiencies and the actions required to be
taken by Tenant to cure the deficiencies. Upon notification of any maintenance deficiency, Tenant
shall have thirty (30) days within which to correct, remedy or cure the deficiency. If the written
notification states the problem is urgent relating to the public health and safety, then Tenant shall
have forty-eight (48) hours to rectify the problem. In the event Tenant does not maintain the
Property in the manner set forth herein and in accordance with the Maintenance Standards,
Landlord shall have, in addition to any other rights and remedies hereunder, the right to maintain
the Property, or to contract for the correction of such deficiencies, after written notice to Tenant,
and Tenant shall be responsible for the payment of all such costs incurred by Landlord.
10.2. Program Maintenance. In addition to the routine maintenance and repair required
pursuant to Section 10. 1, Tenant shall perform the following minimum programmed maintenance
of the Improvements on the Property:
(i)
five (5) years;
every five (5) years; and
Interior painting and window covering replacement at least every
Exterior painting at least every ten (10) years;
Repair and resurfacing of parking areas and walkways at least
(iv) Replacement of all deteriorated or worn landscaping and play
equipment at least every five (5) years.
Upon the request of Tenant, the Executive Director, at her sole and absolute discretion,
may grant a waiver or deferral of any program maintenance requirement. Tenant shall keep such
records of maintenance and repair as are necessary to prove performance of the program
maintenance requirements.
ARTICLE 11
OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS
11.1. Ownership During Term.
11.1.1 Improvements. Subject to the provisions of Sections 5.3.1 and 5.3.2
hereof, all Improvements on the Property as permitted or required by this Ground Lease shall,
during the Term, be and remain the property of Tenant, and Landlord shall not have title thereto.
Tenant shall not, however, demolish, remove, sell, encumber, lease, assign or otherwise convey
any Improvements from the Property except as permitted herein.
11.1.2 Personal Property. All personal property, furnishings, fixtures and
equipment, including, without limitation, Tenant -owned appliances, which are not so affixed to the
Property or the buildings thereon as to require substantial damage to the buildings upon removal
thereof shall constitute personal property including, but not limited to: (a) functional items related
to the everyday operations of the Property; (b) personal property furnishings, fixtures and
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equipment of the nature or type deemed by law as permanently resting upon or attached to the
buildings or land by any means, including, without limitation, cement, plaster, nails, bolts or
screws, or essential to the ordinary and convenient use of the Property and the Improvements. If
Tenant is not then in default under this Ground Lease or the Transaction Documents (after
expiration of any applicable cure period), at any time during the Term and at termination thereof,
Tenant shall have the right to remove any and all such personal property, furnishings, fixtures and
equipment; provided that Tenant shall repair any damage to the Property or the Improvements
caused by such removal.
11.1.3 Basic Building Systems. For purposes of this Ground Lease, the
personal property, furnishings, fixtures and equipment described in this Section 11.1 shall not
include those major building components or fixtures necessary for operation of the basic building
systems such as, but not limited to, the elevators, plumbing, sanitary fixtures, heating and central
air-cooling system.
11.2. Ownership at Expiration or Termination.
11.2.1 Property of Landlord. In accordance with provisions of Sections 5.3.1
and 5.3.2 hereof, and except as provided in Section 11.2.2, all Improvements which constitute or
are a part of the Property shall become (without the payment of any compensation whatsoever to
Tenant or to others) the property of Landlord free and clear of all liens, claims and encumbrances
on such Improvements by Tenant, and anyone claiming under or through Tenant, except for such
title exceptions permitted or required during the Term with Landlord's prior written consent.
Tenant shall then quitclaim to Landlord any and all rights, interests and claims to the
Improvements. Tenant agrees to and shall defend, indemnify and hold Landlord harmless from
and against all liability and loss which may arise from the assertion of any such liens, claims and
any encumbrances on such Improvements (except claims arising due to Landlord's actions) and
except for such title exceptions permitted or required during the Term, so long as upon expiration
or earlier termination of the Term of this Ground Lease, no exception to title to the Property exists
other than exceptions specifically approved by Landlord in writing.
11.2.2 Removal by Tenant. Tenant shall not be required or permitted to
remove the Improvements, or any of them, at the expiration or earlier termination of the Term;
provided, however, that, subject to the provisions of Section 5.3.2 hereof, within thirty (30) days
following the expiration or earlier termination of the Term, Tenant may remove all personal
property, furniture, and equipment.
11.2.3 Unremoved Property. Any personal property, furnishings or equipment
not removed by Tenant pursuant to Section 11.2.2 hereof, shall, without compensation to Tenant,
become Landlords' property, free and clear of all claims to or against them by Tenant or any third
person, firm or entity arising by, through or under Tenant.
11.2.4 Maintenance and Repair of Improvements. Subject to the provisions
of this Ground Lease concerning condemnation, alterations and damage and destruction, Tenant
agrees to assume full responsibility for the operation and maintenance of the Property and the
Improvements and all fixtures and furnishings thereon or therein throughout the Term hereof
without expense to Landlord, and to perform all repairs and replacements necessary to maintain
and preserve the Property, the Improvements, fixtures and furnishings in a decent, safe and
sanitary condition consistent with good practices and in compliance with all applicable laws.
Tenant agrees that Landlord shall not be required to perform any maintenance, repairs or
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services, or to assume any expense not specifically assumed herein in connection with the
Property and the Improvements thereon unless specifically required under the terms of this
Ground Lease.
Except as otherwise provided in this Section 11.2 and in Section 11.4, the condition of the
Improvements required to be maintained hereunder upon completion of the work of maintenance
or repair shall be equal in value, quality and use to the condition of such Improvements before
the event giving rise to the work.
11.3. Waste. Subject to the alteration rights of Tenant and damage and destruction or
condemnation of the Property or any part thereof, Tenant shall not commit or suffer to be
committed any waste of the Property or the Improvements, or any part thereof.
Tenant agrees to keep the Property and the Improvements clean and clear of refuse and
obstructions, and to dispose properly of all garbage, trash and rubbish.
11.4. Alteration of Improvements. Except as provided in Section 7.1, Tenant shall not
make or permit to be made any material, exterior alteration of, addition to or change in, the
Improvements which would affect the exterior elevations (including materials selection and color)
or the size, bulk and scale of the Property, other than routine maintenance and repairs, nor
demolish all or any part of the Improvements, without the prior written consent of Landlord.
Nothing herein shall prohibit interior alterations or decorations, or the removal and replacement
of interior improvements consistent with the specified use of the Property. In requesting consent
for such exterior improvements as required by the foregoing, Tenant shall submit to Landlord
detailed plans and specifications of the proposed work and an explanation of the need and
reasons thereof. Tenant may make such other improvements, alterations, additions or changes
to the Improvements which do not affect the exterior elevations (including materials selection and
color) or the size, bulk and scale thereof without Landlord's prior written consent.
Notwithstanding the prohibition in this Section 11.4, Tenant may make such changes,
repairs, alterations, improvements, renewals or replacements to the exterior elevations, materials,
size, bulk or scale of the Improvements as are required (a) by reason of any law, ordinance,
regulation or order of a competent government authority, (b) for the continued safe and orderly
operation of the Property, or (c) to continue to receive Tax Credits for the Project.
ARTICLE 12
SIGNS AND MARKETING
Tenant shall not place or suffer to be placed on the Property or upon the roof or any
exterior door or wall or on the exterior or interior of any window of the Improvements, any sign,
awning, canopy, marquee, advertising matter, decoration, lettering or other thing of any kind
(exclusive of the signs, awnings and canopies, if any, which may be provided for in the
Development Plans) without the written consent of the Executive Director first had and obtained.
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ARTICLE 13
INDEMNIFICATION
Tenant shall defend, indemnify, pay for, assume all responsibility for, and hold the
Indemnitees, harmless from all claims, demands, damages, defense costs or liability of any kind
or nature relating to the subject matter of this Ground Lease or the validity, applicability,
interpretation or implementation hereof and for any damages to property or injuries to persons,
including accidental death (including attorneys' fees and costs), which may be caused by any acts
or omissions of Tenant under this Ground Lease, whether such activities or performance thereof
be by Tenant or by anyone directly or indirectly employed or contracted with by Tenant and
whether such damage shall accrue or be discovered before or after termination of this Ground
Lease and arising prior to the later of (i) the expiration or earlier termination of the Term of this
Ground Lease or (ii) the date Tenant vacates the Property. Tenant shall not be liable for property
damage or bodily injury to the extent occasioned by the gross negligence or willful misconduct of
Landlord or City or their agents or employees. Tenant shall have the obligation to defend any
such action; provided, however, that this obligation to defend shall not be effective if and to the
extent that Tenant determines in its reasonable discretion that such action is meritorious or that
the interests of the parties justify a compromise or a settlement of such action, in which case
Tenant shall compromise or settle such action in a way that fully protects Indemnitees from any
liability or obligation. In this regard, Tenant's obligation and right to defend shall include the right
to hire (subject to written reasonable approval by Landlord and City) attorneys and experts
necessary to defend, the right to process and settle reasonable claims, the right to enter into
reasonable settlement agreements and pay amounts as required by the terms of such settlement,
and the right to pay any judgments assessed against Indemnitees. If Tenant defends any such
action, as set forth above, (i) Tenant shall indemnify and hold harmless Indemnitees from and
against any claims, losses, liabilities, or damages assessed or awarded against either of them by
way of judgment, settlement, or stipulation and (ii) Landlord shall be entitled to settle any such
claim only with the written consent of Tenant and any settlement without Tenant's consent shall
release Tenant's obligations under this Article 13 with respect to such settled claim. This Section
notwithstanding, indemnification with respect to Hazardous Materials shall be governed by
Section 16.3.
ARTICLE 14
DAMAGE OR DESTRUCTION OF PROPERTY OR IMPROVEMENTS
14.1. Tenant's Repair Obligation.
14.1.1 In case of damage to or destruction of the Property or the Improvements,
or any part thereof, by fire or other cause at any time during the Term of this Ground Lease,
Tenant, if and to the extent insurance proceeds are available, shall restore the same as nearly as
possible to their value, condition and character immediately prior to such damage or destruction.
Such restoration shall be commenced with due diligence and in good faith, and prosecuted with
due diligence and in good faith, unavoidable delays excepted.
14.1.2 In case of damage to or destruction of the Improvements by fire or other
cause resulting in a loss exceeding in the aggregate Ten Thousand Dollars ($10,000), Tenant
shall promptly give written notice thereof to Landlord.
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14.1.3 The provisions of this Section 14.1 shall be subject to Tenant's obligation
to obtain insurance as set forth in Section 9.3.
14.2. Tenant's Restoration of Premises.
14.2.1 If, during the Term, the Improvements are damaged or destroyed, and
the total amount of loss does not exceed thirty-three percent (33%) of the replacement value of
the Improvements, Tenant shall make the loss adjustment with the insurance company insuring
the loss, with the approval of Landlord, which approval shall not be unreasonably withheld or
delayed. The proceeds shall be paid directly to a Mortgagee, if any, and if there is not a
Mortgagee, to Landlord and Tenant for the sole purpose of making the restoration of the
Improvements in accordance with this Article 14.
14.2.2 If, during the Term, the Improvements are damaged or destroyed, and
the total amount of loss exceeds thirty-three percent (33%) of the replacement value of the
Improvements, Tenant shall make the loss adjustment with the insurance company insuring the
loss, with the approval of Landlord, which approval shall not be unreasonably withheld or delayed,
and the insurance company shall immediately pay the proceeds to a bank or trust company
designated by Landlord and approved by Tenant ("Insurance Trustee"), which approval shall not
be unreasonably withheld or delayed. Any approved leasehold Mortgagee shall be an acceptable
Insurance Trustee. All sums deposited with the Insurance Trustee shall be held for the following
purposes and the Insurance Trustee shall have the following powers and duties:
(i) The sums shall be paid in installments by the Insurance Trustee to
the contractor retained by Tenant and approved by Landlord as construction progresses, for
payment of the cost of restoration. A ten percent (10%) retention fund shall be established that
will be paid to the contractor on completion of restoration, payment of all costs, expiration of all
applicable lien periods, and proof that the Property and the Improvements are free of all
mechanics' liens and Iienable claims;
(ii) Payments shall be made on presentation of certificates or vouchers
from the architect or engineer retained by Tenant and approved by Landlord showing the amount
due. If the Insurance Trustee, in its reasonable discretion, determines that the certificates or
vouchers are being improperly approved by the architect or engineer retained by Tenant, the
Insurance Trustee shall have the right to appoint an architect or an engineer to supervise
construction and to make payments on certificates or vouchers approved by the architect or
engineer retained by the Insurance Trustee. The reasonable expenses and charges of the
architect or engineer retained by the Insurance Trustee shall be paid by the Insurance Trustee
out of the trust fund;
(iii) If, after the work of restoration has commenced (and subject to
Section 9.3), the sums held by the Insurance Trustee are not sufficient to pay the actual cost of
restoration, Tenant shall deposit the amount of the deficiency with the Insurance Trustee within
ten (10) days after receipt of request for payment of such amount from the Insurance Trustee,
which request shall be made by the Insurance Trustee promptly after it is determined there will
be a deficiency;
(iv) If the Insurance Trustee has received notice from Landlord that
Tenant is in default under this Ground Lease, then, subject to the lien of a Mortgagee's Mortgage
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and the Mortgagee's prior written consent, the Insurance Trustee shall pay to Landlord an amount
sufficient to cure such default as specified in Landlord's notice to the Insurance Trustee;
(v) Any amounts remaining after making the payments hereinabove
referred to in clauses (a), (b) and (d) shall be paid to any leasehold Mortgagee to the extent
(a) required by any Mortgage and (b) such leasehold Mortgagee makes written demand therefor
to the Insurance Trustee;
(vi) Any undisbursed funds remaining after compliance with all of the
provisions of this Section 14.2 shall, if and to the extent required by any Mortgage, be delivered
to the Mortgagee, and if there is no leasehold Mortgagee, to Tenant; and
(vii) All actual costs and charges of the Insurance Trustee shall be paid
by Tenant. If the Insurance Trustee resigns or for any reason is unwilling to act or continue to
act, Landlord shall substitute a new Insurance Trustee in the manner described in this Section.
14.2.3 Both parties shall promptly execute all documents and perform all acts
reasonably required by the Insurance Trustee to perform its obligations under this Section 14.2.
14.2.4 The provisions of this Section 14.2 shall be subject to Tenant's obligation
to obtain insurance as set forth in Section 9.3.
14.3. Procedure for Restoring Improvements.
14.3.1 If and to the extent Tenant is obligated to restore the Improvements
pursuant to this Article 14, Tenant shall restore the Improvements substantially in accordance
with the Development Plans. Within ninety (90) days after the date of such damage or destruction,
Tenant, at its cost, shall prepare and deliver to Landlord final plans and specifications and working
drawings complying with applicable laws that will be necessary for such restoration. Such plans
and specifications shall specify differences from the Development Plans. The plans and
specifications and working drawings are subject to the approval of Landlord only insofar as they
vary from the Development Plans. Landlord shall have twenty (20) days after receipt of the plans
and specifications and working drawings to either approve or disapprove the plans and
specifications and working drawings and return them to Tenant. If Landlord disapproves the plans
and specifications and working drawings, Landlord shall notify Tenant of its objections in writing,
specifying the objections clearly and stating what modifications are required for Landlord's
approval. Tenant acknowledges that the plans and specifications and working drawings shall be
subject to approval of the appropriate government bodies and that they will be prepared in such
a manner as to obtain that approval.
14.3.2 The restoration shall be accomplished as follows:
(i) Tenant shall commence and pursue the restoration with due
diligence and shall complete the restoration within twenty-four (24) months after final plans and
specifications and working drawings have been approved by the appropriate government bodies
and all required permits have been obtained.
(ii) Tenant shall retain a licensed contractor that is bondable. The
contractor shall be required to carry public liability and property damage insurance, builders risk
insurance, standard fire and extended coverage insurance, with vandalism and malicious mischief
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endorsements, during the period of construction in accordance with Article 9. Such insurance
shall contain waiver of subrogation clauses in favor of Landlord and Tenant in accordance with
the provisions of and to the extent required by Section 9.7.
(iii) Tenant shall notify Landlord of the date of commencement of the
restoration not later than ten (10) days before commencement of the restoration to enable
Landlord to post and record notices of non -responsibility. The contractor retained by Tenant shall
not commence construction until a completion bond and a labor and materials bond have been
delivered to Landlord to insure completion of the construction; provided, however, if Landlord
determines, in the exercise of its reasonable discretion, that adequate protections exist, Landlord
may waive the requirement that a completion bond or labor and materials bond be obtained in
connection with a restoration hereunder.
(iv) Tenant shall accomplish the restoration in a manner that will cause
the least inconvenience, annoyance, and disruption to the Property and the Improvements.
(v) On completion of the restoration Tenant shall immediately record a
notice of completion.
(vi) The restoration shall not be commenced until sums sufficient to
cover the cost of restoration are placed with the Insurance Trustee as provided in Section 14.2.
14.3.3 The provisions of this Section 14.3 shall be subject to Tenant's obligation
to obtain insurance as set forth in Section 9.3.
14.4. Mortgagee Protection. The following provisions are for the protection of a
Mortgagee and shall, notwithstanding anything contained in this Ground Lease to the contrary,
control:
14.4.1 Insurance. Any insurance proceeds payable from any policy of
insurance (other than liability insurance) required by this Ground Lease shall be paid to the
Mortgagee, if any, to the extent required by the Mortgage and shall be applied in accordance with
the requirements of the Mortgage. The Mortgagee, if any, shall have the right to participate in all
adjustments, settlements, negotiations or actions with the insurance company regarding the
amount and allocation of any such insurance proceeds. Any insurance policies permitted or
required by this Ground Lease shall name the Mortgagee, if any, as an additional insured or loss
payee, as appropriate, if required by such Mortgage.
14.4.2 Restoration. Tenant shall have no obligation to restore or repair the
Improvements following the occurrence of any casualty for which insurance is not required under
this Ground Lease. The Mortgagee, if any and if it exercises any of its remedies set forth in this
Ground Lease, shall have no obligation to restore or repair damage to the Improvements. Tenant
shall have no obligation to restore or repair damage to the Improvements if the casualty occurs
during the last five (5) years of this Ground Lease Term. In the event such a loss occurs in the
last five (5) years, then, at the election of Tenant, with the prior written consent of the Mortgagee,
if any, insurance proceeds shall be used, first, to clear the Property of the damaged Improvements
and any debris, and second, the balance shall be used to either restore or repair the Property or
to reduce or pay in full the Mortgage as more particularly provided in the Primary Loan documents,
with any excess being payable in the same manner as Remaining Residual Receipts, specifically,
fifteen percent (15%) to Tenant and eighty-five percent (85%) to Landlord to repay the Authority
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Promissory Note and, upon repayment in full of the Authority Promissory Note, to payment of the
adjusted Rent hereunder, determined pursuant to Section 4.1.2 hereof.
ARTICLE 15
EMINENT DOMAIN
15.1. Notice. The party receiving any notice of the kind specified in this Section 15.1
shall promptly give the other party notice of the receipt, contents and date of the notice received.
For purposes of this Article 15, the term "Notice" shall include:
(i) Notice of Intended Taking;
(ii) Service of any legal process relating to condemnation of the
Property or the Improvements;
(iii) Notice in connection with any proceedings or negotiations with
respect to such condemnation; or
(iv) Notice of intent or willingness to make or negotiate a private
purchase, sale or transfer in lieu of condemnation.
All Notices given pursuant to this Article 15 shall also be provided to the Investor Limited
Partner.
15.2. Representation in Proceedings or Negotiations. Landlord and Tenant shall
each have the right to represent their respective interests in each proceeding or negotiation with
respect to a Taking or intended Taking and to make full proof of their claims. No agreements or
settlement with or sale or transfer to the condemning authority shall be made without the consent
of Landlord, but, as to its reversionary interest only, Landlord may enter into such agreement,
settlement, sale or transfer without the consent of Tenant. Landlord and Tenant each agree to
execute and deliver to the other any instruments which may be required to effectuate or facilitate
the provisions of this Ground Lease relating to condemnation.
15.3. Total Taking.
15.3.1 In the event of a Total Taking, this Ground Lease shall terminate as of
the date of the Taking.
15.3.2 If this Ground Lease is terminated pursuant to this Section 15.3, the
Award for such Taking shall be apportioned and distributed as follows:
(i) First, to the Mortgagee, if any, to the extent of the Mortgage;
(ii) Second, to Landlord, a sum equal to the fair market value of
Landlord's fee interest in the Property (subject to the remaining Term and the Rent reserved), if
Landlord's fee interest in the Property is acquired in the Total Taking, on the date immediately
preceding the Taking or threat of condemnation. The parties shall commence said appraisal by
the earlier of ten (10) days after Tenant's receipt of a Notice of Intended Taking or ten (10) days
after the date of the Taking;
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(iii) Third, to Tenant, a sum equal to the fair market value of the
Improvements made by Tenant on the date immediately preceding the Taking as determined by
the appraisal method set forth in Section 15.10 and determined as if there were no Taking, nor
threat of condemnation; plus the residual value of the Term, subject to the Rent reserved; plus
any part of the Award attributable to the Tax Credits; and
(iv) Fourth, to Landlord, the remainder, if any.
15.4. Substantial Taking.
15.4.1 In the event of a Taking which, in Tenant's and Landlord's mutually
agreeable judgment is substantial, Tenant may, subject to the rights of the Mortgagee, if any,
terminate this Ground Lease. If Tenant elects to terminate this Ground Lease under this provision,
Tenant shall give written notice of its election to do so to Landlord within forty-five (45) days after
receipt of a copy of a Notice of Intended Taking. In the event Landlord disputes the right of Tenant
to terminate this Ground Lease under this provision, Landlord shall give Tenant notice of this fact
within forty-five (45) days after receiving the notice of Tenant's election to terminate, and the
parties shall either raise this issue in the eminent domain proceeding, if any, as an issue with
respect to the apportionment of the Award between Landlord and Tenant or, if there is no eminent
domain proceeding, pursue other remedies as permitted by Section 21.2. In the event it is
determined that Tenant does not have the right to terminate this Ground Lease, the apportionment
of the Award for such Taking and the obligations of Tenant to restore shall be governed by the
terms of Section 15.6 or Section 15.8, whichever is applicable.
15.4.2 In the event it is determined that Tenant has the right to terminate this
Ground Lease, or in the event Landlord does not dispute Tenant's right to terminate this Ground
Lease, such termination shall be as of the time when the Taking entity takes possession of the
portion of the Property and the Improvements taken. In such event, the Award for such
Substantial Taking (including any award for severance, consequential or other damages which
will accrue to the portion of the Property and/or the Improvements not taken) shall be apportioned
and distributed as follows:
(i) First, to the Mortgagee, if any, to the extent of the Mortgage;
(ii) Second, to Landlord, a sum equal to the fair market value of the
Landlord's fee interest in the Property taken (subject to the remaining Term and the Rent
reserved) immediately preceding the date of the Taking as determined by the appraisal process
provided for in Section 15.10, commenced as provided in Section 15.3.2, and as modified by
Section 15.6.3;
(iii) Third, to Landlord, an amount equal to the portion of the award for
severance, consequential or other damages which accrued to the portion of the Landlord's fee
interest in the Property and/or Improvements not taken;
(iv) Fourth, to Tenant a sum equal to the fair market value of the
Improvements made by Tenant taken immediately preceding the date of the Taking as determined
by the appraisal process provided for in Section 15.10, commenced as provided in Section 15.3.2,
and as modified by Section 15.6.3; plus the residual value of the Term, subject to the Rent
reserved; plus any part of the Award attributable to the Tax Credits; and
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(v) Fifth, to Landlord, the remainder, if any.
15.5. Tenant's Right to Revoke Notice of Termination. Notwithstanding anything to
the contrary contained in Section 15.4, if Tenant has elected to terminate this Ground Lease, and
the taking authority abandons or revises the Taking, Tenant shall have forty-five (45) days from
receipt of written notice of such abandonment or revision to revoke its notice of termination of this
Ground Lease.
15.6. Partial Taking.
15.6.1 In the event of a Partial Taking, this Ground Lease shall continue in full
force and effect and there shall be no abatement in or reduction of any of Tenant's obligations
hereunder.
15.6.2 The Award for such Partial Taking shall be apportioned and distributed
first to the Mortgagee, if any, to the extent of the Mortgage, then to Landlord and Tenant in
proportion to the fair market value of their respective interests in the Property and Improvements,
as such interests existed immediately prior to such Partial Taking. Tenant's only interest in the
Property and the Improvements for purposes of this Section 15.6.2 is in those Improvements
constructed or rehabilitated by Tenant. Notwithstanding anything contained herein to the
contrary, any part of the Award attributable to the Tax Credits shall belong to Tenant.
15.6.3 The fair market value of the parties' respective interests in the Property
and the Improvements shall be determined by the appraisal process provided in Section 15.10,
except that the assumptions listed in such Section shall not apply. Rather, the appraisal shall be
based on the value of the Property as improved and encumbered by this Ground Lease and on
the value of the Improvements as they stand, but without regard to any Taking or threat of
condemnation.
15.6.4 Any Award for severance, consequential or other damages which
accrues by reason of the Partial Taking to the portion of the Property or the Improvements not
taken shall be distributed first to the Mortgagee, if any, to the extent of the Mortgage, then shall
be apportioned between Landlord and Tenant in accordance with the diminution in value of their
respective interests.
15.7. Obligation to Repair on Partial Taking. Promptly after any Partial Taking and
regardless of the amount of the Award for such Taking, Tenant shall, to the extent of the Award
received by Tenant and in the manner specified in the provisions of this Ground Lease, repair,
alter, modify or reconstruct the Improvements and/or other improvements on the Property so as
to make them usable for the designated purpose and capable of producing a fair and reasonable
net income.
15.8. Temporary Taking.
15.8.1 In the event of a Temporary Taking of the whole or any part of the
Property and/or Improvements, the Term shall not be reduced or affected in any way and Tenant
shall continue to pay in full any sum or sums of money and charges herein reserved and provided
to be paid by Tenant, and, subject to the other provisions of this Section 15.8, Tenant shall be
entitled to any Award or payment for the temporary use of the Property and/or Improvements prior
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to the termination of this Ground Lease, and Landlord shall be entitled to any Award or payment
for such use after the termination of this Ground Lease.
15.8.2 If, after the occurrence of a temporary taking, possession of the Property
and/or Improvements shall revert to Tenant prior to the expiration of the Term, Tenant shall, to
the extent of the amount of any award or payment, unless at such time there remains less than
five (5) years in the Term, restore the Property and/or Improvements and in all other respects
indemnify and hold Landlord harmless from the effects of such Taking so that the Property and/or
Improvements in every respect shall upon completion of such restoration be in the same condition
as they were prior to the taking thereof.
15.8.3 Any Award or payment for damages or cost of restoration made on or
after the termination of this Ground Lease shall be paid first to the Mortgagee, if any, to the extent
of the Mortgage, then to Landlord absolutely, together with the remaining balance of any other
funds paid to Tenant for such damages or cost of restoration and Tenant shall thereupon be
excused from any obligation to restore the Property and/or Improvements upon the termination of
such Temporary Taking except that any obligation that may have accrued for Tenant to restore
the Property and/or Improvements prior to the commencement of said Temporary Taking shall
continue to be the obligation of Tenant.
15.9. Mortgagee Protection. Notwithstanding anything contained in this Ground Lease
to the contrary, any and all condemnation proceeds shall be paid first to the Mortgagee, if any, to
be applied in accordance with the Mortgage and other documents that govern the loan secured
by the Mortgage to reduce the Mortgage if required by the Mortgage documents.
15.10. Appraisal. Whenever an appraisal of the Property is called for under the terms of
this Ground Lease, the parties shall use the following procedure:
15.10.1 Appointment of Appraiser. Within ten (10) days after notice from
Landlord to Tenant, Landlord and Tenant shall each appoint an MAI appraiser to participate in
the appraisal process provided for in this Section 15.10 and shall give written notice thereof to the
other party. Upon the failure of either party so to appoint, the nondefaulting party shall have the
right to apply to the Superior Court of Orange County, California, to appoint an appraiser to
represent the defaulting party. Within ten (10) days of the parties' appointment, the two
(2) appraisers shall jointly appoint a third MAI appraiser and give written notice thereof to Landlord
and Tenant, or if within ten (10) days of the appointment of said appraisers the two (2) appraisers
shall fail to appoint a third, then either party hereto shall have the right to make application to said
Superior Court to appoint such third appraiser.
15.10.2 Determination of Fair Market Value.
(i) Within thirty (30) days after the appointment of the third appraiser,
the appraisers shall determine the fair market value of the Property and the Improvements in
accordance with the provisions hereof, and shall execute and acknowledge their determination of
fair market value in writing and cause a copy thereof to be delivered to each of the parties hereto.
(ii) The appraisers shall determine the fair market value of the Property
and the Improvements as of the date of Landlord's notice referred to in Section 15.10.1 above,
based on sales of comparable property in the area in which the Property is located. If, however,
in the judgment of a majority of the appraisers, no such comparable sales are available, then the
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appraisal shall be based on the following assumptions: (i) that the Property is free and clear of
this Ground Lease, the Improvements and all other improvements, and all easements and
encumbrances; and (ii) that the Property is available for immediate sale and development for the
purposes and at the density and intensity of development permitted under the zoning, subdivision
and land use planning ordinances and regulations applicable to the Property in effect on the
Commencement Date of this Ground Lease, and any changes or amendments thereto or
modification or variance from the provisions thereof or conditional use permits which could
reasonably be anticipated to have been granted or approved as of the date of this Ground Lease.
In the event of an appraisal made with respect to a partial taking pursuant to Section 15.6.3
hereof, the assumptions in that section shall apply in lieu of the foregoing assumptions in this
paragraph. Notwithstanding anything contained herein to the contrary, if the appraisal, for the
particular purposes for which it is being done, should reasonably reflect the rent restrictions
imposed on the Property pursuant to Article 8 of this Ground Lease, then such rent restrictions
shall be taken into consideration by the appraisers.
(iii) If a majority of the appraisers are unable to agree on fair market
value within thirty (30) days of the appointment of the third appraiser, the three (3) appraisals shall
be added together and their total divided by three (3). The resulting quotient shall be the fair
market value of the Property and the Improvements. If, however, the low appraisal and/or high
appraisal is or are more than ten percent (10%) lower and/or higher than the middle appraisal,
the low and/or high appraisal shall be disregarded. If only one appraisal is disregarded, the
remaining two appraisals shall be added together and their total divided by two (2). The resulting
quotient shall be the fair market value of the Property and the Improvements. If both the low and
high appraisals are disregarded, the middle appraisal shall be the fair market value of the
Property.
15.10.3 Payment of Fees. Each of the parties hereto shall (a) pay for the
services of its appointee, (b) pay one-half (1/2) of the fee charged by the appraiser selected by
their appointees, and (c) pay one-half (1/2) of all other proper costs of the appraisal.
ARTICLE 16
ENVIRONMENTAL
16.1. No Use of Hazardous Materials on the Property. Tenant covenants and agrees
that it shall not, and that it shall not permit any subtenant to, treat, use, store, dispose, release,
handle or otherwise manage Hazardous Materials on the Property except in connection with any
construction, operation, maintenance or repair of the Improvements or in the ordinary course of
its business, and that such conduct shall be done in compliance with all applicable federal, state
and local laws, including all Environmental Laws. Tenant's violation of the foregoing prohibition
shall constitute a breach hereunder and Tenant shall indemnify, hold harmless and defend
Landlord for such violation as provided below. Except for Hazardous Materials first brought onto
the Property by Tenant after the Commencement Date in violation of Environmental Laws, neither
the presence of Hazardous Materials on or under the Property as of the Commencement Date
nor the presence of Hazardous Materials on or under the Property after the Commencement Date
shall constitute a breach by Tenant of any representation, warranty and covenant contained
herein and to the extent the presence of such Hazardous Materials requires remediation, the
costs of such remediation shall be borne by Landlord, rather than Tenant, pursuant to the
provisions of Section 16.3 below.
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16.2. Notice and Remediation by Tenant. Tenant shall promptly give Landlord, and
Landlord shall give Tenant, written notice of any notices, demands, claims or orders received by
Tenant from any governmental agency pertaining to Hazardous Materials which may affect the
Property.
16.3. Environmental Indemnity. Tenant shall save, protect, pay for, defend (with
counsel acceptable to Landlord and/or City, as applicable), indemnify and hold harmless
Landlord, City, and their respective elected and appointed officials, officers, employees, attorneys,
representatives, volunteers, contractors and agents (collectively, "Indemnitees") from and against
any and all Environmental Claims and any and all liabilities, suits, actions, claims, demands,
penalties, damages (including, without limitation, penalties, fines and monetary sanctions),
losses, costs or expenses (including, without limitation, consultants' fees, investigation and
laboratory fees, attorneys' fees and remedial and response costs and third -party claims or costs)
(the foregoing are hereinafter collectively referred to as "Liabilities") that may now or in the future
be incurred or suffered by Indemnitees by reason of, resulting from, in connection with or arising
in any manner whatsoever as a direct or indirect result of: (i) the presence, use, release, escape,
seepage, leakage, spillage, emission, generation, discharge, storage, or disposal of any
Hazardous Materials in, on, under, or about, or the transportation of any such Hazardous
Materials to or from, the Property; (ii) the violation, or alleged violation, of any statute, ordinance,
order, rule, regulation, permit, judgment, or license relating to the use, generation, release,
leakage, spillage, emission, escape, discharge, storage, disposal, or transportation of Hazardous
Materials in, on, under, or about, or to or from, the Property; (iii) the physical and environmental
condition of the Property, (iv) any Liabilities relating to any Environmental Laws and other
Governmental Requirements relating to Hazardous Materials and/or the environmental and/or
physical condition of the Property, and (v) any Environmental Claims relating to the Project or the
Property; provided, however, that the foregoing indemnity shall not apply to any Liabilities arising
or occurring (a) prior to the commencement of this Ground Lease, (b) after the expiration or earlier
termination of the Term of this Ground Lease or the date Tenant vacates the property, whichever
occurs later, or (c) as a result of the grossly negligent or wrongful acts or omissions of Landlord
or City. The foregoing indemnification shall continue in full force and effect regardless of whether
such condition, liability, loss, damage, cost, penalty, fine, and/or expense shall accrue or be
discovered before or after the termination of this Ground Lease. This indemnification
supplements and in no way limits the scope of the indemnification set forth in Article 13.
ARTICLE 17
ASSIGNMENT
Because of the importance that Landlord places on Tenant's qualification, expertise and
identity, and the reliance Landlord makes upon Tenant's ability to construct, complete, and
operate the Project, during the Affordability Period, Tenant shall not assign or attempt to assign
this Ground Lease or any right herein, except to such transferees as approved or permitted
pursuant to this Article 17. Notwithstanding the foregoing, Tenant may sublease the Housing
Units at the Project to Lower Income and Very Low Income Households at an Affordable Rent as
provided herein. In addition, Tenant may grant a right of first refusal and/or option to purchase
Tenant's interest in this Ground Lease and Tenant's interest in the Property, in the fifteenth (15th)
year after the issuance of a certificate of occupancy for the Project by City to one or more general
partners of Tenant.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
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17.1. Prohibition Against Transfer: No Sale or Assignment During Term. The
identities and qualifications of Tenant, as an Affiliate of The Related Companies of California,
LLC, and as an experienced and successful Tenant and operator of affordable apartment
complexes, are of particular concern to Landlord. It is because of this identity and these
qualifications that Landlord has entered into this Ground Lease with Tenant. Except as expressly
set forth in Sections 17.1.1 and 17.1.2, no voluntary or involuntary successor in interest of Tenant
shall acquire any rights or powers under this Ground Lease by assignment, assumption or
otherwise, nor shall Tenant make any total or partial transfer, conveyance, encumbrance to
secure financing or refinancing, assignment or sublease of the whole or any part of the leasehold
interest in the Property, nor shall there be any change in the general or limited partners of Tenant,
without the prior written approval of the Executive Director pursuant to Section 17.1.4 below,
which approval shall not be unreasonably withheld or delayed.
17.1.1 Permitted Transfers. Notwithstanding other provisions of this Ground
Lease to the contrary, Landlord approval of an assignment or transfer of this Ground Lease or
conveyance of Tenant's leasehold interest in the Property, or any part thereof, shall not be
required in connection with any of the following ("Permitted Transfers"):
(i) The granting of temporary easements or permits to facilitate the
construction and development of the Project.
(ii) A right of first refusal and/or option to purchase Tenant's interest in
this Ground Lease and Tenant's interest in the Property or the limited partner's interest in Tenant,
from and after the fifteenth (15th) year after the issuance of a certificate of occupancy for the
Project by City to one or more general partners of Tenant.
(iii) A transfer of a general partnership interest in Tenant to a nonprofit
managing general partner entity.
(iv) Notwithstanding anything to the contrary contained herein, without
the consent of the Landlord, each Investor Limited Partner shall have the right to assign its
interests as limited partner in the Tenant to an entity which is controlled by such Investor Limited
Partner or is under common control with such Investor Limited Partner.
(v) Notwithstanding anything to the contrary contained herein, Investor
Limited Partner shall have the right to remove either general partner of Tenant, or both general
partners, and substitute any Investor Limited Partner or an affiliate thereof as a general partner
of the Tenant, pursuant to the Partnership Agreement, without Landlord's consent. Any proposed
replacement of a general partner with an entity other than an Investor Limited Partner or an
affiliate thereof will be subject to Landlord's prior consent, which shall not be unreasonably
withheld.
(vi) Subject to the restrictions of Section 4, et seq. of the Affordable
Housing Agreement and Section 8.3, et seq. of this Ground Lease, the rental or lease for
occupancy of each of the Housing Units in the Project to qualified Very Low and Low Income
Households.
(vii) Assignment for approved financing purposes, subject to such
financing being considered and approved by Landlord pursuant to this Ground Lease.
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(viii) In the event of a Permitted Transfer by Tenant pursuant to this
Section 17.1.1 not requiring Landlord's prior approval, Tenant nevertheless agrees that within
thirty (30) days following such pre-approved assignment or transfer it shall give written notice to
Landlord of such assignment or transfer along with a true and complete copy of the proposed
assignment or transfer document conforming to the requirements of this Ground Lease.
(ix) Notwithstanding anything to the contrary in this Ground Lease, the
general partners in Tenant shall have the right, without the approval or consent of the Landlord,
to pledge or otherwise encumber its partnership interest in Tenant to Mortgagee and the
foreclosure of such pledge by Mortgagee shall not cause an Event of Default hereunder.
17.1.2 Conditions. In addition to the provisions of Section 17.1.1, Tenant's
right to make an assignment after the recordation of the Release of Construction Covenants
issued pursuant to the Affordable Housing Agreement shall be governed by Section 17.1.3 below
and shall be subject to compliance with the following further conditions:
(A) No Default. At the time of such assignment, this Ground
Lease shall be in full force and effect and either no Event of Default (as defined in Section 21.1)
then exists or no Event of Default will exist upon consummation of the assignment.
(B) Assumption. The assignee shall have executed an express
assumption of the obligations and liabilities of Tenant under this Ground Lease from and after the
date of delivery and recording of the assignment and there shall have been delivered to Landlord
at the time of the request for such assignment a conformed copy of such assumption.
(C) Hold Property Interests Together. Tenant shall hold the
Property, both its leasehold interest under this Ground Lease and the Improvements held
hereunder together, and shall not separately sell, lease (except for occupancy of individual
Housing Units in accordance with this Ground Lease), assign or transfer all or any part of its
leasehold interest in the Property or its fee interest in the Improvements.
17.1.3 Landlord Consideration of Requested Transfer. Landlord agrees that
it will not unreasonably withhold approval of a request for an assignment or transfer made
pursuant to this Section 17.1, provided (a) Tenant delivers written notice to Landlord requesting
such approval, (b) the proposed assignee or transferee possesses a reasonable level of
operational experience and capability with respect to the operation of similar types of affordable
rental housing projects in Southern California, (c) the proposed assignee or transferee possesses
a reasonable level of net worth and resources as necessary to develop, operate, and manage the
Project, (d) such assignment or transfer will not negatively affect the Rent or adjusted Rent to be
paid to Landlord pursuant to Section 4.1, et seq. (exclusive of Section 4.1.3), and (e) the
assignee(s) or transferee(s) completely and fully assume(s) the obligations of Tenant under this
Ground Lease pursuant to an assignment and assumption agreement(s) in a form which is
reasonably acceptable to Landlord and its legal counsel(s). Such notice shall be accompanied
by evidence regarding the proposed assignee's or purchaser's qualifications and experience and
its financial commitments and resources sufficient to enable Landlord to evaluate the proposed
assignee or purchaser pursuant to the criteria set forth in this Section 17.1.4 and other criteria as
reasonably determined by Landlord. Landlord shall approve or disapprove the request within
thirty (30) days of its receipt of Tenant's notice and submittal of complete information and
materials required herein. Landlord approval shall not be required for transfers or assignments
for Approved Financing including foreclosure or deed in lieu of foreclosure. In no event, however,
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FORM OF GROUND LEASE
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shall Landlord be obligated to approve the assignment or transfer of this Ground Lease or the
City Covenants requiring Landlord's approval, pursuant to this Section 17.1.4, except to an
approved transferee or assignee of Tenant's rights in and to the Property and the Project, based
on Landlord's reasonable determination that such transferee or assignee has the experience,
financial strength, knowledge, and overall capability to own, operate and manage the Project in
accordance with the terms, conditions, and restrictions contained in this Ground Lease. In
addition, Landlord shall not be required to grant its approval of any proposed transfer or
assignment unless all information reasonably requested by Landlord relating to the proposed
transferee or assignee entity and all general and limited partners of such entity, including true and
correct copies of an executed Partnership Agreement, if the proposed assignee/transferee is a
partnership, true and correct copies of articles of incorporation if the proposed
assignee/transferee is a corporation, plus current certified financial statements of the entity and
financial statements relating to other affordable rental housing projects developed and/or
operated by such entity(ies) and reporting and compliance documentation for such projects
submitted for public entities providing funding to such projects, etc., as applicable.
(i) In the event Tenant transfers all or any portion of the Project,
subject to and with Landlord approval, any Transfer Net Proceeds shall be split between Landlord
and Tenant in the same manner as Remaining Residual Receipts (eighty-five percent (85%) to
Landlord and fifteen percent (15%) to Tenant) until Landlord has received all Rent under this
Ground Lease, as adjusted pursuant to Sections 4.1.2 or 4.1.3 hereof, as applicable (including
accrued and unpaid Rent as well as prepayment of Rent attributable to the remaining Term of this
Ground Lease) and all Additional Rent owing hereunder. Thereafter, any remaining Transfer Net
Proceeds shall belong to Tenant. The provisions of this Section 17.1.3(a) shall be of no further
force or effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground
Lease.
17.1.4 Approval of Refinancing of Primary Loan. The Executive Director
shall have the right to review all documents related to and to approve (which approval will not be
unreasonably withheld) or disapprove any refinancing of the Primary Loan and any other debt
secured by Tenant's ground leasehold interest in the Property, which refinancing will: (a) increase
the interest rate applicable to such debt, or (b) increase the outstanding principal amount of such
debt, or (c) cause or require the release or withdrawal of cash or equity from any part of the
Project, or (d) otherwise increase the aggregate annual debt service payments on such loan.
The Executive Director shall reasonably consider any such proposed refinancing based on an
economic evaluation conducted by Landlord's economic consultant that analyzes the effect of the
proposed refinancing on (i) the availability of Residual Receipts to repay the Authority Subordinate
Loan, (ii) the availability of Cost Savings pursuant to Section 3.11 of the Affordable Housing
Agreement, and (iii) the ability of Tenant to repay in full the Primary Loan and any other debt or
other liens against the Property as such payment becomes due. In the event Tenant refinances
either or both Primary Loan(s) (or other debt), subject to and with Landlord approval, and Tenant
withdraws equity from the Project, any Refinancing Net Proceeds shall be split between Landlord
and Tenant in the same manner as Remaining Residual Receipts (eighty-five percent (85%) to
Landlord and fifteen percent (15%) to Tenant) until Landlord has received all Rent under this
Ground Lease, as adjusted pursuant to Sections 4.1.2 or 4.1.3 hereof, as applicable (including
accrued and unpaid Rent as well as prepayment of Rent attributable to the remaining Term of this
Ground Lease) and all Additional Rent owing hereunder. Thereafter, any remaining Refinancing
Net Proceeds shall belong to Tenant.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 65 of 86
17.1.5 Assignment Agreement. No assignment of any interest in this Ground
Lease made with Landlord's consent or as herein otherwise permitted shall be effective unless
and until there shall have been delivered to Landlord an executed counterpart of such assignment
or other transfer document containing an agreement, in recordable form, executed by the assignor
and the proposed assignee, wherein and whereby such assignee assumes due performance of
the obligations on the assignor's part to be performed under this Ground Lease from the effective
date of the assignment to the end of the Term.
17.1.6 Further Assignments. The consent by Landlord to an assignment shall
not in any way be construed to relieve Tenant from obtaining the express consent in writing of
Landlord to any further assignment if required by the terms of this Ground Lease.
17.1.7 Other Rights of Mortgagees. Landlord agrees that none of the
restrictions or limitations on assignment or transfer by Tenant set forth in this Article 17 shall be
construed to limit or abrogate the rights of a Mortgagee to (a) seek the appointment of a receiver,
or (b) delegate or assign its rights under this Ground Lease to any third party in connection with
the exercise of said Mortgagee's rights and remedies under its Mortgage.
17.1.8 Prohibition Against Landlord Transfers. Notwithstanding anything to
the contrary set forth in this Ground Lease, unless required by statute, court order or operation of
law, Landlord shall not transfer, assign, pledge, or hypothecate its fee interest in the Property
(other than to entities under common control with Landlord or other governmental entities under
applicable law) prior to the expiration of the Tax Credit Compliance Period without the consent of
Investor Limited Partner, which consent shall not be unreasonably withheld, conditioned, or
delayed.
17.1.9 Terminable Upon Foreclosure. Notwithstanding anything contained in
this Ground Lease to the contrary, upon foreclosure of a Mortgage, acceptance by a Mortgagee
of an assignment or deed in lieu of foreclosure or execution of a New Ground Lease, Article 17 of
this Ground Lease shall be terminable by the purchaser at the foreclosure sale, or the assignee
or grantee of a deed in lieu of foreclosure, by notice to Landlord.
ARTICLE 18
MORTGAGES
18.1. Ground Leasehold Mortgages. At all times during the Term, Tenant shall have
the right to mortgage, pledge, deed in trust, assign rents, issues and profits and/or collaterally
(or absolutely for purposes of security if required by an approved Lender) assign its leasehold
estate and interest in this Ground Lease (but in no event Landlord's fee interest), or otherwise
encumber this Ground Lease, and/or the interest of Tenant hereunder, in whole or in part, and
any interests or rights appurtenant to this Ground Lease, and to assign or pledge the same as
security for any debt (the holder of any such mortgage, pledge or other encumbrance, and the
beneficiary of any such deed of trust being hereafter referred to as "Mortgagee" and the mortgage,
pledge, deed of trust or other instrument as amended or modified as permitted by the terms of
this Ground Lease and with the approval of Landlord's Executive Director, hereafter referred to
as "Mortgage"), upon and subject to each and all of the following terms and conditions:
(i) Prior to the issuance of a Release of Construction Covenants for
the Project, Mortgages entered into by Tenant shall be limited in purpose to and shall not exceed
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the amount necessary and appropriate to develop the Improvements, and to acquire and install
equipment and fixtures thereon. Said amount shall include all hard and soft costs of acquisition,
development, construction, lease -up and operation of the Improvements. Upon and after the
issuance of the Release of Construction Covenants for the Project, Mortgages entered into by
Tenant shall be subject to the reasonable approval of Landlord's Executive Director.
(ii) Any permitted Mortgages entered into by Tenant are to be
originated only by a Lender or Lenders approved in writing by Landlord, which approval will not
be unreasonably withheld and for which Landlord shall state the reasons for any such disapproval.
Any Lender must be duly licensed or registered with any regulatory agency having jurisdiction
over its operation, if any; and any Lender must not be under any order or judgment of any court
or administrative agency restricting or impairing its operation as a Lender where the restriction or
impairment would be directly related to the proposed loan to Tenant. Upon the reasonable
request of Landlord, the beneficial owners of Lender must be disclosed to Landlord.
is hereby preapproved as a Lender, subject to Landlord's reasonable approval
of the terms of any Mortgage encumbering Tenant's leasehold interest in the Property or the
Project.
(iii) All rights acquired by said Mortgagee shall be subject to each and
all of the covenants, conditions and restrictions set forth in this Ground Lease, and to all rights of
Landlord hereunder, none of which covenants, conditions and restrictions is or shall be waived
by Landlord by reason of the giving of any Mortgage.
If Tenant encumbers its leasehold estate by way of a Mortgage with the reasonable
consent of Landlord as permitted herein, and should Landlord be advised in writing of the name
and address of the Mortgagee, then this Ground Lease shall not be terminated or canceled on
account of any Event of Default by Tenant in the performance of the terms, covenants or
conditions hereof until Landlord shall have complied with the provisions of Section 18.2 hereof as
to the Mortgagee's rights to cure.
Notwithstanding the foregoing and subject to Section 8.3.10 herein, the Mortgage
of the Primary Loan is subject to the terms and conditions of a subordination agreement between
the Lender and Landlord and any other Mortgage is subject to the terms of this Ground Lease.
(iv) No cancellation, surrender, termination, amendment, or
modification of this Ground Lease shall be effective without the written consent of the holder of
any Mortgage including, without limitation,
18.2. Landlord's Forbearance and Right to Cure Defaults on Mortgages.
(i) Notice. Landlord will give to Mortgagee, at such address as is
specified by the Mortgagee in accordance with Section 25.1 hereof, a copy of each notice or other
communication with respect to any claim that a default exists or is about to exist from Landlord to
Tenant hereunder at the time of giving such notice or communication to Tenant, and Landlord will
give to Mortgagee a copy of each notice of any rejection of this Ground Lease by any trustee in
bankruptcy of Tenant. Landlord will not exercise any right, power or remedy with respect to any
Event of Default hereunder, and no notice to Tenant of any such Event of Default and no
termination of this Ground Lease in connection therewith shall be effective, unless Landlord has
given to Mortgagee written notice or a copy of its notice to Tenant of such Event of Default or any
such termination, as the case may be, and an opportunity to cure as provided in Section 18.10
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FORM OF GROUND LEASE
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below. Further, after the receipt by Tenant of a notice of default under this Ground Lease and the
expiration of any applicable period of cure given to Tenant under this Ground Lease, Landlord
shall deliver an additional notice ("Mortgagee's Notice") to Mortgagee specifying the default and
stating that Tenant's cure period has expired.
(ii) Mortgagee's Transferees, etc. In the event the leasehold estate
hereunder shall be acquired by foreclosure, trustee's sale or deed or assignment in lieu of
foreclosure of a Mortgage, the purchaser at such sale or the transferee by such assignment and
its successors as holders of the leasehold estate hereunder shall not be liable for any past due
Rent, if any, or other obligations accruing after its or their subsequent sale or transfer of such
leasehold estate and such purchaser or transferee and its successors shall be entitled to transfer
such estate or interest without consent or approval of Landlord. Additionally, in the event the
leasehold estate hereunder shall be acquired by foreclosure, trustee's sale or deed or assignment
in lieu of foreclosure of a Mortgage, the purchaser at such sale or the transferee by such
assignment and its successors as holders of the leasehold estate hereunder shall be liable for
the payment of all Rent (including Additional Rent and any adjusted Rent pursuant to Section 4.1,
et seq., if any), becoming due with respect to the period during which such purchaser, transferee
or other successor is the holder of the leasehold estate hereunder during the entirety of the
remaining Term. This Section shall also apply to the rights of a Mortgagee in connection with the
entry into a New Ground Lease under Section 18.10(c)(8) and to the appointment of a receiver
on behalf of a Mortgagee.
18.3. Limited Liability of Mortgagee for Prior Indemnified Acts. A Mortgagee (or
any permitted successor to Tenant's leasehold interest hereunder arising through a Mortgagee)
shall not be obligated to assume the liability of Tenant for any indemnities arising for a period prior
to such Mortgagee (or such successor) acquiring the right to possession of the Property under
this Ground Lease.
18.4. Landlord Cooperation. Landlord covenants and agrees that it will act and fully
cooperate with Tenant in connection with Tenant's right to grant leasehold mortgages as
hereinabove provided. At the request of Tenant or any proposed or existing Mortgagee, Landlord
shall promptly execute and deliver (but at no cost to Landlord) (i) such documents or instruments
reasonably requested to evidence, acknowledge and/or perfect the rights of Mortgagees as herein
provided; and (ii) an estoppel certificate in such form as may be reasonably requested by a
Mortgagee, limited to certifying the status of this Ground Lease and Tenant's leasehold interest
herein and such matters as are reasonably requested by Tenant or such Mortgagees (provided
no such matters shall effect Landlord's fee interest or alter or amend the terms of this Ground
Lease) unless expressly approved by Landlord. Such estoppel certificate shall include, but not
be limited to, certification by Landlord that (a) this Ground Lease is unmodified and in full force
and effect (or, if modified, state the nature of such modification and certify that this Ground Lease,
as so modified, is in full force and effect), (b) all rents currently due under this Ground Lease have
been paid (or, if unpaid, the period and amount of any arrearages, penalties, interest and other
charges), and (c) there are not, to Landlord's knowledge, any uncured Events of Default on the
part of Tenant under this Ground Lease or facts, acts or omissions which with the giving of notice
or passing of time, or both, would constitute an Event of Default (or, if there is a default, the nature
and scope of the default). Any such estoppel certificate may be conclusively relied upon by any
proposed or existing leasehold Mortgagee or permitted assignee of Tenant's interest in this
Ground Lease.
ATTACHMENT NO. 7
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18.5. No Subordination of Landlord's Fee Interest, Affordable Housing Covenants,
or Entitlements. Landlord's fee interest in the Property, the Affordable Housing Covenants, and
the Entitlement shall each and all be senior to, and shall not be subordinated to, any financing
obtained by Tenant in connection with the Property.
18.6. Priority. This Ground Lease, any extensions, renewals or replacements thereof,
any sublease entered into by Tenant as sublessor, and any Mortgage or other encumbrance
recorded by any Mortgagee shall be superior to any future mortgages, deeds of trust or similar
encumbrances placed by Landlord on the Property and to any lien right, if any, of Landlord on the
buildings, and any furniture, fixtures, equipment or other personal property of Tenant upon the
Property or any interest of Landlord in sublease rentals or similar agreements, and, subject to
payment of costs and expenses incurred therefor being paid by Tenant, Landlord agrees to
execute, acknowledge (if appropriate) and deliver any additional documents reasonably
requested by Mortgagee to confirm the foregoing.
18.7. Claims. Landlord and Tenant shall deliver to Mortgagee notice of any litigation
between the parties or involving the Property or this Ground Lease. Mortgagee shall have the
right, at its option and its expense, to intervene and become a party to any such proceedings. If
Mortgagee elects not to intervene or become a party, Landlord shall deliver to Mortgagee prompt
notice of and a copy of any award, decision or settlement agreement made in connection with any
such proceeding.
18.8. Further Amendments. Subject to Section 18.5 above, Landlord and Tenant shall
cooperate in including in the Ground Lease by suitable and reasonable amendment or
amendments from time to time of a provision or provisions that may be reasonably requested by
any proposed Mortgagee for the purpose of implementing the mortgagee protection provisions
contained in this Ground Lease to allow the Mortgagee reasonable means to protect or preserve
the lien of its Mortgage upon the occurrence of a default under the terms of this Ground Lease.
Subject to Section 18.5 above, Landlord and Tenant each agree to execute and deliver (and to
acknowledge for recording purposes, if necessary) such agreement(s) or instrument(s)
reasonably required to effect such amendment(s).
18.9. Loan Obligations. Nothing contained in this Ground Lease shall relieve Tenant
of its obligations and responsibilities under any Mortgage loans and Mortgage loan documents to
operate the Project as set forth therein.
18.10. Liens and Encumbrances Against Tenant's Interest in this Ground
Leasehold Estate.
(i) Tenant (and Foreclosure Transferee, as applicable) shall have the
right, subject to Landlord's reasonable consent pursuant to Sections 17.1.4 and 18.1 of this
Ground Lease, to encumber the leasehold estate created by this Ground Lease and the
Improvements with one or more deeds of trust or mortgages, in conformance with the
requirements of Sections 17.1.4 and 18.1 hereof and subject to Section 18.5 above.
(ii) Tenant shall not have the right to encumber Landlord's fee interest
in the Property or Landlord's reversionary interest in the Improvements.
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(iii) For as long as there is any lien securing any Mortgage loans:
(A) Landlord shall not agree to any mutual termination or accept
any surrender of this Ground Lease, nor shall Landlord consent to any amendment or modification
of this Ground Lease without the prior written consent of each Lender which has an outstanding
Mortgage loan.
(B) Notwithstanding any default by Tenant under this Ground
Lease, Landlord shall have no right to terminate this Ground Lease unless Landlord shall have
given each Lender that has an outstanding Mortgage loan written notice of such default (which
describes the default(s) in reasonable detail) and such Lender or Lenders shall have failed to
remedy such default or acquire Tenant's leasehold estate created by this Ground Lease or
commence foreclosure or other appropriate proceedings as set forth in, and within the time
specified by, this Section 18.
(C) Any Lender which has an outstanding Mortgage loan shall
have the right, but not the obligation, at any time to pay any or all of the Rent due pursuant to the
terms of this Ground Lease, and do any other act or thing required of Tenant by the terms of this
Ground Lease, to prevent termination of this Ground Lease. Any Mortgagee and its agents and
contractors shall have a right to enter the Property for purposes of accomplishing the foregoing,
so long as such Mortgagee indemnifies and holds Landlord harmless from any and all damage
and/or liability arising from such entry upon the Property. Each Lender shall have ninety (90) days
after receipt of a Mortgagee's Notice to cure the default described in the Mortgagee's Notice. All
payments so made and all things so done shall be as effective to prevent a termination of this
Ground Lease as the same would have been if made and performed by Tenant instead of by
Lender(s).
(D) In addition to the cure period provided in paragraph (3)
above, if the default is such that possession of the Property may be reasonably necessary to
remedy the default, any Lender that has an outstanding Mortgage loan shall have a reasonable
time after the expiration of such ninety (90) day period within which to remedy such default,
provided that (i) such Lender shall have fully cured any default in the payment of any monetary
obligations of Tenant under this Ground Lease within such ninety (90) day period and shall
continue to pay currently such monetary obligations when the same are due, and (ii) such Lender
shall have acquired Tenant's leasehold estate hereunder or commenced foreclosure or other
appropriate proceedings prior to or within such period, and shall be diligently prosecuting the
same.
(E) Any default under this Ground Lease which by its nature
cannot be remedied by any Lender shall be deemed to be remedied if (i) within ninety (90) days
after receiving a Mortgagee's Notice, or prior thereto, any Lender shall have acquired Tenant's
leasehold estate or commenced foreclosure or other appropriate proceedings, (ii) Lender shall
diligently prosecute any such proceedings to completion, (iii) Lender shall have fully cured any
default in the payment of any monetary obligations of Tenant hereunder which does not require
possession of the Property, and (iv) after gaining possession of the Property, the Lender shall
perform all other obligations of Tenant hereunder capable of performance by Lender when the
obligations are due.
(F) If any Lender is prohibited, stayed or enjoined by any
bankruptcy, insolvency or other judicial proceedings involving Tenant from commencing or
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prosecuting foreclosure or other appropriate proceedings, the times specified for commencing or
prosecuting such foreclosure or other proceedings shall be extended for the period of such stay,
prohibition or injunction; provided that any Lender shall have fully cured any default in the payment
of any monetary obligations of Tenant under this Ground Lease and shall continue to pay currently
such monetary obligations when the same fall due; provided, further, that such Lender shall not
interfere with Landlord's efforts to seek compliance by Tenant with any non -monetary obligation
under this Ground Lease.
(G) In the event any Foreclosure Transferee becomes Tenant
under this Ground Lease by means of foreclosure or assignment of the leasehold interest
hereunder in lieu of foreclosure or pursuant to any New Ground Lease obtained under subsection
(8) below, that Foreclosure Transferee shall be personally liable under this Ground Lease or such
New Ground Lease only for the period of time that Foreclosure Transferee remains Tenant
thereunder, and that Foreclosure Transferee's right to assign this Ground Lease or such New
Ground Lease shall be subject to the restrictions of Article 17 and Section 18.13 and as otherwise
set forth in this Ground Lease. Nothing in this Section 18.10 shall be construed to obligate any
Foreclosure Transferee to remedy any default of Tenant, and any failure of any Lender to
complete any such cure after commencing the same shall not give rise to any liability of any other
Lender to Landlord or Tenant.
(H) If this Ground Lease is terminated due to a foreclosure,
order of a bankruptcy court, or otherwise, upon written request by Foreclosure Transferee given
within sixty (60) days after such termination, Landlord shall enter into a New Ground Lease of the
Property with the Foreclosure Transferee ("New Ground Lease") for the remainder of this Ground
Lease Term with the same agreements, covenants, reversionary interests and conditions (except
for any requirements which have been fulfilled by Tenant prior to termination) as are contained in
this Ground Lease and with priority equal to this Ground Lease, which New Ground Lease shall
be effective as of the date of termination of the original Ground Lease; provided, however, that a
Foreclosure Transferee shall promptly exercise best efforts to and shall cure any defaults by
Tenant susceptible to cure by Foreclosure Transferee. The Tenant under the New Ground Lease
shall have the same right, title and interest in and to all Improvements located on the Property as
Tenant had under the terminated Ground Lease immediately prior to its termination. Landlord
shall by quitclaim deed or by the terms of the New Ground Lease convey to the Foreclosure
Transferee title to the improvements, if any, which become vested in Landlord as a result of the
termination of the Ground Lease and shall assign Landlord's interest in all existing subleases for
all or any part of the Property and all attornment given by the subleases. Landlord shall not
terminate or agree to terminate any such sublease or enter into any new lease or sublease for all
or any portion of the Property without Mortgagee's prior written consent. Foreclosure Transferee
shall be responsible for all costs reasonably incurred by Landlord in connection with the
preparation and execution of such New Ground Lease.
(1) The Investor Limited Partner shall have the same rights to
receive notices of default as any Lender authorized under this Section 18.10(c). Nothing in this
Section 18.10(c)(9) shall limit or impair the Investor Limited Partner's rights to cure under
Section 21.1.5 below.
(J) The parties shall not amend this Ground Lease without the
consent of each Lender and the Investor Limited Partner.
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(K) No Mortgagee shall be required to perform any act which is
not susceptible to performance by a Mortgagee, such as to cure a filing or condition of bankruptcy
or insolvency or to cure or commence the cure of any default which is Borrower's failure to pay
any lien, charge or encumbrance which is junior in priority to the Mortgagee's encumbrance.
(iv) Any Mortgage created pursuant to Section 18.1 or subsection (a) of
this Section 18.10 shall be subject to the provisions of this Ground Lease and all rights of Landlord
under this Ground Lease.
(v) No Mortgagee or its designee or transferee shall be or become
liable to Landlord as an assignee of this Ground Lease or otherwise unless it expressly assumes
by written instrument executed by Landlord and Mortgagee or its designee or transferee such
liability (in which event the Mortgagee's, designee's or transferee's liability shall be limited to the
period of time during which it is the owner of the leasehold estate created hereby) and no
assumption shall be inferred from or result from acceptance of an estoppel certificate from
Landlord, acceptance of a Mortgage of Tenant's leasehold estate, or by foreclosure or other
appropriate proceedings in the nature thereof or as the result of any other action or remedy
provided for by such ground leasehold Mortgage or other instrument or from a conveyance from
Tenant pursuant to which the purchaser at foreclosure or grantee shall acquire the rights and
interest of Tenant under the terms of this Ground Lease.
(vi) On transfer of the Ground Lease at any foreclosure sale, or upon
creation of a New Ground Lease, any or all of the following Events of Default relating to the prior
lessee under the Ground Lease shall be deemed cured:
(A) Attachment, execution or other judicial levy upon the
Ground Lease;
(B) Assignment of the Ground Lease for the direct or indirect
benefit of creditors of the prior Tenant;
(C) Judicial appointment of a receiver or similar officer to take
possession of the Ground Lease;
(D) Filing any petition by, for or against Tenant under any
chapter of the federal Bankruptcy Act or any federal or state debtor relief statute, as amended;
(E) Any failure by Tenant to make a disclosure of a hazardous
substance release as required by applicable federal, state or local law, the Ground Lease, or
otherwise; and
(F) Any other defaults personal to the prior owner of the Ground
Lease and/or not otherwise reasonably curable by Mortgagee.
(vii) A Foreclosure Transferee shall succeed to all interest of Tenant in
any security or other deposits or other impound payments paid by Tenant to Landlord, except to
the extent such security or other deposit or impound payment is used to cure an Event of Default
of Tenant hereunder.
(viii) Foreclosure of any Mortgage or any sale thereunder, whether by
judicial proceedings or by virtue of any power of sale contained in such Mortgage, or any
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conveyance of the leasehold estate under this Ground Lease from Tenant to a Foreclosure
Transferee in lieu of foreclosure or other appropriate proceedings in the nature thereof, shall not
require the consent of Landlord or constitute a breach of any provision or a default under this
Ground Lease. Landlord shall recognize the Foreclosure Transferee as the Tenant under this
Ground Lease following any such transfer, subject to the obligations of the Foreclosure
Transferee to comply with this Ground Lease.
18.11. Cost of Loans to be Paid by Tenant. The Tenant affirms that it shall bear all of
the costs and expenses in connection with (i) the preparation and securing of the Mortgage loans,
(ii) the delivery of any instruments and documents and their filing and recording, if required, (iii) all
taxes and charges payable in connection with the Mortgage loans, and (iv) all costs reasonably
incurred by Landlord in providing any estoppel certificates and/or in making any amendments of
this Ground Lease requested by Tenant or Lenders.
18.12. No Merger. There shall be no merger, without the consent of the Mortgagee under
any Mortgage, of the leasehold estate and the fee estate in the Property merely because both
estates are acquired or become vested in the same person or entity.
18.13. Transfer Rights. Foreclosure of any Mortgage, or any sale thereunder, whether
by judicial proceedings or by virtue of any power contained in the Mortgage, or any conveyance
of the leasehold estate hereunder from Tenant to any Mortgagee or an affiliate of Mortgagee or
entity controlled by Mortgagee, through, or in lieu of, foreclosure or other appropriate proceedings
in the nature thereof, shall not require the consent of Landlord or constitute a breach of any
provision of or a default under this Ground Lease, and upon such foreclosure, sale or conveyance,
Landlord shall recognize the purchaser or other transferee in connection therewith as Tenant
hereunder, subject to the obligations of the Foreclosure Transferee to comply with this Ground
Lease.
ARTICLE 19
SUBLEASING
19.1. Subleasing of Property. All subleases made by Tenant to residents of the
Housing Units at the Project (each, a "Resident Lease"; collectively, "Resident Leases") shall be
in compliance with the Affordable Housing Covenants, the HOME Regulations, this Ground
Lease, and all applicable regulations promulgated by TCAC and the requirements of the Tax
Credit Regulatory Agreement, and shall be subject to the following provisions and restrictions:
19.1.1 Each Resident Lease shall contain a provision, satisfactory to Landlord,
requiring the subtenant to attorn to Landlord upon (a) an Event of Default by Tenant under this
Ground Lease, and (b) receipt by such subtenant of written notice of such Event of Default and
instructions to make such subtenant's rental payments to Landlord.
19.1.2 On any termination of this Ground Lease prior to the expiration of the
Term, all of Tenant's interest as sublessor under any and all existing valid and enforceable
Resident Leases for which Landlord has issued a non -disturbance agreement shall be deemed
automatically assigned, transferred and conveyed to Landlord and subtenants under such
Resident Leases shall be deemed to have attorned to Landlord. Landlord shall thereafter be
bound on such Resident Leases to the same extent Tenant, as sublessor, was bound thereunder
and Landlord shall have all the rights under such Resident Leases that Tenant, as sublessor, had
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under such Resident Leases; provided, however, that any amendments to any such Resident
Lease made after the issuance of a non -disturbance agreement to a subtenant shall not be
binding on Landlord.
19.1.3 Each Resident Lease shall expressly provide that it is subject to each and
all of the covenants, conditions, restrictions and provisions of this Ground Lease.
19.2. Nondisturbance Agreements. Landlord shall execute nondisturbance
agreements with any subtenant, which nondisturbance agreement shall provide that (a) so long
as such subtenant has not defaulted under the terms of the Resident Lease, such subtenant's
rights will not be terminated by Landlord on Landlord's exercise of Landlord's right to terminate
this Ground Lease for Tenant's breach, and (b) Landlord shall not be bound by prepayments of
more than one month's rent or security deposits in excess of one month's rent under such
nondisturbance agreement unless such excess prepayment and/or deposit has, in fact, been
transferred to Landlord.
19.3. Rights of Mortgagees. Notwithstanding anything contained in this Ground Lease
to the contrary, all attornment provisions applicable to Landlord shall also be applicable to a
Mortgagee and, as between Landlord and Mortgagee, the Mortgagee shall have priority in any
attornment situation.
ARTICLE 20
PERFORMANCE OF TENANT'S COVENANTS
20.1. Right of Performance.
20.1.1 Rights of Landlord. If Tenant shall at any time fail to pay any Imposition
or other charge in accordance with Article 4 hereof, within the time period therein permitted, or
shall fail to pay for or maintain any of the insurance policies provided for in Article 9 hereof, within
the time therein permitted, or to make any other payment or perform any other act on its part to
be made or performed hereunder, within the time permitted by this Ground Lease, then Landlord,
after thirty (30) days' written notice to Tenant and the Investor Limited Partner (or, in case of an
emergency, on such notice, or without notice, as may be reasonable under the circumstances)
and without waiving or releasing Tenant from any obligation of Tenant hereunder, may (but shall
not be required to):
(i) pay such Imposition or other charge payable by Tenant pursuant to
the provisions of Article 4 hereof, or
(ii) pay for and maintain such insurance policies provided for in
Article 9 hereof, or
(iii) make such other payment or perform such other act on Tenant's
part to be made or performed as in this Ground Lease provided.
20.1.2 Rights of Mortgagees. Notwithstanding anything in this Ground Lease
to the contrary, all of the performance rights available to Landlord under this Section 20.1.1 shall
also be available to Mortgagee, and, as between Landlord and Mortgagee, the performance rights
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of Mortgagee under Section 18.10 shall take precedence over the performance rights of Landlord
under Section 20.1.1.
20.1.3 Rights of Investor Limited Partner. Prior to making a payment to a
third party on behalf of Tenant as permitted by Section 20.1.1, Landlord shall provide not fewer
than five (5) business days' notice (and longer, if reasonably possible under the circumstances,
as required by Section 20.1.1) to the Investor Limited Partner and the Investor Limited Partner
shall have the right to make the payment on Tenant's behalf prior to Landlord's right under
Section 20.1.1.
20.2. Reimbursement and Damages. All sums so paid by Landlord and all costs and
expenses incurred by Landlord in connection with the performance of any such act, together with
interest thereon at the rate provided in Section 4.6 from the respective dates of Landlord's making
of each such payment or incurring of each such cost or expense, shall constitute Additional Rent
payable by Tenant under this Ground Lease and shall be paid by Tenant to Landlord on demand.
Landlord shall not be limited in the proof of any damages which Landlord may claim against
Tenant arising out of or by reason of Tenant's failure to provide and keep in force insurance as
aforesaid, to the amount of the insurance premium or premiums not paid or incurred by Tenant
and which would have been payable upon such insurance, but Landlord shall also be entitled to
recover as damages for such breach, the uninsured amount of any loss (to the extent of any
deficiency in the insurance required by the provisions of this Ground Lease), damages, costs and
expenses of suit, including reasonable attorneys' fees, suffered or incurred by reason of damage
to, or destruction of, the Improvements, occurring during any period in which Tenant shall have
failed or neglected to provide insurance as aforesaid.
ARTICLE 21
EVENTS OF DEFAULT; REMEDIES
21.1. Events of Default. Any one or all of the following events shall constitute an "Event
of Default" hereunder:
21.1.1 If Tenant shall default in the payment of any Rent or Additional Rent when
and as the same become due and payable and such default shall continue for more than ten (10)
days after Landlord shall have given written notice thereof to Tenant; or
21.1.2 The abandonment or vacation of the Property by Tenant for a period of
thirty (30) days or more; or
21.1.3 The entry of any decree or order for relief by any court with respect to
Tenant, or any assignee or transferee of Tenant (hereinafter "Assignee"), in any involuntary case
under the Federal Bankruptcy Code or any other applicable federal or state law; or the
appointment of or taking possession by any receiver, liquidator, assignee, trustee, sequestrator
or other similar official of Tenant or any Assignee (unless such appointment is in connection with
a Mortgagee's exercise of its remedies under its Mortgage), or of any substantial part of the
property of Tenant or such Assignee, or the ordering or winding up or liquidating of the affairs of
Tenant or any Assignee and the continuance of such decree or order unstayed and in effect for a
period of ninety (90) days or more (whether or not consecutive); or the commencement by Tenant
or any such Assignee of a voluntary proceeding under the Federal Bankruptcy Code or any other
applicable state or federal law or consent by Tenant or any such Assignee to the entry of any
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order for relief in an involuntary case under any such law, or consent by Tenant or any such
Assignee to the appointment of or taking of possession by a receiver, liquidator, assignee, trustee,
sequestrator or other similar official of Tenant or any such Assignee, or of any substantial property
of any of the foregoing, or the making by Tenant or any such Assignee of any general assignment
for the benefit of creditors; or Tenant or any such Assignee takes any other voluntary action
related to the business of Tenant or any such Assignee or the winding up of the affairs of any of
the foregoing.
21.1.4 If Tenant shall default in the performance of or compliance with any other
term, covenant or condition of this Ground Lease (other than as set forth in Sections 21.1.1 and
21.1.2) and such default shall continue for more than thirty (30) days after Landlord shall have
given written notice thereof to Tenant, provided, however, if cure of such default reasonably
requires more than thirty (30) days, then, provided that Tenant commences to cure within such
thirty (30) day period and thereafter diligently and continuously prosecutes the cure to completion
(within no more than one hundred eighty (180) days following Landlord's written notice to Tenant),
Tenant shall not be in default during the cure period.
21.1.5 Notwithstanding anything to the contrary contained in this Ground Lease,
prior to declaring any default or taking any remedy permitted under this Ground Lease or
applicable law based upon an alleged default under this Ground Lease by Tenant, Landlord shall
deliver written notice to the Investor Limited Partner of Tenant's failure to cure such default, and
Investor Limited Partner shall have one hundred eighty (180) days to cure such alleged default
(whether of a monetary or nonmonetary nature). In addition, if a Default is caused by the general
partner of Tenant and the Investor Limited Partner removes the general partner of Tenant, such
removal shall be deemed to have cured the Default so long as the Investor Limited Partner and/or
Tenant, as applicable, diligently continues to cure any remaining Events of Default after such
general partner is removed.
21.1.6 Notwithstanding anything to the contrary contained in this Ground Lease,
in the event Landlord's failure or refusal to consent to a loan from a limited partner of Tenant if
and when required by clause (vi) in the definition of Residual Receipts results in a circumstance
that would otherwise constitute an Event of Default hereunder, such circumstance, in and of itself,
shall not constitute an Event of Default hereunder and Landlord shall not be entitled terminate
this Ground Lease due to such circumstance; provided that nothing in the foregoing modifies
(a) Tenant's performance obligations under this Ground Lease or (b) Landlord's remedies with
respect to Events of Default that cannot be remedied by the loan proposed to be made by Tenant's
limited partner.
21.2. Remedies.
21.2.1 If an Event of Default shall occur and continue as aforesaid, then in
addition to any other remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Ground Lease and bring suit against Tenant and recover as
an award in such suit the following:
(i) the worth at the time of award of the unpaid rent and all other sums
due hereunder which had been earned at the time of termination;
(ii) the worth at the time of award of the amount by which the unpaid
rent and all other sums due hereunder which would have been earned after termination until the
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time of award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided;
(iii) the worth at the time of award of the amount by which the unpaid
rent and all other sums due hereunder for the balance of the Term after the time of award exceeds
the amount of such rental loss that Tenant proves could be reasonably avoided;
(iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations under this Ground
Lease or which in the ordinary course of things could be likely to result therefrom; and
(v) such amounts in addition to or in lieu of the foregoing as may be
permitted from time to time by applicable California law.
21.2.2 The "worth at the time of the award" of the amounts referred to in
Sections 21.2.1(a) and 21.2.1(b) above shall be computed by allowing interest at the rate provided
in Section 4.6 as of the date of the award. The "worth at the time of award" of the amount referred
to in Section 21.2.1(c) above shall be computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1 %).
21.2.3 If an Event of Default occurs, Landlord shall also have the right, with or
without terminating this Ground Lease, but subject to any nondisturbance agreements entered
into with subtenants, to reenter the Property and remove all persons and property from the
Property; such property may be removed and stored in a public warehouse or elsewhere at the
cost of and for the account of Tenant.
21.2.4 If an Event of Default occurs, Landlord shall also have the right, subject
to the rights of any permitted Mortgagee with or without terminating this Ground Lease, to relet
the Property. If Landlord so elects to exercise its right to relet the Property but without terminating
this Ground Lease, then rentals received by Landlord from such reletting shall be applied: First,
to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord;
Second, to the payment of any cost of such reletting; Third, to the payment of the cost of any
alterations and repairs to the Property; Fourth, to the payment of Rent and/or Additional Rent due
and unpaid hereunder; and Fifth, the residue, if any, shall be held by Landlord and applied in
payment of future Rent and/or Additional Rent as the same may become due and payable
hereunder. Should the amount of rental received from such reletting during any month which is
applied to the payment of Rent and/or Additional Rent hereunder be less than that agreed to be
paid during that month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord
immediately upon demand therefor by Landlord. Such deficiency shall be calculated and paid
monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses
incurred by Landlord in such reletting or in making alterations and repairs not covered by the
rentals received from such reletting.
21.2.5 No reentry or taking possession of the Property by Landlord pursuant to
Sections 21.2.3 or 21.2.4 shall be construed as an election to terminate this Ground Lease unless
a written notice of such intention is given to Tenant or unless the termination thereof is decreed
by a court of competent jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any default by Tenant, Landlord may at any time after such reletting elect to terminate
this Ground Lease for any such default.
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21.3. Receipt of Rent, No Waiver of Default. The receipt by Landlord of the rents or
any other charges due to Landlord, with knowledge of any breach of this Ground Lease by Tenant
or of any default on the part of Tenant in the observance or performance of any of the conditions
or covenants of this Ground Lease, shall not be deemed to be a waiver of any provisions of this
Ground Lease. No acceptance by Landlord of a lesser sum than the rents or any other charges
then due shall be deemed to be other than on account of the earliest installment of the rents or
other charges due, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment of rent or charges due be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such installment or pursue any other remedy provided in this
Ground Lease. The receipt by Landlord of any rent or any other sum of money or any other
consideration paid by Tenant after the termination of this Ground Lease, or after giving by
Landlord of any notice hereunder to effect such termination, shall not, except as otherwise
expressly set forth in this Ground Lease, reinstate, continue, or extend the term of this Ground
Lease, or destroy, or in any manner impair the efficacy of any such notice of termination as may
have been given hereunder by Landlord to Tenant prior to the receipt of any such sum of money
or other consideration, unless so agreed to in writing and signed by Landlord. Neither acceptance
of the keys nor any other act or thing done by Landlord or by its agents or employees during the
Term shall be deemed to be an acceptance of a surrender of the Property or the Improvements,
excepting only an agreement in writing signed by Landlord accepting or agreeing to accept such
a surrender.
21.4. Effect on Indemnification. Notwithstanding the foregoing, nothing contained in
this Article 21 shall be construed to limit the Indemnitees' right to indemnification as otherwise
provided in this Ground Lease.
ARTICLE 22
PERMITTED CONTESTS
Tenant, at no cost or expense to Landlord, may contest (after prior written notice to
Landlord), by appropriate legal proceedings conducted with due diligence, the amount or validity
or application, in whole or in part, of any Imposition or lien or any Governmental Requirements or
Insurance Requirements, provided that (a) in the case of liens of mechanics, materialmen,
suppliers or vendors, or Impositions or liens therefor, such proceedings shall suspend the
collection thereof from Landlord, and shall suspend a foreclosure against the Property and/or the
Improvements, or any interest therein, or any Rent, if any, (b) neither the Property nor the
Improvements, nor any part thereof or interest therein, nor the Rent, if any, nor any portion thereof,
would be in any danger of being sold, forfeited or lost by reason of such proceedings, (c) in the
case of Governmental Requirements, Landlord would not be in any danger of any criminal liability
or, unless Tenant shall have furnished a bond or other security therefor satisfactory to Landlord,
any additional civil liability for failure to comply therewith and the Property and the Improvements
would not be subject to the imposition of any lien as a result of such failure, and (d) Tenant shall
have furnished to Landlord, if requested, a bond or other security, satisfactory to Landlord. If
Tenant shall fail to contest any such matters, or to give Landlord security as hereinabove provided,
Landlord may, but shall not be obligated to, contest the matter or settle or compromise the same
without inquiring into the validity or the reasonableness thereof. Landlord, at the sole cost and
expense of Tenant, will cooperate with Tenant and execute any documents or pleadings legally
required for any such contest.
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ARTICLE 23
FORCE MAJEURE
23.1. Delay of Performance. Subject to Section 23.2 below, any prevention, delay,
nonperformance or stoppage by Tenant due to any of the following causes shall be excused: any
regulation, order, act, restriction or requirement or limitation imposed by any federal, state,
municipal or foreign government or any department or agency thereof, or civil or military authority;
acts of God; acts or omissions of Landlord or its agents or employees; fire, explosion or floods;
strikes, walkouts or inability to obtain materials; war, terrorism, riots, sabotage or civil insurrection;
or any other causes beyond the reasonable control of Tenant.
23.2. Notice and Cure Requirements. No prevention, delay, or stoppage of
performance shall be excused unless:
(i) Tenant notifies Landlord within thirty (30) days of such prevention,
delay or stoppage that it is claiming excuse of its obligations under this Article 23; and
(ii) Tenant diligently proceeds within thirty (30) days of the conclusion
of such prevention, delay or stoppage to cure the condition causing the prevention, delay or
stoppage; and
(iii) Tenant effects such cure within a reasonable time.
ARTICLE 24
CONSENT RIGHTS
Unless otherwise expressly provided in this Ground Lease, all approvals or consents of
Landlord (or Landlord's Executive Director), Tenant, or any Lender, Mortgagee, or Investor
Limited Partner, shall not be unreasonably withheld, conditioned, or delayed.
ARTICLE 25
GENERAL PROVISIONS
25.1. Notices. Any approval, disapproval, demand, document or other notice ("Notice")
which either party may desire to give to the other party under this Ground Lease must be in writing
and may be given either by (i) personal service, (ii) delivery by reputable document delivery
service such as Federal Express that provides a receipt showing date and time of delivery, (iii) by
facsimile transmission or (iv) mailing in the United States mail, certified mail, postage prepaid,
return receipt requested, addressed to the address of the party as set forth below, or at any other
address as that party may later designate by Notice. Service shall be deemed conclusively made
at the time of service if personally served; upon confirmation of receipt if sent by facsimile
transmission; the next business day if sent by overnight courier and receipt is confirmed by the
signature of an agent or employee of the party served; the next business day after deposit in the
United States mail, properly addressed and postage prepaid, return receipt requested, if served
by express mail; and three (3) days after deposit thereof in the United States mail, properly
addressed and postage prepaid, return receipt requested, if served by certified mail.
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25.1.1 Any notice to Landlord shall be given to:
Anaheim Housing Authority
c/o City Hall, Office of the City Clerk
100 South Anaheim Boulevard
Anaheim, California 92805
Attention: Linda N. Andal, Secretary
Fax No.: (714) 765-4105
With Copies To:
Anaheim Housing Authority
201 South Anaheim Boulevard, 10th Floor
Anaheim, California 92805
Attention: Leonie Mulvihill, Deputy City Attorney IV
Fax No.: (714) 765-4630
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Celeste Brady
Fax No.: (949) 823-5141
25.1.2 Any notice to Tenant shall be given to:
Avon Dakota Housing Partners II, L.P.
18201 Von Karman Avenue, Suite 900
Irvine, California 92612
Attention: William A. Witte
Fax No.: (949) 660-7273
With copies to:
Bocarsly Emden Cowan Esmail & Arndt LLP
633 West Fifth Street, 70th Floor
Los Angeles, California 90071
Attention: Lance Bocarsly
Fax No.: (213) 239-0410
With a Copy to: Any Lender(s) and/or the Investor Limited Partner whose name
and address is identified in a written notice sent to Landlord and
referencing this Ground Lease.
Any party may, by virtue of written Notice in compliance with this Section 25.1, alter or
change the address or the identity of the person to whom any notice, or copy thereof, is to be
sent.
25.2. Certificates. Landlord or Tenant, as the case may be, shall execute, acknowledge
and deliver to the other, promptly upon request by Landlord, Tenant, ground leasehold Mortgagee
or Investor Limited Partner, a Certificate of Landlord or Tenant, as the case may be, certifying
(a) that this Ground Lease is unmodified and in full force and effect (or, if there have been
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modifications, that this Ground Lease is in full force and effect, as modified, and stating the date
of each instrument so modifying this Ground Lease), (b) the date, if any, through which the Rent,
if any, has been paid, (c) whether there are then existing any offsets or defenses against the
enforcement of any term hereof on the part of Tenant to be performed or complied with (and, if
so, specifying the same), and (d) whether any default exists hereunder and, if any such default
exists, specifying the nature and period of existence thereof and what action Landlord or Tenant,
as the case may be, is taking or proposes to take with respect thereto and whether notice thereof
has been given to the party in default. Any Certificate may be relied upon by any prospective
purchaser, transferee, mortgagee or trustee under a deed of trust or leasehold estate in the
Property or any part thereof or of Landlord's or Tenant's interest under this Ground Lease. Tenant
will also deliver to Landlord, promptly upon request, such information with respect to the Property
or any part thereof as from time to time may reasonably be requested.
25.3. No Merger of Title. There shall be no merger of this Ground Lease or the
leasehold estate created by this Ground Lease with any other estate in the Property or any part
thereof by reason of the fact that the same person, firm, corporation or other entity may acquire
or own or hold, directly or indirectly: (a) this Ground Lease or the leasehold estate created by this
Ground Lease or any interest in this Ground Lease or in any such leasehold estate, and (b) any
other estate in the Property and the Improvements or any part thereof or any interest in such
estate, and no such merger shall occur unless and until all persons, corporations, firms and other
entities, including any leasehold Mortgagee or leasehold Mortgagees, having any interest
(including a security interest) in (i) this Ground Lease or the leasehold estate created by this
Ground Lease, and (ii) any other estate in the Property or the Improvements or any part thereof
shall join in a written instrument effecting such merger and shall duly record the same.
25.4. Utility Services. Tenant shall pay or cause to be paid all charges for all public or
private utility services and all sprinkler systems and protective services at any time rendered to
or in connection with the Property or the Improvements, or any part thereof, and shall comply with
all contracts existing on the date hereof or subsequently executed by Tenant relating to any such
services, and will do all other things required for the maintenance and continuance of all such
services.
25.5. Quiet Enjoyment. Tenant, upon paying the Rent, if any, and other charges herein
provided for and upon performing and complying with all covenants, agreements, terms and
conditions of this Ground Lease to be performed or complied with by it, shall lawfully and quietly
hold, occupy and enjoy the Property during the term of this Ground Lease without hindrance or
molestation by Landlord, or any person or persons claiming through Landlord.
25.6. No Claims Against Landlord. Nothing contained in this Ground Lease shall
constitute any consent or request by Landlord, express or implied, for the performance of any
labor or services or the furnishing of any materials or other property with respect to the Property
or any part thereof, nor as giving Tenant any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other property in such
fashion as would permit the making of any claim against Landlord or its interest in the Property in
respect thereof.
25.7. Inspection. Landlord and its authorized representatives may enter the Property
or any part thereof at all reasonable times for the purpose of inspecting, servicing or posting
notices, protecting the Property or the Improvements, or for any other lawful purposes.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 81 of 86
Notwithstanding the immediately preceding sentence, except in the event of an emergency,
Landlord may only enter the Housing Units after giving Tenant three (3) days' prior written notice.
25.8. No Waiver by Landlord. To the extent permitted by applicable law, no failure by
Landlord to insist upon the strict performance of any term hereof or to exercise any right, power
or remedy consequent upon a default under this Ground Lease, and no acceptance of rent during
the continuance of any such default, shall constitute a waiver of any such default or of any such
term. No waiver of any default shall affect or alter this Ground Lease, which shall continue in full
force and effect, or the rights of Landlord with respect to any other then existing or subsequent
default.
25.9. Holding Over. In the event Tenant shall hold over or remain in possession of the
Property or the Improvements with the consent of Landlord after the expiration of the Term, such
holding over or continued possession shall create a tenancy for month to month only, upon the
same terms and conditions as are herein set forth so far as the same are applicable.
25.10. Exculpation of Tenant's Personal Liability. Notwithstanding anything to the
contrary provided in this Ground Lease, including, without limitation, the remedies provisions set
forth in Section 21.2 above, it is specifically understood and agreed that there shall be no personal
liability or obligation on the part of Tenant or any partner of Tenant or any assignee or successor
in interest of Tenant hereunder (including, without limitation, any mortgagee, trustee or beneficiary
under any mortgage or deed of trust which may acquire Tenant's interest under this Ground Lease
through foreclosure or deed in lieu of foreclosure or any purchaser at a foreclosure sale) with
respect to the provisions of this Ground Lease relating to the payment of Rent and the
performance of other obligations under this Ground Lease; but that Landlord and all those
claiming by, through or under Landlord, its successors and assigns, shall look solely to the interest
of Tenant, its successors and assigns in this Ground Lease and the Improvements, for the
satisfaction of each and every provision and each and every right, privilege or remedy of Landlord
or any other party, in the event of any breach or default of Tenant or any assignee or successor
in interest of any of the provisions made by or to be performed by Tenant. However, Tenant
acknowledges and agrees that this exculpation of Tenant's personal liability for the payment of
Rent shall in no way limit the exercise of Landlord's other remedies, including, without limitation,
termination of this Ground Lease.
25.11. No Partnership. Anything contained herein to the contrary notwithstanding,
Landlord does not in any way or for any purpose become a partner of Tenant in the conduct of its
business, or otherwise, or a joint venturer or member of a joint enterprise with Tenant hereunder.
25.12. Remedies Cumulative. The various rights, options, elections and remedies of
Landlord and Tenant, respectively, contained in this Ground Lease shall be cumulative and no
one of them shall be construed as exclusive of any other, or of any right, priority or remedy allowed
or provided for by law and not expressly waived in this Ground Lease.
25.13. Attorney's Fees. In the event of a dispute between the parties arising out of or in
connection with this Ground Lease, whether or not such dispute results in litigation, the prevailing
party (whether resulting from settlement before or after litigation is commenced) shall be entitled
to have and recover from the losing party reasonable attorneys' fees and costs of suit incurred by
the prevailing party.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 82 of 86
25.14. Time Is of the Essence. Time is of the essence of this Ground Lease and all of
the terms, provisions, covenants and conditions hereof.
25.15. Survival of Representations, Warranties and Covenants. The respective
representations, warranties and covenants contained herein shall survive the Commencement
Date and continue throughout the Term.
25.16. Construction of Ground Lease. This Ground Lease shall be construed in
accordance with the substantive laws of the State of California, without regard to the choice of
law rules thereof. The rule of construction that a document be construed strictly against its drafter
shall have no application to this Ground Lease.
25.17. Severability. If one or more of the provisions of this Ground Lease shall be held
to be illegal or otherwise void or invalid, the remainder of this Ground Lease shall not be affected
thereby and shall remain in full force and effect to the maximum extent permitted under applicable
laws and regulations.
25.18. Entire Agreement; Modification. This Ground Lease contains the entire
agreement of the parties with respect to the matters discussed herein. This Ground Lease may
be amended only by an agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought.
25.19. Binding Effect and Benefits. This Ground Lease shall inure to the benefit of and
be binding on the parties hereto and their respective successors and assigns. Except as
otherwise set forth herein, nothing in this Ground Lease, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this Ground Lease.
25.20. Further Assurances. Each party hereto will promptly execute and deliver without
further consideration such additional agreement, assignments, endorsements and other
documents as the other party hereto may reasonably request to carry out the purposes of this
Ground Lease.
25.21. Counterparts. This Ground Lease may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same Ground Lease.
25.22. Number and Gender. Whenever the singular number is used in this Ground
Lease and required by the context, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders.
25.23. Incorporation by Reference. Every Exhibit attached to this Ground Lease and
referred to herein is hereby incorporated by reference.
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 83 of 86
25.24. Modification or Termination. Except for the rights of Mortgagees pursuant to
Article 18 hereinabove, during the entire Tax Credit Compliance Period, no amendment or
voluntary termination of this Ground Lease by Tenant shall be effective without Investor Limited
Partner's prior written consent, which consent shall not be unreasonably withheld, conditioned, or
delayed.
[Signatures to Ground Lease [Avon Dakota Neighborhood - Phase ll]
appear on following pages.]
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page 84 of 86
IN WITNESS WHEREOF, the undersigned have executed this Ground Lease as of the
date first above written.
"TENANT"
AVON DAKOTA HOUSING PARTNERS II, L.P., a
California limited partnership
By: Avon Dakota MGP, LLC,
a California limited liability company, its managing
general partner
By: Affordable Housing Access, Inc., a
California nonprofit public benefit
corporation, its sole member and manager
la
Jonathan B. Webb, President
By: Related/Avon Dakota Development Co., LLC, a
California limited liability company, its
administrative general partner
in
Frank Cardone, Vice President
[Signatures continue on following page]
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page S-1 of 86
[Signatures continue from previous page]
"LANDLORD"
ANAHEIM HOUSING AUTHORITY
a public body, corporate and politic
ma
ATTEST:
LINDA N. ANDAL, AUTHORITY SECRETARY
Linda N. Andal
APPROVED AS TO FORM:
OFFICE OF CITY ATTORNEY
Leonie Mulvihill
Deputy City Attorney IV
STRADLING YOCCA CARLSON & RAUTH
Authority Special Counsel
John E. Woodhead IV,
Executive Director or Authorized Designee
ATTACHMENT NO. 7
FORM OF GROUND LEASE
Page S-2 of 86
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
Real property in the City of Anaheim, County of Orange, State of California, described as
follows:
[to come]
EXHIBIT A TO GROUND LEASE
LEGAL DESCRIPTION OF THE PROPERTY
Page 1 of 1
EXHIBIT B
INCOME COMPUTATION AND CERTIFICATION
NOTE TO APARTMENT OWNER: This form is designed to assist you in computing
Annual Income in accordance with the method set forth in the applicable state and federal laws
and regulations, including without limitation, the Department of Housing and Urban Development
("HUD") Regulations (24 CFR 813). You should make certain that this form is at all times up to
date with applicable state and federal laws and regulations.
Re: , Anaheim, California
I/We, the undersigned, state that I/we have read and answered fully, frankly and
personally each of the following questions for all persons who are to occupy the unit being applied
for in the above -referenced apartment project. Listed below are the names of all persons who
intend to reside in the unit:
1.
Names of
Members of
Household
2.
Relationship to
Head of
Household
3.
Age
4.
Social
Security
Number
5.
Place/Source
of Employment
6.
Monthly Gross
Income Amount
(before
deductions)
HEAD
SPOUSE
Income Computation
1. The total anticipated income, calculated in accordance with the provisions of this
paragraph 1, of all persons over the age of 18 years listed above for the 12 -month period
beginning the date that I/we plan to move into a unit is $
Included in the total anticipated income listed above are:
(a) all wages and salaries, overtime pay, commissions, fees, tips and bonuses
and other compensation for personal services, before payroll deductions;
(b) the net income from the operation of a business or profession or from the
rental of real or personal property (without deducting expenditures for business expansion or
amortization of capital indebtedness or any allowance for depreciation of capital assets),
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 1 of 11
(c) interest and dividends (including income from assets excluded below);
(d) the full amount of periodic payments received from social security,
annuities, insurance policies, retirement funds, pensions, disability or death benefits and other
similar types of periodic receipts, including any lump sum payment for the delayed start of a
periodic payment;
(e) payments in lieu of earnings, such as unemployment and disability
compensation, workmen's compensation and severance pay;
(f) the maximum amount of public assistance available to the above persons
other than the amount of any assistance specifically designated for shelter and utilities;
(g) periodic and determinable allowances, such as alimony and child support
payments and regular contributions and gifts received from persons not residing in the dwelling;
(h) all regular pay, special pay and allowances of a member of the Armed
Forces (whether or not living in the dwelling) who is the head of the household or spouse; and
(i) any earned income tax credit to the extent that it exceeds income tax
liability.
Excluded from such anticipated income are:
(a) casual, sporadic or irregular gifts;
(b) amounts which are specifically for or in reimbursement of medical
expenses;
(c) lump sum additions to family assets, such as inheritances, insurance
payments (including payments under health and accident insurance and workmen's
compensation), capital gains and settlement for personal or property losses;
(d) amounts of educational scholarships paid directly to the student or the
educational institution, and amounts paid by the government to a veteran for use in meeting the
costs of tuition, fees, books and equipment. Any amounts of such scholarships or payments to
veterans not used for the above purposes are to be included in income;
(e) special pay to a household member who is away from home and exposed
to hostile fire;
(f) relocation payments under Title II of the Uniform Relocation Assistance
and Real Property Acquisition Policies Act of 1970;
(g) foster child care payments;
(h) the value of coupon allotments for the purchase of foods pursuant to the
Food Stamp Act of 1977;
(i) payments to volunteers under the Domestic Volunteer Service Act of 1973;
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 2 of 11
(j) payments received under the Alaska Native Claims Settlement Act;
(k) income derived from certain submarginal land of the United States that is
held in trust for certain Indian tribes;
(1) payments or allowances made under the Department of Health and Human
Services' Low -Income Home Energy Assistance Program;
(m) payments received from the Job Training Partnership Act;
(n) income derived from the disposition of funds of the Grand River Band of
Ottawa Indians; and
(o) the first $2,000.00 of per capita shares received from judgment funds
awarded by the Indian Claims Commission or the Court of Claims.
Do the persons whose income or contributions are included in item 6 above:
(a) have savings, stocks, bonds, equity in
real property or other form of capital investment (excluding the
values of necessary items of personal property such as
furniture and automobiles and interests in Indian trust land); or Yes No
(b) have they disposed of any assets (other
than at a foreclosure or Credit Bankruptcy sale) during the last
two years at less than fair market value? Yes No
(c) If the answer to (a) or (b) above is yes,
does the combined total value of all such assets owned or
disposed of by all such persons total more than $5,000? Yes No
(d) If the answer to (c) above is yes, state:
(1) the amount of income expected
to be derived from such assets in the 12 -month period
beginning on the date of initial occupancy in the unit that you
propose to rent: $,
(2) the amount of such income, if
any, that was included in item 1. above: $
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 3 of 11
3. (a) Are all of the individuals who propose to
reside in the unit full-time students?* Yes No
(b) If the answer to 3(a) is yes, is at least 1
of the proposed occupants of the unit a husband and wife
entitled to file a joint federal income tax return? Yes No
4. Neither myself nor any other occupant of the unit I/we propose to rent is the owner
of the rental housing project in which the unit is located (hereinafter the "Owner"), has any family
relationship to the Owner, or owns directly or indirectly any interest in the Owner. For purposes
of this paragraph, indirect ownership by an individual shall mean ownership by a family member,
ownership by a corporation, partnership, estate or trust in proportion to the ownership or beneficial
interest in such corporation, partnership, estate or trust held by the individual or a family member;
and ownership, direct or indirect, by a partner of the individual.
5. This certificate is made with the knowledge that it will be relied upon by the Owner
to determine maximum income for eligibility to occupy the unit, and I/we declare that all
information set forth herein is true, correct and complete and based upon information I/we deem
reliable and that the statement of total anticipated income contained in paragraph 1 is reasonable
and based upon such investigation as the undersigned deemed necessary.
6. I/we will assist the Owner in obtaining any information or documents required to
verify the statements made herein, including either an income verification from my/our present
employer(s) or copies of federal tax returns for the immediately preceding calendar year.
7. I/we acknowledge that I/we have been advised that the making of any
misrepresentation or misstatement in this declaration will constitute a material breach of my/our
agreement with the Owner to lease the unit and will entitle the Owner to prevent or terminate
my/our occupancy of the unit by institution of an action for ejection or other appropriate
proceedings.
8. Housing Authority Statistical Information (Optional — will be used for reporting
purposes only).
Race (Head of
Household)
White Black Asian
Hispanic Native American Other
Physical Disability: Yes No
I/we declare under penalty of perjury that the foregoing is true and correct.
* A full-time student is an individual enrolled as a full-time student during each of 5 calendar months during the
calendar year in which occupancy of the unit begins at an educational organization which normally maintains a regular
faculty and curriculum and normally has a regularly enrolled body of students in attendance and is not an individual
pursuing a full-time course of institutional or farm training under the supervision of an accredited agent of such an
educational organization or of a state or political subdivision thereof.
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 4 of 11
Executed this day of
California.
Applicant
Applicant
in the County of ,
[Signatures of all persons over the age of 18 years listed in column 2 above required.]
FOR COMPLETION BY APARTMENT OWNER ONLY:
1. Calculation of eligible income:
a. Enter amount entered for entire household in
column 6 above: $
b. (1) If answer to question 2(c) above is yes, enter
the total amount entered in 2(d)(1), subtract from
that figure the amount entered in 2(d)(2) and enter
the remaining balance ($ )
(2) Multiply the amount entered in question 2(c)
times the current passbook savings rate to
determine what the total annual earnings on the
amount in 2(c) would be if invested in passbook
savings ($ ), subtract from that figure the
amount entered in 2(d)(2) and enter the remaining
balance ($ )
(3) Enter at right the greater of the amount
calculated under (1) and (2) above: $
C. TOTAL ELIGIBLE INCOME (line 1.a plus
line 1.b(3)): $
2. The amount entered in 1.c:
Qualifies the applicant(s) as a:
30% Very Low Income Household;
40% Very Low Income Household;
50% Very Low Income Household;
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 5 of 11
60% Low Income Household;
Does not qualify the applicant(s) as a Very Low or
Low Income Household.
Number of apartment unit assigned:.
Bedroom Size: Rent: $
Tenant -Paid Utilities:
Water Gas Electric
Trash Other (list Type) _
4. Was this apartment unit last occupied for a period of 31
consecutive days by persons whose aggregate anticipated
annual income as certified in the above manner upon their
initial occupancy of the apartment unit qualified them as
Very Low or Low Income Household? Yes No
Method used to verify applicant(s) income:
Employer income verification.
Social Security Administration verification
Department of Social Services verification
Copies of tax returns
Other: ( )
Manager
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 6 of 11
INCOME VERIFICATION
(For Employed Persons)
The undersigned employee has applied for a rental unit located in a project financed by
the Anaheim Housing Authority for persons of low income. Every income statement of a
prospective tenant must be stringently verified. Please indicate below the employee's current
annual income from wages, overtime, bonuses, commissions or any other form of compensation
received on a regular basis.
Annual Wages:
Overtime:
Bonuses:
Commissions:
Total Current Income:
I hereby certify that the statements above are true and complete to the best of my
knowledge.
Dated:
Signature
Title:
I hereby grant you permission to disclose my income to in order
that they may determine my income eligibility for rental of an apartment located in a project which
has been financed by the Anaheim Housing Authority.
Dated:
Please send form to:
Signature
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 7 of 11
INCOME VERIFICATION
(For Social Security Recipients)
TO: SOCIAL SECURITY ADMINISTRATION
Ladies and Gentlemen:
I have applied for a rental unit located in a project financed by the Anaheim Housing
Authority for persons of low income. Every income statement of a prospective tenant must be
stringently verified. In connection with my application for a rental unit, I hereby give my consent
to release to the specific information requested below.
Dated:
Social Security No.:
Address (Print):
Monthly Benefits Began/Will Begin:
Signature
Name (Print):
Social Security Benefit Amount:
Other Benefit(s): Amount:
Medicare Deduction:
Are benefits expected to change? Yes
If yes, please state date and amount Date:
of change: Amount:
No
If recipient is not receiving full benefit amount, please indicate reason and date recipient
will start receiving full benefit amount:
Reason:
Dated:
Telephone:
Please send form to:
Date of Resumption:
Signature
Name (Print): _
Title:
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 8 of 11
Amount:
INCOME VERIFICATION
(For Department of Social Services Aid Recipients)
TO: CALIFORNIA DEPARTMENT OF SOCIAL SERVICES
Ladies and Gentlemen:
I am receiving assistance through your office. I have applied for a rental unit located in a
project financed by the Anaheim Housing Authority for persons of very low income. Every income
statement of a prospective tenant must be stringently verified. In connection with my application
for a rental unit, I hereby authorize the Department of Social Services to release to
the specific information requested below.
Dated:
Signature
Caseload Number: Name (Print):
Case Number: Case Worker:
1. Number of persons included in budget:
2. Total monthly budget: $
a. Amount of grant: $ Date aid last began:
b. Other income and source:
C. Is other income included in total budget? Yes No
3. Please specify type of aid
(AFDC, FR, Food Stamps, ANB, MediCal, etc.)
4. If recipient is not receiving full grant, please indicate reason:
Overpayment due to client's failure to report other income
Computation error
Other
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 9 of 11
5. Date when full grant will resume:
Dated:
Telephone:
Your very early response will be appreciated.
Please return form to:
Case Worker's Signature
District Office
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 10 of 11
INCOME VERIFICATION
(For Self-Employed Persons)
I hereby attach copies of my individual federal and state income tax returns for the
immediately preceding calendar year and certify that the information shown in such income tax
returns is true and complete to the best of my knowledge.
Dated:
Signature
EXHIBIT B TO GROUND LEASE
INCOME COMPUTATION AND CERTIFICATION
Page 11 of 11
EXHIBIT C
INITIAL MONTHLY RENT SCHEDULE
FOR AVON DAKOTA PHASE II
2017 INCOME LIMITS AND RENTS SCHEDULE—
No. of
Units
Unit
Type
Income
Limit
Gross
Monthly
Rent
Current
Utility
Allowance
Net
Monthly
Rent
2
2 Bd
30% Median Income
$704
$29
$675
1
3 Bd
30% Median Income
$813
$48
$765
2
1 Bd
40% Median Income
$783
$47
$736
1
2 Bd
40% Median Income
$939
$29
$910
2
3 Bd
40% Median Income
$1,085
$48
$1,037
1
1 Bd
50% Median Income
$978
$47
$931
6
2 Bd
50% Median Income
$1,173
$29
$1,144
2
3 Bd
50% Median Income
$1,356
$48
$1,308
3
2 Bd
60% Median Income
$1,408
$29
$1,379
1
3 Bd
60 % Median Income
$1,627
$48
$1,579
TOTAL = 21
The foregoing is by way of illustration only; Affordable Rent shall be determined in accordance
with the Ground Lease.
EXHIBIT C TO GROUND LEASE
INITIAL MONTHLY RENT SCHEDULE
Page 1 of 1
EXHIBIT D
MEMORANDUM OF GROUND LEASE
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Anaheim Housing Authority
201 South Anaheim Boulevard, 10th Floor
Anaheim, California 92805
Attention: Executive Director
This document is exempt from the payment of
a recording fee pursuant to Government Code
§§ 6103 and 27383.
MEMORANDUM OF GROUND LEASE
(Avon Dakota Neighborhood - Phase II)
This MEMORANDUM OF GROUND LEASE (Avon Dakota Neighborhood - Phase II)
("Memorandum") is executed as of , 20_ by and between the ANAHEIM
HOUSING AUTHORITY, a public body, corporate and politic ("Authority"), and AVON DAKOTA
HOUSING PARTNERS II, L.P., a California limited partnership ("Developer").
RECITALS
A. Authority and Developer have entered into that certain unrecorded Affordable
Housing Agreement, dated as of June _, 2017 ("Affordable Housing Agreement"). A copy of the
Affordable Housing Agreement is on file with Authority as a public record.
B. In accordance with and in furtherance of the Affordable Housing Agreement,
Authority and Developer have entered into that certain Ground Lease (Avon Dakota
Neighborhood - Phase II) ("Ground Lease") dated concurrently herewith pursuant to which
Authority has conveyed a ground leasehold interest in that certain parcel of real property, which
is legally described in Attachment No. 1 attached hereto and incorporated herein by reference
("Property") to Developer and Developer has agreed to construct, develop and operate an
affordable rental apartment complex thereon. In no event shall Authority's fee interest in the
Property be subordinated to any deed of trust or other lien or encumbrance for financing.
EXHIBIT D TO GROUND LEASE
MEMORANDUM OF GROUND LEASE (Phase II)
Page 1 of 4
C. Copies of the Affordable Housing Agreement and Ground Lease are available for
public inspection at Authority's office at 201 South Anaheim Boulevard, 10th Floor, Anaheim,
California.
D. The term of the Ground Lease commences the date hereof and continues
thereafter until the earlier of (i) the fifty-seventh (57th) anniversary of the recordation of the
Release of Construction Covenants against the Property in the Official Records; or
(ii) December 31, 2078.
E. The annual rent payable pursuant to the Ground Lease includes the pre -paid
capitalized rent, plus the Additional Rent, plus any reset/adjusted Rent, which is provided for and
fully described in the Ground Lease.
F. The Ground Lease provides that a short form memorandum of the Ground Lease
shall be executed and recorded in the Official Records of Orange County, California.
[Memorandum continues on following page]
EXHIBIT D TO GROUND LEASE
MEMORANDUM OF GROUND LEASE (Phase II)
Page 2 of 4
NOW, THEREFORE, the parties hereto certify as follows:
Pursuant to the Ground Lease, Authority has conveyed a leasehold interest in the Property
to Developer for a term of over fifty-seven (57) years. This Memorandum is not a complete
summary of the Ground Lease, and shall not be used to interpret the provisions of the Ground
Lease.
AUTHORITY:
ANAHEIM HOUSING AUTHORITY,
a public body, corporate and politic
In
ATTEST:
LINDA N. ANDAL, AUTHORITY SECRETARY
Linda N. Andal
APPROVED AS TO FORM:
OFFICE OF CITY ATTORNEY
Leonie Mulvihill
Deputy City Attorney IV
STRADLING YOCCA CARLSON & RAUTH
Authority Special Counsel
John E. Woodhead IV,
Executive Director or Authorized Designee
[Signatures continue on following page]
EXHIBIT D TO GROUND LEASE
MEMORANDUM OF GROUND LEASE (Phase II)
Page 3 of 4
[Signatures continue from previous page]
DEVELOPER:
AVON DAKOTA HOUSING PARTNERS II, L.P., a
California limited partnership
By: Avon Dakota MGP, LLC,
a California limited liability company, its managing
general partner
By: Affordable Housing Access, Inc., a
California nonprofit public benefit
corporation, its sole member and manager
in
Jonathan B. Webb, President
By: Related/Avon Dakota Development Co., LLC, a
California limited liability company, its
administrative general partner
in
Frank Cardone, Vice President
EXHIBIT D TO GROUND LEASE
MEMORANDUM OF GROUND LEASE (Phase II)
Page 4 of 4
ATTACHMENT NO. 1 TO EXHIBIT D
LEGAL DESCRIPTION OF THE PROPERTY
Real property in the City of Anaheim, County of Orange, State of California, described as
follows:
[to come]
ATTACHMENT NO. 1 TO EXHIBIT D
LEGAL DESCRIPTION OF THE PROPERTY
Page 1 of 1
ATTACHMENT NO. 8
FORM OF AUTHORITY PROMISSORY NOTE
AUTHORITY SUBORDINATE LOAN
PROMISSORY NOTE SECURED BY DEED OF TRUST
(Avon Dakota Neighborhood - Phase II)
$[4,141,500] Anaheim, California
, 201_ ("Note Date")
FOR VALUE RECEIVED, AVON DAKOTA HOUSING PARTNERS II, L.P., a California
limited partnership ("Developer"), promises to pay to the ANAHEIM HOUSING AUTHORITY, a
public body, corporate and politic ("Authority"), at its offices located at 201 South Anaheim
Boulevard, 10th Floor, Anaheim, California 92805, or at such other place as Authority may from
time to time designate in writing, (a) the principal sum of Four Million One Hundred Forty One
Thousand Five Hundred Dollars ($4,141,500), or so much of the proceeds as have been
disbursed by Authority to Developer pursuant to the Affordable Housing Agreement (as defined
below); and (b) all costs and expenses payable hereunder (together, "Note Amount").
RECITALS
A. This Authority Subordinate Loan Promissory Note Secured by Deed of Trust (Avon
Dakota Neighborhood - Phase II) ("Note") is made pursuant to that certain Affordable Housing
Agreement by and between Developer and Authority, dated as of June _, 2017 ("Affordable
Housing Agreement").
B. Capitalized terms not described herein shall have the meanings ascribed to them
in the Affordable Housing Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, Developer agrees as follows:
1. Agreement. The principal sums hereunder have been and are being loaned by
Authority to Developer in accordance with and pursuant to the Affordable Housing Agreement,
which is a public record on file in the office of the City Clerk of the City of Anaheim. The terms of
the Affordable Housing Agreement are incorporated herein and made a part hereof to the same
extent and with the same force and effect as if fully set forth herein. In the event of any
inconsistencies between the terms of this Note and the terms of such Affordable Housing
Agreement or other document(s) related to the Note Amount, the terms of this Note shall prevail.
A default by Developer under any of the provisions of the Agreement, that certain Ground Lease
(Avon Dakota Neighborhood - Phase II) of even date herewith by and between Developer and
Authority, that certain Authority Deed of Trust of even date herewith by Developer in favor of
Authority (collectively, the "Transaction Documents") shall, after the expiration of any cure period
under the respective agreement(s), be a default hereunder, and a default hereunder shall be a
default under the Transaction Documents (other than the Ground Lease). In addition, any action
taken by Authority or City to cure a default by Developer under the Primary Loan entered into
between Developer and as Lender the Primary Loan (and any approved
ATTACHMENT NO. 8
FORM OF AUTHORITY PROMISSORY NOTE
Page 1 of 8
successor permanent Lender) shall constitute an Event of Default hereunder if Developer has not
cured such default within fifteen (15) days of receiving notice of such Event of Default.
2. Interest. One percent (1 %) simple interest per annum (based on a 365 -day year
and charged on the basis of the actual number of days elapsed) shall accrue on the Note Amount
and all other amounts due under this Note, except as set forth in Section 9 hereof.
3. Payment. The Note Amount due hereunder shall be paid by Developer's annual
payment to the Authority of an amount equal to eighty-five percent (85%) of Remaining Residual
Receipts from the operation of Phase ll, until this Note has been paid in full. Developer shall also
pay to Authority eighty-five percent (85%) of the Refinancing Net Proceeds immediately upon any
refinancing of Phase II (or any part thereof) and eighty-five percent (85%) of the Transfer Net
Proceeds immediately upon any transfer in whole or in part of Phase II or the Site.
Annual Residual Receipts payments shall be made and delivered by Developer to
Authority on or before one hundred twenty (120) days after the last day of Developer's fiscal year
(which is the calendar year) relating to such payment during the term of this Note, commencing
the first year following the issuance of the first Certificate of Occupancy for Phase 11. Concurrently
with the delivery of each Residual Receipts payment due pursuant to this Note, Developer shall
deliver to Authority the Residual Receipts Report for the corresponding fiscal year, which shall be
a part of the Annual Financial Statement, in the form provided by Executive Director, which
Residual Receipts Report shall provide the basis for Developer's payment of Residual Receipts
to Authority. Residual Receipts shall be calculated on a cash basis, based upon such report and
subject to the following subsections. Developer shall also prepare and provide to Authority,
concurrently with delivery of each Annual Financial Statement, a reconciliation from the accrual -
based Annual Financial Statement to the cash -based Residual Receipts calculation.
In the event there are no Residual Receipts for the calendar year relating to such payment,
no annual payment for such year shall be required hereunder; provided, however, in such event,
no adjustment shall be made to the Note Amount and the amount of unpaid accrued interest for
each calendar year in which no payment has been made shall be paid in accordance with
Section 5 hereof. Any remaining portion of the Note Amount, plus unpaid accrued interest, shall
be due and payable on the fifty-seventh (57th) anniversary of the Note Date. Notwithstanding the
foregoing, the full Note Amount may be accelerated as set forth herein.
a. Definitions. Except as otherwise provided in this Note, capitalized words
and terms used in this Note, if not otherwise defined herein, shall have the meanings ascribed
thereto in the Affordable Housing Agreement.
b. Residua/ Receipts. During the term of this Note, Developer agrees to pay
after the end of each calendar year within the time(s) set forth in Section 3 above, the specified
percentage of Residual Receipts, as described in Section 3 above in this Note and pursuant to
the Affordable Housing Agreement. If there is no Residual Receipts, then no payment is due for
that year and no corresponding adjustment to the outstanding principal amount of this Note shall
be made.
C. Security for Authority Subordinate Loan. This Note is secured by a Deed
of Trust of even date herewith and recorded as an encumbrance to the Developer's leasehold
interest in the Site pursuant to the Ground Lease and fee interest in the Improvements at Phase 11.
ATTACHMENT NO. 8
FORM OF AUTHORITY PROMISSORY NOTE
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d. Disbursement of Authority Subordinate Loan. The Note Amount shall be
deemed to have been disbursed by the Authority to the Developer as of the Note Date.
4. Form of Payments. All amounts due hereunder are payable in immediately
available funds and lawful monies of the United States of America.
5. Application of Payments. All payments shall be applied (i) first, to costs and fees
owing hereunder, (ii) second, to the payment of unpaid accrued interest owing hereunder for each
calendar year in which no payment was made by Developer pursuant to Section 3 hereof, (iii)
third, to the payment of accrued interest for the preceding calendar year, (iv) fourth, to the
payment of any outstanding principal amount of the Additional Subsidy; and (v) fifth, to the
payment of any outstanding principal amount of the Capitalized Ground Rent.
6. Prepayment. At any time, Developer may prepay in whole or in part the
outstanding principal balance under this Note, together with all accrued interest, if any, and unpaid
fees, costs and expenses, if any, payable hereunder, without penalty or premium.
Notwithstanding the foregoing, any such prepayment in whole of this Note shall cause the amount
of Rent payable under the Ground Lease to be reset and adjusted in accordance with the
provisions of Section 4.1.2 of the Ground Lease (except if such prepayment in full occurs prior to
the twentieth (20th) anniversary of the Commencement Date of the Ground Lease, the Rent owing
under the Ground Lease shall be reset and adjusted beginning upon the twentieth (20th)
anniversary of the Commencement Date of the Ground Lease).
7. Security. This Note and all amounts payable hereunder are secured by the Deed
of Trust and Assignment of Rents (Authority Subordinate Loan), a subordinate trust deed of even
date herewith executed by Developer in favor of Authority ("Authority Deed of Trust"), which
Authority Deed of Trust shall only be subordinate to: (a) that certain Deed of Trust, Assignment
of Rents, Security Agreement and Fixture Filing (Construction Trust Deed) executed by
Developer, as borrower, in favor of ., (b) the Ground Lease, (c) the Tax Credit
Regulatory Agreement, and (d) such other encumbrances approved by the Authority in writing.
The terms of the Authority Deed of Trust are incorporated herein and made a part hereof to the
same extent and with the same force and effect as if fully set forth herein. A default under any of
the provisions of the Authority Deed of Trust shall be a default hereunder, and a default hereunder
shall be a default under the Authority Deed of Trust.
8. Acceleration and Other Remedies. The entire balance due under this Note shall
be paid to the Authority, or otherwise satisfied as provided below, upon demand by the Authority,
which may be given upon the earlier to occur of any of the following events (each, an "Event of
Default"): (i) the uncured default of Developer under the Transaction Documents, this Note, or
the Authority Deed of Trust, in each case, after delivery of notice and expiration of the applicable
cure period provided in the respective agreement or instrument; or (ii) the sale, lease or other
transfer or conveyance (other than the permitted rentals and conveyances under the Affordable
Housing Agreement and/or the Ground Lease) of all or any part of the Site or the Improvements,
or any interest therein (individually or collectively, a "Transfer"), without the prior written consent
of Authority, which consent may be withheld in Authority's sole and absolute discretion; Authority
may, at Authority's option, declare the outstanding principal amount of this Note, together with the
then accrued and unpaid interest thereon and other charges hereunder, and all other sums
secured by the Authority Deed of Trust, to be due and payable immediately, and upon such
declaration, such principal and interest and other sums shall immediately become and be due
and payable without demand or notice, all as further set forth in the Authority Deed of Trust. All
ATTACHMENT NO. 8
FORM OF AUTHORITY PROMISSORY NOTE
Page 3 of 8
costs of collection, including, but not limited to, reasonable attorneys' fees and all expenses
incurred in connection with protection of, or realization on, the security for this Note, may be added
to the principal hereunder, and shall accrue interest as provided herein. Authority shall at all times
have the right to proceed against any portion of the security for this Note in such order and in
such manner as Authority may consider appropriate, without waiving any rights with respect to
any of the security. Any delay or omission on the part of Authority in exercising any right
hereunder, under the Agreement, the Transaction Documents or under the Authority Deed of
Trust shall not operate as a waiver of such right, or of any other right. No single or partial exercise
of any right or remedy hereunder or under the Agreement, the Transaction Documents, the
Authority Deed of Trust or any other document or agreement shall preclude other or further
exercises thereof, or the exercise of any other right or remedy. The acceptance of payment of
any sum payable hereunder, or part thereof, after the due date of such payment shall not be a
waiver of Authority's right to either require prompt payment when due of all other sums payable
hereunder or to declare an Event of Default for failure to make prompt or complete payment.
Notwithstanding anything to the contrary contained in this Note, prior to declaring any
default or taking any remedy permitted under this Note or applicable law based upon an alleged
default under this Note by Developer, ("Investor Limited
Partner"), in its capacity as the limited partner of Developer or their successors or assigns as
limited partner(s) of Developer, shall have an additional period of not less than (a) ten (10) days
to cure such alleged default if of a monetary nature, and (b) thirty (30) days to cure such alleged
default if of a nonmonetary nature; provided, however, if in order to cure such a nonmonetary
default Investor Limited Partner, as the limited partner, must remove the general partner of
Developer, Investor Limited Partner, as the limited partner, shall so notify Authority and so long
as Investor Limited Partner, as the limited partner, is diligently and continuously attempting to so
remove such general partner, Investor Limited Partner, as the limited partner, shall have until the
date thirty (30) days after the effective date of the removal of the general partner or general
partners to cure such default.
9. Alternate Rate. Upon the occurrence (and failure to cure) of any Event of Default,
or upon the maturity hereof (by acceleration or otherwise), the entire unpaid principal sum, at the
option of Authority, shall bear interest, from the date of occurrence of such Event of Default or
maturity and after judgment and until collection, at the "Alternate Rate," such rate being the
highest interest rate then permitted by law. Interest calculated at the Alternate Rate, when and if
applicable, shall be due and payable immediately without notice or demand. Developer agrees
that in the event of any Event of Default, Authority will incur additional expense in servicing the
loan evidenced by this Note and will suffer damage and loss resulting from such Event of Default.
Developer agrees that in such event Authority shall be entitled to damages for the detriment
caused thereby, which damages are extremely difficult and impractical to ascertain. Therefore,
Developer agrees that the Alternate Rate (as applied to the unpaid principal balance, accrued
interest, fees, costs and expenses incurred) is a reasonable estimate of such damages to
Authority, and Developer agrees to pay such sum on demand.
10. Waivers. Developer and all endorsers, guarantors and sureties hereof jointly and
severally waive presentment, demand, notice of protest and nonpayment, notice of default or
delinquency, notice of acceleration, notice of costs, expenses or leases or interest thereon, notice
of dishonor, diligence in collection or in proceeding against any of the rights or interests in or to
properties securing this Note, and the benefit of any exemption under any homestead exemption
laws, if applicable. Developer expressly agrees that this Note or any payment hereunder may be
extended from time to time at the Authority's sole discretion and that the Authority may accept
ATTACHMENT NO. 8
FORM OF AUTHORITY PROMISSORY NOTE
Page 4of8
security in consideration for any such extension or release any security for this Note at its sole
discretion all without in any way affecting the liability of Developer. No extension of time for
payment of this Note made by agreement by the Authority with any person now or hereafter liable
for the payment of this Note shall operate to release, discharge, modify, change or affect the
original liability of Developer under this Note, either in whole or in part. The obligations of
Developer under this Note shall be absolute and Developer waives any and all rights to offset,
deduct or withhold any payments or charges due under this Note for any reasons whatsoever.
No previous waiver and no failure or delay by Authority in acting with respect to the terms of this
Note or the Authority Deed of Trust shall constitute a waiver of any breach, default, or failure or
condition under this Note, the Authority Deed of Trust or the obligations secured thereby. A waiver
of any term of this Note, the Authority Deed of Trust or of any of the obligations secured thereby
must be made in writing and shall be limited to the express written terms of such waiver.
11. Consents. Developer and all endorsers, guarantors and sureties consent to:
(a) any renewal, extension or modification (whether one or more, and subject to the terms and
provisions of the Agreement relating to modification, extension, and/or amendment) of the terms
of the Agreement as such terms relate to this Note or the terms or time of payment under this
Note, (b) the release or surrender or exchange or substitution of all or any part of the security,
whether real or personal, or direct or indirect, for the payment hereof, (c) the granting of any other
indulgences to Developer, and (d) the taking or releasing of other or additional parties primarily
or contingently liable hereunder. Any such renewal, extension, modification, release, surrender,
exchange or substitution may be made without notice to Developer or to any endorser, guarantor
or surety hereof, and without affecting the liability of said parties hereunder.
12. Successors and Assigns. Whenever "Authority" is referred to in this Note, such
reference shall be deemed to include the Anaheim Housing Authority and its successors and
assigns, including, without limitation, any subsequent assignee or holder of this Note. All
covenants, provisions and agreements by or on behalf of Developer, and on behalf of any makers,
endorsers, guarantors and sureties hereof which are contained herein shall inure to the benefit of
the Authority and Authority's successors and assigns. Authority may, at its option, assign its right
to receive payment under this Note without necessity of obtaining the consent of Developer.
Whenever "Developer" is referred to in this Note, such reference shall be deemed to include Avon
Dakota Housing Partners II, L.P., a California limited partnership. And its approved successors
and assigns, including, without limitation, any approved subsequent assignee or obligor of this
Note, if such approval is given in accordance with the Agreement. In no event shall Developer
assign or transfer any portion of this Note without the prior express written consent of Authority,
to the extent required in the Agreement.
13. Usury. It is the intention of Developer and Authority to conform strictly to the
Interest Law, as defined below, applicable to this loan transaction. Accordingly, it is agreed that
notwithstanding any provision to the contrary in this Note, or in any of the documents securing
payment hereof or otherwise relating hereto, the aggregate of all interest and any other charges
or consideration constituting interest under the applicable Interest Law that is taken, reserved,
contracted for, charged or received under this Note, or under any of the other aforesaid
agreements or otherwise in connection with this loan transaction, shall under no circumstances
exceed the maximum amount of interest allowed by the Interest Law applicable to this loan
transaction. If any excess of interest in such respect is provided for in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, then, in such event:
(a) the provisions of this paragraph shall govern and control;
ATTACHMENT NO. 8
FORM OF AUTHORITY PROMISSORY NOTE
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(b) neither Developer nor Developer's heirs, legal representatives, successors
or assigns shall be obligated to pay the amount of such interest to the extent that it is in excess
of the maximum amount of interest allowed by the Interest Law applicable to this loan transaction;
(c) any excess shall be deemed canceled automatically and, if theretofore
paid, shall be credited on this Note by Authority or, if this Note shall have been paid in full,
refunded to Developer; and
(d) the effective rate of interest shall be automatically subject to reduction to
the Maximum Legal Rate of Interest (as defined below), allowed under such Interest Law, as now
or hereafter construed by courts of appropriate jurisdiction. To the extent permitted by the Interest
Law applicable to this loan transaction, all sums paid or agreed to be paid to Authority for the use,
forbearance or detention of the indebtedness evidenced hereby shall be amortized, prorated,
allocated and spread throughout the full term of this Note. For purposes of this Note, "Interest
Law" shall mean any present or future law of the State of California, the United States of America,
or any other jurisdiction which has application to the interest and other charges under this Note.
The "Maximum Legal Rate of Interest" shall mean the maximum rate of interest that Authority may
from time to time charge Developer, and under which Developer would have no claim or defense
of usury under the Interest Law.
14. Costs of Enforcement. Developer agrees to pay upon demand all reasonable
costs and expenses, including attorneys' fees, expert witness fees, costs and disbursements
(including appeals), incurred by the Authority to enforce the terms of this Note. In addition to the
foregoing award of attorneys' fees, Authority shall be entitled to its attorneys' fees incurred in any
post-judgment proceedings to enforce any judgment in connection with this Note. This provision
is separate and several and shall survive the merger of this provision into any judgment.
15. Non-Recourse Obligation. Nothing contained in this Note shall be deemed to
cause Developer (or any of its partners, or any of their respective directors, officers, employees,
partners, principals or members) personally to be liable to pay or perform any of its obligations
evidenced hereby, and Authority shall not seek any personal or deficiency judgment on such
obligations, and the sole remedy of Authority shall be against the Site and the collateral under the
Authority Deed of Trust; provided, however, that the foregoing shall not in any way affect any
rights Authority may have (as a secured party or otherwise) hereunder or under the Authority
Deed of Trust or Transaction Documents, or any other rights Authority may have to: (a) recover
directly from Developer any funds, damages or costs (including, without limitation, reasonable
attorneys' fees, expert witness fees, and costs) incurred by Authority as a result of fraud,
intentional misrepresentation or intentional waste by Developer; or (b) recover directly from
Developer any condemnation or insurance proceeds, or other similar funds or payments
attributable to the Site which under the terms of the Transaction Documents should have been
paid to Authority and any costs and expenses incurred by Authority in connection therewith
(including, without limitation, reasonable attorneys' fees, expert witness fees, and costs).
16. Miscellaneous. Time is of the essence hereof. If this Note is now, or hereafter
shall be, signed by more than one party or person, it shall be the joint and several obligation of
such parties or persons (including, without limitation, all makers, endorsers, guarantors and
sureties), and shall be binding upon such parties and upon their respective successors and
assigns. This Note shall be governed by and construed under the laws of the State of California.
Developer irrevocably and unconditionally submits to the jurisdiction of the Superior Court of the
State of California for the County of Orange or the United States District Court of the Central
ATTACHMENT NO. 8
FORM OF AUTHORITY PROMISSORY NOTE
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District of California, as Authority hereof may deem appropriate, in connection with any legal
action or proceeding arising out of or relating to this Note. Developer also waives any objection
regarding personal or professional jurisdiction or venue.
[Signature block appears on following page]
ATTACHMENT NO. 8
FORM OF AUTHORITY PROMISSORY NOTE
Page 7 of 8
IN WITNESS WHEREOF, the Developer has caused this Authority Subordinate Loan
Promissory Note Secured by Deed of Trust (Avon Dakota Neighborhood - Phase II) to be
executed as of the date first set forth above.
"DEVELOPER"
AVON DAKOTA HOUSING PARTNERS II, L.P., a
California limited partnership
By: Avon Dakota MGP, LLC,
a California limited liability company, its managing
general partner
By: Affordable Housing Access, Inc., a
California nonprofit public benefit
corporation, its sole member and manager
Jonathan B. Webb, President
By: Related/Avon Dakota Development Co., LLC, a
California limited liability company, its
administrative general partner
0
Frank Cardone, Vice President
ATTACHMENT NO. 8
FORM OF AUTHORITY PROMISSORY NOTE
Page 8 of 8
ATTACHMENT NO. 9
FORM OF AUTHORITY DEED OF TRUST
AUTHORITY DEED OF TRUST
Recording Requested By and
When Recorded Mail To:
Anaheim Housing Authority
201 South Anaheim Blvd, 10th Floor
Anaheim, California 92805
Attn: Executive Director
(Space above for Recorder's use.)
(This document is exempt from the payment of
a recording fee pursuant to Government Code
Section 6103.)
AUTHORITY SUBORDINATE LOAN
DEED OF TRUST
AND ASSIGNMENT OF RENTS
(Avon Dakota Neighborhood - Phase II)
This AUTHORITY SUBORDINATE LOAN DEED OF TRUST AND ASSIGNMENT OF
RENTS (Avon Dakota Neighborhood - Phase II) ("Deed of Trust"), dated as of
, 201_, is executed by AVON DAKOTA HOUSING PARTNERS II, L.P., a
California limited partnership ("Trustor"), as trustor, whose address is 18201 Von Karman Avenue,
Suite 900, Irvine, California 92612, in favor of First American Title Insurance Company
("Trustee"), as trustee, for the benefit of the ANAHEIM HOUSING AUTHORITY, a public body,
corporate and politic ("Beneficiary"), as beneficiary, whose address is 201 South Anaheim
Boulevard, 10th Floor, Anaheim, California 92805, Attention: Executive Director. Each capitalized
term used herein and not otherwise defined herein shall have the meaning given such term in the
"Affordable Housing Agreement" (as defined in Section 2.1(b), below).
ARTICLE I
GRANT OF SECURITY
1.1 Grant of Security. FOR GOOD AND VALUABLE CONSIDERATION, including the
indebtedness herein recited and the trust herein created, the receipt and adequacy of which are
hereby acknowledged, Trustor hereby irrevocably grants, transfers and assigns to Trustee, IN
TRUST, WITH POWER OF SALE, AND RIGHT OF ENTRY AND POSSESSION, for the benefit
and security of Beneficiary, all rights, titles, interests, estates, powers and privileges that Trustor
now has or may hereafter acquire in or to the following property and interests therein (collectively,
the "Property"):
ATTACHMENT NO. 9
FORM OF AUTHORITY DEED OF TRUST
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(a) That certain ground leasehold interest in and to certain real property
("Land") in the City of Anaheim, County of Orange, State of California, more particularly described
on Attachment A attached hereto;
(b) All buildings and other improvements now or hereafter located on the Land,
including, but not limited to, the Fixtures (as defined below) and any and all other equipment,
machinery, appliances and other articles attached to such buildings and other improvements
(collectively, the "Improvements");
(c) All fixtures (collectively, the "Fixtures") now or hereafter located on,
attached to, installed in or used in connection with the Land and the Improvements, including all
awnings, boilers, furnaces, pipes, plumbing, elevators, cleaning, call and sprinkler systems, fire
extinguishing machinery and equipment, water tanks, heating, ventilating, air conditioning and air
cooling machinery and equipment, gas and electric machinery and equipment, and other
equipment, machinery and appliances and other fixtures of every kind and nature;
(d) All rights, rights-of-way, easements, licenses, profits, privileges,
tenements, hereditaments and appurtenances now owned or hereafter acquired by Trustor and
used in connection with the Land and the Improvements or as a means of access to either or
both;
(e) All of Trustor's right, title and interest now owned or hereafter acquired, in
and to any land lying within the right-of-way of any street, open or proposed, adjoining the Land,
and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection
with the Land and Improvements;
(f) All oil, gas and other mineral rights in or relating to the Land, and all royalty,
leasehold and other rights of Trustor in or relating thereto;
(g) All water, water rights and riparian rights (including, without limitation,
shares of stock evidencing the same) in or relating to the Land;
(h) All leases and subleases relating to all or any part of the Land and the
Improvements or any interest therein, now or hereafter existing or entered into, including all
deposits, advance rentals and other payments of a similar nature but not including the Rents, as
defined and separately assigned in Article 4;
(i) All options to purchase or lease all or any part of the Land or Improvements
or any interest therein (and any greater estate in the Land or Improvements now owned or
hereafter acquired pursuant thereto);
Q) All other estates, easements, licenses, interests, rights, titles, claims or
demands, both in law and in equity, which Trustor now has or may hereafter acquire in the Land
and the Improvements, including, without limitation, (1) any and all awards made for the taking by
eminent domain, or by any proceeding or purchase in lieu thereof, of all or any part of the Property,
including any award resulting from a change of grade of streets and any award for severance
damages, and (2) any and all proceeds of any insurance covering the Property.
ATTACHMENT NO. 9
FORM OF AUTHORITY DEED OF TRUST
Page 2 of 16
ARTICLE II
SECURED OBLIGATIONS
2.1 Secured Obligations. This Deed of Trust, and the lien created hereby, is made for
the purpose of securing the following obligations (collectively, the "Secured Obligations"):
(a) the payment and performance by Trustor of all indebtedness and other
obligations evidenced by that certain Authority Subordinate Loan Promissory Note Secured by
Deed of Trust (Avon Dakota Neighborhood - Phase II) ("Note") dated of even date herewith, made
by Trustor to the order of Beneficiary, in the original principal amount of up to $[4,141,500],
together with interest on such indebtedness according to the terms of the Note, as such Note may
be amended from time to time;
(b) the payment and performance of all indebtedness and other obligations of
Trustor to Beneficiary contained in (i) that certain unrecorded Affordable Housing Agreement,
dated as of June _, 2017, by and among Beneficiary and Trustor ("Affordable Housing
Agreement"), a copy of which is on file with Beneficiary as a public record, (ii) this Deed of Trust,
and (iii) the other "Transaction Documents" (as defined in the Note), whether or not the total
amount thereof may exceed the face amount of the Note, shall be secured hereby to the same
extent as though said agreements were fully incorporated in this Deed of Trust;
(c) the payment and performance of all indebtedness and other obligations as
the then record owner of a ground leasehold estate in and to the Land and the Improvements
may undertake to pay and perform for the benefit of Beneficiary, or its successors or assigns,
when such indebtedness and obligations are contained in a document which recites that the
obligations thereunder are secured by this Deed of Trust;
(d) the payment by Trustor of all amounts advanced by or on behalf of
Beneficiary or Trustee to improve, protect or preserve the Property or the security of this Deed of
Trust, with interest thereon as provided herein; and
(e) the payment and performance of all amendments, modifications,
extensions, renewals and replacements of or for any of the foregoing (including, without limitation,
(i) amendments or modifications of the required principal payment dates or interest payment
dates, or both, as the case may be, accelerating or deferring such interest payment dates in whole
or in part, or (ii) amendments, modifications, extensions or renewals at a different rate of interest),
whether or not any such amendment, modification, extension, renewal or replacement is
evidenced by a new or additional promissory note or other document.
ARTICLE III
COVENANTS
3.1 Payment of Secured Obligations. Trustor shall pay and perform the Secured
Obligations when due.
3.2 Maintenance, Repair, Alterations. Trustor shall maintain and preserve the
Property in good condition and repair; Trustor, except upon the prior written consent of
Beneficiary, shall not remove, demolish or materially alter any of the Improvements, other than to
ATTACHMENT NO. 9
FORM OF AUTHORITY DEED OF TRUST
Page 3 of 16
make repairs in the ordinary course of business of a non-structural nature which serve to preserve
or increase the value of the Property; Trustor shall complete promptly and in a good and
workmanlike manner any Improvement which may be now or hereafter constructed on the Land,
shall promptly restore in like manner any Improvement which may be damaged or destroyed
thereon from any cause whatsoever, and shall pay when due all claims for labor performed and
materials furnished therefor; Trustor shall comply with all laws, ordinances, rules, regulations,
orders, covenants, conditions, restrictions and "Permitted Encumbrances" (as hereinafter defined)
now or hereafter affecting the Property, or any part thereof, or the conduct or operation of Trustor's
business; Trustor shall not commit, suffer or permit any act to be done in, upon or to all or any
part of the Property in violation of any such laws, ordinances, rules, regulations, orders,
covenants, conditions or Permitted Encumbrances now or hereafter affecting the Property;
Trustor shall not commit or permit any waste or deterioration of the Property, and shall keep and
maintain abutting grounds, sidewalks, roads, parking and landscape areas in good and neat order
and repair; Trustor shall not take (nor fail to take) any action, which if taken (or not so taken) would
increase in any way the risk of fire or other hazard occurring to or affecting the Property or which
otherwise would impair the security of Beneficiary in the Property; Trustor shall comply with the
provisions of all leases, if any, constituting a portion of the Property; Trustor shall not abandon
the Property or any portion thereof or leave the Property unprotected, unguarded, vacant or
deserted; Trustor shall not initiate, join in or consent to any change in any zoning ordinance,
general plan, specific plan, private restrictive covenant or other public or private restriction limiting
the uses which may be made of the Property by Trustor or by the owner thereof without the prior
written consent of Beneficiary; Trustor shall secure and maintain in full force and effect all permits
necessary for the use, occupancy and operation of the Property; except as otherwise prohibited
or restricted by the Transaction Documents, or any of them, Trustor shall do any and all other
acts which may be reasonably necessary to protect or preserve the value of the Property and the
rights of Trustee and Beneficiary with respect thereto.
3.3 Insurance.
3.3.1 Insurance. Trustor shall at all times maintain in full force and effect, at
Trustor's sole cost and expense, policies of insurance in form, substance, amounts and with
companies as required by the Agreement. In the event of any damage or destruction to the
Property, all insurance proceeds shall be applied in accordance with the terms and provisions of
the Agreement or, in the absence thereof, as required by law.
3.4 Condemnation and Other Awards. Upon learning of the condemnation or other
taking for public or quasi -public use of, or of the institution or the threatened institution of any
proceeding for the condemnation or other taking for public or quasi -public use of, all or any part
of the Property, Trustor shall immediately notify Beneficiary and Trustee of such fact. Trustor
shall take all actions reasonably required by Beneficiary or Trustee in connection therewith to
defend and protect the interests of Trustor, Beneficiary and/or Trustee in the Property. At
Beneficiary's option, but subject to the rights of senior lienholders, Beneficiary or Trustor may be
the nominal party in such proceeding but in any event Beneficiary shall be entitled, without regard
to the adequacy of its security, to participate in and to control the same and to be represented
therein by counsel of its choice. Trustor hereby assigns to Beneficiary, as security for the Secured
Obligations, all compensation, awards, damages and other amounts payable to Trustor in
connection with any condemnation or other taking of all or any part of the Property for public or
semi-public use (including, but not limited to, the proceeds of any settlement, regardless of
whether or not condemnation or other taking proceedings are instituted in connection therewith).
Upon receipt, Trustor shall, subject to the rights of senior lienholders, immediately deliver all such
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compensation, awards, damages and other amounts to Beneficiary. All such proceeds shall be
applied to restore and rebuild the Property, and thereafter applied to reimburse Beneficiary and
Trustee for all costs and expenses, including reasonable attorneys' fees, incurred in connection
with the collection of such award or settlement. The balance of such award or settlement shall
be applied in accordance with the terms of the Agreement or, in the absence thereof, as required
by law. Application or release of such proceeds as provided herein shall not cure or waive any
default or notice of default hereunder or invalidate any act done pursuant to such notice.
3.5 Taxes and Impositions. Except as otherwise provided in the Transaction
Documents, and subject to availability of any legal exemptions therefor, Trustor shall pay, prior to
delinquency, all of the following (collectively, the "Impositions"):
(a) All general and special real property taxes and assessments imposed on
the Property;
(b) All other taxes and assessments and charges of every kind that are
assessed upon the Property (or upon the owner and/or operator of the Property) and that create
or may create a lien upon the Property (or upon any personal property or fixture used in
connection with the Property), including, without limitation, non-governmental levies and
assessments pursuant to applicable covenants, conditions or restrictions; and
(c) All license fees, taxes and assessments imposed on Beneficiary (other
than Beneficiary's income or franchise taxes) which is/are measured by or based upon (in whole
or in part) the amount of the obligations secured by the Property.
If permitted by law, Trustor may pay the Imposition in installments (together with any
accrued interest). Trustor shall not be required to pay any Imposition so long as (i) its validity is
being actively contested in good faith and by appropriate proceedings, (ii) Trustor has
demonstrated to Beneficiary's reasonable satisfaction that leaving such Imposition unpaid
pending the outcome of such proceedings could not result in conveyance of the Property in
satisfaction of such Imposition or otherwise impair Beneficiary's interest under this Deed of Trust,
and (iii) Trustor has furnished Beneficiary with a bond or other security satisfactory to Beneficiary
in an amount not less than 120% of the applicable claim (including interest and penalties). Upon
demand by Beneficiary from time to time, Trustor shall deliver to Beneficiary, within 30 days
following the due date of any Imposition, evidence of payment reasonably satisfactory to
Beneficiary. In addition, upon demand by Beneficiary from time to time, Trustor shall furnish to
Beneficiary a tax reporting service for the Property of a type and duration, and with a company,
reasonably satisfactory to Beneficiary.
3.6 Utilities. Trustor shall promptly pay all gas, electricity, water, sewer and other utility
charges which are incurred for the benefit of the Property or which may become a lien against the
Property and all other assessments and other charges of a similar nature, public or private,
relating to the Property or any portion thereof, regardless of whether or not any such charge is or
may become a lien thereon.
3.7 Liens. Except as permitted by the Agreement or the Ground Lease, Trustor shall
not cause, incur, suffer or permit to exist or become effective any lien, encumbrance or charge
upon all or any part of the Property or any interest therein. Trustor shall pay and promptly
discharge, at Trustor's sole cost and expense, all liens, encumbrances and charges upon all or
any part of the Property or any interest therein, or contest such claim in conformity with the
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Agreement. If Trustor shall fail to remove and discharge any such lien, encumbrance or charge,
then, in addition to any other right or remedy of Beneficiary, Beneficiary may, but shall not be
obligated to, discharge the same, without notice to or demand on Trustor, and without inquiring
into the validity of such lien, encumbrance or charge or the existence of any defense or offset
thereto, either by paying the amount claimed to be due, or by procuring the discharge of such
lien, encumbrance or charge by depositing in a court a bond or the amount claimed or otherwise
giving security for such claim, or in any other manner permitted or required by law. Subject to the
rights of Trustor under the Agreement, the Trustor shall, immediately upon demand therefor by
Beneficiary, pay to Beneficiary an amount equal to all costs and expenses incurred by Beneficiary
in connection with the exercise by Beneficiary of the foregoing right to discharge any such lien,
encumbrance or charge, together with interest thereon from the date of such expenditure until
paid at the "Alternate Rate" (as defined in the Note).
3.8 Sale or Lease of Property. Except as otherwise provided in the Agreement or the
Ground Lease, Trustor shall not sell, lease or otherwise transfer all or any part of the Property or
any interest therein without the prior written consent of Beneficiary.
3.9 Inspections. Beneficiary, Trustee and their respective agents, representatives and
employees, are each authorized, upon notice reasonable under the circumstances (which may
be written or oral) and subject to the rights of subtenants, if any, to enter at any time upon any
part of the Property during normal business hours for the purpose of inspecting the same and for
the purpose of performing any of the acts Beneficiary and/or Trustee are authorized to perform
hereunder or under the terms of any of the Transaction Documents. Such entry by the Beneficiary
shall be upon 24 -hours' prior notice, and shall be undertaken at Beneficiary's expense, with
Beneficiary holding harmless the Trustor from any claims or injuries which occur in connection
with the exercise of the Beneficiary's rights pursuant to this Section 3.9. The rights of Beneficiary
to enter and inspect pursuant to this Section 3.9 are in addition to and do not limit the rights of the
City of Anaheim to conduct building inspections.
3.10 Defense of Actions. Trustor, at no cost or expense to Beneficiary or Trustee, shall
appear in and defend any action or proceeding purporting to affect the security of this Deed of
Trust, any of the other Transaction Documents, all or any part of the Property or any interest
therein, any additional or other security for the obligations secured hereby, or the interests, rights,
powers or duties of Beneficiary or Trustee hereunder, provided that Trustee or Beneficiary shall
have first tendered the defense to Trustor. If Beneficiary or Trustee elects to become a party to
such action or proceeding, or is made a party thereto, Trustor shall indemnify, defend and hold
Trustee and Beneficiary harmless from all liability, damage, cost and expense incurred by Trustee
and Beneficiary, or either of them, by reason of such action or proceeding (including, without
limitation, reasonable attorneys' fees and expenses), whether or not such action or proceeding is
prosecuted to judgment or decision.
3.11 Protection of Security. If Trustor fails to make any payment or to do any act as
and in the manner provided in this Deed of Trust or any of the other Transaction Documents,
Beneficiary and/or Trustee, each in its own discretion, without obligation so to do, following written
notice or demand to Trustor as provided in the Agreement, and without releasing Trustor from
any obligation, may make or do the same in such manner and to such extent as either may
reasonably deem necessary to protect the security of this Deed of Trust. In connection therewith
(without limiting their general powers), Beneficiary and Trustee shall each have and are hereby
given the right, but not the obligation, following occurrence (prior to cure) of an Event of Default:
(i) to enter upon and take possession of the Property; (ii) to make additions, alterations, repairs
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and improvements to the Property which in the judgment of either may be necessary or proper to
keep the Property in good condition and repair; (iii) to appear and participate in any action or
proceeding affecting or which may affect the security hereof or the rights or powers of Beneficiary
or Trustee; (iv) to pay, purchase, contest or compromise any encumbrance, claim, charge, lien or
debt which in the judgment of either may affect or appears to affect the security of this Deed of
Trust or to be or to appear to be prior or superior hereto; and (v) in exercising such powers, to
pay all necessary or appropriate costs and expenses and employ necessary or desirable
consultants.
3.12 Beneficiary's Powers. Without affecting the liability of Trustor or any other person
liable for the payment of any obligation herein mentioned, and without affecting the lien or charge
of this Deed of Trust upon any portion of the Property not then or theretofore released as security
for the full amount of all Secured Obligations, Beneficiary may, from time to time and without
notice (i) release any person so liable, (ii) extend the maturity or alter any of the terms of any such
obligation (provided, however, that the consent of Trustor shall be required with respect to the
extension or alteration of any unpaid obligation of Trustor to Beneficiary), (iii) waive any provision
contained herein or grant other indulgences, (iv) release or reconvey, or cause to be released or
reconveyed at any time at Beneficiary's option any parcel, a portion or all of the Property, (v) take
or release any other or additional security for any obligation herein mentioned, or (vi) make
compositions or other arrangements with debtors in relation thereto. By accepting payment or
performance of any obligation secured by this Deed of Trust after the payment or performance
thereof is due or after the filing of a notice of default and election to sell, Beneficiary shall not have
thereby waived its right to require prompt payment and performance, when due, of all other
obligations secured hereby, or to declare a default for failure so to pay or perform, or to proceed
with the sale under any notice of default and election to sell theretofore given by Beneficiary, or
with respect to any unpaid balance of the indebtedness secured hereby. The acceptance by
Beneficiary of any sum in an amount less than the sum then due shall not constitute a waiver of
the obligation of Trustor to pay the entire sum then due.
3.13 Costs, Fees and Expenses. Trustor shall pay, on demand, all costs, fees,
expenses, advances, charges, losses and liabilities paid or incurred by Beneficiary and/or Trustee
under or in connection with this Deed of Trust, the enforcement of this Deed of Trust, the collection
of the Secured Obligations, and/or the exercise of any right, power, privilege or remedy given
Beneficiary and/or Trustee under this Deed of Trust, including, (a) foreclosure fees, trustee's fees
and expenses, receiver's fees and expenses and trustee's sale guaranty premiums, (b) costs and
expenses paid or incurred by Beneficiary and/or Trustee and/or any receiver appointed under this
Deed of Trust in connection with the operation, maintenance, management, protection,
preservation, collection, sale or other liquidation of the Property, (c) advances made by
Beneficiary and/or Trustee to complete or partially construct all or any part of any improvements
which may have been commenced on the Land or otherwise to protect the security of this Deed
of Trust, (d) costs of evidence of title, costs of surveys and costs of appraisals, and (e) the fees,
costs and expenses of attorneys, accountants and other consultants; together with interest
thereon from the date of expenditure until so paid at the Alternate Rate.
ARTICLE IV
ASSIGNMENT OF RENTS, ISSUES AND PROFITS
4.1 Assignment of Rents, Issues and Profits. Trustor hereby absolutely and
irrevocably assigns and transfers to Beneficiary all of its right, title and interest in and to all rents,
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issues, profits, royalties, income and other proceeds and similar benefits derived from the
Property (collectively, the "Rents"), and hereby gives to and confers upon Beneficiary the right,
power and authority to collect such Rents. Trustor irrevocably appoints Beneficiary its true and
lawful attorney-in-fact, at the option of Beneficiary, at any time and from time to time, to demand,
receive and enforce payment, to give receipts, releases and satisfactions, and to sue, in its name
or in the name of Trustor, for all Rents, and to apply the same to the obligations secured hereby;
provided, however, that Trustor shall have a license to collect Rents (but not more than one month
in advance unless the written approval of Beneficiary has first been obtained), and to retain and
enjoy the same, so long as an Event of Default shall not have occurred hereunder and be
continuing. The assignment of the Rents in this Article 4 is intended to be an absolute assignment
from Trustor to Beneficiary and not merely the passing of a security interest.
4.2 Collection Upon Default. Upon the occurrence of an Event of Default hereunder,
Trustor's license to collect the Rents shall automatically terminate and Beneficiary may, at any
time without notice, either in person, by agent or by a receiver appointed by a court, and without
regard to the adequacy of any security for the obligations hereby secured, enter upon and take
possession of the Property, or any part thereof, and, with or without taking possession of the
Property or any part thereof, in its own name sue for or otherwise collect such Rents (including
those past due and unpaid, and all prepaid Rents and all other monies which may have been or
may hereafter be deposited with Trustor by any lessee or tenant of Trustor to secure the payment
of any Rent or for any services thereafter to be rendered by Trustor or any other obligation of any
tenant to Trustor arising under any lease, and Trustor agrees that, upon the occurrence of any
Event of Default hereunder, Trustor shall promptly deliver all Rents and other monies to
Beneficiary), and Beneficiary may apply the same, less costs and expenses of operation and
collection, including, without limitation, attorneys' fees, whether or not suit is brought or
prosecuted to judgment, upon any reasonable indebtedness or obligation of Trustor secured
hereby, and in such order as Beneficiary may determine notwithstanding that said indebtedness
or the performance of said obligation may not then be due. The collection of Rents, or the entering
upon and taking possession of the Property, or the application of Rents as provided above, shall
not cure or waive any default or notice of default hereunder or invalidate any act performed in
response to such default or pursuant to such notice of default or be deemed or construed to make
Beneficiary a mortgagee -in -possession of all or any part of the Property.
ARTICLE V
REMEDIES UPON DEFAULT
5.1 Events of Default. The occurrence of any of the following events or conditions shall
constitute an event of default ("Event of Default") hereunder:
5.1.1 Trustor shall fail to pay any amount owing under this Deed of Trust when
due, and such failure is not cured within ten (10) days after Beneficiary gives Trustor written notice
of such failure;
5.1.2 Trustor shall fail to observe or perform any other obligation contained in
this Deed of Trust, and such failure is not cured within thirty (30) days after Beneficiary gives
Trustor notice of such failure; provided that, if cure cannot reasonably be effected within such 30 -
day period, such failure shall not be an Event of Default so long as Borrower promptly (in any
event, within thirty (30) days after receipt of such notice) commences cure, and thereafter
diligently prosecutes such cure to completion;
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5.1.3 The occurrence of an "Event of Default" under the Agreement, the
Transaction Documents or the Note after delivery of notice and expiration of the cure period
provided therein;
5.1.4 A default under any other document or agreement secured hereby, subject
to any applicable cure period; or
5.1.5 The occurrence of a "Default" or "Event of Default" under the loan
documents entered into between Trustor and , in its capacity as Debt
Lender, or any successor permanent lender approved by Beneficiary that is not cured within the
applicable cure or grace period therefor (including cure or grace periods for the Investor Limited
Partner), if Beneficiary, City, or Agency cures such Event of Default, after delivery of notice of
such cure by Beneficiary, City, or Agency to Trustor and expiration of fifteen (15) days following
such Event of Default.
5.2 Acceleration Upon Default; Additional Remedies. Upon the occurrence of an
Event of Default, Beneficiary may, at its option, terminate its obligations under the Transaction
Documents and declare all Secured Obligations to be immediately due and payable without any
presentment, demand, protest or further notice of any kind; and whether or not Beneficiary
exercises said option, Beneficiary may:
5.2.1 Either in person or by agent, with or without bringing any action or
proceeding, or by a receiver appointed by a court and without regard to the adequacy of its
security, enter upon and take possession of the Property, or any part thereof, in its own name or
in the name of Trustee, and do any acts which it deems necessary or desirable to complete the
construction of the Improvements on the Land, to preserve the value, marketability or rentability
of the Property, or part thereof or interest therein, increase the income therefrom or protect the
security hereof and, with or without taking possession of the Property, sue for or otherwise collect
the Rents, including those past due and unpaid, and apply the same, less costs and expenses of
operation and collection including attorneys' fees, upon any Secured Obligations, all in such order
as Beneficiary may determine. The entering upon and taking possession of the Property, the
collection of such Rents and the application thereof as aforesaid, shall not cure or waive any
default or notice of default hereunder or invalidate any act done in response to such default or
pursuant to such notice of default and, notwithstanding the continuance in possession by Trustee,
Beneficiary or a receiver of all or any portion of the Property or the collection, receipt and
application of any of the Rents, the Trustee or Beneficiary shall be entitled to exercise every right
provided for in any of the Transaction Documents or by law upon occurrence of any Event of
Default, including the right to exercise the power of sale;
5.2.2 Commence an action to foreclose this Deed of Trust as a mortgage,
appoint a receiver, or specifically enforce any of the covenants contained herein;
5.2.3 Deliver to Trustee a written declaration of default and demand for sale, and
a written notice of default and election to cause Trustor's interest in the Property to be sold, which
notice Trustee or Beneficiary shall cause to be duly filed for record in the official records of the
County in which the Property is located;
5.2.4 Exercise any and/or all of the rights and remedies available to a secured
party under the California Uniform Commercial Code in such order and in such manner as
Beneficiary, in its sole discretion, may determine (including, without limitation, requiring Trustor to
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assemble the collateral and make the collateral available to Beneficiary at a reasonably
convenient location or location); provided, however, that the expenses of retaking, holding,
preparing for sale or the like as provided thereunder shall include reasonable attorneys' fees and
other expenses of Beneficiary and Trustee and shall be additionally secured by this Deed of Trust;
and/or
5.2.5 Exercise all other rights and remedies provided herein, in any Transaction
Document or other document or agreement now or hereafter securing all or any portion of the
obligations secured hereby, or provided by law or in equity.
5.2.6 Notwithstanding anything to the contrary contained in this Deed of Trust,
prior to declaring any default or taking any remedy permitted under this Deed of Trust or applicable
law based upon an alleged default under this Deed of Trust by Trustor, Beneficiary shall deliver
written notice to the Investor Limited Partner of Trustor's failure to cure such default, and Investor
Limited Partner shall have one hundred eighty (180) days to cure such alleged default (whether
of a monetary or nonmonetary nature). In addition, if a Default is caused by the general partner
of Trustor and the Investor Limited Partner removes the general partner of Trustor, such removal
shall be deemed to have cured the Default so long as the Investor Limited Partner and/or Trustor,
as applicable, diligently continues to cure any remaining Events of Default after such general
partner is removed.
5.3 Foreclosure By Power of Sale.
5.3.1 Should Beneficiary elect to foreclose by exercise of the power of sale
herein contained, Beneficiary shall notify Trustee and shall deposit with Trustee this Deed of Trust
and the Note and such receipts and evidence of expenditures made and secured hereby as
Trustee may require.
5.3.2 Upon receipt of notice from Beneficiary, Trustee shall cause to be recorded,
published and delivered to Trustor such notice of default and election to sell as is then required
by law. Trustee shall, without demand on Trustor, after lapse of such time as may then be
required by law and after recordation of such notice of default and after notice of sale having been
given as required by law, sell the Property at the time and place of sale fixed by it in said notice
of sale, either as a whole, or in separate lots or parcels or items and in such order as Beneficiary
may direct Trustee so to do, at public auction to the highest bidder for cash in lawful money of the
United States of America payable at the time of sale. Trustee shall deliver to such purchaser or
purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but
without any covenant or warranty, express or implied. The recitals in such deed of any matter or
fact shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation,
Trustor, Trustee or Beneficiary, may purchase at such sale.
5.3.3 After deducting all fees, costs and expenses incurred by Beneficiary or
Trustee in connection with such sale, including costs of evidence of title, Beneficiary shall apply
the proceeds of sale in the following priority, to payment of (i) first, all amounts expended under
the terms hereof, not then repaid, with accrued interest at the Alternate Rate; (ii) second, all other
Secured Obligations; and (iii) the remainder, if any, to the person or persons legally entitled
thereto.
5.3.4 Subject to applicable law, Trustee may postpone the sale of all or any
portion of the Property by public announcement at the time and place of sale, and from time to
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time thereafter may postpone such sale by public announcement or subsequently noticed sale,
and without further notice make such sale at the time fixed by the last postponement, or may, in
its discretion, give a new notice of sale.
5.3.5 A sale of less than the whole of the Property or any defective or irregular
sale made hereunder shall not exhaust the power of sale provided for herein; and subsequent
sales may be made hereunder until all obligations secured hereby have been satisfied, or the
entire Property sold, without defect or irregularity.
5.4 Appointment of Receiver. Upon the occurrence of an Event of Default under this
Deed of Trust, Beneficiary, as a matter of right and without notice to Trustor or anyone claiming
under Trustor, and without regard to the then value of the Property or the interest of Trustor
therein, shall have the right to apply to any court having jurisdiction to appoint a receiver or
receivers of the Property, and Trustor hereby irrevocably consents to such appointment and
waives notice of any application therefor. Any such receiver or receivers shall have all the usual
powers and duties of receivers in like or similar cases and all the powers and duties of Beneficiary
in case of entry as provided herein and shall continue as such and exercise all such powers until
the date of confirmation of sale of the Property unless such receivership is sooner terminated.
5.5 Application of Funds After Default. Except as otherwise herein provided and
subject to the rights of senior lienholders, upon the occurrence of an Event of Default hereunder,
Beneficiary may, at any time without notice, apply any or all sums or amounts received and held
by Beneficiary to pay insurance premiums, Impositions, or either of them, or as rents or income
of the Property, or as insurance or condemnation proceeds, and all other sums or amounts
received by Beneficiary from or on account of Trustor or the Property, or otherwise, upon any
Secured Obligation, in such manner and order as Beneficiary may elect, notwithstanding that
such Secured Obligation may not yet be due. The receipt, use or application of any such sum or
amount shall not be construed to affect the maturity of any indebtedness secured by this Deed of
Trust, or any of the rights or powers of Beneficiary or Trustee under the terms of the Transaction
Documents, or any of the obligations of Trustor or any guarantor under the Transaction
Documents; or to cure or waive any default or notice of default under any of the Transaction
Documents; or to invalidate any act of Trustee or Beneficiary.
5.6 Remedies Not Exclusive. Trustee and Beneficiary, and each of them, shall be
entitled to enforce payment and performance of any indebtedness or obligation secured hereby
and to exercise all rights and powers under this Deed of Trust or under any Project Document or
other agreement or any law now or hereafter in force, notwithstanding some or all of the said
indebtedness and obligations secured hereby may now or hereafter be otherwise secured,
whether by guaranty, mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the
acceptance of this Deed of Trust nor its enforcement whether by court action or pursuant to the
power of sale or other powers herein contained, shall prejudice or in any manner affect Trustee's
or Beneficiary's right to realize upon or enforce any other security now or hereafter held by Trustee
or Beneficiary, it being agreed that Trustee and Beneficiary, and each of them, shall be entitled
to enforce this Deed of Trust and any other security for the obligations hereby secured now or
hereafter held by Beneficiary or Trustee in such order and manner as they may in their absolute
discretion determine. No remedy herein conferred upon or reserved to Trustee or Beneficiary is
intended to be exclusive of any other remedy herein, or granted to Beneficiary under any other
agreement, or by law provided or permitted, but each shall be cumulative and shall be in addition
to every other remedy given hereunder or granted to Beneficiary under any other agreement, or
now or hereafter existing at law or in equity or by statute. Every power or remedy given by any
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of the Transaction Documents to the Trustee or Beneficiary or to which either of them may be
otherwise entitled may be exercised, concurrently or independently, from time to time and as often
as may be deemed expedient by the Trustee or Beneficiary, and either of them may pursue
inconsistent remedies. Trustor may be joined in any action brought by Beneficiary to foreclose
under or otherwise enforce this Deed of Trust.
5.7 Request for Notice. Trustor hereby requests that a copy of any notice of default
and that a copy of any notice of sale hereunder be mailed to it at the address set forth in the first
paragraph of this Deed of Trust.
ARTICLE VI
MISCELLANEOUS
6.1 Amendments. This instrument cannot be waived, modified, discharged or
terminated orally, but only by an instrument in writing signed by the party against whom
enforcement of any waiver, modification, discharge or termination is sought.
6.2 Waivers. Trustor waives, to the extent permitted by law, (i) the benefit of all laws
now existing or that may hereafter be enacted providing for any appraisement before sale of any
portion of the Property, and, whether now existing or hereafter arising or created, (ii) all rights of
valuation, appraisement, stay of execution, notice of election to mature or declare due the whole
of the secured indebtedness and marshaling in the event of foreclosure of the liens hereby
created, and (iii) all rights and remedies which Trustor may have or be able to assert by reason
of the laws of the State of California pertaining to the rights and remedies of sureties; provided,
however, nothing contained herein shall be deemed to be a waiver of Trustor's rights under
Section 2924, 2924b and 2924c of the California Civil Code, or under Sections 580a or 726 of the
California Code of Civil Procedure.
6.3 Statements by Trustor. Trustor shall, within ten (10) days after notice thereof from
Beneficiary, deliver to Beneficiary a written statement setting forth the amounts then unpaid and
secured by this Deed of Trust and stating whether any offset or defense exists against such
amounts.
6.4 Statements by Beneficiary. For any statement or accounting requested by Trustor
or any other entitled person pursuant to Section 2943 or Section 2954 of the California Civil Code
or pursuant to any other provision of applicable law, or for any other document or instrument
furnished to Trustor by Beneficiary, Beneficiary may charge the maximum amount permitted by
law at the time of the request therefor, or if there be no such maximum, then in accordance with
Beneficiary's customary charges therefor or the actual cost to Beneficiary therefor, whichever is
greater.
6.5 Reconveyance by Trustee. Upon written request of Beneficiary stating that all
Secured Obligations have been paid and fully performed, and upon surrender by Beneficiary of
this Deed of Trust and the Note to Trustee for cancellation and retention and upon payment by
Trustor of Trustee's fees and the costs and expenses of executing and recording any requested
reconveyance, Trustee shall reconvey to the person or persons legally entitled thereto, without
warranty, any portion of the Property then held hereunder. The recitals in any such reconveyance
of any matter or fact shall be conclusive proof of the truthfulness thereof. The grantee in any such
reconveyance may be described as "the person or persons legally entitled thereto."
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6.6 Notices. All notices, demands, approvals and other communications provided for
herein shall be in writing and shall be personally delivered or mailed by United States mail, as
certified or registered material, return receipt requested, postage prepaid, to the appropriate party
at the address set forth in the first paragraph of this Deed of Trust. Addresses for notice may be
changed from time to time by written notice to all other parties. All communications shall be
effective when actually received; provided, however, that nonreceipt of any communication as the
result of a change of address of which the pending party was not notified or as the result of a
refusal to accept delivery shall be deemed receipt of such communication.
A copy of all notices to Trustor hereunder shall be provided to the Investor Limited Partner,
at the following addresses:
With a copy to:
6.7 Acceptance by Trustee. Trustee accepts this trust when this Deed of Trust, duly
executed and acknowledged, is made a public record as provided by law. The trust created
hereby is irrevocable by Trustor.
6.8 Headinqs. Article and section headings are included in this Deed of Trust for
convenience of reference only and shall not be used in construing this Deed of Trust.
6.9 Severability. Every provision of this Deed of Trust is intended to be severable. In
the event any provision hereof is declared to be illegal, invalid or unenforceable for any reason
whatsoever by a court of competent jurisdiction, such illegality, invalidity or unenforceability shall
not affect the legality, validity or enforceability of the remaining provisions hereof, which provisions
shall remain binding and enforceable.
6.10 Subrogation. To the extent that proceeds of the Note are used, either directly or
indirectly, to pay any outstanding lien, charge or prior encumbrance against the Property,
Beneficiary shall be subrogated to any and all rights and liens held by any owner or holder of such
outstanding liens, charges and prior encumbrances, irrespective of whether such liens, charges
or encumbrances are released.
6.11 Governing Law. This Deed of Trust shall be governed by, and construed in
accordance with, the laws of the State of California.
6.12 Statute of Limitations. The right to plead, use or assert any statute of limitations
as a plea, defense or bar of any kind, or for any purpose, to any obligation secured hereby, or to
any complaint or other pleading or proceeding filed, instituted or maintained for the purpose of
ATTACHMENT NO. 9
FORM OF AUTHORITY DEED OF TRUST
Page 13 of 16
enforcing this Deed of Trust or any rights hereunder, is hereby waived by Trustor to the full extent
permitted by law.
6.13 Interpretation. In this Deed of Trust the singular shall include the plural and the
masculine shall include the feminine and neuter and vice versa, if the context so requires; and
the word "person" shall include corporation, partnership or other form of association. Any
reference in this Deed of Trust to any document, instrument or agreement creating or evidencing
an obligation secured hereby shall include such document, instrument or agreement both as
originally executed and as it may from time to time be modified.
6.14 Trust Irrevocable. The trust created hereby is irrevocable by Trustor. All amounts
payable by Trustor pursuant to this Deed of Trust shall be paid without notice, demand,
counterclaim, setoff, deduction or defense and without abatement, suspension, deferment,
diminution or reduction. Trustor hereby waives all rights now or hereafter conferred by statute or
otherwise to any abatement, suspension, deferment, diminution or reduction of any amount
secured hereby and payable by Trustor to Beneficiary or Trustee.
6.15 Further Assurances. Trustor agrees to do or cause to be done such further acts
and things and to execute and deliver or to cause to be executed and delivered such additional
assignments, agreements, powers and instruments, as Beneficiary or Trustee may reasonably
require or deem advisable to correct any defect, error or omission in this Deed of Trust or the
execution or acknowledgment of this Deed of Trust, to subject to the lien of this Deed of Trust any
of Trustor's properties covered or intended to be covered hereby, to perfect and maintain such
lien, to keep valid and effective the charges and lien hereof, to carry into effect the purposes of
this Deed of Trust or to better assure and confirm to Beneficiary or Trustee their respective rights,
powers and remedies hereunder.
6.16 Trustee's Powers. At any time, and from time to time, without liability therefor and
without notice, upon written request of Beneficiary and presentation of this Deed of Trust and the
note secured hereby for endorsement, and without affecting the personal liability of any person
for payment of the indebtedness or the performance of any other obligation secured hereby or
the effect of this Deed of Trust upon the remainder of the Property, Trustee may (i) reconvey all
or any part of the Property, (ii) consent in writing to the making of any map or plat thereof, (iii) join
in granting any easement thereon, or (iv) join in any extension agreement, agreement
subordinating the lien or charge hereof, or other agreement or instrument relating hereto or to all
or any part of the Property.
6.17 Substitution of Trustee. Beneficiary may, from time to time, by written instrument
executed and acknowledged by Beneficiary and recorded in the county or counties where the
Property is located, or by any other procedure permitted by applicable law, substitute a successor
or successors for the Trustee named herein or acting hereunder.
6.18 Successors and Assigns. This Deed of Trust applies to, inures to the benefit of
and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors
and assigns.
[Signatures block begins on following page]
ATTACHMENT NO. 9
FORM OF AUTHORITY DEED OF TRUST
Page 14 of 16
IN WITNESS WHEREOF, Trustor has duly executed this Deed of Trust as of the date first
above written.
"TRUSTOR"
AVON DAKOTA HOUSING PARTNERS II, L.P., a
California limited partnership
By: Avon Dakota MGP, LLC,
a California limited liability company, its managing
general partner
By: Affordable Housing Access, Inc., a
California nonprofit public benefit
corporation, its sole member and manager
am
Jonathan B. Webb, President
By: Related/Avon Dakota Development Co., LLC, a
California limited liability company, its
administrative general partner
In
Frank Cardone, Vice President
ATTACHMENT NO. 9
FORM OF AUTHORITY DEED OF TRUST
Page 15 of 16
ATTACHMENT A TO DEED OF TRUST
LEGAL DESCRIPTION
Real property in the City of Anaheim, County of Orange, State of California, described as
follows:
[to come]
ATTACHMENT A TO DEED OF TRUST
LEGAL DESCRIPTION
Page 1 of 1
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
REGULATORY AGREEMENT
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Anaheim Housing Authority
201 South Anaheim Boulevard, Suite 1003
Anaheim, California 92805
Attention: Executive Director
This document is exempt from the payment of
a recording fee pursuant to Government Code
§§ 6103 and 27383.
REGULATORY AGREEMENT
This REGULATORY AGREEMENT ("Regulatory Agreement") is entered into as of
, 20, by and among the ANAHEIM HOUSING AUTHORITY, a public body,
corporate and politic ("Authority"), and AVON DAKOTA HOUSING PARTNERS II, L.P., a
California limited partnership ("Developer").
RECITALS
A. Authority is the owner of certain real property located at 808 South Dakota Street,
814 South Dakota Street, 815 South Dakota Street and 833 South Dakota Street within the City
of Anaheim ("Site"), which is legally described in the Legal Description attached hereto as
Exhibit A and incorporated herein by reference, and is the subject of this Regulatory Agreement
("Site").
B. Developer and Authority entered into that certain unrecorded Affordable Housing
Agreement (Avon Dakota Neighborhood - Phase II) dated as of June _, 2017 ("Affordable
Housing Agreement"). A copy of the Affordable Housing Agreement is on file with Authority as a
public record. Subject to the terms and conditions of the Affordable Housing Agreement, Authority
has agreed to ground lease the Site to Developer pursuant to a Ground Lease, and Developer
has agreed to construct an affordable rental housing project consisting of twenty-one (21) units
("Phase II"), and operate Phase II on the Site with all of the units to be made available to Very
Low and Low Income Households (collectively, "Housing Units").
C. Pursuant to the Affordable Housing Agreement, Authority agreed to ground lease
the Site to Developer pursuant to the Ground Lease, and Developer agreed to develop and
operate Phase II thereon.
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 1 of 19
D. The execution and recording of this Regulatory Agreement is a requirement of the
Affordable Housing Agreement. Terms used herein have the meanings set forth in the Affordable
Housing Agreement unless otherwise specifically defined herein.
NOW, THEREFORE, in exchange for the mutual covenants, restrictions, and agreements
set forth herein and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Development of Phase II. Developer agrees to develop the Site subject to the
terms and in accordance with the provisions of the Affordable Housing Agreement, the Scope of
Development which is attached to the Affordable Housing Agreement as Attachment No. 6, the
Schedule of Performance which is attached to the Affordable Housing Agreement as Attachment
No. 5, the Ground Lease, the Entitlement as approved by the City, the Anaheim Municipal Code,
and all other applicable federal, state and local codes, regulations, and ordinances.
2. Housing Units.
(a) Number of Housing Units. Number of Housing Units. Developer
covenants and agrees to make available, restrict occupancy to, and rent the Housing Units in
Phase II to Very Low and Low Income Households, in accordance with this Section 2 and the
Affordable Housing Agreement for Phase II as follows:
(i) Two (2) of the two (2) bedroom Housing Units in Phase II to 30%
AMI Very Low Income Households at an Affordable Rent;
(ii) One (1) of the three (3) bedroom Housing Units in Phase II to 30%
AMI Very Low Income Households at an Affordable Rent;
(iii) Two (2) of the one (1) bedroom Housing Units in Phase II to 40%
AMI Very Low Income Households at an Affordable Rent;
(iv) One (1) of the two (2) bedroom Housing Units in Phase II to 40%
AMI Very Low Income Households at an Affordable Rent;
(v) Two (2) of the three (3) bedroom Housing Units in Phase II to 40%
AMI Very Low Income Households at an Affordable Rent;
(vi) One (1) of the one (1) bedroom Housing Units in Phase II to 50%
AMI Very Low Income Households at an Affordable Rent;
(vii) Six (6) of the two (2) bedroom Housing Units in Phase II to 50%
AMI Very Low Income Households at an Affordable Rent;
(viii) Two (2) of the three (3) bedroom Housing Units in Phase II to 50%
AMI Very Low Income Households at an Affordable Rent;
(ix) Three (3) of the two (2) bedroom Housing Units in Phase II to 60%
AMI Low Income Households at an Affordable Rent; and
(x) One (1) of the three (3) bedroom Housing Units in Phase II to 60%
AMI Low Income Households at an Affordable Rent.
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 2 of 19
(b) Affordable Rent. Affordable Rent shall be charged for all Housing Units
throughout the Affordability Period. The maximum Affordable Rent chargeable for the Housing
Units shall be annually determined by Authority (and as charged and implemented by Developer)
in accordance with the following requirements:
(i) The Affordable Rent for the Housing Units to be rented to 30% AMI
Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of thirty
percent (30%) of AMI for Orange County as determined and published annually by TCAC for a
family of a size appropriate to the unit.
(ii) The Affordable Rent for the Housing Units to be rented to 40% AMI
Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of forty
percent (40%) of AMI for Orange County as determined and published annually by TCAC for a
family of a size appropriate to the unit.
(iii) The Affordable Rent for the Housing Units to be rented to 50% AMI
Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of fifty
percent (50%) of AMI for Orange County as determined and published annually by TCAC for a
family of a size appropriate to the unit.
(iv) The Affordable Rent for the Housing Units to be rented to 60% AMI
Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of sixty
percent (60%) of AMI for Orange County as determined and published annually by TCAC for a
family of a size appropriate to the unit.
Developer shall, and shall cause its Property Manager to, operate Phase II and
cause occupancy of all Housing Units thereon in conformity with these covenants and this
Regulatory Agreement.
For purposes of this Regulatory Agreement, "Affordable Rent" shall mean the total
of monthly payments for (a) use and occupancy of each Housing Unit and land and facilities
associated therewith, (b) any separately charged fees or service charges assessed by Developer
which are required of all tenants, other than security deposits, (c) a reasonable allowance for an
adequate level of service of utilities not included in (a) or (b) above, including garbage collection,
sewer, water, electricity, gas and other heating, cooking and refrigeration fuels, but not including
telephone service, or cable TV or internet services, and (d) possessory interest, taxes or other
fees or charges assessed for use of the land and facilities associated therewith by a public or
private entity other than Developer. No additional charge shall be assessed against tenant
households of the Housing Units for any social or supportive services provided at the Site.
In addition, thirteen (13) of the Housing Units shall constitute "HOME Units", as
follows: (a) at 809 Dakota Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units
shall be Low HOME Units, and (ii) two (2) of the two (2) bath Housing Units shall be High HOME
Units; (b) at 868 Dakota Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units
shall be Low HOME Units, and (ii) three (3) of the two (2) bath Housing Units shall be High HOME
Units; and (c) at 606 Avon Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units
shall be a Low HOME Unit, (ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall
be High HOME Units, and (iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be
High HOME Units. The HOME Units shall be rented in conformity with Low HOME or High HOME
rents in conformity with the HOME Regulations consistent with the identification of such HOME
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 3 of 19
Units as Low HOME or High HOME Units, respectively, in the definition of HOME Units. The
HOME Units shall be rented at the lower of (i) rent determined for Low HOME or High HOME
Units or (ii) rent as otherwise determined in conformity with this Regulatory Agreement.
(c) Duration of Affordability Requirements; Affordability Period. Phase II
and all the Housing Units thereon shall be subject to the requirements of this Section 2, et seq.
for the full term of not less than fifty-seven (57) years from the date that the Release of
Construction Covenants is recorded against the Site in the Official Records. The duration of these
covenants and this requirement shall be known as the "Affordability Period."
(d) Selection of Tenants.
(i) Developer shall be responsible for the selection of tenants for the
Housing Units in compliance with all lawful and reasonable criteria, and shall adopt a tenant
selection system that shall be approved (or disapproved) by Authority Executive Director in his/her
reasonable discretion, pursuant to which Developer shall establish and maintain a chronological
waiting list system for selection of tenants in the order of priority set forth below, and which shall
be set forth in the Marketing and Tenant Selection Plan and the Property Management Plan,
which plans are required to be submitted by Developer and approved by Authority pursuant to
Sections 3 and 7(b) hereof. Throughout the Affordability Period and the Term of the Ground
Lease, Developer shall establish and maintain for Phase II such waiting list of eligible, prospective
tenants to facilitate re -tenanting Housing Units in compliance with the approved Marketing and
Tenant Selection Plan, Property Management Plan, and Anaheim Municipal Code. Further,
subject to applicable Fair Housing Laws and in compliance with the Anaheim Municipal Code, in
particular Section 18.52.160 thereof, Authority shall be afforded a priority marketing period for
thirty (30) days after receiving written notice from Developer that one or more Housing Units have
become vacant at Phase ll, during which time Authority and Tenant shall work cooperatively to
select tenants for any vacant Housing Units at Phase II. Developer shall provide prompt written
notice to Authority when vacancies of Housing Units occur to facilitate timely re -tenanting of
Housing Units pursuant to the approved Marketing and Tenant Selection Plan, Property
Management Plan and Anaheim Municipal Code. Subject to applicable Fair Housing Laws,
Developer's waiting list of prospective, eligible tenants for Housing Units at Phase II shall include
and follow the following order of priority for selection of tenants, and Authority will follow such
order of priority:
(A) Very Low and Low Income Households, as applicable, who
have been displaced from their residences due to programs or projects implemented by the City
of Anaheim or another governmental entity;
(B) Very Low and Low Income Households, as applicable, who
have applied for and have received rental vouchers from Authority;
(C) Very Low and Low Income Households, as applicable, who
are listed on Authority's waiting lists for affordable housing and who live and/or work in Anaheim;
and
(D) Very Low and Low Income Households, as applicable, who
live and/or work in Anaheim.
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 4 of 19
(ii) In the event Tenant rents a Housing Unit to a household holding a
Portable Voucher, if required by the Executive Director in writing to the Tenant, the rental
agreement (or lease agreement, as applicable) between Tenant, as landlord, and the subtenant
shall expressly provide that monthly rent charged shall be the Affordable Rent required hereunder
for the Housing Unit (not fair market rent) and that the rent collected directly from such subtenant
holding a Portable Voucher shall be not more than 40% of subtenant's actual gross income
pursuant to the applicable voucher program regulations; i.e., the rent charged to such subtenant
under the rental agreement shall be the Affordable Rent chargeable hereunder and not market
rent for the area (as determined by a current rent reasonable review conducted in accordance
with Section 8 Federal Program Limitations applicable to Portable Vouchers), as would otherwise
be permitted under the applicable Portable Voucher program. Thus, if required by the Executive
Director in writing in accordance herewith, the subsidy payment to Tenant under any Portable
Voucher shall not exceed the difference between the amount the subtenant actually pays to
Tenant towards such subtenant's rent and the Affordable Rent chargeable for the applicable
Housing Unit hereunder.
(iii) Developer hereby acknowledges and agrees that, upon completion
of construction of Phase II and leasing of the Housing Units to Very Low and Low Income
Households pursuant to this Regulatory Agreement, Developer will have received governmental
subsidies from Authority and from TCAC through the Tax Credits allocated to Phase II (and/or
other subsidies included in the final financing sources for Phase II, as approved by Authority
pursuant to the Affordable Housing Agreement) in exchange for Developer's agreement to limit
the rents charged to tenants of Phase II to an Affordable Rent and Developer further
acknowledges and agrees that acceptance of additional governmental rental subsidies resulting
in total, cumulative rent payments to Developer in excess of an Affordable Rent for any of the
Housing Units at Phase II would constitute an unjustified windfall to Developer at the expense of
Authority and the federal and state governments.
(iv) In the event of a conflict between this Regulatory Agreement and
the approved Marketing and Tenant Selection Plan, the Marketing and Tenant Selection Plan
shall control.
(e) Household Income Requirements. On or before one hundred twenty
(120) days following the end of Developer's fiscal year, commencing the first year after issuance
of the first certificate of occupancy for Phase II, and annually thereafter, Developer shall prepare
and submit to Authority, at Developer's expense, a written summary of the income, household
size, and rent payable by each of the tenants of the Housing Units and, upon the written request
of the Authority, copies of each and all leases or rental agreements and the current rules and
regulations for Phase Il. At Authority's request, Developer shall also provide to Authority
completed income computation and certification forms, all in a form reasonably acceptable to
Authority, for each and all tenants. Developer shall obtain, or shall cause to be obtained by the
Property Manager, a certification from each household leasing a Housing Unit demonstrating that
such household is a 30% AMI Very Low Income Household, 40% AMI Very Low Income
Household, 50% AMI Very Low Income Household, or 60% AMI Low Income Household, as
applicable and according to the Area Median Income annually determined and published by
TCAC for Orange County, and meets the eligibility and occupancy requirements established for
the Housing Unit. Developer shall verify, or shall cause to be verified by the Property Manager,
the income and household size certification of the tenant household.
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 5 of 19
M Affordable Rent; Household Income Categories/Definitions.
(i) "30% AMI Very Low Income Households" shall mean those
households earning not greater than thirty percent (30%) of Orange County Area Median Income,
adjusted for household size, which is set forth annually by regulation of TCAC.
(ii) "40% AMI Very Low Income Households" shall mean those
households earning not greater than forty percent (40%) of Orange County Area Median Income,
adjusted for household size, which is set forth annually by regulation of TCAC.
(iii) "50% AMI Very Low Income Households" shall mean those
households earning not greater than fifty percent (50%) of Orange County Area Median Income,
adjusted for household size, which is set forth annually by regulation of TCAC.
(iv) "60% AMI Low Income Households" shall mean those
households earning not greater than sixty percent (60%) of Orange County Area Median Income,
adjusted for household size, which is set forth annually by regulation of TCAC.
(v) "Very Low Income" and/or "Very Low Income Households"
shall mean and include: (a) very low income households as defined in the Tax Credit Rules and
(b) 30% AMI Very Low Income Households, (c) 40% AMI Very Low Income Households, and
(d) 50% AMI Very Low Income Households. Very Low Income Households include Extremely
Low Income households, as defined in the Tax Credit Rules.
(vi) "Low Income," "Lower Income," "Low Income Households" or
"Lower Income Households" shall mean and include both: (i) lower income households as
defined in the Tax Credit Rules and (ii) 60% AMI Low Income Households. Lower Income
Households include Very Low Income Households and Extremely Low Income Households, as
defined in the Tax Credit Rules.
(g) Occupancy Limits. The maximum occupancy of the Housing Units in
Phase II shall not exceed more than such number of persons as is equal to two persons per
bedroom, plus one. Thus, for the two (2) bedroom Housing Units, the maximum occupancy shall
not exceed five (5) persons. For the three (3) bedroom Housing Units, the maximum occupancy
shall not exceed seven (7) persons. .
3. Marketing Program. Prior to and as a Condition Precedent to the commencement
of the Ground Lease, Developer shall have prepared and obtained Authority's approval, which
approval shall not be unreasonably withheld, of a marketing program for the leasing of the
Housing Units at Phase II ("Marketing Program"). During the Affordability Period, any material
changes to an approved Marketing Program are subject to reasonable review and approval by
the Executive Director. The rental of the Housing Units, as and when they are vacated by the
existing tenants, shall be conducted in accordance with the approved Marketing Program and any
affirmative marketing requirements which have been adopted by the Authority prior to the date
hereof. The availability of Housing Units shall be marketed in accordance with the Marketing
Program as the same may be amended from time to time with Authority's prior written approval,
which approval shall not unreasonably be withheld. Developer shall provide Authority with
periodic reports with respect to the marketing for lease of the Housing Units. Authority agrees to
exercise reasonable efforts to assist Developer in connection with the implementation of the
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 6 of 19
Marketing Program; provided, however, Authority shall not be under any obligation to incur any
out-of-pocket expenses in connection therewith.
4. Social Services. In the event that, despite Developer's reasonable best efforts,
Developer is unable to provide all of the social and supportive services in the Scope of Social and
Supportive Services attached as Attachment No. 19 to the Affordable Housing Agreement,
Developer shall use reasonable best efforts to provide comparable social and supportive services
programming at Phase II that are reasonably similar in scope and content to the Scope of Social
and Supportive Services attached as Attachment No. 19 to the Affordable Housing Agreement
that that meet all the regulations promulgated by TCAC, during the entire fifty-five (55) year
Affordability Period. Such substitute services shall be subject to the prior written approval of the
Authority Executive Director, which approval shall not be unreasonably withheld, conditioned or
delayed. In the event the characteristics of the resident population at Phase II change
substantially, Authority Executive Director shall have the authority to approve revisions to the
Scope of Social and Supportive Services attached to the Affordable Housing Agreement as
Attachment No. 19, in his/her sole and exclusive discretion.
5. Leases; Rental Agreements for Housing Units. Developer shall submit a
standard lease form for use at Phase II to Authority Executive Director for approval, which lease
form shall comply with the requirements of this Regulatory Agreement, including all applicable
provisions of the HAL. Authority shall reasonably approve such lease form upon finding that such
lease form is consistent with this Regulatory Agreement, including all applicable provisions of the
HAL. Developer shall enter into a written lease, in the form approved by Authority, with each
tenant/tenant household of Phase 11. During the Affordability Period, any material changes to the
lease form are subject to the reasonable review and approval of the Executive Director. In the
event Authority uses Home Investment Partnerships Act ("HOME") funds to provide any portion
of the Additional Subsidy to Developer, the lease form shall also comply with all applicable HOME
rules and regulations.
6. Maintenance.
(a) General Maintenance. Developer shall maintain the Site and all
improvements thereon, including lighting and signage, in good condition, free of debris, waste
and graffiti, and in compliance with all applicable provisions of the Anaheim Municipal Code.
Developer shall maintain in accordance with the Maintenance Standards (as hereinafter defined)
the improvements and landscaping on the Site. Such Maintenance Standards shall apply to all
buildings, signage, common amenities, lighting, landscaping, irrigation of landscaping,
architectural elements identifying the Site and any and all other improvements on the Site and
Phase 11. To accomplish the maintenance, Developer shall either staff or contract with and hire
licensed and qualified personnel to perform the maintenance work, including the provision of
labor, equipment, materials, support facilities, and any and all other items necessary to comply
with the requirements of this Regulatory Agreement.
Developer and its maintenance staff, contractors or subcontractors shall comply
with the following standards as to Phase II (collectively, "Maintenance Standards"):
(i) The Site shall be maintained in conformance and in compliance with
the approved final as -built plans, and reasonable maintenance standards which comply with the
industry standard for comparable first quality affordable housing projects in the County, including
but not limited to painting and cleaning of all exterior surfaces and other exterior facades
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 7 of 19
comprising all private improvements and public improvements to the curbline. The Site shall be
maintained in good condition and in accordance with the industry custom and practice generally
applicable to comparable first quality affordable housing projects in the County.
(ii) Landscape maintenance shall include, but not be limited to:
watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning;
trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe
road conditions and visibility, and irrigation coverage; replacement, as needed, of all plant
materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas;
and staking for support of trees.
(iii) Clean-up maintenance shall include, but not be limited to:
maintenance of all sidewalks, paths and other paved areas in clean and weed -free condition;
maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or
unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to
mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the
maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris
are properly disposed of by maintenance workers.
Authority agrees to notify Developer in writing if the condition of the Site does not
meet with the Maintenance Standards and to specify the deficiencies and the actions required to
be taken by Developer to cure the deficiencies. Upon notification of any maintenance deficiency,
Developer shall have thirty (30) days within which to correct, remedy or cure the deficiency. If the
written notification states the problem is urgent relating to the public health and safety, then
Developer shall have forty-eight (48) hours to rectify the problem. In the event Developer does
not maintain the Site in the manner set forth herein and in accordance with the Maintenance
Standards, Authority shall have, in addition to any other rights and remedies hereunder, the right
to maintain the Site, or to contract for the correction of such deficiencies, after written notice to
Developer, and Developer shall be responsible for the payment of all such costs incurred by
Authority.
(b) Program Maintenance. In addition to the routine maintenance and repair
required pursuant to Section 6(a), Developer shall perform the following minimum programmed
maintenance of the Improvements to the Site:
(i)
five (5) years;
every five (5) years; and
Interior painting and window covering replacement at least every
Exterior painting at least every ten (10) years;
Repair and resurfacing of parking areas and walkways at least
(iv) Replacement of all deteriorated or worn landscaping and play
equipment at least every five (5) years.
Upon the request of Developer, the Executive Director, at her sole and absolute
discretion, may grant a waiver or deferral of any program maintenance requirement. Developer
shall keep such records of maintenance and repair as are necessary to prove performance of the
program maintenance requirements.
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 8 of 19
7. Management of Phase II.
(a) Property Manager. Developer shall manage or cause Phase II and all
appurtenances thereto that are a part of Phase 11, 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 County. Developer may contract with a
property management company or property manager, to operate and maintain Phase II in
accordance with the terms of this Section 7 ("Property Manager"); provided, however, the
selection and hiring of the Property Manager (and each successor or assignee), including any
Affiliate, is and shall be subject to prior written approval of Authority's Executive Director (or
designee) in her sole and reasonable discretion. Related Management Company, L.P. ("RMC"),
is hereby approved to act as the Property Manager, subject to Executive Director review of the
scope of services, itemized fees, and fee contract for property management between Developer
and RMC. The Property Manager shall manage Phase II in accordance with the definitions of
Affordable Rent contained in Section 2(b) hereof, the tenant selection requirements contained in
Section 2(d), and the definitions relating to income contained in Section 2(e). Any fee paid to the
Property Manager for social services provided to the tenants shall be exclusive of the fee paid to
the Property Manager relating to the management of Phase II. Except for RMC, Developer shall
conduct due diligence and background evaluation of any potential third party property manager
or property management company to evaluate experience, references, credit worthiness, and
related qualifications as a property manager. Any proposed property manager shall have
significant and relevant prior experience with affordable housing projects and properties
comparable to Phase II and the references and credit record of such property manager/company
shall be investigated (or caused to be investigated) by Developer prior to submitting the name
and qualifications of such proposed property manager to the Executive Director for review and
approval. A complete and true copy of the results of such background evaluation shall be
provided to the Executive Director. Approval of a Property Manager by Authority's Executive
Director shall not be unreasonably delayed but shall be in her sole reasonable discretion, and
Authority Executive Director shall use good faith efforts to respond as promptly as practicable in
order to facilitate effective and ongoing property management of Phase II by one qualified
Property Manager. The replacement of RMC by Developer and/or the selection by Developer of
any new or different Property Manager during the Term of the Ground Lease shall also be subject
to the foregoing requirements.
(b) Property Management Plan. Developer shall prepare and submit to the
Executive Director for review and approval, which approval shall not be unreasonably withheld, a
management plan for Phase I I which includes a detailed plan and strategy for long term marketing,
operation, maintenance, repair and security of Phase Il, inclusive of social services for the
residents of the Housing Units, and the method of selection of tenants, rules and regulations for
tenants, and other rental policies for Phase II ("Property Management Plan"). In this regard,
Authority preapproves RMC as the Property Manager subject to Executive Director review of the
fee contract for property management between Developer and RMC. Executive Director approval
of the Property Management Plan shall not be unreasonably withheld or delayed. Subsequent to
approval of the Property Management Plan by the Executive Director the ongoing management
and operation of Phase 11 shall be in compliance with the approved Property Management Plan.
During the Affordability Period, Developer and its Property Manager may from time to time submit
to the Executive Director proposed amendments to the Property Management Plan, the
implementation of which shall also be subject to the prior written approval of the Executive
Director, which approval shall not be unreasonably withheld.
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 9 of 19
(c) Gross Mismanagement. During the Affordability Period, and in the event
of "Gross Mismanagement" (as defined below) of Phase II, Executive Director and/or Authority
shall have and retain the authority to direct and require any condition(s), acts, or inactions of
Gross Mismanagement to cease and/or be corrected immediately, and further to direct and
require the immediate removal of the Property Manager and replacement with a new qualified
and approved Property Manager, if such condition(s) is/are not ceased and/or corrected after
expiration of thirty (30) days from the date of written notice from Executive Director. If Developer
or Property Manager has commenced to cure such Gross Mismanagement condition(s) on or
before the 20th day from the date of written notice (with evidence of such submitted to the
Executive Director), but has failed to complete such cure by the 30th day (or such longer period
if the cure cannot reasonably be accomplished in thirty (30) days as reasonably determined by
the non -defaulting party), then Developer and its Property Manager shall have an additional 10
days to complete the cure of Gross Mismanagement condition(s). In no event shall any condition
of Gross Mismanagement continue uncured for a period exceeding forty-five (45) days from the
date of the initial written notice of such condition(s), except that the condition described in
subdivision (iv) below may exist for up to, but no longer than, seventy-five (75) days without
triggering Authority's right to remove the Property Manager as described in the immediately
following sentence as long as Developer is diligently working to cure such conditions of Gross
Mismanagement. If such condition(s) do persist beyond such period, Executive Director shall
have the sole and absolute right to immediately and without further notice to Developer (or to
Property Manager or any other person/entity) to remove the Property Manager and Developer
shall contract with a replacement Property Manager reasonably acceptable to Authority (in
accordance with Section 7(a)) within thirty (30) days following Authority's removal of the defaulting
Property Manager. If Developer takes steps to select a new Property Manager that selection is
subject to the requirements set forth above for selection of a Property Manager.
For purposes of this Regulatory Agreement, the term "Gross Mismanagement"
shall mean management of Phase II in a manner which violates the terms and/or intention of this
Regulatory Agreement to operate a first quality affordable housing complex, and shall include,
but is not limited to, any one or more of the following:
(i) Habitually leasing to tenants who exceed the prescribed income
levels;
(ii) Habitually allowing tenants to exceed the prescribed occupancy
levels without taking immediate action to stop such overcrowding;
(iii) Under -funding required reserve accounts if Annual Project
Revenues are sufficient to maintain such reserve accounts;
(iv) Failing to timely maintain Phase II in accordance with the Property
Management Plan and Maintenance Standards;
(v) Fraud or embezzlement of Phase II funds, including without
limitation funds in the reserve accounts;
(vi) Failing to fully cooperate with the Anaheim Police Department or
other local law enforcement agency(ies) with jurisdiction over Phase II, in maintaining a crime -
free environment within Phase II;
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
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(vii) Failing to fully cooperate with the Anaheim Fire Department or other
local public safety agency(ies) with jurisdiction over Phase II, in maintaining a safe and accessible
environment within Phase II;
(viii) Failing to fully cooperate with the Anaheim Planning & Building
Department, including the Code Enforcement Division, or other local health and safety
enforcement agency(ies) with jurisdiction over Phase 11, in maintaining a decent, safe and sanitary
environment within Phase 11; and
(ix) Spending funds from the Capital Replacement Reserve account for
items that are not defined as eligible costs, including eligible capital and/or replacement costs,
under the standards imposed by GAAP (and/or, as applicable, generally accepted auditing
principles).
Notwithstanding the requirements of the Property Manager to correct any condition
of Gross Mismanagement as described above, Developer is obligated and shall use its best
efforts to correct any defects in property management or operations at the earliest feasible time
and, if necessary, to replace the Property Manager as provided above. Developer shall include
advisement and provisions of the foregoing requirements and requirements of this Regulatory
Agreement within any contract between Developer and its Property Manager for Phase II.
(d) Code Enforcement. Developer acknowledges and agrees that Authority,
City, and their employees and authorized agents, shall have the right to conduct code compliance
and/or code enforcement inspections of Phase II and the individual Housing Units for Phase ll,
both exterior and interior, at reasonable times and upon reasonable notice (not less than 48 hours
prior notice, except in an emergency) to Developer and/or an individual tenant. If such notice is
provided by Authority or City representative(s) to Developer, then Developer (or its Property
Manager) shall immediately and directly advise any affected tenant of such upcoming inspection
and cause access to the area(s) and/or Housing Units at Phase II to be made available and open
for inspection. Developer shall include express advisement of such inspection rights within the
lease/rental agreements for each Housing Unit in Phase I I in order for each and every tenant and
tenant household to be aware of this inspection right and such inspection(s) shall not
unreasonably interfere with use and enjoyment of the site.
8. Capital Reserve Requirements. Commencing upon the closing for the
permanent Primary Loan for Phase II, Developer shall annually set aside an amount of not less
than Three Hundred Dollars ($300.00) per Housing Unit (16 Housing Units times $300 equals
$6,300) or such increased amount required by TCAC or the Partnership Agreement or the Lender
under the Primary Loan for Phase II) from the gross rents received from Phase Il, into a separate
interest bearing trust account defined as the Capital Replacement Reserve. Funds in the Capital
Replacement Reserve shall be used only for capital repairs, improvements and replacements to
Phase II, including fixtures and equipment, which are normally capitalized under generally
accepted accounting principles. The non-availability of funds in the Capital Replacement Reserve
does not in any manner relieve or lessen Developer's obligation to undertake any and all
necessary capital repairs, improvements, or replacements and to continue to maintain Phase II in
the manner prescribed herein for Phase II. Not less than once per year, Developer, at its expense,
shall submit to Authority Executive Director an accounting for the Capital Replacement Reserve
for Phase II. Capital improvements and repairs to, and replacements at Phase II shall include
only those items with a long useful life, including without limitation the following: carpet and
drapery replacement; appliance replacement; exterior painting, including exterior trim; hot water
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
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heater replacement; plumbing fixtures replacement, including tubs and showers, toilets,
lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and
replacement, and seal coating; roofing repair and replacement; landscape tree replacement;
irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line
replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous
motors and blowers; common area furniture replacement; and common area repainting. Pursuant
to the procedure for submittal of each Annual Budget for Phase II to Executive Director by
Developer, Executive Director will evaluate the cumulative amount on deposit in the Capital
Replacement Reserve account and exercise her sole, reasonable discretion to determine if
existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative
unexpended/unencumbered account balance in such Capital Replacement Reserve account are
adequate to provide for necessary capital repairs and improvement for Phase II (provided that
required annual deposits thereto are not required to exceed $300/per Housing Unit).
9. Operating Budget and Operating Reserve. Within twelve (12) months after
commencement of construction of Phase II, but in no event later than ninety(90)days prior to the
completion of construction of Phase Il, and not less than annually thereafter on or before
November 1 of each year following the issuance of the first certificate of occupancy issued by the
City's building official for Phase ll, Developer shall submit to Authority on not less than an annual
basis an Operating Budget for Phase II, which budget shall be subject to the written approval of
Executive Director or her designee, which approval shall not be unreasonably withheld. The
Executive Director's discretion in review and approval of each proposed annual Operating Budget
shall include, without limitation, authority to review individual categories, line items, and accounts,
such as the following: extent, type, and amount for social services at or associated with Phase
II; existing balance(s) in and proposed deposits to the Capital Replacement Reserve for Phase II
to evaluate shortfalls and/or cumulative unexpended/unencumbered deposits (provided that
required annual deposits thereto are not required to exceed $300/per unit); conformity of any
annual increases in the Partnership Related Fees for Phase II with the increases permitted in the
definition of "Partnership Related Fees"; reasonableness and conformity to prevailing market
rates in Orange County and rates and fees for goods and services to be provided Developer or
any of its parent, affiliated, or subsidiary entities, etc. for Phase II.
Developer shall, or shall cause the Property Manager to, set aside, in an
"Operating Reserve" for Phase II in a separate interest bearing trust account, a target amount
equal to three (3) months of (i) Debt Service on the Primary Loan and (ii) Operating Expenses for
Phase II ("Target Amount"), which shall be funded by Tax Credit equity; provided, a larger
Operating Reserve may be maintained if required by the approved Lender or Tax Credit Investor
for Phase II. The Operating Reserve shall thereafter be replenished from Annual Project Revenue
(net of Operating Expenses and Debt Service) to maintain the Operating Reserve balance at the
Target Amount. The Target Amount shall be retained in the Operating Reserve to cover shortfalls
between Annual Project Revenue and actual Operating Expenses, but shall in no event be used
to pay for capital items or capital costs properly payable from the Capital Replacement Reserve.
Developer shall, not less than once per every twelve (12) months, submit to the Executive Director
evidence reasonably satisfactory to Authority of compliance herewith.
10. Duty to Prevent Hazardous Material Contamination. During the development
and operation of Phase II, Developer shall take all necessary precautions to prevent the release
of any Hazardous Materials into the environment on or under the Site. Such precautions shall
include compliance with all Governmental Requirements with respect to Hazardous Materials.
Developer shall notify Authority, and provide to Authority a copy or copies, of any notices of
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 12 of 19
violation, notices to comply, citations, inquiries, clean-up or abatement orders, cease and desist
orders, reports filed pursuant to self -reporting requirements and reports filed or applications made
pursuant to any Governmental Requirement relating to Hazardous Materials and underground
tanks, and Developer shall report to Authority, as soon as possible after each incident, any
unusual, potentially important incidents in the event of a release of any Hazardous Materials into
the environment.
For purposes of this Section, "Governmental Requirements" shall mean all laws,
ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the state,
the county, the City, or any other political subdivision in which the Site is located, and of any other
political subdivision, agency or instrumentality exercising jurisdiction over Authority, Developer or
the Site.
For purposes of this Section, "Hazardous Materials" means any substance, material, or
waste which is or becomes regulated by any local governmental authority, the County, including
the Orange County Health Care Agency, the Regional Water Quality Control Board, the State of
California (including the Department of Toxic Substances Control), other state, regional or local
governmental authority, or the United States Government, including, but not limited to, any
material or substance which is (i) defined as a "hazardous waste," "extremely hazardous waste,"
or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to
Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous
Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California
Health and Safety Code, Division 20, Chapter 6.8 (Carpenter -Presley -Tanner Hazardous
Substance Account Act), (iii) defined as a "hazardous material," "hazardous substance," or
"hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20,
Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a
"hazardous substance" under Section 25281 of the California Health and Safety Code, Division
20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) friable
asbestos, (vii) polychlorinated biphenyls, (viii) designated as "hazardous substances" pursuant to
Section 311 of the Clean Water Act (33 U.S.C. §1317), (ix) defined as a "hazardous waste"
pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. §6901, et
seq. (42 U.S.C. §6903) or (x) defined as "hazardous substances" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601, et
seq. Notwithstanding the foregoing, "Hazardous Materials" shall not include such products in
quantities as are customarily used in the construction, maintenance, rehabilitation, management,
operation and residence of residential developments or associated buildings and grounds, or
typically used in residential activities in a manner typical of other comparable residential
developments, or substances commonly ingested by a significant population living within Phase
ll, including without limitation alcohol, aspirin, tobacco and saccharine.
11. Compliance With Laws. Developer shall carry out the design, development and
operation of Phase II in conformity with all applicable laws, including all applicable state labor
standards, City zoning and development standards, building, plumbing, mechanical and electrical
codes, and all other provisions of the Anaheim Municipal Code, and all applicable disabled and
handicapped access requirements, including without limitation the Americans With Disabilities
Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government
Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq.
Developer shall additionally comply with all HOME Regulations and other applicable Federal
Program Limitations as set forth in the Affordable Housing Agreement, specifically including
Section 3.9.3 thereof.
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
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12. Non-Discrimination Covenants. Developer 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) or (d) of Section 12955 of the Government Code, as those bases are
defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of
Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease,
transfer, use, occupancy, tenure, or enjoyment of the Site, nor shall the grantee or any person
claiming under or through him or her, establish or permit any practice or practices of discrimination
or segregation with reference to the selection, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees, or vendees in the Site. The foregoing covenants shall run with
the land. Developer shall refrain from restricting the rental or lease of the Site on any of the bases
listed above. All leases or contracts relating to the Site shall contain or be subject to substantially
the following nondiscrimination or nonsegregation clauses:
(a) In deeds. "The grantee herein covenants by and for himself or herself, his
or her heirs, executors, administrators, and assigns, and all persons claiming under or through
them, that there shall be no discrimination against or segregation of, any person or group of
persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the
Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and
paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code,
in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein
conveyed, nor shall the grantee or any person claiming under or through him or her, establish or
permit any practice or practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in
the premises herein conveyed. The foregoing covenants shall run with the land."
(b) In leases: "The lessee herein covenants by and for himself or herself, his
or her heirs, executors, administrators, and assigns, and all persons claiming under or through
him or her, and this lease is made and accepted upon and subject to the following conditions:
"That there shall be no discrimination against or segregation of any
person or group of persons, on account of any basis listed in
subdivision (a) or (d) of Section 12955 of the Government Code, as
those bases are defined in Sections 12926, 12926.1, subdivision
(m) and paragraph (1) of subdivision (p) of Section 12955, and
Section 12955.2 of the Government Code, in the leasing,
subleasing, transferring, use, occupancy, tenure, or enjoyment of
the premises herein leased nor shall the lessee himself or herself,
or any person claiming under or through him or her, establish or
permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use,
or occupancy, of tenants, lessees, sublessees, subtenants, or
vendees in the premises herein leased."
(c) In contracts: "There shall be no discrimination against or segregation of,
any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section
12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1,
subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of
the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or
enjoyment of the premises which are the subject of this Regulatory Agreement, nor shall the
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 14 of 19
grantee or any person claiming under or through him or her, establish or permit any practice or
practices of discrimination or segregation with reference to the selection, location, number, use
or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein
conveyed. The foregoing covenants shall run with the land."
The covenants established in this Section 14 shall, without regard to technical
classification and designation, be binding for the benefit and in favor of Authority and their
successors and assigns, and shall remain in effect in perpetuity.
13. Monitoring and Recordkeeping. Throughout the Affordability Period, Developer
shall comply with all applicable recordkeeping and monitoring requirements of the HAL and shall
annually complete and submit to Authority a Certification of Continuing Program Compliance in a
form provided by Authority. Representatives of Authority (and City) shall be entitled to enter the
Site upon at least forty-eight (48) hours' notice, to monitor compliance with this Regulatory
Agreement, to inspect the records of the Site, and to conduct an independent audit or inspection
of such records. Developer agrees to cooperate with Authority in making all of its records for
Phase II and making the Site and all Housing Units thereon available for inspection or audit.
Records shall be made available for review and inspection and/or audit in Orange County,
California. Developer agrees to maintain all records relating to Phase II in a businesslike manner,
and to maintain such records for the term of this Regulatory Agreement.
14. Annual Monitoring Fee. Concurrently with the delivery of each Annual Financial
Statement and Residual Receipts Report to Authority, Developer shall pay an Annual Monitoring
Fee to Authority in the amount of One Thousand Fifty Dollars ($1,050), increased annually by 3%,
which shall compensate Authority for its costs incurred to monitor Developer's compliance with
this Agreement.
15. Defaults and Remedies. Defaults of this Regulatory Agreement and remedies
therefor shall be governed by the provisions of Section 6, et seq., of the Affordable Housing
Agreement.
16. Waiver of Terms and Conditions. Any party may, in its sole discretion, waive in
writing any of the terms and conditions of this Regulatory Agreement. Waivers of any covenant,
term, or condition contained herein shall not be construed as a waiver of any subsequent breach
of the same covenant, term, or condition.
17. Non -Liability of Authority or City Officials and Employees. No member,
official, employee or agent of Authority or City shall be personally liable to Developer, or any
successor in interest, in the event of any default or breach by Authority o or for any amount which
may become due to Developer or its successors, or on any obligations under the terms of this
Regulatory Agreement.
18. Time. Time is of the essence in this Regulatory Agreement.
19. Notices. Any approval, disapproval, demand, document or other notice ("Notice")
which any party may desire to give to another party under this Regulatory Agreement must be in
writing and may be given either by (i) personal service, (ii) delivery by reputable document
delivery service such as Federal Express that provides a receipt showing date and time of
delivery, (iii) facsimile transmission, or (iv) mailing in the United States mail, certified mail, postage
prepaid, return receipt requested, addressed to the address of the party as set forth below, or at
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 15 of 19
any other address as that party may later designate by Notice. Service shall be deemed
conclusively made at the time of service if personally served; upon confirmation of receipt if sent
by facsimile transmission; the next business day if sent by overnight courier and receipt is
confirmed by the signature of an agent or employee of the party served; the next business day
after deposit in the United States mail, properly addressed and postage prepaid, return receipt
requested, if served by express mail; and three (3) days after deposit thereof in the United States
mail, properly addressed and postage prepaid, return receipt requested, if served by certified mail.
Developer: Avon Dakota Housing Partners II, L.P.
18201 Von Karman Avenue, Suite 900
Irvine, California 92612
Attention: William A. Witte
Fax No.: (949) 660-7273
With a Copy to: Bocarsly Emden Cowan Esmail & Arndt LLP
633 West Fifth Street, 70th Floor
Los Angeles, California 90071
Attention: Lance Bocarsly
Fax No.: (213) 239-0410
Authority: Anaheim Housing Authority
201 South Anaheim Boulevard, Suite 1003
Anaheim, California 92805
Attention: Linda N. Andal, Secretary
Fax No.: (714) 765-4105
With Copies To: Anaheim Housing Authority
201 South Anaheim Boulevard, Suite 1003
Anaheim, California 92805
Attention: John E. Woodhead IV, Executive Director
Fax No.: (714) 765-4630
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Celeste Brady
Fax No.: (949) 823-5141
Anaheim Housing Authority
200 South Anaheim Boulevard, Suite 356
Anaheim, California 92805
Attention: Leonie Mulvihill, Deputy City Attorney IV
Fax No.: (714) 765-5123
Such addresses may be changed by Notice to the other party given in the same manner
as provided above.
20. Successors and Assigns. This Regulatory Agreement shall run with the land,
and all of the terms, covenants and conditions of this Regulatory Agreement shall be binding upon
Developer and Authority and the permitted successors and assigns of Developer and Authority.
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 16 of 19
Whenever the term "Developer" or "Authority" is used in this Regulatory Agreement, such term
shall include any other successors and assigns as herein provided.
21. Except City, No Third Parties Benefited. Except as to the City of Anaheim, who
the parties agree is an intended third party beneficiary of this Regulatory Agreement, this
Regulatory Agreement is made and entered into for the sole protection and benefit of Authority
(and City) and their successors and assigns and Developer and its successors and assigns, and
no other person or persons shall have any right of action hereon.
22. Partial Invalidity. If any provision of this Regulatory Agreement shall be declared
invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired.
23. Governing Law. This Regulatory Agreement and other instruments given
pursuant hereto shall be construed in accordance with and be governed by the laws of the State
of California. Any references herein to particular statutes or regulations shall be deemed to refer
to successor statutes or regulations, or amendments thereto.
24. Amendment. This Regulatory Agreement may not be changed orally, but only by
agreement in writing signed by Developer and Authority.
[Signatures for Regulatory Agreement continue on following pages.]
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 17 of 19
IN WITNESS WHEREOF, the parties hereto have executed this Regulatory Agreement
as of the date and year first set forth below.
DEVELOPER:
AVON DAKOTA HOUSING PARTNERS II, L.P., a
California limited partnership
By: Avon Dakota MGP, LLC,
a California limited liability company, its managing
general partner
By: Affordable Housing Access, Inc., a
California nonprofit public benefit
corporation, its sole member and manager
in
Jonathan B. Webb, President
By: Related/Avon Dakota Development Co., LLC,
a California limited liability company, its
administrative general partner
In
Frank Cardone, Vice President
[Signatures for Regulatory Agreement continue on following pages.]
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 18 of 19
[Signatures for Regulatory Agreement continue from previous page.]
AUTHORITY:
ANAHEIM HOUSING AUTHORITY, a public body,
corporate and politic
John E. Woodhead, IV,
Executive Director or authorized designee
ATTEST:
LINDA N. ANDAL, AUTHORITY SECRETARY
Linda N. Andal
APPROVED AS TO FORM:
OFFICE OF CITY ATTORNEY
Leonie Mulvihill
Deputy City Attorney IV
STRADLING YOCCA CARLSON & RAUTH
Authority Special Counsel
ATTACHMENT NO. 10
FORM OF REGULATORY AGREEMENT
Page 19 of 19
EXHIBIT A TO ATTACHMENT NO. 10
LEGAL DESCRIPTION
Real property in the City of Anaheim, County of Orange, State of California, described as
follows:
[to come]
EXHIBIT A TO REGULATORY AGREEMENT
LEGAL DESCRIPTION
Page 1 of 1
ATTACHMENT NO. 11
FORM OF COMPLETION GUARANTY
COMPLETION GUARANTY
This COMPLETION GUARANTY ("Guaranty") is made as of 20_, by The
Related Companies, L.P., a New York limited partnership ("Guarantor"), in favor of the City of
Anaheim, a California municipal corporation and charter city ("City"), and Anaheim Housing
Authority, a public body corporate and politic ("Authority"). As used herein, the term "Anaheim
Parties" means City and/or Authority, as the context dictates.
RECITALS
A. Authority is the owner of that certain real property in the City of Anaheim more
particularly described on Exhibit "A" attached hereto and made a part hereof ("Site");
B. Authority, and Avon Dakota Housing Partners Il, L.P. ("Developer") entered into
that certain Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II), dated as of
June _, 2017 (the "AHA"), pursuant to which Developer agreed to construct an affordable rental
housing development on the Site within the time and in accordance with the terms and conditions
of the AHA;
C. In accordance with the AHA, Authority and Developer have entered into a Ground
Lease for the Site, dated ( , 20,] pursuant to which Developer has leased Site from
the Authority, in furtherance of the objectives of the AHA;
D. Pursuant to the AHA, the Authority agreed to (i) convey the leasehold interest in
the Site in consideration for Developer's agreement and covenant to develop twenty-one (21)
affordable apartment units on the Site in conformance with the AHA ("Phase II"), and (ii) make a
loan to Developer in the amount of $[4,141,500] ("Authority Subordinate Loan") to finance part of
the development on the Site, which loan is evidenced by an Authority Promissory Note and
secured by an Authority Deed of Trust encumbering Developer's leasehold estate in the Site
(together with the AHA, the "Loan Documents"); and
E. Guarantor is an Affiliate of Developer, has a substantial financial interest in the
business and affairs of Developer and it will receive substantial economic benefit should
Developer be permitted to develop the Site in the manner and in accordance with the terms of the
AHA.
THEREFORE, to induce the Anaheim Parties to enter into the Loan Documents and to
make the Authority Subordinate Loan, and in consideration thereof, Guarantor unconditionally
guarantees and agrees as follows:
1. AHA. Guarantor acknowledges receipt of a copy of the AHA and all of the
instruments described therein and/or attached thereto. The AHA is incorporated herein by this
reference as though fully set forth herein. AHA as used herein shall mean, refer to and include
the AHA, as well as any riders, exhibits, addenda, amendments and attachments thereto (which
are hereby incorporated herein by this reference) or other documents expressly incorporated by
ATTACHMENT NO. 11
FORM OF COMPLETION GUARANTY
Page 1 of 8
reference in the AHA. Any capitalized term not otherwise defined herein shall have the meaning
ascribed to it in the AHA.
2. Guaranty. Guarantor hereby guarantees the performance by Developer of its
obligation to complete construction of Phase II and all associated on-site and off-site
improvements (collectively, the "Improvements") on the Site pursuant to the terms and conditions
set forth in the AHA and in accordance with the Schedule of Performance attached to the AHA.
Without limiting the generality of the foregoing, Guarantor guarantees that: (a) such construction
shall be substantially completed within the time limits set forth in the AHA, subject to force majeure
delays, as provided in Section 6.3 of the AHA; (b) the development of the Improvements shall be
constructed and substantially completed in accordance with the Development Plans and all other
plans, specifications and the other provisions of the AHA (collectively, "Specifications") without
substantial deviation therefrom, as the same may be modified from time to time in accordance
with the AHA; (c) the development shall be constructed and completed free and clear of any
mechanic's liens, materialmen's liens and equitable liens; and (d) all costs of construction shall
be paid prior to delinquency.
3. Lien Free Completion. Substantial completion of construction of the Improvements
on the Site free and clear of liens shall be deemed to have occurred upon: (a) (i) Authority's
receipt of all required occupancy permit(s) for Phase II issued by the local government agency
having jurisdiction and authority to issue same, and (ii) the expiration of the statutory period(s)
within which valid mechanic's liens, materialmen's liens and/or stop notices may be recorded
and/or served by reason of the construction of Phase ll, or, alternatively, Authority's receipt of
valid, unconditional releases thereof from all persons entitled to record said liens or serve said
stop notices; or (b) Authority's receipt of such other evidence of lien free completion as Authority
deems satisfactory in its reasonable discretion.
4. Obligations of Guarantor Upon Default By Developer. If the construction of the
Improvements is not substantially completed in the manner and within the time required by the
AHA, Guarantor shall, within thirty (30) days of receipt of written demand of the Anaheim Parties:
(a) diligently proceed to complete construction at Guarantor's sole cost and expense; (b) fully pay
and discharge all claims for labor performed and material and services furnished in connection
with the construction of the Improvements; and (c) release and discharge all claims of stop
notices, mechanic's liens, materialmen's liens and equitable liens that may arise in connection
with the construction of the Improvements. Guarantor's obligations hereunder shall be subject to
Authority's unconditional and irrevocable agreement to make the undisbursed Authority
Subordinate Loan funds available to Guarantor (pursuant to the terms and conditions of the Loan
Documents) for the purposes of completing construction of the Improvements and fulfilling
Guarantor's other obligations under this Guaranty; provided, however, that the obligation of
Authority to make such undisbursed Authority Subordinate Loan funds available to Guarantor is
expressly conditioned upon there being no continuing default by Guarantor under this Guaranty.
5. Remedies. If Guarantor fails to promptly perform its obligations under this
Guaranty, the Anaheim Parties shall have the following remedies:
5.1 At the Anaheim Parties' option, and without any obligation to do so, to
proceed to perform on behalf of Guarantor any or all of Guarantor's obligations hereunder and
Guarantor shall, upon demand and whether or not construction is actually completed by the
Anaheim Parties, pay to the Anaheim Parties all sums expended by the Anaheim Parties in
ATTACHMENT NO. 11
FORM OF COMPLETION GUARANTY
Page 2 of 8
performing Guarantor's obligations hereunder together with interest thereon at the highest rate
specified in the Authority Promissory Note; and
5.2 From time to time and without first requiring performance by Developer or
exhausting any or all security for the Authority Subordinate Loan, to bring any action at law or in
equity or both to compel Guarantor to perform its obligations hereunder, and to collect in any such
action compensation for all loss, cost, damage, injury and expense sustained or incurred by the
Anaheim Parties as a direct or indirect consequence of the failure of Guarantor to perform its
obligations.
6. Rights of the Anaheim Parties. Guarantor authorizes the Anaheim Parties, without
giving notice to Guarantor or obtaining Guarantor's consent and without affecting the liability of
Guarantor, from time to time to: (a) approve modifications to the Development Plans and
Specifications so long as such modifications do not materially increase the cost of constructing
Phase II nor materially increase the time necessary to complete Phase II; (b) change the terms
or conditions of disbursement of the Authority Subordinate Loan so long as such changes do not
materially interfere with Developer's ability to construct Phase II as and when required under the
AHA; (c) otherwise modify the Loan Documents, including, without limitation, making changes in
the terms of repayment of the Authority Subordinate Loan or modifying, extending or renewing
payment dates; releasing or subordinating security in whole or in part; changing the interest rate;
or advancing additional funds in its discretion for purposes related to the purposes specified in
the Loan Documents; or (d) assign this Guaranty in whole or in part.
7. Guarantor's Waivers. Guarantor waives: (a) any defense based upon any legal
disability or other defense of Developer, any other guarantor or other person, or by reason of the
cessation or limitation of the liability of Developer from any cause other than full payment and
performance of those obligations of Developer which are guaranteed hereunder; (b) any defense
based upon any lack of authority of the officers, directors, partners or agents acting or purporting
to act on behalf of Developer or any principal of Developer or any defect in the formation of
Developer or any principal of Developer; (c) any defense based upon the application by Developer
of the proceeds of the Authority Subordinate Loan for purposes other than the purposes
represented by Developer to the Anaheim Parties or intended or understood by the Anaheim
Parties or Guarantor; (d) any and all rights and defenses arising out of an election of remedies by
the Anaheim Parties, even though that election of remedies, such as a nonjudicial foreclosure
with respect to security for a guaranteed obligation, has destroyed Guarantor's rights of
subrogation and reimbursement against the principal by the operation of Section 580d of the
California Code of Civil Procedure or otherwise; (e) any defense based upon the Anaheim Parties'
failure to disclose to Guarantor any information concerning Developer's financial condition or any
other circumstances bearing on Developer's ability to pay and perform its obligations under the
Authority Promissory Note or any of the other Loan Documents; (f) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be neither larger in amount
nor in any other respects more burdensome than that of a principal; (g) any defense based upon
the Anaheim Parties' election, in any proceeding instituted under the Federal Bankruptcy Code,
of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute;
(h) any defense based upon any borrowing or any grant of a security interest under Section 364
of the Federal Bankruptcy Code; (i) any right of subrogation, any right to enforce any remedy
which any of the Anaheim Parties may have against Developer and any right to participate in, or
benefit from, any security for the Authority Promissory Note or the other Loan Documents now or
hereafter held by the Anaheim Parties; Q) presentment, demand, protest and notice of any kind;
ATTACHMENT NO. 11
FORM OF COMPLETION GUARANTY
Page 3 of 8
and (k) the benefit of any statute of limitations affecting the liability of Guarantor hereunder or the
enforcement hereof.
Guarantor further waives all rights and defenses that Guarantor may have because the
Developer's debt is secured by real property. This means, among other things: (1) the Anaheim
Parties may collect from Guarantor without first foreclosing on any real or personal property
collateral pledged by Developer. (2) If any of the Anaheim Parties forecloses on any real property
collateral pledged by Developer: (A) The amount of the debt may be reduced only by the price
for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the
sale price. (B) the Anaheim Parties may collect from Guarantor even if the Anaheim Parties, by
foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect
from Developer. The foregoing sentence is an unconditional and irrevocable waiver of any rights
and defenses Guarantor may have because Developer's debt is secured by real property. These
rights and defenses being waived by Guarantor include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.
Without limiting the generality of the foregoing or any other provision hereof, Guarantor
further expressly waives to the extent permitted by law any and all rights and defenses, including
without limitation any rights of subrogation, reimbursement, indemnification and contribution,
which might otherwise be available to Guarantor under California Civil Code Sections 2787 to
2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b,
580d and 726, or any of such sections. Finally, Guarantor agrees that the performance of any
act or any payment which tolls any statute of limitations applicable to the Authority Promissory
Note or any of the other Loan Documents shall similarly operate to toll the statute of limitations
applicable to Guarantor's liability hereunder.
8. Guarantor's Warranties. Guarantor warrants and acknowledges that: (a) Authority
would not make the Authority Subordinate Loan but for this Guaranty; (b) Guarantor has reviewed
all of the terms and provisions of the Loan Documents, including the AHA, Development Plans,
and Specifications; (c) there are no conditions precedent to the effectiveness of this Guaranty;
(d) Guarantor has established adequate means of obtaining from sources other than the Anaheim
Parties, on a continuing basis, financial and other information pertaining to Developer's financial
condition, the Property, the progress of construction of the Improvements, and the status of
Developer's performance of its obligations under the Loan Documents, and the Anaheim Parties
have made no representation to Guarantor as to any such matters; (e) the most recent financial
statements of Guarantor previously delivered to lender are true and correct in all material
respects, have been prepared in accordance with generally accepted accounting principles
consistently applied (or other principles acceptable to the Anaheim Parties) and fairly present in
all material respects the financial condition of Guarantor as of the respective dates thereof, and
no material adverse change has occurred in the financial condition of Guarantor since the
respective dates thereof and (f) Guarantor has not and will not, without the prior written consent
of the Anaheim Parties, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose
of all or substantially all of Guarantor's assets, or any interest therein, other than in the ordinary
course of Guarantor's business.
9. Subordination. Guarantor subordinates all present and future indebtedness owing
by Developer to Guarantor to the obligations at any time owing by Developer to the Anaheim
Parties under the Authority Promissory Note and the other Loan Documents. Guarantor assigns
all such indebtedness to the Anaheim Parties as security for this Guaranty, the Authority
Promissory Note and the other Loan Documents. Guarantor agrees to make no claim for such
ATTACHMENT NO. 11
FORM OF COMPLETION GUARANTY
Page 4 of 8
indebtedness until all obligations of Developer under the Authority Promissory Note and the other
Loan Documents have been fully discharged. Guarantor further agrees not to assign all or any
part of such indebtedness unless each of the Anaheim Parties is given prior notice and such
assignment is expressly made subject to the terms of this Guaranty. If the Anaheim Parties so
request, (a) all instruments evidencing such indebtedness shall be duly endorsed and delivered
to the Anaheim Parties, (b) all security for such indebtedness shall be duly assigned and delivered
to the Anaheim Parties, (c) such indebtedness shall be enforced, collected and held by Guarantor
as trustee for the Anaheim Parties and shall be paid over to the Anaheim Parties on account of
the Authority Subordinate Loan but without reducing or affecting in any manner the liability of
Guarantor under the other provisions of this Guaranty, and (d) Guarantor shall execute, file and
record such documents and instruments and take such other action as the Anaheim Parties deem
necessary or appropriate to perfect, preserve and enforce the Anaheim Parties' rights in and to
such indebtedness and any security therefor. If Guarantor fails to take such action, the Anaheim
Parties, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor.
The foregoing power of attorney is coupled with an interest and cannot be revoked.
10. Bankruptcy of Developer. In any bankruptcy or other proceeding in which the filing
of claims is required by law, Guarantor shall file all claims which Guarantor may have against
Developer relating to any indebtedness of Developer to Guarantor and shall assign to the
Anaheim Parties all rights of Guarantor thereunder. If Guarantor does not file any such claim, the
Anaheim Parties, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of
Guarantor or, in the Anaheim Parties' discretion, to assign the claim to a nominee and to cause
proof of claim to be filed in the name of the Anaheim Parties' nominee. The foregoing power of
attorney is coupled with an interest and cannot be revoked. The Anaheim Parties or their nominee
shall have the right, in its reasonable discretion, to accept or reject any plan proposed in such
proceeding and to take any other action which a party filing a claim is entitled to do. In all such
cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to
pay such claim shall pay to the Anaheim Parties the amount payable on such claim and, to the
full extent necessary for that purpose, Guarantor hereby assigns to the Anaheim Parties all of
Guarantor's rights to any such payments or distributions; provided, however, Guarantor's
obligations hereunder shall not be satisfied except to the extent that the Anaheim Parties receive
cash by reason of any such payment or distribution. If the Anaheim Parties receive anything
hereunder other than cash, the same shall be held as collateral for amounts due under this
Guaranty. If all or any portion of the obligations guaranteed hereunder are paid or performed, the
obligations of Guarantor hereunder shall continue and shall remain in full force and effect in the
event that all or any part of such payment or performance is avoided or recovered directly or
indirectly from the Anaheim Parties as a preference, fraudulent transfer or otherwise under the
Bankruptcy Code or other similar laws, irrespective of (a) any notice of revocation given by
Guarantor prior to such avoidance or recovery, or (b) full payment and performance of all of the
indebtedness and obligations evidenced and secured by the Loan Documents.
11. Authority Subordinate Loan Sales and Participations; Disclosure of Information.
Guarantor agrees that Authority may elect, at any time, to sell, assign, or grant participations in
all or any portion of its rights and obligations under the Loan Documents and this Guaranty, and
that any such sale, assignment or participation may be to one or more financial institutions, private
investors, and/or other entities, at Authority's sole discretion. Guarantor further agrees that
Authority may disseminate to any such actual or potential purchaser(s), assignee(s) or
participant(s) all documents and information (including, without limitation, all financial information)
which has been or is hereafter provided to or known to Authority with respect to: (a) the Property
and Phase II and their operation; (b) any party connected with the Authority Subordinate Loan
ATTACHMENT NO. 11
FORM OF COMPLETION GUARANTY
Page 5 of 8
(including, without limitation, the Guarantor, the Developer, any partner, joint venturer or member
of Developer, any constituent partner, joint venturer or member of Developer, any other guarantor
and any non -borrower trustor); and/or (c) any lending relationship other than the Authority
Subordinate Loan which Authority may have with any party connected with the Authority
Subordinate Loan. In the event of any such sale, assignment or participation, Authority and the
parties to such transaction shall share in the rights and obligations of Authority as set forth in the
Loan Documents only as and to the extent they agree among themselves. In connection with any
such sale, assignment or participation, Guarantor further agrees that the Guaranty shall be
sufficient evidence of the obligations of Guarantor to each purchaser, assignee, or participant,
and upon written request by Authority, Guarantor shall consent to such amendments or
modifications to the Loan Documents as may be reasonably required in order to evidence any
such sale, assignment, or participation. Anything in this Guaranty to the contrary notwithstanding,
and without the need to comply with any of the formal or procedural requirements of this Guaranty,
including this Section, any lender may at any time and from time to time pledge and assign all or
any portion of its rights under all or any of the Loan Documents to a Federal Reserve Bank;
provided that no such pledge or assignment shall release such lender from its obligations
thereunder.
12. Additional, Independent and Unsecured Obligations. This Guaranty is
independent of the obligations of Developer under the Authority Promissory Note, the Authority
Deed of Trust and the other Loan Documents. The Anaheim Parties may bring a separate action
to enforce the provisions hereof against Guarantor without taking action against Developer or any
other party or joining Developer or any other party as a party to such action. Except as otherwise
provided in this Guaranty, this Guaranty is not secured and shall not be deemed to be secured
by any security instrument unless such security instrument expressly recites that it secures this
Guaranty.
13. Attorneys' Fees; Enforcement. If any attorney is engaged by the Anaheim Parties
to enforce or defend any provision of this Guaranty, or any of the other Loan Documents relating
to the construction of the Improvements, or as a consequence of any Default, breach or failure of
condition under the Loan Documents relating to the construction of the Improvements, with or
without the filing of any legal action or proceeding, Guarantor shall pay to the Anaheim Parties,
immediately upon demand all reasonable attorneys' fees and costs incurred by the Anaheim
Parties in connection therewith, together with interest thereon from the date of such demand until
paid at the rate of interest applicable to the principal balance of the Authority Promissory Note as
specified therein.
14. Rules of Construction. The word "Developer" as used herein shall include both the
named Developer and any other person at any time assuming or otherwise becoming primarily
liable for all or any part of the obligations of the named Developer under the Authority Promissory
Note and the other Loan Documents. The term "person" as used herein shall include any
individual, company, trust or other legal entity of any kind whatsoever. If this Guaranty is executed
by more than one person, the term "Guarantor" shall include all such persons. When the context
and construction so require, all words used in the singular herein shall be deemed to have been
used in the plural and vice versa. All headings appearing in this Guaranty are for convenience
only and shall be disregarded in construing this Guaranty.
15. Credit Reports. Each legal entity and individual obligated on this Guaranty hereby
authorizes the Anaheim Parties to order and obtain, from a credit reporting agency of the Anaheim
Parties' choice, a third party credit report on such legal entity and individual.
ATTACHMENT NO. 11
FORM OF COMPLETION GUARANTY
Page 6 of 8
16. Governing Law. This Guaranty shall be governed by, and construed in accordance
with, the laws of the State of California, except to the extent preempted by federal laws. Guarantor
and all persons and entities in any manner obligated to the Anaheim Parties under this Guaranty
consent to the jurisdiction of any federal or state court within the State of California having proper
venue and also consent to service of process by any means authorized by California or federal
law.
17. Miscellaneous. The provisions of this Guaranty will bind and benefit the heirs,
executors, administrators, legal representatives, nominees, successors and assigns of Guarantor
and the Anaheim Parties. The liability of all persons and entities that are in any manner obligated
hereunder shall be joint and several. If any provision of this Guaranty shall be determined by a
court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed
severed from this Guaranty and the remaining parts shall remain in full force as though the invalid,
illegal or unenforceable portion had never been part of this Guaranty.
18. Enforceability. Guarantor hereby acknowledges that: (a) the obligations
undertaken by Guarantor in this Guaranty are complex in nature, and (b) numerous possible
defenses to the enforceability of these obligations may presently exist and/or may arise hereafter,
and (c) as part of the Anaheim Parties' consideration for entering into this transaction, the
Anaheim Parties have specifically bargained for the waiver and relinquishment by Guarantor of
all such defenses, and (d) Guarantor has had the opportunity to seek and receive legal advice
from skilled legal counsel in the area of financial transactions of the type contemplated herein.
Given all of the above, Guarantor does hereby represent and confirm to the Anaheim Parties that
Guarantor is fully informed regarding, and that Guarantor does thoroughly understand: (i) the
nature of all such possible defenses, and (ii) the circumstances under which such defenses may
arise, and (iii) the benefits which such defenses might confer upon Guarantor, and (iv) the legal
consequences to Guarantor of waiving such defenses. Guarantor acknowledges that Guarantor
makes this Guaranty with the intent that this Guaranty and all of the informed waivers herein shall
each and all be fully enforceable by the Anaheim Parties, and that the Anaheim Parties are
induced to enter into this transaction in material reliance upon the presumed full enforceability
thereof.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date appearing
on the first page of this Guaranty.
"GUARANTOR"
The Related Companies, L.P., a New York limited
partnership
By: The Related Realty Group, Inc., its general
partner
By:
Its:
ATTACHMENT NO. 11
FORM OF COMPLETION GUARANTY
Page 7 of 8
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Anaheim Housing Authority
201 South Anaheim Boulevard, Suite
1003
Anaheim, California 92805
Attention: Executive Director
This document is exempt from the
payment of a recording fee
pursuant to Government Code
§§ 6103 and 27383.
NOTICE OF AFFORDABILITY RESTRICTIONS ON
TRANSFER OF PROPERTY
This Notice of Affordability Restrictions on Transfer of Property (or
"Notice of Affordability Restrictions") is executed and recorded pursuant to
Section 33334.3(f)(3)(B) of the California Health and Safety Code as
amended by AB 987, Chapter 690, Statutes of 2007 (herein, "Chapter 690"),
and affects that certain real property generally located at 809 South Dakota
Street, 824 South Dakota Street, 862 South Dakota Street, 868 South
Dakota Street and 606 E. Avon Place in the City of Anaheim, California
("City") as legally described in Exhibit "A" hereto ("Site"). The Anaheim
Housing Authority ("Authority"), and Avon Dakota Housing Partners, L.P., a
California limited partnership ("Developer") have previously entered into an
unrecorded Affordable Housing Agreement (Avon Dakota Neighborhood -
Phase II) dated as of June _, 2017 (the "AHA").
1. The AHA provides for affordability restrictions and restrictions on
the transfer of the Site, as more particularly set forth in the AHA. A copy of
the AHA is on file with Authority as a public record and is deemed
incorporated herein. Reference is made to the AHA with regard to the
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 1 of 15
complete text of the provisions of such agreement and all defined terms
therein, which provides for affordability restrictions and restrictions on the
transfer of the Site.
2. The AHA provides for Authority to convey a leasehold interest in
the Site to Developer and for Developer to (a) rehabilitate 16 rental dwelling
units at the Site and (b) rent a specified number of such dwelling units to
households of limited income, paying an affordable rent; such restrictions are
set forth at greater length in a document entitled the Regulatory Agreement,
substantially in the form of Attachment No. 10 to the Affordable Housing
Agreement ("Regulatory Agreement"), which has been entered into by and
among Authority and Developer, and which is expected to be recorded
substantially concurrently herewith among the Official Records of Orange
County, California. The Regulatory Agreement and the AHA are deemed to
be incorporated herein by reference.
3. Section 2 of the Regulatory Agreement provides as follows:
"2. Housing Units.
"(a) Number of Housing Units. Developer
covenants and agrees to make available, restrict
occupancy to, and rent the Housing Units in Phase II
to Very Low and Low Income Households, in
accordance with this Section 4.1 and the Regulatory
Agreement for Phase II as follows:
"(i) Two (2) of the two (2) bedroom Housing Units
in Phase II to 30% AMI Very Low Income Households
at an Affordable Rent;
"(ii) One (1) of the three (3) bedroom Housing Units
in Phase II to 30% AMI Very Low Income Households
at an Affordable Rent;
"(iii) Two (2) of the one (1) bedroom Housing Units
in Phase II to 40% AMI Very Low Income Households
at an Affordable Rent;
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 2 of 15
"(iv) One (1) of the two (2) bedroom Housing Units
in Phase II to 40% AMI Very Low Income Households
at an Affordable Rent;
"(v) Two (2) of the three (3) bedroom Housing Units
in Phase II to 40% AMI Very Low Income Households
at an Affordable Rent;
"(vi) One (1) of the one (1) bedroom Housing Units
in Phase II to 50% AMI Very Low Income Households
at an Affordable Rent;
"(vii) Six (6) of the two (2) bedroom Housing Units in
Phase II to 50% AMI Very Low Income Households
at an Affordable Rent;
"(viii) Two (2) of the three (3) bedroom Housing Units
in Phase II to 50% AMI Very Low Income Households
at an Affordable Rent;
"(ix) Three (3) of the two (2) bedroom Housing Units
in Phase II to 60% AMI Low Income Households at
an Affordable Rent; and
"(x) One (1) of the three (3) bedroom Housing Units
in Phase II to 60% AMI Low Income Households at
an Affordable Rent.
"(b) Affordable Rent. Affordable Rent shall be
charged for all Housing Units throughout the
Affordability Period. The maximum Affordable Rent
chargeable for the Housing Units shall be annually
determined by Authority (and as charged and
implemented by Developer) in accordance with the
following requirements:
"(i) The Affordable Rent for the Housing Units to be
rented to 30% AMI Very Low Income Households
shall not exceed one -twelfth (1/12) of thirty percent
(30%) of thirty percent (30%) of AMI for Orange
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 3 of 15
County as determined and published annually by
TCAC for a family of a size appropriate to the unit.
"(ii) The Affordable Rent for the Housing Units to be
rented to 40% AMI Very Low Income Households
shall not exceed one -twelfth (1/12) of thirty percent
(30%) of forty percent (40%) of AMI for Orange
County as determined and published annually by
TCAC for a family of a size appropriate to the unit.
"(iii) The Affordable Rent for the Housing Units to be
rented to 50% AMI Very Low Income Households
shall not exceed one -twelfth (1/12) of thirty percent
(30%) of fifty percent (50%) of AMI for Orange
County as determined and published annually by
TCAC for a family of a size appropriate to the unit.
"(iv) The Affordable Rent for the Housing Units to be
rented to 60% AMI Low Income Households shall not
exceed one -twelfth (1/12) of thirty percent (30%) of
sixty percent (60%) of AMI for Orange County as
determined and published annually by TCAC for a
family of a size appropriate to the unit.
"Developer shall, and shall cause its Property
Manager to, operate Phase II and cause occupancy
of all Housing Units thereon in conformity with these
covenants and this Regulatory Agreement.
"For purposes of this Regulatory Agreement,
"Affordable Rent" shall mean the total of monthly
payments for (a) use and occupancy of each Housing
Unit and land and facilities associated therewith, (b)
any separately charged fees or service charges
assessed by Developer which are required of all
tenants, other than security deposits, (c) a
reasonable allowance for an adequate level of
service of utilities not included in (a) or (b) above,
including garbage collection, sewer, water,
electricity, gas and other heating, cooking and
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 4 of 15
refrigeration fuels, but not including telephone
service, or cable TV or internet services, and (d)
possessory interest, taxes or other fees or charges
assessed for use of the land and facilities associated
therewith by a public or private entity other than
Developer. No additional charge shall be assessed
against tenant households of the Housing Units for
any social or supportive services provided at the Site.
"In addition, thirteen (13) of the Housing Units shall
constitute "HOME Units", as follows: (a) at 809
Dakota Street: (i) two (2) of the two (2) bedroom, two
(2) bath Housing Units shall be Low HOME Units,
and (ii) two (2) of the two (2) bath Housing Units shall
be High HOME Units; (b) at 868 Dakota Street: (i)
one (1) of the two (2) bedroom, two (2) bath Housing
Units shall be Low HOME Units, and (ii) three (3) of
the two (2) bath Housing Units shall be High HOME
Units; and (c) at 606 Avon Place: (i) one (1) of the
one (1) bedroom, two (2) bath Housing Units shall be
a Low HOME Unit, (ii) two (2) of the one (1) bedroom,
two (2) bath Housing Units shall be High HOME
Units, and (iii) two (2) of the two (2) bedroom, two (2)
bath Housing Units shall be High HOME Units. The
HOME Units shall be rented in conformity with Low
HOME or High HOME rents in conformity with the
HOME Regulations consistent with the identification
of such HOME Units as Low HOME or High HOME
Units, respectively, in the definition of HOME Units.
The HOME Units shall be rented at the lower of (i)
rent determined for Low HOME or High HOME Units
or (ii) rent as otherwise determined in conformity with
this Regulatory Agreement.
"(c) Duration of Affordability Requirements;
Affordability Period. Phase II and all the Housing
Units thereon shall be subject to the requirements of
this Section 2, et seq. for the full term of not less than
fifty-seven (57) years from the date that the Release
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 5 of 15
of Construction Covenants is recorded against the
Site in the Official Records. The duration of these
covenants and this requirement shall be known as
the "Affordability Period."
"(d) Selection of Tenants.
"(i) Developer shall be responsible for the
selection of tenants for the Housing Units in
compliance with all lawful and reasonable
criteria, and shall adopt a tenant selection
system that shall be approved (or disapproved)
by Authority Executive Director in his/her
reasonable discretion, pursuant to which
Developer shall establish and maintain a
chronological waiting list system for selection of
tenants in the order of priority set forth below,
and which shall be set forth in the Marketing and
Tenant Selection Plan and the Property
Management Plan, which plans are required to
be submitted by Developer and approved by
Authority pursuant to Sections 3 and 7(b) hereof.
Throughout the Affordability Period and the
Term of the Ground Lease, Developer shall
establish and maintain for Phase II such waiting
list of eligible, prospective tenants to facilitate re -
tenanting Housing Units in compliance with the
approved Marketing and Tenant Selection Plan,
Property Management Plan, and Anaheim
Municipal Code. Further, subject to applicable
Fair Housing Laws and in compliance with the
Anaheim Municipal Code, in particular
Section 18.52.160 thereof, Authority shall be
afforded a priority marketing period for thirty (30)
days after receiving written notice from
Developer that one or more Housing Units have
become vacant at Phase II, during which time
Authority and Tenant shall work cooperatively to
select tenants for any vacant Housing Units at
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 6 of 15
Phase II. Developer shall provide prompt written
notice to Authority when vacancies of Housing
Units occur to facilitate timely re -tenanting of
Housing Units pursuant to the approved
Marketing and Tenant Selection Plan, Property
Management Plan and Anaheim Municipal
Code. Subject to applicable Fair Housing Laws,
Developer's waiting list of prospective, eligible
tenants for Housing Units at Phase II shall
include and follow the following order of priority
for selection of tenants, and Authority will follow
such order of priority:
"(A) Very Low and Low Income Households, as
applicable, who have been displaced from their
residences due to programs or projects
implemented by the City of Anaheim or another
governmental entity;
(B) Very Low and Low Income Households, as
applicable, who have applied for and have
received rental vouchers from Authority;
(C) Very Low and Low Income Households, as
applicable, who are listed on Authority's waiting
lists for affordable housing and who live and/or
work in Anaheim; and
(D) Very Low and Low Income Households, as
applicable, who live and/or work in Anaheim.
(ii) In the event Developer rents a Housing
Unit to a household holding a Portable Voucher,
if required by the Executive Director in writing to
the Developer, the rental agreement (or lease
agreement, as applicable) between Developer,
as landlord, and the subtenant shall expressly
provide that monthly rent charged shall be the
Affordable Rent required hereunder for the
Housing Unit (not fair market rent) and that the
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 7 of 15
rent collected directly from such subtenant
holding a Portable Voucher shall be not more
than 40% of subtenant's actual gross income
pursuant to the applicable voucher program
regulations; i.e., the rent charged to such
subtenant under the rental agreement shall be
the Affordable Rent chargeable hereunder and
not market rent for the area (as determined by a
current rent reasonable review conducted in
accordance with Section 8 Federal Program
Limitations applicable to Portable Vouchers), as
would otherwise be permitted under the
applicable Portable Voucher program. Thus, if
required by the Executive Director in writing in
accordance herewith, the subsidy payment to
Developer under any Portable Voucher shall not
exceed the difference between the amount the
subtenant actually pays to Developer towards
such subtenant's rent and the Affordable Rent
chargeable for the applicable Housing Unit
hereunder.
(iii) Developer hereby acknowledges and
agrees that, upon completion of construction of
Phase II and leasing of the Housing Units to Very
Low and Low Income Households pursuant to
this Regulatory Agreement, Developer will have
received governmental subsidies from Authority
and from TCAC through the Tax Credits
allocated to Phase II (and/or other subsidies
included in the final financing sources for Phase
II, as approved by Authority pursuant to the
Affordable Housing Agreement) in exchange for
Developer's agreement to limit the rents charged
to tenants of Phase II to an Affordable Rent and
Developer further acknowledges and agrees that
acceptance of additional governmental rental
subsidies resulting in total, cumulative rent
payments to Developer in excess of an
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 8 of 15
Affordable Rent for any of the Housing Units at
Phase II would constitute an unjustified windfall
to Developer at the expense of Authority and the
federal and state governments.
(iv) In the event of a conflict between this
Regulatory Agreement and the approved Marketing
and Tenant Selection Plan, the Marketing and
Tenant Selection Plan shall control.
"(e) Household Income Requirements. On or
before one hundred twenty (120) days following the
end of Developer's fiscal year, commencing the first
year after issuance of the first certificate of
occupancy for Phase II, and annually thereafter,
Developer shall prepare and submit to Authority, at
Developer's expense, a written summary of the
income, household size, and rent payable by each of
the tenants of the Housing Units and, upon the
written request of the Authority, copies of each and
all leases or rental agreements and the current rules
and regulations for Phase II. At Authority's request,
Developer shall also provide to Authority completed
income computation and certification forms, all in a
form reasonably acceptable to Authority, for each
and all tenants. Developer shall obtain, or shall
cause to be obtained by the Property Manager, a
certification from each household leasing a Housing
Unit demonstrating that such household is a 30%
AMI Very Low Income Household, 40% AMI Very
Low Income Household, 50% AMI Very Low Income
Household, or 60% AMI Low Income Household, as
applicable and according to the Area Median Income
annually determined and published by TCAC for
Orange County, and meets the eligibility and
occupancy requirements established for the Housing
Unit. Developer shall verify, or shall cause to be
verified by the Property Manager, the income and
household size certification of the tenant household.
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 9 of 15
"(f) Affordable Rent; Household Income
Categories/Definitions.
"(i) "30% AMI Very Low Income Households"
shall mean those households earning not greater
than thirty percent (30%) of Orange County Area
Median Income, adjusted for household size, which
is set forth annually by regulation of TCAC.
"(ii) "40% AMI Very Low Income Households"
shall mean those households earning not greater
than forty percent (40%) of Orange County Area
Median Income, adjusted for household size, which
is set forth annually by regulation of TCAC.
"(iii) "50% AMI Very Low Income Households"
shall mean those households earning not greater
than fifty percent (50%) of Orange County Area
Median Income, adjusted for household size, which
is set forth annually by regulation of TCAC.
IN) "60% AMI Low Income Households" shall
mean those households earning not greater than
sixty percent (60%) of Orange County Area Median
Income, adjusted for household size, which is set
forth annually by regulation of TCAC.
"(v) "Very Low Income" and/or "Very Low
Income Households" shall mean and include: (a)
very low income households as defined in the Tax
Credit Rules and (b) 30% AMI Very Low Income
Households, (c) 40% AMI Very Low Income
Households, and (d) 50% AMI Very Low Income
Households. Very Low Income Households include
Extremely Low Income households, as defined in the
Tax Credit Rules.
"(vi) "Low Income," "Lower Income," "Low
Income Households" or "Lower Income
Households" shall mean and include both: (i) lower
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 10 of 15
income households as defined in the Tax Credit
Rules and (ii) 60% AMI Low Income Households.
Lower Income Households include Very Low Income
Households and Extremely Low Income Households,
as defined in the Tax Credit Rules.
"(g) Occupancy Limits. The maximum occupancy
of the Housing Units in Phase II shall not exceed
more than such number of persons as is equal to two
persons per bedroom, plus one. Thus, for the two (2)
bedroom Housing Units, the maximum occupancy
shall not exceed five (5) persons. For the three (3)
bedroom Housing Units, the maximum occupancy
shall not exceed seven (7) persons."
4. The restrictions contained in the Regulatory Agreement expire
fifty-seven (57) years following the date the Release of Construction
Covenants is recorded against the Site in the Official Records of Orange
County, California. The Regulatory Agreement is being submitted for
recordation contemporaneously with this Notice of Affordability Restrictions.
5. The commonly known address for the Site is 809 South Dakota
Street, 824 South Dakota Street, 862 South Dakota Street, 868 South
Dakota Street, and 606 E. Avon Place in the City of Anaheim.
6. The assessor's parcel numbers for the Site are
, , , and ;
such numbers are subject to change.
7. The legal description for the Site is attached hereto as Exhibit A
and is incorporated herein by reference.
8. The Regulatory Agreement, which includes the affordability
restrictions referenced above, is expected to be submitted for recordation in
the Office of the Orange County Recorder contemporaneously with this
Notice of Affordability Restrictions.
9. This Notice of Affordability Restrictions is intended merely to
satisfy the requirements of Chapter 690 of the Act. The AHA and the
Regulatory Agreement both remain in full force and effect and are not
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 11 of 15
amended or altered in any manner whatsoever by this Notice of Affordability
Restrictions.
10. Capitalized terms shall have the meaning established under the
AHA (including all Attachments and Exhibits thereto) excepting only to the
extent as otherwise expressly provided under this Notice of Affordability
Restrictions.
11. Persons having questions regarding this Notice of Affordability
Restrictions, the AHA or the Attachments and Exhibits thereto (including the
Regulatory Agreement) should contact Authority at its offices (201 South
Anaheim Boulevard, Suite 1003, Anaheim, or such other address as may be
designated by Authority from time to time).
[Signatures begin on following page]
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 12 of 15
DEVELOPER:
AVON DAKOTA HOUSING PARTNERS, L.P.,
a California limited partnership
By: Avon Dakota MGP, LLC, a California
limited liability company, its managing
general partner
By: Affordable Housing Access, Inc., a
California nonprofit public benefit
corporation, its sole member and
manager
Jonathan B. Webb,
President
By: Related/Avon Dakota Development Co.,
LLC, a California limited liability
company, its administrative general
partner
am
Frank Cardone, Vice President
[Signatures for Notice of Affordability Restrictions continue on
following pages.]
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 13 of 15
[Signatures for Notice of Affordability Restrictions
continue from previous page.]
AUTHORITY:
ANAHEIM HOUSING AUTHORITY, a public
body, corporate and politic
in
ATTEST:
John E. Woodhead, IV
Executive Director or authorized
designee
LINDA N. ANDAL, AUTHORITY SECRETARY
Linda N. Andal
APPROVED AS TO FORM:
OFFICE OF CITY ATTORNEY
Assistant City Attorney
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 14 of 15
EXHIBIT A TO ATTACHMENT NO. 12
LEGAL DESCRIPTION
Real property in the City of Anaheim, County of Orange, State of California,
described as follows:
[to come]
ATTACHMENT NO. 12
NOTICE OF AFFORDABILITY RESTRICTIONS
Page 15 of 15
ATTACHMENT NO. 13
FORM OF REQUEST FOR NOTICE
REQUEST FOR NOTICE OF DEFAULT
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Anaheim Housing Authority
201 South Anaheim Boulevard, Suite
1003
Anaheim, California 92805
Attn: Executive Director
This document is exempt from the payment of a
recording fee pursuant to Government Code
Section 6103.
REQUEST FOR NOTICE UNDER CIVIL CODE SECTION 2924B
In accordance with California Civil Code Section 2924b request is hereby made that a
copy of any Notice of Default and a copy of any Notice of Sale under the Deeds of Trusts recorded
as Instrument Nos. and on _, 20 in
the Official Records of Orange County, California, and describing land therein as set forth in the
legal description attached hereto as Exhibit A and incorporated herein, executed by AVON
DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership, as Trustor/Borrower,
in which , a is/are named as
Beneficiary(ies), and a is named as Trustee, be mailed to: ANAHEIM
HOUSING AUTHORITY, a California public body, corporate and politic, 201 South Anaheim
Boulevard, Suite 1003, Anaheim, California 92805, Attn: Executive Director.
[Request continues on following page]
ATTACHMENT NO. 13
FORM OF REQUEST FOR NOTICE
Page 1 of 3
NOTICE: A COPY OF ANY NOTICE OF DEFAULT AND OF ANY NOTICE OF SALE WILL
BE SENT ONLY TO THE ADDRESS CONTAINED IN THIS RECORDED
REQUEST. IF ADDRESS CHANGES, A NEW REQUEST MUST BE
RECORDED.
DEVELOPER:
AVON DAKOTA HOUSING PARTNERS II, L.P.,
a California limited partnership
By: Avon Dakota MGP, LLC, a California limited liability
company, its managing general partner
By: Affordable Housing Access, Inc., a
California nonprofit public benefit
corporation, its sole member and manager
Jonathan B. Webb, President
By: Related/Avon Dakota Development Co., LLC, a
California limited liability company, its
administrative general partner
in
Frank Cardone, President
[Signatures for Request for Notice of Default continue on following page.]
ATTACHMENT NO. 13
FORM OF REQUEST FOR NOTICE
Page 2 of 3
[Signatures for Request for Notice of Default continue from previous page.]
AUTHORITY:
ANAHEIM HOUSING AUTHORITY, a public body,
corporate and politic
By:
ATTEST:
John E. Woodhead IV,
Executive Director or authorized designee
LINDA N. ANDAL, AUTHORITY SECRETARY
Linda N. Andal
APPROVED AS TO FORM:
OFFICE OF CITY ATTORNEY
Leonie Mulvihill
Deputy City Attorney IV
STRADLING YOCCA CARLSON & RAUTH
Authority Special Counsel
ATTACHMENT NO. 13
FORM OF REQUEST FOR NOTICE
Page 3 of 3
EXHIBIT A TO ATTACHMENT NO. 13
LEGAL DESCRIPTION
Real property in the City of Anaheim, County of Orange, State of California, described as
follows:
[to come]
EXHIBIT A TO REQUEST FOR NOTICE
LEGAL DESCRIPTION
Page 1 of 1
ATTACHMENT NO. 14
FORM OF RELEASE OF CONSTRUCTION COVENANTS
RELEASE OF CONSTRUCTION COVENANTS
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Attention:
This document is exempt from the payment of a
recording fee pursuant to Government Code
§§ 6103 and 27383.
RELEASE OF CONSTRUCTION COVENANTS
This RELEASE OF CONSTRUCTION COVENANTS ("Release") is hereby made as of
, 20_, by the ANAHEIM HOUSING AUTHORITY, a public body,
corporate and politic ("Authority"), in favor of AVON DAKOTA HOUSING PARTNERS II, L.P., a
California limited partnership ("Developer"). Authority and Agency are sometimes referred to
herein collectively as "Authority/Agency."
RECITALS
A. Authority and Developer have entered into an Affordable Housing Agreement
(Avon Dakota Neighborhood - Phase II), dated as of June _, 2017 (the, "Agreement"), which
Agreement provides for the development of an affordable rental housing complex consisting of
twenty-one (21) rental apartment units, in which all of the Housing Units will be made available to
Very Low and Low Income Households at an Affordable Rent, on certain real property generally
located at 809 South Dakota Street, 824 South Dakota Street, 862 South Dakota Street, 868
South Dakota Street and 606 E. Avon Place in the City of Anaheim, California, which is legally
described on Exhibit "A" attached hereto and made a part hereof by this reference ("Site").
B. "Phase 11" consists of the construction on the Site of twenty-one (21) Housing Units
in two -story buildings ("Development of Phase 11"). As required in the Agreement, Authority shall
furnish Developer with a Release of Construction Covenants upon completion of the Development
of Phase 11, which Release shall be in such form as to permit it to be recorded in the Official
Records of Orange County, California.
D. Authority has conclusively determined that the Development of Phase II as
required by the Agreement has been satisfactorily completed at the Site.
ATTACHMENT NO. 14
FORM OF RELEASE OF CONSTRUCTION COVENANTS
Page 1 of 3
NOW, THEREFORE, Authority hereto certifies as follows:
1. As provided in the Agreement, Authority does hereby certify that the Development
of Phase II has been fully and satisfactorily performed and completed in accordance with the
Agreement.
2. After the recordation of this Release, any person or entity then owning or thereafter
purchasing, or otherwise acquiring any interest in the Site will not (because of such ownership,
purchase, or acquisition) incur any obligation or liability under the Agreement, except that such
party shall be bound by any and all of the covenants, conditions, and restrictions which survive
such recordation, including, without limitation, the Ground Lease and the Regulatory Agreement;
provided, the recordation of this Release shall not alter in any way the order of priority of any liens
or encumbrances against the Site, including the Primary Loan for Phase II.
3. This Release is not a notice of completion as referred to in Section 3093 of the
California Civil Code.
4. The recitals above are incorporated in full as part of the substantive text of this
Release.
[Signatures appear on following pages.]
ATTACHMENT NO. 14
FORM OF RELEASE OF CONSTRUCTION COVENANTS
Page 2 of 3
IN WITNESS WHEREOF, Authority has executed this Release of Construction Covenants
as of the date first set forth above.
AUTHORITY:
ANAHEIM HOUSING AUTHORITY, a public body,
corporate and politic
John E. Woodhead IV,
Executive Director or authorized designee
ATTEST:
LINDA N. ANDAL, AUTHORITY SECRETARY
Authority Secretary
APPROVED AS TO FORM:
OFFICE OF CITY ATTORNEY
Leonie Mulvihill
Deputy City Attorney IV
STRADLING YOCCA CARLSON & RAUTH
Authority Special Counsel
ATTACHMENT NO. 14
FORM OF RELEASE OF CONSTRUCTION COVENANTS
Page 3 of 3
EXHIBIT A TO ATTACHMENT NO. 14
LEGAL DESCRIPTION
Real property in the City of Anaheim, County of Orange, State of California, described as
follows:
[to come]
EXHIBIT A TO RELEASE OF CONSTRUCTION COVENANTS
LEGAL DESCRIPTION
Page 1 of 1
[to come]
ATTACHMENT NO. 15
LIST OF ENVIRONMENTAL REPORTS
ATTACHMENT NO. 15
LIST OF ENVIRONMENTAL REPORTS
Page 1 of 1
ATTACHMENT NO. 16
PRELIMINARY FINANCING PLAN
PRELIMINARY FINANCING PLAN (BUDGET AND PROFORMA)
The following Budget and Proforma describe the parties' assumptions and reasonable
expectations regarding the costs and sources of financing for the Project as of the Effective Date.
ATTACHMENT NO. 16
PRELIMINARY FINANCING PLAN
Page 1 of 1
ATTACHMENT NO. 17
FORM OF OPERATING BUDGET
ATTACHMENT NO. 17
FORM OF OPERATING BUDGET
Page 1 of 4
2018
2018
2017
2018 PUPM
Annual
Increase
Actuals
Budget
Budget
(Decrease)
O., ERATING'INCOME
Rental Income
Rents
Section 8 Subsidy Payments
Total Rental Income:
Total Rental Income
Vacancy Loss
Subtotal
Other Income
Laundry
Vending
Application Fees
NSF and Late Charges
Damages and Cleaning Fees
Forfeited Security Deposits
Other Revenue
Total Other Income:
Financial Income
Interest Earned on Security Deposits
Interest Earned on Reserves
Interest Earned on Impound Accounts
Income from Investments - Misc.
Total Financial Income:
NET TOTAL INCOME:
O RATING EXPENSES
Rental Expenses
Advertising/Marketing
Credit Checks
Miscellaneous Renting Expenses
Total Rental Expenses:
Administrative Expenses
Office Salaries/Payroll
Managers Salary
Managers unit
Payroll Processing Fee
ATTACHMENT NO. 17
FORM OF OPERATING BUDGET
Page 1 of 4
ATTACHMENT NO. 17
FORM OF OPERATING BUDGET
Page 2 of 4
2018
2018
2017
2018 PUPM
Annual
Increase
Actuals
Budget
Budget
(Decrease)
Office Expenses
Copier/Copying
Telephone
Answering Service
Cell Phones and Pagers
Intercom
Postage/Copies
Computer Equipment
Computer Charges
Internet/Cable Connection
Mileage/Travel
Dues and Subscriptions
Seminars/Training
Bank Charges
Management Fee ($ PUPM)
Partnership Management Fee
Asset Management Fee
Compliance Monitoring
CPA/Bookkeeping
Legal Expenses
Audit Expenses
Collection Loss
Misc. Administrative Expenses
Total Administrative Expenses:
Utility Expenses
Electricity
Water
Gas
Sewer
Total Utility Expenses:
Operating and Maintenance
Expenses
Salaries - Janitor/Cleaning
Salaries - Maintenance
Salaries - Repairs
Salaries - Overtime
Salaries - Bonus
Supplies - Janitorial/Cleaning
Supplies - Grounds
Supplies - Repairs
Supplies - Plumbing
Supplies - Electrical
Supplies - Security
Supplies - Decorating/Paint
ATTACHMENT NO. 17
FORM OF OPERATING BUDGET
Page 2 of 4
ATTACHMENT NO. 17
FORM OF OPERATING BUDGET
Page 3 of 4
2018
2018
2017
2018 PUPM
Annual
Increase
Actuals
Budget
Budget
(Decrease)
Supplies - Uniforms
Supplies - Misc.
Contract - Social Service Coordinator
Contract - Janitorial/Cleaning
Contract - Extermination
Contract - Grounds
Contract - Repairs
Contract - Plumbing
Contract - Electrical
Contract - Decorating/Paint
Contract - Security/Alarm
Contract - Consultants
Misc. Operating Expenses
Unit Turnover Costs
Garbage Removal
Elevator Repair/Contract
Heating and Cooling Repair/Contract
Swimming Pool Maintenance
Vehicle Maintenance/Equipment
Misc. Maintenance
Lock and Key Expenses
Window and Glass Expense
Fire Extinguisher Service and Supplies
Uniforms/Laundry
Flooring Replacement
Window Covering Replacement
Appliance Replacement
A/C - Heater Replacement
Furniture/Fixtures Replacement
Plumbing Replacement
Tub Refinishing
Garbage Disposal Replacement
Cabinets Replacement
Other Replacement
Total Operating & Maintenance
Expenses:
Taxes and Insurance
Real Estate Taxes
Payroll Taxes
Property and Liability Insurance
Fidelity Bond Insurance
Worker's Compensation Insurance
Health Insurance & Employee Benefits
401 K Matching/EE Benefits
Other Insurance
ATTACHMENT NO. 17
FORM OF OPERATING BUDGET
Page 3 of 4
ATTACHMENT NO. 17
FORM OF OPERATING BUDGET
Page 4 of 4
2018
2018
2017
2018 PUPM
Annual
Increase
Actuals
Budget
Budget
(Decrease)
Misc. Taxes, Licenses and Permits
Total Taxes and Insurance:
Financial Expenses/Debt Service
Interest
Principal
Misc. Financial Expenses
Total Financial Expenses/Debt
Service:
Reserves
Operating Reserves
Replacement Reserves
Other Reserves
Total Reserves:
TOTAL OPERATING EXPENSES
CASH FLOW
ATTACHMENT NO. 17
FORM OF OPERATING BUDGET
Page 4 of 4
ATTACHMENT NO. 18
FORM OF RESIDUAL RECEIPTS REPORT
Anaheim Housing Authority
(Avon/Dakota Neighborhood, Phase 11 Affordable Housing Project)
Residual Receipts Report
for the Year Ending
Date Prepared
Please complete the following information and execute the certification at the bottom of this
form.
Annual Project Revenue
Please report Annual Project Revenue for the year ending
lines:
Rent Payments received (including Section 8 tenant assistance
payments, if any)
Interest Income (do not include interest income from replacement
and operating reserves nor interest income on tenant security
deposits)
Additional Income Related to Project Operations (for example,
vending machine income, tenant forfeited deposits, laundry
income not paid to the residents' association)
Total Annual Project Revenue (Add lines 1, 2, and 3)
Operating Expenses''
Please report Operating Expenses incurred in relation to the
operations of the Project for the year ending on
the following lines:
Operating and Maintenance Expenses
Utilities
Property management Expenses and On -Site Staff Payroll
Administrative Expenses Incurred by Project
ATTACHMENT NO. 18
FORM OF RESIDUAL RECEIPTS REPORT
Page 1 of 3
on the following
(2)
(3)
(4)
(5)
(6)
(7)
(8)
4t
Property/Possessory Interest Taxes
Insurance
Other Expenses Related to Operations of the Project
Please list these expenses:
Total Annual Operating Expenses
(Add lines 5, 6, 7, 8, 9, 10, and 11)
Net Operating Income (Subtract Line 12 from Line 4)
Do not include expense unrelated to the Project's operations,
such as depreciation, amortization, accrued principal and
interest expense on deferred payment debt, or capital
expenditures paid from withdrawals from the Capital
Replacement Reserve.
Additional Cash Flow Payments
Obligated Debt Service Payments (as approved by Authority and
other parties that may have such approval rights)
Scheduled Deposits to Capital and Operating Reserves (as
approved by Authority)
(9) $
(10)
$
(11)
$
(12)
$
(13)
$
(14) $
(15) $
Additional Payment Obligations (such as Partnership Related (16) $
Fees, Deferred Developer Fee, repayments on loans by partners,
or unpaid Tax Credit amounts, as approved by Authority to have
priority over Residual Receipt Payment to Authority.)
Total Additional Cash Flow Payments (Add lines 14, 15, and (17) $
16)
Residual Receipts for Year Ending (18) $
(Subtract Line 17 from Line 13)
Percentage of Residual Receipts to be (19)
Paid to Authority (as Rent pursuant to that certain Ground
Lease by and between Authority and Borrower dated
Amount Payable to Authority (Multiply Line 18 by Line 19) (20) $
The amount payable to Authority listed on Line 20 is subject to payment according to the
terms of the Ground Lease by and between Authority and Borrower dated
ATTACHMENT NO. 18
FORM OF RESIDUAL RECEIPTS REPORT
Page 2 of 3
. If Line 20 is $0.00 or negative, you owe nothing to Authority this
year. If Line 20 is a positive number, remit check payable to and
attach to this report.
Computation of Residual Receipts
for the Year Ending
The following certification should be executed by the Executive Director or Chief
Financial Officer of the Borrower, or the Managing General Partner of the Borrower.
I certify that the information provided in this form is true, accurate, and correct in all respects.
By:
(Print Name)
Its:
(Title)
ATTACHMENT NO. 18
FORM OF RESIDUAL RECEIPTS REPORT
Page 3 of 3
Date
ATTACHMENT NO. 19
SCOPE OF SOCIAL AND SUPPORTIVE SERVICES
Social and Supportive Service Programming. Developer shall provide a social service program,
free of charge to the residents of the Project, that complies with meeting TCAC's Service
Amenities requirements. Each and all material changes to the scope and details of this Social
and Supportive Services Program require the prior written consent of the Executive Director,
which shall be given or withheld in his sole and reasonable discretion.
1. Adult Educational Classes. Developer shall use best efforts to provide classes, workshops,
and other activities aimed at improving the important life skills of adult residents. Accordingly,
Developer shall use best efforts to provide social and supportive services directed at adult
residents which may include, without limitation, classes regarding financial literacy, computer
training; homebuyer education, General Education Diploma classes, English as a Second
Language classes, parenting classes, employment readiness classes and workshops, and
resume building classes and workshops. Adult Education Classes shall be provided not fewer
than sixty (60) hours per year.
2. After -School Enrichment. Classes and other supervised activities for school -aged children
shall be provided between the hours of approximately 2:30 p.m. and 6:00 p.m., Monday through
Friday, depending on local school schedules. Such After School Enrichment programs shall
include, without limitation, mentoring, homework assistance, and recreational activities. Based
upon the needs of the residents, After School Enrichment programs may also include drug and
gang prevention, art classes, on-site tutoring, and computer literacy classes. After School
Enrichment activities shall be conducted not fewer than ten (10) hours per week, Monday to
Friday, throughout the school year.
[Anaheim Staff to review and confirm]
ATTACHMENT NO. 19
SCOPE OF SOCIAL AND SUPPORTIVE SERVICES
Page 1 of 1
CLERK'S CERTIFICATE
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss.
CITY OF ANAHEIM )
I, LINDA ANDAL, City Clerk of the City of Anaheim, do hereby certify that the foregoing is the
original Resolution No. 2017-091 adopted at a regular meeting provided by law, of the Anaheim
City Council held on the 6th day of June, 2017 by the following vote of the members thereof:
AYES: Mayor Tait and Council Members Murray, Barnes, Moreno, Kring, and Faessel
NOES: None
ABSTAIN: None
ABSENT: Mayor Pro Tem Vanderbilt
IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of June, 2017.
"a�aD
CITY CLERK OF THE CITY OF ANAHEIM
(SEAL)