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AHA-2016-005RESOLUTION NO. AHA 2016-005 A RESOLUTION OF THE ANAHEIM HOUSING AUTHORITY APPROVING THAT CERTAIN COMMITMENT LETTER FROM THE AUTHORITY TO HERMOSA VILLAGE PHASE I HOUSING PARTNERS, L.P. IN THE FORM ATTACHED TO THIS RESOLUTION FOR THAT CERTAIN 297 -UNIT HERMOSA VILLAGE PHASE I NEW PROJECT; AUTHORIZING THE EXECUTIVE DIRECTOR TO SIGN THE COMMITMENT LETTER; AUTHORIZING THE EXECUTIVE DIRECTOR TO NEGOTIATE AND ENTER INTO THE NEW PROJECT DOCUMENTS DESCRIBED IN THE COMMITMENT LETTER THAT IMPLEMENT SUCH COMMITMENT LETTER; AUTHORIZING THE EXECUTIVE DIRECTOR TO IMPLEMENT THE COMMITMENT LETTER AND THE NEW PROJECT DOCUMENTS; FINDING AND DETERMINING THE NEW PROJECT IS CATEGORICALLY EXEMPT UNDER CEQA; AND, MAKING CERTAIN OTHER FINDINGS IN CONNECTION THEREWITH WHEREAS, the Anaheim Housing Authority ("Authority") is a public body, corporate and politic and is duly organized and validly existing under the Housing Authorities Law, California Health & Safety Code Section 34200, et seq., and all successor statutes and implementing regulations thereto ("HAL"); and WHEREAS, the Authority and a new partnership entity, Hermosa Village Phase I Housing Partners, L.P., a California limited partnership ("New Partnership"), desire to set forth in a commitment letter ("Commitment Letter") the material business terms relating to the ground lease and extension of existing ground leases of certain properties and the resyndication, acquisition, rehabilitation, operation, maintenance and management of that certain existing 293 -unit multi -family affordable housing project commonly called Hermosa Village Phase I, located at a general common address of 1515 S. Calle Del Mar, Anaheim, California (together, "Hermosa Village Phase I"); and WHEREAS, the Hermosa Village Phase I project currently consists of 291 apartments available to and occupied by eligible Low Income and Very Low Income tenant households along with two (2) on-site managers' units, and all ancillary and appurtenant facilities (together, "Original Project") located on certain real property situated in Anaheim, California ("Real Property"); and WHEREAS, the Real Property consists of property owned by the Authority on which 253 of the apartments constituting the Original Project are located ("Authority Property"), which are currently ground leased by the Authority to Anaheim Revitalization Partners, L.P., a California limited partnership ("Original Partnership") under the terms of that certain Ground Lease dated August 24, 2000 entered into between the Authority, as lessor, and the Original Partnership, as lessee (as amended, the "Authority Ground Lease"), and other instruments entered into between the Authority and the Original Partnership (together, "Original Project Documents"); and WHEREAS, the remaining forty (40) units of the Original Project and the clubhouse associated with the Original Project are located on portions of the Real Property ("Remaining Real Property") owned by seven (7) different third party owners ("Individual Real Property Owners"), which are ground leased by the Individual Real Property Owners to the Original Partnership under existing ground leases ("Individual Ground Leases"); and WHEREAS, the Original Partnership owns fee title to all of the improvements constituting the Original Project ("Current Improvements") under the Original Project Documents; and WHEREAS, the Authority made a loan to the Original Partnership in an original principal amount of $12,400,000 ("Authority Loan") as evidenced by an Authority Subordinate Loan Note, dated August 24, 2000 ("Original Note"), which Note has an outstanding balance of $14,700,000 and is secured by a subordinate deed of trust in the Original Partnership's leasehold estates in the Authority Ground Lease and the Individual Ground Leases and the Original Partnership's fee interest in the Current Improvements under an Authority Subordinate Loan Deed of Trust dated August 24, 2000 in favor of the Authority ("Original Subordinate Deed of Trust"); and WHEREAS, following the Original Partnership's acquisition, rehabilitation and development of the Original Project, the Authority acquired fee title to additional real property containing four (4) apartment units located at 1607 Hampstead Avenue, Anaheim, California ("1607 Hampstead Property"); and WHEREAS, the Original Partnership desires and intends to transfer and refinance the Original Project in a transfer to the New Partnership (Hermosa Village Phase I Housing Partners, L.P.) and in connection with such transfer and refinancing the New Partnership is applying to the California Tax Credit Allocation Committee ("TCAC") for an award and allocation of 4% Tax Credits ("Tax Credits") and to the California Debt Limit Allocation Committee ("CDLAC") for a bond allocation to issue multifamily housing mortgage revenue bonds in an aggregate amount not to exceed $43,000,000 ("Bonds") in the 2016 application cycles, the proceeds of the tax credit investor's investment and the proceeds of the Bonds will be expended by the New Partnership to acquire and extend the ground leasehold interests, add the 1607 Hampstead Property to the ground leasehold interest, substantially rehabilitate, operate, manage and maintain the new 297 -unit apartments with appurtenant facilities called Hermosa Village Phase I ("New Project"); and WHEREAS, TCAC has adopted a set of regulations that implement the federal and state low income housing tax credit laws, as set forth in California Code of Regulations, Title 4, Division 17, Chapter 1, Section 10300, et seq. ("TCAC Regulations"), in particular Section 10325; and WHEREAS, to receive an allocation of Tax Credits and carry out the New Project, TCAC requires that the New Partnership receive from the Authority a certain "commitment" as defined in Section 10325 of the TCAC Regulations, therefore, the Authority and the New Partnership have negotiated the terms of that certain "Commitment Letter" for the new Project, and by this resolution the Authority desires to approve and authorize execution of such Commitment Letter and for the New Partnership to include such letter in its application submitted to TCAC for an allocation of Tax Credits, and as necessary in its application to CDLAC for the bond allocation; and 2 WHEREAS, if the New Partnership receives an award of 4% Tax Credits from TCAC and an allocation from CDLAC to issue the Bonds, then the New Partnership and the Authority will negotiate and enter into various implementing documents consistent with the terms set forth in this Commitment Letter, including without limitation an affordable housing agreement ("New Project Agreement"), an amended and restated ground lease or new ground lease ("New Project Ground Lease"), an amended and restated or new note and deed of trust evidencing the financial assistance to be provided to the New Partnership by the Authority ("New Loan Documents") and related contracts and instruments (together, "New Project Documents") in implementation of the award of Tax Credits and Bonds and to provide the Authority financial assistance (including without limitation certain Section 8 project -based vouchers and tenant -based vouchers) and conveyance of ground leasehold interests all as described in the Commitment Letter, which are provided in consideration for the New Partnership's acquisition, substantial rehabilitation, and long-term ownership, operation, management and maintenance of the New Project; and WHEREAS, by adoption of this Resolution, the Authority intends that this Commitment Letter fulfill the commitment required under TCAC Regulation Section 10325; and WHEREAS, under the HAL, the Authority has held a duly noticed public hearing on the proposed New Project Ground Lease (including extensions of current ground leases) as described above; and WHEREAS, on behalf of the New Partnership, The Related Companies of California, LLC ("Related") has submitted to the Authority a development proforma and projected cash flows for the New Project dated as of May 27, 2016, which proforma evidences the financial terms associated with the New Project, including without limitation the estimated Authority Loan Paydown Amount, the estimated operating expenses, the estimated Residual Receipts payments to the Authority, and the estimated Project -Based Section 8 Overhang Payment associated with the New Project owned, operated and managed by the New Partnership for which in material reliance thereon the Authority is authorizing execution of the Commitment Letter; and WHEREAS, in connection with the New Project, the Authority will receive the Authority Loan Paydown Amount, estimated at $5,000,000, at closing of the new financing for the New Project, which will reduce the principal amount of the Authority Loan to $9,700,000, and under the New Project Ground Lease the Authority will receive annually from the New Partnership certain Residual Receipts payments; and WHEREAS, pursuant to the California Environmental Quality Act, California Public Resources Code Section 21000, et seq., ("CEQA") and the implementing regulations set forth at Title 14 California Code of Regulations Section 15000, et seq. ("Guidelines"), in particular Sections 15301, 15326, 15354 and 15374, provide certain existing facilities and affordable housing projects establish that the New Project is categorically exempt from CEQA; and 3 WHEREAS, the New Project meets the categorical exemption set forth in Section 15301 (Class 1 Facilities) that consist of the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, and Section 15326 (Class 26: Acquisition of Housing for Housing Assistance Programs) that consist of actions by a housing authority implementing an affordable housing project; and WHEREAS, the Authority has duly considered all terms and conditions of the proposed Commitment Letter, including all exhibits thereto, and believes that the New 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 ANAHEIM HOUSING AUTHORITY: Section 1. The Authority Board finds and determines that the foregoing recitals are true and correct and are a substantive part of this Resolution. Section 2. The Authority authorizes the Authority Executive Executive Director is authorized to Documents (including the Extended implementation of the Commitmeni implementing agreements and instri (including the Extended HAP Contr Letter. Board hereby approves the Commitment Letter and Director to sign such letter. Further the Authority cause to be prepared and executed the New Project HAP Contract described in the Commitment Letter) in Letter so long as the terms and provisions of such iments that will comprise the New Project Documents act) are substantially consistent with this Commitment Section 3. Further, the Authority Executive Director (or his duly authorized representative) is authorized to implement the New Project Documents and take all further actions and execute all documents referenced therein and/or necessary and appropriate to carry out the transaction contemplated by the Commitment Letter, and thereafter the New Project Documents, including all exhibits thereto. To the extent necessary during the implementation of the Commitment Letter and New Project Documents, the Executive Director is authorized to make technical or minor changes and interpretations of the Commitment Letter and the New Project Documents, as necessary to properly implement and carry out the New Project provided any and all such changes shall not in any manner substantially affect the rights and obligations of the Authority under the Commitment Letter, and thereafter under the New Project Documents. In addition, the Executive Director is authorized, on behalf of the Authority, to sign all other documents necessary or appropriate to carry out and implement the Commitment Letter and the New Project Documents, including all exhibits thereto and including causing the issuance of warrants in implementation thereto, and to administer the Authority's obligations, responsibilities and duties to be performed thereunder so long as substantially consistent with the Commitment Letter, and thereafter the New Project Documents. Any and all substantial changes to the Commitment Letter or to the terms and provisions of the implementing agreements and instruments set forth in the New Project Documents shall require the consideration and action of this Authority Board. 11 Section 4. As the "lead agency" under CEQA, the Authority hereby finds and determines that the Commitment Letter and the New Project to be implemented by the New Project Documents meet the categorical exemptions under CEQA as cited in the above recitals, including Class 1 Existing Facilities: the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, and Class 26: Acquisition of Housing for Housing Assistance Programs: actions by a housing authority implementing an affordable housing project. Section 5. The Executive Director (including his authorized designee) is hereby directed to file a Notice of Exemption with the County Clerk of the County of Orange, pursuant to Public Resources Code Section 21084 and CEQA Guidelines Section 15062 and 15374. Section 6. The Authority Secretary shall certify to the adoption of this Resolution. THE FOREGOING RESOLUTION IS PASSED, APPROVED AND ADOPTED BY THE GOVERNING BOARD OF THE ANAHEIM HOUSING AUTHORITY THIS 14th DAY OF JUNE, 2016, BY THE FOLLOWING ROLL CALL VOTE: AYES: Vice Chairman Kring and Authority Members Murray, Brandman, and Vanderbilt NOES: None ABSTAIN: None ABSENT: Chairman Tait AW FNNig OW �� ANAHEIM HOUSING AUTHORITY By: Chair Jo ATTACHMENT TO RESOLUTION ATTACH COPY OF COMMITMENT LETTER ATTACHMENT TO RESOLUTION Commitment Letter City of Anaheim o ANAHEIM HOUSING AUTHORITY y 9 i X Est. 1975 June 14, 2016 Hermosa Village Phase I Housing Partners, L.P. c/o The Related Companies of California, LLC 18201 Von Karman Avenue, Suite 900 Irvine, California 92612 Attn: Frank Cardone, President Re: Commitment Letter to the New Partnership for the New Project at Hermosa Village Phase 1, a 297 -Unit Affordable Housing Project Located at S. 1515 Calle Del Mar, Anaheim, California Provided by the Anaheim Housing Authority under TCAC Regulations Section 10325 Dear Mr. Cardone: The Anaheim Housing Authority ("Authority") is pleased to present this "Commitment Letter" to Hermosa Village Phase I Housing Partners, L.P., a California limited partnership ("New Partnership"), that was approved by the Authority after a duly noticed public hearing, which letter is expressly conditioned upon the terms and conditions set forth herein. The transactions contemplated and described in this Commitment Letter all relate to and are in connection with the New Partnership's acquisition, refinancing, rehabilitation, operation, maintenance and management of that certain 293 -unit multi -family affordable housing project commonly called Hermosa Village Phase I, located at a general common address of 1515 S. Calle Del Mar, Anaheim, California (together, "Hermosa Village Phase I"). Hermosa Village Phase I currently consists of 291 apartments available to and occupied by eligible low income and very low income tenant households along with two (2) on-site managers' units, and all ancillary and appurtenant facilities (collectively, "Original Project") located on certain real property situated in Anaheim, California ("Real Property"). The Real Property consists of certain real property owned by the Authority on which 253 of the apartment units constituting the Original Project are located ("Authority Property"), and currently ground leased by the Authority to Anaheim Revitalization Partners, L.P., a California limited partnership ("Original Partnership") under the terms of that certain Ground Lease, dated as of August 24, 2000 entered into by and between the Authority, as lessor, and the Original Partnership, as lessee (as amended, the "Authority Ground Lease"), and other instruments entered into between the Authority and the Original Partnership (together, "Original Project Documents"). The remaining forty (40) units of the Original Project and the clubhouse associated with the Original Project are located on portions of the Real Property ("Remaining Real Property") owned by the certain third party owners set forth on Exhibit A attached hereto and Hermosa Village Phase I Housing Partners, L.P. June 14, 2016 Page 2 incorporated by this reference ("Individual Real Property Owners"), and ground leased by the Individual Real Property Owners to the Original Partnership pursuant to ground leases listed on Exhibit A ("Individual Ground Leases"). The Original Partnership owns fee title to all of the improvements constituting the Original Project ("Current Improvements") under the Original Project Documents. The Authority made a loan to the Original Partnership in an original principal amount of $12,400,000 ("Authority Loan") as evidenced by that certain Authority Subordinate Loan Note, dated as of August 24, 2000 made by the Original Partnership in favor of the Authority ("Original Note"). As of June 1, 2016, the outstanding balance of the Authority Loan will be approximately $14,700,000 ("Current Authority Loan Balance"). The Original Note for the Authority Loan is secured by the Original Partnership's leasehold estates in the Authority Ground Lease and the Individual Ground Leases and the Original Partnership's fee interest in the Current Improvements as described in that certain Authority Subordinate Loan Deed of Trust dated as of August 24, 2000 made by the Original Partnership in favor of the Authority ("Original Subordinate Deed of Trust"). The "Authority Subordinate Loan Documents" entered into between the Authority and the Original Partnership include the Original Note and the Original Subordinate Deed of Trust and related instruments as more fully described in that certain Final Implementation Agreement for Phase I ("Phase I Final Implementation Agreement") also dated as of August 24, 2000. Following the Original Partnership's acquisition, rehabilitation and development of the Original Project, the Authority acquired fee title to certain real property containing four (4) apartment units located at 1607 Hampstead Avenue, Anaheim, California ("1607 Hampstead Property"), including fee title to the improvements located thereon ("1607 Hampstead Improvements"). The Related Companies of California, LLC ("Related") contributed the sum of $80,000 to the purchase price of the 1607 Hampstead Property. In connection with the transfer and refinancing of the Original Project by the Original Partnership to the New Partnership (Hermosa Village Phase I Housing Partners, L.P.), the Authority submits this Commitment Letter in fulfillment of the commitment required under the TCAC Regulations (defined below) and as a component of the New Partnership's application to the California Tax Credit Allocation Committee ('ICAC") and is intended to comply with and satisfy the provisions of the TCAC Regulations implementing the federal and state low income housing tax credit laws, California Code of Regulations, Title 4, Division 17, Chapter 1, Section 10300, et seq. ("TCAC Regulations"), in particular Section 10325. The New Partnership is applying to TCAC for an award and allocation of 4% Tax Credits ("Tax Credits") in the June 2016 application cycle, and to the California Debt Limit Allocation Committee ("CDLAC") and for a bond allocation to issue multifamily housing mortgage revenue bonds in an aggregate amount not to Hermosa Village Phase I Housing Partners, L.P. June 14, 2016 Page 3 exceed $43,000,000 ("Bonds") also in the June application cycle. If the New Partnership receives the award of Tax Credits from TCAC and the allocation to issue the Bonds from CDLAC, then the New Partnership and the Authority will negotiate and enter into various implementing documents consistent with the terms set forth in this Commitment Letter, including without limitation an affordable housing agreement ("New Project Agreement"), an amended and restated ground lease or new ground lease ("New Project Ground Lease"), an amended and restated or new note and deed of trust evidencing the financial assistance to be provided to the New Partnership by the Authority ("New Loan Documents") and related contracts and instruments (together, "New Project Documents") in implementation of the award of Tax Credits and Bonds and to provide the Authority financial assistance (including without limitation the project -based and tenant -based Section 8 vouchers) and conveyance of ground leasehold interests all as herein described, which are provided in consideration for the New Partnership's acquisition, substantial rehabilitation, and long-term ownership, operation, management and maintenance of the subject affordable housing project. Therefore, related to the foregoing, and subject to all terms and conditions set forth in this Commitment Letter, the Authority hereby agrees as follows: 1. Transfer of the Original Project. The Authority agrees to approve (a) transfer and conveyance of fee title to the Current Improvements from the Original Partnership to the New Partnership; (b) assignment by the Original Partnership of its right, title and interest in and to the Authority Ground Lease to the New Partnership, and assumption by the New Partnership of the Original Partnership's right, title and interest in and to the Authority Ground Lease; (c) assignment by the Original Partnership of its right, title and interest in and to the Individual Ground Leases to the New Partnership, and assumption by the New Partnership of the Original Partnership's right, title and interest in and to the Individual Ground Leases; and (d) assignment by the Original Partnership of its right, title, interest and obligations as borrower of the Authority Loan to the New Partnership, and assumption by the New Partnership of the Original Partnership's right, title, interest and obligations in and to the Authority Loan subject to the terms and conditions of the New Project Documents. This may be accomplished by an assignment and assumption of the Original Partnership's interests in the subject property and project, or by termination of the Original Project Documents and execution of the New Project Documents by the New Partnership and the Authority. 2. Ground Lease Extension. Concurrent with the date the New Partnership acquires the Original Project from the Original Partnership ("Acquisition Date"), the Authority agrees to amend or terminate the Authority Ground Lease and enter into a New Project Ground Lease, and the other New Project Documents with terms including but not limited to the following: Hermosa Village Phase I Housing Partners, L.P. June 14, 2016 Page 4 (a) The term of the New Project Ground Lease will expire not sooner than December 31, 2072; (b) The New Project Ground Lease shall provide for residual receipts ground lease payments equal to 70% of net cash flow that will take effect after repayment of the Authority Loan, subject to review by tax counsel; and (c) The New Project Ground Lease will be amended to include the 1607 Hampstead Property. 3. 1607 Hampstead Improvements. On the Acquisition Date, the New Partnership will acquire fee title to the 1607 Hampstead Improvements by paying the sum of (a) $1,000,000 to the Authority (in addition to the sums paid to Authority under Section 5.(b) below), and (b) $80,000 to Related. For purposes of this Commitment Letter, the Original Project as expanded by the 1607 Hampstead Property and the 1607 Hampstead Improvements is hereinafter referred to as the "New Project", and will consist of 297 residential units. 4. Remaining Real Property. (a) The Authority hereby acknowledges and agrees that on or about the Acquisition Date: (i) the Original Partnership will assign to the New Partnership, and the New Partnership will assume from the Original Partnership, all of the Original Partnership's right, title and interest in and to the Individual Ground Leases; and (ii) the Individual Ground Leases will be amended to extend the expiration dates thereof to a date on or after the expiration date of the New Project Ground Lease; and (iii) in connection with the assignment, assumption and amendments described herein, the rent payable by the New Partnership under the Individual Ground Leases will increase to the amounts listed and stated on Exhibit B attached hereto and incorporated herein by this reference. (b) The Authority acknowledges that it previously made certain loans to some of the Individual Real Property Owners ("Individual Owner Loans"). On or prior to the Acquisition Date, the Authority will extend the maturity date of certain of these Individual Owner Loans to the dates set forth on Exhibit C attached hereto and incorporated herein by this reference. (c) The Authority acknowledges that it obtained options to purchase certain portions of the Real Property owned by some of the Individual Real Property Owners ("Individual Purchase Options"). On or prior to the Acquisition Date, the Authority and certain of the Individual Real Property Owners will extend the option date of certain of these Individual Purchase Options to the dates set forth on Exhibit C. 5. Authority Loan for New Project. On the Acquisition Date, the Authority Loan will be amended and restated by the Authority and the New Hermosa Village Phase I Housing Partners, L.P. June 14, 2016 Page 5 Partnership by execution of the New Project Loan Documents and related New Project Documents, as follows: (a) The maturity date of the Authority Loan shall be extended to December 31, 2072. (b) The Original Partnership shall pay the "Authority Loan Paydown Amount" to the Authority, which shall be immediately applied by the Authority against the Current Authority Loan Balance. Upon payment of the Authority Loan Paydown Amount and its application against the Current Authority Loan Balance, the estimated principal balance of the Authority Loan owed by the New Partnership upon its assumption of the Authority Loan will be approximately $9,700,000, which represents the subsidy the Authority will be providing to the New Partnership. For purposes hereof, the Authority Loan Paydown Amount is currently estimated at $5,000,000. The Authority and New Partnership acknowledge that any lower amount must be approved and agreed to by the Authority Executive Director in his sole and absolute discretion. The -Authority and the New Partnership acknowledge the actual amount of the Authority Loan Paydown Amount cannot be determined with specificity until certain variables associated with the completion of the New Project and the Final Financing Plan therefor (as defined herein) have been determined. Accordingly, at least forty-five (45) days prior to the Acquisition Date, the New Partnership shall submit to the Authority Executive Director a final financing plan with reasonable and complete supporting documentation for the New Project ("Final Financing Plan") that shall set forth the final amount of the Authority Loan Paydown Amount and the full details of such financing, which shall be reasonably consistent with New Project ProForma (as defined and described in Section 12.). The Final Financing Plan shall be subject to the approval of the Authority Executive Director in his sole and absolute discretion and provided within fifteen (15) business days of receipt of a complete submittal to Authority of the Final Financing Plan by the New Partnership. Any disapproval of the Final Financing Plan by the Authority shall be accompanied by a written narrative describing, in reasonable detail, the specific reasons for disapproval. The Authority and the New Partnership shall work together in good faith and with due diligence toward resolution of any disapproval by the Authority in time to permit the New Partnership to acquire the Original Project by the Acquisition Date; provided, however, nothing herein shall restrict the Authority Executive Director's sole and absolute discretion in his review and approval of the Final Financing Plan. (c) Commencing on the permanent loan conversion date of the Primary Loan for the New Project and conditioned upon the Authority's provision of the Extended HAP Contract (as defined in Section 6. below) and subject to applicable federal, state and local laws and regulations therefor (including without limitation, the Section 8 Tenant -Based Assistance: Housing Choice Voucher and Project -Based (PBV) Voucher Programs, 42 U.S.C. 1437f and 3535(d), and the implementing regulations therefor in the Code of Federal Regulations, Parts 982 Hermosa Village Plzase I Housing Partners, L.P. June 14, 2016 Page 6 and 983 (together "Section 8 Laws"), the New Partnership will pay to the Authority on an annual basis, in arrears, the "PBV Section 8 Overhang Payment", which will be calculated as the revenue actually received in the prior Fiscal Year (which shall be defined as the calendar year) by the New Partnership on the 50 apartment units covered by the Extended HAP Contract ("Section 8 PBV Units"), less (i) the tax credit rents applicable to the Section 8 PBV Units in the New Project as permitted by ICAC, less (ii) the authorized property management fee payable with respect to the Section 8 PBV Units, less (iii) the vacancy factor associated with the Section 8 PBV Units, less (iv) debt service paid for the Section 8 PBV Debt. For purposes hereof, "Section 8 PBV Debt" means the permanent loan supported by the "Section 8 PBV Overhang" associated with the Extended HAP Contract. The Authority shall apply each PBV Section 8 Overhang Payment against amounts outstanding on the Authority Loan, applying such payments first to interest due and then to principal. (d) The percentage of net cash flow payable by the New Partnership to the Authority on account of the Authority Loan shall be increased from 65% of net cash flow to 70% of net cash flow of the New Project. The definition of net cash flow will be amended under the New Project Documents to include the PBV Section 8 Overhang Payment (as defined in subsection 5.(c) above) as an "operating expense" of the New Partnership and shall be subject to terms consistent with and equivalent to recent affordable housing transactions between the Authority and affiliates of Related, specifically including and substantially comparable to both (but making proper accommodations for deal -specific differences and the terms set forth in this Commitment Letter): (i) the South Street (Vintage Crossings) project (new construction) and implementing contract therefor set forth in that certain Affordable Housing Agreement (700 E. South Street Project) among the Authority, the former Anaheim Redevelopment Agency and South Street Anaheim Housing Partners, L.P., dated as of June 1, 2010 ("South Street AHA"), and (ii) the Avon -Dakota Neighborhood Phase I project (acquisition/rehabilitation) and implementing contracts therefor set forth in that certain Affordable Housing Agreement Avon -Dakota Neighborhood — Phase I between the Authority and Avon Dakota Housing Partners, L.P., a California limited partnership dated as of March 1, 2012 ("Avon -Dakota I AHA"), including in particular the definitions of "Residual Receipts" as the "net cash flow" available for payment of the Authority Loan and application of Net Transfer Proceeds and Net Refinancing Proceeds as payment sources for the Authority Loan, substantially as those terms are defined in the South Street AHA and the Avon -Dakota I AHA. (e) The security for the Authority Loan shall be amended to include the New Partnership's leasehold interest in the 1607 Hampstead Property and fee interest in the 1607 Hampstead Improvements. (f) The terms of the Authority Loan will include other modifications to the Original Note to include without limitation the following terms: Hermosa Village Please 1 Housing Partners, L.P. June 14, 2016 Page 7 (i) 4% simple interest per annum commencing on the Acquisition Date; (ii) Continue the second lien position subordinate only to the Primary Loan/Bonds and the deeds of trust and regulatory agreements associated therewith, with the terms and conditions of subordination and affirmation of subordination reasonably approved by the Authority Executive Director; (iii) Repayment from 70% of Residual Receipts, 70% of Refinancing Net Proceeds, and 70% of Transfer Net Proceeds (defined consistent with the South Street AHA and the Avon -Dakota I AHA) and 100% of Project Based Section 8 Overhang Payments; (iv) Remaining principal and accrued interest, if any, due on December 31, 2072 or earlier upon non -permitted sale, non -permitted refinancing, or default of the Authority Loan or the New Project Ground Lease; and (v) Cost savings from the New Project, if any, will be applied to pay down the Authority Loan subject to compliance with the TCAC Regulations. 6. Consent to Assignment of Existing HAP Contract; Authority to Enter into Extended HAP Contract with Reduction in Project -Based Vouchers and Addition of Tenant -Based Vouchers. (a) The Section 8 Law, in particular CFR §983.205(b) provides: "Extension of term. A PHA [Authority] may agree to enter into an extension ... before expiration of the [existing] contract, for an additional term of up to 15 years if the PHA determines an extension is appropriate to continue providing affordable housing for low-income families. A HAP contract extension may not exceed 15 years. A PHA may provide for multiple extensions; however, in no circumstance may such extensions exceed 15 years, cumulatively." (b) In this regard, the Authority acknowledges that the Authority and the Original Partnership entered into a Housing Assistance Payment Contract dated as of May 1, 2008 with an initial term of ten (10) years under which the Authority provides the Original Partnership with project -based Section 8 payments for 98 apartment units in the Original Project ("Existing HAP Contract"). The Existing HAP Contract expires on May 1, 2018 ("HAP Expiration Date"). (c) Section 19 of the Existing HAP Contract sets forth the conditions and requirements for the transfer and assignment of such Existing HAP Contract, which will occur in this transaction by the Original Partnership to the New Partnership. By this Commitment Letter the Authority consents to such transfer Hermosa Village Phase I Housing Partners, L.P. June 14, 2016 Page 8 and assignment of the Existing HAP Contract by the Original Partnership to the New Partnership as of the Acquisition Date but expressly subject to the Original Partnership and the New Partnership entering into an assignment and assumption agreement that complies with the Section 8 Law and is in a form reasonably acceptable to the Authority Executive Director prior to the Acquisition Date. (d) Based on the Authority having undertaken and completed underwriting, subsidy -layering review and overall evaluation of the feasibility of the New Project pursuant to the Section 8 Law and other applicable laws, by and under this Commitment Letter, the Authority, agrees to extend once the Existing HAP Contract for a term of fifteen (15) years provided however such 15 -year extension is expressly conditioned upon the Authority continuing to provide only fifty (50) units with project -based Section 8 payments (a reduction of 48 units from the 98 units under the Existing HAP Contract) commencing on the HAP Expiration Date ("Extended HAP Contract"). The Authority agrees to execute and deliver prior to May 1, 2018 the Extended HAP Contract (through an amendment to or amended and restated contract) to the New Partnership for such fifty (50) project - based units in the New Project for the extended 15 -year term that begins on May 1, 2018 and ends on May 1, 2033, all subject to the Section 8 Law and other applicable federal laws and regulations. Further, the Authority agrees that concurrent with the effective date of the Extended HAP Contract it will provide to the 48 tenant households in the New Project (who previously received assistance under the Existing HAP Contract but who do not receive project -based assistance under the Extended HAP Contract) portable, tenant -based Section 8 certificates ("Tenant -Based Vouchers"). Rents payable by the Authority under the Tenant Based Vouchers will be equal to the Section 8 rents payable under the Extended HAP Contract. 7. Affordability Restrictions. The income and rent restrictions for tenant households and occupancy in the New Project shall be maintained as set forth in that certain Agreement Containing Covenants Affecting Real Property, dated as of August 24, 2000, by and between the Authority and the Original Partnership and recorded against the Real Property in the Official Records of Orange County, California on September 1, 2000 as Instrument No. 2000- 0460470, as amended in connection with preparation and completion of the New Project Documents to be entered into between the Authority and the New Partnership prior to concurrent with the Acquisition Date ("Regulatory Agreement"). 8. Developer Fee. Subject to compliance with the TCAC Regulations, the New Partnership will be entitled to pay the developers of the New Project a developer fee in the amount of $3,000,000 in connection with the rehabilitation of the New Project, which developer fee shall be payable in cash with no deferral requirement. Hermosa Village Phase I Housing Partners, L. P. June 14, 2016 Page 9 9. Issuance of the Bonds; Inducement Resolution and TEFRA Hearing and Resolution. The Authority will act as bond issuer with respect to the tax exempt Bonds to be issued to finance the acquisition and rehabilitation of the New Project. In connection therewith, first, of even date with this Commitment Letter, June 14, 2016, the Authority considered and approved at an open meeting the inducement resolution; and, secondly, on August 9, 2016, the City Council of the City of Anaheim will hold a public hearing, referred to as a TEFRA hearing, and after such hearing the City Council will consider and take action on the TEFRA resolution, all pursuant to Section 147(f) of the Internal Revenue Code of 1986. 10. Scope of Social and Supportive Services. The New Partnership agrees hereunder and agrees under the New Project Documents it will provide heightened social and supportive services, in a scope approved by the Authority Executive Director "Supportive Services"), at the New Project initially as required by the Section 8 Law and continuing for the term of the New Ground Lease, which are a material part of the consideration to Authority under this Commitment Letter and the New Project Documents. The Supportive Services shall include, without limitation, services that improve and develop increased employment opportunities, enhance life skills, increase literacy for persons of all ages residing at the Project. The enhanced Supportive Services should be directed at the adolescent population, as well as the children, families and elderly populations at the New Project. The New Project Documents shall specify the Supportive Services to be provided by the New Partnership at the New Project by reference to the type of service and frequency/duration of availability of such service. Further, the New Project Documents shall require the New Partnership to make best efforts to include in the rehabilitation scope and operating budget measures which will allow the swimming pool serving the New Project to be generally open and available for use by residents of the New Project year-round subject to weather and other appropriate (e.g., safety) considerations. (i) The New Project may include agricultural gardens ("Farmscape") and education on cultivating and maintaining them as to be more fully described in the New Project Documents. To the extent acceptable locations within the New Project are identified, the Farmscape gardens shall be incorporated in strategic areas throughout the resident community and made available to the resident households to allow growth and cultivation of their own fruits and vegetables to promote healthy eating/living and community interaction. 11. Scope of Renovations; Parking Congestion. The Authority and the New Partnership shall work together, in good faith, and use commercially reasonable efforts to cause the scope of the construction, rehabilitation and renovation work at the New Project to include, without limitation, improvements to alleviate the existing onsite parking congestion issues, subject to the budget Hermosa Village Please I Housing Partners, L.P. June 14, 2016 Page 10 requirements of the New Project. The Authority and the New Partnership agree to jointly investigate whether the onsite parking issues may be alleviated by securing a ground lease or other long-term use rights for parking purposes on the property located adjacent to the New Project on the south side from the owner, the Southern California Edison Company, if such ground lease or other long-term use rights can be acquired within the limitations imposed by the budget for the New Project. 12. New Project ProForma. The financial terms associated with the New Project, including without limitation the estimated Authority Loan Paydown Amount, the estimated operating expenses, the estimated Residual Receipts payments to the Authority, and the estimated Project -Based Section 8 Overhang Payment associated with the New Project owned, operated and managed by the New Partnership, have been identified in this Commitment Letter, and this Commitment Letter is provided by the Authority, in reliance, and based on the Authority's review of the development proforma and projected cash flows for the New Project dated as of May 27, 2016 and prepared by Related on behalf of the Original Partnership and the New Partnership and submitted by authorized representatives of Related to Authority ("ProForma"). 1. Other Terms. The Authority's obligations to provide the Authority Loan to the New Partnership for the New Project are subject to each and all of the following conditions: (a) The unit mix and income affordability mix of the New Project shall be identical to the Original Project with appropriate changes made to acknowledge units added (i.e., the 1607 Hampstead Improvements) or deducted from the Original Project. Further, all housing units at the New Project shall be restricted as set forth herein and in the New Project Documents for a minimum term of 55 years under the Regulatory Agreement, as amended, with conditions, covenants and restrictions restricting the New Partnership's and its successors' use, ownership, operation, management, maintenance, transfer and financing of the New Project, and such 55 -year Regulatory Agreement, as amended, shall be recorded against the New Project in the Official Records, County of Orange, California. (a) As and if applicable, the New Partnership will comply with the federal Davis -Bacon Act and California Labor Code Section 1720, et seq., relating to prevailing wages ("Prevailing Wage Laws"); in this regard, the Authority and the New Partnership understand that such laws and regulations include exemptions that may apply to the New Project, but under the New Project Documents, the New Partnership will assume responsibility for and indemnify the Authority (and City) relating to the Prevailing Wage Laws as such may be applicable to the New Project. (b) The New Partnership shall submit and obtain Authority's reasonable approval of (i) the construction contract with its general contractor Hermosa Village Phase I Housing Partners, L.P. June 14, 2016 Page 11 (including the requirements to be satisfied by its subcontractors thereunder) relating to the rehabilitation of the New Project, (ii) the limited partnership agreement for the New Partnership that will own and operate the New Project, (iii) management, scope and funding for all required supportive services to be provided by and through the New Partnership at the New Project, and (iv) the marketing and tenant selection plans for the New Project. 13. Authority Executive Director Authorization to Execute this Commitment Letter and to Prepare and Execute the New Project Documents with Terms and Conditions Consistent with this Commitment Letter. After a duly noticed public hearing about ground leasing Authority -owned real property and the terms of this Commitment Letter, and by its consideration and action to approve this Commitment Letter, the Authority has authorized its Executive Director to sign this Commitment Letter on behalf of the Authority. Further the Authority Executive Director is authorized to cause to be prepared and executed the New Project Documents (including the Extended HAP Contract) in implementation of this Commitment Letter so long as the terms and provisions of such implementing agreements and instruments that will comprise the New Project Documents (including the Extended HAP Contract when prepared) are substantially consistent with this Commitment Letter. Further, the Authority Executive Director (or his duly authorized representative) is authorized to implement the New Project Documents and take all further actions and execute all documents referenced therein and/or necessary and appropriate to carry out the transaction contemplated by this Commitment Letter, and thereafter the New Project Documents, including all exhibits thereto. To the extent necessary during the implementation hereof and thereof, the Executive Director is authorized to make technical or minor changes and interpretations of this Commitment Letter and the New Project Documents, as necessary to properly implement and carry out the New Project provided any and all such changes shall not in any manner substantially affect the rights and obligations of the Authority under this Commitment Letter, and the New Project Documents. In addition, the Executive Director is authorized, on behalf of the Authority, to sign all other documents necessary or appropriate to carry out and implement this Commitment Letter and the New Project Documents, including all exhibits thereto and including causing the issuance of warrants in implementation thereto, and to administer the Authority's obligations, responsibilities and duties to be performed thereunder so long as substantially consistent with this Commitment Letter and the New Project Documents. Any and all substantial changes to this Commitment Letter or to the terms and provisions of the implementing agreements and instruments set forth in the New Project Documents shall require the consideration and action of the Authority Board. [Commitment Letter continued on next page] Hermosa Village Phase I Housing Partners, L.P. June 14, 2016 Page 12 This Commitment Letter is conditioned upon the preparation, execution and delivery of legal documentation, in form and substance reasonably satisfactory to the Authority and the New Partnership incorporating substantially the terms and conditions outlined or referred to hereinabove. Should you have any questions or require additional information, please contact Grace Stepter, Housing Programs Manager at (714) 765-4315 or by email at gstepter(aDanaheim.net. ANAHEIM HOUSING AUTHORITY, a public body corporate and politic go AGREED AND ACCEPTED this 14th day of June, 2016: John E. Woodhead IV Executive Director HERMOSA VILLAGE PHASE I HOUSING PARTNERS, L.P. By: Related/Hermosa Village Phase I Development Co., LLC, a California limited liability company Frank Cardone, President EXHIBIT A INDIVIDUAL REAL PROPERTY OWNERS AND INDIVIDUAL GROUND LEASES Individual Real Property Owner Property Address Number of Apartment Units Ground Lease Date Mary Cheng 1538 S. Jeffrey 8 Units November 15, 2000 John Stephens 1533 S. Jeffrey 8 Units April 3, 2000 John Stephens 1532 S. Michelle 8 Units April 3, 2000 Chi Wang 1330 W. Lynne Clubhouse August 22, 2000 Hao Vu 1338 W. Lynne Clubhouse August 22, 2000 Leonard Spivak 1528 S. Jeffrey 8 Units December 5, 2000 Lucille Justiniani 1529 S. Jeffrey 8 Units December 15, 2000 Exhibit A EXHIBIT B NEW RENTS UNDER INDIVIDUAL GROUND LEASES Individual Real Property Owner Property Address New Rent Under Individual Ground Leases Mary Cheng 1538 S. Jeffrey $4,500 John Stephens 1533 S. Jeffrey $4,300 John Stephens 1532 S. Michelle $4,300 Chi Wang 1330 W. Lynne $7,000 Hao Vu 1338 W. Lynne $7,000 Leonard Spivak 1528 S. Jeffrey $4,500 [Lucille Justiniani] [1529 S. Jeffrey] [$4,300] Exhibit B EXHIBIT C EXTENSIONS OF INDIVIDUAL OWNER LOANS AND INDIVIDUAL PURCHASE OPTIONS A. EXTENDED MATURITY DATES OF INDIVIDUAL OWNER LOANS Individual Real Property Owner Property Address Extended Maturity Date of Individual Owner Loans Mary Cheng 1538 S. Jeffrey December 1, 2045 Chi Wang 1330 W. Lynne October 1, 2035 Hao Vu 1338 W. Lynne October 1, 2035 Leonard Spivak 1528 S. Jeffrey December 1, 2035 [Lucille Justiniani] [1529 S. Jeffrey] [December 1, 2040] B. EXTENDED OPTION DATES OF INDIVIDUAL PURCHASE OPTIONS Individual Real Property Property Address Extended Expiration Owner Date of Individual Purchase Options Chi Wang 1330 W. Lynne October 1, 2035 Hao Vu 1338 W. Lynne October 1, 2035 Exhibit C