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HomeMy WebLinkAboutRDA Packet 1999/05/18Notice is hereby given that the Chair of the Redevelopment Agency has called and will convene a special meeting of the Redevelopment Agency/City Council/Housing Authority, Tuesday, May 18, 1999 at 6:00 p.m., in Council Chambers, located in the Public Services Building, 276 Fourth Avenue, Chula Vista, California to consider, deliberate and act upon the following: ~ Ho~on, Chair TUESDAY, MAY 18, 1999 COUNCIL CHAMBEI~ 6:00 P.M. PUBLIC SERVICES BUILDING (IMMEDIATELY FOLLOWING THE CITY COUNCIL MEETING) SPECIAL JOINT MEETING OF THE REDEVELOPMENT AGENCY / CITY COUNCIL / HOUSING AUTHORITY OF THE CITY OF CHULA VISTA 1. ROLL C~LL Agency/Council Members Davis ~, Moot ~1, Padilla I~1, Salas ~, and Chair/Mayor Horton ~ '~. APPROV&L OF MI#UTES April 20, 1999; April 27, 1999; May 4, 1999 This is an opportunity for the general public to address the Redevelopment Agency on any subject matter within the Agency's jurisdiction that is no~t an item on this agenda. (State law, however, generally prohibits the Redevelopment Agency from taking action on any issues not included on the posted agenda.) If you wish to address the Agency on such a subject, please complete the "Request to Speak Under Oral Communications Form" available in the lobby and submit it to the Secretary to the Redevelopment Agency or City Clerk prior to the meeting. Those who wish to speak, please give your name and address for record purposes and follow up action. The following items have been advertised and/or posted as public hearings as required by law. If you wish to speak to any item, please fill out the "Request to Speak Form" available in the lobby and submit it to the Redevelopment Agency or the City Clerk prior to the meeting. 3. PUBLIC HEARING: TO CONSIDER THE SALE OF SPACE 129 AT ORANGE TREE MOBILEHOME PARK Staff Recommendation: To continue this item to the meeting of k, lay 25, 1999. The items listed in this section of the agenda are expected to elicit substantial discussions and deliberations by the Council, staff, or members of the general public. The items will be considered individually by the Council and staff recommendations may in certain cases be presented in the alternative. Those who wish to speak, please fill out a Request to Speak form available in the lobby and submit it to the City Clerk prior to the meeting. AGENDA -2- MAY 18, 1999 4. a) HOUSING AUTHORITY AUTHORIZING THE ISSUANCE, SALE AND DELIVERY Of THE ~ HOUSING AUTHORITY OF THE CITY OF CHULA VISTA MULTI-FAMILY HOUSING MORTGAGE REVENUE BONDS (VILLA SERENA PROJECT), SERIES 1999A, AND THE HOUSING AUTHORITY OF THE CITY OF CHULA VISTA MULTI-FAMILY HOUSING MORTGAGE REVENUE BONDS (VILLA SERENA), SERIES 1999B, IN A COMBINED PRINCIPAL AMOUNT NOT-TO-EXCEED S7,000,000, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH BONDS AND OTHER RELATED DOCUMENTS, AND APPROVING OTHER RELATED ACTIONS IN CONNECTION WITH THE ISSUANCE OF THE BONDS--A.C.I. Sunbow, entered into an Affordable Housing Agreement dated 5/13/97 committing them to provide Iow income and moderate income affordable housing units within the Sunbow subdivision. A.C.L Sunbow LLC proposes to satisfy a portion of its obligations under the Affordable Housing Agreement with the development of a 132-unit senior housing apartment project to be known as "Villa Serena." This project is located on the northeast corner of Medical Center Drive and Medical Center court within the Sunbow II subdivision of eastern Chula Vista. On 11/10/98, Council conducted a public hearing and the Housing Authority adopted a resolution expressing its intent to issue multi-family housing revenue bonds to finance Villa Serena. At this time, the Housing Authority is asked to approve a bond resolution authorizing the issuance of $7,000,000 in tax exempt bonds for the financing of the project and execution in substantial form and other related documents. An amendment to the Affordable Housing Agreement is also being presented declaring a portion of the affordable housing obligations under this Agreement satisfied upon completion of construction of 64 Iow income and 68 Iow and moderate income housing units within Villa Serena and verification of occupancy of these housing units by qualified households. On 2/16/99, Council adopted Resolution No. 19377 granting a Conditional Use Permit for the project and allowing density bonus and a reduction in development standards pursuant to State Law. As a condition of the Conditional Use Permit and the approval of the density bonus granted, the developer is to enter into an agreement with the City. On 4~20~99, the Agency adopted Resolution No. 1624 approving financial assistance in the amount of $275,000 for the development of the project. As a condition of the Agency's financial assistance, the developer is to enter into a loan agreement with the Agency specifying terms of the financial assistance. The First Amendment, Housing Cooperation Agreement, and the Agency Loan Agreement have been prepared and are presented for consideration. [Community Development Director] b) COUNCIL APPROVING THE FIRST AMENDMENT TO THE AFFORDABLE ~ HOUSING AGREEMENT WITH A.C.I. SUNBOW, LLC DECLARING CERTAIN AFFORDABLE HOUSING OBLIGATIONS FOR SUNBOW II SATISFIED SUBJECT TO CONDITIONS c) COUNCIL AUTHORIZING THE EXECUTION AND DELIVERY OF A HOUSING BJ~LI~J-~ COOPERATION AGREEMENT RELATED TO THE VILLA SERENA PROJECT d) AGENCY APPROVING A LOAN AGREEMENT AND RELATED RESTRICTED ~ COVENANTS BY AND BETWEEN THE AGENCY AND SERENA SUNBOW, L.P. Staff recommendation: Council, Housing Authority and Agency adopt the resolutions. AGENDA -3- MAY 18, 1999 5. DIRECTOR'S REPORT(S) 6. CHAIR(S) 7. AGENCY MEMBER COMMENTS The meeting will adjourn to a dosed session and thence to an adjourned Redevelopment Agency meeting on May 25, 1999 at 6:00 pm., immediately following the City Council meeting, in the City Council Chambers. Unless Agency Counsel, the Executive Director, or the Redevelopment Agency states otherwise at this time, the Agency will discuss and deliberate on the following item(s) of business which are permitted by law to be the subject of a closed session discussion, and which the Agency is advised should be discussed in closed session to best protect the interests of the City. The Agency is required by law to return to open session, issue any reports of final action taken in closed session, and the votes taken. However, due to the typical length of time taken up by closed sessions, the videotaping will be terminated at this point in order to save costs so that the Agency's return from closed session, reports of final action taken, and adjournment will not be videotaped. Nevertheless, the report of final action taken will be recorded in the minutes which will be available in the Office of the Secretary to the Redevelopment Agency and the City Clerk's Office. 8. CONFERENCE WITH REAL PROPERTY NEGOTIATOR --Pursuant to Government Code Section 54956.8 Property: 340-368 Bay Boulevard (5 parcels totaling 3.65 acres): 567-022-35 340 Bay Boulevard 1.02 acres 567-022-17 350 Bay Boulevard 0.65 acres 567-022-31 360 Bay Boulevard 0.73 acres 567-022-33 364 Bay Boulevard 0.63 acres 567-022-28 368 Bay Boulevard 0.62 acres Negotiating Parties: City/Redevelopment Agency (Chris Salomone); San Diego Unified Port District; B.F. Goodrich Under Negotiations: Purchase/lease terms and conditions MINUTES OF A JOINT MEETING OF THE REDEVELOPMENT AGENCY AND THE CITY COUNCIL OF THE CITY OF CHULA VISTA, CALIFORNIA APRIL 20, 1999 6:00 P.M. A joint meeting of the Redevelopment Agency and the City Council of the City of Chula Vista was called to order at 7:18 p.m. (immediately following the City Council meeting) in the Council Chambers located in the Public Services Building, 276 Fourth Avenue, Chula Vista, California. CALL TO ORDER 1. ROLL CALL: PRESENT: Agency/Council Members Davis, Padilla, Moot, Salas, and Chair/Mayor Horton ABSENT: None ALSO PRESENT: City Manager/Executive Director Rowlands, Senior Assistant City Attorney/Acting Agency Attorney Moore, Deputy City Clerk Mitchell CONSENT ITEMS (Items 2-3) 2. APPROVAL OF MINUTES of March 2, March 16, March 23, and April 13, 1999 3. RESOLUTION 1622, APPROVING DESIGN PLANS FOR THE CONSTRUCTION OF A 2,104 SQUARE-FOOT FAST FOOD RESTAURANT WITH DRIVE-THRU AT PALOMAR TROLLEY CENTER LOCATED WITHIN THE SOUTHWEST REDEVELOPMENT PROJECT AREA In November 1992, the Agency approved a Disposition and Development Agreement for the construction of the Palomar Trolley Center located on Palomar Street between Broadway and the Palomar Trolley Station. The project included the construction of a main building and five separate building pads. The main building and 4 of the pads are occupied. C&L Restaurant Group is proposing to develop the remaining pad. In accordance with conditions imposed on the project at the time of approval in 1993, the design plans have been reviewed and approved by the Design Review Committee and are now presented for consideration to the Agency. (Community Development Director) Staff.Recommendation: The Agency adopt the resolution. ACTION: Mayor Horton offered the Consent Calendar, headings read, texts waived. The motion carried 5-0, with Councilmember Padilla abstaining on the minutes of March 2, 1999. ORAL COMMUNICATIONS There were none. PUBLIC HF, ARINGS AND RELATED RESOLUTIONS AND ORDINANCES 4. PUBLIC HEARING TO CONSIDER A SPECIAL LAND USE PER/Vl/T TO ALLOW THE ESTABLISHMENT OF A 24-BED ADULT RESIDENTIAL CARE FACILITY AT 275 F STREET RESOLUTION 1623, DENYING A REQUEST TO ESTABLISH A 24-BED ADULT RESIDENTIAL FACILITY AT 275 F STREET. New Beginnings has requested a land use permit to allow the establishment ora 24-bed adult residential facility (ARF) located within the Town Centre I Redevelopment Project Area. An ARF is a State-licensed residential facility for the care of mentally ill patients. In accordance with the Town Centre Redevelopment Plan, the land use is not a permitted use within the commercial area of the Town Centre Redevelopment Project, and, therefore, requires consideration by the Agency. StaffKecommendation: The Agency adopt the resolution. Notice of the hearing was given in accordance with legal requirements, and the hearing was held on the date and at the time specified in the notice. Mayor Horton opened the public hearing and noted that staff had requested that the item be continued. ACTION: Mayor Horton moved to continue the item as requested by stall The motion was seconded by Councilmember Davis and carried 5-0. ACTION ITEMS 5. RESOLUTION 1624, CONDITIONALEY APPROVING FINANCIAL ASSISTANCE OF $275,000 TO CHELSEA INVESTMENT CORPORATION SUNBOW SERVICES COMPANY, LLC FOR THE DEVELOPMENT OF THE PROPOSED 132-UNIT VILLA SERENA SENIOR AFFORDABLE HOUSING PROJECT AND APPROPRIATING $275,000 FROM THE REDEVELOPMENT AGENCY'S LOW AND MODERATE INCOME HOUSING SET-ASIDE THEREFOR The Agency has received a request from Chelsea Investment Corporation Sunbow Services Company, LLC, for financial assistance to develop a 132-unit senior rental housing project. Page 2 - Council/RDA 04/20/99 - ACTION ITEMS (Continued) The project, to be known as "Villa Serena", is located on the northeast corner of Medical Center Drive and Medical Center Court within the Sunbow II subdivision of eastern Chula Vista. All units will be affordable to low income seniors over 62 years of age. The developer will be using Tax Exempt Multi-Family Revenue Bonds and Low Income Housing Tax Credit financing to support the cost of constructing the project. However, there remains a financing gap. Staffis recommending that the Redevelopment Agency provide financial assistance in the amount of $275,000 to meet a portion of this financing gap. (Community Development Director) StaffRecornmendation: The Agency adopt the resolution. Mayor Horton asked what legal mechanisms were in place to assure that this housing is set aside for seniors only. Staffreplied that fair housing laws provide restrictions by age for senior housing. This aspect will be monitored by the bond documents and the City's loan participation on an annual basis to make sure the tenants are qualified by age and income. Councilmember Davis asked how the City would enforce the age and income if it was later discovered that someone was under age or over income. Staff replied that the terms and conditions stipulate that if there are violations, the City will require that the funds be paid back. The document is being finalized and the City will include the best available enforcement mechanisms in it. Councllmember Moot stated that someone who inaccurately represents his or her age to be 62 or older could be subject to eviction. ACTION: Mayor Horton offered Resolution #1624, heading read, text waived. The motion carded 5-0. OTHER BUSINESS 6. DIRECTOR'S REPORT(S) There were none. 7. CHAIR'S REPORTS. There were none. 8. AGENCY MEMBER COMMENTS There were none. Page 3 - Council/RDA 04/20/99 CLOSED SESSION Closed Session was cancelled, and the following items were not discussed: 9. CONFERENCE WITH REAL PROPERTY NEGOTIATOR PURSUANT TO GOVERNMENT CODE SECTION 54956.8 1) Property: Assessor Parcel Nos. 565-310-09; 565-310-25 (approximately 6.35 acres located at the northwest comer of I-5 and E Street) Negotiating Parties: Redevelopment Agency (Chris Salomone), City of San Diego Under Negotiations: Price and terms for disposition 2) Property: Approximately 4 acres at the southeast comer of I-5 and SR-54 Negotiating Parties: City and Redevelopment Agency of Chula Vista (Chris Salomone) and CalTrans Under Negotiations: Price and terms for disposition/acquisition 3) Property: Assessor Parcel No. 562-310-45 (approximately 14.56 acres at the southwest comer of National City Blvd. and C Street) Negotiating Parties: City and Redevelopment Agency of Chula Vista (Chris Salomone) and Wayne Ansley Under Negotiations: Price and terms for disposition/acquisition 4) Property: Assessor Parcel No. 562-321-06 (approximately 10 acres located at the northeast comer of SR-54 and National City Blvd.) Negotiating Parties: City and Redevelopment Agency of Chula Vista (Chris Salomone) and Derr Family Trust Under Negotiations: Price and terms for disposition/acquisition 10.' CONFERENCE WITH LEGAL COUNSEL REGARDING ANTICIPATED LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9Co): Contemplated use of eminent domain by the City of San Diego (Metropolitan Waste Water Department or its affiliates) to acquire Agency owned property. 11. CONFERENCE WITH REAL PROPERTY NEGOTIATOR PURSUANT TO GOVERNMENT CODE SECTION 54956_8: Property: 340-368 Bay Boulevard (5 parcels totaling 3.65 acres): 567-022-35 340 Bay Boulevard 1.02 acres 567-022-17 350 Bay Boulevard 0.65 acres 567-022-31 360 Bay Boulevard 0.73 acres 567-022-33 364 Bay Boulevard 0.63 acres 567-022-28 368 Bay Boulevard 0.62 acres Negotiating Parties: City/Redevelopment Agency (Chris Salomone); San Diego Unified Port District; B.F. Goodrich Under Negotiations: Purchase/lease terms and conditions Page 4 - Council/RDA 04/20/99 At 7:26 p.m., Chair/Mayor Horton adjourned the meeting to the Regular Meeting of the City Council on April 27, 1999 at 6:00 p.m. and to the Regular Meeting of the Redevelopment Agency on May 4, 1999, immediately following the City Council meeting. Respectfully submitted, Susan Mitchell, Deputy City Clerk Page 5 ~ Council/RDA 04/20/99 M1NUTES OF A SPECIAL MEETING OF THE REDEVELOPMENT AGENCY AND THE CITY COUNCIL OF THE C1TY OF CHULA VISTA, CALIFORNIA April 27, 1999 6:00 P.M. A special meeting of the Redevelopment Agency of the City of Chula Vista was called to order at 6:14 p.m. (immediately following the City Council meeting) in the Council Chambers located in the Public Services Building, 276 Fourth Avenue, Chula Vista, California. CALL TO ORDER 1. ROLL CALL: PRESENT: Agency Members Davis, Padilla, Salas, and Chair Horton ABSENT: Agency Member Moot ALSO PRESENT: Executive Director Rowlands, Agency Attorney Kaheny, City Clerk Bigelow ACTION ITEMS 2. RESOLUTION 1625, APPROPRIATING ONE HUNDRED FIFTY SIX THOUSAND SIX HUNDRED SEVENTY FOUR DOLLARS ($156,674) FROM THE UNAPPROPRiATED BALANCE 1N THE LOW AND MODERATE INCOME HOUSING FUND FOR REIMBURSEMENT TO THE STATE DEPARTMENT OF VETERANS AFFAIRS FOR DEVELOPMENT IMPACT FEES IMPOSED BY THE OTAY WATER DISTRiCT FOR THE VETERANS HOME PROJECT On October 8, 1996, Council Resolution # 18448 and Agency Resolution # 1520 were approved adopting the Disposition and Development Agreement between the Redevelopment Agency, the City of Chula Vista, and the State Department of Veterans Affairs for the proposed development of the Veterans Home. Section 1.2 of the DDA stated that the City/Agency agreed to pay, waive, or otherwise arrange for the payment of City development impact fees, permit processing fees, and any other development impact or processing fees imposed by the Otay Water District and San Diego County Water Authority for the Veterans Home project. The construction of the Veterans Home facility is underway, with 40% of the project now completed and a grand opening scheduled for April 2000. In order for the Veterans Home to have access to water, the Development Impact Fees need to be paid to the Otay Water District. (Community Development Director) Staff recommendation: The Agency adopt the resolution. ACTION: Mayor Horton offered Resolution #1625. The motion carried 4-0. ORAL COMMUNICATIONS There were none. ,2-6 OTHER BUSINESS 2. DIRECTOR'S REPORT(S) There were none. 3. CHAIR'S REPORTS. There were none. 4. AGENCY MEMBER COMMENTS There were none. CLOSED SESSION Closed Session was cancelled, and the following items were not discussed: 5. CONFERENCE WITH REAL PROPERTY NEGOTIATOR PURSUANT TO GOVERNIVIENT CODE SECTION 54956.8 1) Property: Assessor Parcel Nos. 565-310-09; 565-310-25 (approximately 6.35 acres located at the northwest corner ofl-5 and E Street) Negotiating Parties:Redevelopment Agency (Chris Salomone) & City of San Diego Under Negotiations: Price and terms for disposition 2) Property: Approximately 4 acres at the southeast corner of 1-5 and SR-54 Negotiating Parties: City and Redevelopment Agency of Chula Vista (Chris Salomone) and CalTrans Under Negotiations: Price and terms fbr disposition/acquisition 3) Property: Assessor Parcel No. 562-310-45 (approximately 14.56 acres at the southwest corner of National City Blvd. and C Street) Negotiating Parties: City and Redevelopment Agency of Chula Vista (Chris Salomone) and Wayne Ansley Under Negotiations: Price and terms for disposition/acquisition 4) Property: Assessor Parcel No. 562-321-06 (approximately 10 acres located at the northeast corner of SR-54 and National City Blvd.) Negotiating Parties: City and Redevelopment Agency of Chula Vista(Chris Salomone) and Derr Family Trust Under Negotiations: Price and terms for disposition/acquisition 6. CONFERENCE WITH LEGAL COUNSEL REGARDING ANTICIPATED LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(b): Contemplated use of eminent domain by the City of San Diego (Metropolitan Waste Water Department or its affiliates) to acquire Agency owned property. Page 2 - RDA 04/27/99 CLOSED SESSION (Continued) 7. CONFERENCE WITH REAL PROPERTY NEGOTIATOR PURSUANT TO GOVERNMENT CODE SECTION 54956.8 Property: 340-368 Bay Boulevard (5 parcels totaling 3.65 acres): 567-022-35 340 Bay Boulevard 1.02 acres 567-022-17 350 Bay Boulevard 0.65 acres 567-022-31 360 Bay Boulevard 0.73 acres 567-022-33 364 Bay Boulevard 0.63 acres 567-022-28 368 Bay Boulevard 0.62 acres Negotiating Parties: City/Redevelopment Agency (Chris Salomone)~ San Diego Unified Port District; B.F. Goodrich Under Negotiations: Purchase/lease terms and conditions ADJOURNMENT At 6:16 p.m., Chair Horton adjourned the meeting. Respect'thlly submitted, Susan Bigelow, CMC/AAE, City Clerk Page 3 - RDA 04/27/99 JOINT MEETING OF THE REDEVELOPMENT AGENCY AND THE CITY COUNCIL OF THE CITY OF CHULA VISTA May 4, 1999 4:00 p.m. A joint meeting of the Redevelopment Agency and the City Council of the City of Chula Vista was called to order at 6:20 p.m. (immediately following the City Council meeting) in the Council Chambers located in the Public Services Building, 276 Fourth Avenue, Chula Vista, California. 1. ROLL CALL PRESENT: Council/Agency Members Davis, Moot, Pafilla, Salas and Mayor/Chair Horton. ABSENT: None. ALSO PRESENT: City Manager/Executive Director Rowlands, City/Agency Attorney Kaheny, City Clerk Bigelow 2. DIRECTOR'S REPORTS There were none 3. CHPdR'S REPORT There was none. 4. AGENCY MEMBER COMMENTS There were none. At 6:22 p.m., Chair/Mayor Horton recessed the meeting to Closed Session. CLOSED SESSIONS 5. CONFERENCE WITH REAL PROPERTY NEGOTIATOR PURSUANT TO GOVERNMENT CODE SECTION 54956.8 1) Property: Assessor Parcel Nos 565-310-09; 565-310-25 (approximately 6.35 acres located at the northwesI corner ofi-5 and E Street) Negotiating Parties: Redevelopment Agency (Chris Salomone) & City of San Diego Under Negotiation: Price and terms for disposilion 2) Property: Approximately 4 acres at lhe southeast corner of 1-5 and SR-54 Negotiating Parties: City and Redevelopment Agency of Chula Vista (Chris Salomone) and CatTrans Under Negotiation: Price and lerms for disposition/acquisition CLOSED SESSIONS (Continued) 3) Property: Assessor Parcel No. 502-310-45 (approximately 14.56 acres at the southwest corner of National City Blvd. and C Street) Negotiating Parties: City and Redevelopment Agency of Chula Vista (Chris Salomone) and Wayne Ansley Under Negotiation: Price and terms for disposition/acquisition 4) Property: Assessor Parcel No. 562-321-06 (approximately I 0 acres located at the northeast corner of SR-54 and National City Blvd.) Negotiating Parties: City and Redevelopment Agency of Chula Vista (Chris Salomone) and Derr Family Trust Under Negotiation: Price and terms for disposition/acquisition No action was taken. 6. CONFERENCE WITH LEGAL COUNSEL REGARDING ANTICIPATED LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(b): Contemplated use of eminent domain by tile Git5, of San Diego (Metropolitan Waste Water Department or ils affiliates) to acquire Agency owned property This item was not discussed 7. CONFERENCE WITH REAL PROPERTY NEGOTIATOR PURSUANT TO GOVERNMENT CODE SECTION 54956.8 Property: 340-368 Bay Boulevard (5 parcels tolaling 3.65 acres): 567-022-35 340 Bay Boulevard 102 acres 567-022-17 350 Bay Boulevard 0 65 acres 567-022-31 360 Bay Boulevard 073 acres 567-022-33 364 Bay Boulevard 0.63 acres 567-022-28 368 Bay Boulevard 062 acres Negotiating Parties: City/Redevelopment Agency (Chris SalomoneL San Diego Unified Port District; BF Goodrich Under Negotiation: Purchase/lease terms and conditions No action was taken. ADJOURNMENT At 7:40 p.m., Chair/Mayor Horton adjourned the meeting to the Regular Meeting of the City Council to be held May 11, 1999 and to tile Regular Meeting of the Redevelopment Agency to be held May 18, 1999. Respeclfitlly st~bmilled, Susan Bigelo~. CMC/AAE~ City Clerk Page 2 - Council & RDA ~ ,..-/O 05/04/99 MINUTES OF A JOINT MEETING OF THE REDEVELOPMENT AGENCY AND THE CITY COUNCIL OF THE CITY OF CHULA VISTA, CALIFORNIA May 11, 1999 6:00 P.M. A joint meeting of the Redevelopment Agency and the City Council of the City of Chula Vista was called to order at ?:50 p.m. (immediately following the City Council meeting) in the Council Chambers Iocaled in '~he Public Services Building, 2?6 Fourth Avenue, Chula Vista, California. CALL TO ORDER 1. ROLL CALL: PRESENT: Agency/Council Members Davis~ Mool, Padilla, Salas, and Chair/Mayor Horton .ABSENT: None .ALSO PRESENT: Executive Director/City Manager Rowlands~ Agency/City Attorney Kaheny, City Clerk Bigelow ORAL COMMUNICATIONS There were none OTHER BUSINESS 2 DIRECTOR'S REPORT(S) There were nolle 3 CHAIR'S REPORTS There were none. 4 AGENCY MEMBER COMMENTS There were none. CLOSED SESSION Closed Session was cancelled, and the following item was not discussed: 5 CONFERENCE WITH REAL PROPERTY NEGOTIATOR PURSUANT TO GOVERNMENT CODE SECTION 54c)56 $ Property: 340-368 Bay Boulevard (5 parcels totaling 0.6. acres): 567-022-35 340 Bay Boulevard 1.02 acres 567-022-17 350 Bay Boulevard 0 65 acres 5(>7-022-31 3(~0 Bay Boulevard 0 7.'I acres >67-02_--~-~ ,,64 Bay Boulevard ()6.~ acres >67-0;._-,8 .,68 Bay Boulevard 062 acres Negotiating Parties: City/Redevelopment Agency (Chris Salomone); San Diego Unified Port District; B.F. Goodrich Under Negotiations: Purchase/lease terms and conditions A DJ OURNMENT At 7:52 p.m., Chair/Mayor Horton adjourned the meeting. Respectfully submitted. Susan Bigelow, CMC/AAE, City Clerk Page.: '~ - RDA 05/I 1/99 REDEVELOPMENT AGENCY AGENDA STATEMENT ITEM NO. ~-~ MEETING DATE 05/18/99 ITEM Tm'r~E-- PUBLIC HEARING: TO CONSIDER THE SALE OF SPACE 129 AT ORANGE TREE MOBILEHOME PARK SUBMII~rED BY.' COMMUNITY DEVELOPMENT DIRECTOR R~m~ BY: CITY MANAGER (4/5TM VOTE; YES__ No X ) Staff requests that this item be continued to the Redevelopment Agency meetino of May 25, 1999. JOINT RED~LOPMENT AGENCY/CITY COUNCIL AGENDA STATEMENT ITEM NO. ITEM TITLE: A) RESOLUTION"--~ O~ AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF THE HOUSING AUTHORITY OF THE CITY OF CHU~ VISTA MULTIFAMILY HOUSING MORTGAGE REVENUE BONDS ~ILLA SERENA PROJECT), SERIES 1999A, AND THE HOUSING AUTHORI~ OF THE CITY OF CHULA VISTA MULTIFAMILY HOUSING MORTGAGE REVENUE BONDS ~ILLA SERENA PROJECT) SERIES 1999B, IN A COMBINED PRINCIPAL AMOUNT NOT TO EXCEED $7,000,000; AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH BONDS AND OTHER RELATED DOCUMENTS, AND APPROVING OTHER RELATED ACTIONS IN CONNECTION WITH THE ISSUANCE OF THE BONDS B) RESOLUTION APPROVING THE FIRST A~END~ENT TO THE AFFORDABLE HOUSING AGREEMENT WITH A.C.I. SUNBOW, LLC, DECLARING CERTAIN AFFORDABLE HOUSING OBLIGATIONS FOR SUNBOW II SATISFIED, SUBJECT TO CONDITIONS c) RESOLUTION AUTHORIZING THE EXECUTION AND DELIVERY OF THE HOUSING COOPE~TtON AGREEMENT RELATED TO THE VILLA SERENA PROJECT RESOLUTION APPROVING A LOAN AGREEMENT AND RELATED RESTRICTIVE COVENANTS BY AND BETWEEN THE AGENCY AND SERENA SUNBOW L.P. SUBMI~ED BY: COMMUNITY DEVELOPMENT DIRECTOR .----D.. Y._ No x. "AcKG"°uN= A.C.I. Sunbow, LLC, a California Limited Liability Corporation, entered into an Affordable Housing Agreement dated May 13, 1997 implementing the Chula Vista Housing Element of the General Plan by commi~ing A.C.I. Sunbow, LLC to provide ninety-seven (97) Iow income and ninety-seven (97) moderate income affordable housing units within the Sunbow II subdivision. A.C.I. Sunbow LLC, proposes to satis~ a potion of its obligations under the Affordable Housing Agreement with the development of a 132 unit senior rental housing project to be owned and operated by Serena Sunbow L.P. (the "Developer"). The project is to be known as "Villa Semna" located on the nodh east corner of Medical Center Drive and Medical Center Coud within the Sunbow I~ subdivision of eastern Chula Vista (see a~ached Exhibit 1). PAGE 2~ ITEM MEETING DATE OS/1 B/gg On November 10, 1998, City Council conducted a public hearin9 and the City adopted a resolution expressing its intent to issue or to have the Housing Authority issue multi-family housing revenue bonds in an amount not to exceed $8,000,000 to finance Villa Serena. Subsequently, on March 10, 1999, the Developer received a commitment of 1999 private activity bonds for multi-family rental housing projects from the California Debt Limit Allocation Committee (CDLAC). At this time, the Housing Authority is asked to approve a bond resolution authorizing the issuance of $7,000,000 in tax exempt bonds for the financing of the project and execution of the Regulatory Agreement and other related documents in substantially the form presented (see attached Exhibit 3). The issuance of the bonds is in the public interest due to the reservation of 20 percent of the project units as affordable housing for Iow income households. An amendment to the Affordable Housing Agreement is also being presented declaring a portion of the Iow and moderate income housing obligations under this Agreement satisfied upon completion of construction of sixty-four (64) Iow income and sixty-eight (68) moderate income housing units within Villa Serena and certification of occupancy of these housing units by qualified households (see attached Exhibit 4). On February 16, 1999, City Council adopted Resolution No. 19377 granting a Conditional Use Permit, PCC 99-26, for Villa Serena and allowing a 69 percent density bonus increase pursuant to California Government Code Section 65915. As a condition of the Conditional Use Permit and the approval of the density bonus and additional incentives granted, the developer is to enter into an agreement with the City specifying the tenancy requirements and terms of commitment for the density bonus and additional incentives. This Agreement, the Housing Cooperation Agreement, assuring the occupancy of the units by Iow and moderate income senior households has been prepared and is attached as Exhibit 5. On April 20, 1999, the Redevelopment Agency adopted Resolution No. 1624 approving financial assistance in the amount of $275,000 to Serena Sunbow, L.P. for Villa Serena. As a condition of the Agency's financial assistance, the developer is to enter into a loan agreement with the Agency specifying terms of the financial assistance. This Loan Agreement and Related Restrictive Covenants has been prepared and is attached as Exhibit 6. In accordance with the requirements of CEQA, the Environmental Review Coordinator determined that the project required the preparation of an Initial Study, and based on such study a Negative Declaration was adopted on February 16, 1999 in connection with the Conditional Use Permit for the project. I RECOMMENDATION ] Staff recommends the following actions: 1) That the Housing Authority adopt a resolution authorizing: a) the issuance, sale and delivery of Multifamily Housing Mortgage Revenue Bonds (Villa Serena Project), Series 1999A, and the Housing Authority of the City of Chula Vista Multifamily Housing Mortgage Revenue Bonds (Villa Serena Project), Series 1999B, in a combined principal amount not to exceed $7,000,000; b) the execution and delivery of such bonds and other related documents; and, c) other related actions in connection with the issuance of the bonds. 2) That the City Council adopt the resolution approving an amendment to the affordable housing agreement with A.C.I. Sunbow, LLC declaring certain affordable housing obligations for Sunbow II satisfied, subject to conditions. 3) That the City Council adopt the resolution authorizing the execution and delivery of housing cooperation agreement related to the Villa Serena project. That the Redevelopment Agency adopt the resolution approving the loan agreement and related restrictive covenants by and between the Agency and Serena Sunbow, L.P. PAGE 3, ITEM MEETING DATE 05/18/99 BOARDS/COMMISSIONS RECOMMENDATION On October 28, 1998, the Housing Advisory Commission voted to conceptually recommend the proposed senior housing project and the use of tax exempt bonds and Low and Moderate Income Housing funds to finance the project. DISCUSSION The Proposed Project The Villa Serena development is proposed to be built at the northeast corner of Medical Center Drive and Medical Center Court in the Sunbow II subdivision east of Interstate 805 in the City of Chula Vista. The development envisions 132 apartment units for rental to Iow and moderate income seniors aged 62 years of age or older. The site is in the final permitting stages with the City and the graded, fully improved site, is expected to be available to the Developer by July 1999. The Villa Serena development is located adjacent to the Veterans Home and within walking distance to Sharp Chula Vista Memorial Hospital and Medical Center. The site has more than adequate access to public transportation. The development envisions 132 apartment units in a two and three story flat configuration (see attached Exhibit 2). Each unit will include one parking space, outdoor storage, and air conditioning. Project amenities include a clubhouse, laundry facilities, security features, and population-appropriate recreational, social and entertainment programs. The proposed unit mix and sizes are as follows: 112 1BPJ1BA units approximately 560 SF 20 2BR/1BA units approximately 700 SF Although the City's highest priority for the development of affordable housing remains family units whenever feasible, staff recommends the development of housing for seniors at this site. This site location provides constraints to the development of housing for families but offers close proximity to services and facilities needed by seniors. The proposed senior housing will be affordable to seniors at the levels described above. Additionally, the site offers an opportunity to provide a mix of housing types and population groups within a master planned community predominately comprised of single family homes and in the neighborhoods east of Interstate 805. Proposed Finsncinq of Project Financing and development of this project is a joint private-public partnership. The developer will be using Tax Exempt Multi-Family Revenue Bonds and Low Income Housing Tax Credit financing to support the estimated $9,379,800 cost of constructing the project. However, there remains a financing gap of approximately $933,300. The following will close this financing gap: · The developer will defer $658,300 of its Developer fee to assist with this gap. · On April 20, 1999, the Redevelopment Agency approved financial assistance in the amount of $275,000 to meet the remaining financing gap. · To further facilitate the development of Villa Serena, on February 16, 1999, City Council approved a sixty-nine percent (69%) density bonus and modifications to the City's parking and open space requirements for this project. Assuming all financial commitments are secured, construction is expected to begin Summer 1999 with completion of the project estimated by Summer 2000. Bond Structure The use of the City's tax exempt status to issue bonds for multi-family rental housing represents a financing tool for the City's Affordable Housing Program. Such bonds are a form of public-private partnership which gains importance as federal housing programs diminish and development costs make Iow income housing development problematic. In the City's Housing Element of the General Plan, the Affordable Housing Program declares that, "Where practical, the City shall PAGE 4, ITEM MEETING DATE 05/1 8/99 consider the use of tax exempt revenue bonds for the purpose of underwriting a portion of the cost of Iow and moderate income housing." Used appropriately in pursuit of public good, tax exempt multi-family bonds represent a tool to achieve such underwriting; made necessary by the gap between market rental rates and development costs. The Housing Authority is being asked to authorize the issuance of two series of bonds to finance the construction of the project. Due to the limited bond allocation available to the State and the large number of applications, CDLAC approved a maximum bond allocation of 90 percent of the request, with the remaining 10 percent of the financing to be taxable. The use of taxable financing and tax exempt financing (or the use of "taxable tails") is a way to leverage limited public resources and necessitated the issuance of two series of bonds for this project. The first series would total approximately $5,566,500 million in tax exempt financing, which is equal to the bond allocation granted by CDLAC. The second series of bonds for about $786,000 represents the 10 percent "taxable tail". Issuer Fee As issuer of the bonds, the Housing Authority will receive issuer fees related to the costs of issuance of the bonds and ongoing monitoring of the project for compliance with the Regulatory Agreement. The standard origination fee and annual administrative fee is 0.13 pement of the bond proceeds. Based upon negotiations with the Developer, staff is recommending an origination fee of 12 basis points, estimated at $8,750, and an annual administrative fee of $5,000. The proposed fee structure is reasonable for this type of bond issuance. The Developer has, in turn, agreed to maintain the affordability of the Iow income units for a period not less than 52 years, exceeding the 30 year term of the bonds. Bond Documents At this time, the Housing Authority is being asked to approve in substantial form all documents related to the bond issuance. These documents are as follows and are on file in the Office of the City Clerk due to the substantial length of the documents, with exceptions as noted: The Trust Indenture for both series of bonds is a document which specifies the terms and conditions for the issuance and selling of the bonds and the use of bond proceeds. The Loan Agreement for the Series B Bonds is the document which specifies the terms and conditions of the Mortgage Loans financing the project. · The Regulatory Agreement is a document which specifies the regulations for the use and operation of the project (Exhibit 3). The Construction Deed of Trust secures the repayment of the mortgage loan. Density Bonus - Housin,q Cooperation Agreement In granting the density bonus and the modifications to the City's parking and open space requirements, California Government Code Section 65915 (State Density Bonus Law) requires that the developer agree to the following: 1) construct a minimum of 10 percent of the total units of the housing development for very Iow income households or 20 pement for Iow income households; 2) Rental rates do not exceed 30 pement of 50 percent of the area median income (AMI) for very Iow income households and 30 percent of 60 pement of the AMI for Iow income households; 3) The above conditions apply for a minimum period of thirty years. The attached Housing Cooperation Agreement has been designed to satisfy the requirements of State Law. The Housing Cooperation Agreement will be recorded against the property and its restrictive covenants will run with the land. The Agreement adiculates the following restrictions and mechanisms for monitoring compliance: 1. Tenant must be a senior household at least one member of which is 62 years of age or older. 2. Twenty-two (22) 1 Bedroom/1 Bath units shall be restricted and affordable to very Iow income households at 50 percent of AMI. 3. Five (5) 2 Bedreom/1 Bath units shall be restricted and affordable to very Iow income households at 50 percent of AMI. ¥-¢ PAGE 5. ITEM MEETING DATE 05/1 8/99 4. Thirty-two (32) 1 Bedroom/1 Bath units shall be restricted and affordable to very Iow income households at 60 percent of AMI. 5. Five (5) 2 Bedroom/1 Bath units shall be restricted and affordable to very Iow income households at 60 percent of AMk 6. The remaining sixty-eight (68) units shall be restricted and affordable to moderate income households between 80 and 120 percent of AMI. 7. Rental rates shall not exceed 30 percent of 50 percent of the AMI for very Iow income households, 30 percent of 60 percent of the AMI for Iow income households, and 30 percent of 110 percent of the AMI for moderate income households. 8. Tenant income is certified at initial occupancy and each year thereafter. 9. Certified reports must be submitted to the City on a semi-annual basis. 10. The above conditions apply for a period of 52 years. Approval of the Housing Cooperation Agreement and its recordation will assure that the developer and all successors will be aware of and bound by this Agreement. Depending upon the outcome of negotiations with Bank of America and an appraisal of the project, it may be necessary to permit a partial or a complete termination of the Housing Cooperation Agreement following a foreclosure and a repayment of the Bonds. The resolution authorizes the City Manager or the City Attorney to recommend changes to the agreement. Any recommended changes to the termination language will be included in the final agreement to be executed. Redevelopment Agency Loan The Agency Loan of $275,000 will be made on the following loan terms: 1. The loan repayment will be secured by a Deed of Trust recorded against the project property. 2. The term of the loan shall be fifty-two (52) years. 3. The outstanding balance shall accrue with simple interest at 6 percent per annum. 4. Payment of principal and interest on the Agency loan shall be made, on an annual basis, out of a fund equal to ninety percent (90%) of the "Residual Receipts", rental income from the project minus debt service on the bonds, payment of the deferred developer fee, and reasonable operating expenses. 5. Developer will be required to operate the project consistent with the Regulatory Agreement required by the project's tax-exempt bond financing and the covenants imposed by this Agreement, the Housing Cooperation Agreement, and the requirements of the Conditional Use Permit for the project. Income and Rent Restrictions All units will be affordable to Iow and moderate income seniors over 62 years of age. Each of the funding sources for the project requires a regulatory agreement governing the use of the project and restricting all 132 units for Iow and moderate- income affordable housing. Of the 132 units, 20 percent (27 units) will be rented to seniors whose income is at or below 50 percent of the Area Median Income (AMI) as determined by HUD, 29 percent (37 units) for seniors at 60 percent of the AMI, and 51 percent (68 units) for seniors at 80 to 120 percent of the AMI. Fifty percent (50%) of the area median income (AMI) is currently $21,000 for a family of two and 60 percent of the AMI is $25,200 for a family of two. Income for a family of two at 120 percent of the AMI is 50,400. It is proposed that the rents on the 1BR units will range from approximately $467 to $564/month. Rents on the restricted 2BR units will range from approximately $557 to $676/month. The restricted rents will increase with increases in the AMk. The regulatory agreement between the Housing Authority and the developer for the bond financing will restrict 20 percent of the total units (27 units) for occupancy by very Iow-income households at 50 percent of the AMI. The Tax Credit financing will also require an independent regulatory agreement, the terms and conditions of which are to be determined at a later date. It is proposed that the Housing Cooperation Agreement between the City and the developer for the density bonus and modifications to City development standards will restrict rents and occupancy of 49 percent of the 132 units (64 units) for PAGE 6. ITEM MEETING DATE 05/1 8/99 lower income seniors, with 27 units for very Iow and 37 units for Iow income seniors, and 51 percent to moderate income seniors. The Loan Agreement and Related Restrictive Covenants for the Agency's financial assistance will echo the same rent and occupancy restrictions of the Housing Cooperation Agreement, with 49 percent (64 units) to very Iow and Iow income senior households and 51 percent to moderate income seniors and will refer to the Housing Cooperation Agreement, The City's and the Agency's affordability and Iow income restrictions will be limited to only 49 percent of the units so that the project is exempt under Article XXXIV of the State Constitution, which would require a public vote of approval for the development and construction of Iow rent housing projects by a public body. In 1978, pursuant to Article XXXIV of the State Constitution, Chula Vista voters passed a 400 unit referendum for the development of Iow income housing, The City has nearly exhausted its Article XXXIV authority of 400 units, Therefore, it is proposed that the City and the Agency limit its Iow income restrictions to 49 percent of the total units in the project. Projects which are less than 50 percent restricted are not considered "public housing" for purposes of Article XXXIV. Staff will bring forward a status report of all projects developed under the City's Article XXXIV authority to the Council and the Agency at a later date. Income and rent restrictions for Villa Serena will be maintained for a period of no less than 52 years, exceeding the 30- year term of the bond and the minimum requirement for State density bonus law. The affordable housing commitment will bind all subsequent owners of Villa Serena, so that the commitment remains in force regardless of ownership, except in limited circumstances following a default and foreclosure on the project. The income and rent restrictions of the Regulatory Agreement and the Housing Cooperation Agreement will be recorded against the Property. Compliance with these restrictions will be subject annually to a regulatory audit and annual tax credit certification. The developer has successfully managed Iow income housing units for 12 years. Compliance with strict property management policies and procedures will ensure that income and rent restrictions will be maintained for the full 52-year compliance period. Senior Housing Restrictions All units will be restricted for occupancy by senior households at least one member of which is 62 years of age or older. The age restriction is incorporated into the Housing Cooperation Agreement and the Loan Agreement, Compliance with these restrictions will be subject annually to a regulatory audit by the City and Agency. As specified in the Housing Cooperation Agreement leasing to tenants who are not income or age qualified is a breach of the Agreement and the City and Agency shall require that such lease be lawfully terminated, Additionally, it is anticipated that the age restrictions will be self enforcing in that leasing of units in a senior housing development to other than qualified tenants would disqualify such development from its exemption from State and Federal Fair Housing Laws, Sunbow's Affordable Housinq Requirement The City's State-mandated Housing Element requires the provision of housing for all economic groups and to distribute affordable housing developments throughout the City's jurisdiction. The City's strategy to implement this mandate, the "Affordable Housing Program", is to require 10 percent (10%) of any new subdivision in excess of fifty (50) units to be made affordable for Iow and moderate income families (5% Iow and 5% moderate) and to balance affordable housing development throughout the City. On May 13, 1997, the City of Chula Vista and A.C.I. Sunbow, LLC executed an Affordable Housing Agreement requiring the provision of ninety-seven (97) Iow income and ninety-seven (97) moderate income affordable housing units within the Sunbow II subdivision. The Developer has proposed the Villa Serena development to satisfy a portion of Sunbow II's Iow and moderate income housing requirements. At this time, the Council is being asked to approve in substantially the form presented the First Amendment to the Affordable Housing Agreement which declares a portion of A.C.I. Sunbow, LLC's Iow and moderate income affordable housing obligations within Sunbow II satisfied upon completion of construction of Villa Serena and occupancy of sixty-four (64) units by Iow income tenants and sixty-eight (88) units for Iow and moderate income tenants. The Iow income housing PAGE 7, ITEM MEr-,,NG DATE 05/1B/gB obligation shall be partially satisfied pursuant to the Regulatory Agreement and Housing Cooperation Agreement, which will require these units to be occupied and affordable to Iow and moderate income households for a period of 52 years. The remaining affordable housing obligation for Sunbow II will be thirty-three (33) Iow income units and twenty-nine (29) moderate-income units. The City may be able to declare Sunbow II's affordable housing obligation fully satisfied at such future time the City and A.C.I. Sunbow LLC is able to determine the extent to which this project or other residential developments demonstrate long term affordability. City Risks and Miti,qation Measures There are four areas of risk which the Housing Authority, City and Agency need to be cognizant. Listed below are these risks and measures staff has incorporated into the transaction to reduce these risks: Risk One - Early Release of Low Income Housinq Obliqation: The Villa Serena development is proposed to satisfy a portion of Sunbow II's obligation. Sunbow II will receive credit for sixty-four Iow income units of the ninety-seven (97) Iow income housing units required under the City's Affordable Housing Program. If the City should release Sunbow II of its Iow income housing obligation too early and the project is not constructed, the City may have lost the opportunity to increase such housing within Sunbow II. Mitigation: An amendment to the Affordable Housing Agreement will stipulate that Sunbow II will receive credit for sixty-four (64) Iow income housing units only upon construction and occupancy of the Villa Serena development. Risk Two - Default under Bonds: While repayment of the bonds will not constitute a liability or obligation to the City or the Housing Authority, should the Developer or a subsequent owner be unable to perform under the conditions of the Bond Indenture, Loan Agreement, Regulatory Agreement, the City's and the Housing Authority's financial rating and/or stature in the marketplace could be negatively impacted. Mitigation: The Developer and its joint venture partners have significant experience and an excellent track record with this type of development project. An affiliate of the Developer is currently constructing Gateway Town Center, now known as Teresina at Lomas Verdes, a 440 unit apartment development with 88 affordable units in Chula Vista. Other projects include the Paul Mirable Center at St. Vincent de Paul's in San Diego, Alejandro Rivera Apartments (104 units) in Calexio, and Las Casitas Apartments (76 units) in San Luis, Arizona. Additionally, the Bonds are being privately placed with the Bank of America FSB and may subsequently be transferred only to "accredited investors" who will deliver an investor letter to the Housing Authority. The Bonds are not rated by any rating agency. Risk Three - No Repayment of Agency Loan: The Agency will be providing $275,000 in the form of a 6 pement simple interest loan to the developer to assist with the development costs of the project. Repayment of the loan will be made from ninety percent (90%) of the residual receipts, which is the amount left over after all expenses are deducted from the income received. It is possible that the Agency will not receive total payment on the loan. Mitigation: The likelihood of repayment is high given there is a demand for these units and the vacancy rate is expected to be Iow. The revenue base should be very reliable. The operating costs for the project are standard. Chelsea Investment Corporation will be the property management firm and if a problem occurs, the Agency will be involved to assure proper handling. The property management firm is highly qualified and experienced with the management of this type of development preject. Risk Four- Subordination of Aqency Loan and Housinq Cooperation Aqreement: It is anticipated that the Agency Loan and the Housing Cooperation Agreement's covenants may be subordinate to the Bonds. Should the Developer or a subsequent owner be unable to perform under the conditions of the Bond Indenture, Loan Agreement, Regulatory Agreement, the Agency may need to cure any loan defaults or lose the aftordability restrictions on the project. PAGE 8, ITEM MEETING DATE 05/1 B/g9 Mitigation: It is unlikely that there will be a foreclosure on the property and a repayment of the Bonds. As discussed previously, there is a demand for these units and the vacancy rate is expected to be iow. The Developer and its joint venture partners have significant experience and an excellent track record with this type of development project. Should the Housing Cooperation Agreement need to be subordinated, staff will also recommend that such subordination result in a partial termination of the Agreement following a foreclosure and a repayment of the Bonds, allowing the minimum affordability restrictions and term of affordability required under State Density Bonus Law remain in place. [ F,SCAL IMPACT All COSTS related to the issuance of the Bonds will be paid for from bond proceeds or equity contributed by the Developer's limited partner, The Bonds will be secured by the project and will not constitute a liability or obligation of the City or Housing Authority. Some staff time costs will be associated with monitoring compliance with the Regulatory Agreement and the Housing Cooperation Agreement. Those costs will be reimbursed from an origination fee of 12 basis points of the bond proceeds, estimated at $8,750, and an annual administrative fee for 52 years of $5,000 to be paid semi-annually by the Developer to the Authority, Financial assistance will be provided from the Redevelopment Agency's Low and Moderate Income Housing Fund, On April 20, 1999, the Agency authorized the Finance Department to appropriate $275,000 in the form of residual receipts loan secured by a note and deed of trust, Proceeds of this loan shall only be disbursed upon execution of required Agency Loan Agreement and all associated documents and satisfaction of any terms of such documents. Any repayment of this loan will be deposited into the Low and Moderate-Income Housing Fund for further use in providing affordable housing programs. [ ~IBI~ 2. Project Site Plan and Elevations 3. Regulatory Agreement 4. First Amendment to the Affordable Housing Agreement [Sunbow Ill 5. Housing Cooperation Agreement 8. Loan Agreement and Related Restrictive Covenants The following exhibits are on file in the Office of the City Clerk: 7. Series 1999 A and B Trust Indenture 8. Series 1999 A and B Loan Agreement 9. Construction Deed of Trust 4-¢ HOUSiNG AUTHORITY OF THE CITY OF CHULA VISTA RESOLUTION NO. J'~/q "0 q RESOLUTION OF THE HOUSiNG AUTHORITY OF THE CITY OF CHULA VISTA AUTHORIZiNG THE ISSUANCE, SALE AND DELIVERY OF THE HOUSiNG AUTHORITY OF THE CITY OF CHULA VISTA MULTIFAMILY HOUSiNG MORTGAGE REVENUE BONDS (VILLA SERENA PROJECT), SERIES 1999A, AND THE HOUSiNG AUTHORITY OF THE CITY OF CHULA VISTA MULTIFAMILY HOUSiNG MORTGAGE REVENUE BONDS (VILLA SERENA), SERIES 1999B, iN A COMBiNED PRINCIPAL AMOUNT NOT TO EXCEED $7,000,000, AUTHORIZiNG THE EXECUTION AND DELIVERY OF SUCH BONDS AND OTHER RELATED DOCUMENTS, AND APPROViNG OTHER RELATED ACTIONS iN CONNECTION WITH THE ISSUANCE OF THE BONDS WHEREAS, Chapter 1 of Part 2 of Division 24 of the Health and Safety Code of the State of California (the "Act") authorizes housing authorities to finance the acquisition, construction and development of multifamily rental housing for persons and families meeting the income limitations contained in the Act; and WHEREAS, the Board of Commissioners (the "Board") of the Housing Authority of the City of Chula Vista (the "Authority") hereby finds and declares that it is necessary, essential and a public purpose for the Authority to finance multifamily rental housing pursuant to the Act, in order to increase the supply of such housing in the City of Chula Vista (the "City") available to persons and families within the income limitations established by the Act; and WHEREAS, the Authority has a program to finance multifamily rental housing pursuant to the Act (the "Program"), and desires at this time to provide for the borrowing of money for such purpose through the issuance of multifamily housing revenue bonds as authorized by the Act; and WHEREAS, the City has conducted a public hearing, as required by Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), for the purpose of determining whether to approve the issuance by the Authority of multifamily housing revenue bonds to be designated "Housing Authority of the City of Chula Vista Multifamily Housing Mortgage Revenue Bonds (Villa Serena Project), Series 1999A" (the "Series 1999A Bonds") and "Housing Authority of the City of Chula Vista Multifamily Housing Mortgage Revenue Bonds (Villa Serena), Series 1999B" (the "Series 1999B Bonds" and, together with the Series 1999A Bonds, the "Bonds") in an aggregate principal amount not to exceed $7,000,000 in order to finance the acquisition and construction of a 132-unit multifamily housing project (the "Project") located in the City; and WHEREAS, all acts, conditions and things required by the Act, and by all other laws of the State of California, to exist, to have happened and to have been performed precedent to and in connection with the issuance of the Bonds and the implementation of the Program as contemplated by this Resolution and the documents referred to herein exist, have happened, and have been performed in regular and due time, form and manner as required by the laws of the State of Califomia, including the Act, and the Authority is now duly authorized and empowered, pursuant to each and every requirement of law, to issue the Bonds for the purpose, in the manner and upon the terms herein provided; and WHEREAS, this Board hereby finds and declares that this Resolution is being adopted pursuant to the powers granted by the Act; NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Housing Authority of the City of Chula Vista, as follows: Section 1. The above recitals, and each of them, are tree and correct. Section 2. Pursuant to the Act and the Code, the Bonds are hereby authorized to be issued pursuant to the provisions of the Indenture of Trust (the "Indenture"), between the Authority and the trustee appointed below (the "Trustee"). The forms of the Bonds as set forth in the Indenture are hereby approved in substantially the forms presented, with such additions thereto or changes therein as are recommended or approved by the Executive Director of the Authority, City Attorney or Bond Counsel and approved by the officer or officers executing the Bonds, to be evidenced conclusively by the execution and delivery of the Bonds. Each of the Chairperson, the Executive Director of the Authority, or their designees, is hereby authorized to execute the Bonds by manual or facsimile signature and the Secretary of the Authority is hereby authorized to attest such signature by manual or facsimile signature and to affix the facsimile seal of the Authority to the Bonds. The proceeds of the Series 1999A Bonds shall be used to make a mortgage loan to Serena Sunbow, L.P., a California limited partnership (the "Borrower"), and the proceeds of the Series 1999B Bonds shall be used to make a second mortgage loan to the Borrower. Section 3. State Street Bank and Trust Company of California, N.A. is hereby appointed as Trustee under the Indenture for the Authority and the owners of the Bonds, with the powers and duties of Trustee as set forth in the Indenture. Section 4. The proposed form of the Indenture presented to this meeting is hereby approved. Each of the Chairperson, the Executive Director, the Deputy Executive Director and the City Clerk of the City, or the designee of any of them, is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Indenture in substantially the form presented, with such additions thereto or changes therein as are recommended or approved by the Executive Director, the City Attorney or Bond Counsel and approved by the officer or officers executing the Indenture, with the approval of such officer or officers to be evidenced conclusively by the execution and delivery of such document, provided that such additions or changes shall not authorize a combined aggregate principal amount of Bonds in excess of $7,000,000. Section 5. The proposed form of the Loan Agreement related to the Bonds (the "Loan Agreement") among the Authority, the Borrower and Bank of America, FSB presented to this meeting is hereby approved. Each of the Chairperson, the Executive Director, the Deputy Executive Director and the Secretary of the Authority, or the designee of any of them, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver a Loan Agreement in substantially the form presented, with such additions thereto or changes therein as are recommended or approved by the Executive Director, City Attorney or Bond Counsel and approved by the officer or officers executing such documents, the approval of such officer or officers to be evidenced conclusively by the execution and delivery of such documents. Section 6. The proposed form of Regulatory Agreement and Declaration of Restrictive Covenants (the "Regulatory Agreement"), among the Authority, the Trustee and the Borrower presented to this meeting is hereby approved. Each of the Chairperson, the Executive Director, the Deputy Executive Director and the Secretary of the Authority, or the designee of any of them, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver a Regulatory Agreement in substantially said form, with such additions thereto or changes therein as are recommended or approved by the Executive Director, City Attorney or Bond Counsel and approved by the officer or officers executing the Regulatory Agreement, the approval of such officers to be evidenced conclusively by the execution and delivery of such document. Section 7. All actions heretofore taken by the officers and agents of the Authority with respect to the establishment of the Program and the sale and issuance of the Bonds are hereby approved, confirmed and ratified. Upon approval of the Executive Director with the advice of the City Attorney, the officers of the Authority are hereby authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents (including an assignment of the Authority's interest in the loans made to the Borrower, a construction deed of trust for the Bonds, an assignment of such deed of trust to the Trustee and instructions the Trustee to authenticate the Bonds and to pay the costs of issuing the Bonds in accordance with the provisions of the Indenture) which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds in accordance with this Resolution and in order to carry out and administer the Program. Should the Chairperson be unavailable to execute any of the documents specified above, then any other available member of the Board is hereby authorized to sign such documents on behalf of the Authority in the place of such officer. Any document authorized to be signed by the City Clerk may be signed by a duly appointed deputy clerk. All documents signed by the facsimile signature of any member of the Board shall be deemed to constitute an original of such document. Section 8. If any section, paragraph or provision of this Resolution shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any remaining provisions of this Resolution. Section 9. This Resolution shall take effect immediately upon its adoption. Presented by Approved as to form by Chris Salomone Director of Community Development RESOLUTION NO../~ ~,/~ ~I~ RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING THE FIRST AMENDMENT TO THE AFFORDABLE HOUSING AGREEMENT WITH A.C.I. SUNBOW, LLC DECLARING CERTAIN AFFORDABLE HOUSING OBLIGATIONS FOR SUNBOW I1 SATISFIED SUBJECT TO CONDITIONS WHEREAS, the City of Chula Vista (the "City") and A.C.I. Sunbow, LLC, a California Limited Liability Company ("Sunbow"), have previously executed an Affordable Housing Agreement dated as of May 13, 1997 (the "Agreement") requiring that certain of the residential units constructed within the Sunbow II Project be constructed as affordable units; and WHEREAS, there is now proposed to be constructed within the Sunbow II Project a 132-unit senior project known as "Villa Serena" in which the units are to be reserved for persons of very low, low and moderate income; and WHEREAS, the Housing Authority of the City of Chula Vista (the "Authority") is intending to issue multifamily housing revenue bonds (the "Bonds") to finance a portion of the construction cost of the Villa Serena apartments in connection with which the Authority and Serena Sunbow, L.P. (the "Developer") will execute a Regulatory Agreement and Declaration of Restrictive Covenants (the "Regulatory Agreement") which will provide for not less than 20 percent of the units (27 units) to be reserved for persons of very Iow income; and WHEREAS, to facilitate the financing and construction of the Villa Serena apartments and to implement the terms of the Agreement, the City desires to amend the Agreement, in part, to declare that A.C.I. Sunbow, LLC shall have satisfied a portion of its low and moderate income housing obligation under the Affordable Housing Agreement upon completion of construction of sixty-four (64) low income housing units and sixty-eight (68) low and moderate income housing units within Villa Serena and verification of occupancy of these affordable housing units by qualified households; and WHEREAS the proposed form of the First Amendment to the Affordable Housing Agreement (the "First Amendment") has been presented at the meeting at which this resolution is being adopted; and WHEREAS, the Environmental Review Coordinator has determined that the First Amendment to the Affordable Housing Agreement is exempt from CEQA review under Section 15061 (b)(3) in that the Amendment to the Agreement will not have the possibility of having a significant effect on the environment, beyond that already analyzed. NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista does hereby approve the First Amendment to the Affordable Housing Agreement related to Sunbow II, a copy of which shall be kept on file in the office of the City Clerk as Document No. BE IT FURTHER RESOLVED that each of the Mayor of the City of Chula Vista and the City Manager, or his written designee, is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the First Amendment in substantially the form presented, with such additions thereto or changes therein as are recommended or approved by the City Manager, City Attorney or Bond Counsel and approved by the officer or officers executing the agreements, with the approval of such officer or officers to be evidenced conclusively by the execution and delivery of such agreement. Presented by Approved as to form by CDihrl~:tSoralo°fmc°on;munity Developm eat Ci~ey (x~ ~ RESOLUTION NO. /~46~ RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AUTHORIZING THE EXECUTION AND DELIVERY OF A HOUSING COOPERATION AGREEMENT RELATED TO THE VILLA SERENA PROJECT WHEREAS, the City Council adopted Resolution 19377 granting Conditional Use Permit No. PCC 99-25 for a 132 unit affordable senior apartment complex within the Sunbow II planned community known as "Villa Serena' and allowing a 69 percent density bonus increase and additional incentives pursuant to California Government Code Section 65915; and WHEREAS, to facilitate the financing and construction of the Villa Serena apartments by Serena Sunbow, L.P. (the "Developer"), the City Council granted a 69 percent density increase and additional incentives in exchange for a commitment of sixty-four units of the development for occupancy by very Iow and low income seniors for a period of 52 years; and WHEREAS, as a condition of the Conditional Use Permit and the approval of the density bonus and additional incentives granted, the Developer is to enter into a written agreement with the City of Chula Vista specifying the tenancy requirements and terms of commitment for the density bonus and additional incentives; and WHEREAS, the proposed form for such written agreement, the Housing Cooperation Agreement, has been presented at the meeting at which this resolution is being adopted; and NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista does hereby approve the Housing Cooperation Agreement related to the Villa Serena project, a copy of which shall be kept on file in the office of the City Clerk as Document No. BE 1T FURTHER RESOLVED that each of the Mayor of the City of Chula Vista and the City Manager, or his written designee is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Housing Cooperation Agreement in substantially the form presented, with such additions thereto or changes therein as are recommended or approved by the City Manager or City Attorney and approved by the officer or officers executing the agreement, with the approval of such officer or officers to be evidenced conclusively by the execution and delivery of such agreements. Presented by Approved as to form by l~ihrt~:-tSoralo°fmc°o~ r~ un ity Development ~oK2eh; n~ ~ ~-- RESOLUTION NO. /~ ,~9,,.~ A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA APPROVING A LOAN AGREEMENT AND RELATED RESTRICTED COVENANTS BY AND BETWEEN THE AGENCY AND SERENA SUNBOW, L.P. WHEREAS, California Health and Safety Code Sections 33334.2 and 33334.6 authorize and direct the Redevelopment Agency of the City of Chula Vista (the "Agency") to expend a certain percentage of all taxes which are allocated to the Agency pursuant to Section 33670 for the purposes of increasing, improving and preserving the community's supply of low and moderate income housing available at affordable housing cost to persons and families of low- and moderate-income, lower income, and very low income; and WHEREAS, pursuant to applicable law the Agency has established a Low and Moderate Income Housing Fund (the "Housing Fund"); and WHEREAS, pursuant to Health and Safety Code Section 33334.2(e), in carrying out its affordable housing activities, the Agency is authorized to provide subsidies to or for the benefit of very low income and lower income households, or persons and families of low or moderate income, to the extent those households cannot obtain housing at affordable costs on the open market, and to provide financial assistance for the construction and rehabilitation of housing which will be made available at an affordable housing cost to such persons; and WHEREAS, pursuant to Health and Safety Code Section 33413(b), the Agency is required to ensure that at least 15 percent of all new and substantially rehabilitated dwelling units developed within a project area under the jurisdiction of the Agency by private or public entities or persons other than the Agency shall be available at affordable housing cost to persons and families of low or moderate income; and WHEREAS, Serena Sunbow, L.P. (the "Developer") has proposed to construct a 132 unit apartment building at the northeast corner of Medical Center Drive and Medical Center Court in the City of Chula Vista, which would be restricted to senior citizens (the "Project"); and WHEREAS, in order to carry out and implement the Redevelopment Plan for the Agency's redevelopment projects and the affordable housing requirements thereof, the Agency proposes to enter into a Loan Agreement and Related Restricted Covenants (the "Agreement") with the Developer, pursuant to which the Agency would make a loan to the Developer (the "Agency Loan"), and the Developer would agree to construct the Project in accordance with the requirements of the Agreement, restrict occupancy of the apartment units in the Project to very low, lower and low and moderate income senior citizen households, and rent those units at an affordable housing cost; and WHEREAS, the Agreement will leverage the investment of the Agency by requiring the Developer to obtain additional financing for the construction and operation of the Project through a combination of a loan obtained from the proceeds of multifamily mortgage revenue bond financing to be issued by the Housing Authority of the City of Chula Vista and an equity contribution by a limited partner investor in consideration for the "4% Tax Credits" to be generated by the Project; and WHEREAS, the Project is located outside of the Agency's redevelopment project areas, but the acquisition, construction and operation of the Project pursuant to the Agreement would benefit the Agency's redevelopment project areas by providing affordable housing for persons who currently live and work within those redevelopment project areas; and WHEREAS, the Agency has adopted an Implementation Plan pursuant to Health and Safety Code Section 33490, which sets forth the objective of providing housing to satisfy the needs and desires of various age, income and ethnic groups of the community, and which specifically provides for the construction of new affordable rental housing units through Agency assistance; and WHEREAS, the Agreement furthers the goals of the Agency set forth in the Implementation Plan as it will facilitate the creation of affordable housing which will serve the residents of the neighborhood and the City; and WHEREAS, the Legislature declares in Health and Safety Code Section 36000, et seq., that new forms of cooperation with the private sector, such as leased housing, disposition of real property acquired through redevelopment, development approvals, and other forms of housing assistance may involve close participation with the private sector in meeting housing needs, without amounting to development, construction or acquisition of low rent housing projects as contemplated under Article XXXIV of the State Constitution; and WHEREAS, Health and Safety Code Section 37001 provides that a low rent housing project under Article XXXIV of the State Constitution does not include a development which is privately owned housing, receiving no ad valorem property tax exemption, other than exemptions granted pursuant to subdivision (f) or (g) of Section 214 of the Revenue and Taxation Code, not fully reimbursed to all taxing entities, and not more than 49 percent of the dwellings, apartments, or other living accommodations of the development may be occupied by persons of low income; and WHEREAS, the Project will not receive any ad valorem property tax exemption, other than exemptions granted pursuant to subdivision (f) or (g) of Section 214 of the Revenue and Taxation Code, and the Agreement restricts less than 49 percent of the units within the Project to persons of low and very low income; and WHEREAS, Health and Safety Code Section 37001.5 provides that a public body does not develop, construct or acquire a low rent housing project under Article XXXIV of the State Constitution when the public body provides assistance to a low rent housing project and monitors construction or rehabilitation of the project to the extent of carrying out routine governmental functions, performing conventional activities of a lender, and imposing constitutionally mandated or statutorily authorized conditions accepted by a grantee of assistance; and WHEREAS, the Agreement provides for assistance by the Agency to the Project, and the Agency's monitoring of construction of the Project to the extem of carrying out routine governmental functions, performing conventional activities of a lender, and imposing constitutionally mandated or statutorily authorized conditions accepted by a grantee of assistance; and WHEREAS, the Agency has duly considered all terms and conditions of the proposed Agreement and believes that the Agreement is in the best interests of the Agency and the City and the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of applicable State and local law requirements; NOW, THEREFORE, THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA DOES RESOLVE AS FOLLOWS: Section 1. The Agency hereby finds that the use of funds from the Agency's Low and Moderate Income Housing Fund pursuant to the Agreement, for the acquisition, construction and operation of real property which is outside of the Agency's redevelopment project areas, will be of benefit to the Agency's redevelopment project areas for the reasons set forth above. Section 2. The Agency hereby determines that the Project is not a "low rent housing project" within the meaning of Article XXXIV of the State Constitution, and that the assistance to be provided pursuant to the Agreement does not constitute development, construction or acquisition of a low-rent housing project within the meaning of Article XXXIV of the State Constitution. This Resolution is hereby deemed to constitute a final approval of a proposal which may result in housing assistance benefiting persons of low income, within the meaning of Health and Safety Code Section 36005 . Section 3. The Agency hereby approves the Agreement in substantially the form presented to the Agency, subject to such revisions as may be made by the Agency Executive Director or his designee. The Chairman of the Agency is hereby authorized to execute the Agreement on behalf of the Agency. A copy of the Agreement when executed by the Agency shall be placed on file in the office of the Executive Secretary of the Agency. Section 4. The Executive Director of the Agency (or his designee) is hereby authorized, on behalf of the Agency, to make revisions to the Agreement which do not materially or substantially increase the Agency's obligations thereunder or materially or substantially change the uses or development permitted on the site on which the Project is to be located, to sign all documents, to make all approvals and take all actions necessary or appropriate to carry out and implement the Agreement and to administer the Agency's obligations, responsibilities and duties to be performed under the Agreement and related documents. Presented by Approved as to form by Chris~al~omo~~2~ '~ ~ c~t~ohrenne~ Director of Community Development -/-t> -q VILLA SERENA APARTMENTS HEDENKAMP AND ASSOCIATES RECORDING REQUESTED BY AND ) WHEN RECORDED RETURN TO: ) ) ROBERT J. WHALEN, ESQ. ) STRADLING YOCCA CARLSON & RAUTH ) P. O. Box 7680 ) Newport Beach, California 92660 ) [Space above for Recorder's use.] REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Among HOUSING AUTHORITY OF THE CITY OF CHULA VISTA, CALIFORNIA and STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee and SERENA SUNBOW, LP, as Borrower Dated as of May 1, 1999 Relating to $5,566,500 CITY OF CHULA VISTA MULTIFAMILY HOUSING MORTGAGE REVENUE BONDS (VILLA SERENA PROJECT) SERIES 1999A and $786,000 CITY OF CHULA VISTA MULTIFAMILY HOUSING MORTGAGE REVENUE BONDS (VILLA SERENA PROJECT) SERIES 1999B Section 1. Definitions and Interpretation ....................................................................................... 2 Section 2. Acquisition, Construction, Equipping and Completion of the Project ......................... 6 Section 3. Residential Rental Property .......................................................................................... 6 Section 4. Low Income Tenants ..................................................................................................... 8 Section 5. Tax Status of the Bonds .............................................................................................. 11 Section 6. Modification of Special Tax Covenants ..................................................................... 12 Section 7. Indemnification ........................................................................................................... 12 Section 8. Consideration .............................................................................................................. 14 Section 9. Reliance ....................................................................................................................... 14 Section 10. Sale or Transfer of the Project; Syndication ............................................................... 14 Section 11. Term ............................................................................................................................ 15 Section 12. Covenants to Run With the Land ................................................................................ 16 Section 13. Burden and Benefit ..................................................................................................... 16 Section 14. Uniformity; Common Plan ......................................................................................... 16 Section 15. Enforcement ................................................................................................................ 16 Section 16. Recording and Filing ................................................................................................... 17 Section 17. Payment of Fees .......................................................................................................... 17 Section 18. Governing Law ........................................................................................................... 18 Section 19. Amendments ............................................................................................................... 18 Section 20. Trustee Acting Solely in Such Capacity ..................................................................... 18 Section 21. Monitoring Compliance by Borrower ......................................................................... 18 Section 22. Affordable Housing Agreement ............................. i .................................................... 19 Section 23. Notice .......................................................................................................................... 19 Section 24. Severability ................................................................................................................. 20 Section 25. Multiple Counterparts ................................................................................................. 20 Signatures ................................................................................................................................... S- 1 EXHIBIT A PROJECT SITE ........................................................................................................ A-1 EXHIBIT B CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE ......................... B-1 EXHIBIT C INCOME COMPUTATION AND CERTIFICATION ............................................ C-1 REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (the "Regulatory Agreement"), made and entered into as of May 1, 1999, by and among the HOUSiNG AUTHORITY OF THE CITY OF CHULA VISTA, CALIFORNIA, a public body corporate and politic duly organized and existing under the laws of the State of California (together with any successor to its rights, duties and obligations, the "Issuer"), STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee (the "Trustee"), and SERENA SUNBOW, LP, a California limited partnership (the "Borrower"), WITNESSE TH: WHEREAS, the Legislature of the State of California enacted Chapter 1 of Part 2 of Division 24 of the Health and Safety Code (the "Act") to authorize cities and counties to issue bonds to finance the acquisition, construction, rehabilitation and development of multifamily rental housing for families and individuals of low or moderate income; and WHEREAS, the Issuer is a political subdivision (within the meaning of that term in the Regulations of the Department of Treasury and the rulings of the Internal Revenue Service prescribed and promulgated pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the "Code")); and WHEREAS, on May 18, 1999, the Board of Commissioners of the Issuer adopted a resolution (the "Resolution"), authorizing the issuance of revenue bonds by the Issuer in connection with financing the acquisition and construction of a 132-unit multifamily rental housing project located in the City of Chula Vista (the "Project"); and WHEREAS, in furtherance of the purposes of the Act and the Resolution and as a part of the Issuer's plan of financing residential rental housing, the Issuer proposes to issue $5,566,500 aggregate principal amount of its revenue bonds designated "City of Chula Vista, California, Multifamily Housing Mortgage Revenue Bonds (Villa Serena Project), Series 1999A" and $786,000 aggregate principal amount of its "City of Chula Vista, California, Multifamily Housing Mortgage Revenue Bonds (Villa Serena Project) Series 1999B (collectively, the "Bonds"), the proceeds of which will be loaned to the Borrower which will use the proceeds of the Bonds to finance the acquisition and construction of the Project for the public purpose of providing decent, safe and sanitary housing for families and individuals of low and moderate income; and WHEREAS, the Issuer, Bank of America FSB and the Borrower have entered into a Loan Agreement, dated the date hereof, providing the terms and conditions under which the Issuer will make the Loan to the Borrower to finance the acquisition and construction of the Project; and WHEREAS, all things necessary to make the Bonds, when issued as provided in the Indenture, the valid, binding, and limited obligations of the Issuer according to the import thereof, and to constitute the Indenture a valid assignment of the amounts pledged to the payment of the principal of, and premium, if any, and interest on the Bonds have been done and performed, and the creation, execution, and delivery of the Indenture (as defined herein) and the execution and issuance of the Bonds, subject to the terms thereof, in all respects have been duly authorized; and 651685.2X240360006 l~ "'~ '~ WHEREAS, the Issuer has obtained an allocation for the Project of a portion of the State of California's private activity bond volume cap, within the meaning of Section 146 of the Code, in accordance with the procedures established by the California Debt Limit Allocation Committee; and WHEREAS, the Code and the regulations and rulings promulgated with respect thereto and the Act prescribe that the use and operation of the Project be restricted in certain respects and in order to ensure that the Project will be owned and operated in accordance with the Code and the Act, the Issuer, the Trustee and the Borrower have determined to enter into this Regulatory Agreement in order to set forth certain terms and conditions relating to the acquisition, construction, equipping and operation of the Project; NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Issuer, the Trustee and the Borrower hereby agree as follows: Section 1. Definitions and Interpretation. The following terms shall have the respective meanings assigned to them in this Section 1 unless the context in which they are used clearly requires otherwise: Any of the capitalized terms not defined herein shall have the meaning set forth in the Indenture. "Adjusted Income" - The adjusted income of a person (together with the adjusted income of all persons the age of 18 years or older who intend to reside with such person in one residential unit) as calculated in the manner prescribed in Regulation Section 1.103-8. "Administration Agreement" - The administration agreement to be entered into among the Issuer, the Borrower and any entity other than the Issuer which is acting as the Program Administrator. "Affiliated Party" - (1) a Person whose relationship with the Borrower would result in a disallowance of losses under Section 267 or 707(b) of the Code, (2) a Person who together with the Borrower are members of the same controlled group of corporations (as defined in Section 1563(a) of the Code, except that "more than 50 percent" shall be substituted for "at least 80 percent" each place it appears therein), (3) a partnership and each of its partners (and their spouses and minor children) whose relationship with the Borrower would result in a disallowance of losses under Section 267 or 707(b) of the Code or (4) an S Corporation and each of its shareholders (and their spouses and minor children) whose relationship with the Borrower would result in a disallowance of losses under Section 267 or 707(b) of the Code. "Affordable Housing Agreement" - The Affordable Housing Agreement dated May 13, 1997 by and between A.C.I. Sunbow, LLC and the City recorded in the Official Records of the County of San Diego on June 9, 1997 as Document No. 1997-0268832. "Area" - The San Diego County, California Primary Metropolitan Statistical Area. "Bank" - Bank of America, FSB, a federal savings bank or its successors and assigns. "Bond Closing" - The date on which there is delivery by the Issuer of, and payment for, the Bonds. "Bondowner Representative" - Shall have the meaning set forth in the Indenture. 651685.2\2403&0006 2 ~' "' ~ --q "Bonds" - Housing Authority of the City of Chula Vista Multifamily Housing Mortgage Revenue Bonds (Villa Serena Project), Series 1999A, and the Housing Authority of the City of Chula Vista Multifamily Housing Mortgage Revenue Bonds (Villa Serena Project), Series 1999B. "Borrower's Tax Certificate" - The certificate of the Borrower, dated as of the Bond Closing, with respect to certain Project Costs delivered to the Issuer by the Borrower. "Certificate of Continuing Program Compliance" - The certificate with respect to the Project to be filed by the Borrower with the Program Administrator, which shall be substantially in the form attached hereto as Exhibit B. "City" - The City of Chula Vista, California. "Income Certification" - The Income Computation and Certification Form in substantially the form attached hereto as Exhibit C. "Indenture" - The Indenture of Trust, dated as of the date hereof, between the Issuer and the Trustee, pursuant to which the Bonds have been issued, as amended or supplemented from time to time. "Loan" - The loan of the proceeds of the Bonds by the Issuer to the Borrower described in the Loan Agreement. "Loan Agreement" - The Loan Agreement dated as of May 1, 1999 by and among the Issuer, the Borrower and Bank of America FSB. "Loan Documents" - The Loan Agreement, the Notes, the Mortgage, the Security Agreement, the assignments by the Borrower of the Construction Contract, the Architecture Contract and the Plans and Specifications, the consents by the contracting parties to such assignments and the Regulatory Agreement. "Low Income Tenants" - Individuals or families with an Adjusted Income which does not exceed 50 percent of the Median Income for the Area as adjusted for household size as set forth below. In no event, however, will the occupants of a residential unit be considered to be Low Income Tenants if all the occupants are students, as defined in Section 151 (c)(4) of the Code, as such may be amended, no one of which is entitled to file a joint federal income tax return. Currently, Section 151(c)(4) defines a student as 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 or is an individual pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of such an educational organization or of a state or political subdivision thereof. 651685.2~24036.0006 3 ~'~ ,~ Adjustment to 50% of Household Size Median Income for the Area 1 70% 2 80% 3 90% 4 100% 5 108% 6 116% 7 124% 8 132% "Low Income Units" - The dwelling units in the Project designated for occupancy by Low Income Tenants pursuant to Section 4(a) of this Regulatory Agreement. "Median Income for the Area" - The median gross income for the Area as most recently determined by the Secretary of Treasury pursuant to Section 142(d)(2)(B) of the Code. "Mortgage" - The Construction Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing of even date herewith, from the Borrower as tmstor to as trustee and the Issuer as beneficiary with respect to the Project, as the same may from time to time be replaced, amended or supplemented as provided therein and in this Indenture. "Person" - Any natural person, firm, partnership, association, limited liability company, corporation, company or public body. "Program Administrator" - The Issuer, or such other entity as is appointed by the Issuer from time to time to act in such capacity hereunder. "Program Administrator's Fee" - The administrative fee of the Program Administrator as set forth in the Administration Agreement. "Project" - The Project Facilities and the Project Site. "Project Costs" - To the extent authorized by the Code, the Regulations and the Act, any and all costs incurred by the Borrower with respect to the acquisition and construction of the Project, whether paid or incurred prior to or after the sixtieth day preceding the Bond Closing, including, without limitation, costs for site preparation, the planning of housing and related facilities and improvements, the acquisition of property, the removal or demolition of existing structures, the construction of housing and related facilities and improvements, and all other work in connection therewith, and all costs of financing, including, without limitation, the cost of consultant, accounting and legal services, other expenses necessary or incident to determining the feasibility of the Project, administrative and other expenses necessary or incident to the Project and the financing thereof (including reimbursement to any municipality, county or entity for expenditures made for the Project) and all other costs approved by Bond Counsel. 651685.2~24036.0006 4 ~ ~ ,~ ~ ~ "Project Facilities" - The buildings, structures and other improvements on the Project Site, and all fixtures and other property owned by the Borrower and located on, or used in connection with, such buildings, structures and other improvements constituting the Project. "Project Site" - The parcel or parcels of real property described in Exhibit "A", which is attached hereto and by this reference incorporated herein, and all rights and appurtenances thereunto appertaining. "Qualified Project Costs" - The Project Costs (excluding Costs of Issuance) incurred after the sixtieth day preceding the Bond Closing which either constitute land or property of a character subject to the allowance for depreciation under Section 167 of the Code or are chargeable to a capital account with respect to the Project for federal income tax and financial accounting purposes, or would be so chargeable either with a proper election by the Borrower or but for the proper election by the Borrower to deduct those amounts within the meaning of Regulation Section 1.103-8(a)(1)(i); and provided further that interest accruing after the date of completion of the Project and interest allocable to costs that are not Qualified Project Costs shall not be a Qualified Project Cost; and provided still further that if any portion of the Project is being constructed by (or acquired from) an Affiliated Party (whether as a general contractor or a subcontractor), "Qualified Project Costs" shall include only the actual out-of-pocket capital costs incurred after the sixtieth day preceding the Bond Closing by such Affiliated Party with respect to the Project (or any portion thereof) within the meaning of Section 147(d)(2) of the Code, as provided in the Tax Certificate. "Qualified Project Period" - The period beginning on the first date on which ten percent of the units in the Project are occupied and ending on the latest of the following dates: (a) the date which is 15 years after the date on which fifty percent of the units in the Project are occupied, (b) the first day on which no tax exempt bonds with respect to the Project are Outstanding, (c) the date on which any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937 terminates, or (d) May 1,2051. "Senior Household" - A household at least one member of which is 62 years of age or older per Section 51.3 of the California Civil Code. "Series A Bonds" - The Housing Authority of the City of Chula Vista, California Multifamily Housing Mortgage Revenue Bonds (Villa Serena Project), Series 1999A. Such terms as are not defined herein shall have the meanings assigned to them in the Indenture. Unless the context clearly requires otherwise, as used in this Regulatory Agreement, words of the masculine, feminine or neuter gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include the plural number, and vice versa, when appropriate. This Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereofi The defined terms used in the preamble and recitals of this Regulatory Agreement have been included for convenience of reference only, and the meaning, construction and interpretation of all defined terms shall be determined by reference to this Section 1 notwithstanding any contrary definition in the preamble or recitals hereof. The titles and headings of the sections of this Regulatory Agreement have been inserted for convenience of reference only, and are not to be 651685.2\24036.0006 5 ~' 3 a~' ~ considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof or be considered or given any effect in construing this Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise. Section 2. Acauisition. Construction, Equipping and Completion of the Project. The Borrower hereby represents, as of the date hereof, and covenants, warrants and agrees as follows: (a) The Borrower has incurred a substantial binding obligation to acquire, construct and equip the Project, pursuant to which the Borrower is obligated to expend at least five percent of the net sale proceeds of the Series A Bonds. (b) The Borrower's reasonable expectations respecting the total cost of the acquisition, construction and equipping of the Project and the disbursement of Bond proceeds are accurately set forth in the Borrower's Tax Certificate attached to the Tax Certificate which has been delivered to the Issuer. (c) The Borrower shall construct the Project and will proceed with due diligence to complete the acquisition, construction and equipping of the Project and expects to expend the full amount of the proceeds of the Loan for Project Costs prior to May 1, 2002. (d) The statements made in the various certificates delivered by the Borrower to the Issuer or the Trustee are true and correct. (e) Money on deposit in any fund or account in connection with the Bonds, whether or not such money was derived from other sources, shall not be used by or under the direction of the Borrower, in a manner which would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code, and the Borrower specifically agrees that the investment of money in any such fund shall be restricted as may be necessary to prevent the Bonds from being "arbitrage bonds" under the Code. (f) The Borrower (and any person related to it within the meaning of Section 147(a)(2) of the Code) will not take or omit to take, as is applicable, any action if such action or omission would in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to the requirements of the Indenture, the Loan Agreement or this Regulatory Agreement. Section 3. Residential Rental Property. The Borrower shall own, manage and operate the Project as a "qualified residential rental project" (within the meaning of Section 142(d) of the Code) until the expiration of the Qualified Project Period. To that end, and for the term of this Regulatory Agreement, the Borrower hereby represents, as of the date hereof, and covenants, warrants and agrees as follows: (a) The Project is being acquired, constructed and equipped for the purpose of providing multifamily residential rental property, and the Borrower shall own, manage and operate the Project as a project to provide multifamily residential rental property comprised ora building or structure or several interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities, in accordance with applicable provisions of Section 142(d) of the Code and Section 1.103-8(b) of the Regulations, and the Act, and in accordance with such requirements as may be imposed thereby on the Project from time to time. 651685.2\24036.0006 6 (b) All of the dwelling units in the Project will be similarly constructed units, and, to the extent required by the Code and the Regulations, each dwelling unit in the Project will contain complete separate and distinct facilities for living, sleeping, eating, cooking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink; provided that any Low Income Tenant may, but shall not be obligated to, provide a refrigerator for the unit to be occupied. (c) None of the dwelling units in the Project will at any time be utilized on a transient basis, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, rest home, retirement house or trailer court or park. (d) No part of the Project will at any time be owned or used as a condominium or by a cooperative housing corporation. Other than obtaining a final subdivision map on the Project and a Final Subdivision Public Report from the California Department of Real Estate, the Borrower shall not take any steps in connection with a conversion of the Project to a condominium or cooperative ownership except with the prior written approving opinion of Bond Counsel that the interest on the Bonds will not become taxable thereby under Section 103 of the Code. (e) All of the dwelling units will be available for rental on a continuous basis to members of the general public who are Senior Households and the Borrower will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Low Income Tenants, Moderate Income Households and to holders of Section 8 certificates or vouchers. (f) The Project Site consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the Project Facilities will comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. (g) No dwelling unit in any building or structure in the Project which contains fewer than five units shall be occupied by the Borrower or by persons related to or affiliated with the Borrower. (h) Should involuntary noncompliance with the provisions of Section 1.103-8(b) of the Regulations be caused by fire, seizure, requisition, foreclosure, transfer of title by deed in lieu of foreclosure, change in a federal law or an action of a federal agency after the Bond Closing which prevents the Issuer from enforcing the requirements of the Regulations, or condemnation or similar event, the Borrower covenants that, within a "reasonable period" determined in accordance with the Regulations, it will either prepay the Mortgage Note or apply any proceeds received as a result of any of the preceding events to reconstruct the Project to meet the requirements of Section 142(d) of the Code and the Regulations. (i) The Borrower shall not discriminate on the basis of race, religion, creed, color, ethnic group identification, sex, source of income (e.g. AFDC, SSI), mental or physical disability, age (except to the extent that all units are to be rented only to Senior Households), national origin or marital status in the rental, lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the operation and management of the Project. 651685.2\24036.0006 (j) Following the expiration or termination of the Qualified Project Period, Low Income Units shall remain available to the Low Income Tenants then occupying such units at the date of expiration or termination of the Qualified Project Period at a rent not greater than the rent determined pursuant to Section 4(a)(ii) below until the earliest of any of the following occurs: (i) The household's income exceeds 140 percent of the income at which such household would qualify as a Low Income Tenant. (ii) The household voluntarily moves or is evicted for "good cause." For these purposes, "good cause" means the nonpayment of rent or allegation of facts necessary to prove major, or repeated minor, violations of material provisions of the lease agreement which detrimentally affect the health and safety of other persons or the structure, the fiscal integrity of the Project, or the purposes or special programs of the Project. (iii) Fifty-two (52) years after the commencement of the Qualified Project Period. (iv) The Borrower pays relocation assistance and benefits to such tenant as provided in Government Code Section 7264(b). (k) During the three-year period prior to the expiration of the Qualified Project Period, the Borrower shall continue to make available to Low Income Tenants Low Income Units that have been vacated to the same extent that other units in the Project are made available to the general public. (1) The Issuer may but shall not be required to monitor the Borrower's compliance with the provisions of subparagraph (j) above. Section 4. Low Income Tenants. Pursuant to the requirements of Section 142(d) of the Code and applicable provisions of the Act, the Borrower hereby represents, as of the date hereof, and warrants, covenants and agrees as follows: (a) During the Qualified Project Period: (i) not less than twenty percent (20%) of the completed units in the Project shall be designated as Low Income Units and shall be continuously occupied by Low Income Tenants. Such Low Income Units shall be of comparable quality and offer a range of sizes and number of bedrooms comparable to those units which are available to other tenants and shall be distributed throughout the Project. (ii) the monthly rent charged for all the Low Income Units shall not exceed one-twelfth of the amount obtained by multiplying 30% times 50% of the Median Income for the Area, as adjusted for household size utilizing the pementages set forth above under the definition of Low Income Tenant and assuming the following unit sizes and household sizes: 651685.2\24036.0006 Unit Size Household Size Studio One Person One Bedroom Two Persons Two Bedrooms Three Persons Three Bedrooms Four Persons A unit occupied by a Low Income Tenant who at the commencement of the occupancy is a Low Income Tenant shall be treated as occupied by a Low Income Tenant until a recertification of such tenant's income in accordance with Section 4(c) below demonstrates that such tenant no longer qualifies as a Low Income Tenant and thereafter any residential unit of comparable or smaller size in the Project is occupied by a new resident other than a Low Income Tenant. Moreover, a unit previously occupied by a Low Income Tenant and then vacated shall be considered occupied by a Low Income Tenant until reoccupied, other than for a temporary period, at which time the character of the unit ~hall be redetermined. In no event shall such temporary period exceed thirty-one (31) days. (b) Immediately prior to a Low Income Tenant's occupancy of a Low Income Unit, the Borrower will obtain and maintain on file an Income Certification from each Low Income Tenant occupying a Low Income Unit, dated immediately prior to the initial occupancy of such Low Income Tenant in the Project (or prior to the Bond Closing in the case of existing Low Income Tenants). In addition, the Borrower will provide such further information as may be required in the future by the State of California, the Issuer, the Program Administrator, or in such other form and manner as may be required to maintain the tax-exempt status of interest on the Bonds under all applicable roles, rulings, policies, procedures or other official statements now or hereafter promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to obligations issued under Section 142(d) of the Code. The Borrower shall verify that the income provided by an applicant is accurate by taking one of the following steps as a part of the verification process: (1) obtain a federal income tax return for the most recent tax year, (2) obtain a written verification of income and employment from applicant's current employer, (3) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain other verification of such applicant's income satisfactory to the Program Administrator or (4) such other information as may be reasonably requested by the Program Administrator. Copies of the most recent Income Certifications for Low Income Tenants commencing or continuing occupancy ora Low Income Unit shall be attached to the quarterly report to be filed with the Program Administrator within 10 days of the last day of each quarter during the Qualified Project Period. (c) Immediately prior to the first anniversary date of the occupancy of a Low Income Unit by one or more Low Income Tenants, and on each anniversary date thereafter, the Borrower shall recertify the income of the occupants of each Low Income Unit by obtaining a completed Income Certification based upon the current income of each occupant of the unit. In the event the recertification demonstrates that such household's income exceeds the income at which such household would qualify as Low Income Tenants, such household will no longer qualify as a Low Income Tenant and the Borrower will rent the next available unit of comparable or smaller size to one or more Low Income Tenants. 6516852~24036.0006 9 1~-- ~-- ti (d) Not later than ten (10) days after the commencement of the Qualified Project Period, and within ten days of the last day of each quarter thereafter during the term of this Regulatory Agreement, the Borrower shall advise the Program Administrator of the status of the occupancy of the Project by delivering to such parties a Certificate of Continuing Program Compliance. (e) The Borrower will maintain complete and accurate records pertaining to the Low Income Units, and will permit any duly authorized representative of the Issuer, the Program Administrator, the Trustee, the Department of the Treasury or the Internal Revenue Service to inspect the books and records of the Borrower pertaining to the Project, including those records pertaining to the occupancy of the Low Income Units. (f) The Borrower shall submit to the Secretary of the Treasury annually on the anniversary date of the start of the Qualified Project Period, or such other date as is required by the Secretary, a certification that the Project continues to meet the requirements of Section 142(d) of the Code, and shall provide a copy of such certification to the Program Administrator. (g) Prior to renting any Low Income Units, the Borrower shall prepare and present to the City a marketing plan for the Low Income Units. The Borrower may begin leasing the Low Income Units following the City Manager's approval of the marketing plan, which consent shall not be unreasonably withheld. The Borrower shall accept as tenants on the same basis as all other prospective tenants, persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, or its successor. The Borrower agrees to contact the San Diego County Housing Authority for a list of persons who are recipients of, or who are applying for, Section 8 certificates or vouchers whenever a Low Income Unit becomes available but not more frequently than every four weeks. The Borrower shall not apply selection criteria to Section 8 certificate or voucher holders that are more burdensome than criteria applied to all other prospective tenants. (h) The Low Income Units shall be of a comparable quality and offer a range of sizes and number of bedrooms comparable to the units that are available to other tenants. (i) The Borrower shall not collect any additional fees or payments from a Low Income Tenant except security deposits or other deposits required of all tenants or for services or items requested by a tenant. The Borrower shall not collect security deposits or other deposits from Section 8 certificate or voucher holders in excess of those allowed under the Section 8 Program. The Borrower shall not discriminate against Low Income Tenant applicants on the basis of source of income (i.e., AFDC or SSI), and the Borrower shall consider a prospective tenant's previous rent history of at least one year as evidence of the ability to pay the applicable rent. (j) Each lease pertaining to a Low Income Unit shall contain a provision to the effect that the Borrower has relied on the income certification and supporting information supplied by the Low Income Tenant in determining qualification for occupancy of the Low Income Unit, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease. Each lease will also contain a provision that failure to cooperate with the annual recertification process reasonably instituted by the Borrower pursuant to Section 4(c) above may at the option of the Borrower disqualify the unit as a Low Income Unit or provide grounds for termination of the lease. 651685.2\24036.0006 (k) The Borrower will execute and deliver to the Issuer an Administration Agreement applicable to the Project upon request of the Issuer. (I) Prior to the Bond Closing, the Borrower agrees to provide to the Program Administrator a copy of the form of application and lease to be provided to prospective Low Income Tenants. The term of the lease shall be not less than thirty (30) days. (m) The Borrower shall notify the Program Administrator of any change in leasing agents or managers for the Project. Section 5. Tax Status of the Bonds. The Borrower and the Issuer each represents, as of the date hereof, and warrants, covenants and agrees that: (a) It will not knowingly take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the exclusion from gross income for federal income tax purposes of the Series A Bonds or the exemption from California personal income taxation of the interest on the Bonds and, if it should take or permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof; (b) It will take such action or actions as may be necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, to comply fully with the Act and all applicable rules, rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service pertaining to obligations issued under Section 142(d) of the Code to the extent necessary to maintain the exclusion from gross income for federal income tax purposes of interest on the Series A Bonds; and (c) The Borrower, at the Borrower's expense, will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real property records of the County of San Diego. The Borrower hereby covenants to notify any subsequent owner of the Project of the requirements and restrictions contained in this Regulatory Agreement in any documents transferring any interest in the Project to another person to the end that such transferee has notice of such restrictions, and to obtain the agreement from any transferee to abide by all requirements and restrictions of this Regulatory Agreement. Section 6. Modification of Special Tax Covenants. The Borrower, the Trustee and the Issuer hereby agree as follows: (a) To the extent any amendments to the Act, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, impose requirements upon the ownership or operation of the Project more restrictive than those imposed by this Regulatory Agreement which must be complied with in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Series A Bonds, this Regulatory 651685.2\24036.0006 11 ~ ~' ,~ -- /,i~ Agreement shall be deemed to be automatically amended to impose such additional or more restrictive requirements. (b) To the extent any amendments to the Act, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, impose requirements upon the ownership or operation of the Project less restrictive than imposed by this Regulatory Agreement, this Regulatory Agreement may be amended to conform in whole or in part to such changed requirements should the Issuer, in its sole discretion, determine that such requirements should be made applicable to the Project. (c) The Borrower, the Issuer and, if applicable, the Trustee shall execute, deliver and, if applicable, file of record any and all documents and instruments, necessary to effectuate the intent of this Section 6, and each of the Borrower and the Issuer hereby appoints the Trustee as its true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Borrower or the Issuer, as is applicable, any such document or instrument (in such form as may be approved in writing by Bond Counsel) if either the Borrower or the Issuer defaults in the performance of its obligations under this subsection (c); provided, however, that the Trustee shall take no action under this subsection (c) without first notifying the Borrower or the Issuer, or both of them, as is applicable, unless directed in writing by the Issuer or the Borrower and without first providing the Borrower or the Issuer, or both, as is applicable, an opportunity to comply with the requirements of this Section 6. Section 7. Indemnification. The Borrower hereby releases the Issuer, the Trustee and the Program Administrator and their officers and employees from, and covenants and agrees to indemnify, hold harmless and defend the Issuer, the Trustee and the Program Administrator and their respective officers, members, directors, officials, agents and employees and each of them (each, an "indemnified party") from and against any and all claims, losses, costs, damages, demands, expenses, taxes, suits, judgments, actions and liabilities of whatever nature, joint and several (including, without limitation, costs of investigation, attorneys' fees, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments), directly or indirectly (a) by or on behalf of any person arising from any cause whatsoever in connection with transactions contemplated hereby or otherwise in connection with the Project, the Bonds, or the execution or amendment of any document relating thereto; (b) arising from any act or omission of the Borrower or any of its agents, servants, employees or licensees, in connection with the Loan or the Project; (c) arising in connection with the issuance and sale, resale or reissuance of any Bonds or any certifications or representations made by any person other than the Issuer or the party seeking indemnification in connection therewith and the carrying out by the Borrower of any of the transactions contemplated by the Bonds, the Indenture, the Loan Agreement and this Regulatory Agreement; (d) arising in connection with the operation of the Project, or the conditions, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation or construction of, the Project or any part thereof; and (e) arising out of or in connection with the Trnstee's acceptance or administration of the trusts created by the Indenture and the exercise of its powers or duties thereunder or under the Loan Agreement, this Regulatory Agreement or any other agreements in connection therewith to which it is a party; except (1) in the case of the foregoing indemnification of the Trustee, the Program Administrator or any of their respective officers, members, directors, agents and employees, to the extent such damages are caused by the negligence or willful misconduct of such person, and (2) in the case of the foregoing indemnification of the Issuer or any of its officers, members, directors, officials, agents and employees, to the extent such damages are caused by the 651685.2L24036.0006 12 I~ ' ~ -- I willful misconduct of such person. In the event that any action or proceeding is brought against any indemnified party with respect to which indemnity may be sought hereunder, the Borrower, upon written notice from the indemnified party, shall assume the investigation and defense thereof, including the employment of counsel selected (i) by the Borrower and reasonably approved by the indemnified party, when the indemnified party is other than the Issuer, and (ii) by the Issuer when the indemnified party is the Issuer or any of its officers, members, directors, officials, agents and employees; and the Borrower shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; vrovided that an affected indemnified party shall have the right to review and approve or disapprove any such compromise or settlement. Each indemnified party shall have the fight if such indemnified party shall conclude in good faith that a conflict of interest exists to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Borrower shall pay the reasonable fees and expenses of such separate counsel. The Borrower also shall pay and discharge and shall indemnify and hold harmless the Trustee, the Issuer and the Program Administrator from (i) any lien or charge upon payments by the Borrower to the Trustee, the Issuer or the Program Administrator hereunder and (ii) any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges in respect of any portion of the Project. If any such claim is asserted, or any such lien or charge upon payments, or any such taxes, assessments, impositions or other charges, are sought to be imposed, the Issuer or the Program Administrator shall give prompt notice to the Borrower and the Borrower shall have the sole right and duty to assume, and will assume, the defense thereof, with full power to litigate, compromise or settle the same in its sole discretion. Notwithstanding any transfer of the Project to another owner in accordance with the provisions of the Loan Agreement, the Mortgage and this Regulatory Agreement, the transferor shall remain obligated to indemnify each indemnified party pursuant to this Section for all matters arising prior to the date of transfer, unless the Issuer consents at the time of transfer to indemnification under this Section 7 from such subsequent owner. In no event, however, shall any such consent by any indemnified party hereunder be deemed to constitute the consent of any other indemnified party. In addition thereto, subject to Section 17 hereof, the Borrower will pay upon demand all of the fees and expenses paid or incurred by the Trustee, the Issuer or the Program Administrator in enforcing the provisions hereof. The provisions of this Section 7 shall survive the term of the Bonds and this Regulatory Agreement and the resignation or removal of the Trustee. The obligations of the Borrower under this Section are independent of any other contractual obligation of the Borrower to provide indemnity to the parties named herein or otherwise, and the obligation of the Borrower to provide indemnity hereunder shall not be interpreted, construed or limited in light of any other separate indemnification obligation of the Borrower. Any indemnified party shall be entitled simultaneously to seek indemnity under this Section and any other provision under which it is entitled to indemnity. Section 8. Consideration. The Issuer has issued the Bonds to make the Loan to finance the Project, all for the purpose, among others, of inducing the Borrower to acquire, rehabilitate, equip and operate the Project. In consideration of the issuance of the Bonds by the Issuer, the 651685.2\24036.0006 13 ~" ' ~ "'/*'n~ Borrower has entered into this Regulatory Agreement and has agreed to restrict the uses to which the Project can be put on the terms and conditions set forth herein. Section 9. Reliance. The Issuer and the Borrower hereby recognize and agree that the representations, warranties, covenants and agreements set forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, and in the exclusion from gross income for federal income tax purposes of interest on the Series A Bonds and the exemption from California personal income taxes of the interest on the Bonds. In performing their duties and obligations hereunder, the Issuer, the Trustee and the Program Administrator may rely upon statements and certificates of the Borrower and Low Income Tenants, and upon audits of the books and records of the Borrower pertaining to the Project. In addition, the Issuer, the Program Administrator and the Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Issuer, the Program Administrator or the Trustee under this Regulatory Agreement in good faith and in conformity with such opinion; provided, however, if there are conflicting opinions among the counsel selected by such parties, the opinion of Bond Counsel shall govern the interpretation and enforcement of this Regulatory Agreement. In determining whether any default or lack of compliance by the Borrower exists under this Regulatory Agreement, the Trustee shall not be required to conduct any investigation into or review of the operations or records of the Borrower and may rely solely on any notice or certificate delivered to the Trustee by the Borrower, the Issuer or the Program Administrator with respect to the occurrence or absence of a default. Section 10. Sale or Transfer of the Proiect; Syndication. The Borrower intends to hold the Project for its own account, has no current plans to sell, transfer or otherwise dispose of the Project, and hereby covenants and agrees not to sell, transfer or otherwise dispose of the Project, or any portion thereof (other than for individual tenant use as contemplated hereunder and replacement of personal property), without obtaining the prior written consent of the Issuer, which consent shall be given upon receipt by the Issuer of (i) such certifications from the Borrower or the Trustee as are reasonably deemed necessary by the Issuer to establish that the Borrower shall not be in default under this Regulatory Agreement or under the Loan Agreement or, if any such defaults exist, the purchaser or assignee undertakes to cure such defaults to the satisfaction of the Issuer; (ii) a written instrument by which the Borrower's purchaser or transferee has assumed in writing and in full the Borrower's duties and obligations under this Regulatory Agreement, the Administration Agreement and the other Loan Documents, (iii) an opinion of counsel for the transferee that the transferee has duly assumed the obligations of the Borrower under this Regulatory Agreement, the Administration Agreement and the other Loan Documents are binding on the transferee, (iv) documentation from the transferee reflecting the transferee's experience with owning and/or operating multifamily housing projects such as the Project and with use and occupancy restrictions similar to those contained in this Regulatory Agreement, and (v) an opinion of Bond Counsel addressed to the Issuer to the effect that such transfer will not cause interest on the Series A Bonds to become includable in the gross income of the recipients thereof for federal income tax purposes. It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the Project in violation of this Section 10 shall be null, void and without effect, shall cause a reversion of title to the Borrower, and shall be ineffective to relieve the Borrower of its obligations under this Regulatory Agreement. Not less than 20 days prior to consummating any sale, transfer or disposition of any interest in the Project, the Borrower shall deliver to the Issuer and the Trustee a notice in writing explaining the nature of the proposed transfer. The Borrower shall not syndicate the Project unless, prior to such syndication, an opinion of counsel acceptable to the Issuer is 651685.2~24036.0006 14 ~ ~,j _ / ~ delivered to the Issuer to the effect that (i) the terms and conditions of the syndication do not reduce or limit any of the requirements of the Act or regulations adopted or documents executed pursuant to the Act, (ii) no requirements of the Issuer shall be subordinated to the syndication agreement and (iii) the syndication shall not result in the provision of fewer assisted units, or the reduction of any benefits or services, than were in existence prior to the syndication agreement. Section 11. Term. Except as provided in Section 30), (k) and (1) above, and in the second paragraph of this Section 11, this Regulatory Agreement and all and several of the terms hereof shall become effective upon its execution and delivery and shall remain in full force and effect during the Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Bonds and expiration of the Indenture, the Loan Agreement, the Mortgage Note and the Mortgage and remain in effect until the end of the Qualified Project Period. Notwithstanding any other provisions of this Regulatory Agreement to the contrary, this entire Regulatory Agreement, or any of the provisions or sections hereof, may be terminated upon agreement by the Issuer, the Trustee and the Borrower only if there shall have been received by the Issuer an opinion of Bond Counsel that such termination will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series A Bonds or the exemption from State personal income taxes of the interest on the Bonds. The terms of this Regulatory Agreement to the contrary notwithstanding, this Regulatory Agreement, and each and all of the terms hereof, shall terminate and be of no further force and effect in the event of an involuntary noncompliance with the provisions of this Regulatory Agreement caused by foreclosure on the Project or delivery of a deed in lieu of foreclosure, fire, seizure, requisition, change in a federal law or an action of a federal agency after the Bond Closing which prevents the Issuer and the Trustee from enforcing the provisions of this Regulatory Agreement or condemnation or a similar event, but only if within a reasonable period thereafter the Bonds are paid in full and retired or amounts received as a consequence of such event are used to provide a project that meets the requirements of the Code set forth in this Regulatory Agreement; provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained herein shall be reinstated if, at any time subsequent to the termination of such provisions as the result of the foreclosure on the Project or the delivery of a deed in lieu of foreclosure or a similar event, the Borrower or any Affiliated Party obtains an ownership interest in the Project for federal income tax purposes. Upon the termination of the terms of this Regulatory Agreement, the parties hereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms hereof; provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Regulatory Agreement in accordance with its terms. Section 12. Covenants to Run With the Land. The Borrower hereby subjects the Project (including the Project Site) to the covenants, reservations and resthctions set forth in this Regulatory Agreement. The Issuer, the Trustee and the Borrower hereby declare their express intent that the covenants, reservations and restrictions set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Borrower's successors in title to the Project; provided, however, that on the termination of this Regulatory Agreement said covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instruments. 6516852\24036.0006 15 ~ --3 ' I ~ Section 13. Burden and Benefit. The Issuer, the Trustee and the Borrower hereby declare their understanding and inten[ that the burden of the covenants set forth herein touch and concern the land in that the Borrower's legal interest in the Project is rendered less valuable thereby. The Issuer, the Trustee and the Borrower hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Low Income Tenants, the intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for which the Bonds were issued. Section 14. Uniformity: Common Plan. The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan for the use, development and improvement of the Pruject Site. Section 15. Enforcement. If the Borrower defaults in the performance or observance of any covenant, agreement or obligation of the Borrower set forth in this Regulatory Agreement, and if such default remains uncured for a period of 60 days after written notice thereof shall have been given by the Issuer or the Trustee to the Borrower (or such longer period if the Borrower provides the Issuer with an opinion of Bond Counsel to the effect that such extension will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds), then the Trustee, subject to the provisions of Section 9 hereof and acting on its own behalf or on behalf of the Issuer, or the Issuer shall declare an "Event of Default" to have occurred hereunder, and, at its option, may take any one or more of the following steps: (i) by mandamus or other suit, action or proceeding at law or in equity, require the Borrower to perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in violation of the rights of the Issuer or the Trustee hereunder; (ii) have access to and inspect, examine and make copies of all of the books and records of the Borrower pertaining to the Project; (iii) take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Borrower hereunder. The Trustee shall have the right, in accordance with this Section 15 and the provisions of the Indenture, upon notice to but without the consent or approval of the Issuer, to exercise any or all of the rights or remedies of the Issuer hereunder. All fees, costs and expenses of the Trustee (including, without limitation, reasonable attorneys fees) incurred in taking any action pursuant to this Section 15 shall be the sole responsibility of the Borrower. After the Indenture has been discharged, or if the Trustee fails to act under this Section 15, the Issuer may act on its own behalf to declare an "Event of Default" to have occurred and to take any one or more of the steps specified hereinabove to the same extent and with the same effect as if taken by the Trustee. After the date on which no Bonds remain outstanding as provided in the Indenture, the Trustee shall no longer have any duties or obligations under this Regulatory Agreement, and all references to the Trustee herein shall be deemed references to the Issuer. Notwithstanding anything contained in this Regulatory Agreement and the Indenture to the contrary, the occurrence of an event of default under this Regulatory Agreement shall not be 651685.2~4036.0006 16 ~. ,,~ ,/~1~ deemed, under any circumstances whatsoever, to constitute a default under the other Loan Documents, except as may be otherwise specified in such other Loan Documents. The parties hereto agree that the maturity date of the Loan may be accelerated solely by the Bondowner Representative upon the occurrence of a default on the part of the Borrower under the Loan Documents and that no person other than the Bondowner Representative shall have the right to (i) declare the principal balance of the Notes to be immediately due and payable, or (ii) commence foreclosure or other like action without express written authorization from the Bondowner Representative. The rights of the Trustee under this Section are in addition to all rights conferred upon the Trustee under the Indenture and in no way limit those rights. All monetary obligations of the Borrower that may arise under this Regulatory Agreement shall be subject and subordinate to the repayment of amounts owed by the Borrower under the other Loan Documents. Section 16. Recordine and Filing. The Borrower shall cause this Regulatory Agreement and all amendments and supplements hereto and thereto, to be recorded and filed in the real property records of the County of San Diego and in such other places as the Issuer or the Trustee may reasonably request. The Borrower shall pay all fees and charges incurred in connection with any such recording. Section 17. Payment of Fees. It is anticipated that moneys on deposit in the funds established under the Indenture will be sufficient to pay the Trustee's and Issuer's costs and expenses. However, to the extent that there are unforeseen and unusual costs and expenses and the moneys in said funds are insufficient therefor, the Borrower hereby agrees to pay all reasonable costs and expenses of the Trustee and the Issuer in connection with the Bonds and the financing of the Project as such costs and expenses become due and payable. Notwithstanding any prepayment of the Loan and notwithstanding a discharge of the Indenture, throughout the term specified in clauses (a), (b) and (c) of the Qualified Project Period, the Borrower shall continue to pay to the Issuer an annual fee of $5,000 in equal semiannual installments on each January 1 and July 1, and to the Trustee reasonable compensation for any services rendered by it hereunder and reimbursement for all expenses reasonably incurred by either of them in connection therewith. The foregoing provisions of this Section 17 shall in no way limit amounts payable by the Borrower under Section 7 hereof, or arising after an Event of Default in connection with the Issuer's or the Trustee's enforcement of the provisions of this Regulatory Agreement. Section 18. Goveming Law. This Regulatory Agreement shall be governed by the laws of the State of California. Except as expressly provided herein and in the Agreement, the Trustee's rights, duties and obligations hereunder are governed in their entirety by the terms and provisions of the Indenture. Section 19. Amendments. This Regulatory Agreement shall be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County. The parties hereto acknowledge that, for so long as the Bonds are outstanding, the owners of the Bonds are third party beneficiaries to this Regulatory Agreement. 651685.2\24036.0006 17 ~ .~ ./q Section 20. Trustee Acting Solely in Such Capacity. In accepting its obligations hereunder, the Trustee acts solely as trustee for the benefit of the owners of the Bonds, and not in its individual capacity; and the duties, powers, rights and liabilities of the Trustee in acting hereunder shall be subject to the provisions of the Indenture, including, without limitation, Article 9 of the Indenture. Section21. Monitoring Compliance by Borrower. Unless it acts as the Program Administrator, the Trustee shall not be responsible for monitoring or verifying compliance by the Borrower with its obligations under this Regulatory Agreement. The Program Administrator shall assume responsibility for monitoring compliance hereunder under the terms of the Administration Agreement. Section 22. Affordable Housinn A~reement. Upon the recordation of this Regulatory Agreement in the real property records of the County of San Diego, the provisions of the Affordable Housing Agreement shall no longer be applicable to the Project, and the recordation of this Regulatory Agreement shall operate to release the Project from the terms of the Affordable Housing Agreement. The release of the Project from the terms of the Affordable Housing Agreement shall in no way alter the obligations of A.C.I. Sunbow, LLC under the Affordable Housing Agreement as amended. Section 23. Notice. All notices, certificates or other communications shall be sufficiently given and (except for notices to the Trustee, which shall be deemed given only when actually received by the Trustee) shall be deemed given on the date personally delivered or on the second day following the date on which the same have been mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: Issuer: Housing Authority of the City of Chula Vista 430 Davidson Street, Suite B Chula Vista, California 91910 Attention: Executive Director Program Housing Authority of the City of Chula Vista Administrator: 276 Fourth Avenue Chula Vista, California 91910 Attention: Executive Director Trustee: State Street Bank and Trust Company of California, N.A. 633 West 5t~ Street, 12th Floor Los Angeles, California 90071 Attention: Corporate Trust Department Borrower: Serena Sunbow, LP c/o Chelsea Investment Corporation 215 South Hwy 101, Suite 200 Solana Beach, CA 92075 Attention: Wallace C. Dieckmann Telephone: (619) (619) 259-2624 Fax: (619) 259-2644 651685.2\24036.0006 with copies to: Edison Capital Housing Investments 18101 Von Karman Avenue, Suite 1700 Irvine, CA 92612-1046 Attention: and: Cox, Castle & Nicholson, LLP 505 Montgomery Street, Suite 1550 San Francisco, CA 94111 Attention: Gary P. Downs, Esq. Bank: Bank of America, FSB 450 "B" Street, Suite 450 San Diego, California 92101 Attention: Loan Administrative Manager Telephone: (619) 515-5829 Fax: (619) 515-5973 Any of the foregoing parties may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, documents or other communications shall be sent. Section 24. Severabilit¥. If any provision of this Regulatory Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby. Section 25. Multiple Counteroarts. This Regulatory Agreement may be executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original. 651685.2\24036.0006 19 ~ '~ ~d~"~ I IN WITNESS WHEREOF, the Issuer, the Trustee and the Borrower have executed this Regulatory Agreement by duly authorized representatives, all as of the date first written hereinabove. HOUSING AUTHORITY OF THE CITY OF CHULA VISTA, CALIFORNIA By: Its: Executive Director [SEAL] ATTEST: Secretary STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By: Its: Authorized Officer 651685.2\24036.0006 ~ ,~,~ ,~,~ SERENA SUNBOW, LP, A CALIFORNIA LIMITED PARTNERSHIP By: PACIFIC SOUTHWEST COMMUNITY DEVELOPMENT CORPORATION, a California nonprofit public benefit corporation, General Partner By: Arlene D. Monroe, Acting Executive Director By: CIC SUNBOW SERVICE COMPANY, L.L.C., a Califomia limited liability company, Administrative General Partner By: James J. Schmid, Managing Member PROPERTY MANAGER: CHELSEA INVESTMENT CORPORATION, a California corporation By: James J. Schmid, Managing Member 6516852\24036.0006 STATE OF CALIFORNIA ) ) ss COUNTY OF ) On before me, , Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 651685.2\24036.0006 STATE OF CALIFORNIA ) ) ss COUNTY OF ) On before me, ., Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 651685.2L24036.0006 STATE OF CALIFORNIA SS COUNTY OF On before me, , Notary Public, personally appeared ., personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 651685.2\24036.0006 EXHIBIT A Project Site All that certain real property located in thc County o£ San Diego, State o£ California, described as follows: EXHIBIT B CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE The undersigned, , being duly authorized to execute this certificate on behalf of SERENA SUNBOW, LP (the "Borrower"), hereby represents and warrants that: 1. The undersigned has read and is thoroughly familiar with the provisions of the Regulatory Agreement and Declaration of Restrictive Covenants (the "Regulatory Agreement") dated as of May 1, 1999 among the Borrower, the Issuer and State Street Bank and Trust Company of California, N.A. associated with the Borrower's participation in the City of Chula Vista, California Multifamily Housing Mortgage Revenue Bonds, Series 1999A (Villa Serena Project), and Series 1999B. 2. As of the date of this certificate, the following percentages of residential units in the Project (i) are occupied by Low-Income Tenants (as such term is defined in the Regulatory Agreement) or (ii) are currently vacant and being held available for such occupancy and have been so held continuously since the date a Low-Income Tenant vacated such unit; as indicated: 1 Bedroom 2 Bedroom Total Occupied by Low-Income % Unit Nos.: Tenants: Held vacant for occupancy continuously sine last occupied by a Low-Income Tenant: % Unit Nos.: 3. The Borrower hereby certifies that the Borrower is not in default under any of the terms of the above documents and no event has occurred which, with the passage of time, would constitute an event of default thereunder, with the exception of the following [state actions being taken to remedy default]. SERENA SUNBOW, LP, A CALIFORNIA LIMITED PARTNERSHIP By: Its: General Partner By: Name: Its: 651685.2~240360006 B-1 ~. ,~ EXHIBIT C 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 Department of Housing and Urban Development ("HUD") Regulations (24 CFR 5.609). You should make certain that this form is at all times up to date with the HUD Regulations. All capitalized terms used herein shall have the meaning set forth in the Regulatory Agreement. Re: [Address of Apartment Building] 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 apartment project. Listed below are the names of all persons who intend to reside in the unit: 1 2 3 4 5 Name of Relationship to Members Head of Social Security Place of of the Household Number Age Employment Household HEAD SPOUSE 651685.2\24036.0006 C-1 ~ ' ~ ~' ~ Income Computation 6. the total anticipated income, calculated in accordance with this paragraph 6, of all persons (except children under 18 years) listed above for the 12-month period beginning the earlier of the date that I/we plan to move into a unit or sign a lease for a unit is $ Included in the total anticipated income listed above are: I. The full amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips and bonuses, and other compensation for personal services; II. The net income from the operation of a business or profession. Expenditures for business expansion or amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation of assets used in a business or profession may be deducted, based on straight line depreciation, as provided in Internal Revenue Service regulations. Any withdrawal of cash or assets from the operation of a business or profession will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the family; III. Interest, dividends, and other net income of any kind from real or personal property. Expenditures for amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation is permitted only as authorized in paragraph (6)(b) of this section. Any withdrawal of cash or assets from an investment will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested by the family. Where the family has net family assets in excess of $ , annual income shall include the greater of the actual income derived from all net family assets or a percentage of the value of such assets based on the current passbook savings rote, as determined by the Department of Housing and Urban Development; IV. The full amount of periodic amounts received from Social Security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts, including a lump-sum amount or prospective monthly amounts for the delayed start of a periodic amount except deferred periodic amounts from supplemental security income and social security benefits that are received in a lump sum amount or in prospective monthly amounts; V. Payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay; VI. Welfare assistance. If the welfare assistance payment includes an amount specifically designated for shelter and utilities that is subject to adjustment by the welfare assistance agency in accordance with the actual cost of shelter and utilities, the amount of welfare assistance income to be included as income shall consist of: A. The amount of the allowance or grant exclusive of the amount specifically designated for shelter or utilities; plus 651685.2\24036.0006 C-2 ~ '9 --~ B. The maximum amount that the welfare assistance agency could in fact allow the family for shelter and utilities. If the family's welfare assistance is ratably reduced form the standard of need by applying a percentage, the amount calculated under this paragraph shall be the amount resulting from one application of the percentage; VII. Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from organizations or from persons not residing in the dwelling; VIII. All regular pay, special pay and allowances ora member of the Armed Forces except the special pay to a family member serving in the Armed Forces who is exposed to hostile fire. Excluded from such anticipated income are: I. Income from employment of children (including foster children) under the age of 18 years; II. Payments received for the care of foster children or foster adults (usually persons with disabilities, unrelated to the tenant family, who are unable to live alone); III. Lump-sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker's compensation), capital gains and settlement for personal or property losses except payments in lieu of eamings, such as unemployment and disability compensation, worker's compensation and severance pay; IV. Amounts received by the family that are specifically for, or in reimbursement of, the cost of medical expenses for any family member; V. Income of a live-in aide, as defined by 24 CFR §5.403; VI. The full amount of student financial assistance paid directly to the student or to the educational institution; VII. The special pay to a family member serving in the Armed Forces who is exposed to hostile fire; VIII. (1) Amounts received under training programs funded by the Department of Housing and Urban Development; (2) Amounts received by a person with a disability that are disregarded for a limited time for purposes of Supplemental Security Income eligibility and benefits because they are set aside for use under a Plan to Attain Self- Sufficiency (PASS): (3) Amounts received by a participant in other publicly assisted programs which are specifically for or in reimbursement of out-of-pocket expenses incurred 651685.2\24036.0006 C-3 ~'$ ~'~ I (special equipment, clothing, transportation, child care, etc.) and which are made solely to allow participation in a specific program; (4) Amounts received under a resident service stipend. A resident service stipend is a modest amount (not to exceed $ per month) received by a resident for performing a service for the Public Housing Authority or owner, on a part- time basis, that enhances the quality of life in the development. Such services may include, but are not limited to, fire patrol, hall monitoring, lawn maintenance, and resident initiatives coordination. No resident may receive more than one such stipend during the same period of time; (5) Incremental earnings and benefits resulting to any family member from participation in qualifying State or local employment training programs (including training programs not affiliated with a local government) and training ora family member as resident management staff. Amounts excluded by this provision must be received under employment training programs with clearly defined goals and objectives, and are excluded only for the period during which the family member participates in the employment training program; IX. Temporary, nonrecurring or sporadic income (including gifts); X. Reparation payments paid by a foreign government pursuant to claims filed under the laws of that government by persons who were persecuted during the Nazi era; XI. Earnings in excess of $ for each full-time student 18 years old or older (excluding the head of household and spouse); XII. Adoption assistance payments in excess of $ per adopted child; XIII. Deferred periodic amounts from supplemental security income and social security benefits that are received in a lump sum amount or in prospective monthly amounts. XIV. Amounts received by the family in the form of refunds or rebates under State or local law for property taxes paid on the dwelling unit; XV. Amounts paid by a State agency to a family with a member who has a developmental disability and is living at home to offset the cost of services and equipment needed to keep the developmentally disabled family member at home; or XVI. Amounts specifically excluded by any other Federal statute from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under any program to which the excIusions set forth in 24 CFR §5.609(c) apply. 651685.2\24036.0006 C-4 7. 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)? __ Yes __ No; or (b) have they disposed of any assets (other than at a foreclosure or 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 $ ? Yes No (d) If the answer to (c) above is yes, state: (1) the combined total value of all such assets: $ ; (2) 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: $ , and (3) the amount of such income, if any, that was included in item 6 above: 8. (a) Are all of the individuals who propose to reside in the unit full-time students*? Yes No *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 or is an individual pursuing a full-time course of institutional on farm training under the supervision of an accredited agent of such an educational organization or of a state or political subdivision thereof. (b) If the answer to 8(a) is yes, is at least 2 of the proposed occupants of the unit a husband and wife entitled to file a joint federal income tax return? Yes No 9. 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 "Borrower"), has any family relationship to the Borrower; or owns directly or indirectly any interest in the 651685.2\24036.0006 C-5 Borrower. 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 trustee held by the individual or a family member; and ownership, direct or indirect, by a partner of the individual. 10. This certificate is made with the knowledge that it will be relied upon by the Borrower to determine maximum income for eligibility to occupy the unit; and I/we declare that all information set forth herein is tree; correct and complete and based upon information I/we deem reliable and that the statement of total anticipated income contained in paragraph 6 is reasonable and based upon such investigation as the undersigned deemed necessary. 1 1. I/we will assist the Borrower 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. 12. 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 Borrower to lease the unit and will entitle the Borrower to prevent or terminate my/our occupancy of the unit by institution of an action for ejection or other appropriate proceedings. I/we declare under penalty of perjury that the foregoing is true and correct. Executed this day of in the County of San Diego, California. Applicant Applicant [Signature of all persons (except children under the age of 18 years) listed in number 2 above required] 651685.2\240360006 C-6 ~ ,, ~ ~ FOR COMPLETION BY BORROWER ONLY: 1. Calculation of eligible income: a. Enter amount entered for entire household in 6 above: $ b. (1) If the answer to 7(c) above is yes, enter the total amount entered in 7(d)(2), subtract from that figure the amount entered in 7(d)(3) and enter the remaining balance ($_ ); (2) Multiply the amount entered in 7(d)(1) times the current passbook savings rate as determined by HUD to determine what the total annual earnings on the amount in 7(d)(1) would be if invested in passbook savings ($ ), subtract from that figure the amount entered in 7(d)(3) and enter the remaining balance ($ ); (3) Enter at right the greater of the amount calculated under (1) or (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 Low Income Tenant(s) __ Does not qualify the applicant(s) as a Low Income Tenant(s). 3. Number of apartment unit assigned: Bedroom Size: __ Rent: $ 4. This apartment unit [was/was not] last occupied for a period of 31 or more 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 Low Income Tenants. 5. Method used to verify applicant(s) income: __ Employer income verification. __ Copies of tax returns. __ Other (. ) Manager 651685.2\24036,0006 INCOME VERIFICATION (for em¢loved t~ersons) The undersigned employee has applied for a rental unit located in a project financed under the City of Chula Vista Multifamily Housing Revenue Bond Program for persons of lower 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 Other Income Total current income I hereby certify that the statements above are true and complete to the best of my knowledge. Signature Date 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 their project which has been financed under the City of Chula Vista Multifamily Housing Revenue Bond Program. Signature Date Please send to: 6516852~24036.0006 C-8 ~,~f~l~ 1NCOME 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 tree and complete to the best of my knowledge. Signature Date 651685.2\24036.0006 C-9 RECORDING REQUESTED BY: City of Chula Vista WHEN RECORDED MAIL TO: City of Chula Vista City Clerk's Office Attn: City Clerk 276 Fourth Avenue Chula Vista CA 91910 (Space above for Recorder's Use) HOUSING COOPERATION AGREEMENT THIS HOUSING COOPERATION AGREEMENT (the "Agreement") is entered into this __ day of , 1999, between the CITY OF CHULA VISTA, a municipal corporation ("City"), and Serena Sunbow, LP, a California limited partnership ("Property Owner") and/or its successors or assignees. ARTICLE 1- Recitals 1.1 Authority. City is authorized to enter into binding agreements for the purpose of protecting public health, safety, and welfare. 1.2 ProCerrv Owner. Property Owner is the legal owner of the fee title to the real property described as Lot 2 of Chula Vista Tract No. 87-8, Rancho Del Sur Phase 1, Unit 1, in the City of Chula Vista, according to map thereof No. 12060 and Lot 332 of Chula Vista Tract No. 90-07, Sunbow II, Units 1 and 2, in the City of Chula Vista, according to map thereof No. 13423. Said real property is referred to in this Agreement as "the Real Property" and as further described in the attached Exhibit "A," which is hereby incorporated herein. 1.3 Density Bonus. Property Owner has submitted to City a proposal for the development of low income senior housing on the Real Property pursuant to State Government Code Section 65915, the City's Senior Housing Development Policy and Chapters 19.04, 19.54, and 19.58 of the Chula Vista Municipal Code. The project will be known as Villa Serena Apartments. 1.4 Project. Property Owner proposes to construct 132 apartment units, with 27 units affordable to very low senior households at or below 50 percent of the Area Median Income ("AMI"), 37 units affordable to low-income senior households at or below 60 percent of AMI, and the remainder of the units (with the exception of units made available to on-site managers) affordable to low and moderate income senior households at or below 120 percent of AMI, at the northeast comer of Medical Center Drive and Medical Center Court in the City of Chula ("Project") to satisfy certain of the affordable housing obligations ofA.C.I. Sunbow, LLC, subject to the terms and conditions of this Agreement and a Regulatory Agreement and Declaration of Restrictive Covenants by and among the Housing Authority of the City of Chula Vista and State Street Bank and Trust Company of California, N.A. 1.5 State Density Bonus Law. The City is required to provide Property Owner with incentives for the production of low income housing units within the development if Property Owner agrees or 652892.3\24036.0006 1 proposes to construct certain percentages of the development for low and/or very low-income households. 1.6 Grant of Density Bonus and Additional Incentives. The City Council of the City ("City Council"), in response to Property Owner's application, approved a density bonus and additional incentives for the Real Property under Conditional Use Permit PCC 99-25. Said resolution is attached as Exhibit B and is incorporated herein. 1.7 Low/Moderate Income Housing. The City's Senior Housing Development Policy and Chapters 19.04, 19.54, and 19.58 of the Chula Vista Municipal Code provide, among other things, that when a developer of housing agrees to construct a specified percentage of the total units of a housing development for senior households of low income, as defined in Section 50093 of the California Health and Safety Code, a city shall grant a density bonus for said housing development. 1.8 Agreement. The City Council established in Resolution No. 19377 as a condition to approval of the Conditional Use Permit, a requirement that an agreement be entered into between City and Property Owner providing for (i) the density bonus and (ii) the creating and maintaining of a specified percentage of the dwelling units on the Real Property for low income senior housing. 1.9 Design Review Committee. The City's Design Review committee, on January 25, 1999, approved Property Owner's site plan, elevations and preliminary plans for the constructing and maintaining of 132 dwelling units on the Real Property. Said resolution is referred to in this Agreement as "the Design Resolution" and is attached as Exhibit C and incorporated herein. 1.10 Intent. These parties intend that this Agreement constitute the agreement referred to in Paragraph 1.7. CITY AND PROPERTY OV~NER HEREBY AGREE AS FOLLOWS: ARTICLE 2- Develooment Standard 2.1 Density Bonus. Property Owner is entitled to construct and maintain on the Real Property 132 dwelling units, a sixty-nine percent (69%) increase in density. 2.2 Other Standards. The permitted uses of the Real Property, the density of use thereof, the maximum height and size of buildings thereon, and provisions for reservations or dedication of land for public purposes and all other standards of development of the Real Property will be governed by each of the following as presently constituted ("the Development Standards"): 2.2.1 General Plan: "Residential Medium" designation in City's General Plan. 2.2.2 Zone Reeulations: The regulations for Planned Community. 2.2.3 Design Resolution: The Design Resolution and any exhibits referred to therein. 2.2.4 Density: The provisions of Paragraph 2.1. 2.2.5 Parkine: Property Owner shall provide one parking space per dwelling unit and fourteen (14) guest parking spaces, a reduction from the 1.5 parking space per one-bedroom and 2 parking space requirement for each two-bedroom unit as specified in Section 19.62.050 of the City of Chula Vista Municipal Code. 652892.3\24036.0006 2.2.6 Open Space: Property Owner shall provide 350 square feet per unit of common usable open space, a reduction from the 400 square feet of open space per dwelling unit requirement for multi-family projects as specified in Section 19.28 of the City of Chula Vista Municipal Code. 2.3 Low and Moderate Income Housing. All 132 dwelling units shall be continuously occupied only by and affordable to senior households of very low, low or low and moderate income as set forth in Article 3. 2.4 Conflict. In the event of conflict between Paragraph 2.I and any other of the Development Standards, Paragraph 2.1 will prevail. 2.5 Effect of Termination Pursuant to Article 3. Termination pursuant to Paragraph 3.6 will not affect, or render inapplicable, the foregoing Development Standards. ARTICLE 3- Low Income Senior Housin[, 3.1 Definitions. For the purposes of this article, the following definitions apply: 3.1.1 "Density Bonus" means a density increase of at least 25 percent over the otherwise maximum allowable residential density under the applicable zoning ordinance and land use element of the general plan. 3.1.2 "Additional Incentives" means a reduction or modification of Development Standards, Zoning Codes or Architectural Design requirements, permitting mixed use zoning within a housing development, or other regulatory incentives or concessions. 3.1.3 "Senior Household" means a household at least one member of which is 62 years or age or older per §51.3 of the California Civil Code. 3.1.4 "Coordinator" means the Housing Coordinator of City. 3.1.5 "Area Median Income" means the latest median income from time to time determined by the United States Department of Housing and Urban Development (pursuant to Section 8 of the United States Housing Act of 1937) for the San Diego Standard Metropolitan Statistical Area. 3.1.6 "Low Income Tenants" means individuals or families with an income which does not exceed 60 percent of the Area Median Income, as adjusted for household size and as most recently determined by the U.S. Department of Housing and Urban Development. 3.17 "Low and Moderate Income Tenants" means families with an income which does not exceed 120 percent of the Area Median Income, as adjusted for household size and as most recently determined by the U.S. Department of Housing and Urban Development. 3.1.8 "Very Low Income Tenants" means individuals or families with an income which does not exceed 50 percent of the Area Median Income, as adjusted for household size and as most recently determined by the U.S. Department of Housing and Urban Development. 3.1.9 "1 BR Very Low Income Apartment" means any of the twenty-two (22) one-bedroom apartment units on the Real Property, which shall be continuously occupied only by and affordable to a Very Low Income Tenant which is a Senior Household. 652892.3\24036.0006 3 3.1.10 "2 BR Very Low Income Apartment" means any of the five (5) two-bedroom apartment units on the Real Property, which shall be continuously occupied by only and aftbrdable to a Very Low Income Tenant which is a Senior Household. 3.1.11 "1 BR Low Income Apartment" means any of the thirty-two (32) one-bedroom apartment units on the Real Property, which shall be continuously occupied only by and aftbrdable to a Low Income Tenant which is a Senior Household. 3.1.12 "2 BR Low Income Apartment" means any of the five (5) two-bedroom apartment units on the Real Property, which shall be continuously occupied only by and affordable to a Low Income Tenant which is a Senior Household. 3.1.13 "1 BR Los and Moderate Income Apartment" means any of the fifty-eight (58) one- bedroom apartment units on the Real Property, which shall continuously be occupied only by and affordable to a Low and Moderate Income Tenant which is a Senior Household. 3.1.14 "2 BR Low and Moderate Income Apartment" means any of the ten (10) two-bedroom apartment units on the Real Property, which shall continuously be occupied only by and affbrdable to a Low and Moderate Income Tenant which is a Senior Household. 3.1.15 "Affordable Apartment" means any one of the apartments defined in Paragraph 3.1.9 through 3.1.14; "Affordable Apartments" means all of such apartments collectively. 3.1.16 "Manager's Unit" means that unit on the real property occupied by a resident property manager which may be exempt from occupancy restrictions. 3.1.17 "Rent" means the total of monthly payments for all of the following: (a) use and occupancy of the apartment unit and land and facilities associated therewith, (b) any separately charged fees or service charges assessed by the lessor which are required of all tenants, other than security deposits, and (c) a reasonable allowance for utilities not included in the above costs, excluding telephone service, which takes into consideration an adequate level of service. 3.2 Oualiflcation of Tenants. As to the Affordable Apartments, the following will apply: 3.2.1 1 BR Very Low Income Apartments. Each 1 BR Very Low Income Apartment will be leased to a Senior Household of one or two persons which is a Very Low Income Tenant. 3.2.2 2 BR Very Low Income Apartments. Each 2 BR Very Low Income Apartment will be leased to a Senior Household of two to four persons which is a Very Low Income Tenant. 3.2.3 1 BR Low Income Apartments. Each 1 BR Low Income Apartment will be leased to a Senior Household of one or two persons which is a Low Income Tenant. 3.2.4 2 BR Very Low Income Apartments. Each 2 BR Low Income Apartment will be Ieased to a Senior Household of two to four persons which is a Low Income Tenant. 3.2.5 1 BR Low and Moderate Income Apartments. Each 1 BR Low and Moderate Income Apartment will be leased to a Senior Household of one or two persons which is a Low and Moderate Income Tenant. 652892.3\24036.0006 4 E~q 3.2.6 2 BR Low and Moderate Income Apartments. Each 2 BR Low and Moderate Income Apartment will be leased to a Senior Household of two to four persons which is a Low and Moderate Income Tenant. 3.3 Monthly Rent. As to the Affordable Apartments, the following will apply: 3.3.1 Very Low Income Apartments. The monthly rent charged for all the Very Low Income Apartments shall not exceed one-twelfth of the amount obtained by multiplying 30 percent times 50 percent of the Area Median Income, as adjusted for household size and assuming the following unit sizes and household sizes: Unit Size Household Size One Bedroom Two Persons Two Bedroom Three Persons 3.3.2 Low Income Apartments. The monthly rent charged for all the Low Income Apartments shall not exceed one-twelfth of the amount obtained by multiplying 30 percent times 60 percent of the Area Median Income, as adjusted for household size and assuming the following unit sizes and household sizes: Unit Size Household Size One Bedroom Two Persons Two Bedroom Three Persons 3.3.3 Low and Moderate Income Apartments. The monthly rent charged for all the Low and Moderate Income Apartments shall not exceed one-twelfth of the amount obtained by multiplying 30 percent times 110 percent of the Area Median Income, as adjusted for household size and assuming the following unit sizes and household sizes: Unit Size Household Size One Bedroom Two Persons Two Bedroom Three Persons 3.4 Proof of Qualification. Property Owner will obtain from each person(s) to whom Property Owner rents an Affordable Apartment a "Supplemental Rental Application" ("the Application ") in the form of Exhibit D attached hereto and incorporated herein (or such other form as City may from time to time adopt and of which City notifies Property Owner in writing). Property Owner will be entitled to rely on the Application and the supporting documents thereto in determining the eligibility of such person(s) to rent such Affordable Apartment. Property Owner will retain the Application and supporting documents for a period of at least three years after the applicant thereof ceases to occupy such Affordable Apartment. Copies of the most recent Supplemental Rental Application for Very Low and Low Income Tenants commencing or continuing occupancy of an Affordable Apartment shall be attached to the semi-annual report to be filed with the City in compliance with Section 3.6 of this Agreement. An Affordable Apartment occupied by a qualified tenant who at the commencement of the occupancy qualifies as a very low income or low income senior household shall be treated as occupied by a Very Low or Low Income Tenant until a recertification of such tenant's income in accordance with Section 3.4.1 below demonstrates that such tenant no longer qualifies as a Very Low or Low Income Tenant. 652892.3\24036.0006 3.4.1 Recertification of Income. Immediately prior to the first anniversary date of the occupancy of an Affordable Apartment by a qualified tenant, and on each anniversary date thereafter, the Property Owner shall recertify the income of the occupants of each Affordable Apartment by obtaining a completed Supplemental Rental Application based upon the current income of each occupant of the Affordable Apartment. In the event the recertification demonstrates that such household's income exceeds the income at which such household would qualify, such household will no longer qualify as a Very Low Income Tenant, Low Income Tenant or Low and Moderate Income Tenant, and the Property Owner will rent the next available unit of comparable or smaller size to one or more Very Low Income Tenant, Low Income Tenants or Low and Moderate Income Tenants. 3.5 Waiver. Property Owner may apply in writing to the Coordinator for a waiver, as to a specifically designated Affordable Apartment. Each such application will be accompanied by written data or other evidence relied upon by Property Owner to show that, for the near future, there will be no reasonable demand for such Affordable Apartments(s). Within 30 days after receipt of any such application, the Coordinator will, in writing, either grant or disapprove the requested waiver; the failure of the Coordinator to act within said period will be deemed to be approval of such requested waiver. If such waiver is granted, Properly Owner may lease the Affordable Apartment(s) affected by the granted waiver to such person(s) and at such rental as Property Owner determines, subject to each of the following: 3.5.1 Month-to-Month Tenancy. Anything in Paragraph 3.5 to the contrary notwithstanding, the lease or rental agreement will create only a month-to-month tenancy. 3.5.2 Termination of Waiver. At any time after granting any such waiver, the Coordinator may, by writing delivered to Property Owner, terminate such grant. Within five days after such delivery, Property Owner will appropriately notify the tenant (s) and occupant (s) (of the Affordable Apartment (s) for which the grant of waiver has been terminated) that the month-to- month tenancy thereof will be and become terminated one month after delivery of such notification by Property Owner. Property Owner will take reasonable steps to effectuate such termination, including diligent commencement and prosecution of an unlawful detainer action. 3.6 Records. Audits. Property Owner will submit to City semi-annual certified rent rolls, disclosing with respect to each Affordable Apartment (i) monthly rent rate, (ii) number of occupants for which the Affordable Apartment is rented, and (iii) the income of such occupant(s) and in the form of Exhibit E attached hereto and incorporated herein (or such other form as City may from time to time adopt and of which City notifies Property Owner in writing). If City determines an audit is necessary to verify a submitted rent roll, it will so notify Property Owner in writing thereof. Within ten days after delivery of said notice, Property Owner will deliver to City the names of three certified public accountants doing business in the metropolitan San Diego area. City will promptly deliver to Property Owner the former's approval of one or more of said names. The audit will be completed by an approved certified public accountant, at Property Owner's cost, within 60 days after the delivery to Property Owner of City's said approval. The certified public accountant will promptly deliver a copy of the written audit to City. 3.7 Term. The term during which this Article 3 applies commences on the date hereof. Said term ends on the date which is fifty-two (52) years after the date on which at least sixty-six (66) of the dwelling units on the Real Property are first occupied. ARTICLE 4 - Breach 4.1 Breach by City. If City breaches any of its covenants contained in this Agreement, Property Owner will have available to it all legal and equitable remedies aftbrded by the laws of the State of California. 652892.3\24036.0006 6 4.2 Breach by Property Owner. If, with respect to any Affordable Apartment, Property Owner breaches this Agreement by charging higher rent than that herein permitted, Property Owner will, immediately upon City's demand, (i) reduce the rent to that permitted herein and (ii) refund to any tenants who theretofore paid such higher rent the amount of the excess, together with interest hereon at the rate of 10 percent per annum, computed from the date(s) of payment of the excess by said tenants to the date of said refund. The provisions of this paragraph constitute a third-party beneficiary contract in favor of such tenants. Further, City is hereby granted the power (but not the duty) to act as attorney-in- fact of such tenants in enforcing this paragraph. 4.3 Breach bv Property Owner. If, with respect to any Affordable Apartment, Property Owner breaches this Agreement by leasing to tenants who are not, pursuant to paragraph 3.2, qualified, Property Owner will, immediately upon City's written demand, and at Property Owner's sole cost, take all lawful steps to terminate such leasing. 4.4 Remedies Not Exclusive. The remedies set forth in Paragraphs 4.2 and 4.3 are not exclusive, but are in addition to all legal or equitable remedies otherwise available to City. 4.5 Redevelopment A~enc¥ Powers to Enforce Agreement. The Redevelopment Agency of the City of Chula Vista is hereby made a third party beneficiary of this Agreement, and shall be entitled to enforce Property Owner's obligations under this Agreement in the same manner as the City. ARTICLE 5 - General Provisions 5.1 Assignment. The rights and obligations of Property Owner under this Agreement may be transferred or assigned, provided such transfer or assignment is made as a part of the conveyance of the fee of all or a portion of the Real Property. Any such transfer or assignment will be subject to the provisions of this Agreement. During the term of this Agreement, any such assignee or transferee will observe and perform all of the duties and obligations of Property Owner contained in this Agreement as such duties and obligations pertain to the portion of said real property so conveyed. 5.2 Amendment or Cancellation of Agreement. This Agreement may be amended from time-to-time or cancelled by the mutual consent of the parties hereto but only in the same manner as its adoption. The term "this Agreement" includes any such amendment properly approved and executed. 5.3 Enforcement. Unless amended or cancelled as provided in Section 5.2, this Agreement is enforceable by any party to it despite a change in the applicable general or specific plans, zoning, subdivision or building regulations adopted by City which alter or amend the rules, regulations or policies governing permitted uses of the land, density and design. 5.4 Hold Harmless. Property Owner shall defend, indemnify, protect and hold harmless the City, its elected and appointed officers and employees, from and against all claims for damages, liability, cost and expense (including without limitation attorneys' fees) for personal injury or property damage arising out of the direct or indirect conduct or operations of the Property Owner, or any agent or employee, subcontractors, or others in connection with the execution of this Agreement, except only for those claims arising from the sole negligence or sole willful misconduct of the City, its officers, or employees. Property Owner's indemnification shall include any and all costs, expenses, attorneys' fees and liability ' incurred by the City, its officers, agents or employees in defending against such claims, whether the same proceed to judgement or not. Property Owner agrees to indemnify, defend, protect and hold harmless the City, its officers, and employees from and against any and all claims, suits, actions, or other proceedings to which the City is exposed resulting from the City's preparations, review, approval, or granting of the Density Bonus as called for in this Agreement. Further, Property Owner, at its own 652892.3\24036.0006 7 ~'""~ 4-- ~ expense shall, upon written request by the City, defend any such suit or action brought against the City, its officers, agents or employees. Property Owner's indemnification of City shall not be limited by any prior or subsequent declaration by the Property Owner. 5.5 Anti-Discrimination. Property Owner, for itself and its successors and assigns, agrees that during the term of this Agreement, will not, with respect to its operation of the Project, discriminate against any person because of race, color, creed, religion, sex, sexual orientation, marital status, age, handicaps, ancestr7 or national origin. 5.6 Binding Effect of Agreement. The burdens of this Agreement bind and the benefits of the Agreement inure to the parties' successors or assignees in interest. 5.7 Relationship of Parties. It is understood that the contractual relationship between City and Property Owner is such that Property Owner is an independent contractor and not an agent of City. 5.8 Notices. All notices, demands or requests provided for or permitted to be given pursuant to this Agreement must be in writing. All notices, demands or requests to be sent to any party shall be deemed to have been properly given or served if personally served or deposited in the United States mail, addressed to such party, postage prepaid, registered or certified, with return receipt requested, at the addresses identified herein as the places of business for each of the designated parties. City: City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Community Development Director Property Owner: Chelsea Investment Corporation 215 South Hwy 101 Suite 200 Solana Beach CA 92075 Attn: Serena Sunbow, LP A party may change its address by giving notice in writing to the other party. Thereafter, notices, demands and requests shall be addressed and transmitted to the new address. ARTICLE 6- Conflicts of Law 6.1 Conflict of City and State or Federal Laws. In the event that state or federal laws or regulations enacted after this Agreement has been entered into prevent or preclude compliance with one or more provisions of this Agreement require changes in plans, maps or permits approved by the City, the parties will: 6.1.1 Notice and Copies: Provide the other party with written notice of such state or federal restriction, provide a copy of such regulation or policy and statement of conflict with the provisions of this Agreement. 6.1.2 Modification Conferences: The parties will, within 30 days, meet and confer in good faith in a reasonable attempt to modify this Agreement to comply with such federal or state law or regulation. 652892.3\24036.0006 8 ~--~ ~" ~"~' ~ 6.2 Council Hearines. Thereafter, regardless of whether the parties reach an agreement on the effect of such federal or state law or regulation upon this Agreement, the matter will be scheduled for hearing before the City Council. Ten days' written notice of such hearing will be given, pursuant to Government Code Section 65091 and 65094. The City Council, at such hearing, will determine the exact modification or suspension which shall be necessitated by such federal or state law or regulation. Property Owner, at the hearing, will have the right to offer oral and written testimony. Any modification or suspension will be taken by the affirmative vote of not less than a majority of the authorized voting members of the City Council. 6.3 Cooperation in Securin~ Permits. The City shall cooperate with the Property Owner in the securing of any permits which may be required as a result of such modifications or suspensions. ARTICLE 7 - Annual Review 7.1 City and Land Owner Responsibilities. City will, at least every 12 months during the term of this Agreement, review the extent of good faith substantial compliance by Property Owner with the terms of this Agreement. Pursuant to Government Code Section 65865.1, Property Owner will have the duty to demonstrate its good faith compliance with the terms of this Agreement at such periodic review. Property Owner will be deemed to have satisfied its duty of demonstration when it presents evidence on its good faith and substantial compliance with the major provisions of Article 3 of this Agreement. Either party may address any requirement of this Agreement during the review. However, ten days' written notice of any requirement to be addressed will be made by the requesting party. If at the time of review an issue not previously identified in writing is required to be addressed, the review at the request of either party will be continued to afford sufficient time for analysis and preparation. 7.2 O~ortunity to be Heard. Upon written request to City by Property Owner, the Property Owner will be permitted an opportunity to be heard orally and/or in writing at a noticed public hearing regarding its performance under this Agreement. 7.3 Information to be Provided Property Owner. The City will, to such an extent as is practical, deposit in the mail to Property Owner a copy of staff reports and related exhibits concerning contract performance a minimum of ten calendar days prior to an such review or action upon this Agreement by the Planning Commission or the City Council. ARTICLE 8 - Miscellaneous Provisions 8.1 Rules of Construction. The singular includes the plural and the neuter gender includes the masculine and the feminine. 8.2 Severability. The parties hereto agree that the provisions are severable. If any provision of this Agreement is held invalid, the remainder of this Agreement will be effective and will remain in full force and effect unless amended or modified by mutual consent of the parties. 8.3 Entire Aereement, Waivers and Amendments; Regulatory Agreement to Control. Except for the Regulatory Agreement, this Agreement, together with any other written document referred to or contemplated herein, embody the entire Agreement and understanding between the parties relating to the subject matter hereof. Notwithstanding any provision in this Agreement to the contrary, so long as the Regulatory Agreement is in effect, the terms of the Regulatory Agreement shall control with respect to the Very Low Income Apartments. Neither this Agreement nor any provision hereof may be amended, modified, waived, or discharged except by an instrument in writing executed by the party against which enforcement or such amendment, waiver, or discharge is sought. 652892.3\24036.0006 9 ~ "4" ~ 8.4 Capacities of Parties. Each signatory and party hereto hereby warrants and represents to the other party that it has legal authority and capacity and direction from its principal to enter into this Agreement, and that all resolutions or other actions have been taken so as to enable it to enter into this Agreement. 8.5 Govemine Law/Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Any action arising under or relating to this Agreement shall be brought only in the Federal or State courts located in San Diego County, State of California, and if applicable, the City of Chula Vista, or as close thereto as possible. Venue for this Agreement, and performance hereunder, shall be the City of Chula Vista. [NEXT PAGE IS SIGNATURE PAGE] 652892.3\24036.0006 IN WITNESS WItEREOF the parties hereto have caused this agreement to be executed as of the day and year first written above. SERENA SUNBOW, LP, A CALIFORNIA LIMITED PARTNERSHIP By: PACIFIC SOUTHWEST COMMUNITY DEVELOPMENT CORPORATION, a California nonprofit public benefit corporation, General Partner By: Arlene D. Monroe, Acting Executive Director By: CIC SUNBOW SERVICE COMPANY, L.L.C., a California limited liability company, General Partner By: James J. Schmid, Managing Member CHELSEA INVESTMENT CORPORATION SUNBOW SERVICES COMPANY, a California limited liability corporation, CITY OF CHULA VISTA, a municipal corporation of the State of California Shirley Horton, Mayor ATTEST: Susan Bigelow, City Clerk 652892.3\24036.0006 ll ~' '--q '-/ / APPROVED AS TO FORM: John M. Kaheny, City Attorney 8§2802.3\24036.0006 12 1~"--4'[~''' STATE OF CALIFORNIA ) ) ss COUNTY OF SAN DIEGO ) On before me, , Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 652892.3~24036.0006 ~ -- 4 -- ~3 STATE OF CALIFORNIA ) ) ss COUNTY OF SAN DIEGO ) On before me, , Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 652892.3\24036.0006 14 EXHIBIT A LEGAL PROPERTY DESCRIPTION Lot 2 of Chula Vista Tract No. 87-8, Rancho Del Sur Phase 1, Unit 1, in the City of Chula Vista, according to map thereof No. 12060 and Lot 332 of Chula Vista Tract No. 90-07, Sunbow II, Units I and 2, in the City of Chula Vista, according to map thereof No. 13423. 652892.3~24036.0006 652892.3\24036.0006 ~ EXHIBIT B RESOLUTION NO. 19377 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA GRANTING A CONDITIONAL USE PERMIT, PCC 99-25, FOR A ONE HUNDRED THIRTY-TWO UNIT AFFORDABLE SENIOR APARTMENT COMPLEX AT THE NORTHEAST CORNER OF MEDICAL CENTER DRIVE AND MEDICAL CENTER COURT WITHIN THE SUNBOW II PLANNED COMMUNITY; AND ALLOW A SIXTY-NINE PERCENT DENSITY BONUS INCREASE PURSUANT TO CALIFORNIA GOVERNMENT CODE SECTION 65915, CHELSEA INVESTMENT CORPORATION. I. RECITALS A. Project Site WHEREAS, the parcel which is the subject matter of this resolution is diagrammatically represented in Exhibit "A," attached hereto and incorporated herein by this reference, and for the purpose of general description herein, consists of a 4.14 acre elongated and relatively level site located at the northeast corner of Medical Center Drive and Medical Center Court ("Project Site"); and B. Project; Application for Discretionary Approval WHEREAS, on November 19, 1998, a duly verified application for a Conditional Use Permit (PCC 99-25) and a sixty-nine percent (fifty-four dwelling units) density bonus increase and other incentives/concessions with respect to the Project Site was filed by Chelsea Investment Corporation ("Developer"); and WHEREAS, Developer requests permission to construct a one hundred thirty- two unit affordable senior apartment complex including associated parking and open space/recreational amenities. The proposal includes a request to reduce the required number of parking spaces from two hundred-eight to one hundred forty-six and the open space requirement from four hundred to three hundred- fifty square feet per unit; and C. Prior Discretionary Approvals Whereas the development of the Project Site has been the subject matter of 1 ) A General Development Plan, Sunbow II General Development Plan (GDP) previously approved by City Council Resolution 15427 ("GDP"); 2) Sectional Planning Area (SPA) Plan, Sunbow II Sectional Planning Area Plan previously adopted by City Council Resolution No. 15524 ("SPA"); 3) Sunbow II Public Facilities Financing Plan ("PFFP"), Sunbow II Design Guidelines all previously approved by City Council on February 20, 1990, by resolution No.15524 4) Sunbow II Air Quality Improvement Plan and Sunbow II Water Conservation Plan Phase lA adopted by City Council Resolution 15524; 5) Sunbow Il Planned Community District Regulations adopted By City Council Ordinance No.2346; 6) Master Tentative Map, Chula Vista Tract 90-07 approved by City Council Resolution No. 15640 and extended one year by Resolution 17177; and Resolution 19377 Page 2 D. Environmental Determination WHEREAS, in accordance with the requirements of CEQA, the Environmental Review Coordinator has determined that the Project requires the preparation of an Initial Study, such study (IS 99-13) was prepared, and based on such study a Negative Declaration was prepared and circulated for public review. E. Planning Commission Record on CUP Application WHEREAS, the Planning Commission held an advertised public hearing on the Project on February 3, 1999, and voted 5-1-0 to adopt Resolution No. PCC 99- 25 recommending that the City Council adopt Negative Declaration IS-99-13, approve Conditional Use Permit PCC 99-25 based on the findings and subject to the conditions contained therein; and grant a sixty-nine percent density increase (54 units above the maximum permitted density) pursuant to California Government Code Section 65195B, Density Bonuses and Other Incentives; and WHEREAS, the Planning Commission concurred with the Design Review Committee to allow a further reduction in parking spaces as long as a minimum of seven guest parking spaces be provided on-site and that none of these seven guest spaces be restricted for disabled use only; and WHEREAS, from the facts presented to the Planning Commission, the Commission has determined that the Project is consistent with the City of Chula Vista General Plan and that the public necessity, convenience and general welfare and good zoning practice support the Project, and implements portions of State related density bonus and that the granting of said density bonus and reductions in parking and open space requirements does not adversely affect the order, amenity, or stability of adjacent land uses; and F. City Council Record of Application WHEREAS, a duly called and noticed public hearing on the Project was held before the City Council of the City of Chula Vista on February 16, to receive the recommendation of the RCC, Planning Commission and Design Review Committee, and to hear public testimony with regard to the same; and WHEREAS, the City Council of the City of Chula Vista considered the recommendation of the Planning Commission regarding the density bonus and additional incentives/concessions on February 16, 1999. NOW, THEREFORE BE IT RESOLVED that the City Council does hereby find, determine and resolve as follows: II. PLANNING COMMISSION RECORD The proceedings and all evidence on the Project introduced before the Planning Commission at their public hearing on this Project held on February 3, 1999, and the minutes and resolution resulting therefrom, are hereby incorporated into the record of this proceeding. Resolution 19377 Page 3 III. CERTIFICATION OF COMPLIANCE WiTH CEQA The City Council does hereby find that the Negative Declaration on IS 99-13 has been prepared in accordance with requirements of the California Environmental Quality Act, the State EIR guidelines and the Environmental Review Procedures of the City of Chula Vista. IV. INDEPENDENT JUDGEMENT OF THE CITY OF CHULA VISTA CITY COUNCIL The City Council finds that the Negative Declaration on IS 99-13 reflects the independent judgement of the City of Chula Vista City Council. V. FINDINGS FOR GRANTING OF DENSITY BONUS The City Council hereby finds that the Project is consistent with the City of Chula Vista General Plan and that the public necessity, convenience and general welfare and good zoning practice support the Project, and implements portions of State related density bonus and that the granting of said density bonus and reductions in parking and open space requirements does not adversely affect the order, amenity, or stability of adjacent land uses. Vi. CONDITIONAL USE PERMIT FINDINGS The City Council of the City of Chula Vista does hereby make the findings required by the City's rules and regulations for the issuance of conditional use permits, as hereinbelow set forth, and sets forth, thereunder, the evidentiary basis, in addition to all other evidence in the record, that permits the stated findings to be made. A. That the proposed use at the location is necessary or desirable to provide a service or facility which will contribute to the general well being of the neighborhood or the community. The proposed project is desirable at this location in that the site provides immediate access to public transportation and is within walking distance of the Sharp Chula Vista Medical Center. A neighborhood commercial center is proposed for a location just south of the site. There are no other senior rental housing developments within the newly developed areas of eastern Chula Vista. In addition, the project will satisfy Sunbow II's Iow income housing requirement. B. That such use will not under the circumstances of the particular case, be detrimental to the health, safety or general welfare of persons residing or working in the vicinity or injurious to property or improvements in the vicinity. The proposed Project is compatible with surrounding residential and institutional land uses and adequate infrastructure is in place. The project is oriented toward Medical Center Drive in order to allow easy ingress/egress to the site, and convenient access to public transportation. Resolution 19377 Page 4 C. That the proposed use will comply with the regulations and conditions specified " in the code for such use. The applicant has requested a reduction in the required number of parking spaces from two hundred-eight to one hundred forty-six (Chula Vista Municipal Code Section 19.62.O50 ) and open space acreage requirement from 400 to 350 sq. Ft. per dwelling unit (Chula Vista Municipal Code Section 19.28.090). Based on previously approved senior housing project parking requirements in the City of Chula Vista and other neighboring jurisdiction, as well as the Project Site's close proximity to public transportation, health care facilities and future neighborhood parks and commercial center within the Sunbow Planned Community, the proposed parking ratio of one space per dwelling unit plus fourteen additional parking spaces for guests is consistent with established standards for this type of residential projects. A further reduction of approximately seven spaces is appropriate in exchange for providing additional pedestrian linkages between village areas and will not negatively affect the amount of overall parking needed to accommodate the project. The proposed senior housing apartment complex features common recreational facilities designed for the intended residents and open lawn areas for outdoor activities. Based on the proposed amenities and the intended residents, the proposed open space is adequate. D. That the granting of this conditional use permit will not adversely affect the General Plan of the City or the adopted plan of any government agency. The Project is in substantial conformance with the Housing Element of the City of Chula Vista General Plan, which supports a wide variety of residential products including senior housing and requires a minimum of ten percent of the total number of dwelling units in subdivisions with more than fifty dwelling units be affordable. The Project will also satisfy the affordable housing requirement prescribed in the Sunbow II affordable Housing Program and Agreement. BE IT FURTHER RESOLVED THAT THE CITY COUNCIL DOES HEREBY APPROVE THE PROJECT SUBJECT TO THE CONDITIONS SET FORTH BELOW: VII. TERMS OF GRANT OF PERMIT OF CONDITIONAL USE PERMIT The City Council hereby grants Conditional Use Permit PCC-99-25 subject to the following conditions whereby the Applicant Shall: A. Ensure that the proposal complies with the use outlined in the application and material submitted therewith except as modified below: 1. Comply with all conditions of Resolution DRC 99-29 dated January 25, 1999. 2. Comply with all requirements of the Engineering Department including the following: Resolution 19377 Page 5 a. Prior to issuance of building permits, applicant shall pay all applicable sewer connection, development impact, and traffic signal fees. b. Construct two driveway approaches per City of Chula Vista standards as shown on the proposed site plan. Prior to said construction, applicant shall obtain a construction permit from the Public Works Department. c. Obtain a grading permit. d. Vehicular turning movement shall be restricted to right turn in and right turn out only at new driveways along Medical Center Drive due to an existing raised concrete median. e. Prior to occupancy, applicant shall submit and receive approval for a lot consolidation for this project. 3. Comply with all requirements of the Chula Vista Fire Department including the following: a. Hammer head turn-around shall be 90' x 25' x 25' b. Fire Alarm systems are required for all buildings c. Class I Standpipe system required in three story building. d. Fire hydrant required at each driveway entrance. B. Any change to the operational profile or expansion of the use shall require approval by the City Council and may result in additional conditions of approval and/or mitigation measures. C. Construct the Project as submitted to and approved by the City Council, except as modified herein and/or as required by the Municipal Code, and as detailed in the project description. D. Comply with all federal, state and local laws, regulations, permits, City ordinances, standards, and policies except as otherwise provided in this Resolution. E. Approval of this Conditional Use Permit is contingent upon granting approval of the requested sixty-nine percent density bonus. F. This special use permit shall become void and ineffective if not utilized or extended within one year from the effective date thereof, in accordance with Section 19.14.260 of the Municipal Code. G. This permit shall be subject to any and all new, modified or deleted conditions imposed after approval of this permit to advance a legitimate governmental Resolution 19377 Page 6 interest related to health, safety, or welfare which the City shall impose after advance written notice to the Permittee and after the City has given to the Permittee the right to be heard with regard thereto. However, the City, in exercising this reserved right/condition, may not impose a substantial expense or deprive Permittee of a substantial revenue sources which the Permittee cannot, in the normal operation of the use permitted, be expected to economically recover. H. The developer agrees to meet and confer and to enter into a density bonus agreement with the City. VIII. CITY COUNCIL APPROVAL OF DENSITY BONUS The C ty Council hereby grants the requested increase in density of sixty-nine percent to allow the construction of a maximum of one-hundred thirty two dwelling units for the residential project located at the north east corner of Medical Center Drive and Medical Center Court in the City of Chula Vista. The City Council further approves the following incentives to the Applicant in order to balance the financial feasibility of the affordable housing project with the usual amenities found in a development of this type consistent with the Conditional Use Permit, PCC 99-25, for the Project: 1. The City implemented alternative parking standards of one parking space for each dwelling unit, with ten percent guest parking provided on-site for this project and fourteen percent of the total parking spaces provided at compact size; and 2. The City allowed a reduction in open space requirements from four-hundred square feet per unit to three hundred-fifty square feet per unit. IX. EXECUTION AND RECORDATION OF RESOLUTION OF APPROVAL Applicant shall execute the Agreement, a copy of which is on file in the office of the City Clerk, indicating the Applicant has read, understands and agrees to the conditions of approval contained herein, and will implement same. X. INDEMNIFICATION/HOLD HARMLESS Applicant/operator shall and does hereby agree to indemnify, protect, defend and hold harmless City, its Council members, officers, employees, agents and representatives, from and against any and all liabilities, losses, damages, demands, claims and costs, including court costs and attorneys' fees (collectively, "liabilities") incurred by the City arising, directly or indirectly, from (a) City's approval and issuance of this Conditional Use Permit, (b) City's approval or issuance of any other permit or action, whether discretionary or non-discretionary, in connection with the use contemplated herein, and (c) Applicant's installation and operation of the facility permitted hereby. Applicant/operator shall acknowledge their agreement to this provision by executing the Agreement of this Conditional Use Permit where indicated. Applicant's/operator's compliance with this provision is an express condition of this Conditional Use Permit and this provision shall be binding on any and all Applicant's/operator's successors and assigns. K "' ~"~' ~,~ Resolution 19377 Page 7 XI. NOTICE' OF DETERMINATION The City Council directs the Environmental Review Coordinator to post a Notice of Determination and file the same with the City Clerk. Xll. INVALIDITY; AUTOMATIC REVOCATION It is the intention of the Redevelopment Agency that its adoption of this Resolution is dependent upon the enforceability of each and every term, provision and condition herein stated; and that in the event that any one or more terms, provisions or conditions are determined by a Court of competent jurisdiction to be invalid, illegal or unenforceable, this resolution and the permit shall be deemed to be automatically revoked and of no further force.and effect ab initio. Presented by Approved as to form by Robert Leiter y~o.~_ n M. Kaheny y ) Planning and Buil~Jing Director /'/~ity Attorney ~ Resolution 19377 Page 8 EXHIBIT A Resolution 19377 Page 9 PASSED, APPROVED, and ADOPTED by the City Council of the City of Chula Vista, California, this 16'h day of February, 1999, by the following vote: AYES: Councilmembers: Davis, Moot, Padilla, Salas and Horton NAYS: Councilmembers: None ABSENT: Councilmembers: None ABSTAIN: Councilmembers: None Shirley Hortr~, Mayor ATTEST: Susan Bigelow, City ClErk STATE OF CALIFORNIA ) COUNTY OF SAN DIEGO ) CITY OF CHULA VISTA ) I, Susan Bigelow, City Clerk of Chula Vista, California, do hereby certify that the foregoing Resolution No. 19377 was duly passed, approved, and adopted by the City Council at a regular meeting of the Chula Vista City Council held on the 16,h day of February, 1999. Executed this 16'h day of February, 1999. Susan Bigelow, City Clerk EXItIBIT B City Council Resolution No. 19377 (Conditional Use Permit and Density Bonus) 652892.3~24036.0006652892.3\240360006 ~ ~'1'~ RESOLUTION NO. 19377 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA GRANTING A CONDITIONAL USE PERMIT, PCC 99-25, FOR A ONE HUNDRED THIRTY-TWO UNIT AFFORDABLE SENIOR APARTMENT COMPLEX AT THE NORTHEAST CORNER OF MEDICAL CENTER DRIVE AND MEDICAL CENTER COURT WITHIN THE SUNBOW II PLANNED COMMUNITY; AND ALLOW A SIXTY-NINE PERCENT DENSITY BONUS INCREASE PURSUANT TO CALIFORNIA GOVERNMENT CODE SECTION 65915, CHELSEA INVESTMENT CORPORATION. I. RECITALS A. Project Site WHEREAS, the parcel which is the subject matter of this resolution is diagrammatically represented in Exhibit "A," attached hereto and incorporated herein by this reference, and for the purpose of general description herein, consists of a 4.14 acre elongated and relatively level site located at the northeast corner of Medical Center Drive and Medical Center Court ("Project Site"); and B. Project; Application for Discretionary Approval WHEREAS, on November 19, 1998, a duly verified application for a Conditional Use Permit (PCC 99-25) and a sixty-nine percent (fifty-four dwelling units) density bonus increase and other incentives/concessions with respect to the Project Site was filed by Chelsea Investment Corporation ("Developer"); and WHEREAS, Developer requests permission to construct a one hundred thirty- two unit affordable senior apartment complex including associated parking and open space/recreational amenities. The proposal includes a request to reduce the required number of parking spaces from two hundred-eight to one hundred forty-six and the open space requirement from four hundred to three hundred- fifty square feet per unit; and C. Prior Discretionary Approvals Whereas the development of the Project Site has been the subject matter of 1 ) A General Development Plan, Sunbow II General Development Plan (GDP) previously approved by City Council Resolution 15427 ("GDP"); 2) Sectional Planning Area (SPA) Plan, Sunbow II Sectional Planning Area Plan previously adopted by City Council Resolution No. 15524 ("SPA"); 3) Sunbow II Public Facilities Financing Plan ("PFFP"), Sunbow II Design Guidelines all previously approved by City Council on February 20, 1990, by resolution No.15524 4) Sunbow II Air Quality Improvement Plan and Sunbow II Water Conservation Plan Phase lA adopted by City Council Resolution 15524 ; 5) Sunbow I1 Planned Community District Regulations adopted By City Council Ordinance No.2346; 6) Master Tentative Map, Chula Vista Tract 90-07 approved by City Council Resolution No. 15640 and extended one year by Resolution 17177; and Resolution 19377 Page 2 D. Environmental Determination WHEREAS, in accordance with the requirements of CEQA, the Environmental Review Coordinator has determined that the Project requires the preparation of an Initial Study, such study (IS 99-13) was prepared, and based on such study a Negative Declaration was prepared and circulated for public review. E. Planning Commission Record on CUP Application WHEREAS, the Planning Commission held an advertised public hearing on the Project on February 3, 1999, and voted 5-1-0 to adopt Resolution No. PCC 99- 25 recommending that the City Council adopt Negative Declaration IS-99-13, approve Conditional Use Permit PCC 99-25 based on the findings and subject to the conditions contained therein; and grant a sixty-nine percent density increase (54- units above the maximum permitted density) pursuant to California Government Code Section 65195B, Density Bonuses and Other Incentives; and WHEREAS, the Planning Commission concurred with the Design Review Committee to allow a further reduction in parking spaces as long as a minimum of seven guest parking spaces be provided on-site and that none of these seven guest spaces be restricted for disabled use only; and WHEREAS, from the facts presented to the Planning Commission, the Commission has determined that the Project is consistent with the City of Chula Vista Generat Plan and that the public necessity, convenience and general welfare and good zoning practice support the Project, and implements portions of State related density bonus and that the granting of said density bonus and reductions in parking and open space requirements does not adversely affect the order, amenity, or stability of adjacent land uses; and F. City Council Record of Application WHEREAS, a duly called and noticed public hearing on the Project was held before the City Council of the City of Chula Vista on February 16, to receive the recommendation of the RCC, Planning Commission and Design Review Committee, and to hear pubtic testimony with regard to the same; and WHEREAS, the City Council of the City of Chula Vista considered the recommendation of the Planning Commission regarding the density bonus and additional incentives/concessions on February 16, 1999. NOW, THEREFORE BE IT RESOLVED that the City Council does hereby find, determine and resolve as follows: II. PLANNING COMMISSION RECORD The proceedings and all evidence on the Project introduced before the Planning Commission at their public hearing on this Project held on February 3, 1999, and the minutes and resolution resulting therefrom, are hereby incorporated into the record of this proceeding. Resolution 19377 Page 3 III. CERTIFICATION OF COMPLIANCE WITH CEQA The City Council does hereby find that the Negative Declaration on IS 99-13 has been prepared in accordance with requirements of the California Environmental Quality Act, the State EIR guidelines and the Environmental Review Procedures of the City of Chula Vista. IV. INDEPENDENT JUDGEMENT OF THE CITY OF CHULA VISTA CITY COUNCIL The City Council finds that the Negative Declaration on IS 99-13 reflects the independent judgement of the City of Chula Vista City Council. V. FINDINGS FOR GRANTING OF DENSITY BONUS The City Council hereby finds that the Project is consistent with the City of Chula Vista General Plan and that the public necessity, convenience and general welfare and good zoning practice support the Project, and implements portions of State related density bonus and that the granting of said density bonus and reductions in parking and open space requirements does not adversely affect the order, amenity, or stability of adjacent land uses. VI. CONDITIONAL USE PERMIT FINDINGS The City Council of the City of Chula Vista does hereby make the findings required by the City's rules and regulations for the issuance of conditional use permits, as hereinbelow set forth, and sets forth, thereunder, the evidentiary basis, in addition to all other evidence in the record, that permits the stated findings to be made. A. That the proposed use at the location is necessary or desirable to provide a service or facility which will contribute to the general well being of the neighborhood or the community. The proposed project is desirable at this location in that the site provides immediate access to public transportation and is within walking distance of the Sharp Chula Vista Medical Center. A neighborhood commercial center is proposed for a location just south of the site. There are no other senior rental housing developments within the newly developed areas of eastern Chula Vista. In addition, the project will satisfy Sunbow IFs Iow income housing requirement. B. That such use will not under the circumstances of the particular case, be detrimental to the health, safety or general welfare of persons residing or working in the vicinity or injurious to property or improvements in the vicinity. The proposed Project is compatible with surrounding residential and institutional land uses and adequate infrastructure is in place. The project is oriented toward Medical Center Drive in order to allow easy ingress/egress to the site, and convenient access to public transportation. Resolution 19377 Page 4 C. That the proposed use will comply with the regulations and conditions specified in the code for such use. The applicant has requested a reduction in the required number of parking spaces from two hundred-eight to one hundred forty-six (Chula Vista Municipal Code Section 19.62.050 ) and open space acreage requirement from 400 to 350 sq. Ft. per dwelling unit (Chula Vista Municipal Code Section 19.28.090). Based on previously approved senior housing project parking requirements in the City of Chula Vista and other neighboring jurisdiction, as well as the Project Site's close proximity to public transportation, health care facilities and future neighborhood parks and commercial center within the Sunbow Planned Community, the proposed parking ratio of one space per dwelling unit plus fourteen additional parking spaces for guests is consistent with established standards for this type of residential projects. A further reduction of approximately seven spaces is appropriate in exchange for providing additional pedestrian linkages between village areas and will not negatively affect the amount of overall parking needed to accommodate the project. The proposed senior housing apartment complex features common recreational facilities designed for the intended residents and open lawn areas for outdoor activities. Based on the proposed amenities and the intended residents, the proposed open space is adequate. D. That the granting of this conditional use permit will not adversely affect the General Plan of the City or the adopted plan of any government agency. The Project is in substantial conformance with the Housing Element of the City of Chula Vista General Plan, which supports a wide variety of residential products including senior housing and requires a minimum of ten percent of the total number of dwelling units in subdivisions with more than fifty dwelling units be affordable. The Project will also satisfy the affordable housing requirement prescribed in the Sunbow II affordable Housing Program and Agreement. BE IT FURTHER RESOLVED THAT THE CITY COUNCIL DOES HEREBY APPROVE THE PROJECT SUBJECT TO THE CONDITIONS SET FORTH BELOW: VII. TERMS OF GRANT OF PERMIT OF CONDITIONAL USE PERMIT The City Council hereby grants Conditional Use Permit PCC-99-25 subject to the following conditions whereby the Applicant Shall: A. Ensure that the proposal complies with the use outlined in the application and material submitted therewith except as modified below: 1. Comply with all conditions of Resolution DRC 99-29 dated January 25, 1999. 2. Comply with all requirements of the Engineering Department including the following: ResoIution 19377 Page 5 a. Prior to issuance of building permits, applicant shall pay all applicable sewer connection, development impact, and traffic signal fees. b. Construct two driveway approaches per City of Chula Vista standards as shown on the proposed site plan. Prior to said construction, applicant shall obtain a construction permit from the Public Works Department. c. Obtain a grading permit. d. Vehicular turning movement shall be restricted to right turn in and right turn out only at new driveways along Medical Center Drive due to an existing raised concrete median. e. Prior to occupancy, applicant shall submit and receive approval for a lot consolidation for this project. 3. Comply with all requirements of the Chula Vista Fire Department including the following: a. Hammer head turn-around shall be 90' x 25' x 25' b. Fire Alarm systems are required for all buildings c. C~ass I Standpipe system required in three story building. d. Fire hydrant required at each driveway entrance. B. Any change to the operational profile or expansion of the use shatl require approval by the City Council and may result in additional conditions of approval and/or mitigation measures. C. Construct the Project as submitted to and approved by the City Council, except as modified herein and/or as required by the Municipal Code, and as detailed in the project description. D. Comply with alt federal, state and local laws, regulations, permits, City ordinances, standards, and policies except as otherwise provided in this Resolution. E. Approval of this Conditional Use Permit is contingent upon granting approval of the requested sixty-nine percent density bonus. F. This special use permit shall become void and ineffective if not utilized or extended within one year from the effective date thereof, in accordance with Section 19.14.260 of the Municipal Cede. G. This permit shall be subject to any and all new, modified or deleted conditions imposed after approval of this permit to advance a legitimate governmental Resolution 19377 Page 6 interest related to health, safety, or welfare which the City shall impose after advance written notice to the Permittee and after the City has given to the Permittee the right to be heard with regard thereto. However, the City, in exercising this reserved right/condition, may not impose a substantial expense or deprive Permittee of a substantial revenue sources which the Permittee cannot, in the normal operation of the use permitted, be expected to economically recover. H. The developer agrees to meet and confer and to enter into a density bonus agreement with the City. VIII. CITY COUNCIL APPROVAL OF DENSITY BONUS The City Council hereby grants the requested increase in density of sixty-nine percent to allow the construction of a maximum of one-hundred thirty two dwelling units for the residential project located at the north east corner of Medical Center Drive and Medical Center Court in the City of Chula Vista. The City Council further approves the following incentives to the Applicant in order to balance the financial feasibility of the affordable housing project with the usual amenities found in a development of this type consistent with the Conditional Use Permit, PCC 99-25, for the Project: 1. The City implemented alternative parking standards of one parking space for each dwelling unit, with ten percent guest parking provided on-site for this project and fourteen percent of the total parking spaces provided at compact size; and 2. The City allowed a reduction in open space requirements from four-hundred square feet per unit to three hundred-fifty square feet per unit. IX. EXECUTION AND RECORDATION OF RESOLUTION OF APPROVAL Applicant shall execute the Agreement, a copy of which is on file in the office of the City Clerk, indicating the Applicant has read, understands and agrees to the conditions of approval contained herein, and will implement same. X. INDEMNIFICATION/HOLD HARMLESS Applicant/operator shall and does hereby agree to indemnify, protect, defend and hold harmless City, its Council members, officers, employees, agents and representatives, from and against any and all liabilities, losses, damages, demands, claims and costs, including court costs and attorneys~ fees (collectively, "liabilities") incurred by the City arising, directly or indirectly, from (a) City's approval and issuance of this Conditional Use Permit, (b) City's approval or issuance of any other permit or action, whether discretionary or non-discretionary, in connection with the use contemplated herein, and (c) Applicant's installation and operation of the facility permitted hereby. Applicant/operator shall acknowledge their agreement to this provision by executing the Agreement of this Conditional Use Permit where indicated. Applicant's/operator's compliance with this provision is an express condition of this Conditional Use Permit and this provision shall be binding on any and all Applicant's~operator's successors and Resolution 19377 Page 7 XI. NOTICE OF DETERMINATION The City Council directs the Environmental Review Coordinator to post a Notice of Determination and file the same with the City Clerk. xIl. INVALIDITY; AUTOMATIC REVOCATION It is the intention of the Redevelopment Agency that its adoption of this Resolution is dependent upon the enforceability of each and every term, provision and condition herein stated; and that in the event that any one or more terms, provisions or conditions are determined by a Court of competent jurisdiction to be invalid, illegal or unenforceable, this resolution and the permit shall be deemed to be automatically revoked and of no further force-and effect ab initio. Presented by Approved as to form by .,.~n M. Kaheny ?' J Robert Leiter '" "~ty Attorney ~ Planning and Buil~ling Director , Resolution 19377 Page 8 EXHIBIT A Resolution 19377 Page 9 PASSED, APPROVED, and ADOPTED by the City Council of the City of Chula Vista, California, this 16'h day of February, 1999, by the following vote: AYES: Councilmembers: Davis, Moot, Padilla, Salas and Horton NAYS: Councilmembers: None ABSENT: Councilmembers: None ABSTAIN: Councilmembers: None Shirley Hort~, Mayor ATTEST: Susan Bigelow, City Cl~rk STATE OF CALIFORNIA ) COUNTY OF SAN DIEGO ) CITY OF CHULA VISTA ) l, Susan Bigetow, City Clerk of Chula Vista, California, do hereby certify that the foregoing Resolution No. 19377 was duly passed, approved, and adopted by the City Council at a regular meeting of the Chula Vista City Council held on the 16'h day of February, 1999. Executed this 16,h day of February, 1999. Susan Bigelow, City Clerk EXHIBIT C Design Review Committee Resolution No. 99-22 (To be Attached) 652892.3~24036.0006 E ~' ~ --~ ~'~ EXHIBIT D SUPPLEMENTAL RENTAL APPLICATION The rental unit for which you are applying has received governmental assistance under programs to encourage more affordable housing. As a result, the unit carries a rent level restriction and is restricted to occupancy by very low, low and low and moderate income households. The information required on this form is necessary to determine you income eligibility to occupy the unit. You must report all household income. Information provided will be confidential and not subject to public disclosure pursuant to State Government Code Section 6254(h). 1. Rental Unit Address 2. Applicant Name 3. Other Household Members 4. Total Current Annual Household Income from all Sources: TOTAL $ Detail: Household Member Income Source 5. Total Gross Annual Household Income shown on most recent Federal Tax return (attach copies of most recent Federal Tax returns for all household members receiving income. Include other verification of income not appearing on tax forms.) TOTAL $. APPLICANT'S STATEMENT I certify, under penalty of perjury, that the foregoing information is true and correct to the best of my knowledge. I understand that any misrepresentation of the information contained herein may be cause for eviction. Signature Date Applicant 652892.3~24036.0006 ~4-- ~ OWNER'S STATEMENT Based on the foregoing information, I certify, under penalty of perjury, that the applicant is eligible to occupy this restricted affordable unit. Eligibility is based on finding that the applicant household's current annual income is $ and does not exceed the current maximum household income of $ allowed under the terms of a Housing Cooperation Agreement with the City of Chula Vista regarding this residential development. Nalne Title Signature Date 652892.3\24036.0006 ~ --q 4q EXHIBIT E SEMI-ANNUAL AFFORDABLE HOUSING MONITORING REPORT Owner's Certification I am the owner or owner's representative for an affordable housing development in the City of Chula Vista, which is bound by a Housing Agreement with the City, I certify under penalty or perjury that the attached rent roll for affordable units at my project is true and correct to the best of my knowledge and complies with the terms and conditions stipulated in the Affordable Housing Agreement, or any agreement that implements the same, with the City of Chula Vista. Name Title Signature Date Deadline for Submittal: January 15th and July 15th Of each year. Word: Monitor Rpt ~" ~ ~ ~ ~ Revised; February 1999 RECORDING REQUESTED BY: Redevelopment Agency of the City of Chula Vista WHEN RECORDED MAIL TO: Redevelopment Agency of the City of Chula Vista Attn: City Clerk 276 Fourth Avenue Chula Vista CA 91910 No fee for recording pursuant to Government Code Section 27383 (Space above for Recorder's Use) LOAN AGREEMENT AND RELATED RESTRICTED COVENANTS THIS LOAN AGREEMENT AND RELATED RESTRICTED COVENANTS (the "Agreement") is entered into as of this __ day of , 1999, between the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic ("Agency"), and SERENA SUNBOW, L.P., a California limited partnership ("Borrower"), and/or its successors or assignees. ARTICLE 1 Recitals 1.1 AuthoriW. Agency is a public body, corporate and politic, exercising governmental functions and powers and organized and existing under the Community Redevelopment Law of the State of California (Health and Safety Code Section 33000, et seq.) and is authorized to enter into binding agreements for the purpose of protecting public health, safety, and welfare. 1.2 Available Funds. Agency has available funds from the Agency's Low and Moderate-Income Housing Fund which can be used for the purposes of funding certain Agency obligations under this Agreement in accordance with the Community Redevelopment Law of the State of California. 1.3 The Property. Borrower is the legal owner of the fee title to the real property described as Lot 2 of Chula Vista Tract No. 87-8, Rancho Del Sur Phase 1, Unit 1, in the City of Chula Vista, according to map thereof No. 12060 and Lot 332 of Chula Vista Tract No. 90-07, Sunbow II, Units 1 and 2, in the City of Chula Vista, according to map thereof No. 13423. Said real property is referred to in this Agreement 652894.3\24036.0006 as the "Real Property" and is further described in the attached Exhibit "A", which is incorporated herein. 1.4 Project. Borrower proposes to construct 132 apartment units, with 27 units affordable to very low senior ~ouseholds.at or below 50 percent of the Area Median Income ("AMI"), 37 units affordable to low- income senior households at or below 60 percent of AMI, and the remainder of the units (other than the units made available to on-site managers) affordable to low and moderate income senior households at or below 120 percent of the Area Median Income, at the northeast coruer of Medical Center Drive and Medical Center Court in the City of Chula Vista ("Project"). The Project is subject to certain affordable housing obligations pursuant to the Affordable Housing Agreement between the City and A.C.I. Sunbow, LLC, the Housing Cooperation Agreement between the City and Borrower, and a Regulatory Agreement and Declaration of Restrictive Covenants by and among the Borrower, the Housing Authority of the City of Chula Vista and [Trustee]. 1.5 Agency Financial Assistance to Borrower. Through the development and operation of the Project, Agency and Borrower desire to provide very low, low and low and moderate income seniors with affordable housing opportunities within the City in accordance with the Community Redevelopment Law and the Agency's redevelopment plans. In order to accomplish this goal, the Agency desires to make a loan from its Low and Moderate Income Housing Fund to Borrower for a portion of the costs of the development of the Project, subject to certain conditions designed to assure the implementation of the Project in accordance with the Redevelopment Plans, state and federal law, and as otherwise provided herein. 1.6 Interests of the Agency and the Public. The development and operation of the Project pursuant to this Agreement, and the fulfillment generally of this Agreement, are in the vital and best interests of the Agency and the and the welfare of the residents of the City of Chula Vista, and in accordance with the public purposes and provisions of applicable federal, state, and local laws and requirements. 1.7 Housin~ Objectives and Goals. The Project accommodates several of the City's Comprehensive Housing Plan Objectives, which are expressly noted in the Housing Element as priorities for the City. The objectives this Project serves are: (1) Achievement ora balanced residential community through integration of low and moderate income housing throughout the City, and the adequate dispersal of such housing to preclude establishment of specific low-income enclaves. (2) The provision of adequate rental housing opportunities and assistance to households with low and very low incomes, including those with special needs such as the elderly, handicapped, single-headed households, large families and those "at-risk" of homelessness. 652894.3\24036.0006 WHEREFORE, based upon the foregoing recitals and in consideration of their mutual and prospective promises and subject to the terms and conditions hereinafter set forth, the parties do hereby agree as follows: ARTICLE 2 Definitions Thc following terms as used in this Agreement shall have thc meanings given unless expressly provided to the contrary: 2.1 "Agency" means the Redevelopment Agency of thc City of Chula Vista, a public body, corporate and politic, having its offices at 276 Fourth Avenue, Chula Vista, California 91910. The term "Agency" as used herein also includes any assignee of, or successor to, the rights, powers, and responsibilities of the Redevelopment Agency of the City of Chula Vista. 2.2 "Agency Loan" means the loan for an amount of Two Hundred Seventy-Five Thousand Dollars ($275,000) by the Agency to Borrower, which loan is the subject of this Agreement. 2.3 "Agency Note" shall mean the promissory note, in substantially the form set forth in Exhibit B attached hereto and incorporated herein, in the principal amount of Two Hundred Seventy- Five Thousand Dollars ($275,000), evidencing the Agency Loan. 2.4 "Agency Trust Deed" shall mean that certain deed of trust, in substantially the form set forth in Exhibit C attached hereto and incorporated herein, which secures Borrower's obligations pursuant to the Agency Note, which shall be recorded in the order of priority set forth in this Agreement. 2.5 "Agreement" means this Loan Agreement and Related Restricted Covenants. 2.6 "Borrower" means Serena Sunbow, L.P., a California limited partnership. The term "Borrower" includes any legally permissible assignee or successor to the rights, powers, and responsibilities of Borrower hereunder, in accordance with Section 11.10 of this Agreement. 2.7 "Certificate of Completion" shall have the meaning ascribed in Section 9.8 of this Agreement. The form of the Certificate of Completion shall be as set forth in Exhibit G to this Agreement, which is incorporated herein. 2.8 "City" shall mean the City of Chula Vista, a municipal corporation, organized under the laws of the State of California and having its offices at 276 Fourth Avenue, Chula Vista, Califomia 91910. 2.9 "Development Fee" shall have the meaning ascribed in Section 4.5. 2.10 "Effective Date" means the date first appearing in this Agreement above, provided that all parties hereto have executed this Agreement as of that date, or within ten (10) business days thereafter. 2.11 "Gross Revenue" shall have the meaning ascribed in Section 4.5. 652894.3\24036.0006 2.12 "Housing Coordinator" means the Housing Coordinator of the Community Development Department of the City of Chula Vista. 2.13 "Project" shall have the meaning ascribed in Section 1.4 of this Agreement. 2.14 "Project Budget" means that certain budget referred to in Section 4.11 of this Agreement and attached hereto as Exhibit E, which is incorporated herein by this reference, which budget may not be materially changed without prior approval of the Housing Coordinator, which approval shall not be unreasonably withheld (a material change is a change that causes the total Project cost to increase or decrease by two percent (2%) or more from what is shown in Exhibit E). 2.15 "Project Pro Forma" means that certain Project Pro Forma referred to in Section 4.11 of this Agreement and attached hereto as Exhibit F, which is incorporated herein by this reference, which pro forma Borrower represents to be a good faith projection of the information set forth therein. 2.16 "Property" means that certain real property described as Lot 2 of Chula Vista Tract No. 87-8, Rancho Del Sur Phase 1, Unit 1, in the City of Chula Vista, according to map thereof No. 12060 and Lot 332 of Chula Vista Tract No. 90-07, Sunbow II, Units 1 and 2, in the City of Chula Vista, according to map thereof No. 13423. 2.17 "Property Manager" means the property management company managing the Project, whether or not the Project is managed by Borrower. The term Property Manager shall not mean the on-site property manager. 2.18 "Residual Receipts" shall have the meaning ascribed in Section 4.5. 2.21 "Restricted Units" means the residential units in the Project whose rent levels and occupancy are to be restricted as set forth in Section 10.2 of this Agreement. 2.22 "Schedule of Performance" means that certain Schedule of Performance attached hereto as Exhibit I and incorporated herein. 2.23 "Title Insurer" means Chicago Title Insurance Company, with offices at 925 B Street, San Diego, California 92101. ARTICLE 3 Financing of the Project 3.1 Summary of Financing. Borrower's current sources and uses of funds summary for the Project is attached hereto as Exhibit D, which is incorporated herein. Borrower contemplates a total project budget of approximately $9,253,200. Borrower shall obtain construction and permanent loan financing funded by two series of multifamily mortgage revenue bonds issued by the Housing Authority of the City of Chula Vista in the approximate aggregate amount of $6,352,500 (the "Bonds"). Agency shall loan to Borrower the amount of $275,000 (approximately $2,083 for each senior housing unit in the Project), secured by the Agency Deed of Trust, which shall be subordinate to the Permanent Loan funded by the Bonds. Borrower shall also apply for an allocation of "4%" tax credits for the Project from the 652894.3~24036.0006 4 ~" "' ~' -- q California Tax Credit Allocation Committee ("TCAC") which will support an equity investment in Borrower by an investor limited partner in the amount of approximately $2,159,866. ARTICLE 4 Agency Loan 4.1 Amount. Subject to the terms and conditions set forth herein and subject further to the terms and conditions set forth within the documents and instruments executed by Borrower in connection with this transaction, the Agency hereby commits to loan to Borrower the total sum of $275,000 (the "Agency Loan") to be applied solely towards the development of the Project on the Property. 4.2 Interest. The outstanding principal amount of the Agency Loan shall accrue interest at the rate of six (6%) percent per annum, compounded annually. 4.3 Borrower's Obli~,ations. The following conditions must be fully satisfied as reasonably determined by the Agency in order to obligate the Agency to make the Agency Loan: a. Borrower shall have submitted a complete application for a preliminary allocation of "4%" low-income housing tax credits from the California Tax Credit Allocation Committee in the amount set forth in the Sources and Uses attached hereto as Exhibit D, or such greater or lesser amount as may be mutually agreed to by the parties. b. Borrower shall have acquired fee title to the Property, or shall be acquiring fee title to the Property concurrently with the disbursement of the Agency Loan. c. Borrower shall have received a firm commitment for an equity contribution from an investor limited partner in Borrower of not less than $2,159,866, or such lesser amount as may be mutually agreed to by the parties. d. Borrower shall have obtained a firm commitment for construction and permanent loan financing in an amount equal to the net proceeds of the Bonds or such greater or lesser amount as may be mutually agreed to by the parties, and such loan shall have closed or be ready to close concurrently with the Agency Loan. e. Borrower shall duly execute (and acknowledge, if applicable) the Agency Note and the Agency Trust Deed, described below, and submit the same into the escrow established for the Borrower's acquisition of the Property, and the Agency Trust Deed shall be ready to be recorded concurrently with the recording of the grant deed conveying title to the Property to the Borrower as an encumbrance to the Property, subordinate only to the liens securing the bond financing and construction financing and other nonmonetary encumbrances approved by the Agency. f. Borrower shall have submitted to the Agency, and Agency shall have reviewed and approved, in its reasonable discretion, any and all loan documents, regulatory agreements or grant 6528943\24036.0006 5 ~ ' ~' ~ contracts to be executed by or otherwise to be binding upon Agency or Borrower in connection with its acquisition of the Property, its development and operation of the Project and/or its financing thereof, including without limitation the regulatory agreement to be executed and recorded in favor of the TCAC (the "TCAC Regulatory Agreement"), and the parmership agreement of the Borrower and documents executed pursuant thereto, such as guaranties and funding agreements. g. Borrower shall provide the Agency with a resolution of its Board of Directors approving this Agreement and the related Agency Loan documents and authorizing Borrower's signatories to execute this Agreement and the related Agency Loan documents on its behalf. h. A title insurance company reasonably acceptable to the Agency shall have unconditionally committed to issue the Lender's Policy to the Agency in accordance with Section 4.9 hereof. i. Borrower shall have submitted to the Agency a copy of an executed property management agreement for the Project with an experienced property manager which is reasonably acceptable to the Agency, in accordance with Section 10.8 hereof. j. Borrower shall satisfy all other obligations under this Agreement required to be performed prior to the closing on the Agency Loan, and shall not be in default in any of its obligations under the terms of this Agreement. All representations and warranties of Borrower contained herein shall be tree and correct in all material respects on and as of the date of the disbursement of the Agency Loan as though made at that time. 4.4 Source of Aaency Loan. The source of the Agency Loan is the Agency's Low and Moderate-Income Housing Fund. Pursuant to California Community Redevelopment Law all one hundred thirty-two (132) units are being assisted with the Low and Moderate Income Housing Fund and must meet all of the California Community Redevelopment Law requirements for the term of the affordability restrictions on the units set forth herein. 4.5 Repayment. Payments under the Agency Loan shall be made as follows: a. Repayment of the Agency Loan shall be deferred during construction of the Project. Commencing on the date of recordation of the deed of trust securing the Permanent Loan, payment of principal and interest on the Agency Note shall be made, on an annual basis, out of a fund equal to ninety percent (90%) of the "Residual Receipts" (defined below) derived from the Property and/or the operation of the Project. Such amounts shall be paid on a priority basis to all other debt service on the Property, except for the loan funded with the proceeds of the Bonds and the Deferred Development Fee (as defined below), if any. Residual Receipts shall be calculated by Borrower each and every year commencing with the first year anniversary of the issuance of the certificate of occupancy by the City. The ninety (90%) percent Residual Receipts payments, if any, shall be made on or before thirty (30) days after the later of (i) the first year anniversary of the issuance of the certificate of occupancy by the City or (ii) the first year anniversary of the date on which the 652894.3\24036.0006 6 ~ Deferred Development Fee, if any, has been paid in full, and on or before 30 days after each subsequent yearly anniversary of the applicable date thereafter. b. "Residual Receipts" is specifically defined as the "Gross Revenue" (as defined below) from the Project minus the "Reasonable Operating Expenses" (as defined below) for the same period. (i) "Gross Revenue" shall mean all revenue, income, receipts, and other consideration actually received from operation and leasing of the Project. Gross Revenue shall include, but not be limited to: all rents, fees and charges paid by tenants, Section 8 payments or other rental subsidy payments received for the dwelling units, all cancellation fees, price index adjustments, and any other rental adjustments to leases or rental agreements; proceeds from vending and laundry room machines; the proceeds of business interruption or similar insurance; the proceeds of casualty insurance to the extent not utilized to repair or rebuild the Project; and condemnation awards for a taking of part or all of the Project for a temporary period. Gross revenue shall also include the fair market value of any goods or services provided in consideration for the leasing or other use of any portion of the Project. Gross revenue shall not include tenants' security deposits, loan proceeds, capital contributions or similar advances or payments from reserve funds. (ii) "Reasonable Operating Expenses" shall include any and all reasonable and actually incurred costs associated with operating and maintaining the Property, to the extent that they are consistent with an annual independent audit, performed by a certified public accountant using generally accepted accounting principles. Such expenses may include, without limitation, property and other taxes and assessments imposed on the Project; premiums for property damage and liability insurance; utilities not directly paid for by the tenants including water, sewer, trash collection, gas and electricity, maintenance and repairs including pest control, landscaping and grounds maintenance, painting and decorating, cleaning, general repairs, and supplies; an annual license or certificate of occupancy fees required for operation of the Project; general administrative expenses directly attributable to the Property including advertising and marketing, security services and systems, and professional fees for legal, audit and accounting; property management fees and reimbursements including on-site manager and assistance manager expenses; partnership management fees payable to the managing general partner of the Borrower in an amount which does not exceed the amount set forth therefor in the Sources and Uses, Project Budget and Pro Forma attached hereto; a property management fee in an amount which does not exceed the amount set forth in the Sources and Uses, Project Budget and Pro Forma attached hereto, cash deposited into a reserve for capital replacements of the Project improvements and an operating reserve (and such other reserve accounts required with respect to the Bonds and the loan funded therefrom) in such reasonable amounts as are required by Project lenders and investors to be held in trust exclusively for use for the maintenance and preservation of the Property; debt service payments (excluding debt service due from residual receipts of the Project) on financing for the Project; and payment of the Deferred Development Fee. In no event shall expenditures, including attorney fees or litigation costs, normally required to be paid out of the Replacement Reserve be treated as Reasonable Operating Expenses unless specifically approved in writing by the Agency. For purposes of the foregoing definition of "Residual Receipts," any property management fee or partnership management fee which is paid to Borrower shall at no time exceed an amount as is customary and standard for affordable housing projects similar in size, scope and character to the Project. Notwithstanding the foregoing, for purposes of this calculation, reasonable operating expenses shall not include the following: programmatic or other similar service oriented operating expenses, principal and interest payments on any debt subordinate to the Agency Note, depreciation, 652894.3L24036.0006 7 ~' ",~,~ '~ amortization, depletion or other non-cash expenses, incentive partnership asset management fees payable to the nonmanaging general partner of the Borrower, or any amount expended from a reserve account. c. The ten percent (10%) of Residual Receipts remaining after the annual Residual Receipts payments on the Agency Note may be retained and used by Borrower in Borrower's sole discretion. d. Except as otherwise expressly provided hereunder, Borrower's obligation to repay the Agency Loan shall be limited to Borrower's annual payment of ninety (90%) percent of the Residual Receipts as described above for a period from the completion of the Project until the date which is fifty two (52) years following the date of the City's issuance of the final certificate of occupancy for the Project (but in no event later than fifty-four (54) years after the date of execution of the Agency Note) (the "Conditional Maturity Date"). Upon the Conditional Maturity Date, Agency shall have the option, at any time, in its sole discretion, but after good faith discussions with Borrower as to available options, upon ninety (90) days' written notice to Borrower, to (a) declare all amounts owed under the Agency Note immediately due and payable, or (b) to require installment payments under the Agency Note based upon (i) a restated principal balance comprised, in the aggregate, of any and all outstanding principal and interest under the Agency Note existing as of the date of Agency election, (ii) a prospective interest rate per annum equal to the Prime Rate then in effect for Bank of America, San Diego office, or such other rate mutually agreed to by the Agency and Borrower, and (iii) monthly installments of principal and interest paid over the course of an amortization schedule to be determined by the Agency in its sole discretion, not to be less than ten (10) years. In the event that Agency elects repayment approach (b), Borrower agrees to execute an endorsement to the Note in favor of Agency reflecting the amended repayment terms described above. e. Notwithstanding the foregoing, in the event that Borrower, or any successors thereto, materially breaches the terms of this Agreement, the Agency Note, or the Agency Trust Deed, or triggers a due on sale, transfer or encumbrance provision set forth in the Agency Note or Agency Trust Deed, the Agency shall have the right in its sole discretion, to declare immediately due and payable all outstanding principal, interest and other sums due under the Agency Note, or to pursue any and all other remedies provided herein, under the Agency Note or Agency Trust Deed, or as otherwise provided at law or in equity. 4.6 Prepayment. Borrower may prepay the principal and any interest due the Agency under the Agency Note prior to or in advance of the time for payment thereof as provided in the Agency Note, without penalty; provided, however, that Borrower acknowledges that the provisions of the Housing Cooperation Agreement and the Regulatory Agreement and Declaration of Restrictive Covenants will be applicable to the Project even though Borrower may have prepaid the Agency Note. 4.7 Assumption. In the event the Project is sold or transferred as approved by the Agency or otherwise permitted pursuant to Section 11.10 hereof, the Agency Loan shall be fully assumable by the approved or permitted transferee. The Agency Loan shall not be assumable by any other transferee. 652894.3\24036.0006 8 4.8 Use of Loan Proceeds. Borrower shall use Agency loan proceeds only to pay for a portion of the cost of the acquisition of the Property, and to pay for the cost of the Lender's Policy. 4.9 Lien Priority, Title Insurance. As a condition to the obligations of Agency to fund the Agency Loan, there shall be no liens or encumbrances upon the Property having priority over the Agency Trust Deed, other than: (a) the deed of trust securing the loan made with the proceeds of the Bonds; and (b) those existing non- monetary encumbrances which are disclosed in title reports to be hereafter delivered by Borrower to Agency and which have been expressly consented to by the Agency in writing. Such consent shall not be unreasonably withheld, subject to Agency's right to attach reasonable conditions thereto. Such priority shall be evidenced by an ALTA lender's insurance policy, including title endorsements reasonably requested by the Agency with liability equal to the amount of the Agency Loan, or such other amount as may be mutually agreed to by the parties (the "Lender's Policy") to be issued to Agency by Chicago Title Company at Close of Escrow. Borrower shall be responsible for the cost of the Lender's Policy, which may be paid for from the proceeds of the Agency Loan. 4.10 Subordination; Refinancing. Agency agrees to take such actions as may be necessary to subordinate the Agency Trust Deed to the construction and permanent financing set forth in Section 4.9 above; provided, however, that: a. any such subordination shall be evidenced by a recorded subordination agreement containing such notice, cure, loan purchase or assumption and project purchase rights as may be reasonably required by the Agency in a form to he approved by the Agency Attorney, which approval shall not be unreasonably withheld; and b. during the period commencing on the Effective Date of this Agreement and ending on the earlier of (a) the date on which one of both of the general partners of Borrower or its successor has repurchased the limited partners' interests in the Borrower, or (b) eighteen (18) years after the date the Agency issues the certificate of occupancy for the Project, if any such refinance during such period results in an increase in the amount owing over the principal balance due at the time of refinancing, or otherwise a distribution of refinance proceeds, then an amount equal to the greater of the difference between the amount of the principal balance due at the time of the refinancing and the new principal balance upon the refinancing or such refinance proceeds ("Refinance Proceeds") shall, within six (6) months after such refinance, be used only to benefit the Project and prior to using the Refinance Proceeds for such permitted purpose Borrower shall notify the Executive Director of such refinance, the amount of the Refinance Proceeds, and the proposed use of the Refinance Proceeds to benefit the Project; and c. upon the repurchase of the limited partners' interest in the partnership, Borrower agrees to exercise good faith efforts to explore the feasibility of refinancing the Project in order to provide proceeds to pay off some or all of any outstanding amounts owed under the Agency Loan. If such a refinance proves to be feasible on terms favorable to the Project, Borrower shall exercise good faith efforts to proceed to close on such a refinance. If not feasible, Borrower shall prepare a written report explaining such infeasibility to the Agency and Borrower shall have no further obligations under this Section 4.10(c). 652894.3,24036.0006 9 ~' --~", ~ d during the period following the conclusion of the period described in subparagraph (b) immediately above, any such refinance that results in an increase in the amount owing over the principal balance due at the time of refinancing, or otherwise a distribution of refinance proceeds, shall be approved in advance by the Executive Director and an amount equal to the greater of the difference between the amount of the principal balance due at the time of the refinancing and the new principal balance upon the refinancing or such refinance proceeds shall be paid to Agency to reduce the outstanding principal and accrued interest due on the Agency Note. 4.11 Borrower's Evidence of Financial Capability. The anticipated sources and uses of funds for acquisition of the Property and development of the Project are set forth in the Project Budget (Exhibit E). The financial projections for the Project are set forth in the Project Pro Forma (Exhibit F). Upon request but in no event later than the disbursement of the Agency Loan Proceeds, Borrower shall submit to the Executive Director, evidence reasonably satisfactory to the Executive Director that Borrower has the financial capability necessary for the acquisition of the Property and the development of the Project thereon pursuant to this Agreement, the Project Budget, and the Project Pro Forma. Such evidence of financial capability shall include the following: a. a copy of the commitment or commitments obtained by Borrower for each of the sources of funds listed in the Project Budget to assist in financing the acquisition of the Property and the construction of the Project, including both construction and take-out financing, equity contributions to be made by investors, and the preliminary tax-credit reservations obtained by Borrower. Within the time set forth in the Schedule of Performance, Borrower shall obtain the construction loan and the equity contributions for the Project in an amount not less than that shown in the Project Budget and, upon request, provide evidence to the Executive Director that the construction loan is available for use in accordance with its terms. All copies of commitments submitted by Borrower to Agency shall be deemed to be certified by Borrower to be true and correct copies thereof. Each commitment for financing shall be in such form and content acceptable to the Executive Director as reasonably evidencing a firm and executed, standard commitment, with only those conditions which are standard or typical for the lender or investor, as appropriate, for similar projects. b. if the total costs set forth in the Project budget exceeds the amount of financing commitments received pursuant to Subparagraph (a) above, such documentation reasonably satisfactory to the Executive Director as is sufficient to demonstrate that Borrower, from any source whatsoever, has adequate funds available and committed to cover such difference. c. a copy of the construction contract between Borrower and its general contractor for all of the improvements required to be constructed by Borrower hereunder, which shall be deemed to be certified by Borrower to be a true and correct copy thereof. d. a corporate surety bond or bonds or other security instrument issued by a surety company with a Best's A-V rating or better, approved as to form, content, and company by the Executive Director and the Agency Attorney with Borrower's contractor or contractors as principal(s), in a penal sum not less than one hundred percent (100%) of the amount of the cost of constructing the Project guaranteeing completion of construction and the payment of wages for 6528943'24036.0006 10 ~' "~"' / i~ services engaged and bills contracted for materials, supplies, and equipment used in the performance of the work, and protecting Borrower and Agency from any liability, losses, or damages arising therefrom. Said bond(s) shall specifically name Agency as a named beneficiary. e. a true and correct copy of the TCAC Preliminary Reservation Letter, the regulatory agreement to be required by TCAC, and other verifiable documentation that Borrower has received. If the equity obtained by limited partner investors ("Tax Credit Equity") increases above the amount indicated on the Project Budget, that additional Tax Credit Equity shall be applied first to Property improvements directly related to the Project, and second to funding eligible Project costs. Any remaining Tax Credit Equity shall be applied to the reduction of the principal amount of the Agency Note. If the Executive Director disapproves of evidence of financing, he or she shall do so by written notice to Borrower stating the reasons for such disapproval. In such event, Borrower shall promptly resubmit its evidence of financial capability not less than thirty (30) days after receipt of the Executive Director's disapproval, the Executive Director shall reconsider such resubmittal and the deadlines in the Schedule of Performance shall be extended accordingly. 4.12 RePorts and Accounting of Residual Receipts. a. In connection with the annual repayment of the Agency Loan, the Borrower shall furnish the Agency with an audited statement duly certified by an independent firm of certified public accountants approved by the Agency, setting forth in reasonable detail the computation and amount of Residual Receipts during the preceding calendar year. b. The Borrower shall keep and maintain at the Project, or elsewhere with the Agency's written consent, full, complete and appropriate books, records and accounts relating to the Project, including all such books, records and accounts necessary or prudent to evidence and substantiate in full detail Borrower's calculation of Residual Receipts. Books, records and accounts relating to Borrower's compliance with the terms, provisions, covenants, and conditions of this Agreement shall be kept and maintained in accordance with generally accepted accounting principles consistently applied, and shall be consistent with requirements of this Agreement which provide for the calculation of the Residual Receipts on a cash basis. All such books, records, and accounts shall be open to and available for inspection by the Agency, its auditors or other authorized representatives at reasonable intervals during normal business hours. Copies of all tax returns and other reports that Borrower may be required to furnish any governmental agency shall at all reasonable times be open for inspection by the Agency at the place that the books, records, accounts of the Borrower are kept. The Borrower shall preserve records on which any statement of Residual Receipts is based for a period of not less than five (5) years after such statement is rendered. ARTICLE 5. Agency Note and Deed of Trust 5.1 Security for Loan. Borrower's obligations to pay the Agency Loan shall be evidenced by a promissory note (the "Agency Note") in substantially the form set forth in Exhibit B at~ached hereto and incorporated herein, except as otherwise approved by the Agency Attorney, and shall be subject to the terms and conditions contained therein. The Agency Note shall provide for simple interest at the rate of six 6528943\24036.0006 (6%) percent per annum. Among other things, the Agency Note shall further provide that the Agency Note is non-recourse and that payments of principal and interest shall be made only from a fund consisting of ninety (90%) percent of the Residual Receipts (as defined in Article 4 hereof). The Agency Note shall be secured by a deed of trust (the "Agency Trust Deed") encumbering the Property as a second priority deed of trust, in the form set forth in Exhibit C attached hereto and incorporated herein. The Agency Trust Deed shall further provide that the occurrence of any material breach or default under this Agreement shall constitute a "default" or "event of default" under the Agency Trust Deed. Prior to Close of Escrow, Borrower shall execute and deliver to Agency the Agency Note and the Agency Trust Deed. The Agency Trust Deed shall be recorded with the Office of the San Diego County Recorder in accordance with Agency's instructions to escrow. Borrower shall be responsible for any and all of Agency's escrow, title and recording costs arising in connection with the Agency Loan, such costs to be paid by Borrower through escrow. ARTICLE 6 Disbursement of Agency Development Loan 6.1 Disbursement. The Agency Loan Proceeds shall be distributed on behalf of Borrower in the escrow established for Borrower's acquisition of the Property. ARTICLE 7 California Community Redevelopment Law Requirements 7.1 Requirements. Because the source of the Agency Loan is the Agency's Low and Moderate-Income Housing Fund, Borrower is required to construct and operate the Project in compliance with all requirements of California Community Redevelopment Law (Health and Safety Code, Division 24), as said code may be amended or suspended from time to time. Not by way of limitation of the foregoing, in compliance with Health and Safety Code, Division 24, from the Effective Date of this Agreement through the end of the term that the units are required to remain affordable pursuant to the California Community Redevelopment Law, Borrower, as the operating entity, shall comply with all of the following requirements: a. Use of the Aeenc¥ Low and Moderate Income Housing Fundg. Low and Moderate Income Housing Funds shall be used only for eligible costs (see, e.g., Health and Safety Code Section 33334.3) in accordance with the Project Budget and Project Pro Forma; all pre-construction and construction activities shall be completed within the times referenced in the Schedule of Performance attached hereto, as said times may be extended in accordance with Section 9.4 and Section 13.3 hereof. b. Affordability. The units shall meet the affordability requirements of Health and Safety Code Section 50053 or this Agreement, whichever is more restrictive, as more particularly set forth in Section 10.2 herein. 652894.3~24036.0006 12 I1~ '~'' /~l~,. c. Housing Standards. Borrower shall maintain units in compliance with local housing code requirements or the provisions of this Agreement, whichever requirements are more restrictive. d. Records and Reports. In addition to the other provisions of this Agreement, including without limitation Section 4.12(b) hereof, Borrower shall provide to Agency all records and reports relating to the Project that may be reasonably requested by Agency in order to enable it to perform its record keeping and reporting obligations pursuant to Health and Safety Code Sections 33080.1 and 33418. e. Enforcement of Agreement. In addition to the other provisions set forth herein, Agency shall have the authority to enforce Borrower's obligation to comply with the California Community Redevelopment Law as set forth in this Agreement. f. Duration of Covenants. In accordance with Health and Safety Code Section 33334.3, the covenants in this Section 2.6 relating to Borrower's compliance with the California Community Redevelopment Law shall remain in effect for the longest feasible time but not less than a period of at least fifty-two (52) years after the date of the City's issuance of the final certificate of occupancy for the Project. i. Monitoring. Not less than once every two years during the period covered by this Section 7.1, Agency may review Borrower's activities and operations under this Agreement and Borrower's compliance with the requirements of the California Community Redevelopment Law, including, but not limited to, Borrower's compliance with the requirements of this Section 7.1. Such review may include an on-site inspection of the Project (including unit interiors). If such an on-site inspection of the Project is to be undertaken, Agency shall coordinate such inspection with Borrower and/or the Property Manager. ARTICLE 8 Development Fee 8.1 Development Fee. Chelsea Investment Corporation Sunbow Services Company, one of the general partners of Borrower, shall be entitled to a development fee, which includes general overhead and profit, in the amount which does not exceed the amount set forth therefor in the Sources and Uses, Project Budget and Pro Forma attached hereto, and in no event greater than the maximum amount permitted pursuant to the Low Income Housing Tax Credit statutes and regulations (the "Development Fee"). It is anticipated that a portion of the Development Fee shall be paid by Borrower from the proceeds of the financing for the acquisition and development of the Project upon the close of such financing, with the balance of the Development Fee (the "Deferred Development Fee") to be paid from Gross Revenue of the Project and equity contributions to Borrower made after the closing. The Borrower's obligation to pay the Deferred Development Fee shall be evidenced by a promissory note (the "Deferred Development Fee Note"). In the event there are any cost savings realized in the construction of the Project, all available funds attributable to such cost savings shall also be applied to the Deferred Development Fee. Regular payments on the Deferred Development Fee Note shall be made on an annual basis out of the Gross Revenues of the Project. Such amounts shall be paid to Borrower on a priority basis to all other debt service on the Property except for the financing made 652894.3~24036.0006 13 ~ ,. ~" ,-. t~ pursuant to the Bonds. The developer shall specifically be entitled to payment of the Deferred Development Fee before payment of the amounts due to Agency pursuant to the Agency Note. The Deferred Development Fee Note shall not be secured by any liens upon the Property. ARTICLE 9 Development of the Project 9.1 Work to be Performed. Borrower agrees to improve the Property with a multi-family residential project consisting of 132 units and operate the Project for occupancy by very low, low and low and moderate income senior citizens, subject to the terms of this Agreement, the Housing Cooperation Agreement, the Regulatory Agreement and Declaration of Restrictive Covenants, and the TCAC Regulatory Agreement (the "Project"). The Project shall consist of 112 one-bedroom units, and 20 two-bedroom units, a community room and other common area facilities in accordance with the plans approved by the City in connection with issuance of the building permit(s), and with the terms of and conditions of all land use permits and approvals required by the City, including but not limited to, Conditional Use Permit PCC 99-25. The Project's units and occupancy shall be restricted in accordance with the terms of this Agreement. If Borrower desires to make any change in any development or building plans after the same have been approved, Borrower shall submit the proposed change to the appropriate body for approval; provided, however, that Borrower may make minor, de minimus changes without Agency's consent. Borrower shall be responsible for all construction and installation and for obtaining all the necessary permits. To the extent required by the Agency, all such work shall be completed in accordance with acquisition, development and management plans submitted to and approved by the Agency. 9.2 Compliance with Permits and Laws. Borrower and its contractors shall carry out the development of the Project and operation of the Project in conformity with all applicable laws, regulations, and rules of the governmental agencies having jurisdiction, including without limitation all conditions and requirements of California Community Redevelopment Law (Health and Safety Code, Division 24); prevailing wage requirements, if any, the applicability of which is for Borrower to determine, pursuant to federal and state law, including California Labor Code § 1770 et seq.; all conditions and requirements imposed by the Low Income Housing Tax Credit Program; applicable labor standards; the City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the City 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., the Unruh Civil Rights Act, Civil Code Section 51, et seq., and the California Building Standards Code, Health and Safety Code Section 18900, et seq., and Agency policies adopted pursuant to said federal standard regulations and requirements. Borrower shall not take any action which would cause a violation of Article XXXIV of the California Constitution. The work shall proceed only after procurement of each permit, licenses, or other authorization that may be required by any governmental agency having jurisdiction, and the Borrower shall be responsible to the Agency for procurement and maintenance thereof, as may be required of the Borrower and all entities engaged in work on the Project. 652894.3\24036.0006 14 ~ ,. ~. ,./q 9.3 Costs of Development. Subject to the terms and conditions of this Agreement, Borrower shall be responsible for all costs of developing the Project, including but not limited to predevelopment costs incurred for items such as planning, design, engineering, and environmental remediation; all development and building fees; the cost incurred to demolish and clear any and all existing improvements, furnishings, fixtures, and equipment from the Property; costs for insurance and bonds (as required); costs for financing; preparation of the Property for construction; and all on-site construction costs. This Agreement does not require Borrower to construct any off-site improvements. Borrower shall be responsible for verifying the adequacy and availability of all utilities. If at any time during the course of the development of the Project, Borrower exhausts fifty (50%) percent or more of the contingency amounts set forth in the Project Budget, Agency shall have the fight, but not the obligation, to approve any additional cost overruns, which approval shall not be unreasonably withheld. 9.4 Schedule of Performance: Progress Reporls. Subject to Section 13.3, Borrower shall begin and complete all construction and development within the times specified in the Schedule of Performance. Once construction is commenced, it shall be continuously and diligently pursued to completion, and shall not be abandoned for more than fifteen (15) consecutive business days, except when due to causes beyond the control and without the fault of Borrower, as set forth in Section 13.3 of this Agreement. During the course of construction, and prior to City's issuance of its certification of occupancy for the Project, Borrower shall keep Agency informed of the progress of construction on the Property and, if requested, shall provide Agency with monthly written progress reports and meet with Agency staff as appropriate. If requested, Borrower shall furnish a construction schedule to Agency indicating completion dates for each portion of work showing progress toward completion of the Project. After completion of construction of the Project and within the time set forth in the Schedule of Performance, Borrower shall provide the Executive Director with a true and correct copy of the final cost certification submitted to TCAC concerning the construction of the Project on the Property. Borrower shall provide additional cost information as may be reasonably requested by the Executive Director to permit the Executive Director to make such determinations as is reasonably required for Agency to verify Borrower's conformance to this Agreement and approved project plans. 9.5 Anti-discrimination During Construction. Borrower, for itself and its successors and assigns, agrees that Borrower will not discriminate against any employee or applicant for employment because of race, color, creed, religion, sex, marital status, ancestry, or national origin in connection with activities undertaken pursuant to this Agreement. 9.6 Right of Access. For the purpose of assuring compliance with this Agreement, representatives of Agency shall have the reasonable right of access to the Property, without charges or fees, at normal construction hours during the period of construction for the purposes of this Agreement, including but not limited to the inspection of the work being performed by Borrower in constructing the Project. Such representatives of Agency shall be those who are so identified in writing by the Executive Director. 652894.3\24036.0006 15 ~,~./~~' Agency shall each indemnify, defend, and hold harmless Borrower and Borrower's officers, employees, and agents from any damage caused or liability arising out of the sole negligence of Agency or its officers, officials, employees, volunteers, agents, or representatives in their exercise of this right of access; provided that it is understood that Agency does not by this Section 9.6 assume any responsibility or liability for a negligent inspection or failure to inspect. Any inspection by Agency pursuant to this section shall be conducted so as not to interfere or impede the construction or operations of the Project. 9.7 Mechanics Liens, Stop Notices, and Notices of Completion. a. If any claim or lien is filed against the Project or a stop notice affecting the Agency Loan is served on the Agency or any other lender or other third party in connection with the Project, then the Borrower shall, within thirty (30) days after such filing or service, either pay and fully discharge the lien or stop notice, effect the release of such lien or stop notice by delivering to the Agency a surety bond in sufficient form and amount, or provide the Agency with other assurance satisfactory to the Agency that the claim of lien or stop notice will be paid or discharged. b. If Borrower fails to discharge any lien, encumbrance, charge, or claim in the manner required in Section 9.7 (a), then in addition to any other right or remedy, the Agency may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at the Borrower's expense. Alternately, the Agency may require the Borrower to immediately deposit with the Agency the amount necessary to satisfy such lien or claim and any costs pending resolution thereof. The Agency shall use such deposit to satisfy any claim or lien that is adversely determined against the Borrower. c. The Borrower shall file a valid notice of cessation or notice of completion upon cessation or construction on the Project for a continuous period of thirty (30) days or more, and take all other reasonable steps to forestall the assertion of claims of lien against the Project. The Borrower authorizes the Agency, but without any obligation, to record any notices of completion or cessation of labor, or any other notice that the Agency deems necessary or desirable to protect its respective interest in the Project. 9.8 Certificate of Completion. Upon Borrower's satisfactory completion of construction of the Project, Agency shall fumish Borrower with a Certificate of Completion upon written request therefor by Borrower. Such Certificate of Completion shall be in a form so as to permit recordation in the Office of the Recorder of the County of San Diego as set forth in Exhibit G which is incorporated herein. The Certificate of Completion shall be, and shall so state, a conclusive determination of satisfactory completion of the construction of the Project and of full compliance with the terms of this Agreement relating to such construction. After the date of the issuance of the Certificate of Completion, and notwithstanding any other provisions of this Agreement to the contrary, any party then owning or thereafter purchasing, leasing, or otherwise acquiring any interest in the Property shall not (because of such ownership, purchase, lease, or acquisition) incur any obligation or liability under this Agreement for the construction of the Project. City shall not unreasonably withhold the Certificate of Completion. If City refuses or fails to furnish the Certificate of Completion after written request from Borrower, City shall, within fifteen (15) days after such written request, provide Borrower with a written statement of the reasons City refused or failed to furnish such Certificate of 652894.3\24036.0006 16 ~ "~""/~ Completion. The statement shall also contain City's opinion of the action Borrower must take to obtain such Certificate of Completion. If the reason for such refusal is confined to the immediate availability of specific items or materials for landscaping, City shall issue its Certificate of Completion upon the posting of cash deposit or an irrevocable letter of credit in favor of City in an amount representing the fair value of the work not yet completed and in a form reasonably acceptable to City's attorney. A Certificate of Completion is not a notice of completion as referred to in California Civil Code Section 3093. 9.9 Estoppels. At the request of Borrower or any holder of a mortgage or deed of trust, Agency shall, from time to time and upon the request of such holder, timely execute and deliver to Borrower or such holder a written statement of Agency that no default or breach exists (or would exist with the passage of time, or giving of notice, or both) by Borrower under this Agreement, if such be the case, and certifying as to whether or not Borrower has at the date of such certification complied with any obligation of Borrower hereunder as to which such holder may inquire. The form of any estoppel letter shall be prepared by the holder or Borrower. ARTICLE 10 Uses Of The Property 10.1 Summary. Borrower covenants and agrees for itself and its successors and assigns to its interest in the Property that Borrower and such successors and assigns shall devote the Property to uses consistent with California Community Redevelopment Law, the approved Development Project/Architectural Plans, the Regulatory Agreement and Declaration of Restrictive Covenants, the Housing Cooperation Agreement, the Agency Trust Deed, and this Agreement, whichever is most restrictive, for a period of fifty-two (52) years after the date of the City's issuance of the final certificate of occupancy for the Project. Agency shall be a third-party beneficiary under the Housing Cooperation Agreement and Regulatory Agreement and Declaration of Restrictive Covenants, and shall have full authority to enforce any breach or default by Borrower under such agreements in the same manner as though it were a breach or default hereunder. Without Agency's prior written consent, which consent may be withheld in Agency's sole and absolute discretion, Borrower shall not consent to any amendment of or modification to the TCAC Regulatory Agreement, Housing Cooperation Agreement and Regulatory Agreement and Declaration of Restrictive Covenants which (i) shortens the term of the affordability restrictions on the units in the Project to a term of less than fifty-two (52) years after the date of the City's issuance of the final certificate of occupancy for the Project or (ii) modifies the number of units required to be rented at affbrdable housing costs to persons of specified incomes. 10.2 Affordable Housing. Borrower covenants and agrees for itself and its successors and assigns to its interest in the Property that commencing upon the completion of the Project and continuing thereafter for a period of fifty- two (52) years after the date of the City's issuance of the final certificate of occupancy for the Project, Borrower and such successors and assigns shall devote one hundred thirty-one (131) of the one hundred thirty:two (132) residential units on the Property (hereinafter the "Restricted Units") to its continuous use as affordable rental housing for low and moderate income senior citizens in 652894.3\24036.0006 17 ~ .~'~ ~ ~ accordance with the terms of this Agreement (the remaining unit to be occupied by the on-site property manager), subject to the occupancy restrictions contained in this Section 10.2. During the period of time set forth in the preceding paragraph, occupancy and rental of the Restricted Units shall be restricted in accordance with the Restricted Unit Mix attached hereto as Exhibit H which is incorporated herein. In determining income eligibility for a particular Restricted Unit, Borrower shall be entitled to rely upon the documentation provided by the prospective tenant as required pursuant to the TCAC Regulatory Agreement, Housing Cooperation Agreement and Regulatory Agreement and Declaration of Restrictive Covenants. Borrower shall not be required to perform further investigations into the household income other than those which are required pursuant to such agreements. Throughout this Agreement, wherever it is stated that Borrower must comply with the affordability requirements and/or verify such compliance, Borrower shall be entitled to rely upon the tenant documentation discussed in this paragraph. In addition to the foregoing, the lease agreement for each Restricted Unit in the Project shall restrict occupancy of the Restricted Unit to a total of two (2) persons for one bedroom apartment units and four (four) persons for two bedroom units. Any violation of such restrictions shall constitute a default by the tenant, unless such occupancy restriction is found invalid by a court of competent jurisdiction in a final non-appealable judgment in a lawsuit in which the Project's occupancy restriction is at-issue, or in an applicable and binding published appellate opinion. 10.3 Reports. Borrower, at its expense, shall submit, or cause the Property Manager to submit, to the appropriate entities any and all reports required to be submitted pursuant to California Community Redevelopment Law. 10.4 Subordination of Affordabilitv Covenants. In the event that the Agency finds that an economically feasible method of financing for the construction and operation of the Project, without the subordination of the affordable housing covenants as may be set forth in this Agreement, is not reasonably available, the Agency shall make the affordable housing covenants set forth in this Agreement junior and subordinate to the deeds of trust and other documents required in connection with the construction and permanent financing for the Project approved pursuant to this Agreement, and the TCAC Regulatory Agreement. Any subordination agreement entered into by the Agency shall contain written commitments which the Agency finds are reasonably designed to protect Agency's investment in the event of default, such as any of the following: (a) a right of Agency to cure a default on the loan prior to foreclosure, (b) a right of Agency to negotiate with the lender after notice of default from the lender and prior to foreclosure, (c) an agreement that if prior to foreclosure of the loan, Agency takes title to the property and cures the default on the loan, the lender will not exercise any right it may have to accelerate the loan by reason of the transfer of title to Agency, and (d) a right of Agency to reacquire the Property from the Borrower at any time after a material default on the loan. 652894.3\24036.0006 18 ~ '~ ' /~ 10.5 Condition of the Property. a. Borrower hereby represents that to the best of its knowledge it is not aware of and has not received any notice or communication from any government agency having jurisdiction over the Property notifying Borrower of the presence of surface or subsurface zone Hazardous Materials in, on, or under the Property, or any portion thereof. "Best knowledge," as used herein, shall mean the actual or constructive knowledge of the Borrower and its officers, directors, employees, agents and representatives, as based upon the documents and materials in the possession of Borrower, and its officers, employees, agents and representatives, including the site investigation report or study referred to in Section 10.5(b) herein. b. In addition to the foregoing, the Borrower has, at its sole cost and expense, engaged its own environmental consultant to conduct a Phase 1 investigation of the Property and produce a report thereof, a copy of which has been provided to the Agency by Borrower. Such report concludes that no Hazardous Materials have been detected on the Property. c. Borrower shall take all necessary precautions to prevent the release into the environment of any Hazardous Materials which may be located in, on or under the Property. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Borrower shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. d. Borrower shall indemnify, defend and hold Agency harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, reasonable attorneys' fees), resulting from, arising out of, or based upon (i) the release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Property, no matter when such claim, action, suit or proceeding is first asserted or begun and no matter how the Hazardous Materials came to be released, used, generated, discharged, stored or disposed of on, under, in or about, to or from the Property, or by whom or how they are discovered, or (ii) the violation, or alleged violation, of any statute, ordinance, order, role, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in or about, to or from, the Property. This indemnity shall include, without limitation, any damage, liability, fine, penalty, parallel indemnity after closing, cost or expense arising from or out of any claim, action, suit or proceeding, including injunctive, mandamus, equity or action at law, for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. e. For purposes of this Agreement, "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, Ventura County, the State of California, regional 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 25130 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 652894.3\24036.0006 19 ~' ' ~' l~ 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 byphenyls, (viii) methyl tertiary butyl ether, (ix) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the California Code of Regulations, Division 4, Chapter 20, (x) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.C. § 1317), (xi) 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 (xii) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601, et seq. 10.6 Marketing Plan. Borrower shall submit for the approval of the Agency, which approval shall not unreasonably be withheld, a plan for marketing the rental of the apartment units in compliance with federal and state fair housing law. Such marketing plan shall include a plan for publicizing the availability of the apartment units within the City, such as notices in any City sponsored newsletter, newspaper advertising in local newspapers and notices in City offices. The marketing plan shall require Borrower to obtain from the Agency the names of low- and moderate-income persons who have been displaced by the Agency's redevelopment projects, and to notify persons on such list of the availability of units in the Project prior to undertaking other forms of marketing. The marketing plan shall provide that the persons on such list of displaced persons be given not fewer than ten (10) days after receipt of such notice to respond by completing application forms for rental of apartment units, as applicable. 10.7 Maintenance of Property. Borrower agrees for itself and its successors in interest to all or any portion of the Property, to maintain the improvements on the Property in conformity with the City Municipal Code, and shall keep the Property free from any accumulation of debris or waste materials. During such period, the Borrower shall also maintain the landscaping planted on the Property in a healthy condition. If at any time Borrower fails to maintain the Property and such condition is not corrected within five days after written notice from Agency with respect to graffiti, debris, waste material, and general maintenance, or thirty days after written notice from Agency with respect to landscaping and building improvements, then Agency, in addition to whatever remedy it may have at law or at equity, shall have the right to enter upon the applicable portion of the Property and perform all acts and work necessary to protect, maintain, and preserve the improvements and landscaped areas on the Property, and to attach a lien upon the Property, or to assess the Property, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by Agency and/or costs of such cure, including a fifteen percent (15%) administrative charge, which amount shall be promptly paid by Borrower to Agency upon demand. 10.8 Provertv Management. The parties acknowledge that the Agency is interested in the long term management and operation of the Property and in the qualifications of any person or entity retained by the Borrower for that 652894.3~24036.0006 20 ~ '~'-- ~0 purpose (the "Property Manager"). Therefore, during the period of the effectiveness of the affordability covenants set forth herein, the Agency may from time to time review and evaluate the identity and performance of the Property Manager as it deems appropriate. If the Agency determines that the performance of the Property Manager is deficient based upon the standards and requirements set forth in this Agreement, the Agency shall provide notice to the Borrower of such deficiencies and the Borrower shall use its best efforts to correct such deficiencies. Upon default of the terms of this Agreement by the Property Manager, the Agency shall have the right to require the Borrower to immediately remove and replace the Property Manager with another property manager or property management company who is reasonably acceptable to the Agency, who is not related to or affiliated with the Borrower, and who has not less than five (5) years experience in property management, including experience managing multifamily residential developments of the size, quality and scope of the Property. In addition, the Borrower shall submit for the approval of the Agency a detailed "Management Plan" which sets forth in detail the duties of the Property Manager, the tenant selection process, a security system and crime prevention program, the procedures for the collection of rent, the procedures for monitoring of occupancy levels, the procedures for eviction of tenants, the rules and regulations of the Property and manner of enforcement, a standard lease form, and other matters relevant to the management of the Property. The management plan shall require the Property Manager to adhere to a fair lease and grievance procedure and provide a plan for tenant participation in management decisions. The management of the Property shall be in compliance with the Management Plan which is approved by the Agency. The Management Plan may be revised from time to time upon the approval of the Agency and the Borrower. 10.9 Design and Occupancy of Senior Units. Borrower shall restrict occupancy of all apartment units in the Project to "Senior Citizens" and "Qualified Permanent Residents" (as those terms are defined in California Civil Code Section 51.3). California Civil Code Section 51.3 presently provides as follows: At least one person in residence in each dwelling unit must be a Senior Citizen, and other residents in the same dwelling unit who are not Senior Citizens must be Qualified Permanent Residents. Temporary guests of a Senior Citizen or Qualified Permanent Resident shall be allowed for a period of not more than sixty (60) days in any twelve (12) month period. Upon the death, dissolution of marriage, hospitalization or other prolonged absence of the Senior Citizen in a dwelling unit, any Qualified Permanent Resident who has continuously resided in the dwelling unit with such Senior Citizen shall be permitted to continue as a resident of that dwelling unit. "Permitted Health Care Residents" (as that term is defined in California Civil Code Section 51.3) shall be permitted to occupy any dwelling unit during any period that such person is actually providing live-in, long-term or hospice health care to a Senior Citizen tenant or Qualified Permanent Resident tenant for compensation. Notwithstanding the foregoing, however, in the event that Borrower in its sole discretion elects to provide one of the apartment units for residency by an on-site manager and/or on-site maintenance manager, such unit or units shall not be required by this Agreement to be restricted to Senior Citizens and Qualified Permanent Residents, except as required by applicable law. 652894.3~24036.0006 21 £ ARTICLE 11 Continuing Obligations of Borrower 11.1 Applicability. For the longer of the entire term, or so long as the Agency Note remains outstanding, the Borrower shall comply with the provisions of this Article 11. 11.2 Insurance. Within ten (10) days after the Borrower's acquisition of the Property, Borrower shall furnish to the Agency duplicate originals or appropriate certificates of insurance coverage evidencing that Borrower has obtained, or cause to be obtained, insurance coverage with respect to the Property and Project in type, amount and from insurers with Best's A-V ratings or better, as are reasonably acceptable to Agency, naming the Agency and its officers, agents, employees, representatives and their respective successors, as named or additional insureds by appropriate endorsements. Such policy shall include, without limitation "all risk" property casualty insurance and comprehensive general liability insurance. Without limiting the generality of the foregoing, such policy shall also include coverage to insure Borrower's indemnity obligations provided herein. Borrower covenants and agrees for itself and its successors and assigns that Borrower and such successors and assigns shall keep such policy in full force and effect until the date that is fifty-two (52) years after the date of the City's issuance of the final certificate of occupancy for the Project. In addition to any other remedy which Agency may have hereunder for Borrower's failure to procure, maintain, and/or pay for the insurance required herein, Agency may (but without any obligation to do so) at any time or from time to time, after thirty (30) days written notice to Borrower, procure such insurance and pay the premiums therefor, in which event Borrower shall immediately repay Agency all sums so paid by Agency together with interest thereon at the rate of ten percent (10%) per annum or the maximum legal rate, whichever is less. 11.3 Proceeds of Insurance. Should the Project be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by Borrower, Borrower shall promptly proceed to obtain insurance proceeds and take all steps necessary to promptly and diligently commence the repair or replacement of the Project to substantially the same condition as the Project is required to be maintained in pursuant to this Agreement if (i) the Borrower agrees in writing within ninety (90) days after payment of the proceeds that such repair or rebuilding is economically feasible, and (ii) each lender of an outstanding Construction and Permanent Loan permits such repair or rebuilding, provided that the extent of Borrower's obligation to restore the Project shall be limited to the amount of the insurance proceeds. If the Borrower is unable or is not permitted to repair, replace, or restore the Project, Borrower must give notice to Agency (in which event Borrower will be entitled to all insurance proceeds, subject to any outstanding lien obligations, but Borrower shall be required to remove all debris from the Property) or Borrower may reconstruct such other improvements on the Property as are consistent with applicable land use regulations and approved by the Agency and the other governmental agency or agencies with jurisdiction. 1 1.4 Taxes. Assessments, Encumbrances~ and Liens. 652894.3\24036.0006 22 ~ Borrower shall pay prior to delinquency all real estate taxes and assessments properly assessed and levied on the Property. Until the date Borrower is entitled to issuance by City of the Certificate of Completion for the Project, Borrower shall not place or allow to be placed thereon any mortgage, trust deed, encumbrance, or lien (except mechanic's liens prior to suit to foreclose the same being filed) not authorized by this Agreement. Borrower shall remove or have removed any levy or attachment made on the Property, or assure the satisfaction thereof, within a reasonable time, but in any event prior to a sale thereunder. Nothing herein contained shall be deemed to prohibit Borrower from contesting the validity or amounts of any tax, assessment, encumbrance, or lien, nor to limit the remedies available to Borrower in respect thereto. 11.5 Hold Harmless. Borrower agrees to indemnify, protect, defend and hold harmless Agency, and Agency's officers, agents, employees, representatives and successors, from and against any and all claims, damages, actions, costs, demands, expenses or liability, including without limitation, reasonable attorneys' fees and court costs, which may arise from the direct or indirect actions or inactions of the Borrower or those of its contractors, sub-contractors, agents, employees or other persons acting on Borrowers' behalf which relate to the Property or Project. This hold harmless agreement applies, without limitation, to all damages and claims for damages suffered or alleged to have been suffered by reasons of the operations referred to in this paragraph, regardless of whether or not the Agency prepared, supplied or approved plans or specifications, or both, for the Property or Project. This indemnity by Borrower, and all other indemnities set forth herein shall survive any foreclosure of the Property by the Agency pursuant to the terms of the Agency Trust Deed. 11.6 Further Indemnification of Agency. It is understood and agreed that the parties hereto have entered this Agreement as a method of providing necessary assistance to Borrower in connection with the development of low and moderate income housing and development of the Property pursuant to all applicable laws and that by contributing public funds to assist in the accomplishment of such development, or by otherwise contributing or assisting with the accomplishment of such development, the Agency assumes no responsibility for insuring that the same is adequately undertaken (including, without limitation, the existence and/or remediation of any hazardous or toxic substances on the Property) and as a material consideration to Agency for entering into this Agreement (and not by way of limiting the generality of Section 11.5 above) Borrower agrees to indemnify, protect, defend and hold harmless Agency and all Agency's representatives, officers, employees and their respective successors from and against any and all claims, damages, actions, demands, liabilities, obligations, expenses, losses or costs, including without limitation, reasonable attorneys' fees and court costs, which may ar/se or in any manner connected with the development of the Project pursuant to this Agreement; excluding, however, from Borrower's indemnity any such liability, losses, damages (including foreseeable or unforeseeable consequential damages), penalties, fines, expenses (including out-of-pocket litigation costs and reasonable attorneys' fees) directly or indirectly arising out of the actions of Agency or its respective employees, contractors, subcontractors or agents. 652894.3L24036.0006 23 ~' ~ I~ 11.7 Obligation to Refrain from Discrimination. There shall be no discrimination against, or segregation of, any persons, or group of persons, on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the enjoyment of the Property, nor shall Borrower itself, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Property or any portion thereof. Borrower shall further comply with all the requirements of the Americans with Disabilities Act. 11.8 Form o f Nondiscrimination and Nonsegregation Clauses. Borrower shall refrain from restricting the rental, sale, or lease of any portion of the Property, or contracts relating to the Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person and shall comply with all the requirements for the ADA. All such deeds, leases or contracts, 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 race, color, creed, religion, sex, marital status, ancestry, or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the land herein conveyed, nor shall the grantee himself, or any persons claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the land herein conveyed and further covenants that all such individuals and entities shall copy with all requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 U.S.C. § 12101, et seq.). The foregoing covenants shall mn 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, 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 race, color, creed, religion, sex, marital status, ancestry, or national origin in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the land herein leased, nor shall the lessee himself, or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the land herein lease and the lease shall be carded out in compliance with all requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 U.S.C. § 12101, et seq.).'" c. In contracts: "There shall be no discrimination against or segregation of any persons or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the sale, lease, transfer, use, occupancy, tenure, or enjoyment of land, nor shall the transferee himself, or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees of land and all such activities shall be conducted in compliance with all the requirements of the Americans with 652894.3\24036.0006 24 t' Disabilities Act of 1990, as the same may be amended from time to time (42 U.S.C. §12101, et seq.)." 11.9. Effect of Covenants. a. Unless sooner terminated by Agency as provided for herein, all covenants contained herein shall mn with the land and shall be extinguished and of no further force and effect upon the fifty-fifth anniversary of the issuance of the certificate of occupancy by the Agency, with the exception of the non-discrimination and non-segregation covenants which shall mn in perpetuity. The covenants established herein shall, without regard to technical classification and designation, be binding on the part of Borrower and any successors and assigns to the Property or any part thereof, and the tenants, lessees, sublessees and occupants of the Property, for the benefit of and in favor of the Property and the Agency, its successors and assigns and any successor in interest thereto. Agency is deemed the beneficiary of such covenants for and in its own right and for the purposes of protecting the interest of the community and other parties, public or private, in whose favor and for whose benefit of such covenants running with the land have been provided, without regard to whether Agency has been, remained, or are owners of any particular land or interest therein. Agency shall have the right to unilaterally terminate the covenants at any time (subject to the TCAC Regulatory Agreement) or, if such covenants are breached (subject to any cure rights provided herein) to exercise all rights and remedies and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it or any other beneficiaries of this Agreement and the covenants may be entitled, including specific performance (it being recognized that the breach of such covenants cannot be adequately compensated by monetary damages), and any and all remedies provided in the Agency Trust Deed and the Agency Note including, without limitation, foreclosure proceedings against the Property. b. Without limiting the generality of the foregoing, in the event that there is a breach of the terms of this Agreement or any covenants provided herein, the Agency shall have the right, but not the obligation, to take any and all actions the Agency deems necessary, to cure such breach, including, without limitation, taking possession of the Property for management and/or repair purposes, and to obtain reimbursement from Borrower for any reasonable costs incurred by the Agency in the exercise of such remedy. Furthermore, Borrower hereby covenants by and for itself, its successors and assigns and every person acquiring an interest in the Property, or any part thereof, that Agency and other public agencies at their sole risk and expense, shall have the right to enter the Property or any part thereof at all reasonable times and with as little interference as possible for the purposes of construction, reconstruction, maintenance, repair or service of any public improvements or public facilities located on the Property and to ensure compliance with the restrictions and covenants contained herein. Any such entry shall be made only after reasonable notice to Borrower (provided, however, that entry to ensure compliance with any restrictions may be without notice to Borrower) and, any damage or injury to the Property resulting from such entry shall be promptly repaired at the sole expense of the public agency responsible for the entry except to the extent any such damage or injury arises as a result of the negligence or willful misconduct of the Borrower or its officers, employees, agents, invitees or contractors. c. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Agreement shall defeat or render invalid or in any way impair the lien or charge of any mortgage, deed of trust or other financing or security instrument; provided, however, that any successor of Borrower to the Property shall be bound by such remaining covenants, conditions, restrictions, limitations and provisions, whether such successor's title was acquired by 652894.3\24036.0006 25 foreclosure, deed in lieu of foreclosure, trustee's sale or otherwise. Failure to comply with the covenants, conditions, restrictions, provisions or the limitation contained in this Agreement shall constitute a material default hereunder permitting the Agency to exercise any of its rights or obligations provided hereunder, including, without limitation, those provided under the Agency Note, or the Agency Trust Deed, or otherwise provided at law or in equity. 11.10 Prohibition A~ainst Assignment and Transfer. The qualifications and identity of Borrower are of particular concern to Agency. It is because of those qualifications and identity that Agency has entered into this Agreement with Borrower. Accordingly, for a period of fifty-two (52) years after the date of the City's issuance of the final certificate of occupancy for the Project, (1) Borrower, without Agency's prior written approval, shall not, whether voluntarily, involuntarily, or by operation of law, and except as permitted in this Section 11.10, undergo any significant change in ownership (including the sale or conveyance of any of the general partnership interests in the Borrower) or assign all or any part of this Agreement or any rights hereunder, and (2) Borrower without Agency's prior written approval, shall not, whether voluntarily, involuntarily, or by operation of law, and except as permitted in this Section 11.10, sell, lease, assign or otherwise convey all or any part of the Property or Project. Notwithstanding the foregoing, the following shall not be considered a significant change in ownership or an assignment or transfer and shall not require Agency approval for purposes of this Section 11.10: (i) Transfers to any entity or entities wholly owned and controlled by Borrower. (ii) The conveyance or dedication of portions of the Property to the Agency or other appropriate governmental agency for the formation of an assessment district, or the granting of easement or permits to facilitate the development of the Property. (iii) A sale or transfer of some or all of the limited partnership interests in the Borrower. (iv) The leasing of all or any apartment units to tenants in the ordinary course of business. (v) Transfers of property management responsibilities in accordance with Section 10.8 hereof, provided, however, that Borrower shall provide Agency thirty (30) days prior written notice of any such management change, and that this exception shall be limited to transfers to property managers with significant experience in managing projects similar to the Project. Any such assignee shall be subject to all terms and conditions of this Agreement, including, without limitation, all affordability restrictions concerning the occupancy of the Property. Borrower shall deliver written notice to Agency requesting approval of any assignment or transfer requiring Agency approval hereunder. Such notice shall be given prior to Borrower entering into a formal written agreement with the proposed assignee. In considering whether it will grant approval to any assignment by Borrower of its interest in the Property or any portion thereof, which assignment requires Agency approval, Agency shall 652894.3\24036.0006 26 consider factors such as (i) the financial strength and capability of the proposed assignee to perform Borrower's obligations hereunder and (ii) the proposed assignee's experience and expertise in the planning, financing, development, and operation of similar projects. No assignment, including assignments which do not require Agency approval hereunder, but excluding assignments for financing purposes, shall be effective unless and until the proposed assignee executes and delivers to Agency an agreement, in form satisfactory to the Agency Attorney, assuming the obligations of the assignor which have been assigned. Thereafter, the assignor shall be relieved of all responsibility to Agency for performance of the obligations assumed by the assignee. No lender approved by Agency pursuant to Section 4 shall be required to execute an assumption agreement and such lender's rights and obligations hereunder shall be as set forth in Section 4. 11.10 Secured Financing; Right of Holders. a. Permitted Encumbrances. Mortgages, deeds of trust, conveyances, and leases-back or any other form of conveyance required for any financing permitted and/or approved by the Agency pursuant to Section 4 hereof are permitted before Agency's issuance of the Certificate of Completion. b. Holder Not Obligated to Construct Improvements. The holder of any mortgage or deed of trust or other security interest authorized by this Agreement shall in no way be obligated by the provisions of this Agreement to construct or complete the improvements or to guarantee such construction or completion; provided, however, that nothing in this Agreement shall be deemed or construed to permit or authorize any such holder (with the exception of the holder of any deed of trust securing the loan made from the proceeds of the Bonds) to devote the Property or any part thereof to any uses, or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement. c. Notice of Default to Mortnaze. Deed of Trust or Other Secured Instrument Holders; Right to Cure. Whenever Agency shall deliver any notice or demand to Borrower with respect to any breach or default by Borrower hereof, Agency shall at the same time deliver a copy of such notice or demand to each approved holder of record of any mortgage, deed of trust, or other security instrument which has previously requested such notice in writing. Each such holder shall (insofar as the rights of Agency are concerned) have the right, at its option within ninety (90) days after the receipt for the notice, to commence and thereafter to diligently proceed to cure or remedy such default and add the cost thereof to the security interest debt and the lien on its security interest. d. Right of Agency to Cure Mortgage, Deed of Trust, or Other Security Instrument Default. In the event of a default or breach by Borrower of a mortgage, deed of trust, or other security instrument or lease-back or conveyance for financing prior to the issuance by City of the Certificate of Completion for the Project, Agency may cure the default prior to completion of any foreclosure. In such event, Agency shall be entitled to reimbursement from Borrower of all costs and expenses reasonably incurred by Agency in curing the default, which right of reimbursement shall be secured by a lien upon the Property to the extent of such costs and disbursements. Any such lien shall be subject to: 652894.3\24036.0006 27 (i) Any mortgage, deed of trust, or other security instrument or sale and lease- back or other conveyance for financing permitted by this Agreement; or (ii) Any rights or interests provided in this Agreement for the protection of the holders of such mortgages, deed of trust, or other security instruments, the lessor under a sale and lease-back, or the grantee under such other conveyance for financing; provided that nothing herein shall be deemed to impose upon Agency any affirmative obligations (by the payment of money, construction, or otherwise) with respect to the Property in the event of its enforcement of its lien. 11.11 Rieht of Aeency to Satisfy Liens. Prior to the issuance by Agency of the Certificate of Completion for the Project, and after Borrower has had a reasonable time to challenge, cure, or satisfy any liens or encumbrances on the Property, Agency, after sixty (60) days prior written notice to Borrower, shall have the right, but not the obligation, to satisfy any liens or encumbrances on the Property; provided, however, that nothing in this Agreement shall require Borrower to pay or make provision for the payment of any tax, assessment, lien, or charge so long as Borrower in good faith shall contest the validity or amount thereof, and so long as such delay in payment shall not subject the Property to forfeiture or sale. ARTICLE 12 Defaults, Remedies, And Termination 12.1 Defaults- General. Subject to all of the extensions of time available in Section 13.3, failure or delay by any party to perform any term or provision of this Agreement constitutes a default under this Agreement; however, the party shall not be deemed to be in default if (i) such party cures, corrects, or remedies such default within thirty (30) days after receipt of a notice specifying such failure or delay, or (ii) for such defaults that cannot reasonably be cured, corrected, or remedied within thirty (30) days, if such party commences to cure, correct, or remedy such failure or delay within thirty (30) days after receipt of a notice specifying such failure or delay, and diligently prosecutes such cure, correction or remedy to completion. The injured party shall give written notice of default to the party in default, specifying the default complained of by the injured party. Copies of any notice of default given to Borrower shall also be delivered to any permitted lender requesting such notice. Except as provided in Section 12.3 herein or as required to protect against further damages, the injured party may not institute proceedings against the party in default until thirty (30) days after giving such notice. Except as otherwise expressly provided in this Agreement, any failure or delay in giving such notice or in asserting any of its rights and remedies as to any default shall not constitute a waiver of any default, nor shall it change the time of default, nor shall it deprive either party of its rights to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. 12.2 Termination. 12.2.1 Termination by Agency. 6528943\240360006 28 ~'~,~.,,~Iv Notwithstanding any other provision of this Agreement to the contrary, in the event that Agency is not in default under this Agreement, Agency shall have the right to terminate this Agreement upon written notice to the other parties if: (i) Borrower commits a material default hereunder and fails to cum said default within the time specified in Section 12.1 hereof; or (ii) Borrower fails to obtain the necessary approvals from the Tax Credit Allocation Committee for participation in the Low Income Housing Tax Credit Program under terms that will restrict the residential units in the Project to the requirements set forth in the Restricted Unit Mix; or (iii) Escrow has not closed on the conveyance of the Property to Borrower on or before ., 1999, as such date may be extended by agreement of all the parties hereto in their sole and absolute discretion; or (iv) Borrower shall have failed to commence construction of the Project pursuant to a valid building permit or permits and is not diligently proceeding with such construction on or before the time required in the Schedule of Performance and does not timely cure such default. In addition, in the event of Borrower's uncured material default under this Agreement at the time Agency exercises its right under this Section 12.2 to terminate the Agreement, nothing in this Section 12.2 is intended or shall be interpreted as a limitation of any other legal or equitable rights to which Agency may be entitled. 12.2.2 Termination bv Borrower. Notwithstanding any other provision of this Agreement to the contrary, in the event that prior to the disbursement of the Agency Loan, and provided that Borrower is not in default under this Agreement, Borrower shall have the right to terminate this Agreement, upon written notice to Agency if: (i) Agency commits a material default hereunder and fails to cure said default within the time specified in Section 12.1; or (ii) Escrow has not closed on the conveyance of the Property to Borrower on or before , 1999, as such date may be extended by agreement of all the parties hereto, in their sole and absolute discretion; or (iii) City fails to approve, after best efforts by Borrower to obtain such approval, such permits as required to commence and complete construction of the Project on the site. In addition, in the event of Agency's uncured material default under this Agreement at the time Borrower exercises its right under this Section 11.2 to terminate the Agreement, nothing in this Section 11.2 is intended or shall be interpreted as a limitation of any other legal or equitable rights to which Borrower may be entitled. 12.3 Le~,al Actions. 12.3.1 Institution of Legal Actions. In addition to any other rights or remedies, either party may institute legal action to cure, correct, or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purposes of this Agreement. Such legal actions must be instituted and maintained in the Superior Court of the County of San Diego, State of California, or in any other appropriate court in that county. 12.3.2 Applicable Law. 652894.3\24036.0006 29 The laws of the State of California shall govern the interpretation and enforcement of this Agreement. 12.3.3 Acceptance of Service of Process. In the event that any legal action is commenced by Borrower against Agency, service of process on Agency shall be made by personal service upon the Executive Director or City Clerk, or in such other manner as may be provided by law. In the event that any legal action is commenced by Agency against Borrower, service of process on Borrower shall be made by personal service upon Borrower or in such other manner as may be provided by law, and shall be valid whether made within or without the State of California. 12.3.4 Action for Specific Performance. If either the Borrower or Agency defaults with regard to any of the provisions of this Agreement, the non-defaulting party shall serve written notice of such default upon the defaulting party. If the default does not commence to he cured by the defaulting party within thirty (30) days after service of the notice of default, the non-defaulting party at its option may thereafter commence an action for specific performance of the terms of this Agreement pertaining to such default, subject to the provisions of Section 13.3 hereof. 12.3.5 Rights and Remedies are Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise by either party of one or more of its rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other party. ARTICLE 13 General Provisions 13.1 Notices. Demands, and Communications Between the Parties. Formal notices, demands, and communications between Agency and Borrower shall 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, or (iii) mailing in the United States mail, certified mail, postage prepaid, return receipt requested, addressed to: To A~encv: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Executive Director With a copy to: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Agency Attorney 652894.3~24036.0006 30 4~ ~'~'~' ~ 0 Community Development Department City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Housing Coordinator To Borrower: Serena Sunbow, LP c/o Chelsea Investment Corporation 215 South Hwy 101, Suite 200 Solana Beach CA 92075 Attn: Wallace Dieckmann Notices personally delivered or delivered by document delivery service shall be deemed effective upon receipt. Notices mailed shall be deemed effective on the second business day following deposit in the United States mail. Such written notices, demands, and communications shall be sent in the same manner to such other addresses as either party may from time to time designate by mail. 13.2 Nonliabilit¥ of Agency Officials and Employees: Conflicts of Interest. No member, official, employee, or contractor of Agency shall be personally liable to Borrower in the event of any default or breach by Agency or for any amount which may become due to Borrower or on any obligations under the terms of this Agreement. No member, official, employee, or agent of Agency shall have any direct or indirect interest in this Agreement nor participate in any decision relating to this Agreement which is prohibited by law. 13.3 Enforced Delay: Extension of Times of Performance. In addition to specific provisions of this Agreement, and except as expressly set forth in Section 12.2 and this Section 13.3, performance by either party hereunder shall not be deemed to be in default and such party shall be entitled to an extension of time to perform its obligations hereunder where delays in performance are due to causes beyond the control and without the fault of such party, including as applicable: war; insurrection; strikes; lock-outs; riots; floods; earthquakes; fires; casualties; supernatural causes; 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; delays of any contractor, subcontractor or supplies; acts of the other party; acts or the failure to act of Agency or any other public or governmental agency or entity (except that any act or failure to act of or by Agency shall not excuse performance by Agency). Notwithstanding the foregoing, an extension of time under this Section 13.3 due to Borrower's inability to secure satisfactory financing, interest rates, and market and economic conditions shall entitle Borrower to an extension of time to perform not to exceed a cumulative total of six (6) months; provided, however that the six (6) month limit shall not apply to Borrower's inability to sell the low income housing tax credits at an amount sufficient to yield approximately the Tax Credit Equity as shown on the Project Budget. In addition, nothing in this Section 13.3 is intended or shall be interpreted to entitle Borrower to an extension of time to close the escrow for acquisition of the Property or to delay commencement of construction of the Project. An extension of time for any cause permitted under this Section 13.3 shall be limited to the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if 652894.3\240360006 3 1 ~ ~ ~' ~ t notice by the party claiming such extension is sent to the other party within thirty (30) days of knowledge of the commencement of the cause, or if no written notice is sent within thirty (30) days, from the date written notice is sent to the other party. Times of performance under this Agreement may be extended by mutual written agreement of Agency and Borrower. 13.4 Inspection of Books and Records. Agency shall have the right at all reasonable times to inspect the books and records of Borrower pertaining to the Property and the Project as pertinent to the purposes of this Agreement. Borrower shall provide its books and records to Agency without reasonable delay upon no less than five (5) days prior written request by Agency. Borrower shall maintain its books and records within the County of San Diego. Agency shall not request inspection for Borrower's books and records more than once in any twelve (12) month period, unless Agency is required to obtain information in order to comply with reporting or other requirements of law herein. Borrower shall have the right at all reasonable times to inspect the books and records of Agency pertaining to the Property and the Project as pertinent to the purposes of the Agreement. 13.5 Interpretation. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against any party by reason of the authorship of this Agreement or any other rule of construction which might otherwise apply. The Section headings are for purposes of convenience only, and shall not be construed to limit or extend the meaning of this Agreement. 13.6 Entire Agreement, Waivers and Amendments. This Agreement integrates all of the terms and conditions mentioned herein, or incidental hereto, and supersedes all negotiations and previous agreements between the parties with respect to all or any part of the subject matter hereof. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of the party to be charged, and all amendments and modifications hereto must be in writing and signed by the appropriate authorities of Agency and Borrower. 13.7 Consent/Reasonableness. Except when this Agreement specifically authorizes a party to withhold its approval or consent in its sole and absolute discretion, when either Agency or Borrower shall require the consent or approval of another party in fulfilling any agreement, covenant, provision, or condition contained in this Agreement, such consent or approval shall not be unreasonably withheld, conditioned, or delayed by the party from whom such consent or approval is sought. 13.8 Severability. If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of this Agreement shall not be 652894.3~24036.0006 32 ~ -- ~ ' ~1~ affected thereby to the extent such remaining provisions are not rendered impractical to perform taking into consideration the purposes of this Agreement. In the event that all or any portion of this Agreement is found to be unenforceable, this Agreement or that portion which is found to be unenforceable shall be deemed to be a statement of intention by the parties; and the parties further agree that in such event, and to the maximum extent permitted by law, they shall take all steps necessary to comply with such procedures or requirements as may be necessary in order to make valid this Agreement or that portion which is found to be unenforceable. 13.9 Third Party Beneficiaries. Notwithstanding any other provision of this Agreement to the contrary nothing herein is intended to create any third party beneficiaries to this Agreement, and no person or entity other than Agency and Borrower, and the permitted successors and assigns of each of them, shall be authorized to enforce the provisions of this Agreement. 13.10 Authority of Signatories to Bind Principals. The persons executing this Agreement on behalf of their respective principals represent that they have been authorized to do so and that they thereby bind the principals to the terms and conditions of this Agreement. 13.11 Representations and Warranties. Borrower and each person executing this Agreement on behalf of Borrower represents and warrants that: (i) Borrower is a limited partnership organized and existing under the laws of the State of California, in good standing, and authorized to do business and doing business in the County of San Diego; (ii) Borrower has all requisite power and authority to carry out its business as now and whenever conducted and to enter into and perform its obligations under this Agreement; (iii) by proper action of Borrower, Borrower's signatories have been duly authorized to execute and deliver this Agreement; (iv) the execution of this Agreement by Borrower does not violate any provision of any other agreement to which Borrower is a party; (v) except as may be specifically set forth in this Agreement, no approvals or consents not heretofore obtained by Borrower are necessary in connection with the execution of this Agreement by Borrower or with the performance by Borrower of its obligations hereunder, and (vi) no attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization, receivership or other proceedings are pending or threatened against the Borrower or any parties affiliated with Borrower, nor are any of such proceedings contemplated by Borrower or any parties affiliated with Borrower. 13.12 Execution. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and such counterparts shall constitute one and the same instrument. 13.13 Relationship of Parties. It is understood that the contractual relationship between the Agency and Borrower is such that Borrower is an independent entity and not an agent or partner of Agency. Nothing in this Agreement 652894.3~24036.0006 33 ~ ~' ~' ~.~ shall constitute Borrower as the agent or partner or representative of Agency for any purpose whatsoever. 13.15 Attorney's Fees. If either party to this Agreement is required to initiate or defend litigation in any way connected with this Agreement, thc prevailing party in such litigation, in addition to any other relief which may be granted, whether legal or equitable, shall be entitled to its actual and reasonable attomey's fees. If either party to this Agreement is required to initiate or defend litigation with a third party because of the violation of any term or provision of this Agreement by the other party, then the party so litigating shall be entitled to its actual and reasonable attorney's fees from the other party to this Agreement. Attomey's fees shall include attorney's fees on any appeal, and in addition a party entitled to attorney's fees shall be entitled to all other reasonable costs for investigating such action, retaining expert witnesses, taking depositions and discovery, and all other necessary costs incurred in such litigation. All such fees shall be deemed to have accrued on commencement of such action and shall be enforceable whether or not such action is prosecuted to judgment. The parties hereto acknowledge and agree that each such party shall bear its own legal costs incurred in connection with the negotiation, approval, and execution of this Agreement. [NEXT PAGE IS SIGNATURE PAGE] 652894.3L24036,0006 34 ~' 1N WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date specified herein. "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body and politic By: Chairman ATTEST: Agency Secretary "BORROWER" SERENA SUNBOW, LP, A CALIFORNIA LIMITED PARTNERSHIP By: PACIFIC SOUTHWEST COMMUNITY DEVELOPMENT CORPORATION, a California nonprofit public benefit corporation, General Partner By: Arlene D. Monroe, Acting Executive Director By: CIC SUNBOW SERVICE COMPANY, L.L.C., a Cali£omia limited liability company, General Partner By: James J. Schmid, Managing Member 652894.3\24036.0006 35 ~' ,~}'-.,~,~" CHELSEA INVESTMENT CORPORATION SUNBOW SERVICES COMPANY, a California limited liability corporation [END OF SIGNATURES] 652894.3\24036.0006 36 ~ . ,,,~° .,~ EXHIBIT A LEGAL DESCRIPTION 652894.3'24036.0006 EXHIBIT A-1 ~' ~'~" ' ,,~ '7 EXHIBIT B PROMISSORY NOTE Secured by a Deed of Trust $275,000 Date: Chula Vista, CA 1. Borrower's Promise to Pay. For value received, the undersigned SERENA SUNBOW, L.P., a California limited parmership ("Borrower"), promises to pay to the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic (the "Agency"), or order, at 276 Fourth Avenue, Chula Vista, California 91910, or such other place as the Agency may designate in writing, the principal sum of Two Hundred Seventy-Five Thousand Dollars ($275,000) (the "principal"), plus interest as set forth in Section 4, below. (a) Use Of Funds. Borrower is improving certain real property described as Lot 2 of Chula Vista Tract No. 87-8, Rancho Del Sur Phase 1, Unit 1, in the City of Chula Vista, according to map thereof No. 12060 and Lot 332 of Chula Vista Tract No. 90-07, Sunbow II, Units 1 and 2, in the City of Chula Vista, according to map thereof No. 13423 (the "Property") with a multi-family residential project consisting of 132 units, subject to the terms of the Financing Agreement, the Housing Cooperation Agreement, the Regulatory Agreement and Declaration of Restrictive Covenants, and the TCAC Regulatory Agreement (the "Project"). This Note evidences the loan made by the Agency to assist Borrower in improving the Property for occupation by very low, low, and low and moderate income seniors, as more particularly set forth in that certain Loan Agreement and Related Restricted Covenants Agreement between the parties dated concurrently herewith ("Loan Agreement"). 2. Definitions. The term set forth in this Section shall have the following meaning in this Note: (a) "Transfer" shall mean any sale, assignment or transfer, voluntary or involuntary, of any interest in the Property. Any transfer without satisfaction of the provisions of this Note is prohibited. Capitalized terms used herein not otherwise defined shall have the meanings set forth in the Loan Agreement. 3. Security. This Note is secured by the Deed of Trust and Security Agreement of the same date as this Note (the "Deed of Trust"), executed by Borrower, as Trustor, in favor of the Agency, as beneficiary, and encumbering the real property described in the Deed of Trust. The Agency will be entitled to the benefits of the security provided by the Deed of Trust and will have the right to enforce the covenants and agreements of Borrower specified within the Deed of Trust. 4. Interest. Interest will accrue on the principal balance remaining unpaid from time to time at the rate of six percent (6%) per annum. Interest shall be calculated on the basis of a 360 day year and actual days elapsed and shall be compounded monthly. 5. Payments. Payments of principal and interest due under this Note shall be made in accordance with the payment terms set forth in Section 4.5 of the Loan Agreement, which such terms are incorporated herein by this reference. All payments on this Note shall be applied first to payment of accrued but unpaid interest, and after all such interest has been paid, any remainder shall be applied to 652894.3,24036.0006 EXHIBIT B-1 ~-' , ~,~', ~ g reduction of the principal balance. Unless the Loan Agreement is extended pursuant to the terms of the Loan Agreement, all principal and interest shall be due and payable on the date following fifty-two (52) years after the date of the City's issuance of the final certificate of occupancy for the Project. 6. Borrower's Right To Repay. Borrower has the right to pay, without penalty or premium, all or any portion of the outstanding amount of this Note prior to the maturity date. 7. No Assumptions of Note. Borrower acknowledges that this Note is given in connection with the development of the Project as part of a program of the Agency to assist with the provision of housing for very low, low and low and moderate income senior citizens. Consequently, this Note is not assumable by transferees of the Property, but is immediately due and payable in full on the date of the Transfer of the Property, whether voluntary or involuntary, unless expressly authorized by the Agency in writing in the Agency's sole and absolute discretion. In order to implement this provision, the Deed of Trust contains a "DUE ON SALE" provision. 8. Maintenance; Taxes; Insurance. Borrower shall maintain the Property in good, clean and orderly condition. Borrower shall promptly pay all property taxes due on the Property prior to any delinquency and shall comply with the insurance requirements set forth in the Deed of Trust. 9. Default. THe occurrence of any one or more of the following events shall constitute an "Event of Default": (a) Default under any agreement or other writing executed in favor of the Agency in connection with this Note, including but not limited to the Loan Agreement or the Deed of Trust, beyond all applicable cure periods; (b) Default in the payment when due of any installment or amount of principal or interest due on this Note, beyond the applicable cure period contained herein; (c) The making by Borrower of any assignment for the benefit of creditors or the voluntary appointment (at the request or with the consent of Borrower) of a receiver, custodian, liquidator or trustee in bankruptcy of any of Borrower's property, or the filing by Borrower of a petition in bankruptcy or other similar proceeding under any law for relief of debtors; (d) The filing against Borrower of a petition in bankruptcy or other similar proceeding under any law for relief of debtors, or the involuntary appointment of a receiver, custodian, liquidator or trustee in bankruptcy of the property of Borrower, if such petition or appointment is not vacated or discharged within sixty (60) calendar days after the filing or making thereof; or (e) The occurrence of a default under any note or deed of trust to which the Deed of Trust is junior and subordinate, beyond the applicable cure period. Upon the occurrence of an Event of Default, the Agency may, at its option, declare the entire unpaid principal balance and accrued interest to be immediately due and payable in full pursuant to Section 10 hereof or pursue any and all other remedies provided at law or in equity. Upon the occurrence of an Event of Default, the entire unpaid principal balance and unpaid interest accrued thereon shall bear interest, from the date of the Event of Default until such default is cured, at a rate of nine percent (9%) compounded monthly ("Default Rate"). 10. Acceleration. Upon the occurrence of default under this Note, the Deed of Trust, or the Loan Agreement, the Agency shall have the right to declare the full amount of the principal under this Note immediately due and payable. Any failure by the Agency to pursue its legal and equitable remedies upon default shall not constitute a waiver of the Agency's right to declare a default and exercise all of its rights under this Note, the Deed of Trust or the Loan Agreement. Nor shall acceptance by the Agency of any payment provided for in the Note constitute a waiver of the Agency's right to require prompt payment of any remaining principal owed. 11. No Offset. Borrower hereby waives any rights of offset it now has or may later have against the Agency, its successors and assigns, and agrees to make the payments called for in this Note in accordance with the terms of this Note. 652894.%24036.0006 EXHIBIT B-2 ~" "~' ~9 12. Waivers. Borrower and any endorsers or guarantors of this Note, for themselves, their heirs, legal representatives, successors and assigns, respectively, severally waive diligence, presentment, protest, and demand, and notice of protest, dishonor and non-payment of this Note, and expressly waive any rights to be released by reasons of any extension of time or change in terms of payment, or change, alteration or release of any security given for the payments hereof, and expressly waive the right to plead any and all statutes of limitations as a defense to any demand on this Note or agreement to pay the same, and jointly and severally agree to pay all costs of collection when incurred, including reasonable attorney fees. If an action is instituted on this Note, the Borrower promises to pay, in addition to the costs and disbursements allowed by law, such sum as a court may adjudge reasonable as attorneys' fees in such action. 13. No Waiver by the Agency. No previous waiver, failure, or delay by the Agency in acting with respect to the terms of this Note, the Deed of Trust, or the other associated documents will constitute a waiver of any breach, default or failure of conditions under this Note, Deed of Trust, or other associated documents. A waiver of any terms must be made in writing. 14. Non Recourse Obligation. Nothing herein contained shall be deemed to cause Borrower (or any of its parmers, or any of their respective directors, officers, employees, partners, principals or members) personally to be liable to pay or perform any of its obligations secured hereby, and Agency shall not seek any personal or deficiency judgment on such obligations, and the sole remedy of Agency shall be against the Property and the collateral under the Deed of Trust; provided, however, that the foregoing shall not in any way affect any rights Agency may have (as a secured party or otherwise) hereunder or under the Deed of Trust or Loan Agreement, or any other rights Agency may have to: (a) recover directly from Borrower any amounts secured by thc Deed of Trust, or any funds, damages or costs (including, without limitation, reasonable attorneys' fees and costs) incurred by Agency as a result of fraud, misrepresentation or waste; or (b) recover directly from Borrower any condemnation or insurance proceeds, or other similar funds or payments attributable to the Property which under the terms of the Deed of Trust should have been paid to Agency and any costs and expenses incurred by Agency in connection therewith (including, without limitation, reasonable attorneys' fees and costs). 15. Late Fees. Borrower acknowledges that if any payment required under this Note is not paid within fifteen (15) days after the date when the same becomes due and payable, the Agency will incur extra administrative expenses (i.e., in addition to expenses incident to receipt of timely payment) and the loss of the use of funds in connection with the delinquency in payment. Because, from the nature of the case, the actual damages suffered by the Agency by reason of such extra administrative expenses and loss of use of funds would be impracticable or extremely difficult to ascertain, Borrower agrees that five percent (5 %) of the amount of the delinquent payment shall be the amount of damages to which the Agency is entitled, upon such breach, in compensation therefor. Therefore, Borrower shall, in such event, without further notice, pay to the Agency as the Agency's sole monetary recovery to cover such extra administrative expenses and loss of use of funds, liquidated damages in the amount of five percent (5%) of the amount of such delinquent payment. The provisions of this paragraph are intended to govern only the determination of damages in the event of a breach in the performance of the obligation of Borrower to make timely payments hereunder. Nothing in this Note shall be construed as an expressed or implied agreement by the Agency to forbear in the collection of any delinquent payment, or be construed as in any way giving Borrower the right, expressed or implied, to fail to make timely payments hereunder, whether upon payment of such damages or otherwise. The right of the holder hereof to receive payment of such liquidated and actual damages, and receipt thereof, are without prejudice to the right of such holder to collect such delinquent payments and other amounts provided to be paid hereunder or under any security for this Note or to declare a default hereunder or under any security for this Note. 652894.3\24036.0006 EXHIBIT B-3 ~ -- ~ -, q 0 16. Giving Of Notices. Except for any notice required under applicable law to be given in another manner, any notice to Borrower provided for in this Note shall be sent certified mail, return receipt requested or express delivery service with a delivery receipt, or personally delivered with a delivery receipt obtained, and shall be deemed to be effective as of the date shown of the delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was returned as undeliverable. Notices shall be directed as follows: Borrower: Serena Sunbow, LP c/o Chelsea Investment Corporation 215 South Hwy 101, Suite 200 Solana Beach CA 92075 Atto: Wallace Dieckmann Agency: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista CA 91910 Attn: Housing Coordinator With copies to: Executive Director and Agency Attorney The parties may subsequently change addresses by providing written notice of the change in address to the other parties in accordance with this Section. 17. No Partnership or Joint Venture. The relationship of Borrower and the Agency under this Note is solely that of Borrower and Lender, and the loan evidenced by this Note and secured by the Deed of Trust will in no manner make the Agency the partner or joint venturer of Borrower. 18. Joint and Several Obligations. This Note is the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and their successors and assigns. 19. Attorney's Fees. In the event of any conflict or dispute concerning any term or provision of this Note or otherwise arising out of this Note, the prevailing party shall be entitled to recover from the other party any and all reasonable costs and expenses incurred in connection therewith, including, but not limited to, attorney's fees and court costs, whether or not a legal action is commenced. 20. Controlling Law. This Note shall be construed in accordance with and be governed by the laws of the State of California. 21. Invalid Provisions. If any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained in this Note. 22. Amendments. Any amendment, alteration or interpretation of this Note must be in writing signed and signed by a duly authorized officer of the Agency and Borrower. If there are any inconsistencies between the terms of this Note and the terms of any of the other Loan documents, the terms of this Note will prevail. [NEXT PAGE IS SIGNATURE PAGE] 652894.3\24036.0006 EXHIBIT IN WITNESS WHEREOF the Borrower has caused this Promissory Note to be executed as of the day and year first written above. SERENA SUNBOW, LP, A CALIFORNIA LIMITED PARTNERSHIP By: PACIFIC SOUTHWEST COMMUNITY DEVELOPMENT CORPORATION, a California nonprofit public benefit corporation, General Partner By: Arlene D. Monroe, Acting Executive Director By: CIC SUNBOW SERVICE COMPANY, L.L.C., a California limited liability company, General Partner By: James J. Schmid, Managing Member CHELSEA iNVESTMENT CORPORATION SUNBOW SERVICES COMPANY, a California limited liability corporation, 652894.3~24036.0006 EXHIBIT B-5 EXHIBIT C AGENCY TRUST DEED 652894.3\24036.0006 EXHIBIT C-I RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista, California 91910 Attention: City Clerk DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING THE PARTIES TO THIS DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILiNG ("Deed of Trust"), made as of _, 1999, are SERENA SUNBOW, L.P., a California limited partnership ("Trustor"), CHICAGO TITLE COMPANY, a California corporation ("Trustee"), and the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic ("Beneficiary"). ARTICLE 1. GRANT IN TRUST 1.1 GRANT. For the purposes of and upon the terms and conditions in this Deed of Trust, Trustor irrevocably grants, conveys and assigns to Trustee, in trust for the benefit of Beneficiary, with power of sale and right of entry and possession, all of that real property located in the City of Chula Vista, County of San Diego, State of California, described on Exhibit A attached hereto, together with all development rights or credits, air fights, water, water fights and water stock related to the real property, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances, easements, rights and fights of way appurtenant or related thereto; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the "Improvements"); all interest or estate which Tmstor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing; (all of the foregoing being collectively referred to as the "Subject Property"). The listing of specific rights or property shall not be interpreted as a limit of general terms. 1.2 ADDRESS. The address of the Subject Property is: the northeast comer of Medical Center Drive and Medical Center Court in the City of Chula Vista, California. However, neither the failure to designate an address nor any inaccuracy in the address designated shall affect the validity or priority of the lien of this Deed of Trust on the Subject Property as described on Exhibit A. 655013.2\24036.0006 -1- ~" . ~.q~ ARTICLE 2. OBLIGATIONS SECURED 2.1 OBLIGATIONS SECURED. Trustor makes this grant and assignment for the purpose of securing the following obligations ("Secured Obligations"): (a) Payment to Beneficiary of all sums at any time owing under that certain Promissory Note of even date herewith executed by Tmstor in favor of Beneficiary in the principal amount of Two Hundred Seventy-Five Thousand Dollars ($275,000), and the performance of all covenants and obligations of Trustor under the Promissory Note and the Loan Agreement and Related Restricted Covenants of even date herewith between Tmstor and Beneficiary ("Loan Agreement"); and (b) Payment and performance of all covenants and obligations of Tmstor under this Deed of Trust; and (c) All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications of the required debt service payments. 2.2 INCORPORATION. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. All persons who may have or acquire an interest in the Subject Property shall be deemed to have notice of the terms of the Secured Obligations. ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS 3.1 ASSIGNMENT. Subject to the rights of the beneficiary under the Senior Deed of Trust (as defined below), Trustor hereby irrevocably assigns to Beneficiary all of Trustor's right, title and interest in, to and under: (a) all leases of the Subject Property or any portion thereof, all licenses and agreements relating to the management, leasing or operation of the Subject Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Subject Property or any portion thereof, whether now existing or entered into after the date hereof ("Leases"); and (b) the rents, issues, deposits and profits of the Subject Property, including, without limitation, all amounts payable and all rights and benefits accruing to Trustor under the Leases ("Payments"). The term "Leases" shall also include all guarantees of and security for the lessees' performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Beneficiary's right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Subject Property. 3.2 GRANT OF LICENSE. Beneficiary confers upon Trustor a license ("License") to collect and retain the Payments as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Subject to the rights of the beneficiary under the Senior Deed of Trust, Beneficiary may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Subject Property. Trustor hereby irrevocably authorizes and directs the 655013.2\24036.0006 -2- lessees under the Leases to rely upon and comply with any notice or demand by Beneficiary for the payment to Beneficiary of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees' undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whethei any Default has actually occurred or is then existing hereunder. Trustor hereby relieves the lessees from any liability to Trustor by reason of relying upon and complying with any such notice or demand by Beneficiary. 3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable Assignment shall not cause Beneficiary to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Subject Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Subject Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Subject Property; or for any negligence in the management, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person, unless caused by the gross negligence or wilful misconduct of Beneficiary or its agents. Beneficiary shall not directly or indirectly be liable to Tmstor or any other person as a consequence of: (i) the exercise or failure to exercise any of the rights, remedies or powers granted to Beneficiary hereunder; or (ii) the failure or refusal of Beneficiary to perform or discharge any obligation, duty or liability of Trustor arising under the Leases. 3.4 REPRESENTATIONS AND WARRANTIES. Tmstor represents and warrants that as of the date of this Deed of Trust there are no Leases affecting any portion of the Subject Property. 3.5 COVENANTS. Trustor covenants and agrees at Tmstor's sole cost and expense to: (a) perform the obligations of lessor contained in the Leases and enforce by all available remedies performance by the lessees of the obligations of the lessees contained in the Leases; (b) give Beneficiary prompt written notice of any material default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exemise commercially reasonable efforts to keep all portions of the Subject Property that are currently subject to Leases leased at all times at rentals not less than the fair market rental value; (d) deliver to Beneficiary fully executed, counterpart original(s) of each and every Lease if requested to do so; and (e) execute and record such additional assignments of any Lease or specific subordinations of any Lease to the Deed of Trust, in form and substance acceptable to Beneficiary, as Beneficiary may request. Except as required or permitted by the Senior Deed of Trust, or its beneficiary, or by the loan agreement secured thereby, Trustor shall not, without Beneficiary's prior written consent or as otherwise permitted by any provision of the Loan Agreement: (i) execute any other assignment relating to any of the Leases; (ii) discount any rent or other sums due under the Leases or collect the same in advance, other than to collect rent one (1) month in advance of the time when it becomes due; (iii) terminate, modify or amend any of the material terms of the Leases or in any material manner release or discharge the lessees from any obligations thereunder; (iv) consent to any assignment or subletting by any lessee; or (v) subordinate or agree to subordinate any of the Leases to any other deed of trust or encumbrance. Any such attempted action in violation of the provisions of this Section 3.5 shall be null and void. Without in any way limiting the requirement of Beneficiary's consent hereunder, but subject 655013.2\24036.0006 -3- I~ --~' q6 to the right of the beneficiary under the Senior Deed of Trust, any sums received by Tmstor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied to reduce the outstanding Secured Obligations and any such sums received by Tmstor shall be held in trust by Tmstor for such purpose. 3.6 ESTOPPEL CERTIFICATES. Within thirty (30) days after written request by Beneficiary, Trustor shall deliver to Beneficiary and to any party designated by Beneficiary estoppel certificates executed by Trustor and by each of the lessees, in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessee's most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Trustor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Beneficiary. ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING 4.1 SECURITY INTEREST. Tmstor hereby grants and assigns to Beneficiary as of the date hereof ("Effective Date") a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Tmstor now or at any time hereafter has any interest (collectively, the "Collateral"): All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for the use and operation of Subject Property (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) together with all rents, issues, deposits and profits of the Subject Property (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes, drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the Subject Property or any business now or hereafter conducted thereon by Tmstor; all permits consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Subject Property; all deposits or other security now or hereafter made with or given to utility companies by Trustor with respect to the Subject Property; all advance payments of insurance premiums made by Tmstor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all funds deposited with Beneficiary pursuant to any loan agreement; all reserves, deferred payments, deposits, accounts, refunds, cost savings and payments of any kind related to the Subject Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files relating to any of the foregoing. As to all of the above described personal property which is or which hereafter becomes a "fixture" under applicable law, this Deed of Trust constitutes and 655013.2,24036.0006 -4- ~" "~' '" q7 is filed as a fixture filing under Sections 9313 and 9402(6) of the California Uniform Commercial Code, as amended or recodified from time to time, and covers goods which are or are to become fixtures. 4.2 REPRESENTATIONS AND WARRANTIES. Tmstor represents and warrants that: (a) Trustor has, or will have, good title to the Collateral (except for items that are leased by Trustor); and (b) Tmstor's principal place of business is located at the address shown in Section 7.9. 4.3 RIGHTS OF BENEFICIARY. In addition to Beneficiary's rights as a "Secured Party" under the California Uniform Commercial Code, as amended or recodified from time to time ("UCC"), Beneficiary may, but shall not be obligated to, at any time without notice and at the expense of Trustor: (a) give notice to any person of Beneficiary's rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Beneficiary therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Tmstor under or from the Collateral. Notwithstanding the above, in no event shall Beneficiary be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Beneficiary shall make an express written election of said remedy under UCC §9505, or other applicable law. 4.4 RIGHTS OF BENEFICIARY ON DEFAULT. Upon the occurrence and during the continuance of a Default (hereinafter defined) under this Deed of Trust, then in addition to all of Beneficiary's rights as a "Secured Party" under the UCC or otherwise at law: (a) Beneficiary may (i) upon written notice, require Trustor to assemble any or all of the Collateral and make it available to Beneficiary at a place designated by Beneficiary; (ii) without prior notice, enter upon the Subject Property or other place where any of the Collateral may be located and take possession of, collect, sell, and dispose of any or all of the Collateral, and store the same at locations acceptable to Beneficiary at Tmstor's expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become purchaser at any such sales; and (b) Beneficiary may, for the account of Tmstor and at Tmstor's expense: (i) operate, use, consume, sell or dispose of the Collateral as Beneficiary deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Beneficiary may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Tmstor in connection with or on account of any or all of the Collateral. Notwithstanding any other provision hereof, Beneficiary shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Tmstor shall make an express written election of said remedy under UCC §9505, or other applicable law. 4.5 POWER OF ATTORNEY. Tmstor hereby irrevocably appoints Beneficiary as Trustor's attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact 655013.2~24036.0006 -5- ~'~ . ~" . ~ Beneficiary may, upon the occurrence and during the continuance of a Default, without the obligation to do so, in Beneficiary's name, or in the name of Trustor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Beneficiary's security interests and rights in or to any of the Collateral, and, upon the occurrence and during the continuance of a Default hereunder, take any other action required of Tmstor; provided, however, that Beneficiary as such attorney-in-fact shall be accountable only for such funds as are actually received by Beneficiary. 4.6 POSSESSION AND USE OF COLLATERAl, Except as otherwise provided in this Section, so long as no Default exists under this Deed of Trust, Trustor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Tmstor's business. ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES 5.1 Intentionally omitted. 5.2 TAXES AND ASSESSMENTS. Subject to Trustor's fights to contest payment of taxes, Trnstor shall pay prior to delinquency all taxes, assessments, levies and charges imposed by any public or quasi-public authority or utility company which are or which may become a lien upon or cause a loss in value of the Subject Property or any interest therein. Tmstor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any public authority upon Beneficiary by reason of its interest in any Secured Obligation or in the Subject Property, or by reason of any payment made to Beneficiary pursuant to any Secured Obligation; provided, however, Trustor shall have no obligation to pay taxes which may be imposed from time to time upon Beneficiary and which are measured by and imposed upon Beneficiary's net income. 5.3 Intentionally omitted. 5.4 PERFORMANCE OF SECURED OBLIGATIONS. Trustor shall promptly pay and perform each Secured Obligation when due. 5.5 LIENS. ENCUMBRANCES AND CHARGES. This Deed of Trust shall constitute a second prior/ty security interest, junior and subordinate only to a Construction Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing, dated concurrently herewith, made in connection with the loan made by the Bank of America, FSB with the proceeds of multifamily revenue bonds in the amount of Six Million Three Hundred Fifty-Two Thousand Four Hundred Sixty-Six Dollars ($6,352,466), and the refinancing thereof which have been approved by Beneficiary or are permitted pursuant to the Loan Agreement (the "Senior Deed of Trust"). Tmstor shall immediately discharge any other lien not approved by Beneficiary in writing that has or may attain priority over this Deed of Trust. Tmstor shall pay when due all obligations secured by or reducible to liens which shall now or hereafter encumber or appear to encumber all or any part of the Subject Property or any interest therein, whether senior or subordinate hereto; provided, however, Tmstor shall have the right to contest in good faith any claims and liens for labor done and materials and services furnished in connection with the construction of any Improvements and any such claim or lien so contested may remain unpaid during the period of such contest and any appeal therefrom. 655013.2\24036.0006 -6- 5.6 DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS. Proceeds of casualty insurance policies and condemnation awards shall be disposed of in accordance with and subject to the conditions contained in the Loan Agreement. 5.7 MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Trustor covenants: (a) to insure the Subject Property against such risks as are required under the Loan Agreement and, at Beneficiary's request, to provide evidence of such insurance to Beneficiary, and to comply with the requirements of any insurance companies insuring the Subject Property; (b) to keep the Subject Property in good condition and repair; (c) except as permitted by the Senior Deed of Trust, or its beneficiary, or the loan agreement secured thereby, not to remove or demolish the Subject Property or any part thereof, not to materially alter, restore or add to the Subject Property and not to initiate or acquiesce in any change in any zoning or other land classification which affects the Subject Property without Beneficiary's prior written consent; (d) to complete or restore promptly and in good and workmanlike manner the Subject Property, or any part thereof which may be damaged or destroyed; (e) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Subject Property and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (f) not to commit or permit waste of the Subject Property; and (g) to do all other acts which from the character or use of the Subject Property may be reasonably necessary to maintain and preserve its value. 5.8 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Trustor's sole expense, Trustor shall protect, preserve and defend the Subject Property and title to and right of possession of the Subject Property, the security hereof and the rights and powers of Beneficiary and Trustee hereunder against all adverse claims. Tmstor shall give Beneficiary and Trustee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Subject Property and of any condemnation offer or action. 5.9 ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts this trust when this Deed of Trust is recorded. From time to time upon written request of Beneficiary and presentation of this Deed of Trust or a certified copy thereof for endorsement, and without affecting the personal liability of any person for payment of any indebtedness or performance of any obligations secured hereby, Trustee may, without liability therefor and without notice: (a) reconvey all or any part of the Subject Property; (b) consent to the making of any map or plat thereof; and (c) join in any grant of easement thereon, any declaration of covenants and restrictions, or any extension agreement or any agreement subordinating the lien or charge of this Deed of Trust. Except as may be required by applicable law, Trustee or Beneficiary may from time to time apply to any court of competent jurisdiction for aid and direction in the execution of the trust hereunder and the enforcement of the rights and remedies available hereunder, and may obtain orders or decrees directing or confirming or approving acts in the execution of said trust and the enforcement of said remedies. Trustee has no obligation to notify any party of any pending sale or any action or proceeding, including, without limitation, actions in which Trustor, Beneficiary or Trustee shall be a party unless held or commenced and maintained by Trustee under this Deed of Trust. Trustee shall not be obligated to perform any act required of it 655013.2k24036.0006 -7- ~' - 3° ,, hereunder unless the performance of the act is requested in writing and Trustee is reasonably indemnified and held harmless against loss, cost, liability or expense. 5.10 EXCULPATIONi INDEMNIFICATION. (a) Beneficiary shall not directly or indirectly be liable to Tmstor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Beneficiary in this Deed of Trust; (ii) the failure or refusal of Beneficiary to perform or discharge any obligation or liability of Tmstor under any agreement related to the Subject Property or under this Deed of Trust; or (iii) any loss sustained by Trustor or any third party resulting from Beneficiary's failure to lease the Subject Property after a Default (hereinafter defined) or from any other act or omission of Beneficiary in managing the Subject Property after a Default unless the loss is caused by the gross negligence or willful misconduct of Beneficiary and no such liability shall be asserted against or imposed upon Beneficiary or its agents, and all such liability is hereby expressly waived and released by Tmstor. (b) Tmstor indemnifies Trustee and Beneficiary against, and holds Trustee and Beneficiary harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys' fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which either may suffer or incur: (i) by reason of this Deed of Trust; (ii) by reason of the execution of this trust or in performance of any act required or permitted hereunder or by law; (iii) as a result of any failure of Tmstor to perform Trustor's obligations; or (iv) by reason of any alleged obligation or undertaking on Beneficiary's part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations contained in any other document related to the Subject Property; provided, however, such indemnity does not include matters caused by the gross negligence or willful misconduct of Beneficiary or its agents. The above obligation of Tmstor to indemnify and hold harmless Trustee and Beneficiary shall survive the release and cancellation of the Secured Obligations and the release and reconveyance or partial release and reconveyance of this Deed of Trust. (c) Trustor shall pay all amounts and indebtedness arising under this Section 5.10 immediately upon written demand by Trustee or Beneficiary together with interest thereon from the date of such demand at the rate of ten percent (10%) per annum. 5.11 SUBSTITUTION OF TRUSTEES. From time to time, by a writing, signed and acknowledged by Beneficiary and recorded in the Office of the Recorder of the County in which the Subject Property is situated, Beneficiary may appoint another trustee to act in the place and stead of Trustee or any successor. Such writing shall set forth any information required by law. The recordation of such instrument of substitution shall discharge Trustee herein named and shall appoint the new trustee as the trustee hereunder with the same effect as if originally named Trustee herein. A writing recorded pursuant to the provisions of this Section 5.11 shall be conclusive proof of the proper substitution of such new Trustee. 5.12 NONRECOURSE OBLIGATION. Nothing herein contained shall be deemed to cause Tmstor (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 secured 655013.2\24036.0006 hereby, and Beneficiary shall not seek any personal or deficiency judgment on such obligations, and the sole remedy of Beneficiary shall be against the Subject Property and the Collateral; provided, however, that the foregoing shall not in any way affect any rights Beneficiary may have (as a secured party or otherwise) hereunder or under the Promissory Note or Loan Agreement, or any other rights Beneficiary may have to: (a) recover directly from Trustor any amounts secured by this Deed of Trust, or any funds, damages or costs (including, without limitation, reasonable attorneys' fees and costs) incurred by Beneficiary as a result of fraud, misrepresentation or waste; or (b) recover directly from Tmstor any condemnation or insurance proceeds, or other similar funds or payments attributable to the Property which under the terms of this Deed of Trust should have been paid to Beneficiary and any costs and expenses incurred by Beneficiary in connection therewith (including, without limitation, reasonable attorneys' fees and costs). 5.13 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Subject Property or in any manner obligated under the Secured Obligations ("Interested Parties"), Beneficiary may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Subject Property and other security for the Secured Obligations. None of the foregoing actions (other than a duly executed written release) shall release or reduce the liability of any of said Interested Parties, to the extent such liability exists, or release or impair the priority of the lien of this Deed of Trust upon the Subject Property. 5.14 RECONVEYANCE. Upon Beneficiary's written request, and upon surrender to Trustee for cancellation of this Deed of Trust or a certified copy thereof and any note, instrument, or instruments setting forth all obligations secured hereby, Trustee shall reconvey, without warranty, the Subject Property or that portion thereof then held hereunder. To the extent permitted by law, the reconveyance may describe the grantee as "the person or persons legally entitled thereto" and the recitals of any matters or facts in any reconveyance executed hereunder shall be conclusive proof of the truthfulness thereof. Neither Beneficiary nor Trustee shall have any duty to determine the rights of persons claiming to be rightful grantees of any reconveyance. When the Subject Property has been fully reconveyed, the last such reconveyance shall operate as a reassignment of all future rents, issues and profits of the Subject Property to the person or persons legally entitled thereto. 5.15 SUBROGATION. Beneficiary shall be subrogated to the lien of all encumbrances, whether released of record or not, paid in whole or in part by Beneficiary pursuant to this Deed of Trust or by the proceeds of any loan secured by this Deed of Trust. 5.16 RIGHT OF INSPECTION. Subject to the rights of tenants or occupants of the Subject Property, Beneficiary, its agents and employees, may enter the Subject Property at any reasonable time upon twenty-four (24) hours' notice (except in cases of emergency where no notice is required) for the purpose of inspecting the Subject Property and ascertaining Trustor's compliance with the terms hereof. 5.17 HAZARDOUS MATERIALS. Without in any way limiting the other representations and warranties set forth in this Deed of Trust, and except as otherwise disclosed in written reports 6550t3.2~24036.0006 -9- ~ . ,~ .. ~.-~,. and surveys previously delivered to Beneficiary, Tmstor hereby specifically represents and warrants to the best of Trustor's actual knowledge, without inquiry, as of the date of this Deed of Trust as follows: (a) The Subject Property is not and has not been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are "hazardous substances," "hazardous wastes," "hazardous materials" or "toxic substances" under the Hazardous Materials Laws, as described below, and/or other applicable environmental laws, ordinances and regulations (collectively, the "Hazardous Materials"). "Hazardous Materials" shall not include commemially reasonable amounts of such materials used (i) in laboratories for educational purposes, (ii) in business offices and schools of the type and nature currently operated by Trustor, (iii) in the ordinary course of construction of the Subject Property, and (iv) by occupants of residential units for normal household activities, and by Trustor for normal maintenance and operations of the Subject Property, all of which materials set forth in (i)-(iv) above are used and stored in accordance with all applicable environmental laws, ordinances and regulations. (b) The Subject Property is in compliance with all laws, ordinances and regulations relating to Hazardous Materials ("Hazardous Materials Laws"), 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, 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.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations. (c) There are no claims or actions ("Hazardous Materials Claims") pending or threatened against Tmstor or the Subject Property by any governmental entity or agency or by any other person or entity relating to Hazardous Materials or pursuant to the Hazardous Materials Laws. (d) The Subject Property has not been designated as Border Zone Property under the provisions of California Health and Safety Code, Sections 25220 et seq. and there has been no occurrence or condition on any real property adjoining or in the vicinity of the Subject Property that could cause the Subject Property or any part thereof to be designated as Border Zone Property. 5.18 HAZARDOUS MATERIALS COVENANTS Trustor agrees as follows: 655013.2\24036.0006 -10- (a) Tmstor shall not cause or permit the Subject Property to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials (other than as provided in Section 5.17(a)(i)-(iii) above). (b) Tmstor shall comply and cause the Subject Property to comply with all Hazardous Materials Laws. (c) Tmstor shall immediately notify Beneficiary in writing off (i) the discovery of any Hazardous Materials (other than those set forth in Section 5.17(a)(i)-(iv) above) on or under the Subject Property; (ii) any knowledge by Tmstor that the Subject Property does not comply with any Hazardous Materials Laws; (iii) any Hazardous Materials Claims; and (iv) the discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Subject Property that could cause the Subject Property or any part thereof to be designated as Border Zone Property. (d) In response to the presence of any Hazardous Materials on or under the Subject Property, Tmstor shall immediately take, at Tmstor's sole expense, in a commercially reasonable manner, all remedial action required by any Hazardous Materials Laws or any judgment, consent decree, settlement or compromise in respect to any Hazardous Materials Claims. 5.19 INSPECTION BY BENEFICIARY. At any reasonable time, upon twenty-four (24) hours' notice (except in cases of emergency where no notice is required) to Tmstor, but subject to the rights of tenants and occupants of the Subject Property, Beneficiary, its employees and agents, may from time to time (whether before or after the commencement of a nonjudicial or judicial foreclosure proceeding) enter and inspect the Subject Property for the purpose of determining the existence, location, nature and magnitude of any past or present release or threatened release of any hazardous substance into, onto, beneath or from the Subject Property. 5.20 HAZARDOUS MATERIALS INDEMNITY. Tmstor hereby agrees to defend, indemnify and hold harmless Beneficiary, its directors, officers, employees, agents, successors and assigns from and against any and all losses, damages, liabilities, claims, actions, judgments, court costs and legal or other expenses (including, without limitation, reasonable attorneys' fees and expenses) which Beneficiary may incur as a direct or indirect consequence of the use, generation, manufacture, storage, disposal, threatened disposal, transportation or presence of Hazardous Materials in, on or under the Subject Property. Tmstor shall immediately pay to Beneficiary upon written demand any amounts owing under this indemnity, together with interest from the date of demand therefor until paid at the rote of ten percent (10%) per annum. TRUSTOR'S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS BENEFICIARY SHALL SURVIVE THE TERMINATION OF THE LOAN AGREEMENT AND THE RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF THE DEED OF TRUST. 5.21 LEGAL EFFECT. Tmstor and Beneficiary agree that: (a) Sections 5.17 through 5.20 are intended as Beneficiary's written request for information (and Trustor's response) concerning the environmental condition of the real property security as required by California Code of Civil Procedure §726.5; and (b) each provision in such sections (together with any indemnity 655013.2~24036.0006 -11- 1~' ,, ~'.., ~ applicable to a breach of any such provision) with respect to the environmental condition of the real property security is intended by Beneficiary and Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure §736, and as such it is expressly understood that Tmstor's duty to indemnify Beneficiary hereunder shall survive: (a) any judicial or non-judicial foreclosure under the Deed of Trust, or transfer of the Subject Property in lieu thereof, and (b) the release and reconveyance or cancellation of the Deed of Trust. ARTICLE 6. DEFAULT PROVISIONS 6.1 DEFAULT. For all purposes hereof, the term "Default" shall mean (a) the occurrence of an "event of default" as defined in the Promissory Note or the Loan Agreement beyond all applicable cure periods provided therein; (b) the failure of Trustor to make any payment of any amount due hereunder when the same is due and payable, where such failure has continued for ten (10) days after notice (c) Tmstor's failure to observe and perform any other covenant, condition or agreement on its part to be observed or performed under this Deed of Trust for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied is given to Tmstor by Beneficiary; provided, however, if the failure stated in the notice is correctabl~ but cannot be corrected within such thirty (30) day period, Tmstor shall have such additional time as reasonably necessary to effect such cure, provided that such corrective action is instituted by Tmstor within such thirty (30) day period and diligently pursued until the default is corrected, (d) at the option of Beneficiary, the occurrence of a breach or default (beyond any applicable cure period) under any other deed of trust to Trustee executed by Trustor for the benefit of Beneficiary of even date herewith or hereafter executed (the "Other Deeds of Trust") which secures (i) payment to Beneficiary of sums owing under the Loan Agreement and/or (ii) the performance of the covenants and obligations of Trustor under the Loan Agreement, or (e) the failure (in any material respect) of any of the representations and warranties of Trustor herein to be true and correct when made. 6.2 RIGHTS AND REMEDIES. At any time after Default, Beneficiary and Trustee shall each have all the following rights and remedies; provided, however, Beneficiary and Trustee may not exercise the rights and remedies under subsections (c), (f) and (g) below until there has been a Default: (a) With or without notice, to declare all Secured Obligations immediately due and payable; (b) With or without notice, and without releasing Trustor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any breach or Default of Trustor and, in connection therewith, to enter upon the Subject Property and do such acts and things as Beneficiary or Trustee deem necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust or the rights or powers of Beneficiary or Trustee under this Deed of Trust; (ii) to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the sole judgment of either Beneficiary or Trustee, is or may be senior in priority to this Deed of Trust, the judgment of Beneficiary or Trustee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with 655013.2\24036.0006 -12- ~ . ~'~.,,~'~" respect to insurance required to be carried under this Deed of Trust; or (v) to employ counsel, accountants, contractors and other appropriate persons. (c) To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Trustor hereunder, and Trustor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Trustor waives the defense of laches and any applicable statute of limitations; (d) To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, and Trustor hereby consents to such appointment; (e) To enter upon, possess, manage and operate the Subject Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Trustor or the then owner of the Subject Property, to make, terminate, enforce or modify Leases of the Subject Property upon such terms and conditions as Beneficiary deems proper, to make repairs, alterations and improvements to the Subject Property as necessary, in Trustee's or Beneficiary's sole judgment, to protect or enhance the security hereof; (f) To execute a written notice of such Default and of its election to cause the Subject Property to be sold to satisfy the Secured Obligations. As a condition precedent to any such sale, Trustee shall give and record such notice as the law then requires. When the minimum period of time required by law after such notice has elapsed, Trustee, without notice to or demand upon Trustor except as required by law, shall sell the Subject Property at the time and place of sale fixed by it in the notice of sale, at one or several sales, either as a whole or in separate parcels and in such manner and order, all as Beneficiary in its sole discretion may determine, at public auction to the highest bidder for cash, in lawful money of the United States, payable at time of sale. Neither Trustor nor any other person or entity other than Beneficiary shall have the right to direct the order in which the Subject Property is sold. Subject to requirements and limits imposed by law, Trustee may from time to time postpone sale of all or any portion of the Subject Property by public announcement at such time and place of sale. Trustee shall deliver to the purchaser at such sale a deed conveying the Subject Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustee, Trustor or Beneficiary may purchase at the sale; (g) To resort to and realize upon the security hereunder and any other security now or later held by Beneficiary concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Trustee and Beneficiary, or either of them, determine in their sole discretion; 655013.2\240360006 -13- (h) Upon sale of the Subject Property at any judicial or non-judicial foreclosure, Beneficiary may credit bid (as determined by Beneficiary in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Beneficiary may, but is not obligated to, take into account all or any of the following: (i) appraisals of the Subject Property as such appraisals may be discounted or adjusted by Beneficiary in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Beneficiary with respect to the Subject Property prior to foreclosure; (iii) expenses and costs which Beneficiary anticipates will be incurred with respect to the Subject Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Subject Property prior to resale, costs of resale (e.g., commissions, attorneys' fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Subject Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Beneficiary; (iv) declining trends in real property values generally and with respect to properties similar to the Subject Property; (v) anticipated discounts upon resale of the Subject Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Beneficiary (in its sole and absolute discretion) deems appropriate. In regard to the above, Trustor acknowledges and agrees that: (w) Beneficiary is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Beneficiary any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Beneficiary's credit bid need not have any relation to any loan-to-value ratios previously discussed between Trustor and Beneficiary; and (z) Beneficiary's credit bid may be (at Beneficiary's sole and absolute discretion) higher or lower than any appraised value of the Subject Property. 6.3 APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, fees and expenses of Trustee, and of this trust, including, without limitation, cost of evidence of title and attorneys' fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, Trustee shall apply all proceeds of any foreclosure sale: (a) to payment of all sums expended by Beneficiary under the terms hereof and not then re-paid, with accrued interest; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto. 6.4 APPLICATION OF OTHER SUMS. All sums received by Beneficiary under Section 6.2 or Section 3.2, less all costs and expenses incurred by Beneficiary or any receiver under Section 6.2 or Section 3.2, including, without limitation, attorneys' fees, shall be applied in payment of the Secured Obligations in such order as Beneficiary shall determine in its sole discretion; provided, however, Beneficiary shall have no liability for funds not actually received by Beneficiary. 6.5 NO CURE OR WAIVER. Neither Beneficiary's nor Trustee's nor any receiver's entry upon and taking possession of all or any part of the Subject Property, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by 655013.2~24036.0006 -14- ~ . ~'~.~' ~ Beneficiary or Trustee or any receiver shall cure or waive any breach, Default or notice of default under this Deed of Trust, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Tmstor has cured all other defaults), or impair the status of the security, or prejudice Beneficiary or Trustee in the exercise of any fight or remedy, or be construed as an affirmation by Beneficiary of any tenancy, lease or option or a subordination of the lien of this Deed of Trust. 6.6 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor agrees to pay to Beneficiary immediately and without demand all reasonable costs and reasonable expenses incurred by Trustee and Beneficiary pursuant to Section 6.2 (including, without limitation, court costs and attorneys' fees, whether incurred in litigation or not) with interest from the date of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the indebtedness as specified in the Loan Agreement. In addition, Trustor shall pay to Trustee all Trustee's fees hereunder and shall reimburse Trustee for all expenses incurred in the administration of this trust, including, without limitation, any attorneys' fees. 6.7 POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably appoints Beneficiary and its successors and assigns, as its attorney-in-fact, which agency is coupled with an interest, upon the occurrence and during the continuance of a default, (a) to execute and/or record any notices of completion, cessation of labor, or any other notices that Beneficiary deems appropriate to protect Beneficiary's interest, (b) upon the issuance of a deed pursuant to the foreclosure of this Deed of Trust or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment or further assurance with respect to the Leases and Payments in favor of the grantee of any such deed, as may be necessary or desirable for such purpose, (c) to prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve Beneficiary's security interests and rights in or to any of the Collateral, and (d) to perform any obligation of Trustor hereunder; provided, however, that: (i) Beneficiary as such attorney-in-fact shall only be accountable for such funds as are actually received by Beneficiary; and (ii) Beneficiary shall not be liable to Trustor or any other person or entity for any failure to act under this Section. ARTICLE 7. MISCELLANEOUS PROVISIONS 7.1 MERGER. No merger shall occur as a result of Beneficiary's acquiring any other estate in, or any other lien on, the Subject Property unless Beneficiary consents to a merger in writing. 7.2 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person has executed this Deed of Trust as "Trustor", the obligations of all such persons hereunder shall be joint and several. 7.3 WAIVER OF MARSHALLING RIGHTS. Trustor, for itself and for all parties claiming through or under Trustor, and for alt parties who may acquire a lien on or interest in the Subject Property, hereby waives all rights to have the Subject Property and/or any other property, including, without limitation, the Collateral, which is now or later may be security for any Secured Obligation ("Other Property") marshaled upon any foreclosure of this Deed of Trust or on a foreclosure of any other security for any of the Secured Obligations. Beneficiary shall have the fight to sell, and any court in which foreclosure proceedings may 655013.2\24036.0006 -l 5- ~ . ~ . ~ be brought shall have the right to order a sale of, the Subject Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Beneficiary may designate. 7.4 RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term "Subject Property" means all and any part of the Subject Property and any interest in the Subject Property. 7.5 SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties here-to; provided, however, that this Section 7.5 does not waive or modify the provisions of Section 5.1 2. 7.6 EXECUTION IN COUNTERPARTS. This Deed of Trust may be executed in any number of counterparts, each of which, when executed and delivered to Beneficiary, will be deemed to be an original and all of which, taken together, will be deemed to be one and the same instrument. 7.7 CALIFORNIA LAW. This Deed of Trust shall be construed in accordance with the laws of the State of California, except to the extent that Federal laws preempt the laws of the State of California. 7.8 INCORPORATION. Exhibit A, as attached, is incorporated into this Deed of Trust by this reference. 7.9 NOTICES. All notices or other communications required or permitted to be given pursuant to the provisions of this Deed of Trust shall be in writing and shall be considered as properly given if delivered personally or sent by first class U.S. mail, postage prepaid, except that notice of a Default may be sent by certified mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective three (3) days after mailing, if mailed by first class mail, and otherwise upon receipt at the addresses set forth below. For purposes of notice, the addresses of the parties shall be: 655013.2\24036.0006 -16- ~g', ~-, ~"'~ Tmstor: Serena Sunbow, LP c/o Chelsea Investment Corporation 215 South Hwy 101, Suite 200 Solana Beach, CA 92075 Attention: Wallace Dieckman Trustee: Chicago Title Company 925 B Street San Diego, California 92101 Beneficiary: Redevelopment Agency of the City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Executive Director With a copy to Agency Attorney and Housing Coordinator Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days notice to the other party in the manner set forth hereinabove. Tmstor shall forward to Beneficiary, without delay, any notices, letters or other communications delivered to the Subject Property or to Trustor naming Beneficiary, as addressee, or which could reasonably be deemed to affect the ability of Trustor to perform its obligations to Beneficiary under the Loan Agreement. 7.10 LOAN AGREEMENT AND PROMISSORY NOTE CONTROL. In the event of conflict between the terms of this Deed of Trust and the Loan Agreement or the Promissory Note, the terms of the Loan Agreement and Promissory Note shall prevail, except that the provisions of 6.2 of this Deed of Trust shall control with respect to rights and remedies of Beneficiary and Trustee hereunder. 7.11 NONDISCRIMINATION. Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through it that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Subject Property, nor shall the grantee of any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Subject Property. [Signature on next page] 655013.2\24036.0006 IN WITNESS WHEREOF, Tmstor has executed this Deed of Trust as of the day and year set forth above. "TRUSTOR" SERENA SUNBOW, LP, A CALIFORNIA LIMITED PARTNERSHIP By: PACIFIC SOUTHWEST COMMUNITY DEVELOPMENT CORPORATION, a California nonprofit public benefit corporation, General Partner By: Arlene D. Monroe, Acting Executive Director By: CIC SUNBOW SERVICE COMPANY, L.L.C., a California limited liability company, General Partner By: James J. Schmid, Managing Member CHELSEA iNVESTMENT CORPORATION SUNBOW SERVICES COMPANY, a Califomia limited liability corporation (ALL SIGNATURES MUST BE ACKNOWLEDGED) 655013.2\24036.0006 -18- SCHEDULE 1 DESCRIPTION OF SUBJECT PROPERTY Exhibit A to Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by SERENA SUNBOW, L.P., a California limited partnership, as Tmstor to Chicago Title Company, a California corporation, as Trustee for the benefit of the REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA, a public body, corporate and politic, as Beneficiary, dated as of ,1999. All the certain real property located in the City of Chula Vista, County of San Diego, State of California, described as follows: Lot 2 of Chula Vista Tract No. 87-8, Rancho Del Sur Phase 1, Unit 1, in the City of Chula Vista, according to map thereof No. 12060 and Lot 332 of Chula Vista Tract No. 90-07, Sunbow II, Units 1 and 2, in the City of Chula Vista, according to map thereof No. 13423. 655013.2\24036.0006 Page 1 of Schedule ~' - ~'- 6o~ STATE OF CALIFORNIA COUNTY OF ss. On this day of ,19__, before me a Notary Public in and for the State of California, personally appeared personally known to me (or proved on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal Signature My commission expires 655013.2~24036.0006 ~'~ *'~3 EXHIBIT D SOURCES AND USES 652894.3'240360006 EXHIBIT D-1 ~.~., ~.,,,. ~ ~ Sent By: CHELSEA INV.; 619 259 1136; 06 May 99 11:40; Job 453;Page 2/7 EXHIBIT E PROJECT BUDGET 652894.3\240360006 EXHIBIT E- 1 ~ -£- ~,& ? Sent By: CHELSEA INV.; 619 259 1136; 06 May 99 11:47; Job 453~Page 5/7 Villa Stun Diego, CA FXHIB;T 6 - DFVF£OPMENT 8UUGET & CALCULATION OF TAX CREDIT EQUITY .~_ND COSTS: .............. LE{3^{.~ BROKERS FEES'~TITI_~ tOTAL L~ND COSTS ~'1,5,0~)- _~X~Y~.~.,. XXXXXXXXXXXXX TOTAL AOaUISlTION COST .STRUCTURES , ~.~..z,..,.~05~4~ ~3,86,.5,456 CoN rNACI'ON OVERHEAD .....~_,,~.6~4 .................... $96,,564 C O N T RA_C. iT q ~, P, .R~ ~J,,~j $_238,911 $23S,D1 TOT~ ~CHEEC~L COST8 C~NS T~UC T/ON INTERES CONST~T~ON LOAN INTEEE~T ,~,~ ....... ~,~, L~AL CQUNS~L FEE ORIGINATION FEE ~,L~,~,~c~ ........... ~,~ E'- Sent By: CHELSEA INV,; 619 259 1136j O0 Uay 99 11:4Bj Job 453;Page 6/7 DEVELOPMENT BUDGET & CALCULATION OF TAX CREDIT EQUITY (Con't) , ,, ,,, EXHIBIT61 PAGE ~. ACTL~AL OR EST, 70% 30% O_~H ER (Ine~i~ CPA O~ ~ A~tg,} TOTAL ~eAL (NOT IN~..~ATI~) ~,~ APPRAISAl .......... $15,~ ...... $15~ RENT RESERVE~ ..................... TOT~ RESERVE G~TS $~2 4~ ~XX~X~XXX ~~. 'GAG APP/ALLOGATION FEE ENVIRONMENTAL (In~l, A~. & Ld. B~ Pnt.} SEISMIC STUDY ,, CONT~OE, NCY (SOFT COSTS) .......... '"~'~1~' SUB~'OT~ RE$1DEN~ COSTs ........... $8,~,681 $1,1~,~7 OTHER . ?~,,~y~O~ER FEE Sl ,075~120 $I ,075,120 ...... TqT~ ~.~!~ENTmL COSTS ~,37S,7~1 ................. $8,242,587 ~ TOTAL PROdEGT AND BASIS COSTS ............. ~, · _ f ,,~, M~ MUM TAX CREDITS ~,~RDD~T9 OVER TEN YEARS ,,, EXHIBIT F PROJECT PRO FORMA 652894.3'24036.0006 EXHIBIT F-1 ~ -- ,~',- 6 ~ Sent By: CHELSEA INV,; 619 259 136~ 06 May 99 11:48; Job 453;Page 7/7 '~'~. . ~ ~ ~ 9 ~ ~ ~ EXHIBIT G CERTIFICATE OF COMPLETION 652894.3~24036.0006 EXHIBIT G-1 ~" ~"'" 7 1 EXHIBIT H RESTRICTED UNIT MIX 6528943'24036.0006 EXHIBIT H-1 Sent By: CHELSEA ;[NV.; 619 259 1136; 06 May 99 11:47; Job 453;Page 4/7 ?_~Ce supplies/M,inor Equipment t Total Other Costs Yearly O~-Slte Management: 3ense Managers Apadment Managers Assistant Managers Sala~ Maintenance Security Sala~ Payroll Taxes & WorkeCs Comp Other Total On-Site Management ~;~,~;~ ~:,~ of Tot a ncome I 26,195 I T~es; Properly ....... (L~ CFD Fee) Personal Propeffy Total Taxes I 30,422 Utilities: Telephone Water & Se~r Total Utilities 1~9!el Expenses $ 2,150 PerUnit INet operating Income $589,415 lReserves ii~!.~ per Unit I 23,760 Net Income Available for Debt Service 565,655 Perm Loan: 6,260,159 Debt Serv ce Covere .~,,~-,~;~,. ~:;"~[[~:. Interest :~ii~i~?.SB~; Annual Debt Service 491,874 Valuation Cap Rate ;;~!~;~!~ 7,802,143 Loan restricted to Lo ,!~;!~:;L;~[~:,~.:}~:S~,~,~; Value without tax crechts 6,241,714 Potential Reduction in Loan 18,445 Sent By: CHELSEA INV.; 619 259 1130; 0S May 99 11:46; Job 458;Pege 3/7 Villa Serene San Diego, CA 132 26-Apr-99 Total Monthly Annual Net Rent Rent 0 0 1,100 1,100 3BPJ2BA 1,100 3BRI2BA 1,100 Clubhouse 2,400 Tcstal Rents 132 76,720 888,936 Laundry ~:~;'~ ~; ' ' ........ Other Income (App. Fees, Late, etc. ~'.~:~ ~9~ Cable A Hi~hspeed Data Income ~.~;~:~;~;~;;~ per mont~per unit Telephone Income ~;~;~:~; per month/par unit Sub-Total 909,547 Less: Vacancies ~ ::::~::~;~;[~ 36,382 Tptal Income $873,165 Operating Expenses Buildin~ Maintenance ~ Expense Sub-Total [ $8,500{ Suildin~ Repairs ..... Elevator Maintenance Trash Removal Total Bid Maintenance $27,017 ~est Control ;egal & Audit ~:,;~ EXHIBIT I SCHEDULE OF PERFORMANCE 652894.3L24036.0006 EXHIBIT £-..~-?? Recording Requested by: ) ) CIIY CLERK ) ) When Recorded, Mail to: ) ) CITY OF CHULA VISTA ) 276 Fourth Avenue ) Chula Vista, CA 91910 ) Attn: Housing Coordinator ) FIRST AMENDMENT TO AFFORDABLE HOUSING AGREEMENT [SUNBOW II PROJECT] This FIRST AMENDMENT TO AFFORDABLE HOUSING AGREEMENT ("Amendment") is entered into effective as of _, 1999 by and between A.C.I. Sunbow, LLC, a California Limited Liability Company ("Developer"), and the City of Chula Vista, a California municipal corporation ("City"), with reference to the following facts: A. Developer and City have previously entered into that certain Affordable Housing Agreement dated May 13, 1997 ("Agreement") relating to Developer's proposed development of a master planned community ("Project") on certain real property owned by Developer within the City described on Exhibit A attached hereto and incorporated herein by this reference ("Property"). B. The Agreement implemented The Chula Vista Housing Element of the General Plan, and related entitlements, including Condition 84 of Tentative Subdivision Map Chula Vista Tract 90- 07, by committing the Developer to provide low income and moderate income affordable housing units within the Project on the terms and conditions set forth therein. C. Developer is proposing to satisfy a portion of its obligations under the Agreement with the development by Serena Sunbow, L.P. ("Serena") of a 132-unit multifamily apartment project ("Villa Serena Project") on Assessor's Parcel Nos. 640-070-40 and 641-110-58 of the Property, subject to the terms and conditions of a Regulatory Agreement and Declaration of Restrictive Covenants by and among the Housing Authority of the City of Chula Vista, Serena and State Street Bank and Trust Company of California, N.A. ("Regulatory Agreement"), and a Housing Cooperation Agreement between Serena and the City. D. City is willing to agree that Developer has satisfied a portion of its obligations under the Agreement through the development of the Serena Project on the terms and conditions set forth heroin. E. Except as otherwise provided herein, all capitalized terms used herein shall have the meanings ascribed thereto in the Agreement. NOW THEREFORE, in consideration of the above recitals, the mutual promises described herein, and other good and valuable consideration the parties acknowledge as satisfactory, the parties agree to amend the Agreement as follows: 654076.2\24036.0006 1. Low Income Housing. Developer shall be deemed to have satisfied a portion of its obligation under the Agreement to provide ninety-seven (97) units of low income housing for the Project upon the completion of construction of the Villa Serena Project and the certification by Serena that twenty-seven (27) units have been occupied therein by Very Low Income Tenants (as defined in the Regulatory Agreement), and that thirty-seven (37) additional units have been occupied by senior households where income does not exceed sixty percent (60%) of the area median income. Upon such certification, Developer's remaining low income housing obligation for Project is thirty- three (33) units. 2. Moderate Income Housing. Developer shall be deemed to have satisfied a portion of its obligation under the Agreement to provide ninety-seven (97) units of low income housing for the Project upon the completion of construction of the Villa Serena Project and the certification by Serena that sixty-eight (68) units have been occupied by households whose income qualifies those units as "moderate income housing" as defined in the Agreement. Upon such certification, Developer's remaining moderate income housing obligation for Project is twenty-nine (29) units. 3. Agreement to Meet and Confer City agrees to meet and confer in good faith with Developer to explore the potential for the satisfaction of additional low income housing requirements under the Agreement through additional income and rent restrictions imposed upon the Project, enforceable by parties other than City or Redevelopment Agency of the City of Chula Vista, which Developer may propose to voluntarily enter with respect to the Project. The City Manager is hereby authorized, on behalf of City, to determine whether such additional rent and income restrictions satisfy the requirements of the Agreement, and to execute such documents and take such actions which the City Manager deems necessary or appropriate to memorialize such determination. 4. Proiect Size Increases. Developer acknowledges and agrees that the extent of Developer's Obligation described herein is premised upon the Project being comprised of one thousand nine hundred forty-six (1,946) residential units. In the event that the total number of residential units within the Project increases beyond 1,946, Developer may be required to provide additional affordable housing units within the Project in accordance with the Sunbow II Sectional Planning Area ("SPA") Plan and the Agreement. 5. Effect of Amendment. This Amendment revises the Agreement to the extent inconsistent therewith. Except as amended hereby, all other terms and conditions of the Agreement shall remain in full force and effect. [NEXT PAGE IS SIGNATURE PAGE] 654076.2\24036.0006 -2- ~',~ --~[. SIGNATURE PAGE TO FIRST AMENDMENT TO AFFORDABLE HOUS1NG AGREEMENT IN WITNESS WHEREOF, City and Developer have executed this Amendment effective as of May ,1999. CITY OF CItULA VISTA A.C.I. SUNBOW, LLC, a California Limited Liability Company By: AYRES LAND COMPANY, 1NC., a California corporation, its Manager Shirley Horton Mayor By: Keith J. Home, President Attest: Beverly Authelet City Clerk Approved as to form by City Attorney 654076.2X24036.0006 -3- ~ ~ ~ ' ~ STATE OF CALIFORNIA ) ) SS. COUNTY OF ) On , before me, , Notary Public, (Print Name or Notary HUDIIC) ~ersonally appeared [] personally known to me -or- proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Of Notary OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could ~revent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT ~ Individual [] Corporate Officer Title(s) Title Or Type Of Document [] Partner(s) [] Limited [] General [] Attorney-In-Fact [] Trustee(s) Number Of Pages [] Guardian/Conservator [] Other: Signer is representing: Date Of Document Name Of Person(s) Or Entity(ies) Signer(s) Other Than Named Above 654076. t\24036.~6 STATE OF CALIFORNIA ) ) SS. COUNTY OF ) On , before me, , Notary Public, (k'rint Name ot Notary HUbI~C) >ersonally appeared [] personally known to me [] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Of Notary OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could )revent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATFACHED DOCUMENT [] Individual [] Corporate Officer Title(s) Title Or Type Of Document [] Partner(s) [] Limited [] General [] Attorney-In-Fact [] Trustee(s) Number Of Pages [] Guardian/Conservator [] Other: Signer is representing: Date Of Document Name Of Pemon(s) Or Entity(les) Signer(s) other ! hah Namec~ Above 654076.1\24036.0006