CITY OF SIMI VALLEY MEMORANDUM

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1 AGENDA ITEM NO. Consent 10 CITY OF SIMI VALLEY MEMORANDUM December 7, 2015 TO: City Council FROM: Department of Environmental Services SUBJECT: ADOPTION OF RESOLUTIONS APPROVING AN AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS AND A LOAN AGREEMENT, APPROVAL OF SUBORDINATION FOR THE CAMINO ESPERANZA SENIOR APARTMENT COMPLEX (CABRILLO ECONOMIC DEVELOPMENT CORPORATION), AND APPROVAL OF A SUPPLEMENTAL BUDGET REQUEST AFFORDABLE HOUSING SUBCOMMITTEE/STAFF RECOMMENDATION The Affordable Housing Subcommittee recommends that the City Council adopt the attached resolutions (page 8 through 123): terminating and releasing the prior City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants for this project; approving an Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, and a Loan Agreement to provide a $500,000 loan for the Camino Esperanza senior apartment complex; consenting to the Assumption Agreement for the project; approving subordination (which is consistent with current City policy and practice), and accepting a minimum of 12 covered carports within the project in lieu of accelerating loan repayment prior to realizing developer and contractor profit, and approve a Supplemental Budget Request (page 7) in the amount of $500,000, appropriating funds from the CDA Housing Successor Agency Fund. Additionally, staff recommends that the City Council authorize the City Manager and City Attorney to execute the final Subordination and Intercreditor Agreement, to fully accomplish the proposed financing. CITY MANAGER S RECOMMENDATION The City Manager concurs with the Affordable Housing Subcommittee recommendation. BACKGROUND AND OVERVIEW On November 17, 2015, the Affordable Housing Subcommittee reviewed the applicant s request to amend and restate the Regulatory Agreement and Declaration of Restrictive Covenants, and a $500,000 Loan Agreement for the Camino Esperanza senior apartment complex, and recommended that the City H 2 / (lg)

2 2 Council approve the applicant s request subject to the developer providing a minimum of 12 covered carports within the project, and contingent upon the subordination agreements deemed acceptable by City staff. On August 13, 2012, the City Council approved an application from Cabrillo Economic Development Corporation (CEDC) to develop a 31-unit senior apartment complex (Camino Esperanza) on a 2.6-acre property located at 1384 Katherine Road South. The project consists of 30 one-bedroom units and one manager s apartment. The project received an 18.8% density bonus in exchange for reserving 30 units for very low-income senior households 62 years of age and above. Eleven of the units will be reserved for seniors with a developmental disability. In requesting this loan, CEDC first requested that the City provide them with a $300,000 predevelopment loan for approximately two years, which would be converted into a permanent loan with a 15-year term. However, the California Department of Housing and Community Development (HCD) subsequently requested that the term of the City loan be 55 years, to match the term of their Multifamily Housing Program (MHP) and Home Investment Partnership Program (HOME) loans. CEDC is therefore requesting that the City loan have a 55-year term, which will accrue no interest during the first 17 years and begin accruing 3% simple interest thereafter. The loan would be funded through the Successor Housing Agency s Affordable Housing Incentives Account. The developer s application indicates that they have received commitments from several funding sources, which include tax exempt bonds, 4% tax credits, MHP and HOME funds from HCD, and an Affordable Housing Program (AHP) loan from the Federal Home Loan Bank of San Francisco. The above funding sources require that rents for the affordable units be reduced below the rent limits that were approved by the City when the project was approved in August The project will reserve 11 units for seniors with disabilities earning no more than 25% of Area Median Income (AMI) and three units for seniors earning no more than 35% of AMI, with the remaining 16 units to be reserved for seniors earning no more than 50% of AMI. The new initial monthly rent limits will now be $361, $525, and $771, respectively. The units will be reserved for extremely low- and low-income households for a term of 55 years. On March 31, 2014, the City Council adopted a resolution approving a joint powers agreement with the California Municipal Finance Authority (CMFA) and approved the issuance of tax-exempt Multifamily Housing Revenue Bonds for the benefit of CEDC, which will provide most of the construction financing for the Camino Esperanza Apartments. CMFA plans to issue the bonds in December. CEDC will have the sole responsibility to repay the bonds, and the City will not incur any financial liability in connection with the bonds. CEDC plans to begin construction shortly after the bonds are issued. On November 17, 2014, the Subcommittee recommended the City Council approve a Loan Agreement to provide a $300,000 loan for the Camino Esperanza senior apartment complex, subject to the developer agreeing to provide a minimum of 12 carports in the project. However, prior to the scheduled City Council meeting, CEDC H 2 / (lg)

3 3 informed the City that their proposal was undergoing the U.S. Department of Housing and Urban Development National Environmental Policy Act Environmental Review and, until a waiver is granted, CEDC must suspend all activities, including the review process for the City s loan. The waiver was procured on September 21, 2015, but the year-long delay forced CEDC to reevaluate their development costs, hence their need to revise their initial request to the Subcommittee, to increase their loan request from $300,000 to $500,000. FINDINGS AND ALTERNATIVES The developer submitted a proforma and cash flow projection in support of their request for a $500,000 loan from the City to provide both predevelopment and permanent financing. The attached Loan Agreement (Attachment B, Res. No , page 46) indicates that the term of the loan would be 55 years and that no interest would accrue during the initial 17 years. The City loan would begin to accrue 3% simple interest beginning in year 18, and would continue to accrue interest until the loan is repaid. A Supplemental Budget Request in the amount of $500,000 would be required to appropriate funds from the CDA Housing Successor Agency Fund for the loan to the Cabrillo Economic Development Corporation for the Camino Esperanza senior apartment complex. There was $3.8 million available in the Fund at the start of FY , and the recent repayment of principal and interest on a CDA-issued loan for the development of the Seasons affordable senior housing project provided an additional $745,000 in program income to the Fund. A total of$200,000 of the City loan would be disbursed for Predevelopment Expenses after City Council approval of the Regulatory Agreement. The remaining $300,000 of the City loan would be disbursed after the issuance of a Zoning Clearance for the project. The City retained Kosmont Companies to review the financial documents provided by CEDC to determine whether the requested financial assistance from the City is warranted. The consultant s analysis (Exhibit 1) states that CEDC has secured sufficient funds to develop, although project costs are elevated. The developer has stated that the relatively high development costs are a result of infrastructure design issues, noise mitigation from the adjacent rail line, and prevailing wage requirement compliance. The City loan would be used to pay for certain predevelopment expenses including architecture, engineering, plan-check, permit fees, and various governmental fees. The developer has requested that the City release the funds at the time a Zoning Clearance is issued, and that the funds be used to provide both predevelopment and permanent financing. At preconstruction, the City loan would be recorded as a subordinate lien to syndicated short-term bond financing between Bank of the West and HCD s HOME loans. Post construction, the City loan would be subordinate to HCD s MHP and HOME loans, which will provide long-term/permanent financing for the project. While there is no guarantee that any project is immune to loan default, staff concludes that the H 2 / (lg)

4 4 subordination agreements are acceptable. Various safety nets, such as right of refusal and to negotiate in good faith to cure issues, established in the subordination agreements as prescribed in the AHA, minimize risk while maintaining longevity of the project s affordability term. The draft Subordination and Intercreditor Agreement from Bank of the West (Attachment A, Res. No , page 109), attached in its final review stages, and the corresponding accompanying resolution authorizes the City Attorney and the City Manager to execute the final Agreement at a later date. The proforma analysis suggests that the City require the developer to begin paying back the City loan prior to realizing developer profit ($1.2 million) and contractor profit ($122,707). As an alternative to consultant s recommendation, Planning Division staff asked CEDC to consider offering a minimum of 12 covered carports in exchange for the requested City loan since the project as approved will not provide any covered parking. In response, CEDC has submitted a site plan (Exhibit 2), which indicates that they will provide a minimum of 12 covered carport spaces, and that the design of the carports will match the apartment buildings. Research indicates that very low-income seniors are less likely than the general public to own personal vehicles. Eleven apartments will be reserved for extremely low-income seniors with developmental disabilities, who are not likely to own a vehicle. Therefore, the proposed addition of 12 covered carports should accommodate a majority of the residents who own vehicles. Recent development trends indicate that the cost to construct the carports should not exceed $100,000, which is equivalent to one-fifth of the City s loan. The carports would be subject to design review by Planning Division staff, and a design that allows harvesting of solar energy is desired. Environmental Review Section 15061(b)(3) of the state CEQA Guidelines states that: A project is exempt from CEQA if the activity is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. The proposed amendment to the Regulatory Agreement and Declaration of Restrictive Covenants would not result in any new development or intensification of development. Therefore, the project is exempt from further review under CEQA. H 2 / (lg)

5 5 The following alternatives are available to the City Council: 1. Adopt the attached resolutions (page 8 through 123): terminating and releasing the prior City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants for this project; approving an Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, and a Loan Agreement to provide a $500,000 loan for the Camino Esperanza senior apartment complex; consenting to the Assumption Agreement for the project; allowing subordination (which is consistent with current City policy and practice, accepting a minimum of 12 covered carports within the project in lieu of accelerating loan repayment prior to realizing developer and contractor profit), and authorizing the City Manager and City Attorney to execute the final Subordination and Intercreditor Agreement, and approve a Supplemental Budget Request in the amount of $500,000, appropriating funds from the CDA Housing Successor Agency Fund; 2. Do not approve the request; 3. Refer the matter back to staff and request additional information for a possible amended action. The Affordable Housing Subcommittee recommends Alternative No. 1. SUGGESTED CITY COUNCIL MOTION I move to First, adopt a resolution terminating and releasing the prior City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza Apartments initially recorded on August 20, Second, adopt a resolution approving the Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants and a Loan Agreement to provide a Supplemental Budget Request of $500,000 for a loan for the Camino Esperanza senior apartment complex, allowing subordination (which is consistent with current City policy and practice), and accepting a minimum of 12 covered carports within the project in lieu of accelerating loan repayment prior to realizing developer and contractor profit. Third, adopt a resolution consenting to the Assignment and Assumption between Cabrillo Economic Development Corporation and Camino Esperanza, L.P. Fourth, adopt a resolution consenting to subordinate to the bond financing under the State Department of Housing and Community Development. Fifth, adopt a resolution consenting to subordinate to the bond financing under Bank of the West, a senior lender, during construction of the project, and authorizing the City Manager and City Attorney to execute the final Subordination and Intercreditor Agreement. H 2 / (lg)

6 6 SUMMARY Cabrillo Economic Development Corporation has submitted an application to amend the Regulatory Agreement and Declaration of Restrictive Covenants for the 31-unit Camino Esperanza senior apartment complex, which will allow them to receive a $500,000 loan from the City for 55 years, funded by the Housing Successor Agency Fund. The request has been reviewed by the City s financial consultant, who determined that the proposed loan is warranted. The Affordable Housing Subcommittee recommends that the loan be approved contingent upon the developer providing a minimum of 12 covered carports within the project and that the subordination agreements deemed acceptable by the City. Peter Lyons, Director Department of Environmental Services Prepared by: Eric Chen, Associate Planner INDEX Page Supplemental Budget Request... 7 Resolution... 8 Attachment A Termination and Release of Regulatory Agreement and Declaration of Restrictive Covenants Resolution Attachment A Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants Attachment B Loan Agreement Attachment C Promissory Note Attachment D Deed of Trust Resolution Attachment A Assignment and Assumption Agreement Resolution Attachment A Subordination Agreement State Department of HCD Resolution Attachment A DRAFT Subordination & Intercreditor Agreement Bank of the West Exhibit 1 Proforma Analysis (Kosmont Companies) Exhibit 2 Site Plan Showing Carport Location H 2 / (lg)

7 7 CITY OF SIMI VALLEY SUPPLEMENTAL BUDGET REQUEST REQUESTING DEPARTMENT FUND(S) AMENDED Environmental Services CDA Housing Successor Agency REVENUES FUND COST CENTER ACCOUNT NUMBER TOTAL CURRENT BUDGET $ - PROPOSED AMENDMENTS $ - AMENDED BUDGET $ $ EXPENDITURES FUND Affordable/Senior Housing 201 COST CENTER 9320 ACCOUNT NUMBER TOTAL CURRENT BUDGET PROPOSED AMENDMENTS $9,125,000 $ 9,125,000 $500,000 $ 500,000 AMENDED BUDGET $9,625, $ 9,625,000 PURPOSE To reflect the budget for a 55-year loan to the Cabrillo Economic Development Corporation to develop the 31-unit Camino Esperanza Senior Apartment Complex at 1384 Katherine Road South, per City Council approval of December 7, Thirty (30) of the units will be reserved for very low-income senior households. The loan will be interest free for the first 17 years, after which simple interest shall accrue at 3.0%. REV 9/14 DEPARTMENT HEAD DATE ADMINISTRATIVE SERVICES DATE CITY MANAGER DATE ENTERED BY DATE

8 8 RESOLUTION NO A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIMI VALLEY ADOPTING THE TERMINATION AND RELEASE OF THE CITY OF SIMI VALLEY REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (CAMINO ESPERANZA APARTMENTS) WHEREAS; the applicant, Cabrillo Economic Development Corporation ( Developer ), has requested that the City Council approve the Termination and Release of the City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza Apartments, Attachment A, attached hereto and incorporated herein by reference, dissolving the Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza initially recorded on October 20, 2012 as Instrument Number , of Official Records of County of Ventura; and WHEREAS, the City Council finds and determines that approval of the Termination and Release of the City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza Apartments allows the subsequent approval Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants which will continue to provide housing for very low-income seniors and is therefore in the best interest of the City. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The City Council finds and determines that the Termination and Release of the City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza Apartments (Attachment A), attached hereto and incorporated herein by reference, is consistent with the goals and provisions of the General Plan. SECTION 2. The City Council finds and determines that the project is exempt from the requirements of the California Environmental Quality Act. SECTION 3. The City Council hereby approves the Termination and Release of the City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza Apartments. SECTION 4. The City Council and the officers of the City are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the Termination and Release of the City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza Apartments, and to administer the transaction following the execution of the Termination

9 9 RES. NO and Release of the City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza Apartments, and otherwise to effectuate the purposes of this Resolution, and such actions previously taken by such officers are hereby ratified and confirmed. SECTION 5. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk. PASSED and ADOPTED this 7th day of December Attest: Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Approved as to Content: Lonnie J. Eldridge, City Attorney Eric J. Levitt, City Manager Peter Lyons, Director Department of Environmental Services

10 RES. NO ATTACHMENT A 10 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Simi Valley Attn.: City Clerk 2929 Tapo Canyon Road Simi Valley, CA [Space above for recorder's use.] This document is recorded for the benefit of the City of Simi Valley and therefore is exempt from the payment of a recording fee pursuant to Government Code Sections 6103 and TERMINATION AND RELEASE OF THE CITY OF SIMI VALLEY REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (Camino Esperanza Apartments) This Termination and Release of the City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants (the "Release") is made effective as of December 7, 2015, by the City of Simi Valley, a municipal corporation (the "City"). This Release pertains to that certain real property located in the City of Simi Valley, California more particularly described in Exhibit A hereto (the "Property"), which exhibit is hereby incorporated herein by this reference. WHEREAS, the City and Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation ("CEDC"), entered into that certain City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants (Camino Esperanza Apartments), dated August 13, 2012 and recorded August 20, 2012 in the Official Records of Ventura County (the "Official Records") as Instrument Number (the "City Regulatory Agreement"); WHEREAS, City will be recording an Amended and Restated City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants (Camino Esperanza Apartments) against the Property in the Official Records, the City and CEDC desire to terminate the City Regulatory Agreement and release the City Regulatory Agreement as an encumbrance from the Property; NOW, THEREFORE, the City and CEDC hereby acknowledge and agree that the City Regulatory Agreement is terminated and the City and CEDC hereby release the Property from the restrictions of the City Regulatory Agreement and direct that the City Regulatory Agreement be removed as an encumbrance on the Property. [SIGNATURE PAGE FOLLOWS] H 42 / (lg)

11 11 RES. NO IN WITNESS WHEREOF, the City hereby executes this Release effective as of the date first written above. Attest: City of Simi Valley, A Municipal Corporation By: Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation Lonnie J. Eldridge, City Attorney By: Approved as to Content: Margarita H. de Escontrias Chief Executive Officer Eric J. Levitt, City Manager By: Debra L. De Vay Chief Financial Officer Peter Lyons, Director Department of Environmental Services H 42 / (lg)

12 12 RES. NO A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ) COUNTY OF On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: A notary public or other officer completing this certificate verifies only the identity of the Name: Notary Public individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. H 42 / (lg)

13 13 STATE OF CALIFORNIA RES. NO ) ) ) COUNTY OF On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 42 / (lg)

14 14 RES. NO A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ) COUNTY OF On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 42 / (lg)

15 15 RES. NO EXHIBIT A LEGAL DESCRIPTION THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF VENTURA, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS: A portion of Section 16, Township 2 North, Range 17 West, Rancho Simi, in the City of Simi Valley, County of Ventura, State of California, as per Map recorded in Book 3, Page 2 of Maps, in the office of the County Recorder of said County, described as follows: Beginning at a point on the Northerly line of said Section 16, at the Northwest corner of the land first described in the deed to Simi Valley Unified School District of Ventura County, California, recorded July 20, 1960, Book 1890, Page 180 of Official Records; thence along the Northwest line of said land of said School District 1st: South 17 15' 15" West feet, more or less, to a point on the Northeast line of the Southern Pacific s 100 foot right of way; thence along said Northeast line, 2nd: North 63 27' 45" West feet to a point on the East line of Katherine Road; thence along said East line, 3rd: North 220 feet, more or less, to a point on the North line of said Section 16; thence 4th: East along said North line 449 feet, more or less, to the point of beginning. EXCEPT the interest in the North 30 feet of said land as reserved for road purposes by Simi Valley Land and Water Company, in deed recorded June 27, 1890, Book 31, Page 21 of Deeds. ALSO EXCEPT from said parcel, so much thereof as is included in a tract of land described as follows: Beginning at a point feet North of the Northwesterly corner of Lot 968 of Susana Knolls Number One, as per Map recorded in Book 19, Page 16 of Maps, in the office of the County Recorder of said County; thence from said point of beginning: 1st: North 1.43 feet; thence, 2nd: North 44 20' East feet; thence, 3rd: North 40 33' 20" East feet; thence, 4th: North 43 6' East feet; thence, 5th: North feet; thence, 6th: East feet; thence, H 42 / (lg)

16 16 RES. NO th: South feet; thence, 8th: West feet; thence, 9th: North feet; thence, 10th: South 43 6' West feet; thence, 11th: South 40 33' 20" West feet; thence, 12th: South 44 20' west feet to the point of beginning. ALSO EXCEPT therefrom 50% of all oil, gas, minerals and other hydrocarbon substances in or under said land, as reserved by Theodore W. Johnson, et al., in deed recorded May 28, 1954, Book 1205, Page 538 of Official Records. APN: H 42 / (lg)

17 17 RESOLUTION NO A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIMI VALLEY APPROVING AN AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS, AND LOAN AGREEMENT FOR THE CAMINO ESPERANZA SENIOR APARTMENT COMPLEX (CABRILLO ECONOMIC DEVELOPMENT CORPORATION) WHEREAS; the applicant, Cabrillo Economic Development Corporation ( Developer ), has requested that the City Council approve an Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza, a Loan Agreement including a Promissory Note and Deed of Trust (Attachments A, B, C, and D) attached hereto and incorporated herein by reference, extending the loan and increasing revenue for the project and creating a minimum of 12 covered carports within the project; and WHEREAS, the Developer requests a $500,000 loan from the City for 55 years to provide financial assistance for the Development, and in exchange the developer shall provide a minimum of 12 covered carports within the project; and WHEREAS, occupancy of the 31-unit Camino Esperanza apartment complex located at 1384 Katherine Road South, Simi Valley (the Property ) is limited to very low-income senior households; and WHEREAS, the City Council maintains the Housing Successor Agency Affordable Housing Fund pursuant to Health and Safety Code Section , which provides for the development and operation of affordable housing programs and projects in the City, collectively the "Affordable Housing Fund"; and WHEREAS, the City Council finds and determines that approval of the Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants will continue to provide housing for very low-income seniors and is therefore in the best interest of the City. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The City Council finds and determines that the Regulatory Agreement and Declaration of Restrictive Covenants (Attachments A, B, C, and D), attached hereto and incorporated herein by reference, is consistent with the goals and provisions of the General Plan.

18 18 SECTION 2. The City Council finds and determines that the project is exempt from the requirements of the California Environmental Quality Act. SECTION 3. The City Council hereby approves the Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants for Camino Esperanza, a Loan Agreement, and allow subordination, which is consistent with current City policy and practice. SECTION 4. The City Council and the officers of the City are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the Regulatory Agreement and Declaration of Restrictive Covenants, and the Loan Agreement, and to administer the transaction following the execution of the Regulatory Agreement and Declaration of Restrictive Covenants, the Loan Agreement, allow subordination which is consistent with current City policy and practice, and otherwise to effectuate the purposes of this Resolution, and such actions previously taken by such officers are hereby ratified and confirmed. SECTION 5. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk. PASSED and ADOPTED this 7th day of December Attest: Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Approved as to Content: Lonnie J. Eldridge, City Attorney Eric J. Levitt, City Manager Peter Lyons, Director Department of Environmental Services

19 ATTACHMENTA 19 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Simi Valley Attn.: City Clerk 2929 Tapo Canyon Road Simi Valley, CA [Space above for recorder's use.] This document is recorded for the benefit of the City of Simi Valley and therefore is exempt from the payment of a recording fee pursuant to Government Code Sections 6103 and AMENDED AND RESTATED CITY OF SIMI VALLEY REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (Camino Esperanza Apartments) This Amended and Restated City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement") is made and entered into as of December 1, 2015, by and between the City of Simi Valley, a municipal corporation (the "City") and Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation (the "Owner"). This Agreement amends and restates in its entirety the City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants, between the City and Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation, predecessor-in-interest to the Owner, dated as of August 13, 2012 and recorded in the official records of Ventura County on August 20, 2012 as document no RECITALS A. The City and Owner wish to enter into this Agreement to ensure that the 31-unit multifamily senior rental housing development with no fewer than twelve (12) covered parking spaces (the Development ) will be used and operated in accordance with the approved conditions and restrictions. The Development is located on the real property in the City of Simi Valley, County of Ventura, more particularly described in Exhibit 1 attached hereto and incorporated herein (the "Property"). THEREFORE, the City and Owner hereby agree as follows: H 43 / (lg) 1

20 20 ARTICLE 1. DEFINITIONS 1.1 Definitions. When used in this Agreement, the following terms shall have the respective meanings assigned to them in this Article 1. (a) "Actual Household Size" shall mean the actual number of persons in the applicable household. (b) "Adjusted Income" shall mean the total anticipated annual income of all persons in a household, as calculated in accordance with 25 California Code of Regulations Section 6914 or pursuant to a successor State housing program that utilizes a reasonably similar method of calculation of adjusted income. In the event that no such program exists, the City shall provide the Owner with a reasonably similar method of calculation of adjusted income as provided in said Section (c) "Agreement" shall mean this City Regulatory Agreement and Declaration of Restrictive Covenants. (d) "Assumed Household Size" shall have the meaning set forth in Section 2.2(b). The definition is utilized to calculate affordable rent and is not intended to be a limit on the number of persons occupying a unit. (e) "City" shall mean the City of Simi Valley, a municipal corporation. (f) "Development" shall mean the Property and the thirty-one (31) units to be developed on the Property, as well as all landscaping, roads, and parking spaces existing thereon, as the same may from time to time exist. (g) "Median Income" shall mean the median gross yearly income adjusted for Actual Household Size (to qualify residents) or Assumed Household Size (to calculate rents), as applicable, in the County of Ventura, California, as published from time to time by the State of California Department of Housing and Community Development or the U.S. Department of Housing and Urban Development. In the event that such income determinations are no longer published, or are not updated for a period of at least eighteen (18) months, the City shall provide the Owner with other income determinations which are reasonably similar with respect to methods of calculation to those previously published by the State of California Department of Housing and Community Development or the U.S. Department of Housing and Urban Development. (h) "Owner" shall mean Cabrillo Economic Development Corporation, a California non-profit corporation, and its successors and assigns to the Development. (i) "Property" shall mean the real property described in Exhibit 1 attached hereto and incorporated herein. (j) "Rent" shall mean the total of monthly payments by the residents of a Unit (other than the manager's Unit) for the following: use and occupancy of the Unit and land and associated facilities, including parking; any separately charged fees or H 43 / (lg) 2

21 21 service charges assessed by Owner which are required of all residents, other than security deposits; the cost of an adequate level of service for utilities paid by the resident, including garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration fuel, but not cable or telephone service; and any other interest, taxes, fees or charges for use of the land or associated facilities and assessed by a public or private entity other than Owner, and paid by the Resident. (k) "Resident" shall mean a senior household occupying a Unit. (l) Senior refers to a person 62 years of age or older. (m) "Senior Household" means a household in which at least one member is 62 years old or older and is the responsible tenant under the rental agreement or lease for the unit. (n) "Term" shall mean the term of this Agreement, which shall commence on the date of recordation of this Agreement, and shall continue for a period of fifty-five (55) years thereafter. (o) "Units" shall mean the thirty-one (31) rental units to be developed by the Owner on the Property, inclusive of one (1) manager's unit. (p) "Very Low-Income Household" shall mean a household with an Adjusted Income that does not exceed the qualifying limits for Very Low-Income households, adjusted for Actual Household Size, as established and amended from time to time pursuant to Section 8 of the United States Housing Act of 1937, and as published by the State of California Department of Housing and Community Development. (q) "Very Low-Income Rent" shall mean the rent permitted to be charged for a Very Low-Income Unit pursuant to Section 2.2(a) below. (r) "Very Low-Income Unit" shall mean the Unit, which, pursuant to Section 2.2(a) below, is required to be occupied by a Very Low-Income Household. ARTICLE 2. AFFORDABILITY COVENANTS AND CITY INCENTIVES 2.1 City Affordable Housing Incentive Account Loan. The City agrees to provide Owner with a $500,000 Loan (the City Loan ) from its Successor Housing Agency Affordable Housing Incentives Account. City agrees to provide the City Loan pursuant to the terms of a Loan Agreement between the City and Owner, dated as of the same date as this Agreement. City agrees to subordinate the City Loan to the construction loan and any permanent loans recorded against the Development provided that any subordination agreement meets the requirements of Section 4.4 of this Agreement and does not conflict with the Conditions of Approval of the Development including Condition A-15, which requires that 30 units be reserved for occupancy by Qualified Tenants. The City Loan shall be recorded as a third trust deed lien against the Property until the permanent financing is in place at which time the City Loan will continue as a third trust deed lien. See Exhibit 2 attached hereto and incorporated herein by reference. H 43 / (lg) 3

22 Occupancy Requirements. (a) Very Low-Income Units. Thirty (30) one-bedroom, Units shall be rented to and occupied by or, if vacant, available for occupancy by Very Low-Income Senior Households. (b) Disabled Persons Occupancy. Borrower shall cause the Development to be operated at all times in compliance with the provisions of: (1) the Unruh Act (Civil Code Section 51), (2) the California Fair Employment and Housing Act (Government Code Section ), (3) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. Section 701), (4) the United States Fair Housing Act, as amended (42 U.S.C. Section 3601), and (5) the Americans With Disabilities Act of 1990 (42 U.S.C. Section 12101), which relate to disabled persons access. Owner shall defend, indemnify, and hold harmless the City, its agents, officials, officers, representatives, and employees, from and against all claims, lawsuits, liabilities or damages of whatever nature arising out of or in connection with, or relating in any manner to any act or omission of Owner, its agents, employees, and subcontractors, and employees thereof, pursuant to the performance or non-performance of this Agreement. The Owner shall thoroughly investigate any and all claims and indemnify the City and do whatever is necessary to protect the City, its agents, officials, officers, representatives, and employees as to any such claims, lawsuits, liabilities, expenses, or damages arising out of this Agreement. The Owner must select an attorney acceptable to the City who will defend such proceeding and the City will control any litigation thereof. Such approval by the City will not be unreasonably withheld. 2.3 Allowable Rent. (a) Very Low-Income Rent. The maximum initial Rent charged to residents of the Very Low-Income Units shall not exceed the lower of one-twelfth (1/12th) of thirty percent (30%) of fifty percent (50%) of Median Income, adjusted for Assumed Household Size, or the maximum initial Rent identified below (as adjusted for the then permitted City Rent). Maximum Initial Rent1 Very Low-Income Units 30 1-Bedroom $887 (b) Assumed Household Size. In calculating the allowable Rent for the Units, the following Assumed Household Sizes shall be utilized: Number of Bedrooms Assumed Household Size One Maximum rent for calendar year Utility allowance to be deducted from maximum initial rents. H 43 / (lg) 4

23 23 (c) After the release of the Income Limit Schedule for Ventura County by the State of California Department of Housing and Community Development of each calendar year, the City shall provide the Owner with a schedule of permissible maximum Very Low-Income Rents for the succeeding year. Under no circumstance may Owner raise rents above the permissible maximum rents as allowed under the annual rent schedule provided by the City. (d) Allowable Rent Adjustment. The Owner shall, for each Unit, on July and each July 1st thereafter, limit the aggregate annual rent increase for the thirty (30) Very Low-Income Units to Rent adjustments based on the increase in Median Income and the annual rent schedule provided by the City. However, in no event shall Rent charged to residents of the Very Low-Income Units exceed one-twelfth (1/12th) of thirty percent (30%) of fifty percent (50%) of Median Income, adjusted for Assumed Household Size. All rents shall be further reduced by a utility allowance based upon the most recent utility allowance published by the Area Housing Authority of the County of Ventura or any successor agency2. st (e) Tax Credit Rules. If the Development is subject to federal lowincome housing tax credit requirements, the provisions of those requirements regarding household size, allowable Rent, and continued occupancy by households whose incomes exceed the eligible income limitations may apply in place of the provisions set forth in this Agreement. 2.4 Repayment of Excess Rents to Residents. (a) Intent of Parties. The Parties hereto agree that the Owner will maintain and operate the Development in accordance with the restrictions concerning affordability, operation, and maintenance of the Development specified herein. In consideration of the requested 18.8 percent density bonus, the Owner has agreed to comply with the affordability requirements as set forth in Article 2 of this Agreement. The Owner agrees and acknowledges that it shall be a default hereunder for the Owner to charge Residents of any Unit in the Development a Rent in excess of the allowable Very Low-Income Rents, as calculated pursuant to Section 2.3 hereof, and that the City shall, in addition to the remedies set forth in this Section 2.4, have the right to exercise the remedies set forth in Section 6.4 below. (b) Payment of Excess Rents to Residents. If at any time during the term of this Agreement a Very Low-Income Unit is rented at more than the maximum allowable rental rate, as calculated according to Section 2.3 hereof, the Owner shall make a cash payment to the affected Resident in an amount equal to the dollar difference between the Rent at which the Unit is actually rented and the allowable Very Low-Income Rent, as applicable, for each month for which the actual Rent paid by the Resident exceeds the allowable Very Low-Income Rent, as applicable. Said cash payment shall be made within thirty (30) days of a written notice from the City that the maximum allowable rental rate has been exceeded. In the event that a Resident cannot be located, prior to December 31st of each calendar year, the Owner shall deposit the required payment or excess rents into the City s Local Housing Account. 2 Owner shall submit utility allowance calculations to the City on or before April 15 th of every year. H 43 / (lg) 5

24 24 (c) Liquidated Damages to City. If any Affordable Units are rented in excess of the Affordable Rent, or to non-qualifying households, the intent of this Agreement will be thwarted, even if the dollar difference is paid to the affected tenant or the City s Local Housing Account, and will therefore constitute a failure of consideration on the Owner s part. Therefore, in any calendar month in which any of the Affordable Units are rented in any manner contrary to the terms of this Agreement, Owner shall pay to the City an additional fifty percent (50%) of the positive dollar difference between the rent actually charged and the Affordable Rent. Notwithstanding the above, the damages provision for renting the Affordable Units contrary to the terms of this Agreement, shall not apply if the City determines, in its sole discretion, that there were no qualified tenants available on each of the days of non-compliance. City may use any source of information it deems appropriate for determining the merits of Owner s claim for any such non-compliance and any such qualified tenant availability. City agrees that it will act reasonably and in good faith at all times with respect to such determination. IN THE EVENT THE OWNER IS IN MATERIAL DEFAULT IN THE PERFORMANCE OR OBSERVANCE OF ANY COVENANT, CONDITIONS, OR AGREEMENTS CONTAINED IN THIS SECTION 2.4(C), THE SOLE AND EXCLUSIVE REMEDY OF THE CITY AGAINST THE OWNER SHALL BE FIFTY PERCENT (50%) OF THE DIFFERENCE BETWEEN ACTUAL RENT CHARGED TO RESIDENTS AND THE ALLOWABLE VERY LOW-INCOME RENT, AS APPLICABLE, BECAUSE IT IS UNDERSTOOD AND AGREED THAT THIS AMOUNT IS A REASONABLE AMOUNT AND IS ESTABLISHED IN LIEU OF DAMAGES WHICH ARE INCAPABLE OF CALCULATION AT THE INCEPTION HEREOF, ACTUAL DAMAGE, SUCH SUM IS THE AMOUNT OF DAMAGE THAT THE CITY WOULD SUSTAIN BY REASON OF ANY SUCH DEFAULT BY THE OWNER, AND THE OWNER DESIRES TO LIMIT ITS LIABILITY HEREUNDER TO SUCH SUM. THE CITY AGREES TO LOOK SOLELY TO SUCH SUM FOR SATISFACTION OF ANY OF THE OWNER S REMEDIES FOR THE COLLECTION OF A JUDGMENT OR OTHER JUDICIAL PROCESS REQUIRING THE PAYMENT OF MONEY BY THE OWNER TO THE CITY IN THE EVENT OF A DEFAULT BY THE OWNER UNDER THIS SECTION 2.4(C). Owner's Initials 2.5 City's Initials Resident Selection and Waiting List. (a) Owner shall submit for approval a detailed outreach and marketing program (the Program ), which shall include, but is not limited to, advertising, publicity and promotion, to the City s Director of Environmental Services (the Director ), within ninety (90) days of offering the units for rent. The purpose of the Program shall be to H 43 / (lg) 6

25 25 inform and educate the public regarding the availability of the Units, which shall be advertised for rent exclusively within the City during the first ninety (90) days. Owner shall solicit and obtain Very Low-Income Senior Households for occupancy of 30 Very Low-Income Units and establish a waiting list for Units that may become available in the future pursuant to the City s adopted Affordable Unit Waiting List Guidelines. Owner shall not engage in any marketing of the Units that has not been approved under this Program. The Program shall include all of the following: (1) A print media schedule for print advertisements to be published in a newspaper of citywide or regional circulation; (2) A broadcast media schedule (optional, at the discretion of the Director or his/her designee); (3) Noticing and listing the project throughout the life of this Agreement with the Area Housing Authority of the County of Ventura, the Senior Citizens Center, City Hall and, if required by the City, the Conejo Simi Valley Moorpark Association of Realtors, Simi Valley churches, the Simi Valley Library and such other similar agencies as the Director of Environmental Services may designate. (4) Notifying all persons on the Owner s and City s waiting list for affordable rental housing; (5) Establishment of a telephone number with message capabilities to receive inquiries concerning the Affordable Units; (6) A display of the fair housing logo in the rental office and in advertising; and (7) Budget to adequately fund the reasonably necessary expenses of the foregoing. With the exception of 5 and 6 above, each of the above shall be implemented only when an Affordable Unit is or will soon be available for rent. As part of the outreach and marketing program, the Owner shall create a waiting list of applicants for the Units, and shall select qualifying prospective tenants on a first-come, first served basis. Owner will not be obliged to rent a Unit to a potential renter on a waiting list unless such potential renter agrees to occupy the Unit no later than (a) forty-five (45) days after Owner notifies such potential renter that the Unit will be available for occupancy, or (b) thirty (30) days after such Unit is vacated by the prior tenant, whichever is later. (b) The Owner shall not discriminate against any applicants for tenancy on the basis of source of income or rent payment [for example, without limitation, Temporary Assistance for Needy Families (TANF), or Section 8], and Owner shall consider a prospective Resident's previous rent history of at least one (1) year, or such other time period the Owner deems reasonable, as evidence of the prospective H 43 / (lg) 7

26 26 Resident's ability to pay the applicable Rent. The ability to pay shall be demonstrated if the prospective Resident can document that the prospective Resident's gross income is at least two (2) times the prospective rent. The Owner, in the reasonable exercise of its discretion, may waive the requirement that the prospective Resident's gross income equal at least two (2) times the prospective rent, and admit prospective Residents with lower gross incomes. (c) The Owner will accept as residents, on the same basis as all other prospective residents, persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing housing program under Section 8 of the United States Housing Act, or its successor. The Owner shall not apply selection criteria to Section 8 certificate or voucher holder participants that is more burdensome than criteria applied to all other prospective residents, nor shall the Owner apply or permit the application of management policies or lease provisions with respect to the Development which have the effect of precluding occupancy of units by such prospective Residents. 2.6 Lease Provisions. Owner shall include in leases for all Units provisions which authorize Owner to immediately terminate the tenancy of any household one or more of whose members misrepresented any fact material to the household's qualification as a Very Low-Income Senior Household. Each lease or rental agreement shall also provide that the household is subject to annual certification in accordance with Section 3.1 below. 2.7 Condominium Conversion. The Owner shall not convert Development units to condominium or cooperative ownership or sell condominium or cooperative conversion rights to the Property during the Term of this Agreement. ARTICLE 3. INCOME CERTIFICATION AND REPORTING 3.1 Income Certification. With respect to new Residents, the Owner will obtain, complete, as a condition to initial occupancy and with respect to new Residents and Existing Residents, and maintain on file annually thereafter, income certifications from each Resident renting any of the Units. The Owner shall make a good faith effort to verify that the income provided by an applicant or occupying household in an income certification is accurate by taking two or more of the following steps as a part of the verification process: (a) obtain a minimum of the three (3) most current pay stubs; (b) obtain an income tax return for the most recent tax year; (c) conduct a credit agency or similar search; (d) obtain the three (3) most current savings and checking account bank statements; (e) obtain an income verification form from the applicant's current employer; (f) obtain an income verification form from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies; or (g) if the applicant is unemployed and has no such tax return, obtain another form of independent verification. Copies of Resident income certifications shall be available to the City upon request. 3.2 Review by City. Owner shall submit to the City for purposes of verification a copy of the rental application and the renter s age and income certification together H 43 / (lg) 8

27 27 with the documents in support thereof prior to the initial occupancy of all Units. No Units shall be rented until City approval is received. 3.3 Tenant Recertification. All tenant recertifications will be conducted in accordance with Section 10337(b) of the California Tax Credit Allocation Committee Regulations, as amended. Developer agrees to perform income recertifications if mandated by state or federal agencies having jurisdiction over the Project. 3.4 Additional Information. Owner shall provide any additional information reasonably requested by the City. The City shall have the right to examine and make copies of all books, records or other documents of Owner, which pertain to any Unit upon three (3) days prior written notice. 3.5 Records. Owner shall maintain complete, accurate and current records pertaining to the Development, and shall permit any duly authorized representative of the City to inspect records, including records pertaining to income, age and household size of Residents. All Resident lists, applications and waiting lists relating to the Development shall at all times be kept separate and identifiable from any other business of the Owner and shall be maintained as required by the City, using record-keeping forms provided by the City, in a reasonable condition for proper audit and subject to examination during business hours by representatives of the City. The Owner shall retain copies of all materials obtained or produced with respect to occupancy of the Units for a period of at least five (5) years. 3.6 On-site Inspection. The City shall have the right to perform an on-site inspection of the Development upon twenty-four (24) hour notice to the Owner. The Owner agrees to cooperate in such inspection. ARTICLE 4. OPERATION OF THE DEVELOPMENT 4.1 Residential Use. The Development shall be operated only for residential use as permanent multifamily rental housing for Very Low-Income Households and all ancillary activities related thereto. 4.2 Taxes and Assessments. Owner shall pay all real and personal property taxes, assessments (other than those which have been abated), if any, and charges and all franchise, income, employment, old age benefit, withholding, sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property; provided, however, that Owner shall have the right to contest in good faith, any such taxes, assessments, or charges. In the event Owner exercises its right to contest any tax, assessment, or charge against it, Owner, on final determination of the proceeding or contest, shall immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest. H 43 / (lg) 9

28 Nondiscrimination. (a) All of the Units shall be available for occupancy on a continuous basis to members of the general public who are age and income eligible. Owner shall not give preference to any particular class or group of persons in renting the Units, except to the extent that the Units are required to be leased to Very Low-Income Senior Households. (b) The Owner covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section of the Government Code, as those bases are defined in Sections 12926, , subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land. 4.4 Non-Subordination of Regulatory Agreement. IT IS AGREED THAT CITY SHALL NOT SUBORDINATE THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS TO ANY MONETARY LIEN RECORDED AGAINST THE PROJECT REGARDLESS OF FINANCING OR REFINANCING RESTRICTIONS UNLESS AUTHORIZED BY THE CITY COUNCIL. ARTICLE 5. PROPERTY MANAGEMENT AND MAINTENANCE 5.1 Management Responsibilities. The Owner is responsible for all management functions with respect to the Development, including without limitation the selection of residents, certification and recertification of household size and income, evictions, collection of rents and deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital items, and security. The City shall have no responsibility over management of the Development. The Owner shall retain a professional property management company, approved by the City, to perform its management duties hereunder. A resident manager shall also be required. Within thirty (30) days from the issuance of a building permit for the Project, Owner shall submit a proposed management plan to the City for approval by the City. The City shall approve or disapprove (with written explanation for disapproval) of the proposed management plan by notifying the Owner in writing. 5.2 Management Agent; Periodic Reports. The Development shall at all times be managed by an experienced management agent reasonably acceptable to the City, with demonstrated ability to operate residential facilities like the Development in a manner that will provide decent, safe, and sanitary housing (as approved, the "Management Agent"). The City approves Cabrillo Economic Development Corporation as the initial Management Agent. The Owner shall submit for the City's approval the H 43 / (lg) 10

29 29 identity of any proposed Management Agent. The Owner shall also submit such additional information about the background, experience and financial condition of any proposed Management Agent as is reasonably necessary for the City to determine whether the proposed Management Agent meets the standard for a qualified Management Agent set forth above. If the proposed Management Agent or on-site resident manager meets the standard for a qualified Management Agent set forth above, the City shall approve the proposed Management Agent by notifying the Owner in writing. 5.3 Performance Review. The City reserves the right to conduct an annual (or more frequently, if deemed reasonably necessary by the City) review of the management practices and financial status of the Development. The purpose of each periodic review will be to enable the City to determine if the Development is being operated and managed in accordance with the requirements and standards of this Agreement. The Owner shall cooperate with the City in such reviews. 5.4 Replacement of Management Agent or On-Site Resident Manager. (a) If, as a result of a periodic review, the City determines, in its reasonable judgment, that the Development is not being operated and managed in accordance with any of the material requirements and standards of this Agreement, the City shall deliver notice (a Management Deficiency Notice ) to Owner setting forth the area in which the City believes the Management Agent or on-site resident manager is deficient. Within fifteen (15) days of receipt by Owner of such written notice, City staff and the Owner shall meet in good faith to consider methods for improving the financial and operating status of the Development. If, after a reasonable period as determined by the City of not less than sixty (60) days, the Owner has not cured the matters set forth in the Management Deficiency Notice, the City may require replacement of the Management Agent or on-site resident manager. (b) If, after the above procedure, the City requires in writing the replacement of the Management Agent or on-site resident manager, Owner shall promptly dismiss the then Management Agent or on-site resident manager, and shall appoint as the Management Agent or on-site resident manager a person or entity meeting the standards for a Management Agent or on-site resident manager set forth in Section 5.2 above and approved by the City pursuant to Section 5.2 above. (c) Any contract for the operation or management of the Development entered into by Owner shall provide that the contract can be terminated as set forth above. Failure to remove the Management Agent or on-site resident manager in accordance with the provisions of this Section shall constitute default under this Agreement, and the City may enforce this provision through legal proceedings as specified in Section Approval of Management Policies. The Owner shall submit its written management policies with respect to the Development to the City for its review, and shall amend such policies in any way necessary to ensure that such policies comply with the provisions of this Agreement. H 43 / (lg) 11

30 Property Maintenance. The City places prime importance on quality maintenance to ensure that all City and City-assisted affordable housing projects within the City are not allowed to deteriorate due to below-average maintenance. Normal wear and tear of the Development will be acceptable to the City assuming the Owner agrees to provide all necessary improvements to assure the Development is maintained in good condition. The Owner shall make all repairs and replacements necessary to keep the improvements in good condition and repair. The Owner agrees, for the entire Term of this Agreement, to maintain all interior and exterior improvements, including landscaping, on the Property in good condition and repair (and, as to landscaping, in a healthy condition) and in accordance with all applicable laws, rules, ordinances, orders and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials, and in accordance with the following maintenance conditions: (a) Landscaping. The Owner agrees to have landscape maintenance performed every other week, including replacement of dead or diseased plants with comparable plants subject to water conservation measures which may be imposed upon the Property by the City or any other applicable entity. Owner agrees to adequately water the landscaping on the Property. Landscaping on the Property shall be adequately watered, kept in a weed-free condition, and routinely trimmed throughout the term of this Agreement. (b) Yard Area. unmaintained, including: No yard areas on the Property shall be left (1) broken or discarded furniture, appliances, and other household equipment stored in yard areas for a period exceeding one (1) week; (2) packing boxes, lumber, trash, dirt, and other debris in areas visible from public property or neighboring properties; and (3) vehicles parked or stored in other than approved parking areas. (c) Building. No buildings located on the Property may be left in an unmaintained condition so that any of the following exist: (1) violations of state law, uniform codes, or City ordinances; (2) conditions that constitute an unsightly appearance that detracts from the aesthetics or value of the Property or constitutes a private or public nuisance; (3) broken windows; (4) graffiti (must be removed within seventy-two (72) hours); and (5) conditions constituting hazards and/or inviting trespassers or malicious mischief. (d) Sidewalks. The Owner shall maintain, repair, and replace as necessary all sidewalks within the Development. H 43 / (lg) 12

31 31 (e) Breach. In the event that the Owner breaches any of the covenants contained in this section and such default continues for a period of seven (7) days after written notice from the City with respect to graffiti, debris, waste material, and general maintenance or thirty (30) days after written notice from the City with respect to landscaping and building improvements, then the City, in addition to whatever other remedy it may have at law or in equity, shall have the right to enter upon the Property and perform or cause to be performed all such acts and work necessary to cure the default. Pursuant to such right of entry, the City shall be permitted (but is not required) to enter upon 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 on 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 the City and/or costs of such cure, including a ten percent (10%) administrative charge, which amount shall be promptly paid by the Owner to the City upon demand. 5.7 Safety Conditions. (a) The Owner acknowledges that the City places a prime importance on the security of City-approved projects and the safety of the residents and surrounding community. The Owner agrees to implement and maintain throughout the Term the following security measures in the Development: (1) to the extent feasible employ defensible space design principles and crime prevention measures in the operation of the Development including but not limited to maintaining adequate lighting in parking areas and pathways; (2) use its best efforts to work with the City police department to implement and operate an effective neighborhood watch program; and (3) provide added security including dead-bolt locks for every entry door, and where entry doors are damaged, replace them with solid-core doors. (b) The City shall have the right to enter on the Property and/or contact the City police department if it becomes aware of or is notified of any conditions that pose a danger to the peace, health, welfare or safety of the Residents and/or the surrounding community, and to perform or cause to be performed such acts as are necessary to correct the condition. ARTICLE 6. MISCELLANEOUS 6.1 Term. The provisions of this Agreement shall apply to the Property until the end of the Term; provided, however, that the provisions of Section 4.3 of the Agreement shall run with the Property and shall remain in effect in perpetuity. This Agreement shall bind any successor, heir or assign of Owner, whether a change in interest occurs voluntarily or involuntarily, by operation of law or otherwise, except as expressly released by the City. H 43 / (lg) 13

32 Compliance with Program Requirements. The Owner's actions with respect to the Property shall at all times be in full conformity with all requirements imposed on projects that receive a density bonus under California Government Code Section et seq. 6.3 Covenants to Run With the Land. The City and Owner hereby declare their express intent that the covenants and restrictions set forth in this Agreement shall run with the land, and shall bind all successors in title to the Property, provided, however, that on the expiration of the Term of this Agreement said covenants and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Property or any portion thereof shall be held conclusively to have been executed, delivered and accepted subject to such covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the City expressly releases such conveyed portion of the Property from the requirements of this Agreement. 6.4 Enforcement by the City. In addition to the remedies under Section 2.3 related to excess Rent payments, if the Owner fails to perform any obligation under this Agreement, and fails to cure the default within thirty (30) days after the City has notified the Owner in writing of the default or, if the default cannot be cured within thirty (30) days, failed to commence to cure within thirty (30) days and thereafter diligently pursue such cure, the City shall have the right to enforce this Agreement by bringing an action at law or in equity to compel Owner's performance of its obligations under this Agreement, and/or for damages, or any other remedy provided by law: 6.5 Rights of Third Parties to Enforce Covenants. Notwithstanding any other provisions of law, all covenants and restrictions contained herein which implement Health and Safety Code Sections and/or 33413(b) (4), or successor provisions, shall run with the land and shall be enforceable by the City of Simi Valley and any of the parties listed in Health and Safety Code Section (f)(7), so long as such provision or successor provision remains in effect. 6.6 Attorneys Fees and Costs. In any action brought to enforce this Agreement, the prevailing party shall be entitled to all costs and expenses of suit, including attorneys' fees. This section shall be interpreted in accordance with California Civil Code Section 1717 and judicial decisions interpreting that statute. 6.7 Recording and Filing. The City and Owner shall cause this Agreement, and all amendments and supplements to it, to be recorded against the Property in the Official Records of the County of Ventura. 6.8 Governing Law. This Agreement shall be governed by the laws of the State of California. 6.9 Amendments. This Agreement may be amended only by a written instrument executed by all the parties hereto or their successors in title, and duly recorded in the real property records of the County of Ventura, California. H 43 / (lg) 14

33 Notice. All notices given or certificates delivered under this Agreement shall be in writing and be deemed received on the delivery or refusal date shown on the delivery receipt, if: (i) personally delivered by a commercial service which furnishes signed receipts of delivery or (ii) mailed by certified mail, return receipt requested, postage prepaid, addressed as shown on the signature page. Any of the parties may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or communications shall be sent Severability. If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions of this Agreement shall not in any way be affected or impaired thereby. IN WITNESS WHEREOF, the City and Owner have executed this Agreement by duly authorized representatives, all on the date first written above. Attest: City of Simi Valley, A Municipal Corporation By: Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation Lonnie J. Eldridge, City Attorney By: Approved as to Content: Margarita H. de Escontrias Chief Executive Officer Eric J. Levitt, City Manager By: Debra L. De Vay Chief Financial Officer Peter Lyons, Director Department of Environmental Services H 43 / (lg) 15

34 34 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF ) ) ) On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 43 / (lg)

35 35 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF ) ) ) On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 43 / (lg)

36 36 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF ) ) ) On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 43 / (lg)

37 37 EXHIBIT 1 PROPERTY DESCRIPTION The land is situated in the City of Simi Valley, County of Ventura, State of California, and is described as follows: All that certain real property situated in the County of Ventura, State of California, described as follows: A portion of Section 16, Township 2 North, Range 17 West, Rancho Simi, in the County of Ventura, State of California, as per map recorded in Book 3, Page 2 of Maps, in the office of the County Recorder of said County, described as follows: Beginning at a point on the Northerly line of said Section 16, at the Northwest corner of the land first described in the deed to Simi Valley Unified School District of Ventura County, California, recorded July 20, 1960 in Book 1890, Page 180 of Official Records; thence along the Northwest line of said land of said school district. (1) South West, feet, more or less, to a point on the Northeast line of the Southern Pacific s 100 foot right of way; thence along said Northeast line, (2) North West, feet to a point on the East line of Katherine Road; thence along said East line, (3) North 220 feet, more or less, to a point on the North line of said Section 16; thence, (4) East along said North line 449 feet, more or less, to the point of beginning. Excepting therefrom said parcel so much thereof as is included in a tract of land, described as follows: Beginning at a point feet North of the Northwesterly corner of Lot 968 of Susana Knolls Number One, as per map thereof recorded in Book 19, Page 16 of maps, in the records of said county; thence from said point of beginning: (1) North 1.43 feet to a point; thence, (2) North East feet to a point; thence, (3) North East feet to a point; thence, (4) North 43 6 East feet to a point; thence, (5) North feet to a point; thence, (6) East feet to point; thence, (7) South feet to a point; thence, H 43 / (lg)

38 38 (8) West feet to a point; thence, (9) North feet to a point; thence, (10) South 43 6 West feet to a point; thence, (11) South West, feet to a point; thence, (12) South West, feet to the point of beginning. Also excepting therefrom 50% of all gas, oil, hydrocarbons and minerals, in or under said land as reserved by Theodore W. Johnson, et al., in deed recorded May 28, 1954 in Book 1205, Page 538 of Official Records. H 43 / (lg)

39 39 EXHIBIT 2 MORTGAGE LOAN AND AMENDED AND RESTATED REGULATORY AGREEMENT RIDER This Rider is attached to and made a part of the promissory note, the deed of trust, the Amended and Restated City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants (Regulatory Agreement), and loan agreement or other document(s) evidencing, securing, and governing a loan in the amount of Five Hundred Thousand Dollars ($500,000) (the Loan ) made by the City of Simi Valley ( Lender ) to Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation, ( Borrower ) for the construction of the Camino Esperanza Apartments (the Project ). The limited partnership developing the Project, whether or not identified as Borrower, is sometimes referred to herein as the Partnership. The Limited Partnership Agreement forming or continuing the Partnership is referred to herein as the Partnership Agreement. The parties hereto agree that the following covenants, terms, and conditions shall be part of and shall modify or supplement each of the documents evidencing, securing, or governing the disbursement of the Loan (the Loan Documents ), and that in the event of any inconsistency or conflict between the covenants, terms, and conditions of the Loan Documents, or the Regulatory Agreement, and this Rider, the following covenants, terms, and conditions shall control and prevail: 1. Non-recourse Obligation. The Loan is a non-recourse obligation of Borrower. Neither Borrower nor any of its general and limited partners (or, if Borrower is not the Partnership, the general and limited partners of the Partnership), nor any other party shall have any personal liability for repayment of the Loan. The sole recourse of Lender under the Loan Documents for repayment of the Loan shall be the exercise of its rights against the Project and related security thereunder. Notwithstanding the foregoing, nothing in this Section 1 shall affect any rights of the Lender to recover directly from Borrower any damages or costs incurred by Lender as a result of fraud, material misrepresentation or waste, and any costs and expenses incurred by the Lender in connection thereof, including without limitation, reasonable attorneys fees. 2. General Partner Change. The withdrawal, removal, and/or replacement of a general partner of the Partnership pursuant to the terms of the Partnership Agreement shall not constitute a default under any of the Loan Documents, and any such actions shall not accelerate the maturity of the Loan, provided that any required substitute general partner is reasonably acceptable to Lender and is selected with reasonable promptness. 3. Monetary Default. Prior to the release of any additional funds authorized under the Loan Agreement, Borrower agrees to provide Lender with the names and addresses of each of the general and limited partners of the Partnership, as identified in the Partnership Agreement, If a monetary event of default occurs under the terms of any of the Loan Documents, prior to exercising any remedies thereunder Lender shall give Borrower and each of the general and limited partners of the Partnership, as identified in the Partnership Agreement, simultaneous written notice of such default. Borrower shall have a period of seven (7) days after such notice is given within which to cure the default H 43 / (lg)

40 40 prior to exercise of remedies by Lender under the Loan Documents, or such longer period of time as may be specified in the Loan Documents. 4. Non-Monetary Default. If a non-monetary event of default occurs under the terms of any of the Loan Documents, prior to exercising any remedies thereunder Lender shall give Borrower and each of the general and limited partners of the Partnership, as identified in the Partnership Agreement, simultaneous written notice of such default. If the default is reasonably capable of being cured within thirty (30) days, Borrower shall have such period to effect a cure prior to exercise of remedies by Lender under the Loan Documents, or such longer period of time as may be specified in the Loan Documents. If the default is such that it is not reasonably capable of being cured within thirty (30) days or such longer period if so specified, and if Borrower (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then Borrower shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by Lender. If Borrower fails to take corrective action or to cure the default within a reasonable time, Lender shall give Borrower and each of the general and limited partners of the Partnership written notice thereof, whereupon the limited partner may remove and replace the general partner with a substitute general partner who shall effect a cure within a reasonable time thereafter in accordance with the foregoing provisions. In no event shall Lender be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the first notice of default is given, or such longer period of time as may be specified in the Loan Documents. 5. Casualty, Condemnation, Etc. In the event of any fire or other casualty to the Project or eminent domain proceedings resulting in condemnation of the Project or any part thereof, Borrower shall have the right to rebuild the Project, and to use all available insurance or condemnation proceeds therefor, provided that (a) such proceeds are sufficient to keep the Loan in balance and rebuild the Project in a manner that provides adequate security to Lender for repayment of the Loan or if such proceeds are insufficient then Borrower shall have funded any deficiency, (b) Lender shall have the right to approve plans and specifications for any major rebuilding and the right to approve disbursements of insurance or condemnation proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no material default then exists under the Loan Documents. If the casualty or condemnation affects only part of the Project and total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial repayment of the Loan in a manner that provides adequate security to Lender for repayment of the remaining balance of the Loan. 6. Force Majeure. There shall be no default for construction or rehabilitation delays beyond the reasonable control of Borrower, provided that such delays do not exceed one hundred eighty (180) days, or such longer period of time as may be specified in the Loan Documents. 7. Purchase Rights. The execution and delivery of the purchase option and right of first refusal agreement described in the Limited Partnership Agreement shall not constitute a default under the Loan Documents or accelerate the maturity of the Loan thereunder. Any requisite consent of Lender to (a) the exercise of said purchase option H 43 / (lg)

41 41 and right of first refusal agreement by the project sponsor identified therein, and to (b) the assumption without penalty of Loan obligations by the project sponsor and the release of Borrower from such obligations, shall not be unreasonably withheld. Subject to any such consent requirement, the exercise of rights under such agreement shall not constitute a default or accelerate maturity of the Loan. 8. Loan Assumption. If the purchase option and right of first refusal agreement described in the Limited Partnership Agreement is not exercised and the Project is sold subject to low-income housing use restrictions as contained in an existing regulatory agreement or other recorded covenant, any requisite consent of lender to said sale, and to the assumption without penalty of loan obligations by the purchaser and the release of Borrower from such obligations, shall not be unreasonably withheld. 9. Lender Approvals, Etc. In any approval, consent, or other determination by Lender required under any of the Loan Documents, Lender shall act reasonably and in good faith. 10. Subordination. Lender and Developer acknowledge that the Lender s Loan Documents shall be subordinate to certain deeds of trust secured by the Project. Lender shall execute and permit the recordation of a subordination agreement, in a form which is reasonably acceptable to Lender and to City, with respect to any lien, encumbrance or mortgage for the Project, provided that Borrower and all potential lienholders agree that the City s Regulatory Agreement, or any of its terms, or the separately recorded Declaration of Conditions and Restrictions, shall not be subordinate to any lien or deeds of trust secured by the Project unless authorized by the City Council. 11. Tax Credit Compliance. As of the date hereof, Internal Revenue Code (IRC) Section 42(h)(6)(E)(ii) does not permit the eviction or termination of tenancy (other than for good cause) of an existing tenant of any low-income unit or any increase in the gross rent with respect to such unit not otherwise permitted under IRC Section 42 for a period of three (3) years after the date the building is acquired by foreclosure or instrument in lieu of foreclosure. In the event the regulatory agreement required by the California Tax Credit Allocation Committee is recorded against the Project, the Lender agrees to comply with the provisions set forth in IRC Section 42(h)(6)(E)(ii). H 43 / (lg)

42 42 In Witness Whereof, the undersigned have caused this Rider to be entered into as of the 1st day of December Attest: City of Simi Valley, A Municipal Corporation By: Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation Lonnie J. Eldridge, City Attorney By: Approved as to Content: Margarita H. de Escontrias Chief Executive Officer Eric J. Levitt, City Manager By: Debra L. De Vay Chief Financial Officer Peter Lyons, Director Department of Environmental Services H 43 / (lg)

43 43 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF ) ) ) On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 43 / (lg)

44 44 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF ) ) ) On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 43 / (lg)

45 45 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF ) ) ) On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 43 / (lg)

46 46 ATTACHMENT B LOAN AGREEMENT THIS LOAN AGREEMENT (the Agreement ) is entered into as of December 1, 2015, by and between the CITY OF SIMI VALLEY, a municipal corporation (the City ), and Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation (the Developer ). RECITALS The following recitals are a substantive part of this Agreement: A. The City and the Developer will enter into an Amended and Restated City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants, dated of even date herewith to be recorded in the official records of Ventura County (the Regulatory Agreement ). The Regulatory Agreement requires the Developer to construct and operate a 31-unit multifamily senior apartment project with a minimum of twelve (12) covered parking spaces (the Project ) on an approximately 2.61-acre parcel of land within the City located at 1384 Katherine Road South (the Site ), and to restrict the rental of 30 apartment units to very low-income senior households at an affordable rent, with 1 manager's unit. The Regulatory Agreement is hereby incorporated herein by reference. B. Pursuant to this Agreement, the City has agreed to provide a loan in the amount of Five Hundred Thousand Dollars, $500,000, (the City Loan ) from the Successor Housing Agency s Affordable Housing Incentives Account to the Developer to be used in connection with the development of the Project. The term of the City Loan shall be fifty-five (55) years. The City Loan will initially be used to fund certain predevelopment costs during project construction and initial occupancy, which is estimated to extend over a period of two years. At the time the construction loan is paid and permanent financing is in place, the City Loan will be deemed to be permanent financing for the remainder of the term. The parties intend that this Agreement will satisfy the obligations of the City pursuant to Article 2.1 of the Regulatory Agreement. C. The City s making of the City Loan to the Developer is in the vital and best interest of 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 laws. NOW, THEREFORE, the City and the Developer hereby agree as follows: 1. City Loan. Subject to Developer s performance of all of the terms, covenants and conditions, which are set forth herein, the City hereby agrees to loan to the Developer Five Hundred Thousand Dollars ($500,000) Repayment of City Loan. The Developer s obligation to repay the City Loan shall be set forth in the Promissory Note in the form of Exhibit A attached hereto, which is incorporated herein. The Promissory Note shall be for a term of fifty five (55) years from the date of the Promissory Note for the Project, and shall bear no interest during the initial 17 years. Beginning on the eighteenth anniversary date of the Note, the City Loan shall commence to accrue 3% simple interest. The 1 H 44 / (lg)

47 47 Promissory Note principal and any accrued interest shall be paid in full at the end of the 55 year term Security for City Loan. The Promissory Note shall be secured by a Deed of Trust to be recorded as an encumbrance to the Site, in the form of Exhibit B attached hereto, which is incorporated herein, and the recordation of a UCC-1 fixture filing with respect to the Project. In the event of any default under the terms of the Promissory Note or the Deed of Trust, the sole recourse of the City for any and all such defaults shall be by judicial foreclosure or by the exercise of the trustee s power of sale and the Developer shall not be personally liable for the payment of the Promissory Note or for the payment of any deficiency established after judicial foreclosure or trustee s sale. Notwithstanding the foregoing, however, the foregoing shall not in any way affect any rights the City may have (as a secured party or otherwise) hereunder or under the Promissory Note or the Deed of Trust to recover directly from the Developer any amounts secured by the Deed of Trust, or any funds, damages or costs (including without limitation reasonable attorneys fees and costs) incurred by the City as a result of fraud, misrepresentation or waste, and any costs and expenses incurred by the City in connection thereof (including without limitation reasonable attorneys fees and costs) Disbursement of City Loan. The City shall disburse the City Loan to pay for all or a portion of the following costs incurred with respect to the Project: (a) fees for engineering and architectural work performed with respect to the Project, City plan check and permit fees, and (b) other fees payable to the City with respect to the Project (the Predevelopment Expenses ). Two Hundred Thousand Dollars ($200,000) of the City Loan shall be disbursed for Predevelopment Expenses after City Council approval of the Regulatory Agreement, subject to the fulfillment or waiver by City of conditions (a), (c), (d), (e) and (f) below. The remaining Three Hundred Thousand Dollars ($300,000) of the City Loan shall be disbursed after the issuance of a Zone Clearance for the Project. All City Loan disbursements shall be subject to the fulfillment or waiver by City of conditions (a) through (f) below. Conditions (a) through (f) below (the Conditions Precedent ) are solely for the benefit of the City, and may be waived by the City Manager in his or her sole discretion. a. Execution of Documents. Developer shall have executed and delivered to the City the Promissory Note, the Regulatory Agreement and the Deed of Trust and any other documents required hereunder, and the Regulatory Agreement and the Deed of Trust shall have been recorded as encumbrances to the Site. b. Developer Submissions. Developer shall have submitted to the City the following: (i) a copy of the partnership agreement for the Project and documents executed pursuant thereto, such as guaranties and funding agreements, (ii) a copy of all executed and proposed construction loan agreements and permanent loan agreements, together with all documents to be executed pursuant to those loan agreements, such as promissory notes and deeds of trust, (iii) a copy of the owner s policy of title insurance issued to the Developer, with endorsements showing no mechanic s liens encumbering the Site (or expiration of statutory time limits for filing of mechanic s liens), and (iv) a copy of an executed property management agreement for 2 H 44 / (lg)

48 48 the Project with an experienced property manager which is reasonably acceptable to the City. All of the foregoing submissions shall be certified by the Developer to be true and complete copies thereof. c. Title Policy. A title insurance company reasonably acceptable to the City shall have unconditionally committed to issue a lender s policy of title insurance insuring the lien of the Deed of Trust in the amount of the City Loan, subject to the liens and associated regulatory agreements, if any, for all Senior Loans described in Section 1.5 and such exceptions as are reasonably acceptable to the City, together with any endorsements reasonably requested by the City. The Developer shall be responsible for the cost of such title policy and endorsements. d. Proof of Insurance. Developer shall have provided to the City a certificate of insurance which satisfies the requirements of Section 2.3 hereof. e. Environmental Condition. disapproved the environmental condition of the Site. City shall not have f. No Default, Representations and Warranties. Developer shall not be in default in any of its obligations under the terms of this Agreement or the Regulatory Agreement. All representations and warranties of Developer contained herein and in the Regulatory Agreement shall be true and correct in all material respects on and as of the date of the disbursement of the City Loan as though made at that time and all covenants of Developer which are required to be performed prior to the disbursement of the City Loan shall have been performed by such date. 1.4 [Reserved] 1.5 Subordination. Developer acknowledges that the Loan Agreement, Note, Deed of Trust, Regulatory Agreement and any other document relating to the City Loan (the "City Loan Documents") shall be subordinate to the loan documents for the construction loan made by Bank of the West from the proceeds of Multifamily Housing Revenue Bonds, in an amount not to exceed Eight Million Dollars ($8,000,000) ("Bond Loan") and the California Department of Housing and Community Development HOME Program Loan, in an amount not to exceed Four Million Five Hundred Thousand Dollars ($4,500,000) ("HOME Loan"); and after project construction is complete and the permanent loans have been recorded, the City Loan will be junior and subordinate only to the HOME Loan and the California Department of Housing and Community Development Multifamily Housing Program Loan, in the amount of Two Million Thirty-Five Thousand Dollars ($2,035,000) (the "MHP Loan") (collectively, the Senior Loans ). City shall execute and permit the recordation of a Subordination Agreement, in a form which is reasonably acceptable to the City, with respect to liens, encumbrances or mortgages for the Project, provided that IT IS AGREED THAT THE CITY SHALL NOT SUBORDINATE THE REGULATORY AGREEMENT OR ANY OF ITS TERMS OR THE SEPARATELY RECORDED DECLARATION OF CONDITIONS AND RESTRICTIONS UNLESS AUTHORIZED BY THE CITY COUNCIL. The City Deed of Trust may be made subordinate to a future deed of trust, or such other 3 H 44 / (lg)

49 49 mortgages approved in writing by the City, where such subordination is required in order to obtain the financing needed for the Project, for the construction and/or permanent loan or loans for the Project, provided that: a. The principal amount of the permanent loan or loans supports a minimum 110% debt service coverage ratio based upon the Developer s submittal of an updated cash flow projection reasonably acceptable to the City; b. City shall receive any notices of default under any such deed of trust in accordance with state law; c. City shall have the right to cure any default by the Developer as a junior lienholder in accordance with state law; The City shall execute and permit the recordation of a subordination agreement, in a form which is reasonably acceptable to the City, with respect to any lien, encumbrance or mortgage which satisfies the above-listed requirements. The City s approval of a proposed subordination agreement which meets these terms shall not be unreasonably withheld, conditioned or delayed. 1.6 Assumption. The Promissory Note shall not be assumable by successors and assigns of Developer without the prior written consent of the City, which consent shall not unreasonably be withheld. 2. Development and Operation Requirements. 2.1 Development and Operation of Project in Compliance with Regulatory Agreement. The Developer shall develop and operate the Project in compliance with the requirements of the Regulatory Agreement, including without limitation the obligations of Section 2.2 regarding occupancy requirements, Section 2.3 regarding allowable rent and rent adjustments, Section 2.5, regarding resident selection and waiting list, and Article 5, regarding management and maintenance of the Project. 2.2 Maintenance. The Developer shall maintain the Project in accordance with Section 5.6 of the Regulatory Agreement and in compliance with all applicable provisions of the Simi Valley Municipal Code. The Project shall not be demolished or converted to another use without the prior written approval of the City. The Project shall be maintained in accordance with this Section 2.2 until the City Loan is repaid in full. If the Project is not so maintained, and such condition is not corrected as soon as possible after notice thereof from the City, then the City may perform the necessary maintenance and Developer shall pay such costs as are reasonably incurred for such maintenance Insurance. Developer shall furnish the City with proper evidence of the following forms of insurance coverage: 4 H 44 / (lg)

50 50 a. General Conditions. Without limiting the Developer s indemnification of the City, Developer shall provide and maintain at its sole expense the insurance listed under subparagraph (b) hereof (Evidence of Coverages) covering its operations, subject to the following conditions: (i) The City, its boards, officers, agents and employees, shall be included as additional insureds in all liability insurance policies, except for workers compensation. The City shall be named as loss payees as their interests may appear in all property insurance. (ii) With respect to the interests of the City, the Developer s insurance shall not be canceled nor reduced in coverage or limits until after thirty (30) days written notice shall have been sent by certified mail (return receipt requested) to the City, Department of Environmental Services, 2929 Tapo Canyon Road, Simi Valley, California 93063, and shall contain an unequivocal clause so stating. (iii) A City approved endorsement or certified copy of insurance policy providing coverage shall be submitted to and approved by the City s Risk Manager prior to commencement of any work or tenancy. (iv) Aggregate Limits/Blanket Coverage - If any of the required insurance coverages contain aggregate limits, or apply to other operations or tenancy of the Developer outside these specifications, Developer shall give City prompt, written notice of any incident, occurrence, claim, settlement, or judgment against that insurance which may diminish the protection that such insurance affords the City. Developer shall further take immediate steps restoring such aggregate limits or shall provide the insurance protection for such aggregate limits. (v) Failure to Procure Insurance - Developer s failure to procure or maintain required insurance shall constitute a material breach of this Agreement under which the City may immediately terminate this Agreement or, at its discretion, procure or renew such insurance to protect the City s interests and pay any and all premiums in connection therewith, and recover all monies so paid from Developer, or deduct all monies so paid from payments due Developer. (vi) Underlying Insurance - Developer shall be responsible for requiring indemnification and insurance from his/her employees receiving mileage allowance, consultants, agents, and subcontractors, if any, to protect the Developer s and the City s interests, and for ensuring that such persons comply with any applicable insurance statutes. Developer is encouraged to seek professional advice in this regard. b. Evidence of Coverages. Evidence of coverages, as checked below, having as a minimum the limits shown, must be submitted and approved prior to the release of City funds. Amounts shown are Combined Single Limit (CSL). Split limits may be substituted if the total per occurrence equals or exceeds the CSL amount. 5 H 44 / (lg)

51 51 a. b. Description Limits Workers Compensation with Waiver of Subrogation Statutory (X) Employer s Liability $500,000 General Liability (must be written on an Occurrence Form) $2 million (X) (X) (X) (X) (X) (X) (X) (X) c. Premises and Operations Contractual Liability Independent Contractor Products/Completed Operations Broad Form Property Damage Broad Form liability Endorsement Explosion Hazard Collapse/Underground Hazard Automobile Liability (must be written on an Occurrence Form) (X) (X) d. Owned Automobiles Nonowned/Hired Automobiles Property Insurance (X) (X) (X) $2 million 100% of Replacement All Risk Coverage Fire & Extended Coverage Fire Legal Liability c. Workers Compensation. Developer shall comply with, and shall cause its contractors to comply with, all of the provisions of the Worker s Compensation Insurance and Safety Acts of the State of California. d. Liability Insurance. In accordance with the provisions of Section 2.3(a) and (b) above, Developer shall furnish to City and maintain in force during the period the Project is maintained on the Site a policy of comprehensive general liability insurance from a good and solvent insurer qualified and licensed to do business in California in which the City and its officers, employees, agents and representatives are named as additional insureds. The certificate and endorsement by the insurance carrier shall contain a statement of obligation on the part of the carrier to notify City of any material change, cancellation or termination of the coverage at least thirty (30) days in advance of the effective date of any such material change, cancellation or termination. Coverage provided hereunder by Developer shall be primary insurance and not be contributing with any insurance maintained by City, and the policy shall contain such an endorsement. A certificate of all such insurance policies required by this Agreement shall be delivered to the City Manager prior to the disbursement of the City Loan. No such insurance shall be canceled or modified without thirty (30) days prior written notice to the City. 6 H 44 / (lg)

52 Indemnification and Hold Harmless. Developer shall indemnify, hold harmless and defend, with attorney(s) reasonably acceptable to the City and its officers, elected and appointed boards and officials, employees, representatives and agents, from and against any and all liability, damages, costs, losses, claims and expenses, suits, actions, proceedings and judgments, including attorney fees, however caused, resulting directly or indirectly from or connected with the ownership, operation, management and maintenance of the Project and the Site, and/or the performance of this Agreement by Developer or its contractors, subcontractors, agents, employees or other persons acting on Developer s behalf Compliance With Laws. The Developer shall develop, maintain and operate the Project and the Site in conformity with all applicable laws, including all applicable state labor standards, the City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the City Municipal Code, all applicable environmental laws, and all applicable disabled and handicapped access requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq Nondiscrimination. Developer for itself and its successors and assigns, agrees 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 leasing, subleasing, rental, transferring, use, occupancy, tenure, or enjoyment of the Site nor shall the Developer or any person claiming under or through the Developer establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, leases, sublessees, subtenants, contractors or vendees in the Site Condition of the Site. a. Developer Disclosure. Developer 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 Site notifying Developer of the presence of surface or subsurface zone Hazardous Materials in, on, or under the Site, or any portion thereof. Best knowledge, as used herein, shall mean the actual or constructive knowledge of the Developer and its officers, directors, employees, agents and representatives, as based upon the documents and materials in the possession of Developer, and its officers, employees, agents and representatives, including the site investigation report or study referred to in Section 2.7(b) herein. b. Investigation of Site. In addition to the foregoing, the Developer has, at its sole cost and expense, engaged its own environmental consultant to conduct a Phase 1 investigation of the Site and produce a report thereof, a copy of which has been provided to the City by Developer. Such report concludes that no Hazardous Materials have been detected on the Site. 7 H 44 / (lg)

53 53 c. Developer Precautions. Developer 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 Site. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Developer 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. Environmental Indemnity. Developer shall indemnify, defend and hold City harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, 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 Site, 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 Site, or by whom or how they are discovered, or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, 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 Site. 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. Definitions. 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, or , or listed pursuant to Section of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law)), (ii) defined as a hazardous substance under Section of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a hazardous material, hazardous substance, or hazardous waste under Section 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 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 8 H 44 / (lg)

54 54 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. 2.8 Liens and Stop Notices. Developer shall not allow to be placed on the Site or any part thereof any lien or stop notice. If a claim of a lien or stop notice is given or recorded affecting the Site the Developer shall within sixty (60) days of such recording or service: a. pay and discharge the same; or b. effect the release thereof by recording and delivering to City a surety bond in sufficient form and amount, or otherwise; or c. provide City with indemnification from a title insurance company reasonably acceptable to the City against such lien or other assurance which City deems, in its sole discretion, to be satisfactory for the payment of such lien or bonded stop notice and for the full and continuous protection of City from the effect of such lien or bonded stop notice. 3. Developer s Representations and Warranties. represents and warrants to City as follows: Developer 3.1. Authority. Developer has full right, power and lawful authority to own the Site and undertake all obligations as provided herein, and the execution, performance and delivery of this Agreement by Developer has been fully authorized by all requisite actions on the part of the Developer. The parties who have executed this Agreement on behalf of Developer are authorized to bind Developer by their signatures hereto Litigation. To the best of Developer s knowledge, there are no actions, suits, material claims, legal proceedings, or any other proceedings affecting the Developer or any parties affiliated with Developer, at law or in equity before any court or governmental agency, domestic or foreign, which if adversely determined, would materially impair the right or ability of Developer to execute or perform its obligations under this Agreement or any documents required hereby to be executed by Developer, or which would materially adversely affect the financial condition of Developer or any parties affiliated with Developer No Conflict. To the best of Developer s knowledge, Developer s execution, delivery, and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which Developer or any parties affiliated with Developer is a party or by which it is bound. 9 H 44 / (lg)

55 No Developer Bankruptcy. No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization, receivership or other proceedings are pending or threatened against the Developer or any parties affiliated with Developer, nor are any of such proceedings contemplated by Developer or any parties affiliated with Developer. 3.5 Notice of Changed Conditions. Until the disbursement of the City Loan, Developer shall, upon learning of any fact or condition, which would cause any of the warranties and representations in this Section 3 not to be true, immediately give written notice of such fact or condition to City. Such exception(s) to a representation shall not be deemed a breach by Developer hereunder, but shall constitute an exception which City shall have a right to approve or disapprove if such exception would have an effect on the development and/or operation of the Project. If City elects to disburse the City Loan to the Developer following disclosure of such information, Developer s representations and warranties contained herein shall be deemed to have been made as of the date of the disbursement of the City Loan, subject to such exception(s). Following the disclosure of such information, City may elect to terminate this Agreement by written notice to the Developer. 4. Remedies for Default. A failure by either party to perform any action or covenant required by this Agreement, the Regulatory Agreement, the Promissory Note, the Deed of Trust, or any loan or deed of trust for the Project which is senior to the City Loan, within the time periods provided herein following notice and failure to cure as described hereafter, constitutes a Default under this Agreement. A party claiming a Default shall give written notice of Default to the other party specifying the Default complained of. Except as otherwise expressly provided in this Agreement, the claimant shall not institute any proceeding against any other party, and the other party shall not be in Default if such party cures such default within five (5) days if the claimed Default is a failure to pay amounts due pursuant to the Promissory Note, or thirty (30) days from receipt of such notice for all other claimed Defaults hereunder. However, in the event that such Default is other than a failure to pay money and is of such a nature that it cannot reasonably be cured within thirty (30) days from receipt of such notice, the claimant shall not institute any proceeding against the other party, and the other party shall not be in Default if such party immediately upon receipt of such notice, with due diligence, commences to cure, correct or remedy such failure or delay and completes such cure, correction or remedy with diligence as soon as reasonably possible thereafter. In the event that the Developer is in default on any loan or deed of trust senior to the City Loan, the Developer shall immediately deliver to the City a copy of such notice of default. Even if the holder of such loan or deed of trust has not exercised its rights or remedies with respect to such default, the City shall have the right (but not be obligated to) cure such default. In such event, the City shall be entitled to reimbursement from the Developer of all costs and expenses actually incurred by the City in curing such default. The City shall be entitled to add such amount to the amounts owing pursuant to the Promissory Note, and secured by the Deed of Trust. 10 H 44 / (lg)

56 Institution of Legal Actions. In addition to any other rights or remedies and subject to the restrictions otherwise set forth in this Agreement, either party may institute an action at law or equity to seek specific performance of the terms of this Agreement, or to cure, correct or remedy any Default, to recover damages for any Default, or to obtain any other remedy consistent with the purpose of this Agreement. The City may also cause all indebtedness of the Developer under this Agreement and the Promissory Note to become immediately due and payable, and may institute an action for judicial or nonjudicial foreclosure pursuant to the Deed of Trust. Legal actions must be instituted in the Superior Court of the County of Ventura, State of California, or in the United States District Court for the Central District of California Acceptance of Service of Process. In the event that any legal action is commenced by the Developer against City, service of process on City shall be made by personal service upon the City Manager or in such other manner as may be provided by law. In the event that any legal action is commenced by City against the Developer, service of process shall be made in such manner as may be provided by law and shall be effective whether served inside or outside of California 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 such 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 Inaction Not a Waiver of Default. Any failures or delays by either party in asserting any of its rights and remedies as to any Default shall not operate as a waiver of any Default or of any such rights or remedies, or deprive either such party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies Applicable Law. The laws of the State of California shall govern the interpretation and enforcement of this Agreement Attorneys Fees. In any action between the parties to interpret, enforce, reform, modify, rescind, or otherwise in connection with any of the terms or provisions of this Agreement, the prevailing party in the action shall be entitled, in addition to any other relief to which it might be entitled, reasonable costs and expenses including, without limitation, litigation costs and reasonable attorneys fees. 11 H 44 / (lg)

57 57 5. General Provisions Notices, Demands and Communications Between the Parties. Any approval, disapproval, demand, document or other notice ( Notice ) which either party may desire to give to the other party under this Agreement must be in writing and may be given either by (i) personal service, (ii) delivery by reputable overnight 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 the address of the party as set forth below, or at any other address as that party may later designate by Notice. To City: City of Simi Valley 2929 Tapo Canyon Road Simi Valley, CA Attention: Director of Environmental Services To Developer: Cabrillo Economic Development Corporation 702 County Square Drive Ventura, CA Attention: Chief Executive Officer Any written notice, demand or communication which is (i) sent by personal service shall be deemed received immediately upon receipt, (ii) sent by reputable document delivery service shall be deemed delivered on the next business day following the date sent, and (iii) sent by United States mail shall be deemed delivered within three days following the date sent; provided, however, that refusal to accept delivery after reasonable attempts thereto shall constitute receipt. Any notices attempted to be delivered to an address from which the receiving party has moved without notice shall be effective on the third day from the date of the attempted delivery or deposit in the United States mail Non-Liability of Officials and Employees of City. No member, official, officer or employee of the City shall be personally liable to the Developer, or any successor in interest, in the event of any Default or breach by City or for any amount which may become due to the Developer or its successors, or on any obligations under the terms of this Agreement Counterparts. This Agreement may be signed in multiple counterparts which, when signed by all parties, shall constitute a binding agreement. This Agreement may be executed in three (3) originals, each of which is deemed to be an original Integration. This Agreement, together with all attachments hereto and the Regulatory Agreement, contains the entire understanding between the parties relating to the transaction contemplated by this Agreement. All prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged in this Agreement and shall be of no further force or effect. Each party is entering this Agreement based solely upon the representations set forth herein 12 H 44 / (lg)

58 58 and upon each party s own independent investigation of any and all facts such party deems material. This Agreement includes Exhibits A and B, which constitute the entire understanding and agreement of the parties, notwithstanding any previous negotiations or agreements between the parties or their predecessors in interest with respect to all or any part of the subject matter hereof No Waiver. A waiver by either party of a breach of any of the covenants, conditions or agreements under this Agreement to be performed by the other party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement Modifications. Any alteration, change, or modification of or to this Agreement, in order to become effective, shall be made in writing and in each instance signed on behalf of each party Severability. If any term, provision, condition, or covenant of this Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law Legal Advice. Each party represents and warrants to the other the following: they have carefully read this Agreement, and in signing this Agreement, they do so with full knowledge of any right which they may have; they have received independent legal advice from their respective legal counsel as to the matters set forth in this Agreement, or have knowingly chosen not to consult legal counsel as to the matters set forth in this Agreement; and, they have freely signed this Agreement without any reliance upon any agreement, promise, statement or representation by or on behalf of the other party, or their respective agents, employees, or attorneys, except as specifically set forth in this Agreement, and without duress or coercion, whether economic or otherwise Time of Essence. Time is expressly made of the essence with respect to the performance by the parties of each and every obligation and condition of this Agreement Cooperation. Each party shall cooperate with the other in this transaction and, in that regard, sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, releases or additional agreements Definitions. Any terms used in this Agreement but not separately defined herein shall have the meaning given to such terms in the Regulatory Agreement. 13 H 44 / (lg)

59 59 IN WITNESS WHEREOF, City and the Developer have executed this Agreement as of the day and year first above written. Attest: City of Simi Valley, A Municipal Corporation By: Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation Lonnie J. Eldridge, City Attorney By: Approved as to Content: Margarita H. de Escontrias Chief Executive Officer Eric J. Levitt, City Manager By: Debra L. De Vay Chief Financial Officer Peter Lyons, Director Department of Environmental Services 14 H 44 / (lg)

60 60 ATTACHMENT C PROMISSORY NOTE Entered into as of December 1, 2015 Simi Valley, California FOR VALUE RECEIVED, Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation ( Borrower ), promises to pay to the CITY OF SIMI VALLEY, a municipal corporation (the City ), or order, at the City s office at 2929 Tapo Canyon Road, Simi Valley, California 93063, or such other place as the City may designate in writing, the sum of Five Hundred Thousand Dollars ($500,000 ) (the Note Amount ), or so much of the Note Amount as has been disbursed by the City hereunder, in currency of the United States of America, which at the time of payment is lawful for the payment of public and private debts. 1. Agreement. This Promissory Note (the Note ) is given in accordance with that certain Loan Agreement executed by the City and Borrower, entered into as of December 1, 2015 (the Loan Agreement ). The rights and obligations of the Borrower and the City under this Note shall be governed by the Loan Agreement and by the additional terms set forth in this Note. In the event of any inconsistencies between the terms of this Note and the terms of the Loan Agreement or any other document related to the Note Amount, the terms of this Note shall prevail. 2. Interest. The Note Amount shall bear no interest during the initial 17 years. Beginning on the eighteenth (18th) anniversary date of this Note until the end of the 55-year term, the Note Amount shall bear 3% simple interest per annum. 3. Repayment of Note Amount. The Note Amount, and any accrued interest, shall be paid by the Borrower at the end of the fifty-fifth (55th) year after date of this Promissory Note. Notwithstanding the foregoing, however, the full Note Amount may be accelerated as set forth in Section 12 hereof. 4. Security. This Note is secured by a Deed of Trust With Assignment of Leases and Rents, Security Agreement, Financing Statement, and Fixture Filing (the Deed of Trust ) dated as of the same date as this Note, and a UCC-1 fixture filing. In the event of any default under the terms of this Note or the Deed of Trust, the sole recourse of the City for any and all such defaults shall be by judicial foreclosure or by the exercise of the trustee s power of sale and the Borrower shall not be personally liable for the payment of the Note Amount or for the payment of any deficiency established after judicial foreclosure or trustee s sale. Notwithstanding the foregoing, however, the foregoing shall not in any way affect any rights the City may have (as a secured party or otherwise) hereunder or under the Agreement or the Deed of Trust to recover directly from Borrower any amounts secured by the Deed of Trust, or any funds, damages or costs (including without limitation reasonable attorneys fees and costs) incurred by the City as a result of fraud, misrepresentation or waste, and any costs and expenses incurred by the City in connection thereof (including without limitation reasonable attorneys fees and costs). 1 H 45 / (lg)

61 61 5. Waivers a. Borrower expressly agrees that this Note or any payment hereunder may be extended from time to time at the City s sole discretion and that the City may accept security in consideration for any such extension or release any security for this Note at its sole discretion all without in any way affecting the liability of Borrower. b. No extension of time for payment of this Note made by agreement by the City with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part. c. The obligations of Borrower under this Note shall be absolute and Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reasons whatsoever. d. Borrower waives presentment, demand, notice of protest and nonpayment, notice of default or delinquency, notice of acceleration, notice of costs, expenses or leases or interest thereon, notice of dishonor, diligence in collection or in proceeding against any of the rights of interests in or to properties securing of this Note, and the benefit of any exemption under any homestead exemption laws, if applicable. e. No previous waiver and no failure or delay by City in acting with respect to the terms of this Note or the Deed of Trust shall constitute a waiver of any breach, default, or failure or condition under this Note, the Deed of Trust or the obligations secured thereby. A waiver of any term of this Note, the Deed of Trust or of any of the obligations secured thereby must be made in writing and shall be limited to the express written terms of such waiver. 6. Attorneys Fees and Costs. Borrower agrees that if any amounts due under this Note are not paid when due, to pay in addition, all costs and expenses of collection and reasonable attorneys fees paid or incurred in connection with the collection or enforcement of this Note, whether or not suit is filed. 7. Joint and Several Obligation. This Note is the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and their heirs, successors and assigns. 8. Amendments and Modifications. This Note may not be changed orally, but only by an amendment in writing signed by Borrower and by the City. 9. City May Assign. City may, at its option, assign its right to receive payment under this Note without necessity of obtaining the consent of the Borrower. 10. Borrower Assignment Prohibited. In no event shall Borrower assign or transfer any portion of this Note without the prior express written consent of the City, which consent shall not unreasonably be withheld. 11. Terms. Any terms not separately defined herein shall have the same meanings as set forth in the Agreement. 2 H 45 / (lg)

62 Acceleration and Other Remedies. Upon: (a) the occurrence of an event of Default as defined in the Agreement, or (b) Borrower selling, contracting to sell, giving an option to purchase, conveying, leasing, further encumbering, mortgaging, assigning or alienating the Site whether directly or indirectly whether voluntarily or involuntarily or by operation of law, or any interest in the Site, or suffering its title, or any interest in the Site to be divested, whether voluntarily or involuntarily, without the consent of the City, City may, at City s option, declare the outstanding principal amount of this Note, together with the then accrued and unpaid interest thereon and other charges hereunder, and all other sums secured by the Deed of Trust, to be due and payable immediately, and upon such declaration, such principal and interest and other sums shall immediately become and be due and payable without demand or notice, all as further set forth in the Deed of Trust. All costs of collection, including, but not limited to, reasonable attorneys fees and all expenses incurred in connection with protection of, or realization on, the security for this Note, may be added to the principal hereunder, and shall accrue interest as provided herein. City shall at all times have the right to proceed against any portion of the security for this Note in such order and in such manner as such City may consider appropriate, without waiving any rights with respect to any of the security. Any delay or omission on the part of the City in exercising any right hereunder, under the Agreement or under the Deed of Trust shall not operate as a waiver of such right, or of any other right. No single or partial exercise of any right or remedy hereunder or under the Agreement or any other document or agreement shall preclude other or further exercises thereof, or the exercise of any other right or remedy. The acceptance of payment of any sum payable hereunder, or part thereof, after the due date of such payment shall not be a waiver of City s right to either require prompt payment when due of all other sums payable hereunder or to declare an Event of Default for failure to make prompt or complete payment. 13. Consents. Borrower hereby consents to: (a) any renewal, extension or modification (whether one or more) of the terms of the Agreement or the terms or time of payment under this Note, (b) the release or surrender or exchange or substitution of all or any part of the security, whether real or personal, or direct or indirect, for the payment hereof, (c) the granting of any other indulgences to Borrower, and (d) the taking or releasing of other or additional parties primarily or contingently liable hereunder. Any such renewal, extension, modification, release, surrender, exchange or substitution may be made without notice to Borrower or to any endorser, guarantor or surety hereof, and without affecting the liability of said parties hereunder. 14. Successors and Assigns. Whenever City is referred to in this Note, such reference shall be deemed to include the City of Simi Valley and its successors and assigns, including, without limitation, any subsequent assignee or holder of this Note. All covenants, provisions and agreements by or on behalf of Borrower, and on behalf of any makers, endorsers, guarantors and sureties hereof which are contained herein shall inure to the benefit of the City and City s successors and assigns. 15. Usury. It is the intention of Borrower and City to conform strictly to the Interest Law, as defined below, applicable to this loan transaction. Accordingly, it is agreed that notwithstanding any provision to the contrary in this Note, or in any of the documents securing payment hereof or otherwise relating hereto, the aggregate of all 3 H 45 / (lg)

63 63 interest and any other charges or consideration constituting interest under the applicable Interest Law that is taken, reserved, contracted for, charged or received under this Note, or under any of the other aforesaid agreements or otherwise in connection with this loan transaction, shall under no circumstances exceed the maximum amount of interest allowed by the Interest Law applicable to this loan transaction. If any excess of interest in such respect is provided for in this Note, or in any of the documents securing payment hereof or otherwise relating hereto, then, in such event: a. the provisions of this paragraph shall govern and control; b. neither Borrower nor Borrower s heirs, legal representatives, successors or assigns shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest allowed by the Interest Law applicable to this loan transaction; c. any excess shall be deemed canceled automatically and, if theretofore paid, shall be credited on this Note by City or, if this Note shall have been paid in full, refunded to Borrower; and d. the effective rate of interest shall be automatically subject to reduction to the Maximum Legal Rate of Interest (as defined below), allowed under such Interest Law, as now or hereafter construed by courts of appropriate jurisdiction. To the extent permitted by the Interest Law applicable to this loan transaction, all sums paid or agreed to be paid to City for the use, forbearance or detention of the indebtedness evidenced hereby shall be amortized, prorated, allocated and spread throughout the full term of this Note. For purposes of this Note, Interest Law shall mean any present or future law of the State of California, the United States of America, or any other jurisdiction, which has application to the interest and other charges under this Note. The Maximum Legal Rate of Interest shall mean the maximum rate of interest that City may from time to time charge Borrower, and under which Borrower would have no claim or defense of usury under the Interest Law. 16. Miscellaneous. Time is of the essence hereof. This Note shall be governed by and construed under the laws of the State of California except to the extent Federal laws preempt the laws of the State of California. Developer irrevocably and unconditionally submits to the jurisdiction of the Superior Court of the State of California for the County of Ventura or the United States District Court of the Central District of California, as City hereof may deem appropriate, or, if required, the Municipal Court of the State of California for the County of Ventura, in connection with any legal action or proceeding arising out of or relating to this Note. Borrower also waives any objection regarding personal or in rem jurisdiction or venue. 17. No Personal Liability. In the event of any default under the terms of this Note or the Deed of Trust, the sole recourse of the City for any and all such defaults shall be by judicial foreclosure or by the exercise of the trustee s power of sale, and Borrower shall not be personally liable for the payment of this Note or for the payment of any deficiency established after judicial foreclosure or trustee s sale; provided, however, that the foregoing shall not in any way affect any rights the City may 4 H 45 / (lg)

64 64 have (as a secured party or otherwise) hereunder or under the Agreement or Deed of Trust to recover directly from Borrower any amounts secured by the Deed of Trust, or any funds, damages or costs (including without limitation reasonable attorneys fees and costs) incurred by City as a result of fraud, misrepresentation or waste, and any costs and expenses incurred by the City in connection thereof (including without limitation reasonable attorneys fees and costs). DEVELOPER: Cabrillo Economic Development Corporation, A California nonprofit public benefit corporation By: Its: Margarita H. de Escontrias Chief Executive Officer By: Its: 5 H 45 / (lg) Debra L. De Vay Chief Financial Officer

65 65 ATTACHMENT D RECORDING REQUESTED BY ) AND WHEN RECORDED RETURN TO: ) ) City of Simi Valley ) 2929 Tapo Canyon Road ) Simi Valley, California ) Attention: Director of Environmental ) Services ) ) This document is exempt from the payment of a recording fee pursuant to Government Code Sections 6103 and DEED OF TRUST With Assignment of Leases and Rents, Security Agreement, Financing Statement, and Fixture Filing THIS DEED OF TRUST WITH ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT, FINANCING STATEMENT, AND FIXTURE FILING ( Deed of Trust ), entered into as of December 1, 2015, is made by and among CABRILLO ECONOMIC DEVELOPMENT CORPORATION, a California non-profit public benefit corporation ( Trustor ), CHICAGO TITLE COMPANY ( Trustee ), and the CITY OF SIMI VALLEY, a municipal corporation, organized and existing under laws of the State of California ( Beneficiary ). The addresses of the parties are set forth in Section 7.11 of this Deed of Trust. ARTICLE I. 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 that real property located in the City of Simi Valley, County of Ventura, State of California, described on Exhibit A attached hereto, together with all development rights or credits, air rights, water, water rights 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 tax reimbursements, appurtenances, easements, rights and rights 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, Trustor s interest in 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 ); and all interest or estate which Trustor 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 H 46 / (lg)

66 Address. The address of the Subject Property is 1384 Katherine Road South, Simi Valley, 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. ARTICLE II. OBLIGATIONS SECURED 2.1 Obligations Secured. Trustor makes this grant and assignment pursuant to a Loan Agreement between Trustor and Beneficiary entered into as of December 1, 2015 (the Loan Agreement ), 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 ( Note ) in the amount of Five Hundred Thousand Dollars ($500,000 ) of even date herewith, executed by Trustor, as maker, and payable to the order of Beneficiary, as holder; and (b) Payment and performance of all covenants and obligations of Trustor under this Deed of Trust; and (c) Payment and performance of all future advances and other obligations that the then record owner of all or part of the Subject Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when such future advance or obligation is evidenced by a writing which recites that it is secured by this Deed of Trust; and (d) 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; and (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes. 2.2 Obligations. The term obligations is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges, if any, late charges and loan fees at any time accruing or assessed on any of the Secured Obligations. 2.3 Incorporation. All terms of the Secured Obligations and the document 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 and to have notice, if applicable and provided therein, that: (a) the Note may permit borrowing, repayment and re-borrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time. 2 H 46 / (lg)

67 67 ARTICLE III. ASSIGNMENT OF LEASES AND RENTS 3.1 Assignment. Trustor hereby irrevocably, absolutely, unconditionally, and presently assigns, transfers, conveys, sets over, and delivers to Beneficiary, subject to the rights of any senior lienholders, 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, enjoyment 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, income, revenues, royalties, earnings and profits of the Subject Property, including, without limitation, all amounts payable and all rights and benefits accruing to Trustor under the Leases, all oil, gas and other mineral royalties, and all rents, issues, deposits, income, revenues, royalties, earnings and profits arising from the use or operation of coin operated laundry machines, vending machines, and all other coin operated machines ( 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, absolute, perfected, choate and unconditional 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 any senior lienholders, Beneficiary may collect and apply the Payments pursuant to Section 6.4 without further notice other than as required in Article VI hereof, without taking possession of the Subject Property, without having a receiver appointed, and without taking any other action. Trustor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Beneficiary for the payment by such lessees directly 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 whether 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. Beneficiary shall not directly or indirectly be liable to Trustor or any other person as a consequence of: (i) the exercise or failure to exercise any of the rights, remedies or powers granted to 3 H 46 / (lg)

68 68 Beneficiary hereunder; (ii) the failure or refusal of Beneficiary to perform or discharge any obligation, duty or liability of Trustor arising under the Leases. 3.4 [Reserved] 3.5 Covenants. Trustor covenants and agrees at Trustor 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 default which occurs with respect to any of the Leases, whether the default be that of the lessee or of the lessor; (c) exercise Trustor s best 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 maximum rent permitted under the regulatory agreements and other restrictions encumbering the Subject Property; (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 this Deed of Trust, in form and substance acceptable to Beneficiary, as Beneficiary may request. Trustor shall not, without Beneficiary s prior written consent: (i) enter into any Leases after the date of this Assignment other than for occupancy of portions of the Subject Property; (ii) execute any other assignment relating to any of the Leases except to construction loans and permanent loans and refinancing s of those loans which have been approved by Beneficiary or are permitted pursuant to the Agreement; (iii) 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; (iv) terminate, modify or amend any of the terms of the Leases or in any manner release or discharge the lessees from any obligations thereunder, except in the ordinary course of business; or (v) subordinate or agree to subordinate any of the Leases to any other deed of trust or encumbrance except to construction loans and permanent loans which have been approved by Beneficiary or are permitted pursuant to the Agreement. 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, any sums received by Trustor 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 Trustor shall be held in trust by Trustor for such purpose. 3.6 Estoppel Certificates. Within thirty (30) days after 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): (i) that the foregoing assignment and the Leases are in full force and effect; (ii) the date of each lessee s most recent payment of rent; (iii) 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 (iv) any other information reasonably requested by Beneficiary. 4 H 46 / (lg)

69 69 ARTICLE IV. SECURITY AGREEMENT, FINANCING STATEMENT, AND FIXTURE FILING 4.1 Security Interest. Trustor hereby grants and assigns to Beneficiary as of the recording date of this Deed Of Trust a third priority interest, junior and subordinate only to the Bank of the West construction loan funded with proceeds of Multifamily Housing Revenue Bonds, in an amount not to exceed Eight Million Dollars ($8,000,000) (the "Bond Loan"),and the California Department of Housing and Community Development HOME Program Loan, in an amount not to exceed Four Million Five Hundred Thousand Dollars ($4,500,000) (the "HOME Loan") (collectively, the Senior Loans ). After project construction is complete and the permanent loans have been recorded, the City Loan will be junior and subordinate only to the HOME Loan and the California Department of Housing and Community Development Multifamily Housing Program Loan, in the amount of Two Million Thirty-Five Thousand Dollars ($2,035,000) (the "MHP Loan") (collectively, the Bond Loan, the HOME Loan and the MHP loan shall be referred to as the Senior Loans ), to secure payment and performance of all of the Secured Obligations, in all of Trustor s interest in the following described personal property in which Trustor now or at any time hereafter has any interest ( 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 use on all or any part of the Subject Property (to the extent the same are not effectively made a part of the Subject 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 III); 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 Trustor; 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 Trustor with respect to the Subject Property; all plans, drawings and specifications relating to the Subject Property; all loan funds held by Beneficiary, whether or not disbursed; 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 a fixture filing under Section 9313, Section 9302(6), and all other applicable sections of the California Uniform Commercial Code, as amended or recodified from time to time, and is acknowledged and agreed to be a construction mortgage under such Sections. 5 H 46 / (lg)

70 Representations and Warranties. Trustor represents and warrants that: (a) Trustor has, or will have, good title to the Collateral; (b) Trustor has not previously assigned or encumbered the Collateral, except pursuant to any deeds of trust securing the Senior Loans, and no financing statement covering any of the Collateral has been delivered to any other person or entity except as required under the Senior Loans; and (c) Trustor s principal place of business is located at the address shown in Section 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 Trustor 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 of a Default 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 Trustor 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 Trustor and at Trustor 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 Trustor 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 Trustor shall make an express written election of said remedy under UCC 9505, or other applicable law. 6 H 46 / (lg)

71 [Reserved] 4.6 Possession and Use of Collateral. Except as otherwise provided in this Section or the other Loan Documents (as defined in Section 6.2(h), below), so long as no Default exists under this Deed of Trust or any of the Loan Documents, Trustor may possess, use, move, transfer or dispose of any of the Collateral in the ordinary course of Trustor s business and in accordance with the Loan Documents. 4.7 Subordination. Beneficiary hereby subjects and subordinates the lien of this Deed of Trust to the deeds of trust securing the Senior Loans, and any other financing or refinancing permitted or approved pursuant to the Regulatory Agreement and Declaration of Restrictive Covenants executed by Trustor and Beneficiary in connection with the loan secured by this Deed of Trust (the "Regulatory Agreement"). ARTICLE V. RIGHTS AND DUTIES OF THE PARTIES 5.1 Title. Trustor represents and warrants that, except as disclosed to Beneficiary in writing which refers to this warranty, Trustor lawfully holds and possesses fee simple title to the Subject Property without limitation on the right to encumber, and that this Deed of Trust is a third lien on the Subject Property and on the Collateral, subject and subordinate only to the liens of the deeds of trust securing, and any regulatory agreements related to, the Senior Loans. 5.2 Taxes and Assessments. Subject to Trustor s rights to contest payment of taxes, Trustor 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. Trustor 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 [Reserved] 5.4 Performance of Secured Obligations. Trustor shall promptly pay and perform each Secured Obligation when due. 5.5 Liens, Encumbrances and Charges. Trustor shall immediately discharge any lien not approved by Beneficiary in writing that has or may attain priority over this Deed of Trust. Trustor shall pay when due all obligations secured by or reducible to liens and encumbrances 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. 7 H 46 / (lg)

72 Damages; Insurance and Condemnation Proceeds. (a) The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Trustor to Beneficiary and, at the request of Beneficiary, subject to any senior assignment to the holder(s) of the deeds of trust securing the Senior Loans and the refinancing thereof as permitted hereunder, shall be paid directly to Beneficiary: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Subject Property; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Subject Property; (iii) all proceeds of any insurance policies payable by reason of loss sustained to all or any part of the Subject Property; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law, and without regard to any requirement contained in Section 5.7(d), Beneficiary may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in any order, and/or Beneficiary may release all or any part of the proceeds to Trustor upon any conditions Beneficiary may impose. Beneficiary may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Beneficiary; provided, however, that if Beneficiary fails to pursue any such claim, Beneficiary shall assign or permit Trustor to pursue such claim upon Trustor s request, and in no event shall Beneficiary be responsible for any failure to collect any claim or award, regardless of the cause of the failure. (b) Subject to the rights of holders of the Senior Loans, Beneficiary shall permit insurance or condemnation proceeds held by Beneficiary to be used for repair or restoration but may condition such application upon reasonable conditions, including, without limitation: (i) the deposit with Beneficiary of such additional funds which Beneficiary determines are needed to pay all cost of the repair or restoration, (including, without limitation, taxes, financing charges, insurance and rent during the repair period); (ii) the establishment of an arrangement for lien releases and disbursement of funds acceptable to Beneficiary; (iii) the delivery to Beneficiary of plans and specifications for the work, a contract for the work signed by a contractor acceptable to Beneficiary, a cost breakdown for the work and a payment and performance bond for the work, all of which shall be acceptable to Beneficiary; and (iv) the delivery to Beneficiary of evidence acceptable to Beneficiary (aa) that after completion of the work the income from the Subject Property will be sufficient to pay all expenses and debt service for the Subject Property; (b) of the continuation of Leases acceptable to and required by Beneficiary; (cc) that upon completion of the work, the size, capacity and total value of the Subject Property will be at least as great as it was before the damage or condemnation occurred, subject to City laws, ordinances, regulations and standards then in effect; (d) that there has been no material adverse change in the financial condition or credit of Trustor since the date of this Deed of Trust; and (e) the satisfaction of any additional conditions that Beneficiary may reasonably establish to protect its security. Trustor hereby acknowledges that the conditions described above are reasonable. 8 H 46 / (lg)

73 Maintenance and Preservation of the Subject Property. Trustor covenants: (a) to insure the Subject Property against such risks as Beneficiary may require and, at Beneficiary s request, to provide evidence of such insurance to Beneficiaries, 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 with Beneficiary s prior written consent, not to remove or demolish the Subject Property or any part thereof; (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, without regard to whether Beneficiary elects to require that insurance proceeds be used to reduce the Secured Obligations as provided in Section 5.6, except to the extent that the damage or destruction is due to a casualty which Trustor is not required to insure against and in fact does not insure against, or to the extent that insurance proceeds are not made available to Trustor; (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. Trustor 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 reconvey all or any part of the Subject Property. 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 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. 9 H 46 / (lg)

74 Compensation; Exculpation; Indemnification. (a) Trustor shall pay Trustee s fees and reimburse Trustee for expenses in the administration of this trust, including attorneys fees. Trustor shall pay to Beneficiary reasonable compensation for services rendered concerning this Deed of Trust, including without limit any statement of amounts owing under any Secured Obligation. Beneficiary shall not directly or indirectly be liable to Trustor 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 Trustor 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 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, and all such liability is hereby expressly waived and released by Trustor. (b) Trustor 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; or (iii) as a result of any failure of Trustor to perform Trustor s obligations, except to the extent such matters which are caused as a result of the gross negligence or willful misconduct of Beneficiary or Trustee. The above obligation of Trustor 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 demand by Trustee or Beneficiary together with interest thereon from the date the indebtedness arises at the rate of interest applicable to the principal balance of the Note as specified therein 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. 10 H 46 / (lg)

75 Due on Sale or Encumbrance. Absent consent required pursuant to the terms of the Loan Documents, if the Subject Property or any interest therein shall be sold, transferred (including, without limitation, through sale or transfer of a majority or controlling interest of the corporate stock or general partnership interests of Trustor), mortgaged, assigned, further encumbered or leased, whether directly or indirectly, whether voluntarily, involuntarily or by operation of law, without the prior written consent of Beneficiary, or as otherwise permitted pursuant to the Regulatory Agreement, then Beneficiary, in its sole discretion, may declare all Secured Obligations immediately due and payable 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 shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the lien of this Deed of Trust upon the Subject Property 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 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 Right of Inspection. Beneficiary, its agents and employees, may enter the Subject Property at any reasonable time, upon reasonable advance notice except in cases of emergency, for the purpose of inspecting the Subject Property and ascertaining Trustor s compliance with the terms hereof. 11 H 46 / (lg)

76 76 ARTICLE VI. DEFAULT PROVISIONS 6.1 Default. For all purposes hereof, the term Default shall mean (a) at Beneficiary s option, the failure of Trustor to make any payment of principal or interest on the Note or to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (b) the failure of Trustor to perform any non-monetary obligation hereunder, or the failure to be true of any representation or warranty of Trustor contained herein and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any, allowed in the Agreement for such failure, or (c) the existence of any Default or Event of Default as defined in the Agreement. 6.2 Rights and Remedies. At any time after Default, Beneficiary and Trustee shall each have all the following rights and remedies: (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 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 12 H 46 / (lg)

77 77 modify the 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. (h) To pursue any other rights and remedies available to Beneficiary or Trustee at law, in equity, or under this Deed of Trust, the Note, or any other agreement, document, or instrument executed in connection therewith (collectively, the Loan Documents ). (i) 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 13 H 46 / (lg)

78 78 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 specified in the Loan Documents or 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. Nothing herein shall diminish or affect Trustor s right to a fair value determination in accordance with the provisions of Code of Civil Procedure Section 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: (i) to payment of all sums expended by Beneficiary under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (ii) to payment of all other Secured Obligations; and (iii) 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 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 Trustor has cured all other defaults), or impair the status of the security, or prejudice Beneficiary or Trustee in the exercise of any right 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. 14 H 46 / (lg)

79 Payment of Costs, Expenses and Attorney s Fees. Trustor agrees to pay to Beneficiary immediately and without demand all costs and expenses incurred by Trustee and Beneficiary pursuant to subparagraphs (a) through (i) inclusive of 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 Note as specified therein. 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. ARTICLE VII. MISCELLANEOUS PROVISIONS 7.1 Additional Provisions. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Beneficiary and contain further agreements and affirmative and negative covenants by Trustor which apply to this Deed of Trust and to the Subject Property and such further rights and agreements are incorporated herein by this reference. 7.2 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. 7.3 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. 7.4 Non-Recourse Obligation. In the event of any default under the terms of the Note or this Deed of Trust, the sole recourse of Beneficiary for any and all such defaults shall be by judicial foreclosure or by the exercise of the trustee s power of sale, and Trustor shall not be personally liable for the payment of the Note or for the payment of any deficiency established after judicial foreclosure or trustee s sale; 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 Agreement or this Deed of Trust to 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, and any costs and expenses incurred by Beneficiary in connection thereof (including without limitation reasonable attorneys fees and costs). 7.5 Waiver of Marshalling Rights. Trustor, for itself and for all parties claiming through or under Trustor, and for all 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 ) marshalled 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 right to sell, and any court in which 15 H 46 / (lg)

80 80 foreclosure proceedings may 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. 7.6 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. 7.7 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 hereto; provided, however, that this Section does not waive or modify the provisions of Section 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. 7.9 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 reference. Incorporation. Exhibit A is incorporated into this Deed of Trust by this 7.11 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 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: To Beneficiary: City of Simi Valley 2929 Tapo Canyon Road Simi Valley, CA Attention: Director of Environmental Services To Trustor: Cabrillo Economic Development Corporation 702 County Square Drive Ventura, CA Attention: Chief Executive Officer To Trustee: Chicago Title Company 500 E. Esplanade Drive, Suite 102 Oxnard, CA H 46 / (lg)

81 81 Any party hereto may change its address for notice hereunder to any other location within the continental United States by the giving of a thirty (30) day notice to the other parties in the manner set forth hereinabove. Trustor shall forward to Beneficiary, without delay, any notices, letters or other communications delivered to the Subject Property or to Trustor naming Beneficiary, Lender or the Construction Lender or any similar designation as addressee, or which could reasonably be deemed to affect the ability of Trustor to perform its obligations to Beneficiary under the Note Waiver of Set Off Rights. Trustor hereby waives all rights to set off, against any amount owed by Trustor under the Loan Documents, any claims Trustor may have against Beneficiary, including, without limitation, the rights afforded by California Code of Civil Procedure Section Trustor s Request for Notice of Default and Notice of Sale. Trustor hereby requests that a copy of any notice of default or notice of sale under this deed of trust be mailed to trustor at the address set forth in section 7.11 of this Deed of Trust. IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year set forth above. TRUSTOR: Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation By: Its: Margarita H. de Escontrias Chief Executive Officer By: Its: Debra L. De Vay Chief Financial Officer 17 H 46 / (lg)

82 82 EXHIBIT A LEGAL DESCRIPTION That real property located in the State of California, County of Ventura, City of Simi Valley, and described as follows: A portion of Section 16, Township 2 North, Range 17 West, Rancho Simi, in the County of Ventura, State of California, as per map recorded in Book 3, Page 2 of Maps, in the office of the County Recorder of said County, described as follows: Beginning at a point on the Northerly line of said Section 16, at the Northwest corner of the land first described in the deed to Simi Valley Unified School District of Ventura County, California, recorded July 20, 1960 in Book 1890, Page 180 of Official Records; thence along the Northwest line of said land of said school district. (1) South West, feet, more or less, to a point on the Northeast line of the Southern Pacific s 100 foot right of way; thence along said Northeast line, (2) North West, feet to a point on the East line of Katherine Road; thence along said East line, (3) North 220 feet, more or less, to a point on the North line of said Section 16; thence, (4) East along said North line 449 feet, more or less, to the point of beginning. Excepting therefrom said parcel so much thereof as is included in a tract of land, described as follows: Beginning at a point feet North of the Northwesterly corner of Lot 968 of Susana Knolls Number One, as per map thereof recorded in Book 19, Page 16 of maps, in the records of said county; thence from said point of beginning: (1) North 1.43 feet to a point; thence, (2) North East feet to a point; thence, (3) North East feet to a point; thence, (4) North 43 6 East feet to a point; thence, (5) North feet to a point; thence, (6) East feet to point; thence, (7) South feet to a point; thence, (8) West feet to a point; thence, H 46 / (lg)

83 83 (9) North feet to a point; thence, (10) South 43 6 West feet to a point; thence, (11) South West, feet to a point; thence, (12) South West, feet to the point of beginning. Also excepting therefrom 50% of all gas, oil, hydrocarbons and minerals, in or under said land as reserved by Theodore W. Johnson, et al., in deed recorded May 28, 1954 in Book 1205, Page 538 of Official Records. H 46 / (lg)

84 84 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ) COUNTY OF On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 46 / (lg)

85 85 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ) COUNTY OF On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public H 46 / (lg)

86 86 RESOLUTION NO A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIMI VALLEY CONSENTING TO THE ASSIGNMENT AND ASSUMPTION OF CAMINO ESPERANZA SENIOR APARTMENTS WHEREAS; the applicant, Cabrillo Economic Development Corporation ( Developer ), has requested that the City Council consents to that certain Assignment and Assumption of Affordable Housing Agreement/Rental ( Assumption Agreement ) between the Developer and Camino Esperanza, L.P.; and WHEREAS, Camino Esperanza L.P. and the Developer have submitted to the City Council an executed copy of the Assumption Agreement, Attachment A, attached hereto and incorporated herein by reference; and WHEREAS, the City Council finds and determines that consenting to the sale/transfer ownership will continue to provide housing for very low-income seniors and is therefore in the best interest of the City. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The City Council finds and determines that the Assignment and Assumption Agreement of Affordable Housing Agreement/Rental (Attachment A), attached hereto and incorporated herein by reference, are consistent with the goals and provisions of the General Plan. SECTION 2. The City Council finds and determines that the project is exempt from the requirements of the California Environmental Quality Act. SECTION 3. The City Council hereby approves the Assumption Agreement. SECTION 4. The City Council and the officers of the City are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the Assumption Agreement, and to administer the transaction following the execution of the Assumption Agreement, and otherwise to effectuate the purposes of this Resolution, and such actions previously taken by such officers are hereby ratified and confirmed.

87 87 RES. NO SECTION 5. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk. PASSED and ADOPTED this 7th day of December Attest: Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Approved as to Content: Lonnie J. Eldridge, City Attorney Eric J. Levitt, City Manager Peter Lyons, Director Department of Environmental Services H 2 / (lg)

88 88 RES. NO ATTACHMENT A RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Simi Valley Attention: City Clerk 2929 Tapo Canyon Road Simi Valley, CA (SPACE ABOVE THIS LINE FOR RECORDER'S USE) Document recorded for the benefit of City of Simi Valley No fee document pursuant to Government Code Section ASSIGNMENT AND ASSUMPTION AGREEMENT Camino Esperanza Senior Apartments 1384 Katherine Road South (City Loan Documents) THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement") is entered into as of the 1st day of December, 2015 by and among Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation ("CEDC"), Camino Esperanza LP, a California limited partnership company (the "LP"), and the City of Simi Valley, a municipal corporation, pursuant to Health & Safety Code Section 34176(a) (the "City"). RECITALS A. The City has made a loan in the original principal amount of Five Hundred Thousand Dollars ($500,000) to CEDC to assist in the development on the real property described in the attached Exhibit A (the "Property") of a 31-unit housing complex affordable to low income senior households (the "City Loan"). B. The City Loan is evidenced by that Loan Agreement between the City and CEDC, dated as of December 7, 2015 (the "City Loan Agreement"), and by that certain Promissory Note dated as of December 7, 2015, executed by CEDC in favor of the City (the "City Note") and secured by that certain Deed of Trust with Assignment of Rents, Security Agreement, Financing Statement, and Fixture Filing, dated as of December 7, 2015 (the "City Deed of Trust"), to be recorded against the Property substantially concurrently with this Agreement in the official records of the County of Ventura (the "Official Records"). The City and CEDC also entered into that certain Amended and Restated City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants, dated as of December 7, 2015 (the "City Affordability Agreement"), to be recorded against the Property substantially concurrently with this Agreement in the Official Records. The City Loan Agreement, the City Note, the City Deed of Trust and the City Affordability Agreement collectively shall be referred to herein as the "City Loan Documents". 1 H 47 / (lg)

89 89 RES. NO AGREEMENT NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which consideration is hereby acknowledged, it is hereby declared, understood and agreed as follows: 1. Assignment by CEDC. CEDC hereby assigns and delegates to the LP all of CEDC's right, title, and interest in and obligations regarding the City Loan Documents. 2. Acceptance of Assignment and Assumption by LP. The LP accepts the above assignment of the CEDC right, title and interest in the City Loan Documents, and assumes all of CEDC's obligations regarding the City Loan Documents, and agrees to perform all of CEDC's obligations and covenants regarding the City Loan Documents and this Agreement. All references in the City Loan Documents to "Developer", "Borrower" and "Trustor" shall be deemed to be references to the LP. 3. City Consent to Assignment/Consent to Transfer of Property. The City hereby consents to the assignment and assumption of CEDC's right, title, and interest in and obligations regarding the City Loan Documents by the LP, and releases CEDC from all obligations regarding the City Loan Documents. The City consents to the transfer of the Property from CEDC to the LP and acknowledges that such transfer shall not cause the acceleration of the City Loan. 4. Full Force and Effect. Except as set forth in this Agreement, the City Loan Documents remain unmodified and are in full force and effect. 5. Headings. The headings used in this Agreement are for convenience only and shall be disregarded in interpreting the substantive provisions of this Agreement. 6. Successors and Assigns. This Agreement shall be binding on and inure to the benefit of the legal representatives, heirs, successors and assigns of the parties. 7. California Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 8. Invalidity. Any provision of this Agreement which is determined by a court to be invalid or unenforceable shall be deemed severed herefrom, and the remaining provisions shall remain in full force and effect as if the invalid or unenforceable provision had not been a part hereof. 9. Counterparts. This Agreement may be signed by the different parties hereto in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement. [signatures on following pages] 2 H 47 / (lg)

90 90 RES. NO IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. CEDC: CABRILLO ECONOMIC DEVELOPMENT CORPORATION, a California nonprofit public benefit corporation By: Margarita H. de Escontrias Chief Executive Officer By: Debra L. De Lay Chief Financial Officer LP: CAMINO ESPERANZA LP, a California limited partnership By: Camino Esperanza LLC, a California limited liability company, its managing general partner By: Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation, its sole member By: Margarita H. de Escontrias Chief Executive Officer By: Debra L. De Lay Chief Financial Officer [signatures continue on following page] 3 H 47 / (lg)

91 91 Attest: RES. NO City of Simi Valley, A Municipal Corporation By: Ky Spangler, Deputy Director/City Clerk Approved as to Form: Lonnie J. Eldridge, City Attorney Approved as to Content: Eric J. Levitt, City Manager Peter Lyons, Director Department of Environmental Services 4 H 47 / (lg) Robert O. Huber, Mayor of the City of Simi Valley, California

92 92 RES. NO A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) COUNTY OF ) On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: H 47 / (lg) Notary Public

93 93 RES. NO A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) COUNTY OF ) On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: H 47 / (lg) Notary Public

94 94 RES. NO A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) COUNTY OF ) On, before me,, Notary Public, personally appeared, who 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: H 47 / (lg) Notary Public

95 95 RES. NO EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY For APN/Parcel ID(s): A portion of Section 16, Township 2 North, Range 17 West, Rancho Simi, in the City of Simi Valley, County of Ventura, State of California, as per Map recorded in Book 3, Page 2 of Maps, in the office of the County Recorder of said County, described as follows: Beginning at a point on the Northerly line of said Section 16, at the Northwest corner of the land first described in the deed to Simi Valley Unified School District of Ventura County, California, recorded July 20, 1960, Book 1890, Page 180 of Official Records; thence along the Northwest line of said land of said School District. 1st: South 17 15' 15" West feet, more or less, to a point on the Northeast line of the Southern Pacific's 100 foot right of way; thence along said Northeast line, 2nd: North 63 27' 45" West feet to a point on the East line of Katherine Road; thence along said East line, 3rd: North 220 feet, more or less, to a point on the North line of said Section 16; thence 4th: East along said North line 449 feet, more or less, to the point of beginning. EXCEPT the interest in the North 30 feet of said land as reserved for road purposes by Simi Valley Land and Water Company, in deed recorded June 27, 1890, Book 31, Page 21 of Deeds. ALSO EXCEPT from said parcel, so much thereof as is included in a tract of land described as follows: Beginning at a point feet North of the Northwesterly corner of Lot 968 of Susana Knolls Number One, as per Map recorded in Book 19, Page 16 of Maps, in the office of the County Recorder of said County; thence from said point of beginning: 1st: North 1.43 feet; thence, 2nd: North 44 20' East feet; thence, 3rd: North 40 33' 20" East feet; thence, 4th: North 43 6' East feet; thence, 5th: North feet; thence, H 47 / (lg)

96 96 RES. NO th: East feet; thence, 7th: South feet; thence, 8th: West feet; thence, 9th: North feet; thence, 10th: South 43 6' West feet; thence, 11th: South 40 33' 20" West feet; thence, 12th: South 44 20' west feet to the point of beginning. ALSO EXCEPT therefrom 50% of all oil, gas, minerals and other hydrocarbon substances in or under said land, as reserved by Theodore W. Johnson, et al., in deed recorded May 28, 1954, Book 1205, Page 538 of Official Records. H 47 / (lg)

97 97 RES. NO RESOLUTION NO A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIMI VALLEY CONSENTING TO A SUBORDINATION AGREEMENT FOR THE CAMINO ESPERANZA SENIOR APARTMENT COMPLEX (CABRILLO ECONOMIC DEVELOPMENT CORPORATION) WHEREAS; the applicant, Cabrillo Economic Development Corporation ( Developer ), has requested that the City Council consent to a Subordination Agreement from the State of California Department of Housing and Community Development (HCD) (Attachment A), attached hereto and incorporated herein by reference, which is consistent with current City policy and practice, will extend the loan and increase revenue for the senior apartment project; and WHEREAS, the Developer requests the City, the Junior Lienholder, subordinate to the bond financing under the State of California Department of HCD, the Senior Lender; and WHEREAS, the City Council maintains the Housing Successor Agency Affordable Housing Fund pursuant to Health and Safety Code Section , which provides for the development and operation of affordable housing programs and projects in the City, collectively the "Affordable Housing Fund"; and WHEREAS, the City Council finds and determines that consenting to the Subordination Agreement will continue to provide housing for very low-income seniors and is therefore in the best interest of the City. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The City Council finds and determines that the Subordination Agreement (Attachment A), attached hereto and incorporated herein by reference, is consistent with the goals and provisions of the General Plan. SECTION 2. The City Council finds and determines that the project is exempt from the requirements of the California Environmental Quality Act. SECTION 3. The City Council hereby approves the Subordination Agreement. SECTION 4. The City Council and the officers of the City are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the Subordination Agreement, and to administer the transaction following the execution of the Subordination Agreement, and otherwise to effectuate the purposes of this Resolution, and such actions previously taken by such officers are hereby ratified and confirmed.

98 98 RES. NO SECTION 5. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk. PASSED and ADOPTED this 7th day of December Attest: Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Approved as to Content: Lonnie J. Eldridge, City Attorney Eric J. Levitt, City Manager Peter Lyons, Director Department of Environmental Services H 27 / (lg)

99 99 RES. NO ATTACHMENT A Free recording in accordance with California Government Code Sections 6103 and RECORDING REQUESTED BY, AND WHEN RECORDED, MAIL TO: HOME Program State of California Department of Housing and Community Development P. O. Box Sacramento, CA Attn: HOME Program, 14-HOME-9271 SUBORDINATION AGREEMENT NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. THIS SUBORDINATION AGREEMENT AND ESTOPPEL CERTIFICATE (the "Agreement") is dated as of December 1, 2015, and is entered into by and among the City of Simi Valley (the "Junior Lender") and Camino Esperanza, L.P., a California limited partnership (the "Borrower"), and the Department of Housing and Community Development, a public agency of the State of California (the "Senior Lender"). RECITALS A. Borrower is the owner of a fee estate in the real property located at 1384 Katherine Road, Simi Valley, CA 93065, County of Ventura and more fully described in Exhibit A attached hereto and made a part hereof (the "Property"). The Borrower will construct a 31-unit multifamily residential rental development on the Property (the "Improvements"). The Property and the Improvements are sometimes referred to collectively as the "Development." HOME Subordination Agreement for City of Simi Valley Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing Prep: 11/30/15 (Final) Dev.: Camino Esperanza Contract No.: 14-HOME-9271 Page 1 of 8

100 100 RES. NO B. The Junior Lender is making a loan to Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation, ( CEDC ) in the principal sum of FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($500,000.00) (the "Junior Lender Loan"). The Junior Lender Loan will be evidenced by a certain promissory note (the Junior Lender Note ), secured by a certain City of Simi Valley (the City ) Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing (the Junior Lender Deed of Trust ). The Junior Lender and CEDC will enter into a document entitled Amended and Restated City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants (the Junior Lender Regulatory Agreement ). The Junior Lender Note, the Junior Lender Deed of Trust and the Junior Lender Regulatory Agreement are hereinafter collectively referred to as the Junior Lender Documents and are to be recorded concurrently with the HOME Recorded Documents. CEDC s rights, title and interests in the Junior Lender Documents have been assigned to, and CEDC s obligations under the Junior Lender Documents, have been assigned to the Borrower with the Junior Lender s consent pursuant to that certain Assignment and Assumption Agreement, dated as of December 1, 2015, among CEDC, the Borrower and the City and is to be recorded concurrently with the HOME Recorded Documents. C. In order to finance the development of the Improvements, the Senior Lender has agreed to loan the Borrower a sum not to exceed FOUR MILLION FIVE HUNDRED THOUSAND AND NO/100 Dollars ($4,500,000.00) from the HOME Program, (the " HOME Loan"), subject to the terms and conditions of: (i) a regulatory agreement restricting the use and occupancy of the Development and the income derived therefrom which shall be dated as of even date herewith and recorded as an encumbrance on the Property in the Official Records (the "HOME Regulatory Agreement"), and (ii) the HOME Development Agreement. The HOME Loan will be evidenced by a promissory note (the "HOME Note"), the repayment of which will be secured by, among other things, a deed of trust by Borrower as trustor, to Senior Lender as beneficiary recorded as an encumbrance on the Property in the Official Records (the " HOME Deed of Trust") and by such other security as is identified in other loan documents. D. The Senior Lender is willing to make the HOME Loan provided the HOME Deed of Trust and the HOME Regulatory Agreement are liens, claims or charges upon the Development prior and superior to the Junior Lienholder Documents, and provided that the Junior Lienholder specifically and unconditionally subordinates and subjects the Junior Lienholder Documents to the liens, claims or charges of the HOME Deed of Trust and the HOME Regulatory Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and in order to induce the Senior Lender to make its HOME Loan, it is hereby declared, understood and agreed as follows: 1. The HOME Regulatory Agreement and the HOME Deed of Trust securing the HOME Subordination Agreement for City of Simi Valley Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing Prep: 11/30/15 (Final) Dev.: Camino Esperanza Contract No.: 14-HOME-9271 Page 2 of 8

101 101 RES. NO HOME Note in favor of the Senior Lender, and any and all renewals, modifications, extensions or advances thereunder or secured thereby (including interest thereon) shall unconditionally be and remain at all times liens, claims, or charges on the Development prior and superior to the Junior Lienholder Documents, and to all rights and privileges of the Junior Lienholder thereunder; and the Junior Lienholder Documents, together with all rights and privileges of the Junior Lienholder thereunder are hereby irrevocably and unconditionally subject and made subordinate to the liens, claims or charges of the HOME Deed of Trust and the HOME Regulatory Agreement. 2. This Agreement shall be the whole and only agreement with regard to the subordination of the Junior Lienholder Documents, together with all rights and privileges of the Junior Lienholder thereunder, to the liens, claims or charges of the HOME Deed of Trust and the HOME Regulatory Agreement, and this Agreement shall supersede and cancel any prior agreements to subordinate the claims, liens or charges of, but only insofar as would affect the priority between the claims, liens or charges of the Junior Lienholder Documents to the HOME Deed of Trust and the HOME Regulatory Agreement including, but not limited to, those provisions, if any, contained in the Junior Lienholder Documents, which provide for the subordination of the lien or charge thereof to another lien or charge on the Property or the Improvements. 3. The Junior Lienholder declares, agrees and acknowledges that: (a) The Junior Lienholder consents and approves (i) all provisions of the HOME Note, the HOME Deed of Trust and the HOME Regulatory Agreement, and (ii) all agreements among the Junior Lienholder, Borrower and Senior Lender for the disbursement of the proceeds of the HOME Loan, including without limitation any loan escrow agreements which have been provided to the Junior Lienholder for review; (b) The Senior Lender, in making disbursements of the HOME Loan pursuant to the HOME Note or any other agreement, is under no obligation or duty to, nor has the Senior Lender represented that it will, see to the application of such proceeds by the person or persons to whom the Senior Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat the subordination herein made in whole or in part; (c) That none of the execution, delivery or recordation of any of the HOME Note, HOME Deed of Trust, or HOME Regulatory Agreement, or the performance of any provision, condition, covenant or other term thereof, will conflict with or result in a breach of the Junior Lienholder Documents or the Junior Lienholder Note; and (d) The Junior Lienholder intentionally and unconditionally waives, relinquishes, subjects and subordinates the claims, liens or charges upon the Development of the Junior Lienholder Documents, all present and future indebtedness and obligations secured thereby, in favor of the claims, liens or charges upon the Development of the HOME Deed of Trust and the HOME Regulatory Agreement, and understands that in HOME Subordination Agreement for City of Simi Valley Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing Prep: 11/30/15 (Final) Dev.: Camino Esperanza Contract No.: 14-HOME-9271 Page 3 of 8

102 102 RES. NO reliance upon, and in consideration of, this waiver, relinquishment, subjection, and subordination, the HOME Loan and advances thereof are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment, subjection and subordination. 4. The Senior Lender would not make the HOME Loan without this Agreement. 5. Junior Lienholder has agreed to this subordination in reliance on the following independent covenants of Senior Lender to Junior Lienholder: (a) Senior Lender has agreed that, in the event that Senior Lender delivers to Borrower a notice of default under the HOME Deed of Trust or the HOME Regulatory Agreement, then Senior Lender shall deliver to Junior Lienholder a copy of said notice within five days of delivery to Borrower, and Junior Lienholder shall have the right (but not the obligation) to cure any or all defaults specified in said notice for a period of three months after the date of its receipt of such notice, or such longer period as may be provided for under California law with respect to the cure rights of junior lienholders. The Senior Lender s failure to provide Borrower a notice of default will not be a breach of this Agreement by the Senior Lender, nor will it impair the Senior Lender s foreclosure remedies in any way. Senior Lender and Junior Lienholder have agreed to negotiate with each other in good faith on workout and/or cure issues following issuance of said notice of default. (b) If, prior to any foreclosure sale of the Development under the HOME Loan, Junior Lienholder takes title to or possession of the Development and cures the outstanding defaults under the HOME Deed of Trust and the HOME Regulatory Agreement, Senior Lender has agreed not to exercise any rights it may have to declare a default and accelerate its loan by reason of the transfer of title or possession to the Junior Lienholder, or, if acceleration has already occurred, Senior Lender has agreed that it will reinstate the HOME Loan at that time; and Senior Lender has agreed that it will recognize Junior Lienholder as borrower under the HOME Loan under the same terms and conditions of said Loan, if Junior Lienholder agrees to assume and perform Borrower s obligations under said Loan. The agreements by Senior Lender contained in this paragraph 5.(b) are subject to Junior Lienholder adequately demonstrating to Senior Lender at the time of any such transfer of title or possession to Junior Lienholder, that Junior Lienholder has the necessary experience and ability to successfully manage the Development. Such determination shall be made by Senior Lender at its sole discretion. 6. This Agreement shall be binding on and inure to the benefit of the legal representatives, heirs, successors and assigns of the parties. 7. This Agreement shall be governed by and construed in accordance with the laws of the State of California. HOME Subordination Agreement for City of Simi Valley Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing Prep: 11/30/15 (Final) Dev.: Camino Esperanza Contract No.: 14-HOME-9271 Page 4 of 8

103 103 RES. NO In the event that any party to this Agreement brings an action to interpret or enforce its rights under this Agreement, the prevailing party in such action shall be entitled to recover its costs and reasonable attorneys' fees as awarded by the court in such action. 9. This Agreement may be signed by different parties hereto in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall be deemed an original of this Agreement. [Signatures of the Junior Lienholder, Borrower and the Department follow on next page of this Agreement. The remainder of this page is intentionally left blank.] HOME Subordination Agreement for City of Simi Valley Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing Prep: 11/30/15 (Final) Dev.: Camino Esperanza Contract No.: 14-HOME-9271 Page 5 of 8

104 104 RES. NO NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON (OR ENTITY) OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above and agree to be bound hereby: JUNIOR LIENHOLDER: City of Simi Valley BORROWER: Camino Esperanza, L.P. City of Simi Valley, a municipal corporation By: Camino Esperanza LLC, a California limited liability company By: Robert O. Huber Mayor of the City of Simi Valley Its: Managing General Partner By: Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation Its: Sole Member ATTEST: By: Margarita H. de Escontrias Chief Executive Officer By: Ky Spangler City Clerk Approved as to form: By: Lonnie J. Eldridge City Attorney SENIOR LENDER: The Department of Housing and Community Development, a public agency of the State of California By: Laura Bateman Its: Program Manager [Signatures must be acknowledged] HOME Subordination Agreement for City of Simi Valley Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing Prep: 11/30/15 (Final) Dev.: Camino Esperanza Contract No.: 14-HOME-9271 Page 6 of 8

105 105 RES. NO EXHIBIT A Legal Description of the Property For APN/Parcel ID(s): A portion of Section 16, Township 2 North, Range 17 West, Rancho Simi, in the City of Simi Valley, County of Ventura, State of California, as per Map recorded in Book 3, Page 2 of Maps, in the office of the County Recorder of said County, described as follows: Beginning at a point on the Northerly line of said Section 16, at the Northwest corner of the land first described in the deed to Simi Valley Unified School District of Ventura County, California, recorded July 20, 1960, Book 1890, Page 180 of Official Records; thence along the Northwest line of said land of said School District 1st: South 17 15' 15" West feet, more or less, to a point on the Northeast line of the Southern Pacific s 100 foot right of way; thence along said Northeast line, 2nd: North 63 27' 45" West feet to a point on the East line of Katherine Road; thence along said East line, 3rd: North 220 feet, more or less, to a point on the North line of said Section 16; thence 4th: East along said North line 449 feet, more or less, to the point of beginning. EXCEPT the interest in the North 30 feet of said land as reserved for road purposes by Simi Valley Land and Water Company, in deed recorded June 27, 1890, Book 31, Page 21 of Deeds. ALSO EXCEPT from said parcel, so much thereof as is included in a tract of land described as follows: Beginning at a point feet North of the Northwesterly corner of Lot 968 of Susana Knolls Number One, as per Map recorded in Book 19, Page 16 of Maps, in the office of the County Recorder of said County; thence from said point of beginning: 1st: North 1.43 feet; thence, 2nd: North 44 20' East feet; thence, 3rd: North 40 33' 20" East feet; thence, 4th: North 43 6' East feet; thence, 5th: North feet; thence, 6th: East feet; thence, 7th: South feet; thence, 8th: West feet; thence, 9th: North feet; thence, 10th: South 43 6' West feet; thence, HOME Subordination Agreement for City of Simi Valley Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing Prep: 11/30/15 (Final) Dev.: Camino Esperanza Contract No.: 14-HOME-9271 Page 7 of 8

106 106 RES. NO th: South 40 33' 20" West feet; thence, 12th: South 44 20' west feet to the point of beginning. ALSO EXCEPT therefrom 50% of all oil, gas, minerals and other hydrocarbon substances in or under said land, as reserved by Theodore W. Johnson, et al., in deed recorded May 28, 1954, Book 1205, Page 538 of Official Records. HOME Subordination Agreement for City of Simi Valley Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing Prep: 11/30/15 (Final) Dev.: Camino Esperanza Contract No.: 14-HOME-9271 Page 8 of 8

107 107 RESOLUTION NO A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIMI VALLEY CONSENTING TO A SUBORDINATION AND INTERCREDITOR AGREEMENT FOR THE CAMINO ESPERANZA SENIOR APARTMENT COMPLEX (CABRILLO ECONOMIC DEVELOPMENT CORPORATION) WHEREAS; the applicant, Cabrillo Economic Development Corporation ( Developer ), has requested that the City Council consent to a Subordination and Intercreditor Agreement from Bank of the West, the form of which is attached hereto as Attachment A and incorporated herein by reference, which is consistent with current City policy and practice, will extend the loan and increase revenue for the senior apartment project; and WHEREAS, the final form of which shall be approved by the City Attorney and the City Manager; and WHEREAS, the Developer requests the City, the Junior Lienholder, subordinate to the bond financing under Bank of the West, the Senior Lender for the duration of construction of the senior apartment complex; and WHEREAS, the City Council maintains the Housing Successor Agency Affordable Housing Fund pursuant to Health and Safety Code Section , which provides for the development and operation of affordable housing programs and projects in the City, collectively the "Affordable Housing Fund"; and WHEREAS, the City Council finds and determines that consenting to the Subordination and Intercreditor Agreement will continue to provide housing for very lowincome seniors and is therefore in the best interest of the City. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The City Council finds and determines that the Subordination and Intercreditor Agreement (Attachment A), attached hereto in substantially final form and incorporated herein by reference, is consistent with the goals and provisions of the General Plan. SECTION 2. The City Council finds and determines that the project is exempt from the requirements of the California Environmental Quality Act. SECTION 3. The City Council hereby consents to a Subordination and Intercreditor Agreement for the Camino Esperanza Senior Apartment Complex and authorizes the City Manager and City Attorney to execute the final Subordination and Intercreditor Agreement.

108 108 RES. NO SECTION 4. The City Council and the officers of the City are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the Subordination and Intercreditor Agreement, and to administer the transaction following the execution of the Subordination and Intercreditor Agreement, and otherwise to effectuate the purposes of this Resolution, and such actions previously taken by such officers are hereby ratified and confirmed. SECTION 5. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk. PASSED and ADOPTED this 7th day of December Attest: Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Approved as to Content: Lonnie J. Eldridge, City Attorney Eric J. Levitt, City Manager Peter Lyons, Director Department of Environmental Services

109 109 RES. NO ATTACHMENT A FREE RECORDING REQUESTED PURSUANT TO GOVERNMENT CODE SECTION ) ) ) ) Recording requested by and ) when recorded return to: ) ) BANK OF THE WEST ) Attn: Cris Galvez ) CBG Loan Middle Office - REID ) 2527 Camino Ramon ) San Ramon, California ) Mail Sort #: NC-B07-3E-I ) Loan No ) ) (space above this line for Recorder's use) SUBORDINATION AND INTERCREDITOR AGREEMENT NOTICE: THIS SUBORDINATION AND INTERCREDITOR AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN(S) OF SOME OTHER OR LATER SECURITY INSTRUMENT. THIS SUBORDINATION AND INTERCREDITOR AGREEMENT ("Agreement") dated as of December 1, 2015, is entered into by and among Bank of the West, a California banking corporation ("BOW"), California Municipal Finance Authority, a joint exercise of powers agency duly organized and existing under the laws of the State of California (the "Issuer"), the City of Simi Valley, a municipal corporation ("City" or "Subordinate Lender"), and Camino Esperanza LP, a California limited partnership ("Borrower"). The Issuer and BOW are herein collectively referred to as the "Senior Lender," and Subordinate Lender together with the Senior Lender are herein collectively referred to as the "Lenders," and individually as a "Lender." Unless otherwise noted, references to instruments recorded in "Official Records" refer to instruments recorded in the Office of the County Recorder of the County of Ventura. RECITALS A. WHEREAS, in connection with this Agreement, Borrower will construct a 31-unit multifamily housing residential facility known as Camino Esperanza Apartments (the "Project") on the real property located at 1384 Katherine Road South, Simi Valley, CA 93063, more particularly described in Exhibit A attached hereto (the "Property"). The Borrower has requested financing from Senior Lender and City to fund the acquisition of the Property and construction of the Project. B. WHEREAS, Borrower and the Lenders have entered or will enter into the following documents related to the financing and/or development of the Project: 1. Senior Interest of BOW and Issuer in the Project. That certain deed of trust affecting the Project dated on or about the date hereof titled "Construction Deed of Trust, Assignment of Leases and Rents Security Agreement and Fixture Filing (California)" in the original amount of Seven Million and No/100 Dollars ($7,000,000) (the "Senior Deed of Trust") executed by Borrower, as trustor, in favor of the Issuer, as beneficiary, and to be recorded in the Official Records substantially concurrently herewith. The Senior Deed of Trust secures that certain promissory note dated December, 2015, titled "Multifamily Construction Note" from Borrower to the Issuer in the face amount of Seven Million and No/100 Dollars ($7,000,000) (the "Bond Note"), which Bond Note evidences a loan (the "Bond Loan") made by the Issuer to Borrower pursuant to the terms of that certain loan Subordination and Intercreditor Agreement (Simi Valley) Esperanza BOW-LD76\

110 110 RES. NO agreement dated as of December 1, 2015, titled "Borrower Loan Agreement" by and between Borrower and the Issuer (the "Bond Loan Agreement"). Pursuant to the terms of that certain funding loan agreement dated as of December 1, 2015, titled "Funding Loan Agreement" by and between the Issuer and BOW (the "BOW Loan Agreement"), BOW has made a loan to the Issuer (the "BOW Loan" and collectively with the Bond Loan, the "Senior Loan"), the proceeds of which were used to fund the Bond Loan. The BOW Loan is evidenced by that certain promissory note dated on or about December, 2015, titled "Governmental Lender Construction Note" in the face amount of Seven Million and No/100 Dollars ($7,000,000) (the "BOW Note"). The Issuer has assigned all of its right, title and interest in the Bond Note, the Senior Deed of Trust and the Bond Loan Agreement to BOW as collateral security for the BOW Loan and other obligations of the Issuer under the BOW Loan Agreement pursuant to that certain Assignment of Deed of Trust and Loan Documents made by the Issuer in favor of BOW (the "Assignment of Bond Loan Documents"), to be recorded in the Official Records substantially concurrently herewith. In connection with the Senior Loan, Borrower and the Issuer shall enter into a certain regulatory agreement dated on or about the date hereof titled "Regulatory Agreement and Declaration of Restrictive Covenants" with respect to the Project, (the "Bond Regulatory Agreement"), to be recorded in the Official Records substantially concurrently herewith. The Senior Deed of Trust, the Bond Note, the Bond Loan Agreement, the BOW Loan Agreement, the BOW Note, the Assignment of Bond Loan Documents, the Bond Regulatory Agreement and any other documents, recorded or unrecorded, pertaining to the Project and the Senior Loan are collectively referred to herein as the "Senior Loan Documents." 2. City's Junior Interest in the Project. That certain deed of trust affecting the Project dated on or about the date hereof titled "Deed of Trust with Assignment of Leases and Rents, Security Agreement, Financing Statement, and Fixture Filing" (the "City Deed of Trust"), executed by Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation ("CEDC"), as trustor, in favor of City, as beneficiary, to be recorded in the Official Records substantially concurrently herewith. The City Deed of Trust secures that certain promissory note dated on or about the date hereof titled "Promissory Note" from CEDC to City in the face amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the "City Note"), which Note evidences a loan (the "Subordinate Loan") made by City to CEDC in accordance with that certain loan agreement dated on or about the date hereof titled "Loan Agreement" (the "City Loan Agreement"), executed by and between the City and CEDC. In connection with the Subordinate Loan, CEDC and City will also be entering into that certain regulatory agreement affecting the Project titled "Amended and Restated City of Simi Valley Regulatory Agreement and Declaration of Restrictive Covenants" (the "City Regulatory Agreement"), to be recorded in the Official Records substantially herewith. The City Deed of Trust, the City Note, the City Loan Agreement, the City Regulatory Agreement, and any other documents, recorded or unrecorded pertaining to the Project and the Subordinate Loan are collectively referred to herein as the "City Loan Documents." The proceeds of the Subordinate Loan have been used or will be used to cover a portion of the pre-development and/or development costs of the Project. The City Loan Documents were assigned to and assumed by Borrower in connection with Borrower's purchase of the Property from CEDC, and the City consented to such assignment and assumption in accordance with that certain assignment dated on or about the date hereof titled "Assignment and Assumption Agreement," by and among CEDC, the Borrower and the City (the "City Assignment" and collectively with the City Loan Documents, the "Subordinate Loan Documents"). The Subordinate Loan together with the Senior Loan are collectively referred to herein as the "Loans." The Subordinate Loan Documents together with the Senior Loan Documents are collectively referred to herein as the "Loan Documents." C. WHEREAS, the Lenders and Borrower desire to set forth the respective lien priorities of the Senior Deed of Trust, the Bond Regulatory Agreement, the City Regulatory Agreement, the City Deed of Trust, and certain related matters concerning the Loans. NOW THEREFORE, in consideration of the foregoing and other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Subordination and Lien Priorities. The Lenders and Borrower acknowledge and agree that the following loans and encumbrances (collectively, the "Recorded Items") shall have the lien priority on the Project, the real property and the other collateral set forth in the applicable recorded instruments as provided below. (a) The lien priority of the Recorded Items with respect to the Project is as follows: Subordination and Intercreditor Agreement (Simi Valley) Esperanza 2

111 111 (i) (ii) (iii) (iv) (v) RES. NO the Bond Regulatory Agreement; the Senior Deed of Trust; the Assignment of Loan Documents; the City Regulatory Agreement; and the City Deed of Trust. (b) The Senior Loan Documents, and any and all renewals, modifications, extensions or advances thereunder or secured thereby (including interest thereon) shall unconditionally be and remain at all times liens, claims, or charges on the Property prior and superior to the Subordinate Loan Documents, and to all rights and privileges of the Subordinate Lender thereunder; and the Subordinate Loan Documents, together with all rights and privileges of the Subordinate Lender thereunder are hereby irrevocably and unconditionally subject and made subordinate to the liens, claims or charges of the Senior Loan Documents. It is a condition precedent to the respective obligations of each party under the Recorded Items to which it is a party that such Recorded Items unconditionally be and remain at all times a lien or charge on the Project, having priority with respect to the other Recorded Items in the order set forth above, and that each party specifically and unconditionally subordinate the lien or charge of each of the Recorded Items to which it is a party as necessary in order that the Recorded Items have the relative priority set forth above. 2. Permitted Payments. No payment shall be made under the Subordinate Loan Documents, and the Subordinate Lender shall not be entitled to receive or retain any payment from any source, on or in respect of the Subordinate Loan Documents, until repayment in full of the Senior Loan, repayment of all amounts owing under the Senior Loan Documents and the termination of the Senior Lender's obligation to fund any portion of the Senior Loan. 3. Insurance or Condemnation Proceeds. Notwithstanding any provision of the Subordinate Loan Documents to the contrary, in the event of any damage to, destruction of, or taking or condemnation (including deed in lieu thereof) of the Property or any portion thereof, any insurance or condemnation proceeds shall be applied first to repair or restoration of the Property and any amounts secured by the Senior Deed of Trust or the City Deed of Trust shall not be accelerated as a result of any casualty loss or condemnation, unless: (a) At the time of the casualty loss or condemnation, there is an Event of Default under the Senior Deed of Trust; or (b) After consultation among the City and Senior Lender, the Senior Lender determines that repair or restoration of the Property is not feasible or that adequate funds are not available therefor; or (c) The conditions precedent to permitting the use of such proceeds to pay costs for the repair or reconstruction of the Property that are set forth in the section entitled Net Claim Proceeds of the Senior Deed of Trust have not been met, and after consultation with the City, Senior Lender determines that permitting release of proceeds for rebuilding would not be prudent under then-current regulatory or underwriting standards or in consideration of factors normally used to determine whether to release funds; provided that such repair or restoration proceeds with reasonable dispatch once condemnation or insurance proceeds are available. Any funds to be applied to repair or restoration shall be held and administered by Senior Lender in accordance with the Senior Loan Documents. 4. Notice to Senior Lender of any Enforcement Action by Subordinate Lender. Subordinate Lender hereby agrees that so long as any sum shall remain outstanding on the Senior Loan, at least sixty (60) days prior to initiating an Enforcement Action (as defined below), the Subordinate Lender shall provide the Senior Lender, in accordance with Section 10 below, notice that a default has occurred under the Subordinate Loan Documents. The term "Enforcement Action" shall mean, with respect to the Subordinate Loan, the acceleration of all or any part of the Subordinate Loan, any foreclosure proceeding, the exercise of any power of sale, the acceptance by the Subordinate Lender of a deed or assignment in lieu of foreclosure, the obtaining of a Subordination and Intercreditor Agreement (Simi Valley) Esperanza 3

112 112 RES. NO receiver, the seeking of default interest, the taking of possession or control of, the suing on the City Note, or any guaranty in favor of the Subordinate Lender, the exercise of any banker's lien or rights of set-off or recoupment, or the taking of any other enforcement action against the Property. 5. [Intentionally Omitted.] 6. Distribution. In the event of any distribution, division, or application (each a "Distribution"), whether partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of Borrower's assets, or the proceeds of Borrower's assets, in whatever form, to creditors of Borrower or upon any indebtedness of Borrower, whether by reason of the liquidation, dissolution or other winding-up of Borrower, or by reason of any execution sale, receivership, insolvency, or bankruptcy proceeding, assignment for the benefit of creditors, proceedings for reorganization, or readjustment of Borrower or Borrower's properties, then and in such event, (a) the Senior Loan shall be paid in full before any payment is made upon the Subordinate Loan, and (b) all payments and distributions, of any kind or character and whether in cash, property, or securities, which shall be payable or deliverable upon or in respect of the Subordinate Loan shall be paid or delivered directly to BOW for application in payment of the amounts then due on the Senior Loan until the Senior Loan shall have been paid in full. In the event of any bankruptcy proceeding concerning Borrower, the Subordinate Lender hereby agrees that post-petition interest on the Senior Loan shall be paid prior to payment of any amount of principal or interest on the Subordinate Loan. This paragraph is not intended to include a foreclosure sale initiated by City as a Distribution when the Project, in whole or in part, is sold and, after such sale, remains subject to the Senior Deed of Trust. 7. City Consent to CEDC's Sale of the Property to the Borrower. The City hereby represents and warrants that pursuant to the Assignment it has consented to the sale and transfer of the Property to the Borrower and acknowledges that such transfer shall not cause the acceleration of the Subordinate Loan. 8. [Intentionally Omitted.] 9. [Intentionally Omitted.] 10. Default By Borrower. If Borrower becomes insolvent or bankrupt, this Agreement shall remain in full force and effect. In the event of a corporate reorganization or corporate arrangement of Borrower under the provisions of the Bankruptcy Code, as amended, this Agreement shall remain in full force and effect and the court having jurisdiction over the reorganization or arrangement is hereby authorized to preserve such priority and subordination in approving any such plan of reorganization or arrangement. Following the expiration of any applicable notice and cure period, any default by Borrower under the terms of the Subordinate Loan also shall be a default under the terms of the Senior Loan to Senior Lender. 11. Duration and Termination. This Agreement will take effect when received by Senior Lender, without the necessity of any acceptance by Senior Lender, in writing or otherwise, and will remain in full force and effect until each Subordinate Lender shall notify Senior Lender in writing at the address shown above to the contrary. Any such notice shall not affect the Senior Loan owed Senior Lender by Borrower at the time of such notice, nor shall such notice affect Senior Loan thereafter granted in compliance with a commitment made by Senior Lender to Borrower prior to receipt of such notice, nor shall such notice affect any renewals of or substitutions for any of the foregoing. Such notice shall affect only indebtedness of Borrower to Senior Lender arising after receipt of such notice and not arising from financial assistance granted by Senior Lender to Borrower in compliance with Senior Lender's obligations under a commitment. 12. Notice and Cure Rights. BOW shall deliver to Subordinate Lender any notice given to Borrower with respect to any default under any of the Senior Loan Documents at such time that notice is provided to Borrower and Subordinate Lender shall have the right, but not the obligation, to cure such default occurring under the Senior Loan Documents provided that cure is made within the applicable cure periods for a cure by the Borrower contained in the Senior Loan Documents. Any cure offered by the limited partner of the Borrower, or such limited partner's affiliates, shall be accepted as if given by the Borrower. If the cure is completed to Senior Lender's reasonable satisfaction, Senior Lender shall rescind any notice of default and accept all payments and all acts by Subordinate Lender on behalf of Borrower as though the same had been done and performed by Borrower. Subordinate Lender shall deliver to Senior Lender any notice given to Borrower with respect to any Subordination and Intercreditor Agreement (Simi Valley) Esperanza 4

113 113 RES. NO default under any of the Subordinate Loan Documents at such time that notice is provided to Borrower and Senior Lender shall have the right, but not the obligation, to cure such default occurring under the Subordinate Loan Documents provided that cure is made within the applicable cure periods for a cure by the Borrower contained in the Subordinate Loan Documents. Any cure offered by the limited partner of the Borrower, or such limited partner's affiliates, shall be accepted as if given by the Borrower. If the cure is completed to Subordinate Lender's reasonable satisfaction, Subordinate Lender shall rescind any notice of default and accept all payments and all acts by Senior Lender on behalf of Borrower as though the same had been done and performed by Borrower. Any notice required hereunder shall be delivered in writing (at the addresses specified below) by any of the following means: (a) personal service; (b) overnight courier; or (c) registered or certified, first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as above provided. Any notice sent pursuant to subsection (a) shall be deemed received upon such personal service. Any notice, demand or request sent pursuant to subsection (b) shall be deemed received on the business day immediately following deposit with the overnight courier, and, if sent pursuant to subsection (c), shall be deemed received forty-eight (48) hours following deposit into the mail. The provisions of this section are intended to supplement, and not to limit, waive, modify or replace, those provisions of law pertaining to notice and cure rights of junior lenders including, without limitation, those set forth in California Civil Code 2924b and 2924c. Senior Lender: California Municipal Finance Authority 2111 Palomar Airport Road, Suite 320 Carlsbad, CA Attention: John Stoecker and Bank of the West CBG Loan Middle Office REID NC-BO7-3E-I 2527 Camino Ramon San Ramon, CA Borrower: Camino Esperanza LP c/o Cabrillo Economic Development Corporation 702 County Square Drive Ventura, CA With a copy to: Goldfarb & Lipman LLP 1300 Clay Street, 11th Floor Oakland, CA With a copy to: Raymond James California Housing Opportunities Fund IV L.L.C. c/o Raymond James Tax Credit Funds, Inc. 880 Carillon Parkway St. Petersburg, Florida Attention: Steven J. Kropf, President With a copy to: Kyle Arndt, Esq. Bocarsly Emden Cowan Esmail & Arndt LLP 633 W. 5th Street, 64th Floor Los Angeles, California Subordination and Intercreditor Agreement (Simi Valley) Esperanza 5

114 114 City: RES. NO City of Simi Valley 2929 Tapo Canyon Road Simi Valley, California Attention: Director of Environmental Services 13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. No provision contained in this Agreement shall be construed (a) as requiring Senior Lender to grant to Borrower or to Subordinate Lender any financial assistance or other accommodations, or (b) as limiting or precluding Senior Lender from the exercise of Senior Lender's own judgment and discretion about amounts and times of payment in making loans or extending accommodations to Borrower. 14. Amendments. This Agreement constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless made in writing and signed by all the parties hereto. 15. Attorneys Fees and Legal Expenses. If any party to this Agreement shall take any action to enforce or otherwise relating to this Agreement, the prevailing party or parties shall be entitled to recover reasonable attorney's fees and costs from the other party or parties. 16. Successors. This Agreement shall extend to and bind the respective heirs, personal representatives, successors and assigns of the parties to this Agreement, and the covenants of the parties respecting subordination of their respective interests shall extend to, include, and be enforceable by any transferee or endorsee to whom a party may transfer any or all of its interests. 17. Waiver. The parties shall not be deemed to have waived any of their respective rights under this Agreement unless such waiver is given in writing and signed by the party. No delay or omission on the part of a party in exercising any right shall operate as a waiver of such right or any other right. A waiver by a party of a provision of this Agreement shall not prejudice or constitute a waiver of that party's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by a party, nor any course of dealing between the parties, shall constitute a waiver of any of that party's rights or of other parties' obligations as to any future transactions. Whenever the consent of a party is required under this Agreement, the granting of such consent by that party in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of that party. 18. [Intentionally Omitted.] 19. Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. 20. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, it shall not invalidate or render unenforceable any other part of this Agreement. 21. Conflicts with Other Agreements. Each of the parties hereto acknowledge and agree that if there is any conflict or inconsistency between the provisions of this Agreement and the provisions contained in any of the Loan Documents or any other agreement between any or all of the Lenders and Borrower, the provisions of this Agreement shall prevail. [SIGNATURES APPEAR ON FOLLOWING PAGES] Subordination and Intercreditor Agreement (Simi Valley) Esperanza 6

115 115 NOTICE: RES. NO THIS SUBORDINATION AND INTERCREDITOR AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN, A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. "BORROWER" CAMINO ESPERANZA LP, a California limited partnership By: Camino Esperanza LLC, a California limited liability company, its Managing General Partner By: Cabrillo Economic Development Corporation, a California nonprofit public benefit corporation, its Sole Member By: Debra L. De Vay, Chief Financial Officer Signature Page to Subordination and Intercreditor Agreement (Simi Valley)- Esperanza S-1

116 116 RES. NO "ISSUER" California Municipal Finance Authority By: Authorized Signatory Signature Page to Subordination and Intercreditor Agreement (Simi Valley)- Esperanza S-2

117 117 RES. NO "BOW" BANK OF THE WEST, a California banking corporation By: Name: Its: Signature Page to Subordination and Intercreditor Agreement (Simi Valley)- Esperanza S-3

118 118 RES. NO "CITY" Attest: City of Simi Valley, A Municipal Corporation By: Ky Spangler, Assistant City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Lonnie J. Eldridge, City Attorney Approved as to Content: Eric J. Levitt, City Manager Peter Lyons, Director Department of Environmental Services Signature Page to Subordination and Intercreditor Agreement (Simi Valley)- Esperanza S-4

119 119 RES. NO EXHIBIT A Legal Description THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE City OF SIMI VALLEY, COUNTY OF VENTURA, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS: A portion of Section 16, Township 2 North, Range 17 West, Rancho Simi, in the City of Simi Valley, County of Ventura, State of California, as per Map recorded in Book 3, Page 2 of Maps, in the office of the County Recorder of said County, described as follows: Beginning at a point on the Northerly line of said Section 16, at the Northwest corner of the land first described in the deed to Simi Valley Unified School District of Ventura County, California, recorded July 20, 1960, Book 1890, Page 180 of Official Records; thence along the Northwest line of said land of said School District 1st: South 17 15' 15" West feet, more or less, to a point on the Northeast line of the Southern Pacific s 100 foot right of way; thence along said Northeast line, 2nd: North 63 27' 45" West feet to a point on the East line of Katherine Road; thence along said East line, 3rd: North 220 feet, more or less, to a point on the North line of said Section 16; thence 4th: East along said North line 449 feet, more or less, to the point of beginning. EXCEPT the interest in the North 30 feet of said land as reserved for road purposes by Simi Valley Land and Water Company, in deed recorded June 27, 1890, Book 31, Page 21 of Deeds. ALSO EXCEPT from said parcel, so much thereof as is included in a tract of land described as follows: Beginning at a point feet North of the Northwesterly corner of Lot 968 of Susana Knolls Number One, as per Map recorded in Book 19, Page 16 of Maps, in the office of the County Recorder of said County; thence from said point of beginning: 1st: North 1.43 feet; thence, 2nd: North 44 20' East feet; thence, 3rd: North 40 33' 20" East feet; thence, 4th: North 43 6' East feet; thence, 6th: East feet; thence, 7th: South feet; thence, 8th: West feet; thence, 9th: North feet; thence, 10th: South 43 6' West feet; thence, 11th: South 40 33' 20" West feet; thence, 12th: South 44 20' west feet to the point of beginning. ALSO EXCEPT therefrom 50% of all oil, gas, minerals and other hydrocarbon substances in or under said land, as reserved by Theodore W. Johnson, et al., in deed recorded May 28, 1954, Book 1205, Page 538 of Official Records. APN: Subordination and Intercreditor Agreement (Simi Valley) - Esperanza Exhibit A A-1

120 120 RES. NO NOTARY ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of } On before me Here Insert Name and Title of the Officer, personally appeared Name(s) of Signer(s) who 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. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature Place Notary Seal Above Subordination and Intercreditor Agreement (Simi Valley) Esperanza Notary Acknowledgment Ack-1 Signature of Notary Public

121 121 RES. NO NOTARY ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of } On before me Here Insert Name and Title of the Officer, personally appeared Name(s) of Signer(s) who 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. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature Place Notary Seal Above Subordination and Intercreditor Agreement (Simi Valley) Esperanza Notary Acknowledgment Ack-2 Signature of Notary Public

122 122 RES. NO NOTARY ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of } On before me Here Insert Name and Title of the Officer, personally appeared Name(s) of Signer(s) who 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. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature Place Notary Seal Above Subordination and Intercreditor Agreement (Simi Valley) Esperanza Notary Acknowledgment Ack-3 Signature of Notary Public

123 123 RES. NO NOTARY ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of } On before me Here Insert Name and Title of the Officer, personally appeared Name(s) of Signer(s) who 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. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature Place Notary Seal Above Subordination and Intercreditor Agreement (Simi Valley) Esperanza Notary Acknowledgment Ack-4 Signature of Notary Public

124 EXHIBIT 1 November 16, 2015 Mr. Eric Chen Associate Planner (Housing) Department of Environmental Services City of Simi Valley 2929 Tapo Canyon Road Simi Valley, CA Re: Updated Review of a Public Subsidy Request for Camino Esperanza Project Dear Mr. Chen: Kosmont Companies ( Kosmont ) has reviewed a set of proforma ( Proforma ) dated October 20, 2015 for the proposed Camino Esperanza affordable senior housing development ( Development ) to be located at 1384 Katherine Road South in the City of Simi Valley ( City ). This review is an update to an analysis of the same Development completed in 2014 by Kosmont, dated September 17, The Proforma was furnished by the City, and created by the Cabrillo Economic Development Corporation ( Developer, CEDC ). The Proforma was submitted as part of a request by the Developer for an interest free predevelopment loan from the City for $500,000. The Developer proposes to convert the predevelopment loan into a secured permanent loan and pay off the loan upon re-syndication of the Development. For reference, the Developer proposes to serve as both the general contractor to construct the Development, as well as the operator. As discussed further herein, Kosmont finds that the Proforma includes potentially elevated costs totaling approximately $701 per square foot of built area. Despite these potential concerns, the Developer appears to have secured Multifamily Housing Program ( MHP ) and Home Investment Partnership Program ( HOME ) commitments that, in conjunction with tax credits and other sources, could be used to support the estimated cost of constructing the Development. Given these considerations, and others discussed herein, to the extent that the City determines that completion of the proposed Development is in the City s interest, Kosmont recommends that the City include in its potential loan documentation provisions that preclude the Developer from realizing Contractor Profit and Developer Profit prior to the repayment of the proposed City loan. Proposed Development The proposed Development consists of the construction and operation of a 31 unit affordable senior housing project. The Development would be constructed on a 2.61 acre site located at 1384 Katherine Road South in the City, and include seven one-story buildings. Thirty of the proposed units would be one-bedroom apartments comprising approximately 540 square feet each. The remaining unit would be a two-bedroom manager s unit comprising approximately 820 square feet. The proposed Development 865 South Figueroa Street, Suite 3500 Los Angeles California ph fx

125 City of Simi Valley Updated Review of Camino Esperanza Loan Request November 16, 2015 Page 2 of 7 also includes an approximately 1,324 square foot community room, providing a total building envelope of approximately 18,344 square feet, of which approximately 17,020 square feet would be living area. Of the 31 units, 30 would be income restricted. The Developer Proforma shows that 11 units would be restricted to individuals with income of no more than 25% of the area median income ( AMI ), three units would be restricted to individuals with income of no more than 35% of AMI, and 16 at no more than 50% of AMI. Developer Proforma As mentioned previously, Kosmont reviewed the Proforma submitted to the City on October 20, 2015 as part of the loan request. The Proforma included a variety of exhibits and estimated construction and operational cost and revenue estimates for the Development. A discussion of pertinent elements of the Proforma follows. Land Cost & Financing The Proforma includes land acquisition costs of $1,550,000, and $939,453 in land carrying costs. The land acquisition costs match those listed in Ventura County Assessor transaction documents, and pursuant to Kosmont s research, the Developer has been financing the property since it purchased it in July of Further, it appears that the Developer has three outstanding loans on the underlying property. The first loan is through Enterprise Housing Financial Services and was underwritten in July of 2005 for $1,280,000. The second loan is through Local Initiatives Support Corporation for $200,000 and was recorded in May of The third loan is through the Ventura County Housing Trust Fund for $500,000, was recorded in September of 2014, and is listed as due in September of Thus, according to Ventura County Assessor records there are a total of $1,980,000 in loans currently secured by the property underlying the proposed Development. Hard Construction Costs Hard construction costs including land development, hard cost contingencies, and an allowance for utility improvements are estimated to be approximately $6.2 million for the Development, or approximately $200,000 per unit (including the manager s unit), and approximately $339 per habitable square foot. These figures include potentially atypical costs associated with the Development including relocation of drainage infrastructure and sound attenuation to minimize acoustic impacts from an adjacent train line. Despite these considerations it is Kosmont s opinion that hard costs appear elevated. Soft Costs The Proforma includes estimates of soft costs including permits, design fees, property taxes, bonds, insurance (construction and builders liability), legal, marketing and project management fees. Soft costs total approximately $1.5 million (including contingency) for the Development, or $47,000 per unit, and $79 per habitable square foot. While as a ratio of hard to soft costs this appears reasonable if not low, on a cost per square foot 865 South Figueroa Street, Suite 3500 Los Angeles California ph fx

126 City of Simi Valley Updated Review of Camino Esperanza Loan Request November 16, 2015 Page 3 of 7 basis, it may be slightly high, though it does include some furnishings, and local permit fees. Contingencies Based on Kosmont s calculations from the figures provided in the Proforma (attached), the construction cost estimates include a hard cost contingency of approximately 5.2%, and a soft cost contingency of approximately 7.3%. A contingency of approximately 10% of hard costs is more typical of proforma estimates, but contingencies as low as 5% of hard costs are not unheard of. Further, contingency for soft costs of as low as 5% to as high as 10% may be considered typical. Financing Predevelopment and construction financing expenses are estimated to be approximately $1,053,000, of which approximately $494,000 is allocated to predevelopment interest, $344,000 is allocated to construction interest and the balance comprised of loan/lender expenses. The financing expenses appear to be estimated based on a construction loan of approximately $7,000,000 which augments HOME and other funding sources. Using a 3.15% interest rate, the allowance for Construction Loan Interest of approximately $344,000 would accommodate approximately 29 months of financing given a 65% average balance, which is a reasonable amount of time to complete the construction of the proposed Development, and likely provides some cushion for lease-up as well. Developer Return Pursuant to Kosmont s calculations, the Proforma includes a developer fee (profit) of approximately $1.2 million, or approximately 10.4% of costs (including financing costs). Developer profit for similar projects often range from 8% to 12% of project costs. Thus, such a profit threshold is not atypical, though given the potentially elevated costs, may also be elevated on a per square foot basis. Additionally, as the Developer will serve as the general contractor for the Development, the Developer will also capture Contractor Overhead and Contractor Profit in the Proforma. For reference, these two items are equal to 3.7% of total Development costs (including the Developer Fee ). Given the Developer s exposure to construction risk, and the low hard cost contingency allowance in the Proforma, Kosmont considers these allocations acceptable. Rental Rates The Proforma includes rental rates based on the varying AMI percentage thresholds of $352, $595, and $850 for 25%, 35%, and 50% of AMI thresholds respectively (before a $52 allowance for utilities). These rental rates were utilized in Kosmont s analysis. Proforma Income Projections In the evaluation of Affordable housing projects proforma income is typically considered over a 30 year horizon. In such estimates project income is typically escalated at 2.5% per year, and expenses are typically escalated at 3.5% per year. As expenses are grown at a faster rate than income, such escalation assumptions inherently suggest 865 South Figueroa Street, Suite 3500 Los Angeles California ph fx

127 City of Simi Valley Updated Review of Camino Esperanza Loan Request November 16, 2015 Page 4 of 7 affordable housing projects are financially infeasible if the period evaluated is long enough. Despite this, most projects are able to show positive proforma cashflow after all expenses over a 30 year period. This is not the case of the proposed Development. As previously introduced (and shown in the attached) under the assumptions in the Proforma, the Development is projected to realize negative cashflow (inclusive of only mandatory debt service) after 17 years. However, should the proposed Development be constructed, by the time it would be operational rents would be expected to increase marginally, and assuming development and permanent financing costs remain unchanged, such increases in rent could be expected to extend positive proforma cashflow beyond 17 years. Regardless, the projected income suggests that a recapitalization or re-syndication could be required sooner than typically required for a typical affordable housing project. It should also be noted that Replacement Reserves are not escalated in the Developers Proforma. This may result in an underfunded replacement reserve in the future. Conclusion Kosmont finds that while the Developer appears to have secured sufficient funds to deliver the proposed Development, the Proforma costs appear elevated, and long-term viability may require recapitalization or re-syndication earlier than typically necessary for similar projects. Kosmont understands that the Developer desires that the City provide a loan without interest until the Development is re-syndicated, which the Developer anticipates would occur sometime around 2030 (approximately year 15 of operations). Given the potentially elevated construction costs and the fact that the developer proposes to serve as the general contractor for the delivery of the Development, as well as the operator, to the extent that the City determines that completion of the proposed Development is in the City s interest, Kosmont recommends that the City include provisions in its potential loan documentation that preclude the Developer from realizing the Contractor Profit and Developer Profit provided for in the Proforma prior to the repayment of the proposed City loan. Kosmont is available to discuss its conclusions at your convenience. Reference exhibits follow. Very Truly Yours, Wil Soholt Sr. Vice President 865 South Figueroa Street, Suite 3500 Los Angeles California ph fx

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