HomeMy WebLinkAbout1996-10-07 City Council (6)City of Palo Alto
City Manager’s Report 6
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: Planning and
Community Environment
AGENDA DATE: October 7, 1996 CMR:418:96
SUBJECT:Loan Agreement and Regulatory Agreement with Alma Place
Associates to Provide Funds for the Construction of the Alma Place
Single Room Occupancy Housing Project at 725-753 Alma Street,
Palo Alto
REQUEST
Council action is requested to approve a permanent loan agreement and a regulatory
agreement with Alma Place Associates (APA) to provide the Cityls permanent funding for
the Alma Place single room occupancy (SRO) housing project at 725-753 Alma Street and
to restrict occupancy and rents for 55 years. The loan agreement consolidates two earlier City
loans and provides additional, previously appropriated, funds for a total of up to $2,695,000
in Commercial Housing In-Lieu funds for development cost subsidies and construction
financing purposes.
RECOMMENDATIONS
Staff recommends that the Council:
Approve the attached loan agreement (with its attached form of promissory note and
deed of trust) and the attached regulatory agreement with Alma Place Associates, to
consolidate the two existing City loans totaling $1,325,725 and to provide up to
$1,369,275 in additional funds under a new loan of $2,695,000, for development cost
subsidies and construction financing for the Alma Place single room occupancy
housing.
Authorize the Mayor to execute the loan agreement and the regulatory agreement with
Alma Place Associates in substantially similar form.
CMR:418:96 Page 1 of 4
o Direct the City Manager to administer the provisions of the agreements and to execute
any other documents necessary, including subordination agreements with the other
lenders, for Alma Place Associates to secure the construction and permanent funding
for the Alma Place SRO project.
POLICY IMPLICATIONS
These actions are consistent with previous Council actions supporting the development of
the 725-753 Alma Street site as very low-income SRO housing and with Council’s
appropriation of $2,695,000 for that purpose by Budget Amendment Ordinances number
4257 adopted January 17,1995 and number 4312 adopted on November 27,1996.
EXECUTIVE SUMMARY
Approval of the staff recommended actions should be the last formal Council action
regarding the City’s financing of the Alma SRO. The Architectural Review Board approved
the final design details on September 19, 1996, and construction is expected to begin in late
October. Edison Housing Investments has agreed to purchase the tax credits. The
construction and permanent bank financing has been secured. Wells Fargo Bank will be the
construction loan lender and First Nationwide Bank will provide a permanent loan coupled
with an Affordable Housing Program loan. The construction contract is being finalized and
subcontractor estimates are being utilized to determine a guaranteed maximum price for the
construction contract. Varian Associates, Inc. is contributing approximately $140,000
toward construction loan fees and an interest write-down, under a 1986 agreement with the
City, for the mitigation of housing impacts related to the development of their facility at 3050
Hansen Way.
The City’s loan is provided at 3 percent simple interest, with all payments of principal and
interest deferred for 15 years from project completion. Thereafter, payments are required
from the project’s available cash flow for the remaining term of the loan. About $350,000
to $450,000 of the City’s $2.695 million loan is expected to be needed for construction period
financing only and, after closing of the permanent funding, will be repaid based on the
project’s actual audited development costs.
The City’s regulatory agreement restricts occupancy and rents on 52 of the 106 SRO units
to provide affordable housing for households with incomes below 40 percent of the median
income for the 55 year term of the Agreement. The City’s restrictions apply only to 49
percent of the units, in order to avoid any limitations posed by Article 34 of the State
constitution. Article 34 limits the extent of local governments’ involvement in the
construction and management of low income rental housing without an authorizing election.
CMR:418:96 Page 2 of 4
However, all 106 SRO units will be protected for 55 years by the recorded regulatory
agreement required by the Tax Credit Allocation Committee.
FISCAL IMPACT
Project Budget and Sources of Funds: Total development costs are about $8.3 million,
according to the most recent cost projections. About 5 percent of total costs, or $404,000,
is allocable to the 1,800 square feet of leasable office space within the project. The
development cost of the office space will be funded by the bank loan and equity from the
general partner. The Palo Alto Housing Corporation (PAHC), the project sponsor, intends
to lease the space, at market-rate rents, for use as their business office. The sources and
amounts of permanent funding are shown in Exhibit D of the loan agreement. The City’s
loan will be secured by a deed of trust on the property and, initially, will be subordinated to
the Wells Fargo Bank construction loan and, later, to the loans made by First Nationwide.
Reserve for Contingency in City Funding: The proposed City loan agreement provides up
to $2.695 million for the SRO project from the Commercial Housing In-Lieu fund. About
$1 million of the City’s contribution has already been expended under the existing
agreements for predevelopment costs and the site purchase. It is expected that about
$350,000 to $450,000 of the $2.695 million City loan will be needed only for construction
financing and then will be repaid upon the closing of the permanent funding from First
Nationwide and the limited partners. However, under the loan agreement, APA may request
City approval to use some or all of these funds for unexpected and unavoidable construction
cost increases and change orders not covered by the contingency allowances in the
development budget. The loan agreement authorizes the City Manager to approve or
disapprove such requests and then such amounts would remain part of the City’s permanent
project loan. Since there is currently a strong upward trend in construction costs, this
approach was suggested by staff.
ENVIRONMENTAL ASSESSMENT
The Council certified a mitigated negative declaration (95-EIA-2) on June 26, 1995, covering
the provision of City housing subsidies for the SRO project, in connection with the adoption
of the project’s Planned Community zone (Ordinance No. 4238).
STEPS FOLLOWING APPROVAL
Excavation is planned to commence later in October 1996, followed by construction of the
parking garage and then the housing. The construction period will take 14 months with
completion expected by the end of 1997. Rent-up is expected to take three to four months.
CMR:418:96 Page 3 of 4
It is anticipated that if there are no major delays, the project would be fully occupied and the
permanent funding in place by April, 1998.
ATTACHMENTS
1. Agreement with Alma Place Associates (with Promissory Note and Deed of Trust)
2.Regulator?..’ Agreement and Declaration of Restrictive Covenants with Alma Place
Associates
PREPARED BY: Catherine Siegel, Housing Coordinator
KENNETH R. SCHREIBER
Director of Planning and
Community Environment
CITY MANAGER APPROVAL:
cc:Palo Alto Housing Corporation
Alma Place Associates
cc without attachments:
Charles Keenan, Keenan Land Company
Earl and Cye Ellison
Willis and rose Thoits, Trustee
Pajaro Partnership
D&T Group
Eleanor Focole
CMR:418:96 Page 4 of 4
Attachment 1
AGREEMENT BETWEEN THE CITY OF PALO ALTO AIqD
ALMA PLACE ASSOCIATES TO FUND THE DEVELOPMENT
OF PROPERTY AT 725/753 ALMA STREET, PAL0 ALTO
THIS AGREEMENT ("Agreement") is made and entered into on
, 1996, by and between the CITY OF PALO ALTO, a
chartered city organized and existing under the constitution and
laws of the State of California ("City"), and ALMA PLACE
ASSOCIATES, a California Limited Partnership, with offices at 540
Cowper Street/ Suite 201, Palo Alto, California 94301 ("APA").
W I T N E S S T H:
WHEREAS, on January 17, 1995, the City adopted Ordinance
No. 4257 authorizing $295,000 toward pre-development expenses for
the development of a single room occupancy development at 725-753
Alma Place, Palo Alto, California ("Project");
WHEREAS, on November 27, 1995, the City adopted Ordinance
No. 4312 appropriating an additiona! $2,400,000 for the Project;
WHEREAS, the City has loaned APA the amounts of $295,000
and $1,030,725 of City Commercial Housing In-lieu Funds for pre-
development costs and land acquisition costs, and APA has executed
promissory notes in those amounts in favor of the City;
WHEREAS, APA is ready to now begin construction of the
Project and has requested that the City provide financial
assistance with construction period expenses for the Project; and
WHEREAS, the City is willing to loan funds to APA for
certain construction and development costs for the Project, which
are necessary to make the Project financially feasible to develop;
NOW THEREFORE, in consideration of the mutual promises
and covenants and terms, conditions and provisions set forth in
this Agreement, the parties agree as follows:
ARTICLE ONE - DEFINITIONS
The following terms as used in this Agreement shall have
the respective meanings assigned to them in this Article One,
unless the context clearly indicates otherwise:
"Agreement"means this "Agreement between the City of Palo
Alto and Alma Place Associates to Fund the Development of Property
at 725/753 Alma Street, Palo Alto".
"Agreement Date" means the date first above-written.
"AHP"means the Affordable Housing Program of the Federal
Home Loan Bank Board, which provides financial subsidies to
eligible affordable housing projects.
961002 s.~ 0071044
1
"APA" means Alma Place Associates, a California Limited
Partnership, or its assignee.
"Available Cash Flow" means the positive cash flow
accruing after the Project’s expenses are deducted from the
Project’s revenues, as more fully defined in Section 6 of the Note.
"City" means the City of Palo Alto, a chartered city
organized and existing under the constitution and laws of the State
of California.
"Covenants" mean the Regulatory Agreement and Declaration
of Restrictive Covenants to be entered into between the City and
APA, setting forth the affordability restrictions and to be
recorded against the Project, as set forth in Exhibit "F".
"Deed of Trust" means the deed of trust granting the City
a lien on the Site to secure APA’s performance under the Agreement,
Note and Deed of Trust, as set forth in Exhibit "C".
"EHI" means Edison Housing Investments, a California
corporation, which may be admitted as a limited partner of APA upon
the satisfaction of specified terms and conditions.
"Escrow Agent" means First American Title Guarantee
Company, located at 1737 North First Street, San Jose, California.
"FNB"means First Nationwide Bank, the federal chartered
bank, which will make the deferred payment AHP Loan and a fully
amortized permanent loan.
"Loan Amount" means the principal sum of funds loaned by
the City to APA under the Pre-development Agreements and this
Agreement, as referred to in Section 3.1 hereof and the Note.
"Note" means the promissory note in the original
principal amount of the Loan Amount, as set forth in Exhibit "B".
"Project" means the development of the Site for the
purpose of providing 106 single room occupancy housing units (plus
a manager’s unit), and up to 1,800 square feet of leasable
commercial office space, as further described in this Agreement and
in accordance with Planned Community (PC) Zone Ordinance No. 4283,
adopted by the City on July 17, 1995.
"Project Manager" means the City’s city manager or her
designated representative.
"Site" means the property, the legal description of which
is set forth in Exhibit "A".
"Term" shall mean the Term of this Agreement.
"WFB"means Wells Fargo Bank, a federally chartered bank,
who will make the construction loan for the Project.
961002 syn 0071044
ARTICLE TWO TERM OF AGREEMENT
2.1 Term. This Agreement is for a Term commencing on
the Agreement Date and continuing until the forty-fifth anniversary
of the Agreement Date, regardless of any repayment of the Loan
Amount or the sale, assignment, transfer or conveyance of the
Project, unless extended by the mutua! consent of the parties or
earlier terminated as provided herein.
ARTICLE THREE -DISBURSEMENT OF FUNDS
3.1 Loan Amount
The City agrees to loan to APA up to a maximum of two
million six hundred ninety-five thousand dollars ($2,695,000)
("Loan Amount") for the purposes set forth in Section 3.3 of this
Agreement. Of this amount, the City has previously loaned APA the
amount of $.1,325,725 in accordance with the agreement between the
City and Palo Alto Housing Corporation, dated January 17, 1995, and
the agreement between the City and APA, dated June I0, 1996,
(collectively, "Pre-development Agreements");the unexpended balance
of the Loan Amount, which is not to exceed $1,369,275, shall be
disbursed according to the terms and subject to the conditions set
forth in this Agreement. The Pre-development Agreements are
superseded by this Agreement and .are of no further force and
effect.
3.2 Promissory Note and Deed of Trust
The Loan Amount shall be evidenced by a promissory note
("Note") in the amount of two million six hundred ninety-five
thousand dollars ($2,695,000). The Note shall be secured by a Deed
of Trust. Interest shall accrue on the outstanding principal sum
at the rate of three percent (3%) per annum, simple interest, from
the date of execution of the Note until the end of the Term. The
Note shall be repayable in accordance with its terms.
If APA commits any breach of this Agreement during its
Term, including any failure to repay the principal sum or accrued
interest as required hereunder, after the expiration of applicable
cure periods, the entire amount advanced, together with interest,
as provided in Section 7.4 hereof, shall, at the option of the City
become immediately due and payable.
3.3 Purpose of Loan
APA shall use the funds loaned pursuant to this Agreement
to construct and deve!op the Project and for construction-period
financing on the Site-in accordance with the provisions of this
Agreement. The City’s sole obligation under this Agreement is
limited to the provision of funds as described in this Section 3.3,
up to the Loan Amount.
961002 s>m 0071044
3.4 Disbursement of funds, project budget and final
accountinq
(a) With respect to any portion of the Loan Amount, APA
shall submit written requests for disbursement of expenses incurred
by APA, to the City for review and approval, in accordance with the
development budget generally described in Exhibit "D". APA
covenants and agrees to provide to the City one or more copies of
contracts, invoices, checks, negotiable instruments, receipts and
other documentation acceptable to the City to verify the purpose
and amount of each request for disbursement. APA shall attach to
each such request a certification, in writing, that the
construction work or services have been satisfactorily performed in
accordance with the construction contract(s) and that the expenses
are reasonable and necessary to complete the Project. The City has
no obligation to approve disbursements at any time during which APA
is in default under this Agreement or to approve disbursements for
disapproved or improperly documented expenses.
APA shall provide the~City with its schedule, and any
subsequent revisions, of estimatedpayments for construction period
costs, including the anticipated billings by the general
contractor. The City and APA agree to cooperate in establishing
written procedures governing the processing of requests for
disbursement, including procedures concerning the City’s inspection
of the progress of the construction work and the timely processing
of disbursements. The City agrees that APA may utilize its Loan
Amount for project development costs prior to the disbursement of
other construction funds, including the WFB construction loan
funds.
(b) The funds provided under this Agreement and the Note
are being advanced by the City to pay a portion of the actual
development costs of, and provide construction-period financing
for, the Property.. A projected development budget and sources of
funds is attached as Exhibit "D". After the completion of the
Project, and the performance of the required audit of the Project’s
development costs, the funds provided by the City will be allocated
to the reasonable and necessary construction and development
expenses not covered by funding from other sources obtained by APA.
The final allocation of the City’s funds will be approved by the
Project Manager based on written information pertaining to the
actual development costs as certified in the required audit and as
otherwise documented by APA.
(c) If the City determines that the entire $2,695,000 of
funding advanced by the City to APA under this Agreement is not
necessary to pay for reasonable, necessary and eligible development
costs of the Project as described herein and as otherwise approved,
in advance, by the City, then APA shall repay the excess amount of
funds, as determined by the City, promptly upon the demand of the
Project Manager and the principal balance of the Note shall be
reduced, accordingly.
961002 syn 0071044
4
(d) The parties acknowledge that the projected
development budget will include reasonable contingency funds for
indirect construction cost ("soft cost") and direct construction
cost increases, and that the expected sources of funds will be
sufficient to develop the Project, as planned. The parties also
acknowledge that APA may request the approval of the Project
Manager, in writing, for increases to the development budget
directly attributable to unexpected or reasonably unavoidable
construction cost increases or for the cost of upgrading materials,
finishes or tenant amenities, to the extent that such budget
increases may exceed the total contingency funds included in the
projected development budget. In the event that the Project Manager
approves of any such requests of APA, the parties agree that such
amounts shall be included in the Project’s final Total Development
Costs, as such term is defined in Section 8 of the Note.
ARTICLE FOUR -COVENANTS AND CONDITIONS
Project
4.1 Construction, Development and Manaqement of the
(a) APA shall commence construction of the Project on or
before December 31, 1997, unless thetime is extended with the
written approval of the City. Notwithstanding any other provision
of this Agreement to the contrary, the City. shall not be obligated
to extend any such appro~val. APA shall complete construction and
receive a certificate of occupancy for the Project on or before
December 31, 1999.
(b) APA shall not default under the commitments for
permanent financing from ~NB and the construction financing from
WFB or the commitment from EHI, and shall c!ose the loans and admit
EHI as a limited partner to-APA in accordance with the terms of
those commitments.
(c) APA shall at all times maintain in full force and
effect all state and local licenses required to operate the Project
in accordance with this Agreement. APA covenants that it will
obtain all federal, state and loca! governmental approvals and
reviews required by law to be obtained for the Project.
(d) APA shall make all reasonable efforts to keep the
units in the Project in good repair and available for occupancy and
to make best efforts to keep the Project fully rented and occupied.
(e) APA shall operate and maintain the single room
occupancy units in the Project as permanent residential housing and
shall comply with the use, occupancy, and rent restrictions as set
forth in the Covenants.
(f) APA understands and agrees that it will be monitored
by the City from time to time to assure compliance with all terms
and conditions in this Agreement, and all applicable local, state
and federal laws, regulations and promulgated policies. APA agrees
961002 s.vn 0071044
5
to use its best efforts to cooperate with the City’s efforts at
monitoring, and to ensure full access to necessary information.
(g) APA shall take full responsibility for its
construction and development work, shall bear all losses and
damages directly resulting to it, to any of its contractors or
subcontractors, and to the City, its officers, employees, agents
and representatives, of any act, error or omission of APA in the
performance of this Agreement.
(h) APA agrees that duly authorized representatives of
City, shall, at all reasonable times during normal business hours,
have access to the Project, and with not less than twenty-four
hours notice, have .the right to inspect the residential units,
until the expiration of this Agreement.
4.2 Conditions precedent and concurrent
The following conditions shall be satisfied prior to or
concurrently with the close of escrow for the City’s Loan Amount,
the failure of each of which shall constitute a default and breach
under this Agreement:
(a) APA shall deliver to the City to its reasonable
satisfaction evidence of its application for a carryover allocation
of the preliminary federal and California low income housing tax
credit reservation for the Project from the California Tax Credit
Allocation Committee, dated May 6, 1996.
(b) APA shall deliver to the City to its reasonable
satisfaction evidence of a commitment for permanent financing from
FNB in the approximate amount of $400,000 for a term of 15 years
and for a zero interest loan of AHP funds in the approximate amount
of $346,000, with payment deferred for the term of 30 years.
(c) APA shall deliver to the City to its reasonable
satisfaction a copy of the commitment letter executed by EHI,
setting forth the terms and conditions under which EHI wil! become
a limited partner of APA and make its equity contribution. APA
shall demonstrate to the City to its reasonable satisfaction that
sufficient funding is committed from EHI and FNB to repay the
interim financing construction !oan from WFB, finance the cost of
the commercial office portion of the Project, and pay the
development fee, as shown in the Project’s development budget, with
costs allocated between the residential component and the
commercial component, as set forth in Exhibit "D".
(d) APA shall execute the Deed of Trust in form and
substance satisfactory.to the City, naming the City as beneficiary.
This Deed of Trust shall expressly name the Note as the obligation
secured thereby.
(e) After the recordation of the Deed of Trust, the
Escrow Agent shal! issue an American Land Title Association (ALTA)
policy of mortgage title insurance in the full, original principal
961002 s.,,,n 0071044
amount of the Note. The title policy shall (i) show fee title to
the Site vested in APA; (2) insure the City as insured under the
policy of title insurance and as beneficiary under the Deed of
Trust; and (3) show title to be free and clear of all liens and
encumbrances prior or superior to the lien of the Deed of Trust,
except for the lien of the deeds of trust securing the construction
loan from WFB in an amount not to exceed $4,600,000 and the AHP
loan from FNB in an amount not less than $340,000, and such other
liens and encumbrances as the City shall expressly approve, in
writing.
4.3 Insurance
APA, at its sole cost and expense, shall obtain and
maintain during the term of this Agreement, insurance with
responsible companies in such amounts and against such risks as is
satisfactory to the City’s risk manager, including, without
limitation, workers’ compensation, to the extent required by law,
course of construction, commercial general liability, comprehensive
automobile liability, persona! injury and property damage
insurance, as appropriate, as set forth in Exhibit "E", insuring
against all liability of APA and its authorized representatives
arising out of or in connection with the development of the
Project, or APA’s performance or non-performance under this
Agreement. Modifications of any insurance requirements set forth
in Exhibit "E" shall be submitted, in writing, to the Project
Manager for approval by the City’s risk manager. Any such
modification shall receive the concurrence of the Office of City
Attorney. APA shall name the City as an additional insured on all
policies of insurance required under the terms of other financing.
4.4 Nothing contained in this Agreement shall create or
justify any claim against the City by any person that APA may have
employed or with whom APA may have contracted relative to the
purchase of materials, supplies or equipment, or the furnishing or
the performance of any work or services with respect to the
construction and development of the Project, and APA shall include
similar requirements in any contracts, entered into for the
development of the Project.
4.5 Anti-discrimination
APA covenants for itself and its successors and assigns
that this Loan is accepted upon the condition that there shall be
no discrimination against or segregation of any person or group of
persons on account of race, color, creed, religion, age, sex,
marital status, sexual preference, national origin, or ancestry in
the construction and development work performed pursuant to this
Agreement.
4.6 ~..roperty management
The City hereby approves Palo Alto Housing-Corporation as
the property manager of the Project. Any change in the property
961002 syn 0071044
manager shall be approved, in advance, by the City’s city manager,
which approval shall not be unreasonably withheld.
ARTICLE FIVE REPRESENTATIONS AND WARRANTIES
5.1 Financial interest
APA represents that it presently has no interest, and
shall not acquire any interest, direct or indirect, financial or
otherwise, which would conflict in any manner or degree with the
rendering of services or the performance of construction and
development work, or both, for the Project under this Agreement.
APA further represents that no person who has or will have any
financial interest under this Agreement is an officer, employee, or
official representative of the City.
5.2 Legal Authority
The making and performance by APA of~ this Agreement, the
Note and Deed of Trust have been duly authorized by all necessary
action and will not violate any provision of law or of APA’s
partnership agreement, or result in the breach of or constitute a
default or require any consent under any lien, charge, or
encumbrance upon any property or assets of APA pursuant to any
indenture or other agreement to which APA is a party or by which
APA or its property may be bound. The person executing this~
Agreement on the behalf of APA has been duly authorized to execute
the same, and such person represents that it is duly organized and
validly existing under the laws of the State of California.
5.3 Litigation
There are no suits or proceedings pending or, to the
knowledge of APA, threatened against or affecting APA which, if
adversely determined, would have a material adverse effect on the
financial condition or business of APA, and there are no
proceedings pending or, to the knowledge of APA, threatened,
against APA which would have a material adverse effect on the
performance of this Agreement by APA.
5.4 Warranty
(a) APA warrants that it has not, and will not execute
any other agreement(s) with provisions contradictory or in
opposition to the provisions hereof, and that, in any event, this
Agreement is paramount and controlling as to the rights and
obligations set forth herein and supersedes any other agreements in
conflict therewith, except as the City may expressly agree to
subordinate its secured interest in the Project.
(b) Section 5.4(a) notwithstanding, any provision in
this Agreement in conflict with any federal, state or local statute
or regulation shall be interpreted subject to that statute or
regulation.
961002 syn 0071044
5.5 Conflict of Interest
APA represents that it is familiar with the provisions of
Sections 1090 through 1097 and 87100 through 87103.5 of the
California Government ~Code, all of which relate to prohibited
conflicts of interest in connection with government contracts. APA
certifies that it knows of no facts that constitute a violation of
said sections, or any of them, and agrees to immediately notify
City if APA shal! at any time obtain knowledge of facts
constituting such a violation.
ARTICLE SIX -INDEMNITY
APA shall protect, indemnify, defend and hold the City,
its Council members, officers, employees and agents harmless from
and against ~and any all claims, demands, liability, costs,
expenses, including attorney’s fees, loss or damages or any nature
whatsoever, including death or injury to any person, property
damage or any other loss caused by, arising out of, or in any way
connected with APA’s failure to perform APA’s covenants and
obligations under this Agreement.
ARTICLE SEVEN -DEFAULT; REMEDIES FOR DEFAULT
7.1 Events of Default
The following shall constitute Events of Default
hereunder and breaches of this Agreement, including, but not be
limited to:
(a) A failure by APA to pay, when due, the unpaid
principal sum, and accrued interest, if any, and any other sums
payable by APA under this Agreement, the Note, or the Deed of
Trust; or
(b) A failure by APA to perform any non-financial
obligation required to be performed by APA under this Agreement,
the Note or the Deed of Trust; or
(c) APA makes a representation in this Agreement which
shall prove to have been false in any material respect when made;
or
(d) APA applies for or consents to the appointment of a
receiver, trustee, or liquidator, or is unable, or admits, in
writing, its inability to pay its debts as they fall due, or makes
a general assignment for the benefit of its creditors, or is
adjudicated a bankrupt or insolvent, or files a voluntary petition
in bankruptcy; or
(e) APA is subject to the entry of an order, decree, or
judgment approving the reorganization of APA, and such order,
decree, or judgment is not stayed for a period of more than sixty
(60) days, or such period as may be permitted by law; or
961002 s.vn 0071044
9
(f) APA sells, assigns, transfers or encumbers the Site
and the Project in a manner inconsistent with the terms of this
Agreement or applicable law, including, without limitation, a sale
at a judicial foreclosure or nonjudicia! foreclosure, or a transfer
in lieu of foreclosure; or
(g) APA terminates the Agreement without cause; or
(h) APA defaults under its agreements with FNB, WFB, EHI
or any other lender or any other agreement for private financing of
the Site and Project, which may be secured by deed of trusts or any
other encumbrances or liens which are senior in priority to the
Deed of Trust after notice and the expiration of applicable cure
periods; or
(i) Any other breach in any .agreement executed by APA in
relation to the Project, after notice and expiration of applicable
cure periods, including, but not limited to those ancillary to this
Agreement, or other loan documents related to the Project,
including the loans from WFB and FNB; or
(j) The failure to comply with the Covenants after
notice and expiration of applicable cure periods; or
(k) The use of proceeds realized by operation,
conveyance, sale, transfer, syndication, encumbrance, or
hypothecation of the Project, or any part thereof, or of the
proceeds of the loan, in a manner not permitted by this Agreement;
or
(1) In the event that the Project is partially or
.entirely destroyed and insurance proceeds under this Agreement have
been collected, the failure of APA or other recipients to use
proceeds to rebuild the Project as residential rental housing in
accordance with the requirements of this Agreement and the
Covenants within two (2) years after receipt of such insurance
proceeds subject to the rights of secured lenders of the Project;
or
(m) Failure to construct and maintain the Project in
accordance with all applicable laws; or
(n) Except as provided in Section 9.2 below, the sale,
partial sale, refinancing, exchange, transfer, sale under
foreclosure, or other disposition of the Site, improvements or
capital equipment situated thereon without the advance written
approval by the City.
7.2 Notice of Default; Cure
In the event of a default, the non-defaulting party shall
provide to the defaulting party written notice of such occurrence,
and the defaulting party shall have thirty (30) days to cure the
default, or if such default cannot be reasonably cured within
thirty (30) days the defaulting party shall commence to cure within
961002 syn 0071044
!0
thirty (30) days and thereafter shall diligently complete such
cure. However, if the default results from the non-compliance by
APA with the affordability restrictions set forth in the Covenants,
APA shall have forty-five (45) days to cure the default, or, if
such default cannot reasonably be cured within forty-five (45)
days, APA shall commence to cure within forty-five (45) days and
APA shall thereafter diligently complete~such cure.
7.3 Irreparable harm to City
It is agreed by APA that the injury to the City arising
from a default under any of theterms of this Agreement would be
irreparable and that the amount of compensation which would provide
adequate relief to the City, in light of its purpose to increase
and maintain the housing stock for low and moderate-income persons,
would be impossible to ascertain.
7.4 Remedies for Default
If, after the time provided in Section 7.2, APA has not
cured the default, the City may on behalf of APA and at APA’s sole
cost:
(a) Demand repayment of the Loan Amount; or
(b) Apply to any court, state or federal, for specific
performance of this Agreement or an injunction against any
violation of this Agreement, or for the appointment of a receiver
to take over and operate the Project in accordance with the terms
of this Agreement, or any other remedies at law or in equity or any
such other actions as shall be necessary or desirable so as to
correct non-compliance with this Agreement; or
(c) Collect all rents and income in connection with the
operation of the Project and use the same and the reserve funds for
the operation and maintenance of the Project, and possess, operate,
complete, lease, rent, renovate, modernize, insure, or sell for
cash or credit, the Site and the Project; or
(d) Take possession of the Project and bring any action
necessary to enforce any rights of APA growing out of the operation
of the Project, and operate the Project in accordance with the
terms of this Agreement until such time as the City, in its sole
discretion, determines that APA is again in a position to operate
the Project in accordance with the terms of this Agreement, and
pursue to final collection by way of compromise or otherwise all
claims by or against APA which are assigned by APA to the City; or
(e) Seek any other remedies as may be available at law
or equity, and convey and execute in the name of the City al! deeds
of conveyance, deeds of release, assignments and satisfactions of
the deeds of trust, and any other written instrument relating to
real or personal property, or any interest of APA therein
subsequently acquired by the City.
961002 syn 0071044
11
The remedies of the City hereunder are cumulative, and
the exercise of one or more of such remedies shall not preclude the
exercise by the City of any one or more of its other remedies.
ARTICLE EIGHT -RECORDS AND DOCUMENTS
8.1 APA shal! keep and maintain books, records, and
other documents relating to the receipt and disbursement of all
funds obtained pursuant to this Agreement that accurately and fully
show the date, amount, purpose and payee of all expenditures drawn
from the Loan Amount, and to keep all estimates, invoices, receipts
and other documents related to expenditures from the Loan Amount.
8.2 APA shall maintain all records of income,
expenditure, assets, liabilities, contracts, operations, rent
schedules, tenant eligibility, and condition of the Project. Such
records shall be maintained in accordance with generally accepted
accounting principles.
8.3 Within one hundred fifty (150) days after the close
of its fiscal year, APA shall deliver to the City an annual audited
financial statement prepared in accordance with generally accepted
accounting principles. The annual audited financial statement
shall include a determination of the Available Cash Flow. The City
reserves the right to request such additional information
concerning the administration and operation of the Project by APA.
8.4 At the request of the City, its agents, employees,
or attorneys, APA shall promptly give specific answers to questions
upon which information is desired from time to time relative to the
income, expenditures, assets, liabilities, contracts, operations
and condition of the Project.
8.5 Any duly authorized representative of the City
shall, at all reasonable times during normal business hours, have
access to and the right to inspect, copy, audit, and examine all
such books, records, and other documents of APA until three (3)
years after the expiration of this Agreement.
ARTICLE NINE ASSIGNMENT
9.1 Assignment by City
The City retains the right at its sole discretion to
assign all or part of its rights under this Agreement for the
purpose of ensuring compliance and enforcement of APA’s obligations
hereunder. In addition, the City may designate an agent to-act on
its behalf in monitoring compliance and enforcing the provisions
hereof.
9.2 Assignment by APA
Except for (a) leases with the Project’s tenants in the
ordinary course of business (including the lease of the commercial
office space), (b) transfer of a ninety-nine percent (99%) limited
961002 s.’cn 0071044
12
partnership interest to a limited partner investor, or (c) the
exercise of an option to acquire the Project by PAHC Alma Place,
Inc. or Palo Alto Housing Corporation, APA shall not cause or
permit any voluntary transfer, assignment or encumbrance of its
interest in the Project or the Site, or lease or permit a sublease
on all or any part of the Project without first obtaining the
City’s written consent. Any transfer, assignment, encumbrance, or
lease without the City’s written consent shall be voidable and, at
the City’s election, shall constitute a breach of this Agreement.
No consent to any assignment, encumbrance or lease shall constitute
a consent to any subsequent assignment, encumbrance or lease, or a
waiver of any of the City’s rights under this Agreement.
ARTICLE TEN - NOTICES
All notices, consents, communications or transmittals
required by this Agreement shall be made, in writing, and shall be
communicated by the United States mail, certified, return receipt
requested or by express delivery with a delivery receipt, and shall
be deemed given as of the date shown on the delivery receipt as the
date of delivery or the date on which delivery was refused, and
shall be addressed to the following addresses, or such other
address as either party may designate, from time to time, by
written notice sent to the other party in like manner:
To City:City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Attn.: City Clerk
Copy to:Director of Planning & Community
Environment
250 Hamilton Avenue
Palo Alto, CA 94301
To APA:Alma Place Associates
540 Cowper Street, Suite 201
Palo Alto, CA 94301-1806
Attn.: General Partner
ARTICLE ELEVEN - MISCELLANEOUS PROVISIONS
II.I Nothing contained in this Agreement, nor any act of
the City, shal! be interpreted or construed as creating the
relationship of third party beneficiary, limited or general
partnership, joint venture, employer or employee, or principa! and
agent between the City and APA or APA’s agents, emp!oyees or
contractors. APA shal! at all times be deemed an independent
contractor and shall be wholly responsible for the manner in which
it or its agents, or both, perform the services required of it by
the terms of this Agreement for the construction and development of
the Project. APA has and hereby retains the right to exercise ful!
control of employment, direction, compensation and discharge of all
persons assisting in the performance of services recognized
hereunder. In regard to the construction and development of the
961002 syn 0071044
13
Project, APA acknowledges and agrees to be solely responsible for
all matters relating to payment of its employees, including
compliance with Social Security, withholding and all other laws and
regulations governing such matters, and shall include requirements
in each contract that contractors shall be solely responsible for
similar matters relating to their employees. APA agrees to be
solely responsible for its own acts and those of its officers,
partners, employees, agents, contractors, subcontractors and
representatives.
11.2 Neither the failure nor the delay on the part of the
City to exercise any right, power, or privilege hereunder shall
operate as a waiver thereof, nor shal! any single or partial
exercise of any right, power, or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other
right, power, or privilege.~
11.3 APA lacks any authority or power to pledge the
credit of CITY or incur any obligation in the name of CITY. This
Agreement shall not be construed or deemed to be an agreement for
the benefit of any third party, and no third party shall have any
claim or right of action hereunder for any cause whatsoever.
11.4 This Agreement constitutes the entire agreement of
the parties concerning its subject matter, and there are no other
oral or written agreements of the parties not incorporated in this
Agreement. Any amendment to this Agreement shall be binding upon
the parties, provided such amendment is set forth in a writing
signed by the parties. The city manager is authorized to execute
any amendments to this Agreement, and confer any consents or
approvals that must be provided by CITY.
11.5 The covenants, agreements, terms, and conditions of
this Agreement shal! inure to and be binding on the successors and
assigns of the parties. Any provision of this Agreement which is
characterized as a covenant or a condition shall be deemed both a
covenant and a condition. If any provision of this Agreement shall
be determined by a court of competent jurisdiction to be invalid,
illegal, void, or unenforceable in any respect, the validity of all
other provisions herein shall remain in full force and effect.
11.6 This Agreement, the Note and the Deed of Trust shall
be deemed contracts made under the laws of the State of California,
and for the purposes hereof shall be governed and construed by and
in accordance with the laws of the State of California. All
exhibits referred to in this Agreement and any addenda, appendices,
attachments, and schedules which may, from time to time, be
referred to in any duly executed amendment hereto are by such
reference incorporated.in this Agreement and shall be deemed to be
part of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all
of which together shall constitute one and the same instrument. The
paragraph headings are not a part of this Agreement and shall have
no effect upon the construction or interpretation of any part of
this Agreement.
961009- s>m 0071044
14
11.7 In the event that suit is brought by either party,
the parties agree that trial of such action shall be vested
exclusively in the state court of California in the City of San
Jose, County of Santa Clara, or in the United States District Court
for the Northern District of California in the City of San Jose.
The prevailing party in any action brought to enforce the terms of
this Agreement or arising out of this Agreement may recover its
reasonable costs and attorneys’ fees expended in connection with
such an action from the other party.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
ATTEST:CITY OF PAL0 ALTO
City Clerk
APPROVED AS TO FORM:
Mayor
ALMA PLACE ASSOCIATES
Senior Asst. City Attorney
APPROVED:
City Manager
By:
PAHC Alma Place, Inc.
~ts General PaxTrner
Marlene H. Prendergast( 1
Executive Director
Deputy City Manager,
Administrative Services
Director of Planning and
Community Environment
ATTACHMENTS:
Exhibit "A" :
Exhibit "B’:
Exhibit "C"
Exhibit
Exhibit
Exhibit
Legal Description of the Site
Promissory Note
Deed of Trust
Budget
Insurance Requirements
Regulatory Agreement
961002 syn 0071044
15
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code ~ i189)
)
) ss.
)
Notary Pub~a~ for said County and State, personally appeared
~Z~t~t~_ ~’~4~.~d-.- , person_a~y_~w~_..~._~9, or proved
to me on the basis o~ satisfactory evidence to be the person(~
whose name(~} is/a~e subscribed to the within instrument and
acknowledged to me that h~/she/t~y executed the same in
h~/her/th~Y~ authorized capacity(i~), and that by h~/her/their
signature(~) on the instrument the person(~, or the entity upon
behalf of which the person(~) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary Publfc
961002 syn 0071044
16
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code .~ 1189)
STATE OF )
) ss.
COUNTY OF )
On , 1996, before me, , a
Notary Public in and for said County and State, personally appeared
, personally known to me or proved
to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary Public
961002 syn 0071044
17
Exhibit "A"
Order No. 507079
Page No. 5
LEGAL DESCRIPTION
REAL PROPERTY in the City of Palo Alto, Courrty of Sa~,a Clara, State of C.,~;,"bmi& desu---’ibed as tollo~,’s:
PARCEL ONE:
Portion of [Juts 1 end 2, as shown upon that certe.Jn Map e~ti"ded, "Map ~ Subdivisionof Block 7 Univers~
Park, now Palo Alto’, ~’hich Map was filed for rec~d in the office of the Rea3rder of the County of Santa
Clara. S~te of California on February 24, 1903 in Volume "F"3" of Maps, at page 10, and more I:~u’ticula:ly
des~--’ibed as follows:
Commencing at a point on the Northeasterly line of AlmaStreet’ said pointbeing distant 100 feet Northwesterly
from the point of intersection thereof with the Northwesterly line of Homer Avenue; running thence
Northwesterly along said Northeasterly line of Alma Street, 93 feet; thence a.t dght angles Northeasterly 105
feet to the Southwesterly line of a 15 foot alley; thence Southe~steffy" aJong said line of said 15 foot 8]ley 93
feet; thence at fight ~,qgles Southwesterly 105 feet to the point of commencement.
PARCEL TWO:
Portion ~f L~t 1 as shown upon that certain Map entitled, "Map of SubdMs~on of, Block 7, University Park,"
which Map was filed for record in the office of the Recorder of the County of Sa~a Clara, State of CaJifomia
on February 2-I, 1903 in Book F3 of Maps, at page 10 end more part.icularly described as follows:
Beginning at a point on the Northeasterly line of Alma Street, distant thereon So~heasterly 132 feet from the
point of intersection thereof with the Southeasterly line of Forest Avenue, as said ~,reet end avenue we shown
upon the map hereinabove referred to; thence Southeasterly on and &long s~.Jd Northeasterly line of Alma
Street, 50 feet; thence at a fight angle Northeasterty 105 feet to the Southwesteffy line_ of a 15 foot alley;
thence Nor’uhwestedy on and along the Southwesterly line of said alley &rid paz~let-’Mth the Northeasterly line
of Alma Street, 50 feet; thence at a fight angle Southwesterly 105 feet to the point of beginning.
PARCEL THREE:
Portion of Lots 1 end 2 in Block 7 as shown upon that certain Map e~t.i’ded, ’Map of Subdivisi6n of Block 7
University Park, now Palo Alto," which Map was filed for record in the office of, ~e Recorder of the County. of,
Santa Clara, State of CeJifomia~ on February 24, 1903 in Book F3 of Maps, ~,, page 10 and more pa.rtJculady
descrbed as follows:
Beginning at a point on the Northeasterty line of Alma Street, distant thereon 193 feet Northwesterly of the
point of intersection of said line of Alma Street with the Northwesterty fire of Homer Avenue; thence
Northwesterly along said line of Alma Street, 25 feet; thence at e fight angle Northeasterly 105 feet to the
Southwesterly line of a 15 foot alley;, thence Southeasterly along said line of said 15 foot alley, 25 feet; thence
at fight angles Southwesterly 105 feet to the point of beginr~ng.
APN: 120-27-80
Exhibit "B"
PROMISSORY NOTE
(CITY HOUSING RESERVE FUNDS)
SECURED BY DEED OF TRUST AND ASSIGNMENT OF RENTS
$ 2,695,000 Date:
Palo Alto, California
FOR VALUE RECEIVED, the undersigned, ALMA PLACE
ASSOCIATES, a California Limited Partnership ("Maker"), hereby
promises to pay to the CITY OF PAL0 ALTO ("Holder"), or order, at
its office of Revenue Collections, 250 Hamilton Avenue, Palo Alto,
or at such other place as may be designated, in writing, by the
Holder, the principal sum of two million six hundred ninety-five
.thousand dollars ($2,695,000) ("Loan Amount"), pursuant to the terms
and conditions set forth in this Promissory Note ("Note"). The
principa! amount of this Note shall bear simple interest at the
rate of three percent (3%) per annum.
ADDITIONAL TERMS AND CONDITIONS
i. This Note is made in connection with agreements
entitled "Agreement between the City of Palo Alto and Alma Place
Associates to fund the Development of Property at 725/753 Alma
Street, Palo Alto" ("Agreement") and "Regulatory Agreement and
Declaration of Restrictive Covenants" ("Regulatory Agreement") for
the development of real property located at 725/753 Alma Street,
Palo Alto ("Site") as a 106 unit single room occupancy (and a
manager’s unit) development ("Project"). All terms, conditions,
agreements and provisions, including the covenants,
representations, and terms of default and remedies for default set
forth in the Agreement and the Regulatory Agreement, are
incorporated herein by reference, and made a par£ hereof.
2. This Note evidences the obligation of the Maker to
make full payment of the Loan Amount to the Holder, in accordance
with the provisions of this Note and the Agreement. Such funds are
to be used solely by the Maker for construction and development of
the Project, as more fully described inthe Agreement.
3. This Note is secured by a deed of trust executed by
Maker for the benefit of the Holder and encumbering the Site.
4. The term of this Note shall commence on the date of
its execution by the Maker, and, subject to the provisions of the
Agreement, shall expire or terminate on the date on which the Maker
makes full payment of the principal sum of this Note. In no event
shall full payment be made by the Maker later than forty-five (45)
years from the date hereof.
5. At any time, and from time to time, the Maker may
prepay to the Holder the principal sum of this Note, or any part
thereof, without penalty.
960930 syn 0071043
6. Except as otherwise provided herein, payments of the
principal sum and interest shall be deferred until January i of the
year following the fifteenth anniversary year of the funding of the
permanent loan for the Project by First Nationwide Bank ("Start
Date"). Annual payments thereafter shall then be due and payable
on or before May I of each subsequent anniversary year during the
term of this Note. The annual payment shall be equal to the lesser
of (I) the annual payment determined by amortizing the amount
outstanding under this Note, as of the Start Date, based on a
twenty-five (25) year amortization schedule, or (2) the Available
Cash Flow of the Maker with respect to the Project for the prior
fiscal year. Payments shal! be credited first to any accrued but
unpaid interest, then to current interest then due and owing, and
then to principal.
For the purpose of this Section 6, "Available Cash Flow"
means the positive cash f!ow accruing after the Project’s expenses
are deducted from the Project’s revenues. It shall be computed
according to the following formula: R E = ACF, where:
"R" is the Project’s rents, revenues, consideration or
income (of any form but excluding capital contributions) derived by
the Maker in connection with or relating to the ownership or
operation of the Project;
"E" is the Project’s customary and reasonable costs and
expenses incurred in connection with the Maker’s operation and
maintenance of the Project, including, without limitation, property
management costs and an annual partnership management fee, if
applicable, principal and interest paid by the Maker on account of
any loan(s) or other obligations owing to bank(s) or other
financial institution(s), provided such loans have been approved,
in advance and in writing, by the Holder, amounts previously
approved by the Holder which are expended to restore the Project
after the occurrence of a casualty loss or condemnation, and
amounts reasonably reserved by the Maker as an operating
contingency reserve account and a replacement reserve account for
the Project; and
"ACF" is the Available Cash Flow.
7. The Maker shall deliver to the Holder within 150
days of the close of each fiscal year of the Project an annual
audited financial statement to determine the amount of Available
Cash Flow. The Holder shall have the right to inspect and audit the
Maker’s books and records concerning the calculation of Available
Cash Flow.
8. Notwithstanding anything to the contrary contained
in this Note, upon the completion of construction of the Project,
the Maker shall prepare or cause to be prepared an independently
audited cost certification in the form required by the California
Tax Credit Allocation Committee, and a final sources and uses of
funds proforma documenting the actual Total Deve!opment Costs of
the Project. In the event the sources of funds [including the Loan
960930 s.%m 0071043
Amount evidenced by this Note and all other loans and grants, th~
limited partner’s capital contribution and the general partner’s
capital contribution (equal to. not less than one percent (1%) of .
total capital contributions)] that are available to pay such costs
exceed the Tota! Development Costs of the Project, the Maker shall
use any such excess to repay the Note. The Maker agrees to provide
the Holder with such audited cost certification and the final
proforma budget within twelve months (12) after the issuance of the
final certificate of occupancy for the Project.
For the purpose of this Section 8, "Total Development
Costs of the Project" includes: al! hard and soft development
costs; a 15% developer fee; all costs related to the tax credit
syndication of the Project; audit costs; marketing costs; funding
costs of any reserves required to be capitalized; all costs related
to obtaining and closing the permanent financing, including
reasonable attorneys’ fees; interest payments on the construction
loan after the completion of construction of the Project and before
the funding of the permanent loan, to the extent net operating
income from the Project is insufficient to pay such interest; and
other documented costs.
9. The Maker and any other maker, co-maker, indorser,
guarantor, and any other party to this Note (collectively,
"0bligors"), and each of them: (i) waive notice of default (except
as provided in Section 13), notice of acceleration, notice of
nonpayment, presentment for payment, demand, protest, notice of
demand, notice of protest, notice of nonpayment, and any other
notice required to be given under the law to the Obligors; (ii)
consent(s) to any and all delays, extensions, renewals, or other
modifications of this Note or waivers of any term hereof or release
or discharge by the Holder of any of the 0bligors or release,
substitution, or failure to act by the Holder, from time to time,
and agree(s) that no such action, failure to act, or failure to
exercise any right or remedy on the part of the Holder shall in any
manner affect or impair the obligations of any Obligor or be
construed as a waiver by the Holder of, or otherwise affect, any of
the Holder’s rights under this Note or the Agreement, under any
indorsement or guaranty of this Note; and (iii) (jointly and
individually, if more than one) agree(s) to pay, on demand, any and
all costs and expenses of collection of this Note or of any
indorsement Or any guaranty hereof, including attorney’s fees.
i0. The pleading of any statute of limitations as a
defense to any demand against the Maker is expressly waived by the
Maker.
Ii. If any default is made hereunder, the Maker promises
to pay the Holder’s reasonable attorneys’ fees and other related
costs and expenses incurred by the Holder in connection with the
enforcement of any rights of the Holder. The Holder’s right to
such fees shall not be limited to its representation by staff
attorneys of the Holder’s Office of the City Attorney, and such
representation shall be valued at the customary and reasonable
rates for private sector legal services.
960930 syn 0071043
12. The occurrence of any of the following shall
constitute an event of default under this Note: (i) The Maker fails
to pay any amount due hereunder within fifteen (15) days of its due
date; or (ii) Any default by the Maker under the Deed of Trust, the
Agreement or the Regulatory Agreement.
Upon the occurrence of any event of default, or at any
time thereafter, at the option of the Holder hereof, the entire
unpaid principal and interest owing on this Note shall become
immediately due and payable. This option may be exercised at any
time following any such event, and the acceptance of one or more
installments thereafter shall not constitute a waiver of such
option with respect to any subsequent event. The Holder’s failure
in the exercise of any other right or remedy hereunder or under any
agreement which secures the indebtedness or is related thereto
shall not affect any right or remedy and no single or partial
exercise of any such right to remedy shall preclude any further
exercise thereof.
If the outstanding unpaid principal balance of this Note
is not paid within thirty (30) days of demand therefor, the Maker
shall pay to the Holder in addition to interest set forth in the
first paragraph of this Note interest equa! to one percent (1%) of
the unpaid principal amount, or the highest rate permitted by law,
whichever is less, per calendar month, or fraction thereof. If
this Note be reduced to judgment, such judgment shall bear the
statutory interest rate on judgments.
13. The Holder shall not exercise any right or remedy
provided for herein because of any default of the Maker unless, in
the event of a monetary default, the Maker shall have failed to pay
the outstanding sums within a period of thirty (30) calendar days
after notice that payment was due. In the event of an uncured
nonmonetary default, the Holder shall have first given written
notice thereof to the Maker, and.the Maker shall have failed to
cure the nonmonetary default within a period of thirty (30) days
after the giving of such notice of such default; provided that if
the nonmonetary default cannot be cured within thirty (30) days and
the Maker proceeds diligently and uses best efforts to cure such
default until it shal! be fully cured within no more than sixty
(60) days after the giving of such notice, then the Holder shall
not exercise any right or remedy provided for herein until such 60-
day period shall expire; provided, however, the Holder shall not be
required to give any such notice or allow any part of the grace
period if the Maker shall have filed a petition in bankruptcy~or
for reorganization or a bill in equity or otherwise initiated
proceedings for the appointment of a receiver of its assets, or if
the Maker shall have made an assignment for the benefit of
creditors, or if a receiver or trustee is appointed .for the Maker
and such appointment or such receivership is not terminated within
forty-five (45) days of such appointment.
960930 syn 0071043
4
With respect to any right to cure or cure period provide(~
in this Section 13, performance of a cure by any affiliated entity
or partner of the Maker shall have the same effect as would like
performance by the Maker.
14. Any notice, demand, or other communication required
hereunder shall not be deemed sufficiently given, unless sent by
certified mail, postage prepaid, return receipt requested, or by
express delivery service or overnight courier service, to the
principal office of the addressee, or at such other address as may
be designated, in writing, from time to time:
Holder:City of Palo Alto
250 Hamilton Avenue
Palo Alto, California
Attn.: City Clerk
94301
Maker:Alma Place Associates
540 Cowper Street, Suite 201
Palo Alto, CA 94301-1806
Attn.: General Partner
The delivery shall be effective on the date shown on the delivery
receipt or the date on which the delivery was refused.
15. This Note shall be nonrecourse against the Obligors.
No judgment, or execution thereof, entered in any action, legal or
equitable, on this Note shall be enforced directly against the
Maker or any officer, director or employee of the Maker, but shaIl
be enforced only against the collateral described in the Deed of
Trust, and such other or further security as, from time to time,
may be hypothecated for this Note. The foregoing limitation shall
not be applicable in the event of (a) fraud by the Maker or any
material misrepresentation made by the Maker to the Holder in the
Agreement, this Note or the Deed of Trust, or (b) the sale or
transfer or other conveyance of all or any part of the Maker’s
interest in the Project without the Holder’s prior written consent.
Furthermore, the foregoing limitation shall not be applicable to
the extent of any loss incurred by the Holder due to (a)
misappropriation by the Maker of any rents (including, without
limitation, the application of rents to other than operating
expenses and debt service), security~ deposits, insurance or
condemnation proceedings, (b) waste caused by or permitted by the
Maker to the Project, or (c) the presence or release of any
hazardous or toxic substances on or in the Site encumbered by the
Deed of Trust. The Holder shall not in any way be prohibited from
naming the Obligors, or any of them, or any person holding under or
through them as parties to any actions, suit or other proceedings
initiated by the Holder to foreclose or otherwise realize upon any
other lien or security interest created in the Site or in any other
collateral given to secure the performance of the obligations of
the Maker pursuant to this Note, and further provided, however,
that nothing in this Section 15 shall be deemed to prejudice the
rights of the Holder to recover any rents, condemnation or
960930 syn 0071043
insurance proceeds, tenant security deposits or other similar funds
or payments attributable to the Site which were misappropriated by
the Obligors, or any of them.
16. The covenants, agreements, terms, and conditions of
this Note shall inure to, and shall be binding on, the successors
and assigns of the Obligors.
17. This Note supersedes and replaces the notes executed
by the Maker in favor of the Holder in the amounts of $295,000 and
$1,030,725 which are of no further force and effect and shall be
returned to the Maker by the Holder marked "Canceled".
ALMA PLACE ASSOCIATES,
a California Limited Partnership
By: PAHC ALMA PLACE, INC.
Its General Partner
Marlene H. Prendergast
Executive Director
The undersigned, CITY, acting through its City Manager
acknowledges that the $295,000 promissory note, dated January 17,
1995, and the $1,030,725 promissory note, dated June 26, 1996,
and referred to in Section 17 above are hereby canceled.
CITY OF PALO ALTO
City Manager
960930 syn 0071043
RECORDING REQUESTED BY AND WHEN
RECORDED MAIL TO:
City of Palo Alto
Department of Planning &
Community Environment
250 Hamilton Avenue
Palo Alto, CA 94301
RECORDED WITHOUT CPLARGE.
GOVERICM~NT CODE SECTIONS 6103, 27383
E:daibit "C"
SPACE ABOVE THIS LINE FOR RECORDER’S USE
DEED OF TRUST AND ASSIGNMENT OF RENTS
APN 120-27-80, 120-27-81 and 120-27-82
This Deed of Trust, made this __ day of , 1996, between ALMA PLACE ASSOCIATES,
a California 1Lrnited partnership ("Trustor"), located at 540 Cowper Street, Suite 201, Palo Alto, California 94301-
1806, FIRST AMERICAN TITLE GUARANTY COMPANY, a California corporation (" Trustee"), and the
CITY OF PALO ALTO, a California municipal corporation ("Beneficiary"),
Witnesseth: That Trustor IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE IN TRUST,
WITH POWER OF SALE, that property in Santa Clara County, California, described as:
See Exhibit "A," attached hereto and incorporated herein by this reference.
In the event the herein described property or any part thereof, or any interest therein is sold, agreed to be
sold, conveyed or alienated by the Trustor, or by the operation of law or otherwise, all obligations secured
by this instrument, irrespective of the maturity dates expressed therein, at the option of the holder hereof and
without demand or notice shall immediately become due and payable.
Together With the rents, issues and profits thereof, SUBJECT, HOWEVER, to the fight, power and authority
hereinafter given to and conferred upon Beneficiary to collect and supply such rents, issues and profits.
For the Purpose of Securing:
1. Performance of each agreement of Trustor herein contained. 2. Payment of the indebtedness evidenced by one
promissory note ("note") of even date herewith, and any extension or renewal thereof, in the principal sum of
$2,695,000 executed by Trustor in favor of Beneficiary or order. 3. Payment of such further sums as the then
record owner of said property hereafter may borrow from Beneficiary, when evidenced by another note (or notes)
reciting it is so secured. 4. Performance by Trustor of its obligations arising under those certain contracts entitled
"Agreement between The City of Palo Alto and Alma Place Associates to Fund the Development of Property at
725/753 Alma Street, Palo Alto", dated , 1996 ("Agreement"); and "Regulatory Agreement and
Declaration of Restrictive Covenants", dated , 1996, recorded on , 1996 as
Instrument No. , in Book __ Page __ of Official Records, Santa Clara County, California.
To Protect the Security of This Deed of Trust, Trustor Agrees:
(1) To keep said property in good condition and repair; not to remove or demolish any building thereon; to
complete or restore promptly and in g6od workmanlike manner any building which may be constructed, damaged
or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor; to comply
with all laws affecting said property, or requiting any alterations or improvements to be made thereon; not to
commit or permit waste thereof; not to commit, suffer or permit any act upon said property in violation of law; to
cultivate, irrigate, fertilize, fumigate, prune and do all other acts which from the character or use of said property
may be reasonably necessary, the specific enumerations herein not excluding the general.
960930 syn 0071042
(2) To provide, maintain and deliver to Beneficiary fire insurance satisfactory to and with loss payable to
Beneficiary. Notwithstanding anything contained in any of the documents evidencing the loan from Beneficiary to
Trustor, unless Beneficiary and Trustor otherwise agree, in writing, the insurance proceeds shall be applied to the
restoration or repair of property damage, provided Trustor reasonably determines that such restoration or repair is
economically feasible and there is no default continuing beyond the expiration of all applicable cure periods. If
Trustor reasonably determines that such restoration or repair is not economically feasible, or if a default exists after
the expiration of all applicable cure periods, the insurance proceeds shall be applied to the sums secured by this
Deed, with the excess, if any, paid to Trustor. In the event funds for such work are insufficient, Beneficiary may,
at its option but without any obligation to do so, advance such additional funds as may be necessary to allow said
property to be repaired or restored, and may add the amount thereof to the principal balance of the Note hereby
secured. If said property is abandoned by Trustor, or if Trustor fails to respond to Beneficiary within thirty (30)
days from the date that notice is mailed by Beneficiary to Trustor that the insurance carrier offers to settle a claim
for insurance benefits, Beneficiary is authorized to collect and apply the insurance proceeds at Beneficiary’s option
either to restoration or repair of said property or to the sums secured by this Deed.
(3) To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or
powers of Beneficiary or Trustee; and to pay all costs and expenses, including cost of evidence of title and
attorney’s fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear,
and in any suit brought by Beneficiary to foreclose this Deed.
(4) To pay: at least ten days before delinquency all taxes and assessments affecting said property, including
assessments on appurtenant water stock; when due, all encumbrances, charges and liens, with interest, on said
property or any part thereof; which appear to be prior or superior hereto; all costs, fees and expenses of this Trust.
Should Trustor fail to make any payment or to do any act as herein provided, then Beneficiary or Trustee, but
without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any
obligation hereof, may: make or do the same in such manner and to such extent as either may deem necessary to
protect the security hereof, Beneficiary or Trustee being authorized to enter upon said property for such purposes;
appear in and defend any action or proceeding purporting-to affect the security hereof or the rights or powers of
Beneficiary or Trustee; pay, purchase, contest or compromise any incumbrance, charge or lien which in the
judgment of either appears to be prior or superior hereto; and, in exercising any such powers, pay necessary
expenses, employ counsel and pay his or her reasonable fees, costs and expenses.
(5) To pay immediately and without demand all sums so expended by Beneficiary or Trustee, with interest from
date of expenditure at the amount allowed by law in effect at the date hereof, and to pay for any statement provided
for by law in effect at the date hereof regarding the obligation secured hereby any amount demanded by Beneficiary
not to exceed the maximum allowed by law at the time when said statement is demanded.
(6) That the proceeds of any award or claim of damages, direct or consequential, in connection with a total and
complete condemnation or taking of said property for public use, shall be applied to the sums secured by this Deed,
with the excess, if any paid to Trustor, unless Trustor and Beneficiary otherwise agree, in writing. In the event of
a partial condemnation or taking, the proceeds shall be applied to the restoration or repair of said property, provided
Trustor reasonably determines that such restoration or repair is economically feasible and there is no default
continuing after the expiration of all applicable cure periods. If Trustor reasonably determines that such restoration
or repair is not economically feasible or if a default exists after the expiration of all applicable cure periods, the
condemnation proceeds shall be applied to the sums secured by this Deed, with the excess, if any, paid to Trustor.
In the event funds for such work are insufficient, Beneficiary may, at its option but without any obligation to do
so, advance such additional funds as may be necessary to allow said property to be restored or repaired, and may
add the amount thereof to the principal balance of the Note hereby secured. If said property is abandoned by
Trustor, or if Trustor fails to respond to Beneficiary within thirty (30) days from the date notice that the condemning
authority intends to settle the condemnation action is mailed by Beneficiary to Trustor, Beneficiary is authorized
to collect and apply the condemnation proceeds at Benefieiary’s option either to the restoration or repair of said
property or to the sums secured by this Deed.
960930s)~ 0071042
.right(7) That by accepting payment of anv sum secured hereby after its due date, Beneficiary does not waive its
either to require prompt payment when due of all other sums so secured or to declare a default for failure so to pay.
(8) That at any time or from time to time, without liability therefor and without notice, upon written request of
Beneficiary and presentation of this Deed and said note for endorsement, and without affecting the personal liability
of any person for payment of the indebtedness secured hereby, Trustee may: reconvey any part of said property;
consent to the making of any map or plat thereof; join in granting any easement thereon; or join in any extension
agreement or any agreement subordinating the lien or charge hereof.
(9) That upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon
surrender of this Deed and said note to Trustee for cancellation and retention and upon payment of its fees, Trustee
shall reconvey, without warranty, the property then held hereunder. The recitals in such reconveyance of any
matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be
described as "the person or persons legally entitled thereto." Five years after issuance of such full reconveyance,
Trustee may destroy said note and this Deed (unless directed in such request to retain them).
(10) That as additional security Trustor hereby gives to and confers upon Beneficiary the right, power and
authority, during the continuance of these Trusts, to collect the rents, issues and profits of said property, reserving
onto Trustor the right, prior to any default by Trustor in payment of any indebtedness secured hereby or in the
perfonTance of any agreements hereunder, to collect and retain such rents, issues, and profits as the become due
and payable. Upon any such default, Beneficiary may at any time without notice, either in person, by agent, or
by a receiver to be appointed by a court, and without regard to the adequacy of any security for the indebtedness
hereby secured, enter upon and take possession of said property or any part thereof, in its own name sue for or
otherwise collect such rents, issues and profits, including those past due and unpaid, and apply the same, less costs
and expenses of operation and collection, including reasonable attorney’s fees, upon any indebtedness secured
hereby, and in such order as Beneficiary may determine. The entering upon and taking possession of said property,
the collection of such rents, issues and profits and the application thereof as aforesaid, shall not cure or waive any
default or notice of default hereunder or invalidate any act done pursuant to such notice.
(11) That upon default by Trustor in payment of any indebtedness secured hereby, or in performance of any
agreement hereunder, and after the expiration of all applicable notice and cure periods provided in said note,
Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written
declaration of default and demand for sale and of written notice of default and of election to cause to be sold said
property, which notice Trustee shall cause to be filed for record. Beneficiary also shall deposit with Trustee this
Deed, said note and all documents evidencing expenditures secured hereby.
After the lapse of such time as may then be required by law following the recordation of said notice of default, and
notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell said
property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such
order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States,
payable at time of sale. Trustee may postpone sale of all or any portion of said property by public announcement
at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement
at the time fixed by the preceding postponement. Trustee shall deliver to such purchaser its deed conveying the
property so sold, but without any covenant or warranty, express or impled. The recitals in such deed of any matters
or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary
as hereinafter defined, may purchase at such sale.
After deducting all costs, fees and expenses of Trustee and of this. Trust, including cost of evidence of title in
connection with sale, Trustee shall apply the proceeds of sale to payment of: all sums expended under the terms
hereof, not then repaid, with accrued interest at the amount allowed by law in effect at the date hereof; all other
sums then secured hereby; and the remainder, if any, to the person or persons legally entitled thereto.
(12) That Beneficiary, or any successor in ownership of any indebtedness secured hereby, may from time to time,
by instrument in writing, substitute a successor or successors to any Trustee named herein or acting hereunder,
which instrument, executed by the Beneficiary and duly acknowledged and recorded in the office of the recorder
960930syn0071042
of the county or counties where said property is situated, shall be conclusive proof of proper substitution of such
successor Trustee or Trustees, who shall, without conveyance from the Trustee predecessor, succeed to all its title,
estate, rights, powers and duties. Said instrument must dontain the name of the original Trustor, Trustee and
Beneficiary hereunder, the book and page where this Deed is recorded and the name and address of the new
Trustee.
(13) That this Deed applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees,
administrators, executors, successors and assigns. The term "Beneficiary" shall mean the owner and holder,
including pledges, of the note secured hereby, whether or not named as Beneficiary herein. In this Deed, whenever
the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes
the plural.
(14) That Trustee accepts this Trust when this Deed, duly executed and acknowledged, is made a public record
as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other Deed of
Trust or of any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party unless brought by
Trustee.
(15) That Trustor shall not sell, convey, transfer, hypothecate or alienate the real property described herein, or any
part thereof, or any interest therein, or shall not be divested of title or any interest therein in any manner or way,
whether voluntarily or involuntarily, without the written consent of Beneficiary being first had and obtained, or if
Trustor shall fail to make any payments due under the note secured by this Deed, or fail to perform any other
obligation under this Deed or note secured hereby, or any other deed of trust encumbering the subject property, then
Beneficiary shall have the right, at its option, to declare any indebtedness or obligations secured hereby, irrespective
of the maturity date specified in any notes evidencing the same, immediately due and payable.
(16) That Trustor shall promptly pay when due the payments of interest, principal and all other charges accruing
under any superior or prior trust deed, mortgage, or other instrument encumbering the subject property. Beneficiary
shall have the right, but not the obligation, to cure any defaults on any superior or prior deed of trust or note
secured thereby and upon curing such default Trustor shall immediately reimburse Beneficiary for all costs and
expenses incurred thereby, together with interest thereon at the maximum legal rate permitted to be charged by non-
exempt lenders under the Constitution of the State of California, and Trustor’s failure to pay any such amount on
demand shall be a default hereunder. Trustor’s breach or default of any covenant or condition of any superior or
prior trust deed, mortgage or other instrument encumbering the Property shall be a default under this Deed.
(17) That Trustor further acknowledges in the event of a default by Trustor on account of the note secured hereby,
and the expiration of any cure period provided therein, then Beneficiary at its sole option shall have the right to
declare the note secured hereby immediately due and payable.
The undersigned Trustor requests that a copy of any Notice of Default and of any Notice of Sale hereunder
be mailed to it at its address hereinbefore set forth and another copy be mailed to the City of Palo Alto, Office of
City Clerk, P. O. Box 10250, Palo Alto, CA 94303.
ALMA PLACE ASSOCIATES
By:PAHC Alma Place, Inc.
Its General Partner
Marlene H. Prendergast, Executive Director
960930s?~0071042
4
STATE OF CALIFORNrlA )
)
COUNTY OF SANTA CLARA )
On , before me, , a notary public in and for said County, personally
appeared Marlene H. Prendergast, personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument, and acknowledged to me that she executed the
same in her authorized capacity, and that by her signature on the instrument the person, or the entity upon behalf
of which the person acted, executed the instrument.
WITNESS my hand and official seal.
960930 syn 0071042
Exhibit
Exhibit D - Projected Development Budget & Sources of Funds1
Uses of Funds
¯Land, Escrow, Demolition
¯Offsites, Site Improvements
¯Hard Construction Costs (incl. personal property & bonds)
¯Hard Costs Contingency @ 6%
¯Architecture, Engineering, Environmental, City Fees & Permits
¯Permanent Financing, Legal, Insurance, Syndication, Consultant & Audit
¯Construction Loan Costs, Fees, Interest (net of City’s loan interest)
¯Rent-Up, Furnishings, Marketing & Operating Reserve
¯Soft Cost Contingency
¯Developer Fee
Total Development Cost
Less: Allocated Office Cost
Total Development Cost of SRO
Bud~e__~t
$703373
357 950
4,578 955
283 968
540 968
192 232
446,096
271,000
53,069
860,735
$8,288,346
($403,697)
$7,884,649
Projected Sources of Permanent Funds
¯First Nationwide Bank - 15 year, amortized loan
¯First Nationwide Bank - Affordable Housing Program, deferred loan
¯Edison Housing Investments - limited partner equity from tax credit investors
¯PAHC Alma Place, Inc. - general partner equity
¯Varian Associates, Inc. - housing mitigation payment per 1986 agreement
¯City of Palo Alto - deferred payment loan
Total Projected Sources of Permanent Funds
~ Based on September 24, 1996 proforma submitted by Alma Place Associates
$390,500
346,159
5,150,819
52,028
140,000
2,208,840
$8,288,346
EXHIBIT
INSURANCE REQUIREMENTS
COURSE OF CONSTRUCTION insurance, to cover the Project’s
construction, with coverage limits in the total amount of all
construction contracts covering the Project in connection with
this Agreement. Such coverage shall remain in effect until
the completion of the Project.
FIRE AND EXTENDED COVERAGE Insurance, to cover not less than
One Hundred Percent (100%) of the replacement cost of all
insurable improvements within or upon the Property, shal! be
obtained upon completion of the Project’s construction. Such
policies shal! include water damage and debris cleanup
provisions.
°
o
°
POLICY MINIMUM LIMITS OF LIABILITY
WORKERS’
COMPENSATION Statutory
COMPREHENSIVE Bodily Injury
AUTOMOBILE
LIABILITY,Property Damage
including owned,
hired, and nonowned
automobiles
$5,000,000 ea. person
$5,000,000 ea. occurrence
$5,000,000 ea. occurrence
COMMERCIAL Bodily Injury
GENERAL
LIABILITY,
including Property Damage
products and
completed operations,
broad form contractua!,
and personal injury.
$5,000,000 ea. person
$5,000,000 ea. occurrence
$5,000,000 aggregate
$5,000,000 ea. occurrence
Each insurance policy required by this Agreement shall contain
the following clauses:
"This insurance shall not be canceled, limited in scope
of coverage or nonrenewed until after thirty (30) days
written notice has been given to the: CITY OF PALO
ALTO/Planning and Community Environment Department, P. O.
Box 10250, Palo Alto, CA 94303."
o "All rights Of subrogation are hereby waived against the
CITY OF PALO ALTO and the members of the City Council and
elective or appointive officers or employees, when acting
within the scope of their employment or appointment."
960930 syn 0071046
1
o "The CITY OF PALO ALTO is named as a loss payee on the
property insurance policy described above."
"The CITY OF PALO ALTO is added as an additional insured
as respects operations of the named insured at or from
the Property."
o "It is agreed that any insurance maintained by the CITY
OF PALO ALTO will apply in excess of, and not contribute
to, insurance provided by this policy."
All insurance coverage required shall be provided through
carriers with a Best’s Key Rating Guide rating of A:X or
higher that are admitted to do business in the State of
California. The certificate(s) of insurance evidencing such
coverage shall be completed and executed by an authorized
representative of the company providing insurance, and shall
be filed with and approved by the City’s risk manager.
960930 ~m 0071046
2
Attachment
RECORDING REQUESTED BY ~ WHEN
RECORDED MAIL TO:
City of Palo Alto
Department of Planning &
Community Environment
250 Hamilton Avenue
Palo Alto, CA 94301
RECORDED WITHOUT CHARGE.
GOVEP!TMENT CODE SECTIONS 6103, 27383
SPACE ABOVE THIS LINE FOR RECORDER’S USE
REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS
THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE
COVENANTS ("Regulatory Agreement") is made and entered into
, 1996, by and between the City of Palo Alto, a
chartered city organized and existing under the constitution and
laws of the State of California ("City") and Alma Place Associates,
a California Limited Partnership, with offices at 540 Cowper
Street, Suite 201, Palo Alto, California 94301 ("APA").
W I T N E S S E T ~{:
WHEREAS, the City is entering into an agreement with APA
entitled "Agreement between the City of Palo Alto and Alma Place
Associates to Fund the Development of Property at 725/753 Alma
Street, Palo Alto" ("Loan Agreement"), under which the City will
loan funds ("Loan") to APA which will be used, together with funds
obtained from other sources, for the construction of one hundred
six (106) single room occupancy residential units for low- and
moderate-income households and a manager’s unit ("Project"), and
the ground floor of the Project will include commercia! office
space;
WHEREAS, the Loan is made from the City’s Commercial
Housing In-lieu account of the Housing Reserve Fund, which has been
established by the City for the purpose of assisting in the
construction, of housing for low- and moderate-income households, on
the condition that the Project be constructed in accordance with
the plans submitted to the City by APA and in accordance with the
Planned Community (PC) Zone Ordinance No. 4283, adopted by the City
on July 17, 1995, and be maintained and operated in accordance with
certain restrictions concerning affordability, operation, and
maintenance of the Project, as specified in this Regulatory
Agreement;
WHEREAS, in consideration of the making of the Loan at an
interest rate substantially be!ow market rates, APA has further
agreed to observe and perform all of the terms and conditions set
960930 syn 0071045
forth below, and in order to ensure that the Project will be used
and operated in accordance with these conditions and restrictions,
the parties wish to enter into this Regulatory Agreement;
NOW THEREFORE, in consideration of the mutual promises
and covenants and terms, conditions and provisions set forth in
this Regulatory Agreement, the parties agree as follows:
ARTICLE i DEFINITIONS
The following terms as used in this Regulatory Agreement
shal! have the respective meanings assigned to them in this Article
I, unless the context clearly indicates otherwise:
"APA" means Alma Place Associates, a California Limited
Partnership, or its assignee.
"City" means the City of Palo Alto, a chartered city
organized and existing under the constitution and laws of the State
of California.
"Deed of Trust" means the deed of trust granting the City
a lien on the Site to secure APA’s performance under the Loan
Agreement, the Note and the Regulatory Agreement.
"Loan" means the principal sum of funds loaned by the City
to APA under the Pre-development Agreements (referred to in the
Loan Agreement) and the Loan Agreement.
"Loan Agreement" means the "Agreement between the City of
Palo Alto and Alma Place Associates to Fund the Development of
Property at 725/753 Alma Street, Palo Alto".
"Median Income" means the median income for households in
Santa Clara County, State of California, as published from time to
time by the United States Department of Housing and Urban
Development ("HUD") in a manner consistent with the determination
of median gross income under Section 8 of the United States Housing
Act of 1937 ("Act"), as amended. For purposes hereof, "40% of
Median Income" shall be the same as HUD’s very-low income limit in
HUD’s publication, as adjusted by the household size, multiplied by
eight-tenths (8/10). In the event that such income determinations
are no longer published by HUD, or are not updated for a period of
at least 18 months from the date of the previous publication, the
City shall provide APA with other income determinations that are
reasonably similar with respect to methods of calculation contained
in that previous HUD publication.
"Note" means the promissory note in the
principal amount of the Loan.
original
"Project" means the development of the Site for the
purpose of providing 106 single room occupancy housing units (plus
a manager’s unit), up to 1,800 square feet of leasable office
space, parking space,.and landscaping, as further described in this
960930 syn 0071045
Agreement and in accordance with Planned Community (PC)
Ordinance No. 4283, adopted by the City on July 17, 1995.
"Project Manager" means the City’s director of planning
and community environment or his designated representative.
"Regulatory Agreement" means this "Regulatory Agreement
and Declaration of Restrictive Covenants".
"Regulations" means the laws, statutes, rules,
regulations, notices and memoranda issued pursuant to the United
States low-income housing credit (Section 42 of the Internal
Revenue Code) and the California low-income housing tax credit
(Sections 17058, 12206 and 23610.5 of the California Revenue and
Taxation Code).
"Rent" means the sum total of all monthly payments to be
made by the Tenants of a Unit for the following privileges: use and
occupancy of the Unit and associated facilities, including parking;
any separately charged fees or service charges assessed by APA
which are required of all Tenants, other than security deposits;
the cost of an adequate level of service for utilities paid by the
Tenant, including garbage collection, sewer, water, electricity,
gas and other heating, cooking and refrigerator or fuel, but not
telephone service; 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 APA, and paid by the Tenant.
"Site" means the real property, the legal description of
which is set forth in Exhibit "A".
"Tenants" (individually, "Tenant") means the occupants of
the Project’s Units.
"~Term" means the period of time beginning on the date of
issuance by the City of a certificate of occupancy for the Units,
and ending fifty-five (55) years following t~e date of issuance of
the certificate of occupancy.
"Units" (individually, "Unit") means the one hundred six
(106) single room occupancy rental units to be constructed on the
Site.
"Very-Low Income Household" means a household with gross
income that does not exceed 40% of Median Income, as defined above,
and which is otherwise a qualified Tenant under the Regulations.
"Very-Low Income Units" means the Units which are
required to be occupied by Very-Low Income Households.
ARTICLE 2 -AFFORDABILITY COVENANTS
2.1 Occupancy requirement
(a) Fifty-two (52) of the 106 Units shall be rented and
960930 syn 0071045
3
occupied by or, if vacant, made available for rental and occupancy
by Very-Low Income Households. The Very-Low Income Units shall be
of comparable quality as the other Units.
(b) The remaining fifty-four (54) of the 106 Units shall
be rented by or, if vacant, made available for renta! and occupancy
by low- and moderate-income households, as defined in the City’s
Comprehensive Plan and in the City’s Housing Reserve Guidelines
adopted by the City’s council. The definition shall include
households with incomes not exceeding 120 per cent (120%) of the
Median Income, as adjusted by household size.
2.2 Allowable rent
(a) Subject to Section 2.3 below, the Rent charged to
the occupants of the 52 Very-Low Income Units shall not exceed one-
twelfth (1/12) of thirty percent (30%) of 40% of Median Income.
(b) In calculating the allowable Rent for the 52 Very-
Low Income Units, the following assumed household sizes shall be
utilized:
Number of Bedrooms Assumed Household size
Single Room Occupancy One person
(c) The maximum Rent charged to the occupants of the 54
low- and moderate-income Units shall not exceed one-twelfth (1/12)
of thirty percent (30%) of 120%" of Median Income based on an
assumed household size of one (i) person.
2.3 Lease provisions
(a) APA shall include in the leases or rental agreements
for all Units a provision which authorizes APA to immediately
terminate the tenancy of any household, after APA determines that
one or more members of such household has misrepresented any fact
materia! to the household’s qualification as a Very-Low Income
Household. Each lease or rental agreement shall provide that the
household is subject to the requirement for the execution of an
annual certification in accordance with Section 4.1 below, and
that, if the household’s income increases above the applicable
limits for a Very-Low Income Household, such household’s Rent may
be increased. APA and the City hereby acknowledge that Section
42(h) (6) (e) (ii) of the United States Internal Revenue Code, as
amended, 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 Section 42 for a period of three (3)
years after the date the Site on which such Unit is located is
acquired by foreclosure or instrument in lieu of foreclosure.
(b) All definitions, procedures and calculations related
to the use, occupancy, determination of rent, qualification and
selection of Tenants and Median Income shall be determined
960930 syn 0071045
4
according to the Regulations. In the event of a conflict betwee~
the provisions of this Regulatory Agreement and the Regulations,
the Regulations shall prevail.
ARTICLE 3 -OPERATION AND MAINTENANCE OF THE PROJECT
3.1 Nontransient residential use
No part of the Project shall be operated as transient
housing; provided, however, the Project shall not be treated as
used on a transient basis merely because the Project or any of the
Units is rented on a month-to-month basis.
3.2 Compliance with loan agreement
APA shall comply with all the terms and provisions of the
Loan Agreement.
3.3 Taxes and assessments
APA shall pay all real and personal property taxes,
assessments 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 Site; provided, however, that APA shal! have the
right to contest in good faith, any such taxes, assessments, or
charges. In the event APA exercises its right to contest any tax,
assessment, or charge against it, APA, on the final determination
of the proceeding or contest, shall immediately pay or discharge
any decision or judgment rendered against it, together with al!
costs, charges and interest.
3.4 Maintenance
APA shall maintain the Project in good repair and working
order, and shall not cause or permit any person to cause waste in,
on or about the Project.
3.5 Nondiscrimination
All of the Units shall be available for occupancy on a
continuous basis to members of the general public who are income-
eligible. APA shall not give preference to any particular class or
group of persons in renting the Units, except for the occupancy
requirements of Section 2.1. There shall be no discrimination
against or segregation of any person or group of persons on account
of race, co!or, creed, religion, age, sex, sexual orientation,
marital status, national origin, source of income (e.g. AFDC or
SSI), ancestry, or .handicap, in the leasing, subleasing,
transferring, use, occupancy, tenure, or enjoyment of any Unit, nor
shall APA or any person claiming under or through APA, establish or
permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use,
960930 syn 0071045
or occupancy, of tenants, lessees, sublessees, subtenants, or
vendees of any Unit or in connection with the employment of persons
for the construction, operation and management of any Unit.
3.6 Section 8 certificate holders
APA will accept as Tenants, on the same basis as all
other prospective tenants, persons who are recipients of federal
certificates for rent subsidies pursuant to the existing housing
program under Section 8 of the Act, or its successor. APA shall
not apply selection criteria to Section 8 certificate or voucher
holders that are more burdensome than criteria applied to all other
prospective tenants, nor shall APA apply or permit the application
of management policies or lease provisions with respect to the
Project which have the effect of precluding occupancy of Units by
such prospective tenants.
ARTICLE 4 -INCOME CERTIFICATION AND REPORTING
4.1 Income certification
APA will obtain, complete and maintain on file,
immediately prior to initial occupancy and annually thereafter,
income certifications from each Tenant renting any of the Units.
APA 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 one or more of the following
steps as a part of the verification process: (i) obtain a pay stub
for the most recent pay period; (2) obtain an income tax return for
the most recent tax year; (3) conduct a credit agency or similar
search; (4) obtain an income verification form from the applicant’s
current employer; (5) obtain an income verification form from the
Social Security Administration or the California Department of
Social Services, or both, if the applicant receives assistance from
either of such agencies; or (6) if the applicant is unemployed and
has no such tax return, obtain another form of independent
verification. Copies of tenant income certification shall be made
available to the City upon request.
4.2 Information to City
APA shall provide any information reasonably requested by
the City. The City shal! have the right to examine and make copies
of all books, records or other documents of APA which pertain to
any Unit.
4.3 Records
APA shall maintain complete, accurate and current records
pertaining to the Units, and shall permit any duly authorized
representative of the City to inspect records, including records
pertaining to incomes and household sizes of Tenants’ households,
and the rents and other charges for occupancy of the Units. All
Tenants lists, applications and waiting lists relating to the
Project shall at all times be kept separate and identifiable from
960930 syn 0071045
6
any other business of APA and shall be maintained as required b_~
the City, in a reasonable condition for proper audit and subject to
examination during business hours by representatives of the City.
APA shall deliver to the City copies of all reports provided to the
California Tax Credit Allocation Committee and the Internal Revenue
Service, as may be requested by the City.
4.4 Assignment by APA
Except for (a) leases with the Project’s tenants in the
ordinary course of business (including the lease of the commercial
office space), (b) transfer of a ninety-nine percent (99%) limited
partnership interest to a limited partner investor, or (c) the
exercise of an option to acquire the Project by PAHC Alma Place,
Inc. or Palo Alto Housing Corporation, APA shall not cause or
permit any voluntary transfer, assignment or encumbrance of its
interest in the Project or the Site, or lease or permit a sublease
on all or any part of the Project without first obtaining the
City’s written consent. Any transfer, assignment, encumbrance, or
lease without the City’s written consent shall be voidable and, at
the City’s election, shall constitute a breach of this Agreement.
No consent to any assignment, encumbrance or lease shall constitute
a consent to any subsequent assignment, encumbrance or lease, or a
waiver of any of the City’s rights under this Agreement.
ARTICLE 5 - NOTICES
All notices, consents, communications or transmittals
required by this Agreement shall be made, in writing, and shall be
communicated by the United States mail, certified, return receipt
requested or by express delivery with a delivery receipt, and shall
be deemed given as of the date shown on the delivery receipt as the
date of delivery or the date on which delivery was refused, and
shall be addressed to the following addresses, or such other
address as either party may designate, from time to time, by
written notice sent to the other party in like manner:
To City:City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Attn.: City Clerk
Copy to:Director of Planning & Community
Environment
250 Hamilton Avenue
Palo Alto, CA 94301
To APA:Alma Place Associates
540 Cowper Street, Suite 201
Palo Alto, CA 94301-1806
Attn.: General Partner
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7
ARTICLE 6 MISCELLANEOUS PROVISIONS
6.1 Nothing contained in this Regulatory Agreement, nor
any act of the City, shall be interpreted or construed as creating
the relationship of third party beneficiary, limited or general
partnership, joint venture, employer or employee, or principal and
agent between the City and APA or APA’s agents, employees or
contractors. APA shall at all times be deemed an independent
contractor and shall be wholly responsible for the manner in which
it or its agents, or both, observe the covenants and conditions
imposed on it by the terms of this Regulatory Agreement. APA has
and hereby retains the right to ’ exercise full control of
employment, direction, compensation and discharge of all persons
assisting in the performance of services recognized hereunder. APA
agrees to be solely responsible for its own acts and those of its
officers, partners, employees, agents, contractors, subcontractors
and representatives.
6.2 Neither the failure nor the delay on the part of the
City to exercise any right, power, or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other
right, power, or privilege. Any of the requirements of this
Regulatory Agreement may be expressly waived by the City in
writing, but no waiver by the City of any requirement of this
Regulatory Agreement shall, or shall be deemed to, extend to or
affect any other provision of this Regulatory Agreement.
6.3 APA lacks any authority or power to pledge the
credit of CITY or incur any obligation in the name of CITY. This
Regulatory Agreement shall not be construed or deemed to be an
agreement for the benefit of any third party, except as expressly
provided herein, and no third party shall have any claim or right
of action hereunder for any cause whatsoever.
6.4 Any amendment to this Regulatory Agreement shall be
binding upon the parties, provided such amendment is set forth in
a writing signed by the parties, and duly recorded in the real
property records of the County of Santa Clara, California. The
city manager is authorized to execute any amendments to this
Agreement, and confer any consents or approvals that may be
provided by the City.
6.5 The covenants, agreements, terms, and conditions of
this Agreement shall inure to and be binding on the successors and
assigns of the parties. Any provision of this Regulatory Agreement
which is characterized as a covenant or a condition shall be deemed
both a covenant and a condition. If any provision of this
Regulatory Agreement shall be determined by a court of competent
jurisdiction to be invalid, illegal, void, or unenforceable in any
respect, the validity of all other provisions herein shall remain
in full force and effect.
960930 syn 0071045
8
6.6 This Regulatory Agreement, the Loan Agreement, th~
Note and the Deed of Trust shall be deemed contracts made under the
laws of the State of California, and for the purposes hereof shal!
be governed and construed by and in accordance with the laws of the
State of California. All exhibits referred to in this Regulatory
Agreement and any addenda, appendices, attachments, and schedules
which may, from time to time, be referred to in any duly executed
amendment hereto are by such reference incorporated in this
Regulatory Agreement and shall be deemed to be part hereof. This
Regulatory Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall
constitute one and the same instrument. The paragraph headings are
not a part of this Regulatory Agreement and shall have no effect
uPon the construction or interpretation of any part of this
Agreement.
6.7 In the event that suit is brought by either party,
the parties agree that trial of such action shal! be vested
exclusively in the state court of California in the City of San
Jose, County of Santa Clara, or in the United States District Court
for the Northern District of California in the City of San Jose.
The prevailing party in any action brought to enforce the terms of
this Regulatory Agreement or arising out of this Regulatory
Agreement may recover its reasonable costs and attorneys’ fees
expended in connection with such an action from the other party.
6.8 The provisions of ibis Regulatory Agreement shall
apply to the Site for the entire Term even if the entire Loan is
paid in full prior to the end of the Term. This Agreement shall
bind any successor, heir or assign of APA, whether a change in
interest occurs voluntarily or involuntarily, by operation of law
or otherwise, except as expressly released by the City. The City
makes the Loan on the condition, and in consideration of this
provision, and would not do so otherwise.
6.9 The City and APA hereby declare their express intent
that the covenants and restrictions set forth in this Regulatory
Agreement shall run with the land, and shall bind all successors in
interest to the Site, provided, however, that on the expiration of
the Term of this Agreement, the covenants and restrictions shall
expire. Each and every contract, deed or other instrument
hereafter executed covering or conveying the Site 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 Site from the requirements of
this Agreement.
6.10 If APA fails to perform any obligation under this
Regulatory Agreement, and fails to cure the default within 30 days
after the City has notified APA in writing of the default or, if
960930 syn 0071045
the default cannot be cured within 30 days, failed to commence to
cure within 30 days and thereafter diligently pursue such cure, the
City shall have the right to enforce this Regulatory Agreement by
any remedy recognized under the Loan Agreement or provided by law
or equity.
6.11 The City and APA shall cause this Agreement, and all
amendments and supplements to it, to be, recorded in the Official
Records of the County of Santa Clara.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
ATTEST:CITY OF PALO ALTO
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
APPROVED:
City Manager
Mayor
ALMA PLACE ASSOCIATES
By:PAHC Alma Place, Inc.
Its General Partner
Deputy City Manager,
Administrative Services
Director of Planning and
Community Environment
ATTACHMENT:
Exhibit "A": Legal Description of the Site
960930 syn 0071045
10
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code ~ 1189)
Notary P~~ for said County and St-~e, ~r~--~nally__app..ear____e_d
, ~_~_s._o_n_ally known to me or ~
tD__me--on-Zhe--basi s {mf.-s a t-is £-a~ t~ ry--ewi~en e~]--{~- ~~- t~-~ p e r s on ( ~
whose name (~ is/a~ subscribed to the within instrument and
acknowledged to me that h~she/th~ executed the same in
his/her/their authorized capacity(ies), and that by h~/her/theCr
signature(~) on the instrument the person(~), or the entity upon
behalf of which the person(~.) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Noiary Public
960930 syn 0071045
11
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code S 1189)
STATE OF )
) ss.
COUNTY OF )
On , 1996, before me, , a
Notary Public in and for said County and State, personally appeared
, personally known to me or proved
to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary Public
960930 syn 0071045
12