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HomeMy WebLinkAbout0159.095TO: FROM: A "{J City of Palo Alto City Manager's Report HONORABLE CITY COUNCIL CITY MANAGER DEPARTMENT: PIa"IliDC ond Commuily E.,iroDment AGENDA DATE: Marcil 10, 1995 CMR!IS9:9S SUBJECf: Rf/OVEn AJ>PI'l>va1 or First Am.ndment 10 FBUdiAC •• d Regula.o". """eme.1 Rtolatl!ll!l '0 til. gnke. Hct.1 bohr ... lb. aty or Palo Alto ."d P ABC Apartmub, lac, Council action is req-uested 10 approve an Amendmenl to City CcoIr8ct No. C40502IJ. the Funding and Regulalory Agreement Relaticg 10 Ille Bluter Hotel (the Regulatory Agreement) between !he City'<>fPalo Alto and PARe Apartments, !rn:. (PARe). The Amendment would revise the project budge! and schedule, eJarify certain language in !he Regulatory Agreement relaled to the closing (){!he project', pennanent private financing, and clariJ)r language con=mng tho City's rights in the event of default by PAHC Apartments,!rn:. The budget revision, when approved, will enable the full contract amount 10 be used for project expense,;. No additiooal City fundj<>g is being ~ for Ibis proje.:l RECOMMEND~DONS SIal! recommends thai Council: I. Approve the attached first Amendment 10 the R<gulatory Agreement (with its atIacbed form of Subordination Agreement) 10 revise the project budget and schedule and to clarifY language related to the closing of the project's pennanenl private finan<:ing and !he City's rights in Ille event of default of P ARC AparIrnet1!s. Inc. 2. AUlborize!he Mayor 10 execute the first Amendment 10 the Regul",ory Agreement in substantially sinnlar form. 3. Authorize !he City Manager to execute the Subordination Agret-ment in substantially similar foon, and any other documents related 10 the closing of the project's permanent financing, and orrect the City Manager to administer the pI"O'isions <>f the Regulatory Agreement, as amended. 1'0&-I col ! c ., '" ~'''~ .~' . POLIO' IMPLlC"'~ The amended Regulalor)' Agreement does not represent any cbange 10 ~xisting City poli<:ies. EXECUTIVE SUMMARY Bacl"uoo!!d; P AHC ApartmenIS. Inc. purcha:led the real property and improvements known as Ibe Barter Hot.! !Or $1.9 millioo in April. 1994 with • combination 0( Federal HOME funds and a $9!O,OOO temporary brid~ loan ftom one 0( >he sell<:rs. The bridge loan was 0<:CeS5aI)' because the bank F AHC inten<led 10 use ",'ould DOt fund the project until C<l<lStruction and rem-up activities were <:O!Ilpleted. P AHC bas • commitment from First Nationwide Bank (the Bank) fOe permanenl financing onder two ioans. in the w.al amount 0( $980,000. Tbe Bank's finam:ing will payoff the bridge !.Jan. Tbe City's loans 10 PAHC, including the HOME funds, fa< boll! purchase o(!he project and its rehabililatioo, loWed $2,070,000. Tbe I""". were f.mded under the R.guJatory Agreement and three promi3SO<)' notes, which were secured by a deed 0( trusI benefitting the City_ Contract Bydoot R.aUOC!!Iion: The BItacbed Amendment \() the Regulatory Agreemet!! (under Exhibit E. Project Budget) reaIlocales unexpended funds from four budget categories (relocation, pre­ development and transacti<>n =, <>perating deficit and furnisbingsl'<:<>ntingeney) 10 rehabilita:loo., to allow PAHC 10 fully ut>lize the criginal 52,070,000 Agreement amount. The changes in the Agreement amounts are summarized below_ Amended 1m3 Aszreemen! Ai'tt"1CTl! Budlret Catei<Jries Amoonls Amoun!;5 @<. E) Funding Sources Acquisition S! ,9'JIJ,OOO S 1,900,(100 HOME. Bank Loan Rehabilitation 685,000 150,750 CDoo, Housing Reserve Relocation t6,OOO 5~,3S1 CDoo, Housing Resecve Pre·Deveklpment 181,000 162,959 CDOO, Housing and Transaction Reserve Costs Opcrarinll Deficit 79,000 72,446 Housing Reserve and Reserve Funds Developer Fee 60,000 60,000 HOME CMR:159:9' Pac' 20/5 / c· ~.~ .. " .. ;. f urnislllnS"> Contingency . TOTAL 12191 Ameroent Amounts 59,000 53,050,000 Amended A&r«ment Amounts (Ex. E) 44,488 53,050.000 Ftmding Sources HOME, Housing Reserve Actual, final project costs a.'" expected 10 reach $3,111,868 by project compieticn, whlcb is defined as the c""'ing of the pamanetll bank loan. AI! budget categories are ei1her st or below budget. except foe rehabilitation construction costs, The final coomuctioo costs totaled S812,6U. which is 5127,618 over the $685.000 estimated in the De=nber 13, 1993 Regulatory Agreement budget The City bas IIQ{ been asked 10 provide funding for these additk<1a1 costs. Of the 5121,618. $65,150 is being covered by the internal budgel1lansfers sI!own above. The Palo Alto Housing Corporation will cover the remaining $61,868 in costs from their rooporat<: resaves in return foe an un=ured note from P ABC Apartments, Inc. The Housing C«JlOCation will be repaid in the future, if residual receipts are avaHable from the operation of the property. if the property <lacs DOl produce sufikient positive cash flow, then the Housing Corporation will DOl be repaid. There are nwnerous reasons for the c<lllStructioo cost in<:reases. Most of the probiems PARe encountered du!ing the rehabilitation are wu-.mon to renovation projects involving older properties. The prin<;ipal diilkullks an: summarized as C<>ilows. 1) Contractor bids came in much higt.er!han antidpaled, even though PARe negotiated extensive "value engin<cring" adjustments with Ibe selected general cootrac!or; the cootingency turned out to be insufikientlOr Il-Js type ofproject. 2) Adaltioca! asbestos was disco"ere<! during constructioo that had Dot been identified in the pre-purcbase ~. Asbestos abatement costs were a major facloc in 1he cost increase,. 3) there were problems with 1he original architectural specifications that resulted in several significant cllange orders. 4) Building Code interpretation issues. especially those related 10 the seismic upgrading, led to significant cbanges in 1he original plans I<nd specificatioos. 5) A IoIal of three months in delays completing the roru;tructioIl w<d: by 1he general cootractor resulted in bigher lempo<ary relocation costs fer the teoants. Other Contract CIwlSes and Subordination Agreement: The attached Amendtnent to the Regulatory Agreement also clarifies the City's rigilts in the ev~ of an unremedied deCavll by PARe Apartments, !nc. WIder the first Nationwide Bank financing or under the Regulatory Agreement In addition, the Pac-] at 5 -:,--~~;--:::-:-:";~._-~"""1n.~. -~ ." --~~-~-~--: -:-~---. -: -- "'>~ii:;;~i">-' :''"' ; ; .. .. ,-. _ -t ...... .. .,' :. ' . ', .. -~-.. '-" . -­.. > ""'- AmendmeDl inoludes, as E><lu'bit B, • Subordination Agreement negotiated between the BalIk and !he City Attorney'. Of!ice. A3. condition of pro,iding its financing. the Bank reqUlrell !hat \he City suborlfmale its loan documents, !he Regulatory Agreement and its deed of In1St 10 !he Bank', deeds of!rust. In the event of any future foreclosure by !he Banl. !he'City', Regulatory Agreemen! provisioo.s would te.rmina!e and the Bank could ....,11 !he property free of any rent 0< use restrlctioos. To protect the City'. interest and financial investment in !he proper!)' as .ffix-dable housing. the attached Amendment and Suboofmali<>n Agreement provide the City with the right to cure P AHC'. unremedied default under !he privale finan<:ing. and an option 10 purchase \he property (or to assign the option to anoIher entity) to prevent toredosur. by the Bank and tenninatioo of the ,... restricOOns. The 5uborcfmation Agreement also des<ribes the conditions under which. new enllty could assume \he Bank's loans. I{owe.er,!be language does oot cbliga!e the City 10 become involved in the resolution of any default situation. The Agreement simp!} preserves \he City's rights shoold the City choose 111 such time to act to preserve the property &s affix-dabl. boosing. FISCAL IMfACf There is 00 fiscal impact resulting from approval of the Amendment 10 the Reguiatory Agreement, since no additional funds are being provided by the Cit)·- ENVIRONMENTAL ASSES$MtNT The Amendment to the RegulatOf)' Agreement is no! subject 10 environmental review under !he National Environmental Policy Act (NEI' A). An environmental assessment under NEPA was rompletecl roc the proje..'! and • Foong of No Signir",anl Impact on the Environment (FONSl) notice was publis-1)ed on November 1, 1993_ The project bas also been deIermlned to he <'8tegorically exempt for purposes of the C.lifurnia Environmental Quality Act (a::QA). ATIACHMENIS L first Amendment To fumfmg and ReSOI.t0rt Agreement Relating To the Barker Hotel (Cit) Cootract No. 405{)2lJ) Between the City of Palo Alto ond P Al-lC Apartments, Inc, ("ith arta<:bed Subocdinatioo Agreement). 2. Letter from Palo Abo Housing Coq>ocatY-.,n PREPARED BY, Catherine Siegel. Housing Coo<,fmat()( DEPARTW.El\'T HEAD REVIEW, CMIU5!i:9S ~;fK:d£LL~ KENNFIH Il_ SCHRElBER Direc!o< of Planning and Community Eavirorunenl i f C-' r . t l· . --.. ..,,, .-.~ . .,.''!'''''', ,,_ r __ l", -:-.,.-.e':'.-:----'?""""""....---.---.. ~-~-._....::_: ------.-~'l( ,'" , • >~ • . -, "::'::.' .' .',.:. ~.' " ."-'>'- :;., ...... , " ,~~: . '~ " ~ 0tJ . ellY MANAOER APPROVAL, : ~~~=;'GL.::=7'f:;o.~---- Manager V cc: I'AHC~!S, Inc. ao Palo AJto.liousing OoIpo<ation moo Citizens Advisory Committee 1'10&<5015 This document is recorded for the ~oeftt of the City ot Palo Alto and 1s entitled to be recorded free of charge in accordan~e with SectiOn 6103 of the Goy~,t Code~ After .Recordati.on, D'lail to: OFFICB OF THE CITY ATTORNEY 250 Hamilton Avenue Palo Alto, CA 94301 ATTACHMENT 1 I'I1S"l MSN'-3IIfT TO I'UHDIJrG AIm UGfJ"L.ATORT AGRE.EMEW'I' IRBLArIlfG 'l'O TIll: nn1111 I!OTEL leln COIiTRACT )l0. C(oS021l} IIl1"rWBlQI THE CUT 01' EO ALO ALTO .L'III PARC APARTMENTS. DIe. THIS FIRS'!' AMlUo'DMENT TO THE FUNDING AND l<~'LATORY AGREEMENT R.8!.ATIN:3 TO ntB BAR.1CER HO'I'E'L {the ·Amendment'}. entered in·to as of this __ ~y of Karch, 1995. by and between the CITY OF PALO ALTO. a municipal corporation Of the State of California {'CITYII and P~C APARn-mNT3. INC... a CalIfornia nonp-ro·fi.t,. public benefit corporatIon (-CONTRACTOR') f' is made with reference to the following: il!eI~ALS A. CITY and CONTRACTOR. are parties 'to that certain i\mding and .Regulatory AgreemeD·t Relating co tbe E.arker Rocel (the 'R.egulatory Agreement') dated as of December 13. 1993 .. and recorded .on February 2... 15194 .. as Instrument No. 12341.345-in Official Records, Santa Clara county. California .. at page 1433 of Volume N28.3 .. where:tly CiTY a.greed to lend CC"h'TRACTOR certain SUlT'tS for the acquisition and rehabilitation of the real property and i1qJrovementB known as t.he Barker Eotel (the ·Property·' .. located at ,35-4.41 E!nerson Street .. Palo Alto ... California and more fully described in ~~ibit ·A· to t.his Amendment .. attacned hereto and incorporated herein by this reference. 8a The Regulatory Agr~ement provided for CITY to lend to C'ONTRAL .. ·"'TOR the SU!nS of $670 .. 0Q·O.OO In federal COtTi!lll.lDity Development: Block Grant funds.. $1.000.C'O'O .. OO in federal EOME Investment Fartnerships Program funds and $400 .. 000.0,Q in. CIT1" riousing .Reserve funds {collectively. the -Loans-J. to assist CC~7RACTOR with the at."'-,.."Uisition a.'ld rehabilitation of the Property .s..nd to preserve its operation as a single room occupancy hocel providing rental hOUSing affordable to l~-ar~ very lov income ho~sebolds {the ·Proje~t~l. CITY ha9 lent such f~lds to CONTRACTOR and the ~>ans are evidenced by three promiSSOry notes dated April 12 .. 1994. a~d secured by a deed of t.rust (th~ -Deed of Trust·~ in favor of CITY as beneficia­ ry .. dated as of April 12~ lS94~ and recorded on April 12. 1994 as 1 Instrument No. 12"3881 in Official ~ecords. S~t~ Clara County~ californla~ at page 151' of Volume N391. c. CONTRACTOR desires to secure certain ~rlvate financing for t.he Project. frc;m First Nationwide Bank .. A FederCl.l Savings BarJc. '-FNB-). in the t~al ~~nt of $9aO.O~0400 {the -FNB Loans~). to repay CONTRACTOR' B private bridge lean for the Eroject.. FNB has requested t.hat CI'n' suboz'dinate the priority of its De'€d. of Trust and Regulatory Agreement t.o the FNB LoaDs. 0. 'CITY and CONTRACTOR therefore desire to amend the Regulatory Agreement under this ATOOnd!:nent to clarify <-ertain prO"'w-ia!ons of t.he Agreemen·t, including the provision setting forth the right of ell"{ or its assignee to purchase the Property to prevent fOl:ecloS".lre and termination of the property's use restrictions in the event of ~~CTOR'S unremedied ~efault under the FNB Loans. NOW ... THERBFORE, CITY and COf!iTAA.....'"'TOR agree as follows: 1. KlICITALS The foregoing recitals are .made a part of t.his .Amendrnen·t. Capitalized terms not. otherwi-ile define::! herein shall have the meanings set forth in tbe Regulatory Agreement. 2 • SOBORIl:orATIOII1 (a) Concurrent.ly with t.he recordation of a. deed of trust frcn CONTRACTOR to FNB~ securing the FNB Loans to cet."'TRACTOR in the prin<:ipal amount of the SWI! of Ii! $a40.0~O.~O. plus Iii) an a~fordable housing subsidy of $140~OCO"OO (for an agqregate loan aJl'\OUZlt <If $ 9 8 0" 0,0,0-" Oil) .. C.!TY agrees to exeCt-lte and del i ver to CONTRACI'OR a Subordination Agreement substantially 1n t.he form att.ached hereto and incorporated herein by this referen-ce as Exhibit -a-. on the -conditi.::>o precedent that elTY has first revieWed and approved all terms and provisior.s of the loan documents to which CITY shall ~ subordicating "its Deed of Trust and :Regulatory Agreement" Wbich approval shall not. be un.reasonably withheld. If FNB or -the t.itle cc:rnpany insuring the priority of the lien o·f FNBPs deed of trust request.s a JnOdification to the SUberai.Dation Agreement and such modification does DOt impair CITY~s rights thereunder ... CITY ag~ees to make such ~ificationr (b) Notwithstanding the foregoing, as a condition precedent to CITY's execution and delivery of tbe Subordination Agre~~nt benefitting FNB~ CONTRACTOR shall deliver to CITY either is ne"'~ ALTA leooer~s policy of t.itle insurance for the project beoefitt!ng CITY, or a rewrite or reis5ua~e of CITY's existing policy of title insurance for the Project,. which ir:.sures the priority of the Regulatory Agreemer.t and the lien oE CIT'{' s Deed of Trust to be superior to all monetary liens and er.cumbr~nces ctner than thc£e to which CITY has specifically subordinat~d. 2 . , · .. . ', 3. IIOOIFICM'IOIIS tQ UGOI.AroRl' AGRZl!:HE!/T (CI'l'1' C?!ltr&~t liTo. C40502UI (.) Section (IIIA)!l)) of the Resulatory A3re~~nt is amended and restated in full as follows:. '13~ '.Project. Canpletioo,' for purposes of this Agreement and notwithstanding t~e definition of Project Completion set forth in the Reguls~ions At Section 92.2 of 24 C~ Part 92, means the date of ~he closing of CO~~CTOR~s private, pe~aLeat 'take-out-financing for the Project.- (b) Section IlllGI U) Of the Regulatory Agreement is amended and restated in full as follows: 'I. Acquisit.ion. CITY shall pay Nine Hu.."'1<ired Twenty __ Thousand Dollars ($920.000.00) by check or checks to CONTRACTOR z t.oward the cost of Property acquisition. That amount shall t.e funded frOCl a combination of HOMB and CDEG funds. as determined approp~iate by CITY's City Manager or her designee. At the close of Escrow f~r purchase of the Property. CONTRACTOR~ at its own cost and. expense... shall secure th:9: issuance of an ALTA leoderPs polley of title insurance p .oarni.ng CITY as beneficiary ... in the .. mount of the total amount of funds loaned by CITY to CON'I'R.ACI'OR under this Agreement.. The poltcy shall insure that the Property is -clear of any t.ltle defects t.hat would prevent the construction and QPeration o,f the Project. Notwithstanding the foregoing. CITY shall not pay the funds to CONTRACTOR as set forth in t.b.ls sect.ieo. (I) {G) U) unless .. prior to. the close of Escrow for the prOperty..-CONTRACTOR has provided assurances sat.isfactory to the City Manager that the follcvlng two ~2) issues affecting the Property have been resolved: (a) All known asbestos·coctaining·material located on the Property shall have been ~ernoved by a contractor certified by the State of California for such asbestos work, vith su>ch abatement accornplished in co(ropliance .... ith all applicable federal, State and local laws p ordinances and regulations; and {b} All work resulting from the Boil analysiS in the vicinity of the fuel oil tar~ buried on ~he Property shall ha,re been. performed p including remm.-al of the t.ank if required by law.-" aoy drair.ing .. filling ... -closing and sealing of the tank .. a..l"ld any necessary remediation associated with the tank.. in compliance with all applicable federal .. State and local laws .. ordinances and regula.tio:c.s.- (e) Section {I' (H) of the Regulatory Agreemen~ is amended and restated in full as follows: J"B. ~ITY"S Dl"I"EgS'T IN "i'1I.B PROPERTY A},-o :RIGHT OR. OPTION" TO RtmCHI:$E CO~.CTOR snall be the sole o.~er of the Property and the Project; provided, however. that CITY and CO!lo"""TRACTOR shall 3 < , ''l • , j :-y '0 ~. . ... ,- share in !the. appreciated value. if any" of the property., based upon CCNTRACTORTs and ~ITY's resp€ctive initial shares of the Project funding. which 51-.311 be determined as of the date of Project. Completioo.. ,"or purpoees of this Agreement. CIT'{'s a.nd CONTRACTOR's respe<:tive initial shares shall be knowtl as their 'ben~ficial interests.' Th~ pa~1es· respective beneficial interests in the Property. as ~etermined at Project Completioo, shall be adjusted d:iring the term. of this Agreement whenever additional capital imprcveilJents are 2".ade t·;, the building located there which are funded from sources ochEr than the Loans ~hich are the subj~ct of this Agre~ctl or whenever CONTRACTOR makes payments to ~ITY on thE! Loans. CON'l'RACTOR shall inform eI'I"l in writing. in a timely mannerl wbenever such capital improveme~ts have been ~de. CONTRACTOR hereby grants CIT! an absolute first right or ~ion to ~rchase the Property. tbroughout the te~ of this _Agreemen~ ... itl. the eveo,t of any of th,e following circumstances set fortb in this Section {I)(Hj~ CITY ray exercise its right or ~100, i~ its sole discretion, by paying to CONTRACT~R the then­ current fair marr.:et value of CONTRAcr-oR.'8 beneficial interest in the P~qperty. leas any outstanding loans on the Property other than tram CITY~ The fair market value of the Property shall be 6eter­ II1.!n~ by an _ appraisal ... obtained at CITY's sole expense_ The appraisal shall consider the value of tbe Property as restricted by t.be a.pplicable reg".Jlatory requiremen,ts and use restrictions set forth in this Agreement. If CONTRACTOR and CITY ~~ ~ agree on the value of tbe Property as ~etermined by ~ITY'S appraisal I t~en the parties ehall jointly select an independent appra.iser whose a~1sal shall be the final determination of the tt~n-curreo.t fair market value of t~e PropertYa The parties shall split the ~ost of the independent appraisal. CITY may_ in its sole discretioo l designate an agent to exercise CITY's right or option to purchase the Property on CITY~s behalf. CITY' may also l in its sole discretion" assign CITY"s right or opt.ion to purchase the Property to any private, governmental or nonprofit entity or individual~ SUch entity or individual may thEn e~~rcise the right or option to purchase the Property under the circumstances set forth in this Section. CITY, its agent or its assigneer may purchase the property under the teI"mS set forth i.e t.his Section in tee event of any of the following circu~~tances: 1. CITY receives ~ritten notice o~ CONTRACTOR~s default under any prhrate financing for the Property or t.he Project 'Which is secured by a deed of t.rust cr any other encumbrance or lien senior in priority to this Agreement or to CIT~~s deed of trust securing the Leans under the Property~s chain of title~ If CON'l'RACTOR fails to cure the default under the private financing wifhin sixty (60J days f,;:,llowing CITY's initial receipt of t.be notice of CONTRACTOR'S default. then CITY shall have '-,;,. "0 . .. I . I ! " ,. . the first right or ~lOQ to purchase the PropErty. ahead of any oeher individual er eotity, 2. Any otber of the circumstan~es set forth in Section II} II) hereof. If CONTRACTOR fails to remedy such circumsta:lCe (e) to CITY's satisfaction within sixty {EO) days relIeving CONTR'C'l'OR's receipt of written ~ice from CITY requesting that such circumstance's} be re~~died, thea CITY shall hav-e t.he first: 'E:"lgbt or option to purchas-e the Property, ahead of any ocher individual or entity.- (d) Section III (I) of the Regulatory Agreement is "amended and restated in full as follows: -1. mlI. 011 S*t t '1OyISIOll The f'..Ill and total a...."1'\OUnt of any outstanding Loan balance und'eY this Agreement shall immediately become due and payable to CITY upon any of the following occurren~es: 1. Voluntary sale or any other transfer of the Propert.y during the term ~f this Agreement .. in-cluding but not limited to sale pursuant -to judicial or nonjudicial foreclOS'"llre or­ transfer in lieu of foreclosure. restrictions Agreement. 2". Termination of the Loftl/Very Low Income use for t.he property sel: fort.h in Part II of this 3. Any ot'her default of CONTXACTOR under this Agreemen,t that Is not remedied, in accordance with Sect.ion IIIJ {L} -0.( this Agreement. c. The filing of any petition by CO~"TR.ACTOR seeking or acquiescing to any reorganization~ arrangement, con-position, readj:lstrnent... liquidation.. dissolution or similar relief under any law relating to bankru~cy or-insolvency, or the filing of an involun·tary petition under such lay against CONTRACTOR whIch is still in effect sixty (60) days from the date of such filing.- (e) Section UI} ~DJ f2J of the Reg-t.llatory Agx:eememt is amended and restated in full as follows: -2. The remaining twenty (2G} Assisted Units shall be occupied by U::>w Incane Houset£clds or Very Low Income Hou.seilolds. The ren·ts for those. Units shall be no greater than the lesser of: a4 The rent determined und.er 92.2S2{a)(1~ Ii} of the Regulations. as amended; or Section b. The rent dEtermined under Section 924:252{a}U]UH o·f the Reg'Jlations .. as ame:lded" i'.o ... ever. based on gross income of no J!"IOre t.han sixty percent (6t]\:) of tb€ Median 5 , :.~ , .- Income for the Area,r rather than sixty-five per_ce'J.t (55tJ. as set for~h in eu~h Regulation.' (f) Sectto!1 (II) (I) of the Regulatory Agre .. ",ent ls amende~ and restated in full as follows: "I. 'nwrcuw AUDITS CONTR.:a.C'TOR shall p-rO'Vide CITY .. during the term of this Agreement.. with copies of aud.ited finan-cial statements of CONTilACTOR.. illCluding any managemen~ letter comTIents on t.he adequacy of in.terns.l or operational cOD·trols ... within one hundred twenty (120J days of the close o,f each fiscal year. The audits covering the fiscal years in whi("h CONTF...ACTOR receives a'rty funds from CITY under this Agreu.ent shall be conducted in accordance with 24 en. part 44 and OMB Circular A-133 1 as amecded. CITY reserves the ri9~i during the term ot this Agreement .. to audit the records.. including the financial records supporting t.he aforementioned financial statements. and other records and docaments pertaining to tte ~rations of th2 project.- (g) Section (II) (Ll (3} of the :R.eg'.Jlatory Agreement is amended ar~ ~estated in full as follows: ·3. To exercise its right O~ ~lon to purchase the PrOperty. in ac.cordance with Section U) (1I) bereof, a.nd to C"..1re any· default of CONTUCTOR. Any electioo by CITY to C'<.lre any default shall not be desned a 'Waiver by CITY of any duties or obligati.ons iq>osed on =R by ttds Agreement or by the R"9'~latiODS: and' (h) The following exh1bits to the R.egulatory Agreement are amended and restated in full as !Set forth in the following eXhibits attached to this Amendment as EXhibit ·C· and incorporated herein by this reference: Schedule.- 1. Exhibit ·C· entit12d ·Project Development •• 80 0TI<n )lOOIFICATIONS Excep< as herein specifically modified, th~ R~~latory Agreemen·t, including its exhibits .. shall remain in full force and effect as originally written. 6 <- IN w:nmss ~i'" t-he parties hereto have entered into this Rirst Amendment to the Regulatory Agreement as of the date and y~ax first above written. CITif OJ' PALO ALTO Mayer AT'1'IIST. City Clerk Senior As3t. City Attorney APPROVB!) AS TO COJsi nall't I city Manager C~receor of Planning ar~ Community Bnvlrooment Director O'::!' Finance Risk Manage~r~-------------- City Auditor Exhibits: ",A.:-Property Descrip<ion "B·~ Fcrrn of Subordination Agreement ·C·: New EXhibits ·C· and -E-to Regulatory Agreerrent · , ClIATIPICA'1'II OP AC~ {Civil Code 5 1189} ! } I On '\L >-..L. \,*= )sa ....... before me, a notary public in 1 and for said Couc "'9 .. \9-... +-"-V''t ... ",,~ ... ~ po'!rsonally known to me (or proved to me on the basis of satia actor"f eviden-ce) to "toe the person fe} whose naJII.e [IS) ia/are subscribed to the within instrurr,ent.. and ackDo~ledged to me that he/she/they executed the S~~ in his/her/their authorized capacity(iea). and that by brs/ner/their signaturets} on the instrument the peraoo(s). or the entity upon behalf Qf which the person(s) acted~ executed tte instrurnent4 8 CUTIFl CAn 01' ACDOWLEIlGMEN'l (Civil Code I 1189) ST1.n OF ____________ , COONTY OF ______ " ___ _ ) l On DOt.ary _ "..,,~-~---~~. befor-e me. r a public in and for said County, personally appeared ~_~_~_~" __ ~~. personally known t.o me (or proved t.o me on It,he basis of satisfactory evideIJoCe) to be the person (s) whose name (8) i .. s/are subscribed to the wit.hin ins t. rument.. aoo acknowledged to me that he/she/they executed the same in h1s/h~r/the1r authorized capacity'ies). and that hy bis/her/their signature{a) on ~be instrument tr.e person(s). or the entity upon behalf of w!llch the person(s) acted .. executed the instnlIDeD·t. WITNESS my hand and official seal .. 5 EXHIBIT 'I.' ~ARKtR HOT(L 435-441 {merso" Street, Palo Alto fIEO.l. PROPEIlTY )1 "" CIIy cr P~~. CourJy of Santa 0.,... So.ate or ~fomr .. <Ie=b<>d as 1oJlo,o.o:;, _ .; lot$ 12 -.">4 U. j;rcxr. 13. os $110"" "" fl' Ma;> of fl. M1l!s ~on '" Blo<!< 13 iii \he Town d unM!!$'tt PiIf<. ~od Fe!lrulU)' 2.8, I~ '" Book 0 of M0;>5. ""ge 71, Sarna Clara Cour;ty """"~ •• _IS_' - ~. in "" _lIy Ina of Eme~ 5~."~ 6s:.:1I1fl'W.1 ISC lee! No_orly ."'" \he poinI d He ... cOOn of \he Noritleasterly lb" of Emer>or. s" ... _ ".;th fl. N~.-.>I~ line oIlMive""Y ~nIle; """'. <:OnllnL!lnQ N~lerl)' a!~ !he ~asteny ino of Ecne=n $tree!. ~ ,..~ lIle"". 01 right ""llles Nor1heaste~ 95 ~t;. f\enc;e eI liShl: ~res Sootheasferr;( 50 ~-..e:;, f'lenc.e a! f~ht l.rl;Tes SotJ!hwe5terly B5 W. 10 Ih.e )J.QrihE:i;S~rfy ~ r;A Eme~::x"'I St-e~ a"ld rtI.= pci."':.l of t>e;;i."('~, - ; / tDIBI'l" -•• ,"ora Clf Subordination Agreement JU:CORDIIIG REQUESTED BY: First Nationwide Sank l A Federal savlno;s BsrJ< lib.", recor<led .... n to: Fr.B~ .a~IOBW%Da BAXI ~ FBD1IUL UnllG6 ~ P.O. eo" 193923 San Francisco,. CA 94119 ATTII' Document contra 1 "'. SPACE ABOVE THIS LIKE FOR JU:CORDER'S USE SUIIORIlI&UOII AGU:IDIEJIT ~rCII: S'IIlB 8ClIORDln~IOIf AORnJll!B"l U:S!lL~B IX 'f00ll 8BCUltrl"Y DI'l'1IRES'l Dr YIIII PIIOPZIt!""l ~G 8!1B.7.1C'l N UII) 01' Ul""R I'IUORI7J" Yl!lIIII l"lDI LI" OlP 80IIB 0"1'D1t OR u.!"I R 8l!CVlUn IIIS"fIUlKBlI'l. THIS SOBORDDiA...notON AGREEMENT (-AGREEMENT-) I made this __ day of 19~5. by PARe Apartll.ents,. .Inc •• a CalIfornia nonprofit public ben..afit corporatiOll.i owner of the real property described on the attached ~ibit A. attached bereto and by thIs reference made a part bereof '-OWner·j~ and city of Palo Alto,. a munIcipal ccrporation of tbe state of California ("Beneficiary") and First NationwIde B4nk~ A Federal Savings Bank [-Lender·). A. With respect. . to the real property more particularly described on _ibit A, (the "Property"). o-..".,r and Beneficiary did execute a Long FoX'll Deed of Trust end Assignment of Rents dated April 12. 1994 in favor of Beneficiary,. ~ich deed of trust yas recorded on April 12,. 1994 as instrument number 12443687 in the official records of the county of Santa Clara (the ·Official Records-). to secure three promrssc~ notes made by ~er in the total amount of $2.070~OCO dated April 12~ 1994~ The promissory notes and deed of tr~st r~ferred to in this Recital are collectively referred to as the -City Loan Docume~ts·~ B~ Wit.h respect to the Property. OWner and Beneficiary have executed a certain r~ing and Regulatory Agreement Relating to the Barker Hotel betveen the City of Palo Alto and PAHe Apartments, Inc., dated December 13. 1993, ~bich was recorded on February 2. 1994 as instrument number 12341345 in the Official Records (the ·origi~l Regulatory Agreement-j,. as amended by th3t certain First Amendment to Fundinq and J(equlatory Aqreement Relatir.q to the Barker Hotel between the City of Palo Alto and PARe A~rtments# Inc~ da~ed Marcb ___ • 1995, vh!ch was recorded on lS95 as instr~ent no~ in the Official Records {th~ 1 PARe Apartme.nts, Inc. Subordination Agreement Page 2 , " . ,<--~;; < ~", -ADen4aent-) (the Original Regulatory Agreement as amended by the Amendment. is hereinafter referred to a.s the -itequlatory Aqree'lllent·) .. C.. Owner haa executed" o-r is Zlbout to execute" .a promissor}" note l~ the sum'of $a4~,~" In favor ot First ¥atlonwide Ba~~" A Federal $&vings Bank ,-Lender-)" payable upon the terms and conditions described tbel'"ein". evidencing a loan toO be lIade by Lender to Ownn. which note ls to be secured by a deed of trust .nd ~ecurity agreement which is to be reoo~ed concurrently herawith (th. -Dee4 of Trust and security A9reement·). 1>. OWner has exeeuted" or i$ about. to elCe'C\i.te, & prO'&issory note 1n the SUB of $140,00-0" in favor ot Lender. payable upon the teras and condition~ described therein, evIdencinq a loan to be .ada by Lender to owner, which note is to be secured by a deed of trust and security 4greeaant which 1s to be recorded concurrently herewith (the -AHP Deed of Trust and Security Agreement-) .. E. rhe loan referred to in RecitalE C above and the loan referred to in this Recital D are hereinafter someti~es referred to collectively as -Lender Loans·. The note and Deed of Trust. and security Agreement referred to Recital C and tI:le note and AHP Deed of Trust and Security Agreement referred to in Recital D and any and all other docunlents securing the l"epayment ot the Lender Loans are bereinafter sometimes referred to collectively as -Lender L~n Documents-. F. It is a c:ondi tion I'recedent to obU 1,,1"'1 the Lender Leans that the Lender Loan Document.s shall unconditionally be and rUl.ain at all times a lla~ or charq~ upon the Proper~y. pliar and superior to any and all lIens In favor of 8eneficia~. G.. Lender Is Yillill9 to make Lender Loans provi"ed the CQndition precedent described ab¢ve is satisfied and ~hat Beneficiary vill specifically ~nd unconditionally subordinate the City Loan DocUme..'lts and Regulatory AqreelDent and any and all lIens or cbarqes to the liens or cbarqes of t.he Lender Loan OocUlilents in favor of Lender. H. It is to the ~utual benefit of the parties bereto that Lender aake the Lender Loans to OWner. and Beneficiary and oYner are ~lling to provide the stibord1natiCh' required by the c~ltion precedent described a~ver NOW" TaEREFORE" in consi~er3tion of mutual be~efits accruing to the partIes hereto and ~er valDable consideration" the receipt and s~fticiency of Which eonsideration is bereby acknovledged" and 2 • "' PAflC Apo.rtJo.ent., Inc. Subordination Agreement Page 3 (?i. -3 In order to induce Lender to make the Lender Loans, it is hereby ~eelered, understood ~nd agreed as follows: (i) The Lendll!!r Loan Docu1nents l ancl any renewals or extensions thereof, shall unconditionally be and remain at all tbles .. 11sn or eharge on the Property, prior and superior to the City Loan Documents and Regulatory Agreement and any and all liens or charges in favor of the Beneficiary.. All advances .ada. by Lende:-and all extensions or modifications agreed t.o by Leoo.er with respect to the Lender Loans .. or the Lender Loan COCUlnents or any other documents A..'ld instruments governing, evidencing or 6ecurinq the Lender Loans shall be secure4 by the lien or charqe of the Lender Loan Documents J which liens sball at all times ~ prior and su~rior to the Cit.y Lean DocUlllents and R-eguletorf Agreement and any and all lIens or Charges in favo~ of the Beneficiary. (2) The Lende.r would not make the Lender Loans without this subordination aqreement. (3l This Aqr~ent shall be the whole and only agreement with reqard to the subordination of the City Loan Documents and. Regulatory Agreement and liens or charges in favor of the Beneficiary to the liens or charges ot the Lender Loan Documents and shall supersede and cancel" but only insofar as would affect the priority of.any prior aqree~ents as to such subo-rdinatlon,. includIng.. but: not liaited t>:), those provisions...-if any" contained in the Lender Loan Documents in favor of the Beneficiary, Whicb provide for the subordination of the lien or c'harqe thereof to another deed or deeds of trust or to another mortqage or mortqaqes. Beneficiary decl~res" aqrees and ackr~wledges that fa) Beneficiary acknowledqes (i) all provi:si..: 'lS of the Lender Loan Docum~~ts in favor of Lender above referred to and (ii) all agreements, incloding but not limited to ~ny loan or escrow aqreements, between OWner and Lender .for the disbursement of the proceeds of the Lender Loan; (b) Lender' in making disbursements pursuant to any such aqreemE:nt is under no obligation or d·uty to, nor-bas Lender represer.ted that it vill see to the application of such proceeCls by the person or persons to ... hom Lender disoorses sucb proe&eds and any application or use of such proceeds for purposes ether than those provided for in such agreement or aqreenents shall not defeat the subordination hereIn made in wbole or in part; 3 " 1 ! PARe Apartmen·t., Inc. Subordination Agreement Page • (c) 8oT~ficiary intentionally and unconditionally vaivea, relinquIshes and subordinates the City Loan Documents ~ R~llatory Aqreezt-ent and all 1 tens-or charges in favor of Beneficiary in lavor of the lie.n or eharqe upon the Property of the Le.nd:~ Loan Documents and u.n(IerstaOO$ that in reliance upon", a..id in oons:lderatlon of, thIs-waiver, relinquishment and ~rdinat!on, specific loans and advances are beir~ and will be made and." as part and parcel thereof, specific aonetary and other obllqations are being and vill be entered into "hieb would not M lIllJ.de or entered into btlt for said relia!"lC-e upon this waiver, relinquishment and subordination; [d) An endorsement ~3S been placed upon the City Loan Documents and Regulatory Aqreement that those Documents have by this ir~trument been ~ubordinated to the lien or charge of the unders Loan Documents in favor of Lender above refer-red to; and (e.) Beneficiary has-no actual knowlec1qe of any defa.ult ~er the City L~ Documents and Regulatory Aqreement~ Lender h~reby acknowledges and ~9rees that Beneficiary shall bave the following rights, (i) Upon any default by Owner (and/or any successor of the OWner to the Property} of any or all of its oblIgations to Lendar under any of thE Lender Loan Documents,. Beneficiary shall have.the r1sht (but not the obllgatior,) to cure that default provided that the time period for the Beneficiary's riqhts to cure the de_fault shall run concurrently 'With any cure period provided under the Lender Loan Documents and any cure perIod provided by law. (ii) In the event title to the Property is transferred to the Beneficiary through foreclosure, and Beneficiary cures all then existinq defaults u.'lder the Lender Loan Documents, simultansously 'With or promptly following title transfer, Lender-Shall reTrain from exercisir~ any rights or remedies it may have by reason of the transfer of title to the BenefiCiary, and such transfer shall not constitute a breach or default under the Lender Loan Documents,. provided that such t~ansfer is a Per.itted Transfer {hereinafter defined}. (iii) In the event title to the Property is transferred by Beneficiary to another qcvenunental entity or nonprofit corporation after Beneficiary has foreClosed,. Lender shall refrain from exercising any rights or remedies it may have by reason of the transfEr of t.itle from Benefici<!llry to such ( • PARe Aparbaent. ~ Inc ~ Subordln~tlon Agreement Page 5 <', •• transfaree l &nd such transfer Shall not constitute a breach or detault under the Lender Loan oocuments~ provided that such transfer is a Peraitted Transfer. Clv) lIotwithstanding a!<ythlng to the contrary contained in the Lender ~ Documents or the provisions of Section (IJ (B) of the Original R"9'.llatory Agreement as restated in paraqrllpb ] [c) of the Amendment wherein Beneficiary :may exercise a right or option to purchase the PropertYr Lender vill consent to a transfer of the Property upon exercise of the option -only if; (a) owner has been in default and Owner fails to cure sUCh de~ault under the Lender LOan Documents or the Regulatory Agreement within sixty (60) days :oll~wing the 8a~ficlary's issuance or initIal recei~r as the case may be, of the notice of default under such documents; (b) the trar.sferee is the City or its designated governmental entity or nonprofit corporation: and (c) s~ transfer is a Pe~itted Transfer. In addition. it Is understood that such riqht or option to pu":t'chase the Property shall be extinguished after the Property has been transferred to the purchaser at a toreclosure sal.::: u.~er the Lender Loan Documents .. (v) As used in the foregol~ paragraphs., the tera Permitted Transfer shall :mean a transfer of the Property under the circumstances descrlr,ed in (il), (ili)and (Lv) above, provided that followinq conditions are a£t: (1) the ~r~~feree and the Property meet Lender's COm3unity Lending Proqra. underwriting criteria in effect ~t the time of the transfe.r of the Property, whi.::b criteria include without li.itation creditworthiness standards and debt service ccveraqe standards: (2) the transferee, if the transferee is any entity other than the Beneficiary, bas executed the form of Assumption Aqreement pJ:"ovided by Lender and has provided evidence satis~actory to Lender in its sole discretion that Assumption Aqreement is a leqal~ valid and binding agreement of the transferee; (3) such t~ansf~ree pays Lender an Assumption Fee equal to one-balf percent (0.5\) of the remainill9' principal balance of the Note: (4) the Loan is c~rrent or it is brought c'Ilrrent simultaneously with or promptly following tbe tra.nsfer of the Property; {5) the Lender receives a new Lender's policy of title insurance or endorsement insuring the continued existing lien status of the Loan~ if necessary; (6) the tr~~sferee pays all costs relating to the transaction (credit report fees~ notary fees~ recording fees~ escrow fees. title fees~ title ins~rance premium. legal fees, and any other costs incurred :by Lender): (1) the transferee varrants that it shall comply with the requjrements of all applicable qoverr~ntal agencies and junior lenders~ if 5 > ..•. PABC Aparblenta. Inc ~ Subordination Agreement Paqe 6 any.. pertaIning to the rental -of the units to low-il'lCO!ll.e boQsebolds, and I} the junior lenders vhose 11er~ have not been _ ertinquished by foreclosure agree in writing that its/their loans to OWner shall not be accelerated or otherwise called in default due to the oontempl~ted assum~ion of the Loa!'!.. In tJle event the above-conditions are met" all existing tenia ot the Len&;r Loan Documents "ill """,ai" in effect. The dbliqations .of Lander stated herein are eYpressly conditioned upon the assumpt:lon transact.ion being in compliance with the applicable law aTJ4 requlations of all government agencies havin9 jurisdiction aver a Lender at the time of the transfer .. '!'he provisions .of this subpara-qreph shall apply to t.he t ... ns~er of the Property by the owner only and it shall not ap?ly to a subsequent t.ransfer by the OWner's transferee .. (vi) Lender aqrees to. qive Beneficiary notice of OWner's de.faul t under the Lender t.oan Documents. if any. simultaneously with written notice sent to ~er, if any, to the toll~inq address: City Clark, city ¢f Palo Alto 250 Hamilton Avenue Palo AJto. CA 94301 Lender's failore. t.o provIde writ.ten notice to Benefi.ciary Shall not extend the time for the OWner to cure any defaults. ~nder no circ~tances shall Lender incur any liability for any un1ntentional failure. to ,provid.e Beneficiary any such notice except where such notices are required by applicable law. JlO'J'ICII, '!'IUS SUBOIIDUIATIOB AGREEXEJI'f COIITAUIS A PROVISIOll BlIICII ALLOWS I'D PJlRSOB OBLIGAnt) 08 YOOl! HAL PROPERTY BECOlIITY ro OBTADI A LOU A PORnO. or lIlUCII BY BII BlrI'EIID£I) POll O'l'IIEll PtJRPOSES !"IlAJI DIP1IOVElIZlfTS 0' ftlB LAJII). BENEFICIARY: CITY OF PALO ALTO. a munic:ipal corporatic-n of the stat. of California By: Its: 6 ~:'I>o,OOO)()(l16j7 -~--,------,~------ • PARe Apartments, Inc. SUbordination Agree~ent F~e 7 CITY A'l"l'ORNEY \\ \\ O~' PAHC APARTMENTS, INC •• a calltornia ncr.profit public benefit corporation By, n.: FIRST lIATIONWIDE BANX, A Federal Savings sank By, It., (ALL 8J:GDflIU8 WST BB ACDIOIJLIiDGBD) .,. U UCONXEIlDED ~7, PRIOll TO !'liB 8UCVU08 01' nIS .l7BORI)Dil\U08 AGRJlIlXE,.." HI! PUUES CONSOL'l WI'l1l nu.II AftOlIlIZYS Win US&>SC'I' nsRn'O. 7 PI>J1C Apert .... nto, Inc. ~~~inatiQn A9r~ement Page 8 IIXl1IIIU A .-':' Tne land referred to 1. situated in the city of Palo Alto, County of Santa Clara, State ot California and i& described as follows: 1..o&n~_.mJOOI6t1 • 1. :e. 3. 4. 5. 6. EXKIllIT ·C· Project Devel~ent Schedule Close Acquisition Bscrow/Purchase of Property Complete Relocation of Commercial Tenant and Temporary Relocation of Residential Tenants Begin Rebabilitat!on of Property ~omplete Rehabilitation of Property Complete O<:cupanq' o! Property Complete Final Reporting and ~neatiOQ; Close Permanent Financing AprU 1994 March 1994 April 1994 January 19.95 February 1595 April 1995 liXBaIT "r P:<oj.ct ."'<$get Pre~aevelopment~ Financing. E$crQW and Miseellan~ous Transaction Costs Operating Deficit DUring (oostructtcc and Reot&Up; keser~~& i¢r Insur~e. Replacements and Operating (09!S De"¥'eloper ~ee 60,000 44.488 • ---" " Faro Alto Housing Corporation !040 Ca.;;aoer Street· Suite: 1{) J • Fa'a AROo. Ca!lfomia 94SO I --(4 15) ".:!I-97C9 • F;u [4},5.) 32l-4~4 J fcbnwy 23, 1995 JUl'le Fleming CilyManag..- Cily of Palo Alto P. O. Box 102;0 Palo .\he), CA 94301 It..:: Amendmem ofFundir.g Agreomen, fOe £.r\;er Hold Dear June: fEB 21 $5 C-::;~'. ~ C:;::-.r •. :;.....:~ .... w •.. , _ ,', •• ~' PAHC has now Enilhed the renovation «the Barker Hotd: Utd. presented it '0 mt. community g In open rJOUse Or! January 11, 1995. Vle are please-d .,rith the result. and find !1Iat t."le tenants are as wetl. It is satisfjing to sen.'~ • population in grut need of housing:. We are in the process of c:k>sing the permanent financing. A5 ""C update our acquisition budget, we find througn. City staft tfu[ it is J1ece~sary for the Counc~ 1.0 ill'nend the elduolt to the City"s fiH).fmg agreement on the Bark..,-Hotel to reflect t'f,e actual costs oftf.e ret~ilitilfion. By this.1ener. we request tnat you a,gendize lhe matter for Council action at tnt. earli~ opportunJty $0 tn:!t we can finarlZt. our proj ed p.iyments and a.ccount:"r:lg The costs cf'ptacing the Ba.l~ Hote1m service el(ceed~d the funds aVailable by approximate.I')' $60,500_ Contractor bids were higher tl:!a'l expected, Asbestos abatement costs were higher than orii.na!ly )demifie(t ArchitecturaT specifi.cat'ons aJ'ld City p:an cr.ecking resohed in suDstaoti.aJ 'nar1g~ oroers and d~T.1Y5_ Conln:ctor derays resulted lo a }-..ig11er opera..tionaT deficit. greater reJocatioo expe~l5es. and mcreased' L'1terest rates Tnis is-.. disappoIntment to PW£ 2lld gives ~xpand'ed meaning to t}.e tenn "nonprcfit"o E .. 'en thoogh this very -compfK:i!.ttO pro jed 'WI'U ConIjI 2 9'% o,'er budge ...... tl'Ie \)\o'er budget L'"nOUnt absorbed our entire dt"\<-eJoper fee. l;'us.,. our efforts 00 this praj~; fur the pa.,:;:: t\oI. 0 yeaa were. "gift" '0 tile oeommul'3ty_ The PAHC Board elected DCA. to request funds f·,) male-up f...""'f this ~s because we fed' some porlti<:aJ co\'enant not to ask lOr any more mone)' for tJ-Iis project. \\' e know t1'lal t1-J: CouociJ v,l!] recognize our bard 'Io'oci and "".;:n continwe to support future request.s. fur funds a.s .-e cor.tim.:e 10 pro .. ide affordabTe nou5i~g. to Pato Afto Sincere1y~ PALO ALTO HOOSfSG CORPORA TlO:-I ~~g,! ---t-~ Executr.e ~:~;~ .";'.