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HomeMy WebLinkAbout19 - Loan Agreement for Senior Affordable Housing at Lower Bayview LandingCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 19 February 25, 2003 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Sharon Wood, Assistant City Manager 644 -3222, swood @city.newport- beach.ca.us SUBJECT: Development Loan Agreement with Newport Housing Partners, L.P. for Senior Affordable Housing at Lower Bayview Landing ISSUE: Are the proposed agreements to loan $1,000,000 to $1,500,000 from the City's affordable housing in -lieu fund to Newport Housing Partners, L. P. acceptable? RECOMMENDATION: Authorize the Mayor to execute the agreements in substantially the same form as presented. DISCUSSION: Back round: The City Council began discussing the senior affordable housing project at Lower Bayview Landing at a study session on January 14, 2003. The report from that meeting (attached) provides background information on the project and the developer's request for financial assistance from the City. The proposed agreements for the City's loan are being refined by the City Attorney and the developer's attorneys, and will be distributed on Friday, February 21. Analysis: The proposed Development Loan Agreement and its exhibits commit the City to loan the developer up to $1,500,000 for development of the senior affordable housing project. The documents commit the developer to build the project, restrict its occupancy to low income persons over 55 years of age, and restrict rents to 30% of allowable income for a period of 55 years. The City will be repaid at 1% simple interest over a period of 55 years, unless 20% of residual receipts is lower, in which case the City will receive the lower amount. The majority of the project's financing will come from tax - exempt bonds, which typically have first priority for repayment. When the City Council Affordable Housing Task Force and staff began discussing Development Loan Agreement with Newport Housing Partners, L.P. February 25, 2003 Page 2 this project with The Related Companies (the parent to Newport Housing Partners), we expected the City's participation to be in the form of a grant, and any repayment is beyond our initial expectations. Disbursement of the loan will be made to the developer only upon closing of the construction loan and only with copies of invoices showing the expenditures for which payment is requested. The City is not obligated to disburse more than $1,000,000 unless the project becomes subject to prevailing wages, despite the developer's adherence to the project schedule included in the Development Loan Agreement. The Development Loan Agreement includes the City's waiver of all development review fees, including environmental documentation, as well as fair share traffic fees and park dedication fees. The developer will be responsible for plan check and building permit and inspection fees. The Completion Guaranty (Exhibit D) is made by The Related Companies, L.P. It guarantees completion of the housing project, and gives the City the right to bring an action to compel Related to complete the project. The City Attorney is still reviewing the enforceability of this provision and the language in the Completion Guaranty. The Restriction (Exhibit E) and the Agreement Containing Covenants provide details on the age and income of tenants, as well as the rents that they may be charged. The City Attorney has reviewed the proposed agreements and has approved them in substance. Minor modifications are still being discussed with the developer's attorneys. Environmental Review: A Draft Mitigated Negative Declaration has been prepared for the housing project, and is on this City Council agenda along with review of the land use and development applications for the project. Fundinq Availability: The affordable housing in -lieu fund has a balance of $2,560,000. Submitted by: Sharon Wood Assistant City Manager COUIyCiI A EN A N0. ll�y R. & un CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Study Session Agenda Item No. 3 January 14, 2003 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Sharon Wood, Assistant City Manager 644 -3222, swood @city.newport- beach.ca.us SUBJECT: Review of Affordable Senior Housing Development at Lower Bayview Landing and View Park Development at Upper Bayview Landing ISSUES: 1. City participation in development of an affordable senior housing project at Lower Bayview Landing, using the affordable housing in -lieu fund. 2. Coordination of the housing development with development of a view park at Upper Bayview Landing. RECOMMENDATION: Review housing and park projects, and provide direction to staff. HOUSING DISCUSSION: Background: State planning law requires cities to adopt general plan housing elements that address regional needs for housing affordable to all income levels. One of the principal provisions of the Newport Beach Housing Element is that developers of market rate housing should allocate 20% of the annual production of units to lower income households. The number of affordable units is to be negotiated for each development project, taking into account proper planning, CEQA compliance, project characteristics, incentives and government financing. The Circulation Improvement and Open Space Agreement ( CIOSA), approved in 1992, gave The Irvine Company entitlements to develop 861 market rate units. Because CIOSA is silent on a specific affordable housing requirement, the City has taken the position that the 20% requirement in the Housing Element should apply, resulting in the Bayview Landing January 14, 2003 Page 2 production of 172 affordable housing units. The Irvine Company does not believe th-s requirement applies to CIOSA, but has been willing to work with the City and potential affordable housing developers to provide an affordable senior housing project. As ear as 1995, the City and The Irvine Company began discussing such a project on the Lower Bayview Landing site. The development agreement for One Ford Road, approved in 1995, specified that Ford's affordable housing requirement was 15% of the 404 units entitled, or E1 affordable units. In lieu of constructing affordable housing units, the developer paid the City $5,000 for every market rate unit developed, for a total of $2,020,000, to facilitate affordable housing in Newport Beach. These funds were received in May 1997, and have been held in an account while the City has explored the best use of them. TIF.e affordable housing in -lieu fund was increased by $540,000 in 2000, when an in -lieu fee was paid by the developers of Sailhouse. Affordable Housing Task Force: The City Council created the Affordable Housing Task Force in 2000, charging it to identify, evaluate and implement one or more affordable housing projects to satisfy community needs and achieve regional housing goals. Current members are Mayor Bromberg and Mayor Pro Tern Ridgeway, with one vacancy formerly filled by Dennis O'Neil. The Task Force has been involved in the following activities: • Monitored progress on updating the General Plan Housing Element; • Wrote to The Irvine Company urging development of a senior housing project as the affordable housing component of its CIOSA developments; • Issued a request for proposals (RFP) for additional projects that could to assisted with the affordable housing in -lieu fund, reviewed the responses, and recommended that the City Council decline to pursue them; and • Most recently, worked with The Irvine Company, The Related Companies and staff to implement an affordable senior housing project at Lower Bayview Landing. Current Proposal: The Irvine Company responded to the Task Force's letter by beginning to discuss the possibility of a density bonus for an affordable housing project, and the City's goals in terms of rent limits and level of affordability. The Task Force provided clarity, and continued to urge The Irvine Company to pursue a project. In June 2001, The Irvine Company identified The Related Companies of California as the affordable housing developer. Related has designed a project with which staff and the Task Force are satisfied, and is ready to make the necessary applications to the Planning Commission and Coastal Bayview Landing January 14, 2003 Page 3 Commission for development approvals, and to the City Council for financial assistance. The project is summarized as follows: • 150, 1 bedroom and 2 bedroom units in three, 3 -story, elevator buildings with parking, community room and swimming pool. • Available to households headed by persons 55 or older. • 100% of units affordable, 80% to low- income households and 20% to very low - income households for a term of 55 years. If built today, the income limit would be $36,300 and the rent limit would be $908. • Site provided by The Irvine Company as part of their contribution to affordable housing in connection with CIOSA development. Planning Approvals Required: Both the General Plan and the Local Coastal Program Land Use Plan designate the site as Retail and Service Commercial, and provide that the site may be developed with senior affordable housing if the Coastal Development Permit findings demonstrate that there are adequate visitor serving uses in the coastal zone. There are no dwelling units included in the Land Use Element summary table for Statistical Area K1, where the site is located, but 200 units of "miscellaneous residential" are included in the Citywide Growth Projections table. These 200 units were intended to allow for the development of affordable housing. Therefore, the project is consistent with the General Plan. The site is in Area 1 of the Bayview Landing Planned Community, a zoning designation that allows development of 120 units of senior housing with a use permit. Both State law and the City's Housing Element require a density bonus of 25% for affordable housing projects, so no additional discretionary action is required to allow the development of 150 units. The site is in the coastal zone, and a Coastal Development Permit from the Coastal Commission is required. Request for City Assistance: Affordable housing projects typically are not economically feasible unless they receive financing from a number of sources at the Federal, State and local levels. Related intends to finance this project with a tax - exempt bond awarded by the California Debt Limit Allocation Committee ( CDLAC), Low Income Housing Tax Credits that are awarded automatically with CDLAC financing, and a grant of $250,000 from The Irvine Company. After all of these sources, the project has a financial gap of just over $1 million, and Related has requested that the City loan this amount from the affordable housing in -lieu fund. Staff has obtained an analysis of Related's financial pro forma from Kathleen Head of Keyser Marston Associates (KMA). Ms. Head specializes in financial analyses of affordable housing projects, and has assisted Newport Beach in analyzing potential Bayview Landing January 14, 2003 Page 4 projects, including earlier proposals for the Lower Bayview site, for several years. Ms. Head verified Related's estimates for construction costs, their financing plan, and their operating pro forma. Her conclusion is that the project requires $1.03 million in City assistance to achieve financial feasibility. After discussions between Related, staff and the Task Force, we have arrived at $1 million of assistance as an acceptable amount. City assistance would be in the form of a loan, subordinate to the other financirg sources and payable over the 55 -year period during which affordability restrictions are in place. This form of assistance is consistent with regulations governing CDLAC and tax credit financing. Potential Additional Assistance: SB 975, effective January 2003, requires that prevailing wages be paid for any project that is financed with public funds. The bill includes an exception for affordable housing projects that receive a tax credit allocation by December 2003. A project must have local approval and Coastal Commission approval, as required in this case, befo °e CDLAC consideration. Related and staff are working as fast as we can to meet this deadline. But especially with Coastal Commission approval required, it is possible that we will not meet the deadline. If prevailing wages do apply to the project, Related estimates that construction costs will increase by 15% and KMA estimates they will increase by 20 %. The requirement to pay prevailing wages creates a cost burden, estimated to be $1.2 million, that cannot be recouped through an increase in the project financing. Neither can it be recouped through developer profit, because affordable housing projects provide only a developer fee to the developer. Related has proposed sharing this burden with the City by deferring $600,000 of their developer fee. KMA has confirmed this is the maximum they could defer and still comply with IRS guidelines. Staff and the Task Force are proposing that the City increase our loan by $500,000, if the project becomes subject to prevailing wages. The City also is being asked to assist the project through waivers of Planning and fair share traffic fees. The Housing Element provides that the City Council may waive Planning fees for affordable housing projects, and staff recommends that the Council waive all Planning fees for this project. The Municipal Code provides that fair share traffic contributions shall be waived for affordable housing projects. The development loan agreement for this assistance program will be on a regular agenda for consideration and action by the City Council. Bayview Landing January 14, 2003 Page 5 PARK DISCUSSION: Background: Upper Bayview Landing is one of the open space sites The Irvine Company agreed to dedicate to the City through CIOSA. The City has discussed limited development of this site as a view park, which would include the following features: Asphalt bicycle trail between Coast Highway and Back Bay Drive; • Lowering of west side of the park to improve views of Upper Newport Bay; • Coastal sage revegetation between the new bicycle trail and Jamboree Road; • Native grass meadow between the new bicycle trail and the eastern bluff top; • Ornamental landscaping at the perimeter along Jamboree Road and part of Coast Highway; • Bluff top fence; and • Drainage improvements. Relationshio to Housino Proiect Public Works staff knew that grading for the view park would result in excess dirt that would need to be exported, and learned that Related had discovered soil problems with the housing site that could be remediated by "surcharging," depositing dirt and allowing it to compact the underlying materials. Both sites also need to provide for drainage in a manner that will protect water quality in Upper Newport Bay, which can be done by creating a joint water quality wetlands. Finally, it would be difficult to connect the new bicycle trail to the one through Newport Dunes without extensive grading or some reconfiguration of the park and housing sites. Related and City staff concluded that the two projects need to be designed in close coordination, and have been working together to resolve these design issues. The proposed design includes a land swap that provides additional land to the City for a better trail design in exchange for additional land to Related for the water quality wetlands. The size of the park would not be reduced as a result of this exchange, and it will allow the housing structures to be tucked into the hillside, contributing to improvement of views. The proposed site plan and grading plan for the projects will be available at the study session. The parties will continue to coordinate work on the two projects to minimize costs and impacts. ENVIRONMENTAL REVIEW: Staff has retained Civic Solutions to prepare environmental documentation to satisfy the CEQA requirements for both projects. It is expected that a Negative Declaration will be presented for the Planning Commission's consideration. Bayview Landing January 14, 2003 Page 3 FUNDING AVAILABILITY: The affordable housing in -lieu fund has a balance of $2,560,000. Capital Account C5100562 has $679,000 available for development of the view park. Submitted by: Sharon Wood Assistant City Manager "RECEI ED AFTER AGEND PRINTED:" 1 -2I-03 DEVELOPMENT LOAN AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH AND NEWPORT HOUSING PARTNERS, L.P. This Development Loan Agreement (this "Agreement ") is dated as of the _`h day of February, 2003, by and between the CITY OF NEWPORT BEACH, a California municipal corporation (hereinafter "City "), and NEWPORT HOUSING PARTNERS, L.P., a California limited partnership ( "Developer "). RECITALS A. City is making a development loan to Developer in an amount of up to ONE MILLION FIVE HUNDRED THOUSAND AND NO /100 Dollars ($1,500,000.00) (the "Loan ") to provide Developer financing for, developing and constructing a one hundred fifty (150) unit (hereinafter individually referred to as a "Unit" and collectively referred to as the "Units ") senior affordable housing project (collectively the "Work of Improvement ") on certain real property located in Newport Beach, California, more particularly described in EXHIBIT A attached hereto (the "Property ", and collectively with the Work of Improvement, the "Project "), which Property will be ground leased to Developer pursuant to the Ground Lease. All initially- capitalized terms in this Agreement shall have the meaning as provided in this Agreement, including in the schedule of additional definitions attached as SCHEDULE 1 hereto and made a part of this Agreement. B. Developer commits that the Units will be subject to the Rent Restrictions set forth in the Restriction, which shall require that twenty percent (20 %) of the Units be designated for 50% Individuals and eighty percent (80 %) of the Units be designated for 60% Individuals, subject to applicable laws including Section 51.3 of the California Civil Code. In addition to the Loan, Developer will use its best efforts to obtain project financing through Bonds and other Permitted Financing. C. City has determined that the Project will increase and improve the supply of affordable housing in the City of Newport Beach and is eligible for loan assistance from City. D. City and Developer have agreed that City will make the Loan to the Developer for the development of the Property subject to the terms and conditions hereinafter set forth and in the other Loan Documents. AGREEMENT ARTICLE I CITY LOAN TO DEVELOPER Section 1.01 Use of Proceeds. Subject to the terms of this Agreement, City agrees to make and Developer agrees to accept the Loan. Developer shall use the proceeds of the Loan solely for costs related to the Project, including for grading, surcharging and site improvements, and identified in a budget 28561253.8 02210± IIOOP 01929676 1 delivered or to be delivered to City, as the same may be amended from time to time by Developer with the City's prior written consent which shall not be unreasonably withheld or delayed (the "Budget "); provided, however, notwithstanding any provision to the contrary in this Agreement, City agrees that Developer may reallocate amounts among any line items in the Budget without the City's consent provided all reallocated amounts relate to the Project and the total aggregate Budget amount does not change. Section 1.02 Loan Terms (a) General. The Loan shall mature on April 1, 2060, unless earlier terminated under the terms of that certain promissory note of even date herewith executed by Developer in favor of City in a face principal amount of $1,500,000.00 (the "Note ") and in the form of EXHIBIT B attached hereto. Developer's obligation to repay the Loan is evidenced by the Note and this Agreement. Performance of the obligations under this Agreement and the Note shall be secured by a Development Loan Deed of Trust of even date herewith in the form of EXHIBIT C attached hereto (the "Deed of Trust ") executed and delivered by Developer for the benefit of City, and encumbering the Leasehold Estate. Completion of the Work of Improvement is guaranteed by The Related Companies, L.P. through its execution and delivery to City of a Completion Guaranty in the form of that attached hereto as EXHIBIT D (the "Completion Guaranty "). This Agreement, the Note, the Deed of Trust, the Completion Guaranty and that certain Agreement containing Covenants in the form attached hereto as EXHIBIT E (the "Restriction "), which among other things subjects the Leasehold Estate to the Rent Restrictions, shall hereinafter be collectively referred to as the "Loan Documents." (b) Interest and Payments. The Loan shall bear interest at the interest rate and for the period defined in the Note; provided, however, that whether by acceleration or otherwise, or from occurrence of an Event of Default (as hereinafter defined) until such default is cured, the entire unpaid principal shall bear interest at the Default Rate (as defined in the Note). Beginning on the first day of April following the calendar year during which Completion occurs (the "Payment Commencement Date "), and continuing on each April 1 st thereafter (each a "Payment Date ") until the Loan is paid in full pursuant to its terms, Developer shall pay to City an amount under the Note equal to the lesser of (i) TWENTY PERCENT (20 %) of the Residual Receipts for the preceding calendar year, or (ii) an amount equal to twelve (12) times the monthly payment which would be required to be paid to fully amortize the then outstanding principal balance of the Loan (on the Payment Date) assuming a 1% simple interest rate, a 55 year amortization period, and equal monthly payments. Such amount shall be applied first to accrued and unpaid interest under the Note and then to principal. As used herein "Residual Receipts" shall mean, for any reporting period, the amount, if any, by which (a) all Gross Income during such reporting period, exceeds (b) all Operating Expenses for such reporting period. 2816 1253 9022101 11001' 01929676 7 Section 1.03 Acceleration. The Note and the Deed of Trust shall provide for the acceleration of the unpaid principal balance of the Note at City's sole discretion, so that all sums theretofore advanced shall become immediately due and payable, and City shall be relieved from all further obligations hereunder, upon the happening of any of the following events of default following all applicable notice and cure periods (each an "Event of Default "): (a) Monetary. Developer's failure to pay when due any sums payable under the Note or any other amount under any of the other Loan Documents subject to the applicable notice and cure period hereinafter provided; (b) Performance of Obligations. Developer's failure to perform any material non- monetary obligation under any of the Loan Documents subject to the applicable notice and cure period hereinafter provided; (c) Representations and Warranties. Any of Developer's representations or warranties in any of the Loan Documents proves to be false in a material way; (d) Voluntary Bankruptcy; Insolvency; Dissolution. (1) Developer's filing of a petition for relief under the Bankruptcy Reform Act of 1978 as amended and recodified ( "Bankruptcy Act "), or under any other present or future state or federal law regarding bankruptcy, reorganization or other relief to debtors (collectively, "Debtor Relief Law "); or (2) Developer's filing any pleading in any involuntary proceeding under the Bankruptcy Act or other Debtor Relief Law, which admits the jurisdiction of the court or the petition's material allegations regarding Developer insolvency; or (3) Developer's making a general assignment for the benefit of creditors; or (4) Developer's applying for, or the appointment of, a receiver, trustee, custodian or liquidator of Developer or any of its property; or (5) filing by Developer of a petition seeking the liquidation or dissolution of Developer or the commencement of any other procedure to liquidate, dissolve or terminate Developer; (e) Involuntary Bankruptcy. Developer's failure to effect a full dismissal of any involuntary petition under the Bankruptcy Act or any other Debtor Relief Law, that is filed against Developer, prior to the earlier of the entry of any other granting relief sought in the involuntary petition, or ninety (90) days after such petition is filed; or (t) Sale. Except for any Permitted Transfer, any sale, or other transfer of the Leasehold Estate. City shall not exercise its right to accelerate the Loan or exercise any other remedies under the Loan Documents with respect to any default under any of the Loan Documents until Developer has failed to remedy or cure the default within thirty (30) days of the date of the written notice (with respect to a monetary default) or within sixty (60) days of the date of written notice (with respect to a non - monetary default) or, if such non - monetary default is not reasonably capable of 28501253.8 022103 11001' 01920070 being remedied or cured within the prescribed period, Developer has failed to either commence and diligently proceed to remedy or cure the non - monetary default. Section 1.04 Remedies. Upon the occurrence of an Event of Default, City may exercise from time to time any rights and remedies available to it at law or in equity or by statute in addition to, and not in lieu of, any rights and remedies expressly granted in the Loan Documents, or in any other instrument between these parties. Without limiting the foregoing, upon the occurrence of an Event of Default, and after the expiration of any applicable notice and cure periods, City shall have the right, in accordance with and subject to, the Ground Lease and applicable law, to take possession of the Property and the Project and perform any and all work it deems advisable or necessary to protect the Project. Developer shall use best efforts to cause the Ground Lease to permit the foregoing. ARTICLE II DISBURSEMENT OF LOAN Section 2.01 Disbursement Conditions. (a) Disbursement of Loan. Except as expressly provided below in this Section 2.01, the Loan shall be disbursed to Developer in one or more disbursements and in such amounts as designated by Developer within five (5) business days of City's receipt from Developer of a written draw request ( "Request ") specifying the amount of the requested disbursement together with copies of invoices and vouchers evidencing the costs for which payment is requested (which costs shall be consistent with the Budget); provided, however, (i) that City shall have no obligation to make more than two (2) disbursements during any calendar month nor make any disbursement to the extent such disbursement which would cause the total amount disbursed under the Loan to exceed $1,500,000, and (ii) upon the closing of the construction loan for the development of the Project (as evidenced by the recording of a deed of trust against the Leasehold Estate securing such construction loan) all undisbursed Loan funds shall be remitted to the construction lender for deposit into a borrower's funds account for future disbursement by the construction lender for the development of the Project. In addition, notwithstanding any provision to the contrary in this Agreement or any of the Loan Documents, City shall have no obligation to disburse more than One Million Dollars ($1,000,000) of the Loan unless and until Developer notifies City in writing that Developer is required to pay "prevailing wages" in accordance with State law to workers undertaking the construction of the Project. (b) Initial Disbursement Conditions. City will not make the disbursement of the Loan until Developer has satisfied or obtained City's written waiver of all of the following conditions: 29561251.8 022103 11001' 01020676 4 1. Executed Loan Documents. City has received all Loan Documents, duly executed in recordable form as appropriate by Developer, and the Deed of Trust and the Restriction have been duly recorded. 2. Title Insurance. Commonwealth Land Title Company ( "Title Company "), is prepared to issue at Developer's expense, a 1992 ALTA Lenders Extended Coverage policy of title insurance ( "Title Policy ") in the amount of up to ONE MILLION FIVE HUNDRED THOUSAND AND No /100 Dollars ($1,500,000.00) showing the Deed of Trust as a valid lien on the Leasehold Estate subject only to exceptions shown in that certain preliminary title report dated November 21, 2002 issued by Title Company under Order No. 2106533 -3 and the liens of any Permitted Financing (collectively, "Permitted Exceptions "), together with endorsements as reasonably required by City. 3. Representations. Developer is not then in default in performance of any of the warranties, representations, covenants, or agreements contained herein and the representations set forth in Article III shall be true and correct. (c) Disbursement Conditions for Loan funds exceeding One Million Dollars. Notwithstanding any provision to the contrary in this Agreement or any of the Loan Documents, City shall have no obligation to disburse more than One Million Dollars ($1,000,000) of the Loan unless and until (i) Developer notifies City in writing that Developer is required to pay "prevailing wages" in accordance with State law to workers undertaking the construction of the Project, and (ii) Developer has completed each of the actions set forth below within the time period provided: REQUIRED ACTIONS FOR PROJECT COMPLETION DATE Submit to the City's Planning Department completed March 31, 2003 applications for a use permit, site plan review, a lot line adjustment and environmental review Submit a completed application to the California Coastal June 2, 2003 Commission Submit a completed application to the California Debt July 16, 2003 Limit Allocation Committee Commence grading or construction December 31, 2003 ARTICLE III REPRESENTATIONS AND WARRANTIES 28561253.8 022103 1100P 01929676 5 Developer makes all of the representations and warranties set forth in this Article III. As used herein "Developer's Knowledge" shall mean the actual and not imputed knowledge of Bill Witte or his successor, if any. Section 3.01 Validity. This Agreement and all other Loan Documents, when executed and delivered, shall be valid and binding upon Developer and are enforceable in accordance with their respective terms. The persons executing and delivering the Loan Documents on Developer's behalf have the authority to do so. Section 3.02 No Litigation. To Developer's Knowledge, there is no litigation, proceeding or dispute pending or threatened against Developer, any of its general partner(s) or any of its officers or directors, or the Leasehold Estate. Section 3.03 Approvals. To Developer's Knowledge, no consent, approval or other action by, any notice to, or any filing with, any court or administrative or governmental body is or will be necessary for the valid execution, delivery or performance by Developer of this Agreement or any of the Loan Documents to which it is or is to be a party, other than such consents and approvals which have heretofore been obtained. Section 3.04 Financial Condition The financial statements of Developer, if any, heretofore delivered to City are accurate and complete in all respects, fairly represent the financial condition of the Developer as of the respective dates of such financial statements, and no change which has a material adverse effect has occurred in the conditions reflected therein since their respective dates. Section 3.05 Utilities. To Developer's Knowledge, water, sewer, electricity, telephone and other utility services necessary for the Property and operation thereof are or will be available for the Property for its intended use. To Developer's Knowledge, all necessary arrangements have been or will be made by Developer with utility companies and local governments to ensure the complete installation and use of such utilities. Section 3.06 Approvals. To Developer's Knowledge, the Property shall comply, and Developer shall take all necessary actions to make the Property comply, with all applicable laws, statutes, rules, regulations and codes, including without limitation occupancy regulations, subdivision regulations, zoning resolutions, building codes, flood plain regulations, environmental and land use laws and regulations and all use penmits affecting the Property. 285o 12 53.8 022101 110011 01929676 6 Section 3.07 Access Roads To Developer's Knowledge, all roads and other access necessary for the development of the Property and the full utilization of the Project for its intended purposes as contemplated herein have either been or will be completed or the necessary rights -of -way therefor have either been acquired by the appropriate governmental authorities or have been or will be dedicated to public use and accepted by such governmental authorities and all necessary steps have been or will be taken by Developer or such governmental authorities to complete the Project. Section 3.08 Construction of Project. Provided that Developer is able to obtain all entitlements necessary for the construction and development of the Project, and provided that Developer is able to obtain all financing required for the Project, Developer agrees to use best efforts to construct the Project. ARTICLE IV AFFIRMATIVE COVENANTS OF DEVELOPER Section 4.01 DevelOWnent of the PCODerty. Comuliance with Laws Developer shall perforni any development work on the Property in a good and workmanlike manner in accordance with all regulations and laws of all governmental agencies having jurisdiction over the same. Section 4.02 Inspection. Developer shall permit City and its representatives to enter upon the Property and observe the development of the Property and all materials to be used in development thereof, and cause the General Contractor and subcontractors to cooperate with City in this regard. Observation by City of development of the Property shall be for the purpose of protecting the security of the Loan only, and such observation shall in no way be construed as an acknowledgment that the Project is free from defects. Section 4.03 Insurance. (a) The Developer shall furnish or cause to be furnished to City following City's written request, duplicate originals or appropriate certificates of insurance as follows: 1. General Liability Insurance. Commercial general liability insurance, including Property Damage, Personal Injury Liability and Fire Legal Liability. Such coverage shall insure on an occurrence basis against claims for "personal injury" and "property damage," including but not limited to bodily injury, death or property damage occurring upon, in or about the Project, including construction and staging areas, or any adjoining sidewalk, streets, and passageways. Such coverage shall take effect and afford protection during the term of the Ground Lease. Such policy shall have an initial minimum coverage limit per occurrence of not less than $3,000,000 with respect to personal injury or 285(,1253,91)2210311001' 01929670 7 death to any one or more persons or damage to property (i.e., combined single limit), and carry a deductible per occurrence of not more than $25,000. 2. Builder's Risk Insurance. Throughout the construction of the Project, coverage of the type now known as builder's completed value risk insurance, as delineated on an All Risk Builder's Risk 100% Value Form. Such insurance shall insure against direct physical loss or damage by fire, lightning, wind, storm, explosion, collapse, vandalism, malicious mischief, glass breakage and such other causes as are covered by such form of insurance (but expressly excluding earthquake coverage). Such policy shall include (A) an endorsement for demolition costs and debris removal, and (B) a "Replacement Cost Endorsement" in amount sufficient to prevent Developer from becoming a co- insurer under the terms of the policy, but in any event in an amount not less than 100% of the then full replacement cost. The replacement cost coverage shall be for work performed and equipment, supplies and materials furnished to the Project with a deductible not exceeding $25,000 per occurrence. 3. Worker's Compensation Insurance. During construction of the Project, Worker's compensation insurance to be carried by General Contractor, in an amount and form sufficient to meet all applicable laws, and employer's liability coverage to a limit of not less than $1,000,000, with respect to personal injury or death to any one or more persons or damage to property. (b) Each insurance policy required under this Section 4.03 shall: 1. Be in form and substance as is then standard in California for policies of like coverage; 2. Be issued by insurance carriers qualified and licensed to engage in the insurance business in the State of California and having a current Policyholder's Management and Financial Size Category Rating of not less than "A- VIII" according to A.M. Best's Insurance Reports Key Rating Guide (unless such rating is not commercially available at a reasonable cost, as reasonably determined by Developer) or if such rating system shall cease, then of recognized financial responsibility approved by City in writing; 3. Provide coverage on an occurrence basis; and 4. Provide that the insurance policy cannot be canceled, suspended, lapsed or modified upon less than 10 days' prior written notice. (c) Any insurance coverage required under this Section 4.03 may be effected by a policy or policies of blanket insurance; provided that (i) the Project (or, in the case of builder's risk coverage, the improvements comprising the Project) is specifically identified therein, by endorsement or otherwise, as included in the coverage provided; (ii) the amount of the total insurance allocated to the Project (or contract) shall be such as to furnish protection equivalent to that which would be afforded by separate insurance policies in the amounts herein required; and (iii) in all other respects any such blanket 2856125 1.8022103 HOOP 01929676 8 policy or policies shall comply with all other provisions of this Agreement. In any such case Developer shall deliver to City a certificate evidencing such insurance. Section 4.04 Financial Information. Developer shall submit to City, on an annual basis, a true and correct copy of the annual financial statement for the Project within 120 days after the end of the preceding calendar year. Section 4.05 Further Documents. Developer shall furnish to City upon request all other instruments and documents in addition to those specifically referred to herein as may reasonably be required from time to time by City. Section 4.06 Developer's Existence. Developer shall maintain and preserve the existence of Developer under the laws of California and maintain its right to transact business in California and in all other states where its activities and ownership of assets are such that qualification to transact business is necessary under the laws of such states. Section 4.07 Protection of Pronert Developer shall protect the Property and all materials stored on the Property for installation on the Property, from removal, destruction and damage. Section 4.08 No Discrimination. The Developer covenants and agrees for itself that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry or handicap in the sale, ground lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Property, nor shall the Developer or any person claiming under or through Developer, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use of occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Property. All subleases or contracts made relative to the Property, improvements thereon, or any part thereof, shall contain or be subject to substantially the following nondiscrimination or-non- segregation clauses: (a) In subleases: "The lessor herein covenants by and for himself, his heirs, executors administrators and assigns, and all persons claiming under or through him, and this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of, any person or group of persons, on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry or handicap in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased nor shall the lessor or any person claiming under or through 28561253.8 022103 1100P 01929676 9 lessor establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees in the land herein leased." (b) In contracts: "There shall be no discrimination against or segregation of, any person, or group of persons, on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry or handicap in the sale, lease, sublease, transfer, use occupancy, tenure or enjoyment of the land, nor shall the transferee himself or any person claiming under or through him, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees; subtenants, sublessees, or vendees of the land." ARTICLE V CLOSING COSTS City shall incur no expenses for recording costs, escrow fees, and title insurance premiums paid in connection with the Loan. Developer shall pay all recording costs, escrow fees and title insurance premiums charged in connection with the Loan. ARTICLE VI GENERAL PROVISIONS Section 6.01 No Third Partv Beneficiaries Except as expressly provided in the Restriction, no person or entity, other than Developer or City and their permitted successors and assigns, shall have any right of action under the Loan Documents or any other document executed in connection therewith. Section 6.02 Waiver. Any waiver by City of any term, condition or requirement of any of the Loan Documents shall not constitute a waiver of any other term, condition or requirement hereof or constitute a waiver of the same term, condition or requirement in any other instance. Section 6.03 Notices Any notice or demand which shall be required or permitted by law or any provisions of this Agreement shall be in writing, and shall be deemed effective when personally delivered or deposited in the United States mail, certified, return receipt requested, postage prepaid, addressed as follows: Nio[253.8021103 uuur 01e2e676 10 To City: City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92658 Attn: City Manager with copy to: 3300 Newport Blvd. Newport Beach, CA 92658 Attn: City Attorney To Developer: Newport Housing Partners, L.P. c/o The Related Companies of California 18201 Von Karman Avenue, Suite 400 Irvine, CA 92612 Attn: Mr. Frank Cardone with copy to: Mayer, Brown, Rowe & Maw 350 South Grand Avenue Suite 2500 Los Angeles, CA 90071 Attn: L. Bruce Fischer, Esq. Section 6.04 Time. Time is of the essence in this Agreement. Section 6.05 Interpretation. In this Agreement personal pronouns shall be construed as though of the gender and number required by the context, the singular shall include the plural and the plural the singular as may be required by the context. Section 6.06 Exhibits and Schedules. All exhibits and schedules attached hereto are incorporated by this reference. ARTICLE VII AMENDMENTS Amendments to this Agreement shall be effective only upon the mutual agreement in writing of the parties hereto. No amendment shall be binding upon City unless duly executed by an appropriate officer of City. 28561253.8 022103 11 00P 01929076 11 ARTICLE VIII SUCCESSORS AND ASSIGNS Developer binds itself, its partners or members, successors, assigns, and legal representatives to City with respect to all covenants, agreements, and obligations contained in the Loan Documents. Developer shall not assign this Agreement in whole or in part without the written consent of City, which consent shall not be unreasonably withheld or delayed. ARTICLE IX RELATIONSHIP It is understood and agreed by and between the parties hereto that Developer in the performance of its obligations under the Loan Documents or any other agreement executed pursuant to this Agreement, shall not act, nor is it at any time authorized to act, as the agent or representative of City in any matter. Developer agrees that it will not, in any matter. hold itself but as the agent or representative of City in any manner, or act in such a fashion as would give the impression to a reasonable person, that Developer is acting in such a capacity. The relationship between Developer and City is, and shall remain, solely that of borrower and lender. At all times Developer shall act as and shall be an independent entity and not an agent or employee of City. ARTICLE X INTEGRATED DOCUMENT The Loan Documents together embody the agreement between City and Developer for the Loan and its terms and conditions. No verbal agreements or conversations with any officer, agent or employee of City prior to the execution of this Agreement, shall affect or modify any of the terms or obligations contained in the Loan Documents. ARTICLE XI SEVERABILITY OF PROVISIONS If any provisions of this Agreement are held invalid, the remainder of this Agreement shall not be affected hereby, if such remainder would then continue to conform to the terms and requirements of applicable law. ARTICLE XII SPECIAL PROVISIONS Section 12.01 Completion Guaranty. Concurrently with the closing of the Loan, Developer shall cause the Completion Guaranty to be executed acrd delivered to the City. 2S So 1253.8 022101 I I OUP 01929076 12 Section 12.02 Waiver of Certain Fees. As material consideration for Developer's entering into this Agreement, City hereby covenants and agrees that: (a) City shall waive the following fees in connection with Developer's development and construction of the Project: all park dedication fees, all use permit fees, the lot line adjustment fee, all environmental documentation fees, all third party consultant fees, all traffic study fees, and any fair share fees, and (b) the only fees that Developer shall be responsible for paying to the City in connection with the development and construction of the Project are those fees set forth below, estimates of which fees are set forth below (it being understood that the amounts set forth below are simply estimates of such fees and are not intended to be a limit on what such fees may actually be): SCHEDULE OF FEES Sanitation District Fees $87,000 Building Department Plan Check Fees $36,000 Building Permit Fees $48,000 Excise Tax- Residential $54,600 Energy Compliance Fees $471 California Seismic Fees $3,360 Fire Plan Check Fees $775 Fire Permit /Inspection Fees $1,075 Public Plan Check Fees $45 Microfilm Fees $500 Plan Check Grading Fees $1,485 Grading Permit Fees $2,969 TOTAL ESTIMATE $236,280 Section 12.03 Mortgagee Protections. 28161253.8022103 HOOP 01929676 13 Whenever City shall deliver any notice or demand to Developer with respect to any breach or default by Developer under the Loan Documents, City shall at the same time deliver to any Permitted Lender or other lender approved by City pursuant to this Agreement and each holder of record of any Permitted Mortgage or other mortgage, deed of trust or other security interest authorized by this Agreement (each hereinafter referred to as a "Holder "), a copy of such notice or demand. Each such Holder shall have the right at its option within sixty (60) days after the receipt of the notice, to cure or remedy, or commence to cure or remedy, any such default and to add the cost thereof to the security interest debt and the lien of its security interest. If such default shall be a default which can only be remedied or cured by such Holder upon obtaining possession, if such Holder has elected to cure the default and such Holder shall seek to obtain possession with diligence and continuity through a receiver or otherwise, then such Holder shall have until sixty (60) days after obtaining possession within which to remedy and/or cure such default; provided that in the case of a default which cannot with diligence be remedied or cured, or the remedy or cure of which cannot be commenced within such sixty (60) day period, such Holder shall have such additional time as reasonably necessary to remedy or cure such default with diligence and continuity; and provided further that such Holder shall not be required to remedy or cure any non- curable default of Developer. Provided that such Holder has given prior written notice of its name and address to City, the notices of default to Developer set forth herein, to be valid and effective as to the Holder and Developer, shall be delivered by City simultaneously to such Holder and Developer. Section 12.04 Snbordination of Loan Docnments. City acknowledges and agrees that the Loan Documents, including without limitation the lien(s) and/or terms of the Deed of Trust and Restriction, shall be subject and subordinate in all respects to all Permitted Mortgages and all documents that may hereafter evidence or pertain to any Bonds issued in connection with the development of the Project and, within ten (10) days following Developer's written request therefore, City shall execute a subordination agreement (on each holder's form) for the benefit of each holder of a Permitted Mortgage or applicable Bond document reflecting such subordination. Section 12.05 Estoppel Certificates. Within ten (10) days following Developer's written request, City shall execute and deliver to any potential holder of a Permitted Mortgage an estoppel certificate (a) confirming provided that such be the case, that Developer is not in default under the Loan Documents and that none of Loan Documents have been modified or supplemented in any way, (b) confirming that such holder of a Permitted Mortgage is entitled to all the protections afforded a holder of a Permitted Mortgage under this Agreement, and (c) containing such other certifications and agreements that such holder may reasonably require or request. 28561253.9 022103 1 100P 01929676 14 Executed by City and Developer on the day and year first above written. CITY OF NEWPORT BEACH, NEWPORT HOUSING PARTNERS, L.P., a California Municipal corporation a California limited partnership LM Name: Steven A. Bromberg Title: APPROVED AS TO FORM: Name: Robert H. Burnham Title: City Attorney By: RELATED/NEWPORT DEVELOPMENT CO., LLC, a California limited liability company, general partner By: By: LAS PALMAS FOUNDATION, a California non - profit public benefit corporation, general partner 295b12i3.8 022103 110101, 01929676 15 By: Its: SCHEDULE I ADDITIONAL DEFINITIONS "Affiliate" shall mean (1) any Person directly or indirectly controlling, controlled by or under common control with another Person; (2) any Person owning or controlling ten percent (10 %) or more of the outstanding voting securities of such other Person; and (3) if that other Person is an officer, director, member or partner, any company for which such Person acts in any such capacity. The term "control" as used in the immediately' preceding sentence, shall mean the power to direct the management. It shall be a presumption that control with respect to a corporation or limited liability company is the right to exercise, directly or indirectly, more than fifty percent (50 %) of the voting rights attributable to the controlled corporation or limited liability company, and, with respect to any individual, partnership, trust, other entity or association, control is the possession, indirectly or directly, of the power to direct or cause the direction of the management or policies of the controlled entity. "Architect" shall mean the architect for the Project selected by Developer. "Assumed Occupancy" shall mean as to any Unit for purposes of determining affordable rent for such Unit, that each one (1) bedroom Unit is assumed to be occupied by two (2) people and each two (2) bedroom Unit is assumed to be occupied by four (4) people. "Bankruptcy Act" shall have the meaning ascribed to it in Section 1.03(d) of the Agreement. "Bonds" shall mean bonds allocated by CDLAC and that are exempt from tax under Section 103 of the Internal Revenue Code. " CDLAC" shall mean the California Debt Limit Allocation Committee. "Completion" shall mean the point in time when all of the following shall have occurred: (1) issuance of permanent certificates of occupancy for all of the Units in the Project by the City; and (2) the Architect, the Construction Manager or Developer certifies that construction of the Project has been completed in a good and workmanlike manner and substantially in accordance with the approved plans and specifications. "Completion Guaranty" shall have the meaning ascribed to it in Section 1.02(a) of the Agreement. "Debtor Relief Law" shall have the meaning ascribed to it in Section 1.03(d) of the Agreement. "Deed of Trust" shall have the meaning ascribed to it in Section 1.02(a) of the Agreement. 28�o 1253 8 022 103 1 1 0011 (11921)(,76 Page l of "Event of Default" shall have the meaning ascribed to it in Section 1.03 of the Agreement. "General Contractor" shall mean the general contractor for the Project selected by Developer. "Governmental Approvals" shall mean any and all special use permits, environmental review, general plan amendments, zoning approvals or changes, required approvals and certifications and/or negative declarations under the California Environmental Quality Act and any other applicable laws and regulations relating to environmental conditions, tentative and final tract or parcel maps, variances, conditional use permits, special use permits, demolition permits, excavation/foundation permits, grading permits, building permits, inspection reports and approvals, certificates of occupancy, and other approvals, permits, certificates, authorizations, consents, orders, entitlements, filings or registrations, and actions of any nature whatsoever required from any Governmental Authority in order to commence construction, construct the Project, occupy the completed Project and operate the Project. "Governmental Authority" means any and all of the State of California, the County of Orange, the City of Newport Beach, the California Coastal Commission, or any other political subdivision in which the Project is located, and any court or political subdivision, agency or instrumentality, including planning commissions and city councils, having jurisdiction in any respect over the Project or the Property. "Gross Income" shall mean the gross rental income received by Developer in connection with its rental of the Units. "Ground Lease" means that certain ground lease of the Property from Irvine Apartment Communities, Inc., as lessor, to Developer, as lessee. "Holder" shall have the meaning ascribed to it in Section 12.03 of the Agreement. "Leasehold Estate" means the leasehold estate created under the Ground Lease. "Loan Documents" shall have the meaning ascribed to it in Section 1.02(a) of the Agreement. "Manager Units" shall mean up to two (2) Units used by managers of the Project. "Note" shall have the meaning ascribed to it in Section 1.02(a) of the Agreement. "Operating Expenses" shall mean all rent and other payments required of lessee under the Ground Lease and all actual, reasonable and customary costs, fees and expenses directly attributable to the operation, leasing, repair, maintenance, taxes and management of the Project, expressly including, without limitation, all of the following: payment of principal and interest on all Permitted Financing (expressly excluding principal and interest under the Loan), all periodic fees and costs attributable to any Permitted Financing; onsite administrative costs (including salaries and benefits and overhead costs); maintenance costs (including materials and labor); reasonable payments to an operating reserve account; reasonable payments to a replacement 2856125a.8022103 1100P 01929676 Page 2 of reserve account; painting, cleaning, repairs and alterations; landscaping; utilities; rubbish removal; certificates, permits and licenses; sewer charges; real and personal property taxes and assessments; insurance; security; advertising, promotion and publicity; office, janitorial, cleaning and building supplies; cable television, satellite and similar facilities; recreational amenities, supplies and services; social services and social services fees; reasonable fees payable to a property manager, not to exceed five percent (5 %) of Gross Income; developer fees as permitted by the California Tax Credit Allocation Committee, including, without limitation, payments under any developer fee note; fees payable to the general partners pursuant to the Partnership Agreement; purchase, repair, servicing and installation of appliances, equipment, fixtures and furnishings (other than from reserves); fees and expenses of accountants, attorneys, consultants and other professionals, including annual audits and tax return preparation costs payable to a third party. "Payment Commencement Date" shall have the meaning ascribed to it in Section 1.02(b) of the Agreement. "Payment Date" shall have the meaning ascribed to it in Section 1.02(b) of the Agreement. "Permitted Financing" shall mean any development loan, construction loan, take -out loan or Bond financing obtained in connection with the construction, development and /or permanent financing of the Project, as well as any other soft or residual receipts loans (other than the Loan), including, without limitation, any loan made to Developer by the ground lessor (or its affiliates) under the Ground Lease. "Permitted Lender" shall mean any Person that makes available Permitted Financing. "Permitted Mortgage" means a conveyance of a security interest in the Leasehold Estate and /or Developer's interest in the Project (including, without limitation, a deed of trust encumbering the Leasehold Estate) to secure any Permitted Financing. "Permitted Transfer" means any of the following: (a) An assignment of all of Developer's interests in any of the Leasehold Estate and the Project to an Affiliate; (b) The syndication of limited partnership interests in Developer; (c) Any Permitted Mortgage; (d) The leasing of any apartment units for occupancy; (e) Any transfer of the Leaselold Estate or Project permitted under the Ground Lease; (f) Any transfer of the Leasehold Estate or Project to any of the general partner(s) or managing member(s) (or their Affiliates) in Developer pursuant to the terms and conditions of the Developer's agreement of limited partnership or operating agreement following the 285612518022W3 1100P 01920076 Page 3 of expiration of the fifteen (15) year tax credit compliance period under Section 42 of the Internal Revenue Code; and (g) A transfer or pledge (for security purposes) by any of the partners in Developer of their respective interest in Developer. "Person" means an individual, partnership, limited partnership, trust, estate, association, corporation, limited liability company or other entity, domestic or foreign. "Project" shall have the meaning ascribed to it in the Recitals of the Agreement. "Property" shall have the meaning ascribed to it in the Recitals of the Agreement. "Rent Restrictions" shall mean the requirement that one hundred percent (100 %) of the Units in the Project (other than up to two (2) Manager Units) shall be made available for occupancy by, and affordable to, individuals ( "60% Individuals ") whose income does not exceed sixty percent (60 %) of the area median income, adjusted for household size, for the Orange County, California MSA, as determined from time to time by the US Department of Housing and Urban Development and at least one of whom is at least fifty -five (55) years of age subject to applicable laws including Section 51.3 of the California Civil Code; provided, however, not less than twenty percent (20 %) of the Units must be made available to individuals ( "50% Individuals ") whose income does not exceed fifty percent (50 %) of the area median income, adjusted for household size, for the Orange County, California MSA, as determined from time to time by the U.S. Department of Housing and Urban Development and at least one of whom is at least fifty -five (55) years of age subject to applicable laws including Section 51.3 of the California Civil Code. For purposes hereof, "affordable" shall mean a rent charge for the Assumed Occupancy of a Unit which is less than or equal to one - twelfth (1 \12) of thirty percent (30 %) of sixty percent (60 %) (or fifty percent (50 %), as applicable) of the area median income adjusted for the Assumed Occupancy for such Unit, for Orange County, California MSA, as determined from time to time by the US Department of Housing and Urban Development. "Request" shall have the meaning ascribed to it in Section 2.01(a) of the Agreement. "Residual Receipts" shall have the meaning ascribed to it in Section 1.02(b) of the Agreement. "Restriction" shall have the meaning ascribed to it in Section 1.02(a) of the Agreement. "Title Company" shall have the meaning ascribed to it in Section 2.01(b)(2) of the Agreement. "Unit" shall have the meaning ascribed to it in the Recitals of the Agreement. "Work of Improvement" shall have the meaning ascribed to it in the Recitals of the Agreement. 18s612s3.8 02210311001' 01r29670 Page 4of4 EXHIBIT A LEGAL DESCRIPTION (Attached) 285o 1 '?3 %1122103 11001' 0192767(, EXHIBIT B NOTE (Attached) 23561253.9 022103 HOOP 01929676 PROMISSORY NOTE SECURED BY DEED OF TRUST Principal Loan Amount: $1,500,000.00 Note Date: 12003 FOR VALUE RECEIVED, the undersigned ( "Maker ") hereby promises to pay to the order of the THE CITY OF NEWPORT BEACH, a public body, corporate and politic ( "Holder "), at a place designated by Holder, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS AND NO CENTS ($1,500,000.00) or so much thereof as is disbursed for the account of Maker, with simple interest from the date of disbursement at the rate of one percent (1 %) per annum. The obligation of Maker to Holder hereunder shall be secured by a deed of trust (the "Trust Deed ") made by Maker encumbering its leasehold interest in the site to be developed (the "Site ") pursuant to the Loan Agreement. The obligation of Maker set forth in this Note is subject to acceleration as set forth in the Trust Deed. Unless expressly defined herein, all capitalized terms used herein shall have the meaning ascribed to them in that certain Development Loan Agreement (the "Loan Agreement ") dated as of the date hereof, entered into by and between Maker and Holder. 1. City Loan. This Note evidences the obligation of Maker to Holder for the repayment of funds loaned to Maker by Holder (the "City Loan ") to finance the development of the Property pursuant to the Loan Agreement. Except as otherwise permitted in the Loan Agreement, Maker shall not make any sale, assignment or conveyance, or transfer in any other form, of Maker's leasehold interest in the Property, or any part thereof, or interest therein without the express written consent of Holder. 2. Additional Terms. (a) Term. The term of this Note shall be fifty -seven (57) years, commencing on the date of this Note. (b) Repayment. Beginning on the Payment Commencement Date and continuing on each Payment Date thereafter through the Maturity Date (as hereinafter defined), Maker shall make a payment to Holder in accordance with Section 1.02(b) of the Loan Agreement. Each payment shall be credited first to interest then accrued and the remainder to principal. Principal and interest are payable in lawful money of the United States. On the fifty - seventh (57`)') anniversary date of this Note (the "Maturity Date "), all remaining unpaid principal and interest shall immediately become due and payable. Following an Event of Default and the expiration of the applicable notice and cure period provided in the Loan Agreement, the whole sum of principal and interest outstanding under this Note shall become immediately due and payable at Holder's option. Failure by Holder to exercise this option shall not constitute a waiver of the right to exercise it in the event of any subsequent Event of Default. At the end of the tens of this Note and discharge of this Note as set forth above, Holder shall mark this Note "PAID IN FULL" and shall then deliver this Note to the trustee of the Trust LAI)I]01 25561256.5021903 14401' 01929676 Deed that secures this Note for the trustee's delivery to Maker in conjunction with the reconveyance of the Trust Deed. (c) Disbursement of the City Loan. Holder shall disburse the City Loan as set forth in the Loan Agreement. 3. Prepayment. This Note maybe prepaid in whole or in part at anytime without the payment of any prepayment penalty. 4. Acceleration of Obligation. Upon the occurrence of an uncured Event of Default of Maker under this Note, the Trust Deed or the Loan Agreement, and the expiration of any notice and cure period provided therein or herein, and upon thirty (30) days, prior written notice to Maker, Holder may, at its option, declare this Note and the entire outstanding indebtedness hereby evidenced to be immediately due and payable and collectible then or thereafter as Holder may elect, regardless of the date of maturity. 5. Default Interest. if any event occurs giving Holder the right to accelerate the Note pursuant to Section 4 above, the entire unpaid outstanding principal owing hereunder shall, as of the date of such Event of Default, commence to accrue interest at a rate equal to two percentage points above the reference rate published by Bank of America, N.A., or the maximum non- usurious interest rate permitted by law, whichever is less. 6. Collection Costs; Attorneys' Fees. If any attorney is engaged by Holder because of any uncured Event of Default under this Note or the Trust Deed or to enforce any provisions of either instrument, whether or not suit is filed hereon, Holder shall bear its own attorney's fees and costs. 7. Severability. The unenforceability or invalidity of any provision or provisions of this Note as to any persons or circumstances shall not render that provision or those provisions unenforceable or invalid as to any other provisions or circumstances, and all provisions hereof, in all other respects, shall remain valid and enforceable. 8. Modifications. Neither this Note nor any term hereof may be waived, amended, discharged, modified, changed or terminated orally; nor shall any waiver of any provision hereof be effective unless by an instrument in writing signed by Maker and Holder. 9. Usury. Notwithstanding any provision in this Note, Trust Deed or other Loan Document, the total liability for payment in the nature of interest shall not exceed the limit now imposed by applicable laws of the State of California. 10. Governing Law. This Note has been executed and delivered by Maker in the State of California and is to be governed and construed in accordance with the laws thereof. IN WITNESS WHEREOF, Maker has executed this Note as of the date and year first above written. "MAKER" LADB01 28561256.5 021903 14461' 01929676 NEWPORT HOUSING PARTNERS, L.P., a California limited partnership By: RELATED/NEWPORT DEVELOPMENT CO., LLC a California limited liability company, general partner C By: LAS PALMAS FOUNDATION, a California non - profit public benefit corporation, general partner By: Its: LADB0128561256.50219031446P 01929676 EXHIBIT C DEED OF TRUST (Attached) '_3_61253.8 022103 1100P 01929676 No fee: Recording requested pursuant to Government Code Section 27383 Recording Requested By, and When Recorded, Return to: City of Newport Beach P.O. Box 1768 Newport Beach, CA 92658 Attn: (space above this line for Recorder's use only) DEED OF TRUST With Assignment of Rents THIS DEED OF TRUST (this "Deed of Trust'), is made this day of 2003, by and between Newport Housing Partners, L.P., a California limited partnership (the `Borrower "), as trustor, ( "Trustee "), and the City of Newport Beach (the `Beneficiary "), a public body, corporate and politic, as beneficiary, and is executed to secure the obligations contained in that certain Promissory Note Secured by Deed of Trust executed by Trustor in favor of Beneficiary and dated 2003 (the "Note "). 1. GRANT IN TRUST AND PROPERTY AGREEMENT. For valuable consideration, Trustor irrevocably grants, transfers and assigns to Trustee, in trust, with power of sale, for the benefit of Beneficiary, the following property (the "Property "): (a) Borrower's interest in the leasehold estate described in Attaclunent A attached to this Deed of Trust and incorporated in this Deed of Trust by reference (the "Leasehold Estate "), which Leasehold Estate covers the real property (the "Land ") described in Attachment B attached to this Deed of Trust and incorporated into this Deed of Trust by reference; and (b) all buildings, structures and other improvements now or in the future located or to be constructed on the Land (the "Improvements "); and (c) all tenements, hereditaments, appurtenances, privileges and other rights and interests now or in the future benefiting or otherwise relating to the Land or the Improvements, including easements, rights -of -way, development rights, mineral rights, water rights and water stock (the "Appurtenances "). 2. OBLIGATIONS SECURED. The Borrower makes this grant for the purpose of securing the following obligations: 28561258.2021003 14471' 01929676 (Page 1 of 10) A. Repayment of the indebtedness of the Borrower to Beneficiary under the Note, in accordance with the terms of the Note or as much as has been disbursed to the Borrower under the Note, along with any extensions, amendments, modifications, or renewals to the Note; and B. Payment of any sums advanced by Beneficiary to protect the Property and priority of this Deed of Trust; and C. Payment of any sums advanced by Beneficiary following a breach of the Borrower's obligation to advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; and D. Performance of every obligation, covenant or agreement of the Borrower contained in this Deed of Trust and the Note, including all modifications, extensions and renewals of these obligations; and E. Performance of any other obligation or repayment of any other indebtedness of the Borrower to Beneficiary, where such evidence of obligation or indebtedness specifically recites that it is secured by this Deed of Trust. 3. ASSIGNMENT OF RENTS AND RIGHT TO POSSESSION. As additional security, the Borrower hereby assigns to Beneficiary: (a) all of the rents, revenues, profits, and income from the Property, any deposits now or hereafter in the Borrower's possession which have been collected with respect to the Property, and any reserve or capital funds now or hereafter held by the Borrower with respect to construction or operation of the Property (collectively, the "Rents "); and (b) the right to enter, take possession of, and manage the Property; provided however that the Borrower shall have, before an Event of Default (as such term is defined in the Note) the exclusive right to possess the Property and to collect Rents and use then in accordance with the Note and all documents relating thereto. This assignment is intended to be an absolute and present transfer of the Borrower's interest in existing, and future Rents, effective as of the date of this Deed of Trust. 4. ENFORCEMENT. Upon the happening of an Event of Default and written notice to the Borrower, Beneficiary may, in addition to other rights and remedies permitted by the Note, this Deed of Trust, or applicable law, (a) enter upon, take possession of, and manage the Property, either in person as a mortgagee -in- possession, by agent, or by a receiver appointed by a court, and do any acts which it deems necessary or desirable to preserve the value, marketability or rentability of the Property, (b) collect all Rents, including those past due and unpaid, and apply the same to pay for the costs and expenses of operation of the Property, including attorneys' fees, and pay off any indebtedness secured by this Deed of Trust, all in such order as Beneficiary may determine, and /or (c) enter upon and take possession of the Property, and complete construction of any improvements on the Property as provided for in the plans and specifications prepared for the improvements. Beneficiary may make, cancel, enforce, and modify leases and rental agreements, obtain and evict tenants, set and modify rent terms, sue for rents due, enter into, modify, or terminate any contracts or agreements, or take any legal action, as it deems necessary with respect to the Rents or the development or operation of the Property. 28561258.2 021903 14471' 01929676 (Page 2 of 10) 5. APPOINTMENT OF A RECEIVER. In any action to enforce this Deed of Trust, Beneficiary may apply for the appointment of a receiver to take possession of the Property and take whatever measures are necessary to preserve and manage the Property for the benefit of Beneficiary and the public interest. The Borrower hereby consents to the appointment of a receiver following the occurrence of an Event of Default. The receiver shall have all of the authority over the Property that Beneficiary would have if Beneficiary took possession of the Property under this assignment as a mortgagee -in- possession, including the right to collect and apply Rents and the right to complete construction of improvements. 6. NO WAIVER OF POWER OF SALE. The entering upon and taking possession of the Property and the collection of Rents shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or notice of default and, notwithstanding the continuance in possession of the Property or the collection and application of Rents, Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust or by law upon occurrence of any Event of Default, including the right to exercise the power of sale. COMMERCIAL CODE PROPERTY AGREEMENT 7. GRANT. This Deed of Trust is intended to be a security agreement and financing statement pursuant to the California Commercial Code for any of the items specified above as part of the Property which under applicable law may be subject to a security interest pursuant to the Commercial Code, and the Borrower hereby grants Beneficiary a security interest in said items. Beneficiary may file a copy of this Deed of Trust in the real estate records or other appropriate index as a financing statement for any of the items specified as part of the Property. The Borrower shall execute and deliver to Beneficiary at Beneficiary's request any financing statements, as well as extensions, renewals, and amendments thereof, and copies of this instrument in such form as Beneficiary may require to perfect a security interest with respect to said items. The Borrower shall pay all costs of filing such financing statements and shall pay all reasonable costs of any record searches for financing statements and releases. Without the prior written consent of Beneficiary, the Borrower shall not create or permit any other security interest in said items. S. REMEDIES. Upon the occurrence of an Event of Default, Beneficiary shall have the remedies of a secured party under the Commercial Code and at Beneficiary's option may also invoke the remedies provided for elsewhere in this Deed of Trust with respect to said items. Beneficiary may proceed against the items of real property and personal property specified above separately or together and in any order whatsoever. RIGHTS AND OBLIGATIONS OF TRUSTOR 9. PERFORMANCE OF SECURED OBLIGATION. The Borrower shall promptly perform each obligation secured by this Deed of Trust. 10. PAYMENT OF PRINCIPAL AND INTEREST. The Borrower shall promptly pay when due the principal and interest on the indebtedness evidenced by the Note, subject to any grace, notice and /or curative periods provided for therein. 28561258.2 021903 1447P 01929676 (Page 3 of 10) 11. MAINTENANCE OF THE PROPERTY. The Borrower shall, at the Borrower's own expense, maintain and preserve the Property or cause the Property to be maintained and preserved in good condition, in good repair, and in a decent, safe, sanitary, habitable and tenantable condition. The Borrower shall not cause or knowingly permit any violations of any laws, ordinances, regulations, covenants, conditions, restrictions, or equitable servitudes as they pertain to improvements, alterations, maintenance or demolition on the Property. The Borrower shall not commit or knowingly permit waste on or to the Property. The Borrower shall not abandon the Property. Beneficiary shall have no responsibility over maintenance of the Property. In the event the Borrower fails to maintain the Property in accordance with the standards in this Deed of Trust, after at least sixty (60) days, except in health and safety emergencies, in which case, after at least ten (10) days prior written notice to the Borrower, Beneficiary may, but shall be under no obligation to, make such repairs or replacements as are necessary and provide for payment thereof. Any amount so advanced by Beneficiary, together with interest thereon from the date of such advance at the same rate of indebtedness as specified in the Note (unless payment of such an interest rate would be contrary to applicable law, in which event such sums shall bear interest at the highest rate then allowed by applicable law), shall become an additional obligation of the Borrower to Beneficiary, and shall be secured by this Deed of Trust. 12. INSPECTION OF THE PROPERTY. The Borrower shall permit Beneficiary to enter and inspect the Property for compliance with these obligations upon 48 hours advance written notice of such visit by Beneficiary to the Borrower or the Borrower's management agent. 13. DEFENSE AND NOTICE OF CLAIMS AND ACTIONS. Following the occurrence of an Event of Default, the Borrower shall appear in and defend, at its own expense, any action or proceeding purporting to affect the Property and /or the rights of Beneficiary. The Borrower shall give Beneficiary and Trustee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding and of any condemnation offer or action with respect to the Property. 14. SUITS TO PROTECT THE PROPERTY. Beneficiary shall have power to institute and maintain such suits and proceedings as it may deem expedient (a) to prevent any impairment of the Property or the rights of Beneficiary, (b) to preserve or protect its interest in the Property and in the Rents, and (c) to restrain the enforcement of or compliance with any governmental legislation, regulation, or order, if the enforcement of or compliance with such legislation, regulation, or order would impair the Property or be prejudicial to the interest of Beneficiary. 15. DAMAGE TO PROPERTY. The Borrower shall give Beneficiary and Trustee prompt notice in writing of any damage to the Property. If any building or improvements erected on the Property is damaged or destroyed by an insurable cause, the Borrower shall, at its cost and expense (but only to the extent of available insurance proceeds), repair or restore said buildings and improvements consistent with the original plans and specifications. Such work or repair shall be commenced within 180 days after the damage or loss occurs and Borrower shall diligently pursue such work or repair to completion. All insurance proceeds collected for such damage or destruction shall be applied to the cost of such repairs or restoration. 28s61?5Q 0271)0± 14471' 01927n76 (Page 4 of 10) 16. TITLE. Borrower warrants that to the best of Borrower's knowledge, the Borrower lawfully has legal title to the Leasehold Estate and Borrower has the right to encumber the same with the Deed of Trust. 17. GRANTING OF EASEMENTS. The Borrower may, without Beneficiary's approval or consent, grant easements, licenses, rights -of -way or other rights or privileges in the nature of easements with respect to the Property including those required or desirable for installation and maintenance of public utilities including water, gas, electricity, sewer, cable television, telephone, and those required by law. 18. TAXES AND LEVIES. The Borrower shall pay prior to delinquency, all taxes, fees, assessments, charges and levies imposed by any public authority or utility company which are or may become a lien affecting the Property. However, the Borrower shall not be required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof shall be promptly and actively contested in good faith and by appropriate proceedings or Borrower has applied for a property tax exemption under applicable law, and (b) Borrower maintains reserves adequate to pay any contested liabilities, or Borrower causes the lien for such taxes to be insured over by the title company insuring the lien of this Deed of Trust. In the event that the Borrower falls to pay any of the foregoing items, Beneficiary may, but shall be under no obligation to, pay the same, after Beneficiary has notified the Borrower in writing of such failure to pay and the Borrower fails to fully pay such items within seven business days after receipt of such written notice. Any amount so advanced by Beneficiary, together with interest thereon from the date of such advance at the same rate of indebtedness as specified in the Note (unless payment of such interest would be contrary to applicable law, in which event such sums shall bear interest at the highest rate then allowed by applicable law), shall become an additional obligation of the Borrower to Beneficiary and shall be secured by this Deed of Trust. 19. CONDEMNATION. All judgments, awards of damages, settlements and compensation made in connection with or in lieu of taking all or any part of or interest in the Property under assertion of the power of eminent domain ( "Funds ") are hereby assigned to and shall be paid to Beneficiary to the extent (but only to the extent) Beneficiary's security interest in the Property is impaired. Beneficiary is authorized (but not required) to collect and receive any Funds and is authorized to apply them in whole or in part upon any indebtedness or obligation secured hereby, in such order and manner as Beneficiary shall determine in its reasonable discretion to the extent (and only to the extent) Beneficiary's security interest in the Property is impaired. All or any part of the amounts so collected and recovered by Beneficiary may be released to the Borrower upon such conditions as Beneficiary may reasonably impose for its disposition. 20. ACCELERATION ON TRANSFER OF PROPERTY; ASSUMPTION. Except as expressly provided below, in the event that the Borrower, without the prior written consent of the Beneficiary, sells, transfers, or conveys its interest in the Property, Beneficiary may at its option declare all sums secured by this Deed of Trust to be immediately due and payable. Notwithstanding the foregoing or anything stated to the contrary elsewhere in this Deed of Trust, the following transfers and/or conveyances are expressly permitted and are not prohibited under this Deed of Trust: 28 SO I'iS 2 021903 14471' 01929676 (Page 5 of 10) A. An assignment of Borrower's interest in the Leasehold Estate and/or the Property to an Affiliate; B. The syndication of limited partnership interests in Borrower; C. Any Permitted Mortgage; D. The leasing of any apartment units now or hereafter constructed on the Land for occupancy; E. Any transfer of the Leasehold Estate permitted; under the ground lease described in Attachment A attached hereto; F. Any transfer of the Leasehold Estate or Borrower's interest in the Property to any of the general partner(s) or managing member(s) (or their Affiliates) in Borrower pursuant to the terms and conditions of Borrower's agreement of limited partnership or operating agreement following the expiration of the fifteen (15) year tax credit compliance period under Section 42 of the Internal Revenue Code; and G. A transfer or pledge (for security purposes) by any of the partners in Borrower of their respective interests in Borrower. 21. RECONVEYANCE BY TRUSTEE. This Deed of Trust is intended to continue for the entire term of the loan evidenced by the Note. Upon written request of Beneficiary stating that all sums secured by this Deed of Trust have been paid and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by the Borrower of Trustee's reasonable fees, Trustee shall reconvey the Property to the Borrower, or to the person or persons legally entitled thereto. DEFAULT AND REMEDIES 22. EVENTS OF DEFAULT. Any of the events listed in the Note as an Event of Default shall also constitute an Event of Default under this Deed of Trust. 23. ACCELERATION OF MATURITY. Upon the happening of an Event of Default which has not be cured within the times and in the manner provided in the Note, Beneficiary may declare all sums advanced to the Borrower tinder the Note and this Deed of Trust immediately due and payable. 24. BENEFICIARY'S REMEDIES. Upon the happening of an Event of Default which has not be cured within the times and in the manner provided in the Note, Beneficiary may, in addition to other rights and remedies permitted by the Note or applicable law, proceed with any or all of the following remedies: A. Enforce the assignment of rents and right to possession as provided for in this Deed of Trost, and /or seek appointment of a receiver to take over possession of the Property and collect Rents; 28561 25s.2 0'1903 1447r 01929676 (Page 6 of 10) B. Enter the Property and take any actions necessary in its judgment to complete construction on the Property as permitted in the assignment of rents and right to possession in this Deed of Trust, either in person or through a receiver appointed by a court; C. Commence an action to foreclose this Deed of Trust pursuant to California Code of Civil Procedure Sections 725a, et seq., and /or seek appointment of a receiver from a court of competent jurisdiction with the authority to protect Beneficiary's interests in the Property, including the authority to complete construction of improvements; D. Deliver to Trustee a written declaration of default and demand for sale, and a written Notice of Default and election to cause the Borrower's interest in the Property to be sold, which notice Trustee or Beneficiary shall duly file for record in the Official Records of Orange County, and exercise its power of sale as provided for below; or E. Pursue any other rights and remedies allow at law or in equity. 25. FORECLOSURE BY POWER OF SALE. Should Beneficiary elect to foreclose by exercise of the power of sale contained in this Deed of Trust, Beneficiary shall notify Trustee and shall deposit with Trustee this Deed of Trust, and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require. Upon receipt of such notice from Beneficiary, Trustee shall cause to be recorded, published and delivered to the Borrower such Notice of Default and Election to Sell as then required by law and by this Decd of Trust. Trustee shall, without demand on the Borrower, after lapse of such time as may then be required by law and after recordation of such Notice of Default and after Notice of Sale having been given as required by law, sell the Property, at the time and place of sale fixed by it in said Notice of Sale, whether as a whole or in separate lots or parcels or items as Trustee shall deem expedient and in such order as it may determine unless specified otherwise by the Borrower, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to the purchaser its deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters of fact shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, the Borrower, Trustee, or Beneficiary, may purchase at the sale. Trustee may postpone the sale of all or any portion of the property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Noticc of Sale. After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale as follows: (i) first, to the payment of all sums then secured by this Deed of Trust, in such order and amounts 28561258.2 021903 14471' 01929(,76 (Page 7 of 10) as Beneficiary in its sole discretion determines, and (ii) the remainder, if any, to the person or persons legally entitled thereto. 26. REMEDIES CUMULATIVE. No right, power or remedy conferred upon or reserved to Beneficiary by this Deed of Trust is intended to be exclusive of any other rights, powers or remedies, but each such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. GENERAL PROVISIONS 27. GOVERNING LAW. This Deed of Trust shall be interpreted under and governed by the laws of the State of California. 28. ATTORNEYS' FEES AND COSTS. In the event of any Event of Default, or any legal or administrative action is commenced to interpret or to enforce the terms of this Deed of Trust, the prevailing party in such action shall be entitled to recover all reasonable attorneys' fees and costs in such action. Any such amounts paid by Beneficiary shall be added to the indebtedness secured by the lien of this Deed of Trust. 29. STATEMENT OF OBLIGATION. Lender may collect a fee not to exceed the maximum allowable under applicable law for furnishing a statement of obligations as provided in the California Civil Code. 30. CONSENTS AND APPROVALS. Any consent or approval of Beneficiary required under this Deed of Trust shall not be unreasonably withheld. 31. TIME. Time is of the essence in this Deed of Trust. 32. NOTICES, DEMANDS AND COMMUNICATIONS. Formal notices, demands and communications between the Borrower and Beneficiary shall be sufficiently given and shall not be deemed given unless dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally, to the principal offices of the Borrower and Beneficiary as follows: Beneficiary: City of Newport Beach P.O. Box 1768 Newport Beach, CA 92658 Attn: The Borrower: Newport Housing Partners, L.P. c/o The Related Companies of California 18201 Von Karman Avenue, Suite 400 Irvine, CA 92612 Attn: Mr. Frank Cardone 28se12S8 z 021003 14471' 01029(,70 (Page 8 of 10) 33. BINDING UPON SUCCESSORS. All provisions of this Deed of Trust shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors -in- interest, transferees, and assigns of the Borrower, Trustee, and Beneficiary. 34. WAIVER. Any waiver by Beneficiary of any obligation of the Borrower in this Deed of Trust must be in writing. No waiver will be implied from any delay or failure by Beneficiary to take action on any breach or default of the Borrower or to pursue any remedy allowed under this Deed of Trust or applicable law. Any extension of time granted to the Borrower to perform any obligation under this Deed of Trust shall not operate as a waiver or release the Borrower from any of its obligations under this Deed of Trust. Consent by Beneficiary to any act or omission by the Borrower shall not be construed to be a consent to any other or subsequent act or omission or to waive the requirement for Beneficiary's written consent to future waivers. 35. AMENDMENTS AND MODIFICATIONS. Any amendments or modifications to this Deed of Trust must be in writing, and shall be made only if mutually agreed upon by Beneficiary and the Borrower. 36. DEFINITIONS. Capitalized terms not otherwise defined in this Deed of Trust shall have the same meaning as defined terms in that certain Development Loan Agreement ( "Loan Agreement ") of even date herewith, entered into by and between Truster and Beneficiary. 37. PROOFS OF CLAIM. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, recomposition or other proceedings affecting the Borrower, its creditors or its property, Trustee, to the extent permitted by law, shall be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of Beneficiary allowed in such proceedings and for any additional amount which may become due and payable by the Borrower hereunder after such date. 38. SEVERABILITY. Every provision of this Deed of Trust is intended to be severable. If any term or provision of this Deed of Trust is declared to be illegal. invalid, or unenforceable by a court of competent jurisdiction all other provisions in this Deed of Trust shall not be affected. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Property, the unsecured or partially secured portion of the debt and all payments made on the debt (whether voluntary or under foreclosure or other enforcement action or procedure) shall be considered to have been first paid or applied to the payment of that portion of the debt which is not secured or partially - secured by the lien of this Deed of Trust. 39. SUBSTITUTION OF TRUSTEES. Beneficiary may from time to time appoint another trustee to act in the place and stead of Trustee or any successor. Upon such appointment and without conveyance, the successor trustee shall be vested with all title, powers, and duties conferred upon Trustee. Each such appointment and substitution shall be made by a written instrument executed by Beneficiary containing reference to this Deed of Trust and its place of record, which when duly recorded in the Orange County Office of the Recorder shall be conclusive proof of proper appointment of the successor trustee. 2s5612;8.2 021901 1447P 0192967 6 (Page 9 of 10) 40. SUBORDINATION. This Deed of Trust shall be junior and subordinate to all Permitted Mortgages. Trustor agrees to execute such subordination agreements as may be required from time to time to effect the priority set forth herein and as provided by the provisions of the Loan Agreement. NEWPORT HOUSING PARTNERS, L.P., a California limited partnership By: RELATED/NEWPORT DEVELOPMENT CO., LLC, a California limited liability company, general partner Lm By: LAS PALMAS FOUNDATION, a California non - profit public benefit corporation, general partner By: Dated: , 2003 Its: 295612S81 0210031447P 01029(,76 (Page 10 of 10) STATE OF ) ) SS. COUNTY OF ) On , 200, before me, , a Notary Public, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name 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. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. Notary Public [Affix Notarial Seal] My commission expires: 285612582 0'19031447P 01929676 STATE OF ) ) SS. COUNTY OF On , 200, before me, , a Notary Public, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name 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. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. Notary Public [Affix Notarial Seal] My commission expires: 28501259.2 021903 14471' 01929670 EXHIBIT D COMPLETION GUARANTY (Attached) 29561253 3 022103 11001' 01929676 COMPLETION GUARANTY THIS COMPLETION GUARANTY ( "Guaranty ") is made as of February 21, 2003 by THE RELATED COMPANIES, L.P., a New York limited partnership ( "Guarantor "), in favor of THE CITY OF NEWPORT BEACH, a California municipal corporation ( "Lender "). RECITALS A. Pursuant to the terms of a Development Loan Agreement between Newport Housing Partners, L.P., a California limited partnership ( "Borrower "), and Lender dated as of even date herewith ( "Loan Agreement "), Lender has agreed to loan to Borrower a principal sum not to exceed ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) ( "Loan ") for the purposes specified in the Loan Agreement, said purposes relating to the real property and Borrower's leasehold interest therein (collectively referred to herein as the "Property ") and improvements described in the Loan Agreement (hereinafter collectively referred to together with the Property as the "Project "). B. The Loan Agreement provides that the Loan shall be evidenced by a promissory note ( "Note ") executed by Borrower payable to the order of Lender in the principal amount of the Loan and shall be secured by a deed of trust more particularly described in the Loan Agreement ( "Deed of Trust") and by other security instruments, if any, specified in the Loan Agreement. The term "Loan Documents" for purposes hereof shall mean the Loan Agreement, the Deed of Trust, the Note and those other documents described in the Loan Agreement as Loan Documents. Unless expressly defined herein, all capitalized terms used herein shall have the meaning ascribed to them in the Loan Agreement. C. Guarantor (i) is affiliated with Borrower in that one or more individuals have a direct or indirect economic or ownership interest in Related/Newport Development Co., LLC and Guarantor and (ii) is entering into this Guaranty as a material inducement to Lender to make the Loan, and Lender is relying on this Guaranty and its enforceability to make the Loan to Borrower. THEREFORE, Guarantor unconditionally agrees as follows: GUARANTY. Guarantor, in the event of a failure to Borrower to do so, hereby guarantees (a) to complete the Project within five (5) years from the date of this Guaranty; (b) to complete the Project free and clear of any mechanic's liens, inaterialman's liens and equitable liens; and (c) to pay all costs of constructing the Project when due; provided, however, Guarantor's obligations under this Agreement are expressly subject to, and conditioned upon, the availability of all construction and de%elopnrcnt financing from its lenders and Lender's making the Loan funds available to Borrower. REMEDIES. The Parties acknowledge that monetary damages would be impossible to calculate if Guarantor fails to promptly perform its obligations under this Guaranty because the primary reason for Lender to make the Loan is to satisfy its obligations under State law to provide housing affordable to all cconomic segments of the community. The Parties also acknowledge that the failure to Guarantor to comply with its obligations will LAD130128j652633 0224031219P 01929076 cause this affordable housing to remain unavailable for some period of time damaging Lender's ability to comply with State law and implement provisions of its housing element. Finally, the Parties acknowledge that the damage to Lender resulting from Guarantor's breach of this Guaranty is essentially non - economic and cannot be assessed or quantified in economic terms. Accordingly, the Parties agree that Guarantor shall pay the Lender the lesser of (a) $250,000, and (b) the then outstanding principal balance under the Loan, in liquidated damages in the event Guarantor fails to perform its obligations to complete the Project pursuant to this Guaranty. In connection with the foregoing, if Guarantor attempts to discharge its obligations hereunder to complete the Project, Lender shall make the undisbursed Loan funds available to Guarantor (pursuant to the terms and conditions of the Loan Documents) for the purposes of completing the Project and fulfilling Guarantor's other obligations under this Guaranty. 3. ADDITIONAL INDEPENDENT AND UNSECURED OBLIGATIONS. The obligations of Guarantor hereunder shall be in addition to and shall not limit or in any way affect the obligations of Guarantor under any other existing or future guaranties unless said other guaranties are expressly modified or revoked in writing. This Guaranty is independent of the obligations of Borrower under the Note, the Deed of Trust and the other Loan Documents. Lender may bring a separate action to enforce the provisions hereof against Guarantor without taking action against Borrower or any other party or joining Borrower or any other party as a party to such action. Except as otherwise provided in this Guaranty, this Guaranty is not secured and shall not be deemed to be secured by any security instrument unless such security instrument expressly recites that it secures this Guaranty. 4. ATTORNEYS' FEES; ENFORCEMENT. If any attorney is engaged by Lender to enforce or defend any provision of this Guaranty, or any of the other Loan Documents relating to the construction of the Project, or as a consequence of any default, breach or failure of condition under the Loan Documents relating to the construction of the Project, with or without the filing of any legal action or proceeding, Guarantor shall pay to Lender, immediately upon demand all attorneys' fees and costs incurred by Lender in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance of the Note as specified therein. 5. GOVERNING LAW. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of California, except to the extent preempted by federal laws. Guarantor and all persons and entities in any manner obligated to Lender under this Guaranty consent to the jurisdiction of any federal or state court within the State of California having proper venue and also consent to service of process by any means authorized by California or federal law. 6. MISCELLANEOUS. The provisions of this Guaranty will bind and benefit the heirs, executors, administrators, legal representatives, nominees, successors and assigns or Guarantor and Lender. The liability of all persons and entities who are in any manner obligated hereunder shall be joint and several. If any provision of this Guaranty shall be determined by a court of competentjurisdiction to be invalid, illegal or unenforceable, LADBO1 23565261.3 0224113 12191' 01929676 that portion shall be deemed severed from this Guaranty and the remaining parts shall remain in full force as though the invalid, illegal or unenforceable portion had never been party of this Guaranty. LADB01 29565203.3 022403 1219P 01929676 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date appearing on the first page of this Guaranty. "GUARANTOR" THE RELATED COMPANIES, L.P. a New York limited partnership By: The Related Realty Group, Inc. a Delaware corporation By: Name: Title: LAM30128565263.30224031219P 01929676 EXHIBIT E RESTRICTION (Attached) 25161'53 8 022103 I100P 019'9676 OFFICIAL BUSINESS Document entitled to free recording per Government Code Section 6103 Recording Requested by and When Recorded Mail to: CITY OF NEWPORT BEACH P.O. Box 1768 Newport Beach, CA 92658 Attn: City Manager (Space above this line for recording use) AGREEMENT CONTAINING COVENANTS This AGREEMENT CONTAINING COVENANTS (this "Agreement ") is made this day of February, 2003, by and between NEWPORT HOUSING PARTNERS, L.P., a California limited partnership ( "Developer ") and THE CITY OF NEWPORT BEACH, a public body, corporate and politic ( "City "). RECITALS A. Concurrently herewith Developer and City are entering into that certain Development Loan Agreement (the "Loan Agreement ") of even date herewith, pursuant to the terms of which the City has agreed to make a development loan (the "Loan ") to Developer in an amount not to exceed One Million Five Hundred Thousand Dollars ($1,500,000) for the development of the Site (as such term is defined below), which Site is being ground leased to Developer in accordance with the tents and conditions of the Ground Lease (as such term is defined below). Developer intends to construct a one hundred fifty (150) unit senior's affordable housing project (the "Project ") on the Site . B. City and Developer desire to place restrictions upon the use and operation of the Project, in order to insure that the Project shall be operated continuously as an affordable housing project available for rental in accordance with the terns set forth below for the term of this Agreement. 28561762.0 02190? 15351' 01929676 TERMS Definitions The following terms, as used in this Agreement, shall have the meanings given unless expressly provided to the contrary: The term "Affordable Rent" shall mean, for each Unit, annual rent that does not exceed thirty percent (30 %) of the appropriate percentage (either 50% or 60 %, as applicable) of median income for the Orange County, California, Metropolitan Statistical Area, adjusted for Assumed Household Size based on the number of bedrooms in such Unit. The term "Assumed Household Size" shall mean as to any Unit for purposes of determining Affordable Rent for such Unit, that each one (1) bedroom Unit is assumed to be occupied by two (2) people and each two (2) bedroom Unit is assumed to be occupied by four (4) people. The term "50% Tenant" means one or two individuals at least one of whom is over fifty - five (55) years of age and whose annual income does not exceed fifty percent (50 %) of the median income for the Orange County, California, Metropolitan Statistical Area as determined by HUD with adjustments for family size. The term "60% Tenant' means one or two individuals at least one of whom is over fifty -five (55) years of age and whose annual income does not exceed sixty percent (60 %) of the median income for the Orange County, California, Metropolitan Statistical Area as determined by HUD with adjustments for family size. The term "Ground Lease" means that certain ground lease of the Site from Irvine Apartment Communities, Inc., as lessor, to Developer, as lessee. The term "HUD" means the United States Department of Housing and Urban Development. The term "Lease" means the lease entered into between Developer and a Tenant of a Unit. The tern "Loan Agreement" shall have the meaning ascribed to it in Recital Paragraph A above. The term "Load' shall have the meaning ascribed to it in Recital Paragraph A above. The term "Manager Units" means the Units (not to exceed two (2)) used by the manager(s) of the Project. The term "Project" shall have the meaning ascribed to it in Recital Paragraph A above. The term "Site" shall mean the real property described in Attachment 1 attached hereto. 28561762.6 021003 15351' 01020676 The term "Tenant" shall mean either a 60% Tenant or a 50% Tenant. The term "Unit" and "Units" shall mean the one hundred fifty (150) dwelling units comprising the Project and subject to rent restrictions as set forth in this Agreement. 2. Use of Site. Developer, on behalf of itself and its successors, assigns, and each successor in interest to the Site or any part thereof, hereby covenants and agrees that the Site shall be developed and used exclusively as rental housing for Tenants at Affordable Rents. 3. Maximiun Incomes. Eighty percent (80 %) of the Units (excluding the Manager Units) shall be restricted to 60% Tenants and twenty percent (20 %) of the Units (excluding the Manager Units) shall be restricted to 50% Tenants. 4. Maximum Rents. Rent charged to any Tenant shall not exceed the "Affordable Rent" for that Unit based upon the Assumed Household Size. 5. Income Computation. Prior to any prospective Tenant's occupancy of a Unit, Developer shall obtain and maintain on file an income computation and certification form for each such prospective Tenant dated prior to the date of initial occupancy in a Unit. Developer shall use its best efforts to verify that the income information provided by an applicant is accurate by taking one or more of the following steps as a part of the verification process: (i) obtain two (2) pay stubs for the most recent pay periods; (ii) obtain a written verification of income and employment from applicant's current employer; (iii) obtain an income verification form from the Social Security Administration and/or California Department of Social Services if the applicant receives assistance from either City; (iv) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain other verification of such applicant's income as is reasonably satisfactory; or (v) obtain such other information as may be reasonably required. Developer shall update the foregoing records annually and shall provide copies of updated tenant eligibility records to City for review upon request. 6. Maintenance. The Developer shall maintain the improvements on the Site in compliance with all applicable State and local housing quality standards and local code requirements. 7. Maintenance of Records; Providing City with Copies of Annual Compliance Certificates. Developer shall maintain complete and accurate records pertaining to the Units, and shall permit any duly authorized representative of the City to inspect the books and records of Developer pertaining to the Project including., but not limited to, those records pertaining to tenant eligibility and occupancy of the Units. Additionally, Developer shall promptly deliver to City copies of all annual income monitoring. reports delivered to the California Tax Credit Allocation Committee from time to time with respect to the Units. 8. Reliance on Tenant Representations. Each tenant lease shall contain a provision to the effect that Developer has relied on the income certification and supporting information supplied by the Tenant in determining qualification for occupancy of a Unit, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such Lease. 2856176Lti 021903 1535P 01929676 9. Subordination. This Agreement shall be junior and subordinate to the lien of any Permitted Mortgage (as such term is defined in the Loan Agreement) and such other and further documents, including regulatory agreements (including those required by the California Tax Credit Allocation Committee) as provided under the Loan Agreement. City agrees to execute such subordination agreements as may be required from time to time to effect the priority set forth in this section and as provided by the provisions of the Loan Agreement. 10. Attorneys' Fees. If any action or proceeding is brought by either party against the other under this Agreement, whether for interpretation, enforcement or otherwise, the prevailing party shall be entitled to receive from the other party all costs and expenses for such action or proceeding, including the fees of attorneys and any expert witnesses. This provision shall also apply to any postjudgment action by either party, including without limitation efforts to enforce a j udgment. 11. Amendments. This Agreement shall be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County of Orange, State of California. 12. Notice. Any notice required to be given hereunder shall be made in writing and shall be given by (i) personal delivery, (ii) courier service that provides a receipt showing date and time of delivery, or (iii) certified or registered mail, postage prepaid, return receipt requested, at the addresses specified below, or at such other addresses as may be specified in writing by the parties hereto: City: City of Newport Beach P.O. Box 1768 Newport Beach, CA 92658 Attn: City Manager Developer: Newport Housing Partners, L.P. c/o The Related Companies of California 18201 Von Karman Avenue, Suite 400 Irvine, CA 92612 Attn: Mr. Bill Witte Notices personally delivered or delivered by courier shall be effective upon receipt. Mailed. notices shall be effective on the earlier of receipt or Noon on the second business day following deposit in the United States mail. 13. Severability /Waiver /InteQratlon. (a) Severability. If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby. (b) Waiver. A waiver by either party of the performance of any covenant or condition herein shall not invalidate this Agreement nor shall it be considered a waiver of 195 (fl 7Q 0 02 1903 153511 01929676 any other covenants or conditions, nor shall the delay or forbearance by either party in exercising any remedy or right be considered a waiver of, or an estoppel against, the later exercise of such remedy or right. (c) Integration. This Agreement contains the entire Agreement between the parties and neither party relies on any warranty or representation not contained in this Agreement. 14. Governing Law. This Agreement shall be governed by the laws of the State of California. 15. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one original and all of which shall be one and the same instrument. 16. Recordation Against Leasehold Estate, Termination. This Agreement shall be recorded against the leasehold estate created under the Ground Lease as described in Attachment 2 attached hereto and shall not encumber fee title to the Site. This Agreement shall automatically terminate and shall be of no force or effect on the date that the Loan is repaid, as evidenced by the reconveyance of the deed of trust securing the Loan and encumbering Developer's leasehold interest under the Ground Lease. 17. Age Restriction for any Tenant Subject to Applicable Law. Notwithstanding any provision to the contrary in this Agreement all requirements for any Tenant to be fifty -five (55) years of age or older as provided in this Agreement shall be subject to all applicable laws, including Section 51.3 of the California Civil Code. )SW 76260'_ 190315; SP Ot Q0676 IN WITNESS WHEREOF, the City and the Developer have executed this Agreement. "CITY" CITY OF NEWPORT BEACH Dated: By: APPROVED AS TO FORM: ROBERT H. BURNHAM, CITY ATTORNEY STEVEN A. BROMBERG, MAYOR 0 "DEVELOPER" NEWPORT HOUSING PARTNERS, L.P., a California limited partnership By: RELATED/NEWPORT DEVELOPMENT CO., LLC, a California limited liability company, general partner By: LAS PALMAS FOUNDATION, a California non - profit public benefit corporation, general partner Dated: _.._ By: Its: 28561762.b 021901 1 535P 01929670 6 ATTACHMENT DESCRIPTION OF SITE '8561762.6021903 1535P 01929670 ATTACHMENT DESCRIPTION OF LEASEHOLD ESTATE 235617620 021903 1535P 01929076 STATE OF ) SS. COUNTY OF ) On before me, a Notary Public, personally appeared , and , 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 he /she executed the same in his/her authorized capacity, and that by his/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. Notary Public 28i0 V01.0021911315351' 01929676 STATE OF ) SS. COUNTY OF ) On before me, a Notary Public, personally appeared , and , 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 he /she executed the same in his /her authorized capacity, and that by his /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. Notary Public 2856176260219031i3i1' 01729676 STATE OF ) SS. COUNTY OF ) On before me, a Notary Public, personally appeared , and , 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 he /she executed the same in his /her authorized capacity, and that by his/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. Notary Public 2850176200219031535 P 01929070