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HomeMy WebLinkAbout10 - Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa MesaQ SEW Pp�T CITY OF z NEWPORT BEACH c�<,FORN'P City Council Staff Report December 10, 2024 Agenda Item No. 10 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Seimone Jurjis, Assistant City Manager/Community Development Director - 949-644-3232, sjurjis@newportbeachca.gov PREPARED BY: Lauren Wooding Whitlinger, Real Property Administrator - 949-644- 3236, Iwooding@newportbeachca.gov TITLE: Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa ABSTRACT: In July 2023, the Newport Beach City Council approved a loan commitment of $3,000,000 to American Family Housing to help fund a new permanent supportive housing project located at 1400 Bristol Street, Costa Mesa. The project will convert the existing, 120-room Travelodge North Motel property into a 78-unit permanent supportive housing project. Following the City of Newport Beach's commitment, the developer secured commitments for the balance of the funds for the project and is finalizing negotiations of the various loan and funding agreements and approvals. For the City Council's consideration is an Affordable Housing Loan Agreement (Agreement) (Attachment A) with American Family Housing and a funding request to loan $3,000,000 toward the conversion of the Travelodge North Homekey Project. RECOMMENDATIONS: a) Find this project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 (Existing facilities) and Section 15302 (Replacement or Reconstruction) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because this project has no potential to have a significant effect on the environment; b) Approve Budget Amendment No. 25-047, appropriating $3,000,000 for increased expenditures in the Permanent Supportive Housing Account No. 01201925-980000- 22M 15; and c) Authorize the City Manager to finalize negotiations and authorize the City Manager and City Clerk to execute the Affordable Housing Loan Agreement between the City of Newport Beach and American Family Housing, LLC, to loan $3,000,000 to convert the property at 1400 Bristol Street, Costa Mesa, into permanent supportive housing, provided the terms of the Agreement are substantially similar with the Agreement attached hereto, which terms shall be reviewed and approved by the City Attorney's Office, and to take any other action necessary to implement the Agreement, including, but not limited to, approving and executing additional documents related thereto. 10-1 Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024 Page 2 DISCUSSION: Following the State of California Department of Housing and Community Development's (HCD) announcement of additional funding for affordable and supportive housing in early 2023, the County of Orange (County) sought development partners and identified American Family Housing's (AFH) proposed project for the acquisition, conversion and operation of the Travelodge North Motel property located at 1400 Bristol Street, Costa Mesa (Property) as permanent supportive housing for those experiencing or at risk of homelessness. AFH's proposed project would convert the existing 120-unit motel property into 78 total units of housing - 76 units of permanent supportive housing and two manager's units (Project). Consistent with the County's funding requirements, AFH also secured financial support from the governing jurisdiction, the City of Costa Mesa. The City of Costa Mesa works closely with Newport Beach to address homelessness issues and made City staff aware of the Project. The Project was submitted to the City Council on July 11, 2023 (Attachment C), and the City committed to participate in the Project (Attachment D). The City's commitment includes a $3,000,000 loan with a 55-year term, at a 3.00% simple interest rate, repaid out of a portion of the project's residual receipts. In return, there would be "local preference" for 12 studio units at the Project, based, in part, on the eligible tenant's connection to Newport Beach. Similarly, with Costa Mesa's contribution of $4,000,000 towards the Project, 16 studio units would have a similar "local preference" for tenants with a connection to the City of Costa Mesa. In addition to the funding from the City and Costa Mesa, the Project was granted Round 3 Homekey funds of almost $29 million from the State through HCD. The County will administer the State Homekey funding as well as provide an additional $6.8 million towards the Project. AFH will round out the Project funding with a private mortgage loan of approximately $3 million. A summary of the funding sources for the Project: Funding Source Amount Homekey Program Award $27,700,000 Homekey — Relocation $750,000 County of Orange HOME $2,400,000 County of Orange MHSA $4,421,520 City of Costa Mesa $4,000,000 City of Newport Beach $3,000,000 Private Loan $3,115,000 Total $45,386,520 10-2 Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024 Page 3 Project Scope and Timing Figure 1 The Property (Figure 1) will be purchased by the County using a portion of the Homekey funds and leased to AFH to redevelop and operate as permanent supportive housing. Existing commercial space on the Property will be included in the purchase, and lease revenues will help support the ongoing operating budget for the Project. The Project includes exterior renovations such as fagade and landscaping improvements, demolition of an existing pool to create a community courtyard, and path of travel upgrades to comply with Americans with Disabilities Act requirements. Interior renovations include extensive upgrades to all living quarters, the installation of kitchenettes, and the reconfiguration of office space to accommodate on -site services. Due to the small size - approximately 250 square feet - of the existing motel rooms, AFH will absorb 42 of the current 120 rooms to create 76 studio and one -bedroom apartments. The space reconfiguration will bring the units into compliance with minimum floor area requirements and provide enough space to accommodate the kitchenettes. Four of the units will be updated to full mobility units, and four units will be updated to visual/hearing impaired units, in compliance with the Americans with Disabilities Act All of the units will be furnished upon initial occupancy with a bed frame, mattress, nightstand, kitchen table and chairs, at no cost to the tenants. Common area amenities including a large community room, community kitchen, outdoor gathering spaces, and two laundry rooms will also be provided at the Project. 10-3 Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024 Page 4 Supportive services will be tailored to each particular household's needs to improve housing stability and retention and overall wellbeing. Services will be provided on and off -site from third party providers and coordinated by AFH. Leasing and property management for the Project will also be provided by AFH, including on -site management staff, maintenance and janitorial services, and oversight of the building and vendors. Tenant Eligibility Standards The following eligibility standards will apply to all of the 76 units at the Project: A. Housing status will be considered, with no less than 38 of the units being dedicated to households experiencing chronic homelessness of one year or longer, 10 units dedicated to households experiencing homelessness of up to one year, and 28 units dedicated to households at -risk of experiencing homelessness. B. All of the units will be restricted to households with incomes equal to or less than 30% of the Area Median Income (AMI) for the county. Twenty four of the 1-bedroom units are restricted to households that qualify through the Orange County Health Care Agency under the Mental Health Services Act. Additionally, 48 units will be covered by a Housing Assistance Payments (HAP) contract with the County, including 38 Housing Choice and 10 Veterans Affairs project -based vouchers. The remaining 28 units not subject to the HAP contract will have a local preference for the City and the City of Costa Mesa. Twelve units will have a household connection to the City of Newport Beach, meaning 36 months' tenancy in the city, current and active employment in the city with documented income, or having a child enrolled in a school within the Newport -Mesa Unified School District, or a child who attended such a school in the last two years. Costa Mesa will have 16 units with a household connection to the City of Costa Mesa, with similar criteria to establish the connection. Summary of Terms The proposed terms of the Agreement are summarized below: 1. The term of the Agreement will run for 55 years, commencing upon completion of the Project. 2. The loan of $3,000,000 will be disbursed through escrow during construction of the Project to cover construction costs and leasing expenses for the Property. 3. The loan will accrue simple interest of 3% per annum from the date of disbursement of the loan proceeds. Full repayment of the principal amount of the loan and any outstanding interest will be due on the maturity date 55 years from completion of construction of the Project and release of construction covenants. 10-4 Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024 Page 5 4. Commencing the first calendar year after disbursement of the loan, AFH will make annual payments to the City. The payment will first be applied to accrued interest, and then to the principal amount of the loan. The annual repayment amount will be based on 50% of the residual receipts from the Property revenues less allowed expenses, and the City's proportionate share of the financing. 5. The Property will be subject to a regulatory agreement, which shall be recorded against title. The regulatory agreement will restrict the use of the Property to supportive affordable housing, limit rents that may be charged to lease the units and will restrict tenants' income to no more than 30% AMI, for 55 years. 6. Twelve studio size units at the Property will be leased to tenants, identified through the County's coordinated entry system as being homeless or at a minimum at -risk of becoming homeless, with ties to Newport Beach. 7. The developer must establish an operating reserve fund and a capital replacement reserve fund to ensure the long-term maintenance and operation of the units and the Property. 8. Annual reports must be submitted to the City providing a detailed description of the financials and performance of the Property, including verification of tenant incomes. 9. The developer shall provide certificates of insurance to the satisfaction of the City's Risk Manager, naming the City as additional insured. The Agreement has been reviewed by the City Attorney's Office. AFH, the City of Costa Mesa, and the County are reviewing the Agreement and may have additional comments; substantive revisions to the Agreement will be returned to City Council for its consideration at a future meeting. FISCAL IMPACT: On July 11, 2023, the City Council committed $3,000,000 to this project, which was appropriated to an account in the General Fund. On October 22, 2024, these funds were included in the year-end surplus and transferred to the Facilities Financing Planning Fund (Fund 513). The proposed budget amendment (Attachment B) appropriates $3,000,000 to the Permanent Supportive Housing Account No. 01 201925-980000-22M1 5, funded by a transfer from the Facilities Financing Planning Fund. The $3,000,000 contribution is the total commitment for the City; all ongoing costs to provide the support services will be managed by AFH. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this project exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 (Existing facilities) and Section 15302 (Replacement or Reconstruction) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential to have a significant effect on the environment. 10-5 Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024 Page 6 NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A — Affordable Housing Agreement Attachment B — Budget Amendment Attachment C — Staff Report, dated July 11, 2023 Attachment D — City of Newport Beach Commitment Letter for the Proposed Travelodge North Homekey Project, dated July 13, 2023 10-6 Attachment A Affordable Housing Loan Agreement 10-7 AFFORDABLE HOUSING LOAN AGREEMENT by and between CITY OF NEWPORT BEACH, a California municipal corporation and charter city and AMERICAN FAMILY HOUSING, a California nonprofit, public benefit corporation 1400 BRISTOL PROJECT 1400 Bristol Street Costa Mesa, California 10-8 TABLE OF CONTENTS RECITALS ARTICLE 1 DEFINITIONS......................................................................3 ARTICLE 2 FINANCING.......................................................................13 ARTICLE 3 DEVELOPMENT OF PROJECT...............................................19 ARTICLE 4 USE OF PROPERTY............................................................. 23 ARTICLE 5 OPERATING STANDARDS ................................................... 23 ARTICLE 6 DEFAULT AND REMEDIES .................................................. 25 ARTICLE 7 ASSIGNMENT AND TRANSFER.............................................27 ARTICLE 8 NONDISCRIMINATION.........................................................28 ARTICLE 9 GENERAL.........................................................................29 ATTACHMENTS 10-9 AFFORDABLE HOUSING LOAN AGREEMENT This AFFORDABLE HOUSING LOAN AGREEMENT ("Agreement") is made and entered into on , 2024, by and between the CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"), and AMERICAN FAMILY HOUSING, a California nonprofit, public benefit corporation ("Developer"). RECITALS A. The County of Orange ("County") is in the process of acquiring the buildings and related structures located at 1400 Bristol Street, Costa Mesa, California, currently known as Travelodge, and legally described and depicted in Attachment No. 1, attached hereto and incorporated herein by reference, and which is identified as Assessor's Parcel Number 439-312- 12 ("Property"), and intends to lease the property to the Developer. B. In connection with this Agreement and associated documents, Developer will rehabilitate, construct and operate the Property as seventy-six (76) affordable units ("Affordable Units") for households experiencing homelessness or who are at risk of homelessness (as defined in Part 578.3 of Title 24 of the Code of Federal Regulations), who are impacted by the COVID-19 pandemic, and who earn thirty percent (30%) or less of the Area Median Income (AMI), plus supportive facilities and two unrestricted Manager's Units ("Project"). The Scope of Development of the Project is further described in Attachment No. 2, attached hereto and incorporated herein by reference. The make-up of the tenant distribution and assistance for the Project is detailed in the Tenant Leasing Plan in Attachment No. 3, attached hereto and incorporated herein by reference. C. Developer has requested assistance from the City to assist Developer to lease, rehabilitate, manage and maintain the Project as long-term affordable housing at an Affordable Rent throughout the Affordability Period, as set forth in more detail in this Agreement and the Regulatory Agreement. The City desires to assist Developer by providing financial assistance to Developer in the form of a loan of in an amount not to exceed Three Million Dollars ($3,000,000.00) from the City's general fund ("City Loan"). The City Loan is being utilized by Developer to finance eligible construction costs associated with completing the Project and initiating operations. The permitted income levels of the tenants of each Qualified Housing Unit and the permissible rents to be charged for tenancy and occupancy of each Qualified Housing Unit are set forth in this Agreement. D. As a part of the implementation of the Project, the County in cooperation with and through the U.S. Department of Housing and Urban Development ("HUD"), will provide forty- eight (48) project -based vouchers to Developer, including ten (10) Veterans Affairs Supportive Housing (VASH) project -based vouchers in the Project. E. With the City Loan, the Project will be subject to this Agreement, the Regulatory Agreement, Affordability Covenants and Restrictions, and other associated documents and requirements as set forth in this Agreement. F. As further described herein, the Project provides affordable housing for occupancy by qualified and eligible Extremely Low Income Households, and covenant and restricts 2 10-10 occupancy and tenancy of the Affordable Units to qualified Extremely Low Income Households at an Affordable Rent for the 55-year Affordability Period as further described herein. G. The City Loan will be funded and sourced only from the general fund. H. The development of the Project is in the best interest of the City and the health, safety, and welfare of the residents of the City, and in accordance with the public purposes and provisions of applicable federal, state, and local laws and requirements. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and conditions herein contained, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS For the purposes of this Agreement, the following capitalized terms not defined elsewhere in this Agreement shall have the following meanings: 1.1 "Affiliate" means (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; or (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 or the power to control election of the board of directors. It shall be a presumption that control with respect to a corporation, limited liability company or limited partnership is the right to exercise or control, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled corporation, limited liability company or limited partnership, 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. 1.2 "Affordability Period" shall mean the duration of the affordable housing requirements and other covenants of and as required by this Agreement and as set forth in the Regulatory Agreement. The Affordability Period shall be from the earlier of. (i) fifty-five (55) years from the date the Notice of Commencement of Affordability Restriction is issued by City and caused to be recorded in the Official Records against the Property; or (ii) if not able to be determined, fifty-seven (57) years after the date of this Agreement. Commencement of the Affordability Period shall be memorialized in a Notice of Commencement of Affordability Restriction and recorded as provided in Section 2.8 of this Agreement. 1.3 "Affordable Rent" means the maximum affordable rent, including a reasonable utility allowance, for extremely low-income households which shall not exceed the product of 30 percent times 30 percent of the AMI adjusted for family size appropriate for the unit pursuant to California Health and Safety Code Section 50053. 1.4 "Affordable Unit" means the seventy-six (76) housing units (not including the two (2) Manager's Units) to be developed as part of the Project and will go through the County's Coordinated Entry System. Sixteen (16) of which shall have a local preference of residents of the City of Costa Mesa and twelve (12) of which shall have a local preference of residents of the City ("Newport Beach Preference Units"). 10-11 1.5 "Agreement" shall mean this Affordable Housing Loan Agreement between City and Developer, including all Attachments, exhibits and other documents attached hereto. 1.6 "Area Median Income or AMI for Orange County" means the most recent applicable county family income published by HCD. 1.7 "Annual Financial Statement" shall mean the certified financial statement of Developer for Project using generally accepted accounting principles (GAAP), as separately accounted for this Project, including Operating Expenses and Annual Project Revenue, as prepared annually and provided to the City at Developer's expense, by an independent certified public accountant reasonably acceptable to the City. 1.8 "Annual Project Revenue" shall mean all gross income and all revenues of any kind from the Project in a calendar year of whatever form or nature, whether direct or indirect, with the exception of the items excluded below, received by or paid to or for the account or benefit of Developer or any of their agents or employees, from any and all sources, resulting from or attributable to the ownership, operation, leasing and occupancy of the Project, determined on the basis of generally accepted accounting principles applied on a consistent basis, and shall include, but not be limited to: (i) gross rentals paid by tenants of the Project under leases, and payments and subsidies of whatever nature, including without limitation any payments, Portable Vouchers, other vouchers or subsidies from HUD or other governmental agency (including Section 8 payments by HUD, the State of California, County of Orange, or any other governmental agency, any person or any organization, received on behalf of tenants under their leases), (ii) amounts paid to Developer on account of Operating Expenses for further disbursement by Developer to a third party or parties, (iii) late charges and interest paid on rentals, (iv) rents and receipts from licenses, concessions, vending machines, coin laundry and similar sources; (v) other fees, charges or payments not denominated as rental but payable to Developer in connection with the rental of office, retail, storage, or other space in the Project; (vi) consideration received in whole or in part for the cancellation, modification, extension or renewal of leases, and (vii) interest and other investment earnings on security deposits, reserve accounts and other Project accounts to the extent disbursed. Notwithstanding the foregoing, Annual Project Revenue shall exclude the following items: (a) security deposits from tenants (except when applied by Developer to rent or other amounts owing by tenants); (b) capital contributions to Developer by its members, partners or shareholders (including capital contributions required to pay any Deferred Developer Fees); (c) condemnation or insurance proceeds; (d) funds received from any source actually and directly used for acquisition of the Property and/or initial development of the Project; or (e) receipt by an Affiliate of management fees or other bona fide arms -length payments for reasonable and necessary Operating Expenses associated with the Project. 1.9 "Applicable Federal Rate" shall mean the interest rate set by the United States Treasury from time to time pursuant to Section 1288(b) of the Internal Revenue Code. The Applicable Federal Rate is published by the Internal Revenue Service in monthly revenue rulings. 1.10 "Building Permit" or "Building Permits" shall mean each and all of the building permit(s) issued by the City of Costa Mesa and required to commence and complete construction of the Project and includes any permit or other approval required by any other public or governmental agency with jurisdiction over the Property and/or Project. 1.11 "Capital Replacement Reserve" shall mean a separate reserve fund account to be established and maintained by Developer equal to not less than Five Hundred Dollars ($500.00) al 10-12 per year for each Housing Unit in the Project, to be used as the primary resource to fund capital improvements, and replacement improvements. The amount of $500.00 for each Housing Unit that is set aside by Developer (or its Property Manager) shall be allocated from the gross rents received from the Property and deposited into a separate interest -bearing trust account for capital repairs and replacements to the improvements, fixtures and equipment at the Property that are normally capitalized under generally accepted accounting principles, including, without limitation, the following: carpet and drape replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs, showers, toilets, lavatories, sinks, and faucets; air conditioning and heating replacement; asphalt repair, replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; gas line pipe replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting. The non -availability of funds in the Capital Replacement Reserve does not in any manner relieve Developer of the obligation to undertake necessary capital repairs and improvements and to continue to maintain the Property and all common areas and common improvements in the manner prescribed herein. Pursuant to the procedure for submittal of each annual Operating Budget to the City Manager by Developer, the City Manager will evaluate the cumulative amount on deposit in the Capital Replacement Reserve account and exercise his or her sole, reasonable discretion to determine if existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative unexpended/unencumbered account balance in such Capital Replacement Reserve account are adequate to provide for necessary capital repairs and improvement to the Property. 1.12 "Capitalized Operating Reserve" shall mean the capitalized operating reserve for the Project, which shall be funded by loan proceeds. 1.13 "Certification of Continuing Program Compliance" shall mean the form of annual certification of the affordable housing requirements for operation of the Project. 1.14 "City" shall mean the City of Newport Beach, a California municipal corporation and charter city, having its offices at 100 Civic Center Drive, Newport Beach, CA 92660. 1.15 "City Loan" shall mean and consist of the financial assistance of Three Million Dollars ($3,000,000.00) sourced solely from the City's general fund, as more particularly provided in Section 2.1. The City Loan is evidenced by the City Note and is secured by the City Deed of Trust and Security Agreement. 1.16 "City Deed of Trust" shall mean a deed of trust securing the City Note and other obligations of Developer hereunder substantially in the form of Attachment No. 4, attached hereto and fully incorporated herein by this reference. The City Deed of Trust shall be a third mortgage deed of trust, subordinate only to a loan or loans issued by an approved lender. Developer has been awarded a Twenty Nine Million Dollars ($29,000,000.00) Homekey Award ("Homekey"). It is currently contemplated that Developer will be obtaining certain loans from the County of Orange in the total amount of Six Million Seven Hundred Eighty One Thousand Five Hundred Twenty Dollars ($6,781,520.00) ("County Loan"), a loan in an amount not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00) from the Housing Authority of the City of Costa Mesa's ("Costa Mesa Authority") Low to Moderate Income Housing Asset Fund ("City Loan") and a grant of City of Costa Mesa ARPA funding in an amount not to exceed One Million Five Hundred Thousand Dollars ($1,500,000.00) ("Costa Mesa ARPA Grant"), a CalOptima Health Grant in the amount of Four Hundred Eighty One Thousand Six Hundred and Sixty Dollars 5 10-13 ($481,660.00) and deferred development fees in the amount of Three Hundred Thirty Eight Thousand Dollars ($338,000.00). The County Loan shall be known as the "Primary Loan." In the event Developer were to obtain a new loan or funding that is not approved by or otherwise permitted under this Agreement without the prior written consent of the City, the City Note and City Deed of Trust shall not be subordinated and shall be and remain a senior lien and encumbrance against the Property and Project, subordinate only to the Regulatory Agreement. 1.17 "City Note" shall mean the promissory note, substantially in the form of Attachment No. 5, attached hereto and fully incorporated herein by this reference, which evidences the City Loan consisting of general funds. 1.18 "City Title Policy" shall have the meaning set forth in Section 2.6.9 and shall be a lender's policy of title insurance insuring the full amount of the City Loan. 1.19 "Closing" and "Closing of Financing" shall mean the closing of the Escrow and recordation in the Official Records of Orange County, California of the City Deed of Trust, Regulatory Agreement, and related instruments evidencing this transaction. 1.20 "Commercial Lease" shall mean either of the following: (i) that certain Supercharger Agreement dated as of December 1, 2021, in favor of Tesla, Inc., as may be amended from time to time; or (ii) any lease by the Borrower to any third party of the approximately [] square feet of commercial space located on the ground floor of the Project provided that the use of such space is compatible with the operation of the Project in accordance with this Agreement. 1.21 "Developer" shall mean American Family Housing, a California non-profit public benefit corporation, having its principal offices at 15161 Jackson Street, Midway City, California 92655 or its newly created limited liability company, 1400 Bristol LLC, in which American Family Housing is the sole member. The term "Developer" includes any legally permissible assignee or successor to the rights, powers, and responsibilities of Developer hereunder, in accordance with Article 8 of this Agreement. 1.22 "Effective Date" shall mean the date this Agreement is approved by the City, which date shall be inserted in the preamble to this Agreement. 1.23 "Eligible Expenses" shall mean expenses incurred by Developer for construction related activities (e.g. hard costs) for the Rehabilitation of the Project, and converting the units from nonresidential to residential. Any remaining funds may be used for expenses such as furniture, fixtures, and equipment for purposes of preparing the Affordable Units for operation as Permanent Supportive Housing. Eligible Expenses do not include: (1) expenses that have already been funded through other sources; (2) site acquisition; and/or (3) soft costs such as architectural, engineering, or related professional services, financing services and fees, and/or initial operating deficit reserve. 1.24 "Escrow" shall mean the escrow established for the disposition of the Property by to the Developer and the closing concurrently of the financings that include the lenders referenced in 2.9 below. 1.25 "Extremely Low -Income Household" shall mean a household with annual income not exceeding thirty percent (30%) of AMI as provided under the income standard of HSC Section Con 10-14 50106, and such households shall pay an Affordable Rent pursuant to HSC Sections 50052.5 and 50053. 1.26 "Extremely Low -Income Units" or "Extremely Low Units" shall mean the seventy- six (76) Affordable Units to be leased and occupied by Extremely Low -Income Households at an Affordable Rent during the Term of the Project. 1.27 "Funding Conditions" shall mean the conditions set forth in Section 2.6 of this Agreement that must be satisfied prior to the City providing the City Loan to Developer. 1.28 "Funding Conditions Satisfaction Date" shall mean the date on which all of the Funding Conditions are actually satisfied or waived by the City. 1.29 "HCD" means the California Department of Housing and Community Development. 1.30 "Housing Unit" or "Housing Units" means the seventy-eight (78) individual apartment units at the Property to be rehabilitated, managed, and operated by Developer as a long- term affordable housing and in implementation of the Project. The Project shall have thirty-six (36) studio Housing Units, forty (40) one -bedroom Housing Units, and two (2) two -bedroom onsite Manager's Unit. 1.31 "Improvements" means all improvements, improvements pertaining to the realty, furnishings, fixtures, works of improvement now existing or hereafter constructed on any portion of the Property and all work of rehabilitation, new construction, or other revitalization to the existing improvements at the Property, including, without limitation, buildings; landscaping, trees and plant materials; and offsite improvements, including, without limitation, streets, curbs, storm drains, and adjacent street lighting, which will be caused to be undertaken by Developer in completion of the Project pursuant to this Agreement and all other Project Documents. 1.32 "Notice of Affordability Restriction" shall mean that document attached to this Agreement as Attachment No. 6. 1.33 "Notice of Commencement of Affordability Restriction" shall mean the document attached to this Agreement as Attachment No. 7. 1.34 "Operating Budget" shall mean the annual operating budget for the Project that sets forth the projected Operating Expenses for the upcoming year that is submitted to and reviewed and approved by the City Manager in his or her discretion, which shall not be unreasonably conditioned, delayed or denied. During and for the Affordability Period, the City Manager's discretion in review and approval of each proposed annual Operating Budget shall include, without limitation, (a) the budget shall be reasonably consistent with comparable Permanent Supportive Housing projects in Orange County, California, (b) may include review of individual categories, line items, and accounts, such as the following: (i) extent, type, and amount for social/supportive services, if any, at or associated with the Project; (ii) existing balance(s) in and proposed deposits to the Capital Replacement Reserve and Capitalized Operating Reserve to evaluate shortfalls and/or cumulative unexpended/unencumbered deposits (provided that required annual deposits into the Capitalized Replacement Reserve are not required to exceed $500/per unit and the amount maintained in the Capitalized Operating Reserve is not required to exceed the Target Amount); (iii) limitation of payments under loans for approved and scheduled Debt Service; (iv) conformity 7 10-15 of any annual increases in the partnership management fee, asset management fee, and general partner guaranty fee with the increases permitted in the definition of "Residual Receipts"; (iv) reasonableness and conformity to prevailing market rates in Costa Mesa and rates and fees for goods and services to be provided by Developer or any Affiliate. 1.35 "Operating Expenses" shall mean actual, reasonable and customary (for comparable high quality, fully rehabilitated, multi -family rental housing developments in Costa Mesa) costs, fees and expenses directly incurred and attributable to the operation, maintenance, and management of the Project in a calendar year, which are in accordance with the Operating Budget (or any amendments thereto) approved by the City through its City Manager under this Agreement, and not a part or paid as a part of the rehabilitation of the Property, including, without limitation, Debt Service; painting, cleaning, repairs, alterations, landscaping; utilities, refuse removal, certificates, permits and licenses, sewer charges, taxes, filing fees, assessments, insurance, security, advertising and promotion, janitorial services, cleaning and building supplies, purchase, repair, servicing and installation of appliances, equipment, fixtures and furnishings which are not paid from the Capital Replacement Reserve, fees and expenses of property management (not exceeding five percent (5%) of gross scheduled income) and common area expenses, fees and expenses of accountants, attorneys and other professionals, the cost of social/supportive services, if any, in an amount equal to the social/supportive services requirement, if any, imposed by HUD or HCD with respect to the Project, and other actual, reasonable and customary operating costs which are directly incurred and paid by Developer, but which are not paid from reserve accounts, and provided, however, that any fees incurred or services provided by Developer or any Affiliate shall not exceed fair market fees or rates for goods or services that are customary and prevailing within the corporate limits of the City of Costa Mesa for such fees, goods, or services. To the extent Developer's only asset is the Project, Operating Expenses shall include actual, reasonable and customary costs, fees and expenses paid to unaffiliated third parties for the operation of Developer, including administrative, accounting and legal fees and expenses. Operating Expenses may include costs, fees or expenses paid to unaffiliated third parties that were not set forth in the approved Operating Budget to the extent such costs, fees or expenses were not foreseen at the time the applicable Operating Budget was created, but nonetheless were actual, reasonable and customary for comparable affordable housing developments; provided, evidence of such expenses must be submitted to the Director for verification purposes prior to payment thereof (except in emergency situations, in which case evidence of such expenses must be submitted to the Director for verification purposes as soon as reasonably practicable). The term "Operating Expenses" shall exclude all and any of the following: (i) salaries of employees of Developer or Developer's general overhead expenses, or expenses, costs and fees paid to an Affiliate of Developer, to the extent any of the foregoing exceed the expenses, costs or fees that would be payable in a bona fide arm's length transaction between unrelated parties in Costa Mesa for the same work or services; (ii) any amounts paid directly by a tenant of the Project to a third party in connection with expenses which, if incurred by Developer, would be Operating Expenses; (iii) optional or elective payments with respect to any financing senior to the City Loan unless approved in writing by the City; (iv) any payments with respect to any Project -related loan or financing other than Debt Service; (v) expenses, expenditures, and charges of any nature whatsoever arising or incurred by Developer prior to completion of the Project with respect to the acquisition, development, maintenance, and upkeep of the Project, or any portion thereof, including, without limitation, all costs and expenses incurred by Developer in connection with the acquisition of the Property, all pre development and pre rehabilitation activities conducted by Developer in connection with the Project, including without limitation, the preparation of all plans and the performance of any tests, studies, investigations or other work, and the rehabilitation of N. 10-16 the Project and any on -site or off -site work performed in connection therewith; (vi) depreciation, amortization, and accrued principal and interest expense on deferred payment debt; and (vii) other expenses not related to the operation, maintenance, or management of the Project. 1.36 "Permanent Supportive Housing" shall mean housing, dwellings, or other living accommodations where the landlord does not limit the tenant's length of tenancy, the landlord does not restrict the tenant's movements, and the tenant has a lease and is subject to the rights and responsibilities of tenancy and has the same meaning as "supportive housing," as defined at Health and Safety Code section 50675.14, subdivision (b)(2), except that it shall include associated facilities if used to provide services to housing residents. 1.37 "Permanent Supportive Housing Period" shall mean the period, during which time Developer shall develop and operate the Property as Permanent Supportive Housing. 1.38 "Permitted Transfer" means any of the following: a. An assignment for financing purposes to an Approved Primary Lender to secure the funds necessary for the Rehabilitation and operation of the Project, so long as such loan documents have been duly reviewed and approved by City, and City has approved such financing or permitted refinancing thereof pursuant to this Agreement; b. An assignment of this Agreement and all of Developer's interests in the Property to an Affiliate or a conveyance back from the Affiliate to Developer, including a limited partnership or limited liability company in which Developer and/or an Affiliate is the managing general partner or sole member, respectively; C. The lease for occupancy of all or any part of the units in the Project in accordance with this Agreement; d. The granting of easements or permits to facilitate the development of the Property and/or the Project in accordance with this Agreement; e. A transfer of the Developer's interest in the Property by foreclosure or deed in lieu of foreclosure to any bona fide third -party lender holding a lien encumbering the Property or the Project (or its nominee); or f. Any Commercial Lease approved by the County, so long as the lease is consistent with the purpose of the project, is permitted in the zone where the Project is located, and would not otherwise require a use permit; g. A transfer otherwise approved in writing by the City. 1.39 "Person" means an individual, partnership, limited partnership, trust, estate, association, corporation, limited liability company, or other entity, domestic or foreign. 1.40 "Plans" means the architectural and construction plans and drawings prepared on behalf of Developer for the Project in accordance with this Agreement. I 10-17 1.41 "Prevailing Wage Action" shall mean any of the following: (a) any determination by the California Department of Industrial Relations that prevailing wage rates should have been paid, but were not; (b) any determination by the California Department of Industrial Relations that higher prevailing wage rates than those paid should have been paid; (c) any administrative or legal action or proceeding arising from any failure to comply with the Federal Davis -Bacon Act (codified as 40 U.S.C. §§ 3141 et seq.) or California Labor Code Sections 1720 through 1781, as amended from time to time, regarding prevailing wages, including maintaining certified payroll records; or (d) any administrative or legal action or proceeding to recover wage amounts at law or in equity. 1.42 "Prescribed Rent Levels" shall mean, based upon the most restrictive requirements of all Project funding sources, for the seventy-six (76) Affordable Units, Affordable Rent calculated at no more than thirty percent (30%) of AMI (HCD rents). 1.43 "Project" shall mean the acquisition of the Property and existing improvements on the Property, the Rehabilitation of the Improvements as Permanent Supportive Housing for seventy-six (76) housing units and two (2) manager's units, with landscaping, driveways, and related improvements, and all other on -site and off -site improvements required for such rehabilitation, with all improvements to be consistent with the development and building plans and permits to be approved by the City. In the event of any inconsistency between the description of the Project in this Agreement and the approved plans and permits, the approved plans and permits shall govern. 1.44 "Project Budget" shall mean the cost estimates for Developer's development of the Project set forth in Attachment No. 8 to this Agreement. The Project Budget may not be materially changed without the prior written approval of City, which shall not be unreasonably withheld or delayed (a material change is a change that causes the total Project costs to increase or decrease from what is shown in the Project Budget or that causes any line item in the Project Budget to increase or decrease by more than 10%). Any changes to the Project Budget, whether or not requiring the approval of City, shall be submitted to City. If the Project Budget is revised as permitted herein, all references herein to the "Project Budget" shall be deemed to refer to the revised Project Budget. 1.45 "Pro Forma" shall mean the document attached to this Agreement as Attachment No. 9. 1.46 "Property" shall mean that certain real property located at 1400 Bristol Street, Costa Mesa, California, Assessor's Parcel Number 439-312-12, more particularly described in the legal description attached hereto as Attachment No. 1. 1.47 "Qualified Household" means a Qualified Extremely Low -Income Household. 1.48 "Qualified Extremely Low -Income Household" means a household whose gross annual income does not exceed 30 percent (30%) of AMI adjusted for family size as set forth from time to time by regulation of HCD. 1.49 "Regulatory Agreement" shall mean that certain joint document between the Developer, the City and the City of Costa Mesa, attached to this Agreement as Attachment No. 10 regulating the operation and maintenance of the Project. The Joint Regulatory Agreement shall be known in this Agreement as Regulatory Agreement. 10 10-18 1.50 "Rehabilitation" or "Substantial Rehabilitation" shall mean the entire work of rehabilitation, repair, construction, and improvement to the Housing Units and overall Property that are required to be completed under this Agreement; a narrative description of such work with detailed specifications therefor is set forth in the Scope of Development, Attachment No. 2. The Rehabilitation shall meet the Uniform Physical Condition Standards (UPCS) for the as promulgated by HUD in 24 CFR 5.703 so that housing is decent, safe, sanitary, and in good repair for use and occupancy by qualified tenants; such standards are established for inspectable items for each of the following areas: site, building exterior, building systems, dwelling units, and common areas. 1.51 "Release of Construction Covenants" shall mean the document attached to this Agreement as Attachment No. 11. 1.52 "Residual Receipts" shall mean Annual Project Revenue less the sum of: a. Operating Expenses; b. Debt Service on the "must pay" loans referenced in 1.16 above and in Section 2.9; C. Reserve Deposits to the Capital Replacement Reserve; d. Reserve Deposits to the Capitalized Operating Reserve; e. contributions made by Developer for the benefit of the Project; f. property management fee for the Project which remains unpaid after payment of Operating Expenses, if any; g. member asset management fees or equivalent for the Project which remain unpaid after payment of Operating Expenses, if any; h. Deferred Developer Fee for the Project which remains unpaid, if any, including interest at the Applicable Federal Rate; and i. repayment of outstanding development and operating loans and/or contributions for capital expenses for which no Project revenues are available, if any, made by the administrative and/or managing general partners of the Developer entity for the Project, including interest at the Applicable Federal. Developer shall make loan payments to debtors on all assumed debt not included in the items listed in (a) to (i) above ("soft loans") from the remaining fifty percent (50%) of residual cash flow. The specific percentage of cash flow to be received by each debtor is based on the percentage of funds loaned to the Project as compared to the sum of all soft loans assumed by the Project. Developer's loan payments on the City Loan shall be paid by Developer to City from the City's Proportionate Share of fifty percent (50%) of Residual Receipts received from operation of the Project, which is anticipated to be seven and six hundred thirty-fourth thousandths percent (7.634%), until the City Loan Maturity Date at which time full payment, principal and interest, is due on the City Loan as set forth in the City Note without regard to Residual Receipts. The "City's Proportionate Share" is a fraction, the numerator of which is equal to the original principal amount of the City Loan, 11 10-19 and the denominator of which is equal to the original principal amounts of the County Loans, the Private Loan and the City Loan. In addition, none of the fees, costs, expenses, or items described above in calculation of Residual Receipts shall include any duplicate entry/item, or double accounting for a cost item. 1.53 "Schedule of Performance" shall mean that certain document attached to this Agreement as Attachment No. 12 setting out the dates and/or time periods by which certain obligations set forth in this Agreement must be performed. 1.54 "Scope of Development" shall mean that certain document attached to this Agreement as Attachment No. 2. 1.55 "Target Amount" shall mean an amount equal to three (3) months of (i) Debt Service on the Primary Loan and (ii) Operating Expenses for the Project. 1.56 "Target Population" shall mean individuals and families who are experiencing homelessness or who are at risk of homelessness, as defined in Part 578.3 of Title 24 of the Code of Federal Regulations, and who are or were impacted by the COVID-19 pandemic or other communicable diseases, as set forth in the Scope of Development. 1.57 "Tenant Leasing Plan" shall mean that plan created by Developer and approved by the County of Orange, City of Newport Beach and the City, which plan is attached hereto as Attachment No. 3. 1.58 "Tenant Selection Plan" shall mean that certain document attached to this Agreement as Attachment No. 13 and as set forth in Section 3.4 of the Regulatory Agreement. 1.59 "Term" shall be from the earlier of. (i) fifty-five (55) years from the date the Notice of Commencement of Affordability Restriction is issued by City and caused to be recorded in the Official Records against the Property; or (ii) if not able to be determined, fifty-seven (57) years after the date of this Agreement. 1.60 "Transfer" shall mean: a. the sale, agreement to sell, transfer or conveyance of the Property the Project, or any portion thereof or interest therein (including, without limitation, a beneficial interest), whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment sale contract or similar instrument affecting all or a portion of the Property or Project, or the lease of all or substantially all of the Property or Project. b. "Transfer" also includes the transfer, assignment, hypothecation or conveyance of legal or beneficial ownership of any interest in Developer, or any conversion of Developer to an entity form other than that of Developer at the time of execution of this Agreement. C. Notwithstanding paragraphs a and b, "Transfer" will not include Permitted Transfers. 12 10-20 ARTICLE 2. FINANCING 2.1 Ci . Loan. The City hereby agrees to loan to Developer and Developer hereby agrees to borrow from the City the sum of up to Three Million Dollars ($3,000,000.00) ("City Loan") of general funds, subject to the terms and conditions set forth in this Agreement, and subject further to the terms and conditions set forth within the Project Documents, including the City Note, City Loan Deed of Trust, and Regulatory Agreement. The anticipated sources and uses of funds for the development of the Project are set forth in the Project Budget, Attachment No. 8. The financial projections for the Project are set forth in the Project Pro Forma, Attachment No. 9. Developer and City acknowledge that the Project Budget and Project Pro Forma are estimates as of the Agreement Date and are subject to change based on changes in costs, AMI, and other such matters related to the development of the Project. Developer shall submit updated Project Budget and Project Pro Forma upon request from City. 2.2 City Note and City Deed of Trust. The City Loan shall be evidenced by the City Note and secured by the City Deed of Trust, which shall be recorded against the Property in the Official Records of the County in a position junior and subordinate to the lenders set forth in Section 2.9. 2.2.1 Terms of City Note. The City Note shall be for a term commencing upon the date of initial disbursement of funds at Closing and continuing for a period of fifty-five (55) years after the date of recordation of the Release of Construction Covenants ("Maturity Date"). The City Note shall bear simple interest at the rate of three percent (3%) per annum from the date of disbursement of City Loan proceeds. Commencing the calendar year immediately after the recordation of the Release of Construction Covenants and annually on or before June 1 of each succeeding year, Developer shall make annual payments to City allocable from City's share of Residual Receipts, until the Maturity Date. On the Maturity Date of the City Note all principal and interest shall be due in full by Developer to City (without regard to Residual Receipts calculation). a. The City Note shall be repaid through an annual Residual Receipts calculation based on operation of the Project. The City Note shall be payable from the City's Proportionate Share of fifty percent (50%) of Residual Receipts, which is anticipated to be seven and six hundred thirty-fourth thousandths percent (7.634%), for the Project until the City Note has been paid in full, but all amounts due, including the full principal amount principal and any and all accrued interest, shall be due and payable in full on the City Loan Maturity Date. Developer shall make annual payments on the City Loan payable from the City's Proportionate Share of fifty percent (50%) of Residual Receipts, which is anticipated to be seven and six hundred thirty-fourth thousandths percent (7.634%), received from operation of the Project until the City Loan matures and full payment, principal and any accrued and unpaid interest, is due on the City Loan as set forth in the City Note. In the event that the City's Proportionate Share of fifty percent (50%) of Residual Receipts, which is anticipated to be seven and six hundred thirty-fourth thousandths percent (7.634%), is insufficient to provide for payment of the entire annual interest payment due under the City Note, then such unpaid interest (referred to as the "past- 13 10-21 due interest amount") shall begin to accrue interest from the date on which such interest payment was due at the interest rate applicable to outstanding principal under the City Note. The next annual payment shall be increased by the amount of the past -due interest amount plus interest accrued thereon. All past -due interest amounts shall continue to accrue interest until all such amounts and accrued interest thereon have been paid to City. b. The City Note shall be accelerated and due in full in the event Developer refinances to take cash out or transfers the Project or any part thereof (but excluding residential leases to tenants and Permitted Transfers), without prior written approval of the City, and the City Note shall be paid in full from Refinancing Net Proceeds, if any, immediately upon any refinancing of the Project (or any part thereof) or as applicable from Transfer Net Proceeds (excluding Permitted Transfers), if any, immediately upon any transfer in whole or in part of the Project (excluding residential leases to tenants). The terms of the City Loan are more particularly described in the City Note. 2.2.2 Security for City Loan. The City Loan shall be secured by the City Deed of Trust, Attachment No. 4, which shall be recorded against the Leasehold Interest in the Property in the Official Records of the County in fourth lien position. 2.2.3 Request for Notice of Default. The City hereby requests that a copy of any notice of default and that a copy of any notice of sale hereunder be mailed to it at the address set forth in Section 9.2 of this Agreement. City shall record a Request for Notice of Default in the official records of Orange County, California. 2.2.4. Consent Required for Assignment and Assumption. Except for Permitted Transfers and other Transfers permitted pursuant to Article 8 below, the City Note shall not be assignable or assumable by any successor or assignee of Developer without the prior written consent of City, which consent may be withheld in the sole and absolute discretion of the City Manager. 2.3. Disbursement of Ci . Loan. Subject to satisfaction by Developer or waiver by City of each and every Funding Conditions to the City Loan set forth in Section 2.6, as applicable, the proceeds of the City Loan shall be disbursed only to pay for a portion of certain eligible Costs of Rehabilitation set forth in the Scope of Development and approved Final Budget (or as otherwise modified under change orders approved by the City's City Manager). City's obligation to disburse the City Loan proceeds as set forth in Section 2.5 is subject to the fulfillment by Developer or waiver by City of the Funding Conditions set forth in Section 2.6 hereof, as well as compliance with the Disbursement Procedures, as applicable. 2.4 Permissible Use of City Loan; Eligible Expenses. Pursuant to all of the terms and conditions of this Agreement, Developer shall be permitted to use the City Loan only for the Eligible Expenses that are actually and reasonably incurred by Developer and approved by the City (such approval not to be unreasonably withheld or delayed), and for no other purpose. The proceeds of the City Loan shall not be used for Project reserve accounts, monitoring, or servicing and origination fees, or for expenditures incurred more than one year after the issuance of the Release of Construction Covenants. 14 10-22 2.5 Proceeds of City Loan Disbursed. Provided Developer is not in default of this Agreement, from and after the Funding Conditions Satisfaction Date, City shall disburse City Loan funds to an escrow account, mutually agreed upon by both parties, for the purpose of fulfilling the 90% construction contract progress billing and/or the final payment obligation under the construction contract. Developer shall submit to City itemized statements, with such supporting information as City may reasonably require, documenting all of Developer's costs eligible to be considered in calculating the Eligible Expenses, including invoices, contracts, or similar documentation. City shall calculate and approve the amount of Developer's Eligible Expenses. Approval of the amount determined by City shall be made by City, in City's reasonable discretion, within thirty (30) days after Developer's submission of its completed payment request. Any disapproval of a payment amount shall be provided to Developer in writing (including the specific reasons for such disapproval) within thirty (30) days after City has received information necessary to make the determination that the payment amount cannot be approved and must be returned by Developer. City's obligation to make disbursements of the City Loan proceeds to Developer shall be contingent and conditional upon Developer's continuing satisfaction and the timely performance of all of its obligations under this Agreement. Upon the occurrence of any event which, with the lapse of time or the giving of notice or both, would constitute a default under this Agreement, after any applicable notice and cure period, City may at any time thereafter and while such event remains uncured, withhold or stop payment of any pending amount until all such defaults are cured to the reasonable satisfaction of City. Further, following expiration of any applicable cure period, but only prior to final disbursement of the City Loan, City may demand return of (and Developer shall return) amounts paid until all such defaults are cured to the reasonable satisfaction of City. In the event the Eligible Expenses for which any disbursement of City Loan funds are advanced are not incurred by Developer within thirty (30) days after City's disbursement, or such longer time as City approves in its sole discretion, City shall have the right to require that Developer return such proceeds to City. In addition, if it is determined, as a result of an audit or otherwise, that any of the disbursements of the City Loan proceeds were improper or made for expenditures not eligible for payment, Developer shall immediately repay to City the amounts of such disbursements, with accrued interest at a rate of 10% per annum from the date City provides notice until the date paid. Notwithstanding the foregoing, City shall have the right to contract with a third party, including without limitation an escrow company to disburse the City Loan proceeds to Developer. 2.6 Funding Conditions. Notwithstanding any other provision of this Agreement to the contrary, City shall have no obligation to disburse any of the City Loan proceeds to Developer unless all of the following conditions (collectively the "Funding Conditions") are satisfied: 2.6.1 Execution and Delivery of Documents. Developer shall submit (a) a copy of the recorded memorandum of ground lease evidencing Developer's leasehold interest in the Property, (b) all documents evidencing that funding from Homekey, the Primary Loans, and City of Costa Mesa has been received for or irrevocably committed to the Project, (c) a copy of the 15 10-23 fully executed general construction contract with a licensed general contractor covering the Rehabilitation and construction of the Project, (d) fully executed City Note, City Deed of Trust, Regulatory Agreement, and (e) any other documents required hereunder in connection with the City Loan and the acquisition and Rehabilitation of the Project by Developer. 2.6.2 Demonstration of Sufficient Funding. Developer shall submit a final project budget and provide documentation to the City demonstrating that it has commitments for sufficient funding for the Project. 2.6.3 Subordination Agreement. City shall have approved the form of any subordination agreements, if any. 2.6.4 Insurance. Developer shall have provided to City evidence of the insurance required under Section 3.9 of this Agreement. 2.6.5 Permits. Developer shall submit evidence to the City that Developer has satisfied all conditions precedent to the issuance of all permits necessary for the rehabilitation and construction of the Project. 2.6.6 Management Plan. Developer shall submit for City review and reasonable approval a Management Plan and Management Agreement for the Project in accordance with the Regulatory Agreement. 2.6.7 Social Services. Developer shall submit for City review and reasonable approval a Social Services Plan, including proposed budget, describing the social service programs to be provided to the Project and identifying the service providers. 2.6.8 No Default. Developer shall not be in default of any of its obligations set forth in this Agreement, and there shall be no event which, with the passage of time or the giving of notice, would constitute a default. 2.6.8 Tenant Lease Agreement. Developer shall have submitted to the City, and the City shall have approved the standard form lease/rental agreement in conformance with the Regulatory Agreement for rental of the Housing Units to eligible tenants in accordance with the terms of this Agreement. 2.6.9 ALTA Lender's Policy. City shall have received an ALTA lender's title insurance policy excluding any survey, creditor's rights or arbitration exceptions, or one or more pro forma policies and evidence of a commitment therefor, reasonably satisfactory to the City Manager ("Title Policy") relating to the City Loan. Such Title Policy shall have a liability limit of not less than the full amount of the City Loan and shall insure City's interest under the City Deed of Trust as a valid lien or charge upon the Property with the priority required by this Agreement. The Title Policy shall include mechanics' lien coverage and such other endorsements as the City may reasonably require. The Title Policy shall contain only such exceptions from coverage as shall have been approved in writing by the City Manager. 16 10-24 In the event that all of the Funding Conditions are not satisfied on or before December 31, 2025, or such earlier time period as provided for herein, or such later deadline as may be mutually approved in writing by City and Developer in the sole and absolute discretion of each of them, either party not in default may terminate this Agreement by delivering written notice to the other parry. No termination under this Agreement shall release either party then in default from liability for such default. 2.7 Reporting Requirements. Developer shall provide quarterly written reports to the City showing, at a minimum, (a) all Eligible Expenses incurred on the Project to which funds were applied, (b) a comparison of such expenses against line items in the Project Budget, (c) the use of the funds, (d) documentation/receipts of the funds spent, and (e) description and status of completion of the Project. Developer shall, thereafter, within sixty (60) days after the recording of the Notice of Release of Construction Covenants provide a final written report to City with the same minimum information as set forth in the immediately preceding sentence. 2.8 Execution and Delivery of Documents. No later than five (5) days after the date the Funding Conditions in subparagraphs (a)-(e) in Section 2.6.1 are satisfied, Developer shall deliver to City the Notice of Affordability Restriction, Attachment No. 10, executed and acknowledged by Developer. Within five (5) days after the Funding Conditions Satisfaction Date and prior to City's disbursement of any loan proceeds to Developer, City shall execute the Regulatory Agreement and shall cause the Regulatory Agreement to be recorded in the Official Records of Orange County, California. The Notice of Commencement of Affordability Restriction shall be recorded in the Official Records of Orange County, California upon completion of the Project concurrently with Costa Mesa's Notice of Affordability Restrictions. 2.9 Additional Financing. 2.9.1 Sources of Financing. Developer and City anticipate the following funding sources to be obtained by Developer and utilized in addition to the City Loan for the Rehabilitation and operation of the Project. The final sources and amounts of funding for the Project as well as the final cost estimates with respect to the Rehabilitation and operation of the Project shall be set forth in the Final Budget. a. Homekey award in the amount of Twenty Nine Million Dollars ($29,000,000.00)]. b. Developer will enter into loans with the County of Orange in an approximate combined original principal amount of Six Million Seven Hundred Eighty One Thousand Five Hundred Twenty Dollars ($6,781,520.00). C. Developer will enter into a loan with the City of Costa Mesa in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00) and the Costa Mesa Authority in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00). d. Developer will be obtaining a CalOptima Health grant in the amount of Three Hundred Fifty One Thousand Six Hundred Sixty Dollars ($351,660.00). 17 10-25 e. Developer will be receiving Three Hundred Thirty Eight Thousand Dollars ($338,000.00) in deferred developer fees. 2.10 Subordination. The City Manager shall have the City execute and deliver subordination agreements as he or she determines are commercially reasonable and consistent with the purpose and effect of this Agreement; provided that any such subordination agreement is approved by HCD. In connection therewith, the Regulatory Agreement implements the affordability requirements imposed under the entitlements and must be senior to all financing unless otherwise agreed to by the City Manager or designee in his or her reasonable discretion. 2.11 Notice of Default to Construction, Right to Cure. Whenever City shall deliver any notice or demand to Developer with respect to any default by Developer under this Agreement (each, a "Notice"), City shall at the same time deliver a copy of such Notice to any lender or funding source that has provided City written request for such notice or demand. The other lenders or funding sources for the Project shall (insofar as the rights of City are concerned) have the right, within ninety (90) days after receipt of the Notice, to cure or remedy any such default. 2.12 Right of the City to Cure Default. In the event of a default or breach by the Developer, Developer shall promptly deliver to City a copy of any notice of default or breach received from any other lender or funding source and City may, but shall not be required to, cure the default following prior notice thereof to the Developer. In such event, Developer shall be liable for, and City shall be entitled to reimbursement from Developer within ten (10) days of written demand, of all reasonable costs and expenses associated with and attributable to the curing of the default, including any default consisting of a breach of this Agreement by the Developer, which are incurred by City. Any sums which become due to City from Developer under the provisions of this Section 2.12 shall constitute a lien on the Property, effective upon recordation by City or City's authorized agent of a notice of lien ("Notice of Lien") concerning nonpayment of any sum due hereunder, the lien priority of which shall be the date the Notice of Lien is recorded in the Official Records of Orange County, California. The Notice of Lien shall state (i) the amount due, which amount shall include interest at the rate of 10% per annum from the date due to the date paid, and shall also include the cost of preparing and recording the Notice of Lien, (ii) the expenses of collection in connection with any nonpayment, including without limitation reasonable attorneys' fees, (iii) a description of the Property, (iv) the name and address of City, (v) the name of Developer, and (vi) in order for the lien to be enforced by non judicial foreclosure, the name and address of the trustee authorized by City to enforce the lien by sale. The lien established pursuant to this Section may be enforced by sale of the Property by City, City's attorneys, any title insurance company authorized to do business in California, or other persons authorized to conduct the sale as a trustee, after failure of Developer to pay any sum due pursuant to this Agreement within thirty (30) days after recordation of the Notice of Lien. The sale shall be conducted in accordance with the provisions of the California Civil Code applicable to the exercise of powers of sale in mortgages and deeds of trust, or in any other manner permitted by law. City, through its agents, shall have the power to bid on the Property at the foreclosure sale, and to acquire and hold, lease, mortgage and convey the same. Suit to recover a money judgment for any amounts due under this Agreement shall be maintainable without foreclosing or waiving any lien securing the same, but this provision or any institution of suit to recover a money judgment shall not IN 10-26 constitute an affirmation of the adequacy of money damages. Any recovery resulting from a suit at law or in equity initiated pursuant to this Section shall include reasonable attorneys' fees as fixed by the court. ARTICLE 3. DEVELOPMENT OF THE PROJECT 3.1 Scope of Development. The Project shall be developed in accordance with and within the limitations established in the Scope of Development, Attachment No. 2. The Project shall generally consist of the acquisition of the former Travelodge Motel Property and Improvements, use of the Property as a seventy-six (76) unit income -qualified Permanent Supportive Housing rental project with two (2) manager's units. The Project shall also include parking, landscaping, lighting, signage, and other amenities, and all other on -site and offsite improvements required for operation of the Project, with all such improvements, following rehabilitation, to be first class in architectural design and quality for a Permanent Supportive Housing project, compliant with state and federal laws regarding adaptability and accessibility by persons with disabilities, and consistent with the development and building plans and permits to be approved by City (provided, however, that nothing herein shall represent, warrant, or guarantee that City of Costa Mesa shall approve any of such plans and permits). Developer shall carry out the development, management, and operation of the Project in conformity with all applicable requirements. 3.2 Development Standards. Developer agrees to design a project that meets all applicable development standards in the Costa Mesa Municipal Code. It is the responsibility of Developer, without cost to the City, to ensure that zoning of the Property and all applicable City land use requirements will be such as to permit construction and completion of the Project and the use, operation, and maintenance of the Project in accordance with the provisions of this Agreement. The review and approval rights set forth in this Article 3 are for the benefit of the City acting in its capacity as a lender to the Project, and will not be deemed to waive, limit or condition in any way the power and authority of the City of Costa Mesa, acting in its governmental capacity. Nothing contained herein shall be deemed to entitle Developer to any City of Costa Mesa permit or other City of Costa Mesa land use approval necessary for the development of the Project, or waive any applicable governmental requirements relating thereto. This Agreement does not (a) grant any land use entitlement to Developer, (b) supersede, nullify, or amend any condition which may be imposed by the City of Costa Mesa in its governmental capacity in connection with approval of the improvements described herein, (c) guarantee to Developer or any other party any profits from the development of the Property, or (d) amend any City of Costa Mesa laws, codes, or rules. This is not a Development Agreement under Government Code Section 65864. 3.3 Plans 3.3.1 Construction Drawings and Related Documents. a. At the City's request, Developer shall provide a copy or make available construction drawings and related documents for the Permanent Supportive Housing improvements (collectively called the "Plans") to the City for review. Final Construction Drawings 19 10-27 and as built plans shall be made available to the City upon request. Final Construction Drawings are hereby defined as those in sufficient detail to obtain all building permits. 3.4 Cost of Construction 3.4.1 The development costs of the Project, including all offsite (if any) or onsite improvements required by the City in connection therewith, shall be the responsibility of Developer, without any cost to the City except as expressly set forth in this Agreement. 3.4.2 Developer will establish procurement procedures to ensure that materials and services are obtained in a cost-effective manner.. 3.5 Right of Access. City and its officers, officials, employees, agents, and representatives shall have the right of access to the Property, upon reasonable prior written notice, without charges or fees, for the purposes of this Agreement, including but not limited to, the inspection of the work being performed in connection with the Project, so long as City representatives comply with all safety rules and do not interfere with, delay or interrupt Developer's construction activities. It is understood that City does not by this right of access assume any responsibility or liability for a negligent inspection or failure to inspect. 3.6 Schedule of Performance. Subject to the force majeure provisions of Section 9.8, Developer shall commence, prosecute, and complete the Project within the time set forth in the Schedule of Performance. Rehabilitation and construction work shall be continuously and diligently pursued to completion and shall not be abandoned for more than thirty (30) consecutive days, except when due to causes beyond the control and without the fault of Developer, as set forth in Section 9.8 of this Agreement. FAILURE TO SATISFY ANY ONE OF THE PERFORMANCE MILESTONES IN THE SCHEDULE OF PERFORMANCE FOLLOWING NOTICE AND EXPIRATION OF THE APPLICABLE CURE PERIOD WILL CONSTITUTE A BREACH OF THIS AGREEMENT AND AN EVENT OF DEFAULT, AND SHALL ENTITLE THE CITY TO MANDATE THE DEVELOPER TO RETURN TO THE CITY ANY FUNDS DISBURSED; IN ANY SUCH INSTANCE, THE CITY MAY ALSO CANCEL THIS AGREEMENT WITHOUT OWING ANY DAMAGES OR OTHER PAYMENT TO DEVELOPER. 3.7 Reporting. At the City's request, Developer shall submit to the City written reports on the progress of the rehabilitation and construction of the Project. The report shall be in such form and detail as may be reasonably required by the City and shall include the use of the funds, documentation/receipts of the funds spent, and description and status of completion of the Project. 3.8 Compliance with laws/permits. 3.8.1 Laws. Developer shall carry out the design, construction, and operation of the Project in conformity with this Article 3 and all applicable federal, state, and local laws, including the City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the Costa Mesa Municipal Code, all applicable disabled 20 10-28 and handicapped access requirements, and all environmental mitigation measures imposed as conditions of approval of the Project. In addition, Developer shall carry out the construction of the Project and the development of the Property in conformity with all applicable federal and state labor laws (including, without limitation, the requirement under California law to pay prevailing wages and hire apprentices). 3.8.2 Permits. Before commencement of construction of any buildings, structures, or other work of improvement upon any portion of the Property, Developer shall, at its own expense, secure or cause to be secured, any and all permits which may be required by the City of Costa Mesa, acting in its governmental capacity, or any other governmental agency with jurisdiction over such work. The disbursement of the City Loan proceeds is subject, among other conditions, to the issuance of all building permits required by the City for the development and construction of the Project. 3.8.3 Prevailing Wage. In accordance with the California Labor Code (Sections 1770 et seq.), the Director of Industrial Relations has ascertained the general prevailing rate of per diem wages in the locality in which the work is to be performed for each craft, classification, or type of workman or mechanic needed to execute the contract. A copy of said determination is available by calling the prevailing wage hotline number (415) 703-4774, and requesting one from the Department of Industrial Relations. All parties to this Agreement shall be governed by all provisions of the California Labor Code — including, but not limited to, the requirement to pay prevailing wage rates (Sections 1770-7981 inclusive) during the Rehabilitation. A copy of the prevailing wage rates shall be posted by the Developer at the Project during the Rehabilitation. Developer acknowledges and understands that other federal and/or state funding sources and financing scenarios may trigger compliance with applicable state and federal prevailing wage laws and regulations. The highest applicable wage requirements will apply. Notwithstanding the foregoing in this Section, Developer shall carry out the construction through completion of the Rehabilitation of the Property in conformity with applicable federal, state and local labor laws and regulations, including, without limitation, as and if applicable, the requirements to pay prevailing wages under federal law (including Davis -Bacon Act, 40 U.S.C. Section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR Part 1 (collectively, "Davis -Bacon")) and California law (Labor Code Section 1720, et seq.). As such, and specifically in connection with the Rehabilitation, Developer acknowledges and agrees that it shall be required to, and shall be required to cause all of its contractors and their contractors to, pay prevailing wages in compliance with California Labor Code Section 1770 et seq., and shall be responsible for the keeping of all records required pursuant to Labor Code Section 1770 et seq., including but not limited to Labor Code Section 1776, and complying with the maximum hours requirements of Labor Code Sections 1810 through 1815, and complying with all regulations and statutory requirements pertaining thereto. Developer acknowledges and agrees that it shall be independently responsible for reviewing the applicable laws and regulations with respect to the payment of prevailing wages and complying therewith. Upon any request by either City, Developer shall provide a true and correct copy of such payroll records as are required under applicable state law. (a) Developer Compliance. In this regard, Developer shall be solely responsible, expressly or impliedly, for determining and effectuating compliance with all 21 10-29 applicable federal, state and local public works requirements, prevailing wage laws, labor laws and standards, and Costa Mesa and Newport Beach make no representation, either legally and/or financially, as to the applicability or non -applicability of any federal, state and local laws to the Rehabilitation and the Project, both onsite and offsite, as applicable. Developer expressly, knowingly and voluntarily acknowledges and agrees that Costa Mesa and Newport Beach have not previously represented to Developer or to any representative, agent or Affiliate of Developer, or its General Contractor or any subcontractor(s) for the construction of the Rehabilitation, in writing or otherwise, in a call for bids or otherwise, that the work and construction undertaken pursuant to this Agreement is (or is not) a "public work," as defined in Section 1720 of the Labor Code or under Davis -Bacon. (b) Indemnification re Prevailing Wages. Developer knowingly and voluntarily agrees that Developer shall have the obligation to provide any and all disclosures or identifications with respect to the Rehabilitation as required by Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation. Developer hereby indemnifies the Indemnified Parties and shall indemnify, protect, pay for, defend (with legal counsel acceptable to City and City) and hold harmless the Indemnified Parties, from and against any and all loss, liability, damage, claim, cost, expense and/or "increased costs" (including reasonable attorneys' fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development, construction (as defined by applicable law) and/or operation of the Project, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer with any applicable local, state and/or federal law or regulation, including, without limitation, any applicable federal and/or state labor laws or regulations (including, without limitation, if applicable, the requirement to pay state and/or federal prevailing wages); (ii) the implementation of Section 1781 of the Labor Code and/or of Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation. It is agreed by the parties that, in connection with the development and construction (as defined by applicable law or regulation) of the Project, including, without limitation, any and all public works (as defined by applicable law or regulation), Developer shall bear all risks of payment or non-payment of prevailing wages under applicable federal, state and local law or regulation and/or the implementation of Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, and/or any other similar law or regulation. "Increased costs," as used in this Section 3.8.3, shall have the meaning ascribed to it in Labor Code Section 1781, as the same may be amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the Rehabilitation by Developer. 3.8.4 Nondiscrimination. Developer shall not discriminate on the basis of race, sex, religion, national origin, ethnicity, sexual orientation, sexual preference, gender, gender identity, gender expression, age, disability, medical condition, or military or veterans status in the solicitation, selection, hiring or treatment of any contractors or consultants, to participate in subcontracting/subconsulting opportunities. Developer understands and agrees that violation of 22 10-30 this clause shall be considered a material breach of this Agreement and may result in termination, debarment, or other sanctions. This language shall be incorporated into all contracts between Developer and any contractor, consultant, subcontractor, subconsultants, vendors and suppliers. 3.9 Insurance. Without limiting Developer's indemnification of City, and prior to comment of work for the Project, Developer shall obtain, provide and maintain and its own expense during the Term of this Agreement or for other periods as specified in this Agreement, policies of insurance of the type, amount, terms and conditions described in the Insurance Requirements, Attachment No. 14. ARTICLE 4. USE OF THE PROPERTY 4.1 Use. Developer and its successors and assigns shall use, operate, and maintain the Property as an affordable rental housing project in accordance with the provisions of this Agreement and the Regulatory Agreement. This Agreement and the Regulatory Agreement provides that the Project will be developed as Permanent Supportive Housing providing for all of the units in the Project to be rented to income -qualified tenants at Affordable Rents, as that term is defined in the Regulatory Agreement, for fifty-five (55) years as provided in Section 1.58. 4.2 Monitoring. The City, and its successors and assigns, shall have the right, but not the obligation, to monitor and enforce the provisions in this Article and the Regulatory Agreement. Developer covenants that it shall comply with any monitoring program set up by the City to enforce the covenants in this Agreement and the Regulatory Agreement. In complying with such monitoring program, at the City's request, Developer or its agent shall annually prepare and submit to the City an occupancy report and financial information and income verification documents for each tenant, and all supporting documentation, on forms provided or approved by the City, setting forth the required information for the preceding year. The City may review such reports to confirm the continuing affordability of the units and the eligibility of tenants required by this Agreement and the Regulatory Agreement. To the extent permitted by law, to defray the City's cost of monitoring the Project, Developer shall pay to the City an annual monitoring fee of $1,600.00, increasing annually at a rate of three percent (3%). 4.3 Unit Occupancy Prohibition. No officer, employee, agent, official, or consultant of Developer may occupy any of the Affordable Units. ARTICLE 5. OPERATING STANDARDS 5.1 Selection of Tenants. The City desires that the Project serve as many local residents and those working in the City who are members of the Target Population and who are thirty percent (30%) of AMI. Developer shall set aside twelve (12) Affordable Units for Eligible Tenants as provided in the Tenant Selection Plan. Developer shall also set aside sixteen (16) Affordable Units for Eligible Tenants who are residents of, or work or formerly worked in, the City of Costa Mesa. To that end, the Developer shall provide information using commercially reasonable standards to the City and the City of Costa Mesa regarding the availability of the units and provide guidance and instructions to interested local parties. Developer shall be responsible for the selection of tenants for the units in compliance with this Agreement, the Regulatory Agreement and the Tenant 23 10-31 Selection Plan, consistent with the Prescribed Rent Levels. Developer shall conduct due diligence and background evaluation of all prospective tenants, including, without limitation, a criminal background check and third -party verification of Target Population status and income, to evaluate references, credit worthiness, and related qualifications. 5.2 Occupancy Limits. To the greatest extent allowed by law, the maximum occupancy of the units shall not exceed more than two persons. 5.3 Income of Tenants. For the Permanent Supportive Housing, each person or family qualifying to occupy one of the units shall do so at the appropriate Affordable Rent, based on the most restrictive limits of Developer's funding sources, which meets the eligibility requirements established for the corresponding unit, and Developer shall obtain a certification from each tenant renting or leasing each unit which substantiates such fact. 5.4 Property Manager. Developer shall manage or cause the Project, and all appurtenances thereto that are a part of the Project, to be managed in a prudent and business -like manner, consistent with good property management standards for other comparable first quality, well managed Permanent Supportive Housing projects in the County of Orange. Developer may contract with a property management company or property manager, to operate and maintain the Project; provided, however, that the selection and hiring of the Property Manager (and each successor or assignee), including any Affiliate, is and shall be subject to prior written approval of the City Manager (or designee) in his or her reasonable discretion. During the Term, the Property Manager shall manage the Project in accordance with the definitions of Affordable Rent herein, the tenant selection requirements contained in Section 5.1, and the definitions relating to income contained in Section 5.3. Developer shall conduct due diligence and background evaluation of any potential third -party property manager or property management company to evaluate experience, references, credit worthiness, and related qualifications as a property manager. Any proposed property manager shall have significant and relevant prior experience with affordable housing projects and properties comparable to the Project and the references and credit record of such property manager/company shall be investigated (or caused to be investigated) by Developer prior to submitting the name and qualifications of such proposed property manager to the Manager for review and approval. A complete and true copy of the results of such background evaluation shall be provided to the City Manager. Approval of a Property Manager by the City Manager shall not be unreasonably withheld, conditioned, or delayed, and the City Manager shall use good faith efforts to respond as promptly as practicable in order to facilitate effective and ongoing property management of the Project on either a temporary or permanent basis. The replacement of a Property Manager by Developer and/or the selection by Developer of any new or different Property Manager during the Term shall also be subject to the foregoing requirements, except in the case of temporary management by a lender or limited partner of Developer, which shall be immediately submitted to City for approval and will not last longer than is reasonably necessary to select a suitable replacement property manager; provided, however, that in no event shall such temporary management continue for longer than sixty (60) days. 24 10-32 5.5 Property Management Plan. Within the time set forth in the Schedule of Performance, Developer shall prepare and submit to the City Manager for review and approval, a management plan for the Project which must include a detailed plan and strategy for long term marketing, operation, maintenance, repair and security of the Project, inclusive of social services for the residents of the units, on -site parking policies, and the method of selection of tenants, rules and regulations for tenants, and other rental policies for the Project ("Property Management Plan"). The City Manager shall review and shall act reasonably to approve or disapprove the Property Management Plan within a reasonable time. During the Term, Developer and its Property Manager may from time to time submit to the City Manager or proposed material amendments to the Property Management Plan, the implementation of which shall also be subject to the prior written approval of the City Manager. 5.6 Maintenance. Developer shall maintain the Property in accordance with the requirements of this Agreement and the Regulatory Agreements. 5.7 Rights of Access. For purposes of assuring compliance with this Agreement, representatives of the City shall have the right of access to the Property without charges or fees, upon twenty-four (24) hour notice to Developer during the period of this Agreement for the purposes of ensuring compliance with this Agreement, including, but not limited to, the inspection of the work being performed in rehabilitating the Project, so long as they comply with all safety rules. Such representatives of the City shall be those who are so identified in writing by the City Manager. Developer and Developer entities shall be responsible for any bodily injury or related damages and indemnify the City for all claims or suits for, and damages to, property and injuries to persons, including accidental death (including expert witness fees, attorney's fees, and costs) arising out of the activities of the City as referred to in this Section 5.7. ARTICLE 6. DEFAULTS AND REMEDIES 6.1 Defaults -General. Failure or delay by either party to perform any term or provision of this Agreement constitutes a default under this Agreement; provided, however, such party shall not be deemed to be in default if (a) it cures, corrects, or remedies such default within thirty (30) days after receipt of a written notice from the other party specifying such failure or delay, or (b) for defaults that cannot reasonably be cured, corrected, or remedied within such time period, if such party commences to cure, correct, or remedy such failure or delay within such time period after receipt of a notice from the other party specifying such failure or delay, and diligently prosecutes such cure, correction or remedy to completion, within an additional sixty (60) days following the conclusion of such thirty (30) day period (for a total of ninety (90) days). If the defaulting party requires more time to cure, correct, or remedy the default, the parties will negotiate in good faith to determine a mutually agreeable extended deadline. The injured party shall give written notice of default to the party in default, specifying the default complained of by the injured party. Except as required to protect against further damages, the injured party may not institute legal proceedings against the party in default until the time for cure, correction, or remedy of a default has expired. Except as otherwise expressly provided in this Agreement, any failure or delay by a party in giving a notice of default or in asserting any of its rights and remedies as to any default shall not constitute a waiver of any default, nor shall it change the time of default, nor shall 25 10-33 it deprive such party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce any such rights or remedies. 6.2 Termination by Ci1y. Subject to the notice and cure provisions set forth in Section 6.1 above, the City shall have the right to terminate this Agreement by providing written notice to Developer in the event any of the following occurs: a. Failure of any condition precedent to the occurrence of the City Loan funding. b. Except for a Permitted Transfer, Developer (or any successor in interest) assigns or attempts to assign the Agreement or any right therein, or transfers the Property (or any portion thereof or interest therein), in violation of this Agreement. C. There is substantial change in the ownership of the Developer, or with respect to the identity of the parties in control of Developer, or the degree thereof, in violation of this Agreement. d. Developer is in default with any requirements in the Schedule of Performance. e. Completion of the Permanent Supportive Housing or Senior Housing does not occur within the time provided in the Schedule of Performance, subject to Force Majeure delays. f. Developer abandons or suspends the Project for a period of sixty (60) days, subject to Force Majeure Delays. g. Developer otherwise materially breaches this Agreement. 6.3 Institution of Legal Actions. In addition to any other rights or remedies, either Party may institute legal action to cure, correct, or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purposes of this Agreement. Such legal actions must be instituted and maintained in the Superior Court of the County of Orange, State of California, or in any other appropriate court in that county. 6.4 Additional City Remedies. In addition to any other rights or remedies available at law or in equity, upon a default of Developer, City may do any of the following: (a) to the extent the City Loan has not yet been disbursed by City to Developer, refuse to advance all or any part of the proceeds; (b) to the extent the City Loan have not yet been disbursed by City to Developer, wholly or partially suspend or terminate the award of the proceeds; (c) wholly or partially suspend or terminate this Agreement by giving at least thirty (30) days' advance written notice to Developer; and (d) to the extent Developer has not expended such funds, require Developer to repay any or all of the City Loan funds. Upon the occurrence of an event which, with the passage of time or the giving of notice, would constitute a default of Developer, City may, to the extent not already disbursed, temporarily withhold disbursement of the City Loan pending correction of 26 10-34 the default by Developer. Any termination by the City of the Agreement will not limit any other remedies that may be available to the City under this Agreement, at law, or in equity. 6.5 Rights and Remedies are Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise by either party of one or more of its rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other party. ARTICLE 7. ASSIGNMENT AND TRANSFER 7.1 Assignment and Transfer by Developer. The qualifications and identity of Developer are of particular concern to City. It is because of those qualifications and identity that City has provided financial assistance to Developer and entered into this Agreement with Developer. Accordingly, Developer shall not, whether voluntarily, involuntarily, or by operation of law, undergo any significant change in ownership or assign all or any part of this Agreement or any rights hereunder or in the Property or in the Project except as approved by the City. In considering whether it will grant approval to any assignment by Developer of its interest in the Property and this Agreement, City shall consider factors such as the financial strength and capability of the proposed transferee to perform Developer's obligations hereunder and the proposed assignee's experience and expertise in the planning, financing, development, and operation of similar projects. Notwithstanding the foregoing, the following transfers shall be permitted hereunder without the prior consent of City: a. The conveyance or dedication of any portion of the Property and/or Project to City or other appropriate governmental agency, or the granting of easements or permits to facilitate the Rehabilitation (as defined herein). b. An assignment of this Agreement and all of Developer's interests in the Property to an Affiliate, or a conveyance back from the Affiliate to Developer; C. An assignment for financing purposes to an Approved Primary Lender to secure the funds necessary for the Rehabilitation and operation of the Project, so long as such loan documents have been duly reviewed and approved by City, and City has approved such financing or permitted refinancing thereof pursuant to this Regulatory Agreement. d. Leasing of individual Housing Units to a Qualified Household in accordance with the Regulatory Agreement. e. A Permitted Transfer as defined and set forth in Section 1.38 above. f. A transfer otherwise approved in writing by the City. In the event of a permitted Transfer by Developer not requiring City's prior approval, Developer nevertheless agrees that at least twenty-one (21) days prior to such Transfer it shall give written notice to City of such assignment and satisfactory evidence that the assignee will and shall assume all of the obligations of this Regulatory Agreement and the Agreement in writing through an assignment and assumption agreement in a form reasonably acceptable to City. The form of each 27 10-35 assignment and assumption agreement shall be submitted to City for review and approval by City's legal counsel not later than twenty-one (21) days prior to the proposed date of the Transfer. ARTICLE 8. NONDISCRIMINATION 8.1 Nondiscrimination. Except to the extent legally permissible in connection with the Preference Units and to comply with the Project's public financing requirements, Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, rental, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property and Project, or any part thereof, nor shall Developer, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property or Project, or any part thereof. 8.1.2 Covenants Run with the Land. The covenants established in this Article shall, without regard to technical classification and designation, be binding for the benefit and in favor of the City and its/their successors and assigns, and shall remain in effect in perpetuity. 8.1.3 Clauses in Contracts and Leases. All contracts and leases relating to the Property shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: a. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." b. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: W. 10-36 "That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." C. In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." ARTICLE 9. GENERAL PROVISIONS 9.1 Attorneys' Fees. If either party commences an action against the other party arising out of or in connection with this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees and costs of suit, including appeals, from the losing party. 9.2 Notices. All notices to be delivered under this Agreement to the other party shall be addressed to the respective parties as set forth below or to such other address and to such other persons as the parties may hereafter designate by written notice to the other parties hereto: To City: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: City Manager 29 10-37 Copy to: City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 Attn: City Attorney To Developer: American Family Housing 15161 Jackson Street Midway City, California 92655 Attention: Myles Anthony Peinemann II Copy to: Goldfarb & Lipman 1300 Clay Street, Eleventh Floor Oakland California 94612 Attention: William F. DiCamillo Notices personally delivered; delivered through the United States mail, by registered or certified mail, postage prepaid; by means of prepaid overnight delivery service; or by email are acceptable forms of notice. Notices shall be deemed given upon receipt in the case of personal delivery, two days after deposit in the mail, or the next business day in the case of email or overnight delivery. Such written notices, demands, and communications shall be sent in the same manner to such other addresses as any Party may from time to time designate in writing. 9.3 Binding on Heirs. This Agreement shall be binding upon the parties hereto and their respective heirs, representatives, transferees, successors, and assigns. 9.4 Entire Agreement, Waivers, and Amendments. This Agreement incorporates all of the terms and conditions mentioned herein, or incidental hereto, and supersedes all negotiations and previous agreements, oral or written, between the parties with respect to all or part of the subject matter hereof. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of the party to be charged. Any amendment or modification to this Agreement must be in writing and executed by City and Developer. 9.5 Interpretation; Governing Law. This Agreement shall be construed according to its fair meaning and as if prepared by both parties hereto. This Agreement shall be construed and enforced in accordance with the internal laws of the State of California, without regard to such state's conflict of law principles. 9.6 Execution Authority. The person(s) executing this Agreement on behalf of the parties hereto warrant that (i) such party is duly organized and existing, (ii) they are duly authorized to execute and deliver this Agreement on behalf of said party, (iii) by so executing this 30 10-38 Agreement, such party is formally bound to the provisions of this Agreement, and (iv) the entering into this Agreement does not violate any provision of any other agreement to which said party is bound. 9.7 Non -liability of City Officials and Employ. No member, official, employee, or contractor of City shall be personally liable to Developer in the event of any default or breach by City or for any amount which may become due to Developer or any obligations under the terms of this Agreement. 9.8 Enforced Delay; Extension of Times of Performance. In addition to specific provisions of this Agreement, and except as expressly set forth in this Section, performance by either party hereunder shall not be deemed to be in default and such party shall be entitled to an extension of time to perform its obligations hereunder where delays in performance are due to causes beyond the reasonable control and without the fault of such party, including as applicable: war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of the public enemy; epidemics; pandemics; local public health emergency; quarantine restrictions; freight embargoes; lack of transportation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor, subcontractor or utility provider supplies; acts of the other party; acts or the failure to act of City or any other public or governmental agency or entity (except that any act or failure to act of or by City shall not excuse performance by City). Notwithstanding the foregoing, Developer's inability to secure satisfactory financing, interest rates, and market and economic conditions shall not entitle Developer to an extension of time to perform. An extension of time for any cause permitted under this Section shall be limited to the period of the enforced delay, which period shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within thirty (30) days of knowledge of the commencement of the cause. If no written notice is sent within thirty (30) days, for purposes of measuring the extension period for performance of the obligation in question, the period of the enforced delay shall commence to run from the date written notice is sent to the other party. Times of performance under this Agreement may be extended by mutual written agreement of City and Developer. 9.9 Severability. If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of this Agreement shall not be affected thereby to the extent such remaining provisions are not rendered impractical to perform taking into consideration the purposes of this Agreement. In the event that all or any portion of this Agreement is found to be unenforceable, this Agreement or that portion which is found to be unenforceable shall be deemed to be a statement of intention by the parties; and the parties further agree that in such event, and to the maximum extent permitted by law, they shall take all steps necessary to comply with such procedures or requirements as may be necessary in order to make valid this Agreement or that portion which is found to be unenforceable. 9.10 Representations and Warranties. Developer and each person executing this Agreement on behalf of Developer represents and warrants that: (a) Developer is a California 31 10-39 nonprofit, public benefit corporation in good standing and authorized to do business in the State of California; (b) Developer has all requisite power and authority to carry out its business as now and whenever conducted and to enter into and perform its obligations under this Agreement and the agreements attached to this Agreement; (c) by proper action of Developer, Developer's signatories have been duly authorized to execute and deliver this Agreement; (d) the execution of this Agreement by Developer does not violate any provision of any other agreement to which Developer is a parry; and (e) except as may be specifically set forth in this Agreement, no approvals or consents not heretofore obtained by Developer are necessary in connection with the execution of this Agreement by Developer or with the performance by Developer of its obligations hereunder. 9.11 City Contract Administration. The City Manager for the City (or his or her authorized representative) shall administer this Agreement on behalf of City and shall have the City to issue interpretations, waive provisions, extend deadlines, enter into amendments of, and terminate this Agreement on behalf of City, subject to City Council approval whenever applicable under City policy or law. 9.12 Execution in Counterpart. This Agreement may be executed in several counterparts, and all so executed shall constitute one agreement binding on all parties hereto, notwithstanding that all parties are not signatories to the original or the same counterpart. 9.13 Indemnity. Developer shall defend, indemnify, assume all responsibility for, and hold City and their respective officers, officials, agents, employees, representatives, volunteers, successors or assigned (collectively, "Indemnified Parties") from and against any and all claims (including, without limitation, claims for bodily injury, death or damage to property), demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorneys' fees, disbursements and court costs) of every kind and nature whatsoever (individually, a Claim; collectively, "Claims"), which may arise from or in any manner relate (directly or indirectly) to any breach of the terms and conditions of this Agreement, any damages to property or injuries to persons directly or indirectly related to or in connection with this Agreement, the Project, and/or the Rehabilitation, operation, management, or ownership of the Property including, without limitation, defects in workmanship or materials or Developer's presence or activities conducted on the Project (including the negligent, reckless, and/or willful acts, errors and/or omissions of Developer, its principals, officers, agents, employees, vendors, suppliers, consultants, subcontractors, anyone employed directly or indirectly by any of them or for whose acts they may be liable, or any or all of them). Notwithstanding the foregoing, nothing herein shall be construed to require Developer to indemnify the Indemnified Parties from any Claim arising from the sole negligence or willful misconduct of the Indemnified Parties, or any Claim arising from either City's refusal to permit the Developer to amend, modify, or implement the Tenant Selection Plan in accordance with any applicable law provided that the Developer provided written notice to the Cities regarding Developers' proposed amendment or implementation. Nothing in this indemnity shall be construed as authorizing any award of attorneys' fees in any action on or to enforce the terms of this Agreement. This indemnity shall apply to all claims and liability regardless of whether any insurance policies are applicable. The policy limits do not act as a limitation upon the amount of 32 10-40 indemnification to be provided Developer. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the Rehabilitation by Developer. 9.14 Attachments. Attachment Nos. 1-14 attached to this Agreement are incorporated herein by this reference and made a part hereof. Said Attachments are identified as follows: Attachment No. 1 Real Property Legal Description Attachment No. 2 Scope of Development Attachment No. 3 Tenant Leasing Plan Attachment No. 4 City Deed of Trust Attachment No. 5 City Note Attachment No. 6 Notice of Affordability Restriction Attachment No. 7 Notice of Commencement of Affordability Restriction Attachment No. 8 Project Budget Attachment No. 9 Project Pro Forma Attachment No. 10 Regulatory Agreement Attachment No. 11. Release of Construction Covenants Attachment No. 12 Schedule of Performance Attachment No. 13 Tenant Selection Plan Attachment No. 14 Insurance Requirements [Signatures on the following page] 33 10-41 IN WITNESS WHEREOF, City and Developer have executed this Affordable Housing Loan Agreement as of the date set forth above. "CITY" CITY OF NEWPORT BEACH, a California municipal corporation and charter City By: Grace Leung City Manager ATTEST: Date: By: Date: Leilani I. Brown City Clerk APPROVED AS TO FORM: By: Date: Aaron Harp City Attorney "DEVELOPER" AMERICAN FAMILY HOUSING, a California nonprofit, public benefit corporation By: Date: Name: Myles Anthony Peinemann II Title: Chief Executive Officer 10-42 ATTACHMENT NO. 1 REAL PROPERTY LEGAL DESCRIPTION That real property located in the State of California, County of Orange, City of Costa Mesa, and described as follows: PARCEL 2, IN THE CITY OF COSTA MESA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 24 PAGE 23 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THAT PORTION CONVEYED TO MESA CONSOLIDATED WATER DISTRICT BY DEED RECORDED DECEMBER 3 l , l 986 AS INSTRUMENT NO. 86-656909, OFFICIAL RECORDS. ALSO EXCEPTING ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFORE AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH WHIPSTCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OF THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AS RESERVED IN DEED FROM THE IRVINE COMPANY, A CORPORATION, RECORDED MARCH 5, 1968 IN BOOK 8535 PAGE 62 OF OFFICIAL RECORDS. APN: 439-312-12 10-43 ATTACHMENT NO. 2 SCOPE OF DEVELOPMENT 10-44 Development Plan The County of Orange and American Family Housing (AFH) are co -applicants for the 1400 Bristol Project, a proposed 78 unit permanent supportive housing facility located at 1400 Bristol Street Costa Mesa CA, 92626 Project Site The site is currently a 120 unit, fully operational Travelodge Inn motel. The project will be a mix of studios, one -bedroom units, and 2 two -bedroom managers' units. The existing property is composed of 3 two-story hotel buildings with open corridors and units that open onto common outdoor area. Purchase Agreement American Family Housing has entered into a Purchase Agreement with the owner of the site. The site purchase price is $24,000,000 with an initial close date of July 29, 2024. Based on the HomeKey award and funding process, we do not expect to meet the initial closing date. The Key terms of the Purchase agreement include: Purchase Price: Deposit: Escrow Close Date: With Extensions: Three 30-day Extensions Construction $24,000,000 $100,000 October 29, 2024 January 27, 2025 $15,000 each T. Morrissey Corporation will act as General Contractor for the project. Upon plan check approval, they expect to begin construction by October 2024 and complete construction with an approved Certificate of Occupancy by June 2025. The property has three two-story structures which contain 120 units. The existing structures currently operate as an open-air hotel, with open corridors and units that open onto the parking lot, a courtyard, and a pool. Each unit receives an abundance of natural light. Overall, the existing hotel is in very good condition. Transitioning the structure from a hotel to a permanent housing use adds additional cost. The current development concept calls for the rehabilitation of the site to allow for 36 one- bedroom units, 40 one -bedroom units, and 2 managers' units, laundry room, site office space and a community room, with outdoor common area. Site Work Add security fencing around the site, restripe parking lot, and upgrade / repair exterior lighting. ADA path of travel requirements and upgraded landscaping are also included. Building Exterior 10-45 Repair walkways, roof and remove existing building signage. Management / Service Office and Community Center Build out the current hotel lobby into management offices, program space, and community room. Upgrade the fire alarm control panel and add audio/communications for 2% of the units. Create a project layout that encourages a sense of community and camaraderie among its residents. Building Interior Complete pest control and asbestos abatement as necessary. Interior demolition as needed to consolidate hotel rooms into residential units. Replacement/Repair/Upgrade of existing HVAC/ Electrical/water & sewer systems and addition of a fire sprinkler fire suppression systems in all units. Addition of kitchens in all units and additions of bedrooms in one- and two -bedroom units. Repair drywall, paint, replace flooring, replace ac units, replace interior lighting, replace cabinetry and storage, and replace unit -plumbing fixtures. Add central laundry facilities. Reconfigure units to make ADA compliant and build out according to code which includes counter adjustments, bathroom reconfigurations, changes to hardware and flooring replacements. Neighborhood Description The project lies within the East Side Costa Mesa Neighborhood. East Side Costa Mesa is situated east of the city of Costa Mesa and west of the city of Newport Beach. It is a predominantly residential area known for its convenient location, vibrant atmosphere, and desirable coastal living. One of the defining features of East Costa Mesa is its proximity to the Pacific Ocean. Residents enjoy easy access to the beautiful beaches of Newport Beach, including the renowned Newport Harbor. IKEAQ scoas�or HALECREST Baker St Baker Sl S Orange Coast a College 0 rne..;Mae war J Orange Countyv V em pia r Museum of Art Rea Best Buy ® Q ama _ Noguchi -_-Garden IRVINE BUSI COMPILE �r Mitsuwa Marketplace famsi � -Costa Mesa / ® QAinvay Commerce Center Bosscat Kitchen JoAir ,m Airport pporthn A & Libatlons� rytr \. '�� Per © 'Nmneisan or Lyon Air Museum Q° 0 MESA DEL MAR TeWinkle Park A111,,11111111 Costa Mesa mental Ct, MONT ICELLO depot vrioua sr COMMUNITY ®Santa Ana Co try Club n �\ oP NewportBeach ° Golf Course® I Santa Ana EAST SIDE Heights COSTA MESA ?>,a Upper Newport Bay Nature Preserve' Renaissance )'F Newport Beach© ego a 9Google Irvine Building MOULINQ NewportBeach �.0% Marriott Bayview© Fletcher Jones Motorcars In N C 10-46 Target Population The Project's 48 voucher units will target homeless/chronically homeless/ at -risk individuals/households. Prospective tenants will be contacted through CES. The additional units will target individuals/households earning 30% of the Area Median Income or less. AMI Levels The 76 residential units will house households who are earning 30% or less of the area median income. 48 of these units will be supported by Project Based Vouchers. Relocation Information The Project is currently a Travelodge motel and as such does not contain any tenants with long-term leases. 10-47 Experience Overview American Family Housing American Family Housing (AFH) is 501(c)3 nonprofit organization that provides a continuum of housing and an array of services to support homeless and low- income families and adults to secure a stable home, to be an active part of their community, and to achieve a fulfilling life. AFH brings over 30 years of experience in developing and managing affordable housing to meet the needs of communities and residents. Our goal is 100 units per year with a goal of adding 1,000 units over a 10-year period. Together with our partners, we have site control today for 240 future permanent supportive housing units that are now in predevelopment. We are uniquely qualified to operate housing and social services together, with both in-house property management and in-house supportive services. We are investing in our existing portfolio, while maintaining a construction pipeline of new and rehabilitated housing units, prioritizing units for homeless households. Experience Owning and Operating Permanent Supportive Housing Currently, AFH operates at 63 sites, offering affordable housing and permanent supportive housing to households in Los Angeles, Orange, and San Bernardino Counties. AFH owns nine buildings in South Gate and five buildings in the City of Long Beach. AFH also provides third -party HomeKey services and property management in two former motels. About 25% of AFH's affordable housing units are considered service -enriched permanent supportive housing and are reserved for households with one disabled family member, while about 10% of the units are set aside for formerly homeless Veterans. Potters Lane American Family Housing developed Potters Lane, which opened in 2017 in Midway City, CA. Potters Lane had a great impact on the narrative around supportive housing for Veterans, as well as the need to innovate in order to reduce construction costs. Potters Lane was the first residential community funded by state bond funds under the Veterans Housing and Homelessness Prevention Program (VHHP) to open in California. Its remarkably rapid construction was made possible by AFH's use of recycled shipping containers. There are 15 qualifying units and 1 manager unit. Eight (8) of the units are prioritized for chronically homeless Veterans under the Veterans Affairs Supportive Housing (VASH) program. Two (2) more units are prioritized for Veterans who do not work with the US Dept. of Veterans Affairs. The remaining five (5) qualifying units have been prioritized for Veterans, but is expected to be shifted for use by chronically homeless individuals (regardless of Veteran status) as Orange County is rapidly approaching "functional zero" homelessness. 10-48 The purpose of the program is to provide tenants with supportive services that include case management, life and social skills development, linkages to medical and mental services, job search and resume writing, recovery groups and family reunification. • Operational funding source: Rental revenues from project -based vouchers and from tenant rent, and the VA • Capital funding source: State of California Dept. of Housing and Community Development, Federal Home Loan Bank of San Francisco Affordable Housing Program (AHP). • Capital Funding Source. • Number of households / clients: 15/15 • Location: Midway City, CA. • Services Planning Area: Central. • Population: referred to AFH through the US Dept. of Veterans Affairs if they are qualifying Veterans who are eligible for VASH; otherwise, through the Coordinated Entry System (CES). Della Rosa Della Rosa is a residential community in the City of Westminster, CA that opened in September 2020. Della Rosa is a two- and three-story, four building, affordable housing development. Della Rosa offers 50 apartment units with 25 studio units housing formerly homeless individuals; these are supportive housing units. The other 25 units are comprised of one- and two -bedroom apartments for families and individuals earning 50% area median income or less in the County of Orange. Resident amenities include a community room with shared kitchen, on -site laundry, on- site management, and on -site supportive services. • Operational funding source: Rental revenues from project -based vouchers and from tenant rent. • Capital funding source: Low Income Housing Tax Credits, County of Orange, City of Westminster. • Number of households / clients: 25/27 • Location: Westminster, CA. • Services Planning Area: Central. • Affirmed Housing is the owner and developer. • AFH is the services provider in this partnership and has no ownership interest. Affirmed and AFH have a fantastic working relationship and we have strong potential to partner more with them in the future in both OC and LA counties. • The management company is Solari Enterprises. • Population: Affordable units are referred to Solari through the Westminster Family Resource Center; for Supportive Housing units, through the Coordinated Entry System (CES) The SH population is comprised of single and coupled adult clients. The affordable housing population is comprised of single individuals and families. Two onsite case 10-49 managers provide general support and life skills to all tenants and intensive case management services are provided to the clients who reside in the 25 SH units. Supportive Housing - Scattered -Site Programs LA County Dept. of Health Services /DHS The purpose of the DHS Program is to provide intensive case management services that will assist high utilizers of the health care system to secure and maintain permanent housing. The DHS Program consists of a multidisciplinary team of Clinicians and Case Managers that serve nine -nine (99) families, individuals and transitional -aged youth that reside in scattered -sites or rather independent apartments across Los Angeles County. The DHS Program utilizes the evidenced -based practices of the Harm Reduction Model and Housing First Philosophy to create individualized housing plans that meet clients "where they are" while actively addressing barriers specific to housing stability. DHS Program services include, but are not limited to— referrals and linkages to shelters, mainstream benefits, identification and birth certificates, medical and mental health services, critical housing navigation, and wrap- around/aftercare services upon placement into PSH. • Operational funding source: Rental revenues from project -based vouchers or from DHS flexible housing subsidies. All staff costs funded by DHS. • Capital funding source: N/A. Often uses AFH-owned apartments. • Number of households / clients: 99/120 • Location: Lomita, Los Angeles, Huntington Park, Gardena, San Pedro, Artesia, Long Beach, South Gate, El Monte, Alhambra, Bellflower, Whittier, Downey, Pasadena, and E1 Monte. • Services Planning Area: Services Planning Area 4, 3, 6, 7, 8 • Population: referred to AFH through LA DHS. Addressing racial equity AFH is committed in our current work, putting our core values into action with every person that rises out of homelessness. But we cannot achieve our nonprofit mission if we do not integrate into our work approaches that address the impact of institutional and structural racism that is present in education, criminal justice, housing, employment, healthcare and access to opportunities. Our staff receives extensive training in cultural competencies specific to racial and gender identity, as well as to the cultural competencies in working with vulnerable populations whose success benefits from AFH's ability to operate with a trauma - informed approach to all aspects of its work. AFH is an operation that aims to align its own diversity to that of the target 10-50 populations we serve. Our latest annual survey indicates our staff is 46% Hispanic/Latinx, 14% Asian American, 12% African American, and 26% white; 59% are women while 35% are men. In terms of sexual orientation, 13% identify as asexual, bisexual, gay, lesbian, pansexual, queer or other, while 68% identify as heterosexual. State and federal accessibility requirements: AFH's Director of Real Estate Development has extensive experience in managing both new construction as well as rehabilitation affordable housing projects that are subject to state and federal accessibility requirements. He works with well qualified CASp consultants to ensure that building design and construction adheres to the code, and engages in creative problem solving to find cost effective yet compliant solutions. 10-51 HOMEKEY MANAGEMENT AFH provides both property management and services for 130 HomeKey units at two sites in Orange County. • AFH has operated the Stanton Inn and Suites HomeKey sites since the day before Thanksgiving Day in 2020, when AFH took over operations of the Project RoomKey site. The site is operated jointly by its Property Management and Services teams, in conformance with Orange County. • As of March 2021, 86 participants have been served year - to - date, with an average length of stay of 53 days. • AFH took over the property management of the Tahiti Motel in late 2020, and more recently its services team stepped in to commence what is now a nearly - complete lease - up of qualifying HomeKey households. • As of March 2021, of 34 participants served, with an average length of stay of 3 days. • AFH is shifting from stabilizing the property to a more housing - placement focused program. Key Leadership Milo Peinemann, Chief Executive Officer, leads American Family Housing with 15 years of experience in housing and homeless services, and brings an in-depth understanding of homeless services and housing policy and development, including real estate lending and investment, asset management of permanent supportive housing, the leasing and operations of supportive services for supportive housing and bridge housing, and real estate project management. As CEO, he drives the organization to fulfill its mission, overseeing all aspects of operations including development, finance, real estate, and program design and management. Milo holds a BA from the University of California, Berkeley, and a Master of Planning from the University of Southern California. Ryan Lehman, Director of Real Estate Development, has extensive experience in the affordable housing field, with particular expertise in developing supportive housing on complex urban sites in Southern California. With 20 plus years of real estate development experience, he most recently served as a Senior Project Manager at A Community of Friends, a developer of supportive housing based in Los Angeles. Ryan is passionate about innovative approaches that can improve the development process and result in beautiful, sustainable and cost effective developments. He holds a Bachelor of Arts Degree from Goshen College and a Master of Arts Degree from UCLA in Urban Planning Dr. Mary Ann Ross, Chief Program Officer, holds has a Ph.D. in Psychology, a Master's in Education, a B.A. in Criminal Justice/Social Work, and holds credentials/certifications in Substance Use Disorder Treatment and Human 10-52 Resources Management. Dr. Ross has twenty-five years of experience in Executive Management and expertise in the fields of Mental Health, Corrections, Substance Use Disorder Treatment, Permanent and Supportive Housing and Nonprofit Management and Consulting. As an executive, Dr. Ross has directed the service continuum of organizations in the public and private sector, designed and directed multiple "landmark" social service programs, successfully wrote and secured state and federal grants, managed multi -million -dollar projects, monitored the compliance of state and federal contracts, and served as the sole Clinical Director of 40 permanent and supportive housing sites. Sean Theile, Director of Property Management, has 14 years of experience in the real estate field and specializes in managing affordable housing communities. Before joining American Family Housing, Sean was the Director of Property Management for Solari Enterprises, Inc., managing affordable communities throughout the state of CA, from the early pre -development stages through their extended compliance periods and beyond. Born and raised in Los Angeles, and having attended California State University of Fresno, Sean has a strong passion for Southern California and recognizes the urgent need to provide quality housing for our growing homeless population. As AFH's Director of Property Management, Sean is dedicated to an operation which provides quality housing and superior customer service to our Residents, and which creates a strong community where our residents can thrive. 10-53 q `° ire4 aTM a :Y717i Y� Apo� A _ 1 .1 1 1 1 1 TrMcQUK"AN ge � IT tk- - - R1dill r.j - k 1`r�Yelo�$ OFA05 L� PQ RT 1 - m _ _ , F. ATTACHMENT NO. 3 TENANT LEASING PLAN 10-56 DRAFT 09 06 2024 77 0 American Family Housing 1400 Bristol Street Costa Mesa, CA 92626 Total Units: 78 76 Qualifying Rental Units: 36 Studios and 40 1-bedrooms 2 Non -Qualifying (Management Units): 2 2-bedrooms Page 1 of 16 10-57 DRAFT 09 06 2024 LEASE -UP PLAN The Lease -Up Plan supports role awareness and coordination among the owner, developer and partner agencies, all of whom must work collaboratively. The experience of the applicant, as potential tenant, is centered in all procedures. In support of communications, this document is or will be updated over time as part of the collaborative pre -leasing and leasing "Crosswalk" process. This document shall be consistent with the Tenant Selection Plan, but is not the Tenant Selection Plan. PROJECT DESCRIPTION 1400 Bristol consists of a three two-story affordable housing development serving households experiencing homelessness, chronic homelessness, and households who are at -risk of becoming homeless. Local Preferences I Homelessness Criteria I Studios - (36) 11BR - t40) 12BR IOC HCA Voucher Costa Mesa Newport Beach CES CH H AR Studio Studio 1BR 1BR 1BR 2BR 1BR - MHSA - PBVASH MHSA MHSA PBV 38 38 35 3 3 6 - 24 24 PBVASH 10 10 3 7 - 5 - 10 - - Non-PBV 28 16 12 28 - - 28 28 - Staff - - - - - - - - - - - 2 - TOTAL 76 16 12 76 38 10 28 36 6 10 24 2 24 76 1 36 1 40 1 2 Of the 78 total units, 76 of the units are restricted for occupancy by Qualifying Households. The remaining two (2) units are set aside for property management staff, and do not have income restrictions. For all 76 Qualifying units, there are a set of eligibility standards that may apply, including Tenant Eligibility, Program Eligibility, and eligibility for Rental Subsidy, as follows: • Housing status: 38 households experiencing chronic homelessness, 10 households experiencing homelessness, and 28 at -risk of homelessness. • Income Limits: All units are restricted to households with incomes equal to or less than 30% of Area Median Income (AMI). • Additional Restrictions: • 24 of the 1-bedroom units are restricted to households that qualify through the Orange County Health Care Agency (HCA) pursuant to the Mental Health Services Act (MHSA). Any unit may count towards MHSA requirements, or both, so long as total project requirements are met. This means that the designations might "float" over time and so, upon unit turnover, the exact requirements of any unit might change so long as total Page 2 of 16 10-58 DRAFT 09 06 2024 project requirements are met. All referrals shall be pre-screened for presumptive eligibility for MHSA qualification. Of the 76 Qualifying rental units, 48 are subject to a project -based rental subsidy: • 48 units are subject to a Housing Assistance Payment (HAP) Contract from the Orange County Housing Authority (OCHA). These units are specifically designated by unit number as either Housing Choice Project -Based Vouchers (PBV) or Veterans Affairs Supportive Housing (VASH) Project -Based Vouchers under the HAP Contract, and do not change if the occupying leaseholder household changes. These applicant households shall be referred by reaching to the Coordinated Entry System (CES) as managed by the County of Orange (County) Continuum of Care (CoC). • Of these 48 HAP units: ■ 38 are PBV units, of which 30 PBV units are 1-bedroom units and 8 are studio units. 24 (all 1-bedroom units) are overlaid with the requirements of the MHSA program. ■ 10 are VASH units, of which 10 VASH are 1-bedroom units. • 28 units are not subject to the HAP Contract. All of these 28 units are studios. Of these 28 units: • 16 units have a local preference for persons connected to the City of Costa Mesa. These households will come from CES as managed by the CoC and based on local preference criteria developed in conjunction with the City of Costa Mesa. • 12 units have a local preference for persons connected to the City of Newport Beach. These households will come from CES as managed by the CoC and based on local preference criteria developed in conjunction with the City of Newport Beach. • For both PBV and VASH units, the units shall be permanently designated by unit number prior to initial leasing; and these designations shall appended to the HAP contract(s) and remain in place for those specific units for the life of the HAP contracts, unless later revised or amended. American Disability Act (ADA) Standards: Of the 76 Qualifying units, at a minimum, 5% of units will be full mobility units and a separate 5% will be full visual/hearing impaired units to ensure American Disability Act (ADA) compliance, as follows: • Four (4) will be full mobility units pursuant to the ADA. • Four (4) will be visual/hearing impaired units. Page 3 of 16 10-59 DRAFT 09 06 2024 Distribution of Units The initial leasing process shall support maximizing the matching of these ADA units to appropriate referrals, in order to reduce the need for Reasonable Accommodations post -occupancy. The HAP contract (PBV, VASH) and program standards (MHSA, Chronic Homeless status, Homeless status, At -Risk status) shall be distributed throughout the building to the greatest extend feasible, and not intentionally grouped together. A higher qualifying standard is always acceptable; thus, a Homeless unit may be occupied by a household qualifying as experiencing Homeless or Chronically Homeless, and an At -Risk unit may be occupied by a household qualifying as At -Risk, Homeless or Chronically Homeless. However, households referred in by CES must otherwise qualify for the unit as pertains to income qualifications, local preferences and other such criteria, which will be spelled out in the Tenant Selection Plan. Coordinated Entry System (CES) Because all qualifying units in the property are funded under the California Department of Housing and Community Development (State HCD) Homekey program, all 76 qualifying units must utilize CES or an equivalent. Thus, there is no broad -based marketing for the site except as provided for under the Orange County CES. The procedures established by CES, and the cities of Costa Mesa and Newport Beach, are as follows: • Referrals for the 38 units under the HAP contract (PBV) shall be for households experiencing chronically homelessness, for referrals into PBV units, and come from the CES, as managed by the CoC. • Referrals for 10 units under the HAP Contract (VASH) shall be for VASH-eligible households, for referral into VASH units, and come from CES as managed by the CoC, including as appropriate, direct referrals from the VA Long Beach Healthcare System. • Referrals for 16 units shall be for tenants who are at -risk of becoming homeless, for referral into units without PBVs, and come from CES as managed by the CoC and based on local preference criteria developed in conjunction with the City of Costa Mesa. • Referrals for 12 units shall be for tenants who are at -risk of becoming homeless, for referral into units without PBVs, and come from CES as managed by the CoC and based on local preference criteria developed in conjunction with the City of Newport Beach. Management Agent: American Family Housing (AFH) will be contracted as the property management company and will oversee staffing, including an on -site property manager and maintenance/janitorial staff, as well oversight of the building's systems, operations, and vendors. Page 4 of 16 10-60 DRAFT 09 06 2024 Lead Services Provider: AFH, as Lead Services Provider (LSP), shall coordinate all services with third - party providers, and shall perform all annual compliance reporting required for services. AFH as LSP will offer the 76 permanent supportive housing (PSH) units wrap -around services, intensive case management services, and services coordination to all tenants at no less than the levels required by Homekey. The required ratio of direct onsite services staff -to -tenant households is no less than 1:15 for households with a qualifying head of household who was chronically homeless; 1:20 for households with a qualifying head of household who was homeless, and 1:25 for a household with a qualifying head of household who was at -risk. Additionally, there shall be other support staff such as supervisors and interns as outlined in the services plan and budget. Levels of services for any given household is based on individualized approaches to services based on individual household acuity and needs. Orange County Housing Authority (OCHA): 48 PBVs (including 10 VASH): OCHA will run its own background checks to determine eligibility of applicants for the PBVs. OCHA and property management will process applicants concurrently. Applicants must be approved by both OCHA and property management prior to move in. Once applicants are approved to execute a lease, OCHA will oversee issuance of the PBVs for the PBV units. OC Health Care Agency (HCA): HCA will confirm MHSA eligibility of applicants referred by CES and provide property management with the MHSA Certificate as eligibility is confirmed. HCA will oversee the collection and submission of the application to OCHA and property management for the 24 MHSA units, in partnership with their contracted service provider. HCA or the contracted service provider will provide supportive services to the MHSA tenants. Supportive services are designed to be provided onsite as well as off -site and are tailored to the level, intensity, and type of housing interventions to meet individual needs. All services are voluntary and acknowledge the individuals strengths and the environmental factors that affect a person's wellbeing and housing stability, including the experience of trauma. Services will provide community -based programing in order to deliver seamless, coordinated services that integrate housing support, and linkage to community services to this target population. Services are intended to improve housing stability and retention, as well as the individuals overall wellbeing. In addition to the HCA BHS onsite support staff, the Residential Clinical Services Coordinator (RCSC) will play a key liaison role to the property. The RCSC provide County contract monitoring support. RCSCs are clinicians who have extensive training and many years of experience in permanent supportive housing, with significant expertise providing services and coordinating with a wide range of housing resources and partners. The RCSCs role is to ensure an effective collaborative process with tenants, service providers and property managers, as well as to support tenants in their recovery goals and to achieve the greatest tenant outcomes. RCSCs will ensure coordination of services with on -site service provider and partner agencies and also in arranging community events to increase engagement and decrease tenant isolation. RCSCs offer an extra layer of support when needed to tenants, on -site service providers and property management by providing consultation and Page 5 of 16 10-61 DRAFT 09 06 2024 facilitating collaboration. RCSCs will engage in one-on-one discussions with tenants to support housing stability and to ensure each resident has access to a variety of responsive supports. California Department of Housing and Community Development: AFH shall handle all direct reporting to HCD. CalOptima Health: The LSP, AFH, is a provider of Tenancy, Navigation, Day Use Rehab, and Enhanced Care Management services. Once applicants are referred by CES, AFH shall screen via CalOptima for eligibility under the CalAIM program. Where possible, applicants shall be enrolled in CalAIM at the time of initial occupancy. Continued enrollment is not a criteria of continued occupancy. Where enrolled, enrollment with the LSP is not a criteria, and so applicants already enrolled with other providers contracted with CalOptima Health may choose to remain enrolled with their provider of choice. Furniture: All restricted units for the life of the property shall be furnished upon initial occupancy at no cost to tenants. This initial furnishings shall include: Bed frame, mattress, nightstand, a kitchen table and two chairs. Common area amenities: • A large multi -purpose community room for group events, classes, or meetings, including a fully furnished community kitchen. • Outdoor gathering spaces adjacent to indoor community rooms. • Two laundry rooms (one on each floor). • Common area spaces are meant to be open for use by tenants during regular business hours, and during off -hours as practical. The Management Agent and Services team shall coordinate access to and scheduling for use of all common area spaces, with oversight and procedures to be determined and/or altered on a working basis by the site -level staff team, with ongoing input from tenants through a formal input process, such as a Tenant Council. Services Staffing Requirements Funding Source Staffing Commitments (Greater/ most restrictive applies) Notes OCHA - PBVs None specified Supportive services 38 Housing Choice Vouchers (HCV) are required and provided by the Sponsor(AFH)for non-MHSA units. VA - VASH None specified VA will provide in - kind supportive services and case Page 6 of 16 10-62 DRAFT 09 06 2024 management. HCD — Homekey - 76 • 3.0 FTE Case Managers. Minimum staffing ratios for Case Management pursuant to the 2023 Homekey NOFA (Round 3): 1:20 for chronically homeless tenants, 1:25 for homeless tenants, and 1:40 for at -risk tenants. HCA - MHSA • 1.5FTE Case Managers. HCA will provide in - kind MHSA supportive • 0.5 FTE Resident Services services and case Coordinator management through a full -service • 0.5 FTE Peer Support partnership. • 0.15 HMIS Admin. 2024 Staffing Plan To be finalized August 2024 Office and Common Area Floor Plans Pending Qualifying Standards for Occupancy Housing First 1400 Bristol is a Housing First community that prioritizes permanent housing followed by access to voluntary supportive services such as medical and mental healthcare, substance use services, benefits assistance, and legal aid, which promote long-term stability. This project will screen applicants and support residents to maintain their tenancy using Housing First principles, in compliance with SB1380. As such, the following practices will apply: • Applicants will be considered for tenancy regardless of their current sobriety or past use of substances, completion of treatment, or participation in services. Participation in services or Page 7 of 16 10-63 DRAFT 09 06 2024 program compliance is not a condition of application approval. The use of alcohol or drugs in and of itself, without other lease violations, is not a reason for denial of tenancy or eviction once housed. • Applicants will not be rejected based on poor credit or financial history, poor or lack of rental history, criminal convictions unrelated to tenancy, housekeeping ability, or behaviors that indicate a lack of "housing readiness." • Once housed, residents can work with Case managers and service coordinators who are trained in and actively employ evidence -based practices for client engagement, including, but not limited to, motivational interviewing and client -centered counseling. Services are informed by a harm -reduction philosophy that recognizes drug and alcohol use and addiction as a part of tenants' lives, where tenants are engaged in nonjudgmental communication regarding drug and alcohol use, and where tenants are offered education regarding how to avoid risky behaviors and engage in safer practices, as well as connected to evidence -based treatment if the tenant so chooses. Guidelines — Maximum Occupancy Limits Upon Date of Move -In Upon Initial Qualification & Occupancy (strictest shall apply) OBR 1BR Min Max Min Max OCHA 1 2 1 4 Costa Mesa 1 2 1 3 Newport Beach 1 2 1 3 Guidelines — Responsibility for Eligibility Standards: There are three primary categories of eligibility criteria for applicant households: (1) Tenant eligibility: These criteria are spelled out in the Tenant Selection Plan, are tied to the deed restricted covenants of the property, and shall not change from year to year. • Pursuant to the Tenant Selection Plan, the Management Agent shall be responsible for confirming that applicants are eligible prior to move -in, and shall oversee annual re - certifications of income. For this property, all units are set at 30% AMI for income qualification. Page 8 of 16 10-64 DRAFT 09 06 2024 (2) Rental subsidy eligibility: These criteria are tied to two types of rental subsidies, which apply to some but not all units: • The Housing Choice Vouchers, which cover 38 of the 76 rental units. Some referral criteria may be altered by OCHA over the years within the requirements of the vouchers, in which case this leasing plan shall be updated to conform. For these units, OCHA shall be responsible for confirming that applicants are eligible for rental assistance prior to move - in. The Management Agent shall be responsible for confirming that applicants have Certificates of Eligibility prior to move -in, and shall facilitate annual re -certifications with OCHA. The units that are assigned PBV are fixed and will not change over time. • The Veterans Affairs Supportive Housing units, which cover 10 of the 76 rental units. For this geography, verification of eligibility shall be provided by the VA Long Beach Healthcare System to the Management Agent. • The HAP contracts are tied to specific unit numbers. The applicable criteria may change from year to year at the discretion of OCHA or the VA. (2) Program eligibility: The program criteria are tied to the deed -restricted covenants of the property, and shall not change from year to year. The Lead Services Provider shall be responsible for supporting the Management Agent in documenting that applicants are eligible for these criteria, prior to final approval for lease execution and initial occupancy. This scope of work includes assisting the Management Agent in coordinating with HCA and/or the VA Long Beach Healthcare System to secure documentation of eligibility for MHSA and the VASH programs, where applicable. The Management Agent shall work with tenants after Initial Occupancy to support ongoing enrollment, re -enrollment, or access to other resources, due to post -occupancy changes in program eligibility or enrollment. For this property: • Verification of housing status (Chronically Homeless, Homeless, and At -Risk) shall apply to all 76 Qualifying units. • MHSA, as administered by the HCA, applies to 24 units. • Eligibility for VASH services administered by the VA Long Beach Healthcare System shall apply to the 10 units which have project -based VASH subsidies. • Referral through CES: All 76 units are required to receive referrals through the CES administered by the CoC. Of those 76 units accepting referrals through CES, 28 of the units are also subject to a local preference: ■ 16 of the units are subject to a City of Costa Mesa preference. The Management Agent shall make best efforts to provide information to the City regarding the availability of the units and provide guidance and instructions to interested local Page 9 of 16 10-65 DRAFT 09 06 2024 parties. To the greatest extent legally allowable, preference will be afforded to applicants who are residents of the City of Costa Mesa, or who are verifiably living or employed within City limits, as defined by the City. ■ 12 of the units are subject to a City of Newport preference. The Management Agent shall make best efforts to provide information to the City regarding the availability of the units and provide guidance and instructions to interested local parties. To the greatest extent legally allowable, preference will be afforded to applicants who are residents of the City of Costa Mesa, or who are verifiably living or employed within City limits, as defined by the City. Page 10 of 16 10-66 DRAFT 09 06 2024 Documents Needed by Applicants- See Property Management Plan (PMP) Supportive Services Notify CoC, local providers, Fair Housing Marketing Screen referrals through CES and provide direct one-on-one support to applicants filling out applications Attach CES Match/Referral Sheet to the front of the application Applications & Applicant Interviews Services will support applicant with appeals process American Family Housing LSP Management Agent Agreement, LSP Agreement, Regulatory Agreements Property Management Review services applications Schedule applicant interview to complete application Process application compliance internally. Do a BC Submit application to Housing Authority & other services funders Update Services/applicant regardingany missing documents and status Page 11 of 16 10-67 DRAFT 09 06 2024 Case Management/Property Management Roles Item Area Case Manager Property Management Refer Client to submit maintenance request Provide notice to the client, assess with PM. Ensure clients understand to repairs, complete within appointment Repairs always submit issues and concerns in time frame, and document repairs. writing to PM as soon as they happen. Inform client how to submit their concern. Respond according to procedures Find out facts, forward to PM if needed, outlined in lease and property Complaints/Suggestions clarify and explain policy to client. Support management grievance procedures. client. Inform client of any on -site suggestions box. Goal Setting/ Discuss dreams/goals to be Stabilization Planning Accomplished and create an individualized No Action Required plan for reaching those goals Promote a safe environment, build tenant Promote and maintain a safe skill/behavior, role-play conflict resolution environment, set clear expectations, strategies, interact with police department or enforce rules/policies, interact with other psychiatric support services as -needed, police department as -needed. Safety (On -Site) explain house rules to resident and advocate Inform CM when inspections or as needed with the PM. auditors are coming to the property with ample notice for case management to prep client or provide any documentation that may be requested. Work with clients individually Address disruptions/arguments, Conflict Resolution amongst to understand conflict resolution strategies, explain rules, encourage and enforce Tenants roles of on -site staff, rules as witnessed, respond to managing behaviors, good neighbor complaints, distribute lease commitments, and adherence to violations/notices (and coordinate with property rules. CM) Assist with getting VOE for newapplicants Assist the client in obtaining Driver's license, Obtaining Vital Identification card, Social Security Card, Birth Certificate, Homeless and Disability Documents Certification, and other documents needed for qualification and recertification in PSH Page 12 of 16 10-68 DRAFT 09 06 2024 Assist clients in applying for any cash and Complete recertification of eligibility Application for non -cash benefits they are eligible for. for housing. If requested, provide income Income/Entitlements Coordinate follow-up, set timelines for information so that CM can complete applications, refer to PM when there are significant Annual Assessments of eligibility for changes in income to address adjustments in PSH (if required for the particular rental calculations. funding program). Refer reports to PM, In-depth training on Assess infestation, Set up/coordinate Pest Management/ apartment care and housekeeping, abatement w/ pest control company, Abatement Activities of Daily Living (ADL) skills, outline preparation and follow-up preparation and follow up for abatement, steps by resident, assess the outcome coordination with pest and on -site staff. Notify PM of needs for health and safety Contact the local police department Health and Safety check of checks as appropriate. Help coordinate and ask them to conduct a wellness client follow-up care, referrals, hospitalization, check to determine the safety and/or and discharge as needed if concerns well-being of the resident. identified. If observed by PM: enforce guidelines for the lease, contact police department if needed, If observed by CM: Work with client on request that supportive services check - Known or Suspected Drug increasing sobriety and compliance if desired in with the client. If in violation of lease Use by the client, with respect to their guidelines: PM should document the confidentiality in the program. Alert activity and issues an appropriate authorities if client intends self -harm or harm notice or document the conversation to another within established agency with the resident. (If a conversation, it reporting protocols. should occur with CM present). The client wants counseling Work with the client to identify nature/cause Refer to CM or someone to talk to for need and refer to appropriate counseling, if applicable. Client Admits Suicidal Assess for safety, refer to Emergency and Assess for basic safety, call 911 or refer Ideation/Intent to Harm psychiatric services (911) or Contracted third- to CM and follow up to ensure care others parties or partnerships for safety received Attend Resident Meeting and provide Resident (Townhall) Coordinate meetings with PM and run requested updates or information Meetings meeting and prepare agenda residents need to know about the property/operations. 1x/week between Property Manager and 1xweek between Property Manager On -site staff meetings Supportive Services, CM creates agenda and and Case Manager runs meetings and circulates minutes Page 13 of 16 10-69 DRAFT 09 06 2024 Rental Calculation Refer resident to PM upon loss/gain of Perform Annual Rental Calculation Procedures income or if questions on how rent is (move -in anniversary) and upon calculated. loss/gain of resident income Housing Team Roles and Responsibilities Successful Housing Teams: • Are committed to a collaborative team approach and support each other's roles • Have mutual respect and understanding regarding each agencies roles and responsibilities • Educate and orient staff and residents regarding the role and responsibilities of the Service Provider/Case Managers and Property Management • Have mutual respect for each other's professional boundaries, roles, and areas of expertise • Work as a team to resolve problems and conflicts • Respect and maintain resident confidentiality regarding treatment plans • Meet and communicate regularly to review challenges and successes to address problems and create solutions • Work together to improve policies and procedures within the housing community. Service Provider/Case Manager Role within the Housing Team: Case Manager's, while maintaining confidentiality regarding mental and physical health diagnosis, provide updates on tenant progress, behavior issues that pertain to property management, and planned community activities. Role during Lease Up/Move-in • Screen referrals through CES and provide direct one-on-one support to applicants filling out voucher application • Print out and attach CES Match/Referral Sheet to the front of the voucher application • Submit voucher applications to Property Management team and schedule applicant interview with Property Management team • Provide documents and back-up to Property Management team as requested • Report to Property Management team regarding status of appeal process for denied applicants • Oversee appeal process for applicants denied (i.e. submitting back-up documentation) • Be the primary contact person to verify homeless/disability certifications Ongoing Role • Link residents with services and resources to address needs • Provide direct support, services, and resources when applicable to address resident needs • Coordinate support and service plans • Provide support and referrals for residents to assist them with remedying lease violations and help prevent evictions • Participate in the Housing Retention Plan Protocol • Coordinate the delivery of prevention programs for residents such as safety and wellness • Coordinate, deliver, and promote community building activities to support resident retention • Work with Property Management in collecting past due rent by assisting resident in Page 14 of 16 10-70 DRAFT 09 06 2024 developing a payment plan if they are late or fall behind on rent payments. Property Manager Role within the Housing Team: Property Management staff provide information related to vacancies, resident lease violations, verbal and written warning's, inspections, delayed rent payments, and property maintenance issues which will affect residents. Role during Lease Up/Move-in • Review voucher application's for errors or discrepancies • Schedule interview with applicant to complete Property Management application • Process Property management application through internal compliance • Submit voucher applications to Housing Authority • Communicate with housing authority, Service Provider and applicant regarding missing documents and update applications with documents received from Service Provider/Applicant • Help move applicant progress along through all parts of the process, including timely submission of applications to Housing Authority Ongoing Role • Oversee physical maintenance of the property • Oversee safety and security of the property • Manage the property • Collect rent • Manage occupancy issues and communicate and collaborate with Service Provider in filling vacancies • Enforce terms of the lease • Participate in the Housing Retention Plan Protocol • Conduct fire drills/inspections regularly • Provide information to the Service Provider Case Manager's regarding resident issues and lease violations prior to issuing any violation or notice • Oversee provision of supplies in Community Room, including daily coffee, water, hand sanitizer, snacks. Shared Roles: • Work collaboratively and cooperate on issues related to the health and safety of residents and building/unit maintenance • Share relevant written materials, memos, lease violations, notices, and application updates on regular basis • Establish clear eviction prevention policies and work together to provide appropriate support to tenants in violation of lease and/or house rules or delinquent in rent • Support problem solving and mediation attempts through collaboration with Service Providerteam • Hold new tenant orientation and welcome new tenants • Building maintenance and security: Case Managers to notify observed problems or issues to Property Manager and Property Manager to respond to issues as they arise Page 15 of 16 10-71 DRAFT 09 06 2024 • Support rent collection • Support housing stability of residents • Health and safety of residents • Tenant grievance process and follow-up • Lease and House Rule enforcement • Handling inappropriate behavior • Participate in weekly team meetings • Emergency procedures during crisis. Team Meetings Multidisciplinary Team Meetings including Case Managers, Property Manager, and AFH will be held on an ongoing weekly basis to discuss safety, operations, and Resident related business. The purpose of all team meetings is to ensure site staff work together as a team with the common goal of sustaining a residential environment that is safe, secure, and well -maintained, while enhancing a sense of community and ensuring Resident's housing retention. Additionally, ongoing crosswalk meetings will be held either monthly or quarterly with OCHA and the VA upon reaching 100% occupancy to discuss tenant challenges and resident retention. Page 16 of 16 10-72 ATTACHMENT NO.4 CITY DEED OF TRUST 10-73 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: City Manager APN: [Free Recording Requested Government Code Sections 6103 and 27383] DEED OF TRUST WITH ASSIGNMENT OF RENTS This DEED OF TRUST, dated as of , 2024 for identification purposes only, is made by and among AMERICAN FAMILY HOUSING, a California Nonprofit Public Benefit Corporation ("Trustor"), , a ("Trustee"), and CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("Beneficiary"). Trustor grants, transfers and assigns to Trustee in trust, upon the trusts, covenants, conditions and agreements and for the uses and purposes hereinafter contained, with power of sale, and right of entry and possession, all of its title and interest in that real property (the "Property") in the City of Costa Mesa, County of Orange, State of California, described in Exhibit A attached hereto and incorporated herein by this reference. Together with Trustor's interest in all buildings, structures and improvements of every nature whatsoever now or hereafter situated on the Property; and Together with the rents, issues and profits thereof; and together with all buildings and improvements of every kind and description now or hereafter erected or placed thereon, and all fixtures, including but not limited to all gas and electric fixtures, engines and machinery, radiators, heaters, furnaces, heating equipment, laundry equipment, steam and hot-water boilers, stoves, ranges, elevators and motors, bathtubs, sinks, water closets, basins, pipes, faucets and other plumbing and heating fixtures, mantles, cabinets, refrigerating plant and refrigerators, whether mechanical or otherwise, cooking apparatus and appurtenances, and all shades, awnings, screens, blinds and other furnishings, it being hereby agreed that all such fixtures and furnishings shall to the extent permitted by law be deemed to be permanently affixed to and a part of the realty; and Together with all building materials and equipment now or hereafter delivered to said premises and intended to be installed therein; and Together with all plans, drawings, specifications, and articles of personal property now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the completion and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, 10-74 and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner. To have and to hold the property hereinbefore described (including the Property and all appurtenances), all such property being referred to collectively herein as the "Property," to Trustee, its successors and assigns forever. FOR THE PURPOSE of securing (1) payment of indebtedness of Trustor to the Beneficiary in the principal sum of THREE MILLION DOLLARS ($3,000,000) (the "City Loan"), evidenced by a promissory note dated , 2024 between Trustor and Beneficiary (the "City Loan Note"), together with all sums due thereunder including interest and other charges; and (2) the performance of each agreement of Trustor in this Deed of Trust and the City Loan Note, including, without limitation, that certain Affordable Housing Agreement entered into by and between Trustor and Beneficiary on or about , 2024 (the "AHA"), and that certain Regulatory Agreement and Declaration of Covenants and Restrictions entered into by and between Trustor and Beneficiary on or about the same date hereof (collectively, the "City Loan Documents"). Said City Loan Note and all of its terms are incorporated herein by reference and this conveyance shall secure any and all extensions, amendments, modifications or renewals thereof however evidenced, and additional advances of the City Loan evidenced by any note reciting that it is secured hereby. AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: 1. That it will pay the City Loan Note at the time and in the manner provided therein; 2. That it will not permit or suffer the use of any of the Property for any purpose other than the use for which the same was intended at the time this Deed of Trust was executed, namely, as permanent supportive housing; 3. That the City Loan Note is incorporated herein and made a part of this Deed of Trust. Upon default under the City Loan Note or this Deed of Trust, Beneficiary, at its option, may declare the whole of the indebtedness secured hereby to be due and payable; 4. That all rents, profits and income from the Property covered by this Deed of Trust are hereby assigned to Beneficiary for the purpose of discharging the debt hereby secured. Permission is hereby given to Trustor so long as no default exists hereunder, to collect such rents, profits and income; 5. That upon default hereunder and the expiration of any applicable notice and cure periods, Beneficiary shall be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession and protect the Property described herein and operate same and collect the rents, profits and income therefrom; 6. That Trustor will keep the improvements now existing or hereafter erected on the Property insured against loss by fire and such other hazards, casualties and contingencies as may be required in writing from time to time by Beneficiary, and all such insurance shall be evidenced by standard fire and extended coverage insurance policy or policies, in the amount of the replacement value of the improvements. Such policies shall be endorsed with a standard mortgage 2 10-75 clause with loss payable to Beneficiary and certificates thereof together with copies of original policies shall be deposited with Beneficiary. Such policies shall be endorsed with a standard mortgage clause with loss payable to Beneficiary subordinate to the rights and interest of the beneficiary of the deed of trust securing the Senior Loan, as described in paragraph 29 below) and certificates thereof together with copies of original policies shall be deposited with Beneficiary; 7. To pay, before delinquency, any taxes and assessments affecting said Property when due, all encumbrances, charges and liens, with interest, on said Property or any part thereof which appear to be prior or superior hereto, all costs, fees and expenses of this Trust unless exemption is obtained therefrom; 8. To keep said Property in good condition and repair, not to remove or demolish any buildings thereon, to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged, or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor (unless contested in good faith if Trustor provides security satisfactory to Beneficiary that any amounts found to be due will be paid and no sale of the Property or other impairment of the security hereunder will occur); to comply with all laws affecting said Property or requiring any alterations or improvements to be made thereon; not to commit or permit waste thereof; not to commit, suffer or permit any act upon said Property in violation of law and/or covenants, conditions and/or restrictions affecting said Property; not to permit or suffer any alteration of or addition to the buildings or improvements hereafter constructed in or upon said Property without the consent of Beneficiary; 9. To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including cost of evidence of title and attorneys' fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear; 10. Should Trustor fail to make any payment or do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof. Beneficiary or Trustee, being authorized to enter upon said Property for such purposes, may commence, appear in and/or defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; may pay, purchase, contest or compromise any encumbrance, charge, or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, may pay necessary expenses, employ counsel, and pay counsel's reasonable fees; 11. Beneficiary shall have the right to pay fire and other property insurance premiums when due should Trustor fail to make any required premium payments. All such payments made by Beneficiary shall be added to the principal sum secured hereby; 12. To pay immediately and without demand all sums so expended by Beneficiary or Trustee, under permission given under this Deed of Trust, with interest from date of expenditure at the rate specified in the City Loan Note; 13. That the City Loan advanced hereunder is to be used for the development, management, and maintenance of the Property; and upon the failure of Trustor to keep and perform 3 10-76 such covenants, the principal sum and all arrears of interest, and other charges provided for in the City Loan Note shall, at the option of Beneficiary, become due and payable, anything contained herein to the contrary notwithstanding; 14. Trustor further covenants that it will not voluntarily create, suffer or permit to be created against the Property, subject to this Deed of Trust, any lien or liens (other than the lien of a deed of trust recorded prior in time and right to this Deed of Trust and/or the lien of a deed of trust to which Trustor has expressly agreed to subordinate the lien of this Deed of Trust, with City's written permission) except as authorized by Beneficiary, and further that it will keep and maintain the Property free from the claims of all persons supplying labor or materials which will enter into the construction of any and all buildings now being erected or to be erected on the Property; 15. That any and all improvements made or about to be made upon the Property, and all plans and specifications, comply with all applicable municipal ordinances and regulations and all other regulations made or promulgated, now or hereafter, by lawful authority, and that the same will upon completion comply with all such municipal ordinances and regulations and with the rules of the applicable fire rating or inspection organization, bureau, association or office. IT IS MUTUALLY AGREED THAT: 16. Subject to any cure rights under the AHA, if the construction of any improvements as herein referred to shall not be carried on with reasonable diligence, or shall be discontinued at any time for any reason other than events of Force Maieure pursuant to Paragraph 34 hereof, Beneficiary, after due notice to Trustor or any subsequent owner, is hereby invested with full and complete authority to enter upon the Property, employ watchmen to protect such improvements from depredation or injury and to preserve and protect the personal property therein, and to continue any and all outstanding contracts for the erection and completion of said building or buildings, to make and enter into any contracts and obligations wherever necessary, either in its own name or in the name of Trustor, and to pay and discharge all debts, obligations and liabilities incurred thereby. All such sums so advanced by Beneficiary (exclusive of advances of the principal of the indebtedness secured hereby) shall be added to the principal of the indebtedness secured hereby and shall be secured by this Deed of Trust and shall be due and payable on demand; 17. In the event of any fire or other casualty to the Project or eminent domain proceedings resulting in condemnation of the Project or any part thereof, Trustor shall have the right to rebuild the Project, and to use all available insurance or condemnation proceeds therefor subject to the prior right to any insurance proceeds or condemnation awards of the beneficiary of the deed of trust securing the Senior Loan, as described in paragraph 29; 18. Upon default by Trustor in making any payments provided for herein or in the City Loan Note secured hereby, and if such default is not made good within fifteen (15) calendar days after notice from Beneficiary, or if Trustor shall fail to perform any covenant or agreement in this Deed of Trust within thirty (30) calendar days after written demand therefor by Beneficiary (or, in the event that more than thirty (30) calendar days is reasonably required to cure such default, should Trustor fail to promptly commence such cure, and diligently prosecute same to completion), Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale, and of written notice of default and of election to cause the Property to be sold, which notice Trustee shall cause to be duly filed for 2 10-77 record and Beneficiary may foreclose this Deed of Trust. Beneficiary shall also deposit with Trustee this Deed of Trust, the City Loan Note and all documents evidencing expenditures secured hereby; 19. After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell Trustor's interest in said Property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may postpone sale of all or any portion of said interest by public announcement at the time and place of sale, and from time to time thereafter may postpone the sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to the purchaser its deed conveying Trustor's interest in the property so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee or Beneficiary, may purchase at the sale. Trustee shall apply the proceeds of sale to payment of (1) the expenses of such sale, together with the reasonable expenses of this trust including therein reasonable Trustee's fees or attorneys' fees for conducting the sale, and the actual cost of publishing, recording, mailing and posting notice of the sale; (2) the cost of any search and/or other evidence of title procured in connection with such sale and revenue stamps on Trustee's deed; (3) all sums expended under the terms hereof, not then repaid, with accrued interest at the rate specified in the City Loan Note; (4) all other sums then secured hereby; and (5) the remainder, if any, to the person or persons legally entitled thereto; 20. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Deed of Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the property is situated, shall be conclusive proof of proper appointment of the successor trustee; 21. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law; 22. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and the City Loan Note to Trustee for cancellation and retention and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals in such reconveyance of any matters of fact shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as "the person or persons legally entitled thereto"; 23. The trust created hereby is irrevocable by Trustor; 24. This Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term "Beneficiary" shall include not only the original Beneficiary hereunder but also any successor to Beneficiary's rights, powers, and responsibilities, and any future owner and holder including 5 10-78 pledgees, of the City Loan Note secured hereby. In this Deed of Trust, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. All obligations of each Trustor hereunder are joint and several; 25. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law, Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee; 26. The undersigned Trustor requests that copies of any notice of default and of any notice of sale hereunder be mailed to it at: c/o Attention: Trustor agrees, at any time after receipt of a written request from Beneficiary, to furnish to Beneficiary a detailed statement in writing of income, rents, profits, and operating expenses of the premises, and the names of the occupants and tenants in possession, together with the expiration dates of their leases and full information regarding all rental and occupancy agreements, and the rents provided for by such leases and rental and occupancy agreements, and such other information regarding the Property and their use as may be requested by Beneficiary. 27. In order to induce Beneficiary to make the loan evidenced hereby, Trustor agrees that in the event of any Transfer of the Property without the prior written consent of Beneficiary (other than a transfer resulting from a foreclosure, or conveyance by deed in lieu of foreclosure, by the holder of the deed of trust securing the Senior Loan), Beneficiary shall have the absolute right at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Beneficiary may grant or deny such consent in its sole discretion and, if consent should be given, any such transfer shall be subject to this paragraph 27, and any such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein. Such assumption shall not, however, release Trustor from any liability thereunder without the prior written consent of Beneficiary. (a) As used herein, "transfer" includes the sale, agreement to sell, transfer or conveyance of the Property, or any portion thereof or interest therein, whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment land sale contract or similar instrument affecting all or a portion of the Property, or the lease of all or substantially all of the Property. "Transfer" shall not include the leasing of individual residential units on the Property or any transaction that doesn't require approval by the Beneficiary pursuant to Section 7.1 of the AHA. (b) The term "sale" means any transfer, assignment, conveyance or lease (other than to a tenant for occupancy) of the Property and/or the improvements thereon, or any portion thereof, or any interest therein by the Trustor, but excludes any purchase option agreement given 0 10-79 to Trustor's general partner(s). Sale includes a sale in condemnation or under threat thereof. Sale does not include dedications and grants of easements to public and private utility companies of the kind customary in real estate development. Sale shall also not include any transaction that doesn't require approval by the Beneficiary pursuant to Section 7.1 of the AHA. Notwithstanding anything to the contrary contained in this Deed of Trust or in the City Loan Note, prior to declaring any default or taking any remedy permitted under this Deed of Trust, the City Loan Note or applicable law based upon an alleged default, the Qualified Tax Credit Investor (the "Investor"), if there is one, shall have a period of not less than thirty (30) calendar days to cure such alleged default; provided, however, if in order to cure such default the Investor reasonably believes that it must remove a general partner of Trustor, or all of them, pursuant to authority granted under the agreement that sets forth the terms of Trustor's limited partnership (the "Partnership Agreement"), and consistent with Section 7.1 of the AHA, the Investor shall so notify Beneficiary and so long as the Investor is reasonably and diligently attempting to remove the general partner or general partners, the Investor shall have until the date that is thirty (30) calendar days after the effective date of the removal of the general partner or general partners to cure such default. 28. Trustor shall permit Beneficiary and its agents or representatives to inspect the Property at any and all reasonable times, with twenty-four (24) hours advance notice. Inspections shall be conducted so as not to interfere with the tenants' use and enjoyment of the Property. 29. It is hereby expressly agreed and acknowledged by Trustor and Beneficiary that this Deed of Trust will be a subordinate deed of trust only to the deed of trust securing the Acquisition Loan before the close of escrow. Further, this Deed of Trust shall only be subordinate to the deeds of trust securing the Construction Loan and Take Out Loan, and that the City Loan secured hereby, and the City Loan Note will be subject and subordinate only to these deeds of trust as such are defined in the AHA (collectively referred to as the "Senior Loan"). 30. For purposes of this Deed of Trust, "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, the State of California, or the United States Government, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste", "acutely hazardous waste", "extremely hazardous waste", or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter -Presley -Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material", "hazardous substance", or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) polychlorinated byphenyls, (viii) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the California Code of Regulations, Chapter 20, (ix) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317), (x) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 7 10-80 6903), (xi) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., (xii) methyl -tertiary butyl ether, (xiii) perchlorate or (xiv) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, which by any governmental requirements either requires special handling in its use, transportation, generation, collection, storage, handling, treatment or disposal, or is defined as "hazardous" or harmful to the environment. For purposes hereof, "Hazardous Materials" excludes materials and substances in quantities as are commonly used in the construction and operation of an apartment complex provided that such materials and substances are used in accordance with all applicable laws. 31. In addition to the general and specific representations, covenants and warranties set forth in this Deed of Trust or otherwise, Trustor represents, covenants and warrants, with respect to Hazardous Materials, as follows: (a) Neither Trustor nor, to the best knowledge of Trustor, any other person, has ever caused or permitted any Hazardous Materials to be manufactured, placed, held, located or disposed of on, under or at the Property or any part thereof, and neither the Property nor any part thereof, or any property adjacent thereto, has ever been used (whether by Trustor or, to the best knowledge of the Trustor, by any other person) as a manufacturing site, dump site or storage site (whether permanent or temporary) for any Hazardous Materials; (b) Trustor hereby agrees to indemnify Beneficiary, its officers, employees, contractors and agents, and hold Beneficiary, its officers, employees, contractors and agents harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against Beneficiary, its officers, employees, contractors or agents for, with respect to, or as a direct or indirect result of, the presence or use, generation, storage, release, threatened release or disposal of Hazardous Materials on or under the Property or the escape, seepage, leakage, spillage, discharge, emission or release of any Hazardous Materials from the Property (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under CERCLA, any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning any Hazardous Materials), caused by Trustor. (c) Trustor has not received any notice of (i) the happening of any event involving the use, spillage, discharge or cleanup of any Hazardous Materials ("Hazardous Discharge") affecting Trustor or the Property or (ii) any complaint, order, citation or notice with regard to air emissions, water discharges, noise emissions or any other environmental, health or safety matter affecting Trustor or the Property ("Environmental Complaint") from any person or entity, including, without limitation, the United States Environmental Protection City ("EPA"). If Trustor receives any such notice after the date hereof, then Trustor will give, within seven (7) business days thereafter, oral and written notice of same to Beneficiary. (d) Without limitation of Beneficiary's rights under this Deed of Trust, Beneficiary shall have the right, but not the obligation, to enter onto the Property or to take such other actions as it deems necessary or advisable to clean up, remove, resolve or minimize the impact of, or otherwise deal with, any such Hazardous Materials or Environmental Complaint upon its receipt of any notice from any person or entity, including without limitation, the EPA, 10-81 asserting the existence of any Hazardous Materials or an Environmental Complaint on or pertaining to the Property which, if true, could result in an order, suit or other action against Trustor affecting any part of the Property by any governmental agency or otherwise which, in the sole opinion of Beneficiary, could jeopardize its security under this Deed of Trust. All reasonable costs and expenses incurred by Beneficiary in the exercise of any such rights shall be secured by this Deed of Trust and shall be payable by Trustor upon demand together with interest thereon at a rate equal to the highest rate payable under the City Loan Note secured hereby. 32. The following shall be an "Event of Default:" (a) Failure of Trustor to pay, when due, principal and interest and any other sums or charges on the City Loan Note, in accordance with the provisions set forth in the City Loan Note and such failure is not cured within fifteen (15) calendar days after receipt of written notice from Beneficiary; or (b) A violation of the terms, conditions or covenants of the City Loan Note, this Deed of Trust, the AHA or City Regulatory Agreement after the expiration of any applicable cure period. 33. Subject to the extensions of time set forth in paragraph 34, and subject to the further provisions of this paragraph 33 and of paragraphs 35 and 36, failure or delay by the Trustor to perform any term or provision of this Deed of Trust constitutes a default under this Deed of Trust. The Trustor must immediately commence to cure, correct, or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. (a) The Beneficiary shall give written notice of default to the Trustor with a copy to the limited partners of Trustor for which Beneficiary has been supplied with address for notice, specifying the default complained of by the Beneficiary. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default. (b) The Trustor shall not be in default so long as it endeavors to complete such cure, correction or remedy with reasonable diligence, provided such cure, correction or remedy is completed within thirty (30) calendar days after receipt of written notice (or such additional time as may be reasonably necessary to correct the cause). (c) Any failures or delays by the Beneficiary in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by the Beneficiary in asserting any of its rights and remedies shall not deprive the Beneficiary of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce any such rights or remedies. 34. Notwithstanding specific provisions of this Deed of Trust, performance hereunder shall not be deemed to be in default where delays or defaults are due to: war; insurrection; strikes; lock -outs; riots; floods; earthquakes; fires; casualties; acts of God or other deities; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor or supplier; acts of the other parry; acts or failure to act of the Beneficiary, or any other public or governmental agency or entity (except that any act or failure to act of Beneficiary shall not excuse performance by Beneficiary); 0 10-82 or any other causes beyond the reasonable control or without the fault of the party claiming an extension of time to perform. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time the party claiming such extension gives notice to the other party, provided notice by the party claiming such extension is given within fifteen (15) calendar days after the commencement of the cause. Times of performance under this Deed of Trust may also be extended in writing by the Beneficiary and Trustor. 35. If a monetary event of default occurs under the terms of the City Loan Note or this Deed of Trust, prior to exercising any remedies thereunder Beneficiary shall give Trustor written notice of such default. Trustor shall have a period of fifteen (15) calendar days after such notice is given within which to cure the default prior to exercise of remedies by Beneficiary under the City Loan Note and this Deed of Trust. 36. If a non -monetary event of default occurs under the terms of the City Loan Note or this Deed of Trust, prior to exercising any remedies hereunder or thereunder, Beneficiary shall give Trustor notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days, Trustor shall have such period to effect a cure prior to exercise of remedies by the Beneficiary under the City Loan Note and this Deed of Trust. If the default is such that it is not reasonably capable of being cured within thirty (30) calendar days, and Trustor (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then Trustor shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by Beneficiary. In no event shall Beneficiary be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) calendar days after the first notice of default is given. 37. Beneficiary shall provide those limited partners of Trustor for which Beneficiary has been supplied with address for notice with a copy of any written notice provided to Trustor under the terms of the City Loan Documents. In the event of a monetary event of default, Trustor's limited partners shall have a period of fifteen (15) calendar days after receipt of such notice, or such longer period of time as may be set forth in the City Loan Documents, to cure the default prior to exercise of any remedy by Beneficiary. In the event a non -monetary event of default occurs under any City Loan Document, Trustor's limited partners shall have a period of thirty (30) calendar days after receipt of such notice, or such longer period of time as may be set forth in the City Loan Documents, to cure the default prior to exercise of any remedy by Beneficiary. Notwithstanding anything to the contrary contained in the City Loan Documents, Beneficiary hereby agrees that any cure of any default made or tendered by Trustor's limited partners shall be deemed to be a cure by Trustor and shall be accepted or rejected on the same basis as if such cure were made or tendered by Trustor. 38. Subject to paragraph 34, Trustor, upon the occurrence of an Event of Default as described in paragraph 32 that has not been cured with the applicable cure period set forth in paragraph 35 or 36, shall be obligated to repay the City Loan and, subject to the nonrecourse provision of the City Loan Note, Beneficiary may seek to enforce payment of any and all amounts due by Trustor pursuant to the terms of the City Loan Note. 39. All expenses (including reasonable attorneys' fees and costs and allowances) incurred in connection with an action to foreclose, or the exercise of any other remedy provided 10 10-83 by this Deed of Trust, including the curing of any Event of Default, shall be the responsibility of Trustor. 40. Except as provided in paragraph 29, each successor owner of an interest in the Property, other than through foreclosure, deed in lieu of foreclosure or an owner who takes an interest in the Property after a foreclosure has occurred, shall take its interest subject to this Deed of Trust. 41. Notwithstanding anything to the contrary herein, Beneficiary agrees that any extended low-income housing commitment (as such term is defined in Section 42(h)(6)(B) of the Internal Revenue Code) (the "Extended Use Agreement") shall be subordinate to this Deed of Trust and shall be recorded against the Property; provided that such Extended Use Agreement, by its terms, will terminate upon foreclosure or upon a transfer of the Property by instrument in lieu of foreclosure in accordance with said Section 42(h)(6)(B). [Signature on the following page] 11 10-84 "Trustor" AMERICAN FAMILY HOUSING, a California Dated: , 2024 Nonprofit Public Benefit Corporation MYLES ANTHONY PEINEMANN II Chief Executive Officer Francisco Flores Chief Financial Officer 12 10-85 ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of } On 920 before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatures(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of (seal) On 120 before me, , Notary Public, personally appeared , proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatures(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal) 13 10-86 EXHIBIT "A" LEGAL DESCRIPTION OF THE PROPERTY LEGAL DESCRIPTION That real property located in the State of California, County of Orange, City of Costa Mesa, and described as follows: PARCEL 2, IN THE CITY OF COSTA MESA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 24 PAGE 23 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THAT PORTION CONVEYED TO MESA CONSOLIDATED WATER DISTRICT BY DEED RECORDED DECEMBER 31, 1986 AS INSTRUMENT NO. 86-656909, OFFICIAL RECORDS. ALSO EXCEPTING ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFORE AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH WHIPSTCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OF THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AS RESERVED IN DEED FROM THE IRVINE COMPANY, A CORPORATION, RECORDED MARCH 5, 1968 IN BOOK 8535 PAGE 62 OF OFFICIAL RECORDS. APN: 439-312-12 14 10-87 ATTACHMENT NO. 5 CITY NOTE 10-88 PROMISSORY NOTE Loan Amount: $3,000,000.00 Newport Beach, California , 2024 FOR VALUE RECEIVED, AMERICAN FAMILY HOUSING, a California Nonprofit Public Benefit Corporation ("Borrower") promises to pay to the CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"), the principal sum of Three Million Dollars and 00/100 ($3,000,000.00), or so much of such principal as may be disbursed pursuant hereto and in accordance with that certain Affordable Housing Agreement between the City and Borrower dated for identification purposes only as of , 2024 ("Agreement"), plus interest on the outstanding principal balance, in accordance with the terms and conditions set forth herein. This Note evidences the obligation of Borrower to City for the repayment of certain funds ("City Loan") loaned to Borrower by City pursuant to the Agreement, in connection with the acquisition of real property located at 1400 Bristol Street North, in the City of Costa Mesa, California ("Property"). All capitalized terms unless otherwise defined herein shall have the same meaning as set forth in the Agreement, which is incorporated herein by this reference. Reference is also made to the following additional agreements and documents, of even date herewith, involving City and Borrower and/or pertaining to the Property: (i) Deed of Trust with Assignment of Rents by and between Borrower as Trustor, City as beneficiary, and Title Insurance Company as Trustee, and recorded in the Office of the Orange County Recorder ("City Deed of Trust"). The City Deed of Trust secures repayment of this Note and performance under the Agreement and City Regulatory Agreement. (ii) Regulatory Agreement by and between Borrower, the City of Costa Mesa and City, for the benefit of City, and recorded in the Office of the Orange County Recorder ("City Regulatory Agreement"). 1. Definitions. "Affiliate" shall mean any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Borrower which, if Borrower is a partnership or limited liability company, shall include each of the constituent members or general partners, respectively, thereof. The term "control" as used in the immediately preceding sentence means, with respect to a person that is a corporation, the right to the exercise, directly or indirectly, of more than 50% of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person. 1 10-89 "Annual Financial Statement" shall mean the financial statements prepared by Borrower for each calendar year beginning in the first year for which payment is due under this Note until the Maturity Date, including a balance sheet, income statement, statement of retained earnings, statement of cash flows, and footnotes thereto, prepared in accordance with generally accepted accounting principles consistently applied, as audited by an independent certified public accountant. "Applicable Percentage" shall mean twenty-five percent (25%). "Assignment" shall mean any voluntary or involuntary conveyance, disposition, assignment, encumbrance (other than a Refinancing as defined below or the creation of the Senior Loan or any other financing permitted by the Agreement), sublease, sale or transfer of the Property, including, without limitation, any transfer by Borrower of all or any portion of its rights under or interest in the Property, any unpermitted change of ownership or control of Borrower, any foreclosure of Borrower's interest in the Property, whether by judicial proceedings, or by virtue of any power contained in a deed of trust, indenture or other instrument creating a lien against the Property, or any assignment of Borrower's estate in the Property through, or in lieu of, foreclosure or other appropriate and bona fide proceedings in the nature thereof; provided, however, that the term "Assignment" as used herein shall not include any permitted transfer as set forth in Section 8 hereof or in Section 7.1 of the Agreement. "Capital Improvements " shall mean all work and improvements with respect to the Property for which costs and expenses may be capitalized in accordance with GAAP. "City Manager" shall mean the individual duly appointed to the position of the City Manager of the City of Newport Beach, or his or her authorized designee. "Debt Service" shall mean scheduled debt service (including impounds, expenses, and other amounts payable) on the Senior Loan. "Developer Fee" shall mean the fee to be paid to the Developer for rehabilitating the Property. A portion of the Developer Fee may be deferred (the "Deferred Developer Fee"). "Fiscal Year" shall mean the fiscal year of Borrower, which is the calendar year. "GAAP" shall mean generally accepted accounting principles as in effect from time to time, consistently applied. "Maturity Date" shall mean the date the Term expires. "Net Operating Income " shall mean, for the applicable period of time, (i) the amount, if any, by which Operating Income for such period exceeds Operating Expenses paid by Borrower during such period; and, provided there is such an excess, less (ii) the Developer Fee, until such fee is paid in full,. "Operating Expenses " shall mean, for the applicable period of time, all costs and expenses reasonably incurred by Borrower in the ordinary course of the management, ownership, and/or W 10-90 operation of the Property by Borrower, including, without limitation, the payment of Debt Service, the funding of reasonable reserves, and the payment of the following fees paid annually: (a) asset management fees paid to the general partners of the Property owner; (b) a fee to cover the cost of the Supportive Services (as defined in Section 3.12 of the Regulatory Agreement); and (c) a property management fee. Operating Expenses shall not include any expenses for Capital Improvements, except for Capital Improvements allowed in the Approved Budget, approved by any lender providing a Senior Loan, or approved, with such approval not to be unreasonably withheld or delayed, by the City Manager. Operating Expenses shall be calculated on a cash basis. "Operating Income" shall mean, for the applicable period of time, all proceeds received by Borrower from the operation of the Property and from any and all sources resulting from or attributable to the operation of the Property, including, without limitation, all rentals, parking receipts, laundry income received by Borrower, forfeited security deposits, and all expense reimbursements paid to Borrower by tenants of the Property. Operating Income shall be calculated on a cash basis. Operating Income excludes insurance proceeds and/or condemnation proceeds. "Senior Loan" shall mean the Costa Mesa Loan, Newport Beach Loan and County , Acquisition Loan, Construction Loan, Take -Out Loan and any loans made to Developer by its principals in compliance with its organizational documents. "Senior Loan Documents" shall mean any and all agreements and documents related to a Senior Loan. "City Loan Documents" shall mean, collectively, the Agreement, this Note, the City Regulatory Agreement, and the City Deed of Trust. "Term" shall mean the period commencing on the execution hereof and terminating fifty- five (55) years from 2. Interest and Repayment. 2.1 Basic Interest Rate. Except as provided in section 2.5 below, the disbursed and unpaid principal balance of the City Loan shall bear interest at the simple rate of three percent (3%) per year (the "Basic Interest Rate"). As used herein, the term "disbursed" shall mean and refer to the time when the City has disbursed such funds to Borrower, pursuant to the Agreement. 2.2 Payment Dates and Amounts. (a) Principal and Interest Pam. Interest and principal payments on this Note shall be payable annually on April 1 of the first year following the disbursement of City Loan. Payments shall be in an amount equal to the Applicable Percentage multiplied by the Net Operating Income minus GP or LP partnership management fees for the calendar year immediately preceding such annual payment date. For any year in which no payment is due or there is no Net Operating Income available for payment of principal and interest, then interest shall continue to accrue on the City Loan during such year. On or before each April 1 during the Term on which a payment is due, regardless as to whether any payment of principal and interest is remitted, 3 10-91 Borrower shall provide City with an accounting documenting the calculation of Net Operating Income for the previous calendar year. (c) Interest First. All payments shall be applied first to accrued interest and thereafter to principal. 2.3 Financial Statements. On each April 1 on which a payment is due pursuant to Section 2.2(a), Borrower shall submit to City its Annual Financial Statement (as the term is defined in the City Regulatory Agreement) for the preceding year. Net Operating Income shall be calculated by Borrower for each year for which payment is due pursuant to Section 2.2(a) (and certified by an authorized officer of Borrower) and reported by Borrower to City annually for each calendar year no later than April 1 st of the following calendar year. All calculations and records shall be based upon Borrower's Annual Financial Statement and shall be subject to audit by City. In connection with any audit, Borrower shall provide to City for inspection and copying any records, receipts, account books, ledgers, checks, or other documents or other evidence reasonably requested by City for the purpose of verifying Borrower's calculation of Net Operating Income, and shall promptly pay to City any further amount due but not paid as a result of any miscalculation by Borrower. City shall promptly pay Borrower any overpayments made by Borrower as shown by such audit. 2.4 Maturity. The outstanding principal balance together with any outstanding interest due thereon and any other sums payable under this Note shall be due and payable in full on the date the Term terminates (the "Maturity Date"). 2.5 Default Rate. Any amounts (including but not limited to amounts of principal and interest on the City Loan) which Borrower does not pay when otherwise due under the terms of this Note, shall bear interest at the rate of the lesser of ten percent (10%) per annum or the maximum rate allowed per law per annum ("Default Rate"), simple interest, from the date which is ten (10) days after such amount would otherwise be due until the date paid. 3. Prepayment; Application of Pam. At any time after the disbursement of the City Loan proceeds, Borrower may prepay all or a portion of the unpaid principal amount of the City Loan and accrued interest and any other sums outstanding without penalty. All payments, including any prepayments or funds received upon acceleration pursuant to Section 9.2(a) below, shall be applied first toward any outstanding costs of collection or other amounts (excluding City Loan principal or interest thereon) due under this Note or the Agreement, then toward outstanding interest accrued at the Default Rate, if any, then toward outstanding interest accrued at the Basic Interest Rate, if any, and finally toward the remaining principal balance under the Note. 4. Security and Source of Pam. Borrower's obligations under this Note, the Agreement and the City Regulatory Agreement shall be secured by the City Deed of Trust. al 10-92 The City Loan shall constitute a nonrecourse obligation of Borrower, and neither Borrower nor any partner, member, or shareholder thereof shall have any personal liability for repayment. The foregoing limitation of liability is intended to apply only to the obligation for the repayment of the principal of, and payment of interest on this Note; nothing contained herein is intended to relieve the Borrower and, if Borrower is a partnership, limited liability company, or corporation, any general partner, member, or shareholder of Borrower of liability for damages caused to City as a result of (i) fraud or willful misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create liens on the real property described in the City Loan documents that are payable or applicable prior to any foreclosure under the Deed of Trust (to the full extent of such taxes, assessments or other charges); (iii) the retention of any rental income or other income arising with respect to the Property collected by Borrower after an Event of Default to the full extent of the rental income or other income retained and collected by Borrower after the giving of any such notice, and not used to pay Operating Expenses of the Property; (iv) the misapplication of any proceeds under any insurance policies or awards resulting from condemnation or the exercise of the power of eminent domain or by reason of damage, loss or destruction to any portion of the Property; and (v) breach of any environmental covenant or representation made by the Borrower relating to the Property. 5. Obligation of Borrower Unconditional. The obligation of Borrower to repay the City Loan and all accrued interest thereon shall be absolute and unconditional, and until such time as all of the outstanding principal of and interest on this Note shall have been fully paid, Borrower agrees that it: (a) will use the funds solely for the purposes set forth herein and in the Agreement; and (b) will not terminate or suspend any payment or obligations under this Note, the Agreement, or any other document executed hereunder or in connection herewith for any cause, including without limitation, any acts or circumstances that may constitute failure of consideration, commercial frustration of purpose, or any duty, liability or obligation arising out of or in connection with this Note, the Agreement or any document executed hereunder or in connection herewith. 6. Purpose of City Loan. The City Loan proceeds shall be used by Borrower for the development, management, and maintenance of the Project as outlined in the Agreement. In no event shall Borrower use or otherwise invest the proceeds of the City Loan except as expressly provided in this Note and in the Agreement. 7. Covenants of Borrower. As additional consideration for the making of the City Loan by City, Borrower covenants as follows: 7.1 Compliance with Agreement, City Regulatory Agreement, and City Deed of Trust. Borrower shall comply with all of its obligations under the Agreement, City Regulatory Agreement and the City Deed of Trust. Any amounts payable by Borrower under the Agreement, City 5 10-93 Regulatory Agreement, or the City Deed of Trust (other than amounts also payable hereunder) shall be deemed added to the principal amount of the City Loan payable hereunder. 7.2 Other Loans. Borrower shall comply with all monetary and non -monetary covenants associated with any loan secured by an interest in the Property. Borrower shall provide to City a copy of any notice of default within five (5) calendar days after receiving any notice of a default or alleged default of such covenants by Borrower, and Borrower shall promptly cure any such default and cooperate in permitting City, to the extent City in its sole discretion elects to do so, to cure or assist in curing the default. Any cost or expenditure incurred by City in providing or assisting in such a cure shall be deemed added to the outstanding principal amount of the City Loan. 7.3 Payment of Deferred Developer Fee and Partnership Management Fee. Borrower shall not pay the Deferred Developer Fee or make any payments of the Partnership Management Fee unless and until Operating Income exceeds Operating Expenses. 8. Assignment of this Note. This Note shall be assignable by Borrower in compliance with Section 7.1 of the Agreement. Notwithstanding anything which may be or appear to be herein to the contrary, no purported assignment of this Note and/or the City Loan shall be effective if such assignment would violate the terms, conditions and restrictions of any applicable ordinances, laws, or regulations. City's consent to such assignment shall be expressly conditioned upon (a) the assignee's execution of such documents as required by City including, without limitation, any and all documents deemed necessary by City to provide for said assignee's assumption of all of the obligations of Borrower hereunder, under the City Regulatory Agreement, under the City Deed of Trust, and under the City Loan Documents, and (b) City's approval of the financial and credit worthiness of such proposed assignee. 9. Events of Default and Remedies. 9.1 Borrower Events of Default. The occurrence of any of the following shall, after the giving of any notice and expiration of any applicable cure period as described therein, constitute an event of default by Borrower hereunder ("Event of Default"): (a) The failure of Borrower to pay or perform any monetary covenant or obligation under the terms of this Note without curing such failure within ten (10) calendar days after receipt of written notice of such default from City (or from any party authorized by City to deliver such notice as identified by City in writing to Borrower); (b) The failure of Borrower to perform any non -monetary covenant or obligation under this Note without curing such failure within thirty (30) calendar days after receipt of written notice of such default from City (or from any party authorized by City to deliver such notice as identified by City in writing to Borrower) specifying the nature of the event or deficiency giving rise to the default and the action required to cure such deficiency. Provided, however, that if any default with respect to a non -monetary obligation is such that it cannot be cured within a C� 10-94 30-day period, it shall be deemed cured if Borrower commences the cure within said 30-day period and diligently prosecutes such cure to completion thereafter. Notwithstanding anything herein to the contrary, the herein described notice requirements and cure periods shall not apply to any Event of Default described in Sections 9.1(e) or 9.1(f) below; (c) The failure of Borrowers to perform any covenant or obligation under the Agreement, City Deed of Trust or City Regulatory Agreement, unless the default is cured within the applicable cure period (if any). (d) The material falsity of any representation or breach of any representation or warranty made by Borrower under the terms of this Note, the Agreement, the City Regulatory Agreement or the City Deed of Trust; (e) Borrower or any constituent member or general partner, or majority shareholder, of Borrower shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of its property, (ii) fail to pay or admit in writing its inability to pay its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated bankrupt or insolvent or (v) commence a voluntary petition that is not withdrawn within ten (10) calendar days of the filing thereof or answer seeking an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy or insolvency proceeding; (f) If without the application, approval or consent of Borrower, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, in respect of Borrower or any constituent member or general partner or majority shareholder of Borrower, for an order for relief or an adjudication in bankruptcy, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of Borrower or of all or any substantial part of Borrower's assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by Borrower, in good faith, the same shall (i) result in the entry of an order for relief or any such adjudication or appointment, or (ii) continue undismissed, or pending and unstayed, for any period of ninety (90) consecutive days; (g) Voluntary cessation of the operation of the Property for a continuous period of more than thirty (30) calendar days or the involuntary cessation of the operation of the Property for a continuous period of more than sixty (60) days; (h) A transfer in violation of Section 7.1 of the Agreement; or (i) Subject to the notice and cure provisions set forth in the Agreement, Borrower shall be in default under any of the terms of the Senior Loan, any other financing, or any other secured or unsecured obligation relating to the Property, unless the default is cured within the cure period, if any, applicable thereto under the terms and obligation which is in default. 7 10-95 9.2 City Remedies. Upon the occurrence and during the continuance of an Event of Default hereunder, City may, in its sole discretion, take any one or more of the following actions: (a) By notice to Borrower except in the case of a default by Borrower under Section 9.1(e) or Section 9.1(f) in which event no notice pursuant to this Note shall be required, declare the entire then unpaid principal balance of the City Loan immediately due and payable, and the same shall become due and payable without further demand, protest or further notice of any kind, all of which are expressly waived. Upon such declaration, outstanding principal and (to the extent permitted by law) interest and any other sums outstanding in connection with the City Loan shall thereafter bear interest at the Default Rate, payable from the date of such declaration until paid in full; (b) Subject to the nonrecourse provisions of Section 4 above, take any and all actions and do any and all things which are allowed, permitted or provided by law, in equity or by statute, in the sole discretion of City, to collect the amounts then due and thereafter to become due hereunder, to exercise its rights under the City Deed of Trust, and to enforce performance and observance of any obligation, agreement or covenant of the Borrower under this Note, the Agreement or under any other document executed in connection herewith; (c) Subject to the nonrecourse provision of Section 4 above, upon the occurrence of an Event of Default which is occasioned by Borrower's failure to pay money, City may, but shall not be obligated to, make such payment. If such payment is made by City, Borrower shall deposit with City, upon written demand therefor, such sum plus interest at the Default Rate. In either case, the Event of Default with respect to which any such payment has been made by City shall not be deemed cured until such repayment (as the case may be) has been made by Borrower. Until repaid, such amounts shall have the security afforded the amounts evidenced by this Note; or (d) Subject to the nonrecourse provisions of Section 4 above, upon the occurrence of an Event of Default described in Section 9.1(e) or 9.1(f) hereof, City shall be entitled and empowered by intervention in such proceedings or otherwise to file and prove a claim for the whole amount owing and unpaid on the City Loan and, in the case of commencement of any judicial proceedings, to file such proof of claim and other papers or documents as may be necessary or advisable in the judgment of City and its counsel to protect the interests of City and to collect and receive any monies or other property in satisfaction of its claim. 9.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to City is intended to be exclusive of any other available remedy or remedies, but each such remedy shall be cumulative and shall be in addition to every other remedy given under this Note or now existing at law or in equity or by statute; and may be exercised in such number, at such times and in such order as City may determine in its sole discretion. No delay or omission to exercise any right or power upon the occurrence of any Event of Default hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient by City. In order to entitle City to exercise any right or remedy reserved to it under this Note, no notice shall be required except as expressly provided herein. N. 10-96 10. Agreement to Pay Attorneys' Fees and Expenses. In the event that City brings any action or files any proceeding in connection with the enforcement of its rights under this Note or the City Deed of Trust, as a consequence of any breach by Borrower of its obligations thereunder, the prevailing party in such action or proceeding shall be entitled to have its reasonable attorneys' fees and out-of-pocket expenditures paid by the losing party. The attorneys' fees so recovered shall include fees for prosecuting or defending any appeal and shall be awarded for any supplemental proceedings until the final judgment is satisfied in full. In addition to the foregoing award of attorneys' fees, the prevailing party in any lawsuit on this Note or the City Deed of Trust shall also be entitled to its reasonable attorneys' fees incurred in any post judgment proceedings to collect or enforce the judgment. In addition to the foregoing, Borrower agrees to pay or reimburse City, upon demand by City, for all costs incurred by City in connection with enforcement of this Note or the City Deed of Trust, including without limitation, reasonable attorneys' fees and costs, if there shall be filed by or against Borrower any proceedings under any federal or state bankruptcy or insolvency laws, whether City is a creditor in such proceedings or otherwise. 11. Notices. All notices, demands, requests, elections, approvals, disapprovals, consents or other communications given under this Note shall be in writing and shall be given by personal delivery, first class mail certified or registered, return receipt requested, or reputable overnight delivery service that provides a receipt with the time and date of delivery and addressed as follows: To City City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: City Manager With a copy to: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: Community Development Director American Family Housing To Borrower: 15161 Jackson JACKSON Street Midway City, California 92655 Attention: Myles Anthony Peinemann II With a copy to: Goldfarb & Lipman 1300 Clay Street, Eleventh Floor Oakland California 94612 Attention: William F. DiCamillo I 10-97 Any Notice shall be deemed received immediately if delivered by hand or by overnight courier, and shall be deemed received on the third day from the date it is postmarked if delivered by registered or certified mail. 12. Severability. The invalidity or unenforceability of any one or more provisions of this Note will in no way affect any other provisions. 13. Interpretation Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender. The captions of the paragraphs of this Note are for convenience only and do not define or limit any terms or provisions. Time is of the essence in the performance of this Note by Borrower. Borrower has been represented by counsel in the negotiation of this Note, and it shall not be interpreted in favor of or against any party on account of relative responsibilities in drafting. Notwithstanding any other provision of this Note, nothing herein or in this Note shall be deemed to require Borrower to pay interest in an amount in excess of any applicable usury law or other legal limitation on interest, and the terms of this Note shall be interpreted to require in each instance the lesser of (a) the amount stated in this Note, and (b) the maximum applicable legal limit. 14. No Waiver; Consents. Any waiver by City must be in writing and will not be construed as a continuing waiver. No waiver will be implied from any delay or failure by City to take action on account of any default of Borrower. Consent by City to any act or omission by Borrower will not be construed to be a consent to any other or subsequent act or omission or to waive the requirements for City's consent to be obtained in any future or other instance. 15. Governing Law and Jurisdiction. This Note shall be governed by the internal laws of the State of California without regard to conflict of law principles. Any legal actions must be instituted in the Superior Court of the County of Orange, State of California, or in the Federal District Court in the Southern District of California. 16. Representations and Warranties of Borrower. Borrower hereby warrants and represents to City that: 16.1 Organization and Standing. Borrower is a California legal entity as described in the Agreement, duly organized, qualified to operate in California and validly existing and in good standing under all applicable laws, and has all requisite power and authority to enter into and perform its obligations under this Note, the Agreement, the City Deed of Trust, the City Regulatory Agreement and all other documents executed in connection herewith. 10 10-98 16.2 Enforceability. This Note and all other instruments to be executed by Borrower in connection with the City Loan constitute the legal, valid and binding obligation of Borrower, without joinder of any other party. 16.3 Authorization and Consents. The execution, delivery and performance of this Note and all other instruments to be executed in connection herewith is consistent with the operating agreement, partnership agreement and any articles and bylaws governing Borrower and have been duly authorized by all necessary action of Borrower's members, partners, directors, officers and shareholders. 16.4 Due and Valid Execution. This Note and all other instruments to be executed in connection herewith, will, as of the date of their execution, have been duly and validly executed by Borrower. 16.5 Licenses. Borrower will obtain and maintain all material licenses, permits, consents and approvals required by all applicable governmental authorities to own and operate the Property. 16.6 Litigation and Compliance. To the best of Borrower's knowledge, there are no suits, other proceedings or investigations pending or threatened against, or affecting the business or the properties of Borrower (other than those as have been previously disclosed in writing to City) which could materially impair its ability to perform its obligations under this Note, nor is Borrower in violation of any laws or ordinances which could materially impair Borrower's ability to perform its obligations under this Note. 16.7 Default. To Borrower's current actual knowledge, there are no facts now in existence which would, with the giving of notice or the lapse of time, or both, constitute an "Event of Default" hereunder, as described in Section 9. 16.8 No Violations. To the best of Borrower's knowledge, the execution and delivery of this Note, the Agreement and all other documents executed or given thereunder, and the performances hereunder and thereunder by Borrower, as applicable, will not constitute a breach of or default under any instrument or agreement to which Borrower may be a party nor, to the best of Borrower's knowledge, will the same constitute a breach of or violate any law or governmental regulation. 17. Approvals. Any review or approval of any matter by the City or any City official or employee under this Note shall be solely for the benefit of City, and neither Borrower nor any other person shall rely upon such review or approval as an indication of the wisdom, soundness, safety, appropriateness, or presence or absence of any matter. Without limiting the generality of the foregoing, Borrower and not City shall be solely responsible for assuring compliance with laws, the suitability of the Property for the Project, the adequacy of the plans, and the safety of the Project construction site, the completed Project, and the operation thereof. 11 10-99 18. Waiver. Subject to Section 4, Borrower agrees that it will still be liable for repayment of this Note, even if the holder hereof does not follow the procedures of presentment, protest, demand, diligence, notice of dishonor and of nonpayment, which requirements are hereby waived. Failure of City or other holder hereof to exercise any right or remedy hereunder shall not constitute a waiver of any future or other default. No acceptance of a past due installment or indulgence granted from time to time shall be construed to be a waiver of, or to preclude the exercise of, the right to insist upon prompt payment thereafter or to impose late charges retroactively or prospectively, or to waiver or preclude the exercise of, the right to insist upon prompt payment thereafter or to impose late charges retroactively or prospectively, or to waive or preclude the exercise of any other rights which City may have. [Signatures on the following page] 12 10-100 IN WITNESS WHEREOF, Borrower has executed this Note as of the date and year first above written. Dated: , 2024 AMERICAN FAMILY HOUSING, a California Nonprofit Public Benefit Corporation MYLES ANTHONY PEINEMANN II Chief Executive Officer Francisco Flores Chief Financial Officer APPROVED AS TO FORM: Dated: , 2024 Aaron C. Harp City Attorney 13 10-101 ATTACHMENT NO. 6 NOTICE OF AFFORDABILITY RESTRICTION 10-102 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: Citv Manager Exempt From Recording Fee Pursuant to Government Code § 27383 NOTICE OF AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY Important notice to owners, purchasers, tenants, lenders, brokers, escrow and title companies, and other persons, regarding affordable housing restrictions on the real property described in this Notice: Affordable housing restrictions have been recorded with respect to the property described below (referred to in this Notice as the "Property") which require that the Property be developed as a six (76) permanent supportive housing units ("PSH Unit" or "PSH Units"), plus two (2) unrestricted managers units, with City of Costa Mesa receiving local preference for no less than sixteen (16) permanent supportive housing units ("Costa Mesa Preference Unit") and the City receiving local preference for no less than twelve (12) PSH Units ("Newport Beach Preference Unit") with all of such units restricted for rental and occupancy by "Eligible Tenants" at an "Affordable Rent" (as those terms are defined in the City Regulatory Agreement) for a term of fifty five (55) years (the "Project") Title of Document Containing Affordable Housing Restrictions: Regulatory Agreement and Declaration of Covenants and Restrictions ("Regulatory Agreement"). Parties to Regulatory Agreement: City of Newport Beach, a California municipal corporation and charter city ("City"), City of Costa Mesa, a California municipal corporation, and American Family Housing, a California Nonprofit Public Benefit Corporation ("Owner"). The Regulatory Agreement is recorded concurrently with this Notice, in the official records of Orange County. Legal Description of Property: See Exhibit "A" attached hereto and incorporated herein by this reference. Location of Property: 1400 Bristol Street North, Costa Mesa, County of Orange, California 92626. Assessor's Parcel Number of Property: 439-312-12 10-103 Summary of Regulatory Agreement: o The Regulatory Agreement restricts rental of twelve (12) units as described in Exhibit B hereto. o The term of the Regulatory Agreement is 55 years. This Notice does not contain a full description of the details of all of the terms and conditions of the Regulatory Agreement. You will need to obtain and read the Regulatory Agreement to fully understand the restrictions and requirements which apply to the Property. This Notice is being recorded and filed in compliance with Health and Safety Code Section 33334.3(f)(3) and (4), and shall be indexed against the City and the Owner of the Property. [Signatures on the following page] 2 10-104 Date: , "City" CITY OF NEWPORT BEACH, a California municipal corporation By: Will O'Neill Mayor ATTEST: Leilani I. Brown City Clerk APPROVED AS TO FORM: Aaron C. Harp City Attorney 10-105 ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of On 920 before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatures(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal) ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of On 120 before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatures(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature al (seal) 10-106 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY LEGAL DESCRIPTION That real property located in the State of California, County of Orange, City of Costa Mesa, and described as follows: PARCEL 2, IN THE CITY OF COSTA MESA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 24 PAGE 23 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THAT PORTION CONVEYED TO MESA CONSOLIDATED WATER DISTRICT BY DEED RECORDED DECEMBER 31, 1986 AS INSTRUMENT NO. 86-656909, OFFICIAL RECORDS. ALSO EXCEPTING ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFORE AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH WHIPSTCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OF THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AS RESERVED IN DEED FROM THE IRVINE COMPANY, A CORPORATION, RECORDED MARCH 5, 1968 IN BOOK 8535 PAGE 62 OF OFFICIAL RECORDS. APN: 439-312-12 5 10-107 EXHIBIT `B" RESTRICTED UNIT MATRIX* City: Size No. of Units 30% AMI Household Unit Newport Beach Studio 12 12 Costa Mesa Studio 16 16 *The Project includes two (2) unrestricted Manager's Units that shall each be occupied by an on - site property manager and not an Eligible Tenant. 6 10-108 ATTACHMENT NO. 7 NOTICE OF COMMENCEMENT OF AFFORDABILITY RESTRICTION 10-109 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: City Clerk Exempt from Recording Fees pursuant to Govt. Co APN: 439-312-12 NOTICE OF COMMENCEMENT OF AFFORDABILITY RESTRICTIONS use Important notice to owners, purchasers, tenants, lenders, brokers, escrow and title companies, and other persons regarding affordable housing restrictions on the real property described in this Notice: Affordable housing restrictions have been [or are being recorded] with respect to the property described below (referred to in this Notice as the "Property") which require that units of the Property be developed as Permanent Supportive Housing Units and be rented to and occupied by persons and households of limited income at affordable rents. AMERICAN FAMILY HOUSING, a California Nonprofit Public Benefit Corporation, hereby provides notice that the Property is subject to certain affordable housing requirements: 1. Location of Property: 1400 Bristol Street North, Costa Mesa, California 92626. 2. Assessor's Parcel Number(s) of Property: 439-312-12. 3. Legal Description of Property: see Exhibit "1" attached hereto and incorporated herein by reference. 4. Title of Document(s) Containing the Affordable Housing Requirements: 4.1 Affordable Housing Agreement by and between City of Newport Beach, California municipal corporation and charter City, City of Costa Mesa, California municipal corporation, and AMERICAN FAMILY HOUSING, California Nonprofit Public Benefit Corporation, dated ("Agreement"). a a a Page 1 of 4 10-110 4.2. City Regulatory Agreement and Declaration of Covenants and Restrictions, as recorded with the Official Records of Orange County, California, on , 20_ as Instrument No. ("Declaration"). 5. Summary of Affordable Housing Restrictions: 5.1. Affordability Period. Not less than (76) permanent supportive housing units ("PSH Unit" or "PSH Units"), plus two (2) unrestricted managers units, with City of Costa Mesa receiving local preference for no less than sixteen (16) permanent supportive housing units and the City receiving local preference for no less than twelve (12) PSH Units with all of such units restricted for rental and occupancy by "Eligible Tenants" at an "Affordable Rent" (as those terms are defined in the City Regulatory Agreement) for a term of fifty five (55) years from the Commencement Date. 5.2. The Commencement Date is 6. This Notice does not contain a full description of the details of all the terms and conditions of the Agreement or the Declaration. You will need to obtain and read the Agreement and Declaration to fully understand the restrictions and requirements which apply to the Property. [Signatures on the following page] Page 2 of 3 10-111 CITY OF NEWPORT BEACH, a California municipal corporation AMERICAN FAMILY HOUSING, a California Nonprofit Public Benefit Corporation By: Grace K. Leung City Manager APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE By: Aaron C. Harp City Attorney ATTEST: By: Leilani I. Brown City Clerk MYLES ANTHONY PEINEMANN II Chief Executive Officer Francisco Flores Chief Financial Officer [SIGNATURES MUST BE NOTARY ACKNOWLEDGED FOR RECORDING] Page 3 of 4 10-112 EXHIBIT "1" LEGAL DESCRIPTION OF SITE PARCEL 2, IN THE CITY OF COSTA MESA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 24 PAGE 23 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THAT PORTION CONVEYED TO MESA CONSOLIDATED WATER DISTRICT BY DEED RECORDED DECEMBER 31, 1986 AS INSTRUMENT NO. 86-656909, OFFICIAL RECORDS. ALSO EXCEPTING ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFORE AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH WHIPSTCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OF THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AS RESERVED IN DEED FROM THE IRVINE COMPANY, A CORPORATION, RECORDED MARCH 5, 1968 IN BOOK 8535 PAGE 62 OF OFFICIAL RECORDS. APN: 439-312-12 Page 4 of 4 10-113 ATTACHMENT NO. 8 PROJECT BUDGET 10-114 1400 Bristol Predev Projections $ 22,500,000 Homekey Current Code Description Budget Budget 1000-10 Land Cost or Value $ 2,730,000 $ 2,250,000 1000-10 Land Cost or Value (Commercial) $ - $ 150,000 1000-15 Demolition $ - $ - 1000-15 Legal $ 7,870 $ 7,870 1000-20 Land Lease Rent Prepayment $ - $ - 1000-25 Existing Improvements Value $ 22,170,000 $ 20,250,000 1000-30 Existing Improvements Value (Commercial) $ - $ 1,350,000 1000-35 Off -Site Improvements $ - $ - Holding Costs $ - $ - 1002-05 Acquisition Loan Fees $ - $ - 1002-10 Predev Loan Interest $ - $ - Relocation $ 1,500,000 $ 5,000 0 Site Work $ 274,000 $ 274,000 0 Structures $ 8,546,131 $ 11,345,562 0 Commercial $ - $ - 0 General Requirements $ 668,214 $ 668,214 0 Contractor Overhead $ 386,695 $ 386,695 0 Contractor Profit $ 386,695 $ 386,695 0 Prevailing Wages $ 1,367,275 $ 1,367,275 0 General Liability Insurance $ 199,078 $ 199,078 0 Other: (P & P Bonds) $ 74,975 $ 74,975 1005-01 Design $ 475,000 $ 585,244 1005-10 Arch. Reimbursables $ - $ - 1005-15 CASp $ - $ - 1005-20 Interior Design $ - $ - 1005-30 Landscape $ - $ - 1005-45 Sustainability/LEED $ - $ - 1005-50 Historic Consultant $ - $ - 1005-60 Supervision $ 95,000 $ - 1006-05 Civil $ 45,000 $ 45,000 1006-25 Dry Utilities $ - $ 70,000 1006-15 Deputy Inspector $ - $ - 1006-10 Soil $ - $ - 1006-20 Survey (ALTA) $ 45,000 $ - 1006-30 Acoustic $ - $ - 1006-40 Water proofing $ - $ - 1007-05 Construction Loan Interest $ - $ - 1007-10 Origination Fee $ - $ - 1007-15 Credit Enhancement/Application Fee $ - $ - 1007-20 Bond Premium $ - $ - 1007-25 Title & Recording $ - $ - 10-115 1008-05 Property Taxes $ - $ - 1008-10 Annual Partnership fee $ - $ - 1009-05 Builder's Risk $ - $ - 1009-10 General Liability Insurance $ - $ - 1009-15 Other: (Inspections) $ - $ - 1100-05 Loan Origination Fee $ 132,170 $ 132,170 1100-10 Credit Enhancement/Application Fee $ 20,862 $ 20,862 1100-15 Title & Recording $ 120,000 $ 120,000 1100-20 Taxes $ 200,390 $ 200,390 1100-25 Insurance $ 100,000 $ 100,000 1200-05 Lender Legal Paid by Applicant $ 30,000 $ 30,000 1200-10 Other: (Owner Legal) $ 50,000 $ 50,000 1300-05 Rent Reserves $ - $ - 1300-10 Capitalized Rent Reserves $ - $ - 1300-15 Required Capitalized Replacement Reserve $ - $ - 1300-20 3-Month Operating Reserve $ 395,798 $ 395,798 1300-25 Other: (Transition Reserve) $ 50,000 $ 50,000 0 Construction Hard Cost Contingency $ 1,026,238 $ 1,157,813 0 Soft Cost Contingency $ 169,596 $ 169,596 1400-05 TCAC App/Allocation/Monitoring Fees $ - $ - 1400-10 Environmental Audit $ 15,000 $ 30,000 1400-15 Local Development Impact Fees $ 100,000 $ 100,000 1401-05 City fees Related to Entitlements $ - $ - 1401-10 Permit Fees $ 100,533 $ 100,533 1401-15 Capital Fees $ - $ - 1401-20 Marketing $ 20,000 $ 20,000 1401-25 Furnishings $ 273,000 $ 273,000 1401-30 Market Study $ - $ 8,250 1401-35 Accounting/Audit $ - $ - 1401-40 Audits & Tax Returns $ - $ - 1401-45 Cost Cert $ - $ - 1401-50 Appraisal $ - $ 17,500 1401-55 Other: Community Outreach $ - $ - 1401-60 Other: Constuction Manager $ - $ - 1401-65 Other: Entitlements Consulant $ - $ - 1401-70 Other: Permit Expeditor $ - $ - 1500-05 Developer Overhead/Profit $ 1,560,000 $ 1,560,000 1500-10 Consultant/Processing Agent $ - $ 10,000 1500-15 Project Administration $ - $ - 1500-20 Broker Fees Paid to a Related Party $ - $ - 1500-25 Construction Oversight by Developer $ - $ - 10-116 1600-05 Organizational Fee $ - $ - 1600-10 Bridge Loan Fees/Exp. $ - $ - 1600-15 Legal Fees $ - $ - 1600-20 Consultant Fees $ - $ - 1600-25 Accountant Fees $ - $ - 1600-30 Tax Opinion $ - $ - Total $ 43,334,520 $ 43,961,520 Sources Homekey $ 29,000,000 $ 29,000,000 County of Orange $ 6,781,520 $ 6,781,520 City of Costa Mesa $ 4,000,000 $ 4,000,000 City of Newport Beach $ 3,000,000 $ 3,000,000 Deferred Developer Fee $ 553,000 $ 300,000 Conventional Contruction to Perm Loan $ 750,000 CalOptima Health (AFH GP Loan) $ 130,000 Total $ 43,334,520 $ 43,961,520 10-117 ATTACHMENT NO. 9 PROJECT PRO FORMA 10-118 AFH - 1400 Bristol Draft Pro forma June 12, 2023 Sources of Funds Permanent Homekey Homekey - Relocation City of Costa Mesa City of Newport Beach County of Orange NOFA - MHSA County of Orange NOFA - HOME Perm Loan Other Total Surplus/(Gap) Amount Rate Term Comments 27,700,000 50% CH 750,000 50% of Relocation Cost 4,000,000 3.00% 55 3,000,000 3.00% 55 4,421,520 24 units, No COSr 2,400,000 24 units ($95k max studios, $100k max 1 BD) 3,115,000 7.00% 15 $ 45,386,520 0 10-119 AFH - 1400 Bristol Draft Pro forma Uses of Funds Total Residential Land Cost/Acquisition 100.0% Acquisition $ 24,000,000 24,000,000 Demolition $ - - Legal $ 15,000 15,000 Existing Improvements Cost or Value $ - - Off site Improvements $ Predevelopment Interest/Holding Cost $ - Total Land Cost/Acquisition Cost $ 24,015,000 24,015,000 Relocation Total Relocation $ 1,500,000 1,500,000 New Construction Site Work $ 274,000 274,000 Residential Structures $ 11,368,000 11,368,000 Commercial Structures $ - General Requirements $ 698,520 698,520 Contractor Overhead & Profit $ 931,360 931,360 General Liability Insurance $ 199,078 199,078 P&B Bonds $ 202,064 202,064 Total New Construction Costs $ 13,673,023 13,673,023 Architectural Fees Design $ 475,000 475,000 Supervision $ 95,000 95,000 Survey & Engineering $ 90,000 90,000 Total Architecture & Engineering $ 660,000 660,000 Construction Interest & Fees Construction Loan Interest $ 110,087 110,087 Origination Fee $ 22,017 22,017 Title and Recording $ 100,000 100,000 Taxes $ - - insurance $ Other Expenses/Legal $ Other - Bond Cost of Issuance $ - - Total Construction Interest & Fees $ 232,104 232,104 Permanent Financing Loan Origination Fee $ 31,150 31,150 Insurance $ 200,000 200,000 Title and Recording $ 20,000 20,000 Total Permanent Financing Costs $ 251,150 251,150 10-120 Legal Fees Lender Legal Paid by Applicant $ 30,000 30,000 Other: Owner Legal $ - - Total Attorney Costs $ 30,000 30,000 Reserves Lease -up Reserves $ 50,000 50,000 Capitalized Operating Reserves $ 373,263 373,263 Required Capitalized Replacement Reserve $ - - 4 Month Operating Reserve $ Other: Transition Reserve $ - - Total Reserve Costs $ 423,263 423,263 Contingency Costs Construction Hard Cost Contingency $ 2,090,885 2,090,885 Soft Cost Contingency $ 124,595 124,595 Total Contingency Costs $ 2,215,480 2,215,480 Other Project Costs TCAC APP/Allocation/Monitorng Fees $ - - Environmental Audit $ 15,000 15,000 Local Devel Impact Fees $ - - Permit Processing Fees $ 200,000 200,000 Capital Fees $ - - Marketing $ - - Furnishings $ 534,000 534,000 Market Study $ - - Accounting/Reimbursable $ Appraisal Costs $ Other Organizational $ - - Other -Construction Management $ 67,500 67,500 Financial Consultant $ 10,000 10,000 Total Other Costs $ 826,500 826,500 Developer Costs Developer Overhead/Profit $ 1,560,000 1,560,000 Total Developer Costs $ 1,560,000 1,560,000 Total Project Cost $ 45,386,520 $ 45,386,520 Per Unit $ 581,878 Summary Total Per Unit Acquisition $ 24,015,000 $ 307,885 Hard cost $ 13,673,023 $ 175,295 Soft cost $ 3,923,017 $ 50,295 Contingency $ 2,215,480 $ 28,404 Developer fee $ 1,560,000 $ 20,000 Total $ 45,386,520 $ 581,878 10-121 AFH - 1400 Bristol Draft Pro forma Income Unit Type Gross Utility Net Total PBV Total Total Net Annual % of AMI Units Rent Allowance Rent Net Rent FMR Increment Increment Monthly Rent Rent Studio (Local Preference) 30% 28 711 - 711 19,908 19,908 238,896 1 bedroom (Local Preference) 30% - 762 - 762 - - - - - 2 bedroom 30% - - - - - - - Studio 30% 8 711 711 5,688 2,035 1,324 10,592 16,280 195,360 1 bedroom 30% 40 762 762 30,480 2,219 1,457 58,280 88,760 1,065,120 2 bedroom 30% - - - - - Manager - 2 bedroom NA 2 Total Units 78 Total Tenant Rent 56,076 Total PBV Increment 68,872 Total Income 1,499,376 Laundry 3,744 $ 4 Per unit per month Tesla Charging Station 44,208 $ 3,684 Per month Restaurant 72,000 $ 6,000 Per month Income $ 1,619,328 1 10-122 AFH - 1400 Bristol Draft Pro forma Expenses Administrative Management Fee Utilities Marketing Legal Accounting/Audit Security Internet/Phone Office Expense Total Administrative Electricity Trash Removal Water/Sewer Gas Total Utilities Payroll/Payroll Taxes On -Site Manager/Maintenance Payroll Maintenance & Custodial Payroll Payroll Taxes/Benefits Total Payroll/Payroll Taxes Insurance Real Estate Taxes & Assessments Maintenance Painting Repairs Pest Control Landscaping Elevator/Fire HVAC Repairs/Maintenance Janitorial Supplies Total Maintenance Replacement Reserve Operating Reserve Other 2,000 7,000 6,500 95,000 8,000 16,000 134,500 65,520 86,190 23,400 54,600 15,000 179,190 $ 70 per unit/month 65,000 58,000 30,750 25% of salaries 153,750 39,000 100,000 27,300 46,000 21,450 18,000 5,000 15,600 10,500 143,850 31,200 Supportive Services 304,000 Other - Asset Management Fees 20,000 Total Other 324,000 Total Expenses $ 1,171,010 Per Unit Per Year $ 15,013 (w/o Reserves, Taxes, RSC) 9,433 $ 400 10-123 AFH - 1400 Bristol Draft Pro forma Cash Flow Tenant Rental Income Rent Subsidy Gross Rental Income (Plus) Other Income (Less) Vacancy Loss Factor - Rental Income (Less) Vacancy Loss Factor- Subsidy (Plus) COST Effective Gross Income (Less) Operating Expenses (Less) Real Estate Taxes (Less) LAHD Monitoring Fee (Less) Other (Less) Supportive Services (Less) Replacement Reserve (Less) Operating Reserve Total Expenses Net Operating Income (Less) require debt payment (Perm Loan) Rental Inflation Factor 2.50% Op. Exp. Inflat. factor 3.50% Other Inc. Inflat. Factor 2.50% Taxes Inflation Factor 2.00% Weighted Vacancy Rate 5.00% Rep/. Res. Infl. Factor 0.00% Subsidy Loss 5.00% Op. Res. (%of op. exp.) 3.50% 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 672,912 689,735 706,978 724,653 742,769 761,338 780,372 799,881 819,878 840,375 861,384 882,919 904,992 927,617 950,807 826,464 847,126 868,304 890,011 912,262 935,068 958,445 982,406 1,006,966 1,032,140 1,057,944 1,084,392 1,111,502 1,139,290 1,167,772 1,499,376 1,536,860 1,575,282 1,614,664 1,655,031 1,696,406 1,738,816 1,782,287 1,826,844 1,872,515 1,919,328 1,967,311 2,016,494 2,066,906 2,118,579 119,952 122,951 126,025 129,175 132,405 135,715 139,108 142,585 146,150 149,804 153,549 157,387 161,322 165,355 169,489 (33,646) (34,487) (35,349) (36,233) (37,138) (38,067) (39,019) (39,994) (40,994) (42,019) (43,069) (44,146) (45,250) (46,381) (47,540) (41,323) (42,356) (43,415) (44,501) (45,613) (46,753) (47,922) (49,120) (50,348) (51,607) (52,897) (54,220) (55,575) (56,964) (58,389) - - - - - - - - - - - - - - - 1,544,359 1,582,968 1,622,542 1,663,206 1,704,684 1,747,301 1,790,983 1,835,758 1,881,652 1,928,693 1,976,910 2,026,333 2,076,991 2,128,916 2,182,139 715,810 740,863 766,794 793,631 821,408 850,158 879,913 910,710 942,585 975,576 1,009,721 1,045,061 1,081,638 1,119,495 1,158,678 100,000 102,000 104,040 106,121 108,243 110,408 112,616 114,869 117,166 119,509 121,899 124,337 126,824 129,361 131,948 - - - - - - - - - - - - - - - 304,000 314,640 325,652 337,050 348,947 361,057 373,694 386,773 400,310 414,321 428,822 443,831 459,365 475,443 492,083 31,200 31,200 31,200 31,200 31,200 31,200 31,200 31,200 31,200 31,200 31,200 31,200 31,200 31,200 31,200 1,151,010 1,188, 703 1,227,686 1,268,002 1,309,699 1,352,822 1,397,423 1,443, 552 1,491,261 1,540, 606 1,591,642 1,644,429 1,699,027 1,755,499 1,813,909 393,349 394,265 394,856 395,104 394,985 394,478 393,560 392,206 390,391 388,087 385,268 381,904 377,964 373,418 368,230 342,043 342,043 342,043 342,043 342,043 342,043 342,043 342,043 342,043 342,043 342,043 342,043 342,043 342,043 342,043 Net Cash Flow 51,306 52,222 52,814 53,061 52,942 52,435 51,517 50,163 48,348 46,045 43,225 39,861 35,922 31,375 26,188 Asset Management Fees $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 Cash Flow $31,306 $32,222 $32,814 $33,061 $32,942 $32,435 $31,517 $30,163 $28,348 $26,045 $23,225 $19,861 $15,922 $11,375 $6,188 Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash Flow for Distribution $31,306 $32,222 $32,814 $33,061 $32,942 $32,435 $31,517 $30,163 $28,348 $26,045 $23,225 $19,861 $15,922 $11,375 $6,188 Residual Receipts to Lenders $15,653 $16,111 $16,407 $16,530 $16,471 $16,218 $15,759 $15,082 $14,174 $13,022 $11,613 $9,931 $7,961 $5,687 $3,094 Residual Receipts to Owner $15,653 $16,111 $16,407 $16,530 $16,471 $16,218 $15,759 $15,082 $14,174 $13,022 $11,613 $9,931 $7,961 $5,687 $3,094 10-124 ATTACHMENT NO. 10 REGULATORY AGREEMENT 10-125 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: City Manager WITH A CONFORMED COPY TO: City of Costa Mesa 77 Fair Drive Costa Mesa, California 92626 Attn: City Manager (Space Above This Line for Recorder's Office Use Only) (Exempt from Recording Fee per Gov. Code § 27383) REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS This REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS ("Agreement") is made and entered into this day of , 2024 ("Effective Date"), by and between the CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("Newport Beach"), the CITY OF COSTA MESA, a California municipal corporation ("Costa Mesa"), and AMERICAN FAMILY HOUSING, a California Nonprofit Public Benefit Corporation ("Developer"). Costa Mesa and Newport Beach are herein collectively referred to as the "Cities." RECITALS: A. Pursuant to that certain ground lease between the County of Orange, as lessor (the "County"), and the Developer, as lessee (the "Ground Lease"), Developer has a leasehold interest in that certain real property and the existing improvements thereon located at 1400 Bristol Street North, Costa Mesa, California, Assessor's Parcel Number 439-312-12, which was formerly known as Travelodge Motel more particularly described in Exhibit "A," attached hereto and incorporated by reference herein ("Property"). B. Pursuant to an Affordable Housing Loan Agreement entered into by and between Developer and Newport Beach, dated ("Newport Beach AHA"), Newport Beach has agreed to provide financial assistance to Developer in an amount up to Three Million Dollars ($3,000,000.00) ("Newport Beach Loan"); and pursuant to an Affordable Housing Grant and Loan Agreement entered into by and between Developer and Costa Mesa dated (the "Costa Mesa AHA"), Costa Mesa has agreed to provide financial assistance to Developer in an amount up to Four Million Dollars ($4,000,000.00) (Newport Beach AHA and Costa Mesa AHA are hereinafter together referred to as "AHAs"). -1- 10-126 C. The AHAs were entered into for the purpose of assisting Developer to finance the rehabilitation of the existing building and related improvements on the Property, in accordance with the Ground Lease, and to make available, and restrict occupancy to, seventy-six (76) Permanent Supportive Housing ("PSH" or "PSH Units") units plus two (2) unrestricted managers' units, with Costa Mesa receiving local preference for no less than sixteen (16) PSH Units and Newport Beach receiving local preference for no less than twelve (12) PSH Units, subject to the terms of this Agreement and the AHAs ("Project"). D. The affordability period under the AHAs, and Sections 1.2 and 6.1 of this Agreement is 55 years as more particularly set forth below ("Affordability Period"). E. Developer intends to rehabilitate and operate the Project at the Property utilizing the proceeds of. (1) the Newport Beach Loan sourced solely from the Newport Beach General Fund, or as much thereof as is disbursed by Newport Beach to Developer; (2) a loan in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00) from the Housing Authority of the City of Costa Mesa ("Authority") Low Moderate Income Housing Asset Funds and a grant in the amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) from the American Rescue Plan Act ("ARPA") (collectively the loan and the grant are known as the "Costa Mesa Loan"); (3) proceeds from the following sources that Developer will obtain: State of California, Housing and Community Development Project Homekey funding in the amount of Twenty Eight Million Two Hundred Fifty Thousand Dollars ($28,250,000.00), County loans in amounts of Four Million Four Hundred Twenty One Thousand Five Hundred Twenty Dollars $4,421,520.00 for the County's Mental Health Services Act (MHSA) loan and Two Million Three Hundred Sixty Thousand Dollars ($2,360,000.00) for the OC Housing Fund 15G loan (collectively the "County Loans"); (4) a CalOptima Health grant in the amount of Four Hundred Eighty -One Thousand Six Hundred and Sixty Dollars ($481,660.00); and (5) deferred developer fees in the approximate amount of Three Hundred Thirty -Eight Thousand Dollars ($338,000.00). F. Newport Beach has agreed to make the Newport Beach Loan to Developer on the condition that the Project be maintained and operated in accordance with the covenants, conditions and restrictions of the Newport Beach AHA and this Agreement related to the long-term ownership, affordability, operation, management, and maintenance of the PSH Units. Costa Mesa has agreed to make the Costa Mesa Loan to Developer on the condition that the Project be maintained and operated in accordance with the covenants, conditions and restrictions of the Costa Mesa AHA and this Agreement related to the long-term ownership, affordability, operation, management, and maintenance of the PSH Units. This Agreement is intended to ensure that Developer, its successors, its assigns and every successor in interest to the Property or any part thereof, shall use, maintain and operate the Project in accordance with the terms and conditions of this Agreement and AHAs, including that the PSH Units shall be available only to Eligible Tenant(s) at an Affordable Rent (as those terms are defined in Article 1 below) during the Affordability Period. G. The provision of the Newport Beach Loan and the Costa Mesa Loan to Developer and the completion of rehabilitation and subsequent operation of the Project pursuant to the terms and conditions of the AHAs and this Agreement are in the vital and best interest of Newport Beach -2- 10-127 and Costa Mesa and the health, safety and welfare of its residents, and are in accord with the public purposes and provisions of applicable state and local laws. AGREEMENT: NOW, THEREFORE, Newport Beach, Costa Mesa, and the Developer declare, covenant and agree, by and for themselves, their heirs, executors, administrators, successors and assigns, and all persons claiming under or through them as follows: The Recitals above form an integral and substantive part of this Agreement and are hereby incorporated by reference into this Agreement. ARTICLE 1 DEFINITIONS 1.1 Affiliate. As used in this Agreement, the term "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; or (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 or the power to control election of the board of directors. It shall be a presumption that control with respect to a corporation, limited liability company or limited partnership is the right to exercise or control, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled corporation, limited liability company or limited partnership, 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. 1.2 Affordability Period. As used in this Agreement, the term Affordability Period shall mean the duration of the affordable housing requirements and other covenants of and as required by the AHAs and as set forth is this Agreement. The Affordability Period shall be fifty- five (55) years and shall be memorialized in a Notice of Commencement of Affordability Restrictions as provided in the AHAs. 1.3 Affordable Rent. As used in this Agreement, the term "Affordable Rent" shall be defined in Section 3.3 of this Agreement. 1.4 AMI. As used in this Agreement, the term "AMP' or "Area Median Income" shall mean the median family income (adjusted for family size) for the Orange County area established by the U.S. Department of Housing and Urban Development ("HUD"). 1.5 Annual Financial Statement. As used in this Agreement, Annual Financial Statement shall mean the certified financial statement of Developer for the Project using generally accepted accounting principles (GAAP), as separately accounted for this Project, including Operating Expenses and Annual Project Revenue, as prepared annually and provided to the City -3- 10-128 at Developer's expense, by an independent certified public accountant reasonably acceptable to the City. 1.6 Capital Improvements. As used in this Agreement, the term "Capital Improvements" means all work and improvements with respect to the Property for which costs and expenses may be capitalized in accordance with generally accepted accounting principles as in effect from time to time, consistently applied. 1.7 City Manager. As used in this Agreement, the term "City Manager" shall mean the individual duly appointed to the position of City Manager of the City of Newport Beach or the City of Costa Mesa, or either of their authorized designees. Whenever an administrative action is required by either City to implement the terms of this Agreement, the City Manager, or his or her authorized designee, shall have authority to act on behalf of City. The City Managers, or their designees, agree to work together so as not to cause any undo delay in any decision. 1.8 Eligible Tenant. As used in this Agreement, the term "Eligible Tenant" shall mean a household experiencing homelessness, a household at risk of homelessness, those chronically homeless, persons with mobility disabilities, persons with hearing or vision disabilities whose annual income does not exceed the thirty percent (30%) of the AMI level. 1.9 Manager's Unit. As used in this Agreement, the term "Manager's Unit" shall mean a Unit occupied by an on -site property manager who does not need to be an Eligible Tenant. The Project contains two (2) Manager's Units. 1.10 Operating Expenses. As used in this Agreement, the term "Operating Expenses" shall have the meaning ascribed in the AHAs. 1.11 Rehabilitation. As used in this Agreement, the term "Rehabilitation" shall mean the entire work of rehabilitation, repair, construction, and improvement to the overall Property that are required to be completed under this Agreement and the AHAs. The Rehabilitation shall ensure that the housing units are decent, safe, sanitary, and in good repair for use and occupancy by Eligible Tenants; such standards are established for inspectable items for each of the following areas: site, building exterior, building systems, dwelling units, and common areas. 1.12 Restricted Unit Matrix. As used in this Agreement, the term "Restricted Unit Matrix" shall mean that certain matrix attached hereto and incorporated herein as Exhibit `B." 1.13 Term. As used in this Agreement, the term "Term" shall mean the period commencing on the Effective Date and terminating fifty-five (55) years from date on which a Notice of Commencement of Affordability Restrictions, as provided in the AHAs, is recorded in the Official Records of Orange County, or if such date cannot be determined, fifty-seven (57) years after the Effective Date. ARTICLE 2 REHABILITATION, COMPLETION, AND OPERATION OF PROJECT 2.1 Rehabilitation. Developer agrees to cause the rehabilitation of the Property subject to the terms and in accordance with the provisions of the AHAs including the Scope of me 10-129 Development, Schedule of Performance, the approved Rehabilitation Plans ("Project Documents"), the Costa Mesa Municipal Code, Uniform Codes, and all other applicable federal, state and local codes, regulations, and ordinances. ARTICLE 3 LAND USE RESTRICTIONS AND AFFORDABLE HOUSING COVENANTS 3.1. Permitted Uses. The Property and Project shall be used only for a permanent supportive affordable housing project that is comprised of private rental dwelling units and related amenity uses and for no other purposes in accordance with this Agreement and the AHAs. None of the PSH Units at the Property shall at any time be utilized on a transient basis, nor shall the Property or any portion thereof ever be used as a hotel, motel, dormitory, fraternity or sorority house, rooming house, short-term rental, vacation home such as AirBnB or VRBO, or hospital, nursing home, sanitarium or rest home. Developer shall not convert the Property to condominium ownership during the Affordability Period without the prior consideration and action approving such conversion by the respective City Councils of Newport Beach and Costa Mesa, which approval may be granted, withheld or denied in their sole and absolute discretion and until such approval is granted, if at all by both City Councils. Developer shall be in material breach of this Agreement if Developer files a "White Report" and/or records a condominium plan for the Property. Developer shall not maintain or cause to be maintained any public nuisance or private nuisance on or about the Property. Nothing in this Section shall prohibit the Developer from entering into Commercial Leases as defined in the AHAs, or as permitted by the Ground Lease. 3.2 Number and Allocation of PSH Units to Costa Mesa and Newport Beach. Developer covenants and agrees to develop, operate, and maintain seventy-six (76) PSH Units with no less than sixteen (16) Units for which Costa Mesa shall receive local preference, as set forth in the Costa Mesa AHA ("Costa Mesa Preference Units"), and no less than twelve (12) Units for which Newport Beach shall receive local preference, as set forth in the Newport Beach AHA ("Newport Beach Preference Units"), all at an Affordable Rent as defined in Section 3.3 below, including two (2) additional Units designated as the Managers" Units that are reserved for occupancy by an onsite property managers. The Costa Mesa Preference Units and Newport Beach Preference Units are herein collectively referred to as the "Preference Units." Nothing in this Agreement shall require Developer to violate any law in connection with the Preference Units, and provided that the Developer selects Eligible Tenants in accordance with the Tenant Selection Plan, the Cities shall not be permitted to declare any breach of this Agreement in connection with Developer's obligation to lease the Preference Units. The AHAs require Developer to enter into this Agreement, which provides, among other requirements, that the seventy-six (76) Units within the Project be rented to and occupied by "Eligible Tenants" (as those terms are defined in Article 1 above). Developer shall require that all Eligible Tenants occupying Preference Units execute a Lease Rider as attached hereto and incorporated herein by reference as Exhibit "C." To the extent an Eligible Tenant cannot be located for any vacant PSH Unit, in accordance with the Tenant Selection Plan (as defined below), the Developer may continue to hold such PSH Unit vacant, or may lease such vacant unit to any household, subject to Section 3.4 below, whose annual income -5- 10-130 does not exceed the thirty percent (30%) of the AMI level, and Developer shall be deemed to be in compliance with this Section. 3.3 Affordable Rent Defined. Pursuant to California Health and Safety Code Section 50053, the maximum Affordable Rent, including a reasonable utility allowance for extremely low- income households shall not exceed the thirty percent (30%) of the AMI adjusted for family size appropriate for the unit ("Affordable Rent"). Affordable Rent shall be charged for all Preference Units (excepting the Manager's Units) throughout the Affordability Period. Provided however, that Affordable Rent and income limits for Eligible Tenant(s) shall be subject to the possibility of adjustment, if applicable, under Section 3.6 herein. Further, the term Affordable Rent includes the total of monthly payments by the tenants of a PSH Unit for (a) use and occupancy of a PCH Unit and facilities associated therewith, (b) any separately charged fees or service charges assessed by Developer that are required of all tenants of the PSH Units, other than security deposits, (c) a reasonable allowance for utilities not included in (a) or (b) above, including (as applicable) garbage collection, sewer, water, electricity and gas, and (d) possessory interest, taxes or other fees or charges assessed for the use of the PSH Units and facilities associated therewith by a public or private entity other than Developer. 3.4 Tenant Selection Covenants. The County Coordinated Entry System ("CES") shall be responsible for the referral of potential tenants for the PSH Units in compliance with the applicable federal, state and local laws during the Affordability Period, as applicable and subject to lawful and reasonable criteria, all of which shall be set forth in the Tenant Selection Plan, as provided in Section 3.4.3 below ("Tenant Selection Plan"). The Tenant Selection Plan shall establish the eligibility criteria for the selection of tenants that meet the applicable requirements of this Section 3.4, with first reasonable preference to rent vacant Preference Units to an Eligible Tenant on the County's tenant waiting list who qualifies for a Preference Unit. 3.4.1 Minimum Occupancy Limits. As included in the annual income certification provided by Developer, or as otherwise reasonably requested by either City, Developer shall make available for both City Manager's review and approval such information that Developer reviewed and considered in its tenant selection process, together with its statement that Developer has determined that each selected tenant will comply with the income, rent, and operational covenants and all applicable terms and conditions of this Agreement. Subject to applicable law, the minimum occupancy of the PSH Units in the Project shall be one person per bedroom. 3.4.2 PSH Units Intended as Replacement Housing by Newport Beach, Costa Mesa, and their Affiliated Entities. Developer acknowledges that the Cities are investing in the Project and providing their respective loan to Developer to cause long-term permanent supportive housing, qualifying as reserved or banked replacement housing under federal or state laws, as, if, and when applicable to each respective City or its affiliated entities. Therefore, this Agreement shall serve as notice and evidence that each City is investing in the Project and providing its respective City financial assistance to Developer under the AHAs to qualify, use, and bank the PSH Units in this Project (excluding the Manager's Units) for purposes of replacement housing as defined and required under federal and state laws, as, if and when applicable, to either City and Housing Authority. 10-131 3.4.3 Tenant Selection Plan. Developer shall operate the Project in compliance with the approved Tenant Selection Plan as described in the AHAs. The Tenant Selection Plan includes tenant eligibility criteria, method of selection of tenants. income qualifications, local preferences and . Subsequent to approval of an amendment or new Tenant Selection Plan by both City Managers for the ongoing management and operation of the Project, Developer shall be in full compliance with this Agreement, applicable law, and the AHAs. In this regard, Developer and Property Manager may from time to time submit to the Cities City Managers proposed amendments to the Tenant Selection Plan, which are also subject to the prior written approval of the Cities City Managers, which shall not be unreasonably withheld, delayed or conditioned, or required in the event any amendment is solely to comply with any applicable law. 3.4.4 Supporting Documentation of Tenant Selection. As included in the annual income certification provided by Developer, or as otherwise reasonably requested by Cities, Developer shall make available for both City Manager's review such information that Developer reviewed and considered in its selection process, together with its statement that Developer has determined that each selected tenant satisfies the income eligibility requirements, Affordable Rent requirements, and other requirements of this Agreement. (a) In this regard, Developer covenants and agrees that (i) each Preference Unit tenant (other than the on -site Property Managers) shall and will be as applicable an Eligible Tenant (at initial occupancy, and Developer will use commercially reasonable efforts to comply with the Tenant Selection Plan for each subsequent tenant placed in a Preference Unit), and (ii) the cost to each tenant household (other than onsite Property Managers) for the corresponding Preference Unit on the Property shall be at and within the defined applicable Affordable Rent, and (iii) each tenant household (other than onsite Property Managers) shall meet HUD Housing Quality Standards ("HQS") occupancy standards for the PSH Unit, and (iv) the occupancy and use of the PSH Units and Property shall comply with all other covenants and obligations of this Agreement (collectively, "Tenant Selection Covenants"). 3.5 Income Certification Requirements. Following the completion of the Rehabilitation and occupancy by Eligible Tenant(s) of the PSH Units, and annually thereafter (on or before March 31 of each calendar year), Developer shall submit to the Cities, at Developer's expense, a written summary of the income, household size, and rent payable by the tenants of the PSH Units. At either City's request, but not less frequently than prior to each initial and subsequent rental of each PSH Unit to a new tenant household (but not lease renewals) and every sixth -year thereafter, Developer shall prepare income computation, asset evaluation, and certification forms, for any such tenant or tenants. Developer shall obtain, or shall cause to be obtained by the Property Manager(s), an annual certification from each household leasing a Preference Unit demonstrating that such household is an Eligible Tenant. Developer shall determine if the Eligible Tenant of the Preference Units continue to qualify as Eligible Tenant(s) under this Agreement. Developer shall require each tenant of a Preference Unit to provide documentation supporting and certifying that the occupant continues to meet the income requirements of an Eligible Tenant, and Developer may rely upon such certification and supporting documentation in recertifying the tenant. -7- 10-132 3.6 Affordable Rent during the Affordability Period. Maximum monthly rent chargeable for the Preference Units shall comply with the definition of Affordable Rent applicable to the Preference Units as set forth in Section 3.3 above. 3.6.1 Rent Schedule and Utility Allowance. Developer shall annually reexamine the income of each tenant household of the PSH Units for compliance with the AHAs and this Agreement. The maximum monthly rent must be recalculated by Developer, and the Cities shall have the right to review such recalculated rent levels annually with respect to the Preference Units. Any increase in rents for the PSH Units is subject to the provisions of outstanding leases. Developer must provide all tenants not less than thirty (30) days, or such longer period pursuant to applicable federal, state or local laws, prior written notice before implementing any increase in monthly rent. 3.6.2 Increases in Eligible Tenant Income. A tenant who qualifies for a Preference Unit (e.g. Eligible Tenant) shall be deemed to continue to be so qualified until such time as the annual re -verification of such tenant's income demonstrates that such tenant no longer qualifies as an Eligible Tenant. A tenant household whose income increases such that such tenant household ceases to be income qualified to occupy any Preference Unit at the Project, may continue to occupy his or her Preference Unit and be charged rent including a reasonable utility allowance, not greater than the lesser of thirty percent (30%) of the household's adjusted monthly income, recertified annually, or the market rent applicable to the PSH Unit as published by the California Department of Housing and Community Development for a period of six (6) months after the tenant household no longer income -qualifies to continue to occupy a PSH Unit in compliance with this Agreement, after which time the tenant's lease will be terminated and the PSH Unit will be re -leased to an Eligible Tenant. 3.7 Maintenance. 3.7.1 At Occupancy of the PSH Units at Completion of Rehabilitation. As of the date of and prior to initial occupancy of each of the Preference Units by Eligible Tenant(s), Developer shall rehabilitate and improve each unit so that the condition of each unit is decent, safe and sanitary and complies with HQS. 3.7.2 During Operation of the Project. Developer shall, at its sole cost and expense, maintain or cause to be maintained the interior and exterior of the Project and all PSH Units thereof and the Property in a decent, safe and sanitary manner, in accordance with HQS and the standards of maintenance of comparable high quality, well -managed permanent supportive housing projects within Orange County, California such as and comparable to those owned or operated by other highly reputable owners and developers of high quality permanent supportive housing projects in Orange County. If at any time Developer fails to maintain the Project or the Property in accordance with this Agreement and such condition is not corrected within ten (10) days after written notice from Costa Mesa with respect to graffiti, debris, and waste material, or thirty (30) days after written notice from Costa Mesa with respect to general maintenance, landscaping and building improvements, then Costa Mesa, in addition to whatever remedy it may have at law or at equity, shall have the right to enter upon the applicable portion of the Project or the Property and perform all acts and work necessary to protect, maintain, and preserve the Project and the Property, and to attach a lien upon the Property, or to assess the Property, in the amount in 10-133 of the expenditures arising from such acts and work of protection, maintenance, and preservation by Costa Mesa and/or costs of such cure, including a reasonable administrative charge, which amount shall be promptly paid by Developer to Costa Mesa upon demand. The liens created under this Section 3.7 shall be subject and subordinate to the lien of the mortgages or deeds of trust encumbering the Property (or any part of the Property). Nothing in such lien rights diminish or lessen Costa Mesa's rights under applicable federal, state and local laws, including but not limited to code enforcement, inspection warrants, public or private nuisance, or receivership laws. 3.8 Management of the Project. 3.8.1 Property Manager. Developer shall cause the Project, and all appurtenances thereto that are a part of the Project, to be managed in a prudent and business -like manner, consistent with property management standards for other comparable high quality, well - managed rental housing projects in Orange County, California. Developer itself may be the property manager or Developer shall contract with a property management company or property manager to operate and maintain the Project in accordance with the terms of this Article 3; however, the selection and hiring of the Property Manager (and each successor or assignee Property Manager) is and shall be subject to prior written approval of the Cities' City Managers at their sole, reasonable discretion. The City Managers shall work together in their decision so as not to cause any undo delay. For each and any subsequent Property Manager, Developer shall conduct due diligence and background evaluation of any potential outside property manager or property management company to evaluate experience, references, credit worthiness, and related qualifications as a property manager. Any proposed property manager shall have prior experience with rental housing projects and properties comparable to the Project, including prior experience in managing permanent supportive housing projects, and the references and credit record of such manager/company shall be investigated (or caused to be investigated) by Developer prior to submitting the name and qualifications of such proposed property manager to the to the Cities City Managers for review and approval. A complete and true copy of the results of such background evaluation shall be provided to the Cities City Managers. Approval of a Property Manager by the Cities City Managers shall not be unreasonably delayed but shall be in their sole, reasonable discretion, and the City Managers shall use good faith efforts to respond as promptly as practicable in order to facilitate effective and ongoing management of the Project. Upon request, Developer shall make available for the Cities review support documentation that substantiates the annual property management fee. (a) Gross Mismanagement. In the event of "Gross Mismanagement" of the Preference Units, the Cities shall require any condition(s), acts, or inactions of Gross Mismanagement to cease and/or be corrected immediately, and further to direct and require the immediate removal of the Property Manager and replacement with a new qualified and approved Property Manager, if such condition(s) is/are not ceased and/or corrected after expiration of thirty (30) days from the date of written notice from either City. If Developer or Property Manager has commenced to cure such Gross Mismanagement condition(s) on or before the 20t' day from the date of written notice (with evidence of such submitted to the Cities), but has failed to complete such cure by the thirtieth (30t') day, then Developer or Property Manager shall have an additional ten (10) days to complete the cure of such Gross Mismanagement condition(s). Due to the importance and nature of good property management of permanent supportive housing and the provision of Supportive Services in connection there with as defined and provided in Section 3.12 Rz 10-134 of this Agreement, in no event shall any condition of Gross Mismanagement continue uncured for a period exceeding forty-five (45) days from date of the initial written notice of such condition(s) from either City. If such condition(s) does persist beyond such period, the Cities shall have the sole and absolute right to immediately and without further notice to Developer (or to Property Manager or any other person/entity) replace the Property Manager with a new property manager of the Cities City Managers selection at the sole cost and expense of Developer. If Developer takes steps to select a new Property Manager that selection is subject to the requirements set forth above for selection of a Property Manager. (i) For purposes of this Agreement, the term "Gross Mismanagement" shall mean management of the Project (or any part of the Project) in a manner which materially violates the terms and/or intention of this Agreement to operate a high quality permanent supportive housing complex comparable to other similar complexes in Orange County, California, and shall include, but is not limited to, any one or more of the following: (A) Knowingly leasing to tenants who exceed the prescribed income levels; (B) Knowingly allowing the tenants to exceed the prescribed occupancy levels without taking immediate action to stop such overcrowding; (C) Knowingly allowing the tenants to allow or use any PSH Unit for vacation rental purposes without taking immediate action to stop such activity; (D) Underfunding required reserve accounts, and not making timely Reserve Deposits, unless funds are not available to deposit in such accounts despite commercially reasonable efforts to operate the Project and fund such accounts; (E) Failing to timely maintain the Project in accordance with the Leasing Plan (as the term is defined in the Newport Beach AHA), Tenant Selection Plan and the manner prescribed herein; (F) Failing to submit timely and/or adequate annual reports to City as required herein; (G) Fraud or embezzlement of Project funds, including without limitation funds in the reserve accounts; (H) Failing to reasonably cooperate and communicate with the Costa Mesa Police Department or other local law enforcement agency(ies) with jurisdiction over the Project, in maintaining a crime -free environment within the Project; (I) Failing to reasonably cooperate and communicate with the Costa Mesa Fire Department or other local public safety agency(ies) with jurisdiction over the Project, in maintaining a safe environment within the Project; (J) Failing to reasonably cooperate and communicate with the Costa Mesa Planning & Building Department, including the Code Enforcement Division, -10- 10-135 or other local health and safety enforcement agency(ies) with jurisdiction over the Project, in maintaining a safe environment within the Project; and (K) Spending funds from the Capital Replacement Reserve account(s), as provided in the AHAs, for items that are not defined as capital costs under the standards imposed by GAAP (and/or, as applicable, generally accepted auditing principles.) (ii) Notwithstanding the requirements of the Property Manager to correct any condition of Gross Mismanagement as described above, Developer is obligated and shall use commercially reasonable efforts to correct any defects in property management or operations at the earliest feasible time and, if necessary, to replace the Property Manager as provided above. Developer shall include advisement and provisions of the foregoing requirements and requirements of this Agreement within any contract between Developer and its Property Manager. (b) Marketing. Developer shall comply with an affirmative marketing plan reasonably approved by the Cities, including methods for informing the public and potential tenants about the federal fair housing laws, procedures to inform and solicit applications from persons in the housing market area not likely to apply for tenancy at the PSH Units without special outreach and recordkeeping methods that will permit City to evaluate the actions taken by Developer (or Property Manager) to affirmatively market the PSH Units at the Project. Specific procedures for marketing and leasing PSH Units shall be set forth in the Tenant Selection Plan and shall include: (i) Posting advertisements and notices of the availability of the Housing Unit(s) in local newspapers and other publications. Such advertisements and notices shall include a description of the age and income requirements applicable to the Housing Unit(s). (ii) Posting advertisements and notices of the vacancy(ies) at local religious institutions, community centers, public buildings such as post -offices and at: (i) City Hall for the Cities, (ii) Newport Beach OASIS and Costa Mesa Senior Center, and (iii) Family Resource Centers, or other locations as the Cities may suggest. (iii) Posting advertisements and notices of the vacancy(ies) anywhere Developer believes tenant households eligible for occupancy in the PSH Units at the Project are likely to become informed. 3.8.2 Operation and Management of Property Post -Closing. After the rehabilitation of the Project, the day to -day management and operation of the Project and the overall Property shall be undertaken by and shall be the sole legal and financial responsibility of Developer. After completion of the Rehabilitation and during the Affordability Period, Developer is and shall remain responsible for and shall exercise its best efforts to manage and operate the Property consistent with good property management standards of comparable permanent supportive housing properties in Orange County, California such as those owned or operated by Developer and by other highly reputable owners and developers of high -quality permanent supportive housing projects in the Orange County. -11- 10-136 3.9 Code Enforcement. Developer acknowledges and agrees that Costa Mesa and its employees and authorized agents shall have the right to conduct code compliance and/or code enforcement inspections of the Project and the individual units, both exterior and interior, during normal business hours and upon reasonable written notice (not less than 72 hours prior notice) to Developer and/or an individual tenant. If such notice is provided by City representative(s) to Developer, then Developer (or its Property Manager) shall immediately and directly advise tenant of such upcoming inspection and cause access to the area(s) and/or units on the Project to be made available and open for inspection. Developer shall include express advisement of such inspection rights within the approved lease/rental agreements for each Housing Unit in the Project in order for each and every tenant and tenant household to be aware of this inspection right. Costa Mesa and Developer acknowledge and agree that the Property and Project is located within the sole jurisdiction of Costa Mesa and that Newport Beach has no legal obligations or authority to enforce the Costa Mesa Municipal Code including violations of housing, fire code, zoning, public nuisance and all other applicable laws. 3.10 Operating Budget. Developer shall submit to both Cities on not less than an annual basis the operating budget for the Project that sets forth the projected Operating Expenses for the upcoming calendar year. 3.11 Monitoring and Recordkeeping. 3.11.1 Affordability Period Compliance. Developer shall comply with all applicable recordkeeping and monitoring requirements including this Section 3.11 and shall annually complete and submit to both Cities a Certification of Continuing Program Compliance substantially in the form of attached hereto as Exhibit "D" or other form provided by the Cities ("Program Certification"). (a) Cities shall be entitled to monitor compliance with this Agreement, to inspect the records of the Project, and to conduct an independent audit or inspection of such records. Developer agrees to maintain records in a businesslike manner, to make such records available to the Cities upon seventy-two (72) hour notice, and to maintain such records for the entire Affordability Period. 3.11.2 Annual Monitoring Fee. Concurrently with the delivery of each annual report and Program Certificate to City, to the extent not prohibited by any applicable law, Developer shall pay an Annual Monitoring Fee to each City in the amount One Thousand Six Hundred Dollars ($1,600) increased annually by 3%, which shall compensate the Cities for their costs incurred to monitor Developer's compliance with this Agreement. 3.12 Supportive Services. Developer shall use its best efforts to create a comprehensive supportive services program that is targeted to the needs of the residents of the Project ("Support Services"). Any change in the scope, amount, or type of Supportive Services to be provided at the Property shall be subject to prior approval of both Cities, which approval shall not be unreasonably withheld or conditioned. Developer shall provide (or cause the provision of) Supportive Services at the Project throughout the entire Affordability Period. While Developer intends to provide the Supportive Services and pay the expenses therefor, Developer and the Cities agree to cooperate in -12- 10-137 good faith to obtain additional or other funding sources to provide the various Supportive Services and other programs that shall be provided to the residents throughout the Affordability Period. 3.13 Capital Reserve Requirements. Developer shall annually deposit into a set aside Capital Replacement Reserve account an amount equal to Five Hundred Dollars ($500.00) for each PSH Unit, or shall cause the Property Manager to do so; provided, that funding of replacement reserves under the requirements of any other funder, so long as such replacement reserve deposits are not less than the amount required under this Section, shall satisfy this requirement. The Capital Replacement Reserve deposits shall be allocated from the gross collections for all rents received from the operation of the Property and shall be deposited into a separate interest -bearing trust account. Funds in the Capital Replacement Reserve shall be used for capital replacements to the fixtures and equipment on the Property (including common areas) that are normally capitalized under generally accepted accounting principles and shall include the following: carpet and drape replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs, showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; gas line pipe replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting. The non -availability of funds in the Capital Replacement Reserve does not in any manner relieve Developer of the obligation to undertake necessary capital repairs and improvements and to continue to maintain the Property and all common areas and common improvements in the manner prescribed herein. 3.13.1 Annual Accounting of Capital Replacement Reserve. Not less than once per calendar year, Developer, at its expense, shall submit to the Cities an accounting for the Capital Replacement Reserve set forth in the Annual Financial Statement, demonstrating compliance with this Section. 3.14 Capitalized Operating Reserve. In connection with operation of the Project, Developer shall, or shall cause the Property Manager to, deposit in an amount equal to three (3) months of Operating Expenses for the Project ("Target Amount") in a Capitalized Operating Reserve to be held in a separate interest bearing trust account, which initial deposit shall be funded using proceeds of any primary loan, provided that funding of, and disbursements from, a capitalized operating reserve under the requirements of any primary loan, so long as such capitalized operating reserve amounts are no less than the amount required under this Section, shall satisfy this requirement. The Capitalized Operating Reserve shall thereafter be replenished from Annual Project Revenue (if any) only to the extent required by any funder. The amount in the Capitalized Operating Reserve shall be retained to cover shortfalls between Annual Project Revenue and actual Operating Expenses, but shall in no event be used to pay for distributions to Developer, capital items or capital costs properly payable from the Capital Replacement Reserve. 3.14.1 Annual Accounting of Capitalized Operating Reserve. Not less than once per calendar year, Developer, at its expense, shall submit to the Cities an accounting for the Capitalized Operating Reserve set forth in the Annual Financial Statement, demonstrating compliance with this Section. -13- 10-138 ARTICLE 4 COMPLIANCE WITH LAWS. 4.1 Property Standards. Developer agrees to ensure that Rehabilitation and operation of the Project will comply with all applicable requirements, including the following: 4.1.1 State and Local Requirements. The Project and all PSH Units and common areas at the Property shall meet all applicable State and local codes, ordinances, and zoning requirements, including all applicable requirements set forth in the Costa Mesa Municipal Code and all applicable State and local residential and building codes. The Project and all PSH Units and common areas at the Property must meet all such applicable requirements upon Project completion. 4.1.2 Ongoing Property Condition Standards: Rental Housing. Developer shall ensure that the Project, including all PSH Units and common areas at the Property, comply with City of Cosa Mesa established property standards for rental housing ("City Property Standards") throughout the Affordability Period. In accordance with City Property Standards, Developer shall maintain the Project, including all PSH Units and common areas at the Property: (a) as decent, safe, and sanitary housing in good repair, (b) free of all health and safety defects and all life -threatening deficiencies, and (c) in compliance with the lead -based paint regulations and requirements in 24 CFR Part 35. 4.1.3 Inspections; Corrective and Remedial Actions. The parties understand that the County of Orange will undertake ongoing inspections of the Project. Developer agrees it will take all remedial actions to address and correct deficiencies and other issues identified by the County. 4.1.4 Handicapped Accessibility. Developer shall comply with, as and to the extent applicable, (a) Section 504 of the Rehabilitation Act of 1973, and implementing regulations at 24 CFR 8C governing accessibility of projects assisted with federal funds; (b) the Americans with Disabilities Act of 1990, and implementing regulations at 28 CFR 35-36 in order to provide handicapped accessibility to the extent readily achievable; (c) the Uniform Federal Accessibility Standards (UFAS) pursuant to the Architectural Barriers Act of 1968, 42 U.S.C. 4151-4157, as amended; and (d) any other applicable law. 4.1.5 Use of Debarred, Suspended, or Ineligible Participants. To the extent applicable during the Rehabilitation, Developer shall comply with the provisions of 24 CFR 24 relating to the employment, engagement of services, awarding of contracts, or funding of any contractor or subcontractor during any period of debarment, suspension, or placement in ineligibility status. Developer, each subcontractor, and any other contractors or subcontractors or agents of Developer (subject to compliance with 24 CFR part 135) shall have provided to Costa Mesa the certification in appendix B of 24 CFR Part 24 that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation from this Project, and Costa Mesa shall be responsible for determining whether each contractor has been debarred. -14- 10-139 4.1.6 Maintenance of Drug -Free Workplace. Developer shall certify that Developer will provide a drug -free workplace in accordance with 2 CFR 2429. 4.1.7 Lead -Based Paint. Costa Mesa, as a recipient of federal funds, has modified and conformed all of its federally funded housing programs to the Lead -Based Paint Poisoning Prevention Act, Title X of the 1992 Housing and Community Development Act, 42 U.S.C. §4800, et seq., specifically §§4821 4846, and the implementing regulations thereto. In this regard, Developer shall comply with all applicable federal requirements relating to lead -based paint. 4.1.8 Affirmative Marketing. Developer shall adopt and implement affirmative marketing procedures and requirements at the Property. 4.1.9 Nondiscrimination, Equal Opportunity and Fair Housing. Developer shall carry out the Project and perform its obligations under this Agreement in compliance with all of the federal laws and regulations regarding nondiscrimination equal opportunity and fair housing described in 24 CFR 92.350 and 24 CFR 5.105. 4.1.10 Energy Conservation Standards. As applicable to the Project, Developer shall cause the Property to meet the cost-effective energy conservation and effectiveness standards in 24 CFR 965 and 24 CFR 990.185. 4.1.11 Displacement and Relocation. Developer acknowledges and agrees that, pursuant to Federal Program Limitations and consistent with the other goals and objectives of that part and pursuant to a Relocation Plan, Developer must ensure that it has taken all reasonable steps to minimize the displacement of persons as a result of the Rehabilitation work. Furthermore, to the extent feasible, residential tenants must be provided a reasonable opportunity to lease and occupy a suitable, decent, safe, sanitary and affordable PSH Unit at the Property or comparable outside property upon completion of the Rehabilitation work. Developer shall cause all Relocation of tenants and occupants of the Property to be conducted in accordance with the Relocation Laws and all Federal Program Limitations. Developer further agrees to cooperate with Costa Mesa in meeting the requirements of the Federal Program Limitations and shall take all actions and measures reasonably required by Costa Mesa's City Manager (or his or her duly authorized representative) in connection therewith. 4.1.12 Documentation and Monitoring Requirements. Developer shall maintain records, reports and information as required by Exhibit "B" hereof. Upon request, Developer shall make records available for the Cities review. 4.1.13 Conflict of Interest. Developer shall comply with and be bound by the conflict of interest provisions set forth at 24 CFR 570.611. 4.1.14 Conflicts between and among Federal Program Limitations and State or Local Law. If and to the extent applicable for any source of federal revenue expended to implement the Project and in the event of any conflict or inconsistency between applicable Federal Program Limitations and/or and State or local law, then the more stringent requirement(s) shall control. -15- 10-140 4.1.15 Layering Review. To the extent applicable, Developer acknowledges that a layering review will be performed in accordance with Federal Program Limitations. In connection with such review Developer acknowledges and agrees it shall be required to represent and certify to City that no government assistance other than the Costa Mesa Loan, the Newport Beach Loan, the County Loan, the welfare exemption under California Revenue and Taxation Code Section 214(g), and the HAP Contract assistance has been obtained or is contemplated to be obtained for the Rehabilitation and operation of the Property. After such layering review, Developer agrees to notify City in the event that it applies for or proposes to use governmental funds, other than as listed in the previous sentence, for the Property or the Project. 4.2 Compliance with Laws. Developer shall carry out the design and construction of the Rehabilitation and operation of the Project in conformity with all applicable federal, state and local laws, including, without limitation, applicable state labor standards, City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the Costa Mesa Municipal Code, and all applicable disabled and handicapped access requirements, including without limitation (to the extent applicable) the Section 8 laws, Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq., HOTMA, and any other applicable governmental requirements. Developer (and its Affiliates and successors and assigns) shall pay prior to delinquency all ad valorem real estate taxes, possessory interest taxes, and assessments, if any, as to the Property and Project, subject to Developer's (and its Affiliates and successors and assigns) right to contest in good faith any such taxes. Developer may apply for and receive any exemption from the payment of property taxes or assessments on any interest in or as to Property and Project without the prior approval of Costa Mesa. 4.2.1 Prevailing Wage Laws. In accordance with the California Labor Code (Sections 1770 et seq.), the Director of Industrial Relations has ascertained the general prevailing rate of per diem wages in the locality in which the work is to be performed for each craft, classification, or type of workman or mechanic needed to execute the contract. A copy of said determination is available by calling the prevailing wage hotline number (415) 703-4774, and requesting one from the Department of Industrial Relations. All parties to this Agreement shall be governed by all provisions of the California Labor Code — including, but not limited to, the requirement to pay prevailing wage rates (Sections 1770-7981 inclusive) during the Rehabilitation. A copy of the prevailing wage rates shall be posted by the Developer at the Project during the Rehabilitation. Developer acknowledges and understands that other federal and/or state funding sources and financing scenarios may trigger compliance with applicable state and federal prevailing wage laws and regulations. The highest applicable wage requirements will apply. Notwithstanding the foregoing in this Section, Developer shall carry out the construction through completion of the Rehabilitation of the Property in conformity with applicable federal, state and local labor laws and regulations, including, without limitation, as and if applicable, the requirements to pay prevailing wages under federal law (including Davis -Bacon Act, 40 U.S.C. Section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR Part 1 (collectively, "Davis -Bacon")) and California law (Labor Code Section 1720, et seq.). As such, and specifically in connection with the Rehabilitation, Developer acknowledges and agrees that it shall be required to, and shall be required to cause all of its contractors and their contractors to, pay prevailing wages in compliance with California Labor Code Section 1770 et seq., and shall be -16- 10-141 responsible for the keeping of all records required pursuant to Labor Code Section 1770 et seq., including but not limited to Labor Code Section 1776, and complying with the maximum hours requirements of Labor Code Sections 1810 through 1815, and complying with all regulations and statutory requirements pertaining thereto. Developer acknowledges and agrees that it shall be independently responsible for reviewing the applicable laws and regulations with respect to the payment of prevailing wages and complying therewith. Upon any request by either City, Developer shall provide a true and correct copy of such payroll records as are required under applicable state law. (a) Developer Compliance. In this regard, Developer shall be solely responsible, expressly or impliedly, for determining and effectuating compliance with all applicable federal, state and local public works requirements, prevailing wage laws, labor laws and standards, and Costa Mesa and Newport Beach make no representation, either legally and/or financially, as to the applicability or non -applicability of any federal, state and local laws to the Rehabilitation and the Project, both onsite and offsite, as applicable. Developer expressly, knowingly and voluntarily acknowledges and agrees that Costa Mesa and Newport Beach have not previously represented to Developer or to any representative, agent or Affiliate of Developer, or its General Contractor or any subcontractor(s) for the construction of the Rehabilitation, in writing or otherwise, in a call for bids or otherwise, that the work and construction undertaken pursuant to this Agreement is (or is not) a "public work," as defined in Section 1720 of the Labor Code or under Davis -Bacon. (b) Indemnification re Prevailing Wages. Developer knowingly and voluntarily agrees that Developer shall have the obligation to provide any and all disclosures or identifications with respect to the Rehabilitation as required by Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation. Developer hereby indemnifies the Indemnified Parties and shall indemnify, protect, pay for, defend (with legal counsel acceptable to City and City) and hold harmless the Indemnified Parties, from and against any and all loss, liability, damage, claim, cost, expense and/or "increased costs" (including reasonable attorneys' fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development, construction (as defined by applicable law) and/or operation of the Project, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer with any applicable local, state and/or federal law or regulation, including, without limitation, any applicable federal and/or state labor laws or regulations (including, without limitation, if applicable, the requirement to pay state and/or federal prevailing wages); (ii) the implementation of Section 1781 of the Labor Code and/or of Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation. It is agreed by the parties that, in connection with the development and construction (as defined by applicable law or regulation) of the Project, including, without limitation, any and all public works (as defined by applicable law or regulation), Developer shall bear all risks of payment or non-payment of prevailing wages under applicable federal, state and local law or regulation and/or the implementation of Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, and/or any other similar law or regulation. "Increased costs," as used in this Section 4.2.1, shall have the meaning ascribed to it in Labor Code Section -17- 10-142 1781, as the same may be amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the Rehabilitation by Developer. ARTICLE 5 NONDISCRIMINATION COVENANTS 5.1 Nondiscrimination. Except to the extent legally permissible in connection with the Preference Units and to comply with the Project's public financing requirements, Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, rental, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property and Project, or any part thereof, nor shall Developer, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property or Project, or any part thereof. 5.2 Covenants Run with the Land. The covenants established in this Article 5 shall, without regard to technical classification and designation, be binding for the benefit and in favor of the Cites and their successors and assigns, and shall remain in effect in perpetuity. 5.3 Clauses in Contracts and Leases. All contracts and leases relating to the Property shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (a) In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." go 10-143 (b) In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, 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 any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." (c) In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." ARTICLE 6 TERM AND EFFECT OF COVENANTS 6.1 Affordability Period. The provisions of this Agreement shall apply to the Property, even if the Costa Mesa and Newport Loans are paid in full, until the end of the Affordability Period. This Agreement shall bind any successor, heir or assign of Developer, whether a change in interest occurs voluntarily or involuntarily, by operation of law or otherwise, with or without the approval of City, except as expressly released by City. The Cities awarded funding to Developer based on the condition, and in consideration of, this provision, and would not do so otherwise. 6.2 Covenants to Run with the Land. Cosa Mesa, Newport Beach and Developer hereby declare their express intent that the covenants and restrictions set forth in this Agreement shall run with the land, and shall bind all successors in title to the Property. Each and every contract, deed or other instrument hereafter executed covering or conveying the Property or any -19- 10-144 portion thereof shall be held conclusively to have been executed, delivered and accepted subject to such covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the Cities expressly release such conveyed portion of the Property from the requirements of the Agreement. ARTICLE 7 TRANSFERS 7.1 Transfers; General Prohibition of Transfer without Cities Consent. The qualifications and identity of Developer as the qualified Developer and as an experienced and successful developer and operator/manager of affordable housing, in particular permanent supportive rental housing, are of particular concern to City. It is because of these identities and the qualifications of the Developer that each City has entered into their respective AHA and this Agreement with Developer. Accordingly, commencing upon the execution of the AHAs and this Agreement and continuing until the end of the Affordability Period, no voluntary or involuntary successor in interest of Developer shall acquire any rights or powers under the AHAs or this Agreement, nor shall Developer make any total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the Property (excepting rental/lease of PSH Units), or any part thereof, or the AHAs or this Agreement (collectively referred to herein as a "Transfer") without the prior written approval of the Cities in their sole, reasonable discretion, except as expressly set forth in the AHAs (each a "Permitted Transfer"). Approval of a Permitted Transfer, pursuant to the AHAs, shall not waive, limit, or otherwise impair the Cities rights regarding any subsequent Permitted Transfer. ARTICLE 8 ENFORCEMENT AND REMEDIES 8.1 Remedies. In the event of default or breach of any of the terms or conditions of this Agreement by Developer, its heirs, executors, administrators or assigns, the Cities may pursue the remedy thereof by any and all means of enforcement, both in equity and at law, as provided by the laws of the State of California, including, but not limited to, injunctive relief and/or specific performance. 8.2 Rights of Cities. Except as limited by Section 3.9 of this Agreement, Costa Mesa and Newport Beach have the right to enforce all of the provisions of this Agreement. This Agreement does not in any way infringe on the right or duties of Costa Mesa to enforce any of the provisions of the Costa Mesa Municipal Code including, but not limited to, the abatement of dangerous buildings. In addition to the general rights of enforcement, Costa Mesa shall have the right, through Costa Mesa's agents and employees, to enter upon any part of the Property upon seventy-two (72) hours' written notice and during normal business hours for the purpose of enforcing the California Vehicle Code and the ordinances and other regulations of City, and for maintenance and/or repair of any or all publicly owned utilities. 8.3 Nuisance. The result of every act or omission whereby there is a material violation by Developer of any of the covenants contained in this Agreement in whole or in part is hereby -20- 10-145 declared to be and constitutes a nuisance, and every remedy allowable at law or equity against a nuisance, either public or private, shall be applicable against every such result and may be exercised by Costa Mesa or its successors in interest, without derogation of Costa Mesa's rights under law. Developer does not by this Section 8.3 waive any procedural rights under applicable law (including, without limitation, the rights to notice, cure, and appeal, if any). 8.4 No Third Parties Benefited. Except as provided herein as to the Cities, which shall be third -party beneficiaries hereunder, this Agreement is made for the purpose of setting forth rights and obligations of Developer and the Cities, and no other person shall have any rights hereunder or by reason hereof. 8.5 Right of Entry for Maintenance and Repair. Costa Mesa has the right of entry during normal business hours and upon and after reasonable attempts to contact Developer or Property Manager, to effect emergency repairs or maintenance which Developer has failed to perform. Subsequent to sixty (60) days written notice to Developer (or Property Manager) specifically outlining the noncompliance, Costa Mesa shall have the right of entry during normal business hours to enforce compliance with this Agreement which Developer or Property Manager have failed to perform. 8.6 Costs of Repair. The costs borne by Costa Mesa of any such repairs or maintenance emergency and/or non -emergency pursuant to Section 8.5 above, shall become a charge for which Developer shall be responsible and may, if unpaid, be assessed as a lien against the Property, subordinate to all existing financing liens. 8.7 Cumulative Remedies. The remedies herein provided for breach of the covenants contained in this Agreement shall be deemed cumulative, and none of such remedies shall be deemed exclusive. ARTICLE 9 HOLD HARMLESS, INDEMNITY AND INSURANCE 9.1 Hold Harmless and Indemnity. To the fullest extent permitted by law, Developer shall defend, indemnify, assume all responsibility for, and save and hold harmless Costa Mesa and Newport Beach, and their respective officers, officials, agents, employees, representatives, volunteers, successors or assigned (collectively, "Indemnified Parties") from and against any and all claims (including, without limitation, claims for bodily injury, death or damage to property), demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorneys' fees, disbursements and court costs) of every kind and nature whatsoever (individually, a Claim; collectively, "Claims"), which may arise from or in any manner relate (directly or indirectly) to any breach of the terms and conditions of this Agreement, any damages to property or injuries to persons directly or indirectly related to or in connection with this Agreement, the Project, and/or the Rehabilitation, operation, management, or ownership of the Property including, without limitation, defects in workmanship or materials or Developer's presence or activities conducted on the Project (including the negligent, reckless, and/or willful acts, errors and/or omissions of Developer, its principals, officers, agents, employees, vendors, -21- 10-146 suppliers, consultants, subcontractors, anyone employed directly or indirectly by any of them or for whose acts they may be liable, or any or all of them). The foregoing indemnity shall survive termination of this Agreement. Notwithstanding the foregoing, nothing herein shall be construed to require Developer to indemnify the Indemnified Parties from any Claim arising from the sole negligence or willful misconduct of the Indemnified Parties, or any Claim arising from either City's refusal to permit the Developer to amend, modify, or implement the Tenant Selection Plan in accordance with any applicable law provided that the Developer provided written notice to the Cities regarding Developers' proposed amendment or implementation. Nothing in this indemnity shall be construed as authorizing any award of attorneys' fees in any action on or to enforce the terms of this Agreement. This indemnity shall apply to all claims and liability regardless of whether any insurance policies are applicable. The policy limits do not act as a limitation upon the amount of indemnification to be provided Developer. 9.2 Developer Insurance Requirements. Developer, for the term of this Agreement, shall procure and keep in full force and effect or cause to be procured and kept in full force and effect for the mutual benefit of Developer, Costa Mesa and Newport Beach, insurance policies reasonably determined by both Cities and commensurate with industry standards for the area, as are required in the AHAs. 9.3 Knowledge of Claim. If at any time Developer or any of its contractors and/or subcontractors becomes aware of a claim or a potential claim related to the Project in which the demand or probably ultimate cost exceeds $25,000.00, Developer (and as applicable each and all of its contractors and subcontractors) shall promptly provide written notice ("Claim Notice") to the Cities which sets forth the nature of the claim or potential claim and the date on which Developer became aware of such claim or potential claim and shall provide the Cities with copies of any documents relating to such claim or potential claim. 9.4 Notice of Change in Coverage. If, at any time, Developer or any of its contractors and/or subcontractors becomes aware that any of the coverages provided above are going to be canceled, limited in scope or coverage, terminated or non -renewed, then Developer and each contractor and/or subcontractor shall promptly provide the Cities with written notice ("Insurance Notice") of such cancellation, limitation, termination or non -renewal. Upon the receipt of the Insurance Notice or the Claim Notice, or at any time when the Cities have knowledge of (i) the cancellation, limitation, termination or non -renewal of one or more of Developer's or any of its contractors and/or subcontractors insurance policies enumerated above or (ii) a claim or potential claim under one or more of such policies in accordance with Section 9.3 above, then, in addition to its other rights and remedies pursuant to this Agreement, the Cities shall have the right to suspend each City's obligations under this Agreement until such time as Developer and each of its contractors and/or subcontractors furnishes, or causes to be furnished to Cities, duplicate originals or appropriate certificates of insurance for coverages in the amount of not less than those specified above or until the time such claim or potential claim has been resolved to the reasonable satisfaction of Cities, whichever first occurs. 9.5 Waiver of Subrogation. Developer and each of its contractors and subcontractors hereby waive all rights to recover against the Indemnified Parties for any loss incurred by -22- 10-147 Developer and each or any of its contractors and subcontractors from any cause insured against or required by any Project Document to be insured against; provided, however, that this waiver of subrogation shall not be effective with respect to any insurance policy if the coverage thereunder would be materially reduced or impaired as a result. Developer and each of its contractors and subcontractors shall use their best efforts to obtain only policies that permit the foregoing waiver of subrogation. 9.6 Obligation to Repair and Restore Damage Due to Casualty Covered by Insurance. Subject to the provisions below and to the rights of the County, pursuant to the Ground Lease, and the primary lender and any replacement primary lender if the Project shall be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by Developer, subject to the rights of the primary lender, Developer shall promptly proceed to obtain insurance proceeds and take all steps necessary to begin reconstruction and, immediately upon receipt of insurance proceeds, to promptly and diligently commence the repair or replacement of the Project improvements to substantially the same condition as the Project improvements existed immediately prior to the casualty, if and to the extent the insurance proceeds are available and sufficient to cover the actual cost of repair, replacement, or restoration, then subject to the rights of the primary lender. Developer shall complete the same as soon as possible thereafter so that the Project Improvements can be occupied in accordance with this Agreement. Subject to force majeure delays, in no event shall the repair, replacement, or restoration period exceed two (2) calendar years from the date Developer obtains insurance proceeds unless each Cities City Manager, in their reasonable discretion, approves a longer period of time. Costa Mesa shall cooperate with Developer, at no expense to Costa Mesa, in obtaining any governmental permits required for the repair, replacement, or restoration. If, however, the then -existing laws of any other governmental agencies with jurisdiction over the Property do not permit the repair, replacement, or restoration, Developer may elect not to repair, replace, or restore the Project Improvements by giving notice to both Cities (in which event Developer will be entitled to all insurance proceeds but Developer shall be required to remove all debris from the applicable portion of the Property) or Developer may reconstruct such other improvements on the Property as are consistent with applicable land use regulations and approved by Costa Mesa and the other governmental agency or agencies with jurisdiction. 9.7 Non -Liability of Cities. Developer acknowledges and agrees that: (a) The relationship between Developer, Cosa Mesa and Newport Beach is and shall remain solely that of borrower and lender, and by this Agreement or any of the other Project documents, Costa Mesa and Newport Beach neither undertake nor assume any responsibility to review, inspect, supervise, approve (other than for aesthetics) or inform Developer of any matter in connection with the Project, including matters relating to: (i) the scope of Rehabilitation, (ii) architects, contractors, subcontractors and materialmen, or the workmanship of or materials used by any of them, or (iii) the progress of the Rehabilitation of the Project and its conformity with its scope; and Developer shall rely entirely on its own judgment with respect to such matters and acknowledges that any review, inspection, supervision, approval or information supplied to Developer by Costa Mesa or Newport Beach in connection with such matters is solely for the protection of Cities and that neither Developer nor any third party is entitled to rely on it; -23- 10-148 (b) Notwithstanding any other provision of any Project document: (a) Cities are not a partner, joint venturer, alter -ego, manager, controlling person or other business associate or participant of any kind of Developer and Cities do not intend to ever assume any such status; (b) Cities activities in connection with the Property shall not be "outside the scope of the activities of a lender of money" within the meaning of California Civil Code Section 3434, as modified or recodified from time to time, and Cities do not intend to ever assume any responsibility to any person for the quality or safety of the Property; and (c) Cities shall not be deemed responsible for or a participant in any acts, omissions or decisions of Developer; (c) Cities shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any construction on, or occupancy or use of, the Property, whether arising from: (a) any defect in any building, grading, landscaping or other on -site or off -site improvement; (b) any act or omission of Developer or any of Developer's agents, employees, independent contractors, licensees, invitees or volunteers; or (c) any accident on the Property or any fire or other casualty or hazard thereon; and (d) By accepting or approving anything required to be performed or given to Cities under the Project Documents, including any certificate, financial statement, survey, appraisal or insurance policy, Cities shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by Cities to anyone. Nothing in this Article 9 shall be construed as limiting in any way the extent to which Developer may be held responsible for payments of damages to persons or property resulting from Developer's performance of the work covered under the AHAs or this Agreement. 9.8 Reimbursement of City for Enforcement of Project Documents. Developer shall reimburse Cities within thirty (30) days following written demand itemizing all costs reasonably incurred by Cities (including the reasonable fees and expenses of attorneys, accountants, appraisers and other consultants, whether the same are independent contractors or employees of Cities) in connection with the enforcement of the Project documents including the following: (a) Cities commencement of, appearance in, or defense of any action or proceeding purporting to affect the rights or obligations of the parties to any Project document, and (b) all claims, demands, causes of action, liabilities, losses, commissions and other costs against which Cities are indemnified under the Project documents and defense of any action if Costa Mesa and/or Newport Beach have tendered the defense of such action to Developer and Developer fails to defend any such action. Such reimbursement obligations shall bear interest commencing upon the expiration of such 30-day notice, at a simple interest rate of six percent (6%) per annum, and shall be secured by Costa Mesa's or Newport Beach's deeds of trust. If not fully paid, then such reimbursement obligations shall survive the cancellation of the Costa Mesa and Newport Beach promissory notes, release and reconveyance of the Cities' deeds of trust, issuance of the Release of Construction Covenants, and termination of the AHAs and this Agreement. -24- 10-149 ARTICLE 10 ASSIGNMENT OF AGREEMENT This Agreement shall be binding upon Developer, its executors, administrators and assigns and all persons claiming under or through Developer. Wherever this Agreement employs the term "Developer," it shall be deemed to include Developer, its executors, administrators and assigns and all persons claiming under or through Developer. Except for Permitted Transfers, Developer shall not voluntarily assign any of its rights or obligations under this Agreement without the prior written consent of City and any purported assignment made without said consent shall be null and void for all purposes. ARTICLE 11 RECORDATION Developer agrees that this Agreement and any amendment or cancellation hereof shall be recorded in the official records of Orange County by Developer within ten (10) days after the effective date of this Agreement and within ten (10) days after any amendment or cancellation hereof. Developer agrees to provide Cities with two copies of the recorded Agreement (or any amendment) within five (5) days of the recording date. ARTICLE 12 NOTICE Written notice, demands and communications between Costa Mesa, Newport Beach and Developer shall be deemed sufficient if dispatched by personal delivery, overnight delivery by a reputable courier service, registered or certified mail, postage prepaid, return receipt requested to the principal offices of Costa Mesa, Newport Beach and Developer, the addresses of which are hereinafter set forth. Such written notices, demands and communications may be sent in the manner prescribed to each other's addresses as either party may, from time to time, designate by mail, or the same may be delivered in person to representatives of either party upon such premises. Said addresses are as follows: To Developer: American Family Housing Attention: Andi Lau 15161 Jackson Street Midway City, California 92655 Copy to: Goldfarb & Lipman LLP 1300 Clay Street, 1 lth Floor Oakland, CA 94612 Attention: William DiCamillo -25- 10-150 If to Newport Beach: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: City Manager With Copies to: City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 Attn: City Attorney If to Costa Mesa: City of Costa Mesa 77 Fair Drive Costa Mesa, California 92626 Attn: City Manager With copies to: Jones Mayer 3777 N. Harbor Boulevard Fullerton, California 92835 Attention: Kimberly Barlow, Esq. Notices herein shall be deemed given as of the date of personal service or three (3) consecutive calendar days after deposit of the same in the custody of the United States Postal Service. ARTICLE 13 WAIVER Failure by a party to insist upon the strict performance of any of the provisions of this Agreement by the other party or the failure by the party to exercise its rights under or upon a default by the other party herein shall not constitute a waiver of such parry's right to demand strict compliance from such other party in the future. ARTICLE 14 SUBORDINATION OF CITY LOAN 14.1 Subordination Agreements. Costa Mesa, Newport Beach, Developer and initial approved primary lender have agreed to enter into or will enter into a subordination agreement, each of which authorize Cosa Mesa and Newport Beach Loans as subordinate mortgage liens against the Property subject to all of the conditions contained therein; provided however in all events this Agreement is and shall remain a senior, non -subordinate encumbrance against the Property, subject to the Ground Lease and any deed of trust in favor of the County. Further, the subordination agreement establishes rights, benefits and obligations between and among the parties relating defaults, mortgagee protections, rights to cure, etc. and shall apply as and between Cities and Developer until the maturity date as set forth therein. -26- 10-151 14.2 Estoppels and Reaffirmation of Subordination. A subordination agreement may include the terms, conditions and limitations relating to estoppel(s) and/or reaffirmation thereof subject to the condition therein and as provided herein; provided however, the reaffirmation shall be evidenced by an agreement in a form reasonably acceptable to Cities and their respective legal counsel. If and to the extent any reaffirmation, new, or amended subordination, or any estoppel certificates, or similar documents are requested and/or necessary, Developer expressly acknowledges and agrees that any and all third -party cost incurred or to be incurred by Cities, including for example attorney fees or other consultant's costs, are and shall be the sole financial responsibility of Developer (or its Lender or other third party, but in no event Cities). Cities shall have no obligation to commence work on such additional work relating to subordination or reaffirmation of subordination without a deposit of the estimated third -party costs which Cities may draw upon to pay such third -party costs. Cities agrees that the fees for such third party(ies), including consultants and attorneys, will be pursuant to current fee or consulting agreement(s) at the time of such request, which as of the effective date of this Agreement are materially less than rates charged to private entity clients. ARTICLE 15 SEVERABILITY If any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision(s) had never been contained herein. ARTICLE 16 CAPTION AND PRONOUNS The captions and headings of the various Articles and Sections of this Agreement are for convenience only, and are not to be construed as confining or limiting in any way the scope or intent of the provisions hereof. Whenever the context requires or permits, the singular shall include the plural, the plural shall include the singular, and masculine, feminine and neuter shall be freely interchangeable. ARTICLE 17 NO ATTORNEYS' FEES In any action to interpret or enforce any provision of this Agreement, the prevailing party shall not be entitled to attorneys' fees. -27- 10-152 ARTICLE 18 MODIFICATION OF AGREEMENT This Agreement may be modified or amended by mutual consent of the parties, provided that all amendments are in writing. ARTICLE 19 SOLE AGREEMENTS The AHAs, this Agreement, and all other Project Documents contain the sole and entire agreement and understanding of the parties with respect to the subject matter hereof. No representations, oral or otherwise, express or implied, other than those contained herein, have been made by the parties. In the event of a conflict between the provisions of this Agreement and the AHAs, this Agreement shall control. ARTICLE 20 COUNTERPARTS; MULTIPLE ORIGINALS This Agreement may be executed in counterparts, and in multiple originals, each of which shall constitute one, and the same, agreement. [Signatures appear on the following pages] No 10-153 IN WITNESS WHEREOF, the Cities and Developer have executed this Regulatory Agreement and Declaration of Covenants and Restrictions by duly authorized representatives on the Effective Date. "NEWPORT BEACH" CITY OF NEWPORT BEACH, a California municipal corporation and charter city Dated: , 2024 By. Grace K. Leung City Manager ATTEST: Dated: , 2024 By: Dated: , 2024 Leilam L Brown City Clerk APPROVED AS TO FORM: Aaron C. Harp City Attorney -29- 10-154 "COSTA MESA" CITY OF COSTA MESA, a California municipal corporation Dated: , 2024 By: Mayor ATTEST: Dated: , 2024 By: City Clerk APPROVED AS TO FORM: Dated: 2024 By: City Attorney -30- 10-155 "DEVELOPER" AMERICAN FAMILY HOUSING, a California nonprofit public benefit corporation By: Myles Anthony Peinemann II Chief Executive Officer Attachments: Exhibit A — Legal Description Exhibit B — Restricted Unit Matrix Exhibit C — Lease Rider Exhibit D — Certification of Continuing Program Compliance Exhibit E — Documentation and Monitoring Requirements -31- 10-156 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or of that document. STATE OF CALIFORNIA ) )ss. COUNTY OF ) On , before me, , Notary Public, (here insert name and title of the officer) personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or of that document. STATE OF CALIFORNIA )ss. COUNTY OF (seal) On , before me, , Notary Public, (here insert name and title of the officer) personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal) -32- 10-157 EXHIBIT "A" LEGAL DESCRIPTION OF SITE PARCEL 2, IN THE CITY OF COSTA MESA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 24 PAGE 23 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THAT PORTION CONVEYED TO MESA CONSOLIDATED WATER DISTRICT BY DEED RECORDED DECEMBER 31, 1986 AS INSTRUMENT NO. 86-656909, OFFICIAL RECORDS. ALSO EXCEPTING ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFORE AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH WHIPSTCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OF THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AS RESERVED IN DEED FROM THE IRVINE COMPANY, A CORPORATION, RECORDED MARCH 5, 1968 IN BOOK 8535 PAGE 62 OF OFFICIAL RECORDS. APN: 439-312-12 -33- 10-158 EXHIBIT `B" RESTRICTED UNIT MATRIX* City: Size No. of Units 30% AMI Household Unit Newport Beach Studio 12 12 Costa Mesa Studio 16 16 *The Project includes two (2) unrestricted Manager's Units that shall each be occupied by an on - site property manager and not an Eligible Tenant. -34- 10-159 EXHIBIT "C" LEASE RIDER [See following page] -35- 10-160 PERMANENT SUPPORTIVE HOUSING PROJECT Lease Rider RESIDENT: (if there is more than one adult occupant, each person must sign the rider) LEASE DATE: UNIT NO.: The undersigned tenant(s) hereby certify and agree as follows: 1. Income Certification. The attached income certification is true, correct and complete. I/we agree to provide a similar certification annually upon request during the term of my occupancy. 2. Employer Verification. The landlord or property manager has my permission to verify my/our income from any sources of income Uwe receive. 3. False Statements. If the income certification and/or lease application submitted by me/us is false, or if I/we fail to provide annual certifications, the landlord or property manager will have the right to terminate my/our lease and recover possession of my/our unit. I/we understand that the landlord and property manager are relying on this income certification and the related third -party income and asset verifications in accepting me/us as a tenant, and the landlord or property manager will be seriously harmed if my/our income does not qualify the unit for the affordable housing program. 4. This rider shall be considered as part of my/our lease. Date: -36- Tenant Tenant Tenant Tenant 10-161 EXHIBIT "D" CERTIFICATION OF CONTINUING PROGRAM COMPLIANCE , a duly authorized officer of and on behalf of AMERICAN FAMILY HOUSING ("Owner/Operator"), hereby represents and warrants that: 1. He/she has read and is thoroughly familiar with the provisions of the Regulatory Agreement and Declaration of Covenant and Restrictions ("Agreement") by and between the City of Costa Mesa, the City of Newport Beach (collectively "Cities") and American Family Housing of which this certification is an attachment. 2. As of the date of this certification, each PSH Unit on the Property (other than the two on - site manager's units) (i) is currently occupied by tenants qualifying as an Eligible Tenant(s) at an Affordable Rent (as such terms are defined in the Agreement); or (ii) is currently vacant and being held available for occupancy by such Eligible Tenant(s) in accordance with the Agreement and have been so held continuously since the date the previous qualifying Eligible Tenant vacated such PSH Unit, as indicated: [describe number of vacant PSH Units and length of time each such PSH Unit has remained vacant]; or (iii) is occupied by qualifying Eligible Tenant(s) whose incomes have increased above such qualifications in accordance with the terms and conditions of Sections 3.4, 3.5 and 3.6 of the Agreement. 3. The unit size, the rental amount charged and collected by Owner/Operator, the number of occupants and the income of the occupants for the Property is set forth below: [Add attachment if needed] This affidavit is made with the knowledge that it will be relied upon by Authority to determine compliance with the Agreement. Owner/Operator warrants that all information set forth in this document is true, correct and complete and based upon information Owner/Operator deems reliable and based upon such investigation as Owner/Operator deemed necessary. Owner/Operator acknowledges that Owner/Operator has been advised that the making of any misrepresentation or misstatement in this affidavit will constitute a material breach of the Agreement with both Cities and may entitle both Cities to initiate and pursue all applicable legal and equitable remedies with respect such Agreement. Owner/Operator does hereby swear under penalty of perjury that the foregoing statements are true and correct and that this certificate was executed on , 20 . "OWNER/OPERATOR" IC M. -37- 10-162 EXHIBIT "E" DOCUMENTATION AND MONITORING REQUIREMENTS Developer shall comply with the requirements set forth in this Exhibit at all times during the term of that certain Newport Beach AHA and Costa Mesa AHA (collectively referred to as the "AHAs") and that certain Regulatory Agreement to which this Exhibit is attached ("Agreement"). Documentation and Recordkeeping. (a) Records to be maintained. Developer shall maintain all records pertinent to the Construction and operation of the Project funded under the AHAs. Records shall be maintained for each tenant household, each PSH Unit, and each expenditure of Newport Beach and Costa Mesa Loans (collectively referred to as "City Loan") for the Project pursuant to the Agreement. Such records shall include but are not limited to: (i) Records providing a full description of each activity undertaken for which City Loan funds were applied. (ii) Records required to determine the eligibility of activities for use of City Loan funds. (iii) Records (including property inspection reports) demonstrating that each PSH Unit meets the City Property Standards upon occupancy and at the time of each annual inspection and was constructed and is maintained in accordance with the Agreement. (iv) With respect to the Preference Units, Records demonstration Developers compliance with the tenant selection covenants and tenant selection policies pursuant to Section 3.4 of the Agreement. (v) Records (e.g. all source documentation collected by Developer or the Property Manager, written eligibility determinations and documentation regarding any appeals of eligibility determinations) demonstrating the eligibility of each tenant household, including documentation showing income eligibility as Eligible Tenant(s). (vi) Records demonstrating that each rental agreement or lease for tenant household occupying a PSH Unit complies with the requirements of this Agreement including Sections 3.2 & 5.3. (vii) Records documenting compliance with Developer's marketing and outreach obligations under the Agreement. (viii) Records documenting compliance with the lead -based hazards requirements under the Agreement. (ix) Records demonstrating compliance by Developer, and each of its contractors and subcontractors with all applicable prevailing wage and labor compliance requirements set forth in the Agreement or otherwise required by applicable law. 10-163 (b) Retention. Developer shall retain all financial records, supporting documents, statistical records, and all other records pertinent to the Agreement for a period of five (5) years after the end of each Developer's fiscal year. Notwithstanding the above, if there are litigation matters, claims, audits, negotiations or other actions that involve any of the records cited and that have started before the expiration of the five-year period, then all pertinent records must be retained until completion of the actions and resolution of all issues, or the expiration of the five-year period, whichever occurs later. (c) Client Data. Developer shall maintain data regarding each tenant household that rents and occupies a Preference Unit at the Project demonstrating eligibility under the Agreement. Such data shall include, but not be limited to, client name, address, and income level. Such information shall be made available to City monitors or their designees for review upon request. (d) Disclosure. Developer understands that client information collected under this Agreement is private and the use or disclosure of such information, when not directly connected with the administration of the Cities or Developer's responsibilities with respect to Developer's performance under this Agreement, is prohibited unless written consent is obtained from such person receiving housing or any services and, in the case of a minor, that of a responsible parent/guardian. (e) Audits and Inspections. All Developer records with respect to any matters covered by this Agreement shall be made available to the Cities or any of their authorized representatives, at any time during normal business hours, as often as deemed necessary, to audit, examine, and make excerpts or transcripts of all relevant data. Any deficiencies noted in audit reports must be fully cleared by Developer within 30 days after receipt by Developer. Failure of Developer to comply with the above audit requirements will constitute a violation of this Agreement and may result in the withholding of future payments. Upon request by the Cities, Developer hereby agrees to conduct an annual audit in accordance with requirements and policies set by the Cities. -39- 10-164 ATTACHMENT NO. 11 RELEASE OF CONSTRUCTION COVENANTS 10-165 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: APN: 439-312-12 Space above for Recorder's use Exempt from Recording Fee per Gov. Code§ 27383 RELEASE OF CONSTRUCTION COVENANTS This RELEASE OF CONSTRUCTION COVENANTS ("Release") is made this day of 20 , by the CITY OF NEWPORT BEACH, a California municipal corporation ("City"), in favor of AMERICAN FAMILY HOUSING, a California Nonprofit Public Benefit Corporation ("Developer"). RECITALS A. Developer is the owner of that certain real property located in the City of Costa Mesa, County of Orange, State of California, more particularly described in the legal description attached hereto as Exhibit "A" ("Site"). B. On or about , 2024, City and Developer entered into that certain Affordable Housing Agreement and Joint Escrow Instructions ("AHA") which provides for Developer to develop a permanent supportive housing project on the Site, more particularly described therein as the "Project." C. Pursuant to the AHA, City is required to furnish Developer with this Release upon request by Developer after completion of construction of the Project as long as: (1) Developer is not in default under this Agreement, (2) the City Regulatory Agreement or any documents related hereto, (3) and the Developer obtains a final waiver of claims and liens and release of rights for the Project. D. The issuance by City of this Release shall be conclusive evidence that Developer has complied with the terms of the AHA pertaining to the construction of the Project. NOW, THEREFORE: 1. As provided in the AHA, City does hereby certify that the construction of the Project has been satisfactorily performed and completed, and that such development and construction work complies with the AHA. 2. This Release does not constitute evidence of compliance with or satisfaction of any obligation of Developer to any holder of a mortgage or any insurer of a mortgage security 10-166 money loaned to finance the work of construction of improvements and development of the Site, or any part of thereof. 3. This Release is not a notice of completion as referred to in Section 3093 of the California Civil Code. [Signatures on the following page] 2 10-167 IN WITNESS WHEREOF, City has executed this Release as of the date set forth above. ATTEST: City Clerk "CITY" CITY OF NEWPORT BEACH, a California municipal corporation and charter City City Manager CONSENT TO RECORDATION NEWPORT VETERANS HOUSING, LP, a California limited partnership, owner of the Site described herein, hereby consents to the recordation of this Release against the Site. "DEVELOPER" AMERICAN FAMILY HOUSING, a California Nonprofit Public Benefit Corporation MYLES ANTHONY PEINEMANN II Chief Executive Officer Francisco Flores Chief Financial Officer 10-168 EXHIBIT "A" LEGAL DESCRIPTION OF SITE LEGAL DESCRIPTION That real property located in the State of California, County of Orange, City of Costa Mesa, and described as follows: PARCEL 2, IN THE CITY OF COSTA MESA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 24 PAGE 23 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THAT PORTION CONVEYED TO MESA CONSOLIDATED WATER DISTRICT BY DEED RECORDED DECEMBER 31, 1986 AS INSTRUMENT NO. 86-656909, OFFICIAL RECORDS. ALSO EXCEPTING ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFORE AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH WHIPSTCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OF THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AS RESERVED IN DEED FROM THE IRVINE COMPANY, A CORPORATION, RECORDED MARCH 5, 1968 IN BOOK 8535 PAGE 62 OF OFFICIAL RECORDS. APN: 439-312-12 2 10-169 ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of } On 120 before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatures(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal) ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of On 120 before me, , Notary Public, personally appeared , proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatures(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature 5 (seal) 10-170 ATTACHMENT NO. 12 SCHEDULE OF PERFORMANCE 10-171 ATTACHMENT NO. 3 SCHEDULE OF PERFORMANCE Our construction and development timeline is summarized below: Notice of Award Initiate Plan Check Submittals Mobilize Construction Staff Procurement and Bid Obtain Building Permit Purchase Site Construction Start Homekey Funds Capital Expenditure Mobilize Site Staff Begin Tenant Selection Construction Completion Full Occupancy June 2024 June 2024 June 2024 July - August 2024 October 2024 October 2024 (or upon availability of HomeKey Funds) October 2024 February 2025 Apri12025 April 2025 June 2025 September 2025 10-172 ATTACHMENT NO. 13 TENANT SELECTION PLAN 10-173 TENANT SELECTION CRITERIA A. PROJECT DESCRIPTION 1400 Bristol is an affordable housing development consisting of a three, two-story improvements serving households experiencing homelessness, chronic homelessness, and households who are at - risk of becoming homeless. r Homelessness Criteria Studios - p6 11311 -{40 CH H AR Studio Studio 1RR 18R 18R - MHSA - PBVASH MHSA 2BR OC HCA 2BR 16R - MHSA Voucher Local Preferences Costa Mesa Newport Reach CES PRV 38 38 3S 3 3 - 6 - 24 24 P6VASH 10 10 3 7 5 - - 10 - Nan-PRV 28 16 12 28 28 28 - Staff - - - - - - - 2 - TOTAL 76 1 16 12 76 38 10 28 36 6 10 24 2 24 76 36 40 2 Of the 78 total units, 76 of the units are restricted for occupancy by Qualifying Households. The remaining two (2) units are set aside for property management staff, and do not have income restrictions. B. TENANT ELIGIBILITY STANDARDS For all 76 Qualifying units, there is a set of eligibility standards that may apply, including Tenant Eligibility, Program Eligibility, and eligibility for Rental Subsidy, as follows: Housing status: 38 households experiencing chronic homelessness, 10 households experiencing homelessness, and 28 at -risk of homelessness. 2. Income Limits: All units are restricted to households with incomes equal to or less than 30% of Area Median Income (AMI). 3. Additional Restrictions: a. 24 of the 1-bedroom units are restricted to households that qualify through the Orange County Health Care Agency (HCA) pursuant to the Mental Health Services Act (MHSA). Any unit may count towards MHSA requirements, City of Newport Beach requirements, or both, as long as the total project requirements are met. This means that the designations might "float" over time and, upon unit turnover, the exact requirements of any unit might change so long as the total project requirements are met. All referrals shall be pre-screened for presumptive eligibility for MHSA qualification. 10-174 Of the 76 Qualifying rental units, 48 are subject to a project -based rental subsidy: 48 units are subject to a Housing Assistance Payment (HAP) Contract from the Orange County Housing Authority (OCHA). These units are specifically designated by unit number as either Housing Choice Project -Based Vouchers (PBV) or Veterans Affairs Supportive Housing (VASH) Project -Based Vouchers under the HAP Contract, and do not change if the occupying leaseholder household changes. These applicant households shall be referred by the Coordinated Entry System (CES) as managed by the County of Orange (County) Continuum of Care (CoC). a. Of these 48 HAP units: i. 38 are PBV units, of which 30 PBV units are 1-bedroom units and 8 are studio units. 24 (all 1-bedroom units) are overlaid with the requirements of the MHSA program. ii. 10 are VASH units, of which 10 VASH are 1-bedroom units. 2. 28 units are not subject to the HAP Contract. All of these 28 units are studios. Of these 28 units: a. 16 units have a local preference for persons connected to the City of Costa Mesa. These households will come from CES as managed by the CoC and based on local preference criteria developed in conjunction with the City of Costa Mesa. b. 12 units have a local preference for persons connected to the City of Newport Beach. These households will come from CES as managed by the CoC and based on local preference criteria developed in conjunction with the City of Newport Beach. 3. For both PBV and VASH units, the units shall be permanently designated by unit number prior to initial leasing; and these designations shall appended to the HAP contract(s) and remain in place for those specific units for the life of the HAP contracts, unless later revised or amended. American Disability Act (ADA) Standards: Of the 76 Qualifying units, at a minimum, 5% of units will be full mobility units and a separate 5% will be full visual/hearing impaired units to ensure American Disability Act (ADA) compliance, as follows: 1. Four (4) will be full mobility units pursuant to the ADA. 2. Four (4) will be visual/hearing impaired units. 10-175 C. DISTRIBUTION OF UNITS The initial leasing process shall support maximizing the matching of the ADA units to appropriate referrals, in order to reduce the need for Reasonable Accommodations post -occupancy. The HAP contract (PBV, VASH) and program standards (MHSA, Chronic Homeless status, Homeless status, At -Risk status) units shall be distributed throughout the buildings to the greatest extent feasible, and not intentionally grouped together. A higher qualifying standard is always acceptable; thus, a Homeless unit may be occupied by a household qualifying as experiencing Homeless or Chronically Homeless, and an At -Risk unit may be occupied by a household qualifying as At -Risk, Homeless or Chronically Homeless. However, households matched by CES must otherwise qualify for the unit with regard to income qualifications, local preferences and other such criteria, which will be spelled out in the Tenant Selection Plan. D. COUNTY OF ORANGE COORDINATED ENTRY SYSTEM (CES) Because all qualifying units in the property are funded under the California Department of Housing and Community Development (State HCD) Homekey program, the76 qualifying units must utilize CES or an equivalent. Thus, there is no broad -based marketing for the site except as provided for under the Orange County CES. The procedures established by CES, and the cities of Costa Mesa and Newport Beach, are as follows: 1. Referrals for the 38 units under the HAP contract (PBV) shall be for households experiencing chronic homelessness. 2. Referrals for 10 units under the HAP Contract (VASH) shall be for VASH-eligible households, for referral into VASH units, and come from CES as managed by the CoC, including as appropriate, direct referrals from the VA Long Beach Healthcare System. 3. Referrals for 16 units shall be for tenants who are at -risk of becoming homeless, for referral into units without PBVs, and come from CES as managed by the CoC and based on local preference criteria developed in conjunction with the City of Costa Mesa. 4. Referrals for 12 units shall be for tenants who are at -risk of becoming homeless, for referral into units without PBVs, and come from CES as managed by the CoC and based on the following local preference criteria, in no particular order of significance, as developed with the City of Newport Beach. The criteria include: a. Extremely Low -Income Households who are at risk of homelessness; 10-176 b. Households with strong ties (i.e. live, work, school, and/or family) in the City of Newport Beach, defined as: i. 36 months' tenancy in the City of Newport Beach; ii. Current, active employment in the City of Newport Beach with documented income; iii. Having a child enrolled in a school within the Newport -Mesa Unified School District, or having a child who attended such a school in the last two (2) years; City of Newport Beach staff members shall use their best judgment and use a reasonable standard to evaluate the above criteria. City of Newport Beach staff or agents thereof may assist with obtaining proper documentation to satisfy the above criteria. E. OUALIFYING STANDARDS FOR OCCUPANCY 1. Housing First. 1400 Bristol is a Housing First community that prioritizes permanent housing followed by access to voluntary supportive services such as medical and mental healthcare, substance use services, benefits assistance, and legal aid, which promote long-term stability. This project will screen applicants and support residents to maintain their tenancy using Housing First principles, in compliance with SB1380. As such, the following practices will apply: a. Applicants will be considered for tenancy regardless of their current sobriety or past use of substances, completion of treatment, or participation in services. Participation in services or program compliance is not a condition of application approval. The use of alcohol or drugs in and of itself, without other lease violations, is not a reason for denial of tenancy or eviction once housed. b. Applicants will not be rejected based on poor credit or financial history, poor or lack of rental history, criminal convictions unrelated to tenancy, housekeeping ability, or behaviors that indicate a lack of "housing readiness." c. Once housed, residents can work with case managers and service coordinators who are trained in and actively employ evidence -based practices for client engagement, including, but not limited to, motivational interviewing and client -centered counseling. Services are informed by a harm -reduction philosophy that recognizes drug and alcohol use and addiction as a part of tenants' lives, where tenants are engaged in 10-177 nonjudgmental communication regarding drug and alcohol use, and where tenants are offered education regarding how to avoid risky behaviors and engage in safer practices, as well as being connected to evidence -based treatment if the tenant so chooses. 2. Guidelines — Maximum Occupancy Limits Upon Date of Move -In Upon Initial Qualification & Occupancy (strictest shall apply) OBR 1BR Min Max Min Max OCHA 1 2 1 4 Costa Mesa 1 2 1 3 Newport Beach 1 2 1 3 10-178 ATTACHMENT NO. 14 INSURANCE REQUIREMENTS 10-179 INSURANCE REQUIREMENTS 1.1 Provision of Insurance. Without limiting Developer's indemnification of the Cities, and prior to commencement of Scope of Development under the AHAs, Developer shall obtain, provide and maintain at its own expense during the term of this Agreement, policies of insurance of the type and amounts described below and in a form satisfactory to the Cities. Developer agrees to provide insurance in accordance with requirements set forth here. If Developer uses existing coverage to comply and that coverage does not meet these requirements, Developer agrees to amend, supplement or endorse the existing coverage. 1.2 Acceptable Insurers. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance in the State of California, with an assigned policyholders' Rating of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best's Key Rating Guide, unless otherwise approved by the Cities Risk Managers. 1.3 Coverage Requirements. 1.3.1 General Liability Insurance. Developer shall maintain commercial general liability insurance, and if necessary umbrella liability insurance, with coverage at least as broad as provided by Insurance Services Office form CG 00 01 covering CGL on an "occurrence" basis, including products and completed operations, property damage, bodily injury and personal & advertising injury with limits no less than five million dollars ($5,000,000) per occurrence. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. Costa Mesa and Newport Beach, their officers, officials, employees, and volunteers are to be covered as additional insureds on the CGL policy with respect to liability arising out of work or operations performed by or on behalf of the Developer including materials, parts, or equipment furnished in connection with such work or operations and automobiles owned, leased, hired, or borrowed by or on behalf of the Developer. General liability coverage can be provided in the form of an endorsement to the Developer's insurance (at least as broad as ISO Form CG 20 10, CG 11 85 or both CG 20 10 and CG 20 37 forms if later revisions used). 1.3.2 Property Insurance. Developer shall maintain property insurance on an "all risk" basis equal to the full replacement cost of the property with no coinsurance penalty. Such coverage shall name the Cities as a loss payee as their interest may appear. 1.3.3 Builder's Risk Insurance. For any property constructed, insurance shall be maintained to cover "all risk" of physical loss and providing coverage for loss or damage from collapse, including collapse resulting from builder's design error. All property stored off -site or in transit must be covered. The value insured shall cover 100% of the completed contract cost, including boiler & machinery and soft costs and shall be maintained until full acceptance of the work. Such coverage shall name the Cities as a loss payee as their interest may appear. At the discretion of the Cities, the requirement for such coverage may include additional protection for Earthquake and/or Flood. Developer shall provide the Cities with a copy of the policy. 10-180 1.3.4 Automobile Liability Insurance with coverage at least as broad as Insurance Services Office Form CA 00 01 covering any auto (Code 1), or if Developer has no owned autos, coverage for hired autos (Code 8) and non -owned autos (Code 9) with limit no less than one million dollars ($1,000,000) each accident for bodily injury and property damage. 1.3.5 Workers' Compensation as required by the State of California with statutory limits, and Employer's Liability Insurance with a limit of not less than one million dollars ($1,000,000) per accident for bodily injury or disease. 1.3.6 Professional Liability with limit of not less than two million dollars ($2,000,000) each claim and four million dollars ($4,000,000) aggregate. Covered professional services shall specifically include all work to be performed under the Agreement and delete any exclusion that may potentially delete coverage for the work to be performed. 1.3.7 Pollution Legal Liability including onsite and offsite coverage for bodily injury (including death and mental anguish), property damage, non -owned disposal site liability, defense costs, cleanup costs, and pollution conditions that arise from or in connection with the transportation (including loading and unloading) of any waste or waste materials off or away from the premises. Coverage shall be provided for both sudden and accidental and gradual and continuous pollution events with limits no less than five million dollars ($5,000,000) each loss and five million dollars ($5,000,000) in the aggregate. The policy shall not exclude any hazardous materials for which there is exposure. 1.3.8 Crime Bond in an amount not less than five million dollars ($5,000,000) with coverage including, but not limited to theft, forgery, alteration, computer fraud, and funds transfer fraud. 1.3.9 Excess Umbrella Liability Policies. If any excess or umbrella liability policies are used to meet the limits of liability required by this Agreement, then said policies shall be "following form" of the underlying policy coverage, terms, conditions, and provisions and shall meet all the insurance requirements stated in this Agreement, including, but not limited to the additional insured, primary & non-contributory and waiver of subrogation insurance requirements stated herein. 1.4 Other Insurance Requirements. The policies are to contain, or be endorsed to contain, the following provisions: 1.4.1 Waiver of Subrogation. All insurance coverage maintained or procured pursuant to this agreement shall be endorsed to waive subrogation against the Cities, their elected or appointed officers, agents, officials, employees and volunteers or shall specifically allow Developer or others providing insurance evidence in compliance with these requirements to waive their right of recovery prior to a loss. Developer hereby waives its own right of recovery against the Cities and shall require similar written express waivers and insurance clauses from each of its subcontractors. 1.4.2 Additional Insured Status. All liability policies including general liability, excess liability, pollution liability, and automobile liability, but not including professional 10-181 liability shall provide or be endorsed to provide that Costa Mesa and Newport Beach and their officers, officials, employees, and agents shall be included as insureds under such policies. 1.4.3 Primary and Non -Contributory. All liability coverage shall apply on a primary basis and shall not require contribution from any insurance or self-insurance maintained by the Cities. 1.4.4 Notice of Cancellation. All policies shall provide the Cities with thirty (30) days' notice of cancellation (except for nonpayment for which ten (10) days' notice is required) or nonrenewal of coverage for each required coverage. 1.5 Additional Agreements Between the Parties. The parties hereby agree to the following: 1.5.1 Evidence of Insurance. Developer shall provide certificates of insurance to the Cities as evidence of the insurance coverage required herein, along with a waiver of subrogation endorsement for workers' compensation, additional insured and primary and non- contributory endorsements for commercial general liability and auto liability, and a loss payee endorsement for property and builders risk, and other endorsements as specified herein for each coverage. Insurance certificates and endorsement must be approved by the Cities Risk Managers prior to commencement of development. Current certification of insurance shall be kept on file with the Cities at all times during the term of this contract. The Cities reserve the right to require complete, certified copies of all required insurance policies, at any time. 1.5.2 Enforcement of Contract Provisions. Developer acknowledges and agrees that any actual or alleged failure on the part of the Cities to inform Developer of non-compliance with any requirement imposes no additional obligations on the Cities nor does it waive any rights hereunder. 1.5.3 Insurance Obligations of Developer. The Cities require and shall be entitled to the Developer's broader coverage and/or the higher limits if Developer maintains broader coverage and/or higher limits than the minimums shown above. Any available insurance proceeds excess of the specified minimum limits of insurance and coverage shall be available to the Cities. No representation is made that the minimum insurance requirements of this Agreement are sufficient to cover the obligations of Developer under this Agreement. 1.5.4 Self -insured Retentions. Any self -insured retentions must be declared to and approved by the Cities. The Cities reserve the right to require that self -insured retentions be eliminated, lowered, or replaced by a deductible. Self-insurance will not be considered to comply with these requirements unless approved by the Cities. 1.5.5 The Cities Remedies for Non -Compliance. If Developer or any subcontractor fails to provide and maintain insurance as required herein, then the Cities shall have the right but not the obligation, to purchase such insurance, to terminate this agreement, or to suspend Developer's right to proceed until proper evidence of insurance is provided. Any amounts paid by the Cities shall, at the Cities sole option, be deducted from amounts payable to Developer or reimbursed by Developer upon demand. 10-182 1.5.6 Timely Notice of Claims. Developer shall give the Cities prompt and timely notice of claims made or suits instituted that arise out of or result from Developer's performance under this Agreement, and that involve or may involve coverage under any of the required liability policies. The Cities assumes no obligation or liability by such notice, but has the right (but not the duty) to monitor the handling of any such claim or claims if they are likely to involve the Cities. 1.5.7 Maintenance of General Liability Coverage. Developer agrees to maintain commercial general liability coverage for a period of ten (10) years after completion of the project or to obtain coverage for completed operations liability for an equivalent period. 1.5.8 Developer's Insurance. Developer shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection and prosecution of the work under the Scope of Development as outlined in the AHA. 1.5.9 Contractual Liability. The coverage provided shall apply to the obligations assumed by Developer under the indemnity provisions of this Agreement. 1.5.10 Claims Made Policies. If coverage is written on a claims -made basis, the retroactive date of such insurance and all subsequent insurance shall coincide or precede the effective date of Developer's initial Agreement with the Cities and continuous coverage shall be maintained, or an extended reporting period shall be exercised for a period of at least ten (10) years from termination or expiration of this Agreement. 1.5.11 Insurance For Subcontractors. Developer shall be responsible for causing subcontractors to purchase the same types and limits of insurance in compliance with the terms of this Agreement, including adding the Cities as an additional insured, providing primary and non- contributory coverage and waiver of subrogation to the subcontractor's policies. Commercial general liability additional insured endorsements shall be as broad as ISO Form CG 20 10 11 85 or if not available, through the addition of both CG 20 38 and CG 20 40. 10-183 Attachment B Budget Amendment 10-184 a�wPoly" a Department: Finance Requestor: Jason AI -Imam City of Newport Beach BUDGET AMENDMENT 2024-25 BA#: 25-047 ONETIME: F-/] Yes ❑ No Approvals ❑ CITY MANAGER'S APPROVAL ONLY Finance Director: [21 COUNCIL APPROVAL REQUIRED JCity Clerk: Date IV Date EXPLANATION FOR REQUEST: To appropriate funds from the FFP unappropriated fund balance to the General Fund Capital Project Fund ❑ from existing budget appropriations for the Permanent Supportive Housing Project. ❑ from additional estimated revenues ❑� from unappropriated fund balance REVENUES Fund # Org Object Project Description Increase or (Decrease) $ 012 01299 691513 INTERFUNDTRANSFERS-TRANSFER IN FFP FUND 3,000,000.00 Subtotall $ 3,000,000.00 EXPENDITURES Fund # Org Object Project Description Increase or (Decrease) $ 513 51399 991012 INTERFUND TRANSFERS - TRANSFER OUT CIP FUND 3,000,000.00 012 01201925 980000 22M15 FACILITIES - CIP EXPENDITURES FOR GL 3,000,000.00 Subtotal $ 6,000,000.001-1 FUND BALANCE Fund # Object Description Increase or (Decrease) $ 012 300000 GENERAL FUND CAPITAL PROJECTS - FUND BALANCE CONTROL - 513 300000 FACILITIES FINANCING PLAN - FUND BALANCE CONTROL (3,000,000.00) Subtotal $ (3,000,000.00) Fund Balance Change Required 10-185 Attachment C Staff Report, July 11, 2023 10-186 Q �EwPpRT CITY OF s NEWPORT BEACH `q44:09 City Council Staff Report July 11, 2023 Agenda Item No. 15 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Grace K. Leung, City Manager - 949-644-3001, gleung@newportbeachca.gov PREPARED BY: Tara Finnigan, Assistant City Manager, tinnigan@newportbeachca.gov Lauren Wooding Whitlinger, Real Property Administrator Iwooding@newportbeachca.gov PHONE: 949-644-3001 TITLE: Request to Commit $3 Million in Funding to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa ABSTRACT: The City of Newport Beach (City) has been invited to participate in the funding of a permanent supportive housing project proposed by American Family Housing. The project, located at 1400 Bristol Street, Costa Mesa, would convert the existing, 120-room Travelodge North Motel property, into a 78-unit permanent supportive housing project. Staff recommends the City Council approve committing $3,000,000 toward the conversion of the Travelodge North Homekey Project. RECOMMENDATIONS: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; b) Approve Budget Amendment No. 24-009 appropriating $2,000,000 from General Fund surplus funds for Fiscal Year 2022-23 and transferring $1,000,000 from the General Fund CIP Fund to commit $3,000,000 toward this project as further outlined in this report; and c) Approve a commitment of $3,000,000, and authorize the City Manager to execute a Commitment Letter to American Family Housing for the conversion of the Travelodge North Motel property at 1400 Bristol Street, Costa Mesa, CA, in connection with the application for Homekey Round 3 permanent supportive housing project funding. 10-187 15-1 Request to Commit $3 Million in Funding for the Travelodge North Homekey Project July 11, 2023 Page 2 DISCUSSION: Background In March 2023, the State of California Department of Housing and Community Development (HCD) announced the availability of $736 million in Homekey Round 3 funds for projects that would help expand the state's supply of affordable and supportive housing for those experiencing or at risk of homelessness. Following HCD's announcement, the County of Orange (County) released a Request for Information (RFI) to identify a list of developers with potential housing projects that could meet the Homekey eligibility requirements. American Family Housing (AFH) is a nonprofit organization with nearly 40 years of experience providing services to those experiencing or at -risk of homelessness, and in the development and operation of affordable, supportive and bridge housing. AFH currently owns and operates 49 housing projects, encompassing 386 affordable units, in Los Angeles and Orange Counties. AFH responded to the County's RFI with a proposal for the acquisition, conversion and operation of the Travelodge North Motel property located at 1400 Bristol Street, Costa Mesa (Property) as permanent supportive housing for those experiencing or at risk of homelessness (Project). AFH's proposed project would convert the existing 120-unit motel property into 78 total units of housing — 76 units of permanent supportive housing and two manager's units. A location map is included as Attachment A and a project overview is included as Attachment C. Per HCD's Homekey program requirements, the Project would operate as permanent supportive housing for a minimum term of 55 years. The County RFI required applicants' proposals to show financial support from the governing jurisdiction or a plan to secure such support and AFH approached the City of Costa Mesa earlier this year about the Project and the potential for local funding. Permanent Supportive Housing in Newport Beach In recent years, the City of Newport Beach helped to fund The Cove Apartments, comprised of 12 units of permanent affordable and supportive rental housing for homeless veterans and low-income senior citizens. The project, located near 60th Street and West Coast Highway, opened in 2018. As part of a multi -pronged approach to addressing homelessness, in 2020, the City Council approved identifying approximately $3 million in funding and authorized staff to actively seek experienced affordable housing developers to develop, operate and help finance a project with up to 50 units of permanent supportive housing in Newport Beach. The City issued a Request for Qualifications and ultimately selected Jamboree Housing Corporation and National CORE to help identify a site and develop a project. The first of the two developers to present a project to the City would be awarded the job. Both developers have actively sought property to acquire and convert or develop, but high Newport Beach land values and the dynamic real estate market of recent years have stymied their efforts. To date, neither developer has been able to identify a viable site. 10-188 15-2 Request to Commit $3 Million in Funding for the Travelodge North Homekey Project July 11, 2023 Page 3 Proposed Participation in Travelodge North Project Costa Mesa staff was aware that the City of Newport Beach was actively seeking a permanent supportive housing project and contacted Newport Beach staff this spring about participating in the Project and helping to provide the local funding required. Staff has since been in discussions with Costa Mesa and AFH about the Project and the City of Newport Beach's possible participation. AFH has asked Newport Beach to provide a $3,000,000 loan with a 55-year term, at a 3.00% simple interest rate, repaid out of a portion of the project's residual receipts. Costa Mesa would provide $4,000,000 in funding. In return, there would be "local preference" for 28 studio units at the Project, and the County of Orange's Coordinated Entry System (CES) qualifying tenants based, in part, on their connection to Newport Beach or Costa Mesa. As currently proposed, there would be local preference on 12 units for Newport Beach and 16 units for Costa Mesa. Project Scope AFH is currently in escrow to purchase fee simple interest in the Property for $24,000,000 or $200,000 per unit. The outside closing date under the purchase contract is February 24, 2024. The proposed Project includes exterior renovations such as fagade and landscaping improvements, demolition of an existing pool to create a community courtyard, and path of travel upgrades to comply with American with Disabilities Act requirements. Interior renovations include extensive upgrades to all living quarters, the installation of kitchenettes, and the reconfiguration of office space to accommodate on -site services. Due to the small size - approximately 250 square feet - of the existing motel rooms, AFH is proposing to absorb 42 of the current 120 rooms to create 76 studio and one - bedroom apartments. The space reconfiguration will bring the units into compliance with minimum floor space requirements and provide enough space to accommodate the kitchenettes. AFH estimates the total development cost to complete the Project is $45,386,520. Proposed Funding As proposed, the Project's funding would come from the following sources: 1. Homekey Program —The Homekey Program provides grant funding based on the number of rooms acquired. AFH anticipates an award of $28,450,000, or $240,000 per unit, in Homekey funds. The Homekey Program also provides funding to develop and administer a relocation plan to ensure the housing needs of current residents are addressed. 10-189 15-3 Request to Commit $3 Million in Funding for the Travelodge North Homekey Project July 11, 2023 Page 4 2. County of Orange — In addition to the County's involvement in the application for Homekey Program funds, in March 2023, the County released the 2023 Supportive Housing Notice of Funding Available (NOFA), making $67.1 million available from state and federal sources including the HOME Investment Partnership (HOME) and the Mental Health Services Act (MHSA) to promote the development of supportive housing. AFH intends to apply for two development loans in addition to the Homekey Program funds: one for $2,400,000 in HOME Funds, and one for $4,421,520 in MHSA funds. Further, to support the ongoing operations of the Project, AFH intends to apply for 48 project -based housing choice vouchers, which would subsidize the difference between a tenant's contribution and the determined rent for a specific unit. 3. City of Costa Mesa — On June 20, 2023, the Costa Mesa City Council approved the commitment of $4,000,000 in local funds to AFH to support the Project. 4. City of Newport Beach — The City is being asked to commit $3,000,000 in local funds to AFH toward the Project. 5. Private Loan — The $3,115,000 balance of the anticipated Project costs are to be sourced from a private mortgage lender, likely for a 20-year term at market rates. A summary of the proposed funding sources is as follows: Funding Source Amount Homekey Program Award $27,700,000 Homekey - Relocation $750,000 County of Orange HOME $2,400,000 County of Orange MHSA $4,421,520 City of Costa Mesa $4,000,000 City of Newport Beach $3,000,000 Private Loan $3,115,000 TOTAL $45,386,520 If approved by the City Council, a letter of commitment from the City will allow AFH to submit applications to the various grant funding sources. The City's funding would be contingent upon the award of all other funding sources, commitment of local preference of 12 units for the City, as well as positive outcomes related to pre -acquisition due diligence investigations typical of affordable housing projects. Costa Mesa's funding commitment is also contingent upon the successful award of funding from the other sources, and the successful completion of pre -development activities such as the environmental review and financial feasibility analysis. Upon award of the various funding sources, a loan agreement with AFH will be presented to the City Council for its consideration. 10-190 15-4 Request to Commit $3 Million in Funding for the Travelodge North Homekey Project July 11, 2023 Page 5 Timeline County staff is currently reviewing AFH's proposal, qualifications and request for funding, submitted in response to the County's RFI and Notice of Funding Availability, and anticipates taking the proposal to the Orange County Board of Supervisors for consideration later this month. Should the Orange County Board of Supervisors approve the Project and authorize the County funding this month, AFH will submit its formal application for Homekey Program funds. The developer anticipates the Homekey funding will be released by the end of 2023 or early 2024 and escrow on the property will close soon after. HCD requires units to be available for occupancy within 12 months from the date of award, placing the anticipated completion date of the Project in late 2024 or early 2025. FISCAL IMPACT: In 2020, the City Council approved allocating $3 million to a permanent supportive housing project, appropriating $1 million from the General Fund and anticipating $2 million would come from future development agreement funding. The Fiscal Year 2023-24 Capital Improvement Program (CIP) budget includes $1,000,000 in funding for Permanent Supportive Housing (Project No. 22M15) in the General Fund CIP Fund (012), which will be transferred to the General Fund (010) to fund a portion of the City's $3,000,000 commitment for this project. At this time, additional development agreement contributions have not been received. Therefore, it is recommended that the City Council consider approving a supplemental appropriation of $2,000,000 to account no. 0102041- 841060 in the General Fund utilizing a portion of the anticipated General Fund budget surplus for Fiscal Year 2022-23 (Attachment B). The Third Quarter Budget Update that was provided to the City Council on May 23, 2023, reflected an anticipated budget surplus of $15.8 million. Approximately $8.4 million of the budget surplus is expected to be utilized to set -aside funds for the contingency reserve, and to replenish the FFP and General Fund CIP Fund for amounts attributable to the Dove Street property purchase. Therefore, the unrestricted portion of the General Fund surplus for Fiscal Year 2022-23 is projected to be approximately $7.4 million, which would be reduced to $5.4 million if the City Council approves the supplemental appropriation of $2 million for this permanent supportive housing project. The General Fund would be replenished when development agreement funding is received. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. 10-191 15-5 Request to Commit $3 Million in Funding for the Travelodge North Homekey Project July 11, 2023 Page 6 NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A — Location Map Attachment B — Budget Amendment Attachment C — Project Overview 10-192 15-6 NTTAf`LJRACAIT /1 1 1 > is l•'._ _ `..' \\ � / ' —,� •� \ � a • � � �• " -fix ,; .40 73 Newport Beach Boundary ;DO /i<91 ATTACHMENT B � aEW PORT ° City of Newport Beach > BUDGET AMENDMENT C7"Foaa`* 2023-24 BA#: 24-009 Department: City Manager ONETIME: F-,] yes ❑ No Requestor: Tara Finnigan Approvals F 1 CITY MANAGER'S APPROVAL ONLY Finance Director: • c"W WAMA(01 Date COUNCIL APPROVAL REQUIRED City Clerk: Date EXPLANATION FOR REQUEST: To appropriate funding to American Family Housing for the Travelodge North Homekey Project. from existing budget appropriations ❑ from additional estimated revenues Q from unappropriated fund balance REVENUES Fund # Org Object Project Description Increase or (Decrease) 010 01099 691012 GENERAL FUND INTERFUND TRANSFR -TRANSFER IN FUND 01 1,000,000.00 Subtotall $ 1,000,000.00 EXPENDITURES Fund # Org Object Project Description Increase or (Decrease) $ 012 0120192S 980000 22M15 FACILITIES - CIP EXPENDITURES FOR GL (1,000,000.00) 012 01299 991010 INTERFUND TRANSFERS - TRANSFER OUT GENERAL FUND 1,000,000.00 010 0102041 841060 CITY MGR OUTREACH SERVICES - OTHER AGENCY FEES 3,000,000.00 Subtotall $ 3,000,000.00 FUND BALANCE Fund # Object Description Increase or (Decrease) $ 010 300000 GENERAL FUND - FUND BALANCE CONTROL (2,000,000.00) 012 300000 GENERAL FUND CAPITAL PROJECTS - FUND BALANCE CONTROL Subtotal $ _ (2,000,000.00)1 Fund Balance Change Required 10-194 15-8 ATTACHMENT C 0• American Family Housing Welcome Home 1400 Bristol Homekey Development Project Summary For its proposed 1400 Bristol Homekey development located at 1400 Bristol Street in Costa Mesa, American Family Housing (AFH) proposes the rehabilitation of a fully operational 120 unit motel into a 78-unit permanent supportive housing community which would house 38 chronically homeless tenants, 28 homeless tenants and 10 tenants who are at -risk of becoming homeless. Two units would be set -aside for on -site property management staff. The project is composed of two 2-story buildings with ample indoor and outdoor common areas. The buildings feature 120 existing hotel rooms which will be renovated to become affordable residential units. Unit improvements include: combining some units so the final unit mix is 36 studio units, 40 one bedroom units and 2 two bedroom staff units. The 3.5 acre site provides ample parking and open space along with a free standing restaurant which would remain as a revenue source for the development. AFH will serve as developer, property manager and supportive services provider. 1400 Bristol will be the 6t" Homekey project that AFH is involved with in a significant role. Financing The City of Costa Mesa intends to provide $4,000,000 in soft financing to the project. To make the project feasible, AFH is requesting $3 million from the City of Newport Beach, which would in turn allow AFH to secure $3 million in Orange County funds. The County would arrange for a local preference for 28 units within the Coordinated Entry System for tenants with a connection to Newport Beach or Costa Mesa in exchange for the two cities financial support. The local preference would also apply for replacement tenants when tenants move out. The requested support of $187,500 per unit is consistent with County MHSA funding levels and the amount of subsidy per unit that other cities in Southern California typically provide. Sources of Funds Homekey $28,450,000 City of Newport Beach 3,000,000 City of Costa Mesa 4,000,000 County of Orange 6,821,520 Permanent Loan 3,115,000 Total $45,386,520 www_AFFI usa.org O 714.897.3221 • F 714.893.6858 15161 Jackson Street, Midway City, CA 92655 10-195 15-9 �• American amily ikkousing Unit Mix Unit Type %AMI # Studio (Proj Based Vouchers) 30% 8 1 Bdrm (Pro* Based Vouchers) 30% 40 Studio* 30% 28 Staff NA 2 Total *represents 28 units with local preference Key Milestones Newport Beach City Council Orange County Board of Supervisors Homekey Application Submittal Homekey Anticipated Award Purchase site Start of rehabilitation Finish rehabilitation Complete lease -up American Family Housing m TBD July 18 July 19 September 18 December 4 December 18 September 12, 2024 December 6, 2024 Welcome Home The mission of American Family Housing (AFH) is to provide a continuum of housing and an array of services to support homeless and low-income families and adults to secure a stable home, to be an active part of their community, and to achieve a self-sustaining way of life. AFH brings an interdisciplinary expertise to its mission, generating cost-effective, practical solutions for vulnerable households who otherwise might not be able to secure or maintain a home. REAL ESTATE DEVELOPMENT oversees our construction and acquisition pipeline, with over 200 units coming. PROGRAM SERVICES support our tenants and clients with a focus on evidence -based practices. PROPERTY MANAGEMENT handles the operations and maintenance of more than 50 AFH rental properties. www_AFFI usa.org O 714.897.3221 • F 714.893.6858 15161 Jackson Street, Midway City, CA 92655 10-196 15-10 ATTACHMENT D �PO4V n V � S July 13, 2023 Milo Peinemann Chief Executive Officer American Family Housing 15161 Jackson Street Midway City, CA 92655 CITY of NEWPORT'BEACH 100 Civic Center Drive Newport Beach, California 92660 949 644-3001 1 949 644-3020 FAX newportbeachca.gov Re: City of Newport Beach Commitment Letter for the Proposed Travelodge North Homekey Project Dear Mr. Peinemann: At its July 11, 2023 meeting, the Newport Beach City Council approved a loan commitment of $3,000,000 to American Family Housing (AFH) to provide local match funds for costs associated with the acquisition, rehabilitation and conversion of the Travelodge North Motel property, located at 1400 Bristol Street, Costa Mesa, CA, into permanent supportive housing. Fund Source: City of Newport Beach (City) General Fund surplus funds for FY 2022- 23 Amount: $2,000,000 Fund Source: City General Fund Capital Improvement Program Amount- $1,000,000 The City's funding would be provided in the form of a loan, with a 55-year term, at a 3.00% simple interest rate. The loan would be repaid out of a portion of the project's residual receipts. The City's funding is conditional based upon the following: 1. AFH being awarded Homekey Program Funding of at least $28,450,000 2. AFH securing HOME and MHSA funding from the County of Orange of at least $6,821,520 3. AFH receiving the City of Costa Mesa's funding of $4,000,000 4. AFH securing a private loan of $3,115,000 5. Newport Beach receiving local preference on 12 units of permanent supportive housing from this project Letter to Milo Peinemann July 13, 2023 Page 2 6. AFH successfully completing pre -acquisition due diligence and pre -development activities 7. AFH and the City of Newport Beach reaching mutually agreeable terms for the loan agreement and regulatory agreement If you have any questions, please contact Tara Finnigan, assistant city manager, at 949- 644-3035 or tinnigan@newportbeachca.gov. Sincerely, race Leung City Manager City of Newport Beach Attachment: Statement of City Council Action City of Newport Beach 10-198 CITY OF NEWPORT BEACH SEW PORE 100 Civic Center Drive Newport Beach, California 92660 [� 949 644-3005 1 949 644-3039 FAX nnewportbeachca.gov/cityclerk STATEMENT OF ACTION OF THE CITY COUNCIL CITY OF NEWPORT BEACH 4:00 p.m. — Regular Meeting City Council Chambers 100 Civic Center Drive Newport Beach, CA 92660 Tuesday, July 11, 2023 The regular meeting of the City Council of the City of Newport Beach was called to order at 4:02 p.m. aF*k�'eicxaFnk��Y�c�3c�r�rik�reF*ir9e��F*9e4e�F���+c:ricat#�:�'r�'crr.ic*:'rr.�'r�Fx�rxa4r�:rs'cxaFacisicxic�F�Y+'cicr.9cirir�c�F#iric* :,� . 2� R Roll Call: Present: Mayor Noah Blom, Mayor Pro Tern Will O'Neill, Council Member Brad Avery, Council Member Robyn Grant, Council Member Lauren Kleiman, Council Member Joe Stapleton, Council Member Erik Weigand it it it �r of ��**�k�r eFxeFxxir 9r 9r �Y 4r�9t �k'�F 9c �'coF*>k�****���yc dr 9F �Y is 3c*�c k�'c>F*ir �F#ic of rr is i; ��r is it �c is 7c is it it is it it :k �r Agenda Item No. 15 Request to Commit $3 Million in Funding to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa Recommended Action: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; b) Approve Budget Amendment No. 24-009 appropriating $2,000,000 from General Fund surplus funds for Fiscal Year 2022-23 and transferring $1,000,000 from the General Fund CIP Fund to commit $3,000,000 toward this project as further outlined in the report; and c) Approve a commitment of $3,000,000, and authorize the City Manager to execute a Commitment Letter to American Family Housing for the conversion of the Travelodge North Motel property at 1400 Bristol Street, Costa Mesa, CA, in connection with the application for Homekey Round 3 permanent supportive housing project funding. Motion by Mayor Pro Tern O'Neill, seconded by Council Member Grant to approve the Recommended Action. Approved 7-0. nF�aF�'r�r�F�'r9eit*at�F�e9c�9e�F�Fa'r9r**�;�F�kok�kdr�'rkx��c:c��:?c9:xeFkichx:ex4:i;x-'r4e9exxxxxxr,x?:r,se:'r�k�F�:'r.�::Ficirx Adjournment Mayor Blom adjourned the regular meeting of the City Council of the City of Newport Beach at 4:58 p.m. Leilani I. Brown, City Clerk STATE OF CALIFORNIA COUNTY OF ORANGE ss. CITY OF NEWPORT BEACH } 1, LEILANI I. BROWN, City Clerk of the City of Newport Beach, California, do hereby certify that the above and foregoing is a true and correct Statement of Action of the City Council of the City of Newport Beach of said City at their regular meeting held on July 11, 2023. Witness my hand and seal of the said City of Newport Beach this 12`b day of July, 2023. �., Leilani I. Brown, MMC City Clerk City of Newport Beach, California A," - Eric Brya Deputy C y Clerk City of Newport Beach 10-200