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HomeMy WebLinkAboutC-6377(J) - Subordination and Interceditor AgreementWHEN RECORDED MAIL TO: Citibank, N.A. Transaction Management Group/Post Closing 388 Greenwich Street, 8th Floor New York, New York 10013 Attention: Tanya Jimenez Re: Newport Veterans Apartments Deal ID No. 24368 WITH A CONFORMED COPY TO: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attention: City Clerk Re: Contract C-6377 SUBORDINATION AND INTERCREDITOR AGREEMENT (City of Newport Beach) 16173569-v6 SUBORDINATION AND INTERCREDITOR AGREEMENT (City of Newport Beach) THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement") dated as of June It, 2017, is made by and between CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("Junior Lender") and CITIBANIK, N.A., a national banking association ("Senior Lender") and acknowledged by NEWPORT VETERANS APARTMENTS LP, a California limited partnership ("Borrower"). Junior Lender, Senior Lender, and Borrower are each a "Party" and together the "Parties" to this Agreement. RECITALS: A. Borrower has applied to the California Housing Finance Agency, a public instrumentality and political subdivision of the State of California ("Governmental Lender"), for a loan (the "Senior Loan") for the acquisition, construction, development, equipping and/or operation of a 12 -unit multifamily residential project located in the City of Newport Beach, Orange County, California, known or to be known as Newport Veterans Apartments (the "Property"). B. The Senior Loan is evidenced by (i) that certain Multifamily Note, dated as of the Closing Date, in the maximum principal amount of Three Million Three Hundred Thousand and 00/100 Dollars ($3,300,000) made by Borrower payable to the order of Governmental Lender (the "Senior Note") and (ii) that certain Borrower Loan Agreement, dated as of June 1, 2017, by and between Borrower and Governmental Lender (the "Borrower Loan Agreement'). C. The Senior Loan is secured by, among other things, that certain Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 1, 2017, executed by Borrower for the benefit of Governmental Lender (as the same may from time to time be extended, consolidated, substituted for, modified, increased, amended and supplemented, "Senior Security Instrument'), which Senior Security Instrument recorded concurrently herewith in Orange County, California ("Official Records") encumbers the Property. D. Borrower requested that Senior Lender enter into that certain Funding Loan Agreement dated as of June 1, 2017, by and among Governmental Lender, U.S. Bank National Association, a national banking association, as fiscal agent, and Senior Lender, pursuant to which Senior Lender will make a loan to Governmental Lender (the "Funding Loan"), the proceeds of which will be used to make the Senior Loan to Borrower pursuant to the Borrower Loan Agreement. E. The Senior Note, the Senior Security Instrument and the Borrower Loan Agreement have each been assigned by Governmental Lender to Senior Lender to secure the Funding Loan. The Borrower and Senior Lender have entered into that certain Construction Funding Agreement dated as of June 1, 2017 (the "Construction Funding Agreement') regarding the manner in which the improvements at the Property will be completed and paid for. Subordination and Intercreditor Agreement (City of Newport Beach) Newport Veterans Apartments F. Junior Lender has made a loan (the "Junior Loan") to Borrower in the original principal amount of One Million Nine Hundred Seventy Five Thousand Dollars and 00/100 ($1,975,000), which Junior Loan is evidenced by that certain Promissory Note, dated as of December 18, 2015, made by Borrower to Junior Lender (the "Junior Note") and secured by, the Junior Security Instrument (as hereinafter defined) encumbering the Property, and has been advanced to Borrower pursuant to that certain Affordable Housing Agreement and Joint Escrow Instructions, dated as of December 14, 2015, by and between Community Development Partners, a California corporation, and Junior Lender, as assigned to Borrower pursuant to that certain Affordable Housing Agreement and Joint Escrow Instructions Assignment and Assumption Agreement, dated as of December 18, 2015 (the "Junior Loan Agreement"). G. As a condition to the making of the Senior Loan, Senior Lender requires that Junior Lender execute and deliver this Agreement. NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce the making of the Senior Loan, the Parties hereby agrees as follows: 1. Definitions. As used in this Agreement, the capitalized terms set forth below shall have the respective meanings indicated: "Bankruptcy Proceeding" means any bankruptcy, reorganization, insolvency, composition, restructuring, dissolution, liquidation, receivership, assignment for the benefit of creditors, or custodianship action or proceeding under any federal or state law with respect to Borrower, any guarantor of any of the Senior Indebtedness, any of their respective properties, or any of their respective partners, members, officers, directors, or shareholders. "CaIHFA Permanent Loans" means the permanent and subsidy loans to be made for the purpose of refinancing of the Senior Loan by California Housing Finance Agency in the amount of $1,575,000 and $290,000, respectively, pursuant to a commitment dated November 8, 2016, as amended. "Casualty" means the occurrence of damage to or loss of any of the Property by fire or other casualty. "Condemnation " means any proposed or actual condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Property, whether direct or indirect. "Default Notice" means: (a) a copy of any written notice from Senior Lender to Borrower and Junior Lender stating that a Senior Loan Default has occurred under the Senior Loan Documents; or (b) a copy of the written notice from Junior Lender to Borrower and Senior Lender stating that a Junior Loan Default has occurred under the Junior Loan Documents. Each Default Notice shall specify the default upon which such Default Notice is based. "Enforcement Action" means any exercise of any of Junior Lender's remedies under the Junior Security Instrument or any of the other Junior Loan Documents, including, without limitation, any of the following: (i) the acceleration of all or any part of the Junior Indebtedness, (ii) the commencement of any judicial or non judicial action of proceeding to enforce any Subordination and Intercreditor Agreement (City of Newport Beach) 2 Newport Veterans Apartments obligation of Borrower under any of the Junior Loan Documents, collect any monies payable to Borrower or have a receiver appointed to collect any monies payable to Borrower, or foreclose the lien(s) created by the Junior Security Instrument, (iii) the filing or joining in the filing of any involuntary Bankruptcy Proceeding against Borrower or any person or entity which owns a direct or indirect interest in Borrower, (iv) the advertising of or commencement of any foreclosure or trustee's sale proceedings, (v) the exercise of any power of sale, (vi) the acceptance of a deed or assignment in lieu of foreclosure or sale, (vii) the collecting of Rents, (viii) the obtaining of or seeking of the appointment of a receiver, (ix) the seeking of default interest, (x) the taking of possession or control of any of the Property, (xi) the commencement of any suit or other legal, administrative, or arbitration proceeding based upon the Junior Note or any other of the Junior Loan Documents, (xii) the exercising of any banker's lien or rights of set- off or recoupment, or (xiii) the taking of any other enforcement action against Borrower, any other party liable for any of the Junior Indebtedness or obligated under any of the Junior Loan Documents, or the Property. "Junior Indebtedness" means all indebtedness of any kind at any time evidenced or secured by, or arising under, the Junior Loan Documents, whether incurred, arising or accruing before or after the filing of any Bankruptcy Proceeding. "Junior Loan Default" means any act, failure to act, event, condition, or occurrence which constitutes, or which with the giving of notice or the passage of time, or both, would constitute, an "Event of Default" as defined in the Junior Security Instrument. "Junior Loan Documents" means, collectively, the Junior Note, the Junior Security Instrument, the Junior Loan Agreement, that certain Affordable Housing Agreement and Joint Escrow Instructions, dated as of December 14, 2015, by and between Junior Lender and Borrower and the other documents evidencing, securing or delivered in connection with the Junior Loan which are listed on Exhibit B attached hereto, together with such modifications, amendments and supplements thereto as are approved in writing by Senior Lender to the extent such consent required by this Agreement. "Junior Security Instrument" means that certain Deed of Trust with Assignment of Rents, dated as of December 18, 2015, recorded on December 22, 2015, as Instrument No. 2015000645083 in the Orange County Official Records, made by Borrower for the benefit of Junior Lender, as the same may from time to time be extended, consolidated, substituted for, modified, amended or supplemented. "Loan Agreement" means that certain Construction Funding Agreement, dated as of June 1, 2017, by and between Borrower and Senior Lender relating to the Senior Loan. "Loss Proceeds" means all monies received or to be received under any insurance policy, from any condemning authority, or from any other source, as a result of any Condemnation or Casualty. "Property" means (i) the land and improvements known or to be known as Newport Veterans Apartments, located in the City of Newport Beach, Orange County, State of California, which Property is more particularly described on Exhibit A attached hereto, and (ii) all furniture, Subordination and Intercreditor Agreement (City of Newport Beach) 3 Newport Veterans Apartments fixtures and equipment located at such apartments and other property, accounts, deposits and rights and interests of Borrower encumbered by the Senior Security Instrument and/or the other Senior Loan Documents. "Senior Indebtedness" means all indebtedness of any kind at any time evidenced or secured by, or arising under, the Senior Loan Documents, whether incurred, arising or accruing before or after the filing of any Bankruptcy Proceeding. "Senior Loan Documents" means, collectively, the Senior Security Instrument, the Senior Note, the Loan Agreement and all of the other documents, instruments and agreements now or hereafter evidencing, securing or otherwise executed in connection with the Senior Loan, as the same may from time to time be extended, consolidated, substituted for, modified, increased, amended and supplemented in accordance with the provisions of this Agreement. "Senior Loan Default" means any act, failure to act, event, condition, or occurrence which constitutes, or which with the giving of notice or the passage of time, or both, would constitute, an "Event of Default' as defined in the Senior Security Instrument. "Senior Note" means the Note, as defined by the Senior Security Instrument, as the same may from time to time be extended, consolidated, substituted for, modified, increased, amended and supplemented. "Senior Security Instrument" means that certain Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 1, 2017, made by Borrower for the benefit of Senior Lender, as the same may from time to time be extended, consolidated, substituted for, modified, increased, amended and supplemented. "Subordinated Junior Documents" means, collectively, the Junior Note, the Junior Security Instrument, together with such modifications, amendments and supplements thereto. 2. Junior Loan and Subordinated Junior Documents are Subordinate; Acts by Senior Lender do not Affect Subordination. (a) Junior Lender hereby covenants and agrees on behalf of itself and its successors and permitted assigns that the Subordinated Junior Documents and the Junior Indebtedness is and shall at all times continue to be, subordinate, subject and inferior (in payment and priority) to the Senior Loan Documents and the Senior Indebtedness, and that the liens, rights, payment interests, priority interests and security interests granted to Junior Lender in connection with the Subordinated Junior Documents are, and are hereby expressly acknowledged to be in all respects and at all times, subject, subordinate and inferior in all respects to the liens, rights, payment, priority and security interests granted to Senior Lender under the Senior Loan and the Senior Loan Documents and the terms, covenants, conditions, operations and effects thereof. (b) Except as expressly set forth herein, repayment of the Junior Indebtedness, is and shall be subordinated to repayment in full of the Senior Loan. Prior to a Senior Loan Default (regardless of whether such Senior Loan Default occurs prior to or during the pendency of a Bankruptcy Proceeding), Junior Lender shall be entitled to receive and Subordination and [ntercreditor Agreement (City of Newport Beach) 4 Newport Veterans Apartments retain payments made pursuant to and in accordance with the terms of the Junior Loan Documents. Junior Lender agrees that from and after such time as it has received a Default Notice from either Senior Lender or a written notice from Borrower that a Senior Loan Default then exists (which has not been expressly waived in writing by Senior Lender) or otherwise has actual knowledge of such a Senior Loan Default, Junior Lender shall not receive or accept any payments under the Junior Loan. (c) Without limiting the foregoing, in any Bankruptcy Proceeding, upon any payment or distribution (whether in cash, property, securities, or otherwise) to creditors the Senior Indebtedness shall first be paid in full in cash before Junior Lender shall be entitled to receive any payment or other distribution on account of or in respect of the Junior Indebtedness. (d) The subordination of the Subordinated Junior Documents shall continue in the event that any payment under the Senior Loan Documents (whether by or on behalf of Borrower, as proceeds of security or enforcement of any right of set-off or otherwise) is for any reason repaid or returned to Borrower or its insolvent estate, or avoided, set aside or required to be paid to Borrower, a trustee, receiver or other similar party under any bankruptcy, insolvency, receivership or similar law. In such event, the Senior Indebtedness or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding to the extent of any repayment, return, or other action, as if such payment on account of the Senior Indebtedness had not been made. (e) The subordination of the Subordinated Junior Documents shall apply and continue notwithstanding (i) the actual date and time of execution, delivery, recording, filing or perfection of the Senior Security Instrument and other Senior Loan Documents and of the Junior Security Instrument and other Subordinated Junior Documents, and (ii) the availability of any collateral to Senior Lender, including the availability of any collateral other than the Property. (f) By reason of, and without in any way limiting, the full subordination of the Junior Indebtedness and the Subordinated Junior Documents provided for in this Agreement, all rights and claims of Junior Lender under the Junior Security Instrument or under the Subordinated Junior Documents in or to the Property or any portion thereof, the proceeds thereof, the Leases thereof, the Rents, issues and profits therefrom, and the Loss Proceeds payable with respect thereto, are expressly subject and subordinate in all respects to the rights and claims of Senior Lender under the Senior Loan Documents in and to the Property or any portion thereof, the proceeds thereof, the Leases thereof, the Rents, issues and profits therefrom, and the Loss Proceeds payable with respect thereto. (g) [Intentionally Omitted]. (h) Junior Lender hereby acknowledges and agrees that Senior Lender may, with notice to the Junior Lender but without the consent or approval of Junior Lender, agree with Borrower to extend, consolidate, modify, or amend any or all the Senior Loan Documents and otherwise act or fail to act with respect to any matter set forth in any Senior Loan Document (including, without limitation, the exercise of any rights or Subordination and Intercreditor Agreement (City of Newport Beach) 5 Newport Veterans Apartments remedies, waiver, forbearance or delay in enforcing any rights or remedies, the declaration of acceleration, the declaration of defaults or events of default, the release, in whole or in part, of any collateral or other property, and any consent, approval or waiver), and all such extensions, consolidations, modifications, amendments acts and omissions shall not release, impair or otherwise affect Junior Lender's obligations and agreements hereunder. Notwithstanding the foregoing, Senior Lender may not modify any provisions of the Senior Loan Documents that increases the Senior Indebtedness, except for increases in the Senior Indebtedness that result from advances made by Senior Lender to protect the security or lien priority of Senior Lender under the Senior Loan Documents or to cure defaults under the Junior Loan Documents. It is being understood, nevertheless, that except as provided in this Agreement, the subordination of the Subordinated Junior Documents does not in any respect alter, diminish, or limit the rights of the Junior Lender to proceed on the underlying obligation as evidenced by said Subordinated Junior Documents. The terms of the Junior Loan Documents shall remain in full force and effect subject to this subordination of the aforementioned Subordinated Junior Documents. 3. Junior Lender Agreements. (a) Without the prior written consent of Senior Lender in each instance, Junior Lender shall not (i) amend, modify, waive, extend, renew or replace any provision of any of the Junior Loan Documents other than as permitted under this Agreement, or (ii) pledge, assign, transfer, convey, or sell any interest in the Junior Indebtedness or any of the Junior Loan Documents other than as permitted under this Agreement; or (iii) appear in, defend or bring any action in connection with the Property other than as permitted under this Agreement; or (iv) take any action concerning environmental matters affecting the Property. Regardless of any contrary provision in the Junior Loan Documents, Junior Lender shall not collect payments for the purpose of escrowing for any cost or expense related to the Property or for any portion of the Junior Indebtedness. (b) Notwithstanding any contrary provision in the Junior Loan Documents, Senior Lender shall have the right, but shall not have any obligation, to cure any Junior Loan Default until ninety (90) days following Senior Lender's receipt of an Default Notice given by Junior Lender as a consequence of the Junior Loan Default. Senior Lender shall not be subrogated to the rights of Junior Lender under the Junior Loan Documents by reason of Senior Lender having cured any Junior Loan Default. However, Junior Lender acknowledges that all amounts advanced or expended by Senior Lender to cure a Junior Loan Default shall be added to and become a part of the Senior Indebtedness pursuant to the terms of the Senior Security Instrument. (c) Intentionally Omitted]. (d) [Intentionally Omitted]. (e) Until such time as any of the Senior Indebtedness has been repaid in full and the Senior Security Instrument has been released and discharged, unless and until it Subordination and Intercreditor Agreement (City of Newport Beach) 6 Newport Veterans Apartments has given Senior Lender at least ninety (90) days prior written notice, Junior Lender shall not without the prior written consent of Senior Lender, which may be withheld in Senior Lender's sole and absolute discretion, commence or join with any other creditor, other than Senior Lender, in commencing any Bankruptcy Proceeding involving Borrower, and Junior Lender shall not initiate and shall not be a party to any action, motion or request, in a Bankruptcy Proceeding involving any other person or entity, which seeks the consolidation of some or all of the assets of Borrower into such Bankruptcy Proceeding, unless Senior Lender shall have initiated or brought any such action, motion or request. In the event of any Bankruptcy Proceeding relating to Borrower or the Property or, in the event of any Bankruptcy Proceeding relating to any other person or entity into which (notwithstanding the covenant in the first sentence of this clause) the assets or interests of Borrower are consolidated, then in either event, the Senior Loan shall first be paid in full before Junior Lender shall be entitled to receive and retain any payment or distribution in respect to the Junior Loan. Junior Lender agrees that (i) Senior Lender shall receive all payments and distributions of every kind or character in respect of the Junior Loan to which Junior Lender would otherwise be entitled, but for the subordination provisions of this Agreement (including without limitation, any payments or distributions during the pendency of a Bankruptcy Proceeding involving Borrower or the Property), and (ii) the subordination of the Junior Loan and the Junior Loan Documents shall not be affected in any way by Senior Lender electing, under Section 1111(b) of the federal bankruptcy code, to have its claim treated as being a fully secured claim. In addition, Junior Lender hereby covenants and agrees that, in connection with a Bankruptcy Proceeding involving Borrower, neither Junior Lender nor any of its affiliates shall (i) make or participate in a loan facility to or for the benefit of Borrower on a basis that is senior to or pari passu with the liens and interests held by Senior Lender pursuant to the Senior Loan Documents, (ii) not vote affirmatively in favor of any plan of reorganization or liquidation unless Senior Lender has also voted affirmatively in favor of such plan, and (iii) not contest the continued accrual of interest on the Senior Indebtedness, in accordance with and at the rates specified in the Senior Loan Documents, both for periods before and for periods after the commencement of such Bankruptcy Proceedings. (f) Junior Lender covenants and agrees that the effectiveness of this Agreement and the rights of Senior Lender hereunder shall be in no way impaired, affected, diminished or released by any renewal or extension of the time of payment of the Senior Loan, by any delay, forbearance, failure, neglect or refusal of Senior Lender in enforcing payment thereof or in enforcing the lien of or attempting to realize upon the Senior Loan Documents or any other security which may have been given or may hereafter be given for the Senior Loan, by any waiver or failure to exercise any right or remedy under the Senior Loan Documents, or by any other act or failure to act by Senior Lender. Junior Lender acknowledges that Senior Lender, at its sole option, may release all or any portion of the Property from the lien of the Senior Security Instrument, and may release or waive any guaranty, surety or indemnity providing additional collateral to Senior Lender, and Junior Lender hereby waives any legal or equitable right in respect of marshaling it might have, in connection with any release of all or any portion of the Property by Senior Lender, to require the separate sales of any portion of the Property or to require Senior Lender to exhaust its remedies against any portion of the Property or any other collateral before proceeding against any other portion of the Property or other Subordination and Intercreditor Agreement (City of Newport Beach) 7 Newport Veterans Apartments collateral (including guarantees) for the Senior Loan. Senior Lender may pursue all rights and remedies available to it under the Senior Loan Documents, at law, or in equity, regardless of any Default Notice or Enforcement Action by Junior Lender. At any time or from time to time and any number of times, with notice to Junior Lender and without affecting the liability of Junior Lender, and in addition to Senior Lender's rights under Section 2(h) above, any security for the Senior Indebtedness may be modified, exchanged, surrendered or otherwise dealt with or additional security may be pledged or mortgaged for the Senior Indebtedness. (g) Junior Lender acknowledges that it entered into the transactions contemplated by the Junior Loan Documents and made the Junior Loan to Borrower without reliance upon any information or advice from Senior Lender. (h) Junior Lender hereby represents and warrants that, as of the date hereof, the entire proceeds of the Junior Loan have been disbursed to Borrower. Junior Lender hereby further represents and warrants that: (i) Junior Lender is now the owner and holder of the Junior Loan Documents; (ii) the Junior Loan Documents are now in full force and effect; (iii) the Junior Loan Documents have not been modified or amended; (iv) no default or event which, with the passing of time or giving of notice would constitute a default, under the Junior Loan Documents has occurred; (v) the current outstanding principal balance of the Junior Indebtedness is One Million Nine Hundred Seventy -Five Thousand Dollars and no/100 Dollars ($1,975,000); (vi) [intentionally omitted]; (vii) none of the rights of Junior Lender under any of the Junior Loan Documents are subject to the rights of any third parties, by way of subrogation, indemnification or otherwise; and (viii) there are no other Junior Loan Documents other than those listed on Exhibit B hereto. Borrower further represents and warrants that it has provided to Senior Lender a true, complete, and correct copy of all the Junior Loan Documents. (i) Junior Lender hereby agrees that notwithstanding anything to the contrary in the Junior Loan Documents, for so long as the Senior Loan is outstanding, Borrower shall not be obligated to pay more than twenty-five percent (25%) of Net Operating Income (as defined in the Junior Note) in payments under the Junior Note. 0) Notwithstanding any provision to the contrary contained in the Junior Loan Documents, in the event of a foreclosure of the Senior Instrument: (i) the Regulatory Agreement and Declaration of Covenants and Restrictions, dated as of December 18, 20015, by and between Junior Lender and Borrower, recorded on December 22, 2015, as Instrument No. 2015000645086 in the Orange County Official Records (the "Regulatory Agreement") shall be automatically deemed modified to replace Section 1.13 with the following: "1.13 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 "C". This matrix requires the 12 one - bedroom Units at the project site to be the following: 12 Units at 60% Subordination and Intercreditor Agreement (City of Newport Beach) 8 Newport Veterans Apartments AMI. This matrix additionally requires that seven (7) Units be occupied by Veteran Households and five (5) Units be occupied by Senior Households with a leasing preference for Veteran Senior Households." (ii) Exhibit C to the Regulatory Agreement and Exhibit B to the that certain Notice of Affordability Restrictions on Transfer of Property, dated as of December 18, 2015, with consent for recordation by Borrower, recorded on December 22, 2015, as Instrument No. 2015000645085 in the Orange County Official Records shall each be automatically deemed modified to read as follows: RESTRICTED UNIT MATRIX* Size No. of Units 60% AMI 60% Senior Veteran Veteran Household Unit Household Unit One bedroom 12 7 5 * At all times one (1) unit shall be occupied by an on-site property manager that is also an Eligible Tenant. 4. Limited Standstill Agreement; Right to Cure Senior Loan Default. (a) Until such time as any of the Senior Indebtedness has been repaid in full and the Senior Security Instrument has been released and discharged, unless and until it has given Senior Lender at least ninety (90) days prior written notice, Junior Lender shall not without the prior written consent of Senior Lender, which may be withheld in Senior Lender's sole and absolute discretion, take any Enforcement Action, including, without limitation, (i) accelerate the Junior Loan, (ii) exercise any of Junior Lender's remedies under the Junior Security Instrument or any of the other Junior Loan Documents (including, without limitation, the commencement of any judicial or non -judicial action of proceeding (a) to enforce any obligation of Borrower under any of the Junior Loan Documents, (b) to collect any monies payable to Borrower, (c) to have a receiver appointed to collect any monies payable to Borrower; or (d) to foreclose the lien(s) created by the Junior Security Instrument) or (iii) file or join in the filing of any involuntary Bankruptcy Proceeding against Borrower or any person or entity which owns a direct or indirect interest in Borrower; provided, however, that such limitation on the remedies of Junior Lender shall not derogate or otherwise limit Junior Lender's rights, following an event of default under the Junior Loan Documents to (a) compute interest on all amounts due and payable under the Junior Loan at the default rate described in the Junior Loan Documents, (b) compute prepayment premiums and late charges, (c) enforce against any person, other than Borrower and any guarantors or indemnitors under the Senior Loan Documents, any guaranty of the obligations of Borrower under the Junior Loan, and (d) enforce covenants and agreements of Borrower relating to income, rent, or affordability restrictions contained in any land use restriction or regulatory agreement. Subordination and Intercreditor Agreement (City of Newport Beach) 9 Newport Veterans Apartments (b) Senior Lender shall, simultaneously with the sending of any Default Notice for a Senior Loan Default to Borrower, send to Junior Lender a copy of such Default Notice; provided, however, failure to do so shall not affect the validity of such notice or any obligation of Borrower to Senior Lender and shall not affect the relative priorities between the Senior Loan and the Junior Loan as set forth herein. Borrower covenants and agrees to forward to Junior Lender, within three (3) business days of Borrower's receipt thereof, a copy of any Default Notice for a Senior Loan Default Borrower receives from Senior Lender. (c) Junior Lender shall have the right, but shall not have any obligation, to cure any Senior Loan Default until ninety (90) days following Junior Lender's receipt of Default Notice for a Senior Loan Default if during such ninety (90) day period Junior Lender keeps current all payments required by the Senior Loan Documents; provided that in the event a non -monetary default creates an unacceptable level of risk relative to the Property, or Senior Lender's secured position relative to the Property, as determined by Senior Lender in its sole discretion, then Senior Lender may exercise during such ninety (90) day period all available rights and remedies to protect and preserve the Property and the rents, revenues and other proceeds from the Property. Junior Lender shall not be subrogated to the rights of Senior Lender under the Senior Loan Documents by reason of Junior Lender having cured any Senior Loan Default. However, Senior Lender acknowledges that, to the extent so provided in the Junior Loan Documents, amounts advanced or expended by Junior Lender to cure a Senior Loan Default may be added to and become a part of the Junior Indebtedness. (d) Junior Lender agrees that, notwithstanding any contrary provision contained in the Junior Loan Documents, a Senior Loan Default shall not constitute a default under the Junior Loan Documents if no other default occurred under the Junior Loan Documents. (e) Junior Lender acknowledges that any conveyance or other transfer of title to the Property pursuant to a foreclosure of the Junior Security Instrument (including a conveyance or other transfer of title pursuant to the exercise of a power of sale contained in the Junior Security Instrument), or any deed or assignment in lieu of foreclosure or similar arrangement, shall be subject to the transfer provisions of the Senior Loan Documents; and the person (including Junior Lender) who acquires title to the Property pursuant to the foreclosure proceeding (or pursuant to the exercise of a power of sale contained in the Junior Security Instrument) shall not be deemed to be automatically approved by Senior Lender. 5. Insurance. Junior Lender acknowledges that all original policies of insurance required pursuant to the Senior Security Instrument shall be held by Senior Lender. The preceding sentence shall not preclude Junior Lender from requiring that it be named as a loss payee, as its interest may appear, under all policies of property damage insurance maintained by Borrower with respect to the Property, provided such action does not affect the priority of payment of the proceeds of property damage insurance under the Senior Security Instrument, or that it be named as an additional insured under all policies of liability insurance maintained by Borrower with respect to the Property as required by the Junior Loan Documents. Subordination and Intercreditor Agreement (City of Newport Beach) 10 Newport Veterans Apartments 6. Cooperation with Refinancing. Junior Lender hereby agrees to cooperate with Borrower in any refinancing of the Senior Loan at its maturity by the Ca1HFA Permanent Loan and, if requested by California Housing Finance Agency, shall execute a subordination and Intercreditor agreement in as shall be mutually agreed upon by California Housing Finance Agency and Junior Lender. 7. Default. Each party hereto acknowledges that in the event any party fails to comply with its obligations hereunder, the other parties shall have all rights available at law and in equity, including the right to obtain specific performance of the obligations of such defaulting party and injunctive relief. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. 8. Enforcement Costs. Borrower agrees to reimburse Senior Lender for any and all costs and expenses (including reasonable attorneys' fees) incurred by Senior Lender in connection with enforcing its rights against Junior Lender under this Agreement. Junior Lender shall not be liable for payment of any attorney fees, costs, or expenses incurred by the other Parties under this Agreement. 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 Central District of California, Southern Division. In the event of any litigation between the parties hereto, the prevailing Party shall not be entitled to receive its attorney's fees and costs and such other costs incurred in investigating the action and prosecuting the same, including costs for expert witnesses, costs on appeal, and for discovery. 9. Notices. Any notice which any party hereto may be required or may desire to give hereunder shall be deemed to have been given and shall be effective only if it is in writing and (i) delivered personally, (ii) mailed, postage prepaid, by United State registered or certified mail, return receipts requested, or (iii) delivered by overnight express courier, in each instance addressed as follows: To Junior Lender: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attention: City Manager With a copy to: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attention: Community Development Director If to Senior Lender: Citibank, N.A. 388 Greenwich Street, 8th Floor New York, New York 10013 Subordination and Intercreditor Agreement (City of Newport Beach) 11 Newport veterans Apartments Attention: Transaction Management Group Re: Newport Veterans Apartments Deal ID No. 24368 Facsimile: (212) 723-8209 With a copy to: Citibank, N.A. 325 East Hillcrest Drive, Suite 160 Thousand Oaks, California 91360 Attention: Operations Manager/Asset Manager Re: Newport Veterans Apartments Deal ID No. 24368 Facsimile: (805) 557-0924 Prior to the Conversion Citibank, N.A. Date, with a copy to: 388 Greenwich Street, 8th Floor New York, New York 10013 Attention: Account Specialist Re: Newport Veterans Apartments Deal ID No. 24368 Facsimile: (212) 723-8209 Following the Conversion Citibank N.A. Date, with a copy to: c/o Berkadia Commercial Servicing Department 323 Norristown Road, Suite 300 Ambler, Pennsylvania 19002 Attention: Client Relations Manager Re: Newport Veterans Apartments Deal ID No. 24368 Facsimile: (215) 328-0305 And a copy of any notices Citibank, N.A. of default sent to: 388 Greenwich Street New York, New York 10013 Attention: General Counsel's Office Re: Newport Veterans Apartments Deal ID No. 24368 Facsimile: (646) 291-5754 or at such other addresses or to the attention of such other persons as may from time to time be designated by the party to be addressed by written notice to the other in the manner herein provided. Notices, demands and requests given in the manner aforesaid shall be deemed sufficiently served or given for all purposes hereunder when received or when delivery is refused or when the same are returned to sender for failure to be called for. 10. WAIVER OF TRIAL BY JURY. TO THE MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW, EACH OF THE PARTIES HERETO (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP BETWEEN THE PARTIES THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL Subordination and [ntercreditor Agreement (City of Newport Beach) 12 Newport Veterans Apartments BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL. 11. Term. The term of this Agreement shall commence on the date hereof and shall continue until the earliest to occur of the following events: (i) the payment of all of the principal of, interest on and other amounts payable under the Senior Loan Documents; (ii) the payment of all of the principal of, interest on and other amounts payable under the Junior Loan Documents. In all events, the provisions of Section 30) shall survive any foreclosure of the Senior Instrument. 12. Miscellaneous. (a) Junior Lender shall, within twenty (20) business days following a written request from Senior Lender, provide Senior Lender with a written statement setting forth the then current outstanding principal balance of the Junior Loan, the aggregate accrued and unpaid interest under the Junior Loan, and stating whether, to the knowledge of Junior Lender, any default or event of default exists under the Junior Loan, and containing such other information with respect to the Junior Indebtedness as Senior Lender may require. Upon notice from Senior Lender from time to time, Junior Lender shall execute and deliver such additional instruments and documents, and shall take such actions, as are required by Senior Lender in order to further evidence or effectuate the provisions and intent of this Agreement. (b) This Agreement shall bind and inure to the benefit of all successors and assigns of Junior Lender and Senior Lender. Senior Lender may assign its interest in the Senior Loan Documents without notice to or consent of Junior Lender. Junior Lender assign its rights and interests hereunder to any governmental entity provided that Junior Lender so notifies Senior Lender. Junior Lender may not assign its rights and interests hereunder to any non-governmental entity without the prior written consent of Senior Lender, which consent may be withheld or conditioned in its sole and absolute discretion. (c) Senior Lender hereby consents to the Junior Loan and the Junior Loan Documents; provided, however, that this Agreement does not constitute an approval by Senior Lender of the terms of the Junior Loan Documents. Junior Lender hereby consents to the Senior Loan and the Senior Loan Documents; provided, however, that this Agreement does not constitute an approval by Junior Lender of the terms of the Senior Loan Documents. (d) This Agreement may be executed in multiple counterparts, each of which shall constitute an original document and all of which together shall constitute one agreement. (e) IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, MATTERS OF CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER, THIS AGREEMENT HAS BEEN ENTERED INTO AND DELIVERED IN, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS OF THE STATE WHERE Subordination and Intercreditor Agreement (City of Newport Beach) 13 Newport Veterans Apartments THE PROPERTY IS LOCATED, WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF CONFLICTS OF LAW. (f) Time is of the essence in the performance of every covenant and agreement contained in this Agreement. (g) If any provision or remedy set forth in this Agreement for any reason shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or remedy of this Agreement and this Agreement shall be construed as if such invalid, illegal or unenforceable provision or remedy had never been set forth herein, but only to the extent of such invalidity, illegality or unenforceability. (h) Each party hereto hereby represents and warrants that this Agreement has been duly authorized, executed and delivered by it and constitutes a legal, valid and binding agreement enforceable in all material respects in accordance with its terms. (i) Borrower hereby acknowledges and consents to the execution of this Agreement, and agrees to be bound by the provisions hereof that are applicable to Borrower. Solely as between Senior Lender and Junior Lender, all of the signatories below hereby agree that to the extent of any conflict between the terms and provisions of this Agreement and the terms and provisions of the Senior Loan Documents and/or the Junior Loan Documents respectively, the terms and provisions of this Agreement shall govern and control. By executing this Agreement in the place provided below, Borrower hereby (i) acknowledges the provisions hereof, (ii) agrees not to take any action inconsistent with Senior Lender's rights or Junior Lender's rights under this Agreement, (iii) waives and relinquishes to the maximum extent permitted by law any and all rights, defenses and claims now existing or hereinafter accruing relating to Junior Lender's forbearance from exercising any rights and remedies pursuant to Section 4 of this Agreement, including, without limitation, any defenses based on the statute of limitations or any equitable defenses, such as laches, and (iv) acknowledges and agrees that (A) this Agreement is entered into for the sole protection and benefit of Senior Lender and Junior Lender (and their respective successors, assigns and participants), and no other person (including Borrower) shall have any benefits, rights or remedies under or by reason of this Agreement, (B) nothing in this Agreement is intended, or shall be construed to, relieve or discharge the obligations or liabilities of any third party (including Borrower under the Senior Loan Documents and the Junior Loan Documents), (c) none of Borrower nor any of its affiliates shall be, or be deemed to be, beneficiaries of any of the provisions hereof or have any rights hereunder whatsoever, and (D) no provision of this Agreement is intended to, or shall be construed to, give any such third party (including Borrower) any right subrogating to the rights of, or action against, Senior Lender or Junior Lender. 0) No amendment, supplement, modification, waiver or termination of this Agreement shall be effective against any party unless such amendment, supplement, modification, waiver or termination is contained in a writing signed by such party. Subordination and Intercreditor Agreement (City of Newport Beach) 14 Newport Veterans Apartments (k) No party other than Senior Lender and Junior Lender shall have any rights under, or be deemed a beneficiary of any of the provisions of, this Agreement. (1) Nothing herein or in any of the Senior Loan Documents or Junior Loan Documents shall be deemed to constitute Senior Lender as a joint venturer or partner of Junior Lender. (m) Nothing in this Agreement is intended, nor will it be construed, to in any way limit the exercise by Junior Lender of its governmental powers (including police, regulatory and taxing powers) with respect to Borrower or the Mortgaged Property to the same extent as if it were not a party to this Agreement or the transactions contemplated by this Agreement. 13. Attached Exhibits. The following Exhibits are attached to this Agreement and are incorporated by reference herein as if more fully set forth in the text hereof: Exhibit A — Legal Description Exhibit B — Junior Loan Documents [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Subordination and Intercreditor Agreement (City of Newport Beach) 15 Newport Veterans Apartments IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Subordination and Intercreditor Agreement or caused this Subordination and Intercreditor Agreement to be duly executed and delivered by their respective authorized representatives as of the date first set forth above. Dated: June', 2017 Dated: June ZT, 2017 Dated: June 0, 2017 111100]ta11NOaN CITY OF NEWPOR ACH, a ' c municipal co ora ' n and chart c' 1 By: Kev' 1 Muldoon Mayor APPROVE S TO FORM: Aaron C. arp (AM owiz�ll'} City Alfbipey ATTEST: 4&14-'nw� Leilani I. Brown City Clerk CA Ll V-' 90F Subordination and Intercreditor Agreement (City of Newport Beach) S-1 Newport Veterans Apartments CALIFORNIA ALL-PURPOSE 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 OnAL'Lih C-1 before me, '"" ( ere insert name and title of the officer), personally appeared M who proved to me on the basis of satisfactory evidence to be the person whose names) is/a subscribed to the within instrument and acknowledged to me that he/sPk/tl 6y executed the same in his/�r/their authorized capacity(i , and that by his/or/tl4ir signature on the instrument the person, or the entity upon beha f of which the person() 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. JENNIFER LEE NELSON Commission * 2096990 Z Signature (Seal) j Notary Public - California z Z Riverside County Mv comm. Expires Jan 13, 2019+ Subordination and Intercreditor Agreement (City of Newport Beach) Newport Veterans Apartments SENIOR LENDER: CITIBANK, N.A. By: Name: Michael Hemmens Title: Authorized Signatory Subordination and Intercreditor Agreement (City of Newport Beach) S-2 Newport Veterans Apartments CALIFORNIA ALL-PURPOSE 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 COUNTY OF ��✓t� CALIFORNIA On 1.701 before me,nKw W(here insert name and title of the officer), personally appeared M, I> who proved to me on the basis of satisfactory evidence to be the person whose named is are subscribed to the within instrument and acknowledged to me that h�she/they executed the same in his her/their authorized capacityes f, and that byhi her/their signature(,q on the instrument the personM, or the entity upon behalf of which the personXacted, 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) "�.IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIL MATTHEW W. KNIPPRATH = Notary Public • California =`=� k : Ventura County _ �~`� : Commission # 2109157 = My Comm. Expires Apr 27, 2019 I!nn!unuununnunnuuuuuuuwn!wuuumuuuuumumnum�. Subordination and Intercreditor Agreement (City of Newport Beach) Newport Veterans Apartments ACKNOWLEDGED AND AGREED AS OF THE DATE FIRST SET FORTH ABOVE: BORROWER: NEWPORT VETERANS APARTMENTS LP, a California limited partnership By: Mercy House CHDO, Inc., a California nonprofit public benefit corporation, its managing general partner By: Name: rry Haynes Title: Executive Director By: CDP Newport LLC, a California limited liability company, its administrative general partner By: Community Development Partners, a California corporation, its sole member and manager By: Name: Kyle Paine Title: President Subordination and Intercreditor Agreement (City of Newport Beach) S-3 Newport Veterans Apartments ACKNOWLEDGED AND AGREED AS OF THE DATE FIRST SET FORTH ABOVE: :0 NEWPORT VETERANS APARTMENTS LP, a California limited partnership By: Mercy House CHDO, Inc., a California nonprofit public benefit corporation, its managing general partner By: _ Name Title: Larry Haynes Executive Director By: CDP Newport LLC, a California limited liability company, its administrative general partner By: Community Development Partners, a California corporation, its sole member and manager By: _I/ Name: Kyle Paine Title: President Subordination and Intercreditor Agreement (City of Newport Beach) S-3 Newport Veterans Apartments CALIFORNIA ALL-PURPOSE 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 rr�n1 OF COUNTY OF V E, vw f_ CALIFORNIA On;Vm ,)pts- before me, 0L[Ch-0j)4&g7R 4here insert name and title of the officer), personally appeared Lowc. c who proved to me on the basis of satisfactory evidence to be the person(4 whose nam*) 0/a�e subscribed to the within instrument and acknowledged to me that/sl,-/t y executed the same in 10/heir authorized capacity(.ioo, and that by Ji /lopk-lkeir signature(.$) on the instrument the person(40, or the entity upon behalf of which the personE4 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. Signatur (Seal) ___r ANALILIA721-21-926 LESTI Commission ZNotary Public • California z 4POrange z County 9 My Comm. E ares Au 29 2019 Subordination and Intercreditor Agreement (City of Newport Beach) Newport Veterans Apartments CALIFORNIA ALL-PURPOSE 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 GA- OF CALIFORNIA COUNTY OF 0"734C �' Allis �•�G9rr-�e� On % before me, IN oyri4.&/ jV4*"c_ (here insert name and title of the officer), per onally appeared K,/te— 12AI ✓r- who proved to me on the basis of satisfactory evidence to be the person(.*)'whose name(&)' is/are subscribed to the within instrument and acknowledged to me that he/s*/th-y executed the same in his/lWVtk6r authorized capacity(ies), and that by his/lir/tl*r signature(Won the instrument the persoRoss , or the entity upon behalf of which the personv 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) 4�N� a- Ltd I /JD _JIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIiII111111111111L SOPHIA LICAUCO Notary Public - California .�� Orange County Commission # 2066886 My Comm. Expires May 3. 2018 111111111111111111111111111111111111 III 1111111111111111111111111111111111111111111111111 r. Subordination and Intercreditor Agreement (City of Newport Beach) Newport Veterans Apartments EXHIBIT A LEGAL DESCRIPTION All that certain real property situated in the County of Orange, State of California, described as follows: Lots 11, 12 and 13 in Block 160 of River Section, Newport Beach, in the City of Newport Beach, County of Orange, State of California, as shown on a map recorded in Book 4, Page 25 of Miscellaneous Maps, in the office of the County Recorder of said County. EXCEPT therefrom Lot 11 all oil, gas, minerals and other hydrocarbon substances lying below a depth shown below but with no right of surface entry, as provided in the deeds of record. Depth: 50 feet EXCEPT therefrom Lot 13 all oil, gas, minerals and other hydrocarbon substances lying below a depth shown below but with no right of surface entry, as provided in the deeds of record. Depth: 50 feet EXCEPT therefrom Lot 12 all oil, gas, minerals and other hydrocarbon substances lying below a depth shown below but with no right of surface entry, as provided in the deeds of record Depth: 400 feet. Assessor's Parcel Number: 045-114-15 Address: 6001 Newport Shores Drive, Newport Beach, California 92663 Subordination and [ntercreditor Agreement (City of Newport Beach) A-1 Newport Veterans Apartments EXHIBIT B JUNIOR LOAN DOCUMENTS 1. Affordable Housing Agreement and Joint Escrow Instructions, dated as of December 14, 2015, by and between Community Development Partners, a California corporation, and Junior Lender, as assigned to Borrower pursuant to that certain Affordable Housing Agreement and Joint Escrow Instructions Assignment and Assumption Agreement, dated as of December 18, 2015, recorded on December 22, 2015, as Instrument No. 2015000645084 in the Orange County Official Records. 2. Promissory Note, dated December 18, 2015, made by Borrower to Junior Lender. 3. Deed of Trust with Assignment of Rents, dated December 18, 2015, made by Borrower for the benefit of Junior Lender, recorded on December 22, 2015, as Instrument No. 2015000645083 in the Orange County Official Records. 4. Regulatory Agreement and Declaration of Covenants and Restrictions, dated as of December 18, 20015, by and between Junior Lender and Borrower, recorded on December 22, 2015, as Instrument No. 2015000645086 in the Orange County Official Records. 5. Notice of Affordability Restrictions on Transfer of Property, dated as of December 18, 2015, with consent for recordation by Borrower, recorded on December 22, 2015, as Instrument No. 2015000645085 in the Orange County Official Records. Subordination and Intercreditor Agreement (City of Newport Beach) B-1 Newport Veterans Apartments