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HomeMy WebLinkAboutRDA 04 SHEA HOMES AG 07-21-97DATE: JULY 21, 1997 RDA NO. 4 / inter-Com TO: WILLIAM A. HUSTON, EXECUTIVE DIRECTOR FROM: CHRISTINE A. SHINGLETON, ASSISTANT CITY MANAGER SUB~EC~ AMENDMENT NO. 2 TO SHEA HOMES DISPOSITION DEVELOPMENT AGREEMENT RECOMMENDATION It is recommended that the Redevelopment Agency approve Amendment No. 2 to the Disposition and Development Agreement (DDA) between the Tustin Community Redevelopment Agency and Shea Homes Limited Partnership, subject to any minor modifications made with approval of the City Attorney. FISCAL IMPACT No additional Agency financial commitment is needed for the project. DISCUSSION The.Redevel°pment Agency approved a DDA with Shea Homes on August 21, 1995 for development of 145 single family detached owner homes in the South Central Redevelopment Project Area. The Agency also subsequently approved an Amendment to the DDA on April 1, 1996. The DDA and deeds for the project require that 21 affordable units be maintained in the project: .8 units for very low income households; 6 units for low income households; and, 7 units for. moderate income households. These units are secured by affordability covenants and a deed of trust. The deeds of trust on the very low and low income units were based on the actual Agency subsidy provided. On the moderate income units,, the Agency placed a $10,000 second trust deed on the property as an enforcement mechanism, even though there was no Agency subsidy. There is now a problem with the sale of moderate restricted units' in that .moderate income buyers with the restrictions required by Redevelopment AgencY Report ~ - - Amendment No. 2 to Shea Homes DDA July 21, 1997 Page 2 the DDA are not desirous of having an additional $10,000 added to their mortgage. Shea has only been able to sell one of the moderate restricted units because the buyer wanted the specific location of the unit. Shea has even reduced the price of the moderate income restricted units by $10,000 in an attempt to offset the $10,000 trust deed being required; but the buyers still do not want the restrictions. The City has identified a mechanism to provide the Agency with. a reasonable enforcement mechanism without having to rely on a $10,000 deed of trust. Amendments to the Shea Homes DDA have been prepared to accommodate the needed changes on moderate income unit requirements and the Agency's loan documents. The Amendment is necessarily broad since the City Attorney's office has not yet been able to obtain approval of lenders on the Agreement. As a result, the City Attorney has designed the Amendment to avoid the need to further address any individual issue which may still arise with lenders or Shea Homes to resolve this issue. We are, therefore, requesting' that the Agency approve the Amendment, subject' to any modifications necessary in further negotiations subject to approVal of the City Attorney. CAS: kbm\ccreport\shea#2, cas AMENDMENT NO. 2 TO DISPOSITION AND DEVELOPMENT AGREEMENT by and between THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY, as Agency, and SHEA HOMES LIMITED PARTNERSHIP, a California Limited Partnership, as Developer AMENDMENT NO. 2 TO DISPOSITION AND DEVELOPMENT AGREEMENT This Amendment No. 2 to Disposition and Development Agreement ("Amendment No. 2 to DDA") is entered into by and between the Tustin Community Redevelopment Agency, a California community redevelopment agency ("Agency"), and Shea Homes Limited Partnership, a California limited partnership ("Developer"), with reference to the following facts: A. On December 27, 1995, Agency and Developer entered into a Disposition and Development Agreement (the "DDA") with regard to the development of a 145-unit single family, owner occupied project as more fully described therein and currently known as Tustin Grove (the "Project"). On that same date, and pursuant to the DDA, Developer executed 'a promissory note (the "Note"), in an amount not to exceed Three Hundred Ninety-Seven Thousand One Hundred Eighty-Three Dollars ($397,183.00), payable to Agency. The Note is secured by a deed of trust against the Project dated December 21, 1995, executed by Developer and recorded in the official records of the County Recorder of Orange County, California on January 2, 1996, as Instrument Number 19960002071 (the "Deed of Trust"). B. Under the provisions of the DDA, Developer is required to sell 21 of the units at the Project to moderate, Iow and very Iow income buyers, as more specifically provided in the DDA (the "Affordable Units"). In addition, the DDA requires that Developer's deeds to the buyers of the Affordable Units contain certain occupancy and resale restrictions which are covenants running with the land ("Agency's CC&R's"). Also, the DDA requires that Agency shall provide, to the buyers of the Affordable Units, certain financing in the form of notes and deeds of trust ("Agency's Loan Documents"). The deeds of trust shall be subordinate to the deeds of trust of certain third-party lenders. C. When Developer was beginning sales of certain Affordable Units, Developer determined that it wished to have the Project apprOved by the Federal National Mortgage Association ("FNMA") and the United States Department of Housing. and Urban Development ("HUD"). This was to enhance the ability of Developer's mortgage broker to broker loans for the Affordable Units and to enhance potential sales of the Affordable Units; Certain provisions of the DDA involving Agency's CC&Rs and Agency's Loan Documents needed to be modified to satisfy FNMA and/or HUD. Accordingly, on May 30, 1996, Agency and DeVeloper entered into an Amendment No. 1101-00002 48633_1 '1 to Disposition and Development Agreement ("Ame'ndment NO. 1 to DDA"), in orde~: to effectuate the necessary changes. Amendment No. 1 to DDA obligated Agency to (1) use its best efforts to negotiate with FNMA and/or HUD concerning, the changes to Agency's CC&R's and Agency's Loan Documents necessary to satisfy both the requirements of FNMA and/or HUD and the needs of AgencY in its redevelopment efforts, and (2) provide notice of any negotiated changes to Developer. Pursuant to Amendment No. I to DDA, Agency provided Developer with Agency Notice No. 1 re Changes to DDA ("Notice No. 1"), dated ,1996, informing Developer of the following: (a) changes in Agency's CC&R's, (b) the additional requirement of a right of first refusal with respect to each Affordable Unit, and (c) the resulting need to amend the Note and Deed of Trust. Pur, suant to Amendment No. 1 to DDA and Notice No. 1, the parties executed an Amendment No. 1 to Promissory Note, dated ("Note Amendment No. 1"), and an Amendment No. I to Deed of Trust, dated ~, 1996, and recorded in the official records of the County Recorder of Orange County, California on ,1996, as Instrument Number ~ ("Deed of Trust Amendment No. 1"). D. Developer has now sold all of the Low and Very-Low Income Units, as required under the DDA, but has sold only one 'of the seven Moderate Income Units required to be sold under the DDA. The DDA presently requires Developer to sell the Moderate Income Units to moderate income households subject to both (1) Agency's CC&R's, and (2) a Ten Thousand Dollar ($10,000) "silent second" deed of trust. However, Agency does not actually lend any money to the purchaser of a Moderate Income Unit. Rather, the "silent second" merely provides a mechanism for Agency to enforce Agency's CC&R's against the purchaser and provides the purchaser with a method of buying out of Agency's CC&R's, if so desired. Apparently, moderate income household purchasers, for the most part, find that there are other more attractive and more feasible methods of financing a unit rather than purchasing it as a Moderate Income Unit subject to a "silent second." Therefore, Developer has an inventory of unsold Moderate Income Units. E. In order to satisfy its requirement, under the DDA, to sell six more Moderate Income Units, Developer has requested that the "silent second's'_ for Moderate Income Units be eliminated and that Agency rely upon anOther method of enforcing Agency's CC&R's against the purchasers of Moderate Income Units. Agency is willing to eliminate the "silent second," but only if Agency's CC&R's are expanded to contain a replacement enforcement mechanism. F. Developer has a need to offer competitive financing for Moderate Income Units at the Project, so that it can sell those Units more expeditiously. G. Agency has an interest in having the Moderate Income units at the 1101-00002 48633_1 Project sold, in order to increase the pool of affordable housing for moderate income persons or families in the City of Tustin. NOW, THEREFORE, the parties hereto agree as follows: 1. Section 611.2 of the DDA is.hereby revised to read as follows: "2. Moderate Income Units For the purposes of implementing this Section 611 for those units identified by Developer and approved by Agency pursuant to Section 602 as for sale to moderate income households, above, Developer shall cause to be included in the grant deed for the sale of each unit, the following language: 'The grant made by this Deed shall be conditioned upon and subject to the following covenants, conditions and restrictions: .. Grantee shall use and occupy the premises as Grantee's principal place of residence upon acquisition of title or possession, whichever is earlier, and Grantee shall not transfer any interest in the premises, nor enter into any sale of the premises prior to the close of escrow for the sale of the Premises to Grantee; and . Any transfer of any interest in the premises, or any contract or lease or sale of the premises Prior to the acquisition of title to the premises by Grantee shall be void; and . Except as set forth in this Paragraph 3, Grantee shall use and occupy the premises as Grantee's principal place of residence immediately upon the close of escrow and shall continue to so use and occupy the premises for the duration of Grantee's ownership of the premises. For a period of five (5) years from the date of this deed, Grantee shall not lease or rent the premises for any reason unless Grantee obtains the prior written consent of the Tustin Community Redevelopment Agency ("Agency"), which shall be granted within fifteen (15) business days after Grantee provides to · Agency both: (i) a written request for Agency's consent to. the proposed rental, and (ii) evidence, reasonably satisfactory to Agency, that the proposed rental rate is an "affordable rent" for moderate income households, as defined in Health and Safety Code Section 50053, and that the proposed renter is a moderate income person or family, as defined in Health and Safety Code Section 50093. After such five (5) year 1101-00002 48633_1 , . period, Grantee may-lease or rent the premises without restriction'; and If, prior to July 15, 2015, Grantee desires to sell the premises, Grantee may do so only if, with the prior written consent of Agency, it sells the premises: (i) at an "affordable housing cost" for a moderate income household, as defined in Section 50052.5 of the Health and Safety Code, and (ii) to a transferee who qualifies as a moderate income person or family, as defined in Section 50093 of the Health and Safety Code, and who agrees in writing to be bound by the covenants, conditions and restrictions of Paragraphs 1 through 8 hereof. Agency shall consent to the transfer to a moderate income transferee within fifteen (15) business days after receipt, from Grantee, of (i) a written request for Agency's consent to the proposed transfer, (ii) evidence, reasonably satisfactory to Agency, that the proposed sales price qualifies as an "affordable housing cost" for a moderate income household, as defined in Section 50052.5 of the Health and Safety Code, and the proposed transferee qualifies as a moderate income person or family, as defined in Section 50093 of the Health and Safety Code, and (iii) the proposed transferee's written agreement, in form and substance satisfactory to Agency, to be bound by the covenants, conditions, and restrictions of Paragraphs 1 through 8 hereof; and If, prior t° July 15, 2015, Grantee desires to sell the premises without complying with the preceding paragraph, Grantee may do so only with the prior written consent of Agency, on payment to Agency of an amount equal to: Ten Thousand Dollars ($10,000) plus the "Agency's Share of Equity" earned in the unit during the time Grantee held title to the unit. "Agency's Share of Equity" shall be the product: of the ratio that the Ten Thousand Dollars ($10,000) bears to the.contracted sales price at the time of the original purchase, times the equity earned in the unit during the time Grantee was the owner of the unit. "Equity" shall be defined as the difference between the sales price at which Grantee enters into a contract' to resell the unit and the sum of (i) the down payment Grantee originally paid at the time Grantee bought the unit, (ii) normal and reasonable loan fees and closing costs paid for by Grantee when originally purchasing the unit, and (iii) the outstanding balances of (a) any purchase money mortgage(s) affecting the premises at the time of resale, and (b) any mortgage(s), affecting the premises at the time of resale, used to effectuate a refinance of a purchase money mortgage (or a prior refinance thereof), to the extent that the original principle balance of the refinance mortgage did not exceed the principle balance due and owing under the purchase money mortgage (or a prior refinance thereof), at the time of the 1101-OOO02 48633_1 refinance. -To the-extent that the original principal balance-0f any refinance mortgage exceeded the outstanding principle balance of the purchase money mortgage (or a prior refinance thereof) at the time of the refinance, the outstanding balance of such refinance mortgage at the time of resale shall be reduced by the amount of such excess, for the purpose of the calculation of "Equity" under this ParagraPh; and The provisions of Paragraphs 1 through 8 shall constitute covenants which shall run with the land and be binding upon Grantee and Grantee's successors in interest, and all parties having, or acquiring any right, title or interest in or to the premises. Any deed purporting to convey title to the premises to a subsequent transferee shall be voidable, at the option of Agency, unless it has attached thereto a written consent, from Agency, to the transfer, pursuant to either Paragraph 4 or Paragraph 5 above. This remedy is in addition to any other remedies that Agency possesses at law or in equity to enforce the covenants, conditions and restrictions set forth herein; and , The covenants, conditions and restrictions established under Paragraphs 1 through 8 are made expressly for the benefit of, and shall inure to, Agency and the City of Tustin, a municipal corporation; and Se The provisions of Paragraphs I through 8 and the covenants running with the land shall terminate automatically and become thereafter void on the earlier to occur of: (1) July 15, 2015, (2) payment by Grantee of Ten Thousand Dollars ($10,000) plus the Agency's Share of Equity pursuant to Paragraph 5 above, (3) the date on which the premises are conveyed by trustee's deed pursuant to foreclosure of the deed of trust of any institutional lender whose deed of trust has first priority over all other deeds of trust affecting the premises, (4) the date of any deed-in-lieu of foreclosure pursuant to which the premises are conveyed to any institutional lender whose deed of trust has first priority over all other deeds of trust affecting the premises, or (5) the date of any assignment, to the Department of Housing and Urban Development, of both (a) a note which is (i) payable to any institutional lender and (ii) secured by a deed of trust that has first priority over all other deeds of trust affecting the premises, and (b) such deed of trust." In addition, before the close of escrow pertaining to a Moderate Income Unit, Developer shall: (a) obtain an acknowledgment, in form and substance satisfactory to Agency, of the foregoing covenants, conditions and restrictions, executed by each purchaser of a Moderate Income Unit, and (b) deliver the 1101-00002 48633_1 'original, executed aCknowledgment to Agency for its records." 2. Sections 404, 405 and 406 of the DDA are hereby deleted in their entireties. 3. At the request of Developer, Agency, in its sole and absolute discretion, may further amend the DDA if Agency determines that either (a) Moderate Income Units remain unsaleable due to Agency's CC&R's as amended herein, or (b) Agency's CC&R's as amended herein do not meet FNMA and/or HUD requirements. Pursuant to such amendment, Agency may: (1) further amend Agency's CC&R's contained in DDA Section 611.2, (2) reinstate the note and deed of trust requirement with respect to Moderate Income Units, whether on the same or different terms as previously required under the DDA, (3) change the right of first refusal requirement with respect to Moderate Income Units, and/or (4) require the use of such other documentation (the "Additional Documentation") with respect to Moderate Income Units as Agency, in its sole and absolute discretion, determines will assist in Developer's sales efforts while preserving Agency's ability to effectively enforce the requirement that the Moderate Income Units remain owned and occupied by moderate income persons or families until July 15, 2015. Any such DDA amendment shall be effective upon Developer's receipt and acknowledgment of notice, in the form of an Agency Notice No. 2 re Changes to DDA ("Notice No. 2"), executed by Agency. 4. The standard form closing documents, the standard form escrow instructions, and the escrow procedures agreed upon by the parties shall be revised as necessary: (a) to effectuate the use and recordation of Moderate Income Unit deeds containing Agency's CC&R's as amended herein, (b) on account of the termination of the note and deed of trust requirements with respect to purchasers of Moderate Income Units, and (c) to effectuate any further DDA amendment pursuant to any Notice No. 2. To the extent of any conflict between Attachment 3 (the Scope of Development) and Attachment 4 (the Schedule of Performance) to the DDA and the terms of this Amendment No. 2 to DDA, the terms of this Amendment No. 2 to DDA shall prevail. 5. To make the Note and Deed of Trust consistent herewith, Developer shall execute an Amendment No. 2 to Promissory Note ("Note Amendment No. 2"), in the form of Exhibit "A" attached hereto and incorporated herein by reference, and an Amendment No. 2 to Deed of Trust ("Deed of Trust Amendment No. 2"), in the form of Exhibit "B" attached hereto and incorporated herein by reference. As stated in Exhibits "A" and "B," Developer represents and warrants that: (1) as provided in Section 212 of the DDA, Developer has not voluntarily encumbered the Project or any portion thereof, except to the extent that Developer has conveyed title to any unit at the Project for which Developer has submitted to Agency, as of the date of this Amendment No. 2 to DDA, a request for partial reconveyance and the buyer of 1101-00002 48633_1 sUch unit has encumbered or permitted the encumbrance of' the same (a "Permitted Encumbrance"), and (2) to the best of Developer's knowledge, no involuntary liens or encumbrances have been recorded against the Project, except for Permitted Encumbrances. The Deed of Trust, as amended by Deed of Trust Amendments Nos. 1 and 2, shall continue to secure the performance of the Note, as amended by Note Amendments Nos. I and 2, and as further amended, modified, extended or renewed from time to time. It is the intention of the parties that the Deed of Trust, as amended by the Deed of Trust Amendments Nos. 1 and 2, continue to be a first deed of trust against the Project, with the same priority vis-a-vis all other monetary encumbrances against the Project as the priority of the (unamended) Deed of Trust at the time of its recordation on January 2, 1996. In the event that such priority is challenged by any party, Agency shall have the right, in its sole and absolute discretion, to declare this Amendment No. 2 to DDA, Notices Nos. 1 and/or 2 (if any), Deed of Trust Amendments Nos. 1 and/or 2, and Note Amendments Nos. I and/or 2, to be void, with the effect that the Note and the Deed of Trust shall be effective as though this Amendment No. 2 to DDA, Notices Nos. I and/or 2 (if any), Deed of Trust Amendments Nos. 1 and/or 2 and Note Amendments Nos. 1 and/or 2, as applicable, were never executed. 6. Except as expressly amended herein, the DDA, as amended by Amendment No. I to DDA, shall remain in full force and effect. 1101-00002 48633_1 7. The effective date of this Amendment No. 2 to DDA shall be the date when it shall have been signed by Agency. IN WITNESS WHEREOF, Agency and Developer have signed this Amendment No. 2 to DDA on the respective dates set forth below. "Agency" Dated: TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a California community redevelopment agency APPROVED AS TO FORM' By: Jeffery M. Thomas, Chair By: Lois E. Jeffrey, Agency Counsel ATTEST: Recording Secretary Dated: "Developer" SHEA HOMES LIMITED PARTNERSHIP, a California limited partnership By: J.F. Shea Co., Inc., a Nevada corporation, its general partner By: Les Thomas, its Vice President 1101-00002 48633_1 DO NoT DESTROY THIS-NOTE AMENDMENT: -WHEN PAID, THIS NOTE AMENDMENT MUST BE SURRENDERED TO THE TRUSTEE FOR CANCELLATION, BEFORE RECONVEYANCE OF THE DEED OF TRUST SECURING THE NOTE WILL BE MADE. AMENDMENT NO. 2 TO PROMISSORY NOTE (Shea Homes Limited Partnership) RECITALS: On December 27, 1995, SHEA HOMES LIMITED PARTNERSHIP, a California limited partnership ("Obligor"), executed a promissory note (the "Note") in an amount not to exceed Three Hundred Ninety-Seven Thousand One Hundred Eighty-Three Dollars ($397,183.00) payable to the TUSTIN .COMMUNITY REDEVELOPMENT AGENCY, a California community redevelopment agency ("Agency"), pursuant to that certain Disposition and Development Agreement between Obligor and Agency, dated December 27, 1995 (the "DDA"). The DDA pertains to Obligor's development of certain property known as Tustin Grove (the "Project"). The Note is secured by a deed of trust against the Project dated December 21, 1995, executed by Obligor and recorded in the official records of the County Recorder of Orange County, California on January 2, 1996, as Instrument Number 19960002071 (the "Deed of Trust"). Subsequent to the execution of the DDA, the Note, and the .Deed of Trust, Obligor requested that Agency agree to amend the DDA and modify Agency's financing program pertaining to the sale of units to very-low, low and moderate income buyers at the Project, in order to obtain the approval of the United States Department of Housing and Urban Development ("HUD") and/or the Federal National Mortgage Association to the secondary financing for the Project. Pursuant to that certain Amendment No. I to Disposition' and Development Agreement dated May 30, 1996 (the "First Amendment to DDA"), between Obligor and Agency, and that certain Agency Notice No. I re Changes to DDA attached to the First Amendment to DDA ("Notice No. 1"), the parties have so amended the DDA. In order to effectuate the First Amendment to DDA, the parties executed an Amendment No. I to Promissory Note, dated ("Note Amendment No. 1"), and an Amendment No. I to Deed of Trust, dated , 1996, and recorded in the official records of the County Recorder Of Orange County, California on ,1996, as Instrument Number ("Deed of Trust Amendment No. 1"). Subsequent to the execUtion of the First Amendment to DDA, Note Amendment No. 1, and Deed of Trust Amendment No. 1, Obligor requested that Agency agree to further amend the DDA and modify Agency's financing program pertaining to the sale of moderate income units at the Project, in order to make the financing of moderate EXHIBIT "A" Page 1 of 4 income units more competitive and to increase sales of moderate income units. Pursuant to that certain Amendment No. 2 to Disposition and Development Agreement dated ,1997 (the "Second Amendment to DDA"), between Obligor and Agency, the parties have so amended the DDA. Pursuant to the Second Amendment to DDA, Agency has agreed to relieve Obligor of the requirement that it have each buyer of a moderate income unit execute a $10,000 promissory note, payable to Agency, and a'$10,000 deed of trust securing the same, to be recorded as' required in the DDA, provided that: (a) the covenants, conditions and restrictions contained in Section 611.2 of the DDA ("Agency's CC&R's") be amended as provided in the Second Amendment to DDA; and (b) before the close of escrow pertaining to a moderate income unit, Ob!igor shall (i) obtain an acknowledgment, in form and substance satisfactory to Agency, of Agency's CC&R's, executed by each buyer of a moderate income unit, and (ii) deliver the original, executed acknowledgment to Agency for its records, in addition, at the request of Obligor, Agency, in its sole and absolute discretion, may further amend the DDA if Agency determines that either (a) moderate income units remain unsaleable due to Agency's CC&R's, as amended, or (b) Agency's CC&R's, as amended, do not meet FNMA and/or HUD requirements. Pursuant to such a DDA amendment, Agency may: (a) further amend Agency's CC&R's, (b) reinstate the note and deed of trust requirement with respect to moderate income units, whether on the same or different terms as previously required under the DDA, (c) change the right of first refusal requirement with respect to moderate income units, and/or (d) require the use of such other documentation (the "Additional Documentation") with respect to moderate income units as Agency, in its sole and absolute discretion, determines will assist in Obligor's sales efforts while preserving Agency's ability to effectively enforce the requirement that the moderate income units remain owned and occupied by moderate income persons or families until July 15, 2015. Any such DDA amendment shall be effective upon ' Obligor's receipt and acknowledgment of notice, in the form of an Agency Notice No. 2 re Changes to DDA ("Notice No. 2"), executed by Agency. The parties have agreed to further amend the Note and Deed of Trust so that the schedule of incremental Note cancellations and (partial) reconveyances of Deed of Trust shall be consistent with current DDA requirements concerning sales of moderate income units. Therefore, the parties further .amend the Note as provided below. AMENDMENT: 1. Satisfaction and Release. Notwithstanding the provisions of Section IV of the Note to the contrary, and until such time as Agency may issue a Notice No. 2 which provides otherwise: (a) Agency waives the following requirements - (i) that each buyer of a moderate income unit at the Project execute a promissory note in the amount EXHIBIT "A" 1101-00002 48635_1 Page 2 of 4 provided in Section 404 of the DDA, (ii) that each suCh note be delivered to Agency, and (iii) that a deed of trust securing each such note be executed and recorded, and (b) when a moderate income unit is one of the Subsidized Units with respect to which a partial or full Note cancellation or a partial or complete reconveyance of Deed of Trust is sought, it shall be an additional condition precedent to such cancellation or reconveyance that the following requirement be met with respect to such moderate income unit: before the close of escrow pertaining to a moderate income unit, Obligor shall (i) obtain an acknowledgment, in form and substance satisfactory to Agency, of Agency's CC&R's, executed by each buyer of a moderate income unit, and (ii) deliver the original, executed acknowledgment to Agency for its records. The preceding sentence may be modified or revoked, or additional requirements for Note cancellation and Deed of Trust reconveyance may be added, pursuant to a Notice No. 2 issued by Agency to Obligor, under the terms and conditions described above. The parties agree to further amend the Note and Deed of Trust, as and if necessary, in order to effectuate any further DDA amendment as expressed in a Notice No. 2. 2. Security and Priority. Obligor represents and warrants that: (a) as provided in Section 212 of the DDA, Obligor has not voluntarily encumbered the Project or any portion thereof, except to the extent that Obligor has conveyed title to any unit at th'e Project for which Obligor has submitted to Agency, as of the date of this Amendment No. 2 to Promissory Note, a request for partial reconveyance and the buyer of such unit has encumbered or permitted the encumbrance of the same (a "Permitted Encumbrance"), and (b)to the best of Obligor's knowledge, no involuntary liens or encumbrances have been recorded against the Project, except for Permitted Encumbrances. The Deed of Trust, as amended by Deed of Trust Amendment No. I and Amendment No. 2 to Deed of Trust of even date herewith ("Deed of Trust Amendment No. 2"), shall continue to secure the performance of the Note, as amended by Note Amendment No. 1, as further amended herein, and as further amended, modified, extended or renewed from time to time. It is the intention of the parties that the Deed of Trust, as amended by the Deed of Trust Amendments Nos. 1 and 2, continue to be a first deed of trust against the Project, with the same priority vis-a-vis all other monetary encumbrances against the Project as the priority of the (unamended) Deed of Trust at the time of its recordation on January 2, 1996. In the event that such priority is challenged by anY party, Agency shall have the right, in its sole and absolute discretion, to declare the Second'Amendment to DDA, Notices Nos. I and/or 2 (if any), Deed of Trust Amendments Nos. 1 and/or 2, and Note Amendments NoS. 1 and/or 2, to be void, with the effect that the Note and the Deed of Trust shall be effective as though the Second Amendment to DDA, Notices Nos. I and/or 2 (if any), Deed of Trust Amendments Nos. 1 and/or 2 and Note Amendments Nos. I and/or 2, as applicable, were never executed. 1101-00002 EXHIBIT "A" 48635...1 Page 3 of 4 .o 3. Continued Effect. Except as expressly provided herein, the Note, as amended by Note Amendment No. 1, shall remain in full force and effect. "Obligor" "Agency" SHEA HOMES LIMITED PARTNERSHIP, a California limited partnership By: J.F. Shea Co., inc., a Nevada corporation, its general partner By: Les Thomas, its Vice President Dated: ,1997 TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a California community redevelopment agency By: Its: Dated: ., 1997 APPROVED AS TO FORM: By: Lois E. Jeffrey, Agency Counsel ATTEST: Recording Secretary 1101-o0002 48635_.1 EXHIBIT "A" Page 4 of 4 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: CITY OF TUSTIN COMMUNITY REDEVELOPMENT AGENCY Attention: Christine Shingleton 300 Centennial Way Tustin, CA 92780-3767 ) ) ) ) ) ) ) ) (Space Above for Recorder) This Agreement is recorded at the request and for the benefit of the City of Tustin Community Redevelopment Agency and is exempt from payment of a recording fee pursuant to Government Code Section 6103. CITY OF TUSTIN COMMUNITY REDEVELOPMENT AGENCY By: Its: Dated: , 1996 AMENDMENT NO. 2 TO DEED OF TRUST RECITALS: _ On December 27, 1995, SHEA HOMES LIMITED pARTNERSHIP, a California limited partnership ("Trustor"), executed ~a promissory note (the "Note") in an amount not to exceed Three Hundred Ninety-Seven Thousand One Hundred Eighty-Three Dollars ($397,183.00) payable to the TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a California community redevelopment agency ("Beneficiary"), pursuant to that certain Disposition and Development Agreement between Trustor and Beneficiary, dated December 27, 1995 (the "Agreement"). The Agreement pertains to Trustor's development of certain property known as Tustin Grove' (the "Project"), more particularly described on Exhibit A attached hereto and incorporated herein by reference. The Note is secured by a deed of trust against the Project dated December 21, 1995, executed by Trustor and recorded in the official records of the County Recorder of Orange County, California on January 2, 1996 as Instrument Number 19960002071 (the "Deed of Trust"). 1101-00002 48636 EXHIBIT "B" July11, 1997 Page 1 of 6 Subsequent to the execution of the Agreement, the Note, and the Deed of Trust, Trustor requested that Beneficiary agree to amend the Agreement and modify Beneficiary's financing program pertaining to the sale of units to very-low, Iow and moderate income buyers at the Project, in order to obtain the approval, of the United States Department of Housing and Urban Development ("HUD") and/or the Federal National Mortgage Association, of the secondary financing for the Project: Pursuant to that certain Amendment No. 1 to Disposition and Development Agreement dated May 30, 1996 ("DDA Amendment No. 1"), between Trustor and Beneficiary, and that certain Agency Notice No. 1 re Changes to DDA attached to DDA Amendment No. 1 ("Notice No. 1") the parties so amended the Agreement. As part of Notice No. 1, the anti-speculation covenants that Beneficiary required to be contained in the deeds conveying title to the buyers of very-low, Iow and moderate income units at the Project (the "Subsidized Units") were modified so as to terminate on foreclosure, deed-in-lieu of foreclosure, or assignment of the first deed of trust to HUD, as more specifically provided in Notice No. 1. In order to protect Beneficiary's investment at the Project a.nd to help it maintain a supply of affordable housing in the City of Tustin, the parties agreed, pursuant to Notice No. 1, that'all buyers of Subsidized Units at the Project shall execute rights of first refusal, in the form of Exhibit A to Notice No. 1 or in such other form as the parties may subsequently agree in writing (either of such forms being referred to hereinafter as a "Right of First Refusal"), and such respective Rights of First Refusal shall be recorded immediately after the deeds conveying title to the respective Subsidized Units to those buyers and before any deeds of trust or other financing documents are recorded pertaining to such respective Subsidized Units. Moreover, pursuant to Notice No. 1, the parties agreed that: (1) the Note shall not be deemed paid, in whole or in part, until, in addition to the other requirements as set forth in the Note, a Right of First Refusal has been executed and recorded, in the manner prOvided above, with respect to each Subsidized Unit the sale of which is a condition precedent to such deemed payment, and (2) no partial reconveyance of the Deed of Trust shall be permitted with respect to a Subsidized Unit until, in addition to the other requirements as set forth in the Deed of Trust, a Right of First Refusal, with respect to such Subsidized Unit, has been executed and recorded in the manner provided above. In order to effectuate that agreement, the parties amended the Note pursuant to that certain Amendment No.1 to Promissory Note dated ., 1996 ("Note Amendment No. 1"), and amended the Deed of Trust pursuant to that certain Amendment No. 1 to Deed of Trust dated ..... 1996, executed by Trustor and Beneficiary and recorded in the official records of the County Recorder of Orange County, California on ,1996 as Instrument Number ("Deed of Trust Amendment No. 1"). Subsequent to the execution of DDA Amendment No. 1, Note Amendment No. 1, and Deed of Trust Amendment No. 1, Trustor requested that Beneficiary agree to further amend the Agreement and modify Beneficiary's financing program pertaining to the sale of moderate income units at the Project, in order to make the financing of moderate income units more competitive and to increase sales of moderate income units. Pursuant to that certain Amendment No. 2 to Disposition and Development Agreement dated' 1101-00002 EX H lB IT "B" 48636 July11.1997 Page 2_ of 6 , 1997 ("DDA Amendment No. 2"), between Trustor and Beneficiary, the parties have so amended the Agreement. · .... . Pursuant to DDA Amendment No.2, Beneficiary has agreed to relieve Trustor of the requirement that it have each buyer of-a moderate income unit execute a $10,000 promissory note, payable to Beneficiary, and a $10,000 deed of trust securing the same, to be recorded as required in the Agreement, provided that: (a) the covenants, conditions -and restrictions contained in Section 611.2 of the Agreement ("Beneficiary's CC&R's") be amended as provided in DDA Amendment No. 2; and (b) before the close of escrow pertaining to a moderate income unit, Trustor shall (i) obtain an acknowledgment, in form and substance satisfactory to Beneficiary, of Beneficiary's CC&R's, executed by each buyer of a moderate income unit, and (ii) deliver the original, executed acknowledgment to Beneficiary for its records, in addition, at the request of Trustor, Beneficiary, in its sole and absolute discretion, may further amend the Agreement if Beneficiary determines that either (a) moderate income units remain unsaleable due to Beneficiary's CC&R's, as amended, or (b) Beneficiary's CC&R's, as amended, do not meet FNMA and/or HUD requirements. Pursuant to such an amendment of the Aqreement, Beneficiary may: (a) further amend Beneficiary's CC&R's, (b) reinstate the not~ and deed of trust requirement with respect to moderate income units, whether on the same or different terms as previously required under the Agreement, (c) change the Right of First Refusal requirement with respect to moderate income units, and/or (d) require the use of such other documentation (the "Additional Documentation") with respect to moderate income units as Beneficiary, in its sole and absolute discretion, determines will assist in Trustor's sales efforts while preserving Beneficiary's ability to effectively enforce the requirement that the moderate income units remain owned and occupied by moderate income persons or families until July 15, 2015. Any such Agreement amendment shall be effective upon Trustor's receipt and acknowledgment of notice, in the form of an Agency Notice No. 2 re Changes to DDA ("Notice No. 2"), executed by Beneficiary. The parties have agreed to further amend the Note and Deed of Trust so that the schedule of incremental Note cancellations and (partial) reconveyances of Deed of Trust shall be consistent with current Agreement requirements concerning sales of moderate income units. Therefore, the parties are further amending the Note pursuant to an Amendment No. 2 to Promissory Note of even date herewith ("Note Amendment No. 2") and hereby further amend the Deed of Trust as provided below. AMENDMENT: 1. Reconveyances. Section 2 of the Rider attached to the Deed of Trust is hereby revised to read as follows: "2. Partial Reconveyances. By its acceptance of this Deed of Trust, Beneficiary hereby agrees that, provided no notice of default has been recorded and no condition or event has occurred that would constitute a default upon the passage of time or the giving of notice, Beneficiary shall give Trustor partial reconveyances from the lien of this Deed of Trust, on Trustor's written request, of 1101-0oo02 48636 July 11,1997 EXHIBIT "B" Page 3 of 6 any portion of the Property constituting a lot or parcel shown on a recorded subdivision .map covering all or any portion of the Property (either a "Subsidized Unit" or a "Non-Subsidized Unit" as defined in the note the performance of which is secured by this Deed of Trust (the "Secured Note")). Reconveyance shall be conditioned on either of the following: (a) the transfer, to a purchaser for value, of title to a Non-Subsidized Unit, by a deed in the form required by the Agreement as amended from time to time, or (b) (i) the transfer, to a moderate income buyer, a Iow income buyer or a very-low income buyer, of title to a Subsidized Unit, by a deed in the form required by the Agreement as amended from time to time, (ii) the execution by such a buyer of a note evidencing an Agency Subsidy Loan (for Moderate Income Households, Low Income Households or Very-Low Income Households) (a "Subsidy Note") in the amount required by the terms of the Agreement as amended from time to time, the delivery of such Subsidy Note to Beneficiary, and the execution and recordation of a deed of trust securing such Subsidy Note; provided, however, that if the terms of the Agreement, as amended from time to time, do not require the execution of a Subsidy Note and deed of trust by the buyer of a certain Subsidized Unit, then, in that case, no such Subsidy Note and deed of trust shall be required as a condition to reconveyance hereunder, the execution by such a buyer of a right of first refusal, in the form required by the Agreement, as amended from time to time, and recorded after the deed conveying title to the buyer of a Subsidized Unit and before the recordation of any deed of trust or other financing documents pertaining to such Subsidized Unit, (iv) to the extent required by the Agreement, as amended from time to time, the execution, by each buyer of a Subsidized Unit, of an acknowledgment, in form and substance satisfactory to Beneficiary, of the covenants, conditions and restrictions contained in the deed to such buyer, and the deliyery to Beneficiary, before close of escrow pertaining to such Subsidized Unit, of the original, executed acknowledgment pertaining to such Subsidized Unit, and (v) the execution, delivery and/or recordation of such Additional Documentation pertaining to the sale of a Subsidized Unit, on the terms, and to the extent, as may be required by the Agreement, as amended from time to time. 1101-00002 48636 July11,1997 EXHIBIT "B" Page 4 of 6 Notwithstanding the foregoing, however, there shall be no partial reconveyance with respect to the one-hundred-forty-fifth unit (whether Subsidized or Non-Subsidized) to be sold, so as to effectuate the complete reconveyance of this Deed of Trust, if the Trustor has not then complied with all terms and conditions of the. Agreement as amended from time to time, the Secured Note, and this Deed of Trust. A complete reconveyance of this Deed of Trust shall be reCorded concurrently with the deed transferring title of the one-hundred-forty-fifth unit to a purchaser, provided that all terms and conditions of the Agreement as amended from time to time, the Secured Note, and this Deed of Trust have then been satisfied. Trustor shall pay all costs of preparing, executing and recording all documents necessary to accomplish the partial release and reconveyance. With respect to any partial reconveyance, Trustor further agrees: (a) at Beneficiary's option, such partial reconveyance shall be conditioned upon Beneficiary receiving, at Trustor's expense, an endorsement to Beneficiary's title insurance policy, which insures that the portions of the Property remaining subject to this Deed of Trust have legal access to a public street; and/or (b) at Beneficiary's option, such partial reconveyance shall be conditioned upon Beneficiary receiving, at Trustor's expense, an endorsement to Beneficiary's title insurance policy, which insures that such partial reconveyance will not adversely affect the priority of this Deed of Trust with respect to the portions of the Property remaining subject to this Deed of Trust." 2. Priority. Trustor represents and warrants that: (1) as provided in Section 212 of the Agreement, Trustor has not voluntarily encumbered the Project or any portion thereof, except to the extent that Trustor has conveyed title to any unit at the Project for which Trustor has submitted to Beneficiary, as of the date of this Amendment No. 2 to Deed of Trust, a request for partial reconveyance and the buyer of such unit has encumbered or permitted the encumbrance of the same (a "Permitted Encumbrance"), and (2) to the best of Trustor's knowledge, no involuntary liens or encumbrances have been recorded against the Project, except for Permitted Encumbrances. The Deed of Trust, as amended by Deed of Trust Amendment No. 1 and this Amendment No. 2 to Deed of Trust ("Deed of Trust Amendment No. 2"), shall continue to secure the performance of the Note, as amended by Note Amendments Nos. 1 and 2, and as further amended, modified, extended or renewed from time to time. It is the intention of the parties that the Deed of Trust, as amended by Deed of Trust Amendments Nos. 1 and 2, continue to be a first deed of trust against the Project, with the same priority vis-a- vis all other monetary encumbrances against the Project as the priority of the (unamended) Deed of Trust at the time of its recordation. In the event that such priority is challenged by any party, Beneficiary shall have the right, in its sole and absolute discretion, to declare DDA Amendment No. 2, Notices Nos. 1 and/or 2 (if any), Note Amendments Nos. 1 and/or 2, and Deed of Trust Amendments Nos. 1 and/or 2, to be void, with the effect that the Note and the Deed of Trust shall be effective as though DDA Amendment No. 2, Notices Nos. 1 and/or 2, Note Amendments Nos. 1 and/or 2, and Deed of Trust Amendments Nos. 1 and/or 2, as applicable, were never executed. 1101-00002 48636 EXHIBIT "B" July11, 1997 Page 5 of 6 3. Continued Effectiveness. Except as expressly provided herein, the Deed of Trust shall remain in full force and effect. Trustor: Dated: ,1997 SHEA HOMES LIMITED PARTNERSHIP, a California limited partnership By: J.F. Shea Co., Inc., a Nevada corporation, its general partner Dated' ,1997 APPROVED AS TO FORM: BY: Les Thomas, its Vice President Beneficiary: TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a California community redevelopment agency By: Jeffery M. Thomas, Chair By: Lois E. Jeffrey, Agency Counsel ATTEST: Recording Secretary 110i-00002 48636 July11,1997 EXHIBIT "B' Page 6 of 6 ALL PURPOSE ACKNOWLEDGMENT _ . STATE OF CALIFORNIA COUNTY OF ) ) SS: ) On this. day of ,19 appeared Name(s) of Signer(s) , before me, , Notary Public, personally personally known to me - OR proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. NOTARY SEAL Signature of Notary CAPACITY CLAIMED BY SIGNER: Individual(s) Corporate Officers Title(s) Partner(s) General Partner of a Limited Partnership Attorney-in-Fact Trustee(s) Subscribing Witness Guardian/Conservator Other: SIGNER IS REPRESENTING' Name of Person(s).or Entity(les) THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED BELOW: Title or Type of Document: Number of Pages: Date of Document: Signer(s) Other Than Named Above: 1101-00002 48636 July 11, 1997 ALL PURPOSE ACKNOWLEDGMENT STATE OF CALIFORNIA COUNTY OF ) ) SS: ) . On this __ day of ,19__ , before me, , Notary Public, personally appeared Name(s) of Signer(s) personally known to me - OR proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. NOTARY SEAL Signature of Notary CAPACITY CLAIMED BY SIGNER: Individual(s) Corporate Officers Title(s) Partner(s) General Partner of a Limited Partnership Attorney-in-Fact Trustee(s) Subscribing Witness Guardian/Conservator Other: SIGNER IS REPRESENTING' Name of Person(s) or Entity(ies) THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED BELOW: Title or Type of Document: Number of Pages: Date of Document: Signer(s) Other Than Named Above: 1101-00002 48636 July 11,1997 EXHIBIT "A" LEGAL DESCRIPTION All of Tract No. 14934 in the City of Tustin, County of Orange, State of California,. as per map filed in Book 725 Pages 1 through 8, inclusive, of Miscellaneous Maps in the Office of the County Recorder of said county. 1101-00002 28250_1