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HomeMy WebLinkAbout07 FIRST AMEND. TO DECLARATION OF AFFORDABLE HOUSING COVENANTS FOR ANTON LEGACY1ZY O ' AGENDA ,. REPORT �S T� MEETING DATE: APRIL 21, 2015 Agenda Item 7 Reviewed: City Manager JCP Finance Director N/A TO: JEFFREY C. PARKER, CITY MANAGER & HOUSING AUTHORITY EXECUTIVE DIRECTOR FROM: TUSTIN HOUSING AUTHORITY SUBJECT: FIRST AMENDMENT TO DECLARATION OF AFFORDABLE HOUSING COVENANTS AND REGULATORY AGREEMENT FOR THE ANTON LEGACY PROJECT SUMMARY Authorization is requested to amend the Declaration of Affordable Housing Covenants and Regulatory Agreement for the Anton Legacy Project at Tustin Legacy with Anton Legacy Tustin, L.P. RECOMMENDATION 1. It is recommended the City Council approve and authorize the City Manager, or his designee, to execute the First Amendment to Declaration of Affordable Housing Covenants and Regulatory Agreement. 2. It is recommended the Tustin Housing Authority Commissioners approve and authorize the Executive Director, or his designee, to execute the First Amendment to Declaration of Affordable Housing Covenants and Regulatory Agreement. FISCAL IMPACT There is no fiscal impact. CORRELATION TO THE STRATEGIC PLAN The First Amendment contributes to Goal A of the City's Strategic Plan, enhancing the vibrancy and quality of life in all neighborhoods and areas of the community. BACKGROUND/DISCUSSION On May 23, 2013, the City, the Tustin Housing Authority ("Housing Authority') and Anton Legacy Tustin, L.P. ("Anton Legacy") entered into a Declaration of Affordable Housing Covenants and Regulatory Agreement ("Agreement") for the development of Agenda Report April 21, 2015 Page 2 225 affordable housing rental units, comprised of 88 Very Low Income Units, 73 Low Income Units, and 64 Moderate Income Units. The parties are seeking to amend the Agreement in order to affirm residents are not paying any mandatory fees or costs for onsite parking and to offset the loss of garage revenue by allowing Very Low and Low Income rent limits to adjust higher as determined by California Tax Credit Allocation Committee ("TCAC"). Since Anton Legacy's ability to obtain financing was partially based on garage rental revenue, the City and Housing Authority are proposing to allow Anton Legacy to charge rents to Very Low and Low Income households that would be compliance with the TCAC. Under the current Agreement, rent, based on the Housing Authority's rent calculations, is lower than TCAC for Very Low and Low Income two and three bedroom units. The amended Agreement will protect existing tenants from significant annual rent increases by limiting the increase to the greater of (1) three percent (3%) or (2) the percent increase that occurs when the California Department of Housing and Community Development publishes their annual income limits. Once existing tenants' rent matches the rent allowed under TCAC, all future rent increases will be in association with TCAC rent limits. All new tenants' rent will immediately be based on the TCAC rent limits. The amended Agreement will not impact the rent for Moderate Income households. Staff is available to respond to questions by the City Council and Housing Authority Commission. Jerry Craig Economic D e� p & ousing Manager Tustin Housinb A on First Amendment to Declaration of Affordable Housing Covenants and Regulatory Agreement CITY OF TUSTIN OFFICIAL BUSINESS REQUEST DOCUMENT BE RECORDED AND EXEMPT FROM RECORDING FEES PER GOVERNMENT CODE SECTION 6103 AND SECTION 27383 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: City of Tustin and Tustin Housing Authority 300 Centennial Way Tustin, California 92780 Attn: City Clerk/Authority Secretary Space above this line for Recorder's use only FIRST AMENDMENT TO DECLARATION OF AFFORDABLE HOUSING COVENANTS AND REGULATORY AGREEMENT This FIRST AMENDMENT TO DECLARATION OF AFFORDABLE HOUSING COVENANTS AND REGULATORY AGREEMENT ("Amendment") is executed as of 2015 ("Effective Date") by and among the TUSTIN HOUSING AUTHORITY, a public body corporate and politic ("Authority"), the CITY OF TUSTIN, a California municipal corporation (together with any successor of City, the "City"), and ANTON LEGACY TUSTIN L.P., a California limited partnership ("Owner"). The City and the Authority are sometimes referred to herein collectively as "Tustin"). Tustin and Owner are sometimes referred to herein individually as a "Party" and collectively as the "Parties". RECITALS A. City is a California municipal corporation and general law city under the laws of the State of California. B. Authority is a local housing authority and a public body, corporate and politic formed, organized, existing, and exercising its powers pursuant to the California Housing Authorities Law, Health and Safety Code, Section 34200, et seq. and has been authorized to transact business pursuant to action of the City Council. Authority is and shall remain as a separate public body, corporate and politic, exercising governmental functions and performing a public function of the City. C. Further, the Authority functions as the "housing successor" to the former Tustin Community Redevelopment Agency, a dissolved community redevelopment agency and former public body corporate and politic ("Former Agency"), pursuant to the requirements of Parts 1.8 and 1.85, Division 24 of the California Health and Safety Code commencing with Section 34161, et seg., as amended. 065239\6819415v2 DOCSOC/ 1702582v2/200350-0001 D. The Parties entered into that certain Declaration of Affordable Housing Covenants and Regulatory Agreement dated as of May 23, 2013 recorded in the Official Records, County of Orange, State of California on May 23, 2013 as instrument number 2013-000314479 ("Original Agreement") with respect to certain real property legally described on Exhibit "A" attached hereto and fully incorporated by this reference. E. Statutory references in this Amendment are to the California Health and Safety Code, unless otherwise stated. Capitalized terms used herein are as defined in the Original Agreement unless otherwise defined in this Amendment. F. Among other provisions, the Original Agreement establishes and covenants for 225 Affordable Rental Housing Units on the Property and Project, including 88 Very Low Income Units, 73 Low Income Units, and 64 Moderate Income Units, with each Affordable Housing Unit leased to a Qualified Household for a monthly Rent Consideration in an amount not to exceed the applicable Maximum Monthly Affordable Rent. G. Under State laws and regulations, the term affordable rent includes all mandatory costs and fees imposed on a tenant household. Tustin desires that tenants in the Project's Affordable Housing Units be provided the use of all parking spaces and garages within the Project at no charge, including no mandatory or additional fee, and thus outside the determination and calculation of Maximum Monthly Affordable Rent. H. The Parties intend by this Amendment to confirm that no Qualified Tenants shall pay any mandatory fees or costs for onsite parking. 1. Sections 50052.5 and 50053 provide that the State's implementing regulations for determination and calculation of a tenant household's annual gross income and affordable rent may establish "alternative criteria, where necessary, to be consistent with pertinent federal statutes and regulations governing federally assisted rental and cooperative housing." Further, such laws provide that "provided there are no pertinent federal statutes applicable to a project or program, [the term] `adjusted for family size appropriate to the unit' shall mean for a household of one person in the case of a studio unit, two persons in the case of a one -bedroom unit, three persons in the case of a two- bedroom unit, four persons in the case of a three-bedroom unit, and five persons in the case of a four-bedroom unit." J. In this regard, there are pertinent federal and state statutes and regulations relating to "Tax Credits" set forth in Section 42 of the Internal Revenue Code, and California Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and Health and Safety Code Section 50199.4, et seq., including the "Tax Credit Rules" implementing the foregoing set forth in Title 4 Cal. Code Regs. that define the term "adjusted for family size appropriate to the unit" and correspondingly modify the calculation of affordable rent. K. By this Amendment, Tustin and Owner agree to certain modifications to the definitions of Maximum Monthly Affordable Rent and Rent Consideration to be applied to Very Low Income Qualified Households and Low Income Qualified Households to align and follow the Tax Credit Rules cited herein. Therefore, the Rent Consideration to be charged to Low Income Qualified Households and Very Low Income Qualified Households may, at the Owner's option, be phased into operations of the Project by Owner and when applied shall be based on applicable rent 065239VI941M 2 DOCSOC/ 1702582 v2/200350-0001 limits published by the California Tax Credit Allocation Committee ("TCAC") rather than the income limits published by the California Department of Housing and Community Development. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. All Parkins at Proiect for Qualified Households at No Cost/Fee. Owner agrees that it shall not charge or impose any fee or cost to any Qualified Household in the Project for parking within the Project, whether for surface parking, covered parking or garage parking; in this regard, there shall be no mandatory charge to any Qualified Household for parking at the Project and no charges for parking shall in any event be included in the Rent Consideration; provided however, that use of parking spaces in the Project's private garages shall be subject to the terms and conditions of (i) any agreement between Owner and the City, (ii) any agreement between Owner and any Qualified Household and (iii) any applicable and lawful rules and regulations promulgated by Owner so long as such agreements do not establish any charge or fee for parking. 2. Maximum Monthly Affordable Rent. The Parties desire that maximum rent limits for Low Income Units and Very Low Income Units in the Project shall be hereafter based on the rent limits published by TCAC; provided however, that Maximum Monthly Affordable Rent for Moderate Income Households shall be a remain subject to the calculation of affordable rent as defined in Section 50053(b)(4). As such, the Original Agreement is hereby amended as follows: (a) The fourth sentence of Section 2.4.1 of the Original Agreement is hereby amended to read: "Owner shall deliver to the City their proposed list of Maximum Monthly Affordable Rent for each Moderate Income Unit in the Project (the "Proposed List") no later than the Outside Rent Calculation Date." (b) The last sentence of Section 2.4.1 of the Original Agreement is hereby amended to read: "Owner shall not charge Rent Consideration for a Moderate Income Unit that exceeds the applicable Maximum Monthly Affordable Rent for such Moderate Income Unit set forth on the most recently approved (or deemed approved) Proposed List." (c) The last sentence of Section 2.4.2 of the Original Agreement is hereby amended to read: "In establishing Maximum Monthly Affordable Rent for each Moderate Income Household, Owner shall not exceed the rental amounts specified on the City Maximum Rent List, unless such list is not published on or before the date that is 45 days following the publication of the HCD List, in which event Owner shall not exceed the rental amounts specified on the HCD List." (d) The following terms are hereby added to Exhibit B of the Original Agreement: (i) " `AMGI' means the median gross income of the area in which the Project is located as determined by the Secretary of the Treasury of the United States for purposes of Section 42 of the Internal Revenue Code." (ii) " `TCAC List' means the maximum affordable rents published by TCAC." 065239A6819415v2 3 DOCSOC/ 1702582v2/200350-0001 (e) The definition of "Maximum Monthly Affordable Rent" in Exhibit B of the Original Agreement is hereby replaced in its entirety with the following: "`Maximum Monthly Affordable Rent' means for any Affordable Housing Unit, the maximum monthly Rent Consideration payable by the tenant under the lease that does not exceed the following: (a) with respect to Very Low Income Units, the Annual Maximum Very Low Income Rent for a Very Low Income Household (calculated in accordance with the requirements below) divided by twelve (12) as specifically applicable to the particular Qualified Household that is the tenant, (b) with respect to Low Income Units, the Annual Maximum Low Income Rent for a Low Income Household (calculated in accordance with the requirements below) divided by twelve (12), as specifically applicable to the particular Qualified Household that is the tenant, and (c) with respect to Moderate Income Units, the Annual Maximum Moderate Income Rent for a Moderate Income Household (calculated in accordance with the requirements below) divided by twelve (12), as specifically applicable to the particular Qualified Household that is the tenant. The applicable Annual Maximum Rent for a particular Qualified Household shall take into account and include a reasonable allowance for utilities and shall otherwise be an amount not in excess of the following: For `Moderate Income Units,' as more particularly defined in Health and Safety Code Section 50053(b)(4), and as generally described herein, the `Annual Maximum Moderate Income Rent' shall be equal to the product obtained by multiplying (i) thirty percent (30%) by (ii) one hundred and ten percent (110%) of the annual Orange County Median Income adjusted for family size appropriate for the units, including a reasonable utility allowance. Notwithstanding the foregoing, in accordance with Health and Safety Code Section 50053(b)(4), the City has determined and hereby agrees that, for a Moderate Income Household with annual gross incomes that exceed one hundred and ten percent (I 10%) of the annual Orange County Median Income, adjusted for family size appropriate for the unit, the Annual Maximum Moderate Income Rent shall not exceed 30 percent of actual gross income of the tenant household, including a reasonable utility allowance. For `Low Income Units', as generally described herein, the `Annual Maximum Low Income Rent' shall be equal to the product obtained by multiplying (i) thirty percent (30%) by (ii) the imputed income limitation applicable to a unit pursuant to Section 42(g)(2)(C) of the Internal Revenue Code in which the maximum income level is sixty percent (60%) of AMGI, subject to any adjustment as set forth in the TCAC List. For `Very Low Income Units', as generally described herein, `Annual Maximum Very Low Income Rent' shall be equal to the product obtained by multiplying (i) thirty percent (30%) by (ii) the imputed income limitation applicable to a unit pursuant to Section 42(g)(2)(C) of the Internal Revenue Code in which the maximum income level is fifty percent (50%) of AMGI, subject to any adjustment as set forth in the TCAC List." 06523916819415v2 4 DOCS OC/ 1702582v2/200350-0001 3. Owner to Phase-in Modifications to Defined Maximum Monthly Affordable Rent for Existing Very Low Income and Low Income Qualified Households and Apply Maximum Monthly Affordable Rent to New Very Low Income and Low Income Tenants. Owner agrees that, until such time as the rent charged for a Low Income Household or a Very Low Income Household for any existing tenant has been increased to the maximum rent set forth in the TCAC List for the applicable income category, the rent to be charged to such household in a calendar year shall not be increased over the rent charged in the previous calendar year by more than the greater of (i) three percent (3%) or (ii) (A) with respect to any Low Income Household, the amount by which thirty percent (30%) of sixty percent (60%) of the Orange County Median Income, including a reasonable utility allowance, for such calendar year exceeds thirty percent (30%) of sixty percent (60%) of the Orange County Median Income, including a reasonable utility allowance, for the previous calendar year and (B) with respect to any Very Low Income Household, the amount by which thirty percent (30%) of fifty percent (50%) of the Orange County Median Income, including a reasonable utility allowance, for such calendar year exceeds thirty percent (30%) of fifty percent (50%) of the Orange County Median Income, including a reasonable utility allowance, for the previous calendar year. The limitation on rent increases set forth in this Section 4 shall apply only with respect to Project tenants, existing upon the Effective Date. 4. No Other Modifications. Except as amended hereby, the Original Agreement remains in full form and effect and is hereby ratified and confirmed. If there are any inconsistencies between the Original Agreement and this Amendment, this Amendment shall control. 5. Counterparts. This Amendment may be executed in several counterparts, and all so executed shall constitute one agreement, binding on all the parties hereto. Any counterpart of this Amendment that has attached to it separate signature pages that together contain the signatures of all parties hereto shall for all purposes be deemed a fully -executed instrument and shall become effective and binding as of the Effective Date. [Signature Pages Follow Immediately] 065239\6819415v2 DOCSOC/ 17025R2v2/200350-0001 IN WITNESS WHEREOF, the City, the Authority and Owner have executed this Amendment all as of the date first written above. TUSTIN HOUSING AUTHORITY, a public body CITY OF TUSTIN, a Califomia municipal corporate and politic corporation 0 In Jeffrey C. Parker Executive Director ATTEST: M Erica Rabe City Clerk Services Supervisor APPROVED AS TO FORM: M David E. Kendig, Esq. City Attorney and Authority General Counsel Celeste Stahl Brady, Esq. Authority Special Counsel Jeffrey C. Parker City Manager Signatures for Amendment Continue on Following Pagel 065239\6819415v2 6 DOCSOC/1702582v2/200350-0001 [Signatures for Amendment Continued from Previous Page] OWNER: ANTON LEGACY TUSTIN L.P., a California limited partnership By: PacH Anton South Holdings, LLC, a California limited liability company, its Managing General Partner By: Pacific Housing, Inc., a California nonprofit public benefit corporation, its Sole Member and Manager M Mark A. Wiese, President By: Anton Legacy, LLC, a California limited liability company, its Co -General Partner LE LN 065239\6819415v2 DOCSOC/ 17025 82v2/200350-0001 Steven L. Eggert, Manager Peter H. Geremia, Manager 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 ss. COUNTY OF On before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 06523%5819915v2 DOCSOCA 702582v2/200350-0001 EXHIBIT "A" Leval Description 065239\6819415v2 DOCSOC/ 1702582v2/200350-0001 Exhibit "A" REAL PROPERTY IN THE CITY OF TUSTIN, COUNTY OF ORANGE, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS: PARCEL A: PARCEL 2 AS SHOWN ON THAT CERTAIN LOT LINE ADJUSTMENT 2013-01 RECORDED APRIL 29, 2013 AS INSTRUMENT N0, 2013000254548, ORANGE COUNTY RECORDS, DESCRIBED AS FOLLOWS: LOT 20 OF TRACT NO 17404, IN THE CITY OF TUSTIN, COUNTY OF ORANGE, STATE OF CALIFORNIA, PER MAP FILED IN BOOK 907, PAGES 6 THROUGH 42, INCLUSIVE OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. TOGETHER WITH THAT PORTION OF LOT MMM OF SAID TRACT NO. 17404 DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHEASTERLY TERMINUS OF THAT CERTAIN COURSE ON THE SOUTHWESTERLY BOUNDARY OF SAID LOT MMM HAVING A BEARING AND DISTANCE OF "N15°09'38"W 260.76' " AS SHOWN ON SAID TRACT NO. 17404; THENCE ALONG SAID COURSE, NORTH 15°09'38" WEST 227.67 FEET; THENCE LEAVING SAID SOUTHWESTERLY BOUNDARY, NORTH 74°50'22" EAST 19.46 FEET; THENCE SOUTH 15°09'38" EAST 17.82 FEET; THENCE NORTH 74°50'22" EAST 19.84 FEET; THENCE SOUTH 15°09'38" EAST 55.00 FEET; THENCE SOUTH 74°50'22" WEST 0.50 FEET TO THE BEGINNING OF A CURVE CONCAVE SOUTHEASTERLY HAVING A RADIUS OF 9.50 FEET; THENCE SOUTHWESTERLY AND SOUTHERLY ALONG SAID CURVE 14.92 FEET THROUGH A CENTRAL ANGLE OF 90°00'00"; THENCE SOUTH 15009'38" EAST 124.35 FEET TO THE BEGINNING OF A NON -TANGENT CURVE CONCAVE SOUTHEASTERLY HAVING A RADIUS OF 9.50 FEET, A RADIAL LINE TO SAID POINT BEARS NORTH 19'23'11- WEST; THENCE SOUTHWESTERLY AND SOUTHERLY ALONG SAID CURVE 14.22 FEET THROUGH A CENTRAL ANGLE OF 85046'27"; THENCE SOUTH 15°09'38" EAST 11.53 FEET TO A POINT OF THAT CERTAIN COURSE ON THE SOUTHEASTERLY BOUNDARY OF SAID LOT MMM HAVING A BEARING AND DISTANCE OF "N 74050'22" E 30.00'" AS SHOWN ON SAID TRACT NO. 17404; THENCE ALONG SAID COURSE, SOUTH 74050'22" WEST 20.50 FEET TO THE POINT OF BEGINNING. APN: 430-381-26 (LOT 20) AND A PORTION OF 430-381-62 (LOT MMM) (apts) LOTS NNN AND PPP OF TRACT NO. 17404, IN THE CITY OF TUSTIN, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP FILED IN BOOK 907, PAGES 6 THROUGH 42 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. APN: 430-381-37 (LOT NNN) and 430,-381-36 (LOT PPP) EXCEPTING FROM SAID PARCELS A AND B: ANY AND ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS, NATURAL GAS RIGHTS AND OTHER HYDROCARBON BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM AND ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE SAID PARCELS A AND B, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING FOR AND STORING IN AND REMOVING THE SAME FROM SAID PARCELS A AND B OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THE SAID PARCELS A AND B, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE SAID PARCELS A AND B, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO RE -DRILL, RE -TUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELL OR MINES; BUT WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE OR OPERATE THROUGH THE SURFACE OF THE SAID PARCELS A AND B OR OTHERWISE TO ADVERSELY AFFECT THE USE OR OPERATION OF THE SAID PARCELS AS ANTICIPATED BY THE DDA** OR THE STRUCTURAL INTEGRITY OF ANY IMPROVEMENTS PERMITTED PURSUANT TO THE DDA ON THE SAID PARCEL A AND B, AS RESERVED BY THE CITY OF TUSTIN IN THAT CERTAIN QUITCLAIM DEED TO THE ANTON LEGACY TUSTIN L.P., A CALIFORNIA LIMITED PARTNERSHIP RECORDED f aY 23 , 2013 AS INSTRUMENT NO. 20I30o03tibqq,j, ORANGE COUNTY RECORDS. NOTWITHSTANDING THE FOREGOING, THE RESERVATION BY THE CITY OF TUSTIN OF THE RIGHTS AND INTERESTS ABOVE SHALL NOT BE DEEMED TO LIMIT THE RIGHT OF SAID ANTON LEGACY TUSTIN L.P., A CALIFORNIA LIMITED PARTNERSHIP, AND ITS SUCCESSORS AND ASSIGNS, TO DRIVE PILES, CONSTRUCT CAISSONS, FOUNDATIONS, BASEMENTS AND OTHER SUBSURFACE IMPROVEMENTS, AND OTHERWISE ENGAGE IN SUBSURFACE CONSTRUCTION ACTIVITY IN ORDER TO CONSTRUCT THE IMPROVEMENTS- ON MPROVEMENTS ON THE SAID PARCELS A AND B. ALSO EXCEPTING FROM SAID PARCELS A AND B: (apts) ANY AND ALL WATER, WATER RIGHTS OR INTERESTS THEREIN APPURTENANT OR RELATING TO THE SAID PARCELS A AND B OR OWNED OR USED BY THE CITY OF TUSTIN IN CONNECTION WITH OR WITH RESPECT TO THE SAID LAND NO MATTER HOW ACQUIRED BY THE CITY OF TUSTIN, WHETHER SUCH WATER RIGHTS SHALL BE RIPARIAN, OVERLYING, APPROPRIATIVE, LITTORAL, PERCOLATING, PRESCRIPTIVE, ADJUDICATED, STATUTORY OR CONTRACTUAL, TOGETHER WITH THE PERPETUAL RIGHT AND POWER TO EXPLORE, DRILL, RE -DRILL AND REMOVE THE SAME FROM OR IN THE SAID PARCELS A AND B, TO STORE THE SAME BENEATH THE SURFACE OF THE SAID PARCELS A AND B AND TO DIVERT OR OTHERWISE UTILIZE SUCH WATER, RIGHTS OR INTERESTS ON ANY OTHER PROPERTY OWNED OR LEASED BY THE CITY OF TUSTIN; BUT WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE OR OPERATE THROUGH THE SURFACE OF THE SAID PARCELS A AND B OR OTHERWISE TO ADVERSELY AFFECT THE USE OR OPERATION OF THE SAID PARCELS AS ANTICIPATED BY THE DDA** OR THE STRUCTURAL INTEGRITY OF ANY IMPROVEMENTS PERMITTED PURSUANT TO THE DDA ON THE SAID PARCELS A AND B AS RESERVED BY THE CITY OF TUSTIN 1N THAT CERTAIN QUITCLAIM DEED TO THE ANTON LEGACY TUSTIN L.P., A CALIFORNIA LIMITED PARTNERSHIP RECORDED Mav 23 , 2013 AS INSTRUMENT NO. 2013 ppp313921, ORANGE COUNTY RECORDS, NOTWITHSTANDING THE FOREGOING, THE RESERVATION BY THE CITY OF TUSTIN OF THE RIGHTS AND INTERESTS ABOVE SHALL NOT BE DEEMED TO LIMIT THE RIGHT OF SAID ANTON LEGACY TUSTIN L.P., A CALIFORNIA LIMITED PARTNERSHIP, AND ITS SUCCESSORS AND ASSIGNS, TO DRIVE PILES, CONSTRUCT CAISSONS, FOUNDATIONS, BASEMENTS AND OTHER SUBSURFACE IMPROVEMENTS, AND OTHERWISE ENGAGE IN SUBSURFACE CONSTRUCTION ACTIVITY IN ORDER TO CONSTRUCT THE IMPROVEMENTS ON THE SAID PARCELS A AND B. ** "DDA" SHALL REFER TO THAI' CERTAIN UNRECORDED DISPOSITION AND DEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF TUSTIN AND ANTON LEGACY TUSTIN L.P., A CALIFORNIA LIMITED PARTNERSHIP AS DISCLOSED BY THAI' CERTAIN "MEMORANDUM OF DISPOSITION AND DEVELOPMENT AGREEMENT" RECORDED M" 25_, 2013 AS INSTRUMENT NO. 20 1 3 0003139 1q_, ORANGE COUNTY RECORDS (apts)