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HomeMy WebLinkAbout07 SECOND AMENDMENT TO THE REGULATORY AGMT & DECLARATION OF RESTRICTIVE COVENANTS FOR COVENTRY COURTMEETING DATE: FEBRUARY 6, 2018 TO: JEFFREY C. PARKER, CITY MANAGER & HOUSING AUTHORITY EXECUTIVE DIRECTOR FROM: TUSTIN HOUSING AUTHORITY SUBJECT: SECOND AMENDMENT TO THE REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS FOR COVENTRY COURT SUMMARY The Tustin Housing Authority ("Authority") is seeking authorization for an amendment to the Regulatory Agreement and Declaration of Restrictive Covenants for Coventry Court. RECOMMENDATION 1. It is recommended the City Council approve and authorize the City Manager, or his designee, to execute the Second Amendment to the Regulatory Agreement and Declaration of Restrictive Covenants. 2. It is recommended the Tustin Housing Authority Commission approve and authorize the Executive Director, or his designee, to execute the Second Amendment to the Regulatory Agreement and Declaration of Restrictive Covenants. FISCAL IMPACT Meta Housing, a General Partner affiliate of Tustin Coventry Seniors, L.P., has agreed to reimburse the City for attorney fees and staff costs associated with the review and approval of the Second Amendment. CORRELATION TO THE STRATEGIC PLAN Entering into the Second 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. Agenda Report February 6, 2018 Page 2 BACKGROUND Tustin Coventry Seniors, L.P. ("Developer") developed and owns Coventry Court, a 240 -unit senior project with 153 affordable units at 17318 Cambridge Way in Tustin Legacy. On September 30, 2010, the City, the Tustin Community Redevelopment Agency and Tustin Coventry Seniors, L.P ("Developer") entered into a Regulatory Agreement and Declaration of Restrictive Covenants ("Regulatory Agreement"). On March 20, 2012, the City, the City acting as the Successor Agency to the former Tustin Community Redevelopment Agency, the Tustin Housing Authority, and the Developer entered into a First Amendment. The First Amendment acknowledged the dissolution of Redevelopment and that the Regulatory Agreement is now an asset of the Tustin Housing Authority. The Developer is seeking to refinance the subject property with a new loan using a Housing and Urban Development ("HUD") insured mortgage. The lender is Red Mortgage Capital, LLC ("Lender"). HUD has assigned an underwriter to review the loan application. It is anticipated in mid-February, HUD will issue a firm commitment and the Developer and the Lender can lock in the interest rate. One condition is HUD requires all other financing and regulatory agreements be subordinate to their First Trust Deed ("First"). Pending City Council and Housing Authority Commission approval of the Second Amendment, the Lender will submit closing documents to HUD in March and HUD should approve the closing documents before or by April. The Second Amendment will be executed when the loan closes. The City Attorney's Office has reviewed and approved the attached Second Amendment, which subordinates to the First while maintaining the project's age and income restrictions. Staff is recommending the City Council and Housing Authority Commission approve and authorize entering into the Second Amendment with the Developer. Staff is available for any questions the City Council and Housing Authority Commission may have. Joh tuchanan Jerry Craig / ctor of Economic Development Deputy Director of Eic Development Tustin Housing Authority Tustin Hou'sLing­Authority Attachment: Second Amendment to the Regulatory Agreement and Declaration of Restrictive Covenants CITY OF TUSTIN OFFICIAL BUSINESS DOCUMENT EXEMPT FROM RECORDING FEES PER GOVENMENT CODE SECTION 6103 AND 27283 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Tustin 300 Centennial Way Tustin, CA 92780 Attention: City Clerk [SPACE ABOVE FOR RECORDER]. This SECOND AMENDMENT TO REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS ("Amendment") is made as of , 20187 by TUSTIN COVENTRY SENIORS, LP, a California limited partnership ("Borrower") and the CITY OF TUSTIN, a municipal corporation ("City"), and the TUSTIN HOUSING AUTHORITY, a public body corporate and politic ("Authority"). WHEREAS, Borrower has obtained financing from Red Mortgage Capital, LLC, a Delaware limited liability company ("Lender"), for the benefit of a project known as Coventry Court, located at 17318 Cambridge Way, Tustin, Orange County, California ("Project"), which loan is secured by a Multifamily Deed of Trust, Assignment of Leases and Rents and Security Agreement dated as of , 2018 from Borrower in favor of Lender, to be recorded in the Official Records of Orange County (the "Official Records") concurrently herewith ("Security Instrument"), and which loan is insured by the United States Department of Housing and Urban Development ("HUD"); WHEREAS, Borrower agreed to provide affordable senior citizen housing as a condition for approval from City to construct the Project and to receive a density bonus and, in connection therewith, the City required certain restrictions be recorded against the Project; and WHEREAS, Borrower, City, and the Tustin Community Redevelopment Agency (predecessor -in -interest to the Authority) entered into that certain Regulatory Agreement and Declaration of Restrictive Covenants dated September 20, 2010, recorded in the Official Records on October 12, 2010 as Instrument No. 2010000514068, as amended by (a) that certain First Amendment to Regulatory Agreement and Declaration of Restrictive Covenants dated March 20, 2012 and recorded in the Official Records on June 137 2012 as Instrument Nos. 2012000336013, 20120003360147 2012000336015, and (b) the certain Modification of Regulatory Agreement and Declaration of Restrictive Covenants Coventry Court Qualified Project Period Review Certificate dated July 27, 2012 and recorded in the Official Records on July 30, 2012 as Instrument No. 2012000431346 with respect to the Project as more particularly described in Exhibit A attached hereto (as amended, the "Restrictive Covenants"). WHEREAS, HUD requires as a condition of its insuring Lender's financing to the Project, the lien and covenants of the Restrictive Covenants be subordinated to the lien, covenants, and enforcement of the Security Instrument; and WHEREAS, for the specific purpose of assisting Borrower with obtaining the above referenced Mortgage Loan, the City and Authority have agreed to subordinate the Restrictive Covenants to the lien of the Mortgage Loan in accordance with the terms of this Amendment. NOW, THEREFORE, in consideration of the foregoing and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: (a) In the event of any conflict between any provision contained elsewhere in the Restrictive Covenants and any provision contained in this Amendment, the provision contained in this Amendment shall govern and be controlling in all respects as set forth more fully herein. (b) The following terms shall have the following definitions: "Code" means the Internal Revenue Code of 1986, as amended. "HUD" means the United States Department of Housing and Urban Development. "HUD Regulatory Agreement" means the Regulatory Agreement for Multifamily Projects between Borrower and HUD with respect to the Project, as the same may be supplemented, amended or modified from time to time. "Lender" means Red Mortgage Capital, LLC, a Delaware limited liability company, its successors and assigns. "Mortgage Loan" means the mortgage loan made by Lender to the Borrower pursuant to the Mortgage Loan Documents with respect to the Project. "Mortgage Loan Documents" means the Security Instrument, the HUD Regulatory Agreement and all other documents required by HUD or Lender in connection with the Mortgage Loan. "National Housing Act" means the National Housing Act of 1934, as amended. "Program Obligations" has the meaning set forth in the Security Instrument. "Security Instrument" means the mortgage or Multifamily Deed of Trust, Assignment of Leases and Rents and Security Instrument from Borrower in favor of Lender, as the same may be supplemented, amended or modified. "Surplus Cash" has the meaning specified in the HUD Regulatory Agreement. (c) Notwithstanding anything in the Restrictive Covenants to the contrary, the provisions hereof are expressly subordinate to the Mortgage Loan Documents, including without limitation, the Security Instrument, and (ii) Program Obligations (the Mortgage Loan Documents and Program Obligations are collectively referred to herein as the "HUD Requirements"). Borrower covenants that it will not take or permit any action that would result in a violation of the Code, HUD Requirements or Restrictive Covenants. In the event of any conflict between the provisions of the Restrictive Covenants and the provisions of the HUD Requirements, HUD shall be and remains entitled to enforce the HUD Requirements. Notwithstanding the foregoing, nothing herein limits the City's or the Authority's ability to enforce the terms of the Restrictive Covenants, provided such terms do not conflict with statutory provisions of the National Housing Act or the regulations related thereto. The Borrower represents and warrants that to the best of Borrower's knowledge the Restrictive Covenants impose no terms or requirements that conflict with the National Housing Act and related regulations. (d) In the event of foreclosure or deed in lieu of foreclosure, the Restrictive Covenants (including without limitation, any and all land use covenants and/or restrictions contained herein) shall automatically terminate, with the exception of the Post - Foreclosure Restrictions described in Section (e) below and the requirements in 26 U.S.C. 42(h)(6)(E)(ii), or as otherwise approved by HUD. (e) Notwithstanding paragraph (d), in the event of a foreclosure of Lender's interest under the Security Instrument or delivery by the Borrower of a deed in lieu thereof (a "Foreclosure"), the income and rent restrictions set forth in Section 3.1, Section 3.2, Sections 3.3.1 through 3.3.4, Section 3.3.9, Section 3.4, and Section 3.7 of the Restrictive Covenants shall continue to apply to the Project (collectively the "Post -Foreclosure Restrictions"). Notwithstanding any termination, in whole or in part, of the Restrictive Covenants, the Post -Foreclosure Restrictions are covenants that shall run with the land and remain in effect until July 1, 2067. Pursuant to Chapter 1 of Title 9 of the Tustin City Code, which provides for a density bonus program as required by California state law, in addition to the City and the Authority, the Post -Foreclosure Restrictions may also be enforced by any tenant occupying a unit at the Project or by Borrower. (f) Borrower, City and Authority acknowledge that Borrower's failure to comply with the covenants provided in the Restrictive Covenants does not and shall not serve as a basis for default under the terms of the Security Instrument, the HUD Regulatory Agreement, or any other document relating to the Mortgage Loan to Borrower for the Project nor shall it serve as a basis for default under the HUD Requirements, unless a default also arises under the HUD Requirements. (g) In enforcing the Restrictive Covenants the City and Authority will not file any claim against the Project or the Mortgage Loan proceeds, any reserve or deposit required by HUD in connection with the Security Instrument or HUD Regulatory Agreement, or the rents or other income from the property other than a claim against: i. Available Surplus Cash, if the Borrower is a for-profit entity; ii. Available distributions of Surplus Cash and residual receipts authorized for release by HUD, if the Borrower is a limited distribution entity; or iii. Available residual receipts authorized by HUD, if the Borrower is a non- profit entity (h) For so long as the Mortgage Loan is outstanding, Borrower, City and Authority shall not further amend the Restrictive Covenants, without HUD's prior written consent. (i) Subject to the HUD Regulatory Agreement, City or Authority may require Borrower to indemnify and hold City or Authority harmless from all loss, cost, damage and expense arising from any claim or proceeding instituted against City or Authority relating to the subordination and covenants set forth in the Restrictive Covenants, provided, however, that Borrower's obligation to indemnify and hold City or Authority harmless shall be limited to available Surplus Cash and/or residual receipts of the Borrower. [SIGNATURES AND ACKNOWLEDGEMENTS BEGIN ON THE NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first written above. BORROWER: TUSTIN COVENTRY SENIORS, LP, a California limited partnership Name: Title: CITY: CITY OF TUSTIN a municipal corporation Jeffrey C. Parker City Manager [Signature must be notarizedl [Signature must be notarizedl AUTHORITY: TUSTIN HOUSING AUTHORITY a public body corporate and politic Jeffrey C. Parker Executive Director [Signature must be notarizedl EXHIBIT A LEGAL DESCRIPTION Real property in the City of Tustin, County of Orange, State of California, described as follows: TRACT PARCEL A: LOT 265 OF TRACT NO. 16581, IN THE CITY OF TUSTIN, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON THE MAP RECORDED IN BOOK 877 PAGES 33 THROUGH 50 INCLUSIVE OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY. EXCEPTING THEREFROM ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM AND ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING OR EXPLORING AND OPERATING THEREFORE AND STORING IN AND REMOVING SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE OR OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED BY MOFFETT MEADOWS PARTNERS, LLC, BY DEEDS RECORDED JULY 29, 2005 AS INSTRUMENT NOS. 2005000587781, 2005000590846, 2005000591024 AND 2005000591381, ALL OF OFFICIAL RECORDS. PARCEL B: A NONEXCLUSIVE EASEMENT FOR ACCESS, INGRESS AND EGRESS AND PARKING AS SET FORTH IN THAT CERTAIN MUTUAL BENEFIT AGREEMENT AND USE AND ACCESS EASEMENTS DATED NOVEMBER 11, 2010 BY AND BETWEEN COLUMBUS SQUARE COMMUNITY ASSOCIATION, A CALIFORNIA NONPROFIT MUTUAL BENEFIT CORPORATION AND TUSTIN COVENTRY SENIORS, LP, A CALIFORNIA LIMITED PARTNERSHIP RECORDED DECEMBER 20, 2010 AS INSTRUMENT NO. 2010000686124 OF OFFICIAL RECORDS.