SR-11J (2)
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Santa Monica, California
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HD'ML:pbh
Council Mtg. 9/14/82
TO:
Mayor and City Council
SUBJECT.
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Addendum to Item 1~
City Staff
FROM:
Amendment No. 2 to Agreement for Sale of land for Private Development
Introduction
Since the writing of the original staff report on this item, counsel to the
California Housing Finance Agency (CHFA) has reviewed the Agreement and
proposed Amendment No. 2 and has requested that the Agreement be subordinated
to a Supplemental Agreement between CHFA and the developer. Staff has therefore
revised proposed Amendment No.2 to reflect this request.
Intent of t~e Supplemental A~r~ement
In 1980, Congress adopted the Mortgage Subsidy Bond Tax Act which more narrowly
defined the conditions under which mortgage revenue bonds could qualify for
tax exemption. The Supplemental Agreement requires the developer to comply
with the Act since the project will be financed with the proceeds of a
revenue bond issued by CHFA. Major requirements of the Act provide (1) that
a minimum of 20% of the units financed be for occupancy by lower income
households, and (2) all units are rented for a minimum of 20 years. These
and other provisions of the Supplemental Agreement do not appear to be
in conflict with the intent of the Agreement for SaJe of land for Private
Development approved by Council on February 14. 1981.
Staff Recommendation
Staff recommends that Council approve and authorize execution of the
attached Amendment No.2.
Prepared by: Mindy Leiterman
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AMENDMENT NUMBER 2
AMENDMENT TO AGREEMENT fOR
SALE OF LAND fOR PRIVATE DEVELOPMENT
BY AND BETWEEN
CITY OF SANTA MONICA
AND
OCEAN PARK VILLAS
Whereas, the City of Santa Honica (hereinafter IICltyll) and Ocean Park
Villas (hereinafter If DevelopeI'll) entered into an Agreement for Sale of Land for
Private Development (hereinafter llAgreementll) dated February 23, 1981, for the purchase
of certain land in the City of Santa Monica (hereinafter Itproject site");
Whereas, under the terms of said Agreement, it was contemplated that
Developer would obtain a loan for the construction of low and moderate income housing
on the project site, said loan to be insured by the Secretary of Housing and Urban
Devefopment (hereinafter "Secretarylt);
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Whereas, On July IS, 1982. the Secretary issued to Active Mortgage
Corporation an amended Commitment for Insurance of Advances which committed tne
Secretary, in accordance with its terms and upon satisfaction of certain conditions,
to endorse for insurance a mortgage note in the amount of $1.557,000.00 to be secured
by a mortgage on the project site and the project designated as FHA Project No.
122-35547 to be constructed thereon;
Now, Therefore. in order to induce the Secretary to insure said mortgage
note in accordance with the Regulations of the Department of Housing and Urban
Development (hereinafter "Departmentl'). the parties hereto agree to amend the
Agreement as fallows.
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I. Notwithstanding anything in the ~greement to the contrary. in the
event that any provision of the Agreement in any way tends to contradict. modify
or in any way change the terms of the Regulatory Agreement encumbering the project.
entered into between the Secretary and the Developer. the terms of the Regulatory
Agreement shall prevail and govern and said Agreement shall be subordinate to the-
U.S. HOUSing Act of 1937; or if any provision of the Agreement in any way tends to
limit the Department in its administration of the National Housing Act. as amended.
or the regulations and instructions issued pursuant thereto. the Agreement shall
be deemed amended so as to comply with the National Housing Act.
2. In the event that the Secretary. or his successors in office. shalt
acquire title to the project and the project site. through the operation of his
contract of mortgage insurance. either bV foreclosure or deed in lieu of foreclosure,
the City shall have 90 days from the date of acquisition by the Secretary. or his
successors in office, upon terms and conditions as approved by the Secretary.
within whIch ta exercise its right to purchase under Section 8(a)(ii} of the Agreement.
Should the City fail to exercise its option to purchase. within the 90 day period
or such period as it may be extended at the sole discretion of the Secretary. the
option to purchase shall be null and void.
3. The City hereby _grees that its right to reenter and take control
of the project site under the terms of Section 604 of the Agreement is subje't and
subordinate to the rights of the Secretary. or the holder of any mortgage insured
by the Secretary. under the terms of the Mortgage, the Regulatory Agreement, the
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Building loan Agreement, the Performance Bond, or other form of Assurance of
Completion, all of whIch documents will be entered into pursuant to the Secretary.s
endorsement of the mortgage note under the terms of the Commitment of Insurance of
Advances. Nothing in the Agreement sh~l' be deemed in any way to impair the rights
of the Secretary. or the holder of any mortgage, under the terms of said documents.
4. Any right of reentry shall be subject and subordinate to the
Supplemental Agreement entered into between the Cal1fornia Housing Finance Agency
and Developer that is in substantially the form attached hereto as Exhibit A.
5 No agreement entered into between the City and the Oeveloper subsequent
to the date of this Amendment shall in any way be deemed to supersede or modify this
Amendment without the prior written approval of the Secretary.
IN WITNESS WHEREOF. the City and the Developer have signed this Amendment
as of the dates set opposite their signatures.
APPROVED AS TO FORM.
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ROBERT M. MYERS U
City Attorney
City of Santa Monica
, 1982
By
JOHN H. ALSCHULER, JR.
City Manager
. 1982
By
RUTH VANNATTA GOLDWAY
Ma yo r
Oeve 1 oper:
Ocean Park Villas, a limited partnership
sE11: /~, 1982
By
6.EA/E/t'RL ~R~4"R"
Page 2 of 2
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EXHIBIT A
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SUPPLEMENTAL AGREEMENT
Th~s Agreement is made by and between
_ _ _ ., , ("Developer'l) a!")d the CallfornJ.a
Hous~ng F2nance Agency ("Agency") as of this 7th day of
$~pte~ber_, 1982.
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RecJ.tals
A. Agency has conditlonally committed to provlde
constructJ.on loan and permanent mortgage financJ.ng through
the J.ssuance of its Rental Housing Revenue Bonds (FF~ Insured
Loans) 1982 Series A (the "Bonds") for a housJ.ng development
(the "Development") to be bUllt and managed by Developer.
Tbe Development is generally descrJ.bed as
(name) conslstJ.ng of approxJma~Aly dwelllng units
located ln the
(Cl tyjcounty), further descrlbed in Fxh~bl t nA" hereto
B. Construction loan advances by the Agency to
flnance the Development wl11 be insured by the Federal
HousIng Ad."T11ni stratlon ("FHA ") pursuant to Sect10n 220,
221(d)(3) or 22l(d)(4) of the National HO~~1ng Act. as
amended.
c. ThlS Agreement is part of that certaln
Development Loan Corr~ltment between Developer and Agency
dated ..' 1982, incorporated by reference herein.
NOW, THEREFORE. in order to provide further
assurances to Agency as a lender of the financial lntegrity
of the Development, and to insure the t1mely payment by
Developer of principal and interest on the Agency's loan
(ffLoan") to finance the Development. and for the Agency to be
in a pOSition to comply with FHA's requirements imposed on
FHA mortgagees, the Zenov~ch-Moscone-Chacon HOUSing and Home
Flnance Act. as amended, ("Act") and the Mortgage Subsidy
Bond Tax Act of 1980, as amended, the partles hereto agree as
follows:
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1. Developer agrees to execute ln a tlmely
manner any extenslons of the PHouslng ASslstance
_.Payments ContractU referred to in paragraph l(e) of the
Development Loan CommItment.
2. Any impounds for taxes, hazard lnsurance,
mortgage insurance, reserves for replacement, or any
other accounts establlshed under the FHA loan documents
for the Development shall be held and ffiaIntalned by the
Agency and dlsbursed upon tpe request or with the
approval of FHA by the Agency for the purposes for which
s~ch accounts were establIshed.
3. Agency shall be rnalntalned as a loss
payee or coinsured on any POllCY of fIre, casualty,
cop.structlon or llablllty insurance obtained or
rnalntained by the Developer in connectlon WIth the
constructlon and management of the Development.
4. Agency shall have the rIght to Inspect
the bUlld~ng5 (lncludlng the ~nterior unlts thereof)
grounds, books and records, and any fInanclal records
malnta~ned for the Development, upon request of the
Agency, dur~n9 normal business hours.
s. Developer shall provlde Agency WIth
caples of the following documents at such tIme as they
are fu~nished to or recelved from the Department of
P.oCls~ng and Urban Development ("HUD") and/or FI-IA:
a. Annual audlted f~r.anc~al statements In a
format approved by HUD.
b. BUD annual management reVlews of the
project.
c. BUD's approval of all rent increases.
6. Durlng the f~rst three years of the
Development's operatlons, Developer agrees to rnalntaln
wlth the Agency, in cash or cash equIvalent, an
operating deflclt escrow meetlng the terms set forth ~n
the Agency's Development Loan CommItment.
7. The Developer covenants and agrees wlth
the Agency that not less than 20 percent of the total
number of unlts in the Development shall be for
occupancy on a priority baSIS by lower-income
households, as defined in Section 50079.5 of the Act at
affordable rents, as defined by the Act, for a perlod of
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not less than 20 years flom the date the Loan is made.
The provis~ons of th1s paragraph 7 shall be blndlng upon
all successors in i~terest of the Developer.
8. The Developer covenants w1th respect to
the Development that;
a. At all times during a twenty-year periodl
cOF.menclng wlth the date the DevelQP~ent is flrst
ava~lable for occupancy, the Developer wlll take
all necessary actions to ensure tha~ 100 percent of
the dwelling unlts in the Development are rented
and occupled. or avallable for rental by, persons
and faml11es other than the owner of the
Development or an lndlvldual related to such owner
who are members of the general publlC. and at least
20 percent of the dwell~ng units in the Development
are occupled by persons and farnl11es of low or
moderate income wlthln the meaning of Section
l67(k){3)(B) of the Internal Revenue Code of 1954.
as amended (referred to herein as ~persons and
families of low or moderate income~ or "persons or
famil~es of low or moderate ~ncomeJl). The status
of a tenant as "the owner of the Development or an
IndIVIdual related to such owner" shall be
determ~ned in accordance with Section 103(b)(4)(A)
of the Internal Revenue Code of 1954, and any
proposed, temporary or flnal regulatIons
promulgated thereunder applicable to the
Developffient. For the purpose of compliance wlth
thlS paragraph, tenants who quallfy as persons or
familles of low or moderate income at the
corr~encement of their tenancy shall be deemed to be
persons or farnllies of low or moderate income for
the duration of thelr tenancy. and vacant unlts as
to which the immediately precedlng tenants were
persons or fam~lies of low or moderate income shall
be deemed to be occupled by persons or famllles of
low or moderate income so long as they rema1n
available for rent by persons and fam~l~es of low
or moderate income. In the event such a vacant
unit remains vacant fer more than thirty (30) daysl
and the number of dwelling un~ts occupied by
persons and families of low or moderate 1ncome
(excluding vacant units) constitutes less than 20%
of the unlts in the Development. the Developer
shall make such vacant unit available to persons
and famllies of low or moderate income at annual
rentals not exceeding 30% of the low or moderate
income level. as determined pursuant to Section
167(k)(3)(B} of the Internal Revenue Code_of 1954,
as amended.
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b. The Developer and the Agency shall at all
times do and perform all acts and thlr.gs per~~tted
by law and necessary or deslrable ~n order to
assure that lnterest pald by the Agency on the
Bonds of the Agency the proceeds of WhlCh are being
used to make the Loan shall, for the purposes of
Federal income taxes and State of Callforn~a
personal ~ncome taxes, be exempt from all in=ome
taxation under any valid provislon of law, except
that the Developer and the Agency shall rot be in
v~olatlon of thlS covenant as a result of any Bend
being held by a person who, wlthln the meaning of
Sectlon 103{b){lO} of the Internal Revenue Code of
1954, as affiended, is a "substantlal user" of the
facllitles w1th respect to WhlCh the proceeds of
the funds were used or is a "related person" wlthln
the rneanlng of Section l03(b)(6)(C) of the Internal
Revenue Code of 1954, as arr.ended.
9. In the event that the Developer transfers
t~tle or the rlghts of possesslon and control of the
Development to a th1rd party, the Developer hereby
covenants and agrees to ~nclude prov~sions, in a form
substant~ally SImilar to Exhlb~t B hereto, in all
documents involved wlth such transfer which regulre the
acqulrlng party, as well as any successors in lnterest
to such party, to assume the oblIgations of the
Developer imposed by paragraph 8 of this Agreement. In
the event that such provislons are not Included ~n any
such document, such provISIons shall be deemed to be
lncluded In such document. The Agency is a thlrd party
beneflciary of any transfer docuwent provls1ons requlred
pursuant to thIS Section w~th the rIght to enforce such
provls1ons agaInst any thIrd party transferee of the
Development. The Developer hereby aSSIgns to the Age~cy
any and all rIghts that ~t may have to enforce agalnst
thlrd party transferees those transfer document
provis~ons requIred pursuant to thlS Sectlon.
10. Notwithstandlng any other prOVISIons of
thIS Agreement, If an involuntary loss or the
substantial destruction of the Development as a result
of unforeseen events such as flre, seIzure, requls~tlon,
foreclosure or condemnation occurs WhICh would render
compliance wlth the prOVisions of Sections 7 through 9
of this Agreement unnecessary to preserve the exemption
from federal income taxes of interest on the Bonds and
to comply w~th the provisions of the Act, and the
Secretary of Housing and Urban Development or his
successor has been ass~gned the loan relatlng to the
Development or holds tl tIe to the Development, _sald
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Secretary snaIl not be bound by the covenants,
cond~t~ons and restr1ct1ons of Sect10ns 7 througr 9 of
this Agreement.
DEVELOPER
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CALIFORNIA HOUSH..... Fr~.~t'-~-
AGENCY _ -,
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D~~~;f~p-~nt=W;;ic-e~ "
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04002~-0002-068-0393J
08/24/82
HD'ML'pbh
Counc.i I Mtg
9/14/82
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"a
1+ 00
Monica, Cal ifornia
76
/ /-::T
TO:
Mayor and City Council
FROM'
CIty Staff
SUBJECT
./
Addendum to Item lit
Amendment No.2 to Agreement for Sale of Land for Private Development
Introduction
Since the writing of the original staff report on this item, counsel to the
California Housing Finance Agency (CHFA) has revIewed the Agreement and
proposed Amendment No.2 and has requested that the Agreement be subordinated
to a Supplenental Agree~ent between CHFA and the developer. Staff has therefore
revised proposed ~endment No.2 to reflect this request
Intent of the Supplemental Agree~ent
In 1980, Congress adopted the Mortgage Subsidy Bond Tax Act which more narro\11y
defined the conditions under which mortgage revenue bonds could qualify for
tax exemption. The Supplemental Agreement requires the developer to comply
wIth the Act since the project will be financed with the proceeds of a
revenue bond issued by CHFA. Major requirements of the Act provide (1) that
a minImum of 20% of the unIts financed be for occupancy by lower income
households, and (2) all units are rented for a minimum of 20 years. These
and other provisions of the Supplemental Agree~ent do not appear to be
in conflict v'lth the intent of the Agreement for Sale of Land for Private
Development approved by Council on February 14, 1981.
Staff Recommendation
Staff recommends that Council approve and authorize execution of the
attached Amendment No. 2
Prepared by' Mindy Leiterman
/tIN) To
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