City of Culver City, California
Agenda Item Report
Meeting Date: 12/05/2011 Item Number: JC-2
JOINT CITY COUNCIL/REDEVELOPMENT AGENCY BOARD AGENDA ITEM:
Approval of a First Amendment to the Disposition and Development Agreement By
and Between The Culver City Redevelopment Agency, The City of Culver City, and
Tilden Terrace, L.P.
Contact Person/Dept.:
John Fisanotti
Tevis Barnes
Phone Number:
(310) 253-5767
(310) 253-5782
Fiscal Impact: Yes [X] No [] General Fund: Yes [] No [X]
Public Hearing: [] Action Item: [] Attachments: [X]
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification E-mail, Agenda and Meetings – City Council, and Redevelopment
Agency, Affordable Housing, Redevelopment Agency Projects and Top Ten Development
Projects (12/01/2011).
Department Approval:
Sol Blumenfeld: (11/22/11)
City Attorney Approval:
Carol Schwab (by H. Baker) (11/28/11)
Agency General Counsel Approval:
Murray Kane: (11/18/11)
Chief Financial Officer Approval:
Jeff Muir (11/29/11)
City Manager/Executive Director Approval:
John Nachbar: (12/01/11)
RECOMMENDATION:
Staff recommends that the Agency Board participates in the deliberation regarding
the First Amendment to the Disposition and Development Agreement for the
development of the Tilden Terrace mixed use, affordable housing project (Project).
Staff recommends the City Council approve the First Amendment to the Disposition
and Development Agreement for the development of the Tilden Terrace mixed use,
affordable housing project (the “Project”.)
BACKGROUND:
On March 21, 2011, the City of Culver City (City) and the Culver City
Redevelopment Agency (Agency) entered into a Disposition and Development
Agreement (DDA) with Tilden Terrace, L.P. (Developer) for the development of a
mixed use affordable housing project. The Developer is an entity formed by the Los
Angeles Housing Partnership, Inc. (LAHP) to develop their property at 11042-52
West Washington Boulevard jointly with property under City ownership at 11054-56
West Washington Boulevard (formerly known as the Pleasantview Site).
City of Culver City, California
Agenda Item Report
Pursuant to the DDA, the City will sell its property to the Developer upon the closing
of construction financing for the Project. In addition to a loan of Former Agency
Funds (including former Housing Set Aside Funds former tax increment funds) from
the City to the Developer, the Project is dependent upon the Developer’s receipt of
tax credits from the State of California Tax Credit Allocation Committee (TCAC) and
commercial financing.
In June of 2011, the project received an award of tax credits from TCAC, and the
Developer is now attempting to obtain the construction financing, conclude sale of
the property, and start construction by December 19, 2011 in accordance with the
timelines contained in the DDA and the Preliminary Reservation Letter from TCAC.
Reasons for the Amendment:
In the ensuing months since the DDA was approved, staff has learned after-the-fact
of certain changes initiated by the Developer in order to improve their TCAC
application. The most significant changes involve a revised project pro forma and
budget. In addition to these project specific changes, staff also became aware of
management changes at LAHP. Based on these changes, staff and City Special
Counsel/Agency General Counsel believe that an amendment to the DDA is needed
for the Project to go forward.
Because of the stay issued by the California Supreme Court on August 11, 2001, the
Agency is prevented from taking action on certain items until the Court renders a
decision (expected by January, 2012) in the case of California Redevelopment
Association et al v. Matosantos et al. Pursuant to the Cooperation Agreement
between the Agency and the City, the City has full authority to amend the DDA as
outlined more fully below. Therefore, the Agency Board is only participating in the
deliberations regarding the proposed Amendment to the DDA.
The Agency and the City entered into a Cooperation Agreement dated January 15,
2011, which was amended on February 22, 2011, and again on March 7, 2011
(collectively, the “Cooperation Agreement”), obligating the City to, among other
things, carry out the Project and obligating the Agency to, among other things, pay
the City’s costs of carrying out the Project. In furtherance of the Cooperation
Agreement and to achieve important municipal and other public purposes pursuant
to Resolutions adopted by the Agency and City on March 7, 2011, the Agency
conveyed the Agency Parcel and other Agency owned properties to the City and
transferred the Agency’s cash accounts (Former Agency Funds) to the City.
Article VIII(c) of the DDA provides the City with the authority to amend the DDA
without further Agency action. Further, Section 708(a) of the DDA provides the City
with the authority, among other things and without further Agency action, to perform
all of the duties and obligations of the Agency under the DDA and to exercise and
have the benefit of all of the Agency’s rights, remedies and interests under the DDA.
City of Culver City, California
Agenda Item Report
Extension Request to TCAC:
Notwithstanding the above efforts of the Agency and the City to ensure that the
Project is an enforceable obligation, and not jeopardized by recent state legislation
and/or the Supreme Court’s pending decision, the construction lender is unwilling to
close on its loan pending the State Supreme Court’s decision regarding
redevelopment law. As a result, the Developer intends on seeking a 90-day time
extension from TCAC in connection with deadline to begin construction. TCAC
regulation 10325 permits Developers under these circumstances to request a 90-day
extension to the project construction start date.
DISCUSSION:
Amendment Contents:
After the City and Agency approved the DDA on March 21, 2011, the Developer filed
its application for tax credits with TCAC. Contained within the TCAC application,
various terms of the Project pro-forma and budget were altered from the version
contained in the approved DDA. Ostensibly, the changes were intended to improve
the Project’s chances of obtaining the critically needed tax credits from TCAC within
the framework of the competitive process used to determine award of tax credits.
In the months of September and October 2011, the Developer provided staff with the
revised project pro-formas and budgets stemming from the changes introduced as
part of the TCAC application. The Developer’s proposed changes to the Project
financing during the construction and permanent phase would result in significant
revisions to the DDA, the Project Budget (Exhibit No. 6 to the DDA), and the Method
of Financing (Exhibit No. 3 to the DDA). It should be noted that: a) funding from
other sources is reasonably anticipated at the levels shown below; and b) the
numbers will be finalized only at closing; and c) the final numbers may vary slightly,
but not significantly from the list below; and d) the City’s contribution is fixed and will
not change in response to minor changes in the levels from the other funding
sources; and therefore, with the City Council’s consent, staff will execute the final
draft of the proposed First Amendment so long as the final numbers do not vary
greatly from the anticipated numbers. As currently negotiated by staff, such
revisions now include:
1. Increasing the Construction Loan during the construction phase from $4,177,217
to $4,923,457;
2. Reducing the Permanent Loan during the permanent phase from $1,798,790 to
$1,710,000;
3. Including as a new source of funding for the Project from the Enterprise Housing
and Green Grant in the amount of $40,000;
4. Eliminating as a source of funding for the Project during the permanent phase the
conditional grant or loan to be awarded to the Developer pursuant to the Federal
Home Loan Bank Affordable Housing Program in the amount of $330,000 (“AHP City of Culver City, California
Agenda Item Report
Funds”) (however, staff insisted that these funds be pursued and the Developer
agreed to apply for them in 2012 which, if awarded, shall cause a corresponding
reduction in the City’s Residential Loan);
5. Eliminating the costs deferred until Completion during the construction phase in
the amount of $132,843; reducing the Deferred Developer Fee during the
construction phase from $1,260,000 to $1,171,543 and eliminating the Deferred
Developer Fee during the permanent phase in the amount of $700,000; reducing
the Limited Partner Capital Contributions during the construction phase from
$3,216,800 to $2,650,000; and,
6. Increasing the additional Limited Partner Capital Contribution during the
permanent phase from $2,740,910 to $4,385,000.
With respect to the changes to the Project pro forma, it should be pointed out that
the City’s/Agency’s total contribution toward the Project under the DDA did not and
would not change, nor did the total Project cost change.
Therefore, in connection with the Agency’s review and approval rights set forth in the
DDA, staff recommends the City Council approve the First Amendment to the DDA
in order to include in the DDA (i) certain warranties, covenants, and representations
to be made by and on behalf of the Developer in connection with Developer’s ability
to carry out the Project and the status of the Developer and its general partners, and
(ii) a requirement for the Developer to submit to the Agency on an annual basis
audited financial statements of its general partners.
Extension Request to TCAC:
No action is needed by either the Agency Board or the City Council. By receiving
and filing Attachment No. 5, the City and the Agency hereby acknowledge receipt of
the construction lender’s concern in its letter dated, November 29, 2011 requesting
an extension of 90-days from TCAC, pursuant to Regulation No. 10325 (c) (8). The
proposed language of the First Amendment also includes a requirement for the
Developer to obtain the written approval of the City Manager prior to requesting an
extension. Staff will provide documentation to the Developer as required per the
regulation. Although this will be a delay, it does greatly improve the overall chance
of successfully closing the transaction. The Developer’s attorney has had numerous
discussions with the Executive Director at TCAC and we believe that this request will
be granted as similar requests have already been received favorably by TCAC.
FISCAL ANALYSIS:
Approval of the First Amendment does not alter the financial terms to the
City/Agency (i.e. the land sale price for the sale of the Agency’s parcel does not
change, the amount of City/Agency financial contribution to the Project cost does not
change, and the total Project budget remains essentially the same).
City of Culver City, California
Agenda Item Report
ATTACHMENTS:
1. Proposed Revised Method of Financing
2. Proposed Revised Project Budget
3. Letter from the City Manager to the Los Angeles Housing Partnership
4. Letter from the Los Angeles Housing Partnership in reply to the City Manager
5. Letter from Wells Fargo Bank stating its inability to fund the construction loan
MOTION:
That the City Council:
1. Approve a First Amendment to the Disposition and Development Agreement
By and Between the Culver City Redevelopment Agency, the City of Culver
City, and Tilden Terrace, L.P.; and,
2. Authorize the City Attorney/City Special Counsel to review/prepare the
necessary documents; and,
3. Authorize the City Manager to execute such documents on behalf of the City of
Culver City.
MEETING DATE: 12.05.11
AGENDA ITEM: Consideration of a First Amendment to the Disposition and
Development Agreement By and Between The Culver City
Redevelopment Agency, The City of Culver City, and Tilden
Terrace, L.P.
ATTACHMENTS
Pages
1. Proposed Revised Method of Financing 1-12
2. Proposed Revised Project Budget 13
3. Letter from City Manager to the Los Angeles
Housing Partnership 14-15
4. Letter from Los Angeles Housing Partnership
in reply to the City Manager 16-18
5. Letter from Wells Fargo 19 ATTACHMENT NO. 2
(Exhibit No. 3 to the DDA)
REVISED METHOD OF FINANCING
This is the Method of Financing attached to the Disposition and Development Agreement by and
between The Culver City Redevelopment Agency (the “Agency”), The City of Culver City (the
“City”) and Tilden Terrace, L.P. (the “Developer”), as amended by that certain First Amendment to
the Disposition and Development Agreement by and between the City and the Developer
(collectively referred to herein as the “DDA”). The DDA relates to Developer’s acquisition of the
Site and development of a 33-unit multifamily housing project (including one manager’s unit and
approximately 10,700 square feet of commercial space), to be rented, at Affordable Rents, to Very
Low Income and Low Income Households. Any reference in this Method of Financing to the
Agency or the Agency Executive Director shall mean and refer to the City and the City Manager,
respectively, when the City is carrying out the duties and obligations or exercising the rights and
remedies of the Agency pursuant to Section 708(a) of the DDA. Any capitalized term not otherwise
defined herein shall have the meaning ascribed to it in the DDA.
The Project will be financed by a combination of the Residential Loan, the Commercial Loan, the
Senior Loan and Developer Equity derived in part from the syndication of the Nine Percent Tax
Credit. The Residential Loan will be used to fund a portion of the Developer’ Acquisition Costs for
the Site in the approximate amount of $5,100,000, with the balance of the Residential Loan used to
fund Project development costs during the Construction Period. Notwithstanding, however, and in
accordance with the DDA, in no event shall the Residential Loan be used to fund other land costs
relating to Off-Site Improvements or costs associated with the commercial component of the Project.
1. Total Project Cost. The parties estimate that the total Project Costs shall be
approximately $23,985,000. Developer acknowledges that the Agency is relying on Developer’s
experience and expertise in establishing the Project Costs and Developer represents that the Project
Budget is based on the best, good faith estimate of the Developer of the costs that are likely to be
incurred for the Project.
2. Sources of Construction Financing. The parties anticipate that the Project Costs
shall be financed during the Construction Period with the following combinations of funds.
Developer must make every reasonable effort to structure the terms of the construction financing in a
way that will minimize the amount of the Agency Loan.
(a) The Construction Loan in the estimated amount of $4,923,457.
(b) The Residential Loan in the amount of $11,805,000. The principal amount of
the Residential Loan shall be reduced by an amount equivalent to the amount
ATTACHMENT 1
1of AHP Funds awarded and received for the Project in accordance with
Section 4 below.
(c) The Commercial Loan in the amount of $3,395,000.
(d) The Enterprise Housing and Green Grant in the amount of $40,000.
(e) Developer Equity consisting of each of the following:
(i) The withholding of a portion of the Developer Fee in the approximate
amount of $1,171,543 (“Deferred Developer Fee”), which will be paid to the
Developer incrementally as follows: (1) $217,886 upon the Completion of the
Project; (2) $544,715 upon the Conversion Date at the Permanent Financing
Event; (3) $108,942 upon the filing and acceptance of Form(s) 8609 for the
Nine Percent Tax Credit; and (4) $300,000 (relating to the commercial
component) to be paid in 20 monthly installments of $15,000 each
commencing with start of construction of the Project. In the event the
Limited Partner Capital Contribution payment amount set forth in (ii) and/or
(iii) of this paragraph 2(e) is less than anticipated or in the event there are cost
overruns not funded or contingencies not otherwise funded by the sources of
funds as described in this Section 2, the funds proposed to pay the Deferred
Developer Fee shall be re-allocated to fund the deficit in the Limited Partner
Capital Contribution payment, any cost overruns not funded, and any
contingencies not otherwise funded by the other sources of funds described in
this Section 2, and that portion of the Deferred Developer Fee equal to the
amount of funds re-allocated shall be foregone by the Developer; and
(ii) A Limited Partner Capital Contribution in the amount of $1,250,000
to be disbursed upon the Construction Financing Event in accordance with
the Developer’s Limited Partnership Agreement; and
(iii) An additional Limited Partner Capital Contribution in the amount of
$1,400,000 to be disbursed upon Notice of Completion in accordance with
the Developer’s Limited Partnership Agreement; and
(iv) Developer shall be responsible during the Construction Period to
provide funds, if and as needed, to pay for any cost overruns not funded and
contingencies not otherwise funded by the sources of funds as described
herein.
3. Sources of Permanent Financing. The parties anticipate that, after the Conversion
Date, the Project Costs shall be financed with the following combinations of funds. The Developer
ATTACHMENT 1
2must make every reasonable effort to structure the terms of the permanent financing in a way that
will minimize the amount of the Agency Loan.
(a) The Permanent Loan in the approximate original principal amount of
$1,710,000.
(b) The Residential Loan referenced in paragraph 2(b) above in the original
principal amount of $11,805,000. If actual Project Costs, as set forth in the
audited cost certification contained in the placed-in-service application
submitted by Developer to the California Tax Credit Allocation Committee
pursuant to Section 10322(i)(1) of Title 4 of the California Code of
Regulations, are less than the total Project Costs set forth in the most recently
approved Project Budget, the resulting cost savings shall be allocated to
reduce the principal amount of the Residential Loan in accordance with
Section 3(e) hereof. The principal amount of the Residential Loan shall be
reduced by an amount equivalent to the amount of AHP Funds awarded and
received for the Project in accordance with Section 4 below.
(c) The Commercial Loan referenced in paragraph 2(c) above in the original
principal amount of $3,395,000.
(d) The Enterprise Housing and Green Grant in the amount of $40,000.
(e) Developer Equity consisting of each of the following:
(i) The Limited Partner Capital Contribution referenced in paragraph
2(e)(ii) above in the amount of $1,250,000; and
(ii) The additional Limited Partner Capital Contribution referenced in
paragraph 2(e)(iii) above in the amount of $1,400,000; and
(iii) An additional Limited Partner Capital Contribution in the amount of
$3,329,574 to be disbursed by Completion in accordance with the
Developer’s Limited Partnership Agreement; and
(iv) An additional Limited Partner Capital Contribution in the amount of
$703,450 to be disbursed upon the Permanent Financing Event in accordance
with the Developer’s Limited Partnership Agreement; and
(v) An additional Limited Partner Capital Contribution in the
approximate amount of $351,976 to be disbursed upon the filing and
acceptance of Form(s) 8609 for the Nine Percent Tax Credit, which amount
ATTACHMENT 1
3may be adjusted pursuant to the provisions and requirements of the federal
Internal Revenue Code, the TCAC Regulatory Agreement and the provisions
of the Limited Partnership Agreement and the Contribution Agreement. In
the event the Limited Partner Capital Contribution, when added to the
Permanent Loan, the Residential Loan, the Commercial Loan and the
Enterprise Housing and Green Grant, is greater than the amount needed to
pay the Project Costs, as set forth in the audited cost certification contained in
the placed-in-service application submitted by Developer to the California
Tax Credit Allocation Committee pursuant to Section 10322(i)(1) of Title 4
of the California Code of Regulations (“Placed-In-Service Application”),
such funds shall be applied to reduce the amount of the Residential Loan.
Developer shall submit to the Agency a copy of the Placed-In-Service
Application, which must include a certification of the amount of tax credit
equity raised and the syndication costs; and
(vi) Developer shall be responsible during the Permanent Period to
provide funds, if and as needed, to pay for any cost overruns not funded and
contingencies not otherwise funded by the sources of funds as described
herein.
4, AHP Funds. The Developer shall seek to obtain a grant or loan for use toward the
Project in the approximate principal amount of $330,000 awarded by a member bank of the Federal
Home Loan Bank under the Federal Home Loan Bank Affordable Housing Program (“AHP Funds”).
If awarded, the AHP Funds shall be subject to terms and conditions that are approved by the City
Manager or designee. If awarded, the principal amount of the Residential Loan shall be reduced by
an amount equivalent to the amount of AHP Funds received for the Project.
5. Project Budget. The parties anticipate that all Project Costs shall be as set forth in
the Project Budget attached to DDA. The Project Budget shall be subject to change from time-to-
time, subject to the prior written approval of the Agency Executive Director or designee (which
approval shall not be unreasonably withheld or delayed), upon which approval the Project Budget
shall be replaced by the approved revised Project Budget. Within the respective times provided
therefor in the Schedule of Performance, the Developer shall demonstrate to the satisfaction of the
Agency Executive Director that the Senior Loan and all Developer Equity will be available for
payment or refinancing of Project Costs when and as required by this Method of Financing and that
the Developer has sufficient funds available for payment of all Project Costs. The amounts set forth
in Sections 2 and 3 hereof (excluding the amounts of the Residential Loan and the Commercial
Loan) are subject to modification pursuant to the final approved Project Budget, which may reflect
additional sources of funding subject to terms and conditions that are approved by the Agency
Executive Director or designee.
ATTACHMENT 1
46. Evidence of Financing. The sum of the Construction Loan plus the Residential Loan
plus the Commercial Loan plus the Developer’s Equity plus the Enterprise Housing and Green Grant,
as provided in Sections 2 and 3 above, shall, at all times, be sufficient to pay all Project Costs as set
forth in the most recently approved Project Budget. Prior to the Construction Financing Event,
Developer shall submit for Agency review and approval evidence of such financing, including: (a)
copies of all loan documents required by the Construction Lender to obtain the Construction Loan;
(b) the Limited Partnership Agreement and other documentation evidencing the availability of the
Developer Equity, including the Limited Partner Capital Contribution; (c) a firm and binding
commitment from the Permanent Lender to provide the Permanent Loan; (d) documentation
evidencing the availability of the Enterprise Housing and Green Grant; and (e) any other documents
reasonably required by the Agency. The Agency shall not unreasonably withhold its approval of the
Developer’s evidence of financing.
7. Residential Loan.
(a) In accordance with and subject to the terms and conditions of the DDA and
this Method of Financing, the Agency agrees to make the Residential Loan to Developer and the
Developer agrees to borrow such funds for the purpose of payment of Project Costs.
(b) The Developer hereby acknowledges that the Residential Loan is intended to
be “gap” financing, not to exceed the amount needed to bridge the gap between the total Project
Costs and the maximum Senior Loan obtainable by Developer plus the maximum amount of
Developer Equity set forth above plus the maximum amount of the Enterprise Housing and Green
Grant set forth above, but in any event not to exceed the respective dollar amounts of the Residential
Loan set forth above. The Developer shall use all commercially reasonable efforts to maximize the
amount of the Senior Loan and the Limited Partner Capital Contribution that will be available for the
payment of Project Costs.
(c) The Residential Loan shall be used exclusively to pay Project Costs identified
in the Project Budget, in accordance with the DDA and this Method of Financing.
(d) At the Construction Financing Event, the Agency and the Developer shall
execute and deliver such instruments and documents as may be necessary to evidence and secure the
affordability restrictions on the Site and to evidence and secure the Residential Loan, consistent with
the terms of the DDA and this Method of Financing, and each in a form that is acceptable to the
Agency, including the following:
(1) the Grant Deed;
(2) the Agreement Containing Covenants;
(3) the Notice of Affordability Restrictions;
ATTACHMENT 1
5
(4) the Residential Note;
(5) the Residential Deed of Trust;
(6) the Assignment of Rents and Leases;
(7) the Assignment of Agreements;
(8) the Environmental Indemnity;
(9) the UCC1 Financing Statement (for State and County Filing);
(10) the Subordination Agreement;
(11) the Memorandum of City Option; and
(12) the Disbursement Agreement.
.
8. Commercial Loan.
(a) In accordance with and subject to the terms and conditions of the DDA and
this Method of Financing, the Agency agrees to make the Commercial Loan to Developer and the
Developer agrees to accept such funds for the purpose of payment of Project Costs.
(b) The Commercial Loan shall be used exclusively to pay Project Costs
identified in the Project Budget.
(c) At the Construction Financing Event, the Agency and the Developer shall
execute and deliver such instruments and documents as may be necessary to evidence and secure the
Commercial Loan, consistent with the terms of the DDA and this Method of Financing, and each in a
form that is acceptable to the Agency, including the following:
(1) the Commercial Note;
(2) the Commercial Deed of Trust;
(3) the Assignment of Rents and Leases;
(4) the Assignment of Agreements;
(5) the Environmental Indemnity;
ATTACHMENT 1
6
(6) the UCC1 Financing Statement (for State and County filing);
(7) the Subordination Agreement;
(8) the Memorandum of City Option; and
(9) the Disbursement Agreement.
9. Subordination. The Agreement Containing Covenants shall unconditionally be and
at all times remain prior and superior to the lien created by the Senior Deed of Trust and any other of
the Senior Loan Documents and all of the terms and conditions contained in the Senior Loan
Documents. However, the Agency shall subordinate the Residential Loan Documents, the
Commercial Loan Documents and the obligations contained in Sections 2.1, 2.2 and 2.3 of the
Agreement Containing Covenants to the lien created by the Senior Deed of Trust and any other of the
Senior Loan Documents and all of the terms and conditions contained in the Senior Loan
Documents.
If the Developer demonstrates to the reasonable satisfaction of the Agency Executive Director
or designee that the Developer will be unable to obtain the Construction Loan and/or the Permanent
Loan without a modification of the affordability restrictions upon a foreclosure, then the Agency
Executive Director or designee may allow the income and rent restrictions on the 30% and 40% tax
credit units to float upward upon a foreclosure of the Senior Loan to the income and rent restrictions
that apply to Very Low Income Units under Community Redevelopment Law.
Subject to the terms and conditions of this Section 9, prior to the Construction Financing
Event, the Agency shall execute subordination agreements to, among other things, subordinate the
Residential Loan Documents and the Commercial Loan Documents to the Senior Deed of Trust and
other Senior Loan Documents, provided, however, that such subordination agreements must contain
provisions reasonably satisfactory to the Agency to protect the Agency’s investment in the event of
default.
10. Recordation. Upon the Construction Financing Event, the Title Company shall
record the Grant Deed, the Agreement Containing Covenants, the Senior Loan Documents, the
Commercial Loan Documents and the Residential Loan Documents in accordance with instructions
provided by the Agency, the Construction Lender and the Developer, and shall be prepared to issue
to the Agency and ALTA lenders policy of title insurance, insuring that each the Residential Deed of
Trust and the Commercial Deed of Trust, respectively, is a valid lien encumbering the Site in the
priority required by the Agency and in amounts and with endorsements as the Agency may require.
ATTACHMENT 1
711. Agency’s Conditions Precedent to Construction Financing Event.
(a) The Agency’s obligation to fund the Residential Loan and the Commercial
Loan and convey title to the Agency Parcel shall be conditioned and contingent upon satisfaction or
the Agency’s waiver of each of the following conditions precedent (collectively, the “Agency’s
Conditions to Closing”):
(i) Developer submits and the Agency approves evidence that the final
working drawings have been approved by the City, and, to the extent
required by the DDA, by the Agency;
(ii) Developer submits and the Agency approves the final bid set for
construction of the Project;
(iii) Developer submits and the Agency approves a copy of the fully
executed general construction contract with a licensed general
contractor, covering all construction work required by the DDA and
the approved final working drawings;
(iv) Developer shall have submitted to the City written confirmation (i)
that all leases, rental agreements or similar use contracts or
arrangements on, of or relating to the Developer Parcel, or any part
thereof, have been terminated and concluded in their entirety, and (ii)
that all tenants, lessees or occupants of the Developer Parcel, or any
part thereof, have vacated the Developer Parcel and have no further
right, interest or claim to occupancy, use or otherwise of or to the
Developer Parcel, or any part thereof;
(v) Developer submits and the Agency approves the payment and
performance bonds required by the Construction Lender, which must
name the Agency and the City as additional obligees;
(vi) Developer delivers to the Agency and the Agency approves the
asbestos and lead survey required by Section 417 of the DDA;
(vii) Developer submits and the Agency approves a final Project Budget,
current as of the Construction Financing Event, demonstrating to the
satisfaction of the Agency the availability of sufficient funds to pay
all Project Costs;
(viii) Developer shall have deposited with the Escrow Agent any and all of
the funds and duly executed instruments required of it by the DDA
ATTACHMENT 1
8and this Method of Financing to close the Residential Loan and the
Commercial Loan;
(ix) Developer submits evidence satisfactory to the Agency that
Developer has satisfied all conditions precedent to the issuance of all
Permits necessary for the Project, other than payment of fees (for
which funds have been budgeted in the Project Budget);
(x) Developer submits and the Agency approves the Maintenance
Program, including the Maintenance Budget, as required by the DDA;
(xi) Developer submits and the Agency approves the Annual Project
Budget for the first year of operation, as required by the DDA;
(xii) Developer submits and the Agency approves the Management Plan,
as required by the DDA;
(xiii) Developer, Senior Lender and the Agency enter into a Disbursement
Agreement, consistent with the terms of this Method of Financing,
setting forth the timing and conditions of the disbursement of the
Developer Equity, the Senior Loan, the Residential Loan and the
Commercial Loan;
(xiv) Title Insurance Company is prepared to issue the title insurance
policies required by the Agency;
(xv) Developer submits to the Agency and the Agency approves the
certificates of insurance and endorsements showing that the
Developer has obtained the insurance policies required by the DDA;
(xvi) Developer deposits with the Escrow Agent all of the funds and duly
executed instruments required of it by the DDA and this Method of
Financing to close the Escrow;
(xvii) Developer delivers to the Agency and the Agency approves the final
Construction Loan Documents;
(xviii) Developer delivers to the Agency and the Agency approves the
Amended and Restated Limited Partnership Agreement;
(xix) Developer delivers to the Agency and the Agency approves the
conveyance instrument for conveyance of the Developer Parcel from
Los Angeles Housing Partnership, Inc. to Developer, which
conveyance shall occur at the Construction Financing Event;
ATTACHMENT 1
9(xx) Developer delivers to the Agency and the Agency approves
documentary evidence that the Developer and its general partners are
in current good standing and that the Developer is duly authorized to
execute the Residential Loan Documents and the Commercial Loan
Documents and implement the DDA;
(xxi) Developer is in full compliance with the terms and conditions of the
DDA and all documents and instruments referred to therein or
executed by the Developer in furtherance of the DDA and all
representations and warranties of the Developer contained therein and
in this Method of Financing shall be true and correct in all material
respects;
(xxii) Developer shall have satisfied all conditions precedent to the
Construction Financing Event (as provided in the DDA and this
Method of Financing);
(xxiii) Developer shall be in compliance with all applicable provisions of
federal, state and local law;
(xxiv) The City shall have reviewed and approved the Escrow Agent’s
estimated statement of closing costs for the Construction Financing
Event;
(xxv) Developer shall not be in default of any of its obligations under the
DDA or any documents and instruments referred to therein or
executed by the Developer in furtherance of the DDA; and
(xxvi) No litigation shall be threatened or pending which seeks to prevent
the construction or operation of the Project, or any part thereof,
according to the terms set forth in the DDA.
In the event any of the Agency’s Conditions to Closing are not satisfied (or waived by
the Agency) by the date set forth in the Schedule of Performance for the occurrence of the
Construction Financing Event, the Agency may cancel the Escrow and terminate the DDA by
delivering ten (10) calendar days’ prior written notice to the Developer and the Escrow Agent. The
Developer may nullify the notice to terminate if, within such ten (10) calendar day period, the
Developer (at no cost to the Agency) cures any unsatisfied Conditions to Closing and notifies the
Escrow Agent of such cure. In the event of termination pursuant to this paragraph, (i) the Escrow
shall be cancelled and any funds deposited by the parties shall be returned to them with any interest
earned on such funds; (ii) the Developer shall be responsible for any escrow cancellation fees
imposed by the Escrow Agent; and (iii) the DDA shall be terminated and the parties shall have no
further rights or obligations thereunder.
ATTACHMENT 1
10(b) Waiver of Conditions Precedent. Notwithstanding the foregoing, the Agency,
in the sole discretion of the Agency Executive Director, may waive any of the foregoing conditions
precedent to the Construction Financing Event. A waiver of any of the foregoing conditions shall not
operate in any way as a waiver, or estoppel with respect to, any subsequent or other failure to comply
with such condition, or any other condition contained in this Method of Financing, the DDA or any
of the Residential Loan Documents or Commercial Loan Documents.
12. Disbursement of Residential Loan and Commercial Loan.
(a) The Residential Loan and the Commercial Loan shall be disbursed for the
payment of Project Costs in accordance with a Disbursement Agreement and escrow instructions
among the Agency, Senior Lender and Developer that are consistent with the terms of this Method of
Financing and the DDA and are in form and substance that are mutually acceptable to the Agency
Executive Director or designee, the Developer and the Senior Lender. The Disbursement Agreement
shall, among other things, set forth the Agency’s inspection and approval rights over draw requests,
the use of the Project’s contingency allowance, and change orders, including the Agency’s control
over approval of change orders and draw requests relating to the Off-Site Improvements, and shall
assure the Agency’s right to fully participate in monthly draw meetings.
(b) Disbursement of the Residential Loan shall occur as follows: First, $5,100,000
shall be funded at the Construction Financing Event to pay the Developer’s Acquisition Costs for the
Site. Next, a portion of the Residential Loan shall be disbursed to reimburse the Developer for
reasonable out of pocket costs to bring the Leasing Office (the shell, electrical, plumbing and HVAC
systems) into conformity with the City of Culver City Building Code and to pay lease payments for
the Leasing Office, in amounts approved by the Agency and supported with reasonably detailed
documentation. The Commercial Loan and the undisbursed balance of the Residential Loan shall be
disbursed on a pari passu basis with the Construction Loan, provided that, no portion of the
Residential Loan or the Commercial Loan shall be disbursed until the Agency’s conditions to
disbursement set forth in the Disbursement Agreement have been satisfied or waived, which shall
include but not be limited to the Agency’s approval of the Developer’s draw requests. The Agency
shall have no obligation to authorize disbursement during the Construction Period of any portion of
the Residential Loan or the Commercial Loan until the Land Loan has been repaid in full and not less
than 20% of the Limited Partner Capital Contribution described in Section 2(e)(ii) herein above has
been fully funded. Disbursement of the Commercial Loan and that portion of the Residential Loan to
be disbursed during the Construction Period shall each be subject to a ten percent (10%) retention
(provided, however, that predevelopment costs shall not be subject to retention), which shall be
released to the Developer upon Completion of the Project, provided that, if the reason for the
Developer not achieving Completion is confined to the immediate availability of specific items or
materials for landscaping, and/or minor items, the Agency will release the retention upon the posting
of a bond by the Developer with the Agency in an amount representing the fair value of the work not
yet completed.
ATTACHMENT 1
1113. Repayment Terms. The repayment terms of the Residential Loan and the
Commercial Loan shall be as set forth in the Residential Note and the Commercial Note,
respectively.
14. Distribution of Cost Savings and Solar Rebates
To induce the Agency to make the Residential Loan, the Developer covenants and agrees as follows:
(a) Distribution of Cost Savings
If, on the date of the conversion of the Construction Loan to the Permanent Loan, the
sum of all Project Funds disbursed (as the term “Project Funds” is defined in the Disbursement
Agreement), plus any retention amounts then owing to contractors and others, plus any unpaid
Project Costs set forth in the most recent approved Project Budget which the Agency and
Construction Lender agree are to be disbursed subsequent to the Completion date (such as, by way of
example only and without limiting the generality of the foregoing, costs associated with funding final
Tax Credit Equity Investor capital contributions) is less than $23,985,000 (the amount of such
savings being referred to herein as the “Cost Savings”), then to the extent of fifty percent (50%) of
the Cost Savings, any undisbursed amount of the Permanent Loan plus any undisbursed amount of
the Residential Loan plus any undisbursed amount of the Commercial Loan plus any undisbursed
capital contributions by the Developer’s Limited Partner shall be released or retained, as the case
may be, to the Agency.
(b) Distribution of Solar Rebates or Awards
It is the intent of the parties that if any additional funds beyond the amounts shown in
the Project Budget are obtained by the Developer as a benefit of the Project’s photovoltaic system,
such as solar rebates or an in-lieu grant pursuant to Section 1603 of the American Recovery and
Reinvestment Tax Act of 2009, then fifty percent (50%) of such funds shall be used to pay down the
Residential Loan.
ATTACHMENT 1
12ATTACHMENT NO. 3
(Exhibit No. 6 to the DDA)
REVISED PROJECT BUDGET
SOURCES OF ACQUISITION AND CONSTRUCTION FUNDS:
Construction Loan $ 4,923,457
Residential Loan $ 11,805,000
Commercial Loan $ 3,395,000
Enterprise Housing and Green Grant $ 40,000
Limited Partner Capital Contribution (Closing) $ 1,250,000
Limited Partner Capital Contribution (Completion) $ 1,400,000
Deferred/Withheld Developer Fee $ 1,171,543
TOTAL SOURCES: $23,985,000
SOURCES OF PERMANENT FUNDS:
Permanent Loan $ 1,710,000
Residential Loan $ 11,805,000
Commercial Loan $ 3,395,000
Enterprise Housing and Green Grant $ 40,000
Limited Partner Capital Contribution (Closing) $ 1,250,000
Limited Partner Capital Contribution (Completion) $ 4,729,574
Limited Partner Capital Contribution (Permanent) $ 703,450
Limited Partner Capital Contribution (8609) $ 351,976
TOTAL SOURCES: $23,985,000
PROJECT COSTS:
Property Acquisition $ 5,100,000
Other Land Related Costs (Incl. Off-Site Improvements) $ 604,500
Fees, Permits & Studies $1,436,350
Direct Construction Costs $ 13,772,000
Indirect Construction Costs $ 789,000
Developer Fee $ 1,389,429
Rent-Up Costs $ 80,000
Capitalized Operating Reserves $ 200,000
Financing Costs $ 613,721
TOTAL PROJECT COSTS: $ 23,985,000
ATTACHMENT 2
13ATTACHMENT 3
14ATTACHMENT 3
15Los
Angeles
Housing
Partnership
November 3, 2011
john M. Nachbar
City Manager
City of Culver City
9770 Culver Boulevard
Culver City, California 90232-0507
Via Federal Express
Re: Disposition and Development Agreement (DDA) By and Between Tilden
Terrace, L.P., The Culver City Redevelopment Agency and The City of Culver
City; Significant Changes in Management and Control of Developer's General
Partner
Dear Mr. Nachbar:
This letter is in response to your letter dated October 26, 2011 wherein you reference
the section of the DDA for Tilden Terrace that requires notification to the City by Los Angeles
Housing Partnership of any significant changes in management and control of the developer
general partner.
As you are aware, on October 11, 2011, Board Member and former President & CEO of
LAHP, Lou Bernardy, Interim Executive Director Genette Foster and LAHP Project Management
staff ,met with Sol Blumenfeld, john Fisanotti and Tevis Barnes at City Hall. The purpose of the
meeting was for Mr. Bernardy, on behalf of the Board, to introduce Ms. Foster, report on the
recent changes in LAHP management and to communicate the Board of Director's plan for
recruiting a new Finance Officer and a new Executive Director. In addition, Mr. Bernardy
wanted to personally communicate assurances to the Agency and City staff that LAHP remains
fully committed and capable of moving forward with the Tilden Terrace development in all
respects.
1200 Wilshire Boulevard, Suite 307, Los Angeles, California 90017
Telephone: 213.629.9172 www.lahousingpartnership.com
ATTACHMENT 4
16Mr. Bernardy the following plan of action adopted by LAHP's Board Directors:
1. Assign individual board members and third party consultants to work with staff on real
estate projects and core administrative tasks;
2. individual board to meet with or otherwise communicate with LAHP's
partners, lenders, supporters, and other key stakeholders;
3. Insure the financial integrity of the organization through the review of the organization's
finances by independent auditor;
4. Identify and hire an Interim Executive Director with the skills and experience to
effectively lead the estate development operations for LAHP;
5. Recruit, interview and hire a new Finance Director by November 3D, 2011.
6. Recruit, interview and hire a new Executive Director by January 2012.
While the resignation of LAHP's former was unfortunate and
unexpected by the Board, I want to reiterate that it was not the of any
misappropriation or inappropriate actions. We will keep the City informed of our recruitment
process and will with you and staff the qualifications of the persons that the Board
chooses to fill the Finance Director and Executive positions.
My and I on the Board of Directors have served as volunteer of the LAHP
Board for well over 15 years. is significant experience and of Los
Angeles Housing Partnership and this leadership has been clearly demonstrated by our
immediate intervention in day-to-day management during the past 10 weeks. The Board is
of seasoned real estate professionals, affordable housing community
economic development and executive directors of major community based nonprofit
corporations, with a combined 120 years of We have successfully led organizations
and companies and on numerous of public private organizations and
institutions over We are committed to supporting LAHP and ensuring the
ongoing success of the organization. We are confident that LAHP and will continue to build on
many achievements exceptional work over the twenty years.
Currently, Ms. Foster, under the direction the Board, is working with the LAHP project
management staff, the City and the Tilden Terrace development team to
required to the initial closing by December 19,2011 and commencing construction. The
construction and permanent lenders as well as the investor limited partner for the project have
been identified and are working toward the 19
th
goal. Contractor has
negotiation of construction contract is underway.
ATTACHMENT 4
17Pursuant to your req attached please find the following LAHP corporate documents and
information:
Financial Statements:
411 FYE 2009 Audited Financial Statement
411 FYE 2010 Audited Financial Statement
411 FYE 2011 Unaudited Financial Statements (Audit is underway
411 FYE 2011-2012 Interim Financial Statement
Returns:
411 2010 Form 990
411 2010 Form 990
Bank Statements:
411 All LAHP Accounts - immediate past 6 months
and Recruitment:
411 Curriculum Interim Executive Genette
411 Job Description - Finance Director, LAHP
411 Job Description - Executive Director, LAHP
We have complete confidence in our team and assure you, the Mayor and members of
the City Councit and everyone who has been involved and supportive of the project and our
combined efforts, that LAHP will continue to perform and will successfully complete the Tilden
Terrace development.
Sincerely,
Marva Smith
Board of Directors
cc: The Honorable Mayor and Members of the City Council
Sol Blumenfeld, Agency Assistant Director
Carol A. Schwab, City Attorney
Heather Baker, Assistant City Attorney
Kyle Arndt, " Bocarsly Emden Cowan Esmail & Arndt, LLP
Joseph M Hudson Housing LLC
Genette Foster, Interim Director, LAHP
ATTACHMENT 4
18ATTACHMENT 5
19