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CC Resolution 14851 (Agreement Granting to Centertown II, LLC an Option to Lease 855 C Street)1 RESOLUTION NO. 14851 RESOLUTION OF THE SAN RAFAEL CITY COUNCIL APPROVING AND AUTHORIZING THE CITY MANAGER TO EXECUTE AN AGREEMENT GRANTING TO CENTERTOWN II, LLC AN OPTION TO LEASE THE REAL PROPERTY LOCATED AT 855 C STREET IN THE CITY OF SAN RAFAEL WHEREAS, the City of San Rafael, as successor housing agency to the former San Rafael Redevelopment Agency (“SRRA”), is the fee owner of that certain approximately 0.98-acre lot at 855 C Street in downtown San Rafael (“Centertown Land”) on which the Centertown Apartments are located; and WHEREAS, in 1989 Centertown Associates, Ltd. (“Centertown Associates”) a limited partnership managed by BRIDGE Housing and EAH Housing (“BRIDGE/EAH”), entered into a 75-year ground lease with City’s predecessor-in-interest, SRRA, which provided among other things for redevelopment of the Centertown Land, including an existing, partially completed foundation structure that was part of an earlier failed condominium development, as an affordable rental apartment project; and WHEREAS, as contemplated by the ground lease, Centertown Associates completed development of the Centertown apartments (“Centertown Apartments”) which include approximately 85,469 gross square feet of building area arranged around a central courtyard, with 60 affordable family apartments– 17 one-bedroom units, 27 two-bedroom units, 15 three-bedroom units, and an onsite two-bedroom property manager’s unit; and WHEREAS, all of the residents of Centertown Apartments are lower income households, with an average household income equal to approximately 32% of the Marin County Areawide Median Income (AMI); and WHEREAS, the ground lease originally recorded on November 30, 1989, has been subsequently amended three times given evolving financial conditions over time; and WHEREAS, Centertown Apartments has experienced numerous construction related issues, including significant problems related to water intrusion, aging building systems and deferred maintenance with a total estimated rehabilitation cost of approximately $10 million, which includes an approximately 10 percent hard cost contingency that is typical for rehabilitation of older properties; and WHEREAS, BRIDGE/EAH desire to fund the needed rehabilitation work by re-syndicating and refinancing the Centertown Apartments development using tax exempt bond proceeds and in connection therewith BRIDGE/EAH desire to extend the term of the ground lease and modify the existing City loans to extend their term and reduce their interest rates; and WHEREAS, entering into an option to enter a new ground lease will enable BRIDGE/EAH to demonstrate sufficient site control to apply for an allocation of tax-exempt bond proceeds from the California Debt Limit Allocation Committee (“CDLAC”); NOW, THEREFORE, BE IT RESOLVED, that the City Council hereby approves and authorizes the City Manager to execute an Option to Lease Agreement with Centertown II, LLC for the real property located at 855 C Street in the City of San Rafael in the form attached to this Resolution as Exhibit A, subject to final approval as to form by the City Attorney. 2 I, LINDSAY LARA, City Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the City Council held on the 17th day of August 2020, by the following vote to wit: AYES: COUNCILMEMBERS: Bushey, Colin, Gamblin, McCullough & Mayor Phillips NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None ___ LINDSAY LARA, City Clerk EXHIBIT A: OPTION TO LEASE DocuSign Envelope ID: 64284353-C3E8-4C7A-A2B1-1448EAE1C932 OPTION TO LEASE (CENTERTOWN PROJECT) This Option to Lease ("Agreement") is entered into as of AugustCJ4, 202O ("Effective Date"), by and between the City of San Rafael, a municipal corporation, in its capacity as successor in interest to the housing assets of the former Redevelopment Agency of the City of San Rafael ("Owner"), and Centertown Il, LLC, a California limited liability company ("Optionee"). Owner and Optionee may individually be referred to as "Party" and collectively referred to as "Parties". RECITALS A. Owner, as successor housing agency to the former Redevelopment Agency of the City of San Rafael, owns that certain real property located at 855 C Street, in the City of San Rafael, as more particularly described in Exhibit A attached hereto and incorporated herein by this reference ("Property"). B. Centertown Associates Ltd., a California limited partnership ("Centertown Ltd.") acquired a leasehold interest in the Property ("Leasehold Estate") from Owner's predecessor -in - interest, the former Redevelopment Agency of the City of San Rafael, pursuant to that certain Ground Lease Centertown Project dated November 6, 1989, as amended by that certain First Amended and Restated Ground Lease dated August 20, 1990, that certain Second Amendment to the First Amended and Restated Ground Lease dated May 6, 1991, and that certain Third Amendment to First Amended and Restated Ground Lease Centertown Project dated April 1, 1993, and as may be further amended (collectively, "Existing Ground Lease"). The term of the Existing Ground Lease is seventy-five (75) years, which term expires November 6th, 2064 C. Pursuant to the terms of the Existing Ground Lease, Centertown Ltd. developed, constricted, owns and operates a residential development consisting of sixty (60) units rented to and occupied by low income households and commonly known as Centertown Apartments ("Project") on the Property. D. The Project is in need of rehabilitation. In order to finance the rehabilitation, a new allocation of low-income housing tax credits pursuant to Internal Revenue Code Section 42 ("LIHTC") will be obtained, which requires that (i) the Project be owned by a new, to be formed limited partnership (the "Partnership") and (ii) the term of the ground lease for the Property be ninety-nine (99) years. As such, (i) Optionee will enter into a purchase and sale agreement with Centertown Ltd. to purchase the Project (the "PSA") and (ii) the Existing Ground Lease will be terminated and Optionee will enter into a new ground lease with Owner to lease the Property pursuant to this Agreement. Both the PSA and this Agreement will be assigned to, and assumed by, the Partnership. Optionee will be the general partner of the Partnership. E. The parties desire to enter into this Agreement to set forth the terms of the option from Owner to Optionee to lease the Property. 144176\2669045.6 OAK #4843-2810-6436 v7 DocuSign Envelope ID: 64284353-C3E8-4C7A-A2B1-1448EAE1C932 AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals, which are hereby incorporated into this Agreement by this reference, and the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which consideration is hereby acknowledged, it is hereby declared, understood and agreed as follows: Section 1. Grant of Option and Consideration. For consideration of One Hundred Dollars ($100.00), Owner grants to Optionee an option ("Option") to ground lease the Property on the terms and conditions set forth in this Agreement. Section 2. Term of Option. The term of the Option shall commence on the Effective Date of this Agreement and shall expire at 12:01 a.m. on the date that is three (3) years from the Effective Date, unless such date is extended by a written amendment to this Agreement executed by Owner and Optionee (as may be extended, the "Option Term"). If the expiration date of the Option Term falls on a Saturday, Sunday, or legal holiday in the State of California, then the Option may be exercised on, and shall expire at midnight on, the next following business day. Optionee may request an extension of the Option Term for an additional two (2) years by giving written notice to Owner no later than thirty (30) days prior to the expiration of the initial Option Term ("Extension"), which Extension shall be subject to approval by the City Council. Section 3. Exercise of Option. Optionee may exercise the Option by delivering to Owner, during the Option Term, a written notice of the exercise of the Option ("Option Notice"). Section 4. Lease of the Property. Following execution and delivery of the Option Notice, the Parties shall negotiate in good faith a new ground lease for the Property ("Ground Lease"). The Parties agree to use the Existing Ground Lease as the model for the Ground Lease with the Material Lease Term changes set forth in Exhibit B hereto. Any new Ground Lease shall be subject to approval by Optionee's board and the City Council. Section 5. Closing. (a) Close of Escrow. The Parties' execution and delivery of a new Ground Lease as contemplated herein shall be effectuated through an escrow with an escrow holder mutually acceptable to the Parties. The escrow shall close within ninety (90) days after the Option is exercised ("Close of Escrow"), which date may be extended by Optionee in its reasonable discretion for up to an additional thirty (30) days upon notice to Owner of such intent by Optionee. (b) Closing Expenses. If the Option is exercised, Optionee shall pay any documentary transfer tax, revenue tax or excise tax (and any surtax thereon) due in connection with the consummation of this transaction, the premium for Optionee's title policy, Owner's title policy premium and all other escrow and closing costs. Optionee shall be responsible for its own attorneys' fees and Optionee shall also reimburse Owner for Owner's attorneys' fees, not to exceed $10,000. Owner shall be responsible for any of Owner's attorneys' fees in excess of $10,000. Section 6. Option Not to Be Recorded. This Agreement will not be recorded. 2 14417612669045.6 OAK #4843-2810-6436 v7 DocuSign Envelope ID: 64284353-C3E8-4C7A-A2B1-1448EAE1C932 Section 7. Notice. Any notice or other communication given or made pursuant to this Agreement shall be in writing and shall be deemed given if. (a) delivered personally or by courier, (b) sent by overnight express delivery, (c) mailed by registered or certified mail (return receipt requested), postage prepaid, or (d) sent by email in PDF format ("Email Notification") provided that (i) any Email Notification received after 5:00 p.m. on a business day shall be deemed received on the next business day and (ii) the sender also delivers the communication by one of the methods listed in (a) -(c) (the "Secondary Notice") provided that if the recipient of the Email Notification responds with an email acknowledgement of receipt (an automatic "read receipt" does not constitute acknowledgement), such Secondary Notice is not required, to a party at its respective address set forth below (or at such other address as shall be specified by the party by like notice given to the other party): If to Owner: City of San Rafael 1400 Fifth Avenue, Room 203 San Rafael, CA 94901 Attn: Jim Schutz, City Manager jim.schutz@cityofsanrafacl.org With a copy to: And: City of San Rafael 1400 Fifth Avenue, Room 202 San Rafael, CA 94901 Attn: Robert Epstein, City Attorney rob. epstein@cityofsanrafael.org Burke, Williams & Sorensen, LLP 1901 Harrison St., Suite 900 Oakland, CA 94612 Attn: Gerald J. Ramiza jramiza@bwslaw.com If to Optionee: Centertown II, LLC c/o BRIDGE Housing Corporation 600 California Street, Suite 600 San Francisco, CA 94108 Attn: Rebecca V. Hlebasko and Sarah White rhlebasko@bridgehousing.com swhite@bridgehousing.com And: 3 14417612669045.6 OAK 44843-2810-6436 v7 DocuSign Envelope ID: 64284353-C3E8-4C7A-A2B1-1448EAE1C932 Centertown II, LLC c/o EAH, Inc. 22 Pelican Way San Rafael, CA 94901 Attn: Welton Jordan Welton.Jordan@eahhousing.org With a copy to: Goldfarb & Lipman LLP 1300 Clay Street, 11th Floor City Center Plaza Oakland, CA 94612 Attn: Erica Williams Orcharton ewilliams@goldfarblipman.com Any notice provided in accordance with this Section shall be deemed to have been given on the delivery date or the date that delivery is refused by the addressee, as shown on the return receipt. Section 8. Miscellaneous. (a) Captions. The captions used herein are for convenience of reference only and are not part of this Agreement and do not in any way limit or amplify the terms and provisions hereof. (b) Severability. If any portion of this Agreement is declared by a court of competent jurisdiction to be invalid or unenforceable, such portion shall be deemed severed from this Agreement and the remaining parts shall continue in full force as though such invalid or unenforceable provision had not been part of this Agreement. (c) Time. Time is of the essence of each and all of the obligations, covenants and conditions of this Agreement. (d) Further Documentation. Upon the reasonable request of the other party, each party will execute, acknowledge, and deliver or cause to be executed, acknowledged and delivered, such further instruments and documents as may be reasonably necessary in order to carry out the intent and purpose of this Agreement, including, but not limited to escrow instructions. (e) Default. Failure by any party to perform its obligations as provided in this Agreement shall constitute an event of default hereunder. The non -defaulting party shall give written notice of a default to the defaulting party, specifying the nature of the default and the required action to cure the default. If a default remains uncured fifteen (15) days after receipt by the defaulting party of such notice, or for such longer period of time as may be reasonably necessary to effect cure (in no event to exceed sixty (60) days), so long as the defaulting party has commenced cure within such fifteen (15) day period and is diligently proceeding to completion, the non - defaulting party may exercise the remedies set forth below. 4 144`•.76\2669045.6 OAK #4843-2810-6436 v7 DocuSign Envelope ID: 64284353-C3E8-4C7A-A2B1-1448EAE1C932 (f) Remedies; No Damages. In no event shall a Party be liable in damages for any default under this Agreement, it being expressly understood and agreed that the sole legal remedy available to a Party for a breach or violation of this Agreement by the other Party shall be an action in specific performance, or other injunctive or declaratory relief to enforce the provisions of this Agreement by the other Party, or to terminate this Agreement. (g) Governing Law. This Agreement shall be interpreted in accordance with and governed by the laws of the State of California. (h) Assignment by Optionee. Optionee may assign this Agreement to the Partnership without the need for consent from Owner. Any other assignment shall require the prior written consent of the Owner. (i) Authorization; Binding Effect. The execution, delivery and performance by the Optionee of this Agreement and any related documents and actions have been duly authorized by all requisite action of the Optionee and create legally binding obligations for the Optionee. The rights and obligations of the Owner and Optionee under this Agreement shall inure to the benefit of, and bind, their respective successors and assigns. 0) Commission. Each party to this Agreement represents to the other Party that is has not engaged or used the services of any person, firm, or corporation that may claim a broker's commission or finder's fee upon execution or exercise of the Option, and each Party to this Agreement agrees to hold the other Party harmless from any loss, damage, expense, or liability, including attorney's fees, resulting from any claim by any person, firm, or corporation based upon its having acted as broker or finder on behalf of said indemnifying Party. (k) Entire Agreement. This Agreement constitutes the entire agreement between Owner and Optionee with respect to the subject matter hereof and supersedes all prior offers and negotiations, oral and written. This Agreement may not be amended or modified in any respect whatsoever except by an instrument in writing signed by Owner and Optionee. (1) Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will be deemed to be a single document. (m) No Joint Venture or Partnership. Owner and Optionee hereby renounce the existence of any form of agency relationship, joint venture, or partnership between Owner and Optionee and agree that nothing contained herein or in any new Ground Lease executed in connection herewith shall be construed as creating any such relationship between Owner and Optionee other than landlord and tenant. (n) Facsimile and Electronic Signatures. Facsimile or electronic signatures may be used in place of original signatures on this Agreement. Each party intends to be bound by the signatures on the facsimile or electronic document, is aware that the other parties will rely on the facsimile or electronic signatures, and hereby waives any defenses to the enforcement of the terms of this Agreement based on the use of a facsimile or electronic signature. S 144176\2669045.6 OAK #4843-2810.6436 v7 DocuSign Envelope ID: 64284353-C3E8-4C7A-A2B1-1448EAE1C932 IN WITNESS WHEREOF, Owner and Optionee have executed this Agreement as of the Effective Date. ATTEST: L f� Lin say Lara�o, City Clerk APPROVED AS TO FORM: L-4. 6 bj Robert Epstein, City Attorney [1111/0i�l a� CITY OF S N RAFA , a muni ipal corporation By: ' k Name: JikR4Ht7 �.� Title: City Manager OPTIONEE: CENTERTOWN II, LLC, a California limited liability company By: BRIDGE HOUSING CORPORATION, a California nonprofit public benefit corporation, its managing member By: �DocuSigned by: .`. Name: Eilm'i a ge'shadri Its: vice President By: EAH, Inc., a California nonprofit public benefit corporation, its member Welton Jordan,,,, 12aoe20120648- 700 By: Name: _Welton Jordan Its: Assistant Secretary 6 144176\2669045.6 OAK #4843-2810-6436 v7 DocuSign Envelope ID: 64284353-C3E8-4C7A-A2B1-1448EAE1C932 EXHIBIT A LEGAL DESCRIPTION OF PROPERTY LEGAL DESCRIPTION Parcel A All that certain real property situated in the City of San Rafael, County of Marin, State of California, described as follows: "Map of Centertown an Air -space Condominium. Also Being a reversion to acreage being the Lands of U.F. Service Corp., a California Corporation, as described by Deed recorded under Recorder's Serial No. 83-16358, Marin county Records and a portion of the lands described by the Record of survey filed in Book 18 of Surveys, at Page 47, Marin County Records", filed for record December 13, 1983 in Volume 18 of Maps, at Page 98, Marin County Records. Parcel B All that certain real property situated in the City of San Rafael, county of Marin, State of California, described as follows: BEGINNING at a point on the Westerly line of C Street distant thereon log feet 8 inches Northerly from the intersection of said Westerly line of C Street and the Northerly line of Second Street said point of beginning being the Southeast corner of that lot conveyed by Loretta Ceaser to John Mirata by Deed recorded in Book 165 of Deeds, page 269, running thence Westerly at a right angle to C street and along the Southerly line of the Lot so conveyed by Ceaser to Mireta 150 feet; thence Southerly at a right angle 42 feet; thence Easterly at a right angle 150 feet to the Westerly line of C Street thence Northerly along the said line of C Street 42 feet to the point of beginning. BEING a portion of Block 15 of the Townsite of the Town of San Rafael. EXCEPTING from Parcel A and Parcel B above described, all buildings, structures and improvements of every kind, now existing or to be constructed on or under the surface of the above described property, for a term of years equal to and to run concurrently with the term of the Ground Lease. 144176\2669045.6 OAK #4843-2810-6436 v7 DocuSign Envelope ID: 64284353-C3E8-4C7A-A2B1-1448EAE1C932 EXHIBIT B MATERIAL LEASE TERMS Term 99 years from the effective date of the new Ground Lease Rent $83,000, paid at closing (when Ground Lease is executed) through a capitalized lease payment. ($83,000 is the value of the land based on an appraisal.) Use Use same language from Section 2.4 of Existing Lease (60 units of housing; up to 28% affordable to low income households (80% AMI)) Taxes and Optionee/Lessee shall pay taxes and assessments and will apply for Assessments property tax exemption. Ownership of Optionee/Lessee owns improvements until lease termination/end of term at Improvements which time the ownership of the improvements will vest in the Owner/Lessor Construction Ground Lease to contain language reflecting rehabilitation scope and Provisions schedule As -Is Use same language from Section 3.6 and 3.7 of the Existing Lease Mortgagee Use language from Articles IV -VI of Existing Lease with agreed upon Protection; modifications to reflect reasonable current lender/investor requirements Insurance, Casualty and current Owner/Lessor insurance standards. and Condemnation Optionee/Lessee shall have right of first refusal if Owner/Lessor sells land Right of First Refusal (Use same language from Section 7.4 of Existing Lease) Transfer and Use language from Section 10.16 of Existing Lease but add pre -approval Assignment of (a) Optionee's/Lessee's (or its members) (i) option to purchase the Project or limited partner's interest in the Partnership and (ii) Section 42 right of first refusal, (b) removal of general partner of the Partnership by the limited partner pursuant to the to be entered into partnership agreement of the Partnership. 144`76\2669045.6 OAK #4843-2810-6436 v7