20-0828_SJC GROVES LP_Land Promissory Note Secured by Deed of Trust_1LAND PROMISSORY NOTE SECURED BY DEED OF TRUST
(San Juan Capistrano — The Groves at Williams Ranch)
Principal Amount: $4,100,000
Maker: SJC GROVES LP, a California
limited partnership
Maturity Date: Fifty-five (55) years from
the date on which the Certificate of
Completion is issued
Land Loan.
Date of Note: August 28, 2020
Lender: CITY OF SAN JUAN CAPISTRANO,
a municipal corporation
Interest Rate: One -Quarter Percent (0.25%)
FOR VALUE RECEIVED, the undersigned SJC GROVES LP, a California limited
partnership ("Maker"), with its principal place of business located at 14211 Yorba Street, Suite
200, Tustin, CA 92780, promises to pay to the CITY OF SAN JUAN CAPISTRANO, a
municipal corporation (the "City" or "Holder") at 32400 Paseo Adelanto, San Juan Capistrano,
California 92675, or such place as the Holder may, from time to time, designate by written notice
to the Maker, the principal sum of FOUR MILLION ONE HUNDRED THOUSAND
DOLLARS ($4,100,000), (the "Land Loan"), together with any accrued interest, if applicable,
as set forth in this Note. This Promissory Note (the "Note") is made and given pursuant to that
certain Affordable Housing Disposition and Development Agreement between the City and
Maker's predecessor -in -interest, dated July 16, 2019, as amended (the "Affordable Housing
Agreement"). The Affordable Housing Agreement is incorporated herein by this reference. All
initially capitalized terms used but not defined herein shall have the meanings given to them in
the Affordable Housing Agreement. The Land Loan is made for the conveyance of the Property
by City to Maker in accordance with the terms and conditions of the Affordable Housing
Agreement.
2. Term of Loan and Right of Prepayment.
a. Maturity Date. All accrued interest, if any, and principal shall be due and
payable in full without any further demand or notice fifty-five (55) years from the date on which
the Certificate of Completion is recorded pursuant to the Affordable Housing Agreement
("Maturity Date").
b. Prepayment. This Note may be prepaid in whole or in part at any time and
from time to time without penalty or premium.
Security for Note.
This Note is secured by a Deed of Trust executed by Maker which creates a lien on that
certain real property as described therein and in the Affordable Housing Agreement.
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4. Interest Calculation.
The principal outstanding under this Note shall accrue simple interest at the rate of one-
quarter percent (0.25%) per annum, except in the case of Default as set forth in Section 9 of this
Note. Principal and interest shall be payable in lawful money of the United States of America.
If applicable, interest shall be computed based on an actual day year and the actual number of
days elapsed. Interest shall commence on amounts disbursed hereunder from the date of
disbursement.
Annual Payment.
Following completion of the Project as evidenced by the issuance by the City of a
Certificate of Completion as set forth in the Affordable Housing Agreement, and continuing each
year thereafter until the Maturity Date, a portion of the Residual Receipts (as defined below)
from the Project shall be paid to Holder and applied to pay down the amounts due and owing
under this Note. The payments described below shall be paid to Holder no later than April 1
each year, with the first payment due on the April 1 following the issuance of a Certificate of
Occupancy for the Project, and continuing each year thereafter.
a. Annual Payments from Residual Receipts. Maker shall make repayments
of the outstanding principal and accrued interest, if any, equal to the City's Land Percentage of
Fifty Percent (50%) of the Residual Receipts from the Project as repayment of amounts due and
owing under this Note. For the purposes of this Note, "City's Land Percentage" means the
percentage calculated by dividing (1) the original principal amount of the Land Loan actually
disbursed to Borrower by (2) the sum of Total Assistance from all other government entities
obtained by the Borrower, any portion of which is a loan to be repaid utilizing Residual Receipts.
"Total Assistance" means the original principal amounts of loans and grants made by the other
government entities plus the cumulative value of Project Based Section 8 or similar housing
vouchers provided by the other government entities.
Such annual payments shall be accompanied by the Maker's report of Residual
Receipts. The Maker shall provide the Holder with the audited financial statement provided for
in Section 6, and any other documentation reasonably requested by Holder to substantiate the
Maker's determination of Residual Receipts.
All payments made hereunder shall be credited first to any accrued but unpaid
interest (if applicable), then to current interest due and owing and lastly to principal. Interest not
paid current each year shall be added to and thereafter be considered additional principal due
hereunder.
Notwithstanding the foregoing, the entire outstanding balance of principal and
any interest owing under this Note shall be due and payable in full fifty-five (55) years from the
date hereof.
Prior to any sale of all or any portion of the Project, or Refinancing of all or any
portion of the outstanding debt from the Project, and so long as there is any outstanding amount due
and owing under this Note, Maker shall notify Holder of any such proposed or intended sale or
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Refinancing. In such event, Maker and Holder shall meet and confer, and shall use good faith
efforts, to determine the feasibility of the payoff or restructuring of the remaining balance owing
under this Note as part of any such sale or Refinancing to provide for repayment of this Note sooner
than the fifty-five (55) year repayment period.
b. Definition of Residual Receints. For the purposes of this Note, "Residual
Receipts" shall mean the sum of money computed as follows:
(i) All rents, revenues, consideration or income (of any form) received
by Maker in connection with or relating to the ownership or operation of the Project, including
any net revenue derived from any Refinancing of the Project and any revenue from
contributions, loans or grants which is not required to meet future Project obligations (but
excluding tenants' security deposits, partner capital contributions and similar advances) ("Gross
Revenue") less all of the following: all customary and reasonable costs (i.e., mandatory (hard)
mortgage payments) and expenses reasonably and actually incurred in connection with the
operation and maintenance of the Project, including but not limited to premiums for property and
liability insurance; utility services not paid directly by tenants; maintenance and repair; security
services and payments for social/supportive services; any adjuster payments to the investor
limited partner required under Maker's partnership agreement; payment of principal or interest
on any indebtedness of Maker to any affiliate of Maker (individual or entity) or partner of Maker
to repay completion and operating deficit loans relating to the Project; asset management fee
payable to the limited partner of Maker in an amount approved as part of the Project Budget (as
defined in the Affordable Housing Agreement); partnership management fee payable to Maker,
not to exceed the amount approved as part of the Project Budget (as defined in the Affordable
Housing Agreement); reasonable property management fees not to exceed 8% of gross revenue;
deferred developer fee in an amount approved as part of the Project Budget (as defined in the
Affordable Housing Agreement); amounts (approved by Holder) expended to restore the Project
after a casualty loss or condemnation; reasonable and customary cost for accounting and auditing
the books and records of the Project; taxes; franchise tax filing fees; and any other reserves
reasonably required by the investors or the lenders approved by the City for the Project
(collectively "Operating Expenses").
(ii) Notwithstanding the generality of the foregoing, the following
items are not expenses or deductible in computing Residual Receipts:
(A) Depreciation, cost recovery, amortization and similar items
which do not involve the expenditure of cash.
6. Audited Financial Statement.
Maker shall annually provide Holder with an audited financial statement documenting the
calculation of Residual Receipts for the previous calendar year ending December 31. The
audited financial statement shall be provided on or before April 1, together with payment of the
Residual Receipts payment due to Holder. Holder shall have the right to inspect and audit
Maker's books and records concerning the calculation of the Residual Receipts Payment and to
object within ninety (90) days from receipt of Maker's statement. Failure to timely object shall
be deemed acceptance. If Holder does object, Holder shall specify the reasons for disapproval.
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Maker shall have thirty (30) days to reconcile any disapproved item. If Maker and Holder
cannot agree on the amount of the Residual Receipts payment, an independent auditor mutually
selected by Maker and Holder shall resolve any disputed items. The cost of the auditor shall be
shared equally by Maker and Holder.
Annual Budeet.
Maker shall prepare and submit to Holder a proposed annual operating budget for the
management and operation of the Project ("Annual Budget") no later than 60 days preceding the
effective year of such budget. The Annual Budget shall include the projected Gross Revenue
and Operating Expenses for the year and a line item showing the projected Residual Receipts
from the Project for the year. Holder will review the Annual Budget and, if acceptable, approve
it, which approval shall not be unreasonably withheld. If the Annual Budget is not acceptable,
Holder shall specify the reasons for disapproval. The intent of this section is to provide Holder
an opportunity to disapprove any unreasonable expenses which would diminish the Residual
Receipts from the Project. Once approved, any changes to the Annual Budget which exceed ten
percent (10%) of the total Annual Budget shall require Holder's prior written consent, which
consent shall not be unreasonably withheld. ,
8. Acceleration Upon Certain Events or Upon Default.
In the event of any Default under the terms of this Note, the Affordable Housing
Agreement or the Regulatory Agreement, the Deed of Trust which is the security for this Note,
or under any Senior loans, notes or deeds of trust, at the option of the Holder and after notice to
the Maker, providing Maker with thirty (30) days in which to cure any Default, and such Default
not having been cured within thirty (30) days (or ;f a greater amount of time is reasonably
necessary to effect a cure, if actions to cure such Default are not undertaken within said thirty
(30) day period and pursued with reasonable diligence thereafter), all principal and interest due
under this Note shall immediately become due and payable, upon thirty (30) day written notice
from the Holder to the Maker. Failure to exercise such option shall not constitute a waiver of the
right to exercise it in the event of any subsequent Default.
Should the undersigned Maker agree to or sell, convey, transfer, or dispose of the real
property described in the Deed of Trust securing this Note or any part thereof or interest therein,
without first obtaining the prior written consent of the Holder (except for a Permitted Transfer, as
defined in the Affordable Housing Agreement), then, at the option of the Holder, all principal
and interest due hereunder shall immediately become due and payable upon thirty (30) days
written notice from the Holder to the Maker. Consent to one transaction of this type will not
constitute a waiver of the right to require consent to future or successive transactions.
Notwithstanding the generality of the foregoing, certain transfers permitted under the
Affordable Housing Agreement shall not constitute a Default hereunder or under the Affordable
Housing Agreement, and any such action shall not accelerate the maturity of this Promissory
Note, provided that any transfer is either a Permitted Transfer as defined in the Affordable
Housing Agreement or is reasonably acceptable to the Authority with reasonable promptness,
and any transferee under such a transfer agrees to be bound by any and all instruments in favor of
the Authority.
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9. Interest on Default.
From and after a Default, the entire outstanding principal balance of this Note shall
automatically bear an annual interest rate equal to the lesser of: (a) eight percent (8%)
compounding annually; or (b) the maximum interest rate allowed by law.
10. Costs Paid by Maker.
Maker agrees to pay the following costs, expenses and attorneys fees paid or incurred by
the Holder of this Note, or as adjudged by a court of competent jurisdiction: (a) reasonable costs
of collection, costs and expenses and attorneys fees paid or incurred in connection with the
collection or enforcement of this Note, whether or not suit is filed; and (b) costs of suit in such
sum as the court may adjudge reasonable as attorneys fees in any action to enforce payment of
this instrument.
11. Waiver.
Maker hereby waives diligence, presentment, protest and demand, notice of protest,
dishonor and nonpayment of this instrument, and expressly agrees that, without in any way
affecting the liability of Maker hereunder, the Holder hereof may extend the Maturity Date or the
time for payment of any installment due hereunder, accept additional security, release any party
liable hereunder or release any security now or hereafter securing this Note. Maker hereby
waives, to the fullest extent permitted by law, the right to plead any and all statutes of limitations
as a defense to any demand on this instrument or any deed of trust, security agreement, guarantee
or other agreement now or hereafter securing this Note.
12. Indemnification.
Maker shall indemnify, defend, protect and hold the Authority harmless from and against
any and all loss, damage, liability, action, cause of action, cost or expense, including, without
limitation, reasonable attorneys fees and expenses incurred by the Holder hereof, arising as a
result of any (i) fraud or material misrepresentation by the Maker under or in connection with the
Affordable Housing Agreement or related agreements; (ii) intentional bad faith waste of the real
property encumbered by the deed of trust which secures this Note; and (iii) losses resulting from
Maker's failure to maintain insurance as required under the provisions of the deed of trust
securing this Note and the Affordable Housing Agreement.
13. Nonrecourse.
This Note shall become a nonrecourse obligation of Maker on the date that Maker files a
valid and timely Notice of Completion for the Project and the Holder must resort only to the
Project or the Property, or both, for repayment should the Maker fail to repay the sums evidenced
hereby. At such time as this Note becomes nonrecourse, neither Maker nor any of its general
and limited partner shall have any personal liability for repayment of the Land Loan and no
deficiency judgment may be obtained against Maker or any of its general and limited partners
except for actual or constructive fraud, material misrepresentation, intentional bad faith waste of
or on the Project and such other matters as are referred to below. Notwithstanding the generality
of the foregoing, however, Maker shall indemnify, defend, protect and hold Holder harmless
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from and against any and all loss, damage, liability, action, cause of action, cost or expense,
including, without limitation, reasonable attorneys' fees and expenses incurred by the Holder
arising as a result of any (i) fraud or material misrepresentation by the Maker under or in
connection with the Affordable Housing Agreement or any other agreements or documents
provided in connection therewith; (ii) intentional bad faith waste of the Property encumbered by
the deed of trust which secures this Note; and (iii) losses resulting from Maker's failure to
maintain insurance as required under the provisions of the deed of trust securing this Note.
Maker's obligation to indemnify the Holder hereof as aforesaid shall be recourse obligations of
the Maker, and in the event of any breach of such obligations, the Holder shall have the right to
proceed directly against the Maker to recover any and all losses, damages, liability, costs and
expenses (including without limitation, reasonable attorneys' fees and expenses) and may bring
any action and institute any proceeding to obtain a deficiency judgment in or following
foreclosure for any and all such losses, damages, liabilities, costs and expenses resulting from
such breach.
14. Severability.
If any provision of this Note is determined by a court of competent jurisdiction to be void
or unenforceable, such determination shall not affect any other provision of this instrument, and
all other provisions hereof shall remain valid and in full force and effect.
15. Non -Waiver.
No delay in demanding or failure to demand performance hereunder shall constitute a
waiver by the Holder hereof of its right to subsequently demand such performance or to exercise
any remedies for any Default hereunder. Further, in order to be effective, any waiver of any of
the Holder's rights and remedies hereunder shall be expressed in a writing signed by a duly
appointed representative of the Holder hereof. Further, waiver by the Holder hereof of any right
hereunder shall not constitute a waiver of any other right, including, but not limited to, the right
to exercise any and all remedies for a different or subsequent event of Default hereunder.
[Signatures on Following Page]
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MAKER:
SJC GROVES LP, a California limited partnership
By: RCC MGP LLC,
a California limited liability company,
its managing general partner
By: Riverside Charitable Corporation,
a California nonprofit public benefit corporation,
its sole member and manager
By:
Kenneth S. Robertson Presl t
By: SJC Groves CCR LLC,
a California limited liability company,
its developer general partner
By: C & C Development Co., LLC,
a California limited liability company,
its sole member and manager
By:
Todd R. Cottle, Trustee of the 2007
Todd R. Cottle and Jennifer N. Cottle
Revocable Trust, its Member
By: The Waterford Group, Inc,
a California corporation,
its member
By: /2'1�
Se wson
Chief Executive Officer
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