Item 6 - 2nd Amendment to Owner Participation Agreement Poway Land an RDA ,9a -/ q- 9r
®AGENDA REPORT SUMMARY 0. •
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77.MME
TO: Honorable Chairman and Members of the Redevelopment Agency Board
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FROM: James L. Bowersox, Executive Direc '')"
INITIATED BY: John D. Fitch, Assistant Executive Directol
Warren H. Shafer, Director of Redevelopment Sbrvice ^)
Pamela R. Colby, Redevelopment Project Administrators
DATE: October 3, 1995
SUI3JECI': Second Amendment to the Owner Participation Agreement and the First
Amendment to the Lease Option Agreement By and Between Poway Land, Inc.
and the Poway Redevelopment.
ABSTRACT
On September 19, 1995 the Redevelopment Agency Board provided direction to its
negotiators, staff and Agency Special Legal Counsel , regarding the potential
acquisition of Haley Ranch Estates as provided by the Owner Participation Agreement
(OPA) and Lease Option Agreement (Lease) with Poway Land, Inc. Staff and Agency
Special Legal Counsel have negotiated with Poway Land and have reached an agreement on
acquisition terms which are now being provided for Agency approval . The proposed
agreement would require an amendment to the OPA and Lease to allow a partial payment of
the final acquisition price. This report discusses the terms of the proposed Agency
acquisition of Haley Ranch Estates and the modifications to the OPA necessary to effect
this method of acquisition. The Amendment also sets forth a mechanism and timeline for
determining the final purchase price for Haley Ranch Estates.
ENVIRONMENTAL REVIEW
This item is not subject to CEQA review.
FISCAL IMPACT
Approval of this item would result in the expenditure of $4,620,000 from the
Redevelopment Agency's Housing Fund. There is currently $4,247,787 available in the
Haley project account (#471-5951) . An additional $372,213 must be appropriated from
the unappropriated reserve of the Agency's Housing Fund (#471-8912) . The balance of
the purchase price, if any, will be determined by the parties pursuant to the purchase
price calculation formula in the Lease-Option Agreement and brought forward at a future
date for Agency approval .
ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE
Allan Kuebler, Richard Kuebler, Catherine Rodman, and Kathy Berry.
RECOMMENDATION
It is recommended that the Redevelopment Agency adopt the attached resolution approving
the Second Amendment to the Owner Participation Agreement and First Amendment to the
Lease Option Agreement with Poway Land and appropriate $372,213 from the Redevelopment
Agency's Housing Fund (#471-8912) .
ACTION Approved staff recommendation; promissory note to be $280,000; gave staff dis-
cretion to modify document language with approval of special counsel . 4-0. Councilmember
Raxfnrrl absent. -an1G
1 Marjorie K. Wah?,e�CCity Clerk 'DCT 3
( )I \ 1995 ITEM 6 "
~ AGENDA REPORT
CITY OF POW A Y
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TO: Honorable Chairman and Members of the Redevelopment Agency
FROM: James L. Bowersox, Executive Direc~ ^
INITIATED BY: John D. Fitch Assistant Executive Directo~l\
Warren H. Shafer, Director of Redevelopment Services
Pamela R. Colby, Redevelopment Project Administrator ~
DATE: October 3, 1995
SUBJECT: Second Amendment to Owner Participation Agreement and First
Amendment to Lease Option Agreement by and between Poway Land,
Inc. and the Poway Redevelopment.
BACKGROUND
On June 29, 1989 an Owner Participation Agreement (OPA) was executed by and between
the Redevelopment Agency and Poway Land, Inc. The amended OPA provided for the
development of Haley Ranch Estates by Poway Land with financial assistance
($6,471,599) from the Agency's Housing Fund. Under the OPA and Lease-Option
Agreement (Lease) entered into pursuant to the OPA, the Agency has a master lease on
the property. Affordability covenants have also been placed on all 65 units by the
Agency. The OPA and lease provide the Agency an option which requires the Agency to
purchase the property within ten years from the issuance of the Certificate of
Completion that is, until December 2004. While the Agency has over nine years to
purchase Haley, the purchase price could increase rather substantially during the
ten-year option period.
Over the past year, Poway Land and the Agency have discussed the Agency's purchase
of the property, but have been unable to reach agreement on the price. On June 19,
1995, the Redevelopment Agency Board directed its negotiators to make an offer to
purchase the subject property. On June 23, 1995 the Agency tendered its offer to
purchase. However, this offer was not accepted by Poway land who continued to
pursue permanent financing with American Savings Bank for the project.
Under the OPA, Redevelopment Agency approval is required for any liens to be placed
on the property which includes permanent project financing. In addition, the Agency
ACTION:
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October 3, 1995
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must make specific findings if it subordinates its affordability covenants to a ~.
permanent loan. On September 5, 1995, the Agency Board approved a subordination
agreement and certain terms for a permanent loan with American Savings Bank. The
Agency did not, however, approve a "negative amortization" provision of the loan
proposed by Poway Land. This provision could have caused the loan principal to
increase due to the deferred payment of certain interest costs. The effect would
have been the payment of interest on deferred interest payments and this was
unacceptable to the Agency.
In the interest of retiring the construction loan and avoiding additional bank fees,
interest costs, and the unacceptable negative amortization provision of the proposed
permanent loan, acquisition discussions continued with Poway Land. On September 19,
1995, the Redevelopment Agency Board directed staff to negotiate the terms for an
Agency acquisition of the property. Since that time, Agency staff and Special Legal
Counsel have been working with the construction lender, Imperial Bank, and Poway
Land and their legal counsel to effect an agreement regarding the terms of said
acquisition.
FINDINGS
Imperial Bank, the project construction lender, has indicated that it will not
- extend the construction loan beyond October 6, 1995. Given this time constraint, it
is unlikely that the Agency and Poway Land will reach agreement on the final
purchase price. Therefore, an Agency acquisition with a partial payment of the
final purchase price was explored and is being recommended at this time.
An agreement has been reached between the Redevelopment Agency negotiators (staff
and Special Legal Counsel) and Poway Land which is contingent upon the Agency's
approval. As proposed, the Agency would pay $4,620,000 into escrow in exchange for
clear title to the site. The $4,620,000 would be disbursed by the escrow agent to
take out the construction lender and pay certain outstanding construction bills for
the project. Imperial Bank has indicated that a cash payoff of the construction
loan on October 6, 1995 would amount to $4,513,740. This amount includes a
principal amount of about $4.32 million. The difference is accrued interest and
bank fees.
The Agency would also expend $106,260 through escrow to pay outstanding construction
related bills for the Haley project. The validity of these expenses would be
reviewed through the process for calculating the final purchase price. The total
Agency cost of this transaction at this time would be $4,620,000 which is less than
the offer made on June 23, 1995 for the complete acquisition of Haley. In exchange
for this payment, the Agency would receive clean title to Haley Ranch Estates in the
form of a Grant Deed. Because the final purchase price has not been determined, the
Agency would provide Poway Land with a Promissory Note, secured by a Deed of Trust,
for the balance due, if any, based upon the purchase price calculation provided in
the Lease-Option Agreement. The amendment would also establish time limits in
connection with the final calculation of the purchase price. Poway Land would be
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Agenda Report
October 3, 1995
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required to provide the Agency with a full cost accounting for the project on or
before November 15, 1995. The parties would then have until May 15, 1996 to agree
on the amount of the final purchase price. If agreement is not reached then both
parties would agree that an action of declaratory relief would be filed with the San
Diego County Superior Court on or before June 17, 1996.
An amendment to the OPA and Lease is the mechanism by which the Agency may acquire
the property through a partial payment of the purchase price. Sections 303 through
307 of the OPA would be revised and a new Section 308 will be added by the proposed
amendment.
ENVIRONMENTAL REVIEW
This item is not subject to CEQA review.
FISCAL IMPACT
Approval of this item would result in the expenditure of $4,620,000 from the
Redevelopment Agency's Housing Fund. There is currently $4,247,787 available in the
Haley project account (#471-5951). An additional $372,213 must be appropriated from
the unappropriated reserve of the Agency's Housing Fund (#471-8912). The balance of
the purchase price, if any, will be paid pursuant to the purchase price calculation
formula in the Lease-Option Agreement and brought forward at a future date for
Agency approval.
ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE
Allan Kuebler, Poway Land, Richard Kuebler, Poway Land, Catherine Rodman, Legal Aid
Society, and Kathy Berry, Imperial Bank.
RECOMMENDATION
It is recommended that the Redevelopment Agency adopted the attached resolution
approving the Second Amendment to the Owner Participation Agreement and First
Amendment to the Lease Option Agreement with Poway Land and appropriate $372,213
from the Redevelopment Agency's Housing Fund (#471-8912).
Attachments: A - Second Amendment to the Owner Participation Agreement (in
preparation)
B - Redevelopment Agency Resolution (in preparation)
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(( AGENDA REPORT ~
CITY OF POW A Y
ADDITIONAL IIATfRIAL
TO: Honorable Chairman and Member of the Redevelopment Agency -.
FROM: James L. Bowersox, Executive Dire~
INITIATED BY: John D. Fitch, Assistant Executive Director ~
Warren H. Shafer, Director of Redevelopment Services ~~
Pamela R. Colby, Redevelopment Project Administrator
DATE: October 3, 1995
SUBJECT: Second Amendment to the Owner Participation Agreement and
the First Amendment to the Lease Option Agreement By and
Between Poway Land, Inc. and the Poway Redevelopment.
BACKGROUND
Over the past two weeks staff, Agency Special Legal Counsel, Poway Land and
their legal counsel have been working. to finalize an agreement regarding the
terms of the Redevelopment Agency's acquisition of Haley Ranch Estates. As of
Friday, September 29, 1995, the Agency resolution of approval and the Second
Amendment to the Owner Participation Agreement necessary for this acquisition
have been prepared and forwarded to Poway Land.
FINDINGS
Attached are draft copies of the (1) Second Amendment To Owner Participation
Agreement And First Amendment To Lease Option Agreement and (2) Res07ution Of
The Poway Redeve70pment Agency Approving And Adopting The Second Amendment To
Owner Participation Agreement And First Amendment To Lease Option Agreement By
And Between The Poway Redevelopment Agency And Poway Land, Inc. These
documents reflect the most recent draft of said documents and may be subject
to further modification prior to Agency action on this item. To the extent
that any changes are recommended, staff will submit revised materials as they
are available. Changes may occur since we have not received final approval of
the documents by Poway Land.
RECOMMENDATION
Insert these draft materials as Attachments "A" and "B" in the Staff Report
prepared for this item.
E:\CITY\RDA\HALEY.I2t /.
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ACTION:
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OCT 3 1995 ITEM .6 IF-I'"
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Attachment A
SECOND AMENDMENf
TO OWNER PARTICIPATION AGREEMENT AND
FIRST AMENDMENf TO LEASE OPTION AGREEMENf
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This SECOND AMENDMENT TO OWNER PARTICIPATION AGREEMENT AND
FIRST AMENDMENT TO LEASE OPTION AGREEMENT (this" Amendment") is entered
into by and between the POWAY REDEVELOPMENT AGENCY (the "Agency") and
POWAY LAND, INC., a California corporation (the "Panicipant") and is in implementation and
furtherance of the OP A and the Lease Option Agreement (as those terms are defmed below).
RECITALS
. WHEREAS, the Agency and the Panicipant have entered into that certain Owner
Participation Agreement (the "OPA") dated June 27, 1989, and that certain Lease Option
Agreement dated, January 25, 1991 (the "Lease Option Agreement) (capitalized terms used
herein and not otherwise defined shall have the same meaning as set forth in the OP A and the
Lease Option Agreement); and
WHEREAS, the OPA and the Lease Option Agreement provide for the Agency's lease of
the Site from the Participant and grant the Agency an option to purchase the Site for an amount
equal to the Purchase Price which amount is to be determined according to the formula set forth
in the OPA and the Lease Option Agreement; and
WHEREAS, the Participant and the Agency entered into the First Amendment to the
Owner Participation Agreement dated April 30, 1991; and
WHEREAS, the parties desire to enter into this Amendment which provides for the
Agency's payment of the Acquisition Amount, the Participant's transfer of fee title to the Site to
the Agency, the Agency's execution and delivery of the Promissory Note and Deed of Trust to
the Participant and which establishes a time line and mechanism for the settlement of the dispute
between the parties regarding the final calculation of the Purchase Price.
NOW TIlEREFORE, TIlE PARTIES AGREE AS FOLLOWS:
Section 1. Purchase Price. The following paragraph shall be added at the end of
Section 303 of the OPA:
"The Agency's obligation to pay the Purchase Price shall be satisfied as follows: (i) the
Agency shall deposit into Escrow cash, a wire transfer or a cashier's check in the amount of
Four Million Six Hundred Twenty Thousand Dollars ($4,620,000) (the "Acquisition Amount");
and (ii) the Agency shall execute the Promissory Note attached hereto as Exhibit A, which
Promissory Note shall be in the face amount of Two Hundred Eighty Thousand Dollars
($280,000) (the "Face Amount") and which evidences the Agency's obligation to pay to
Participant the Face Amount plus an amount equal to the difference between the final Purchase
.U8L:30849 _31424182345.00015 OCT 3 1995 ITEM 6 ,i:,....
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Price to be determined in the manner and within the time set forth below, less the sum of
Acquisition Amount and the Face Amount (the. Additional Payment Amount.) (Le., Additional
Payment Amount = Purchase Price - [Acquisition Amount + Face Amount)), if any, which
Promissory Note shall be secured by the Deed of Trust attached hereto as Exhibit B to be
executed by the Agency as Trustor in favor of the Participant as beneficiary. .-
The Acquisition Amount shall be disbursed by the Escrow Agent as follows: (i) first to
satisfy the lien on the Site of that certain deed of trust dated December 21, 1990 and recorded
with the San Diego County Recorder's Office as Document No. 90-0677039, which was executed
by Panicipant as trustor, and in which Guardian Bank, is named as beneficiary and trustee which
deed of trust has been assigned of record to Imperial Bank, a California corporation, by
assignment recorded March 30, 1995 as File No. 95-0131128 of Official Records of the County
of San Diego (the .Imperial Bank Lien.); and (ii) after satisfaction of the Imperial Bank Lien, the
remainder of the Acquisition Amount shall be applied towards the payment of
[pARTICIPANT TO SUPPLY INFORMATION REGARDING
CONSTRUCTION OBLIGATIONS AND AMOUNTS] until the Acquisition Amount is
exhausted. Prior to the execution of this Amendment, Panicipant has supplied the Agency with
an estimate of the amount required to satisfy the Imperial Bank Lien of Four Million Five
Hundred Thineen Thousand Seven Hundred Thirty Nine Dollars and One Cent ($4,513,739.01).
[pARTICIPANT TO SUPPLY IMPERIAL BANK DEMAND]
After the Panicipant's conveyance of the Site to the Agency, the panies hereto agree to
enter into negotiations, which may include with the consent of both the Agency and the
Panicipant submission of this matter to some form of Alternative Dispute Resolution (including
without limitation, mediation, non-binding arbitration, and/or binding arbitration), in order to
finally determine the calculation and amount of the Purchase Price under the formula set forth in
OPA and the Lease Option Agreement. On or before November 15, 1995, the Participant shall
supply the Agency a repon from the accounting firm of Coopers & Lybrand which sets forth the
Panicipants calculation of the Purchase Price and the Panicipant shall supply the Agency with
such additional information as the Agency may reasonably determine is required in order to
suppon such calculation. Thereafter, on or before December 15, 1995, the Agency shall cause a
cenified audit of the information submitted by Poway Land to be commenced, In the event that
the panies have not reached final agreement on the amount of the Purchase Price on or before
May 15, 1996, both panies agree that an action for declaratory relief will be filed on or before
June 17, 1996, in the Superior Coun of the County of San Diego and that such action will be
limited to requesting that the coun make a fmal determination regarding the amount of the
Purchase Price due under the OPA and the Lease Option Agreement and the Agency's obligation,
if any, to pay an Additional Payment Amount. The Participant and the Agency recognize that
certain actions undertaken by the other party regarding the OP A and the development of the Site
thereunder may be included within the scope of the determination of the Purchase Price,
however, the panies hereby expressly agree that the scope of any litigation shall be limited solely
to the determination of the Purchase Price and that no other or additional causes of action,
including without limitation, any causes of action for damages, will be raised in this or any other
litigation. .
Section 2. Reservation of Rights. The panies hereto reserve all rights regarding the
determination of the Purchase Price and the proper characterization of specific fees and costs
items for purposes of the formula set forth in the OP A and the Lease Option Agreement for the
'U8L:30849 _31424182345.00015 2 OCT 3 1995 11 EM h .t
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calculation of the Purchase Price. Agency's payment of the Acquisition Amount is in no way
intended to be and shall not be deemed or construed acceptance by the Agency of any of the
panicular cost items making up the Purchase Price.
IN WITNESS WHEREOF, the Agency and the Panicipant have executed this .,.
Amendment on the respective dates set forth below:
POWAY REDEVELOPMENT AGENCY,
a public body corporate and politic
Dated: , 1995 By:
Chairman
ATI'EST:
Secretary
APPROVED AS TO FORM:
STRADLING, YOCCA, CARLSON & RAUTH,
a Professional Corporation
Agency Special Counsel
POWAY LAND, INC., a California
corporation
Dated: ,1995 By:
lts:
Dated: ,1995 By:
Its:
APPROVED AS TO FORM:
SCHALL, BOUDREAU, GORE,
a Professional Corporation
Counsel to Poway Land
PUBL:30849 _31424[ 82345.00015 3 ITEM .6 . i.l
(JCT 3 1995
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ExmBIT A
SECURED PROMISSORY NOTE
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San Diego, California
October _, 1995
FOR VALUE RECEIVED, the POWAY REDEVELOPMENT AGENCY, a
public body corporate and politic, exercising governmental functions pursuant to Chapter 2 of the
Community Redevelopment Law of the State of California, whose address is 13325 Civic Center
Drive, Poway, California 92064, ("Agency"), promises to pay to the order of POW A Y LAND,
INC., a California corporation, or its assigns or successor ("Poway Land"), whose address is
1335 Hotel Circle South, #112, San Diego, California 92108, in lawful money of the United
States of America, a principal sum of not less than TWO HUNDRED EIGHTY THOUSAND
DOLLARS ($280,000) plus any additional amount equal to the Additional Payment Amount as
that term is defined in and which may be due as provided for under Section 303, of that cenain
Owner Participation Agreement ("OPA") by and between the Agency and Poway Land dated
June 27, 1989 as amended by the First Amendment to Owner Participation Agreement dated
April 30, 1991 and the Second Amendment to Owner Participation Agreement and First
Amendment to Lease Option Agreement dated , 1995 (the "OPA"). Capitalized terms
used herein and not otherwise defined shall have the same meaning as set forth in the OP A as
amended. Agency and Poway Land further covenant and agree to comply with the terms and
conditions of this Note as set forth hereinafter.
Section 1. ReDresentations and Warranties of Mencv.
Section 1.1 Agency is a public body corporate and politic, existing pursuant to the
Community Redevelopment Law, which has been authorized to transact business pursuant to
action of the City of Poway. The execution and delivery of this Note and the consummation of
this transaction by Agency have been duly authorized by all requisite actions on the part of the
Agency.
Section 1.2 The execution and delivery of this Note, the incurrence of the obligations
set forth in this Note, the consummation of the transactions contemplated by this Note, and the
compliance with the terms of this Note do not to the best of Agency's knowledge conflict with or
result in a breach of any statute, regulation, ordinance, general plan, or the terms, conditions or
provisions of, or constitute a default under, any bond, note or other evidence of indebtedness or
any contract, indenture, mongage, deed of trust, loan agreement, lease or other agreement or
instrument to which Agency is a party.
ExmBIT A
'UBL,30849 _314241 82345.000 15 (page I of 4) OCT 3 1995 ITEM h'" M
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Section 2. Maturitv Date. The outstanding principal balance under this Note, together with
all other sums due Poway by Agency as provided hereunder and under the Deed of Trust which
secures this Note, shall be due and payable on or before one hundred and twenty (120) days
following the fmal determination of the Purchase Price in accordance with and subject to the -
terms and requirements of Section 303 of the OPA (the 'Maturity Date').
Section 3. Accrual of Interest Uoon Default.
Section 3.1 This Note shall bear no interest unless and until Agency defaults in its
obligation to pay all amounts due and owing under this Note and the Deed of Trust and/or fails
to pay the remaining amount due and owing in full on the Maturity Date. In the event of such
under a default, then interest shall accrue at the rate of twelve percent (12 %) per annum from the
Maturity Date until all amounts due and owing under this Note and the Deed of Trust which
secures it are paid in full.
Section 3.2 Agency may prepay this Note in whole or in pan at any time without
penalty .
Section 3.3 In the event of a default under this Promissory Note, each payment shall
be credited as follows: first, to sums due under this Note, other than sums representing principal
or interest; second, against accrued but unpaid interest; and, fmally, against principal.
- Section 4. Deed of Trust Secures Note. This Note is secured by that certain Deed of Trust
and Assignment of Rents of even date herewith against the property described therein ('Deed of
Trust').
Section 5. Waiver
Section 5.1 Agency shall not be deemed, by any act or omission or commission to
have waived any of its rights or remedies hereunder unless such waiver is in writing and is
signed by the Agency, and then, only to the extent specifically set forth in writing.
Section 5.2 Poway Land shall not be deemed, by any act or omission or commission,
to have waived any of its rights or remedies hereunder unless such waiver is in writing and is
signed by Poway Land and, then, only to the extent specifically set forth in writing. A waiver
with reference to one event shall not be construed as continuing or as a bar to or waiver of any
right or remedy as to a subsequent event. No delay or omission of Poway Land in exercising
any right, whether before or after a default by Agency under this Note, shall impair any such
right or shall be construed to be a waiver of any such right, and the acceptance at any time by
Poway Land of any past due or panial payment shall not be deemed to be a waiver of the right to
require payment in full of any other or remaining amounts, immediately if such amounts are then
past due, or, in all other cases, when due and payable. The release of any party liable on this
Note shall not operate to release any other party liable on it.
Section 6. Attornev's Fees and Costs. In the event of a dispute concerning the terms of this
Note or the Deed of Trust by which it is secured, the prevailing party shall pay all costs, fees
and expenses (including, without limitation, reasonable attorneys' fees) incurred by the non-
EXHIBIT A
PUBL:30849 _314241 B2345 .00015 (Page 2 of 4) ITEM b .l.
OCT 3 1995
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prevailing party. The term "dispute" includes any form of litigation, whether in state, federal or
bankruptcy court, arbitration, mediation or other alternative dispute resolution procedure
provided, however, this Section 6 shall not apply to the submiuaI of the calculation of the
Purchase Price to Alternative Dispute Resolution or to a judicial action pursuant to Section 303 of__
the OPA.
Section 7. Default. Time is of the essence of payment. Upon the occurrence of any default
hereunder or under the Deed of Trust, the entire unpaid principal balance and all other amounts
due under this Note and/or the Deed of Trust, at the option of Poway Land, shall at once become
due and payable and Poway Land may exercise any or all other rights and remedies provided for
in this Note, the Deed of Trust, by law, and in equity.
Section 8. Remedies. The rights and remedies of Poway Land with respect to this Note
shall be cumulative, concurrent and nonexclusive and may be pursued singly. successively or
together, at the sole discretion of the Poway, at such times as Poway Land may deem necessary
or advisable in its sole discretion. Poway Land's failure to exercise any such right or remedy
shall in no event be construed as a waiver or release of such right pr remedy.
Section 9. Miscellaneous Provisions.
Section 9.1 The words" Agency" and "Poway Land" shall be deemed to include where
appropriate their respective heirs, legatees, devisees, administrators, executors, successors and
assigns; provided, however, that this Note may not be assigned by Agency without the prior
written consent of Poway Land, which consent will not be unreasonably withheld.
Section 9.2 This Note shall be governed by and be construed according to the laws of
the State of California, except to the extent federal laws preempt the laws of the State of
California.
Section 9.3 Notwithstanding any provisions herein, the total liability for payment in the
nature of a late charge or interest shall not exceed the limit now imposed by applicable laws of
the State of California.
Section 9.4 Every provision of this Note is intended to be severable. If any term or
provision hereof is declared by a court of competent jurisdiction to be illegal or invalid, such
illegal or invalid term or provision shall not effect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable.
Section 10. Transfer. This Note shall be fully assignable, provided, however, that this Note
shall not be transferrable at any time or within fifteen (15) days of other such transfers, by
assignment, sale or otherwise to more than five (5) transferees, and provided further that any
transferee or recipient of an interest herein shall provide to the Agency, prior to such transfer, an
investor letter executed by such transferee in the form attached hereto as Appendix 1.
EXIllBIT A ..
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IN WITNESS WHEREOF, Agency, intending to be legally bound hereby, has duly
executed this Promissory Note as of the day and year fU'St above written.
POWAY REDEVELOPMENT AGENCY,
a public body, corporate and politic _.
Executive Director
ATIEST:
Agency Secretary
APPROVED AS TO FORM:
STRADLING, YOCCA, CARLSON & RAUTH
a Professional Corporation
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By:
Agency Special Counsel
EXHIBIT A
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PUBL:30849 _31424182345.00015 (lCT :3 ITEM .6 "
1995
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APPENDIX 1 TO EXHIBIT A
INVESTOR LETIER
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PROMISSORY NOTE OF POW A Y REDEVELOPMENT AGENCY TO
POWAY LAND, INC. UNDER mAT CERTAIN SECOND AMENDMENT
TO OWNER PARTICIPATION AGREEMENT AND FIRST AMENDMENT
TO LEASE OPTION AGREEMENT BY AND BETWEEN THE POWAY
REDEVELOPMENT AGENCY AND POWAY LAND, INC., DATED
,1995
The undersigned, on behalf of (the "Purchaser"), represents and
warrants to the Poway Redevelopment Agency (the" Agency") that the Purchaser is purchasing a
Promissory Note in the principal amount of $280,000 (the "Note") for its own account for
investment and with no present intention of distributing or selling ~e Note or any part thereof or
any interest therein, either currently or after the passage of a fixed period of time, or upon the
occurrence or non-occurrence of any predetermined event or circumstances, provided, however
that at all times the disposition of such Note is and shall remain totally within the control of the
Purchaser.
The Purchaser understands that the Note has not been registered under the Securities Act
of 1933, as amended. The Purchaser acknowledges that in purchasing the Note it is not relying
on any representations of the Agency or any of its employees or agents with respect to the
financial quality of the Note. The Purchaser is relying solely on statements and representations
of the seller hereof (the "Seller") and on its own knowledge and investigation of the facts and
circumstances relating to the purchase of the Note. The Purchaser acknowledges that the Note is
in the face amount of Two Hundred Eighty Thousand Dollars ($280,000) and that the Agency's
obligation under the Note to pay the "Additional Payment Amount" (as that term is defmed in the
Note) is contingent upon the fmal determination of the Purchase Price (as that term is defined in
the "OPA" and "Lease Option Agreement" which terms are defmed below) according to the
calculations to be undertaken in accordance with the terms of the Owner Participation Agreement
by and between the Agency and Poway Land, Inc. dated June 27, 1989 (the "OPA") and the
Lease Option Agreement by and between the Agency and Poway Land, Inc. dated January 25,
1991 (the "Lease Option Agreement") as both were amended by the Second Amendment to OPA
and First Amendment to Lease Option Agreement by and between the Agency and Poway Land
dated , 1995 (the" Amendment") (the OPA, the Lease Option Agreement and the
Amendment will be referred to collectively herein as the "Agreements"). The Purchaser further
acknowledges that the Additional Payment Amount, if any, secured by the Note is an uncertain
sum and that there may in fact be no amount other than the face amount due under the Note.
The Purchaser has knowledge and experience in financial and business matters and is
capable of evaluating the merits and risks of purchasing the Note. In the opinion of the
Purchaser, and based upon its independent investigation of the Note and the Agreements, the
Purchaser is satisfied that the probability of the Agency's payment of the Additional Payment
Amount is sufficient to warrant the Purchaser's purchase of the Note.
APPENDIX 1 TO EXInBIT A
puad0849 _314241 B2345.(XX115 Page 1 of 2 tleT 3 1995 ITEM .6 . .1'
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The Purchaser covenants that it is familiar with the terms of the Agreements and that it
has access to sufficient information relative to the Agreements and the probability of the
paymenrs of the Additional Payment Amount to make an informed invesnnent decision or can
acquire it without unreasonable effort or expense. -.
The Agency and the Seller have made available to the Purchaser the opportUnity to ask
questions and receive answers from such parties concerning the terms and conditions on which
the Note has been offered for sale to the Purchaser and to obtain such additional information
relative to the financial data and business of such parties and the status of the parties
determination of the Additional Payment Amount, to the extent that such parties possess such
information or can acquire it without unreasonable effort or expense, as the Purchaser has
deemed necessary and appropriate in the circumstances.
The undersigned acknowledges receipt of all such information as the undersigned deems
necessary and appropriate to enable the undersigned to evaluate the fmancial risk inherent in
acquiring the Note and acknowledges receipt of satisfactory and complete information covering
the security for the Note;
The Purchaser reserves the right to dispose of the Note in accordance with the terms of
the Note if, in irs judgment, its disposition would be compelled by prudence or required by law;
provided, however, that no public offering of all or a portion of the Note shall be made. The
Purchaser understands that it may sell the Note to any qualified institutional investor provided
that any such transfer shall be made in accordance with all federal and related state securities
laws and with the requirements of the Agreemenrs. In the event that it does so sell the Note in
the future, it shall assume the responsibility for disclosure of all material information that may be
necessary to comply with all federal and related state securities laws.
Dated: , 1995 , as Purchaser
By:
Irs:
Approved as to form:
POWAY REDEVELOPMENT AGENCY
By:
Its:
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APPENDIX 1 TO EXHIBIT A
PUBc:308<l9 _31424182345.00015 Page 2 of 2 OCT 3 ITEM I;, .1'
1995
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EXHIBIT B
CmCAGO TITLE LONG FORM DEED OF TRUST
(To be inserted.)
_.
EXHIBIT B
PUBL:30S49 _31424182345.00015 (Page 1 of 1) DCT 3 1995 ITEM .6 ,I
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Attachment B
RESOLlJrION NO. -
RESOLurION OF THE POWAY REDEVELOPMENT ~
AGENCY APPROVING AND ADOPTING THE SECOND
AMENDMENT TO OWNER PARTICIPATION AGREEMENT
AND FIRST AMENDMENT TO LEASE OPTION
AGREEMENT BY AND BETWEEN THE POWAY
REDEVELOPMENT AGENCY AND POWAY LAND, INC.
WHEREAS, the Poway Redevelopment Agency (the" Agency") and Poway Land, Inc.
("Poway Land") have entered in to that certain Owner Participation Agreement (the "OPA")
dated June 27, 1989, which provides generally for Poway Land's development of a mobile home
park on certain real property located within the Paguay Redevelopment Project (the "Site"), the
provision of the Agency Assistance to Poway Land, and the restriqtion of the occupancy of the
units in the mobile park to families of low and moderate income; and
WHEREAS, pursuant to the OPA, Poway Land and the Agency entered in to that certain
Lease Option Agreement dated, January 25, 1991 (the "Lease Option Agreement); and
WHEREAS, the OPA and the Lease Option Agreement provide for. the Agency's lease of
the Site from the Poway Land and grant the Agency an option to purchase the Site for an amount
to be determined according to the formula set forth in the OPA and the Lease Option Agreement
(the "Purchase Price"); and
WHEREAS, Poway Land and the Agency entered into the First Amendment to the
Owner Participation Agreement dated April 30, 1991, pursuant to which the amount of the
Agency Assistance was increased and certain revisions were made to the Scope of Development;
and
WHEREAS, in accordance with Section 302 of the OPA, the Agency has exercised its
Option to purchase the Site; and
WHEREAS, the Agency and Poway Land are in disagreement as to the proper
calculation and amount of the Purchase Price under the formula set forth in the OPA and the
Lease Option Agreement for the Agency's acquisition of the Site thereunder; and
WHEREAS, in furtherance of the OPA and the Lease Option Agreement and in order to
stabilize the Project and provide for the Agency's acquisition thereof, the parties desire to enter
into the Second Amendment to Owner Participation Agreement and First Amendment to Lease
Option Agreement in order to provide for the Agency's partial payment of the Purchase Price,
the Participant's transfer of fee title to the Site to the Agency and to establish a time line and
- mechanism for the settlement of the dispute betWeen the parties regarding the final calculation of
the Purchase Price.
PUBL:30923_114241B234S.000IS tlCT 3 1995 ITEM 6
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NOW, TIlEREFORE, TIlE POWAY REDEVELOPMENT AGENCY DOES
HEREBY RESOLVE, ORDER AND DETERMINE AS FOLLOWS:
Section 1. The Agency hereby approves the Second Amendment to Owner -.
Participation Agreement and First Amendment to Lease Option Agreement attached hereto as
Exhibit A and incorporated herein by this reference (the "Second Amendment").
Section 2. The Agency hereby authorizes the Executive Director of the Agency to
execute the Second Amendment on behalf of the Agency and to execute such other documents
and take such further actions as may be necessary or appropriate to effectuate the OP A and the
Lease Option Agreement as amended by the Second Amendment.
.
PASSED, APPROVED AND ADOPTED this _ day of ,1995.
Chairman, Poway Redevelopment Agency
ATI'EST:
Secretary, Poway Redevelopment Agency
APPROVED AS TO FORM:
Stradling, Yocca, Carlson & Rauth
Agency Special Counsel
PUBL:30923 _114241 B234S,OOOlS 2 OCT 3 1995 ITEM 6
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EXHIBIT A
Second Amendment to Owner Participation Agreement
and First Amendment to Lease Option Agreement
[To Be Inserted]
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4 DOT 3 1995 ITEM 6 .",
PUBc:30923_114241B234S.0001S
14 of 14
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LEGAL Al.l) SOCIETY Or ~~AN DIEGO. iNC. U;q,F.l\. W..\I.L~,
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FAX COVER SHEET
.. .. .. .. .. .. .. .. .. * * .. .. * * * * * * * * .. .. * .. .. .. .. ..
PLEAS I'. IJF.LIVER THE FOLLOWING PAGE(S):
TO: Don Higginson, Chairman
LOCATT':'tJ: City of Poway/Poway Redevelopment Agency
FAX Nl1MBER: 748-1455
FROM: Catherine A. Rodman
FAX NUMBER: 16191 722-0549
WE ARE TRANSMITTING A TOTAL O~ 3 PAGES INCLUDING THIS COVER
SHEET. THE ORIGINAL WILL X WILL NOT FOLLOW IN THE MAIL.
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DATE: lu/3/95 TIMEs 4:15 p.m.
FAX MESSAGE
..,
Flo~Je include this letter with Item 6 of the public hearing.
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lill!.F,; : The information contained in this fax messaqe may contain
I,ttorney-client information intended only for the use of
the individual or entity named above. If you are not the
intended recipient, or the employee or agent respons'ble
to deliver it to the intended recipient, be aware that
any disclosure, copying, distribution, or use of the
contente of this transmission is prohibited. If you have
received this transmission in error, plense notify us
immediately by telephone, and return the original mess,1.ge
to us at the above address, via the U.S. Postal Service.
Thank you.
1 d l<,; f': ,. q:l;t"[ "lJO 5~S0 ~~L 519 :l31 "PlSU1?..~til,)'t i'''!1ii p'rrml.6 l<ni=lc\
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October 3, 1995 FAXED AND MAILED
Don Hi9'l'ir""'I, Chairman
poway RQu~v~lopment Agency
13325 Civic Center Drive
poway, CA 92064
Re: P~u~vsed Ex~enditu~e of Lo~ ~nd Moderate !nco~e HouB1na Funds
to Acquire Halev Ranch Estates
Dear Mr. Higginsonl
Though mi""ddCl.essed to me and mailed without your return address,
I did, fv,tunateiy, receive your agenda' and accompanying report
summary on October 2, 1995. Without more time to review the
proposed expenditure, Second Amended OPA and First Amended Lease
Option. and based on the nature of the transaction proposed, Legal
Aid SoctAty objects to this proposed expenditure of Housing Fund
monies.
First, ths "'genda report summary is deceptive in its charact(O>ri-
zatiot1 u.. l:he "fiscal impact" of this transaction,' $4.62 million
1s not the entire purchase price for Haley Park Estates. Rather,
the Housing Fund is being tapped for in excess of $12 millton,
approximately $200,000.00 per unit, Staff 1& now proposing that
the Housing Fund be tapped for the additional amount.of $4.62
million plus an undetermined balance. The staff report-concedes
that In an effort to take action before the construction loan
expires, on October 6th, these monies would be paid without
verifying the validity of the expenditures. (See agenda report, p.
3, par. 4) .
There Br... numerous costs involved in Haley Park Estates which are
suspecl dnd others which clearly are violative of Conununity
Redevelopment Law. For example, approximately $1 million was spent
to clear the si':e previously occupied by Haley Trailer Ranch to
prepnre it for commercial development. This is an inappropriate
use of Housing Fund monies. In addition, payment to the displacees
of ~elcca~io~ behefits, u~de= State Relccatio~ ~aw, is e.lse r..ot a
proper expenditure of Housing Fund money which must be spent to
build, Lnpcove, or preserve affordable housing not relocate people
from it. Nor can the Housing Fund be properly expended to remove
or demoliRh the coaches at the Haley Trailer Ranch site. Again,
the money is to expand the community's supply of affordable
housing, not demolish or remove it,
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OCT 3 1995 ITEM 6 ..
G d Wd i.'.l:~ Sr;c.1',- 'DO r;~S0 GcL 519 :l31 "P'SUE';l:lO - Fq,;q;:lI:lS pltj lE't.:..r] : LJi'~rl-J
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Don HiggJ.!!!l1m
Oct~,I::.-.J., _J..W
Paao 2
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To pay monies first and ask questions with regard to the propriety
of the various expenditures later fails to assure that the Housing
Fund r.v.nJHs axe spent in accordance with state law.
In addition, while no mention is made in the agenda regarding this
item, the original OPA and the First Amended OPA only require that
the units in Haley Park Estates be occupied by and affordable to
moderate l.ncome households, I.e. those making at or balow 120% of
area mod1.an. The Agency has repeatedly touted this project as a
very low income development. If that is the case and the Agency is
committed to ~ajntain affordability to that income level, then the
Second Amendment to the OPA should reflect this commitment.
Sincerely,
G::~' SAN 01EOO, INC.
CATHF.RINl': .~v FlOD:fA,N
Attorney ut Law
CAR/aIr
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