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HomeMy WebLinkAboutStaff Report 3.I 6/16/2014DATE: June 11, 2014 Agenda Item #3.1 TO: Honorable Mayor and Members of the City Council through City Manager FROM: Eric W. Danly, City Attorney SUBJECT: Resolution Approving the Subordination of Financing and Regulatory Agreements for the Logan Place Apartments Affordable Housing Development and Ratifying the Project Financing Provided by the City of Petaluma and the former Petaluma Community Development Commission RECOMMENDATION It is recommended that the City Council adopt the attached resolution entitled: "Resolution Of The City Council Of The City Of Petaluma Approving The Subordination Of Financing And Regulatory Agreements For The Logan Place Apartments Affordable Housing Development And Ratifying The Project Financing Provided By The City And The Former Petaluma Community Development Commission" The purpose of this resolution is to obtain authorization for the City Manager to sign agreements subordinating loans of the former Petaluma Community Development Commission and the City and regulatory agreements for the Logan Place Apartments affordable housing development in favor of long -terns financing for the project, and, in an abundance of caution, to confirm Council authorization for the entire financial support package for the Logan Place project. Total funding for the project in the amount of $7.65 million is made up of debt issued by the City and by the former commission, the housing assets of which (including the Logan Place debt) the city has elected to assume. On January 9, 2012, the City Council adopted a resolution pursuant to which the City agreed to serve as the successor agency to the commission commencing upon the dissolution of the commission on February 1, 2012 pursuant to Assembly Bill xt 26. On January 23, 2012, the City Council adopted a resolution pursuant to which the City elected to retain the housing assets and housing functions previously performed by the commission, and elected to assume such housing assets and functions commencing upon dissolution of the commission. The City and the former commission provided financing to Burbank Housing Development Corporation, a California nonprofit public benefit corporation and to Burbank's successor in Agenda RevieN : n City Attorney (�J�//�\ Finance Director City Manager -\ _ interest -- Logan Place, L.P., a California limited partnership -- to assist in the development of Logan Place affordable housing project consisting of 66 units of multifamily housing located at 1200 Petaluma Boulevard North. Funding was approved in adopted budgets of the City and the former commission allocating annual budget amounts to the project The project financing provided by the former commission tools the form of: (i) a loan in the principal amount of One Million Dollars ($1,000,000), (ii) a loan in the principal amount of One Million Three Hundred Thousand Dollars ($1,300,000), and (iii) a loan in the principal amount of One Million, Three Hundred Fifty Thousand Dollars ($1,350,000), for a total of former commission financing totaling $3.65 million. The former commission loans are secured by a deed of trust. A regulatory agreement restricting project rents was recorded in connection with the former commission loans. In addition, the City provided a loan for the project in the amount of Four Million Dollars ($4,000,000) funded with Home Investment Partnership funds. That financing is secured by a deed of trust, and the developer executed a regulatory agreement restricting project rents and occupancy. The California Department of Housing and Community Development has agreed to provide a construction loan for the project in the amount of Six Million, Eighty -Two Thousand and Forty - Two Dollars ($6,082,042) using funds from the department's Multifamily Housing Program. The department's commitment to make the loan is expressly conditioned upon the subordination of the deeds of trust, regulatory agreements and all other documents executed in connection with the City and former commission loans, to the construction loan, and the deed of trust and the regulatory agreement to be executed by developer for the benefit of HCD in connection with the MHP Loan. The former commission's low- and moderate -income housing fund was the source of some of the funds used to provide the loans. In its capacity as the housing successor to former commission, the City is required to comply with the housing provisions of Community Redevelopment Law. Pursuant to Health and Safety Code Section 33334.14 (a)(4), the City, in its capacity as the as the housing successor, is permitted to subordinate the affordability restrictions set forth in the City/former commission regulatory agreement to liens, encumbrances, and regulatory agreements for the benefit of state and federal agencies providing project financing. The project developer has prepared proposed subordination agreements that provide the City with notice and an opportunity to cure defaults of the developer's obligations related to the construction financing, as a means of protecting the City's interest in the project (the project debt the City has issued and assumed that will become junior to the construction financing upon approval of the subordination agreements). The latest draft subordination agreements are attached to the resolution included with this staff report. The subordination agreements are still receiving minor, non -substantive edits. The attached resolution provides that the City Council: (i) authorizes the subordination of the deeds of trust, regulatory agreements and other documents related to the City and former commission loans to the deed of trust and the regulatory agreement to be executed by developer for in connection with the construction financing and (ii), and ratifies and affirms the execution and delivery of all documents executed by the City and/or by former commission in connection with the project financing. DISCUSSION The City's agreement to subordinate the City and former commission deeds of trust, regulatory agreements and related documents executed in support of the Logan Place project will enable the developer to obtain low-cost construction financing for the project. Completion of the project will provide 65 units of affordable housing that will remain subject to rent and occupancy restrictions pursuant to the City regulatory agreement and the construction financing regulatory agreement. In the event that a default under the construction financing arises and remains uncured, and there is a foreclosure under the construction financing deed of trust, there is a risk that the City would lose its security interests in the property and the project, and a risk that the affordability restrictions would be terminated. However, pursuant to the proposed subordination agreements, the City will have the right to cure defaults under the construction financing documents. Also, it was anticipated that subordination of the City and former commission loans and regulatory and affordability agreements would be sought to obtain additional financing for the project. FINANCIAL IMPACTS The proposed action creates no new financial impacts or risks not contemplated as part of the overall project support. The proposed action creates no new payment obligations of the City but does add risk concerning the City's recovery of project financing and accrued interest. ATTACHMENTS Subordination resolution Subordination agreements (3) ATTACHMENT RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA APPROVING THE SUBORDINATION OF FINANCING AND REGULATORY AGREEMENTS FOR THE LOGAN PLACE APARTMENTS AFFORDABLE HOUSING DEVELOPMENT RATIFYING THE PROJECT FINANCING PROVIDED BY THE CITY OF PETALUMA AND THE FORMER PETALUMA COMMUNITY DEVELOPMENT COMMISSION WHEREAS, pursuant to Resolution No. 2012-007, adopted by the City Council on January 9, 2012, the City of Petaluma ("City") agreed to serve as the successor agency ("Successor Agency") to the Petaluma Community Development Commission ("PCDC") commencing upon the dissolution of PCDC on February 1, 2012 pursuant to Assembly Bill xl 26; and WHEREAS, pursuant to Resolution No. 2012-009, adopted by the City Council on January 23, 2012, in accordance with Health and Safety Code Section 34176, the City elected to retain the housing assets and housing functions previously performed by PCDC, and elected to assume such housing assets and functions commencing upon dissolution of PCDC; and WHEREAS, the City and PCDC have provided financing to Burbank Housing Development Corporation, a California nonprofit public benefit corporation (`Burbank") and to Burbank's successor in interest, Logan Place, L.P., a California limited partnership ("Developer"), to assist in the development of an affordable housing project consisting of 66 units of multifamily housing (the "Project") located at 1200 Petaluma Boulevard North (the "Property"); and WHEREAS, Burbank conveyed the Property to Developer, and Burbank continues to serve as Developer's administrative general partner; and WHEREAS, the City and PCDC financing for the Project consists of the following (collectively, the "Loans"): (i) a loan in the principal amount of One Million Dollars ($1,000,000), evidenced by a promissory note dated March 5, 2008, executed by Burbank for the benefit of PCDC, and secured by a deed of trust executed by Burbank for the benefit of PCDC and recorded in the Official Records of Sonoma County ("Official Records") on March 17, 2008 as Instrument No. 2008-024306 (the "Deed of Trust"); (ii) a loan in the principal -amount of One Million Three Hundred Thousand Dollars ($1,300,000), evidenced by a promissory note dated October 1, 2008, executed by Burbank for the benefit of PCDC; and (iii) a loan in the principal amount of One Million, Three Hundred Fifty Thousand Dollars ($1,350,000) evidenced by a promissory note dated May 1, 2012, executed by Developer for the benefit of City; and WHEREAS, pursuant to that certain Assignment and Assumption of City Loans dated as of May 1, 2012, executed by and among Burbank, Developer and City, and recorded in the Official Records on May 24, 2012 as Instrument No. 2012-049567, the Developer assumed all of Burbank's rights and obligations under the Loans, including without limitation, Burbank's payment obligations under the promissory notes evidencing the Loans and Burbank's performance obligations under the Deed of Trust; and WHEREAS, pursuant to that certain Modification to Deed of Trust dated as of May 1, 2012, executed by and among Burbank, Developer and the City in its capacity as the successor in interest to PCDC, and recorded in the Official Records on May 24, 2012 as Instrument No. 2012- 049566, the Deed of Trust was modified to explicitly provide that all of the Loans are secured by the Deed of Trust; and WHEREAS, pursuant to an Affordable Housing Regulatory Agreement and Declaration of Restricted Covenants dated as of May 1, 2012, and executed by and between the City and the Developer, and recorded in the Official Records on May 24, 2012 as Instrument No. 2012049575 (the "City Regulatory Agreement"), the Developer agreed to limit occupancy of the Project to Eligible Households at Affordable Rent (as defined in the Regulatory Agreement); and WHEREAS, the City provided additional financing for the Project, consisting of a loan in the amount of Four Million Dollars ($4,000,000) funded with Home Investment Partnership ("HOME") funds (the "HOME Loan"), evidenced by a promissory note dated May 1, 2012 executed by Developer for the benefit of City, and secured by a deed of trust executed by Developer for the benefit of City and recorded in the Official Records on May 24, 2012 as Instrument No. 2002-049574 (the "HOME Deed of Trust"); and WHEREAS, in connection with the HOME Loan, Developer and City executed that certain Regulatory Agreement dated as of May 1, 2012 and recorded in the Official Records on May 24, 2012 as Instrument No. 2012-049573 (the "HOME Regulatory Agreement"); and WHEREAS, Silicon Valley Bank ("Construction Lender") provided construction financing for the Project, and in connection therewith, the City and PCDC agreed to subordinate the Deed of Trust, the City Regulatory Agreement, the HOME Deed of Trust, and the HOME Regulatory Agreement to Construction Lender's deed of trust; and WHEREAS, the California Department of Housing and Community Development ("HCD") has agreed to provide a construction loan to Developer for the Project in the amount of Six Million, Eighty -Two Thousand and Forty -Two Dollars ($6,082,042) (the "MHP Loan") using funds from HCD's Multifamily Housing Program ("MHP"); and WHEREAS, HCD's commitment to make the MHP Loan is expressly conditioned upon the subordination of the Deed of Trust, the City Regulatory Agreement, the HOME Deed of Trust, the HOME Regulatory Agreement, and all other documents evidencing or securing the Loans or the HOME Loan to the deed of trust and the regulatory agreement to be executed by Developer for the benefit of HCD in connection with the MHP Loan; and WHEREAS, some of the funding for the Loans was provided using funds from PCDC's low and moderate -income housing fund established pursuant to Health and Safety Code Section 33334.3; and WHEREAS, in its capacity as the housing successor to PCDC, the City is required to comply with the housing provisions of Community Redevelopment Law; and WHEREAS, pursuant to Health and Safety Code Section 33334.14 (a)(4), the City in its capacity as the as the housing successor, is permitted to subordinate the affordability restrictions set forth in the Regulatory Agreement to liens, encumbrances, and regulatory agreements for the benefit of state and federal agencies providing financing; and WHEREAS, the proposed HCD subordination agreements require HCD to provide the City with notice and an opportunity to cure defaults under the HCD documents; NOW THEREFORE BE IT RESOLVED that the City Council of the City of Petaluma hereby: 1. Ratifies and affirms the provision of the Loans and the HOME Loan to Burbank and to Developer, and ratifies and affirms the execution and delivery of all documents executed by the City and/or by PCDC in connection with the Loans and/or the HOME Loan. 2. Agrees to subordinate the Deed of Trust, the City Regulatory Agreement, the HOME Deed of Trust, the HOME Regulatory Agreement, and all other documents evidencing or securing the Loans or the HOME Loan to the deed of trust and the regulatory agreement to be executed by Developer for the benefit of HCD in connection with the MHP Loan. 3. Authorizes and directs the City Manager and his designees to take all actions necessary to implement this Resolution, including without limitation the execution, delivery, and recordation of subordination agreements for the benefit of HCD. 61 ATTACHMENT FREE RECORDING IN ACCORDANCE WITH CALIFORNIA GOVERNMENT CODE SECTION 27383 RECORDING REQUESTED BY, AND WHEN RECORDED. MAIL TO: State of California Department of Housing and Community Development Multifamily Housing Program P. O. Box 952052 Sacramento, CA 94252-2052 Attn: Legal Affairs Division 10 -MHP -7153 SUBORDINATION AGREEMENT AND ESTOPPEL CERTIFICATE NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. THIS SUBORDINATION AGREEMENT AND ESTOPPEL CERTIFICATE (the "Agreement") is dated as of June 13, 2014, for reference purposes only, and is entered into by and among City of Petaluma, a California municipal corporation (the "Junior Lienholder"), Logan Place, L.P., a California limited partnership (the 'Borrower"), and the Department of Housing and Community Development, a public agency of the State of California (the "Senior Lender"). RECITALS A. Borrower is the owner of the fee simple interest in that real property described in Exhibit A attached hereto and made a part hereof (the 'Property"). The Borrower is developing a 66 -unit multifamily residential rental development on the Property (the 'Improvements"). The Property and the Improvements are sometimes referred to collectively as the "Development." B. The Junior Lienholder has made a loan to the Borrower in the principal sum of Four Million and no/100 Dollars ($4,000,000.00) (the "Junior Lienholder Loan"). The Junior Lienholder Loan is evidenced by a certain promissory note (the "Junior Lienholder Note"), which is secured by a certain deed of trust (the "Junior Lienholder Deed of Trust") recorded May 24, 2012, as Instrument No. 2012049574, in the Official Records of Sonoma County, California (the "Official Records"). The Junior Lienholder and Borrower have entered into a MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (Petaluma -HOME $4,000,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 1 of 7 document entitled 'Regulatory Agreement (HOME)" affecting the use of the Development, recorded May 24, 2012, as Instrument No. 2012049573, in the Official Records (the "Junior Lienholder Regulatory Agreement"). (The Junior Lienholder Deed of Trust, the Junior Lienholder Regulatory Agreement and all other documents evidencing or securing the Junior Lienholder Loan are collectively referred to herein as the "Junior Lienholder Documents"). C. In order to finance the development of the Improvements, the Senior Lender has agreed to loan the Borrower a sum not to exceed Six Million Eighty Two Thousand Forty Two and no/100 Dollars ($6,082,042.00) (the "MHP Loan"), subject to the terms and conditions of: (i) a regulatory agreement restricting the use and occupancy of the Development and the income derived therefrom which shall be dated as of even date herewith and recorded concurrently herewith as an encumbrance on the Property in the Official Records (the "MHP Regulatory Agreement'), and (ii) other loan documents. The MHP Loan will be evidenced by a promissory note (the "MHP Note"), the repayment of which will be secured by, among other things, a deed of trust by Borrower as trustor, to Senior Lender as beneficiary recorded concurrently herewith as an encumbrance on the Property in the Official Records (the "MHP Deed of Trust') and by such other security as is identified in other loan documents. D. The Senior Lender is willing to make the MHP Loan provided the MHP Deed of Trust and the MHP Regulatory Agreement are liens, claims or charges upon the Development prior and superior to the Junior Lienholder Documents, and provided that the Junior Lienholder specifically and unconditionally subordinates and subjects the Junior Lienholder Documents to the liens, claims or charges of the MHP Deed of Trust and the MHP Regulatory Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and in order to induce the Senior Lender to make its MHP Loan, it is hereby declared, understood and agreed as follows: 1. The MHP Regulatory Agreement and the MHP Deed of Trust securing the MHP Note in favor of the Senior Lender, and any and all renewals, modifications, extensions or advances thereunder or secured thereby (including interest thereon) shall unconditionally be and remain at all times liens, claims, or charges on the Development prior and superior to the Junior Lienholder Documents, and to all rights and privileges of the Junior Lienholder thereunder; and the Junior Lienholder Documents, together with all rights and privileges of the Junior Lienholder thereunder are hereby irrevocably and unconditionally subject and made subordinate to the liens, claims or charges of the MHP Deed of Trust and the MHP Regulatory Agreement. 2. This Agreement shall be the whole and only agreement with regard to the subordination of the Junior Lienholder Documents, together with all rights and privileges of MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Page 2 of 7 Rev: 07/16/2013 Prep: 05/22/14 (Petaluma -HOME $4,000,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 6� the Junior Lienholder thereunder, to the liens, claims or charges of the MHP Deed of Trust and the MHP Regulatory Agreement, and this Agreement shall supersede and cancel any prior agreements to subordinate the claims, liens or charges of, but only insofar as would affect the priority between the claims, liens or charges of the Junior Lienholder Documents to the MHP Deed of Trust and the MHP Regulatory Agreement including, but not limited to, those provisions, if any, contained in the Junior Lienholder Documents, which provide for the subordination of the lien or charge thereof to another lien or charge on the Property or the Improvements. 3. The Junior Lienholder declares, agrees and acknowledges that: (a) The Junior Lienholder consents and approves (i) all provisions of the MHP Note, the MHP Deed of Trust and the MHP Regulatory Agreement, and (ii) all agreements among the Junior Lienholder, Borrower and Senior Lender for the disbursement of the proceeds of the MHP Loan, including without limitation any loan escrow agreements which have been provided to the Junior Lienholder for review; (b) The Senior Lender, in making disbursements of the MHP Loan pursuant to the MHP Note or any other agreement, is under no obligation or duty to, nor has the Senior Lender represented that it will, see to the application of such proceeds by the person or persons to whom the Senior Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat the subordination herein made in whole or in part; (c) That none of the execution, delivery or recordation of any of the MHP Note, MHP Deed of Trust, or MHP Regulatory Agreement, or the performance of any provision, condition, covenant or other term thereof, will conflict with or result in a breach of the Junior Lienholder Documents or the Junior Lienholder Note; and (d) The Junior Lienholder intentionally and unconditionally waives, relinquishes, subjects and subordinates the claims, liens or charges upon the Development of the Junior Lienholder Documents, all present and future indebtedness and obligations secured thereby, in favor of the claims, liens or charges upon the Development of the MHP Deed of Trust and the MHP Regulatory Agreement, and understands that in reliance upon, and in consideration of, this waiver, relinquishment, subjection, and subordination, the MHP Loan and advances thereof are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment, subjection and subordination. 4. Senior Lender hereby agrees, but only as a separate and independent covenant of the Senior Lender and not as a condition to the continued effectiveness of the covenants and agreements of the Borrower and the Junior Lienholder as set forth herein, as follows: MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Page 3 of 7 Rev: 07/16/2013 Prep: 05122/14 (Petaluma -HOME $4,000,000 Loan) Dev: Lagan Place Loan No.: 10 -MHP -7153 (a) Following a notice from the Senior Lender to the Borrower that a default or breach exists under the terms of the Senior Lender Documents and each of them, the Senior Lender shall promptly (but in no event later than the following business day) send a copy of such notice to the Junior Lienholder and the Junior Lienholder shall have the right, but not the obligation, to cure the default as follows: (i) If the default is reasonably capable of being cured within thirty (30) days, as determined by the Senior Lender in its sole discretion, the Junior Lienholder shall have such period to effect a cure prior to exercise of remedies by Senior Lender under the Senior Lender Documents, or such longer period of time as may be specified in the Senior Lender Documents. (ii) If the default is such that it is not reasonably capable of being cured within thirty (30) days, as determined by the Senior Lender in its sole discretion, or such longer period if so specified, and if the Junior Lienholder (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then the Junior Lienholder shall have such additional time as is determined by the Senior Lender, in its sole discretion, to be reasonably necessary to cure the default prior to exercise of any remedies by Senior Lender. In no event shall Senior Lender be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within ninety (90) days after the first notice of default is given, or such longer period of time as may be specified in the Senior Lender Documents. Nothing in this subparagraph (a) is intended to modify any covenant, term or condition contained in the Senior Lender Documents, including, without limitation, the covenant against creating or recording any liens or encumbrances against the Property without the prior written approval of the Senior Lender. (b) The provisions of this paragraph 4 are intended to supplement, and not to limit, waive, modify or replace, those provisions of law pertaining to notice and cure rights of junior lenders including, without limitation, those set forth in California Civil Code sections 2924b and 2924c. 5. The Senior Lender would not make the MHP Loan without this Agreement. 6. This Agreement shall be binding on and inure to the benefit of the legal representatives, heirs, successors and assigns of the parties. 7. This Agreement shall be governed by and construed in accordance with the MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Page 4 of 7 Rev: 07/16/2013 Prep: 05/22/14 (Petaluma -HOME $4,000,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 /�.` laws of the State of California. 8. In the event that any party to this Agreement brings an action to interpret or enforce its rights under this Agreement, the prevailing party in such action shall be entitled to recover its costs and reasonable attorneys' fees as awarded by the court in such action. 9. This Agreement may be signed by different parties hereto in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall be deemed an original of this Agreement. [Signatures follow on page 6 of this Subordination Agreement & Estoppel Certificate.] [The remainder of this page is intentionally left blank.] MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Page 5 of 7 Rev: 07/16/2013 Prep: 05/22/14 (Petaluma -HOME $4,000,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 /l NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON (OR ENTITY) OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above and agree to be bound hereby: JUNIOR LIENHOLDER: City of Petaluma, a California municipal corporation Bv: Name: John C. Brown Title: City Manager APPROVED AS TO FORM: BY: NAME: Eric W. Danlv ITS: City Attorney BORROWER: Logan Place, L.P., a California limited partnership By: Burbank Housing Development Corporation, a California nonprofit public benefit corporation Its: Managing General Partner 1A Charles Cornell Executive Director SENIOR LENDER: Department of Housing and Community Development, a public agency of the State of California LOM Regi Fletcher, Manager Multifamily Housing Program [All signatures must be acknowledged.] MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (Petaluma -HOME $4,000,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 6 of 7 /M EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY Real property in the City of Petaluma, County of Sonoma, State of California, described as follows: PARCEL ONE: LOT 2 AS NUMBERED AND DESIGNATED UPON THAT CERTAIN PARCEL MAP NO. 5102, FILED SEPTEMBER 2, 1976, IN THE OFFICE OF THE COUNTY RECORDER IN BOOK 238 OF MAPS, PAGES 46 AND 47, SONOMA COUNTY RECORDS. PARCEL TWO: AN EASEMENT FOR ACCESS AND DRAINAGE DESCRIBED IN DEED FROM MICHAEL ESTOURNES AND JUDITH ESTOURNES, HUSBAND AND WIFE, DATED JUNE 4, 2007, RECORDED AUGUST 15, 2008, INSTRUMENT NO. 2008074837, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT BEING THE NORTHWESTERLY CORNER OF THE LANDS OF ESTOURNES AS DESCRIBED IN DOCUMENT NO. 2003-018797, SONOMA COUNTY RECORDS, BEING ON THE EASTERLY RIGHT OF WAY OF PETALUMA BOULEVARD NORTH; THENCE NORTH 580 45' 50" EAST, ALONG THE NORTHERLY BOUNDARY OF SAID LANDS OF ESTOURNES AND THE SOUTHEAST LINE OF RANCHO ROBLAR DE LA MISERIA, A DISTANCE OF 154.73 FEET; THENCE SOUTH 310 14' 10" EAST, 13.00 FEET; THENCE SOUTH 580 45' 50" WEST, 158.73 FEET TO THE EASTERLY RIGHT OF WAY OF PETALUMA BOULEVARD NORTH; THENCE NORTH 130 20' 02" WEST, 13.66 FEET TO THE POINT OF BEGINNING. PARCEL THREE: AN EASEMENT FOR DRAINAGE PURPOSES DESCRIBED IN DEED FROM MICHAEL ESTOURNES AND JUDITH ESTOURNES, HUSBAND AND WIFE, DATED JUNE 4, 2007, RECORDED AUGUST 15, 2008, INSTRUMENT NO. 2008074837, DESCRIBED AS FOLLOWS: THE WESTERLY 8 FEET, ALONG THE EASTERLY RIGHT OF WAY PETALUMA BOULEVARD NORTH, OF THE LANDS OF ESTOURNES AS DESCRIBED IN DOCUMENT NO. 2003-108797, SONOMA COUNTY RECORDS. APN: 019-020-013-000 MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (Petaluma -HOME $4,000,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 7 of 7 /.D FREE RECORDING IN ACCORDANCE WITH CALIFORNIA GOVERNMENT CODE SECTION 27383 RECORDING REQUESTED BY, AND WHEN RECORDED, MAIL TO: State of California Department of Housing and Community Development Multifamily Housing Program P. 0. Box 952052 Sacramento, CA 94252-2052 Attn: Legal Affairs Division 10 -MHP -7153 SUBORDINATION AGREEMENT AND ESTOPPEL CERTIFICATE NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. THIS SUBORDINATION AGREEMENT AND ESTOPPEL CERTIFICATE (the "Agreement') is dated as of June 13, 2014, for reference purposes only, and is entered into by and among the City of Petaluma, a California municipal corporation and housing successor agency to the former Petaluma Community Development Commission, (the "Junior Lienholder"), Logan Place, L.P., a California limited partnership (the 'Borrower"), and the Department of Housing and Community Development, a public agency of the State of California (the "Senior Lender"). RECITALS A. Borrower is the owner of the fee simple interest in that real property described in Exhibit A attached hereto and made a part hereof (the 'Property"). The Borrower is developing a 66 -unit multifamily residential rental development on the Property (the 'Improvements"). The Property and the Improvements are sometimes referred to collectively as the "Development. B. The Junior Lienholder has made a loan to the Borrower in the original principal sum of One Million and no/100 Dollars ($1,000,000.00) (the "Junior Lienholder Loan"). The Junior Lienholder Loan is evidenced by a certain promissory note (the "Junior Lienholder Note'), which is secured by a certain deed of trust (the "Junior Lienholder Deed of Trust') recorded March 17, 2008, as Instrument No. 2008024306, in the Official Records of Sonoma County, California (the "Official Records"). A Modification to Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated May 1, 2012, executed by and between Burbank Housing Development Corporation and the City of Petaluma, Housing MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Page 1 of 7 Rev: 07/16/2013 Prep: 05/22/14 (Petaluma CDC $3,650,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 /, Successor and/or Successor Agency to the former Petaluma Community Development Commission, to secure the indebtedness in the aggregate amount of $3,650,000.00, recorded May 24, 2012, Instrument No. 2012049566 (the "Junior Lienholder Modification"). The Junior Lienholder and Borrower have also entered into a document entitled "Assignment and Assumption Agreement" affecting the use of the Development, recorded May 24, 2012, Instrument No. 2012049567, in the Official Records (the "Junior Lienholder Assumption"). (The Junior Lienholder Deed of Trust, the Junior Lienholder Modification, the Junior Lienholder Assumption and all other documents evidencing or securing the Junior Lienholder Loan are collectively referred to herein as the "Junior Lienholder Documents'). C. In order to finance the development of the Improvements, the Senior Lender has agreed to loan the Borrower a sum not to exceed Six Million Eighty Two Thousand Forty Two and no/100 Dollars ($6,082,042.00) (the "MHP Loan"), subject to the terms and conditions of: (i) a regulatory agreement restricting the use and occupancy of the Development and the income derived therefrom which shall be dated as of even date herewith and recorded concurrently herewith as an encumbrance on the Property in the Official Records (the "MHP Regulatory Agreement"), and (ii) other loan documents. The MHP Loan will be evidenced by a promissory note (the "MHP Note"), the repayment of which will be secured by, among other things, a deed of trust by Borrower as trustor, to Senior Lender as beneficiary recorded concurrently herewith as an encumbrance on the Property in the Official Records (the "MHP Deed of Trust") and by such other security as is identified in other loan documents. D. The Senior Lender is willing to make the MHP Loan provided the MHP Deed of Trust and the MHP Regulatory Agreement are liens, claims or charges upon the Development prior and superior to the Junior Lienholder Documents, and provided that the Junior Lienholder specifically and unconditionally subordinates and subjects the Junior Lienholder Documents to the liens, claims or charges of the MHP Deed of Trust and the MHP Regulatory Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and in order to induce the Senior Lender to make its MHP Loan, it is hereby declared, understood and agreed as follows: 1. The MHP Regulatory Agreement and the MHP Deed of Trust securing the MHP Note in favor of the Senior Lender, and any and all renewals, modifications, extensions or advances thereunder or secured thereby (including interest thereon) shall unconditionally be and remain at all times liens, claims, or charges on the Development prior and superior to the Junior Lienholder Documents, and to all rights and privileges of the Junior Lienholder thereunder; and the Junior Lienholder Documents, together with all rights and privileges of the Junior Lienholder thereunder are hereby irrevocably and unconditionally subject and made subordinate to the liens, claims or charges of the MHP Deed of Trust and the MHP Regulatory Agreement. MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Page 2 of 7 Rev: 07/16/2013 Prep: 05/22/14 (Petaluma CDC $3,650,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 2. This Agreement shall be the whole and only agreement with regard to the subordination of the Junior Lienholder Documents, together with all rights and privileges of the Junior Lienholder thereunder, to the liens, claims or charges of the MHP Deed of Trust and the MHP Regulatory Agreement, and this Agreement shall supersede and cancel any prior agreements to subordinate the claims, liens or charges of, but only insofar as would affect the priority between the claims, liens or charges of the Junior Lienholder Documents to the MHP Deed of Trust and the MHP Regulatory Agreement including, but not limited to, those provisions, if any, contained in the Junior Lienholder Documents, which provide for the subordination of the lien or charge thereof to another lien or charge on the Property or the Improvements. 3. The Junior Lienholder declares, agrees and acknowledges that: (a) The Junior Lienholder consents and approves (i) all provisions of the MHP Note, the MHP Deed of Trust and the MHP Regulatory Agreement, and (ii) all agreements among the Junior Lienholder, Borrower and Senior Lender for the disbursement of the proceeds of the MHP Loan, including without limitation any loan escrow agreements which have been provided to the Junior Lienholder for review; (b) The Senior Lender, in making disbursements of the MHP Loan pursuant to the MHP Note or any other agreement, is under no obligation or duty to, nor has the Senior Lender represented that it will, see to the application of such proceeds by the person or persons to whom the Senior Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat the subordination herein made in whole or in part; (c) That none of the execution, delivery or recordation of any of the MHP Note, MHP Deed of Trust, or MHP Regulatory Agreement, or the performance of any provision, condition, covenant or other term thereof, will conflict with or result in a breach of the Junior Lienholder Documents or the Junior Lienholder Note; and (d) The Junior Lienholder intentionally and unconditionally waives, relinquishes, subjects and subordinates the claims, liens or charges upon the Development of the Junior Lienholder Documents, all present and future indebtedness and obligations secured thereby, in favor of the claims, liens or charges upon the Development of the MHP Deed of Trust and the MHP Regulatory Agreement, and understands that in reliance upon, and in consideration of, this waiver, relinquishment, subjection, and subordination, the MHP Loan and advances thereof are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment, subjection and subordination. MHP Subord. Agrmt & Estoppel Cer(if. (NOFA 05/03/10) Page 3 of 7 Rev: 07/16/2013 Prep: 05/22/14 (Petaluma CDC $3,650,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 16 4. Senior Lender hereby agrees, but only as a separate and independent covenant of the Senior Lender and not as a condition to the continued effectiveness of the covenants and agreements of the Borrower and the Junior Lienholder as set forth herein, as follows: (a) Following a notice from the Senior Lender to the Borrower that a default or breach exists under the terms of the Senior Lender Documents and each of them, the Senior Lender shall promptly (but in no event later than the following business day) send a copy of such notice to the Junior Lienholder and the Junior Lienholder shall have the right, but not the obligation, to cure the default as follows: (i) If the default is reasonably capable of being cured within thirty (30) days, as determined by the Senior Lender in its sole discretion, the Junior Lienholder shall have such period to effect a cure prior to exercise of remedies by Senior Lender under the Senior Lender Documents, or such longer period of time as may be specified in the Senior Lender Documents. (ii) If the default is such that it is not reasonably capable of being cured within thirty (30) days, as determined by the Senior Lender in its sole discretion, or such longer period if so specified, and if the Junior Lienholder (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then the Junior Lienholder shall have such additional time as is determined by the Senior Lender, in its sole discretion, to be reasonably necessary to cure the default prior to exercise of any remedies by Senior Lender. In no event shall Senior Lender be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within ninety (90) days after the first notice of default is given, or such longer period of time as may be specified in the Senior Lender Documents. Nothing in this subparagraph (a) is intended to modify any covenant, term or condition contained in the Senior Lender Documents, including, without limitation, the covenant against creating or recording any liens or encumbrances against the Property without the prior written approval of the Senior Lender. (b) The provisions of this paragraph 4 are intended to supplement, and not to limit, waive, modify or replace, those provisions of law pertaining to notice and cure rights of junior lenders including, without limitation, those set forth in California Civil Code sections 2924b and 2924c. 5. The Senior Lender would not make the MHP Loan without this Agreement MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Page 4 of 7 Rev: 07/16/2013 Prep: 05/22/14 (Petaluma CDC $3,650,000 Loan) Dev: Logan Place / 'i Loan No.: 10 -MHP -7153 6. This Agreement shall be binding on and inure to the benefit of the legal representatives, heirs, successors and assigns of the parties. 7. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 8. In the event that any party to this Agreement brings an action to interpret or enforce its rights under this Agreement, the prevailing party in such action shall be entitled to recover its costs and reasonable attorneys' fees as awarded by the court in such action. 9. This Agreement may be signed by different parties hereto in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall be deemed an original of this Agreement. [Signatures follow on page 6 of this Subordination Agreement & Estoppel Certificate.] [The remainder of this page is intentionally left blank.] MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (Petaluma CDC $3,650,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 5 of 7 / tl� NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON (OR ENTITY) OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above and agree to be bound hereby: JUNIOR LIENHOLDER: City of Petaluma, a California municipal corporation and housing successor agency to the former Petaluma Community Development Commission Bv: Name: John C. Brown Title: City Manager APPROVED AS TO FORM: BY: NAME: Eric W. Daniy ITS: City Attorney BORROWER: Logan Place, L.P., a California limited partnership By: Burbank Housing Development Corporation, a California nonprofit public benefit corporation Its: Managing General Partner Charles Cornell Executive Director SENIOR LENDER: Department of Housing and Community Development, a public agency of the State of California By: Regi Fletcher, Manager Multifamily Housing Program MHP Subord. Agrmt & Estoppel Certif. (NO FA 05/03/10) Page 6 of 7 Rev: 07/16/2013 Prep: 05/22/14 (Petaluma CDC $3,650,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 [All signatures must be acknowledged.] EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY Real property in the City of Petaluma, County of Sonoma, State of California, described as follows: PARCEL ONE: LOT 2 AS NUMBERED AND DESIGNATED UPON THAT CERTAIN PARCEL MAP NO. 5102, FILED SEPTEMBER 2, 1976, IN THE OFFICE OF THE COUNTY RECORDER IN BOOK 238 OF MAPS, PAGES 46 AND 47, SONOMA COUNTY RECORDS. PARCEL TWO: AN EASEMENT FOR ACCESS AND DRAINAGE DESCRIBED IN DEED FROM MICHAEL ESTOURNES AND JUDITH ESTOURNES, HUSBAND AND WIFE, DATED JUNE 4, 2007, RECORDED AUGUST 15, 2008, INSTRUMENT NO. 2008074837, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT BEING THE NORTHWESTERLY CORNER OF THE LANDS OF ESTOURNES AS DESCRIBED IN DOCUMENT NO. 2003-018797, SONOMA COUNTY RECORDS, BEING ON THE EASTERLY RIGHT OF WAY OF PETALUMA BOULEVARD NORTH; THENCE NORTH 580 45' 50" EAST, ALONG THE NORTHERLY BOUNDARY OF SAID LANDS OF ESTOURNES AND THE SOUTHEAST LINE OF RANCHO ROBLAR DE LA MISERIA, A DISTANCE OF 154.73 FEET; THENCE SOUTH 310 14' 10" EAST, 13.00 FEET; THENCE SOUTH 580 45' 50" WEST, 158.73 FEET TO THE EASTERLY RIGHT OF WAY OF PETALUMA BOULEVARD NORTH; THENCE NORTH 130 20' 02" WEST. 13.66 FEET TO THE POINT OF BEGINNING. PARCEL THREE: AN EASEMENT FOR DRAINAGE PURPOSES DESCRIBED IN DEED FROM MICHAEL ESTOURNES AND JUDITH ESTOURNES, HUSBAND AND WIFE, DATED JUNE 4, 2007, RECORDED AUGUST 15, 2008, INSTRUMENT NO. 2008074837, DESCRIBED AS FOLLOWS: THE WESTERLY 8 FEET, ALONG THE EASTERLY RIGHT OF WAY PETALUMA BOULEVARD NORTH, OF THE LANDS OF ESTOURNES AS DESCRIBED IN DOCUMENT NO. 2003-108797, SONOMA COUNTY RECORDS. APN: 019-020-013-000 MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (Petaluma CDC $3,650,000 Loan) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 7 of 7 FREE RECORDING IN ACCORDANCE WITH CALIFORNIA GOVERNMENT CODE SECTION 27383 RECORDING REQUESTED BY, AND WHEN RECORDED, MAIL TO: State of California Department of Housing and Community Development Multifamily Housing Program P. O. Box 952052 Sacramento, CA 94252-2052 Attn: Legal Affairs Division 10 -MHP -7153 SUBORDINATION AGREEMENT AND ESTOPPEL CERTIFICATE NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. THIS SUBORDINATION AGREEMENT AND ESTOPPEL CERTIFICATE (the "Agreement") is dated as of June 13, 2014, for reference purposes only, and is entered into by and among the City of Petaluma, a California municipal corporation (the "Junior Lienholder"), Logan Place, L.P., a California limited partnership (the "Borrower"), and the Department of Housing and Community Development, a public agency of the State of California (the "Senior Lender"). RECITALS A. Borrower is the owner of the fee simple interest in that real property described in Exhibit A attached hereto and made a part hereof (the "Property"). The Borrower is developing a 66 -unit multifamily residential rental development on the Property (the "Improvements"). The Property and the Improvements are sometimes referred to collectively as the "Development." B. The Junior Lienholder and Borrower have entered into a document entitled "Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants" affecting the use of the Development, recorded May 24, 2012, as Instrument No. 20120049575 (the "Junior Lienholder Regulatory Agreement"), in the Official Records of Sonoma County, California (the "Official Records"). The Junior Lienholder and Borrower have also entered into a document entitled "Notice of Affordability Restrictions on Transfer of Property" affecting the use of the Development, recorded May 24, 2012, as Instrument No. MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Page 1 of 7 Rev: 07/16/2013 Prep: 05/22/14 (City of Petaluma) Dev: Logan Place Loan No.: 10 -MHP -7153 i ` 20120049576, in the Official Records (the "Junior Lienholder Notice"). (The Junior Lienholder Deed of Trust, the Junior Lienholder Regulatory Agreement, Junior Lienholder Notice and all other documents evidencing or securing the Junior Lienholder Loan are collectively referred to herein as the "Junior Lienholder Documents"). C. In order to finance the development of the Improvements, the Senior Lender has agreed to loan the Borrower a sum not to exceed Six Million Eighty Two Thousand Forty Two and no/100 Dollars ($6,082,042.00) (the "MHP Loan"), subject to the terms and conditions of: (i) a regulatory agreement restricting the use and occupancy of the Development and the income derived therefrom which shall be dated as of even date herewith and recorded concurrently herewith as an encumbrance on the Property in the Official Records (the "MHP Regulatory Agreement'), and (ii) other loan documents. The MHP Loan will be evidenced by a promissory note (the "MHP Note"), the repayment of which will be secured by, among other things, a deed of trust by Borrower as trustor, to Senior Lender as beneficiary recorded concurrently herewith as an encumbrance on the Property in the Official Records (the "MHP Deed of Trust') and by such other security as is identified in other loan documents. D. The Senior Lender is willing to make the MHP Loan provided the MHP Deed of Trust and the MHP Regulatory Agreement are liens, claims or charges upon the Development prior and superior to the Junior Lienholder Documents, and provided that the Junior Lienholder specifically and unconditionally subordinates and subjects the Junior Lienholder Documents to the liens, claims or charges of the MHP Deed of Trust and the MHP Regulatory Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and in order to induce the Senior Lender to make its MHP Loan, it is hereby declared, understood and agreed as follows: 1. The MHP Regulatory Agreement and the MHP Deed of Trust securing the MHP Note in favor of the Senior Lender, and any and all renewals, modifications, extensions or advances thereunder or secured thereby (including interest thereon) shall unconditionally be and remain at all times liens, claims, or charges on the Development prior and superior to the Junior Lienholder Documents, and to all rights and privileges of the Junior Lienholder thereunder; and the Junior Lienholder Documents, together with all rights and privileges of the Junior Lienholder thereunder are hereby irrevocably and unconditionally subject and made subordinate to the liens, claims or charges of the MHP Deed of Trust and the MHP Regulatory Agreement. MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (City of Petaluma) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 2 of 7 2. This Agreement shall be the whole and only agreement with regard to the subordination of the Junior Lienholder Documents, together with all rights and privileges of the Junior Lienholder thereunder, to the liens, claims or charges of the MHP Deed of Trust and the MHP Regulatory Agreement, and this Agreement shall supersede and cancel any prior agreements to subordinate the claims, liens or charges of, but only insofar as would affect the priority between the claims, liens or charges of the Junior Lienholder Documents to the MHP Deed of Trust and the MHP Regulatory Agreement including, but not limited to, those provisions, if any, contained in the Junior Lienholder Documents, which provide for the subordination of the lien or charge thereof to another lien or charge on the Property or the Improvements. 3. The Junior Lienholder declares, agrees and acknowledges that: (a) The Junior Lienholder consents and approves (i) all provisions of the MHP Note, the MHP Deed of Trust and the MHP Regulatory Agreement, and (ii) all agreements among the Junior Lienholder, Borrower and Senior Lender for the disbursement of the proceeds of the MHP Loan, including without limitation any loan escrow agreements which have been provided to the Junior Lienholder for review; (b) The Senior Lender, in making disbursements of the MHP Loan pursuant to the MHP Note or any other agreement, is under no obligation or duty to, nor has the Senior Lender represented that it will, see to the application of such proceeds by the person or persons to whom the Senior Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat the subordination herein made in whole or in part; (c) That none of the execution, delivery or recordation of any of the MHP Note, MHP Deed of Trust, or MHP Regulatory Agreement, or the performance of any provision, condition, covenant or other term thereof, will conflict with or result in a breach of the Junior Lienholder Documents or the Junior Lienholder Note; and (d) The Junior Lienholder intentionally and unconditionally waives, relinquishes, subjects and subordinates the claims, liens or charges upon the Development of the Junior Lienholder Documents, all present and future indebtedness and obligations secured thereby, in favor of the claims, liens or charges upon the Development of the MHP Deed of Trust and the MHP Regulatory Agreement, and understands that in reliance upon, and in consideration of, this waiver, relinquishment; subjection, and subordination, the MHP Loan and advances thereof are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment, subjection and subordination. MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (City of Petaluma) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 3 of 7 4. Senior Lender hereby agrees, but only as a separate and independent covenant of the Senior Lender and not as a condition to the continued effectiveness of the covenants and agreements of the Borrower and the Junior Lienholder as set forth herein, as follows: (a) Following a notice from the Senior Lender to the Borrower that a default or breach exists under the terms of the Senior Lender Documents and each of them, the Senior Lender shall promptly (but in no event later than the following business day) send a copy of such notice to the Junior Lienholder and the Junior Lienholder shall have the right, but not the obligation, to cure the default as follows: (i) If the default is reasonably capable of being cured within thirty (30) days, as determined by the Senior Lender in its sole discretion, the Junior Lienholder shall have such period to effect a cure prior to exercise of remedies by Senior Lender under the Senior Lender Documents, or such longer period of time as may be specified in the Senior Lender Documents. (ii) If the default is such that it is not reasonably capable of being cured within thirty (30) days, as determined by the Senior Lender in its sole discretion, or such longer period if so specified, and if the Junior Lienholder (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then the Junior Lienholder shall have such additional time as is determined by the Senior Lender, in its sole discretion, to be reasonably necessary to cure the default prior to exercise of any remedies by Senior Lender. In no event shall Senior Lender be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within ninety (90) days after the first notice of default is given, or such longer period of time as may be specified in the Senior Lender Documents. Nothing in this subparagraph (a) is intended to modify any covenant, term or condition contained in the Senior Lender Documents, including, without limitation, the covenant against creating or recording any liens or encumbrances against the Property without the prior written approval of the Senior Lender. (b) The provisions of this paragraph 4 are intended to supplement, and not to limit, waive, modify or replace, those provisions of law pertaining to notice and cure rights of junior lenders including, without limitation, those set forth in California Civil Code sections 2924b and 2924c. MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (City of Petaluma) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 4 of 7 5. The Senior Lender would not make the MHP Loan without this Agreement. 6. This Agreement shall be binding on and inure to the benefit of the legal representatives, heirs, successors and assigns of the parties. 7. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 8. In the event that any party to this Agreement brings an action to interpret or enforce its rights under this Agreement, the prevailing party in such action shall be entitled to recover its costs and reasonable attorneys' fees as awarded by the court in such action. 9. This Agreement may be signed by different parties hereto in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall be deemed an original of this Agreement. [Signatures follow on page 6 of this 6 Subordination Agreement & Estoppel Certificate. [The remainder of this page is intentionally left blank.] MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (City of Petaluma) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 5 of 7 C2 NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON (OR ENTITY) OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above and agree to be bound hereby: JUNIOR LIENHOLDER: City of Petaluma, a California municipal corporation By: Name: John C. Brown Title: City Manager APPROVED AS TO FORM: BORROWER: Logan Place, L.P., a California limited partnership By: Burbank Housing Development Corporation, a California nonprofit public benefit corporation Its: Managing General Partner M Charles Cornell Executive Director SENIOR LENDER: Department of Housing and Community Development, a public agency of the State of California an Regi Fletcher, Manager Multifamily Housing Program [All signatures must be acknowledged.] MHP Subord. Agrmt & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (City of Petaluma) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 6 of 7 -- F rW M11-.1 LEGAL DESCRIPTION OF THE PROPERTY Real property in the City of Petaluma, County of Sonoma, State of California, described as follows: PARCEL ONE: LOT 2 AS NUMBERED AND DESIGNATED UPON THAT CERTAIN PARCEL MAP NO. 5102, FILED SEPTEMBER 2, 1976, IN THE OFFICE OF THE COUNTY RECORDER IN BOOK 238 OF MAPS, PAGES 46 AND 47, SONOMA COUNTY RECORDS. PARCEL TWO: AN EASEMENT FOR ACCESS AND DRAINAGE DESCRIBED IN DEED FROM MICHAEL ESTOURNES AND JUDITH ESTOURNES, HUSBAND AND WIFE, DATED JUNE 4, 2007, RECORDED AUGUST 15, 2008, INSTRUMENT NO. 2008074837, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT BEING THE NORTHWESTERLY CORNER OF THE LANDS OF ESTOURNES AS DESCRIBED IN DOCUMENT NO. 2003-018797, SONOMA COUNTY RECORDS, BEING ON THE EASTERLY RIGHT OF WAY OF PETALUMA BOULEVARD NORTH; THENCE NORTH 581 45' 50" EAST, ALONG THE NORTHERLY BOUNDARY OF SAID LANDS OF ESTOURNES AND THE SOUTHEAST LINE OF RANCHO ROBLAR DE LA MISERIA, A DISTANCE OF 154.73 FEET; THENCE SOUTH 311 14' 10" EAST, 13.00 FEET; THENCE SOUTH 581 45' 50" WEST, 158.73 FEET TO THE EASTERLY RIGHT OF WAY OF PETALUMA BOULEVARD NORTH; THENCE NORTH 131 20' 02" WEST, 13.66 FEET TO THE POINT OF BEGINNING. PARCEL THREE: AN EASEMENT FOR DRAINAGE PURPOSES DESCRIBED IN DEED FROM MICHAEL ESTOURNES AND JUDITH ESTOURNES, HUSBAND AND WIFE, DATED JUNE 4, 2007, RECORDED AUGUST 15, 2008, INSTRUMENT NO. 2008074837, DESCRIBED AS FOLLOWS: THE WESTERLY 8 FEET, ALONG THE EASTERLY RIGHT OF WAY PETALUMA BOULEVARD NORTH, OF THE LANDS OF ESTOURNES AS DESCRIBED IN DOCUMENT NO. 2003-108797, SONOMA COUNTY RECORDS. APN: 019-020-013-000 MHP Subord. Agrml & Estoppel Certif. (NOFA 05/03/10) Rev: 07/16/2013 Prep: 05/22/14 (City of Petaluma) Dev: Logan Place Loan No.: 10 -MHP -7153 Page 7 of 7 c