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HomeMy WebLinkAboutPCDC Resolution 2011-10 06/20/2011RESOLUTION NO. 2011 -10 PETALUMA COMMUNITY DEVELOPMENT COMMISSION MAKING REQUIRED FINDINGS AND AUTHORIZING EXECUTION OF A SUBORDINATION AGREEMENT FOR VINTAGE CHATEAU II SENIOR APARTMENTS WHEREAS, the Petaluma Community Development Commission ( "Agency ") is a redevelopment agency formed, existing and exercising its powers pursuant to California Community Redevelopment Law, Health and Safety Code Section 33,000 et seq. ( "CRL "); and, WHEREAS, pursuant to that certain First Amended to Promissory Note Secured By a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated June 23, 2011; that certain Deed of Trust, Assignment of Rents Security Agreement and Fixture Filing recorded on October 10, 2008 as Instrument No. 2008091646 in the Official Records of Sonoma County ( "Official Records "); and that certain Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants dated June 23, 2011 to be recorded in the Official Records, by and between Agency and Vintage Chateau, L.P., a California limited partnership ( "Borrower ") (collectively, "Agency Agreements "), Agency has made a loan to Borrower in the current principal amount of $4,500,000 (the "Agency Loan ") for the purpose of partially financing an affordable multifamily senior housing project (the "Project ") in the City of Petaluma on Sonoma County Assessor's Parcel Number 007 - 350- 013 -0000 (the "Property "); and, WHEREAS, Borrower has received additional financing for construction of the Project from or though Wells Fargo Bank, National Association; Federal Home Loan Mortgage Corporation, and Citibank, N.A. (collectively, "Project Lenders "); and, WHEREAS, Project Lenders have requested that Agency enter into a Subordination Agreement, a copy of which is attached to and made a part of this Resolution, pursuant to which the Agency would subordinate the Agency Agreements and the Agency Loan to Borrower's indebtedness to the Project Lenders; and, WHEREAS, Health and Safety Code Section 33334.14 permits subordination of redevelopment agency affordability restrictions for the Project provided that: (i) the redevelopment agency makes a finding that alternative financing is not reasonably available on economically feasible terms without subordination, and (ii) the redevelopment agency obtains written commitments to protect its investment in the event of a default; and, WHEREAS, the Borrower has informed the Agency that Borrower has been unable to find alternate sources that would enable it to finance the Project without such subordination; and, WHEREAS, the proposed Subordination Agreement provides the Agency with rights to receive notice and to cure defaults arising under the Project Lenders' loan documents and the right to enforce covenants of Borrower relating to income, rent or affordability restrictions. NOW, THEREFORE, BE IT RESOLVED by the Petaluma Community Development Commission that it hereby: 1. Finds that without subordination of the Agency Agreements an economically feasible alternative for financing the Project is not reasonably available and that the terms of the PC DC Resolution No. 2011 -10 Page 1 Subordination Agreement provide the Agency with reasonable means of protecting the Agency's investment in the Project in the event of default. 2. Authorizes the Agency Executive Director or his designee to execute the Subordination Agreement substantially in the form on file with the City Clerk and to take such other actions reasonably necessary to carry out the intent of this Resolution. ADOPTED this 20th day of June, 2011 by the following vote: �aa. psr li,' i �iip il u a I n err i s ' "' �ro irih'w ;e a Commissioner Aye a Noy q iov �, Albertson X Barrett X Chair Glass X Harris X Vice Chair Healy X Kearney X Renee X C Did Chair ATTEST: Claire Cooper, CMC, Recordin Secretary APPROVED AS TO FORM: no Eric W. Danly, General Counsel PCDC Resolution No. 2011 -10 Page 2 ATTACHMENT TO PCDC RESOLUTION 2011 -10 RECORDING REQUESTED BY AND WHEN RECORDED AND RETURN TO: Citi Community Capital Municipal Securities Division 1801 California St., Suite 3700 Denver, CO 80202 Attention: Judy Wessler Citi # Freddie Mac Loan Nos.: - Construction — Permanent — Short Term Market (Gap) SUBORDINA'T'ION AGREEMENT PCDC Resolution No. 2011 -10 Page 3 Freddie Mac Loan Nos.: - Construction – Permanent – Short Term Market (Gap) Bonds FHLMC FORM —JULY 2006 (Governmental Entity) SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT (this "Agreement ") is entered into as of the 1st day of June, 2011, by and between (i) WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as trustee under the Indenture (the "Bond Trustee "), (ii) FEDERAL HOME LOAN MORTGAGE CORPORATION, a shareholder - owned, government- sponsored enterprise organized and existing under the laws of the United States ( "Freddie Mac "), (iii) CITIBANK, N.A., a national banking association ( "Citi ") (Bond Trustee, Freddie Mac and Citi, together with their respective successors and assigns, as their interests may appear, collectively, the "Senior Mortgagee "), and (iv) the PETALUMA COMMUNITY DEVELOPMENT COMMISSION, a public body, corporate and politic (in its capacity as subordinate lender, the "Subordinate Mortgagee "). RECITALS A. Vintage Chateau, L.P., a California limited partnership (the "Borrower ") is the owner of certain land located in the City of Petaluma, County of Sonoma, California, described in Exhibit A hereto (the "Land "). The Land will be improved with a multifamily housing project to be known as Vintage Chateau II (the "Improvements "). The Land together with the Improvements are sometimes hereinafter referred to as the "Project." B. ABAG Finance Authority for Nonprofit Corporations (in its capacity as bond issuer, the "Issuer ") has released and converted its Affordable Multifamily Housing Revenue Bonds (Vintage Chateau II) 2009 Series A -2 in the original principal amount of $5,730,000 (the "NIPB Bonds ") and issued and sold its Multifamily Housing Revenue Bonds (Vintage Chateau II) 2011 Series A in the original principal amount of $2,370,000 (the "Market Rate Bonds, and together with the NIPB Bond the "Bonds ") pursuant to a Series Indenture dated as of the date hereof (the "Indenture ") between the Issuer and Bond Trustee. The proceeds of the Bonds (the "Bond Loan ") were loaned by the Issuer to the Borrower upon the terms and conditions of a certain Financing Agreement dated as of the date hereof among the Issuer, Bond Trustee and Borrower (the "Financing Agreement ") for the sole and exclusive purpose of financing the Improvements. The Bond Loan will be secured by the First Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of the date hereof ( "First Mortgage ") encumbering the Land and Improvements and other "Mortgaged Property" (as defined in the First Mortgage). C. In connection with the issuance of the Bonds, Freddie Mac has entered into a Credit Enhancement Agreement dated as of the date hereof with the Bond Trustee (the "Credit Enhancement Agreement ") pursuant to which Freddie Mac has agreed to make certain advances to the Bond Trustee (a) with respect to amounts due under the Bond Loan and (b) to PCDC Resolution No. 2011 -10 Page 4 provide funds to purchase the Bonds tendered under certain circumstances in accordance with the Indenture. D. The Borrower has entered into a Reimbursement and Security Agreement dated as of the date hereof with Freddie Mac (the "Reimbursement Agreement ") to evidence the Borrower's obligation to reimburse Freddie Mac for advances under the Credit Enhancement Agreement. E. The Reimbursement Agreement is secured by a Second Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of the date hereof (the "Second Mortgage ") executed by Borrower in favor of Freddie Mac, as beneficiary, encumbering the Land and Improvements and other "Mortgaged Property" (as defined in the Second Mortgage). F. Citi has entered into a certain Construction Phase Financing Agreement with Freddie Mac (the "Construction Phase Financing Agreement ") pursuant to which (i) Citi will administer and monitor the Bond Loan during the construction phase of the Project, including the disbursement of proceeds of the Bond Loan, (ii) Citi will assume certain construction and lease up risks with respect to the Project, and (iii) Citi will provide a construction loan to the Borrower, certain proceeds of which will be disbursed directly to Bond Trustee to secure, in part, Borrower's reimbursement obligations to Freddie Mac with respect to the Credit Enhancement Agreement, and otherwise to finance the acquisition and construction of the Project (the "Construction Loan "). G. The Construction Loan is secured by a Third Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of the date hereof (the "Third Mortgage "; the First Mortgage, the Second Mortgage and the Third Mortgage referred to collectively herein as "Senior Mortgage ") executed by Borrower in favor of Citi, as beneficiary, encumbering the Land and Improvements and other "Mortgaged Property" (as defined in the Third Mortgage, the First Mortgage "Mortgaged Property ", Second Mortgage "Mortgaged Property" and Third Mortgage "Mortgaged Property" referred to collectively herein as "Mortgaged Property "). H. The Subordinate Mortgagee has made a loan to Borrower in the current principal amount of $4,500,000 (the "Subordinate Loan ") evidenced by a Promissory Note dated September 30, 2008 by Borrower to the Subordinate Mortgagee, as amended by the First Amendment to Promissory Note Secured By a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of June , 2011 by and between Subordinate Mortgagee and Borrower (collectively, the "Subordinate Note "). The loan is secured by a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated October 15, 2008 encumbering the Land and Improvements and recorded October 10, 2008 as Instrument No. 20080091645 in the Official Records ( "Recording Offices ") of Sonoma County, California, as amended by the First Amendment to Deed of Trust dated as of June , 2011 by and between Subordinate Mortgagee and Borrower (collectively, the "Subordinate Mortgage "). PCDC Resolution No. 2011 -10 Page 5 I. The Senior Mortgage is intended to be recorded in the Recording Offices. The First Amendment to Deed of Trust is intended to be recorded in the Recording Offices currently herewith following the recording of the Senior Mortgage. K. The execution and delivery of this Agreement is a condition of Bond Trustee entering into the Financing Agreement, Freddie Mac entering into the Credit Enhancement Agreement, and Citi making the Construction Loan. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINI'T'IONS. The following terms, when used in this Agreement (including, as appropriate, when used in the above recitals), shall have the following meanings. (a) The terms "Condemnation ", "Impositions ", "Leases", "Rents ", "Restoration" and "'T'ransfer ", as well as any term used in this Agreement and not otherwise defined in this Agreement, shall have the meanings given to those terms in the Senior Mortgage. (b) "Bankruptcy Proceeding" means any bankruptcy, reorganization, insolvency, composition, restructuring, dissolution, liquidation, receivership, assignment for the benefit of creditors, or custodianship action or proceeding under any federal or state law with respect to the Borrower, any guarantor of any of the Senior Indebtedness, any of their respective properties, or any of their respective partners, members, officers, directors, or shareholders. (c) "Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Agreement, together with their successors and assigns, and any other person or entity who acquires title to the Land and Improvements after the date of this Agreement; provided that the term `Borrower" shall not include the Senior Mortgagee in the event that the Senior Mortgagee may acquire title to the Land and Improvements. (d) "Casualty" means the occurrence of damage to or loss of any of the Mortgaged. Property by fire or other casualty. (e) "Enforcement Action" means the acceleration of all or any part of the Subordinate Indebtedness, the advertising of or commencement of any foreclosure or trustee's sale proceedings, the exercise of any power of sale, the acceptance of a deed or assignment in lieu of foreclosure or sale, the collecting of Rents, the obtaining of or seeking of the appointment of a receiver, the seeking of default interest, the taking of possession or control of any of the Mortgaged Property, the commencement of any suit or other legal, administrative, or arbitration proceeding based upon the Subordinate Note or any other of the Subordinate Loan Documents, the exercising of any banker's lien or rights of set -off or recoupment, or the taking of any other enforcement action against the Borrower, any other PCDC Resolution No. 2011 -10 Page 6 party liable for any of the Subordinate Indebtedness or obligated under any of the Subordinate Loan Documents, or the Mortgaged Property. (f) "Enforcement Action Notice" means a written notice from the Subordinate Mortgagee to the Senior Mortgagee, given following a Subordinate Mortgage Default and the expiration of any notice or cure periods provided for such Subordinate Mortgage Default in the Subordinate Loan Documents, setting forth in reasonable detail the Enforcement Action proposed to be taken by the Subordinate Mortgagee. (g) "Loss Proceeds" means all monies received or to be received under any insurance policy, from any condemning authority, or from any other source, as a result or any Condemnation or Casualty. (h) "Senior Indebtedness" means, collectively, the "Indebtedness" as defined in the First Mortgage, the Second Mortgage and the Third Mortgage. (i) "Senior Loan Documents" means, collectively, the "Bond Mortgage Loan Documents" as defined in the First Mortgage and the "Loan Documents" as defined in the Second Mortgage and the Third Mortgage. (j) "Senior Mortgage Default" means any act, failure to act, event, condition, or occurrence which constitutes, or which with the giving of notice or the passage of time, or both, would constitute, an "Event of Default" as defined in the First Mortgage, the Second Mortgage or the Third Mortgage. (k) "Senior Mortgagee" means the entities named as such in the first paragraph of this Agreement and any other person or entity who subsequently becomes the holder of the promissory note relating to the Bond Loan, the obligor under the Credit Enhancement Agreement or the holder of the promissory note relating to the Construction Loan. (1) "Subordinate Indebtedness" means all sums evidenced or secured or guaranteed by, or otherwise due and payable to the Subordinate Mortgagee pursuant to the Subordinate Loan Documents. (m) "Subordinate Loan Documents" means the, Subordinate Mortgage, the Subordinate Note, the Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants, dated June _, 2011 to be recorded in the Recording Offices concurrently herewith (the "Restrictive Covenant ") and all other documents at any time evidencing, securing, guaranteeing, or otherwise delivered in connection with the Subordinate Loan, as the same may be amended from time to time. (n) "Subordinate Mortgage Default" means any act, failure to act, event, condition, or occurrence which allows (but for any contrary provision of this Agreement), or PCDC Resolution No. 2011 -10 Page 7 which with the giving of notice or the passage of time, or both, would allow (but for any contrary provision of this Agreement), the Subordinate Mortgagee to take an Enforcement Action. (o) "Subordinate Mortgagee" means the person or entity named as such in the first paragraph of this Agreement and any other person or entity who becomes the legal holder of the Subordinate Note after the date of this Agreement. (q) "Surplus Cash" means, with respect to any period, any revenues of the Borrower remaining after paying, or setting aside funds for paying, the following: (i) all sums due or currently required to be paid under the Financing Agreement (including but not limited to any deposits to a principal reserve fund), (ii) all sums due or currently required to be paid under the Reimbursement Agreement or any of the other Senior Loan Documents (including but not limited to any Imposition Deposits as defined in the Senior Mortgage), (iii) all deposits to any replacement reserve, completion/repair reserve or other reserve or escrow required by the Senior Loan Documents that are due or currently payable, (iv) all fees due or currently payable by the Borrower in connection with the Bonds, including but not limited to fees and expenses of the Issuer, the Trustee, the remarketing agent, the tender agent and any rebate analyst, and (v) all reasonable operating expenses of the Mortgaged Property, including but not limited to real estate taxes, insurance premiums, utilities, building maintenance and repairs, management fees, payroll, administrative expenses, legal expenses and audit expenses (excluding any developer fees payable with respect to the Mortgaged Property). 2. SUBORDINATION OF SUBORDINATE INDEBTEDNESS. (a) The Subordinate Indebtedness is and shall at all times continue to be subject and subordinate in right of payment to the prior payment in full of the Senior Indebtedness. (b) Until the occurrence of a Senior Mortgage Default, the Subordinate Mortgagee shall be entitled to retain for its own account all payments made on account of the principal of and interest on the Subordinate Indebtedness in accordance with the requirements of the Subordinate Loan Documents; provided no such payment is made more than ten (10) days in advance of the due date thereof, and provided further that no such payment exceeds 75% of then available Surplus Cash. However, immediately upon the Subordinate Mortgagee's receipt of notice or actual knowledge of a Senior Mortgage Default, the Subordinate Mortgagee will not accept any payments on account of the Subordinate Indebtedness, and the provisions of Section 2(c) of this Agreement shall apply. The Subordinate Mortgagee acknowledges that a Subordinate Mortgage Default constitutes a Senior Mortgage Default. Accordingly, upon the occurrence of a Subordinate Mortgage Default, the Subordinate Mortgagee shall be deemed to have actual knowledge of a Senior Mortgage Default. PCDC Resolution No. 2011 -10 Page 8 (c) If (i) the Subordinate Mortgagee receives any payment, property, or asset of any kind or in any form on account of the Subordinate Indebtedness (including, without limitation, any proceeds from any Enforcement Action) after a Senior Mortgage Default of which the Subordinate Mortgagee has actual knowledge or has been given notice, or (ii) the Subordinate Mortgagee receives, voluntarily or involuntarily, by operation of law or otherwise, any payment, property, or asset in or in connection with any Bankruptcy Proceeding, such payment, property, or asset will be received and held in trust for the Senior Mortgagee. The Subordinate Mortgagee will promptly remit, in kind and properly endorsed as necessary, all such payments, properties, and assets to the Senior Mortgagee. The Senior Mortgagee shall apply any payment, asset, or property so received from the Subordinate Mortgagee to the Senior Indebtedness in such order, amount (with respect to any asset or property other than immediately available funds), and manner as the Senior Mortgagee shall determine in its sole and absolute discretion. The Subordinate Mortgagee hereby designates and appoints, irrevocably and coupled with an interest, the Senior Mortgagee (and all persons and entities designated by the Senior Mortgagee) as the Subordinate Mortgagee's true and lawful attorney -in -fact with power to endorse the name of the Subordinate Mortgagee upon any check or other instrument and to take any action necessary to collect any payment, property, or asset referred to in, or otherwise to effectuate the provisions of, this Section 2(c). (d) Without limiting the complete subordination of the Subordinate Indebtedness to the payment in full of the Senior Indebtedness, in any Bankruptcy Proceeding, upon any payment or distribution (whether in cash, property, securities, or otherwise) to creditors (i) the Senior Indebtedness shall first be paid in full in cash before the Subordinate Mortgagee shall be entitled to receive any payment or other distribution on account of or in respect of the Subordinate Indebtedness, and (ii) until all of the Senior Indebtedness is paid in full in cash, any payment or distribution to which the Subordinate Mortgagee would be entitled but for this Agreement (whether in cash, property, or other assets) shall be made to the Senior Mortgagee. (e) The subordination of the Subordinate Indebtedness shall continue in the event that any payment under the Senior Loan Documents (whether by or on behalf of the Borrower, as proceeds of security or enforcement of any right of set -off or otherwise) is for any reason repaid or returned to the Borrower or its insolvent estate, or avoided, set aside or required to be paid to the Borrower, a trustee, receiver or other similar party under any bankruptcy, insolvency, receivership or similar law. In such event, the Senior Indebtedness or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding to the extent of any repayment, return, or other action, as if such payment on account of the Senior Indebtedness had not been made. 3. SUBORDINATION OF SUBORDINATE LOAN DOCUMENTS. (a) The Subordinate Mortgage and each of the other Subordinate Loan Documents are, and shall at all times remain, subject and subordinate in all respects to the PCDC Resolution No. 2011 -10 Page 9 liens, terms, covenants, conditions, operations, and effects of the Senior Mortgage and each of the other Senior Loan Documents. (b) The subordination of the Subordinate Loan Documents and of the Subordinate Indebtedness shall apply and continue notwithstanding (i) the actual date and time of execution, delivery, recording, filing or perfection of the Senior Mortgage and other Senior Loan Documents and of the Subordinate Mortgage and other Subordinate Loan Documents, and (ii) the availability of any collateral to the Senior Mortgagee, including the availability of any collateral other than the Mortgaged Property. (c) By reason of, and without in any way limiting, the full subordination of the Subordinate Indebtedness and the Subordinate Loan Documents provided for in this Agreement, all rights and claims of the Subordinate Mortgagee under the Subordinate Mortgage or under the Subordinate Loan Documents in or to the Mortgaged Property or any portion thereof, the proceeds thereof, the Leases thereof, the Rents, issues and profits therefrom, and the Loss Proceeds payable with respect thereto, are expressly subject and subordinate in all respects to the rights and claims of the Senior Mortgagee under the Senior Loan Documents in and to the Mortgaged Property or any portion thereof, the proceeds thereof, the Leases thereof, the Rents, issues and profits therefrom, and the Loss Proceeds payable with respect thereto. (d) If the Subordinate Mortgagee, by indemnification, subrogation or otherwise, shall acquire any lien, estate, right or other interest in any of the Mortgaged Property, that lien, estate, right or other interest shall be fully subject and subordinate to the receipt by the Senior Mortgagee of payment in full of the Senior Indebtedness, and to the Senior Loan Documents, to the same extent as the Subordinate Indebtedness and the Subordinate Loan Documents are subordinate pursuant to this Agreement. (e) In confirmation, and not as a condition, of the subordination of the Subordinate Indebtedness and the Subordinate Loan Documents provided for in this Agreement, the Subordinate Mortgagee shall place on or attach to the Subordinate Note the following notice, and shall provide the Senior Mortgagee with a copy of the Subordinate Note showing such notice: "The indebtedness evidenced by this promissory note is payable only from seventy five percent (75 %) of Surplus Cash (as defined in the Subordination Agreement referenced below) and the right of the holder of this promissory note to payment of any of the indebtedness evidenced by this promissory note is and shall at all times be subordinate to the right of (i) Wells Fargo Bank, National Association, a national banking association, as trustee, under a certain Financing Agreement dated as of June 1, 2011 by and among the maker of this promissory note, ABAG Finance Authority for Nonprofit Corporations (in its capacity as bond issuer) and Wells Fargo Bank, National Association (the "Financing PCDC Resolution No. 2011 -10 Page 10 Agreement "), (ii) Federal Home Loan Mortgage Corporation under a certain Reimbursement and Security Agreement dated as of June 1, 2011 between the maker of this promissory note and Federal Home Loan Mortgage Corporation (the "Reimbursement Agreement ") and (iii) Citibank, N.A. under a certain Construction Loan Agreement dated as of June 1, 2011 between the maker of this promissory note and Citibank, N.A. (the "Construction Loan Agreement ") to payment in full of the obligations evidenced by the Financing Agreement, the Reimbursement Agreement and the Construction Loan Agreement. The foregoing subordination is pursuant to a Subordination Agreement dated as of June 1, 2011 by and among Wells Fargo Bank, National Association, Federal Home Loan Mortgage Corporation, Citibank, N.A., and the Petaluma Community Development Commission." 4. ADDITIONAL REPRESENTATIONS AND COVENANTS. (a) The Subordinate Mortgagee represents and warrants that (i) the Subordinate Mortgagee is now the owner and holder of the Subordinate Loan Documents; (ii) the Subordinate Loan Documents are now in full force and effect; (c) the Subordinate Loan Documents have not been modified or amended; (iv) no Subordinate Mortgage Default has occurred, (v) the current principal balance of the Subordinate Indebtedness is $4,500,000; (vi) no scheduled monthly payments under the Subordinate Note have been or will be prepaid; and (vii) none of the rights of the Subordinate Mortgagee under any of the Subordinate Loan Documents are subject to the rights of any third parties, by way of subrogation, indemnification or otherwise. (b) Without the prior written consent of the Senior Mortgagee in each instance, the Subordinate Mortgagee shall not (i) amend, modify, waive, extend, renew or replace any provision of any of the Subordinate Loan Documents, or (ii) pledge, assign, transfer, convey, or sell any interest in the Subordinate Indebtedness or any of the Subordinate Loan Documents; or (iii) accept any payment on account of the Subordinate Indebtedness other than a regularly scheduled payment of interest or principal and interest made not earlier than ten (10) days prior to the due date thereof, or as expressly authorized in Section 4(i) and not in excess of 75% of then available Surplus Cash; or (iv) take any action which has the effect of increasing the Subordinate Indebtedness, or (v) appear in, defend or bring any action to protect the Subordinate Mortgagee's interest in the Mortgaged Property, or (vi) take any action concerning environmental matters affecting the Mortgaged Property. (c) The Subordinate Mortgagee shall deliver to the Senior Mortgagee a copy of each notice received or delivered by the Subordinate Mortgagee pursuant to the Subordinate Loan Documents or in connection with the Subordinate Indebtedness, simultaneously with the Subordinate Mortgagee's delivery or receipt of such notice. The Senior Mortgagee shall deliver to the Subordinate Mortgagee a copy of each notice of a Senior Mortgage Default delivered by the Senior Mortgagee, simultaneously with the Senior Mortgagee's delivery of such notice. Neither PC DC Resolution No. 2011 -10 Page 11 giving nor failing to give a notice to the Senior Mortgagee or Subordinate Mortgagee pursuant to this Section 4(c) shall affect the validity of any notice given by the Senior Mortgagee or Subordinate Mortgagee to the Borrower, as between the Borrower and such of the Senior Mortgagee or the Subordinate Mortgagee as provided the notice to the Borrower. (d) Without the prior written consent of the Senior Mortgagee in each instance, the Subordinate Mortgagee will not commence, or join with any other creditor in commencing, any Bankruptcy Proceeding. In the event of a Bankruptcy Proceeding, the Subordinate Mortgagee shall not vote affirmatively in favor of any plan of reorganization or liquidation unless the Senior Mortgagee has also voted affirmatively in favor of such plan. In the event of any Bankruptcy Proceeding, the Subordinate Mortgagee shall not contest the continued accrual of interest on the Senior Indebtedness, in accordance with and at the rates specified in the Senior Loan Documents, both for periods before and for periods after the commencement of such Bankruptcy Proceedings. (e) Whenever the Subordinate Loan Documents give the Subordinate Mortgagee approval or consent rights with respect to any matter, and a right of approval or consent with regard to the same or substantially the same matter is also granted to the Senior Mortgagee pursuant to the Senior Loan Documents or otherwise, the Senior Mortgagee's approval or consent or failure to approve or consent, as the case may be, shall be binding on the Subordinate Mortgagee. None of the other provisions of this Section 4 are intended to be in any way in limitation of the provisions of this Section 4(e). (f) All requirements pertaining to insurance under the Subordinate Loan Documents (including requirements relating to amounts and types of coverages, deductibles and special endorsements) shall be deemed satisfied if the Borrower complies with the insurance requirements under the Senior Loan Documents. All original policies of insurance required pursuant to the Senior Loan Documents shall be held by the Senior Mortgagee. Nothing in this Section 4(f) shall preclude the Subordinate Mortgagee from requiring that it be named as a mortgagee and loss payee, as its interest may appear, under all policies of property damage insurance maintained by the Borrower with respect to the Mortgaged Property, provided such action does not affect the priority of payment of Proceeds, or that the Subordinate Mortgagee be named as an additional insured under all policies of liability insurance maintained by the Borrower with respect to the Mortgaged Property. (g) In the event of a Condemnation or a Casualty, the following provisions shall apply: (i) the rights of the Subordinate Mortgagee (under the Subordinate Loan Documents or otherwise) to participate in any proceeding or action relating to a Condemnation or a Casualty, or to participate or join in any PCDC Resolution No. 2011 -10 Page 12 settlement of, or to adjust, any claims resulting from a Condemnation or a Casualty, shall be and remain subordinate in all respects to the Senior Mortgagee's rights under the Senior Loan Documents with respect thereto, and the Subordinate Mortgagee shall be bound by any settlement or adjustment of a claim resulting from a Condemnation or a Casualty made by the Senior Mortgagee; (ii) all Loss Proceeds shall be applied either to payment of the costs and expenses of Restoration or to payment on account of the Senior Indebtedness, as and in the manner determined by the Senior Mortgagee in its sole discretion; (iii) in the event the Senior Mortgagee applies or releases Loss Proceeds for the purposes of Restoration of the Mortgaged Property, the Subordinate Mortgagee shall release for such purpose all of its right, title and interest, if any, in and to such Loss Proceeds. If the Senior Mortgagee holds Loss Proceeds, or monitors the disbursement thereof, the Subordinate Mortgagee shall not do so. Nothing contained in this Agreement shall be deemed to require the Senior Mortgagee to act for or on behalf of the Subordinate Mortgagee in connection with any Restoration or to hold or monitor any Loss Proceeds in trust for or otherwise on behalf of the Subordinate Mortgagee, and all or any Loss Proceeds may be commingled with any funds of the Senior Mortgagee; and (iv) if the Senior Mortgagee elects to apply Loss Proceeds to payment on account of the Senior Indebtedness, and if the application of such Loss Proceeds results in the payment in full of the entire Senior Indebtedness, any remaining Loss Proceeds held by the Senior Mortgagee shall be paid to the Subordinate Mortgagee unless another party has asserted a claim to the remaining Loss Proceeds. (h) The Subordinate Mortgagee shall enter into recognition and non - disturbance agreements with any tenants under commercial or retail Leases to whom the Senior Mortgagee has granted recognition and non - disturbance, on the same terms and conditions given by the Senior Mortgagee. (i) Except as provided in this Section 4(i), and regardless of any contrary provision in the Subordinate Loan Documents, the Subordinate Mortgagee shall not collect payments for the purpose of escrowing for any cost or expense related to the Mortgaged Property or for any portion of the Subordinate Indebtedness. However, if the Senior Mortgagee is not collecting escrow payments for one or more Impositions (as defined in the Senior Mortgage), the Subordinate Mortgagee may collect escrow payments for such Impositions; provided that all payments so collected by the Subordinate Mortgagee shall be held in trust by the Subordinate Mortgagee to be applied only to the payment of such Impositions. PCDC Resolution No. 2011 -10 Page 13 (j) Within ten (10) days after request by the Senior Mortgagee, the Subordinate Mortgagee shall furnish the Senior Mortgagee with a statement, duly acknowledged and certified setting forth the then - current amount and terms of the Subordinate Indebtedness, that there exists no default under the Subordinate Loan Documents (or describing any default that does exist), and such other information with respect to the Subordinate Indebtedness as the Senior Mortgagee may request. (k) The Senior Mortgagee may waive, postpone, extend, reduce or otherwise modify any provisions of the Senior Loan Documents without the necessity of obtaining the consent of or providing notice to the Subordinate Mortgagee, and without affecting any of the provisions of this Agreement. 5. DEFAULT UNDER LOAN DOCUMENTS. (a) The Senior Mortgagee shall have the right to cure any Subordinate Mortgage Default until such time, if ever, as the Senior Mortgagee's delivery to the Subordinate Mortgagee of written consent to an Enforcement Action described in an Enforcement Action Notice given by the Subordinate Mortgagee as a consequence of the Subordinate Mortgage Default. The Senior Mortgagee shall not have any obligation whatsoever to cure any Subordinate Mortgage Default. The Senior Mortgagee shall not be subrogated to the rights of the Subordinate Mortgagee under the Subordinate Loan Documents by reason of the Senior Mortgagee having cured any Subordinate Mortgage Default. However, the Subordinate Mortgagee acknowledges that all amounts advanced or expended by the Senior Mortgagee in accordance with the Senior Loan Documents to cure a Subordinate Mortgage Default shall be added to and become a part of the Senior Indebtedness under Section 12 of the Senior Mortgage and shall be secured by the lien of, the Senior Mortgage.. (b) The Subordinate Mortgagee shall have the right to cure any Senior Mortgage Default during such period of time, if any, as the Borrower is permitted by the terms of the Senior Loan Documents to cure such Senior Mortgage Default. The Subordinate Mortgagee shall not be subrogated to the rights of the Senior Mortgagee under the Senior Loan Documents by reason of the Subordinate Mortgagee having cured any Senior Mortgage Default. (c) In the event of a Subordinate Mortgage Default, the Subordinate Mortgagee will not commence any Enforcement Action until after the Subordinate Mortgagee has given the Senior Mortgagee an Enforcement Action Notice with respect to such Enforcement Action and received Senior Mortgagee's written consent to such Enforcement Action by the Subordinate Mortgagee, provided that the Subordinate Mortgagee shall be entitled to seek specific performance to enforce covenants and agreements of the Borrower relating to income, rent, or affordability restrictions contained in the Restrictive Covenant subject to Senior Mortgagee's right to cure a Subordinate Mortgage Default set forth in Section 5(a). The Senior Mortgagee shall advise the Subordinate Mortgagee whether or not the Senior Mortgagee PCDC Resolution No. 2011 -10 Page 14 consents to the Enforcement Action by the Subordinate Mortgagee within ninety (90) days following the Senior Mortgagee's receipt of the Enforcement Action Notice (failure of the Senior Mortgagee to provide written consent to the Enforcement Action within such 90 -day period constitutes the Senior Mortgagee's refusal of such consent). The Subordinate Mortgagee acknowledges that the Senior Mortgagee may grant or refuse consent to the Subordinate Mortgagee's Enforcement Action in the Senior Mortgagee's sole and absolute discretion, and that such discretion may be exercised in an arbitrary manner. Any Enforcement Action on the part of the Subordinate Mortgagee shall be subject to the provisions of this Agreement. The Subordinate Mortgagee acknowledges that the provisions of this Section 5(c) are fair and reasonable under the circumstances, that the Subordinate Mortgagee has received a substantial benefit from the Senior Mortgagee having granted its consent to the Subordinate Mortgage, and that the Senior Mortgagee would not have granted such consent without the inclusion of these provisions in this Agreement. (d) The Senior Mortgagee may pursue all rights and remedies available to it under the Senior Loan Documents, at law, or in equity, regardless of any Enforcement Action Notice or Enforcement Action by the Subordinate Mortgagee. No action or failure to act on the part of the Senior Mortgagee in the event of a Subordinate Mortgage Default or commencement of an Enforcement Action shall constitute a waiver on the part of the Senior Mortgagee of any provision of the Senior Loan Documents or this Agreement. (e) In the event that an Enforcement Action taken by the Subordinate Mortgagee is the appointment of a receiver for any of the Mortgaged Property, all of the rents, issues, profits and proceeds collected by the receiver shall be paid and applied by the receiver solely to and for the benefit of the Senior Mortgagee until the Senior Indebtedness shall have been paid in full. (f) The Subordinate Mortgagee hereby expressly consents to and authorizes the release by the Senior Mortgagee of all or any portion of the Mortgaged Property from the lien, operation, and effect of the Senior Loan Documents. The Subordinate Mortgagee hereby waives to the fullest extent permitted by law, all equitable or other rights it may have (i) in connection with any release of any portion of the Mortgaged Property, (ii) to require the separate sales of any portion of the Mortgaged Property or to require the Senior Mortgagee to exhaust its remedies against any portion of the Mortgaged Property or any combination of portions of the Mortgaged Property or any other collateral for the Senior Indebtedness, or (iii) to require the Senior Mortgagee to proceed against the Borrower, any other party that may be liable for any of the Senior Indebtedness (including any general partner of the Borrower if the Borrower is a partnership), any portion of the Mortgaged Property or combination of portions of the Mortgaged Property, or any other collateral, before proceeding against all or such portions or combination of portions of the Mortgaged Property as the Senior Mortgagee determines. The Subordinate Mortgagee waives to the fullest extent PCDC Resolution No. 2011 -10 Page 15 permitted by law any and all benefits under California Civil Code Sections 2845, 2849 and 2850. The Subordinate Mortgagee hereby expressly consents to and authorizes, at the option of the Senior Mortgagee, the sale, either separately or together, of all or any portion of the Mortgaged Property. The Subordinate Mortgagee acknowledges that without notice to the Subordinate Mortgagee and without affecting any of the provisions of this Agreement, the Senior Mortgagee may (i) extend the time for or waive any payment or performance under the Senior Loan Documents; (ii) modify or amend in any respect any provision of the. Senior Loan Documents; and (iii) modify, exchange, surrender, release and otherwise deal with any additional collateral for the Senior Indebtedness. (g) If any party other than the Borrower (including the Senior Mortgagee) acquires title to any of the Mortgaged Property pursuant to a foreclosure of, or trustee's sale or other exercise of any power of sale under, the Senior Mortgage conducted in accordance with applicable law, the lien, operation, and effect of the Subordinate Mortgage and other Subordinate Loan Documents automatically shall terminate with respect to such Mortgaged Property. 6. MISCELLANEOUS PROVISIONS (a) In the event of any conflict or inconsistency between the terms of the Subordinate Loan Documents and the terms of this Agreement, the terms of this Agreement shall control. (b) This Agreement shall be binding upon and shall inure to the benefit of the respective legal successors and assigns of the parties hereto. (c) This Agreement does not constitute an approval by the Senior Mortgagee of the terms of the Subordinate Loan Documents. (d) Each notice, request, demand, consent, approval or other communication (collectively, "notices ", and singly, a "notice ") which is required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if (i) personally delivered with proof of delivery thereof (any notice so delivered shall be deemed to have been received at the time so delivered), or (ii) sent by a national overnight courier service (such as FedEx) designating earliest available delivery (any notice so delivered shall be deemed to have been received on the next business day following receipt by the courier), or (c) sent by United States registered or certified mail, return receipt requested, postage prepaid, at a post office regularly maintained by the United States Postal Service (any notice so sent shall be deemed to have been received on the date of delivery as confirmed by the return receipt), addressed to the respective parties as follows: (i) Notices intended for the Senior Mortgagee shall be addressed to the address set forth in the Senior Mortgage for notices to the Senior Mortgagee. PC DC Resolution No. 2011 -10 Page 16 (ii) Notices intended for the Subordinate Mortgagee shall be addressed to: Petaluma Community Development Commission 11 English Street Petaluma, CA 94952 Attention: Housing Administrator Any party, by notice given pursuant to this Section, may change the person or persons and /or address or addresses, or designate an additional person or persons or an additional address or addresses, for its notices, but notice of a change of address shall only be effective upon receipt. Neither party shall refuse or reject delivery of any notice given in accordance with this Section. (e) Nothing herein or in any of the Senior Loan Documents or Subordinate Loan Documents shall be deemed to constitute the Senior Mortgagee as a joint venturer or partner of the Subordinate Mortgagee. (f) Upon notice from the Senior Mortgagee from time to time, the Subordinate Mortgagee shall execute and deliver such additional Instruments and documents, and shall take such actions, as are required by the Senior Mortgagee in order to further evidence or effectuate the provisions and intent of this Agreement. (g) This Agreement shall be governed by the laws of the State in which the Land is located. (h) If any one or more of the provisions contained in this Agreement, or any application thereof, shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein, and any other application thereof, shall not in any way be affected or impaired thereby. (i) The term of this Agreement shall commence on the date hereof and shall continue until the earliest to occur of the following events: (i) the payment of all of the Senior Indebtedness; provided that this Agreement shall be reinstated in the event any payment on account of the Senior Indebtedness is avoided, set aside, rescinded or repaid by the Senior Mortgagee as described in Section 2(e) hereof, (ii) the payment of all of the Subordinate Indebtedness other than by reason of payments which the Subordinate Mortgagee is obligated to remit to the Senior Mortgagee pursuant to this Agreement; (iii) the acquisition by the Senior Mortgagee or by a third party purchaser, of title to the Land and Improvements pursuant to a foreclosure of, or trustee's sale or other exercise of a power of sale under, the Senior Mortgage; or (iv) without limiting the provisions of Section 5(d), the acquisition by the Subordinate Mortgagee, with the prior written consent of the Senior Mortgagee, of title to the Land and Improvements subject to the PCDC Resolution No. 2011 -10 Page 17 Senior Mortgage pursuant to a foreclosure, or a deed in lieu of foreclosure, of (or the exercise of a power of sale under) the Subordinate Mortgage. (j) No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. (k) Each party hereto acknowledges that in the event any party fails to comply with its obligations hereunder, the other parties shall have all rights available at law and in equity, including the right to obtain specific performance of the obligations of such defaulting party and injunctive relief. (1) No party other than the Senior Mortgagee and the Subordinate Mortgagee shall have any rights under, or be deemed a beneficiary of any of the provisions of, this Agreement. (m) No amendment, supplement, modification, waiver or termination of this Agreement shall be effective against any party unless such amendment, supplement, modification, waiver or termination is contained in a writing signed by such party. (n) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (o) Notwithstanding any provision of this Agreement to the contrary, the parties acknowledge and agree that, as among the Bond Trustee, Freddie Mac and Citi, the relative rights of the parties constituting Senior Mortgagee under this Agreement shall be governed by the terms of the Intercreditor Agreement, dated as of June 1, 2011, by and among Bond Trustee, Freddie Mac, the Issuer and Citi, and the terms of the Construction Phase Financing Agreement, copies of which have been reviewed and acknowledged by Borrower. The foregoing shall in no event relieve Borrower of, or modify, the obligations of Borrower and Subordinate Mortgagee to the Senior Mortgagee under this Agreement. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] PCDC Resolution No. 2011 -10 Page 18 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written. SENIOR MORTGAGEE: WELLS FARGO BANK, NATIONAL ASSOCIATION, solely as Bond Trustee By: Name: Grace Yang Title: Vice President PCDC Resolution No. 2011 -10 Page 19 SENIOR MORTGAGEE Continued: FEDERAL HOME LOAN MORTGAGE CORPORATION By:_ Name Title: Monty Childs Director ACKNOWLEDGMENT COMMONWEALTH OF VIRGINIA) COUNTY OF FAIRFAX ) On , before me, , a Notary Public in and for said County and Commonwealth of Virginia, personally appeared Monty Childs, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he /she executed the same in his /her authorized capacity, and that by his /her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. Notary Signature PC DC Resolution No. 2011 -10 Page 20 SENIOR MORTGAGEE Continued: CITIBANK, N.A., a national banking association By: _ Name Title: Kathy Millhouse Vice President STATE OF CALIFORNIA ) COUNTY OF SAN FRANCISCO ) On , 2011 before me, Trina O'Donohoe, Notary Public, personally appeared Kathy Millhouse, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature of Notary Public (Seal) PCDC Resolution No. 2011 -10 Page 21 SUBORDINATE MORTGAGEE: PETALUMA COMMUNITY DEVELOPMENT COMMISSION, a public body, corporate and politic By: Name: John C. Brown Title: Executive Director ATTEST: Wo Claire Cooper, CMC, Agency Secretary APPROVED AS TO FORM: I: Eric W. Danly, City Attorney PCDC Resolution No. 2011 -10 Page 22 Borrower hereby acknowledges receipt of a copy of this Subordination Agreement, dated as of June 1, 2011, by and among Wells Fargo Bank, National Association, Federal Home Loan Mortgage Corporation, Citibank, N.A. and the Petaluma Community Development Commission and consents to the agreement of the parties set forth herein. VINTAGE CHATEAU, L.P., a California limited partnership By: USA Chateau, Inc., a California corporation, its Administrative General Partner By: Name: Geoffrey C. Brown Title: President By: Riverside Charitable Corporation, a California nonprofit public benefit corporation, its Managing General Partner By: _ Name Title: Kenneth S. Robertson President PCDC Resolution No. 2011 -10 Page 23 GENERAL ACKNOWLEDGMENT STATE OF CALIFORNIA COUNTY OF On before me, Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are subscribed to the within instrument and acknowledged to me that he /she /they executed the same in his/her /their authorized capacity(ies), and that by his/her /their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature of Notary Public (Seal) PCDC Resolution No. 2011 -10 Page 24 EXHIBIT A DESCRIPTION OF THE LAND All that certain real property situated in the City of Petaluma, County of Sonoma, State of California, described as follows: Parcel One: Lying within lot 214 of the Petaluma Rancho, as shown in Book 21 of Maps at Page 1, Sonoma County Records, being a portion of the lands of Lynch Gulch Co., LP, as recorded in Document No. 91- 0109867, being more particularly described as follows: Beginning at the most Northeasterly corner of said lands of Lynch Gulch Co., LP, thence along the Southerly line of McDowell Boulevard, North 54 27' 15" West 321.00 feet; thence leaving said Southerly line of McDowell Boulevard, South 35° 32'45" West 139.37 feet; thence along a non - tangent curve to the left, whose center bears South 79 39' 47" East, having a radius of 21.00 feet, through a central angle of 43 32' 54 ", an arc length of 15.96 feet; thence along a tangent reverse curve, having a radius of 48.00 feet, through a central angle of 118 31' 45 ", an arc length of 99.30 feet; thence South 35° 32'45" West 5.35 feet, to a point on the Southwesterly line of the lands of Lynch Gulch Co., LP, recorded in Document No. 92- 0023809, Sonoma County Records; thence along the Southwesterly line of said parcel South 54° 27' 15" East 296.00 feet, to a point on the Northerly line of a 40 -foot access and utility easement, a portion of said Lot A, as shown on 289 Maps 6; thence along said Northerly line North 35° 32'45" East 236.74 feet, to the point of beginning. Parcel Two: A 40 -foot access and utility easement more particularly described as follows; A portion of that 40 -foot easement for road access and utility purposes as shown on 289 Maps at Page 6, Sonoma County Records, more particularly described as follows: Beginning at a point on the Southwesterly line of McDowell Boulevard, said point being the most Southeasterly corner of the lands of Lynch Creek Co. (Document No. 91- 109866), marked on the ground by a 1/2" iron pipe tagged LS 2798, as shown on that Record of Survey filed in Book 423 of Maps at Page 7, Sonoma County Records; thence Southwesterly along the Southeasterly line of said lands of Lynch Creek Co., South 35° 32'45" West 236.74 feet; thence leaving said line North 54° 27' 15" West 40.00 feet to a point on the Southeasterly line of the lands of Lynch Gulch Co. (Document No. 92- 023809); thence along said line of Lynch Gulch Co., North 35° 32'45" East 236.74 feet, to a point on the Southwesterly line of McDowell Boulevard; thence along said line of McDowell Boulevard, South 54 27' 15" East 40.00 feet to the point of beginning. Parcel Three: An Ingress Egress Easement more particularly described as follows; Being a portion of the lands of Vintage Gold Senior Apartments, L.P., a California limited Partnership, as described under Document Number 1998 - 0096082, Official Records of Sonoma County, California, described as follows: Beginning at point on the southerly right of way line of McDowell Boulevard said point being the Northeast corner of the lands of City of Petaluma as shown on that Record of Survey filed in Book 423 of Maps, Page 7, Sonoma County Records; thence along said Southerly right of way line of McDowell Blvd. South 54 °27'15" East 47.00 feet; thence leaving said right of way line South 35 0 32'45" West 139.37 feet; thence along a non tangent curve to the left whose center bears South 79 0 39'47" East, having a radius of 21.00 feet, through a central angle of 43 0 32'54 ", for an arc length of 15.96 feet; thence along a tangent reverse curve having a radius of 48.00 feet, through a central angle of 118 °31'45 ", for an arc length of 99.30 feet; thence South 35 °32'45" West 5.35 feet to a point on the Southwesterly line of the lands of Lynch Gulch Co., L.P. as described in Grant Deed recorded under Document Number 1992- 0023809, Official Records of Sonoma County; thence along said Southwesterly line North 54 0 27' 15" West 72.00 feet to the Southwest comer of said lands of Lynch Gulch Co.; thence along said Northwesterly line of said lands of PCDC Resolution No. 2011 -10 Page 25 Lynch Gulch Co., L.P., being coincident with the Southeasterly line of the lands of City of Petaluma, recorded in Book 3174, Page 436, Official Records of Sonoma County, North 35 °32'45" East 236.74 feet to the Point of Beginning. AP N : 007 - 350 - 013 -0000 PCDC Resolution No. 2011 -10 Page 26