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HomeMy WebLinkAbout2018-014946 3 • 2018014946 Tommy Gong San Luis Obispo - County Clerk-Recorder 04/16/2018 10:56 AM RECORDING REQUESTED BY Recorded at the request of • PUBLIC FIRST AMERICAN TITLE INSURANCE COMPANY Titles: 1 Pages: 22 Fees: $159.00 AND WHEN RECORDED MAIL TO: Taxes: 0.00 Total: $159.00 City Arroyo 300 East Branchh Street Arroyo Grande,California 93421 SUBORDINATION AGREEMENT 077-071-029 1 4- Subordination Agreement U.S.Department OMB Approval No.2502-0598 and Urban Development Housing (Exp.06/30/2017) Office of Housing Public Reporting Burden for this collection of information is estimated to average 0.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Response to this request for information is required in order to receive the benefits to be derived. This agency may not collect this information, and you are not required to complete this form unless it displays a currently valid OMB control number. While no assurance of confidentiality is pledged to respondents, HUD generally discloses this data only in response to a Freedom of Information Act request. Project Name: Arroyo Grande Apartments HUD Project No: 122-11405 THIS SUBORDINATION AGREEMENT ("Agreement") is entered into as of the 1st day of April, 2018 by and among (i) RED MORTGAGE CAPITAL, LLC, a Delaware limited liability company ("Senior Lender"), (ii) CITY OF ARROYO GRANDE, a municipal corporation ("City"), and (iii) COURTLAND-ARROYO GRANDE, L.P., a California limited partnership ("Borrower"). Recitals WHEREAS, Borrower is the owner of that certain 108 unit residential rental development known as "Arroyo Grande Apartments " ("Project"), located at 241 North Courtland Street, Arroyo Grande, CA 93420. Senior Lender has made or is making the senior mortgage loan as described on Schedule A hereto ("Senior Indebtedness") to Borrower in the original principal amount(s) as shown on Schedule A, evidenced by the Note described in Schedule A ("Senior Note"), and secured by, among other things, the Security Instrument as described in Schedule A (collectively, "Senior Security Instrument"), covering the property described in Exhibit A attached hereto together with all improvements thereon and personal property used relative thereof, all as more particularly described in the Senior Security Instrument ("Mortgaged Property"). WHEREAS, City is the beneficiary of a Deed of Trust with Assignment of Rents (Short Form) from the Borrower dated as of September 4, 2014 and recorded October 14, 2014 as Instrument No. 2014-042401 in the Official Records of San Luis Obispo County, California (the "Land Records") ("Subordinate Deed of Trust"), securing the Borrower's performance under that certain Regulatory Agreement by and between City and Borrower recorded on November 9, 2004, as Instrument No. 2004-098502 in the Land Records ("City Regulatory Agreement"), pursuant to the Second and Amended Restated Affordable Housing Agreement dated as of September 14, 2004 between Borrower and City's successor-in-interest ("AHA") (the City Regulatory Agreement and the AHA are collectively referred to herein as the "Restrictive Covenants"). WHEREAS, the Restrictive Covenants, except for the Senior Covenants (defined below), have been subordinated to the lien of the Senior Security Instrument pursuant to the terms and conditions of that certain Subordination Agreement by and among the City,. the Successor Agency to the dissolved Arroyo Grande Redevelopment Agency ("Agency") and the Borrower dated as of March 1, 2018 and recorded in the Land Records contemporaneously herewith and prior hereto (the "RCSA"). Subordination Agreement HUD-92420M (06/14) • ' 2 WHEREAS, Senior Lender, with the approval of the U.S. Department of Housing and Urban Development ("HUD"), has agreed to permit City to keep the Subordinate Deed of Trust outstanding and maintain a subordinate mortgage lien against the Mortgaged Property subject to all of the conditions contained in this Agreement and in accordance with Program Obligations. "Program Obligations" means (1) all applicable statutes and any regulations issued by the Secretary pursuant thereto that apply to the Project, including all amendments to such statutes and regulations, as they become effective, except that changes subject to notice and comment rulemaking shall become effective only upon complen of the rulemaking process, and (2) all current requirements in HUD handbooks and guides, notices, and mortgagee letters that apply to the Project, and all future updates, changes and amendments thereto, as they become effective, except that changes subject to notice and comment rulemaking shall become effective only upon completion of the rulemaking process, and provided that such future updates, changes and amendments shall be applicable to the Project only to the extent that they interpret, clarify and implement terms in this Agreement rather than add or delete provisions from such document. Handbooks, guides, notices, and mortgagee letters are available on HUD's official website: (http://www.hud.gov/offices/adm/hudclips/index.cfm, or a successor location to that site). NOW, THEREFORE, in order to induce Senior Lender to permit City to keep outstanding the Subordinate Deed of Trust to Borrower and continue to have a subordinate mortgage lien against the Mortgaged Property, and in consideration thereof, Senior Lender, City and Borrower agree as follows: 1. Definitions. In addition to the terms defined in the Recitals to this Agreement, for purposes of this Agreement the following terms have the respective meanings set forth below: (a) "Affiliate" is defined in 24 C.F.R. 200.215, or any successor regulation. (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 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 entities identified as "Borrower" in the first paragraph of this Agreement, together with any successors, heirs, and assigns (jointly and severally). Borrower shall include any entity taking title to the Mortgaged Property, whether or not such entity assumes the Senior Note, provided that the term "Borrower" shall not include Senior Lender in the event that Senior Lender may acquire title to the Mortgaged Property. Whenever the term "Borrower" is used herein, the same shall be deemed to include the obligor of the debt secured by the Senior Security Instrument. (d) "Business Day" means any day other than Saturday, Sunday or any other day on which Senior Lender or HUD is not open for business. Subordination Agreement HUD-92420M (06/14) • 3 (e) "City" means the Entity named as such in the first paragraph on page 1 of this Agreement. (f) "Covenant Event of Default" is defined in the Senior Security Instrument. (g) "Entity" means an estate, trust, partnership, corporation, limited liability company, limited liability partnership, governmental department or agency or any other entity which has the legal capacity to own property. (h) "Monetary Event of Default" is defined in the Senior Security Instrument. (i) "Non-Project Sources" means any funds that are not derived from Project Sources. (j) "Project Sources" means the Mortgaged Property (as defined in the Senior Security Instrument), any proceeds of the Senior loan, and any reserve or deposit made with Senior Lender or any other party as required by HUD in connection with the Senior loan. (k) "Senior Covenants" means those covenants set forth in Section 5.27 of the AHA and Article II, Section 2 of the City Regulatory Agreement and acknowledged as senior to the Senior Indebtedness in the RCSA. (I) "Senior Indebtedness" means all present and future indebtedness, obligations, and liabilities of Borrower to Senior Lender under or in connection with the Senior loan or Senior Loan Documents. (m) "Senior Lender" means the Entity named as such in the first paragraph on page 1 of this Agreement, its successors and assigns. (n) "Senior Loan Documents" means the Senior Note, the Senior Security Instrument, and the Regulatory Agreement between Borrower and HUD, as such documents may be amended from time to time and all other documents at any time evidencing, securing, guaranteeing, or otherwise delivered in connection with the Senior Indebtedness. (o) "Senior Security Instrument Default" means a "Monetary Event of Default" or a "Covenant Event of Default" as defined in the Senior Security Instrument. (p) "Subordinate Deed of Trust " means the Subordinate Deed of Trust securing performance of the Subordinate Obligations. (q) "Subordinate Deed of Trust Default" means any act, failure to act, event, conditions, or occurrence which allows (but for any contrary provision of this Agreement), or which with the giving of notice or the passage of time, or both, would allow (but for any contrary provision of this Agreement), City to take a Subordinate Deed of Trust Enforcement Action. (r) "Subordinate Deed of Trust Enforcement Action" means 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 Subordination Agreement HUD-92420M (06/14) • 4 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 Restrictive Covenants or the Subordinate Deed of Trust, the exercising of any banker's lien or rights of set-off or recoupment, or the taking of any other enforcement action against Borrower, any other party liable for any of the Subordinate Obligations or obligated under the Subordinate Deed of Trust, or the Mortgaged Property. (s) "Subordinate Obligations" means all present and future obligations and liabilities of Borrower to City under or in connection with the Subordinate Deed of Trust or the Restrictive Covenants. (t) "Surplus Cash" is defined herein to mean the same as that term is defined in the Regulatory Agreement between Borrower and HUD. 2. Permission to Allow Mortgage Lien Against Mortgaged Property. Senior Lender agrees, subject to the provisions of this Agreement, to the Subordinate Deed of Trust against the Mortgaged Property (which is subordinate in all respects to the lien of the Senior Security Instrument) to secure Borrower's performance obligations to City and Agency under and in connection with the Restrictive Covenants. Such permission is subject to the condition that each of the representations and warranties made by Borrower and City in Section 3 are true and correct on the date of this Agreement. If any of the representations and warranties made by Borrower and City in Section 3 are not true and correct on the date of this Agreement, the provisions of the Senior Loan Documents applicable to unpermitted liens on the Mortgaged Property shall apply. 3. Borrower's and City's Representations and Warranties. Borrower and, with respect to subsections (a) through (d) below, City each make the following representations and warranties to Senior Lender: (a) Relationship of Borrower to City. City is not an Affiliate of Borrower. (b) Senior Loan Documents. The executed Senior Loan Documents are the same forms as-approved by HUD prior to the date of this Agreement. Upon execution and delivery of the Senior Loan Documents, Borrower shall deliver to City an executed copy of each of the Senior Loan Documents, certified to be true, correct and complete. 4. Deliveries. Borrower shall submit the following items to Senior Lender and HUD. (a) Title Evidence. Evidence of title (title policy or title policy endorsement, as appropriate) insuring the lien of the Senior Security Instrument which insures that (i) the lien of the Subordinate Deed of Trust is subordinate to Subordination Agreement HUD-92420M (06/14) 5 the lien of the Senior Mortgage, and (ii) this Agreement has been recorded among the applicable land records. 5. Terms of Subordination. (a) Agreement to Subordinate. Senior Lender and City agree that the Subordinate Deed of Trust is and shall be subject and subordinate in all respects to the liens, terms, covenants and conditions of the Senior Security Instrument and the other Senior Loan Documents and to all advances heretofore made or which may hereafter be made pursuant to the Senior Security Instrument and the other Senior Loan Documents (including but not limited to, all sums advanced for the purposes of(1) protecting or further securing the lien of the Senior Security Instrument, curing defaults by Borrower under the Senior Loan Documents or for any other purpose expressly permitted by the Senior Security Instrument, or (2) constructing, renovating, repairing, furnishing, fixturing or equipping the Mortgaged Property). City agrees to extinguish and release its lien on any and all Mortgaged Property in the event Senior Lender, HUD, or a designee of either acquires title to the Mortgaged Property pursuant to a deed in lieu of foreclosure Notwithstanding anything to the contrary in this Agreement, this Agreement does not affect the City or the Agency's rights under the Restrictive Covenants, subject to the terms and conditions of the RCSA, to enforce the Senior Covenants. (b) Subordination of Subrogation Rights. City agrees that if, by reason of its payment of real estate taxes or other monetary obligations of Borrower, or by reason of its exercise of any other right or remedy under the Subordinate Deed of Trust, it acquires by right of subrogation or otherwise a lien on the Mortgaged Property which (but for this subsection) would be senior to the lien of the Senior Security Instrument, then, in that event, such lien shall be subject and subordinate to the lien of the Senior Security Instrument. (c) Payments After Senior Security Instrument Default. Borrower agrees that, after it receives notice (or otherwise acquires knowledge) of a Senior Security Instrument Default, it will not make any payments under or pursuant to the Subordinate Deed of Trust or Restrictive Covenants (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorney's fees, or any other sums secured by the Subordinate Deed of Trust) without Senior Lender's prior written consent. City agrees that, after it receives a default notice from Senior Lender with written instructions directing City not to accept payments from Project Sources, it will not accept any payments under or pursuant to the Subordinate Deed of Trust or the Restrictive Covenants (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorney's fees, or any other sums secured by the Subordinate Deed of Trust) unless either (i) such payment is being made solely from Non- Project Sources or (ii) such payment is made with Senior Lender's prior written consent. If City receives written notice from Senior Lender that the Senior Security Instrument Default which gave rise to City's obligation not to accept payments has Subordination Agreement HUD-92420M (06/14) 6 been cured, waived, or otherwise suspended by Senior Lender, the restrictions on payment to City in this Section 5 shall terminate, and Senior Lender shall have no right to any subsequent payments made to City by Borrower prior to City's receipt of a new default notice from Senior Lender in accordance with the provisions of this Section 5(c). (d) Remitting Payments to Senior Lender. If, after City receives a default notice from Senior Lender in accordance with subsection (d) above, City receives any payments under the Subordinate Deed of Trust or Restrictive Covenants (other than payments permitted under subsection (c) above), City agrees that such payment or other distribution will be received and held in trust for Senior Lender and unless Senior Lender otherwise notifies City in writing, will be promptly remitted, in kind to Senior Lender, properly endorsed to Senior Lender, to be applied to the principal of, interest on and other amounts due under the Senior Loan Documents in accordance with the provisions of the Senior Loan Documents. By executing this Agreement, Borrower specifically authorizes City to endorse and remit any such payments to Senior Lender, and specifically waives any and all rights to have such payments returned to Borrower or credited. Borrower and Senior Lender acknowledge and agree that payments received by City, and remitted to Senior Lender under this Section 5, shall not be applied or otherwise credited, nor shall the tender of such payment to Senior Lender waive any Subordinate Deed of Trust Default which may arise from the inability of City to retain such payment or apply such payment. (e) Agreement Not to Commence Bankruptcy Proceeding. City agrees that during the term of this Agreement it will not commence, or join with any other creditor in commencing any Bankruptcy Proceeding with respect to Borrower, without Senior Lender's prior written consent. 6. Default Under Subordinate Deed of Trust and Restrictive Covenants. (a) Notice of Default and Cure Rights. City shall deliver to Senior Lender a default notice within five Business Days in each case where City has given a default notice to Borrower. Failure of City to send a default notice to Senior Lender shall not prevent the exercise of City's rights and remedies under the Subordinate Deed of Trust or Restrictive Covenants, subject to the provisions of this Agreement and the RCSA. Senior Lender shall have the opportunity, but not the obligation, to cure any Subordinate Deed of Trust Default within 60 days following the date of such notice; provided, however that City shall be entitled, during such 60-day period, to continue to pursue its rights and remedies under the Subordinate Deed of Trust or Restrictive Covenants, subject to the limitations set forth in Section 6(b) below and the RCSA. (b) City's Exercise of Remedies After Notice to Senior Lender. If a Subordinate Deed of Trust Default occurs and is continuing, City agrees that it will not commence foreclosure proceedings with respect to the Mortgaged Property under the Subordinate Deed of Trust or exercise any other rights or remedies it may have under the Subordinate Deed of Trust or Restrictive Covenants with Subordination Agreement HUD-92420M (06/14) , respect to the Mortgaged Property, including, but not limited to foreclosing upon the Subordinate Deed of Trust, collecting rents, appointing (or seeking the appointment of) a receiver or exercising any other rights or remedies thereunder without Senior Lender's prior written consent. However, the preceding sentence shall not (i) limit City's right to bring an action seeking recovery solely from Non-Project Sources or (ii) preclude City from exercising or enforcing all the rights available to City under the Subordinate Deed of Trust or Restrictive Covenants and/or under applicable law to enforce covenants and agreements of Borrower relating to income, rent or affordability restrictions. 7. Default Under Senior Loan Documents. (a) Notice of Default and Cure Rights. Senior Lender shall deliver to City a default notice within five Business Days in each case where Senior Lender has given a default notice to Borrower (provided that Senior Lender shall have no liability to Borrower, City or to any other Entity for failure to timely give such notice). Failure of Senior Lender to send a default notice to City shall not prevent the exercise of Senior Lender's right and remedies under the Senior Loan Documents, subject to the provisions of this Agreement. Borrower agrees that City shall have the opportunity, but not the obligation, to cure either a Monetary Event of Default or a Covenant Event of Default within 30 days following the date of such notice, or any time prior to an assignment of the Senior Security Instrument from Senior Lender to HUD, whichever date is later. City acknowledges that Senior Lender shall be entitled during such period described above to continue to pursue its remedies under the Senior Loan Documents. City shall have the opportunity to cure a Covenant Event of Default during such period described above so long as there is no Monetary Event of Default under the Senior Loan Documents. All amounts paid by City to Senior Lender to cure any default under the Senior Loan Documents shall be deemed to have been advanced by City pursuant to, and shall be secured by the lien of, the Subordinate Deed of Trust. (b) Cross Default. City agrees that, notwithstanding any contrary provision contained in the Subordinate Deed of Trust Documents, a Senior Security Instrument Default shall not constitute a default under the Subordinate Deed of Trust if no other default occurred under the Subordinate Deed of Trust or Restrictive Covenants. 8. Conflict. Borrower, Senior Lender and City each agrees that, in the event of any conflict or inconsistency between the terms of the Senior Loan Documents, the Subordinate Deed of Trust , Restrictive Covenants and the terms of this Agreement, the terms of this Agreement shall govern and control solely as to the following: (a) the relative priority of the security interests of Senior Lender and City in the Mortgaged Property; and (b) solely as between Senior Lender and City, the notice requirements, cure rights, and the other rights and obligations which Senior Lender and City have agreed to as expressly provided in this Agreement. Borrower acknowledges that the terms and provisions of this Agreement shall not, and shall not be deemed to: extend Borrower's time to cure any Senior Security Subordination Agreement HUD-92420M (06/14) • 8 Instrument Default or Subordinate Deed of Trust Default, as the case may be; give Borrower the right to notice of any Senior Security Instrument Default or Subordinate Deed of Trust Default, as the case may be other than that, if any, provided, respectively under the Senior Loan Documents or the Subordinate Deed of Trust or Restrictive Covenants, as applicable; or create any other right or benefit for Borrower as against Senior Lender or City. 9. Rights and Obligations of City under the Subordinate Deed of Trust and Restrictive Covenants and of Senior Lender under the Senior Loan Documents. Subject to each of the other terms of this Agreement, all of the following provisions shall supersede any provisions of the Subordinate Deed of Trust and Restrictive Covenants, covering the same subject matter: (a) Protection of Security Interest. City shall not, without the prior written consent of Senior Lender in each instance, take any action which has the effect of increasing the obligations under, or secured by, the Subordinate Deed of Trust or Restrictive Covenants, except that City shall have the right to advance funds to cure Senior Security Instrument Defaults pursuant to Section 7(a) above and advance funds pursuant to the Subordinate Deed of Trust for the purpose of paying real estate taxes and insurance premiums, making necessary repairs to the Mortgaged Property and curing other defaults by Borrower under the Subordinate Deed of Trust or Restrictive Covenants. (b) Condemnation or Casualty. In the event of: a taking or threatened taking by condemnation or other exercise of eminent domain of all or a portion of the Mortgaged Property (collectively, a "Taking"); or the occurrence of a fire or other casualty resulting in damage to all or a portion of the Mortgaged Property (collec- tively, a "Casualty"), at any time or times when the Senior Security Instrument remains a lien on the Mortgaged Property the following provisions shall apply: (1) City hereby agrees that its rights (under the Subordinate Deed of Trust , Restrictive Covenants or otherwise) to participate in any proceeding or action relating to a Taking and/or a Casualty, or to participate or join in any settlement of, or to adjust, any claims resulting from a Taking or a Casualty shall be and remain subordinate in all respects to Senior Lender's rights under the Senior Loan Documents with respect thereto, and City shall be bound by any settlement or adjustment of a claim resulting from a Taking or a Casualty made by or with the written consent of Senior Lender; and (2) all proceeds received or to be received on account of a Taking or a Casualty, or both, shall be applied (to payment of the costs and expenses of repair and restoration and/or to payment of the Senior Security Instrument) in the manner determined by Senior Lender in its sole discretion. (c) No Modification of Subordinate Deed of Trust or Restrictive Covenants. Borrower and City each agrees that, until the principal of, interest on Subordination Agreement HUD-92420M (06/14) . . 9 and all other amounts payable under the Senior Loan Documents have been paid in full, it will not, without the prior written consent of Senior Lender in each instance, increase the required payments, if any, due under the Subordinate Deed of Trust or Restrictive Covenants, or otherwise amend the Subordinate Deed of Trust's or Restrictive Covenants' terms in a manner that creates an adverse effect upon Senior Lender under the Senior Loan Documents. Any unauthorized amendment of the Subordinate Deed of Trust or Restrictive Covenants without Senior Lender's consent shall be void ab initio and of no effect whatsoever. 10. Modification of Senior Loan Documents; Refinancing of Senior Indebtedness. City consents to any agreement or arrangement in which Senior Lender waives, postpones, extends, reduces or modifies any provisions of the Senior Loan Documents, including any provision requiring the payment of money, provided however, there shall be no modification of the Senior Loan Documents without the consent of the City if such modification would increase the principal amount of the Senior Indebtedness beyond the original principal amount of the Senior Indebtedness (excluding any amounts having been advanced by Senior Lender for the protection of its security interest pursuant to the Senior Loan Documents), increase the interest rate of the Senior Indebtedness, or decrease the original maturity term of the Senior Indebtedness. City further agrees that its agreement to subordinate hereunder shall extend to any new mortgage debt which is for the purpose of refinancing all or any part of the Senior Indebtedness in accordance with Program Obligations (including reasonable and necessary costs associated with the closing and/or the refinancing); and that all the terms and covenants of this Agreement shall inure to the benefit of any holder of any such refinanced debt; and that all references to the Senior Indebtedness, the Senior Note, the Senior Security Instrument, the Senior Loan Documents and Senior Lender shall mean, respectively, the indebtedness related to the refinance loan, the refinance note, the security instrument securing the refinance note, all documents evidencing, securing or otherwise pertaining to the refinance note and the holder of the refinance note. 11. Default by City or Senior Lender. If City or Senior Lender defaults in performing or observing any of the terms, covenants or conditions to be performed or observed by it under this Agreement, the other, non-defaulting Lender shall have the right to all available legal and equitable relief. Subordination Agreement HUD-92420M (06/14) • 10 12. Notices. Each notice, request, demand, consent, approval or other communication (hereinafter in this Section referred to collectively as "notices" and referred to singly as a "notice") which Senior Lender or City is required or permitted to give to the other party pursuant to this Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if: (a) personally delivered with proof of delivery thereof(any notice so . delivered shall be deemed to have been received at the time so delivered); or (b) sent by Federal Express (or other similar national overnight courier) designating next Business Day 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 two Business Days after mailing in the United States), addressed to the respective parties as follows: SENIOR LENDER: RED MORTGAGE CAPITAL, LLC 1717 Main Street, Suite 900 Dallas, Texas 75201, Attn: Attention: FHA Loan Servicing With a copy to: U.S. Department of Housing and Urban Development Director- Office of Multifamily Asset Management Room 6160 451 Seventh Street, S.W. Washington, DC 20410 CITY: City of Arroyo Grande 300 East Branch Street Arroyo Grande, California 93420 Attention: City Manager Either party may, by notice given pursuant to this Section, 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. Subordination Agreement HUD-92420M (06/14) • 11 13. General. (a) Assignment/Successors. This Agreement shall be binding upon Borrower, Senior Lender and City and shall inure to the benefit of the respective legal successors and assigns of Senior Lender and City. (b) No Partnership or Joint Venture. Senior Lender's consent to the Subordinate Deed of Trust and Restrictive Covenants does not constitute Senior Lender as a joint venturer or partner of City. Neither party hereto shall hold itself out as a partner, agent or Affiliate of any other party hereto. (c) Senior Lender's and City's Consent. Wherever Senior Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by Senior Lender in its sole and absolute discretion, unless otherwise expressly provided in this Agreement. Wherever City's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by City in its sole and absolute discretion, unless otherwise expressly provided in this Agreement. (d) Further Assurances; UCC Financing Statements. City, Senior Lender and Borrower each agree, at Borrower's expense, to execute and deliver all additional instruments and/or documents reasonably required by any other party to this Agreement in order to evidence that the Subordinate Deed of Trust is subordinate to the lien, covenants and conditions of the Senior Loan Documents, or to further evidence the intent of this Agreement. Senior Lender is hereby authorized to file any and all UCC financing statement amendments required to reflect the priority of the Senior Indebtedness. (e) Amendment. This Agreement shall not be amended except by written instrument signed by all parties hereto. (f) Governing Law. This Agreement shall be governed by the laws of the State in which the Mortgaged Property is located, except as, so long as the Senior loan is insured or held by HUD, and solely as to rights and remedies of HUD, federal jurisdiction may be appropriate pursuant to any federal requirements. The State courts, and with respect to HUD's rights and remedies, federal courts, and governmental authorities in the State in which the Mortgaged Property is located, shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Subordinate Deed of Trust or Restrictive Covenants. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. (g) Severable Provisions. If any provision of this Agreement shall be invalid or unenforceable to any extent, then the other provisions of this Agreement shall not be affected thereby and shall be enforced to the greatest extent permitted by law. Subordination Agreement HUD-92420M (06/14) • - - 1-2 (h) Term. 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 principal of, interest on and other amounts payable under the Senior Loan Documents; (ii) the acquisition by Senior Lender of title to the Mortgaged Property pursuant to a foreclosure; or (iii) the acquisition by City of title to the Mortgaged Property pursuant to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale'contained in, the Subordinate Mortgage, but only if such acquisition of title does not violate any of the terms of this Agreement. Notwithstanding the foregoing, in the event the Senior Indebtedness is refinanced, the term of this Agreement shall continue and the Subordinate Obligations, Subordinate Deed of Trust, and Restrictive Covenants (with the exception of the Senior Covenants) shall be subordinate to any such indebtedness related to the refinance loan as provided in Section 10 above. (i) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original for all purposes; provided, however, that all such counterparts shall together constitute one and the same instrument. Each signatory below hereby certifies that each of their statements and representations contained in this Agreement and all their supporting documentation thereto are true, accurate, and complete. This Agreement has been made, presented, and delivered for the purpose of influencing an official action of HUD in insuring the Loan, and may be relied upon by HUD as a true statement of the facts contained therein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. [SIGNATURES FOLLOW ON THE NEXT PAGE] Subordination Agreement HUD-92420M (06/14) LENDER: RED MORTGAGE CAPITAL, LLC, a Delaware limited liability company Jey N. Leeth Di potor ACKNOWLEDGMENT STATE OF TEXAS ] ss: COUNTY OF at tk4 The forgoing instrument was acknowledged before me this tOtiv day of April 2018, by Jeffrey N. Leeth, Director of RED MORTGAGE CAPITAL, LLC, a Delaware limited liability company on behalf of said limited liability company for the purposes therein contained. . ""' . WILLIAM KIRK SHIELDS JR 0, 4 Notary Public,State of Texas /7 J `e-c Comm.Expires 09-15-2019 '' ������+� Notary ID 13036917-1 i� lli1L`��� 7.1 Notary Public My Commission Expires: Cri.S [SIGNATURE ENDS ON THE SUCCEEDING PAGE] 14 CITY: CITY OF ARROYO GRANDE, a municipal corporation �lr.. By. Ja 1- - gman - City 7MMer A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of San Luis Obispo ) On P c\ \ \\ 2OVg , before me, .,eSS`\ CA( — 'fl , notary public, personally appeared mQ_S j,.ctt r\ , who proved to me on the basis of satisfactory evidence to be the perssAs) 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. :'., JESSICA MATSON -_: Notary Public-California 3ire _° San Luis Obispo Countyj "°l +n Commission#2235281 ( tary Signature) (Seal) My Comm.Expires Mar 22,2022 [SIGNATURES FOLLOW ON THE NEXT PAGE] Subordination Agreement HUD-92420M (06/14) BORROWER: COURTLAND-ARROYO GRANDE, L.P. a California limited partnership By: Foundation for Affordable Housing II, Inc. a California nonprofit public benefit corporation its General Partner By: Thomas E. Willard President By: MFPA, Inc. a California corporation its General Partner By: Kasey Burke Vice-President [ACKNOWLEDGMENT APPEARS ON THE SUCCEEDING PAGE] CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT CIVIL CODE § 1189 r A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached,and not the truthfulness,accuracy,or validity of that document. State of California 1ONIC County of C On L Cr 9 i0 1�1i before me, ��(� Le -i �I cart4 rliitzirj p6'C Date altar?) I Here Insert Name and Title of the Officer personally appeared �S E.• YV ltar?) Name(s)of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(swhose namekris/weThubscribed to the within instrument and acknowledged to me that he/ 11e/tey executed the same in his/p€r/tlrr authorized capacity(ieaj;and that by his/lyzr/thetfsignature -on the instrument the person(,�)�or the entity upon behalf of which the personKacted, executed the instrument. GISSELLE SHANTAL PICARD I certify under PENALTY OF PERJURY under the ' > a.4Notary Public-California z laws of the State of California that the foregoing Orange County z z Orli Commission#2158959 ' paragraph is true and correct. "fi M Comm. Expires Jul 2. 2020 WITNESS my hand and official seal. I A 1,0 Signature All Place Notary Seal and/or Stamp Above N'gnature of Notary Public OPTIONAL Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: Document Date: Number of Pages: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: Signer's Name: ❑ Corporate Officer— Title(s): 0 Corporate Officer—Title(s): ❑ Partner— 0 Limited 0 General 0 Partner— 0 Limited 0 General ❑ Individual 0 Attorney in Fact 0 Individual 0 Attorney in Fact ❑ Trustee 0 Guardian of Conservator 0 Trustee 0 Guardian of Conservator ❑ Other: 0 Other: Signer is Representing: Signer is Representing: ©2017 National Notary Association BORROWER: COURTLAND-ARROYO GRANDE, L.P. a California limited partnership By: Foundation for Affordable Housing II, Inc. a California nonprofit public benefit corporation its General Partner By: Thomas E. Willard President By: MFPA, Inc. a California corporation its General Partner By: -4111b Kasey Burke Vice-President [ACKNOWLEDGMENT APPEARS ON THE SUCCEEDING PAGE] • ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of LLL Ano- -5 ) On ?r► ` q, `k, i. , before me, r�.v-cam ( , a Notary Public, personally appeared Kasev Burke who proved to me on the basis of satisfactory evidence to be the person() whose name() is/are subscribed to the wit in instrument and acknowledged to me that he/s /thby executed the same in his/he//their authorize capacity(�s), and that by his/h#r their signature( n the instrument the person(s , or the entity upon behalf of which the person( acted, executed the instrume t. 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. MARIAN KIN �`_ Notary Public-California .51100:', Los a County I ,�� a �'T,"j Commission N 2151321 Signature r. , �L� (Seal) I__•_—__ Comm.?eft_ Pp/272020 [SIGNATURES CONTINUE ON THE SUCCEEDING PAGE] 16 Warning: Any person who knowingly presents a false, fictitious, or fraudulent statement or claim in a matter within the jurisdiction of the U.S. Department of Housing and Urban Development is subject to criminal penalties, civil liability, and administrative sanctions. Subordination Agreement HUD-92420M (06/14) 17 SCHEDULE A 1. Note (Multistate) executed by Borrower to Senior Lender in the original principal amount of$7,900,200.00 dated as of March 1, 2018. 2. Multifamily Deed of Trust, Assignment of Rents and Security Agreement ("Security Instrument") dated as of March 1, 2018, and recorded in the Recorder's Office of San Luis Obispo County, California ("Records") on March 14, 2018 as Document Number 2018010000. Subordination Agreement HUD-92420M (06/14) e p • 18 Exhibit A Legal Description Real property in the City of Arroyo Grande, County of San Luis Obispo, State of California, described as follows: PARCEL 1: PARCEL 1 AS SHOWN ON CERTIFICATE OF COMPLIANCE FOR LOT LINE ADJUSTMENT, AS EVIDENCED BY DOCUMENT RECORDED NOVEMBER 27, 2002 AS INSTRUMENT NO. 2002-104331 OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS : ALL OF THAT REAL PROPERTY DESCRIBED IN THE DEED FROM PHILLIPS- SMITH INVESTMENT COMPANY TO ROBERT H. NEWDOLL AND MERILEE PECK NEWDOLL RECORDED APRIL 5, 1990 IN VOLUME 3484 OF OFFICIAL RECORDS AT PAGE 59 IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THE SOUTHERLY 231.84 FEET, AS MEASURED ALONG THE EASTERLY AND WESTERLY SIDELINES OF THE PROPERTY DESCRIBED AS PARCEL 2 IN SAID DEED. PARCEL 2: EASEMENTS FOR SEWER, WATER LINES, STORM DRAINS, UTILITY MAINTENANCE, RETAINING WALL AND CONSTRUCTION AS SET FORTH IN THAT CERTAIN DECLARATION OF DEVELOPMENT COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF EASEMENTS RECORDED DECEMBER 8, 2002 AS INSTRUMENT NO. 2002-107107, AS AMENDED BY FIRST AMENDMENT THERETO RECORDED FEBRUARY 2, 2003 AS INSTRUMENT NO. 2003-016695, BOTH OF OFFICIAL RECORDS. APN: 077-071-029 Subordination Agreement HUD-92420M (06/14) END OF DOCUMENT