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HomeMy WebLinkAbout2016-04-27 e-packet@6:00Wednesday, April 27, 2016 6:00 PM City of South San Francisco P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA Municipal Services Building, Council Chambers 33 Arroyo Drive, South San Francisco, CA Joint Special Meeting City Council and Successor Agency Special Meeting Agenda April 27, 2016Joint Special Meeting City Council and Successor Agency Special Meeting Agenda NOTICE IS HEREBY GIVEN, pursuant to Section 54956 of the Government Code of the State of California, that the Successor Agency to the City of South San Francisco Redevelopment Agency and the City Council will hold a Joint Special Meeting on Wednesday, April 27, 2016, at 6:00 p.m., in the Municipal Services Building, Council Chambers, 33 Arroyo Drive, South San Francisco, California. Purpose of the meeting: 1. CALL TO ORDER 2. ROLL CALL 3. AGENDA REVIEW 4. PUBLIC COMMENTS CLOSED SESSION Closed Session: Conference with Real Property Negotiators: (Pursuant to Government Code Section 54956.8) Properties: 201-219 Grand Avenue (APN: 012-316-110; 012-316-100; 012-316-090) and 418 Linden Avenue (APN: 012-314-010) Agency Negotiators: Alex Greenwood Negotiating Parties: Brookwood Equities, LLC, the City of South San Francisco, and the Successor Agency to the Redevelopment Agency of the City of South San Francisco Under Negotiation: Price and terms for the disposition of the property. (Ron Gerber, Housing and Redevelopment Manager). 5. Closed Session: Conference with Legal Counsel - Anticipated Litigation (Pursuant to Government Code Section 54956.9) Initiation of Litigation and Significant Exposure to Litigation: One Case 6. CITY COUNCIL ONLY Closed Session: Public Employee Performance Evaluation (Pursuant to Government Code Section 45957) Title: City Manager. 7. Page 2 City of South San Francisco Printed on 9/8/2016 April 27, 2016Joint Special Meeting City Council and Successor Agency Special Meeting Agenda ADMINISTRATIVE BUSINESS Report regarding Resolution authorizing the City Manager to enter into an Exclusive Negotiating Rights Agreement (ENRA) between The City of South San Francisco and MidPen Housing Corporation for a potential Disposition and Development Agreement and Ground Lease and Development of Affordable Workforce Housing at The City Owned Miller/Maple Parking Lot (APN 012311330) (Alex Greenwood : ECD Director) 8. Resolution authorizing the City Manager to enter into an Exclusive Negotiating Rights Agreement (ENRA) between the City of South San Francisco and MidPen Housing for a potential Disposition and Development Agreement and Ground Lease and Development of Affordable Workforce Housing at the City Owned Miller/Maple Parking Lot (APN 012311330). 8a. Page 3 City of South San Francisco Printed on 9/8/2016 City of South San Francisco Legislation Text P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA File #:16-357,Version:1 Closed Session: Conference with Real Property Negotiators: (Pursuant to Government Code Section 54956.8) Properties:201-219 Grand Avenue (APN:012-316-110;012-316-100;012-316-090)and 418 Linden Avenue (APN: 012-314-010) Agency Negotiators: Alex Greenwood Negotiating Parties:Brookwood Equities,LLC,the City of South San Francisco,and the Successor Agency to the Redevelopment Agency of the City of South San Francisco Under Negotiation: Price and terms for the disposition of the property. (Ron Gerber, Housing and Redevelopment Manager). City of South San Francisco Printed on 5/13/2016Page 1 of 1 powered by Legistar™ City of South San Francisco Legislation Text P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA File #:16-358,Version:1 Closed Session:Conference with Legal Counsel -Anticipated Litigation (Pursuant to Government Code Section 54956.9) Initiation of Litigation and Significant Exposure to Litigation: One Case City of South San Francisco Printed on 5/13/2016Page 1 of 1 powered by Legistar™ City of South San Francisco Legislation Text P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA File #:16-359,Version:1 Closed Session: Public Employee Performance Evaluation (Pursuant to Government Code Section 45957) Title: City Manager. City of South San Francisco Printed on 5/13/2016Page 1 of 1 powered by Legistar™ City of South San Francisco Legislation Text P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA File #:16-355,Version:1 Report regarding Resolution authorizing the City Manager to enter into an Exclusive Negotiating Rights Agreement (ENRA)between The City of South San Francisco and MidPen Housing Corporation for a potential Disposition and Development Agreement and Ground Lease and Development of Affordable Workforce Housing at The City Owned Miller/Maple Parking Lot (APN 012311330) (Alex Greenwood : ECD Director) RECOMMENDATION That the City Council adopt a resolution authorizing the City Manager to enter into an Exclusive Negotiating Rights Agreement (ENRA)between the City of South San Francisco and MidPen Housing Corporation for the City-owned Miller/Maple Parking Lot (APN 012311330). BACKGROUND/ DISCUSSION Introduction Council is requested to provide direction to staff regarding key business points and policy issues,which will be negotiated during the Exclusive Negotiating Period. On December 16,2015,the City Council held a study session on workforce housing.As a result of that study session,the City Council directed staff to pursue several projects and initiatives to promote workforce housing. As part of this overall strategy,the City Council directed staff to issue a Request for Qualifications (RFQ)for a potential workforce housing project.The site is a 14,000 sq.ft.,City-owned parcel located at the corner of Miller and Maple Avenues, commonly known as the Miller/Maple Parking Lot (see Attachment 4: Site Map). Staff issued the RFQ on December 22,2015 and held a pre-submittal meeting and site visit on January 15, 2016.The deadline for submissions was January 25,2016,and the City received four highly experienced affordable housing developers’ responses to the RFQ solicitation. On February 25,2016,the Joint Housing Subcommittee (Subcommittee)interviewed all four of the developers. Representing the Subcommittee are:Mayor Mark Addiego,Councilmember Karyl Matsumoto,and Planning Commissioners Aris Ruiz and Norm Faria.All four developers were interviewed and the Subcommittee’s consensus was to recommend Bridge Housing and MidPen Housing as the two preferred developers.These two developers were invited back for an in-depth discussion on March 1,2016 and March 7,2016.As a result of these meetings,the Subcommittee members recommended MidPen Housing to the City Council as a potential developer of the Miller/Maple Parking Lot Site. On March 9,2016,the City Council agreed to select MidPen Housing as the preferred developer.City Council adopted a resolution authorizing the City Manager to negotiate an ENRA between MidPen Housing and the City. Exclusive Negotiating Rights Agreement The purpose of the ENRA is to establish procedures and standards for the negotiation between the City and City of South San Francisco Printed on 5/13/2016Page 1 of 4 powered by Legistar™ File #:16-355,Version:1 The purpose of the ENRA is to establish procedures and standards for the negotiation between the City and MidPen Housing in order to reach a Ground Lease Agreement (GLA).Matters that will be resolved in the ENRA include: ·Negotiating a Ground Lease Agreement with MidPen Housing and the terms of this agreement. ·Resolving the scope and terms of any affordability restrictions.This includes the applicability of any leasing preferences and the unit type and unit mix for the Development. ·If any financial assistance will be provided to MidPen for the acquisition of a leasehold interest in the Site,and construction of the Development.If the City does provide financial assistance,the terms will also be resolved during the term of the ENRA. Some of the key action items that will be addressed during the Exclusive Negotiating Period include: ·The physical and land title conditions of the Site and remediation of any adverse conditions, ·The type of entitlements necessary for the Development, ·The design, density, mix and phasing of the Development; ·The development schedule for the Development, and ·Financing of the Development (including, without limitation, the terms of the City Assistance, if any. The Negotiating Period is set for 90 days with a 45 day Extension Period.However,if the terms of the Exclusive Negotiations are not met in the 135 days,an additional 45 day Extension Period may be granted in writing by the City Manager. Policy Issues Identifying the unit sizes and mix,the target population as well as the affordability levels is critical. Determination of the above has a great impact on the financial resources available to fund the project.The lower the income levels, the more funding resources may become available to the City, see Attachment 2. Unit Sizes and Mix Discussion items at the March 1,2016 Subcommittee meeting included the types of units and on-site parking permutations.The types of units (studios,one or two bedrooms)and parking ratios will affect the number of units that may be built and consequently household nature and size.Studio and one-bedroom units would be suited to one to two person households, with two and three bedroom units better suited for families. Council is requested to provide direction regarding the target household size and unit size configuration that should be studied during the Exclusive Negotiating Period. Target Population The Subcommittee noted at the March 1, 2016 meeting, some of the following groups: ·Veterans, ·City of South San Francisco Employees, ·County of San Mateo Employees, ·People who work in South San Francisco and live elsewhere, ·People who live in South San Francisco and work elsewhere, ·People who live and work in South San Francisco. The above target groups would still need to meet the affordable housing household Area Median Income (AMI) thresholds. As mentioned earlier,Council directed Staff to pursue several projects and initiatives to promote workforce City of South San Francisco Printed on 5/13/2016Page 2 of 4 powered by Legistar™ File #:16-355,Version:1 As mentioned earlier,Council directed Staff to pursue several projects and initiatives to promote workforce housing for City employees.However,a preliminary salary survey revealed that few City Staff employees would be eligible for housing at the Extremely Low and Very Low income levels.Extending the preference to a wider population,would ensure that this project is able to meet the lower affordability levels,if this is Council’s preference. Council is requested to provide direction regarding the target population for the development.This will then be further studied during the Exclusive Negotiating Period with a final proposal presented to the Council for consideration when the Ground Lease Agreement (GLA) is brought back to the Council for approval in June. Affordability Levels In addition to establishing the target population,the level of affordability relating to household income levels will need to be determined.Council is requested to provide direction regarding the household income levels allowable for the units. Table 1: AMI levels for San Mateo County Income Category 1 Person Household 2 Person Household 3 Person Household 4 Person Household Extremely Low (30% AMI)$24,650 $28,150 $31,650 $35,150 Very Low (50% AMI)$41,050 $46,900 $52,750 $58,600 Low (80% AMI)$65,700 $75,100 $84,500 $93,850 Median (100% AMI)$72,100 $82,400 $92,700 $103,000 Moderate (120% AMI)$86,520 $98,900 $111,250 $123,600 Source: Housing and Urban Development (2015) FINANCING One of the greatest challenges communities face in providing affordable workforce housing is finding funding sources.Most funding resources require housing to meet the Extremely Low and Very Low household AMI levels.South San Francisco is fortunate to have limited funding options available at the median to moderate- income range. The policy direction on the key issues,mentioned above,will also provide more clarity towards determining a financing plan for the development of the Miller/Maple Parking Lot Site and securing appropriate funding sources. The potential internal funding sources that may be available at Council’s discretion are summarized below: Funding Source Income (AMI)Amount (if known) Discounted long-term ground lease N/A To be negotiated The City Fund 205 (Affordable housing mitigation fee) Under 120% (under $86,250*) $1.6 million City Housing Successor Agency Funds 30-60% ($24,650- $43,260*) $1.5 million** 0-30% (Under $24,650*) $1 million** 380 Alta Vista Sale N/A $1 million**City of South San Francisco Printed on 5/13/2016Page 3 of 4 powered by Legistar™ File #:16-355,Version:1 Funding Source Income (AMI)Amount (if known)Discounted long-term ground lease N/A To be negotiated The City Fund 205 (Affordable housing mitigation fee) Under 120% (under $86,250*) $1.6 million City Housing Successor Agency Funds 30-60% ($24,650- $43,260*) $1.5 million** 0-30% (Under $24,650*) $1 million** 380 Alta Vista Sale N/A $1 million** *Assumes a one-person household **Staffing costs estimated to be $150,000 per year Potential external funding sources that may be available to the City are detailed in Attachment 2.These include tax credits, bonds, Section 8 Housing Vouchers, Cap and Trade, CDBG and Measure A. These potential funding sources,and others,will be further explored during Exclusive Negotiating Period to arrive at a preferred financing plan for the development for final approval by the Council in June.Staff seeks Council direction regarding which of the above City funding sources Council may consider utilizing.These options will be explored in more detail during the Exclusive Negotiating Period. CONCLUSION It is recommended that the City Council adopt a resolution authorizing the City Manager to enter into an ENRA between the City of South San Francisco and MidPen Housing for the City-owned Miller/Maple Parking Lot (APN 012311330). Council is requested to provide policy direction for the affordable housing elements related to: ·Unit Sizes, Type, and Mix ·Target Population ·Affordability Levels With this direction,staff will return to the Council in June with a final proposal for unit configuration, affordability mix and financing plan for the development as part of the GLA approval. By: Approved: Alex Greenwood Director of Economic and Community Development Mike Futrell City Manager Attachments:Resolution Attachment 1: Draft Exclusive Negotiating Rights Agreement (ENRA) Attachment 2: Potential Financing Tools Attachment 3: Miller/Maple City Council PowerPoint Attachment 4: Site Map MF/AG/RG/JB: yp 2635115.1 City of South San Francisco Printed on 5/13/2016Page 4 of 4 powered by Legistar™ 1 Attachment 1 EXCLUSIVE NEGOTIATING RIGHTS AGREEMENT (MILLER/MAPLEAFFORDABLE WORKFORCE HOUSING DEVELOPMENT) This Exclusive Negotiating Rights Agreement (this "Agreement") is entered into as of this ____ day of April, 2016 (the "Effective Date"), by and between the City of South San Francisco, a municipal corporation (the "City"), and MidPen Housing Corporation, a nonprofit public benefit corporation (the "Master Developer"), on the basis of the following facts: RECITALS A.On December 22, 2016the City of South San Francisco (the "City") a issued a Request for Qualifications ("RFQ") to select a developer to develop a mixed-income, affordable and workforce housing development (the “Development”) on certain real property,APN 012311330, a parking lotlocated on the corner of Miller Avenue and Maple Avenue, as more particularly described in Exhibit Ato this Agreement (the "Site"). B.Through a competitive process, the Master Developerwas selected as the developer of the Site. C.The purpose of this Agreement is to establish procedures and standards for the negotiation by the City and the Master Developer of a disposition and development agreement (a "DDA") pursuant to which, among other matters: (1) if specified preconditions are satisfied, the City would ground lease the Site to the Master Developerfor a rental rate to be negotiated that would enable a financially feasible development; (2) the scope and terms of any affordability restrictions, applicability of any leasing preferences and the unit type and unit mix for the Development, (3) the terms, if any, under which the City mayprovide financial assistance to the Master Developerfor the acquisitionof a leasehold interest in the Site, and construction of the Development (the "City Assistance"); and (4) the Master Developerwould develop the Development on the Site. As more fully set forth in Section 3.1, the Master Developerand City acknowledge and agree thatthis Agreement in itself does not obligate any party to acquire or convey any property, does not grant the Master Developerthe right to develop the Development, and does not obligate the Master Developeror the City to any activities or costs to develop the Development, except for the preliminary analysis and negotiations contemplated by this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties mutually agree as follows: 2 ARTICLE 1. EXCLUSIVE NEGOTIATIONS Section 1.1 Good Faith Negotiations. The City and the Master Developer shall negotiate diligently and in good faith, during the Negotiating Period described in Section 1.2, and subject to the terms and conditions of this Agreement, both City and Master Developer shall proceed diligently andin good faith regarding negotiation and documentation of the potential terms, conditions, covenants, restrictions and agreements of a DDA between them. City and Master Developer shall generally cooperate with each other and supply such documents and information as may be reasonably requested by the other to facilitate the conduct of the negotiations. During the Negotiating Period, the parties shall use good faith efforts to accomplish the respective tasks outlined in Article 2 to facilitate the negotiation of a mutually satisfactory DDA and shall exercise reasonable efforts to complete discussions relating to the terms, conditions, covenants, restrictions or agreements of a DDA, all as may be mutually acceptable to both City and Master Developer. The exact terms and conditions of a DDA, if any, shall be determined during the course of these negotiations. During the Negotiation Period, Master Developer shall also undertake and use commercially reasonable efforts to complete the actions described in the Schedule of Performance attached to this Agreement as Exhibit B(the “Schedule of Performance”)within the time period specified for each such action in the Schedule of Performance. During the Negotiation Period, the Schedule of Performance may be amended with the mutual consent of the City and Master Developer. Among the issues to be addressed in the negotiations are: (i) the terms of the ground lease of the Site to the Master Developer(the “Ground Lease”), (ii) the physical and land title conditions of the Site and remediation of any adverse conditions, (iii) the type of entitlements necessary for the Development, (iv) the design, density, mix and phasing of the Development; (v) the development schedule for the Development, and (vi) financing of the Development (including, without limitation, the terms of the City Assistance). Section 1.2 Negotiating Period. The negotiating period under this Agreement is 90 days, commencing on the Effective Date, subject to an additional 45-day extension as provided below and as provided in Section 2.2. The Negotiating Period may be extended for an additional 45-day period by the written mutual agreement of the parties, as provided below (the "Negotiating Period"). The City Manager has the authority to agree to such an extension on behalf of the City if, in the City Manager's judgment, sufficient progress toward execution of a mutually acceptable DDAhas been made during the initial 45 day negotiating period to merit such extension, and shall be extended as reasonably needed for preparation of supplemental environmental documentation that may be required prior to approval of the DDA. If a DDAhas not been executed by the City and the Master Developerby the expiration of the Negotiating Period, then this Agreement shall terminate and neither party shall have any further rights or obligations under this Agreement. If a DDAis executed by the City and the Master Developerthen, upon such execution, this Agreement shall terminate, and all rights and obligations of the parties shall be as set forth in the executed DDA. 3 Section 1.3 Exclusive Negotiations. During the Negotiating Period the City shall not negotiate with any entity, other than the Master Developer, regarding development of the Site, or solicit or entertain bids or proposals to do so. Section 1.4 Identification of Master Developerand City Representatives. The Master Developer's representative to negotiate the DDAwith the City is Jan Lindenthal. The City representative to negotiate the DDAis Mike Futrell, City Manager. Either party may designate a substitute representative by giving written notice to the other party. ARTICLE 2. NEGOTIATION TASKS Section 2.1 Overview. To facilitate negotiation of the DDA, the parties shall use reasonable good faith efforts to accomplish the tasks set forth in this Article 2 in a timeframe that will support negotiation and execution of a mutually acceptable DDAprior to the expiration of the Negotiating Period. Section 2.2 Financing and Costs of Development. Within the time set forth in the Schedule of Performance,the Master Developer will provide the City with a preliminary financial analysis for the construction of the Development. The financial analysis submitted shall be refined by the parties during the Negotiating Periodand otherwise as provided in the DDA. Section 2.3 Terms of Ground Lease. The City and the Master Developershall seek to agree upon the terms of the Ground Lease. Without limiting the generality of the foregoing, and among other terms, the Ground Lease shall include each of the following terms: (a)The parties to the Ground Lease shall be City, as landlord, and Master Developer, or its affiliate, as tenant. (b)The term of the Ground Lease shall (i) commence on the date the Ground Lease is executed (the “Commencement Date”), which is date is anticipated to be the closing of the construction financing for the Development; and (ii) expire on the term set forth on the Ground Lease (the “Termination Date”). (c)The terms for the payment of rent under the Ground Lease. (d)The Ground Lease shall provide that Citywill own fee title to the land comprising the Site, and tenant, will own fee title to all improvements constructed or otherwise located on the Site. (e)The Ground Lease will permit tenant to encumber its leasehold interest in the Site to secure any loans deemed necessary or desirable by tenant and will include mortgagee protection provisions required by tenant’s lender. 4 Section 2.4 City Assistance. The City and the Master Developershall negotiate the terms of the City Assistance,if any,which may include an acquisition component and a construction component. Section 2.5 Site and Conceptual Plans. Within the time set forth in the Schedule of Performance, the Master Developershall submit to the City conceptual plans for the development of the entire Site (“Conceptual Plans”). The City shall review and comment on the Conceptual Plans in a timely manner. Section 2.6 Schedule of Performance. The Master Developer and the City agree to negotiate an amended Schedule of Performance to be incorporated into the DDA, which shall include but not be limited to: the dates for obtaining Planning Approvals and financing commitments for the Development, and the dates for the commencement and completion of construction of the Development (including any proposed phasing thereof). Section 2.7 Due Diligence. During the Negotiating Period the Master Developershall conduct due diligence activities, including but not limited to planning, soils report, hazardous materials report, financial feasibility and title adequacy. (a)Physical Adequacy Determination. The Master Developershall conduct physical due diligence activities to determine whether the Site is suitable for the Development, taking into account the geotechnical and soils conditions, the presence or absence of toxic or other hazardous materials, the massing of the proposed Development improvements and the parking requirements imposed on developments of this type and the other environmental and regulatory factors that the Master Developerdeems relevant. If, in the MasterDeveloper's judgment based on such investigations and analyses, the Site is not suitable for development, the Master Developer may notify the City in writing prior to the expiration of the Negotiating Period of its determination (an "Unsuitability Notice"). Upon delivery of an Unsuitability Notice by the Master Developer, this Agreement shall be terminated without further action of any party, and thereafter no party shall have any further duties, obligations, rights, or liabilities under this Agreement. The parties acknowledge that any executed DDAshall provide a similar opportunity for the Master Developer to determine the physical suitability of the Site. (b)Title Adequacy Determination. Within thirty (30) days following the Effective Date, the City shall cause a reputable title company to issue a Preliminary Title Report (the "Report") on the Site to the Master Developer. If the Master Developerobjects to any exception appearing on the Report or should any title exception arise after the date of the Report, the Master Developermay object to such exception, provided such objection is made to the City in writing on or before the expiration of the Negotiating Period. If the Master Developerobjects to any exception to title, the City, within thirty (30) days of receipt of Master Developer's objection shall notify the Master Developerin writing whether City elects to (1) cause the exception to be removed of record, (2) obtain a commitment from the title company for an appropriate endorsement to the policy of title insurance to be issued to the Master Developer, insuring against the objectionable exception, or (3) terminate this Agreement unless the MasterDeveloperelects to take title subject to such exception. If any party elects to terminate this Agreement pursuant to this Section 2.8(b), no party shall thereafter have any obligations to or rights against the others 5 hereunder. The parties acknowledge that any executed DDAshall provide a similar opportunity for the Master Developerto determine the title adequacy of the Site. Section 2.8 Reports. (a)The Master Developershall provide the City with copies of all reports, studies, analyses, correspondence and similar documents, but excluding confidential or proprietary information, prepared or commissioned by the Master Developerwith respect to this Agreement and the Development. The Master Developermakes no representation or warranty as to the accuracy or completeness of any such materials. (b)The City shall provide the Master Developerwith copies of all reports, studies, analyses, correspondence and similar documents prepared or commissioned by the City with respect to this Agreement and the Development, promptly following execution of this Agreement with respect to documents then in its possession or under its reasonable control, and promptly upon their completion with respect to any subsequently prepared documents. Section 2.9 Environmental Review. During the Negotiating Period the City and the Master Developershall review existing environmental documentation to ascertain whether it adequately addresses the Development. Based on that analysis the City shall prepare or cause to be prepared the appropriate environmental documentation required by the California Environmental Quality Act ("CEQA") for consideration of approval of the DDAand any Planning Approvals required for the Development; provided, that nothing in this Agreement shall be construed to compel the City to approve or make any particular findings with respect to such CEQA documentation. The Master Developershall provide such information about the Development as may be required to enable the City to prepare or cause preparation and consideration of any CEQA-required document, and shall otherwise generally cooperate with the City to complete this task. Section 2.10Progress Reports. From time to time as reasonably agreed upon by the parties, each party shall make oral or written progress reports advising the other party on studies being madeand matters being evaluated by the reporting party with respect to this Agreement and the Development within ten (10) days of a request from the other party. ARTICLE 3. GENERAL PROVISIONS Section 3.1 Limitation on Effect of Agreement. This Agreement shall not obligate either the City or the Master Developerto enter into a DDAor to enter into any particular DDA. By execution of this Agreement, the City is not committing itself to or agreeing to undertake acquisition, disposition, or exercise of control over any parcels in the Site. Execution of this Agreement by the City is merely an agreement to conduct a period of exclusive negotiations in accordance with the terms hereof, reserving for subsequent City action the final discretion and approval regarding the execution of a DDAand all proceedings and decisions in connection therewith. Any DDAresulting from negotiations pursuant to this Agreement shall become 6 effective only if and after such DDAhas been considered and approved by the City and executed by duly authorized representatives of the City and the Master Developer. Until and unless a DDA is signed by the Master Developer, approved by the City and executed by the City, no agreement drafts, actions, deliverables or communications arising from the performance of this Agreement shall impose any legally binding obligation on either party to enter into or support entering into a DDAor be used as evidence of any oral or implied agreement by either party to enter into any other legally binding document. Section 3.2 Notices. Formal notices, demands and communications (other than day to day routine communications) between the City and the Master Developershall be sufficiently given if, and shall not be deemed given unless: (i) dispatched by certified mail, postage prepaid, return receipt requested, (ii) sent by express delivery or overnight courier service with a delivery receipt, (iii) personally delivered with a delivery receipt, or (iv) sent by facsimile with a copy delivered by one of the previous three methods, to the office of the parties shown as follows, or such other address as the parties may designate in writing from time to time: City:City of South San Francisco 400 Grand Avenue South San Francisco, CA 94080 Attn: Mike Futrell Master Developer:MidPen Housing Corporation 303 Vintage Park Drive, Suite 250 Foster City, CA 94404 Attn: Jan Lindenthal Such written notices, demands and communications shall be effective on the date shown on the delivery receipt as the date delivered or the date on which delivery was refused. Section 3.3 Right of Entry. The Master Developerand its consultants shall have the right to enter upon the Site during normal business hours to conduct investigations in accordance with this Agreement. In connection with such entry and investigation, the Master Developershall: (i) give the City or its designee reasonable advance notice; (ii) repair and restore any damage it may cause;(iii) carry liability insurance covering the right of entry naming the City as an additional insured; and (iv) deliver to the City, within ten(10) days of receipt thereof, a complete copy of any investigation, test, report or study which the Master Developerconducts, or causes to be conducted, with respect to the Site. Section 3.4 Costs and Expenses. Except as explicitly set forth in this Agreement, each party shall be responsible for its own costs and expenses in connection with any activities and negotiations undertaken in connection with this Agreement, and the performance of each party's obligations under this Agreement. Section 3.5 No Commissions. Each party represents to the other that is has not retained the services of any broker, agent or finder with respect to the Site or in connection with any matters 7 relating to this transaction of the subject discussions, and agrees to hold the other party harmless from and against any claim for commission, fee, or other remuneration by any broker, agent, or finder under any claimed retainer for services with respect thereto. The City shall not be liable for any real estate commissions or brokerage fees that may arise from this Agreement or any DDAthat may result from this Agreement, unless the City retains a broker, agent or finder. Section 3.6 Defaults and Remedies. (a)Default. Failure by either Party to negotiate in good faith as provided in this Agreement shall constitute an event of default under this Agreement. The non-defaulting Party shall give written notice of a default to the defaulting Party, specifying the nature of the default and the required action to cure the default. If a default remains uncured fifteen (15) days after receipt by the defaulting Party of such notice, the non-defaulting Party may exercise the remedies set forth in subsection (b). (b)Remedies. (1)In the event of an uncured default by the City, the Master Developer may elect the following remedies: (i) terminate this Agreement,in which case following such termination, neither Party shall have any further right, remedy or obligation under this Agreement; or (ii) seek specific performance of the exclusive negotiating obligations of the City under this Agreement. Master Developer's remedy of specific performance shall mean only that if the City breaches its duty of negotiating in good faith or negotiating exclusively with Master Developer, that Master Developermay seek appropriate order requiring the City to cease or refrain from negotiating with any such third party until the end of the Negotiating Period. (2)In the event of an uncured default by the Master Developer, the City's sole remedy shall be to terminate this Agreement. Following such termination, neither Party shall have any right, remedy or obligation under this Agreement Except as expressly provided above, no Party shall have any liability to any other Party for damages or otherwise for any default, nor shall any Party have any other claims with respect to performance under this Agreement. Each Party specifically waives and releases any such rights or claims it may otherwise have at law or in equity. Section 3.7 Attorneys' Fees. The prevailing party in any action to enforce this Agreement shall be entitled to recover attorneys' fees and costs from the other party. Section 3.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 3.9 Entire Agreement. This Agreement constitutes the entire agreement of the parties regarding the subject matters of this Agreement. 8 Section 3.10Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement. Section 3.11Assignment. The Master Developermay not transfer or assign any or all of its rights or obligations hereunder except with the prior written consent of the City, which consent shall be granted or withheld in the City's reasonable discretion, and any such attempted transfer or assignment without the prior written consent of City shall be void. Notwithstanding the foregoing, Master Developershall have the right to assign its rights and obligations under this Agreement to an affiliated entity, pursuant to a form of assignment agreement approved by the City. Section 3.12Non-Recourse to Agents. No member, official, employee, agent, or consultant of any party to this Agreement shall be personally liable to any other party, or any successor in interest or person claiming by, through or under any party, in the event of any default or breach, or for or on accountof any amount which may be or become due, or in any claim, cause or obligation whatsoever under the terms of this Agreement. Section 3.13No Third Party Beneficiaries. This Agreement is made and entered into solely for the benefit of the City and the Master Developerand no other person shall have any right of action under or by reason of this Agreement. Section 3.14Actions by the City. Whenever this Agreement calls for or permits the approval, consent, authorization or waiver of the City, the approval, consent, authorization, or waiver of the City Manager of the City shall constitute the approval, consent, authorization or waiver of the City without further action of the City Council. Section 3.15Relationship of the Parties. The subject of this Agreement is a private development with neither party acting as the agent of the other party in any respect. None of the provisions in this Agreement shall be deemed to render the City a partner in the Master Developer’s business, or joint venturer or member in any joint enterprise with the Master Developer. Section 3.16Cooperation. In connection with this Agreement, the Master Developerand the City shall reasonably cooperate with one another to achieve the objectives and purposes of this Agreement. In so doing, the Master Developerand the City shall each refrain from doing anything that would render its performance under this Agreement impossible and each shall do everything that this Agreement contemplates that the party shall do to accomplish the objectives and purposes of this Agreement. 9 IN WITNESS WHEREOF, this Agreement has been executed by the parties on the date first above written. MASTER DEVELOPER: MIDPEN HOUSING CORPORATION By:_____________________________ Jan Lindenthal, Vice President CITY: CITY OF SOUTH SAN FRANCISCO By:______________________________ Mike Futrell, City Manager A-1 EXHIBIT A SITE DESCRIPTION The land referred to is situated in the County of San Mateo, City of South San Francisco, State of California, and is described as follows: Lots 12 and 13 in Block 126, as delineated upon that certain Map entitled "South San Francisco San Mateo Co. Cal. Plat No. 1", filed for record in the Office of the Recorder of the County of San Mateo, State of California, on March 1st, 1892 in Liber "B" of Maps, at Page 6, and a copy thereof in the Liber 2 of Maps at page 52. A.P.N. 012-311-330-0 A-2 EXHIBIT B SCHEDULE OF PERFORMANCE City Council Meeting –ENRA Approved by City Council & Signed by both parties April 27, 2016 Expiration of 90 Day Exclusive Negotiating Period for DDA & Ground Lease July 26, 2016 Attachment 2: Potential Financing Resources Funding Source Income (AMI)Administered By Description Low-Income Housing Tax Credits (9%) Under 60% AMI State -TCAC Since 1986, the primary vehicle for financing affordable housing in the nation has been the Low Income Housing Tax Credit (LIHTC) program. The LIHTC is by far the largest funding source available for affordable housing. The IRS allocates federal tax credits to state agencies that award them to affordable housing developers. Affordable housing developers use the equity generated from the sale of these tax credits to cover a portion of the cost to construct the affordable housing. The most valuable federal tax credits are the “9%” credits which provide a relatively deep subsidy (typically funding between 50-65% of the project’s development costs excluding land). Unfortunately, the federal supply of 9% tax credits provided to each state is severely limited, and TCAC has had to create an elaborate and highly competitive selection process to allocate these oversubscribed 9% credits. Low-Income Housing Tax Credits (4%) Under 60% AMI State -TCAC An alternative for projects that may not qualify for or be able to win the 9% credits are the non-competitive “4%” federal tax credits which provide a much shallower subsidy, typically funding only about 30-40% of project development costs excluding land. These 4% credits are awarded automatically to projects that rely on tax- exempt bond financing. Tax Exempt Bonds Under 60% AMI State -CDLAC Although the issuance of tax exempt bonds is subject to an allocation process as well, this process has rarely been competitive because the statewide bond allocation has historically been ample to fund all projects meeting relatively low threshold requirements. The bonds provide a shallow subsidy by providing for lower interest rates on construction and permanent financing. Multi-Family Housing Program Under 60% AMI State -HCD California Department of Housing and Community Development’s Multifamily Housing Program (MHP) which provides 55-year “soft loans” that allow loan repayments to be deferred if the cash flow is not adequate. MHP funds were provided primarily via voter-approved bond initiatives, with an infusion last year from the state's general fund. Funds for the program are currently largely depleted, with replenshiment needed either from additional general fund allocations, future bond issuance or the adoption of a new permanent state source. Funding Source Income (AMI)Administered By Description Project Based Section 8 Vouchers Under 50% AMI Local Housing Authority Federal rent-subsidy program under Section 8 of the U.S. Housing Act, which issues rent vouchers to eligible households. The voucher payment subsidizes the difference between the fair market rent and the tenant’s contribution of 30% of their adjusted income. There are two Section 8 programs, Project Based Vouchers, which are allocated to a specific building, and Tenant Based Vouchers, which are portable and allocated to a household. Project Based Vouchers increase the rental income of the affordable housing development enabling the property to support more conventional debt and thus need less subsidy. Generally, Housing Authorities can allocate Project-Based Vouchers for up to 25% of the units, but with senior properties this can be up to 100%. Cap andTrade (AHSC) Under 80% AMI State -HCD and SGC The Affordable Housing and Sustainable Communities Program (AHSC) is an extremely promising new source of state funds which, unlike MHP, will be replenished annually from the State’s Cap-and-Trade auction proceeds. This program funds housing and transportation projects to support infill and compact developments that reduce greenhouse gas ("GHG") emissions. Early competition has been fierce for this new funding source which is designed to pair well with non-competitive 4% credits and favors projects in dense, urban centers close to high quality transit. The program has $320 million available in the 2016 round. The maximum funding level is $20 million per project. We expect the program to continue to evolve, with changes to the scoring system, funding levels and eligibility requirements. HOME Under 80% AMI (90% of assisted units at 60% AMI, 20% of assisted units at 50% AMI) HOME Jurisdiction (County, City or State) San Mateo County has annual HOME funding. In 2016- 2017, there were approximately $2M in HOME funds available for housing development. Other cities in the County with CDBG funding are Daly City, South San Francisco, San Mateo and Redwood City. CDBG 51% of Project Units serving Low and Moderate Income households CDBG Jurisdiction (County or City) San Mateo County has annual CDBG funding. In 2016- 2017, there were approximately $1M in CDBG funds available for housing development. Other cities in the County with CDBG funding are Daly City, South San Francisco, San Mateo and Redwood City. Housing Impact Fees Set by Locality; normally under 80% AMI Locality A per square foot impact fee levied on market rate housing that can be used to build affordable homes. The fees are based on the idea that every person who moves into a market-rate home generates a need for services typically provided by employees paid less than the median income. Funding Source Income (AMI)Administered By Description Commercial Linkage Fees Set by Locality; normally under 80%AMI Locality CLFs are a type of impact fee assessed on new commercial developments or major employers based on the need for workforce housing generated by new and expanding businesses. Revenues generated by the fee are then used to help fund the development of affordable housing opportunities within accessible commuting distance to the employment center. County of San Mateo -Measure A - Affordable Housing Funds Under 60% AMI County In November 2012, San Mateo County voters approved Measure A, a 10-year half-cent general sales tax, to maintain the quality of life for all County residents. San Mateo County’s Affordable Housing Funds originally came from a one-time disbursement of “boomerang” housing trust funds. The most recent funding round was a combination of Measure A funding and Housing Authority funds. For the next round in 2016-17, ~$9 million is being proposed. Infill Infrastructure Grant (IIG) Under 60% AMI for rental projects State -HCD The Infill Infrastructure Grant Program was funded by Proposition 1C. Its primary objective is to promote infill housing development. The program seeks to accomplish this objective by providing financial assistance in the form of grants for infrastructure improvements necessary to facilitate new infill housing development. This program does not currently have resources available. Veterans Housing and Homelessness Prevention (VHHP) Under 60% AMI (at least 45% of assisted units restricted to 30% AMI) State -HCD Collaboration between California Department of Veteran Affairs, California Department of Housing and Community Development and California Housing Finance Agency to provide $600 million in Proposition 41 general obligation bonds to fund affordable multifamily rental, supportive and transitional housing. Goal to make $75M available annually. Maximum loan for a single project in 2015 was $10M. Federal Home Loan Bank Affordable Housing Program (FHLB AHP) For rental projects, at least 20% of units under 50% AMI FHLB The FHLB grant program is run through Bank members who sponsor developer applications. In the 2015 competition the FHLB awarded $44.7M in AHP grants to 64 projects across the country. Maximum subsidy with this program is $10,000 per affordable unit and up to $2M per project. As a practical matter, at least 60% of the units should be under 50% of AMI to be competitive for an award. City Council April 27, 2016 Attachment 3 Miller Ave Dec 16, 2015: City Council Study Session on Affordable Workforce Housing Dec 22, 2015 –Jan 15, 2016: RFQ issued with 4 submissionsreceived Feb 25, Mar 1 & Mar 7: Joint Housing Subcommittee met to review submissions and interview developers Mar 9: City Council adopted a resolution authorizing the City Manager to negotiate an ENRA between the City and MidPen Housing Negotiate Ground Lease with MidPen Housing Corporation Resolve the scope and terms of development Resolve Financing of the development Resolve Policy Issues 5 Unit Size and Mix •Types of units (studios, one-, two-or three-bedroom units) •Size of units determines household size (singles, couples/families) Target Population •SSF Employees •County of San Mateo Employees •Veterans •People who live and work in SSF Affordability Levels •Household income levels of future residents 6 Policy issues inform financing resources City funding sources available at Council’s Discretion includes: Discounted long-term ground lease City Fund 205 City Housing Successor Agency Funds San Mateo Measure A 380 Alta Vista sale Other sources of funding includes State and Federal Grants/Loans Approve: Adopt a resolution authorizing the City Manager to enter into an ENRA between the City of South San Francisco and MidPen Housing. Provide policy direction: Unit Sizes, Type, and Mix Target Population Affordability Levels Attachment 4: Site Map Maple Ave Miller Ave City of South San Francisco Legislation Text P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA File #:16-306,Version:1 Resolution authorizing the City Manager to enter into an Exclusive Negotiating Rights Agreement (ENRA) between the City of South San Francisco and MidPen Housing for a potential Disposition and Development Agreement and Ground Lease and Development of Affordable Workforce Housing at the City Owned Miller/Maple Parking Lot (APN 012311330). RESOLUTION AUTHORIZING THE CITY MANAGER TO ENTER INTO AN EXCLUSIVE NEGOTIATING RIGHTS AGREEMENT (ENRA) BETWEEN THE CITY OF SOUTH SAN FRANCISCO AND MIDPEN HOUSING FOR A POTENTIAL DISPOSITION AND DEVELOPMENT AGREEMENT AND GROUND LEASE AND DEVELOPMENT OF AFFORDABLE WORKFORCE HOUSING AT THE CITY OWNED MILLER/MAPLE PARKING LOT (APN 012311330) WHEREAS,the City of South San Francisco (City)is the owner of certain real property (the Property) located in the City, known as County Assessor’s Parcel Number 012-311-330; and WHEREAS,the City is interested in conveying an interest in the Property to MidPen Housing (Developer),contingent upon Developer preparing all appropriate environmental review documents,and applying for land use entitlements from the City and if such entitlements are granted,constructing a development of affordable residential units on the Property; and, WHEREAS,Developer anticipates expending funds to prepare environmental review documents, architectural and design drawings and conduct certain studies that are needed to assess the feasibility of the Project and seek land use entitlements and therefore,requires a grant of exclusive negotiating rights in order to be willing to make such expenditures; and WHEREAS,City desires to grant Developer the exclusive right to negotiate with City with regard to development of the Property; and WHEREAS,staff has prepared an Exclusive Negotiation Rights Agreement (Agreement)with Developer to reflect the terms and conditions of such exclusive collaboration and negotiation,attached hereto and incorporated herein. NOW,THEREFORE,the City Council of the City of South San Francisco does hereby resolve as follows: 1. The Recitals set forth above are true and correct, and are incorporated herein by reference. 2.The Agreement,substantially in the form attached hereto,is hereby approved,and the City Manager or his designee is hereby authorized to execute it on behalf of the City;to make revisions to the Agreement, with review and approval by the City Attorney,which do not materially or substantially increase the City’s obligations thereunder;to sign all documents;to make all approvals and take all actions necessary or City of South San Francisco Printed on 5/13/2016Page 1 of 2 powered by Legistar™ File #:16-306,Version:1 obligations thereunder;to sign all documents;to make all approvals and take all actions necessary or appropriate to carry out and implement the intent of this Resolution. ***** City of South San Francisco Printed on 5/13/2016Page 2 of 2 powered by Legistar™ 1 EXCLUSIVE NEGOTIATING RIGHTS AGREEMENT (MILLER/MAPLEAFFORDABLE WORKFORCE HOUSING DEVELOPMENT) This Exclusive Negotiating Rights Agreement (this "Agreement") is entered into as of this ____ day of April, 2016 (the "Effective Date"), by and between the City of South San Francisco, a municipal corporation (the "City"), and MidPen Housing Corporation, a nonprofit public benefit corporation (the "Master Developer"), on the basis of the following facts: RECITALS A.On December 22, 2016the City of South San Francisco (the "City") a issued a Request for Qualifications ("RFQ") to select a developer to develop a mixed-income, affordable and workforce housing development (the “Development”) on certain real property,APN 012311330, a parking lotlocated on the corner of Miller Avenue and Maple Avenue, as more particularly described in Exhibit Ato this Agreement (the "Site"). B.Through a competitive process, the Master Developerwas selected as the developer of the Site. C.The purpose of this Agreement is to establish procedures and standards for the negotiation by the City and the Master Developer of a disposition and development agreement (a "DDA") pursuant to which, among other matters: (1) if specified preconditions are satisfied, the City would ground lease the Site to the Master Developerfor a rental rate to be negotiated that would enable a financially feasible development; (2) the scope and terms of any affordability restrictions, applicability of any leasing preferences and the unit type and unit mix for the Development, (3) the terms, if any, under which the City mayprovide financial assistance to the Master Developerfor the acquisitionof a leasehold interest in the Site, and construction of the Development (the "City Assistance"); and (4) the Master Developerwould develop the Development on the Site. As more fully set forth in Section 3.1, the Master Developerand City acknowledge and agree thatthis Agreement in itself does not obligate any party to acquire or convey any property, does not grant the Master Developerthe right to develop the Development, and does not obligate the Master Developeror the City to any activities or costs to develop the Development, except for the preliminary analysis and negotiations contemplated by this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties mutually agree as follows: ARTICLE 1. EXCLUSIVE NEGOTIATIONS 2 Section 1.1 Good Faith Negotiations. The City and the Master Developer shall negotiate diligently and in good faith, during the Negotiating Period described in Section 1.2, and subject to the terms and conditions of this Agreement, both City and Master Developer shall proceed diligently and in good faith regarding negotiation and documentation of the potential terms, conditions, covenants, restrictions and agreements of a DDA between them. City and Master Developer shall generally cooperate with each other and supply such documents and information as may be reasonably requested by the other to facilitate the conduct of the negotiations. During the Negotiating Period, the parties shall use good faith efforts to accomplish the respective tasks outlined in Article 2 to facilitate the negotiation of a mutually satisfactory DDA and shall exercise reasonable efforts to complete discussions relating to the terms, conditions, covenants, restrictions or agreements of a DDA, all as may be mutually acceptable to both City and Master Developer. The exact terms and conditions of a DDA, if any, shall be determined during the course of these negotiations. During the Negotiation Period, Master Developer shall also undertake and use commercially reasonable efforts to complete the actions described in the Schedule of Performance attached to this Agreement as Exhibit B(the “Schedule of Performance”)within the time period specified for each such action in the Schedule of Performance. During the Negotiation Period, the Schedule of Performance may be amended with the mutual consent of the City and Master Developer. Among the issues to be addressed in the negotiations are: (i) the terms of the ground lease of the Site to the Master Developer(the “Ground Lease”), (ii) the physical and land title conditions of the Site and remediation of any adverse conditions, (iii) the type of entitlements necessary for the Development, (iv) the design, density, mix and phasing of the Development; (v) the development schedule for the Development, and (vi) financing of the Development (including, without limitation, the terms of the City Assistance). Section 1.2 Negotiating Period. The negotiating period under this Agreement is 90 days, commencing on the Effective Date, subject to an additional 45-day extension as provided below and asprovided in Section 2.2. The Negotiating Period may be extended for an additional 45-day period by the written mutual agreement of the parties, as provided below (the "Negotiating Period"). The City Manager has the authority to agree to such an extensionon behalf of the City if, in the City Manager's judgment, sufficient progress toward execution of a mutually acceptable DDAhas been made during the initial 45 day negotiating period to merit such extension, and shall be extended as reasonably needed for preparation of supplemental environmental documentation that may be required prior to approval of the DDA. If a DDAhas not been executed by the City and the Master Developerby the expiration of the Negotiating Period, then this Agreement shall terminate and neither party shall have any further rights or obligations under this Agreement. If a DDAis executed by the City and the Master Developerthen, upon such execution, this Agreement shall terminate, and all rights and obligations of the parties shallbe as set forth in the executed DDA. Section 1.3 Exclusive Negotiations. During the Negotiating Period the City shall not negotiate with any entity, other than the Master Developer, regarding development of the Site, or solicit or entertain bids or proposals to doso. 3 Section 1.4 Identification of Master Developerand City Representatives. The Master Developer's representative to negotiate the DDAwith the City is Jan Lindenthal. The City representative to negotiate the DDAis Mike Futrell, City Manager. Either party may designate a substitute representative by giving written notice to the other party. ARTICLE 2. NEGOTIATION TASKS Section 2.1 Overview. To facilitate negotiation of the DDA, the parties shall use reasonable good faith efforts to accomplish the tasks set forth in this Article 2 in a timeframe that will support negotiation and execution of a mutually acceptable DDAprior to the expiration of the Negotiating Period. Section 2.2 Financing and Costs of Development. Within the time set forth in the Schedule of Performance,the Master Developer will provide the City with a preliminary financial analysis for the construction of the Development. The financial analysis submitted shall be refined by the parties during the Negotiating Periodand otherwise as provided in the DDA. Section 2.3 Terms of Ground Lease. The City and the Master Developershall seek to agree upon the terms of the Ground Lease. Without limiting the generality of the foregoing, and among other terms, the Ground Lease shall include each of the following terms: (a)The parties tothe Ground Lease shall be City, as landlord, and Master Developer, or its affiliate, as tenant. (b)The term of the Ground Lease shall (i) commence on the date the Ground Lease is executed (the “Commencement Date”), which is date is anticipated to be the closing of the construction financing for the Development; and (ii) expire on the term set forth on the Ground Lease (the “Termination Date”). (c)The terms for the payment of rent under the Ground Lease. (d)The Ground Lease shall provide that City will ownfee title to the land comprising the Site, and tenant, will own fee title to all improvements constructed or otherwise located on the Site. (e)The Ground Lease will permit tenant to encumber its leasehold interest in the Site to secure any loans deemed necessary or desirable by tenant and will include mortgagee protection provisions required by tenant’s lender. Section 2.4 City Assistance. The City and the Master Developershall negotiate the terms of the City Assistance,if any,which may include an acquisitioncomponent and a construction component. Section 2.5 Site and Conceptual Plans. Within the time set forth in the Schedule of 4 Performance, the Master Developershall submit to the City conceptual plans for the development of the entire Site (“Conceptual Plans”). The City shall review and comment on the Conceptual Plans in a timely manner. Section 2.6 Schedule of Performance. The Master Developer and the City agree to negotiate an amended Schedule of Performance to be incorporated into the DDA, which shall include but notbe limited to: the dates for obtaining Planning Approvals and financing commitments for the Development, and the dates for the commencement and completion of construction of the Development (including any proposed phasing thereof). Section 2.7 Due Diligence. During the Negotiating Period the Master Developershall conduct due diligence activities, including but not limited to planning, soils report, hazardous materials report, financial feasibility and title adequacy. (a)Physical Adequacy Determination. The Master Developershall conduct physical due diligence activities to determine whether the Site is suitable for the Development, taking into account the geotechnical and soils conditions, the presence or absence of toxic or other hazardous materials, the massing of the proposed Development improvements and the parking requirements imposed on developments of this type and the other environmental and regulatory factors that the Master Developerdeems relevant. If, in the MasterDeveloper's judgment based on such investigations and analyses, the Site is not suitable for development, the Master Developermay notify the City in writing prior to the expiration of the Negotiating Period of its determination (an "Unsuitability Notice"). Upon delivery of an Unsuitability Notice by the Master Developer, this Agreement shall be terminated without further action of any party, and thereafter no party shall have any further duties, obligations, rights, or liabilities under this Agreement. The parties acknowledge that anyexecuted DDAshall provide a similar opportunity for the Master Developerto determine the physical suitability of the Site. (b)Title Adequacy Determination. Within thirty (30) days following the Effective Date, the City shall cause a reputable title company to issue a Preliminary Title Report (the "Report") on the Site to the Master Developer. If the Master Developerobjects to any exception appearing on the Report or should any title exception arise after the date of the Report, the Master Developermay object to such exception, provided such objection is made to the City in writing on or before the expiration of the Negotiating Period. If the Master Developerobjects to any exception to title, the City, within thirty (30) days of receipt of Master Developer's objection shall notify the Master Developerin writing whether City elects to (1) cause the exception to be removed of record, (2) obtain a commitment from the title company for an appropriate endorsement to the policy of title insurance to be issued to the Master Developer, insuring against the objectionable exception, or (3) terminate this Agreement unless the Master Developerelects to take title subject to such exception. If any party elects to terminate this Agreement pursuant to this Section 2.8(b), no party shall thereafter have any obligations to or rights against the others hereunder. The parties acknowledge that any executed DDAshall provide a similar opportunity for the Master Developerto determine the title adequacy of the Site. 5 Section 2.8 Reports. (a)The Master Developershall provide the City with copies of all reports, studies, analyses, correspondence and similar documents, but excluding confidential or proprietary information, prepared or commissioned by the Master Developerwith respect to this Agreement and the Development. The Master Developermakes no representation or warranty as to the accuracy or completeness of any such materials. (b)The City shall provide the Master Developerwith copies of all reports, studies, analyses, correspondence and similar documents prepared or commissioned by the City with respect to this Agreement and the Development, promptly following execution of this Agreement with respect to documents then in its possession or under its reasonable control, and promptly upon their completion with respect to any subsequently prepared documents. Section 2.9 Environmental Review. During the Negotiating Period the City and the Master Developershall review existing environmental documentation to ascertain whether it adequately addresses the Development. Based on that analysis the City shall prepare or cause to be prepared the appropriate environmental documentation required by the California Environmental Quality Act ("CEQA") for consideration of approval of the DDAand any Planning Approvals required for the Development; provided, that nothing in this Agreement shall be construed to compel the City to approve or make any particular findings with respect to such CEQA documentation. The Master Developershall provide such information about the Development as may be required to enable the City to prepare or cause preparation and consideration of any CEQA-required document, and shall otherwise generally cooperate with the City to complete this task. Section 2.10Progress Reports. From time to time as reasonably agreed upon by the parties, each party shall make oral or written progress reports advising the other party on studies being madeand matters being evaluated by the reporting party with respect to this Agreement and the Development within ten (10) days of a request from the other party. ARTICLE 3. GENERAL PROVISIONS Section 3.1 Limitation on Effect of Agreement. This Agreement shall not obligate either the City or the Master Developerto enter into a DDAor to enter into any particular DDA. By execution of this Agreement, the City is not committing itself to or agreeing to undertake acquisition, disposition, or exercise of control over any parcels in the Site. Execution of this Agreement by the City is merely an agreement to conduct a period of exclusive negotiations in accordance with the terms hereof, reserving for subsequent City action the final discretion and approval regarding the execution of a DDAand all proceedings and decisions in connection therewith. Any DDAresulting from negotiations pursuant to this Agreement shall become effective only if and after such DDAhas been considered and approved by the City and executed by duly authorized representatives of the City and the Master Developer. Until and unless a DDAis signed by the Master Developer, approved by the City and executed by the City, no agreement drafts, actions, deliverables or communications arising from the performance of this 6 Agreement shall impose any legally binding obligation on either party to enter into or support entering into a DDAor be used as evidence of any oral or implied agreement by either party to enter into any other legally binding document. Section 3.2 Notices. Formal notices, demands and communications (other than day to day routine communications) between the City and the Master Developershall be sufficiently given if, and shall not be deemed given unless: (i) dispatched by certified mail, postage prepaid, return receipt requested, (ii) sent by express delivery or overnight courier service with a delivery receipt, (iii) personally delivered with a delivery receipt, or (iv) sent by facsimile with a copy delivered by one of the previous three methods, to the office of the parties shown as follows, or such other address as the parties may designate in writing from time to time: City:City of South San Francisco 400 Grand Avenue South San Francisco, CA 94080 Attn: Mike Futrell Master Developer:MidPen Housing Corporation 303 Vintage Park Drive, Suite 250 Foster City, CA 94404 Attn: Jan Lindenthal Such written notices, demands and communications shall be effective on the date shown on the delivery receipt as the date delivered or the date on which delivery was refused. Section 3.3 Right of Entry. The Master Developerand its consultants shall have the right to enter upon the Site during normal business hours to conduct investigations in accordance with this Agreement. In connection with such entry and investigation, the Master Developershall: (i) give the City or its designee reasonable advance notice; (ii) repair and restore any damage it may cause;(iii) carry liability insurance covering the right of entry naming the City as an additional insured; and (iv) deliver to the City, within ten (10) days of receipt thereof, a complete copy of any investigation, test, report or study which the Master Developerconducts, or causes to be conducted, with respect to the Site. Section 3.4 Costs and Expenses. Except as explicitly set forth in this Agreement, each party shall be responsible for its own costs and expenses in connection with any activities and negotiations undertaken in connection with this Agreement, and the performance of each party's obligations under this Agreement. Section 3.5 No Commissions. Each party represents to the other that is has not retained the services of any broker, agent or finder with respect to the Site or in connection with any matters relating to this transaction of the subject discussions, and agrees to hold the other party harmless from and against any claim for commission, fee, or other remuneration by any broker, agent, or finder under any claimed retainer for services with respect thereto. The City 7 shall not be liable for any real estate commissions or brokerage fees that may arise from this Agreement or any DDAthat may result from this Agreement, unless the City retains a broker, agent or finder. Section 3.6 Defaults and Remedies. (a)Default. Failure by either Party to negotiate in good faith as provided in this Agreement shall constitute an event of default under this Agreement. The non-defaulting Party shall give written notice of a default to the defaulting Party, specifying the nature of the default and the required action to cure the default. If a default remains uncured fifteen (15) days after receipt by the defaulting Party of such notice, the non-defaulting Party may exercise the remedies set forth in subsection (b). (b)Remedies. (1)In the event of an uncured default by the City, the Master Developermay elect the following remedies: (i) terminate this Agreement,in which case following such termination, neither Party shall have any further right, remedy or obligation under this Agreement; or (ii) seek specific performance of the exclusive negotiating obligations ofthe City under this Agreement. Master Developer's remedy of specific performance shall mean only that if the City breaches its duty of negotiating in good faith or negotiating exclusively with Master Developer, that Master Developermay seek appropriate order requiring the City to cease or refrain from negotiating with any such third party until the end of the Negotiating Period. (2)In the event of an uncured default by the Master Developer, the City's sole remedy shall be to terminate this Agreement. Following such termination, neither Party shall have any right, remedy or obligation under this Agreement Except as expressly provided above, no Party shall have any liability to any other Party for damages or otherwise for any default, nor shall any Party have any other claims with respect to performance under this Agreement. Each Party specifically waives and releases any such rights or claims it may otherwise have at law or in equity. Section 3.7 Attorneys' Fees. The prevailing party in any action to enforce this Agreement shall be entitled to recover attorneys' fees and costs from the other party. Section 3.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 3.9 Entire Agreement. This Agreement constitutes the entire agreement of the parties regarding the subject matters of this Agreement. Section 3.10Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement. 8 Section 3.11Assignment. The Master Developermay not transfer or assign any or all of its rights or obligations hereunder except with the prior written consent of the City, which consent shall be granted or withheld in the City's reasonable discretion, and any such attempted transfer or assignment without the prior written consent of City shall be void. Notwithstanding the foregoing, Master Developershall have the right to assign its rights and obligations under this Agreement to an affiliated entity, pursuant to a form of assignment agreement approved by the City. Section 3.12Non-Recourse to Agents. No member, official, employee, agent, or consultant of any party to this Agreement shall be personally liable to any other party, or any successor in interest or person claiming by, through or under any party, in the event of any default or breach, or for or on account of any amount which may be or become due, or in any claim, cause or obligation whatsoever under the terms of this Agreement. Section 3.13No Third Party Beneficiaries. This Agreement is made and entered into solely for the benefit of the City and the Master Developerand no other person shall have any right of action under or by reason of this Agreement. Section 3.14Actions by the City. Whenever this Agreement calls for or permits the approval, consent, authorization or waiver of the City, the approval, consent, authorization, or waiver of the City Manager of the City shall constitute the approval, consent, authorization or waiver of the City without further action of the City Council. Section 3.15Relationship of the Parties. The subject of this Agreement is a private development with neither party acting as the agent of the other party in any respect. None of the provisions in this Agreement shall be deemed to render the City a partner in the Master Developer’s business, or joint venturer or member in any joint enterprise with the Master Developer. Section 3.16Cooperation. In connection with this Agreement, the Master Developer and the City shall reasonably cooperate with one another to achieve the objectives and purposes of this Agreement. In so doing, the Master Developerand the City shall each refrain from doing anything that would render its performance under this Agreement impossible and each shall do everything that this Agreement contemplates that the party shall do to accomplish the objectives and purposes of this Agreement. 9 IN WITNESS WHEREOF, this Agreement has been executed by the parties on the date first above written. MASTER DEVELOPER: MIDPEN HOUSING CORPORATION By:_____________________________ Jan Lindenthal, VicePresident CITY: CITY OF SOUTH SAN FRANCISCO By:______________________________ Mike Futrell, City Manager A-1 EXHIBIT A SITE DESCRIPTION The land referred to is situated in the County of San Mateo, City of South San Francisco, State of California, and is described as follows: Lots 12 and 13 in Block 126, as delineated upon that certain Map entitled "South San Francisco San Mateo Co. Cal. Plat No. 1", filed for record in the Office of the Recorder of the County of SanMateo, State of California, on March 1st, 1892 in Liber "B" of Maps, at Page 6, and a copy thereof in the Liber 2 of Maps at page 52. A.P.N. 012-311-330-0 A-2 EXHIBIT B SCHEDULE OF PERFORMANCE City Council Meeting –ENRA Approved by City Council & Signed by both parties April 27, 2016 Expiration of 90 Day Exclusive Negotiating Period for DDA & Ground Lease July 26, 2016