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In addition to the Promissory Note, HOUSE, Inc. will be required to enter into the City's standard HOME contract, and Deed of Trust. The property is also subject to the Restrictive Covenants, Resale Restrictions and Option to Designate Eligible Purchasers Agreement (Restrictive Covenants) that were placed on the land at the time of initial sale and run for perpetuity. In addition, the Housing Commission expressed some interest in exploring a separate Regulatory Agreement with HOUSE, Inc. if existing documents cannot address all regulatory matters related to this purchase. To address this concern, staff has made amendments to the standard Promissory Note. However, if the combination of the existing Regulatory Agreement and amended Promissory Note do not address this concern, staff will further explore a separate regulatory agreement or language that will be processed as part of the project escrow process. Staff anticipates assisting HOUSE, Inc. with the purchase/sale transaction which should be completed within 90 days. DISCUSSION HOUSE, Inc. is highly motivated to acquire an additional Pleasanton property to serve its growing client base and feels it is important to secure funding as soon as possible in order to take advantage of a favorable housing market and interest rates. It has determined that the acquisition of the available Bernal property meets its financial plan and operational needs. Further, it will provide quality housing for its tenants. Notwithstanding the benefits of this transaction, there are a number of issues that were raised during the Housing Commission review that should be presented to the City Council. First, the City's Restrictive Covenants require that the property be sold to first time homebuyers with low incomes and state that the property must be owner occupied with no ongoing rental of units. With this transaction, the subject property would be purchased by anon-profit organization and the units would be "rented." As a result of this situation, staff requested legal assistance and the City Attorney's office determined that the proposed use of the property is generally consistent with the intent and "spirit" of the City's affordable housing program. This decision is based in part, on the fact that sale documents will require that home be occupied only by individuals with low incomes at minimal rents and that the agency will not receive any profit by making the housing available to residents. Rents, which in general range from $200 to $500 monthly on other HOUSE, Inc. properties, are set based on the clients' income/ability to pay and the cost of maintaining the property. Another area for discussion is the sharing of equity. As currently outlined in the Restrictive Covenants, the property owner is entitled to receive all equity earned on the property. However, as noted above, HOUSE, Inc. has agreed to an equity share based on the percentage share of the purchase split between the City and HOUSE, Inc. As a result, HOUSE, Inc. will receive an equity share of approximately 20.66% and the City will receive the remainder. This equity share is similar to the formula that has been used previously by the City and HOUSE, Inc. Page 4 of 6