Subordination Agreement (ADOH) - Substantial Final Form
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Subordination Agreement
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When Recorded Return Electronic Copy To:
Arizona Department of Housing
ATTN: Rental Programs Administrator
1110 West Washington Street, Suite 280
Phoenix, Arizona 85007
SUBORDINATION AGREEMENT
DATE:
_________________, 2023
BORROWER:
MHMP 19 Glendale Senior Apartments LLLP,
an Arizona limited liability limited partnership
1600 Broadway Suite 2000
Denver, Colorado 80202
SENIOR LENDER:
State of Arizona, Arizona Department of Housing,
a constituent department and an agency of the State of Arizona
1110 West Washington Street, Suite 280
Phoenix, AZ 85007
SUBORDINATE LENDER:
City of Glendale,
an Arizona municipal corporation
Attn: Matthew Hess
Community Revitalization Division
5850 West Glendale Avenue
Glendale, Arizona 85301
BACKGROUND
A. Senior Lender has made or agreed to make a construction loan to Borrower in the
original principal amount of $3,000,000.00 (the “Senior Loan”), made pursuant to that certain
Funding Agreement No. ___________ by and between Senior Lender and Borrower (the “Senior
Funding Agreement”). The Senior Loan is evidenced by, among other things, a Promissory Note
(National Housing Trust Funds for Rental Development Projects) (“Senior Note”) and a
Declaration of Covenants, Conditions and Restrictions (National Housing Trust Fund Program)
(the “Senior Declaration”). The Senior Loan is secured by, among other things, a Deed of Trust
with Assignment of Rents, Fixture Filing and Security Agreement executed by Borrower in favor
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of Senior Lender (the “Senior Deed of Trust”), and a UCC-1 Financing Statement, all of which
will be recorded in the Official Records of Maricopa County, Arizona concurrently herewith, and
a UCC-1 Financing Statement, filed with the Secretary of State, State of Arizona concurrently
herewith, all as encumbrances upon the real property described on Exhibit A attached
(“Property”). The Senior Funding Agreement, Senior Note, Senior Declaration, Senior Deed of
Trust, and other documents evidencing, securing, or otherwise relating to the Senior Loan,
including without any limitation UCC-1 financing statement(s), are collectively referred to as the
“Senior Loan Documents”.
B. Subordinate Lender has made or agreed to make a construction loan to Borrower in
the original principal amount of $500,000.00 (the “Subordinate Loan”). The Subordinate Loan is
evidenced by, among other things, a Promissory Note (the “Subordinate Note”), and is secured
by, among other things, a Deed of Trust, executed by Borrower in favor of Subordinate Lender
(the “Subordinate Deed of Trust”), which will be recorded in the Official Records of Maricopa
County, Arizona concurrently herewith, as an encumbrance upon the Property. The Subordinate
Note and Subordinate Deed of Trust, and other documents evidencing, securing, or otherwise
relating to the Subordinate Loan, including without limitation any UCC-1 Financing
Statement(s), are collectively referred to as the “Subordinate Loan Documents”.
C. As of the Effective Date, the Subordinate Loan is not in default.
D. As a condition precedent to the making of the Senior Loan, Senior Lender has required
Subordinate Lender to subordinate the lien of the Subordinate Deed of Trust to the lien of the
Senior Deed of Trust on the terms and conditions, and to the extent, set forth below.
E. Senior Lender and Subordinate Lender (collectively, “Lenders” or either of them, a
“Lender”) have entered into this Subordination Agreement (“Agreement”) to establish the
priorities of their real and personal property interests described in the Senior Loan Documents
and the Subordinate Loan Documents (“Collateral”) and to set forth certain other agreements
between them regarding their relative rights against Borrower and the Collateral, and Borrower
has also entered this Agreement to acknowledge its agreement with, and approval of, such terms.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties represent, warrant and agree as follows:
1.
Lien Subordination. Without waiving Subordinate Lender’s right to enforce the
Subordinate Loan Documents in the event of a default, Subordinate Lender hereby
unconditionally and irrevocably subordinates the lien of the Subordinate Deed of Trust, any other
liens in personal property securing the Subordinate Loan and evidenced by the Subordinate Loan
Documents or any UCC-1 financing statement(s), and all of Subordinate Lender’s rights, remedies
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and privileges thereunder to the lien of the Senior Deed of Trust, any other liens in real and
personal property securing the Senior Loan and evidenced by the Senior Loan Documents or any
UCC-1 financing statement(s), and all of Senior Lender’s rights, remedies, and privileges
thereunder and to all advances or charges made or accruing under the Senior Loan Documents.
This Agreement of subordination extends to and includes, without limitation, the unconditional
and irrevocable subordination of the liens of the Subordinate Loan Documents to: (i) the Senior
Loan, the liens of the Senior Loan Documents and any and all advances under the Senior Loan
Documents; (ii) all terms, provisions, covenants, agreements and conditions of, and all claims
under or relating to, the Senior Deed of Trust (including those relating to the determination and
disposition of insurance proceeds, condemnation awards, sales proceeds and similar amounts
and the obligations of any Guarantor), subject to Section 5 below; (iii) all fees, expenses,
indemnities and other amounts payable to Senior Lender under the Senior Loan Documents; (iv)
any and all amendments, modifications, extensions, renewals, increases or consolidations of the
Senior Loan Documents so long as such amendments, modifications, increases or consolidations
do not increase the original principal amount of the Senior Loan, the applicable interest rate, or
the term, except for amounts expended by Senior Lender to preserve the Property.
2.
Consent to Senior Loan. Subject to the terms of this Agreement, and without
waiving any rights it may have under the Subordinate Loan Documents that may prohibit any
further senior or subordinate financing, Subordinate Lender hereby consents to the Senior Loan,
Borrower’s execution and acknowledgment of the Senior Funding Agreement, Senior Note,
Senior Deed of Trust and any other Senior Loan Document, and the existence of Senior Lender’s
senior lien against the Collateral pursuant to the Senior Loan Documents. Subordinate Lender
acknowledges and agrees that Senior Lender would not make the Senior Loan without this
Agreement. Senior Lender may rely upon the agreements, acknowledgements, and information
set forth herein in connection with the Senior Loan to Borrower.
3.
Payments. Senior Lender hereby consents to the Subordinate Lender collecting
payments from Borrower under and pursuant to the Subordinate Loan Documents.
4.
Defeasance of Payments. If and to the extent that any payment under the Senior
Loan Documents or Subordinate Loan Documents (whether by or on behalf of the Borrower, any
guarantor, as proceeds of collateral, or enforcement of any right of setoff or otherwise) is declared
by any court of competent jurisdiction to be a fraudulent conveyance or a preference, set aside,
or required to be paid to a trustee, receiver or other similar person under any bankruptcy,
insolvency, receivership or similar law, then if such payment is recovered by, or paid over to,
such trustee, receiver or other similar person, the Senior Loan or Subordinate Loan, or such part
thereof originally intended to be satisfied, shall be deemed to be reinstated and outstanding as if
such payment had not occurred. Similarly, if and to the extent that any payment under the
Subordinate Loan Documents (whether by or on behalf of the Borrower, any guarantor, as
proceeds of collateral, or enforcement of any right of setoff or otherwise) is required to be paid to
Senior Lender under the terms of this Agreement, or otherwise, then if such payment is actually
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recovered by, or paid over to, Senior Lender, the Subordinate Loan(s), or such part thereof
originally intended to be satisfied, shall be deemed to be reinstated and outstanding as if such
payment had not occurred; however, nothing herein requires Subordinate Lender to pay over to
Senior Lender any payment that is claimed and/or declared to be a fraudulent conveyance or a
preference, set aside or required to be paid to a trustee, receiver or other similar person under
any bankruptcy, insolvency, receivership or similar law. If and to the extent that any payment
under the Subordinate Loan Documents (whether by or on behalf of the Borrower, any guarantor,
as proceeds of collateral, or enforcement of any right of setoff or otherwise) is required to be paid
to Senior Lender under the terms of this Agreement, or otherwise, and then if such payment is
actually required to be paid to a trustee, receiver or other similar person under any bankruptcy,
insolvency, receivership or similar law, and such payment is recovered by, or paid over to such
trustee, receiver or other similar person, then the Senior Loan and Subordinate Loan, and such
parts thereof originally intended to be satisfied, shall be deemed to be reinstated and outstanding
as if such payment had not occurred.
5.
Insurance and Condemnation Provisions.
5.1.
Subordinate Lender hereby subordinates all of its right, title, interest or
claim in and to: (i) all proceeds of all policies of insurance covering all or any portion of the
Property or a building in which Subordinate Lender’s interest has been subordinated pursuant
to the terms hereof or insuring the Borrower, and (ii) all awards or other compensation made for
any taking of all or any portion of the Property or a building in which Subordinate Lender’s
interest has been subordinated pursuant to the terms hereof, to the rights of Senior Lender in and
to such insurance proceeds and condemnation awards.
5.2.
So long as any indebtedness remains outstanding under the Senior Loan
Documents, Senior Lender shall be entitled to receive any and all insurance or condemnation
awards or proceeds for all or any portion of the Property or a building in which Subordinate
Lender’s interest has been subordinated pursuant to the terms hereof, either for application to
such indebtedness or for such repair, reconstruction, or renewal of the Property as Senior Lender
shall direct in its sole discretion. If, following any such application or disposition of the insurance
proceeds or condemnation awards and other compensation, any balance remains, then such
excess shall be made payable to Subordinate Lender, or if Subordinate Lender's rights to receive
such proceeds are disputed by the Borrower or other parties, then Senior Lender may either make
such excess payable to the joint order of Borrower and Subordinate Lender as their interests may
appear under the Subordinate Loan Documents, or Senior Lender may interplead such excess
into court for further disposition.
5.3.
Subordinate Lender agrees at any time, and from time to time, to execute
such documents as Senior Lender or an insurer may reasonably require to confirm that any rights
that Subordinate Lender may have as a loss payee or additional insured are expressly subject and
subordinate to the rights of Senior Lender as an additional insured or loss payee. If any insurance
or condemnation awards or proceeds are tendered or paid to Subordinate Lender in violation of
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this Section 5, Subordinate Lender shall immediately tender such awards or proceeds to Senior
Lender.
6.
Waivers. Except expressly provided herein, neither Lender has made any
representations to the other Lender about Borrower’s creditworthiness or the Property, nor is
either Lender relying on the underwriting or due diligence investigation of the other Lender.
7.
Notices.
7.1.
Any notices given to any party hereunder shall be (i) hand-delivered,
effective upon receipt, (ii) sent by United States Express Mail or by private overnight courier,
effective upon receipt, or (iii) served by certified mail, postage prepaid, return receipt requested
and addressed to such party at the following addresses, or to such other address(es) or
addressee(s) as the party to be served with notice may have furnished in writing to the other
party, effective three (3) days after mailing.
Senior Lender:
Arizona Department of Housing
1110 West Washington Street, Suite 280
Phoenix, Arizona 85007
Attention: Asset Manager
Subordinate Lender:
City of Glendale
Attn: Matthew Hess
Community Revitalization Division
5850 West Glendale Avenue
Glendale, Arizona 85301
8.
Construction. This Agreement shall be construed as a whole, in accordance with
the fair meaning of its language, and as each party has been represented by legal counsel of its
choice in the negotiation and drafting of this Agreement, neither this Agreement nor any
provision thereof shall be construed for or against either party by reason of the identity of the
party drafting this, or any portion of the Agreement.
9.
Other Provisions.
9.1.
Subordinate Lender may assign Subordinate Lender’s interest in the
Subordinate Loan without Senior Lender’s consent to another constituent department and/or
agency of the State of Arizona.
9.2.
Senior Lender shall provide Subordinate Lender with notice of Senior
Lender’s intent to assign its interest in the Senior Loan to another party. Senior Lender shall not
assign Senior Lender’s interest in the Senior Loan without the prior written consent of
Subordinate Lender, and such consent shall not be unreasonably withheld.
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9.3.
Subordinate Lender acknowledges and agrees that Senior Lender would
not make the Senior Lender loan without this Agreement.
9.4.
Subordinate Lender acknowledges having received and reviewed, or an
opportunity to receive and review copies of the Senior Note and the Senior Deed of Trust and
consents to and approves all of the provisions thereof.
9.5.
This Agreement constitutes the entire agreement between the parties, and
as long as all or any part of the Senior Note remains unsatisfied, shall supersede and render
unenforceable any inconsistent prior agreements regarding the subordination of the Subordinate
Loan and any liens or rights created thereunder.
9.6.
If any provision of this Agreement is invalid, illegal, or unenforceable, such
provision shall be considered severed from the rest of this Agreement and the remaining
provisions shall continue in full force and effect as if the invalid provision had not been included.
9.7.
This Agreement inures to the benefit of and is binding upon the parties
hereto and their respective heirs, successors and assigns.
9.8.
This Agreement is construed by and governed in accordance with the laws
of the state of Arizona.
9.9.
This Agreement may be signed in multiple counterparts with the same
effect as if all signatories had executed the same instrument. If counterpart originals are
deposited into escrow for recording, the escrow agent may insert and substitute signature and
notary pages, as needed, to create a single recordable original agreement.
[SIGNATURES APPEAR ON THE FOLLOWING PAGES]
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Signature/Acknowledgment Page
to Subordination Agreement
IN WITNESS WHEREOF, Senior Lender has duly executed and delivered this Subordination
Agreement as of the date of this Agreement.
SENIOR LENDER:
STATE OF ARIZONA,
ARIZONA DEPARTMENT OF HOUSING,
a constituent department and an agency of the State of Arizona
By:
Joan Serviss, Director
or Ruby Dhillon-Williams, Deputy Director
or Keon Montgomery, Assistant Deputy Director/Housing & Community Development
STATE OF ARIZONA
)
) ss.
County of Maricopa
)
The foregoing instrument was acknowledged before me this _____ day of ___________,
2023 by _________________________ as _________________________ of State of Arizona, Arizona
Department of Housing, a constituent department and an agency of the State of Arizona, on
behalf of said constituent department and an agency.
My commission expires:
__________________________________
Notary Public
[STAMP/SEAL]
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Signature/Acknowledgment Page
to Subordination Agreement
IN WITNESS WHEREOF, Subordinate Lender has duly executed and delivered this
Subordination Agreement as of the date of this Agreement.
SUBORDINATE LENDER:
CITY OF GLENDALE,
an Arizona municipal corporation
By:
Name:
Title:
STATE OF ________________ )
) ss.
County of ________________ )
The foregoing instrument was acknowledged before me this _____ day of ___________,
2023, by _____________________________, the _______________________ of City of Glendale, an
Arizona municipal corporation.
My commission expires:
__________________________________
Notary Public
[STAMP/SEAL]
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Signature/Acknowledgment Page
to Subordination Agreement
IN WITNESS WHEREOF, Borrower has duly executed and delivered this Subordination
Agreement as of the date of this Agreement.
BORROWER:
MHMP 19 GLENDALE SENIOR APARTMENTS LLLP
a Colorado limited liability limited partnership
By: MHMP 19 Glendale Senior Apartments GP LLC,
a Colorado limited liability company,
Its: General Partner
By: Mercy Housing Mountain Plains,
a Colorado nonprofit corporation,
Its: Sole Manager and Member
By: ___________________
Name: Kuhl Brown
Title: Real Estate Development Director
STATE OF ______________
)
) ss.
County of _______________ )
The foregoing instrument was acknowledged before me this _____ day of ___________,
2023, by _____________________, the _________________________ of [Name of Borrower],
a[Domicile State] [type of legal entity], on behalf of the [type of legal entity].
My commission expires:
__________________________________
Notary Public
[STAMP/SEAL]
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Exhibit A
Legal Description of Real Property
[Insert Legal Description From Title Company]