3-04. Tax Certificate.pdf

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TAX CERTIFICATE AND AGREEMENT

$40,322,758

CALIFORNIA MUNICIPAL FINANCE AUTHORITY

MULTIFAMILY HOUSING REVENUE NOTE

(ROSEFIELD VILLAGE)

2020 SERIES A

August 11, 2020

This Tax Certificate and Agreement (this “Tax Certificate”) is by and between the California Municipal Finance Authority (the “Governmental Lender”) and Constitution and Eagle LP, a California limited partnership (the “Borrower”), in connection with the execution and delivery by the Governmental Lender of its California Municipal Finance Authority Multifamily Housing Revenue Note (Rosefield Village) 2020 Series A in the aggregate face amount (maximum principal amount) of $40,322,758 (the “Governmental Note”). The Governmental Note is being executed and delivered pursuant to a Funding Loan Agreement, dated as of August 1, 2020 (the “Funding Loan Agreement”), among the Governmental Lender, Bank of America, N.A. (the “Funding Lender”) and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”), and evidences the Governmental Lender’s obligation to repay a loan (the “Funding Loan”) made by the Funding Lender to the Governmental Lender. The representations of facts and expectations and covenants contained in this Tax Certificate are in furtherance of the covenants contained in Section 5.07 of the Funding Loan Agreement and Section 2.05 of the Project Loan Agreement, dated as of August 1, 2020 (the “Project Loan Agreement”), among the Governmental Lender, the Fiscal Agent, and the Borrower, and Section 5 of the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of August 1, 2020 (the “Regulatory Agreement”) by and among the Governmental Lender, the Fiscal Agent and the Borrower, and are made in part pursuant to Treasury Regulations Section 1.148-2(b)(2).

ARTICLE I

IN GENERAL

1.1 The Governmental Lender. The Governmental Lender is a constituted authority and is executing and delivering the Governmental Note on behalf of one or more political subdivisions. The Governmental Lender hereby certifies, represents, covenants and warrants that

(i) the Governmental Lender has been created pursuant to the laws of the State of California;

(ii) the Governmental Lender was created for a public purpose; (iii) the Governmental Lender is governed by a body ultimately controlled by one or more political subdivisions; (iv) the Governmental Lender is authorized to issue obligations, such as the Governmental Note, for the purposes for which the Governmental Lender was created; (v) the earnings of the Governmental Lender will not and cannot inure to the benefit of any private person; and (vi) upon dissolution of the Governmental Lender, title to all of the Governmental Lender’s assets will revert to one or more political subdivisions of the State.

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1.2 Delivery of the Governmental Note. On the date hereof, in exchange for receipt of good funds, the Governmental Lender is delivering the Governmental Note to the Funding Lender.

1.3 Purpose of Tax Certificate. The Governmental Lender and the Borrower are delivering this Tax Certificate to Orrick, Herrington & Sutcliffe LLP, as tax counsel (“Tax Counsel”), with the understanding that Orrick, Herrington & Sutcliffe LLP will rely in part upon this Tax Certificate in rendering its opinion that interest on the Governmental Note is excluded from gross income for federal income tax purposes under Section 103 of the Code. To that end, the Governmental Lender and the Borrower hereby covenant to take (or refrain from taking) any actions necessary or required to maintain the exclusion from gross income of interest on the Governmental Note.

1.4 Purpose of Financing. The Governmental Note is being executed and delivered to provide funds for the Governmental Lender to make a loan (the “Borrower Loan”) to the Borrower for the rehabilitation, construction and development of affordable multifamily residential rental housing (as more particularly described in the Regulatory Agreement, the “Project”). Proceeds of the Governmental Note, and no other funds, will to be used to fund the Borrower Loan, and the Borrower Loan will be assigned to the Funding Lender.

1.5 Single Issue. The Governmental Note was executed and delivered to the Funding Lender on August 11, 2020 (the “Sale Date”) pursuant to a single plan of financing, and is expected to be paid out of substantially the same source of funds. The Funding Loan is originated on a draw-down basis under master legal documents that are final and binding as of the Closing Date, and all of the Funding Loan is reasonably expected to be advanced. No other governmental obligations that are expected to be paid out of substantially the same source of funds as the Governmental Note have been or will be sold within the 31-day period beginning 15 days before the Sale Date pursuant to the same plan of financing as the Governmental Note. Revenues of the Project are expected to be sufficient to pay principal of and interest on the Borrower Loan when due which will enable the Governmental Lender to pay the Governmental Note when due. The Governmental Note pays interest currently. Revenues of the Project are not expected to be used for the payment of any other governmental obligations. The Governmental Note will be a single issue for purposes of Section 103 of the Code.

Immediately available funds in payment of the initial purchase price of the Governmental Note in the amount of $425,206.72 will be advanced from the Funding Lender to the Borrower on the date hereof. The remaining amount to be paid for the Governmental Note, $39,897,551.28 will be advanced from the Funding Lender to the Borrower if certain conditions of the Project Loan Agreement are satisfied.

1.6 Definitions. Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in the Funding Loan Agreement and the Project Loan Agreement.

Unless the context otherwise requires, the following capitalized terms have the following meanings:

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“Adjusted Gross Proceeds” means Gross Proceeds, adjusted as set forth in Treasury Regulations Section 1.148-7(c)(3). Thus, Adjusted Gross Proceeds generally means Gross Proceeds, less the sum of amounts held in the Bona Fide Debt Service Funds.

“Bona Fide Debt Service Fund” means those funds and accounts (or portions of those funds and accounts) identified in Section 4.18 of this Tax Certificate.

“Closing Date” means the date of this Tax Certificate.

“Code” means the Internal Revenue Code of 1986, or any successor, and the applicable Treasury Regulations promulgated thereunder.

“De Minimis Expenditures” means an amount not in excess of $100,000.

“Gross Proceeds” has the meaning used in Section 1.148-1(b) of the Treasury Regulations, and generally means all proceeds derived from or relating to the Governmental Note, including Sale Proceeds, Investment Proceeds, and other amounts expected to be used to pay debt service on the Governmental Note.

“Investment Proceeds” means earnings received from investing and reinvesting Sale Proceeds and from investing and reinvesting such earnings.

“Investment Property” means any security or obligation, any annuity contract, or any other investment-type property.

“Low Income Tenants” means the tenants of the Project that qualify to rent the minimum 40% low income or 20% very low income, whichever requirement is selected by the Governmental Lender and the Borrower, apartment units.

“Net Sale Proceeds” means Sale Proceeds, minus $100,000.

“Nonpurpose Investment” means any Investment Property in which Gross Proceeds are invested other than the Funding Loan.

“Note Year” means, initially, the period beginning on the Closing Date and ending on August 11, 2021 (or on an earlier date selected by the Governmental Lender in accordance with Treasury Regulations Section 1.148-1(b)) and each successive one-year period thereafter. The last Note Year will end on the last day on which the Governmental Note is outstanding for federal tax purposes.

“Opinion of Counsel” means a written opinion of nationally recognized tax counsel, addressed to the Governmental Lender and delivered to the Funding Lender to the effect that the exclusion from gross income for federal income tax purposes of interest on the Governmental Note will not be adversely affected.

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“Preliminary Expenditures” means architectural, engineering, surveying, soil testing, costs of executing and delivering the Governmental Note, and similar costs paid with respect to the Project in an aggregate amount not exceeding 20% of the issue price of the Governmental Note.

“Rebate Requirement” means the amount of rebatable arbitrage computed as of the last day of any Note Year pursuant to Section 1.148-3 of the Treasury Regulations.

“Related Person” means:

(i) In the case of a 501(c)(3) corporation, any organization that, directly or indirectly, controls or is controlled by the 501(c)(3) corporation or is part of a group that is commonly controlled.

(ii) In the case of a corporation other than a 501(c)(3) corporation,

(A) an individual who owns directly or indirectly more than 50% in value of the outstanding stock of the corporation; (B) a partnership, if any partner owns more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profit interests of the partnership; (C) another corporation, if that corporation owns more than 50% of the voting power or value of the corporation; (D) another corporation, if more than 50% of the voting power or value of its stock is owned by the corporation; (E) another corporation, if five or fewer individuals own stock possessing more than 50% of the voting power or value of both that corporation and the corporation; (F) an S corporation, if the same individual owns more than 50% in value of both the S corporation and the corporation; or (G) a trust or its grantor, either of which owns more than 50% in value of the outstanding stock of the corporation.

(iii) In the case of a partnership, (A) a partner that owns directly or indirectly more than 50% of the capital interest or the profits interest in such partnership;

(B) another partnership, if the same person or persons own directly or indirectly more than 50% of the capital interest or the profits interest in both that partnership and the partnership;

or (C) a corporation, if the same person or persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or the profits interest in the partnership.

(iv) In the case of an individual, (A) members of the individual’s family (including the individual’s spouse, brothers, sisters, ancestors and lineal descendants);

(B) a corporation more than 50% in value of the outstanding stock of which is owned directly or indirectly by or for such individual; (C) a partnership, if the individual owns directly or indirectly more than 50% of the capital interest or the profits interest in such partnership; or (D) a trust as to which the individual is either grantor or beneficiary, or which has the same grantor as a trust to which the individual is beneficiary.

“Sale Proceeds” means any amount(s) actually or constructively received from the sale of the issue (i.e. sale of the Governmental Note).

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“Tax Certificate” means this Tax Certificate and Agreement.

“Tax-Exempt Bond” means any obligation the interest on which is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code or Section 103 of the Internal Revenue Code of 1954, as amended (the “1954 Code”), and Title XIII of the Tax Reform Act of 1986, as amended, as well as stock in a regulated investment company to the extent at least 95 percent of income to the stockholder is treated as interest that is excludable from gross income under Section 103 of the Code but does not include any interest in a “specified private activity bond” within the meaning of Section 57(a)(5)(C) of the Code.

“Yield” means that discount rate described in Section 5.1 of this Tax Certificate.

1.7 Governmental Lender Reliance on Other Parties. With respect to certain matters contained in this Tax Certificate, the Governmental Lender specifically relies upon certifications of (a) the Borrower contained herein and (b) the Funding Lender in the Funding Lenders’ Certificate attached hereto as EXHIBIT A. The Governmental Lender is not aware of any facts or circumstances that would cause it to question the accuracy or reasonableness of any representation made in this Tax Certificate or in the Exhibits hereto.

1.8 Borrower Reliance on Other Parties. With respect to certain matters contained in this Tax Certificate, the Borrower specifically relies upon certifications of (a) the Governmental Lender contained herein and (b) the Funding Lender contained set forth in EXHIBIT A. The Borrower is not aware of any facts or circumstances that would cause it to question the accuracy or reasonableness of any representation made in this Tax Certificate or in the Exhibits hereto.

1.9 Description of Financing Program. Other than reimbursement for closing expenses, the Borrower has not paid the Funding Lender any amounts in connection with the execution and delivery of the Governmental Note. On the Closing Date, the Funding Lender does not directly or indirectly own any interest in the Borrower.

The Governmental Note is and will be executed and delivered pursuant to a draw-down structure under final legal documents being executed on the date hereof. Pursuant to the terms of the Project Loan Agreement, the Funding Lender is required to advance the remaining amount to be paid for the Governmental Note, being $39,897,551.28, if certain conditions of the Project Loan Agreement are satisfied (the “Draw-Down Conditions”). The Draw-Down Conditions are objective criteria and, if the Draw-Down Conditions are satisfied, the Funding Lender will not have the discretion to choose not to advance the remaining amount to be paid, on the Borrower Loan and the Governmental Note. Accordingly, the Funding Loan Agreement is a binding contract that obligates the Funding Lender to advance the remaining amount to be paid on the Governmental Note subject only to the requirement that the Draw-Down Conditions are satisfied. The Borrower reasonably expects all of the Governmental Note proceeds to be delivered within three years (see the covenant in Section 2.5 of this Tax Certificate that, absent an Opinion of Counsel, no amount will be drawn on the Governmental Note after certain deadlines).

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ARTICLE II

REPRESENTATIONS, CERTIFICATIONS,

EXPECTATIONS AND COVENANTS OF THE GOVERNMENTAL LENDER

2.1 Official Action. On June 7, 2019 (the “Inducement Date”), the Governmental Lender adopted a resolution (the “Inducement Resolution”) stating its findings as to the public benefits of the Project, the intention to execute and deliver the Governmental Note to assist in the financing of the Project and the intention to execute and deliver in aggregate principal amounts not to exceed a specified principal amount of revenue bonds to finance the Project (or portions thereof). A copy of the Inducement Resolution is attached hereto as EXHIBIT B.

2.2 Public Hearing and Approval. On November 28, 2019, the Governmental Lender caused to be published in the Alameda Sun, being a newspaper of general circulation in the City of Alameda (the “City”) a notice of public hearing to be held by the City Council of the City (the “City Council”) regarding the execution and delivery of the Bonds to finance the costs of the Project. A copy of said notice is attached hereto as EXHIBIT C.

On December 17, 2019 the public hearing was held by the Council. At such hearing, all interested persons were invited and given an opportunity to comment upon the nature and location of the facilities comprising the Project and the financing thereof. Following said public hearing, on December 17, 2019, the City Council approved the Project, and the financing thereof through the issuance of multifamily housing revenue bonds, in an amount not to exceed $45,000,000. A copy of such approval is attached hereto as EXHIBIT D.

2.3 Registered Form. The Governmental Note is being executed and delivered in registered form.

2.4 Information Reporting. The Governmental Lender will cause a properly completed and executed IRS Form 8038 to be filed with respect to the Governmental Note not later than November 15, 2020. A copy of the Form 8038 is attached hereto as EXHIBIT F.

2.5 Volume Cap. On February 18, 2020, the California Debt Limit Allocation Committee adopted its Resolution No. 20-442 (the “CDLAC Resolution”) for $40,927,500 of its State of California 2020 private activity bond volume cap to the Governmental Lender for the Project. The issue price of the Governmental Note does not exceed its volume cap allocation.

Attached as EXHIBIT H is a copy of the CDLAC Resolution. Pursuant to IRS Notice 2011-63, the Governmental Lender and the Borrower hereby elect to treat all of the Governmental Note as issued on the Closing Date for purposes of Section 146 of the Code. Absent an Opinion of Counsel, the Borrower will not draw down any amounts in respect of the Governmental Note after December 31, 2023.

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ARTICLE III

REPRESENTATIONS, CERTIFICATIONS,

EXPECTATIONS AND COVENANTS OF THE BORROWER

3.1 Ownership of the Project. The Project will be initially owned and operated by the Borrower. The Project is located on a single parcel or contiguous parcels of land or parcels of land that are contiguous except for the interposition of a road, street, stream or similar property.

The Project is located entirely within the City. The Project is located on land owned by the Housing Authority of the City of Alameda, a public body, corporate and politic, and the ground lease to the Borrower will expire after the final maturity date of the Governmental Note.

3.2 Qualifying Costs; Reallocation. (a) Good Costs. The total “proceeds” of the Governmental Note (i.e., the issue price of the Governmental Note plus investment earnings during construction of the Project) are estimated to be no more than $40,322,758. Due to the draw-down structure of the Governmental Note and the Borrower’s expectation that all of the Sale Proceeds will be spent on Project costs immediately upon each draw and receipt of funds, no investment earnings are expected. At least 97% of such proceeds will be allocable to costs of constructing or developing property of a character subject to the allowance for depreciation, which property constitutes qualified residential rental project facilities (as described in Sections 3.3 and 3.4 below) and which costs were paid or incurred no more than 60 days prior to the Inducement Date (“Good Costs”). Costs of execution and delivery of the Governmental Note are not Good Costs. All of the reasonably expected costs listed in EXHIBIT E, totaling $42,453,321 are Good Costs and do not include the cost of land or other property or services which the Borrower paid to any Related Person.

Contingency items listed in EXHIBIT E reflect the Borrower’s expectation that there will be actual Good Costs paid with or allocated to proceeds in the amount shown. The Borrower acknowledges that the listed contingency items are not costs of the Project until a specific Project cost is paid, and the Borrower covenants that each such actual cost will be reviewed and analyzed for the portion of such cost, if any, that is a Good Cost, based on the nature of the actual cost in question. All of the contingency will ultimately be allocated to Good Costs.

In addition to the costs listed in EXHIBIT E, “proceeds” of the Governmental Note may be used, up to a maximum amount of three percent (3%), to pay for certain costs that may not be chargeable to the capital account of qualifying facilities that comprise the Project, such as costs of executing and delivering the Governmental Note (although in no event may more than 2% of the proceeds of the Governmental Note be used to pay costs of execution and delivery), interest and credit enhancement expenses on the Governmental Note that accrue with respect to completed portions of the Project (generally, portions of the Project with respect to which a final certificate of occupancy has been issued). The aggregate of these costs and the costs listed in EXHIBIT E exceeds the expected total proceeds.

(b) Reallocation. Pursuant to Treasury Regulations Section 1.148-6(d), the Governmental Lender must account for the allocation of proceeds the Governmental Note to expenditures not later than 18 months after the later of the date the expenditure is paid or the date

84151-4047-7730.4 the Project is placed in service. This allocation must be made in any event by the date 60 days after the fifth anniversary of the Closing Date or retirement of the Governmental Note, if earlier.

The expenditures constituting the Project represent only a portion of the total costs of a multifamily housing project. Multiple sources of funds are available to be used to pay for expenditures of the Project as they are incurred, and the Governmental Lender and the Borrower may perform a final allocation of proceeds as set forth Treasury Regulations Section 1.148-6(d) after such initial payment.

3.3 Qualified Residential Rental Project.

(a) The Project will consist only of:

(i) those portions of buildings that are (A) complete facilities for living, sleeping, eating, cooking and sanitation, which will be used on other than a transient basis by one or more persons and which will be available on a regular basis for use by members of the general public (subject to any limitations on eligible tenants imposed by the Governmental Lender), and (B) facilities and areas properly allocable to such living facilities, such as centrally located machinery and equipment and common areas in a typical apartment building that are equally available to all of the tenants (but not including any health club facility),

(ii) land and other facilities that are properly allocable to such living facilities, such as parking areas and recreational areas for occupants of the living facilities that are equally available to all of the tenants, or

(iii) directly related and essential land areas, facilities, and building areas that are of a character and size commensurate with the number and size of the living facilities and are not functionally related and subordinate to, or properly allocable to, any other facilities.

(b) The Governmental Lender and the Borrower entered into the Regulatory Agreement in order to assure the Governmental Lender and the owners of the Governmental Note that proceeds of the Governmental Note will be used to provide a “residential rental project” under Section 142(d) of the Code, and, thus, that interest on the Governmental Note will be excluded from gross income for federal income tax purposes under Section 103 of the Code. The Regulatory Agreement is hereby incorporated by reference into this Tax Certificate.

(c) The land costs included on EXHIBIT E consist of survey costs, improvement costs, engineering costs (relating to the acquisition, survey and improvement costs listed above), interest costs, legal and accounting costs, and title and recording fees that are properly allocable to the Project (or facilities directly related and essential to the Project) and which are attributable to land acquired, or work performed, after the date 60 days before the date of the Inducement Resolution. Land costs also include clearing and grading costs, landscaping, and other similar costs that are added to the Borrower’s cost

94151-4047-7730.4 basis in the land. The legal costs included herein do not include legal costs related to the execution and delivery the Governmental Note.

(d) The building costs included on EXHIBIT E consist of construction costs, architect costs, land preparation costs (including allocable engineering fees that may not be treated as a land cost), insurance costs and legal and accounting costs that are properly allocable to the Project (or facilities directly related and essential to the Project) and which are attributable to items acquired, or work performed, after the date 60 days before the date of the Inducement Resolution. These costs include material and labor costs incurred to construct the Project (and facilities directly related and essential to the Project). Land preparation costs include costs that would normally be treated as costs added to the Borrower’s cost basis in the land but which are directly associated with the construction of the Project or of facilities functionally related and subordinate to the Project, and thus are treated as depreciable property (e.g., excavation costs for the Project’s foundation). The legal costs included herein do not include legal costs related to the execution and delivery of the Governmental Note.

(e) No “capitalized interest” is listed on EXHIBIT E that is interest attributable to (i) proceeds of the related indebtedness expended for items acquired, or work performed, prior to the date of the Inducement Resolution, or (ii) a period after which (A) construction of the real property portion of the Project to which such interest is allocable is completed (e.g., the completion of construction of a structure or portion or floor thereof), or

(B) personal property to which such interest is allocable has been placed in service (e.g., the installation of appliances) for federal income tax purposes.

(f) “Points” paid to the Governmental Lender or any originating correspondent of the Governmental Lender (whether denominated as loan fees, commitment fees or origination fees) are generally treated as prepaid interest amortizable ratably over the term of the Funding Loan. However, “points” paid to the Governmental Lender that reimburse the Governmental Lender for actual costs that it incurred to execute and deliver the Governmental Note are execution and delivery costs. Notwithstanding the foregoing, the entire amount of the Governmental Lender’s fee paid from Governmental Note proceeds has been included as a cost of executing and delivering the Governmental Note.

3.4 Project Description.

(a) The Project is located on contiguous parcels and will consist of 91 rentable apartment units plus one manager’s unit and various related facilities including certain amenities and tenant recreational facilities (the “TRF”) and necessary maintenance, electrical, heating, plumbing and sanitation space common to the Project. The Project further consists of parking spaces that are used by the residential tenants and their guests.

The residential rental structure contains residential units, and necessary heating, plumbing and sanitation areas. Each residential unit contains separate and complete facilities for living, sleeping, eating, cooking and sanitation. For example, each unit contains a living area, a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink, all of which are separate and distinct from other

104151-4047-7730.4 units. The Project includes normal landscaping around the exterior of each of the structures that make up the Project.

(b) The number of parking spaces allocated to the Project are functionally related and subordinate to the Project in that they are no greater in number than is normally appropriate for a project that is the size of the Project, and they are available equally to tenants of the Project. Only tenants of the Project, their guests, employees of the Borrower, and employees of the management company will use these parking spaces.

(c) The TRF exist as a tenant amenity and may be used by any tenant for no additional cost. The TRF are of a character and size commensurate with the character and size of the Project and are functionally related and subordinate to the rest of the Project.

(d) The Borrower will not provide any medical, psychiatric, or nursing services, or any similar services, to the residents of the Project.

3.5 Change in Use. The Borrower reasonably expects to use all Sale Proceeds of the Governmental Note for the Project. The Borrower further expects to use the Project in accordance with the provisions of Section 3.3 hereof for the entire stated term to maturity of the Governmental Note, and, absent an Opinion of Counsel, the Borrower in fact will use all Net Sale Proceeds of the Governmental Note and the Project as set forth in this Section 3.5 and Section 3.3 hereof.

3.6 Prohibited Facilities. None of the proceeds of the Governmental Note will be used to finance or refinance any airplane, skybox or other private luxury box, facility primarily used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises.

3.7 Useful Life. The remaining weighted average reasonably expected economic life of facilities comprising the Project is at least 35 years (see EXHIBIT E). The weighted average maturity of the Governmental Note is no longer than 30 years. Accordingly, the weighted average maturity of the Governmental Note is not longer than 120% of the average useful life of the facilities comprising the Project. The Governmental Lender and the Borrower reasonably expect that the term of the Governmental Note is no longer than reasonably necessary for the governmental purposes thereof.

3.8 Land Expenditures. None of the proceeds of the Governmental Note will be allocable to costs properly chargeable to the capital account of land or interests in land.

3.9 No Existing Facilities. A portion of the development to be located at the same site with the Project includes the acquisition of existing facilities that were previously used as multifamily rental housing (the “Existing Site Facilities”) that will be rehabilitated during the construction of the Project. No proceeds of the Governmental Note will be allocated to acquiring the Existing Site Facilities. In that connection, proceeds of the Governmental Note will not be used to acquire any property unless such property was or will be first used by the acquirer.

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3.10 Targeting Compliance. The Borrower will continuously remain in compliance with the low-income targeting requirements set forth in Section 142(d) of the Code for the Project. In general, Section 142(d) of the Code requires that during the “qualified project period” either (a) 20% or more of the residential units in a project are occupied by individuals whose income is 50% or less of area median gross income, or (b) 40% or more of the residential units in a project are occupied by individuals whose income is 60% or less of area median income. The specific requirements in this regard are set forth in the Regulatory Agreement.

3.11 [RESERVED].

3.12 Changes to Terms of the Notes. The Borrower and the Funding Lender could agree to amend or alter the terms of the lending transaction evidenced by the Project Note and the Governmental Note without amending the terms of the Funding Loan Agreement or the Project Loan Agreement. Tax Counsel has advised the Borrower that any such amendments or alteration could cause the Governmental Note to be treated as retired and reissued and unless appropriate actions are taken or are not taken (as appropriate) by the Borrower, the interest in respect of the Governmental Note will not be excluded from gross income for federal income tax purposes.

ARTICLE IV

REPRESENTATIONS, CERTIFICATIONS, EXPECTATIONS

AND COVENANTS OF THE GOVERNMENTAL LENDER AND THE BORROWER

4.1 Reasonable Expectations. This Article IV states the reasonable expectations of the Governmental Lender and the Borrower with respect to the amounts and uses of Governmental Note proceeds and certain other moneys. The expectations of the Governmental Lender and the Borrower concerning certain uses of Governmental Note proceeds and certain other moneys described herein and other matters are based in whole or in part upon representations of other parties as set forth in this Tax Certificate. Neither the Governmental Lender nor the Borrower is aware of any facts or circumstances that would cause either of them to question the accuracy or reasonableness of any representations made in this Tax Certificate.

4.2 Federal Guarantee. The Governmental Note is an obligation executed and delivered to provide qualified residential rental property. No proceeds of the Governmental Note will be invested in any federally insured deposits or accounts. The preceding sentence shall not apply to: (a) investments in the Bona Fide Debt Service Fund; (b) investments in obligations issued by the United States Department of Treasury.

4.3 No Refunding. The Governmental Lender and the Borrower expect and warrant that none of the proceeds of the Governmental Note will be used to pay debt service with respect to any issue of obligations other than the Governmental Note.

4.4 No Pooling. The Governmental Lender and the Borrower will not use any Governmental Note proceeds directly or indirectly to make or finance loans to two or more ultimate borrowers.

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4.5 No Hedge Note. As of the date hereof, the Governmental Lender and the Borrower reasonably expect that more than 85% of Net Sale Proceeds of the Governmental Note will be expended for governmental purposes of the Governmental Note before August 11, 2023. Not more than 50% of the proceeds of the Governmental Note will be invested in Nonpurpose Investments having a substantially guaranteed yield for four years or more. In addition, the payment of legal and underwriting costs associated with the execution and delivery of the Governmental Note is not contingent, and at least 95% of all legal and underwriting costs associated with the execution and delivery of the Governmental Note will be paid no later than 180 days after the Closing Date.

4.6 Sale Proceeds and Other Amounts. The Borrower will not use any proceeds of the Governmental Note to finance any other project. The Borrower will cause all of the Sale Proceeds to be spent on costs of the Project in accordance with Section 3.2 herein. Funds other than proceeds of the Governmental Note will be used to pay the developer fee and costs of execution and delivery of the Governmental Note.

4.7 Costs of Execution and Delivery. None of the Sale Proceeds will be used to pay costs associated with executing and delivering the Governmental Note.

4.8 Other Replacement Proceeds. Neither Governmental Lender nor the Borrower (nor any related person) will use any Gross Proceeds directly or indirectly to replace funds of the Governmental Lender, the Borrower (or any related person), which funds are or will be used directly or indirectly to acquire Investment Property reasonably expected to produce a yield that is materially higher than the yield on the Governmental Note.

4.9 [RESERVED].

4.10 Administrative Costs. The Borrower has paid or reimbursed (or will pay or reimburse) the Governmental Lender for certain administrative costs incurred by or for the benefit of the Governmental Lender in connection with the Governmental Note, including costs of executing and delivering the Governmental Note and fees and expenses of the Funding Lender and the Servicer (if appointed pursuant to the Funding Loan Agreement and as defined therein), but excluding general expenses or administrative overhead of the Governmental Lender. Applying the yield on the Governmental Note as a discount rate, the present value of these payments to or for the benefit of the Governmental Lender does not exceed the present value of administrative costs paid by or for the benefit of the Governmental Lender with respect to the Governmental Note.

4.11 Governmental Lender and Other Fees. The Borrower is required to pay certain expenses arising out of or in connection with the Project Loan Agreement and other associated costs, and to pay to the Governmental Lender an annual fee payable in advance on each anniversary of the Closing Date (commencing on the Closing Date and continuing throughout the Qualified Project Period) as more fully described in Section 18 of the Regulatory Agreement.

The Governmental Lender does not expect the payment of the Governmental Lender’s net fees, or any of the other fees described above, to cause the yield on the Funding Loan to exceed the yield on the Governmental Note by more than one-eighth of one percent (0.125%).

For purposes of the preceding sentence, the Governmental Lender’s “net fees” are (1) the fee paid

134151-4047-7730.4 to the Governmental Lender upon execution and delivery of the Governmental Note, the annual fee paid to the Governmental Lender, and any of the other fees described above, less (2) costs of execution and delivery of the Governmental Note paid by the Governmental Lender to a person or entity that is not a Related Person to the Governmental Lender (and not reimbursed by the Borrower) and costs of carrying the Funding Loan paid by the Governmental Lender to a person or entity that is not a Related Person to the Governmental Lender (and not reimbursed by the Borrower), including costs of asset management and compliance monitoring. To the extent these payments otherwise would cause the yield on the Funding Loan to exceed the yield on the Governmental Note by more than one-eighth of one percent (0.125%), the Governmental Lender, upon notification of such fact, will return these payments to the Borrower or make appropriate “yield reduction payments” unless the Governmental Lender has received an Opinion of Counsel to the effect that retention by the Governmental Lender of the full amount of its fees will not adversely affect the exclusion of interest on the Governmental Note from gross income under Section 103 of the Code.

4.12 Expenditure of Proceeds; Reimbursement Timing. For purposes of this Tax Certificate, Proceeds will be treated as spent when they are used to pay or reimburse disbursements by the Borrower that are (a) capital expenditures relating to the Project, (b) costs of executing and delivering the Governmental Note, (c) interest on the Funding Loan through the later of three years after the Closing Date or one year after the Project is placed in service, (d) initial operating expenses directly associated with the Project (in aggregate amount not exceeding 5% of the Sale Proceeds), or (e) other miscellaneous expenditures described in Treasury Regulations Section 1.148-6(d)(3)(ii). Absent an Opinion of Counsel, all expenditures of Proceeds will be made in respect of (f) Preliminary Expenditures, (g) costs of executing and delivering the Governmental Note, (h) other payments made by the Borrower on or after the Closing Date, or (i) capital costs of the project paid on or after the date 60 days before the adoption of the Inducement Resolution. With respect to the expenditures described in (i) above, the Borrower acknowledges that any such expenditures must be reimbursed with proceeds of the Governmental Note, if at all, no later than three years after the date of the expenditure and no more than 18 months after the portion of the Project to which such costs relate is placed in service. The Borrower represents that it will not make a payment of Proceeds to a Related Person. The Borrower does not expect to allocate any proceeds of the Governmental Note to reimburse itself for costs paid prior to the Closing Date.

4.13 Offering Price. On the Closing Date, the Funding Lender will advance $425,206.72 to the Borrower. The proceeds of the Funding Loan shall be advanced by the Funding Lender directly to the Borrower for the account of the Governmental Lender as and when needed to make each advance in accordance with the disbursement provisions of the Project Loan Agreement and the Construction Disbursement Agreement. Upon each advance of principal under the Project Loan Agreement and the Construction Funding Agreement, a like amount of the Funding Loan shall be deemed concurrently and simultaneously advanced under the Funding Loan Agreement. The Funding Lender will be paid a fee of $181,452.41 by the Borrower in connection with the Governmental Note, which represents a payment in the nature of points and is not consideration for services or property provided by the Funding Lender.

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4.14 Investment Proceeds. All Investment Proceeds earned with respect to any fund or account established under the Funding Loan Agreement shall be retained as part of each such fund or account.

4.15 Sale Proceeds. The Borrower will not use any proceeds of the Governmental Note to finance any facilities other than the Project. The Governmental Lender will cause all of the Sale Proceeds to be spent in accordance with the Funding Loan Agreement and on costs of the Project in accordance with Section 3.2 herein. Equity from the Borrower will be used to pay the costs of execution and delivery of the Governmental Note. No more than 2% of Sale Proceeds will be used to pay costs of execution and delivery of the Governmental Note.

4.16 Funds and Accounts. The following funds and accounts relating to the Governmental Note have been or may be established:

Administration Fund Loan Payment Fund Loan Prepayment Fund Project Loan Fund Project Account Borrower Equity Account Cost of Issuance Fund Rebate Fund Revenue Fund

Neither the Governmental Lender nor the Borrower nor any other person benefitting from the execution and delivery of the Governmental Note expects to use any fund or account other than the Revenue Fund, the Loan Payment Fund, and the Loan Prepayment Fund directly or indirectly to pay principal of or interest on the Funding Loan. Other than the Revenue Fund, the Loan Payment Fund, and the Loan Prepayment Fund, no fund or account, however established, is pledged as security for the Governmental Note such that there is a reasonable assurance that amounts held in such other fund or account will be available if needed to pay debt service on the Governmental Note.

4.17 Administration Fund. The Administration Fund will be funded by the Borrower.

Amounts in the Administration Fund shall be withdrawn or maintained, as appropriate, by the Fiscal Agent and used: to pay to the Fiscal Agent when due the Ordinary Fiscal Agent's Fees and Expenses; to pay to the Governmental Lender when due the Governmental Lender Fee; to pay when due the reasonable fees and expenses of a Rebate Analyst in connection with the computations relating to arbitrage rebate required under this Funding Loan Agreement and the Project Loan Agreement, upon receipt of an invoice from the Rebate Analyst; to pay to the Fiscal Agent any Extraordinary Fiscal Agent's Fees and Expenses due and payable from time to time, as set forth in an invoice submitted to the Borrower and the Servicer; to pay to the Governmental Lender any extraordinary expenses it may incur in connection with the Loans or this Funding Loan Agreement from time to time, as set forth in an invoice submitted to the Fiscal Agent and the Servicer; to pay to the Funding Lender Representative any unpaid amounts due under the Continuing Covenant Agreement, as certified in writing by the Funding Lender Representative to

154151-4047-7730.4 the Fiscal Agent; to make up any deficiency in the Loan Prepayment Fund on any prepayment date of the Funding Loan, to the extent money then available in accordance with Section 4.03(d) hereof in the Loan Prepayment Fund is insufficient to prepay the Funding Loan scheduled for prepayment on such prepayment date; and, to transfer any remaining balance after application as aforesaid to the Revenue Fund.

4.18 Bona Fide Debt Service Fund.

(a) The Governmental Note is a special, limited obligation of the Governmental Lender payable from payments of principal and interest that will be derived from the Funding Loan and possibly certain other funds (the “Revenues”) pledged pursuant to the Funding Loan Agreement. The Borrower expects to make payments on the Funding Loan using current revenues of the Borrower and will not set aside moneys for future payments on the Funding Loan.

(b) Under the Funding Loan Agreement, all payments under the Project Loan Agreement are to be applied as provided in the Funding Loan Agreement for payments of principal and interest on the Funding Loan and certain other fees and expenses.

(c) The only funds or accounts expected by the Borrower to accumulate amounts to pay debt service on the Governmental Note are the Revenue Fund, the Loan Payment Fund, and the Loan Prepayment Fund (collectively, the “Bona Fide Debt Service Fund”). Amounts held in the Bona Fide Debt Service Fund will be accounted for on a first-in, first-out basis. The Bona Fide Debt Service Fund will be used primarily to achieve a proper matching of revenues and debt service within each Note Year for all of the Governmental Note outstanding and, therefore, constitute a bona fide debt service fund.

The Bona Fide Debt Service Fund will be depleted at least once a year except for a reasonable carryover amount not to exceed the greater of the prior Note Year’s earnings on such funds or 1/12th of the prior Note Year’s debt service on the Governmental Note.

Amounts contributed to the Bona Fide Debt Service Fund will be spent within thirteen months after the date of such contribution and any amounts received from the investment or reinvestment of moneys held in the Bona Fide Debt Service Fund will be expended within one year after the date of accumulation thereof in such fund. To the extent amounts in the Bona Fide Debt Service Funds are depleted as set forth in this Section 4.18(c), amounts in the Bona Fide Debt Service Fund shall be invested without regard to yield.

4.19 Rebate Fund. The Governmental Lender and the Borrower jointly covenant not to use moneys on deposit in any fund or account in connection with the Governmental Note in a manner which will cause the Governmental Note to be an “arbitrage bond” within the meaning of Section 148 of the Code. To that end, the Rebate Fund is hereby created. Pursuant generally to Part VI hereof and specifically to Section 6.3 hereof, the Funding Lender shall deposit into the Rebate Fund any payments received from or caused to be received from the Borrower for purposes of ultimate rebate to the United States. The amount required to be held in the Rebate Fund at any point in time is determined pursuant to the requirements of the Code, including particularly Section 148(f) of the Code and the regulations applicable thereto. Moneys in the Rebate Fund are neither pledged to nor expected to be used to pay debt service on the Governmental Note. Sale

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Proceeds and Investment Proceeds are not expected to be held in the Rebate Fund. To the extent Sale Proceeds and Investment Proceeds are not held in the Rebate Fund, amounts in the Rebate Fund will be invested without regard to yield.

4.20 Three-Year Temporary Period. As of the Closing Date:

(a) The Governmental Lender and the Borrower reasonably expect that 85 percent or more of the Net Sale Proceeds of the Governmental Note will be allocated to expenditures for the Project within three years after the Closing Date.

(b) The Borrower has incurred or expects to incur within six months after the Closing Date a substantial binding obligation to a third party for the Project involving an expenditure of at least 5 percent of the Net Sale Proceeds of the Governmental Note.

(c) The Governmental Lender and the Borrower reasonably expect that completion of the Project and the allocation of the Net Sale Proceeds of the Governmental Note to costs of the Project will proceed with due diligence.

Sale Proceeds of the Governmental Note will be deposited in the Project Account in the Project Loan Fund. Sale Proceeds deposited in the Project Account in the Project Loan Fund and Investment Proceeds thereon may be invested without regard to yield through August 11, 2023.

Thereafter, such proceeds will be invested as provided in Section 5.4 hereof.

4.21 Borrower Equity Account. Tax credit equity and various other money that is not Sale Proceeds or Investment Proceeds of the Bonds may be held in the Borrower Equity Account from time to time. Amounts in the Borrower Equity Account may be used to pay costs of the Project. Amounts in the Borrower Equity Account are not reasonably expected to pay debt service on the Governmental Note and are not pledged to the Governmental Note such that there is a reasonable assurance that amounts in the Borrower Equity Account will be available to pay debt service on the Governmental Note in the event of financial difficulty of the Borrower or the Project.

To the extent amounts in the Borrower Equity Account are not Sale Proceeds or Investment Proceeds and are not reasonably expected to pay debt service on the Governmental Note nor pledged to pay debt service on the Governmental Note, amounts in the Borrower Equity Account may be invested without regard to yield. If Sale Proceeds or Investment Proceeds are ever held in the Borrower Equity Account or amounts in the Borrower Equity Account are either reasonably expected to pay debt service on the Governmental Note or pledged to pay debt service on the Governmental Note, such amounts must be invested as set forth in Section 5.4 of this Tax Certificate.

4.22 No Abusive Arbitrage Device. The Governmental Note is not and will not be part of a transaction or series of transactions that has the effect of (a) enabling the Governmental Lender, the Borrower or any Related Person to exploit the difference between tax-exempt and taxable interest rates to obtain a material financial advantage, and (b) over-burdening the tax-exempt bond market in any manner, including (without limitation) by selling bonds that would not otherwise be sold or selling more bonds, or issuing them sooner, or allowing them to remain outstanding longer, than otherwise would be necessary.

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4.23 No Imputed Proceeds. The purchase price of each obligation that is part of the…