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Item 10GCity of Southlake, Texas MEMORANDUM August 10, 2005 TO: Shana Yelverton, City Manager FROM: Sharen Elam, Director of Finance SUBJECT: Consider Tri -Party Agreement for Town Square Grand Avenue Action Requested: Consider Tri -Party Agreement for Town Square Grand Avenue. Background Information: On March 1, 2005 City Council approved Grand Avenue Developer's and Economic Agreements "Development Agreements" for public improvements within TIF boundaries. Both agreements govern certain aspects of the development of the property and proved for certain conditional periodic payments (performance base payments) to Cooper & Stebbins. Inland Western Retail Real Estate Trust, Inc. "Construction Lender" has agreed to make a loan to Cooper & Stebbins to assist in financing the development of the property and construction of the improvements. The loan is secured by, among other things, the grand avenue property. The Development Agreements authorize the City to enter into an agreement (tri- party) with the developer and construction lender to evidence the respective rights and obligations of the parties under the agreements. Financial Considerations: None required Citizen Input/ Board Review: None required Legal Review: City attorneys have reviewed the attached document. Alternatives: Approve, amend or deny Supporting Documents: Tri -party agreement Staff Recommendation: Consider the attached agreement DALLAS 1509657x89 TRI -PARTY AGREEMENT THIS TRI -PARTY AGREEMENT (this " Agreement ") is executed as of April 29, 2005, by and among INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland corporation ( " Construction Lender "), SLTS GRAND AVENUE, L.P., a Texas limited partnership ( " Borrower "), and the CITY OF SOUTHLAKE, TEXAS, a Texas municipal corporation of Tarrant County and Denton County (the " City "). The BOARD OF DIRECTORS OF THE REINVESTMENT ZONE NUMBER ONE, CITY OF SOUTHLAKE, TEXAS ( " Board ") joins in the execution of this Agreement for the limited purposes set forth on its signature page. RECITALS: Borrower is the owner of that certain property described on Exhibit "A" attached hereto and made a part hereof for all purposes (the " Property "). The Property is located in Southlake, Tarrant County, Texas. Borrower intends to develop the Property for use as first class retail and office buildings, a hotel and a movie theatre, together with ancillary areas and improvements thereon (collectively, the " Improvements "). Borrower and the City have entered into that certain Economic Development Program Agreement dated , 2005 (the " Economic Development Agreement "), and Borrower, the City and the Board have entered into that certain Development Agreement with SLTS Grand Avenue, L.P. for Public Improvements to Property Within Reinvestment Zone Number One, City of Southlake dated 2005 (the " SLTS Development Agreement "), both of which govern certain aspects of the development of the Property and provide for certain conditional periodic payments to Borrower by the City, all as more particularly set forth in the Economic Development Agreement and the SLTS Development Agreement. The Economic Development Agreement and the SLTS Development Agreement are collectively referred to herein as the " Development Agreements Construction Lender has agreed to make a loan to Borrower in the maximum principal sum of $86,430,000 (the " Loan "), to assist Borrower in financing the development of the Property and the construction of the Improvements. The Loan will be advanced to Borrower in accordance with the terms of that certain Loan Agreement dated as of April 29, 2005, by and between Construction Lender and Borrower (the " Loan Agreement "), and is evidenced by a promissory note in the maximum principal amount of the Loan (the " Note "), which Note is secured by, among other things, a Deed of Trust and Security Agreement and UCC Financing Statement for Fixture Filing (the " Deed of Trust ") encumbering the Property. The Loan Agreement, the Note, the Deed of Trust and all other documents evidencing or securing the Loan are referred to herein as the " Loan Documents The Development Agreements authorize the City to enter into an agreement with Borrower and Construction Lender to evidence the respective rights and obligations of the parties under the Development Agreements. Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to such terms in the Development Agreements. IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: DALLAS 1509657x89 Collateral Assignment. a. In consideration of the making of the Loan by Construction Lender to Borrower, Borrower hereby collaterally assigns to Construction Lender, as security for the Loan, all of Borrower's right, title and interest in and to the Development Agreements. b. The City hereby consents to such collateral assignment described in Section 2.a. for the sole purpose of further securing the Loan; it being understood and agreed that notwithstanding such collateral assignment and any subsequent assumption by Lender of such obligation(s) in accordance with Section 2.c. below, Borrower will, at all times, remain obligated to perform under the Development Agreements. Construction Lender will send to the City a copy of any written notice of an Event of Default (as defined in the Loan Agreement) or notice of foreclosure sent to Borrower by Construction Lender with respect to the Loan, at the same time and in the same manner as such written notice is provided to Borrower. C. Upon the occurrence of any Event of Default, Construction Lender may take, at Construction Lender's option, any and all actions under the Development Agreements on its own behalf or, at the election of Construction Lender, for and on behalf of Borrower, to consummate Borrower's obligations under the Development Agreements (the " Borrower's Obligations "), including without limitation, the completion of the Improvements, and in addition to consummating the Borrower's Obligations, Construction Lender shall be entitled to receive any and all of the Borrower's Development Payments (as defined below) and other benefits expressly granted to Borrower in the Development Agreements ( collectively. the " Borrower's Benefits )7 provided that all conditions precedent to receiving the Borrower's Benefits have been satisfied. If Construction Lender elects to perform any of the Borrower's Obligations, either on its on behalf or for and on behalf of Borrower, Construction Lender shall promptly notify the City of such election and Construction Lender shall not have the right to perform any of the Borrower's Obligations until such notification has been given d. Borrower hereby appoints Construction Lender as its attorney -in -fact for the purpose of complying with the Borrower's Obligations and to take such other and further action as Construction Lender determines appropriate to consummate the Borrower's Obligations, such power of attorney being irrevocable and deemed coupled with an interest. In the event Construction Lender, in exercising its remedies under the Loan Documents, elects to take title to the Property (by foreclosure, deed in lieu of foreclosure or otherwise), the City agrees that Construction Lender may do so by taking title to the Property in an Affiliate (defined below), in which case such Affiliate shall be entitled to all of Construction Lender's rights hereunder. As used herein, " Affiliate " means any entity which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with Construction Lender. e. Borrower and Construction Lender represent to the City that the stated maturity date of the Loan is April 29, 2007, and assuming certain conditions have been met. Borrower may extend the stated maturity date of the Loan to April 14. 2008 (the "Outside Maturity Date "). If Construction Lender voluntarily extends the maturity date of the Loan beyond the Outside Maturity Date without the prior consent of the City, then the City shall have no obligations under this Agreement to either Borrower or Lender and this Agreement shall be considered terminated. Payments under the Development Agreements Until such time as Construction Lender has notified the City in writing that (1) all amounts owing on the Loan are otherwise paid in full, (ii) Construction Lender is released from all obligations to make further advances thereunder, and (iii) all other obligations of Borrower under the Loan Documents have been fully satisfied (collectively, the " Loan Obligations "), the parties agree that City shall pay directly to Construction Lender all payments due and payable to Borrower under the Development Agreements including, without limitation, all Program Payments under the Economic Development Agreement and all payments under the SLTS Development Agreement (collectively, the " Development Payments "). Borrower hereby agrees that it shall have no right to receive any Development Payments until and unless Construction Lender has DALLAS 1509657x89 notified the City in writing that the Loan Obligations have been satisfied in full, and Construction Lender hereby agrees to issue such notification to the City promptly upon Borrower's satisfaction of the Loan Obligations. Borrower hereby consents to the City paying the Development Payments directly to Construction Lender, and waives any claims that it may have against the City for wrongfully paying the Development Payments to Construction Lender. In the event that the City pays to Construction Lender any Development Payments that in whole or in part accrued after the satisfaction of the Loan Obligations, Construction Lender shall promptly remit such applicable portion(s) of the Development Payments to Borrower and City shall not be obligated to Borrower in any manner. Effectiveness of Development Agreements; No Default Borrower and the City each hereby respectively represent and warrant (i.e., Borrower represents and warrants as to Borrower and Borrower only, and the City represents and warrants as to the City and the City only) to Construction Lender that (1) a true, complete and correct copy of the Economic Development Agreement and any and all amendments thereto are attached hereto as Exhibit `B " ; (ii) a true, complete and correct copy of the SLTS Development Agreement and any and all amendments thereto are attached hereto as Exhibit "C " ; (iii) the Development Agreements have been duly executed and delivered by all parties thereto; (iv) the Development Agreements are in full force and effect and, have not been amended or modified; and (v) to their current actual knowledge, without inquiry, no material default currently exists under the Development Agreements. Borrower represents and warrants to Construction Lender that upon execution of this Agreement, Construction Lender will have received a collateral assignment of the Borrower's Benefits. Borrower and the City shall promptly notify Construction Lender in writing of any default under the Development Agreements. Borrower Default If Borrower defaults under either the Economic Development Agreement or the SLTS Development Agreement, and the City elects to exercise its right to terminate the Economic Development Agreement or the SLTS Development Agreement, as the case may be, as a result of such default, Borrower shall promptly notify Construction Lender in writing of such default and the City shall, simultaneously with sending the same to Borrower, send to Construction Lender a copy of any written notice of default sent to Borrower, and Construction Lender shall have the right to attempt to cure any such default during any applicable cure period granted to Borrower under the Development Agreements. Notwithstanding the foregoing, nothing contained in this Agreement shall obligate Construction Lender to cure any default under the Development Agreements, and in the event of any Borrower default hereunder, under no circumstances shall the execution of this Agreement by Construction Lender be construed as (1) an agreement by Construction Lender to assume Borrower's obligations under this Agreement, (ii) an agreement by Construction Lender to continue to finance the costs of the construction of the Improvements, or (iii) an agreement by Construction Lender to waive any default that may arise under the Loan Documents as a result of any breach of the Development Agreements by Borrower. Amendments; and Assignments of Development Agreements Without the prior written consent of Construction Lender, neither Borrower nor the City shall terminate, amend, modify or assign the Development Agreements, nor shall Borrower or the City waive any of the provisions of the Development Agreements or extend any time for performance of any obligations thereunder. Notwithstanding the foregoing, but subject to the notice and opportunity to cure rights granted to Construction Lender in Section 4 above with respect to a termination, during the existence of this Agreement the City may: (1) terminate the Development Agreements in accordance with any rights of City thereunder without the consent of Construction Lender, and (ii) amend or modify the Development Agreements without the consent of Construction Lender, if such amendment or modification does not otherwise require the consent or agreement of Borrower. Notices All notices under this Agreement must be given in writing and will be considered to have been duly and properly served upon personal delivery to the party being served, or if mailed, upon DALLAS 1509657x89 the first to occur of (1) actual receipt, (ii) the expiration of forty -eight (48) hours after deposit in United States registered or certified mail, postage prepaid, or (iii) the expiration of twenty -four (24) hours after deposit for overnight delivery with Federal Express or another nationally recognized express delivery company, addressed to the parties as follows: If to Construction Lender: Inland Western Retail Real Estate Trust, Inc. 2901 Butterfield Road Oak Brook, Illinois 60523 Attention: Dennis K. Holland Telephone No. (630) 218 -8000 Facsimile No. (630) 218 -4900 with a copy to Gardere Wynne Sewell LLP 1601 Elm Street Suite 3000 Dallas, Texas 75201 -4761 Attention: Kevin L. Kelley Telephone No. (214) 999 -4503 Facsimile No. (214) 999 -3503 If to Borrower: SLTS Grand Avenue, L.P. c/o Cooper & Stebbins 1256 Main Street, Suite 240 Southlake, Texas 76092 Attention: Brian R. Stebbins Telephone No. (817) 329 -8400 Facsimile No. (817) 251 -8717 with a copy to: Winstead Sechrest & Minick, P.C. 5400 Renaissance Tower 1201 Elm Street Dallas, Texas 75270 -2199 Attention: John M. Nolan Telephone No. (214) 745 -5251 Facsimile No. (214) 745 -5390 If to the City City of Southlake 1400 Main Street Southlake, Texas 76092 Attention: City Manager DALLAS 1509657x89 5 Telephone No. (817) Facsimile No. (817) Such addresses may be changed by notice to the other parties given in the same manner as provided above, but such changes in address to be effective only upon receipt. Termination This Agreement will terminate upon the earliest to occur of (1) the date Construction Lender has notified the City in writing of the satisfaction in full of the Loan Obligations, (ii) by a written agreement of termination signed by all of the parties hereto, or (iii) by City's termination of any of the Development Agreements pursuant to the terms thereof. Counterparts This Agreement may be executed in any number of counterparts as may be convenient or necessary, and it shall not be necessary that the signatures of all parties hereto or thereto be contained on any one counterpart hereof or thereof. Additionally, the parties hereto agree that for purposes of facilitating the execution of this Agreement, the signature pages taken from the separate individually executed counterparts of this Agreement may be combined to form multiple fully executed counterparts. All executed counterparts of this Agreement shall be deemed to be originals, but all of such counterparts taken together or collectively, as the case may be, shall constitute one and the same agreement. Waiver No waiver of any of the terms or conditions of this Agreement, and no waiver of any default or failure of compliance, shall be effective unless in writing, and no waiver furnished in writing shall be deemed to be a waiver of any other term or provision or any future condition of this Agreement. Miscellaneous This Agreement will be governed by Texas law and venue in any proceeding relating to this Agreement shall be in Tarrant County, Texas E)r if i n fdefal ,.,,,,..t, i n the N Di- I i .I ef Te�ias The invalidity or unenforceability of any provision of this Agreement will not affect any other provision of this Agreement. The captions of the Sections of this Agreement are for convenience only and do not limit any terms or provisions herein. Successors and Assigns This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, including without limitation, any person or entity obligated by operation of law upon the reorganization, merger, consolidation or other change in the organizational structure of any of the parties hereto; provided however Construction Lender may not assign any of its rights and obligations hereunder to another person or entity unless saeh assignee is gene ally suer "institutional lenaef." —except in connection with a syndication of the Loan wherein Construction Lender or an Affiliate of Construction Lender is the agent or lead lender for such syndicate, provided further however . any assignment of this Agreement shall be subject to the limitations set forth in the Development Agreements, as modified by this Agreement. 1. Attorneys' Fees. The prevailing party in the adjudication of any proceeding relating to this Agreement shall be authorized to recover its reasonable and necessary attorney's fees pursuant to Sec. 271.159 of the Texas Local Government Code. 2. Construction Lender agrees that City shall not be liable to Borrower or Lender or any other party for any special or consequential damages, direct or indirect, punitive damages, interest, or cost of court or expenses related to litigation (other than reasonable and necessary attorney's fees, as provided in Section 12 hereof) for any act of default by City under this Agreement. 6 DALLAS 1509657x89 [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] DALLAS 1509657v,99 IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. CONSTRUCTION LENDER: INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland corporation By: _ Name: Its: Assistant Secretary BORROWER: SLTS GRAND AVENUE, L.P., a Texas limited partnership By: SLTS Grand Avenue Genpar, L.L.C., a Texas limited liability company, its general partner By: Cooper & Stebbins, L.P., a Texas limited partnership, its sole member By: CS Town Centres, LLC, a Texas limited liability company, its general partner By: Brian R. Stebbins, Member THE CITY: CITY OF SOUTHLAKE TEXAS, a Texas municipal corporation of Tarrant County and Denton County By: Name (printed): Title: ATTEST: By: Name (printed): Title: DALLAS 1509657x89 8 JOINDER OF THE BOARD The Board joins in the execution of this Agreement for the purpose of consenting to the terms hereof, but only to the extent that this Agreement applies to the SLTS Development Agreement. BOARD OF DIRECTORS OF THE REINVESTMENT ZONE NUMBER ONE, CITY OF SOUTHLAKE, TEXAS By: Name (printed): Title: DALLAS 1509657x89 STATE OF MARYLAND COUNTY OF This instrument was acknowledged before me on this day of , 2005, by of INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland corporation, on behalf of said corporation. [SEAL] Notary Public, State of Maryland Notary's commission expires: STATE OF TEXAS COUNTY OF Printed Name of Notary: This instrument was acknowledged before me on this day of , 2005, by Brian R. Stebbins, Member of CS Town Centres, LLC, a Texas limited liability company, general partner of Cooper & Stebbins, L.P., a Texas limited partnership, sole member of SLTS Grand Avenue Genpar, LL. C., a Texas limited partnership, on behalf of said limited partnership. [SEAL] Notary's commission expires: DALLAS 1509657x89 Notary Public, State of Texas Printed Name of Notary: 10 STATE OF TEXAS COUNTY OF This instrument was acknowledged before me on this day of , 2005, by of City of Southlake Texas, a Texas municipal corporation of Tarrant County and Denton County, on behalf of said municipal corporation. [SEAL] Notary Public, State of Texas Notary's commission expires: STATE OF TEXAS COUNTY OF Printed Name of Notary: This instrument was acknowledged before me on this day of , 2005, by of the Board of Directors of the Reinvestment Zone Number One, City of Southlake Texas, on behalf of such board. [SEAL] Notary Public, State of Texas Notary's commission expires: DALLAS 1509657x89 Printed Name of Notary: 11 EXHIBIT "A" DESCRIPTION OF THE PROPERTY DALLAS 1509657x89 12 EXHIBIT "B" ECONOMIC DEVELOPMENT AGREEMENT [Attached] DALLAS 1509657x89 13 EXHIBIT "C" SLTS DEVELOPMENT AGREEMENT [Attached] DALLAS 1509657x89