DRAFT SUMMARY OF DEVELOPMENT AGREEMENT BETWEEN COMMUNITY MARITIME PARK ASSOCIATES, INC. AND MARITIME PARK DEVELOPMENT PARTNERS, LLC

Transcription

1 DRAFT SUMMARY OF DEVELOPMENT AGREEMENT BETWEEN COMMUNITY MARITIME PARK ASSOCIATES, INC. AND MARITIME PARK DEVELOPMENT PARTNERS, LLC The Development Agreement ( the Agreement ) formally designates Maritime Park Development Partners, LLC, as the project developer ( the Developer ). The Agreement provides for the Developer to complete the Site Preparation Project to make the Site ready for construction, and then to complete the Public Improvements. The Agreement provides that the Private Improvements will be constructed under the terms of the Sub-Lease. The following represents an Article-by-Article summary of the Development Agreement: I. Definitions. This Article defines terms used in the Agreement. All of the defined terms are capitalized in the Agreement. II. Purpose and Intent, Scope and Compensation. This Article sets forth the purpose and intent of the Agreement. It describes the public purpose of the Project, how the Project is to be developed in accordance with the Design Criteria CMPA approved on November 28, 2007, and in accordance with approved plans and specifications, and the general obligations of the Developer to carry out the project. This Article then provides for designating authorized representatives of CMPA and the Developer, and designates the Developer as the overall Project Coordinator. This Article provides that the Developer shall manage the Private Improvements and act as CMPA s agent in managing the Public Improvements, and UWF shall manage its facilities. This Article grants CMPA the right to all net cash flows from the Public Improvements, and requires the parties to develop annual budgets of the Public Improvements planned uses. This Article provides for CMPA to pay the Developer an industry-standard Development Fee and a Management Fee for its services. Purpose and Intent of this Agreement Requires that the Public and Private Improvements be consistent with the agreements between the City and the CMPA. Requires Private Improvements portion of the project to pay ad valorem taxes. Requires the Project be developed as a unified and integrated multi-use project Requires that the Project be designed in general conformance with the Design Criteria with changes to be approved by both parties Provides for the funding of the Site Preparation and Public improvements be sourced from the CRA bonds and that all parties will endeavor to source additional public funding outside of city or CRA funds for additional monies to be used toward the Public Improvements. Requires that funding for the Private Improvements shall be the responsibility of the Developer The City shall own all improvements of the Public Improvements portion of the Project as well as the land where Private Improvements are developed. States that the Developer shall own the improvements on the Private Improvements portion of the development, but not the land subject to the terms of the Sub-leases. Project Coordination The Developer shall be the Project Coordinator Operating Responsibility, Funding and Revenues DRAFT Page 1 of 9

2 The Developer shall manage all Private Improvements UWF shall manage their facilities (Maritime Museum, Maritime Research Facility, Multi- Cultural Center, and Amphitheater) The Developer shall manage the Public Improvements as CMPA s agent for a 5 year term at which time the management fees may be renegotiated. An additional 5 year term is available at the Developer s option provided that they maintain the property within defined budgetary constraints. Provides for termination of management agreement due to defaults in performance. The source of funding for CMPA operations shall be: o the $175,000 from the Pelican s lease o profits from the Pelican s operations (guaranteed to be no less than $250,000 per year for the first 5 years o o Special Assessments on the Private Improvements, if necessary Incremental income derived from the Project for the CRA dependent upon CRA and City approval All net cash flows from operation of the Public Improvements shall be the property of CMPA Requires Developer to present operating budgets to the CMPA annually for approval Development and Management Fees The Developer shall be paid a Development Fee equal to 4% of the total cost of the Site Preparation Project and the Public Improvements Project less (a) Impact Fees; (b) Developer Fee; and (c) any unused contingencies. Payment of the Development Fee shall not exceed $100,000 per month for the period from execution of the Development Agreement to the closing of the Public Financing based on approved expenses. Thereafter, payment of the Development Fee shall be prorated monthly over the expected construction period with periodic adjustments as needed. Developer shall be reimbursed up to $150,000 in approved third party expenses incurred prior to the execution of the Development Agreement. Bruce Cutright s involvement in the project shall be a minimum of one day per week with twice per month in Pensacola. Mr. Cutright s compensation shall be fully charged against the Development Fee. The above requirement shall apply starting upon execution of the Development Agreement and running through the completion of the Public Improvements. Any deviation from the above time requirements or replacement would require CMPA authorization. Managements fees shall be as follows: o 4% of all office or other income from the Public Improvements (exclusive of the multiuse stadium) o a fee of $20,000/yr with annual CPI adjustments for the management of the park facilities including, but not limited to landscaping, capital improvements, security, and parking o ten percent (10%) of gross revenues for event production, facilities rentals (excluding income derived from Pelican s lease), and sponsorship income (excluding stadium naming rights) administered by the Developer up to $1,000,000/yr., 5% thereafter. o an annual facility management fee for managing the multi-use stadium based upon commercially reasonable rates not to exceed Two Hundred Fifty Thousand Dollars ($250,000). Provisions allow for the fee to be adjusted based on the status of CMPA s operating cash position. o Management Fees may be renegotiated after 5 years III. Project Schedule. This Article provides for the adoption of a project schedule to ensure timely completion of the Project. DRAFT Page 2 of 9

3 Project Schedule The Project Schedule is subject to review and approval by the CMPA. The schedule is attached in the full agreement as an exhibit. IV. Site Preparation Project and Public Improvements. This Article provides for the manner in which the Site Preparation Project and Public Improvements will be completed. The Site Preparation Project is defined as the construction and completion of those improvements necessary to prepare the Project Site for construction of the Public Improvements (the multiuse facility and the open park) and the Private Improvements, including a conference center venue if feasible. This Article provides for plans and specifications for the non-private phase of the development, describes how Contractors are to be selected and bound to guaranteed maximum prices, and gives guidelines for construction activity. Site Preparation Project Permit The Developer shall be responsible for obtaining building and construction permits Site Preparation Project /Public Improvement Project Plans and Specifications The Developer will hire Project Professionals to prepare the Site Preparation Project plans and specifications identified in an Exhibit to this agreement. The Developer will notify CMPA of any changes or additions to the Exhibit. Fees of these Project Professionals will be paid for or reimbursed from the Public Financing. All contracts between Developer and Project Professionals shall be assignable to CMPA CMPA shall approve all plans and specifications prepared by the Project Professionals prior to commencement of work on the Project Site. Construction of the Site Preparation Project and Public Improvements The Developer may, following acceptable approval of a design-build contract, be authorized to act as Contractor for the above subject to negotiation of a design-build contract(s) using a GMP contract which allows for reimbursements for certain specified general conditions. Agreement calls for a total overhead and profit of 3% of costs and a contingency of 4% of costs. Should the Developer act as Contractor, Mark White shall be a key man in the construction project with specific provisions to be negotiated in the design-build contract. All savings by the Developer acting as Contractor from the established GMP shall be returned to the CMPA or the City. The City agrees to provide a provision in the construction contract, to the extent possible by State law, whereby construction materials may be purchased on behalf of and for the benefit of the City and be exempt from sales tax. V. Site Preparation Project and Public Improvements Budget and Financing. This Article describes how CMPA will pay for the Site Preparation Project and Public Improvements, and limits the total amount the City will commit to the Project to a maximum of $40 million dollars (of which approximately $38 million remains for the Developer to complete the Site Preparation Project and the Public Improvements) of net proceeds received from a bond issue plus any supplemental grants or other funds obtained for the Project. This Article refers to an attached budget of these costs, and provides for the manner in which payments will be made out of a Construction Fund after CMPA s review and approval of all submitted invoices for Site Preparation Project Costs and Public Improvement Costs. DRAFT Page 3 of 9

4 Budget The parties agree that the City's obligation to pay the costs of designing, constructing and installing the Site Preparation Project completed under the terms of this Agreement, the Public Improvements completed under the terms of the Master Lease and to pay other costs (including soft costs) shall not exceed $38,000,000) in the aggregate. Other funds may be sought to supplement or offset the maximum. Public Improvements Financing The Developer has prepared and submitted a budget for the Site Improvement Project and the Public Improvements as an Exhibit to this agreement. Any changes to said budget will be subject to review and approval by the CMPA board. The budget is attached in the full agreement as an exhibit. Should CMPA not have sufficient funds, or expect to not have sufficient funds, available to it to pay the Site Preparation Project Costs and Public Improvements Costs when needed, then CMPA shall promptly so notify the Developer and direct the Developer to revise the Site Preparation Project Plans and Specifications, the plans and specifications for the Public Improvements, and the Public Improvements Budget to reduce the costs thereof to the amount of the Public Financing Reporting and Auditing The Developer shall annually supply anticipated operating budgets to CMPA and offer on a quarterly basis to supply associated summary financial position documentation related to the management and operation of the Public Improvements for which the Developer has contracted to operate and manage. CMPA may audit Developers financial records relating to the project VI. Sub-Lease. This Article provides for the execution of the Sub-Lease, which is attached in the full agreement as an exhibit. This Article generally describes the Parcel Plan (where the various improvements will be located), and provides a procedure for any change to the Parcel Plan. The Developer is given access to the Project Site for preliminary work, and is allowed to erect a sign describing the Project. Sub-Lease All revenue derived from ground leases are the property of the City The ground lease terms shall be as follows each use: o Commercial 60 years o Hotel up to 80 years o Residential 99 years (building must be at least 20% residential to qualify) Land pricing shall be established as follows: Developer would initiate a process at the time(s) of its choosing to set land pricing that would be applicable to any and all private land for any development upon which substantial construction commences within 30 months of the pricing determination. The land pricing would be set for a matrix of potential uses (e.g. residential, office, retail, restaurant, hotel, other to be determined by Developer) on a per buildable square foot basis. Land pricing would be set for the different uses at waterfront versus non-waterfront locations (the definitions of these categories to be specified in the pricing determination). DRAFT Page 4 of 9

5 The land pricing for a particular building would be determined based on applying the $/square foot pricing to the square footages attributed to the use components. The land pricing would recognize that the land is improved parcels rather than raw land. The land pricing would place primary emphasis on a residual value approach, i.e. an economic analysis of what land pricing could be supported by development of different kinds based on reasonably anticipated revenues, expenses, development costs, and developer profit. The land price setting would provide for each matrix use (water- and non-waterfront) estimated land pricing per gross buildable square foot. All references to gross buildable square feet, buildable square feet, or gross building area (GBA) in this term sheet refer to the gross area of enclosed building (i.e. excluding balconies or other outdoor spaces) that is usable for occupancy or common area but excluding parking area). The process would be initiated by Developer which would proposes land pricing for the matrix of uses (water- and non-waterfront) and provide analyses supporting the proposed land pricing. CMPA and its advisor would review Developer s submittal and, if agreement could be reached, would approve the land pricing matrix, either as proposed or as mutually agreed upon. If the parties cannot agree, CMPA s advisor would prepare its own estimates and supportive analysis and the two sets of land pricing estimates and analyses would be submitted to a third party recognized as expert in developmental land economics, who would then choose one or the other proposed pricing, which shall be the applicable land pricing for that period. The third party expert would be selected from a pool determined to be mutually agreeable to both parties. Ground lease rental amounts shall be calculated as follows: o For any parcel upon which substantial construction start occurs within the 30 month period of the initial land price setting, the lease payment for the first year shall be 7.0% of the land price, except that for any parcel developed with a building including a residential component, the lease payment for the first year shall be a percentage of the land price, which percentage shall be the weighted average of the gross building area attributable to the non-residential component multiplied by 7.0% and the gross building area attributable to the residential component multiplied by 6.0%. Lease payments shall escalate annually thereafter at 2.0%. o For any parcel upon which substantial construction commences in a subsequent land pricing period, the lease payment percentage and annual escalation rate shall be set at the time of the land pricing determination as follows. The lease payment percentage shall be based upon the Overall Capitalization Rates reported in the most recent edition of the Korpacz Real Estate Investor Survey published quarterly by Price Waterhouse Coopers. Specifically, the lease payment for the first year shall be a percentage of the land price, which percentage shall be set at the average of the Average Overall Capitalization Rates reported for the most recent quarter for national CBD Office and national Apartment plus 0.5%, except that for any parcel developed with a building DRAFT Page 5 of 9

6 including a residential component, the percentage shall be the weighted average of the gross building area attributable to the non-residential component multiplied by the average of the Average Overall Capitalization Rates reported for the most recent quarter for national CBD Office and national Apartment plus 0.5% and the gross building area attributable to the residential component multiplied by the average of the Average Overall Capitalization Rates reported for the most recent quarter for national CBD Office and national Apartment less 0.5%. The annual escalation rate shall be set at the rate of increase in Consumer Price Index Urban Consumers (CPI-U) for the most recent 12 month period prior to the land price setting determination (i.e. CPI-U for the most recent reported month divided by CPI-U for the month that is 12 months prior to the most recent month) less 1.0%. Should, at any time, the Korpacz report cease publication, the parties would agree on a comparable source for such information, and if they can not agree on such a source, the determination would be made within the process set for determining land pricing. For example, if the land pricing determination for residential use is determined to be $10 per buildable square foot and the land pricing for a nonresidential use is determined to be $20 per buildable square foot, then if the development were to start substantial construction within the 30 month period of the initial price setting, and if the building to be constructed on the parcel included a total of 20,000 square feet of gross building area with 10,000 square feet attributable to each of the two use components, then the first year lease payment would be $19,500, based on the following calculations: land price on a capitalized basis at $300,000 ($10 x 10,000 square feet plus $20 x 10,000 square feet); conversion to initial lease year lease rate at 6.5% (50% 7.0% and 50% 6.0%). The second year lease payment would be $19,890 ($19,500 x 102%). The lease payment determined by the above methodology applied to a specific development would be subject to adjustment as follows. To the extent the development for that parcel incorporates structured parking, the pricing for that parcel would be adjusted to reflect the additional cost of such parking beyond what was assumed in the pricing determination (surface or none) after subtracting from that amount the value of any public financing provided to the development project on that parcel. Any such adjustment could not reduce land lease payments for other parcels without the authorization of CMPA. The determination of the delta of cost attributable to structured parking would require MPDP to present a proposed adjustment with relevant construction and development analyses to CMPA for its review with a process for determination as specified above for the pricing matrix. Each party will pay for its own costs in the process and share equally the costs of the third party expert, if required. Rent payments begin at the earlier of substantial completion of construction or 24 months after commencement of construction. Developer must develop the Private Improvements at a specified development pace to maintain lease rights to undeveloped lands. as follows: Subject to the provisions in the following paragraphs, starting at 24 months* following the execution of the development agreement, Developer (or its sub-lessee(s)) would be expected to commence construction on a pace that would result in an average of 30,000 square feet gross building area (as defined above) of private development per year (for the purposes of this section, Private Development is defined as privately financed development, including uses such as office, residential, retail, restaurant, DRAFT Page 6 of 9

7 hotel but excluding conference center (unless developed with private financing), UWF facilities, or other non-privately financed uses)). Developer shall be subject to the penalty provisions described below if: Construction on a first building of no less than 30,000 square feet GBA of private development is not commenced within 30 months* following the development agreement or if construction on that building is not substantially completed within 48 months* of the development agreement. The above pace and provisions would apply to each subsequent year (e.g. commencement of construction on a second building of not less that 30,0000 square feet no later than 42 months following the development agreement and completion no later than 60 months following the development agreement), except that private development shall be considered cumulatively, i.e. if Developer constructs a 60,000 square foot building in the first period, it would automatically be considered to have met its obligation relative to the second period without construction of a second building in that period. (* Note the completion date is set 24 months after the expected construction start date and a generous 24 month period for completion is allowed. The penalty provisions are scheduled to allow for a construction start 6 months after the expected construction start to provide an opportunity to catch up without penalty.) Should a building be developed containing space for Quint Studer, the Studer Group, or its affiliates, the portion of the gross building area allocable to Studer s occupancy would not count toward MPDP s obligations under the Development Pace provisions, but the remaining additional gross building area allocated to private development (as defined previously in this section) would count toward that obligation. The period of performance could be extended for up to 12 months in the event of economic distress can be demonstrated to prevail at the time the construction starttriggered penalty provision is scheduled to apply. A condition of economic distress can be automatically considered to apply if at the time Developer proposes to exercise this right it can present evidence of both of the two following indicators: Housing starts in Escambia County or the City of Pensacola for the last 12 month period for which such records are available are below the seven-year average. The vacancy rate for Class A downtown office space in Florida (or, if not available for Florida as a whole, then for all major markets in Florida for which such data is published) as reported by any of the major national brokerage firms (e.g. Cushman & Wakefield, CBRE, Marcus & Millichap) for the most recent period for which such report is available indicates a vacancy rate of 17% or more. If such data is not available for Florida as a whole, then rate shall be calculated as a weighted (by square footage) average of the vacancy rates for the component individual markets. If Developer exercises its right to an extension for condition of economic distress, it must subsequently construct a minimum of 30,000 square feet of additional private development, in order to exercise that provision a second time. In no event, shall there be more than a total of two extensions for a condition of economic distress. Failure to maintain the specified pace of development, as may be extended by the condition of economic distress provision, would result in the following: Developer would be able to maintain its lease rights for an additional 12 month period by paying $3,000 per month per acre for any undeveloped parcels or until such time as it is in conformance with the development pace schedule if within that 12 month DRAFT Page 7 of 9

8 period. Such payments would not be refundable or credited toward the later lease payments. If Developer is not in conformance at the end of this 12 month period, CMPA would have the right to terminate Developer s rights to lease any of the remaining private land. VII. VIII. IX. Insurance. This Article addresses insurance requirements for CMPA and the Developer. All Project Professionals and Contractors will be required to provide insurance coverage acceptable to CMPA. Indemnification. This Article provides for indemnification if either party breaches the Agreement or has misrepresented its status, and holds the Developer harmless for any preexisting environmental conditions. Representations, Warranties and Covenants of the Developer. The substance of this Article is that the Developer represents that it is validly organized and has the required legal standing to execute the Agreement, and agrees to perform its obligations as outlined in the Agreement. X. Representations, Warranties and Covenants of CMPA. This is a similar provision for CMPA, under which CMPA represents its legal status and that all things required of it under its governing documents have occurred to enable it to execute the Agreement. XI. XII. Conditions Precedent. This Article describes conditions that must be met before the Developer is obligated to proceed with the Site Preparation Project. Default; Termination. This Article makes provision for what constitutes default under the Agreement by the Developer or CMPA. It also makes provision for how and on what conditions the Agreement is terminated and for a termination payment to the Developer. CMPA may terminate MPDP s development agreement at its discretion at any time. If, termination is not for cause as described in agreement, then: (1) if the public financing has not closed, CMPA would pay MPDP a termination fee of $50,000; (2) if the public financing has closed or later closes within 24 months of termination, CMPA would, at such time as funds from financing are available, pay MPDP a termination fee of an amount equaling $250,000 less the amount of any prior termination fee if previously paid. XIII. XIV. XV. XVI. Right to Contest. This Article gives either party the right to contest a lien or dispute with a contractor with notice to the other party. Dispute Resolution. The parties are required under this Article to mediate any dispute before resorting to litigation. Unavoidable Delay. This Article provides a definition for any unavoidable delay that would toll any time periods in the Agreement. Restrictions on Use. Under this Article the Project Site can only be used for the Project as described in the Agreement. DRAFT Page 8 of 9

9 XVII. XVIII. Fire or Other Casualty. This Article describes how the parties are to use insurance proceeds and consider reconstruction of damaged improvements on the Site. Miscellaneous. This Article provides for how notices under the Agreement are to be given, that jurisdiction of any dispute will be in Escambia County, and that the Agreement is to be governed by Florida law. DRAFT Page 9 of 9