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HomeMy WebLinkAbout027951 RES - 11/18/2008A RESOLUTION GRANTING A VARIANCE FROM THE GUIDELINES AND CRITERIA FOR GRANTING TAX ABATEMENT AND AUTHORIZING THE EXECUTION OF AN AGREEMENT WITH TRANSCONTINENTAL REALTY INVESTORS, INC. PROVIDING FOR TEMPORARY PROPERTY TAX ABATEMENT WHEREAS, the Texas Property Redevelopment and Tax Abatement Act (the "Act"), Texas Tax Code, Chapter 312, as amended, authorizes the City of City of Corpus Christi, Texas (the "City") to enter into tax abatement agreements for projects meeting the guidelines and criteria for granting tax abatement duly adopted by the City; and WHEREAS, an application for temporary tax abatement has been filed with the City by Transcontinental Realty Investors, Inc. for the construction of improvements to facilities in the City; and WHEREAS, the property to be covered by the proposed tax abatement agreement is located in the city limits of the City of Corpus Christi within an area designated as a reinvestment zone eligible for property tax abatement under the provisions of the Act; WHEREAS, the Transcontinental Realty Investors, Inc.'s proposed multi -family housing project will be located on the shoreline on Corpus Christi Beach, within the City's designated Renewal Community; WHEREAS, Corpus Christi Beach is located just north of the City's Central Business District, but shares much of the blight and lack of economic activity, similar to that associated with Downtown Corpus Christi; WHEREAS, there is a need to promote the development of multi -family housing on Corpus Christi Beach to help revitalize this portion of the community and restore the area as one of the City's gateways and tourist industry meccas; WHEREAS, there is a need to revitalize both areas, and the development of multi -family housing has been identified as a key to the redevelopment and restoration of these areas; WHEREAS, an increased number of full-time residents will help support retail establishments that can attract both residents and visitors; WHEREAS, the City's Guidelines and Criteria for Granting Tax Abatement do not clearly address the type of tax abatement that should be applicable to Renewal Community multi -family housing facility; WHEREAS, Section 3(f) authorizes a variance from specific provisions in the City's Guidelines and Criteria for Granting Tax Abatement, if the variance obtains a vote of three-fourths of the governing body; and 027951 Tax Abatement Agreement Resolution -- 3612 Surfside w variance — 13072008 2 WHEREAS, the project is not located on property that is owned or leased by a person who is a member of the city council; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, TEXAS: SECTION 1. The City Council authorizes a variance from Section 2.(g)(2)C. and 2.g.(3) of the City of Corpus Christi Guidelines and Criteria for Granting Tax Abatement, and authorizes Renewal Community multi -family housing facilities to receive the same tax abatements as Central Business District Residential Facilities. SECTION 2. The City Council finds and determines that the terms of the proposed agreement with Transcontinental Realty Investors, Inc. providing for temporary property tax abatement and the property subject to the proposed agreement meet the applicable guidelines and criteria, as amended, adopted by the City. The City Council further determines that the proposed project is feasible and the proposed temporary abatement of taxes will inure to the long term benefit of the City. SECTION 3. The Tax Abatement Agreement with Transcontinental Realty Investors, Inc. attached in substantial form as Exhibit A, is approved, and the City Manger is authorized to execute the agreement once Transcontinental Realty Investors, Inc. acquires Lot 7A, Corpus Beach Hotel Addition and Lot 169, Block 7, Corpus Beach Hotel Addition. Adopted at a regular meeting of the City Council on the ) '&ay of November, 2008. ATTEST: CITY OF CORPUS CHRISTI Armando Chapa City Secretary riry Garre Mayor APPROVED AS TO FORM: November 7th, 2008 R. day Reining First Assistant City Attorney For the City Attorney Tax Abatement Agreement Resolution — 3612 surfside w variance -- 13072008 2 Corpus Christi, Texas of Nr(Milda* ,2008 The above resolution was passed by the following vote: Henry Garrett Melody Cooper Larry Elizondo, Sr. Mike Hummel) Bill Kelly Priscilla G. Leal John E. Marez Nelda Martinez Michael McCutchon 027951 Tax Abatement Agreement Resolution — 3612 Surfside w variance -- 13072008 3 3 TAX ABATEMENT AGREEMENT THE STATE OF TEXAS } } COUNTY OF NUECES } This Tax Abatement Agreement ("Agreement") is made and entered into by and between the City of Corpus Christi, Texas ("City") and Transcontinental Realty Investors, Inc., a Nevada corporation ("Owner"), the owner of taxable property in the City of Corpus Christi, Texas, located at 3612 Surfside Boulevard, Corpus Christi, Nueces County, Texas ("Property"). I. AUTHORIZATION This Agreement is authorized by the Texas Property Redevelopment and Tax Abatement Act, Texas Tax Code, Chapter 312, as amended ("Act"), and is subject to the laws of the State of Texas and the charter, ordinances, and orders of the City. II. DEFINITIONS A. As used in this Agreement, the following terms have the following meanings: 1. "Abatement" means the temporary or partial exemption from ad valorem taxes of certain added value to real and personal property in a zone designated for economic development purposes under the Act 2. "Added Value" means the increase In the assessed value of the Eligible Property as a result of "expansion" or "modernization" of an existing facility or construction of a "new facility." It does not mean or include "deferred maintenance." 3. "Base Year Value" means the assessed value of the Improvements on the Property as certified by the Nueces County Appraisal District as of the January 1 preceding the execution of this Agreement, plus the agreed upon value of Improvements made after January 1, but before the execution of this Agreement. 4. "Construction Phase" means the period during which a material and substantial improvement of the Property occurs which represents a separate and distinct construction operation undertaken for the purpose of erecting the Improvements. (a) The Construction Phase ends upon the earliest to occur of the following events: (1) When a certificate of occupancy is issued for the project (if within City limits). TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 EXHIBIT A (2) When commercial production of a product or provision of a service is achieved at the facility. (3) When the architect or engineer supervising construction issues a certificate of substantial completion, or some similar instrument. (4) Two (2) years after the date of this Agreement. (b) The determination of the end of the Construction Phase is made by the City, in its sole and absolute discretion, based upon the above criteria and the other factors as the City may deem relevant. (c) The determination of the end of the Construction Phase by the City is conclusive, and any judicial review of the determination is governed by the substantial evidence rule. 5. "Eligible Property" means the buildings, structures, site improvements, and that office space and certain personal property necessary to the operation and administration of the Facility to be constructed under this Agreement. A list of the Eligible Property is set forth in the Project Description, which is attached to this Agreement as Exhibit A and made a part of this Agreement. During the Construction Phase of the Eligible Property, the Owner may make the change orders to the Eligible Property as are reasonably necessary to accomplish its intended use, provided that no the change order may be made which will change the qualification of the project as a "Facility" under the Guidelines and Criteria for Granting Tax Abatement approved by the City. 6. "Facility" means a Basic Manufacturing or Service Facility, Regional Distribution Center Facility, Regional Telecommunications/Data Processing Center Facility, Regional Visitor Amusement Facility, Central Business District (CBD) Residential Facility, Renewal Community Facility, or Petrochemical Facility approved by the City as set forth in the Guidelines and Criteria for Granting Tax Abatement adopted by the City. 7. 'Improvements" means the buildings, portions of buildings, and other improvements, including fixed machinery and equipment, used for commercial or industrial purposes on the Property. 8. "Ineligible Property" means land; inventories; supplies; tools; furnishings and other forms of movable personal property; vehicles; vessels; aircraft; housing; hotel accommodations; deferred maintenance investments; property to be rented or leased, except as provided in Section 2(e); any improvements, including those to produce, store or distribute natural gas, fluids or gases, which are not integral to the operation of the Facility; improvements to real property which have an economic life of less than 15 years; property owned or used by the State of Texas or its political subdivisions or by any organization owned, operated, or directed by a political subdivision of the State of Texas; unless any of the above types of property are specifically authorized by the City. TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 2 B. The Guidelines and Criteria for Granting Tax Abatement adopted by the City are incorporated as a part of this Agreement. Except as the guidelines and criteria are specifically modified by this Agreement, all definitions in the guidelines and criteria are applicable to this Agreement. ID. PROPERTY A. The Property is an area within the City of Corpus Christi, Texas, located in whole or in part within the jurisdiction of the City, and is more fully described in Exhibit B attached to this Agreement and made a part of this Agreement. The Property is located within a zone for tax abatement established under Chapter 312 of the Texas Tax Code, as amended, by the City of Corpus Christi, Texas. C. The Nueces County Appraisal District has established the following values for the Property as of the January 1 valuation date prior to the date of execution of this Agreement. Account No. R217622 Land $1,458,315.00 Improvements $0.00 C. The City and the Owner agree that the value of any additions to the Improvements made after January 1 or not otherwise reflected on the above valuation of Improvements is: Additional Improvements: $0.00 D. Addition of the above amount to the valuation of the Improvements as of the January 1 valuation date prior to the date of execution of this Agreement results in a Base Year Value as follows: Base Year Value: $1,458,315.00 IV. TERM OF ABATEMENT AND AGREEMENT A. The City agrees to abate the ad valorem taxes on the Eligible Property under this Article and Articles V and VI of this Agreement. The Abatement on the Eligible Property is based upon a variance granted by the City Council. Notwithstanding the location of the property north of the north of the Industrial Canal/Ship Channel, the variance authorizes treating the property as a Central Business District Residential Facility. B. The Abatement is effective with the January 1 valuation date immediately following the date of execution of this Agreement. The Abatement continues for up to two (2) years during the period of the Construction Phase and for the next five (5) full tax years after the Construction Phase, expiring as of December3l of the third tax year. If the period of the Construction Phase exceeds two (2) years, the Facility is considered TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 3 completed for purposes of Abatement, and in no case may the period of Abatement, inclusive of construction and completion exceed seven (7) tax years. The years of Abatement provided in this Agreement in each instance coincide with the tax year commencing on January 1 and expiring on December 31, and in no event may the Abatement extend beyond December 31 of the fifth tax year. This Abatement also covers as Eligible Property those supplemental improvements to the Eligible Property that are added or constructed during the post -construction five (5) year period of Abatement. In no event, however, may the total Abatement period for the Eligible Property exceed the maximum seven (7) year Abatement period for the entire project as specified in this Agreement. C. The term of this Agreement continues for a period of five (5) years following expiration of the abatement period. All terms and conditions imposed upon the Owner continue in effect during the period, and the Owner is obligated specifically to continue the minimum employment levels specified in this Agreement. Any default is be subject to the provisions of Article VIII of this Agreement. V. TAXABILITY During the period that the Abatement is effective, taxes is payable as follows: 1. The value of the land comprising the Property is fully taxable. 2. The Base Year Value of existing Improvements comprising the Property is fully taxable. 3. The value of Ineligible Property is fully taxable. 4. The Added Value of Eligible Property is abated under Article VI of this Agreement. VI. AMOUNT OF ABATEMENT A. The Abatement provided by this Agreement is based upon improvements for a Renewal Community Facility -- residential multi -family housing, based upon the guidelines for a Central Business District Residential Facility. There is no job creation requirement. The percentage of tax abated for each dollar of Added Value is under the following schedule: Percentage of Abatement Construction Period (not to exceed 2 years) 100% Year 100% Year 2 100% TAX ABATEMENT AGREEMENT — 3612 Surfside-- Variance 11072008 4 Year 3 100% Year 4 100% Years 100% B. At the time of execution of this Agreement, the Owner reasonably estimates and represents to the City that the Added Value comprising permanent Improvements upon completion of the Construction Phase is: $16,000,000.00 ("Estimated Added Value"), of which $16,000,000.00 is eligible for tax abatement. C. In the event that upon completion of the Construction Phase, the Added Value of permanent Improvements, as determined by the Appraisal District, is at any time during the period of Abatement be less than eight -five percent (85%) of the Estimated Added Value, not due to circumstances beyond the control of Owner, the Owner agrees to pay, as additional taxes under this Agreement, an amount equal to the then current tax rate of the City applied to the difference between the Added Value from eighty-five percent (85%) of the Estimated Added Value, multiplied by 100%, minus the net percentage of Abatement provided under this Agreement. For the purposes of this provision, the term "circumstances beyond the control of Owner" includes casualty losses, national economic factors, shutdowns due to governmental regulations, strikes, acts of war; and the like. D. The formula for calculating the additional tax is outlined as follows: (Tax Rate) x [(85% of Est. Added Value - Actual AV) x (100% - Abatement%)] = Additional Tax. VII. CONTEMPLATED IMPROVEMENTS The contemplated improvements are set forth in the Project Description attached as Exhibit "A." During the Construction Phase, the Owner may make the change orders to the project that are reasonably necessary, provided that no the change order may be made that will change the qualification of the project as a "Facility" under the Guidelines and Criteria for Granting Tax Abatement approved by the City. All improvements must be completed under all applicable laws, ordinances, rules or regulations. During the term of this Agreement, use of the Property is limited to operation of the Facility described in the Project Description consistent with the general purpose of encouraging development or redevelopment of the zone during the period of this Agreement. VIII. EVENTS OF DEFAULT AND RECAPTURE A. Failure to Commence Operation During Term of Agreement. In the event that the Facility is not completed by the January 1 following the completion of construction, no TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 5 abatement is given for that tax year, and the full amount of taxes assessed against the property is due and payable for that tax year. In the event that the Owner fails to complete construction by the next January 1, then this Abatement Agreement terminates and all abated taxes during the period of construction are recaptured and must be paid within 60 days of the termination. B. Discontinuance of Operations During Term of Abatement. In the event the Facility is completed, but subsequently discontinues operations or the minimum number of permanent jobs is not maintained on any January 1 during the term of the Agreement after the completion of construction, for any reason except on a temporary basis due to fire, explosion, or other casualty, accident, or natural disaster, the Agreement may be terminated by the City, and all taxes previously abated by virtue of this Agreement are recaptured and must paid within 60 days of the termination. C. Delinquent Taxes. In the event that the Owner allows its ad valorem taxes to become delinquent or fails to timely and properly follow the legal procedures for their protest or contest, this Agreement terminates and the abatement of the taxes for the calendar year of the delinquency also terminates. The total taxes assessed without abatement for that calendar year must be paid within sixty (60) days from the date of termination. Penalty and interest do not begin to accrue on the additional amount of taxes due as the result of recapture under this provision until the first day of the month following the sixty (60) day notice, at which time penalty and interest accrues under the laws of the State of Texas. Penalty and interest on the amount of taxes originally levied based upon the Abatement begin to accrue as of the date the taxes were due under the laws of the State of Texas. D. Notice of Default. Should the City determine that the Owner is in default under the terms and conditions of this Agreement, City must notify the Owner that if the default is not cured within sixty (60) days from the date of the notice ("Cure Period"), then this Agreement may be terminated. In the event the Owner fails to cure the default during the Cure Period, this Agreement may be terminated and the taxes abated by virtue of the Agreement will be recaptured and must be paid as provided in this Agreement. E. Actual Added Value. Should the Nueces County Appraisal District determine that the total level of Added Value during any year of the term of this Agreement after completion of the Construction Phase is lower than the Estimated Added Value the that a lower percentage of Abatement is applicable, for each year during which an Abatement has been granted, the difference between the tax abated and the tax that should have been abated based upon the actual Added Value is determined by the City and must paid within 60 days of notification to the Owner of the determination. Penalty and interest does not begin to accrue upon the sum until the first day of the month following the sixty (60) day notice, at which time penalty and interest accrues under the laws of the State of Texas. TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 6 F. Reduction in Rollback Tax Rate. 1. If during any year of the period of Abatement any portion of the abated value is added to the current total value of the City, but is not treated as "new property value" (as defined in Section 26.012 (17) of the Texas Tax Code) for the purpose of establishing the "effective maintenance rate" in calculating the "rollback tax rate" under Section 26.04 (c) (2) of the Texas Tax Code and if the City's budget calculations indicate that a tax rate in excess of the "rollback tax rate" is required to fund the operations of the City for the succeeding year, then the City recaptures from the Owner a tax in an amount equal to the lesser of the following: (a) The amount of the taxes abated for that year by the City with respect to the Property. (b) The amount obtained by subtracting the rollback tax rate computed without the abated property value being treated as new property value from the rollback tax rate computed with the abated property value being treated as new property value and multiplying the difference by the total assessed value of the City. 2. If the City has granted an abatement of taxes to more than one taxpayer, then the amount of the recapture calculated under subparagraph (b) above is prorated on the basis of the value of the abatement with respect to each taxpayer. 3. This event does not constitute a "default" under this Agreement, and the sixty (60) day Cure Period provided above does not apply. The recaptured taxes must be paid within thirty (30) days after notice of the rollback in tax rate has been given to the Owner. Penalty and interest do not begin to accrue upon the sum until the first day of the month following the thirty (30) day notice, at which time penalty and interest accrue under the laws of the State of Texas. G. Continuation of Tax Lien. 1. The amount of tax abated each year under the terms of this Agreement is secured by a first and prior tax lien, which continue in existence from year to year until the time as this Agreement between the City and Owner is fully performed by Owner, or until all taxes, whether assessed or recaptured, are paid in full. H. City Council Reserves Right to Terminate or Modify Agreement. In the event of any default by Owner, the City Council reserves the right to terminate or modify this Agreement. 1. Owner's right to appeal. 1. Owner must be afforded written notice of the default and the opportunity to cure as provided above. TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 7 2. If Owner believes the action was improper, Owner may file an appeal in Nueces County district court within sixty (60) days after written notice of the action by the City. 3. Owner shall remit to the City, within the 60 -day period, any additional or recaptured taxes levied under the payment provisions of Texas Tax Code § 42.08. 4. If the final determination of the appeal increases Owner's tax liability above the amount paid, Owner shall remit the additional tax under Tax Code § 42.42. 5. If the final determination of the appeal decreases Owner's tax liability, the City will refund the Owner the difference between the amount of tax paid and the amount of tax for which Owner is liable under Tax Code § 42.43. IX. ADMINISTRATION A. Inspections. The Owner shall allow employees and/or representatives of the City to have access to the Property during the term of this Agreement to inspect the Facility to determine compliance with the terms and conditions of this Agreement. All inspections will be made only after the giving of twenty-four (24) hours prior notice, and conducted in the manner as to not unreasonably interfere with the construction or operation of the Facility. All inspections must be made with one or more representatives of the Owner and under Owner's safety standards. B. Appraisals. 1. The Chief Appraiser of the Nueces County Appraisal District annually determines: (a) The taxable value of the real and personal property comprising the Property taking into consideration the Abatement provided by this Agreement. (b) The full taxable value without Abatement of the real and personal property comprising the Property. 2. The Chief Appraiser records both the abated taxable value and the full taxable value in the appraisal records. 3. The full taxable value figure listed in the appraisal records is used to compute the amount of abated taxes that are required to be recaptured and paid in the event this Agreement is terminated in a manner that results in recapture. 4. Each year the Owner shall furnish the Chief Appraiser with the information outlined in Chapter 22, Texas Tax Code, as amended, as may be necessary for the administration of the Agreement specified in this Agreement. TAX ABATEMENT AGREEMENT -- 3612 Surfside— Variance 11072008 8 C. Annual Reports. 1. Owner shall certify to the governing body of the City on or before April 1 each year that the Owner is in compliance with each applicable term of this Agreement. 2. Additionally, during the initial four years of the term of property tax abatement, Owner shall provide to the City an annual report covering those items listed on Schedule I attached to this Agreement in order to document the efforts of the Owner to acquire goods and services on a local basis. 3. The annual report is prepared on a calendar year basis and is submitted to the City no later than ninety (90) days following the end of each the calendar year. 4. The annual report is accompanied by an audit letter prepared by an independent accounting firm which has reviewed the report. 5. The copies of the four prior quarterly IRS 941 returns must be provided to verify employment D. "Buy Local" Provision. 1. The Owner shall give preference and priority to local manufacturers, suppliers, contractors, and labor, except where not reasonably possible to do so without added expense, substantial inconvenience, or sacrifice in operating efficiency. 2. In the case of an exception involving a purchase over $10,000.00, the justification for the purchase must be included in the annual report. 3. The Owner further acknowledges that it is a legal and moral obligation of persons receiving property tax abatements to favor local manufacturers, suppliers, contractors, and labor, all other factors being equal. 4. For the purposes of this provision, the term "local" as used to describe manufacturers, suppliers, contractors, and labor includes firms, businesses, and persons who reside in or maintain an office in either Nueces County or San Patricio County. 5. In the event of a breach of the buy local provision, the percentage of abatement is proportionately reduced — to the amount the disqualified contract bears to the total construction cost for the project. X. ASSIGNMENT A. The Owner may assign this Agreement to any one or more corporation(s), 50% or more of the outstanding voting securities of which are owned, directly or indirectly, by TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 9 one of the Owners, or any partnership(s) or limited partnership(s) in which an Owner, or a subsidiary of an Owner, is a general partner. B. The Owner may assign this Agreement to any other new owner or lessee of the Facility with the prior written consent of the City, which consent may not be unreasonably withheld. C. Any assignment must provide that the assignee shall irrevocably and unconditionally assume all the duties and obligations of the assignor and become the Owner upon the same terms and conditions as set out in this Agreement. D. In the event more than one entity is Owner under this Agreement, the obligations of the entities is joint and several. E. Any assignment of this Agreement is to an entity that must provide substantially the same improvements to the Property, except to the extent the improvements have been completed. F. No assignment is approved if the Owner or any assignee is indebted to the City for ad valorem taxes or other obligations. XI. NOTICES A. Any notice required to be given under the provisions of this Agreement must be in writing and are duly served when deposited, with the proper postage prepaid, and registered or certified, return receipt requested, with the United States Postal Service, addressed to the City or Owner at the addresses listed below. B. If mailed, any notice or communication is deemed to be received three days after the date of deposit in the United States Mail. Unless otherwise provided in this Agreement, all notices is delivered to the following addresses: To the City: To the Owner: CITY OF CORPUS CHRISTI 1201 Leopard Street P. 0. Box 9277 Corpus Christi, Texas 78469 Attn: City Manager Transcontinental Realty Investors, Inc. 1800 Valley View Lane, Suite 300 Dallas, Texas 75234 Attn: Vice President of Residential Construction C. Either party may designate a different address by giving the other party ten days" written notice. This Agreement has been executed by the parties in multiple originals or counterparts, each having full force and effect. TAX ABATEMENT AGREEMENT-- 3612 Surfside-- Variance 11072008 10 Executed this day of , 2008. ATTEST: CITY OF CORPUS CHRISTI, TEXAS By: By: Armando Chapa 'Angel R. Escobar City Secretary Interim City Manager APPROVED AS TO FORM: By: R. Jay Reining First Assistant City Attorney For City Attorney OWNER: TRANSCONTINENTAL REALTY INVESTORS, INC. By: Al Crozier Vice President of Residential Construction STATE OF TEXAS COUNTY OF ACKNOWLEDGMENT KNOW ALL BY THESE PRESENTS This instrument was acknowledged before me on , 2008, by Al Crozier, Executive Vice President of Residential Construction, Transcontinental Realty Investors, Inc., a Nevada corporation, on behalf of the corporation. NOTARY PUBLIC, State of Texas TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 11 SCHEDULE 1 "Buy Local" Annual Reports The following information is reported to the City on a calendar -year basis during the first four years of the tax abatement program: 1. Dollar amount spent for materials* (local). 2. Dollar amount spent for materials (total). 3. Dollar amount spent for labor** (local). 4. Dollar amount spent for labor** (total). 5. Number of jobs created in the construction project (local). 6. Number of jobs created in the construction project (total). 7. Number of jobs created on a permanent basis (local). 8. Number of jobs created on a permanent basis (total). * "Materials" are defined to include all materials used in excavation, site improvement, demolition, concrete, structural steel, fire proofing, piping, electrical, instruments, paintings and scaffolding, insulation, temporary construction facilities, supplies, equipment rental in construction, small tools and consumables. This term does not include major items of machinery and equipment not readily -available locally. ** "Labor" is defined to include all labor in connection with the excavation, site improvement, demolition, concrete construction, structural steel, fire proofing, equipment placement, piping, electrical, instruments, painting and scaffolding, insulation, construction services, craft benefits, payroll burdens, and related labor expenses. This term does not include engineering services in connection with the project design. The term 'local" as used to describe manufacturers, suppliers, contractors and labor shall include firms, businesses, and persons who reside in or maintain an office in either Nueces County or San Patricio County. TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 12 Exhibit A Project Plan CALAIS ON CORPUS BAY The project to be developed is located on 4.46 acres in North Beach at 3612 Surfside. The project will be a 232 unit luxury Class "A" apartment community with parking on the ground level under the building and 3 stories of residences for a total of four stories, a leasing center and amenities above the garage level including a spectacular pool and amenity deck facing the Bay and Beach. Covered parking on the first level will number approximately 410 spaces, which is more than adequate for the proposed project. An additional 83 open parking spaces will be provided on the site. The site having beachfront exposure will offer unique water front living and an extremely easy commute to the Central Business district or the abundant employment centers surrounding the location. The mix will contain 151 one bedroom one bath and 81 two- bedroom two -bath units. The approximate net rentable area will be 188,000 square feet. Two conveniently located elevators will service the upper floors. The amenity package will include a fitness facility, business center and great room and leasing center overlooking the Bay and the Pool deck. Construction will take 14 to 18 months to complete. The owner, Transcontinental Realty Investors, Inc., who currently own and manage over 20,000 units nationwide, will provide Onsite management. Transcontinental Realty Investors is an externally advised and managed real estate investment company that owns a diverse portfolio of income-producing properties and land held for development. The Company's portfolio of income-producing properties includes residential apartment communities, office buildings, hotels and other commercial properties. Transcontinental Realty Investors' investment strategy includes acquiring existing income-producing properties, as well as developing new properties on land already owned or acquired for a specific development project. Transcontinental Realty Investors acquires land primarily in urban in -fill locations or high-growth suburban markets. Transcontinental Realty Investors are an active buyer and seller. During 2008, Transcontinental Realty Investors acquired over $78.4 million and sold over $163.0 million of land and income-producing properties. As of June 30, 2008, the Company owned approximately 9,356 units in 48 residential apartment communities and 27 commercial properties of approximately 5.4 million rentable square feet. In addition, Transcontinental Realty Investors own over 6,325 acres of land held for development and 13 projects under construction. Attached are some schematic drawings and property descriptions. TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 13 EXHIBIT B PROPERTY DESCRIPTION 3612 Surfside Boulevard, Corpus Christi, Nueces County, Texas. Legal description Lot 7A, Corpus Beach Hotel Addition. TAX ABATEMENT AGREEMENT -- 3612 Surfside-- Variance 11072008 14