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HomeMy WebLinkAboutC2010-434 - 10/19/2010 - NAAMENDED MEMORANDUM OF UNDERSTANDING BETWEEN THE CORPUS CHRISTI HOUSING FINANCE CORPORATION AND NRP HOLDINGS LLC COSTA TARRAGONA I I This Amended Memorandum of Understanding {the "MOU") is between the Corpus Christi Housing Finance Corporation ("CCHFC"), a Texas housing finance corporation, and NRP Holdings, LLC ("NRP"}, an Ohio limited liability company, amends and replaces that prior Memorandum of Understanding between the parties dated January 20, 2009, and is dated effective as of October 26, 2010. NRP is a developer of affordable housing in the State of Texas. CCHFC is a Texas housing finance corporation whose mission is to provide safe, decent and sanitary housing for low-to-moderate income persons. NRP and CCHFC already have completed Costa Tarragona I and hereby agree to work cooperatively to develop affordable housing at the following location, in accordance with the terms of this MOU: Costa Tarragona II, being a 96-unit multifamily development to be located adjacent to Costa Tarragona I at the southeast corner of the intersection of North Padre Island Drive and Interstate Highway 37 in Corpus Christi, Texas (the "Project"), In order to accomplish this purpose, the parties agree as follows: AGREEMENTS: A. Liability and Hold Harmless Agreements. 1. All parties agree that there shall be absolutely nothing in this MOU or any other agreement concerning this property that will give rise to a charge against the general credit or taxing powers of the City of Corpus Christi nor shall this MOU be anything other than a limited obligation of the CCHFC, limited solely to the CCHFC's interest in the Project. 2. NRP has applied for HOME funds from the City of Corpus Christi and it is anticipated that the City's standard HOME funds contract will be utilized for the Project. The HOME funds contract shall become a covenant rurnung with the land. The parties acknowledge that the approval of any HOME funds for the Project is subject to compliance with alI terms of the request .for proposals solicited by the City of Corpus Christi and the award of funds by the City Council. Nothing herein shall create an obligation of the City to award any HOME funds for the Project. 2010-434 10/19/10 NRP Holdings I~VC~EX~D 10113120I0 3. NRP will put in place or cause to 6e put in place guarantees, sureties or other agreements acceptable to the CCHFC to hold the .CCHFC andlor its affiliate harmless with regard to any liability arising from the project in any amount in excess of the interests the CCHFC or its affiliate has in the project. B. Ownership Structure. 1. Costa Tarragona II, Ltd. (the "Partnership") has been formed for the purpose of owning the Project. Asingle-purpose entity that is an affiliate of CCHFC has been admitted into the Partnership as the sole general partner (the "General Partner"). 2. NRP may designate an afflliate to serve as a special limited partner of the Partnership (the "Class B LF"), with certain oversight and approval rights. 3. The duties, oversight and approval rights of the General Partner and the Class B LP shall be set forth in a limited partnership agreement (the "Partnership Agreement") to be entered into among the General Partner, the Class B LP, and an equity investor, as the limited partner. The General Partner shall have the right to approve the Partnership Agreement at is sole discretion. 4. Title to the land for the Project shall be taken in CCHFC, and CCHFC shall then enter into along-term Ground Lease far a period of two years longer than the term of the mortgage loan, with the Partnership as tenant with an interest in the improvements that constitute the Project. Funding for the acquisition of the land will come from the financing of the Project, and shall be paid to CCHFC in the form of an up- front Ground Lease payment. Upon termination of the Ground Lease, ownership of the improvements constituting the Project shall revert to CCHFC. The terms and provisions of the Ground Lease will be negotiated between NRP and the CCHFC. C. Due Dili ence As a condition to CCHFC's participation with the Project, CCHFC requires NRP to provide due diligence information on the Project and its proposed financing and operations. NRP shall deliver the due diligence items on a checklist {the "Checklist") at the times indicated on the Checklist. D. Financing. 1. The Partnership has been awarded $1,333,459 in low income housing tax credits ("Tax Credits") from the Texas Department of Housing and Community Affairs {"TDHCA"}. The parties anticipate that an affiliate of a to-be-determined equity provider {the "Investor LP") will provide equity financing for the Project (the "Equity") in return for an allocation of the Tax Credits. CCHFC shall have the right to review and approve the financing arrangements and the terms and conditions of any Equity financing documents. The Equity financing documents are expected to include the Partnership 2 10113!2010 Agreement. The Class B LP shall prepare, and CCHFC shall review, each draw request submitted to the Investor LP for Equity. 2. NRP shall have the right to designate an affiliate of NRP to purchase the credits and become the Investor LP, provided that the price of the Equity shall be no less than such amount to put the Partnership in the same net profit position as indicated in the application for the Tax Credits. 3. Additional funding of $500,000 has been awarded from TDHCA in HOME Funds, additional funding of $777,964 has been awarded from the City of Corpus Christi HOME Fund Program, and an interim loan commitment of $222,036 has been received from the Capital Area Housing Finance Corporation. CCHFC shall have the right to review and approve all financing arrangements and terms and conditions of any loan documents in its sale discretion. The loan documents shall be amended to accommodate the Ground Lease described above and any other revisions requested by CCHFC or as may be appropriate to implement the terms of this MOU. NRP shall be responsible for applying for all interim and permanent financing for the Partnership. CCHFC shall have the right to review and approve the identity of the permanent lender and the terms of all financing arrangements in its sole discretion. A commitment for permanent financing acceptable to CCHFC shall be in .place prior to Closing (as hereinafter defined.) 4. NRP shall provide any guarantees of construction completion, operating expenses, Tax Credit delivery, and the like that maybe required in conjunction with any loan financing, the Equity financing, or the.recitals above. E. Design and Construction. 1. NRP shall provide comprehensive development services to the Partnership pursuant to a Development Agreement to be entered into by the Partnership and NRP. The General Partner shall have the right of approval of the Development Agreement in its sole discretion. 2. NRP has provided CCHFC a detailed development budget for the Project and shall provide a detailed final development budget that is in conformance with the MOU. 3. NRP shall be responsible far obtaining the services of design professionals for the design of the site plan and design of the project. CCHFC will be provided copies of the final plans and specifications for the Project, including all construction contracts. 4. In order to secure an exemption from state sales tax for the acquisition of building materials, CCHFC shall serve as the general contractor and enter into a master subcontractor agreement with the Partnership. The master subcontractor will be NRP Contractors LLC ("NRPC"}, an affiliate of NRP. Any fee payable to NRPC shall be a Partnership expense of the Partnership. NRPC's prafit shall reflect a typical 6-2-6 construction profit in addition to unused contingency and cost savings. NRP shall provide the Partnership a standard AlA form Fixed Price contract in an amount and 3 10/13/2010 otherwise on terms and conditions acceptable to all parties, each acting reasonably, and shall provide such guarantees, sureties or agreements acceptable to the CCHFC to hold the CCHFC and its affiliate harmless from any cause of action during construction. Notwithstanding anything herein to the contrary, NRP has the sole responsibility for securing such sales tax exemption, however, the CCHFC will make a good faith effort to satisfy reasonable requests from NRP in connection. with securing such sales tax exemption. 5. NRP shall be responsible for obtaining all governmental approvals and permits needed in order to construct and operate the Project. 6. NRP shall guarantee to the Partnership, the Investor LP and any lender, delivery of the Project on time and within the approved budget (as it may be amended or revised from time to time with appropriate approvals). CCHFC or its affiliate shall have the right to review and approve any material change orders or any material changes in the scope of work or plans and specifications during construction. 7. The Project shall be constructed so as to comply with ADA and Section 504 requirements, as applicable under federal and state law. F. Management; Operation; Accorrntin~. 1. NRP Management LLC or such other NRP designated affiliate shall serve as the property manager ("Manager") for the Project under the terms and conditions as defined in a separate Property Management Agreement, which must be in form and substance acceptable to the parties, each acting reasonably. The amount of the Management Fee shall be the greater of Thirty-Five Dollars ($3S) per unit per month or five percent {S%) of effective gross income and paid as outlined in the Property Management Agreement. An additional Three Hundred Dollars ($300) per month administrative fee will be paid to Manager following project stabilization. Because the Project consists of new construction, prior to the receipt of a Certificate of Occupancy for the first residential building, the Manager will be compensated by monthly fees equal to Twenty ($20) per unit commencing with the first complete month after the first Froject employee commences to work at the Project, provided such date is typical for when an employee would commence working at similar projects. Manager shall further be entitled to receive aTwenty-Five Thousand $25,000) property set-up fee payable no later than the first {ls1} anniversary of the start of construction.. 2. Manager shall identify providers of the amenities and services to the Property, including, but not Iimited to, laundry machines, vending machines, cable television, Internet and phone services, and utility providers. CCHFC shall have the right to review and approve providers of such services and the terms of any agreements related to such services. 3. Keystone Services, LLC {"Keystone"), an affiliate of NPR, shall provide accounting services {including but not limited to booldceeping, cost certification, carryover, 10% test, preparing tax returns, monitoring reporting requirements, processing 4 zoizo~zoia construction loan draws and change orders) to the Project until the later of: (i} conversion to the Permanent Loan; {ii} receipt of the final installment of the Equity Financing; and (iii) receipt of Form 8609. Keystone shall receive a fee from the Partnership of Fifteen Thousand Dollars ($15,000} per year for such services, prorated for any partial year. G. Supportive Services. So long as Manager is the property manager for the Project, Manager shall be responsible for coordinating, providing and monitoring supportive services for the residents of the Project during the Tax ~ Credit compliance period within the budget available in the operating budget far the Project. CCHFC shall have the right to review and approve the supportive services plan. The scope of the supportive services shall be consistent with the services described and committed to in the application to TDHCA far the Credits and the fee shall be consistent with that set forth in the budget indicated with the application. H. Community Support. N1tP shall be responsible for interfacing with the local governmental officials in connection with support for the Project. The parties will consult with each other and coordinate the response to any media inquiries and/or public opposition to the Project that may arise. Tax Exemption. The ownership structure contemplated herein is expected to generate ad valorem tax exemption for the Project. CCHFC, on behalf of the Partnership, shall work with the applicable appraisal district to obtain confirmation of the availability of such exemption. Nevertheless, the Partnership shall agree to make payments in lieu of taxes to the appropriate taxing jurisdiction at a level negotiated by the CCHFC and NRP based upon the availability of funds in the final operating budget for the Project. J. Fees and Expenses. 1. As consideration for the development services to the Partnership in connection with the construction of the Project, the Partnership shall in accordance with the Partnership Agreement, pay a fee (the "Developer Fee") of up to $1,548,000 or such maximum amount as may be permitted by all applicable laws, rules and regulations including those of lender, which Developer Fee shall include any of such Developer's overhead charged to the Project. Since the Project is fnanced through 9% Tax Credits, the CCHFC will be the "Developer" (as such term is defined in the QAP} and will receive 30% of the Developer Fee available for such Project. NRP will be a Co-Developer and receive 70% of the Developer Fee available for such Project. The parties acknowledge that, pursuant to Section 49.6(d) of the QAP, NRP may not serve as Developer of 9% Tax Credit projects receiving an allocation of Tax Credits of more than $2 million in the aggregate in the 2010 application round (the "Credit Cap"). 5 0/l3/2D10 2. The General Partner and the Class B LP each shall be entitled to a Partnership Management Fee in the amount of $5,000 per year, payable from the Partnership's net cash flow, as provided in the Partnership Agreement 3. The General Partner may be entitled to receive other fees or priority distributions for its services in such capacity. Such amounts shall be payable from the Partnership's net cash flow, solely after payment of Developer Fee in full. The General Partner shall share 50% of any amount so received with the Class B LP. 4. After payment of the Developer Fee, the General Partner's fee, if any, and any other priority net cash flow payments established in the Partnership Agreement, the General Partner and the Class B LP shall split any remaining net cash flow distribution to them on a 50150 basis. 5. Neither party shall enter into any contractual relationship or agreement relating to the Project that would cause either financial or legal liability to the other, without the other party's prior written consent. K. Long Term Ownership. At the end of the 15-year Tax Credit compliance period, the General Partner, CCHFC, or their designated affiliate shall have a right of first refusal to acquire the Project. In addition, at the end of the 15-year Tax Credit compliance period, the General Partner shall have an option to acquire the interests of the Investor LP and the Class B LP. The purchase price for the right of first refusal or the option shall be fair market value, based on an appraisal performed by an appraiser mutually agreed to by the General and Class B LP Partners. The parties agree that any sale or refinancing proceeds shall be split between CCHFC and the Class B LP on a 50150 basis. L. Miscellaneous. 1. This MOU reflects the entire understanding between the parties and may only be amended by CCHFC or NRP in writing, signed by both parties. 2. Each party hereto is prohibited from assigning any of its interests, benefits or responsibilities hereunder to any third party or related third party, without the prior written consent of the other party, such consent not to be unreasonably withheld. 3. CCHFC's execution of this MOU is subject to approval by CCHFC's Board of Directors. 4. The parties agree to execute such documents and do such things as maybe necessary or appropriate to facilitate the development of the Project and the consummation of their agreement herein. 6 10/13/2010 5. This MOU may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one agreement binding on aiI parties hereto, notwithstanding that all the parties shall not have signed the same counterpart. 6. THIS MOU SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, EXCLUSIVE OF CONFLICT OF LAWS PRINCIPLES. 7. In case any one or more of the provisions contained in this MOU for any reason are held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision hereof, and this MOU will be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 8. The parties hereto submit exclusively to the jurisdiction of the state and federal courts of Nueces County, Texas, and venue -for any cause of action arising hereunder shall lie exclusively in the state and federal courts of Nueces County, Texas. 9. Should any part employ an attorney or attorneys to enforce any of the provisions hereof, to protect its interest in any manner arising under this MOU, or to recover damages for the breach of this MOU, the nan-prevailing party in any action pursued in courts of competent jurisdiction (the finality of which is not legally contested agrees to pay to the prevailing party all reasonable costs, damages and expenses, including specifically, but without implied limitation, attorneys' fees, expended or incurred by the prevailing party in connection therewith. The liability of the CCHFC and/or its designated affiliate is strictly limited to its interests in the Project under the terms of this MOU. 10. The subject headings contained in this MOU are for reference purposes only and do not affect in any way the meaning or interpretation hereof. 11. This MOU shall continue until terminated upon the occurrence of one of the following conditions: {i) CCHFC and NRP sign a mutual consent to terminate this Agreement; (ii} The transactions contemplated hereby are not closed by December 31, 2011; {iii) The terms of the Loan and Equity financing (including the permanent loan commitment} for the Project are unacceptable to CCHFC, in its sole discretion, and CCHFC provides NRP notice of such fact and a 30-day opportunity to provide financing terms that are acceptable to CCHFC and NRP; (iv} Unless otherwise waived, NRP fails to deliver Checklist items as 7 ]0/l3/2010 required herein; (v} Either party breaches its obligations under this MOU, the non- binding party provides the breaching party notice of such fact and a 15-day opportunity to cure, and the breaching party fails to do so; or {vi} Either party files for bankruptcy protection, makes an assignment for the benefit of creditors, has a receiver appointed as to its assets ar generally becomes insolvent. Upon termination of this MOU for any of the reason cited above, neither party shall have any ongoing obligation to the other with respect to this MOU and the Project. In addition, the provisions of this MOU with respect to the Project will be terminated and suspended when the General Partner is admitted to the Partnership Agreement and CCHFC and NRP and their affiliates, as applicable, enter into definitive agreements with respect to the governance of the Partnership and the development, construction, financing, and operation of the Project as contemplated herein. All parties acknowledge that the various terms and provisions in this MOU shall he incorporate into the Partnership Agreement and the other definitive agreements. 12. The parties aclcnowiedge that the CCHFC and the General Partner will be represented in this transaction by Wood, Boykin & Wolter, P.C. ("CCHFC Counsel") and the Partnership will be represented in this transaction by separate counsel agreed upon by the parties ("Partnership Counsel"). All costs of CCHFC Counsel and Partnership Counsel will be considered costs of the Project and paid as provided herein. NRP, the Class B LP, and their affiliates will be represented by separate counsel and will not be entitled to rely on Partnership Counsel for representation in this matter. EXECUTED to be effective as of the date above shown. CORPUS CHRISTI HOUSING FINANCE CORPORATION r By: ` 1 R. Escobar eneral Manager NRP HOLDINGS LLC By: N e: r~ul c~ ~ f_.r Ti ~111'pha i ~~ * .-- '~~ ~~ wrprr MV ~ r1 UkFlic~ g ~' t;~1ilfCll l `~ ~ ~ ~ ..r..ip +.~~ 3fCCR@l'R6tY