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HomeMy WebLinkAboutC08-241R E D P E A K P R O P E R T I E S August 11, 2008 VIA E-MAIL AND REGULAR MAIL Mr. Bryan Treu, County Attorney Eagle County 500 Broadway, PO Box 850 Eagle, CO 81631 Re: Proposal to Purchase Lake Creek Village Apartments Dear Bryan: This Letter of Intent ("LOI") serves to memorialize the general terms for the proposed purchase of Lake Creek Village Apartments (the "Property") by RedPeak Properties, LLC, a Delaware Limited Liability Company ("RedPeak" or "Buyer"), from Eagle County, Colorado, a body corporate and politic ("Eagle County"). Eagle County proposes to exercise its right to acquire the Property from Lake Creek Affordable Housing Corporation (the "Corporation") in connection with defeasance of the existing bonds (the "Bonds") described in Eagle County's Request for Proposal dated April, 2008 (the "RFP") and then to convey the Property to Buyer. All costs and expenses relating to the acquisition of marketable title to the Property will be the responsibility of Eagle County. It is anticipated that the transaction will be structured as a ground lease between the Eagle County Housing Authority (the "Authority"), as lessor (and transferee of the Property), and Buyer, as lessee, subject to the Master Covenant for the Occupancy and Resale of Lake Creek Village Apartments (the "Master Covenant") attached to the RFP and with a 1% or other nominal ownership interest (the "Interest") in the lessee entity being conveyed to the Authority, all in form and substance mutually acceptable to RedPeak and Eagle County. Neither Eagle County nor the Authority will be required to pay any financial compensation to Buyer for the Interest, nor shall Buyer receive arly credit against the Purchase Price for the Interest. This LOI is being submitted in conjunction with Red Peak's response to the RFP described above. The completed Proposal Form and related questionnaires, forms and addenda with references to Attachments in the order described in Eagle County's Proposal Form, have been submitted to Eagle County by Buyer. The purpose of this LOI is to provide the general terms and conditions under which RedPeak and Eagle County may enter into an agreement to purchase the Property, including the land, web- sites, and all personal property related to the operation of the Property located thereon, and any rights, benefits, or intangibles owned or used by Eagle County in connection with the operation of A #1344423 v8 1600 GLENARM PLACE, SUITE 2.00 DENVER, CO 801.02 303-32.I-PEAK (73~5~ 3~3-3L1-7305 FAx WWW.REDPEAK.COM the Property (including tenant ledgers, rent roll data, etc.). Red Peak and Eagle County hereby agree that the general terms to sale and purchase of the Property are as follows: 1. PROPERTY: An income-qualified 270-unit apartment community comprised of thirty-four (34) 2-story apartment buildings, related garage buildings and other improvements on approximately 30 acres, located in Edwards, Colorado. 2. PURCHASE PRICE: The Purchase Price for the Property shall be $53,000,000 (less any applicable credits or pro-rations, but only as expressly provided for herein). 3. LOAN AND DEFEASANCE Buyer agrees to provide a loan to Eagle County in an OF THE BONDS: amount necessary to defense the Bonds (but such amount shall not exceed the Purchase Price). Such loan will be made and paid off concurrently with the closing of the proposed transaction described herein. The terms and conditions of the loan shall be further negotiated by Eagle County and Buyer in connection with the negotiation of the Draft Purchase Agreement (as defined below). 4. DUE DILIGENCE Buyer shall have a forty-five (45) day period of time after INVESTIGATIONS: mutual execution of this LOI (the "Investigation Period") to investigate all matters related to the Property. Eagle County will direct the current management company for the Property, Corum Real Estate Group ("Corum"), to provide Buyer with the due diligence materials listed on Exhibit A attached hereto which are in the possession or control of Corum, Eagle County or the Corporation (to the extent applicable) within three (3) business days after the date of this LOI and any other documents or materials relating to the Property that are in the possession or control of Corum, Eagle County or the Corporation that are reasonably requested by RedPeak. In addition, Buyer is authorized to contact Corum directly relating to such materials. Buyer acknowledges that Eagle County is not presently in title to the Property and does not have or separately maintain the materials listed in such Exhibit but Eagle County agrees to use commercially reasonably efforts to cause the Corum and the Corporation to provide such materials. 5. FINANCING There is NO financing contingency. RedPeak is an ALL- CONTINGENCY: CASH buyer. 6. TITLE COMPANY: The Title Company shall be Stewart Title Company, 97 Main Street, Suite W-201, Edwards, CO 81632. 7. CLOSING COSTS, Closing costs, credits, surveys and prorations will be on CREDITS, SURVEYS AND customary terms and conditions to be negotiated between PROBATIONS: Eagle County and RedPeak and included in the Draft Purchase Agreement. -2- #1344423 v8 8. RIGHT OF ENTRY: Buyer will have the right to enter the Property pursuant to the teens and conditions of that certain Access and Indemnity Agreement by and between Buyer and the Corporation dated July 14, 2008 (the "Access Agreement"). 9. CLOSING: The anticipated Closing date under the Draft Purchase Agreement will occur within thirty (30) calendar days following the expiration of the Investigation Period or as otherwise mutually agreed to by the parties. The Closing of the transaction will be by escrow pursuant to escrow instructions to the Title Company mutually satisfactory to the parties and pursuant to which all documents and funds required by the Draft Purchase Agreement to consummate the transactions contemplated thereby will be delivered to the Title Company to be held in escrow until upon payment in full of the Bonds (and any other monetary encumbrances) out of the sale proceeds and transfer of the Property from the Corporation to Eagle County. At such time the Title Company will release the escrow and complete the Closing of the transaction. The Draft Purchase Agreement will set forth in further detail a description of the required logistics for Closing and defeasing the Bonds. 10. PREPARATION OF DRAFT Within ten (10) business days of mutual execution of this PURCHASE AGREEMENT: LOI, Buyer shall deliver a draft of a proposed purchase and sale agreement (the "Draft Purchase Agreement"), which shall embody the points set forth herein, the RFP, the Master Covenant and the Joint Ownership Agreement, and any other requirements of Buyer, Eagle County and their respective legal counsel that each may deem necessary. 11. REPRESENTATIONS AND The Property shall be sold "as is" with only mutually WARRANTIES: acceptable representations or warranties. 12. COMMISSIONS: Buyer and Eagle County represent and warrant to each other that no real estate commissions, finders' fees or brokers' fees have been or will be incurred in connection with the sale of the Property. 13. TAX MATTERS: Eagle County and Buyer will work together to obtain adequate assurances as determined by Buyer in its sole discretion that the Property will be exempt from taxes after the Closing so long as Buyer complies with the terms and conditions of the Master Covenant. 14. MISCELLANEOUS: This LOI may be executed in a number of counterparts, which when executed by the parties shall be deemed to be one LOI. Evidence of execution will be acceptable by tele- facsimile transmission or by a-mail. #1344423 v8 - 3 15. RENT RESTRICTIONS: The Maximum Rent as defined in Section 5.2 of the Master Covenant attached as Exhibit B to the RFP shall be amended to provide that RedPeak will be granted the option to increase Maximum Rent at a rate of 1 %AMI for each $300,000 of Capital Expenditures it invests in the Property up to a maximum of $1.5 million (5 AMI percentage points). The increase in AMI may go into effect no earlier than the 6th year of RedPeak's ownership. Additionally, the Master Covenant shall be amended to provide for both of the following options in the event that taxes are levied against Property: (a) an increase in the Maximum Rent if favorable tax treatment related to providing affordable rental housing at the Property is lost or diminished or (b) Eagle County to compensate the owner of the Property in an amount equal to the tax liability in which case the Maximum Rent shall remain unchanged. The increase in Maximum Rent described in (a) above shall be commensurate with the resulting increase in tax liability, subject to further negotiation of the exact terms and circumstances of such increase. Eagle County shall have the option to select either (a) or (b) in the event that taxes are levied against the Property. If Eagle County does not elect option (b), option (a) shall automatically take effect. Additionally, the parties will modify the Master Covenant so as to (i) include only the two (2) highest income earners in a given Household in calculating the "Gross Household Income" cap and (ii) to provide that any tenants at the Property as of the Closing (as defined above) shall be deemed compliant with the occupancy restrictions set forth in the Master Covenant and shall not be considered in violation of the Master Covenant regardless of their income as of such date. I6. PROPERTY RedPeak's affiliate, RedPeak Management, LLC, will be the MANAGEMENT: Property Manager of the asset and Gerry Flynn at PolarStar Properties will assist in transition issues, local vendor procurement and general support for property management functions. RedPeak intends to employ local vendors where possible and to become very engaged in local industry issues. All employees at the Property will be required to pass drug testing and criminal background checks. RedPeak shall conduct surveys of existing residents as well as large employers in the area to determine resident and employer needs on a go-forward basis. This market research will be used to establish a pricing and upgrade plan for the Property, subject to and in accordance with the Master Covenant and Paragraph 15 hereof. -4- #1344423 v8 17. BOARD RATIFICATION: RedPeak understands that execution of this LOI by the below-named signatory on behalf of the County must be approved and ratified by affirmative motion of the Eagle County Board of County Commissioners (the "Board") at a regularly scheduled and public meeting. Subject to Paragraph 18 below, such approval by the Board shall not change the non-binding nature of this LOI. Upon mutual execution of this LOI by Eagle County and RedPeak, Eagle County shall schedule a public hearing within (10) business days thereafter for approval and ratification by the Board. Unless such approval and ratification is received within such ten (10) day period, this LOI shall be null and void, unless such date is extended by the parties. RedPeak also understands that any proposed purchase agreement between the parties must be approved and ratified by affirmative motion of the Board at a regularly scheduled and public meeting and that it will not become effective until such approval and ratification is received. 18. DUE DILIGENCE COSTS In the event that Eagle County sells, leases or otherwise AND EXPENSES: conveys the Property to another buyer for a higher price, Eagle County agrees to reimburse Buyer for all of its documented third-party out-of-pocket costs and expenses incurred by Buyer in connection with due diligence and financing related to the Property ("Due Diligence Expenses"), but only up to a maximum of $250,000 and provided that Eagle County shall not be obligated to reimburse Buyer for any such costs or expenses in the event that (a) Buyer fails to provide the loan described in Paragraph 3 above on the scheduled Closing date in connection with a sale of the Property to Buyer, (b) the Board does not ratify and approve this LOI as provided in Paragraph 17 at the meeting scheduled for such purpose, (c) this LOI becomes null and void pursuant to Paragraph 17 above, (d) Buyer for any reason breaks off negotiations with Eagle County relating to the purchase of the Property or elects for any reason not to proceed with the proposed purchase, (e) the parties are unable in good faith to agree upon the terms and conditions of a mutually satisfactory Draft Purchase Agreement, (f) the parties mutually agree to discontinue their negotiations relating to the purchase and sale of the Property, or (g) Eagle County is unable to defease the Bonds and take title to the Property as described herein. Additionally, Buyer agrees to allow Eagle County to review and audit its Due Diligence Expense in connection with a claim by Buyer to recover such expenses pursuant to this paragraph. Notwithstanding the non-binding nature of this LOI, upon approval and ratification by the Board as provided in Paragraph 17, this Paragraph 18 shall be binding -5- #1344423 v8 on the parties for a period of six (6) months after such approval and ratification, after which time this paragraph shall be of no further force and effect. This LOI is a list of proposed points that may or may not become part of an executed contract. It is not based on any agreement between the parties. Except as set forth in the Access Agreement, RedPeak and Eagle County understand and acknowledge that no legal obligations are created by this LOI, and that neither RedPeak nor Eagle County will have any legal obligations with respect to the proposed transaction (unless and until a definitive purchase agreement is negotiated, executed and delivered by both parties and approved and ratified by the Board as provided above, and then only as provided therein). This letter is not intended to impose any obligation on either party, and in particular it does not impose on any party any obligation to bargain in good faith or in any way other than at arm's length. In no event will a purchase agreement be executed until defeasance of the Bonds and transfer of the Property to Eagle County as described above. This paragraph supersedes all other conflicting language. If this proposal is acceptable, please execute the enclosed copy of this LOI in the space provided, and return a copy to RedPeak on or before 5:00 p.m. NIDT on August 13, 2008, this LOI shall be deemed withdrawn. REDPEAK PROPERTIES, LLC By: Elizabeth L. Lacy Vice President - I~ Phone: 303-321-73 5 Fax: 303-321-?30 Email: elacy@redpeak.com -6- #1344423 v8 APPROVED AND ACCEPTED THIS ~ DAY OF AUGUST, 2008 EAGLE County Manager -7- #1344423 v8 EXHIBIT A To Letter of Intent dated August 11, 2008 from RedPeak Properties, LLC DUE DILIGENCE MATERIAL FOR THE PROPERTY 1. Current Rent Roll showing market rent, actual rent, move-in date, lease expiration date and any current concessions 2. Concession Report showing all current concessions in-place (if not on rent roll) and concessions given by unit since January 1, 2007 3. 2005, 2006 and 2007 Year End Operating Statements 4. Parking Garage Rent Roll (if applicable) 5. Year to Date 2008 Operating Statement 6. 2006, 2007 and 2008 Real and Personal Property Tax Statements (if applicable) 7. Utility Bills for 2006, 2007 and year to date 2008 8. Copies of the following reports if currently available: A). Environmental B). Surveys C). As Built Plans D). Engineering Reports E). PUD 9. Any warranties currently in place at the Property 10. Any Vendor or Service Contracts currently in place at the Property. 11. Any reports or notices from Eagle County or other appropriate governmental or quasi-governmental entities, including fire, life safety, building or inspection reports, etc. completed or received in the past 18 months 12. Personal Property Inventory 13. History of Capital Expenditures for 2006, 2007 and year to date 2008 14. Insurance claim history/coverage for the past 2 years 1 S. Staffing and payroll list including salaries, full/part time status, burden, bonuses and apartment compensation, if any 16. Meeting Minutes for the Lake Creek Affordable Housing Corporation. #1344423 v8