No preview available
HomeMy WebLinkAboutECHDA25-08 Ulysses Development Group, LLC_second amendment SECOND AMENDMENT TO TERM SHEET This Second Amendment to Term Sheet (this “Amendment”) is entered into as of May 6th, 2025 by and among EAGLE COUNTY HOUSING AND DEVELOPMENT AUTHORITY, a Colorado public body, corporate and politic (“ECHDA”) and ULYSSES DEVELOPMENT GROUP LLC, a Delaware limited liability company (“UDG”). WHEREAS, ECHDA and UDG entered into that certain Eagle County Housing and Development Authority Outline of Special Limited Partner and Acquisition Subordinate Loan Terms dated on or about April 16, 2024, as amended by that certain First Amendment to Term Sheet dated May 21, 2024 (collectively, as further amended herein, the “Term Sheet”). Capitalized but undefined terms shall have the meanings ascribed to them in the Term Sheet. WHEREAS, pursuant to the Term Sheet, on June 14, 2024, Eagle Villas Owner LP, as borrower (the “Eagle Villas Owner”), obtained: (i) a loan from ECHDA (the “ECHDA Permanent Loan”), as lender, in the amount of $4,913,442, which constitutes a second-priority lien, subordinate only to the Senior Loan; and (ii) a loan in the amount of $1,586,558 (the “ECHDA Fourth Priority Loan”), which constitutes a fourth-priority lien, subordinate to the Senior Loan, the ECHDA Permanent Loan, and the THLF Loan. WHEREAS, pursuant to the Term Sheet, UDG obtained a $5,000,000 THLF Loan from the State of Colorado, by and through the Department of Local Affairs, for the benefit of the Division of Housing (“DOLA”), which THLF Loan is evidenced by a loan agreement, a promissory note, a statement of the work, and a use covenant and regulatory agreement (collectively, the “THLF Loan Documents”). WHEREAS, UDG loaned the proceeds of the THLF Loan to Eagle Villas Owner (the “Downstream Loan”). The documents evidencing the Downstream Loan are referred to herein as the “Downstream Loan Documents”. WHEREAS, pursuant to the Term Sheet, at the Resyndication, the ECHDA Permanent Loan was required to be paid down to an outstanding principal balance of $3,000,000.00, and the ECHDA Permanent Loan was required to be a second-priority loan, and the Downstream Loan was required to be repaid in its entirety. WHEREAS, at the Resyndication, Eagle Villas Owner, Eagle Villas GP LLC, a Delaware limited liability company (the “General Partner”), NEF Assignment Corporation, an Illinois not- for-profit corporation, as nominee (the “Investor”) and ECHDA will enter into that certain Second Amended and Restated Limited Partnership Agreement of Eagle Villas Owner (the “Second Amended LPA”). WHEREAS, ECHDA and UDG desire to amend the Term Sheet as provided in this Amendment. Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is acknowledged and agreed, ECHDA and UDG hereby agree as follows: 1. ECHDA Permanent Loan. Simultaneous with the closing of the Resyndication, the terms of the ECHDA Permanent Loan will be amended as follows: a. The Permanent Loan Amount will be increased from $3,000,000 to $4,000,000. b. The term of the ECHDA Permanent Loan will be extended to twenty-one (21) years following the closing of the Resyndication. Eagle Villas Owner will have no further right to extend the term of the ECHDA Permanent Loan. The ECHDA Permanent Loan will be payable in full upon any sale or refinancing of the Project. c. The interest rate on the ECHDA Permanent Loan will be the long-term applicable federal rate applicable during the month of closing of the Resyndication, compounding annually, which shall be 4.62%. d. The Eagle Villas Owner will pay ECHDA fifty percent (50%) of Project cash flow after payment of the deferred developer fee (the “Cash Flow Payment”), which Cash Flow Payment will be used: first, to pay accrued interest and second, will be applied to principal on the ECHDA Permanent Loan in accordance with the Second Amended and Restated Agreement of Limited Partnership. The Cash Flow Payment will terminate upon repayment of principal and accrued interest on the ECHDA Permanent Loan. e. ECHDA will subordinate the lien priority of the ECHDA Permanent Loan to the lien of the New Downstream Loan (defined below). The terms of any required subordination or intercreditor agreement will be subject to the approval of ECHDA, such approval not to be unreasonably withheld, conditioned or delayed. Counsel for ECHDA shall prepare the necessary amendments to reflect that the ECHDA Permanent Loan shall be in third position. 2. THLF Loan and Downstream Loan. Simultaneous with the closing of the Resyndication, of the THLF Loan and Downstream Loan will be amended as follows: a. On the closing of the Resyndication, Eagle Villas Owner shall repay the Downstream Loan to UDG in full, and the deed of trust securing the Downstream Loan and the collateral assignment of such deed of trust to DOLA as additional collateral for the THLF Loan shall be terminated, and Eagle Villas Owner shall be released from its obligations under the Downstream Loan Documents (the “Downstream Loan Termination”). In connection with the Downstream Loan Termination, UDG will assign the proceeds of the Downstream Loan repayment (the “Downstream Loan Proceeds”) to ECHDA, ECHDA will then loan the proceeds to the Borrower, which will be accomplished by funds wired in and out of the escrow closing agent and notated on the settlement statement at the closing of the Resyndication. Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 b. Simultaneously with the Downstream Loan Termination, UDG will assign its right, title and interest in and to the THLF Loan Documents to ECHDA, and ECHDA will assume such obligations from UDG (the “ECHDA THLF Loan”), which ECHDA THLF Loan will be evidenced by, among other things, an assignment, assumption and amendment agreement, a loan agreement, a promissory note and a statement of the work (collectively the “ECHDA THLF Loan Documents”). The ECHDA THLF Loan Documents shall incorporate the following terms: i. The ECHDA THLF Loan will be in the initial principal amount of $5,000,000. ii. The interest rate on the ECHDA THLF Loan shall be 1.00%, compounding annually. iii. The term of the ECHDA THLF Loan shall be twenty-one (21) years following the closing of the Resyndication. iv. ECHDA will make annual interest payments on the ECHDA THLF Loan of $50,000 for the first ten (10) years of the term. Thereafter and for the remainder of the term, ECHDA will make annual principal and interest payments of $193,741. v. Payments of principal and interest on the ECHDA THLF Loan will be non- recourse to ECHDA, and DOLA’s sole remedy for payment defaults under the ECHDA THLF Loan will be the enforcement of the collateral assignment and then the deed of trust securing the New Downstream Loan. Eagle Villas Owner will expressly assume the obligations of ECHDA under the ECHDA THLF Loan Documents, and will agree to indemnify and hold harmless ECHDA for any obligations arising under the ECHDA THLF Loan Documents other than payments of principal and interest, which obligations will be subject to the Guaranty described in Section 10 below. 3. New Downstream Loan. On the closing of the Resyndication, immediately after the THLF Loan is assigned by UDG to ECHDA, ECHDA shall loan the Downstream Loan Proceeds to Eagle Villas Owner (the “New Downstream Loan”). The New Downstream Loan shall have the following terms: a. The New Downstream Loan will be in the initial principal amount of $5,000,000. b. The interest rate on the New Downstream Loan will be one percent (1.00%) per annum, compounding annually. c. The term of the New Downstream Loan will be twenty-one (21) years following the closing of the Resyndication. Eagle Villas Owner will not have any right to Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 extend the term of the New Downstream Loan. The New Downstream Loan will be payable in full upon any sale or refinancing of the Project. d. At the closing of the Resyndication, Eagle Villas Owner will establish a project budget that will allocate an amount of $100,000 to be used for the purpose of making payments on the New Downstream Loan in the amount of $50,000 per year for years one (1) and two (2). e. The Eagle Villas Owner will pay ECHDA a priority payment, prior to payment of the deferred developer fee, from Project cash flow as follows: $50,000 for years three (3) through ten (10) of the term of the New Downstream Loan; and thereafter, $193,741 per year for the remainder of the term of the New Downstream Loan (the “Priority Cash Flow Payment”). The Priority Cash Flow Payment is specifically to fund payments by ECHDA to DOLA under the ECHDA THLF Loan, and the Priority Cash Flow Payment will terminate upon repayment of the ECHDA THLF Loan. f. ECHDA will collaterally assign the deed of trust securing the New Downstream Loan to DOLA as collateral for the ECHDA THLF Loan. g. The New Downstream Loan shall be in second (2nd) position after the senior construction loan and permanent loan, but senior to the ECHDA Permanent Loan. 4. ECHDA LURA. The Term Steet currently provides that, “the LURA will provide that upon the closing of the Resyndication, rents for the Restricted Units will be affordable to households earning between 45-80% AMI (provided that the unit mix will be similar to the existing affordability other than 12 Units which may be rented to families earning up to 80% AMI) for the remaining term of the ECHDA LURA.” Such text is hereby deleted and replaced with the following: “The LURA will provide that, upon the closing of the Resyndication, the LURA will contain the following rent restrictions: (a) ten (10) of the Units shall have rents not exceeding thirty percent (30%) of the annual income of a family whose income equals forty five percent (45%) or less of AMI, as determined by HUD, and shall be occupied by individuals or families whose income is forty five percent (45%) or less of AMI, with adjustments for smaller and larger families (b) ninety eight (98) of the Units shall have rents not exceeding thirty percent (30%) of the annual income of a family whose income equals between fifty percent (50%) and sixty percent (60%) of AMI, as determined by HUD, and shall be occupied by individuals or families whose income is between fifty percent (50%) or less of AMI and sixty percent (60%) of AMI, with adjustments for smaller and larger families; and (c) twelve (12) Units shall have rents not exceeding thirty percent (30%) of the annual income of a family whose income equals eighty percent (80%) of AMI, as determined by HUD, and shall be occupied by individuals or families whose income is eighty percent (80%) or less of AMI, with adjustments for smaller and larger families (the “80% Units”). Further, Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 rental rates for the 80% Units shall not be increased until turn-over of an 80% Unit has occurred.” 5. CHFA LURA. Simultaneous with the closing of the Resyndication, the Eagle Villas Owner will record amendments to the land use restriction agreements in favor of the Colorado Housing and Finance Authority (“CHFA”) currently recorded on the Project (as amended, the “Existing CHFA LURAs”). In addition, a new land use restriction agreement will be recorded on the Project in favor of CHFA prior to the Project being ‘placed in service,’ (the “New CHFA LURA”) which New CHFA LURA will replace the Existing CHFA LURAs. The ECHDA LURA will be subordinated to the Existing CHFA LURAs at the closing of the Resyndication. The 10 units that are restricted at 45% AMI under the Existing CHFA LURAs will be designated at 50% AMI in the New CHFA LURA. These 10 units will not be increased through attrition by management or ownership and will remain at 45% AMI for both income and rents. 6. Right of First Refusal. The Term Sheet provisions related to the ROFR are hereby amended as follows: a. The term of the ROFR shall not commence until the last day of the last expiring Compliance Period. b. For so long as the General Partner has not acquired the interest of the Investor under the Second Amended LPA, the term of the ROFR is a limited to the two (2) year period after the last day of the last expiring Compliance Period (the “Investor ROFR Period”), provided that, in the event the General Partner or its affiliate has acquired the Investor’s interest in the Partnership, such two (2) year period shall instead be a ten (10) year period after the end of the last expiring Compliance Period notwithstanding any previous expiration of the two (2) year term set forth above. c. During the Investor ROFR Period, the purchase price for the Property pursuant to the Refusal Right shall be equal to the greater of: (a) The sum of: (a) the outstanding principal, accrued interest, any prepayment penalty and any other amounts due under any and all mortgage loan documents and any other debt, secured or unsecured, relating to the Property, whether or not such amounts are due upon sale, and the total amount of all other indebtedness of the Partnership as of the date of closing (collectively, the “Loans”); and (b) an amount sufficient to assure receipt by the Consenting Limited Partner from the proceeds of the sale of the Property (when distributed pursuant to liquidation provisions in the Second Amended LPA) of an amount not less than the sum of all federal, state and local taxes, including without limitation, all income taxes due upon sale, incurred or to be incurred by the Consenting Limited Partner (or its respective constituent partners or members) as a result of such sale, plus the amount of any theretofore unpaid credit adjustment payments and other unpaid obligations to which the Consenting Limited Partner is entitled under the Second Amended LPA (including due to Change in Tax Law), plus the amount of any unpaid obligations owed to the Consenting Limited Partner under the Second Amended LPA. In computing such price, it shall be assumed that each of the Partners (or their constituent partners or members) has Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 an effective combined federal, state and local income tax rate equal to the maximum of such rates in effect on the date of Closing; and (b) the price in the Offer Notice. d. The exercise of ECHDA’s right of first refusal shall be subject to either (i) the repayment in full of the Permanent Loan (including any applicable interest and/or prepayment premium) or (ii) obtaining Permanent Lender’s approval of an assumption of the Permanent Loan in accordance with the terms and conditions of such Permanent Loan Documents. 7. Right to Replace General Partner. The Term Sheet is hereby amended to provided that ECHDA’s right to replace the General Partner in the event of removal of the General Partner by the Investor shall be subject to the consent of the Investor, which consent may be granted or withheld in the Investor’s sole and absolute discretion. 8. Exit Fee. The Term Sheet is amended to provided that the Exit Fee will be payable from Cash Flow following distributions to fund the Operating Reserve to the Operating Reserve Target Amount, but subject to the obligations of UDG and the General Partner to guarantee payment of the same as described in Section 10 below. 9. Minimum Exemption Term. The Term Sheet is amended to provide that the Special Limited Partner’s right to withdraw based upon a determination that the Project is “financially viable” shall commence on, and the Minimum Exemption Term shall expire on, the scheduled maturity date of the Permanent Loan under the Permanent Loan Documents, without giving effect to any later refinancing of the Permanent Loan or amendment of the Permanent Loan Documents, provided that if the Permanent Loan is prepaid or refinanced (or does not close and fund for any reason) the Minimum Exemption Term shall expire on the end of the last expiring Compliance Period (the “Minimum Exemption Term”). For the avoidance of doubt, in no event will the Minimum Exemption Term be required for any refinancing of the Permanent Loan. 10. Guaranty: In addition to the guaranteed obligations described in the Term Sheet, UDG and the General Partner shall guarantee the following obligation in favor of ECHDA: a. Any obligations arising under the ECHDA THLF Loan Documents other than payment of principal and interest; b. The difference in the purchase price for the Project to be paid by the Special Limited Partner upon exercising its rights to acquire the Project pursuant to the terms of the Right of First Refusal Agreement between (y) the purchase price for the Project described in Section 2(a) of the Right of First Refusal Agreement, and (z) the “minimum purchase price” as defined in Section 42(i)(7)(B) of the Internal Revenue Code; c. Any deficit capital account restoration obligation of the Special Limited Partner under the Second Amended LPA; and Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 d. Payment of the Exit Fee if there is insufficient Cash Flow available to pay the Exit Fee in full within ninety (90) days after the Special Limited Partner’s exit from the Partnership or if the Special Limited Partner was removed pursuant the provisions of the Second Amended LPA for other than its own acts or omissions. In addition, the Guaranty shall require UDG to at all times maintain a minimum net worth of not less than $500,000. 11. Bonds. At the closing of the Resyndication, ECHDA shall issue conduit tax- exempt revenue bonds utilizing private activity bond volume cap from the sources listed below (the “Bonds”) based on the bond cap amount for the Project, and the proceeds of the sale of the Bonds will be used to make a loan (the “Bond Loan”) to Eagle Villas Owner: a. Private Activity Bond Volume Cap: i. ECHDA has available 2024 carryforward in the amount of $28,039,215, consisting of the following amounts: 1. March 2024: ECHDA was awarded $13,200,000 from the Statewide Balance for the Project. 2. September 2024: Eagle County assigned its annual 2024 direct allocation, $3,478,699, to ECHDA for the Project. 3. September 2024: Pitkin County assigned its annual 2024 direct allocation, $1,060,516, to ECHDA for the Project. 4. December 2024: ECHDA was awarded $10,300,000 in bond cap allocation for the Project. ii. March 2025: Eagle County has assigned is 2025 annual direct allocation, $3,551,789, to ECHDA for the Project. iii. Eagle Villas Owner has requested a top-up amount of volume cap from the Colorado Housing and Finance Authority (CHFA) to meet the 50% test; if approved, the authority to use such amount is expected to be delegated from CHFA’s 2024 carryforward allocation. b. Eagle Villas Owner covenants to pay the Department of Local Affairs of the State of Colorado all fees that relate to the Bonds’ private activity bond volume cap allocation, or if already paid by ECHDA, Eagle Villas Owner will reimburse ECHDA for the same. c. In connection with the issuance of the Bonds and making the Bond Loan, Eagle Villas Owner, as borrower under the Bond Loan, shall pay ECHDA the following Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 fees associated with the Bond issuance, each calculated based on the permanent Bond Loan amount: i. 0.16% up-front closing fee of the original principal amount of the Bonds; and ii. 0.04% ongoing annual fee of the permanent loan amount, starting on the anniversary of closing. d. ECHDA has retained Taft Stettinius & Hollister LLP (f/k/a Sherman and Howard L.L.C.), as bond counsel. Eagle Villas Owner will pay Taft legal fees at closing of the Resyndication, or in the event that the Resyndication fails to close, at the termination of negotiations related to the Resyndication. e. The Bonds shall be special, limited obligations of ECHDA and shall be payable solely from the revenues and receipts and other amounts received by or on behalf of ECHDA pursuant to the Indenture. The Bonds shall not be a debt or indebtedness of Eagle County (the “County”) or the State or any political subdivision thereof (including ECHDA), and neither the County, the State nor any political subdivision thereof shall be liable thereon, nor in any event shall the Bonds be payable out of any funds or properties other than those of ECHDA pledged under the Indenture. The Bonds shall not constitute an indebtedness or a multiple fiscal-year financial obligation within the meaning of any constitutional or statutory debt limitation or restriction. Neither the County, the State nor any political subdivision thereof (except ECHDA from the sources identified in the Indenture) shall be liable for payment of the Bonds nor in any event shall principal of and interest on the Bonds be payable out of any funds or assets other than those pledged to that purpose by ECHDA in the Indenture. No taxing powers, if any, of ECHDA, the State or any political subdivision thereof are available to pay the Bonds or interest thereon. ECHDA has no taxing power. f. Except for information contained in the Preliminary Official Statement and the Official Statement relating to the Bonds (the “Official Statement”) under the captions “THE ISSUER” and “ABSENCE OF LITIGATION – The Issuer” as such captions relate solely to ECHDA in the Official Statement, ECHDA has not and will not confirm, and assumes no responsibility for, the accuracy, sufficiency or fairness of any statements in the Official Statement or any amendments thereof or supplements thereto, or in any reports, financial information, offering or disclosure documents or other information relating to the Project, the Borrower, or the history, businesses, properties, organization, management, financial condition, market area or any other matter relating to the Borrower, or the Project or otherwise contained in the Official Statement. 12. HOME Loan. At the closing of the Resyndication, Eagle Villas Owner shall obtain a direct loan from DOLA (the “HOME Loan”), based upon the following terms: Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 a. The HOME Loan will be in the principal amount of $3,400,000. b. The HOME Loan will accrue simple interest at 1.00% per annum. c. The term to the HOME Loan will be twenty-one (21) years following the closing of the Resyndication. d. The Eagle Villas Owner will pay DOLA thirteen and seventy-one one-hundredths percent (13.71%) of Project cash flow after payment of the deferred developer fee. e. The Home Loan shall be in fourth (4th) position after the senior construction loan and permanent loan, the New Downstream Loan and the ECHDA Permanent Loan. f. DOLA shall prepare the initial drafts of the documents evidencing the HOME Loan. 13. Priority. Notwithstanding anything contained in the Term Sheet to the contrary, the order of priority of the loans following the closing of the Resyndication shall be: i. First, the senior construction loan and permanent loan; ii. Second, the New Downstream Loan; iii. Third, the ECHDA Permanent Loan; and iv. Fourth, the HOME Loan. 14. Legal Fees. Holland & Hart LLP (“H&H”) has represented ECHDA in connection with the acquisition of the Project, the origination of the ECHDA Permanent Loan and the ECHDA Fourth Priority Loan, and continues to represent ECHDA in connection with the matters set forth in this Amendment and the closing of the Resyndication. UDG agrees that Eagle Villas Owner shall pay H&H legal fees (inclusive of legal fees that H&H deferred from the original Project acquisition as an accommodation to UDG) at the Closing of the Resyndication, or in the event that the Resyndication fails to close, at the termination of negotiations of the Resyndication, but no in excess of $200,000.00. 15. Effect of Amendment. The terms and conditions of this Amendment shall amend, supersede, replace, govern and control over any conflicting or inconsistent terms and conditions in the Term Sheet, but except as modified in this Amendment, all other terms and conditions of the Term Sheet shall remain unmodified and in full force and effect and are hereby ratified and reaffirmed by each of the undersigned. Unless otherwise defined in this Amendment, all capitalized terms shall have the same meanings as provided in the Term Sheet. 16. Venue, Jurisdiction and Applicable Law. Any and all claims, disputes or controversies related to this the Term Sheet as amended hereby, or breach thereof, shall be litigated in the District Court for Eagle County, Colorado, which shall be the sole and exclusive forum for Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 such litigation. This Agreement shall be construed and interpreted under and shall be governed by the laws of the State of Colorado. 17. Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original; and such counterparts when taken together shall constitute but one agreement. [Signatures on following page(s)] Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98 IN WITNESS WHEREOF, the undersigned have caused this Second Amendment term sheet to be executed as of the day and year first appearing above. ECHDA: Eagle County Housing and Development Authority, a Colorado public body, corporate and politic By: _______________________________________ Jeanne McQueeny, Chair Attest: By: _________________________________________ Kimberly Bell Williams Executive Director UDG: ULYSSES DEVELOPMENT GROUP LLC, a Delaware limited liability company By:___________________________ Name: Jonthan A. Gruskin Title: Authorized Signatory 34379930_v9 Docusign Envelope ID: 84B2155E-AEB9-43BE-9CAC-A527DF797C98