DEVELOPMENT AGREEMENT
AGREEMENT made as of June __, 1996 by and between ▇▇▇▇▇▇▇ HOUSING L. P.,
a New York limited partnership (the "Partnership") and R&D YOUNG DEVELOPERS,
LLC, a New York limited liability company (the "Developer").
Recitals
1. The Partnership was formed to acquire, rehabilitate, develop,
improve, maintain, own, operate, lease, dispose of and otherwise deal with an
apartment project located in New Rochelle, New York, known as the ▇▇▇▇▇▇▇ St.
Apartments (the "Apartment Complex").
2. Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the First Amended and Restated Agreement of Limited
Partnership of the Partnership of even date herewith (the "Partnership
Agreement").
3. The Apartment Complex, following the completion of rehabilitation,
is expected to constitute a "qualified low-income housing project" (as defined
in Section 42(g)(1) of the Code).
4. The Developer has already provided and will continue to provide
certain services with respect to the Apartment Complex during the acquisition,
development, rehabilitation and initial operating phases thereof.
5. In consideration for such services, past and future, the
Partnership has agreed to pay to the Developer certain fees computed and paid
in the manner stated herein.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
Section 1. Defined Terms.
"Development Advances" has the meaning set forth in Section 2.
"Development Costs" means any and all costs and expenses necessary to (i)
cause the rehabilitation of the Apartment Complex to be completed, in a good
and workmanlike manner, free and clear of all mechanics', materialmen's or
similar liens, in accordance with the Plans and Specifications, (ii) equip the
Apartment Complex with all necessary and appropriate fixtures, equipment and
articles of personal property (including, without limitation, refrigerators and
ranges), (iii) obtain all required certificates of occupancy for the apartment
units and other space in the Apartment Complex, (iv) pay the Development Fee,
(v) finance the rehabilitation of the Apartment Complex and achieve Permanent
Mortgage Commencement in accordance with the provisions of the Project
Documents, (vi) discharge all Partnership liabilities and obligations arising
out of any casualty generating insurance proceeds for the Partnership, (vii)
fund any Partnership reserves required hereunder or under any of the Project
Documents, (viii) repay and discharge the Construction Loan, and (ix) pay any
other costs or expenses necessary to achieve the Completion Date and Permanent
Mortgage Commencement.
"Specified Proceeds" means (i) the proceeds of all Mortgage Loans, (ii)
the net rental income, if any, generated by the Apartment Complex prior to
Permanent Mortgage Commencement which is permitted by the Lenders to be applied
to the payment of Development Costs, (iii) the Capital Contributions of the
Investment Limited Partner and the Special Limited Partner, (iv) the Capital
Contributions of the General Partner in the amounts set forth in Schedule A of
the Partnership Agreement as of the Admission Date plus such additional Capital
Contributions as are made from time to time thereafter by the General Partner,
and (v) any insurance proceeds arising out of casualties occurring prior to
Permanent Mortgage Commencement.
Section 2. Obligation to Complete Rehabilitation and to Pay Development
Costs.
The Developer shall complete the rehabilitation of the Apartment Complex
or cause the same to be completed in a good and workmanlike manner, free and
clear of all mechanics', materialmen's or similar liens and shall equip the
Apartment Complex or cause the same to be equipped with all necessary and
appropriate fixtures, equipment and articles of personal property, including
without limitation, refrigerators and ranges, provided for in the Project
Documents and the Plans and Specifications. The Developer also shall cause the
achievement of Permanent Mortgage Commencement in accordance with the terms of
the Partnership Agreement. If the Specified Proceeds as available from time to
time are insufficient to pay all Development Costs and achieve Permanent
Mortgage Commencement, the Developer shall advance or cause to be advanced to
the Partnership from time to time as needed all such funds as are required to
pay such deficiencies. Any such advances ("Development Advances") shall, to
the extent permitted under the Project Documents and any applicable Regulations
or requirements of any Lender or Agency (or otherwise with any Requisite
Approvals), be reimbursed at or prior to Permanent Mortgage Commencement only
out of Specified Proceeds available from time to time after payment of all
Development Costs. Any balance of the amount of each Development Advance not
reimbursed through Permanent Mortgage Commencement shall not be reimbursable,
shall not be credited to the Capital Account of any Partner, or otherwise
change the interest of any Person in the Partnership, but shall be borne by the
Developer under the terms of this Agreement.
Section 3. Development Services.
(a) The Developer has heretofore performed, or caused to be performed,
certain services relating to the acquisition and development of the Apartment
Complex and shall continue to oversee the rehabilitation and development of the
Apartment Complex, and shall perform the services and carry out the
responsibilities with respect to the Apartment Complex as are set forth herein,
and such additional duties and responsibilities as are reasonably within the
general scope of such services and responsibilities and are designated from
time to time by the General Partner.
(b) The Developer's services shall be performed in the name and on
behalf of the Partnership and shall consist of the duties set forth in
subparagraphs (i)-(xv) below of this Section 3(b) and as provided elsewhere in
this Agreement; provided, however, that if the performance of any duty of the
Developer set forth in this Agreement is beyond the reasonable control of the
Developer, the Developer shall nonetheless be obligated to (i) use its best
efforts to perform such duty and (ii) promptly notify the General Partner that
the performance of such duty is beyond its reasonable control. The Developer
has performed, caused to be performed or shall perform or cause to be
performed the following:
(i) Negotiate and cause to be executed in the name and on
behalf of the Partnership any agreements for architectural,
engineering, testing, construction or legal or consulting services
for the Apartment Complex, and any agreements for the
rehabilitation of any improvements or tenant improvements to be
constructed or installed by the Partnership or the furnishing of
any supplies, materials, machinery or equipment therefor, or any
amendments thereof, provided that no agreement shall be executed
nor binding commitment made until the terms and conditions thereof
and the party with whom the agreement is to be made have been
approved by the General Partner unless the terms, conditions, and
parties comply with guidelines issued by the General Partner
concerning such agreements;
(ii) Advise the Partnership as to the steps necessary to
qualify the Apartment Complex during the compliance period defined
in Section 42(i)(1) of the Code as a "qualified low-income housing
project" under Section 42(g)(1) of the Code;
(iii) Assist the Partnership in preparing and processing an
application for a low-income housing tax credit allocation for the
Apartment Complex under Section 42 of the Code;
(iv) Advise the Partnership as to federal, state and local
subsidy programs available for the Apartment Complex;
(v) Establish and implement appropriate administrative and
financial controls for the design and rehabilitation of the
Apartment Complex, including but not limited to:
(A) coordination and administration of the Apartment
Complex architect, the general contractor, and other contractors,
professionals and consultants employed in connection with the
design or rehabilitation of the Apartment Complex;
(B) administration of any construction contracts on behalf
of the Partnership;
(C) participation in conferences and the rendering of such
advice and assistance as will aid in developing economical,
efficient and desirable design and rehabilitation procedures;
(D) the rendering of advice and recommendations as to the
selection of general contractor, subcontractors and suppliers;
(E) the review and submission to the General Partner for
approval of all requests for payments under any architectural
agreement, general contractor's agreement, or any loan agreements
with any lending institutions providing funds for the benefit of
the Partnership for the design or rehabilitation of any
improvements;
(F) the submission of any suggestions or requests for
changes which could in any reasonable manner improve the design,
efficiency or cost of the Apartment Complex and of which it becomes
aware;
(G) applying for and maintaining in full force and effect
any and all governmental permits and approvals required of the
Partnership for the lawful rehabilitation of the Apartment Complex;
(H) compliance with all terms and conditions applicable to
the Partnership or the Apartment Complex contained in any
governmental permit or approval required or obtained by the
Partnership for the lawful rehabilitation of the Apartment Complex,
or in any insurance policy affecting or covering the Apartment
Complex, or in any surety bond obtained by the Partnership in
connection with the Apartment Complex;
(I) furnishing such consultation and advice relating to the
Apartment Complex as may be reasonably requested from time to time
by the General Partner and which is within the Developer's area of
expertise and experience;
(J) keeping the General Partner fully informed on a regular
basis of the progress of the design and rehabilitation of the
Apartment Complex, including the preparation of such reports as are
provided for herein or as may reasonably be requested by the
General Partner and which are of a nature generally requested or
expected of construction managers or similar owner's
representatives on similar projects;
(K) giving or making as agent or attorney-in-fact for the
Partnership the Partnership's instructions, requirements, approvals
and payments (out of Partnership funds) provided for in the
agreements with the Apartment Complex architect, general
contractor, and other contractors, professionals and consultants
retained for the Apartment Complex; and
(L) at the Partnership's expense, filing on behalf of and
as the attorney-in-fact for the Partnership any notices of
completion required or permitted to be filed upon the completion of
any improvement(s) and taking such actions as may be required to
obtain any certificates of occupancy or equivalent documents
required to permit the occupancy of the Apartment Complex.
(vi) Inspect the progress of the course of the
rehabilitation of the Apartment Complex, including verification
of the materials and labor being furnished to and on such
rehabilitation so as to be fully competent to approve or disapprove
requests for payment made by the Apartment Complex architect and
the general contractor, or by any other parties with respect to the
design or rehabilitation of the Apartment Complex, and in addition
to verify that the rehabilitation is being carried out
substantially in accordance with the Plans and Specifications
approved by the General Partner or, in the event that the
rehabilitation is not being so carried out, to promptly notify the
General Partner;
(vii) If requested to do so by the General Partner, perform
or cause to be performed on behalf of the Partnership all
obligations of the Partnership with respect to the design or
rehabilitation of the Apartment Complex contained in any loan
agreement or security agreement entered into in connection with any
construction or long-term financing for the Apartment Complex, or
in any lease or rental agreement relating to space in the Apartment
Complex, or in any agreement entered into with any governmental
body or agency relating to the terms and conditions of such
rehabilitation, provided that copies of such agreements have been
provided by the Partnership to the Developer or the Partnership has
otherwise notified the Developer in writing of such obligations;
(viii) To the extent requested to do so by the General
Partner, prepare and distribute to the General Partner a critical
path schedule, and periodic updates thereto as necessary to reflect
any material changes, but in any event not less frequently than
quarterly, other design or rehabilitation cost estimates as
required by the General Partner, and financial accounting reports,
including monthly progress reports on the quality, progress and
cost of the rehabilitation and recommendations as to the drawing of
funds from any loans arranged by the Partnership to cover the cost
of design and rehabilitation of the Apartment Complex, or as to the
providing of additional capital contributions should such loan
funds for any reason be unavailable or inadequate;
(ix) At the Partnership's expense, obtain and maintain
insurance coverage for the Apartment Complex, the Partnership, and
the Developer and its employees, at all times until final
completion of the rehabilitation of the Apartment Complex, in
accordance with an insurance schedule approved by the General
Partner, which insurance shall include general public liability
insurance covering claims for personal injury, including but not
limited to bodily injury, or property damage, occurring in or upon
the Property or the streets, passageways, curbs and vaults
adjoining the Property. Such insurance shall be in a liability
amount approved by the General Partner;
(x) Comply with all applicable present and future laws,
ordinances, orders, rules, regulations and requirements
(hereinafter in this subparagraph (x) called "laws") of all
federal, state and municipal governments, courts, departments,
commissions, boards and offices, any national or local Board of
Fire Underwriters or Insurance Services Offices having jurisdiction
in the county in which the Apartment Complex is located or any
other body exercising functions similar to those of any of the
foregoing, or any insurance carriers providing any insurance
coverage for the Partnership or the Apartment Complex, which may be
applicable to the Apartment Complex or any part thereof. Any such
compliance undertaken by the Developer on behalf of and in the name
of the Partnership, in accordance with the provisions of this
Agreement, shall be at the Partnership's expense. The Developer
shall likewise ensure that all agreements between the Partnership
and independent contractors performing work in connection with the
Apartment Complex shall include the agreement of said independent
contractors to comply with all such applicable laws;
(xi) Assemble and retain all contracts, agreements and other
records and data as may be necessary to carry out the Developer's
functions hereunder. Without limiting the foregoing, the Developer
will prepare, accumulate and furnish to the General Partner and the
appropriate governmental authorities, as and when requested, data
and information sufficient to identify the market value of
improvements in place as of each real property tax lien date, and
will make application for appropriate exclusions from the capital
costs of the Apartment Complex for purposes of real property ad
valorem taxes;
(xii) Coordinate and administer the design and rehabilitation
of all interior tenant improvements to the extent required under
any leases or other occupancy agreements to be constructed or
furnished by the Partnership with respect to the initial leasing of
space in the Apartment Complex, whether involving building standard
or non-building standard work;
(xiii) Use its best efforts to cause the timely completion of
the Apartment Complex in accordance with the approved Plans and
Specifications and the time schedules for such completion approved
by the General Partner;
(xiv) At the direction of the General Partner, implement any
decisions of the General Partner made in connection with the
design, rehabilitation and development of the Apartment Complex or
any policies and procedures relating thereto, exclusive of leasing
activities; and
(xv) Perform and administer , or cause to be performed or
administered, any and all other services and responsibilities of
the Developer which are set forth in any other provisions of this
Agreement, or which are reasonably requested to be performed by the
General Partner and are within the scope of the services described
herein.
Section 4. Limitations and Restrictions.
Notwithstanding any provisions of this Agreement, the Developer shall not
take any action, expend any sum, make any decision, give any consent, approval
or authorization, or incur any obligation with respect to any of the following
matters unless and until the same has been approved by the General Partner:
(a) Approval of all construction and architectural contracts and all
architectural plans, specifications and drawings prior to the rehabilitation
and/or alteration of any improvements contemplated thereby, except for such
matters as may be expressly delegated in writing to the Developer by the
General Partner;
(b) Any proposed change in the work of the rehabilitation of the
Apartment Complex, or in the Plans and Specifications therefor as previously
approved by the General Partner, or in the cost thereof, or any other change
which would affect the design, cost, value or quality of the Apartment Complex,
except for such matters as may be expressly delegated in writing to the
Developer by the General Partner;
(c) Making any expenditure or incurring any obligation by or on behalf
of the Partnership or the Apartment Complex involving a sum in excess of
$25,000 or involving a sum of more than $5,000 where the same relates to a
component part of any work, the combined cost of which exceeds $25,000, except
for expenditures made and obligations incurred pursuant to and specifically set
forth in a construction budget approved by the General Partner (the
"Construction Budget"), any construction contract approved by the General
Partner or for such matters as may be otherwise expressly delegated to the
Developer by the General Partner;
(d) Making any expenditure or incurring any obligation which, when
added to any other expenditure, exceeds the Construction Budget or any line
item specified in the Construction Budget, except for such matters as may be
otherwise expressly delegated in writing to the Developer by the General
Partner; or
(e) Expending more than what the Developer in good faith believes to be
the fair and reasonable market value at the time and place of contracting for
any goods purchased or leased or services engaged on behalf of the Partnership
or otherwise in connection with the Apartment Complex.
Section 5. Accounts and Records.
(a) The Developer on behalf of the Partnership, shall keep or cause to
be kept at the Partnership's expense such books of account and other records as
may be required and approved by the General Partner, including, but not limited
to, records relating to the costs of rehabilitation and rehabilitation
advances. The Developer shall keep vouchers, statements, receipted bills and
invoices and all other records, in the form approved by the General Partner,
covering all collections, if any, disbursements and other data in connection
with the Apartment Complex prior to the Completion Date. All accounts and
records relating to the Apartment Complex, including all correspondence, shall
be surrendered to the Partnership, upon demand without charge therefor.
(b) The Developer shall cooperate with the Management Agent to
facilitate the timely preparation by the Management Agent of such reports and
financial statements as the Management Agent is required to furnish pursuant to
the Management Agreement.
(c) All books and records prepared or maintained by the Developer shall
be kept and maintained at all times at the place or places approved by the
General Partner, and shall be available for and subject to audit, inspection
and copying by the Management Agent, the General Partner or any representative
or auditor thereof or supervisory or regulatory authority, at the times and in
the manner set forth in the Partnership Agreement.
Section 6. Development Fees.
For its services in connection with the development of the Apartment
Complex and the supervision of the rehabilitation of the Apartment Complex, and
as reimbursement for Development Advances, the Developer shall receive a fee(or
reimbursement, as the case may be) (the "Development Fee") in the amount of
$139,000. The Development Fee shall be deemed to have been earned as and when
the Developer's services are rendered and such Development Fee shall be paid
out of Specified Proceeds. If Specified Proceeds are insufficient to pay the
Development Fee, such unpaid amounts shall be paid out of Cash Flow
distributable pursuant to Section 10.2(a), Clause Fourth of the Partnership
Agreement. In any event, the General Partner shall cause the Partnership to
pay such Development Fee only after the payment of all Development Costs (other
than the Development Fee). If the Development Fee has not been fully paid by
the tenth anniversary of the Completion Date, the General Partner shall make a
Capital Contribution to the Partnership in an amount sufficient to enable the
Partnership to pay any unpaid portion of the Development Fee.
Section 7. Applicable Law.
This Agreement, and the application or interpretation hereof, shall be
governed by and construed in accordance with the laws of the State of New York.
Section 8. Binding Agreement.
This Agreement shall be binding on the parties hereto, their heirs,
executors, personal representatives, successors and assigns. As long as the
Developer is not in default under this Agreement, the obligation of the
Partnership to pay the Development Fee shall not be affected by any change in
the identity of the General Partner of the Partnership or by the separate
actions, agreement, or default of any other person or entity affiliated with or
related to the Developer.
Section 9. Headings.
All section headings in this Agreement are for convenience of reference
only and are not intended to qualify the meaning of any section.
Section 10. Terminology.
All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders, the
singular shall include the plural, and vice versa as the context may require.
Section 11. Benefit of Agreement.
The obligations and undertakings of the Developer set forth in this
Agreement are made for the benefit of the Partnership and its Partners and
shall not inure to the benefit of any creditor of the Partnership other than a
Partner, notwithstanding any pledge or assignment by the Partnership of this
Agreement or any rights hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
PARTNERSHIP: ▇▇▇▇▇▇▇ HOUSING L.P., by its General Partner,
▇▇▇▇▇▇▇ DEVELOPMENT, LLC
By:______________________________
DEVELOPER: R & D YOUNG DEVELOPERS, LLC
By:______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Member
