DEVELOPMENT AGREEMENT
AGREEMENT made as of August 1, 1996 by and between LOS LUNAS
APARTMENTS LIMITED PARTNERSHIP, a New Mexico limited partnership (the
"Partnership") and G. XXXX XXXXX (the "Developer").
Recitals
1. The Partnership was formed to acquire, construct, develop,
improve, maintain, own, operate, lease, dispose of and otherwise deal
with an apartment project located in Los Lunas, New Mexico, known as the
Los Lunas 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
construction, 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, construction 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 contruction 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 construction 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, (v) any insurance proceeds arising out of
casualties occurring prior to Permanent Mortgage Commencement.
Section 2. Obligation to Complete construction and to Pay
Development Costs.
The Developer shall complete the construction 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 certain services
relating to the development of the Apartment Complex and shall continue
to oversee the construction 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 or
shall perform the following:
(i) Negotiate and cause to be executed in the name
and on behalf of the Partnership any agreements for
architectural, engineering, testing or consulting services
for the Apartment Complex, and any agreements for the
construction 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
construction 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 construction 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 construction
procedures;
(D) the rendering of advice and recommendations as
to the selection of 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
construction 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;
(G) applying for the maintaining in full force and
effect any and all governmental permits and approvals
required for the lawful construction 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 for the lawful construction of the Apartment
Complex, or in any insurance policy affecting or covering
the Apartment Complex, or in any surety bond obtained 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;
(J) keeping the General Partner fully informed on a
regular basis of the progress of the design and construction
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 the Partnership's
instructions, requirements, approvals and payments 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
construction of the Apartment Complex, including
verification of the materials and labor being furnished to
and on such construction 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
construction of the Apartment Complex, and in addition to
verify that the construction is being carried out
substantially in accordance with the Plans and
Specifications approved by the General Partner or, in the
event that the construction] is not being so carried out, to
promptly notify the General Partner;
(vii) If requested to do so by the General Partner,
perform on behalf of the Partnership all obligations of the
Partnership with respect to the design or construction 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 construction, 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
construction cost estimates as required by the General
Partner, and financial accounting reports, including monthly
progress reports on the quality, progress and cost of the
construction and recommendations as to the drawing of funds
from any loans arranged by the Partnership to cover the cost
of design and construction 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 construction 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 necessary, 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
construction 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 accomplish 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, construction and development of
the Apartment Complex or any policies and procedures
relating thereto, exclusive of leasing activities; and
(xv) Perform and administer any and all other
services and responsibilities of the Developer which are set
forth in any other provisions of this Agreement, or which
are requested to be performed by the General Partner and are
within the general 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
construction 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 construction 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") 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 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 construction and construction 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 construction of the
Apartment Complex, and as reimbursement for Development Advances, the
Developer shall receive a fee (the "Development Fee") in the amount of
$150,000. All of such fee was earned by the Developer as of
December 31, 1994 and was accrued as of December 31, 1994. 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 Second 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 Mexico.
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.
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: LOS LUNAS APARTMENTS LIMITED PARTNERSHIP, a
New Mexico limited partnership by its general
partner
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
DEVELOPER:
/s/ G. Xxxx Xxxxx
G. Xxxx Xxxxx
