CANYON-JOHNSON URBAN FUND II, L.P.
Exhibit
10.21
0000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000
May
4,
2007
Via
Facsimile and
Overnight
Courier
Stratus
Properties, Inc., a Delaware corporation
Xx.
Xxxxxxx X. Xxxxxxxxx, III
00
Xxx
Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx,
Xxxxx 00000
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Re:
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Block
21 – Austin, Texas – Agreement to Form
Company
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Dear
Beau:
Reference
is made to that certain Term Sheet (the
“Term Sheet”)
executed as of February 22, 2007 by Canyon-Xxxxxxx Urban Fund II, L.P., a
Delaware limited partnership (“Urban”) and your
affiliate, Stratus Properties Operating Co., L.P., a Delaware limited
partnership. Capitalized terms not otherwise defined herein shall
have the meanings assigned to them in the Operating Agreement described
below.
We
are
pleased to inform you that subject to the terms and conditions of this Agreement
to Form Company (“Agreement”), Urban hereby agrees (i)
to enter into an Operating Agreement with your affiliate XXXXXXX XXXXX 00
XXXXXXXXXXX, X.X. (“Stratus Member” or
“Stratus”) substantially in the
form attached hereto as
Exhibit A (“Operating Agreement”) (subject to such
changes made necessary by changes to the Initial Budget attached to the
Operating Agreement as may arise in the interim period prior to Closing and
as
approved by Urban, and the completion of exhibits and schedules, which the
parties agree to act in good faith to complete as expeditiously as possible)
in
order that Urban and Stratus Member may become members of CJUF II Stratus Block
21 LLC, a Delaware limited liability company
(“Company”), (ii) contribute the Urban Contribution at
such time as described in the Operating Agreement, and (iii) immediately
thereafter cause the Company to execute a development agreement with a qualified
developer (“Developer”) wholly owned by Stratus
Properties, Inc. (“SPI”) substantially in the form of Exhibit B
hereto (subject, however to the completion of exhibits and schedules reasonably
satisfactory in substance to Urban) (“Development
Agreement”). All terms not defined herein shall have the
meanings assigned thereto in the Operating Agreement or Development Agreement,
as applicable. The date on
which
Urban shall execute the Operating Agreement, and fund its initial contribution
at such times contemplated therein, Stratus shall contribute the Stratus
Contribution, and the Company executes the Development Agreement, shall be
referred to herein as the Closing Date (the “Closing
Date”). Urban’s obligation to close on the Closing Date
shall be subject to and conditioned upon the satisfaction of the following
conditions (the “Closing Conditions”): (i)
Stratus shall contemporaneously execute the Operating Agreement and contribute
the Stratus Contribution as contemplated in the Operating Agreement; (ii) from
and after the date of this Agreement, Urban shall not discover or otherwise
become aware of any information not heretofore disclosed to Urban in writing
that is inconsistent in a material and adverse manner with the information
provided to Urban prior to the date hereof, of the business, assets, operations,
condition (financial or otherwise), projections or prospects of the Project
and/or Stratus or Developer or any of their respective affiliates (collectively,
the “Stratus Parties” and each individually, a
“Stratus Party”); (iii) since the date
of this
Agreement, no event, change or condition shall have occurred that has had,
or
could reasonably be expected to have, a material adverse effect on the business,
assets, operations, condition (financial or otherwise), projections or prospects
of any of the Stratus Parties; (iv) there shall be no moratorium or restriction
or prohibition on development or construction limiting, precluding or delaying
the Developer’s ability to develop and construct the Project in any material
respect; (v) as of their execution, the representations and warranties of
Stratus and Developer contained in the Operating Agreement and Development
Agreement shall be true, accurate and complete; (vi) all of the conditions
set
forth on Exhibit C attached hereto and incorporated herein by this
reference shall be satisfied; and (vii) all of the conditions identified in
clauses (i) through (vi) shall be satisfied on or prior to the “Outside
Date” (Urban may waive or extend the time for performance of any of the
above conditions in its sole discretion).
During
the interim period following the
parties’ execution of this Agreement and the Closing Date, Urban and Stratus,
together with the Developer, shall use all reasonable commercial efforts to
work
together in good faith to satisfy each of the conditions identified
above. Stratus and Developer shall provide Urban with any updates
with respect to the Project and/or to the due diligence materials and other
information heretofore provided to Urban. Urban will provide Stratus
and Developer any updates known to Urban and information received by Urban
with
respect to the Project and/or to the due diligence materials.
Stratus
acknowledges that
notwithstanding anything herein or in any other document to the contrary, the
general partner of Urban must provide not less than ten (10) business days’
advance written notice to each limited partner of any capital
call. Accordingly, Stratus shall advise Urban in writing of the
anticipated day of Closing Date not less than eleven (11) business days prior
to
such anticipated Closing Date and at that time shall also request that Urban
call capital in order to fund the initial Urban Contribution. Upon
timely receipt of such request, Urban will call for capital from its limited
partners and in such capital call will require that such contributions be made
on or prior to the business day prior to the anticipated Closing
Date. The capital contributions of Urban’s partners shall commence to
earn a Preferred Return as contemplated in the Operating Agreement.
The
Stratus Parties acknowledge and
represent that they are working solely with, and will continue to work solely
with, Urban until the Outside Date in an effort to consummate the transactions
contemplated herein and in so doing, the Stratus Parties acknowledge that Urban
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has
spent
significant time and money investigating the proposed transactions in order
to
be able to issue this Agreement and will continue to spend a significant amount
of time and money in preparation of a Closing (as such term is defined in the
Operating Agreement). If the Closing Date has not occurred by the
Outside Date, then this Agreement will terminate and neither Urban nor any
Stratus Party will have any further liabilities or obligations to each
other. The Outside Date is March 15, 2008 unless Stratus has not used
its reasonable commercial efforts to cause the Closing Conditions to be met
on
or before March 15, 2008, in which case Urban shall have the right to request
that the Outside Date shall be extended for such period as Stratus shall have
failed to use its reasonable commercial efforts to cause the Outside Date to
occur on or prior to March 15, 2008.
If
there is a Stratus Change in
Control (defined below) prior to the time Stratus contributes the
Property to the Company and the Company begins operations, or if either of
Xxxxxxx Xxxxx or Xxxxxxx X. Xxxxxxxxx are no longer general counsel and
president, respectively, of the Stratus Parties and actively supervising the
Property and the Project, and replacements satisfactory to Urban in its sole
discretion have not been appointed within 30 days of such occurrence (a
"Key Person Event"), then, at Urban's election exercised
within 45 days of a Stratus Change of Control, or within 15 days of the Key
Person Event, Urban may elect either of the following;
(i) The
Stratus Parties and SPI, jointly and severally, shall immediately pay to Urban
100% of the third party costs and expenses incurred by it plus 11% per annum
on
such expenses from and as made (the “Walk Reimbursement”), and
neither Urban nor the Stratus Parties shall have any further obligation to
each
other (if any shall exist at that time) to consummate the transactions
contemplated herein, or
(ii) Urban
shall purchase all of the right, title and interest of the Stratus Parties
and
SPI and their affiliates in the Property and Project, and all related
development rights, contract rights and other associated assets, free and clear
of all monetary encumbrances (other than liens for ad valorem real estate taxes
not yet due and payable) an "Urban Purchase Event") and
pay to the Stratus Parties $1.5 million plus the amount of Stratus’ Costs and
Expenses paid by the Stratus Parties prior to the date of the closing of the
Urban Purchase Event (the “Urban Purchase Event
Closing”) plus all ad valorem real estate taxes allocated through
the date of the Urban Purchase Event Closing, plus all costs and expenses
accrued by the Stratus Parties through the Urban Purchase Event Closing that
have not been paid as of such date but would properly be included in Stratus
Costs and Expenses when paid. (In the event that an Urban Purchase
Event occurs, the Stratus Parties and their affiliates shall cooperate in
securing to Urban the benefit of the assets purchased thereunder, including
the
transfer of City permits and rights, loan agreements and commitments to
Urban.)
Provided,
however, that the Stratus Parties shall not be required to pay a Walk
Reimbursement or sell pursuant to an Urban Purchase Event if such Stratus Change
in Control or Key Person Event occurs at a time after (i) Urban shall have
defaulted under the terms of this Agreement or (ii) if Urban shall not be
obligated to proceed with the transactions contemplated hereby due to a failure
of condition that Urban has not agreed to waive or extend or (iii) if the
appropriate consents from Starwood Hotels & Resorts
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Worldwide,
Inc. have not been received on or before the Outside Date (and Stratus covenants
to use commercially reasonable efforts to secure the same within 30 day of
this
Agreement). (For the avoidance of doubt, Urban need not make either
election, and if no election is made the parties shall continue to proceed
as
set forth herein.)
A
“Stratus Change of Control” means the occurrence of any
of the following:
(i) the
direct or indirect sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of more than 50% of the properties or assets of SPI to any
“person” (as that term is used in Section 13(d) of the Securities Exchange Act
of 1934);
(ii) the
adoption of a plan relating to the liquidation or dissolution of
SPI;
(iii) the
consummation of any transaction (including, without limitation, sale of stock,
or any merger or consolidation), the result of which is that any “person” (as
defined above) becomes the beneficial owner, directly or indirectly, of more
than fifty percent (50%) of the voting stock of SPI, measured by voting power
rather than number of shares; or
(iv) the
consummation of any transaction (including, without limitation, any sale, merger
or consolidation), the result of which is that Stratus, in whole or in part,
is
no longer wholly-owned by SPI.
Each
party and its affiliates and
representatives agree to treat (i) all information provided by the other party
or its affiliates or representatives regarding the Property or themselves or
their affiliates, and (ii) the information contained in this Agreement
(collectively, all “Transaction Information”), as
confidential information provided to them by the other party or its affiliates
or representatives (as the case may be). Urban may disclose this Agreement
to
its limited partners as long as such limited partners are informed of Urban’s
confidentiality obligations herein. Further, the parties and
their respective affiliates and representatives shall not disclose such
Transaction Information other than for the purpose of underwriting or
negotiating this transaction, or as otherwise may be required by
law. Except as otherwise expressly provided in this Agreement to the
contrary, this Agreement contains the entire understanding among the parties
hereto with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements, or conditions,
express or implied, oral or written, including, without limitation, that certain
Xxxxx 00 Xxxx Xxxxx dated February 22, 2007. All exhibits hereto are
by this reference incorporated herein and are intended to be terms of this
Agreement.
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This
Agreement and the terms hereof
constitute the binding obligations of Urban, Stratus, and SPI.
Very
truly yours,
CANYON-XXXXXXX
URBAN FUND II, L.P.,
a
Delaware limited partnership
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By:
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Canyon-Xxxxxxx
Realty Advisors II, LLC,
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a
Delaware limited liability company,
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General
Partner
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By:
/s/ K. Xxxxxx Xxxxxx
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K.
Xxxxxx Xxxxxx
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Authorized
Signatory
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By:
/s/ Xxxxxxx Xxxxx
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Xxxxxxx
Xxxxx
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Director
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By
signing in the spaces provided
below, Stratus and Stratus Properties Inc., hereby acknowledge for themselves
and their affiliates receipt of this Agreement as contemplated under the Term
Sheet and agrees for themselves and their affiliates to be bound by the terms
hereof.
STRATUS
PROPERTIES OPERATING CO., L.P.,
a
Delaware Limited Partnership
By: STRS
L.L.C., a Delaware limited liability company,
General
Partner
By: Stratus
Properties Inc., a Delaware corporation,
Sole
Member
By:____/s/ Xxxxxxx X. Xxxxxxxxx
III____________
Name:__William
X. Xxxxxxxxx
III_____________
Title:___President_________________________
STRATUS
PROPERTIES INC., a Delaware corporation
By:___/s/
Xxxxxxx X. Xxxxxxxxx
III____________
Name: ___William
X. Xxxxxxxxx
III____________
Title:_____President________________________
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XXXXXXX
XXXXX 00 XXXXXXXXXXX, X.X.
a
Texas
Limited Partnership
By: XXXXXXX
XXXXX 00 XXXXXXXXXXX XX, L.L.C.,
a
Texas limited liability company,
General Partner
By: ____/s/
Xxxxxxx X. Xxxxxxxxx
III_______________
Name: _____William
X. Xxxxxxxxx
III_______________
Title: ______President__________________________
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EXHIBIT
A
Form
of Operating Agreement
[See
Attached]
Exhibit
A
EXHIBIT
B
Form
of Development Agreement
[See
Attached]
Exhibit
B
EXHIBIT
C
Additional
Conditions to be approved by Urban before the Closing Date (the approval of
Urban shall be given reasonably unless otherwise stated)
1. Urban
shall have received litigation, judgment and lien reports for Stratus, SPI,
and
Stratus Properties Operating Co., L.P., and such reports shall be satisfactory
to Urban.
2. Stratus
shall have caused B21I to transfer title to the Property to the Company, free
and clear of any monetary liens or encumbrances except for those (i) liens
and
encumbrances set forth on that certain title insurance policy #175-1020212
dated
February 5, 2007 issued by Commonwealth Land Title Insurance Company; (ii)
in
favor of a Construction Lender; (iii) required to effect the Business Plan
and
to be recorded after February 5, 2007; and (iv) liens for ad valorem real estate
taxes not yet due and payable.
3. The
Property Agreements shall have been assigned to the Company free and clear
of
liens, charges and encumbrances.
4. The
Company shall have entered into the Core/Shell GMP, in form and substance
reasonably acceptable Urban, with Austin Commercial, Inc., providing a
guaranteed maximum price for those components of the Project as set forth on
Exhibit C to the Operating Agreement.
5. Stratus
or its Affiliates shall have received thirty-five percent (35%) pre-sales on
the
residential condominiums, which presales shall include 5% deposits at contract
signing and 5% deposits upon 50% completion of construction and such pre-sales
shall equate to at least $61 million of gross Company revenue for the 35%
presold (i.e., $174 million of total revenue projected).
6. The
City
of Austin shall have issued a site development permit and a building permit
for
the initial phase of the Project, as described in Exhibit
C-1.
7. Construction
loan financing on terms equal or better than the terms set forth on
Exhibit C-2 with a Construction Lender acceptable to Urban
shall have been obtained.
8. The
Initial Budget and related business plans (which will include development
budgets including finishing costs not covered by the guaranteed maximum price
construction contract) attached to the Operating Agreement attached hereto
shall
at the Closing shall continue to represent and be the Stratus Parties’ good
faith estimate of the costs and expenses required to implement the Company’s
Business as contemplated in the Operating Agreement. The Initial
Budget shall include all project costs (inclusive of land, hard costs, soft
costs (including insurance) and other project related costs).
9. The
Members shall have unanimously approved a contractor bonding strategy for the
Project.
10. Urban
shall have received an estimate of the costs, if any, of remediating, abating
or
otherwise responding to, any environmental conditions affecting the Property
and
the cost of
environmental
insurance and approved such costs and the general environmental remediation
program.
11. Urban
shall have received and approved an unconditional irrevocable commitment to
issue an extended coverage owner’s title policy on the standard Texas State
Board of Insurance promulgated form and endorsements subject only to title
exceptions, approved by Urban, with such endorsements as Urban shall reasonably
request.
12. Evidence
that the Property is properly zoned to permit development of the Project shall
have been provided to Urban for its approval.
13. Architectural
services agreements shall have been executed and delivered for the architect
of
record and for the design architect, in each case on terms, and with an
architect, acceptable to Urban, and an architect’s certification acceptable to
Urban shall have been delivered.
14. Consents
and estoppels shall have been executed, in form and substance reasonably
satisfactory to Urban for each of the following: (i) X.X. Xxxxx, Inc.
with respect to the Agreement Regarding Construction Staging, (ii) Austin
Children’s Museum, (iii) the City of Austin, and (iv) Starwood Hotels &
Resorts Worldwide, Inc.
15. Urban
shall have approved the general liability, builder’s risk, continuing operations
and other applicable insurance policies for the Project, all of which shall
have
been obtained and in force effective at the Closing Date.
16. Organizational
documents for the Stratus Parties and any relevant affiliate and certificates
for such parties evidencing such parties valid existence and authority to
transact business shall have been delivered to Urban for its approval promptly
after the date hereof and such approval shall have been obtained.
Exhibit
C
EXHIBIT
C-1 TO ADDITIONAL CONDITIONS
Site
Development Permit and Initial Phase Building Permit
Site
Development Permit
The
Site
Development Permit shall comprise:
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1.
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An
Unconsolidated Site Development Permit issued by the City of Austin
for
the garage and foundation excavation component of the Project based
on the
unconsolidated site plan application prepared and sealed by Bury
+
Partners, Engineers, dated April 17, 2007, and submitted to and approved
by the City of Austin pursuant to its Land Development Code;
and
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2.
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A
Consolidated Site Development Permit issued by the City of Austin
for the
Project based on the consolidated site plan application prepared
and
sealed by Bury + Partners, Engineers, and submitted to and approved
by the
City of Austin pursuant to its Land Development
Code.
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Initial
Phase Building Permit
A
building permit issued by the City of Austin for construction of the foundation
and parking garage components of the Project based on plans and specifications
prepared and sealed by BOKA Xxxxxx and Associates.
Exhibit
C-1
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EXHIBIT
C-2 TO ADDITIONAL
CONDITIONS
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Construction
Loan Financing Terms
with a Construction Lender Acceptable to Urban
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LTV: A
minimum loan-to-value of seventy percent
(70%).
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Interest
Rate: A maximum annual interest rate of seven and one-half
percent (7.5%).
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Loan
Term: A minimum loan term of thirty-six (36)
months.
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Exhibit
C-2
