HomeMy WebLinkAbout2023-09-26 Memorandum of Understanding-NRP LoneStar Development LLC- Anna ApartmentsCHAPMAN AND CUTLER LLP
DRAFT OF SEPTEMBER 14, 2023
MEMORANDUM OF UNDERSTANDING
BETWEEN
ANNA PUBLIC FACILITY CORPORATION
KO51
NRP LONE STAR DEVELOPMENT LLC
"ANNA APARTMENTS"
THIS MEMORANDUM OF UNDERSTANDING (this "MO U ") is between the ANNA PUBLIC
FACH= CORPORATION (the "Anna PFC"), a nonprofit public facility corporation organized
under Chapter 303 of the Texas Local Government Code (the "Act"), and NRP LONE STAR
DEVELOPMENT LLC (the "Developer" or "NRP"), a Ohio limited liability company and is dated
and effective as of [September 26], 2023.
The Developer is a developer of affordable and market rate housing in the State of Texas.
The Anna PFC is a nonprofit public facility corporation whose mission is to assist in the financing
of public facilities. The Developer and the Anna PFC hereby agree to work cooperatively to
acquire, finance and develop a 337-unit multifamily housing development to be located in the City
of Anna, Collin County, Texas (the "Project "), in accordance with the terms of this MOU and the
term sheet attached hereto as Exhibit C.
In order to accomplish this purpose, the parties agree as follows:
AGREEMENTS
A. OWNERSHIP STRUCTURE
1. The Developer will form a limited partnership named Meryl Street LP
(the "Partnership ") for the purpose of leasing and developing the Project. A single -purpose entity
that is controlled by the Developer will be admitted into the Partnership as the sole General Partner
(the "General Partner").
2. The Anna PFC may designate an affiliate to serve as a special limited partner of the
Partnership (the "Special LP "), with certain limited oversight and approval rights.
3. The duties of the General Partner, the Special LP and the Investor LP shall be set
forth in a partnership agreement (the "Partnership Agree»ent ") to be entered into among the
General Partner, the Special LP and the Investor LP. The parties will cooperate in good faith to
cause the Partnership Agreement to contain terms consistent with those set forth in Exhibit B
hereto, it being recognized that approval of the Anna PFC's Board of Directors is contingent upon
the Partnership Agreement containing terns consistent with Exhibit B.
Memorandum of Understanding - Anna PFC and NRP 4886-4299-4434 v6.docx
Memorandum of Understanding
Anna Apartments
[September 26] , 2023
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The Special LP's execution of the Partnership Agreement shall be subject to the following
terms:
(i) The Special LP's representations shall be hnuted to those within the Special LP's
actual knowledge and in no case shall due inquiry be required, it being understood and agreed that
the Special LP's will not be looked upon by the General Partner or the Investor LP to conduct
Project -related diligence, and any such diligence conducted by the Anna PFC is solely for its own
benefit;
(ii) The Special LP shall be indemnified by the Developer and the Partnership for any
liabilities incurred tinder the Partnership Agreement, except for liabilities incurred as a result of
the Special LP's gross negligence or willful misconduct and in no event shall such indemnification
be contingent upon a ruling of a court of law;
(iii) The Special LP shall not be required to covenant to undertake actions or obligations
that the General Partner will be required to take under the Partnership Agreement, and
(iv) The Partnership Agreement shall contain a provision wherein the General Partner and
Investor LP acknowledge that the obligations of the Special LP under the Partnership Agreement
are obligations solely of the Special LP and not the owner of the Special LP.
4. Title to the land (the "Land ") and all improvements constructed thereon (including
without limitation the Project) shall be taken in the name of a subsidiary of the ;Anna PFC (the
"Lessor"), and the Lessor shall then enter into a 99-year lease (the "Lease") with: the Partnership
(sometimes referred to as "Tenant "), as tenant, holding a leasehold interest in the Land and all
improvements constricted thereon. Funding for the acquisition of the Land will come from the
financing of the Project, and may be paid to the Lessor in the form of an up -front Lease payment.
Upon termination of the Lease, ownership of the improvements constitutuig the Project shall revert
to the Anna PFC. The Lessor shall be indemnified by the Developer and the Partnership for any
liabilities incurred under the Lease; provided, that following substantial completion of the
constriction of the Project, such indemnification shall be limited to any liabilities incurred in
relation to operation of the Project. Such indemnification shall not apply to liabilities incurred as
a result of the Lessor's gross negligence or willful misconduct and in no event shall such
indemnification be contingent upon a ruling of a court of law. So long as the Tenant is not in
default under the Lease, the Tenant will be permitted under the Lease to assign its interest in the
Lease in accordance with Section I.1 below; provided, however, that the Lessor's consent shall not
be required for Tenant to assign its interest in the Lease to an affiliate of Tenant. Lessor will not
be permitted to assign its interests under the Lease in any manner which jeopardizes the availability
of the ad valorem tax exemption of the Project or as may be prohibited under the Partnership
Agreement or any loan documents.
5. The General Partner shall only be permitted to assign its interests in the Partnership
upon the prior written consent of the Special LP which such consent shall not be unreasonably
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[September 26], 2023
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withheld, conditioned, or delayed; provided, however, that the Special LP's consent shall not be
required for General Partner to assign its interest in the Partnership to an affiliate of Tenant.
B . DuE DILIGENCE
As a condition to the Anna PFC's participation ui the financing and ownership of the
Project, the Anna PFC requires the Developer to provide due diligence information on the Project
and its proposed financing and operations pursuant to the due diligence checklist (the "Clieckl ist ")
attached hereto as Exhibit A. The Developer shall deliver the due diligence items on the Checklist
at the times stated on the Checklist. Failure of the Developer to deliver to the Anna PFC due
diligence items reasonably acceptable to the Anna PFC shall be grounds for the Anna PFC to
terminate this MOU in its discretion.
C. FINANCING
1. The Developer will apply for construction and permanent financing (the "Loma ") on
behalf of the Partnership, which shall include a leasehold mortgage on the Project. The Developer
shall be responsible for selecting the lender and negotiating the loan terms on behalf of the
Partnership; provided, that the Anna PFC shall have the right to review and approve the initial
financing arrangements and the terms and conditions of any Loan documents, which approval shall
not be unreasonably withheld, conditioned or delayed. To the extent required by the Loan, Anna
PFC, and/or its affiliates, as applicable, agree to subordinate their interests in the Project, and the
Lessor will execute a joinder of its fee interest in the Project to a mortgage or deed of trust.
2. On behalf of the Partnership, the Developer will cause the investor limited partner,
that is controlled by an affiliate of the Developer (the "Iywestor LP "), to make an equity
contribution to the Partnership (the "Equity "), which will be documented in the Partnership
Agreement. The Investor LP may receive a hurdle return for all or a portion of its equity
contribution. The Investor LP and Special LP are collectively referenced herein as "Limited
Partners."
3. The Developer shall pay all costs and fees associated with applying for the Loan and
facilitating the Equity investment, which costs, along with all other pre -development costs incurred
by the Developer (to the extent included within the approved budget), may be reimbursed at
Closing (as defined herein) from the proceeds of the Loan and Equity. In the event this MOU is
terminated or the transaction fails to close as contemplated herein, the Developer shall be solely
responsible for all costs described above, and the Anna PFC and its affiliates shall have no
responsibility for payment or reimbursement of such costs.
4. The Developer and its affiliates shall provide any guarantees of construction
completion, operating expenses, return on Equity investment, and the like that may be required in
conjunction with the Loan or the Equity financing. Neither the Anna PFC, the Special LP nor any
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Anna Apartments
[September 26], 2023
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of their affiliates will provide any guarantees or indemnities in connection with the financing of
the Project.
D. DESIGN AND CONSTRUCTION
1. The Developer shall provide comprehensive development services to the Partnership
pursuant to a Development Agreement to be entered into by the Partnership and Developer.
2. The Developer shall prepare and promptly provide the Anna PFC a detailed
development budget for the Project.
3. The Developer shall be responsible for obtaining the services of design professionals
for the design of the site plan and design of the Project. The Anna PFC will be provided copies of
the final plans and specifications for the Project, including all construction contracts. The Anna
PFC will have the right to review, comment and approve such plans, specifications and contracts
at least five (5) business days prior to the execution of the contracts, which approval shall not be
unreasonably withheld, conditioned or delayed.
4. In order to secure an exemption from state sales tax for the acquisition of building
materials, an affiliate of the Anna PFC (the "Contractor"), shall serve as the general contractor in
connection with the constriction of the Project. In connection with the participation of the
Contractor as described in the previous sentence, the Contractor shall be entitled to a fee equal to
1% of construction hard costs, which is estimated to be $554,421, payable half at Closing (as
defined herein) and the remaining half upon issuance of the final certificate of occupancy for the
the Project. The Contractor will enter into a master subcontract with NRP Contractors H LLC, an
affiliate of the Developer, which master subcontractor shall be entitled to fees as set forth in Exhibit
C. The Developer, the Partnership and the master subcontractor shall provide indemnification to
the Contractor for all liabilities incurred by the Contractor in connection with the Project except
those caused by the Contractor's gross negligence or willful misconduct.
5. The Developer shall be responsible for obtaining all governmental approvals and
permits needed in order to constrict and operate the Project.
6. The Project shall be constructed so as to comply with Americans with Disabilities
Act and Section 504 of the Rehabilitation Act of 1973 requirements, as applicable under federal
and state law.
E. MANAGEMENT AND OPERATION
1. NRP Management LLC, or such other Developer designated affiliate shall serve as
the property manager (the "Property Matutger ") for the Project, which will be memorialized in a
management agreement (the "Matwgenient Agreeitient ") if form and substance reasonably
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acceptable to the Anna PFC. The Management Agreement will include fees payable to the
Property Manager, as set forth in Exhibit C.
2. Annually, by no later than December 1 of the preceding calendar year, the Property
Manager shall provide the Partnership with a proposed annual operating and capital budget.
F. COMMUNITY SUPPORT
The Developer shall be responsible for interfacing with the local governmental officials in
connection with support for the Project, and the Anna PFC shall provide reasonable cooperation
in connection with such matters, if requested by the Developer. The parties will consult with each
other and coordinate the response to any media inquiries and/or public opposition to the Project
that may arise.
G. AD VALOREM PROPERTY TAX EXEMPTION/COMPLIANCE AND REPORTING REQUIREMENTS
1. The ownership structure contemplated herein is expected to generate ad valorem
tax exemption for the Project, for an initial duration of up to 60 years (the "Initial E.reniption
Period") and renewals as set forth herein. The Anna PFC, on behalf of the Partnership, shall work
with the Developer and the applicable appraisal district to request confirmation of the availability
of such exemption in the form of a pre -determination letter delivered to the Partnership prior to
Closing. Upon Closing, the Anna PFC will request that the appraisal district apply the tax
exemption to the Project. The Anna PFC makes no representations or guaranties that the
exemption will be obtained and will take no responsibility for maintaining the exemption after
Closing (as defined herein) other than to provide cooperation to and at the direction of the General
Partner. At Closing, the Developer shall cause an opinion of counsel to be delivered, in form and
substance acceptable to the Anna PFC, with respect to the ad valorem tax exemption. Upon
direction of the General Partner and no later than three years prior to the expiration of the Initial
Exemption Period, the Anna PFC shall reasonably cooperate to seek approval for extension of the
exemption for an additional 60 years following the end of the Initial Exemption Period. If the
appraisal district does not approve an extension or if the Project's ad valorem tax exemption is
otherwise lost for any reason (the "Loss of Tax Status "), the Anna PFC and the Tenant shall use
reasonable efforts to modify the structure to allow the ad valorem tax exemption to continue. If
such efforts are unable to cure the Loss of Tax Status, then the Lessor shall convey fee title of the
Project to the Partnership for a nominal fee, and the Lease will terminate, and the Special LP's
interest in the Partnership shall likewise be redeemed or conveyed for a nominal fee plus any fees
that have accrued and are payable under the Partnership Agreement to the Special LP prior to the
date of the Loss of Tax Status, such that the Special LP will no longer have an interest in the
Partnership.
2. The General Partner shall cause the Project to be operated pursuant to the
requirements of the Act, to the extent applicable to the Project, including but not lunited to the
standards for tenant participation in the housing choice voucher program. The General Partner
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shall provide information not less than quarterly, and upon reasonable request, sufficient for the
Anna PFC to post on its website the Project's compliance with Section 303.0425 of the Act and
policies regarding tenant participation in the housing choice voucher program.
3. To the extent applicable to the Project, the General Partner shall cause, at the
Partnership's expense, an annual audit report to be prepared and submitted to the Texas
Department of Housing and Community Affairs (the "TDHCA ") and the Chief Appraiser of the
applicable appraisal district pursuant to Section 303.0426 of the Act and any procedures and rules
established by TDHCA regarding such annual audit. The General Partner shall be responsible for
resolving any notice of noncompliance from TDHCA in connection with such annual audit.
H. FEEs AND EXPENSES
1. The Developer shall be entitled to receive a development fee (the "Development
Fee") from the Partnership as set forth in Exhibit C.
2. The Anna PFC or its designated affiliate shall be entitled to receive an acquisition fee
(the "Acquisition Fee") from the Partnership in the amount of $806,552, which fee shall be
payable at Closing (as defined herein).
3. The Lessor (or its designated affiliate) shall be entitled to receive an annual lease
payment under the Lease on each January 1, commencing the first January 1 of', the Lease term
after stabilization of the Project, in the initial annual amount of $27,000 and increasing by 3%
annually (the "Annual Lease Pco)ment "). The Annual Lease Payment shall be payable as the first
item in the cash flow waterfall under the Partnership Agreement and shall accrue without interest
in the event net cash flow is insufficient to pay such lease payment in any year. The parties agree
that the Annual Lease Payment will be structured as subordinate to debt service for a Loan as
reasonably requested by Lender.
4. The Special LP shall be entitled to receive a partnership management fee (the "SLP
Management Fee") in the initial amount of $10,000 and increasing by 3% annually for its services
in connection with management of the Partnership. To the extent that cash flow is insufficient to
pay such fee in any year, the SLP Management Fee will accrue without interest until paid.
5. The Special LP shall be entitled to receive an amount equal to 1% of the gross sales
price for a sale of the Project to a third party, with such amount to be payable to the Special Member
after repayment of the Loan but prior to any Equity payment. In the event of the initial refinance
of the Loan to the Project with a new lender, the Special LP shall be entitled to receive an amount
equal to 10% of the net cash flow generated from the refinancing, subordinate to the Investor LP's
return of all capital and any preferred return, as well as any costs of the refinance. The amounts
payable to the Special LP under this Paragraph H.5, together with any other fees or distributions
to which the Special LP may be entitled under the Partnership Agreement, shall be retained by the
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Special LP, and the Special LP shall not be required, under any circumstance, to share any such
amounts with the Developer.
6. Neither party shall enter into any contractual relationship or agreement relating to the
Project that would cause either financial or legal liability to the other, without the other party's
prior written consent.
7. All expenses incurred by the Anna PFC in connection with this MOU, including but
not limited to costs for staff time to review the proposed Project, third -party reports, the Anna
PFC's legal counsel, special real estate counsel and other expenses incurred by the Anna PFC in
connection with the proposed Project (the "Costs "), shall be included in the Project's development
budget and reimbursed by the Partnership to the Anna PFC concurrently with the closing on the
Loan (the "Closing "). Anna PFC expects to incur costs for Special LP Counsel and Hilltop
Securities (each defined below) in the amount of $100,000 each, which fees shall be payable at
Closing and are in addition to the fees set forth in the immediately succeeding paragraph.
In addition to the fees set forth above and as a precondition for the Anna PFC proceeding
with the Project as set forth in this MOU, upon execution and delivery of this MOU and approval
of the same by the Anna PFC Board of Directors, the Developer shall pay the amount of $25,000
to each of Hilltop Securities and Special LP Counsel. Such fees are nonrefundable.
I. LONG TERM OWNERSHIP
1. Tenant shall be permitted to sell its interest in the Lease (the "Leasehold Estate") at
any time following the thirtieth (30th) day after completion of construction of the Project, as
evidenced by issuance of the final certificate of occupancy for the Project (the "Construction
Completion.").
(i) Any such sale will be a transfer of the Leasehold Estate to a third ;parry purchaser
with this Lease remaining in full force and effect, which transfer shall be expressly subject to the
ROFR (defined below) and Tenant's receipt of Lessor's written approval (such approval not to be
unreasonably withheld, conditioned or delayed) of the intended third -party purchaser (a
"Leasehold Sale").
(ii) If Tenant identifies a third party to acquire the Leasehold Estate pursuant to a
Leasehold Sale, it shall first provide written notice of the identity of the third party to Lessor.
Lessor shall have thirty (30) days following its receipt of such notice in which to perform a due
diligence review on the proposed replacement tenant. Lessor shall not unreasonably withhold,
condition or delay its consent if the proposed replacement tenant would satisfy a national bank's
customary "know your customer" requirements. Lessor's failure to provide a consent to or a
disapproval of a proposed replacement tenant within such thirty (30) day period shall be deemed
to constitute its approval of such Leasehold Sale. Following Lessor's approval (or deemed
approval) of a Leasehold Sale, Tenant may transfer the Leasehold Estate and all of its rights and
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Anna Apartments
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obligations under this Lease to the proposed replacement tenant and this Lease shall continue in
full force and effect on all of the same terms and conditions.
2. Following Construction Completion, in the event of a proposed Leasehold Sale, the
Special LP, the Anna PFC, or the Anna PFC's designated affiliate shall have a right of first refusal
to acquire the Leasehold Estate on the same terms offered by such third party buyer (the "ROFR").
The Special LP shall have 30 days in which to notify the Partnership of its intent to purchase the
Leasehold Estate pursuant to the ROFR at terms of the bona fide offer, and closing of such sale
much occur within the sooner of (i) 60 days or (ii) the closing timing proposed in the bona fide
offer. The ROFR shall expire after the Leasehold Sale.
3. To the extent required by a Leasehold Sale or refinance, the Lessor, Anna PFC,
and/or their affiliates, as applicable, shall subordinate their interests (including the leasehold
interests) in the Project to the interest of a lender in connection with such sale or refinance, and
the Lessor will execute a joinder of its fee interest in the Project to a mortgage or deed of trust.
J. REGULATORY RESTRICTIONS
The Developer and the Anna PFC agree that (i) at least 10% of the units in the Project will
be restricted for rent to individuals and families earning less than 60% of the area median income
(as published from time to time by the Department of Housing and Urban Development pursuant
to Section 8 of the United States Housing Act of 1937, as amended) (the "AW"); (ii) at least 40%
of the units in the Project will be restricted for rent to individuals and families earning less than
80% of the AMI; (iii) rents charged shall not exceed 30% of the applicable AMI per each category
of units, adjusted for family size; and (iv) the Project will be subject to any such other restrictions
as shall be reasonably required by the Anna PFC, consistent with the Act. Income shall be verified
by the Developer pursuant to a review of the tenants' federal income tax returns or other
commercially reasonable method acceptable to the Anna PFC. The Developer and the Anna PFC
will enter into a Regulatory Agreement at Closing to be recorded in the applicable county land
records that will set forth the income restrictions and describe the methodology for income
verification and reporting, and require that the income restrictions shall last at least for the longer
period of 20 years from the effective date of the Regulatory Agreement or the date on which the
Special LP is no longer a partner of the Partnership.
K. MISCELLANEOUS
1. This MOU reflects the entire understanding between the parties and may only be
amended in writing, signed by both parties. This MOU is a contract and not merely an "agreement
to agree:'
2. Each parry hereto is prohibited from assigning any of its interests, benefits or
responsibilities hereunder to any third parry or related thud party, without the prior written consent
of the other parry, such consent not to be unreasonably withheld, conditioned, or delayed.
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3. The parties agree to execute such documents and do other such reasonable things as
may be necessary or appropriate to facilitate the development of the Project and the constunmation
of the agreements set forth herein.
4. This MOU may be executed in several counterparts, each of which shall be deemed
to be an original and all of which together shall constitute one contract binding on all parties hereto,
notwithstanding that all the parties shall not have signed the same counterpart
��I U • � _ - 1•-i-��I� __�� • �� �--• � _ � • � � _ •� './M�� MCI __ •
THE STATE OF TEXAS, EXCLUSIVE OF CONFLICT OF LAWS PRINCIPLES.
6. In case any one or more of the provisions contained in this MOU for any reason is
held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability will not affect any other provision hereof, and this MOU will be construed as if
such invalid, illegal or unenforceable provision had never been contained herein.
7. The parties hereto submit exclusively to the jurisdiction of the state and federal courts
of Collin County, Texas, and venue for any cause of action arising hereunder shall lie exclusively
in the state and federal courts of Collin County, Texas.
8. Should any party employ an attorney or attorneys to enforce any of the provisions
hereof, to protect its interest ui any manner arising under this MOU, or to recover damages for the
breach of this MOU, the non -prevailing party in any action pursued in courts of competent
jurisdiction (the finality of which is not legally contested) agrees to pay to the prevailing party all
reasonable costs, damages and expenses, including specifically, but without implied limitation,
attorneys' fees, expended or incurred by the prevailing party in connection therewith.
9. The subject headings contained in this MOU are for reference purposes only and do
not affect in any way the meaning or interpretation hereof.
10. This MOU shall continue until terminated upon the occurrence of I any one of the
following conditions:
(a) The Anna PFC and the Developer sign a mutual consent to terminate this
MOU;
(b) Loan and Equity financing for the Project are not closed within 2 years of
the execution hereof, subject to one 2-year extension at the written request of the
Developer;
(c) The Anna PFC's Board of Directors takes action to disapprove of the
participation of the Anna PFC in the financing of the Project as described in this MOU at
any time prior to the Closing;
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(d) If Developer determines that the transactions contemplated by this MOU
are not feasible, Developer may terminate this MOU by delivery written notice thereof to
the Anna PFC;
(e) Either party breaches its obligations under this MOU, the non -breaching
party provides the breaching party notice of such fact and a 15-day opportunity to cure,
and the breaching party fails to do so; or
(f) Either party files for bankruptcy protection, makes an assignment for the
benefit of creditors, has a receiver appointed as to its assets, or generally becomes
insolvent.
Upon termination of this MOU for any of the reasons cited above, neither party shall have
any ongoing obligation to the other with respect to this MOU nor the Project. In addition, the
provisions of this MOU with respect to the Project will be terminated when the General Partner is
admitted to the Partnership and the Anna PFC and the Developer and their affiliates, as applicable,
enter into definitive agreements with respect to the governance of the Partnership and the
development, constriction, financing, and operation of the Project as contemplated herein.
11. The parties acknowledge that the Special LP, the Anna PFC and its affiliates will be
represented in this transaction in a legal capacity by Chapman and Cutler LLP ( "Special LP
Cotatsel ") and Hilltop Securities Inc. in a financial advisory capacity ( "Hilltop Securities "). The
Developer, the Partnership, the General Partner and their affiliates will be represented by separate
counsel and will not be entitled to rely on Special LP Counsel for representation in this matter.
[Remainder of Page Intentionally Left Blank]
EXECUTED to be effective as of the date above shown.
By
Stan Carver II
President
NRP LONE STAR DEVELOPMENT LLC
By _
Natne:
Title:
[Signature Page to "Anna Apartments" MOT]
EX IT A
ANNA PUBLIC FACILITY CORPORATION
CHECKLIST OF DUE DILIGENCE
PROPERTY ITEMS
RECEIVED
ITEM
DEADLINE
NOTES
Project Description, including
number of units, unit sizes, and
amenities
Site Location information, with ma
Proposed Rent Schedule, with tenant
income restrictions
Site Plan
Appraisal
Phase I Environmental
Soils Report
Evidence of site control
Evidence of zonin
Title commitment with all exceptions
Survey
DEVELOPMENT ITEMS
RECEIVED
ITEM
DEADLINE
NOTES
Detailed Development Budget
Sources and Uses
Statement of Developer's experience,
including evidence of net worth
Resume of Master Subcontractor,
with evidence of experience
Plans and Specifications
Resume of Architect, with evidence
of experience
FINANCING ITEMS
RECEIVED
ITEM
DEADLINE
NOTES
15- ear Pro Forma
Debt financing commitment
Equity financing commitment
Description of all other sources of
fmancin
Application for debt financing
OPERATIONAL ITEMS
RECEIVED
ITEM
DEADLINE
NOTES
Resume of property management
company, with evidence of
experience
Proposed Rent Schedule, with
tenant income restrictions
ORGANIZATIONAL ITEMS
RECEIVED
ITEM
DEADLINE
NOTES
Organizational documents for
limited partnership
EXHIBIT B
PARTNERSHIP AGREEMENT TERMS
The following is a summary of terms that the Anna PFC will require in the Partnership
Agreement. The following list is not intended to be exhaustive and is untended to supplement and
not limit the terms of the MOU.
REPRESENTATIONS
• The Special LP will make representations only as to its tax status, existence and due
authorization and execution of Partnership documents.
• The Special LP will become a limited partner in the Partnership at Closing, therefore pre -
closing items must be addressed by the General Partner or other Developer affiliate. Under
no circumstances will the Special LP execute documents on behalf of the Partnership.
• The Special LP is not performing due diligence on the Project. Therefore, any
representations regarding the Project must be provided by the General Partner.
• The Special LP's representations are generally as to its own knowledge. The knowledge
of the Special LP may not be qualified by phrases such as "after due inquiry." The Special
LP will make no inquiry.
COVENANTS
• The Special LP may covenant not to take affirmative actions, but the Special LP cannot
covenant not to permit or allow others to do things.
• The Special LP cannot covenant to maintain the property tax exemption, but the Special
LP shall agree to cooperate with the General Partner in making any required filings if and
when directed by the General Partner.
• Any covenants relating to the operation of the Partnership or the construction or operation
of the Project should be made by the General Partner.
• The Special LP will not covenant to maintain adequate capital.
INDEMNITIES AND GUARANTEES
• The Special LP should be indemnified for all losses other than those caused by its gross
negligence or willful. misconduct.
• The Special LP's indemnification should not be conditioned on a court determination.
• The Special LP will indemnify only for its oven gross negligence or willfuil misconduct.
The Special LP will not indemnify for actions or inactions of the General Partner.
• The Special LP will not provide completion guarantees, environmental guarantees, credit
guarantees, or covenant to make up for cash flow short falls.
• The Special LP will not be required to make loans to the Partnership.
• If the Partnership is required to provide a guarantee, the guarantee should either be limited
to the assets of the Partnership or should explicitly state that the guarantee is not intended
to be recourse to the Special LP or its affiliates.
DUTIES AND OBLIGATIONS FOR ADMINISTRATION OF PARTNERSHIP
• The General Partner will be the partner responsible for the administration of the Partnership
and the operation of the Project.
• The General Partner will be responsible for obtaining any insurance required by the
Partnership Agreement or other Partnership documents and will name the Special LP as an
additional insured where applicable.
• The General Partner will be responsible for ensuring any requirements for maintaining the
ad valorem tax exemption are met, including any ongoing correspondence with the
applicable appraisal district. The General Partner shall cause its counsel, at the expense of
the Partnership, to deliver an opinion at Closing regarding the ad valorem exemption,
which opinion must be addressed to and in form and substance acceptable to the Anna PFC
and the Lessor. The Special LP will agree to provide reasonable cooperation at the
direction of the General Partner with respect to the ad valorem tax exemption.
• All reports that are required by the Investor LP shall be made by the General Partner, and
any penalties imposed for late reports shall be imposed only on the General Partner.
• Notices required by the Investor LP shall be made by the General Partner.
OPTION/RIGHT OF FIRST REFUSAL
• The Anna PFC will be granted the right of first refusal described in the MOU.
TAXES AND ALLOCATIONS
• The General Partner will be responsible for the preparation of the tax return and tax filings.
The General Partner will cooperate with the Special LP to the extent its signature is
required.
• Losses in excess of capital accounts are allocated to the General Partner.
• The Special LP will not have a deficit restoration obligation either annually or on
liquidation.
• The General Partner will be the "partnership representative" for the purposes of tax audits.
• If the Partnership has an adjustment on audit, the Special LP will pay its allocated share
but will not put additional fronds into the Partnership.
REMOVAL
• Unless a removal is caused by its own gross negligence or willftd misconduct, the Special
LP will not be liable for the costs related to removal or replacement.
• The Special LP will not be liable for events after removal, except those related to the
Special LP's sole gross negligence or willful misconduct.
MISCELLANEOUS
• The governing law, jurisdiction and venue will be Texas.
EXffiBIT.0
TERM SHEET
TERM SHEET FOR THE DEVELOPMENT OF
ANNA APARTMENTS
IN THE CITY OF ANNA, TEXAS //4023
This Term Sheet, in addition to the Memorandum of Understanding ("MOU") above,
addresses the terms for the development and financing of the Project (hereafter defined). This Term
Sheet is not meant to be an exhaustive document and will be replaced and superseded by definitive
documentation. No legally binding obligations on either party will be created, implied or inferred until
documents in final form are executed and delivered by all parties in a form acceptable to each party,
in each party's sole and absolute discretion. This Term Sheet and the MOU, together, replace all
previous understandings and agreements, written or oral, with respect to the Project.
The Project will be owned by a wholly -owned subsidiary of the Anna Public Facility Corporation
("APFC"). Such subsidiary ("Lessor") shall hold fee title to the Land and Improvements upon
payment, on the Closing Date, to the NRP affiliate that owns the Land of the amount of the contract
price for NRP or its affiliate's purchase of the Land ("Land Price"). On the Closing Date, the Lessor
will simultaneously enter into a lease with the Tenant, which will make an upfront lease payment to
the Lessor in the amount of the Land Price. Tenant will be responsible for the costs of the
Improvements. The Land and Improvements will be leased to Tenant on a long term lease.
Capital Event: A sale of the entire Project (including any proposed assignment of the
entire Lease) to a third party for consideration or of all of the interests
in the Tenant Partnership to a third party for consideration.
City: City of Anna, Texas.
Closing Date: The date of closing for all financing for the Project.
Construction: Tenant will contract with APFC, or its wholly -owned subsidiary, as
general contractor, to construct the Improvements ("General
Contractor"); and General Contractor will enter into a Master Sub -
Contract with NRP Contractors II LLC, an affiliate of NRP ("NRP
Contractors"), to construct the Improvements. NRP Contractors will
receive a Contractor Fee of 5%, plus general conditions and 1.5% IGA
fee, and any construction contract with NRP Contractors will also
include a contractor's contingency of 3% solely for the use of NRP
Contractors. NRP Contractors will provide construction completion
guarantees necessary to satisfy any lenders and Equity Contribution
Partners for the Project on terms acceptable to NRP Contractors in its
sole discretion. General Contractor shall be indemnified to the fullest
extent permitted by applicable law by each of the Tenant and NRP
Contractors, and the indemnification shall be reflected in the
construction contract documentation.
Developer: NRP Lone Star Development, LLC, or another affiliate of NRP.
Development Agreement: Developer, APFC (or its designated affiliate) and Tenant will enter into
a development agreement ("Development Agreement") in a form
acceptable to the parties of the contract, in accordance with the terms
set forth herein and in the MOU.
Developer Fee: Developer is to receive a Developer Fee in connection with the
development of the Project in an amount equal to three and one-half
percent (3.5%) of the total development costs of the Project. It is
anticipated thirty percent (30%) of the Developer Fee will be earned
and paid at the construction loan closing. Fifty percent (50%) of the
Developer Fee will be earned and paid monthly out of the loan proceeds
as part of the monthly construction loan process and the final twenty
percent (20%) will be earned and paid upon issuance of the final
certificate of occupancy for the Project. The timing and amount of the
payment shall be subject to the lender and Equity Partner's consent.
Equity
Contribution Partners: The entity or entities which are selected by NRP to contribute common
equity (cash or property) to the Equity Partner and to be admitted as a
limited partner to the Equity Partner, one of which will, be NRP Partner.
Such interest may receive a hurdle return for all or a portion of its equity
contribution.
Equity Partner: A Texas limited partnership, the sole general partner of which will be
NRP Manager, and whose limited partners will be NRP Partner (which
will contribute the Land Contribution and some cash in accordance
with the Project Budget) and the Equity Contribution Partners (which
will contribute cash in accordance with the Project Budget). The
structure is expected to look similar to the attached Schedule 1.
Governing Law: State of Texas.
Guarantees: Certain financial obligations will be guaranteed by NRP Contractors or
an affiliate on terms to be negotiated by NRP and lenders and the
Equity Contribution Partners. APFC and its affiliates will not be
required to provide any financial guarantees with respect to financing
or construction of the Project.
Improvements: Approximately 337 units of multifamily residential housing, together
with all onsite infrastructure improvements for the Project, pursuant to
Plans and Specifications developed by Developer, and will include a
pool, fitness center, clubhouse space, and other Class -A multifamily
amenities appropriate for the Project as determined by Tenant
Partnership.
1)
Land: Approximately 15.4 +/- acres for the Project to be built and operated as
proposed by this Term Sheet, in Collin County, Texas, and as shown
on the parcel map attached as Exhibit A hereto. The Land will be
conveyed to Lessor in return for an upfront lease payment in the
amount of the Land Price.
Lease: Lease between the Lessor and Tenant, pursuant to which Lessor leases
the Project to the Tenant for a term of 99 years (the "Lease"). So long
as Tenant is not in default under the Lease, Tenant will be permitted
under the Lease to assign its interest in the Lease as set forth in the
MOU. Landlord will not be permitted to assign its interests under the
Lease in any manner which jeopardizes the availability of exemption
of the Project from ad valorem taxation or to the extent as may
prohibited in any loan documents with the lenders or any agreement
between the Tenant and the Equity Contribution Partner. The rent will
be (1) prepaid rent at the Closing Date in the amount of the Land Price
and (2) $27,000 starting on the first January 1 of the Lease term after
stabilization of the Project and continuing each January 1 thereafter,
increasing annually by 3%.
A memorandum of the Lease and/or a Regulatory Agreement to be
recorded concurrent with the Closing Date will provide that for any
year the Tenant wishes to obtain a property tax exemption, it will set
aside or rent at least 10% of the units to tenants whose income is less
than 60% of the area median income (AMI) and it will set aside or rent
at least 40% of the units (collectively, the "Affordable Units") to
tenants whose income is less than 80% of AMI. Such AMI shall have
a floor no lower than the AMI at the Closing Date.
Management: NRP Management LLC, an affiliate of NRP Group ("NRP Manager"),
will be designated the property manager for the Project and will
manage the leasing and operations of the Project. NRP Management
will receive a base Management Fee as follows:
Commencing with the end of the first complete calendar month after
the first employee of NRP or any affiliate commences work on site at
the Project (provided such date is typical for when a management
company would commence work on promotional'; and/or leasing
activities at similar project), the greater of (i) $35 per unit per month or
(ii) $9,000 per month; and
Commencing with substantial completion of the first residential
building, the greater of (i) $35 per unit per month or (ii) 3% multiplied
by the effective gross income of the Project as (outlined in the
Management Agreement; but in no event less than $9000 per month.
NRP Manager shall receive a setup fee, payable no later than the first
(1') annual anniversary of the Closing Date. NRP Manager shall
3
further receive a property lease up fee, payable upon stabilization of
the project. The amounts of such fees shall be determined by the
Equity Partner and NRP based on market conditions.
Miscellaneous Expenses: Tenant will be responsible for and will include in the Project Budget
all legal fees of APFC and its affiliates actually incurred in connection
with the preparation, negotiation and execution of the Project and
financing documents, all reasonable out-of-pocket expenses, including,
without limitation, all business, financial, collateral due diligence
expenses, and, to the extent provided herein, all appraisal fees and all
examination fees. In addition to the fees set forth !above and as a
precondition for the APFC proceeding with the financing of the Project,
upon execution and delivery of this MOU and board) approval of the
same by APFC, the Developer shall pay the amount of $25,000 to each
of Hilltop Securities Inc. and Chapman and Cutler LLP. Such fees are
nonrefundable but shall be reimbursed by the Project', to Developer at
the Closing Date.
NRP: NRP Properties LLC, an Ohio limited liability company, or its
affiliates.
NRP Partner: An affiliate of NRP, which will be a limited partner of the Equity
Partner, which in turn will be a limited partner of the Tenant.
Other Terms: In addition to and consistent with the terms set forth in the MOU,
Tenant's organization documents will contain such usual and
customary terms for limited partnership formed for the acquisition,
financing, ownership, development, management, leasing and sale of
the Project, including, without limitation, provisions for limitation on
transfer of partnership interests, delivery of periodic financial and other
reports necessary for securities laws disclaimers, accredited investor
representations and compliance under the Development Agreement.
PFC Structuring Fee: APFC, or one of its affiliates, will receive a structuring fee equal to
$806,552, payable at the Closing Date, in return for providing the
organizational structure described in this Term Sheet, which is
anticipated to allow the Project to be sales tax exempt during the
construction of the Project, and to be and remain 100% property tax
exempt (including the Property and the Project Improvements) as set
forth in the MOU.
Plans and Specifications: APFC, Tenant, Lenders, and Equity Contribution Partner will have the
right to review and approve the Plans and Specifications for Project
once they are materially completed, the approval of which will not be
unreasonable withheld or delayed. Once they have approved the
conceptual and/or schematic design for the Project, it may not object to
such design Plans and Specifications, unless the subsequent Plans and
Specifications materially and adversely affects the design character or
value of the Project.
4
Project: The Project will be the Land and Improvements, to be developed by
Developer.
Project Budget: The Project Budget will be finalized and approved by fall parties to the
transaction prior to the Closing Date, and will include the proposed
sources of funds that will be needed to develop, construct and operate
the Project, and the uses on which the funds will be spent. Sources of
revenue include, without limitation, rental income, capital
contributions and other revenues. Project uses include all reasonable
and necessary direct and hard costs incurred in connection with the
Project.
Project Financing: Lessor will provide the leasehold estate for the Project to the Tenant
pursuant to the Lease. The Lease will be prepared once the Lenders are
identified and will include commercially reasonable provisions
required by the Lenders, which may include a requirement for Lessor
to subordinate its interests in the Project, including the leasehold and
to execute a joinder of its fee interests in the Project to a mortgage or
deed of trust.
Loans
For the Project, Developer will obtain a senior loan from a senior lender
to the Tenant for approximately the amount shown in the Project
Budget for development of the Project to be secured by a first -lien deed
of trust on the Tenant's leasehold interest in the Project, and if required,
a lien on Lessor's fee interest in the Project. Developer may also obtain
subordinated loans (which may be structured as mezzanine financing)
from a subordinate lender for approximately the amount shown in the
Project Budget which may be secured by a second -lien deed of trust on
the Tenant Leasehold interest, a lien on Lessor's fee interest in the
Project or partnership interest in the Tenant or Equity Contribution
Partner.
All financings and guarantees must be acceptable to Developer in their
sole and absolute discretion. APFC or its designated, affiliate, Equity
Partners, and Developer will be provided with a right of notice and the
right to cure Tenant Partnership's defaults for all financings.
Equity
Developer will obtain one or more Equity Contribution Partners who
will invest approximately the amount shown in the Project Budget.
One of the Equity Contribution Partners will be NRP Partner (which
will make a contribution of the Land at the Agreed Value and a
contribution of cash as provided for in the Project Budget).
Contributions from the Equity Contribution Partners will be
E
contributed to the Equity Partnership, (which will be contributed by the
Equity Partnership to the Tenant for approximately the amounts shown
in the Project Budget). The Equity Partner will be paid from cash flow
and will at all times be subordinate to the Loans. The Equity
Contribution Partners and NRP will receive a returnhurdle which is
expected to be approximately 10% on their initial contributions and
will be repaid their investment from a Capital Event before any
"Promote". Accordingly, cash flow splits will adjust after the payment
of the hurdle returns.
Project Term: The "Project Term" is from commencement of Project for a period of
99 years after closing.
Representations and
Warranties: Those customarily found in credit agreements for asset -based lending
transaction of this type and others appropriate to this transaction in the
reasonable credit judgment of APFC and NRP, subject to limitations
and exceptions as set forth in the MOU and to be agreed upon.
Sale: Upon a sale of the entire Project (including any proposed assignment
of the entire Lease) to a third party for consideration or of all of the
interests in the Tenant to a third party for consideration, Special
Limited Partner shall receive a fee equal to 1.00% of the Sale Price. To
the extent required by a Sale or refinance, Lessor shall subordinate its
interests in the Project to the interest of a lender, including the
leasehold, as well as a joinder of its fee interests in Ithe Project to a
mortgage or deed of trust.
Sale Price: The sales price received by the Tenant for the sale of the Project.
Sales Tax: The General Contractor will be responsible for the purchase of
materials for the construction of the Project so that the purchases will
be exempt from all sales and use taxes pursuant to applicable law. In
connection with its services, the General Contractor will receive a fee
as set forth in the MOU.
SLP Management Fee: Special Limited Partner shall be entitled to receive a partnership
management fee as set forth in the MOU.
Special Limited Partner: A to -be -formed wholly -owned subsidiary of APFC.
Tenant: Meryl Street LP, will be a single purpose Texas limited partnership, the
sole General Partner of which will be ultimately managed by NRP
Manager, LLC, a Florida limited liability company (or an affiliate), the
Special Limited Partner of which will be a wholly -owned subsidiary of
APFC, and the Limited Partner of which will be the Equity Partner.
This instrument may be executed in several counterparts, each of which will be deemed an
original and all of which will constitute one and the same instrument, and will become effective when
R
counterparts have been signed by each of the parties and delivered to the other party; it being
understood that all parties need not sign the same counterpart. The exchange of copies hereof and of
signature pages by facsimile transmission (whether directly from one facsimile device to another by
means of a dial -up connection or whether mediated by the worldwide web), by electronic mail in
"portable document format" ("..Rdf') form, or by any other electronic means intended to preserve the
original graphic and pictorial appearance of a document, or by combination of such means, will
constitute effective execution and delivery hereof as to the parties and may be used in lieu of the
original document for all purposes. Signatures of the parties transmitted by any of the foregoing
methods will be deemed to be their original signatures for all purposes.
Signature Pages Follout
7
MI
NRP Properties LLC, an Ohio limited liability company
LE
Name:
Title:
APFC: Anna Public Facility Corporation, a Texas nonprofit public
facility corporation
Stan Carve
President
EXIMIT A
Property
Lot 8, Block A and Lot 1, Block B of the FinW Replat of Lots i R, 3R, 69 71 g, 9 of Block A and
Lot l of Block B, Anna Retail Addition, an addition to the City of Anna, Golf County, Texas,
according to the plat thereof, recorded in Plat Book ice, Page 471, Piai Reow& of Collin County,
Texas,
Sthedidel,
10
General Partner
NRP Meryl GP LLC
a to -be -formed Delaware limed liability company
Formed: TBD
EIN: TBD
0%
GP of both Meryl Street Ltd and
Meryl Street Apt LP
Meryl Street (PFC)
Ground Lessee (Borrower)
Meryl Street LP
a to -be -formed Delaware limited partnership
Formed: TBD
EIN: TBD
Limited Partner
Meryl Street Apt LP
a to -be -formed Delaware limited liability partnership
Formed: TBD
EIN: TBD
100% LP of Meryl Street LP and
Sole Member of NRP Meryl GP LLC
Meryl Street JV LLC
a to -be -formed Delaware limited liability
company
Farmed: TBD
EIN: TBD
100% Common
90% Residual
Special Limited Partner
APFC Anna Apartments; SLP, LLC
a Texas limited liability company formed on
TBD
EIN: TBD
0% Common
Residual Interest
Sole Member
Anna Public Facility Corporation
a Texas public facility corporation formed on
TBD
EIN: TBD
0% Common
Residual Interest
Directors
TBD
Officers
TBD
Meryl Street (PFC)
Meryl Street ]V LLC
a to -be -formed Delaware limited liability
company
Formed: TBD
EIN: TBD
100% Common
90% Residual
Managing Member:
NRP Meryl Street Holdings LLC
A to -be -formed Delaware limited
liability company
formed TBD
EIN: TBD
Common Member
1000/o Promoted Member
Non- Managing Member:
NRP Meryl Street Promote LLC
A to -be -formed Delaware limited
liability company
formed TBD
EIN: TBD
100% Promoted Member
See page 4
Non -Managing Member:
[Investor TBD]
Common Member
Managing Member:
NRP Meryl Street Sponsor LLC
A to -be -formed Delaware limited
liability company
formed TBD
EIN: TBD
100% Common Member
See page 3
VA
JDH Meryl Street Investment LLC
An Ohio limited liability company
Formed: TBD
EIN: TBD
9 938%
J. David Heller Trustee,
UAD 12116/1998.
100%
*Interests will be transferred
to Heller Family Trusts post -dosing
NRP Meryl Street Sponsor LLC
A to -be -formed Delaware limited
liability company
formed TBD
EIN: TBD
100% Common Member
2023 NRP DCP LLC
An Ohio limited liability company
Formed: 9/26/2022
EIN: 92-0634073
1.027%
RP Market Rate Ken Outcalt
Subsidiary LLC 33.33%
66.67%
Managing Member
NRP TCP GP Fund IV LLC
a Delaware limited liability company
EIN: 92 1625071
85.049%
AGT NRP Invesbor IV, L.L.C.
a Delaware limited liability company
Formed:
EIN:
75%
NRP 2023
Employee
Co -Investment
Fund LLC
Formed: 12/7/2023
EIN: 92-1624788
3.987%
NRP Market Rate
Subsidiary LLC
25%
(see ownership on Page
5)-
3
Meryl Street E-Group LLC
an Ohio limited liability
company formed TBD
EN: TBD
Residual Interest
NRP Meryl Street Promote LLC
A to -be -formed Delaware limited
liability company
formed TBD
EIN: TBD
100% Promoted Member
NRP Market Rate
Subsidiary LLC
62.408%
AGT NRP Investor IV, L.L.C.
a Delaware limited liability company
Formed:
EIN:
33.605%
NRP 2023
Employee
Co -Investment
Fund LLC
Formed: 12/7/2023
EIN: 921624788
3.987%
AGT NRP Investor, LLC
a Delaware limited liability company
40%
LIMITED PARTNER
Declaration of 7Wst dated as of December 16,1998,
as amended by
the amended and Restated
Declaration of Thist dated as of June 20, 2017
99%
Trustee
J. David Heller
NRP Enterprises LLC
a Delaware
limited liability company
formed: June 15, 2015
EIN: 35-2538440
100%
NRP Direct Subsichary LLC
an Ohio limited liability company
Formed : June 15, 2015
EIN: 37-1788623
60% Common Member
NRP Master L.P.
a Delaware
limited partnership
Formed: June 15, 2015
EIN: 47-4652432
100%
LIMITED PARTNER
Restatement of Declaration of Trust dated
as of July 9, 2012
.5%
(non -economic Interest and no control)
Trustee
T. Richard Bailey
GENERAL PARTNER
JDH Realty Investments Corp.
An Ohio corporation
Formed on 6/15/2015
-5%
Declaration of Trust dated as of December 16,1998,
as amended by the
Amended and Restated Declaration of Trust dated
As of June 20, 2007.
(see Trustee Information on this page)
5
NRP GUARANTORS Organizational Structure
Note: All Guarantors have 096 Ownership Interestin the Borrower
Ownership ofAll Guarantor enfities can be linked via NRP Enterprises LLC whose ownership is described on Page 3.
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