Exhibit 10.1
PROGRAM AGREEMENT
FOR
AIMCO/APFC MULTIFAMILY DEVELOPMENT PROGRAM
Dated as of August 5, 2022
PROGRAM AGREEMENT
THIS PROGRAM AGREEMENT (“Agreement”) is entered into as of August 5, 2022, by and between Aimco OP, L.P., a Delaware limited partnership (“Aimco”), and Alaska Permanent Fund Corporation, an instrumentality of the State of Alaska, on behalf of the state funds managed under AS 37.13 (together with its permitted successors and assigns, “APFC”).
Recitals
Aimco and APFC desire to establish a program for their joint investment in the acquisition, development, construction, ownership, leasing, operation, and sale of certain multi-family rental apartment projects through a series of separate Ventures (defined below), upon and subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth in this Agreement, and for other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Aimco and APFC hereby agree as follows:
DEFINITIONS AND INTERPRETATION
“Affiliate” means, with respect to any Person, any other Person Controlling or Controlled by or under common Control with such Person.
“Agreement” shall have the meaning set forth in the Preamble to this Agreement.
“Aimco” shall have the meaning set forth in the Preamble to this Agreement.
“Aimco Capital Allocation” shall have the meaning set forth in Section 2.1(b).
“Aimco Percentage Interest” shall mean, for each Project, the Percentage Interest of Aimco for such Project.
“Aimco OP” shall mean Aimco OP, L.P., a Delaware limited partnership, or its Successor.
“Aimco Parent” means Apartment Investment and Management Company, a Maryland corporation, or its Successor.
“Aimco Related Party” shall mean each of Aimco OP, Aimco Parent and each Person that is wholly owned, directly or indirectly, by Aimco OP and/or Aimco Parent.
“Aimco Sole Control Party” shall mean each Aimco Related Party and each other Person that has one or more Aimco Related Parties (and no other Person) as it sole general partner(s), managing member(s) or equivalent, directly or indirectly. For clarification, (x) if a Person has
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one or more limited partners or non-managing members that are not Aimco Related Parties and that have customary veto rights with respect to major decisions but do not have day-to-day management control or the power to act on behalf of such Person, such Person may be an Aimco Sole Control Party, and (y) if a Person is managed by “co-managers”, “co-managing members”, “co-general partners” or the equivalent, one of whom is an Aimco Related Party and one of which is not an Aimco Related Party, such Person is not an Aimco Sole Control Party.
“Aimco’s Knowledge” shall have the meaning set forth in Section 5.1(e).
“APFC” shall have the meaning set forth in the Preamble to this Agreement.
“APFC Capital Allocation” shall have the meaning set forth in Section 2.1(c).
“APFC Percentage Interest” shall mean, for each Project, the Percentage Interest of APFC for such Project.
“Business Day” shall mean any day, other than Saturday, Sunday, or a day national banks are authorized or required to be closed in Denver, Colorado or Juneau, Alaska.
“Business Plan” shall mean a written description of a Project which shall include (i) the development program for the Project, (ii) the budget for the acquisition, development and construction of the Project (which shall be the Project Budget in the case of the Business Plan submitted in connection with Final Review), (iii) the sources and uses for the Project, (iv) the proforma for the Project (which shall include a calculation of the Profit Margin, Yield and Leveraged IRR), (v) a development and construction critical dates schedule, and (vi) such additional information as Aimco determines.
“Capital Allocations” shall mean the APFC Capital Allocation and the Aimco Capital Allocation.
“Capital Contributions” shall have the meaning ascribed to it in the Venture Agreement.
“Commitment Period” means the period commencing on the date of this Agreement and ending on the Commitment Termination Date.
“Commitment Termination Date” shall mean the earliest to occur of the following: (i) the date on which APFC has given Preliminary Approval or Final Approval for Selected Projects that are allocated 95% or more of the APFC Capital Allocation (subject to Section 2.4(d)), (ii) the thirtieth (30th) calendar day after written notice from APFC to Aimco of APFC’s election to terminate the Commitment Period, (iii) the earlier of (a) the tenth (10th) anniversary of the date of this Agreement and (b) the thirtieth (30th) calendar day after written notice from Aimco to APFC following any three (3) year period in which Aimco has been unable to locate Qualifying Projects for APFC Preliminary Approval, and (iv) the date of issuance of a Default Termination Notice.
“Control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether as an officer, director,
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member, or otherwise through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative to the foregoing.
“Default Termination Notice” shall have the meaning set forth in Section 6.2.
“Determination Date” shall mean (i) for Preliminary Review of a Project, the date on which Aimco submits such Project to APFC pursuant to Section 2.2(a) (or if Aimco does not submit such Project to APFC, the outside date for submission of such Project pursuant to Section 2.2(a)), and (ii) for Final Review of a Project, the date on which Aimco submits such Project to APFC pursuant to Section 2.3(a) (or if Aimco does not submit such Project to APFC, the outside date for submission of such Project pursuant to Section 2.3(a)).
“Event of Default” shall have the meaning set forth in Section 6.1.
“Excluded Projects” shall mean those Projects listed on Exhibit A.
“Exclusivity Termination Date” means the earlier of (i) the Commitment Termination Date and (ii) the thirtieth (30th) calendar day after written notice from Aimco to APFC of Aimco’s election to terminate the exclusivity provisions of this Agreement if during the eighteen (18) month period prior to such termination APFC has declined to give Preliminary Approval and/or Final Approval to three (3) or more Qualifying Projects.
“Fair Market Value” means, with respect to any property or asset, the cash purchase price which could be negotiated in an arm’s-length, free market transaction, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction.
“Final Approval” shall have the meaning set forth in Section 2.3(c).
“Final Completion” shall mean, with respect to any Project, substantial completion of construction of such Project, the completion of all punchlist items in a good and workmanlike manner in accordance with the applicable plans and specifications and all applicable laws, covenants, conditions and restrictions, and a final and unconditional approval (certificate of occupancy, temporary certificate of occupancy or the equivalent) has been issued by all appropriate governmental authorities for the core and shell of the improvements (but not including any tenant improvements) and closeout of the applicable construction contract.
“Final Investment Package” shall have the meaning set forth in Section 2.3(b).
“Final Review” shall have the meaning set forth in Section 2.3(a).
“Initial Investment Package” shall have the meaning set forth in Section 2.2(b).
“Investment Guidelines” means, collectively, the following criteria with respect to a Project: (a) at Final Completion, such Project will generate a Profit Margin of not less than 20%, (b) at Stabilization, such Project will generate a Yield of not less than 150 basis points in excess of the projected capitalization rate at Stabilization, (c) based on a hypothetical sale at Stabilization and liquidation of the applicable Venture, such Project will generate a Leveraged
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IRR of not less than 18%, and (d) the Total Project Cost of such Project is anticipated to be not less than $50,000,000. Notwithstanding the foregoing, the Project known as the Anschutz project in Aurora, Colorado shall be deemed to comply with the Investment Guidelines for purposes of this Agreement.
“Investment Package” means an Initial Investment Package or Final Investment Package.
“Leveraged IRR” shall mean the annual discount rate at which the net present value of the projected capital contributions to and distributions from a Venture equals zero, calculated for each such capital contribution from the date such capital contribution was made, based on the actual number of days elapsed over a 365 or 366 day year, as the case may be, using the XIRR formula utilized in the most recent version of Microsoft Excel from time to time.
“Non-Qualifying Projects” shall mean a Project that is not a Qualifying Project.
“Outside Vertical Commitment Date” shall mean, for each Project, a date set forth in the Pursuit Schedule for such Project as the last date on which the Vertical Commitment Date shall occur.
“Percentage Interest” shall have the meaning ascribed to it in each Venture Agreement, and shall be determined in accordance with Section 2.8.
“Person” shall mean an individual, partnership, corporation, limited liability company, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity.
“Phase” shall have the meaning set forth in Section 2.7.
“Phased Project” shall have the meaning set forth in Section 2.7.
“Preliminary Approval” shall have the meaning set forth in Section 2.2(c).
“Preliminary Review” shall have the meaning set forth in Section 2.2(a).
“Profit Margin” shall mean, for any Project, the ratio that (i) the excess of the Fair Market Value of the Project as of Stabilization over the Total Project Cost bears to (ii) the Total Project Cost.
“Project” shall mean the ground-up development of a multifamily rental apartment project on land owned directly or indirectly by, or that may in the future be owned directly or indirectly by, a Venture.
“Project Budget” means the budget for the acquisition, development and construction of a Project.
“Pursuit Budget” shall mean, for each Submitted Preliminary Project, the budget for the Pursuit Costs for such Submitted Preliminary Project included in the Initial Investment Package, as such budget may be modified in accordance with the terms of this Agreement.
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“Pursuit Schedule” shall mean the schedule for the acquisition and development of a Project up to the Vertical Commitment Date, as such schedule may be modified in accordance with the terms of this Agreement.
“Pursuit Costs” shall mean, for each Project, all third party out-of-pocket costs and expenses incurred in connection with the acquisition and development of such Project prior to the Vertical Commitment Date. For clarity, (i) the cost of the land included in the Pursuit Costs shall be the actual third party cost of acquiring the land, without mark-up, and (ii) Pursuit Costs shall not include any fees to, or overhead of, Aimco or its Affiliates. Notwithstanding the foregoing, Pursuit Costs may include reasonable out-of-pocket expenses incurred by Aimco and APFC or their Affiliates but excluding costs for travel and lodging related to such Project.
“Qualifying Project” shall mean any Project (other than the Excluded Projects) with respect to which, as of the Determination Date, (i) an Aimco Sole Control Party owns in fee simple (or has a contract to acquire in fee simple) such Project, and (ii) such Project, in the good faith business judgment of Aimco, is projected to satisfy all of the Investment Guidelines.
“Rejected Project” shall mean (i) any Submitted Preliminary Project for which APFC declines, or is deemed to have declined, to grant Preliminary Approval (unless and until such Submitted Preliminary Project becomes a Submitted Final Project and APFC thereafter grants Final Approval with respect to such Submitted Final Project), and (ii) any Submitted Final Project (including a Selected Preliminary Project) for which APFC declines, or is deemed to have declined, to grant Final Approval.
“Selected Final Project” shall have the meaning set forth in Section 2.3(c).
“Selected Preliminary Project” shall have the meaning set forth in Section 2.2(c).
“Selected Project” shall mean any Selected Preliminary Project or Selected Final Project; excluding, however, any Selected Preliminary Project for which APFC declines, or is deemed to have declined, to grant Final Approval, from and after the date that such Selected Preliminary Project becomes a Rejected Project.
“Stabilization” shall mean, for any Project, the achievement of stabilized occupancy of such Project, which shall generally refer to such Project achieving lease-up and occupancy from rent paying tenants leasing (i) at least 92% of the total rental residential units under leases with terms substantially consistent with any leasing parameters included in the Business Plan for such Project, and (ii) 92% of the total commercial rentable square footage, provided that this clause (ii) shall not apply to any Project in which the commercial rentable square footage is less than five percent (5%) of the total square footage of the Project.
“Submitted Final Project” shall mean any Qualifying Project or Non-Qualifying Project submitted to APFC for Final Review in accordance with Section 2.3.
“Submitted Preliminary Project” shall mean any Qualifying Project or Non-Qualifying Project submitted to APFC for Preliminary Review in accordance with Section 2.2.
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“Submitted Project” shall mean any Submitted Preliminary Project or Submitted Final Project.
“Successor” means, with respect to any Person, a successor owner of all or substantially all of such Person’s assets, whether by merger, consolidation, division, acquisition or otherwise.
“Total Project Cost” shall mean, for any Project, the total cost of acquiring, developing, constructing and operating such Project through Stabilization.
“Venture” shall mean each separate limited liability company formed by Aimco and APFC or their Affiliates pursuant to this Agreement for the purpose of acquiring a Project, which limited liability company shall be governed by a Venture Agreement.
“Venture Agreement” shall mean in the case of each Venture, a limited liability company agreement in substantially the form to be approved by Aimco and APFC within 5 business days from the date of this Agreement.
“Venture Closing” shall mean, with respect to a Selected Final Project, the formation of the Venture for such Project and the execution of the Venture Documents for such Venture.
“Venture Closing Date” shall mean, for any Venture Closing, the date on which such Venture Closing occurs.
“Venture Documents” shall mean, with respect to each Venture, the Venture Agreement and all other agreements relating to such Venture approved by or executed by APFC Member and Aimco Member.
“Vertical Commitment Date” shall mean for each Project the date, determined by Aimco in its good faith business judgment and set forth in the Pursuit Schedule for such Project, on which the Project Budget (including related construction pricing) for such Project is sufficiently finalized that Aimco can provide the cost overrun protections set forth in the Venture Agreement for such Project, provided that in no event shall the Vertical Commitment Date be later than the date that is thirty (30) days prior to the earlier of (i) the projected date for the commencement of on-site construction of the Project (excluding any on-site work that is provided for in the Pursuit Budget) and (ii) the projected date of closing on the construction loan for the Project.
“Yield” shall mean, for any Project, the ratio that the untrended annual net operating income of such Project bears to the Total Project Costs of such Project.
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APPROVAL OF PROJECTS AND FORMATION OF VENTURES
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Provided, that if the Net Proceeds are insufficient to pay to Aimco and APFC all amounts required pursuant to the foregoing clause (A) (such insufficiency, the “Shortfall”), then Aimco shall pay to APFC an amount equal to (i) the Shortfall multiplied by (ii) a percentage equal to the excess of 50% over the Aimco Percentage Interest.
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COVENANTS OF THE PARTIES
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CONDITIONS PRECEDENT
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REPRESENTATIONS, WARRANTIES AND COVENANTS
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EVENTS OF DEFAULT
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MISCELLANEOUS
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If to APFC, addressed as follows: The Alaska Permanent Fund Corporation |
with a copy to: Cox, Castle & Nicholson LLP 2029 Century Park East, Suite 2100 Los Angeles CA 90067 Attention: Elizabeth A. Willes Email: ewilles@coxcastle.com |
If to Aimco, addressed as follows: Aimco OP, L.P. 4582 South Ulster Street, Suite 1400 Denver, CO 80237 Attention: Lynn Stanfield and Jennifer Johnson Email: lynn.stanfield@aimco.com, jennifer.johnson@aimco.com |
with a copy to: Arnold & Porter 601 Massachusetts Ave, NW Washington, DC 20001 Attention: Michael Goodwin and Carey Smith Email: michael.goodwin@arnoldporter.com carey.smith@arnoldporter.com |
All notices given in accordance with this Agreement shall be effective upon delivery at the address of the addressee. By giving written notice thereof, each party to this Agreement shall have the right from time to time to change its address pursuant hereto.
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[Signature page follows]
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SIGNATURE PAGE TO PROGRAM AGREEMENT FOR
APFC/AIMCO MULTIFAMILY DEVELOPMENT PROGRAM
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
Aimco OP, L.P., a Delaware limited partnership
By: Aimco OP GP, LLC, a Delaware limited liability company, its general partner
By: Apartment Investment and Management Company, a Maryland corporation, its member
By:
Name:
Its:
S-1
ALASKA PERMANENT FUND CORPORATION, an instrumentality of the State of Alaska, on behalf of the state funds managed under AS 37.13
By:
Name:
Title:
S-2