DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (the "Agreement") is entered into this 17th
day of June, 1999 between INVESCO REALTY ADVISORS, INC. (the "Investor"), and
BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
("Developer").
W I T N E S S E T H:
WHEREAS, pursuant to a Contribution Agreement dated June 8, 1999 (the
"Contribution Agreement") Developer, Nichols Lansdale Limited Partnership, III,
a Pennsylvania limited partnership, and Investor have formed Brandywine
Industrial Partnership ("BIP"), a Delaware limited partnership, to own and
operate several existing industrial and warehouse properties (collectively, the
"BIP Properties") in Pennsylvania, Maryland, Delaware and the counties of
Burlington, Camden and Gloucester in New Jersey (the "Applicable Area"); and
WHEREAS, Investor and Developer desire to acquire, develop, own and
operate additional industrial and warehouse properties in the Applicable Area in
conjunction with the BIP Properties; and
WHEREAS, Developer directly owns or controls the ownership of several
vacant land parcels which are described on Exhibit A attached hereto (the
"Option Land").
NOW, THEREFORE, for and in consideration of the various covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Identification of Opportunities. During the Term (as defined in
Paragraph 14) of this Agreement, each party may identify projects in the
Applicable Area which would be appropriate for acquisition and development (an
"Opportunity") by a joint venture that would be formed by the parties or their
affiliates (a "Development Joint Venture"). A project shall constitute an
Opportunity and be subject to the provisions of this Agreement only if the
project meets each of the following criteria:
a. the project involves the acquisition and/or development of
industrial and/or warehouse building(s) that contain or, upon completion of
development would contain, an aggregate of not less than 50,000 net rentable
square feet;
b. the project is located exclusively within the Applicable
Area;
c. the project is not an Excluded Opportunity (as defined in
Paragraph 14).
When a party has identified an Opportunity, and assembled such
information as it believes would form the basis for a meaningful discussion
between the parties as to whether to pursue such Opportunity, such party shall
inform the other party (an "Opportunity Notice") and provide the other party
with such information. Subject to the 15-day period referenced in Paragraph 3
below, the parties will then negotiate in good faith to determine whether to
pursue the Opportunity through a Development Joint Venture. Such negotiations
will also cover terms of the project comprising the Opportunity, including the
type and size of the building(s) and the required amounts of debt and equity
financing. The parties contemplate that the Development Joint Venture will
employ approximately 55%-60% leverage. If the parties agree to pursue the
identified Opportunity, they, or their affiliates, will execute a partnership
agreement to reflect their agreement.
The following terms will be part of every Development Joint Venture:
a. net operating cash flow will be distributed to the partners
on a pro-rata basis in accordance with their respective
outstanding equity contributions;
b. net proceeds from a sale or refinancing will be distributed
first to the partners on a pro-rata basis in accordance
with their respective outstanding equity contributions
until each has received the return of its equity
contribution;
c. net proceeds from a sale or refinancing will next be
distributed to the partners on a pro-rata basis in
accordance with their respective equity contributions until
each has received a 12.0% leveraged IRR on its equity
contribution;
d. net proceeds from a sale or refinancing will
next be distributed as follows: 60% to the partners on a
pro-rata basis in accordance with their respective equity
contributions and 40% to Developer until Investor has
received a 18.0% leveraged IRR on its equity contribution;
e. any remaining net proceeds from a sale or refinancing will
be distributed as follows: 40% to the partners on a
pro-rata basis in accordance with their respective equity
contributions and 60% to Developer.
In addition, each Development Joint Venture will include a mutually
acceptable buy-sell provision and a right of first offer in favor of Developer
covering the properties owned by the Development Joint Venture. The Development
Joint Venture will also include a mechanism to compensate Developer and its
affiliates for third party costs (e.g., architectural, engineering, zoning, site
assessment, legal, structural, environmental, etc.) associated with the pursuit
of Opportunities approved by the Development Joint Venture or Investor,
including approved Opportunities that are not ultimately acquired or purchased
by the Development Joint Venture.
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2. Development Option. If the parties have agreed to pursue an
Opportunity: (i) Developer will have the option either to contribute equity
(which may be in the form of the land to be used for the project and if such
land is Option Land, it shall be valued as provided in Paragraph 4 below) in an
amount up to Investor's contribution or not to contribute any equity and (ii)
Investor will have the option either (a) to contribute its equity at the
commencement of the project or (b) if acceptable to a third party lender, to
contribute its equity throughout the construction process or at the completion
of the construction, in which case Investor shall execute a tri-party agreement
with the construction lender. The parties shall execute a mutually agreeable
contribution agreement at the outset of construction setting forth each party's
funding obligations and the other conditions which must be met before the
project is acquired by the Development Joint Venture.
3. Development Exclusive. During the Term of this Agreement, neither
Developer nor Brandywine Realty Trust nor any controlled affiliate of such party
shall acquire or develop any industrial property or warehouse in the Applicable
Area which it does not own or control, directly or indirectly through one or
more subsidiaries, as of the date hereof if the acquisition or development meets
the Opportunity criteria set forth in Paragraph 1; provided, however, that, in
the event that one party presents to the other party an Opportunity, as provided
for in Paragraph 1, and the parties fail to agree on whether to pursue the
Opportunity and the terms of the related Development Joint Venture within 15
days of delivery of an Opportunity Notice from one party to the other, then a
party may thereafter pursue such Opportunity for its own account without any
obligation to permit the other party or any affiliate of the other party to
participate in such Opportunity.
4. Option to Purchase. Developer grants to Investor, for the benefit of
the Development Joint Venture, an option, exercisable only during the Term, to
purchase the Option Land for a price of $6.00 multiplied by the number of
Buildable Square Feet (as hereinafter defined) in the Option Land. "Buildable
Square Feet" shall mean the maximum amount of actual square footage approved
pursuant to the Opportunity which the applicable governmental statutes, laws,
and regulations and any applicable private restrictions permit to be built on
the Option Land. The option may only be exercised as to portions of the Option
Land which Developer and Investor have agreed to include in the Development
Joint Venture as an Opportunity under Paragraph 1 above, and any remaining
portion of the Option Land shall remain subject to the option during the balance
of the Term.
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The option shall be exercised by written notice from Investor to
Developer, and Developer shall transfer good and marketable title, free and
clear of all liens, claims and encumbrances, to the designated portion of the
Option Land to the Development Joint, subject, however, to liens, claims and
encumbrances currently existing or arising during the Term in the ordinary
course of business, such as liens for unpaid taxes not yet due and payable. Upon
receipt of such written notice, Developer and Investor shall enter into a
purchase contract, for the benefit of the Development Joint Venture, which will
incorporate the relevant terms of this Agreement and contain such other
provisions as are commercially reasonable under the circumstances, taking into
account comparable provisions of the Contribution Agreement. Such purchase
contract will have as an exhibit the partnership agreement creating the
Development Joint Venture, which will be executed by the parties or their
affiliates at closing.
In the event that Developer receives an offer from an unaffiliated
third party during the Term to purchase all or a portion of the Option Land then
Developer will provide Investor with prompt written notice of Developer's
receipt of such offer, and Investor will have 15 days from receipt of such
notice to elect to exercise the option to purchase the Option Land. If Investor
does not elect to exercise the option prior to expiration of such 15-day period,
then the option shall expire with respect to such Option Land upon expiration of
such 15-day period.
5. Survey. Within thirty (30) days after the exercise of an option
under Paragraph 4 of this Agreement, Developer shall, at Development Joint
Venture's cost and expense, obtain a current survey of the Option Land subject
to the option exercise meeting the standards for surveys contained in the
Contribution Agreement, to the extent applicable, and otherwise reasonably
acceptable to Investor. The survey shall certify the number of Buildable Square
Feet for the Option Land subject to the option exercise.
6. Title. Developer shall obtain and deliver to Investor, at
Development Joint Venture's expenses, within twenty (20) days following the date
an option is exercised pursuant to Paragraph 4, a commitment for an owner's
title insurance policy (the "Title Commitment") covering title to the Option
Land subject to the option exercise and meeting the requirements of the
Contribution Agreement, to the extent applicable. Investor shall, within ten
(10) days following the receipt of the Title Commitment, notify Developer of
permitted title exceptions for the purpose of the purchase contract.
7. Further Encumbrances. Developer agrees that, during the Term and so
long as Investor is not in default under this Agreement, it will not, without
the prior written consent of Investor, which consent shall not be unreasonably
withheld or delayed, encumber the Option Land or enter into any leases,
agreements or contracts affecting the Option Land. Notwithstanding the
foregoing, Developer and Investor acknowledge that a portion of the Option Land,
as legally described on the attached Exhibit B, is subject to an option right
for the benefit of BIP, and that the option granted herein shall be subject to
and subordinate to that option.
8. Representations and Warranties. Developer represents and warrants
that: (a) Developer presently owns the Option Land in fee simple absolute; (b)
that the Option Land is not subject to any claims, liens or encumbrances [except
as set forth on the attached Exhibit C]; and (c) Developer has full limited
partnership power, right and authority to enter into this Agreement and perform
the covenants set forth herein. Investor represents and warrants that: (a)
Investor has full power, right and authority to enter into this Agreement and
perform the covenants set forth herein.
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9. Taxes and Maintenance of Option Land. Developer agrees that it shall
promptly pay when due all real estate taxes on the Option Land and, further,
that it shall use commercially reasonable efforts to maintain the Option Land in
substantially its current condition. If Developer fails to pay said real estate
taxes when and as due, and is not challenging its obligation to pay said taxes
in good faith and in a commercially reasonable manner then, within ten (10)
business days following receipt of written notice from Investor of said failure,
Investor may pay such taxes and Developer shall promptly reimburse Investor for
such amount, together with interest thereon at a rate of twelve percent (12%)
per annum.
10. Additional Developer Services. Developer or an affiliate shall
provide the following services to the Development Joint Venture:
a. property management for all properties owned by the
Development Joint Venture for a fee of 1.0% of collected revenue for
single-tenant properties and 3.0% for all other properties, based on the form of
agreement executed by BIP and Brandywine Real Estate Services Corporation in
conjunction with the consummation of the transactions covered by the
Contribution Agreement;
b. leasing brokerage for all available premises owned by the
Development Joint Venture for then prevailing market fees, based on the form of
agreement executed by BIP and Brandywine Real Estate Services Corporation in
conjunction with the consummation of the transactions covered by the
Contribution Agreement;
c. construction/development management for all construction
projects undertaken by the Development Joint Venture, at then prevailing market
fees.
11. Notices. Any notice, request, demand, instruction or other
communication to be given by a party to the other party hereunder, except those
required to be delivered at the Closing, shall be in writing, and shall be
deemed to be delivered (a) upon receipt, if delivered by facsimile, (b) upon
receipt if hand delivered, (c) on the first business day after having been
delivered to a national overnight air courier service, or (d) three business
days after deposit by registered or certified mail, return receipt requested,
addressed as follows:
If to Investor: Invesco Realty Advisors
One Lincoln Centre, Suite 700
5400 LBJ Freeway, LB-2
Dallas, Texas 75240
Attention: Scott Dennis, Alan Green and
Jason Haas
Fax: 972/715-5811
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with an additional copy to: D'Ancona & Pflaum LLC
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
Attention: J. Kelly Bufton, Esq.
Fax: (312) 602-3078
If to Developer: Brandywine Operating Partnership, L.P.
14 Campus Boulevard
Newtown Square, Pennsylvania 19073
Attention: Gerard H. Sweeney, President
and Chief Executive Officer and
Brad A. Molotsky, General Counsel
Fax:(610) 325-5622
12. Recording. Developer and Investor shall execute and record a
memorandum of this Agreement evidencing the existence of this Agreement.
13. Term of this Agreement. This Agreement shall be valid and
enforceable for a period commencing on the date hereof and continuing through
but not after the Term.
14. Definitions. As used herein, the following terms have meanings
assigned to them below:
a. "Excluded Opportunity" shall mean a project or transaction
that involves any of: (i) a passive investment by or on behalf of Developer or
Investor (i.e., an investment that does not involve active management by
Developer or Investor or an affiliate); (ii) an investment that involves
securities or instruments convertible into securities of Developer or its
affiliates and not just cash; (iii) an investment in industrial or warehouse
properties as part of a mixed portfolio transaction (i.e., a transaction
involving multiple commercial facilities that either are not exclusively within
the Applicable Area or include non-industrial or non-warehouse properties); (iv)
a contractual commitment by Developer or an affiliate, in effect on the date
hereof, to pursue a transaction which would, if consummated, be inconsistent
with or breach the exclusivity arrangement provided for in Paragraph 1 hereof;
(v) the sale or contribution by Developer or an affiliate of any industrial or
warehouse property or properties that Developer or an affiliate owns or controls
on the date hereof.
b. "Restrictive Business Combination" means a transaction in
which Brandywine Realty Trust or Developer either merges or consolidates
(whether directly or in a triangular transaction) with a third party in an
arm's-length transaction if, immediately prior to such merger or consolidation,
such third party or its parent has entered into commitments that would be
inconsistent with or breached by the exclusivity arrangement provided for in
Paragraph 1 hereof.
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c. "Term" means the period commencing on the date hereof and
ending on the earliest to occur of: (i) the third anniversary of the date
hereof; (ii) the consummation of a Restrictive Business Combination; (iii) the
failure of Investor and Developer to agree to pursue four consecutive
Opportunities; (iv) a breach by Investor of its obligation to commit equity to
the Development Joint Venture; (v) the filing by or against Investor or
Developer of a bankruptcy petition or petition for relief from creditors; and
(vi) the date on which Investor has contributed or unconditionally committed to
contribute an aggregate of at least $25 million to the Development Joint
Venture.
INVESCO REALTY ADVISORS, INC.
By: /s/ Ron Ragsdale
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Title: Vice President
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BRANDYWINE OPERATING PARTNERSHIP,
L.P. by Brandywine Realty Trust, general partner
By: /s/ Gerard H. Sweeney
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Title: President and Chief Executive Officer
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Exhibit A
Option Land
Iron Run - Parcels B and C as depicted on the marketing brochure attached hereto
Highlands Business Park - Lots 8.01, 7.05 and 7.06
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