PDC Resolution 6543

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					                       PORTLAND DEVELOPMENT COMMISSION
                                 Portland, Oregon


                                   RESOLUTION NO. 6543


               AUTHORIZING THE EXECUTIVE DIRECTOR TO EXECUTE AN
               AMENDMENT TO THE THIRD AMENDED AND RESTATED
               DEVELOPMENT AGREEMENT WITH PORTLAND HOTEL
               DEVELOPER, LLC FOR THE MEIER & FRANK BUILDING
               REUSE PROJECT FOR THE PURPOSE, AMONG OTHERS, OF
               AUTHORIZING AN ADDITIONAL PDC LOAN OF $3,000,000


        WHEREAS, the River District Urban Renewal Area Plan (“Plan”), adopted by the
Portland Development Commission (“PDC”) Board of Commissioners (“Board”) by Resolution
No. 5158 on August 19, 1998, and by City Council by Ordinance 172808 on October 21, 1998,
provides tax increment funding and authority to support the accomplishment of community goals
in the downtown retail core;

        WHEREAS, The Central City Plan identifies the following policy for Downtown Portland:
Policy 14, Downtown: “Strengthen the Downtown as the heart of the region, maintain its role as
the preeminent business location in the region, expand its role in retailing, housing, tourism and
reinforce its cultural, educational, entertainment, governmental and ceremonial activities;”

        WHEREAS, The “Downtown Portland Retail Strategy identifies the retention and
rehabilitation of the downtown Meier & Frank Department Store as a number one priority to
strengthen the retail core’s vitality as a retail destination that was adopted as policy by the PDC
Board on July 10, 2002, by Resolution No. 5896;

       WHEREAS, the Executive Director was authorized by Resolution No. 5897 on July 10,
2002, to enter into negotiations with the building owner, The May Department Stores Company
(“May”), for a public/private partnership to rehabilitate the Meier & Frank Building (“Building”);

        WHEREAS, Sage Hospitality Resources, Inc. (“Sage”) executed a Purchase & Sale
Agreement with May to purchase a condominium interest in the upper nine floors above the five
stories of the building to be retained by May, for the purpose of redeveloping and operating a
hotel;

       WHEREAS, the Board approved Resolution No. 6241 on May 25, 2005, authorizing the
Executive Director to execute a Development Agreement with Sage;

        WHEREAS, the Board approved Resolution No. 6277 on July 13, 2005, authorizing the
Interim Executive Director to execute Amended and Restated Development Agreements with
May and Sage;

       WHEREAS, the Board approved Resolution No. 6317 on December 14, 2005,
authorizing the Executive Director to execute a Second Amended and Restated Development
Agreement with Sage;
Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment
December 12, 2007                                                                         Page 2 of 3


        WHEREAS, Sage formed Portland Hotel Developer, LLC (“Developer”) to develop a
hotel in the upper nine floors of the Building;

       WHEREAS, the Board approved Resolution No. 6343 on March 8, 2006, authorizing the
Executive Director to execute a Third Amended and Restated Development Agreement (“Sage
Third Amended and Restated Development Agreement”) with Sage;

      WHEREAS, subsequent unforeseen conditions discovered during demolition and new
enhancements to the hotel have increased the development cost of the hotel by $15 million;

        WHEREAS, Sage’s construction lender, Prudential, is requiring that Sage develop a new
capitalization plan (“2007 M&F Capitalization Plan”) to cover the cost overruns and thereby
provide a balanced project budget;

        WHEREAS, an additional $3.8 million of the unforeseen construction costs are
attributable to safety improvements, green building practices, and seismic structural upgrades to
renovate the Building;

        WHEREAS, Sage is requesting that PDC provide an additional $3 million loan to
Developer to fund a portion of the unforeseen construction costs described in the immediately
preceding recital, for a new total loan amount of $16.925 million as part of an updated capital
plan for the project;

         WHEREAS, Sage has represented that the remaining cost overruns will be covered by
the following sources under the 2007 M&F Capitalization Plan: (i) the mezzanine lender for the
hotel project has committed to provide an additional $9.4 million mezzanine loan to Developer;
(ii) Developer will forfeit $1 million of its development fee for the hotel project; and (iii) the cost
overruns will create additional historic tax credits that could be sold to generate additional net
proceeds for the hotel project in the estimated amount of $1.6 million (collectively, “Other
Financing”); and

      WHEREAS, an amendment to the Sage Third Amended and Restated Development
Agreement is now required in order to increase the mezzanine debt for the hotel project and to
memorialize the agreement of PDC to provide to Developer an additional $3 million loan.

        NOW, THEREFORE, BE IT RESOLVED that the Board finds that rehabilitation of the
Meier & Frank Building supports implementation of goals of the River District Urban Renewal
Plan, the Central City Plan, and the Downtown Portland Retail Strategy Plan;

       BE IT FURTHER RESOLVED that the Executive Director is authorized to enter into a
First Amendment to the Third Amended and Restated Development Agreement with Portland
Hotel Developer, LLC in substantially the form attached hereto as Exhibit A (“First Amendment”)
containing the above-described amendment;

       BE IT FURTHER RESOLVED that the Executive Director shall be delegated authority to
approve any modifications to the loan terms for the Other Financing currently anticipated to be
provided pursuant to the 2007 M&F Capitalization Plan, subject to PDC Loan Committee review
and recommendation to the Executive Director as to whether such modifications shall be
approved by the Executive Director;
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       BE IT FURTHER RESOLVED that the Executive Director shall be delegated authority to
approve any modifications to the First Amendment which are necessary to reflect any
modifications described in the immediately preceding clause above; and

        BE IT FURTHER RESOLVED that this Resolution shall become effective immediately
upon its adoption.

       Adopted by the Portland Development Commission on December 12, 2007.
Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                         Exhibit A
December 12, 2007                                                                     Page 1 of 19


                           FIRST AMENDMENT
                                 TO THE
          THIRD AMENDED AND RESTATED DEVELOPMENT AGREEMENT
                   FOR THE MEIER AND FRANK BUILDING

                           PORTLAND HOTEL DEVELOPER, LLC.

        THIS FIRST AMENDMENT TO THE THIRD AMENDED AND RESTATED
DEVELOPMENT AGREEMENT (this “Amendment”) is made as of ______________, 2007,
by the CITY OF PORTLAND (the “City”), a municipal corporation of the State of Oregon,
acting by and through the PORTLAND DEVELOPMENT COMMISSION, the duly
designated urban renewal agency of the City of Portland (“PDC”), and PORTLAND HOTEL
DEVELOPER, LLC, a Delaware limited liability company (“Developer”).
                                         RECITALS
A.      PDC and Sage Hospitality Resources, LLC, as predecessor-in-interest to Developer,
        previously entered into a Development Agreement on June 10, 2005 (“Original
        Development Agreement”) in connection with the proposed redevelopment of a portion
        of the building commonly known as the Meier & Frank Building into a hotel.

B.      PDC and Developer entered into that certain Amended and Restated Development
        Agreement dated September 19, 2005 (“Amended and Restated Development
        Agreement”) to amend and restate the Original Development Agreement and thereby
        address concerns raised by the Oregon Bureau of Labor and Industries.

C.      PDC and Developer entered into that certain Second Amended and Restated
        Development Agreement dated December 23, 2005 (“Second Amended and Restated
        Development Agreement”) to amend and restate the Amended and Restated Development
        Agreement and thereby extend the term of the Bridge Loan made by PDC.

D.      PDC and Developer entered into that certain Third Amended and Restated Development
        Agreement dated March 13, 2006 (“Third Amended and Restated Development
        Agreement” or “Agreement”) to amend and restate the Second Amended and Restated
        Development Agreement and thereby allow an increase in the maximum amount of the
        Mezzanine Loan in order to fund cost increases in the Hotel Project.

E.      The Hotel Project has incurred (i) unforeseen cost overruns due to additional work
        necessary to address structural and other unanticipated issues and (ii) additional costs due
        to discretionary upgrades to be made to the Hotel Project to enhance the operating


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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                       Exhibit A
December 12, 2007                                                                   Page 2 of 19


        performance of the Hotel Project. Such cost overruns and additional costs are estimated
        to total approximately $14,000,000 and are more particularly described in Exhibit “A”
        attached hereto (“Additional Costs”).

F.      Developer has requested that PDC provide additional financing for the Hotel Project in
        the amount of $3,000,000. Developer anticipates that the remainder of the Additional
        Costs will be covered with (x) an additional $1,600,000 of net sales proceeds to be
        generated from the sale of an additional allocation of Historic Tax Credits for eligible
        cost overruns incurred in connection with the Hotel Project and (y) a forfeiture by
        Developer of $1,000,000 of Developer’s development fee and (z) additional funds in the
        amount of $9,400,000 which will ultimately be funded through an increase in the
        Mezzanine Loan (the additional funds described in this clause (z), the “2008 Bridge
        Debt”).

G.      The parties now desire to amend the Third Amended and Restated Development
        Agreement as provided in this Amendment.

        NOW THEREFORE, in consideration of the premises and the agreements set forth herein
and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Parties agree as follows:

                                        DEFINITIONS
Except as otherwise provided below, the capitalized terms used herein shall have the respective
meanings ascribed thereto in the Third Amended and Restated Development Agreement:
1.      “2008 Bridge Debt” shall have the meaning ascribed to such term in Recital F above.

2.     “2008 Closing” means the execution of all documents (including without limitation, the
2008 Transaction Documents) necessary to fund the Additional Costs of the Hotel Project in
accordance with Sections 1 and 2 of the Agreement.

3.     “2008 Closing Date” means the date on which funds from the 2008 PDC Project Loan
and 2008 Bridge Funds are made available to Developer pursuant to the terms of the applicable
2008 Transaction Documents.

4.      “2008 Final Amendment Termination Date” means ________, 20____.

5.      “2008 Intercreditor Agreement” means that certain Second Amended and Restated
Intercreditor Agreement to be executed by and among the CDE, the Mezzanine Lender, Sage

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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                       Exhibit A
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Portland LLC, PDC, Developer, Property Owner and Portland Hotel Lease Manager, LLC in
connection with the 2008 Closing.

6.      “2008 Mezzanine Additional Debt” means the additional debt (in the form of an
increase in the Mezzanine Loan to Developer) in an amount not to exceed $9,400,000 (subject to
the total of PDC’s Project Loan, 2008 Project Loan, Seismic Loan and Bridge Loan amounts not
exceeding a combined loan to value ratio of 99.3% of appraised stabilized value), which will be
the take-out financing for the bridge loans (including the 2008 Bridge Debt) of equal amount.

7.      “2008 PDC Project Loan” shall have the meaning ascribed thereto in Subsection 2.2.6
of the Agreement.

8.     “2008 PDC Project Loan Documents” shall have the meaning ascribed thereto in
Subsection 2.2.6 of the Agreement.

9.      “2008 Transaction Documents” means the documents necessary to implement the
financing structure described in Sections 1 and 2 of the Agreement, and will include, without
limitation, (a) a 2008 Intercreditor Agreement, (b) the 2008 PDC Project Loan Documents, (c)
documentation which evidences a forward commitment of the Mezzanine Lender to fund the
2008 Mezzanine Additional Debt, (d) documentation which evidences a forward commitment to
fund the 2008 Bridge Debt, and (e) documentation which evidences an increase in rental
payments by the Master Lessee under the Master Lease by such amounts, if any, as shall be
necessary to ensure timely payment of all debt service requirements on the 2008 PDC Project
Loan and all other debt or obligations which are senior in priority to repayment of the 2008 PDC
Project Loan pursuant to the terms of the 2008 Intercreditor Agreement, all as will be defined in
those documents approved by PDC.

10.  “Additional Costs” shall have the meaning ascribed thereto in Recital E of this
Amendment.

11.   “Agreement” means collectively, the Third Amended and Restated Development
Agreement, as amended by this Amendment.

12.     Reserved.

13.     “Escrow Agent” means Chicago Title Insurance Company.


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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                       Exhibit A
December 12, 2007                                                                   Page 4 of 19


14.     Reserved.

15.    “Hotel Condominium Unit” means the condominium interest in and to that certain real
property situated in Multnomah County, State of Oregon which is more particularly described in
Exhibit “B” hereto.

16.    “Master Lease” means that certain Meier and Frank Master Lease dated as of March 31,
2006, by and between the Master Lessee and Developer, and all amendments thereto.

17.     “Master Lessee” means Portland Hotel Master Lessee LLC, and any successors thereto.

18.     “Mezzanine Lender” means Portland Mezzanine Lender, LLC, and any successors
thereto.

19.      “Third Party Sale” means a sale of all or substantially all of the Hotel Project to an
entity that is not owned in part, directly or indirectly, by Property Owner, or an Affiliate of
Developer or Property Owner. For purposes of the Agreement, a “Third Party Sale” shall not
include transfers of interests at an entity level of the members/owners more remote than the
members of the Property Owner or a sale by either member of the Property Owner to the other
member of the Property Owner if PDC has approved the new managing member of the transferee
prior to the Third Party Sale, which approval shall not be unreasonably withheld.

20.    “Sage Cost Overrun Contribution” means the forfeiture by Developer of $1,000,000 of
the development fee for the Hotel Project.

                                           AGREEMENT
       1.     AMENDMENT OF SECTION 1.1 OF THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Section 1.1 of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by the following:

                         1.1     Developer Obligations. Developer will obtain all construction
                and permanent financing necessary to complete construction of the Hotel Project
                at a total construction and acquisition cost anticipated to be approximately
                $133,000,000. Developer intends to cause the rehabilitation, operation, and
                maintenance of the Hotel Project in accordance with the terms of this Agreement,
                specifically Sections 3 and 4 below.


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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                        Exhibit A
December 12, 2007                                                                    Page 5 of 19


       2.     AMENDMENT OF SECTION 1.2 OF THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Section 1.2 of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by the following:

                        1.2     PDC Financial Participation. In consideration of Developer’s
                performance of the Developer obligations, PDC agrees to make a total of
                $16,925,000 available to Developer in support of the public benefits of the Hotel
                Project, as loan funds, in the form of a Seismic Loan to the Property Owner, a
                Project Loan to the Property Owner, a Bridge Loan to the Investment Fund and a
                2008 PDC Project Loan to the Developer, all in accordance with the terms of this
                Agreement, specifically Section 2 below.

       3.     AMENDMENT OF SECTION 1.3 OF THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Section 1.3 of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by the following:

                      1.3       General Financing Structure. Developer will pay for the
                acquisition of the property and development of the Hotel Project using funds
                derived from multiple sources including (a) the PDC Loans, (b) the 2008 PDC
                Project Loan, (c) cash sum of the net proceeds from the sale of New Markets Tax
                Credits, Historic Tax Credits, and BETC’s, (d) the Prudential Bridge Loan, (e) the
                2008 Bridge Debt and (f) Sage Cost Overrun Contribution. To effect the
                investment of these funds into the Hotel Project, PDC will make a Bridge Loan to
                the Investment Fund and the Investment Fund will make a Qualified Equity
                Investment as equity into the CDE. CDE will make Real Estate Loans to the
                Property Owner and Developer. The Property Owner and Developer will use the
                proceeds of the Real Estate Loans to develop the Hotel Project. In addition PDC
                will make (a) a Project Loan to the Property Owner, (b) a Seismic Loan to the
                Property Owner and (c) a 2008 PDC Project Loan to the Developer and the
                Developer will obtain the 2008 Bridge Debt.

       4.     AMENDMENT OF SECTION 2.2 OF THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Section 2.2 of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by the following:

                      2.2      Public Participation in Hotel Project Financing. PDC shall
                 financially participate in the Hotel Project by funding $16,925,000 of the
                 Development Costs as described below. The specifics of each loan will be
                 subject to approval by the PDC Loan Committee and will be reviewed for
                 consistency with PDC Loan Guidelines and the terms of this Section 2.2:

       5.     AMENDMENT OF SUBSECTION 2.2.5 OF THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Subsection 2.2.5 of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by the following:


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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                        Exhibit A
December 12, 2007                                                                    Page 6 of 19


                             2.2.5     Intercreditor Agreement. The security of each of the
                      PDC Loans and the 2008 PDC Project Loan shall be subject to the terms of
                      a 2008 Intercreditor Agreement. PDC’s priorities and rights will be
                      described in the 2008 Intercreditor Agreement, and those rights will be
                      enforced through the actions of the collateral agent. The 2008 Intercreditor
                      Agreement will provide in part that the security of the PDC Loans and the
                      2008 PDC Project Loan is subordinate to the Real Estate Loan (and all CDE
                      Loans made to Property Owner and Developer), the Mezzanine Loan (as the
                      same is increased by the 2008 Mezzanine Additional Debt), the Prudential
                      Bridge Loan and the 2008 Bridge Debt.

       6.     ADDITION OF NEW SUBSECTION 2.2.6 TO THE THIRD AMENDED
AND RESTATED DEVELOPMENT AGREEMENT. A new Subsection 2.2.6 is hereby
added to the Third Amended and Restated Development Agreement to read as follows:

                                2.2.6 2008 PDC Project Loan. At the Closing, PDC will loan to
                     the Developer Three Million and No/100 Dollars ($3,000,000.00) to pay for
                     a portion of the Development Costs attributable to the Hotel Project (“2008
                     PDC Project Loan”). The Project Loan shall be both a construction loan
                     and a permanent loan. The Developer agrees to cause the Developer and the
                     Property Owner, as applicable, to execute such documents as are reasonably
                     required by PDC and the PDC Loan Committee, including but not limited to
                     a Note, a Loan Agreement, and security documents (“2008 PDC Project
                     Loan Documents”), that are based on the following general loan terms:
                                        (a)     2008 PDC Project Loan Term: The term of the
                       2008 PDC Project Loan shall begin at the 2008 Closing Date and end no
                       earlier than the earlier to occur of (i) last day of the New Markets Tax
                       Credit compliance period, (ii) the due date of the Mezzanine Loan, but no
                       later than fifteen (15) years after the Closing Date.
                                        (b)     Interest Rate: The interest rate on the 2008 PDC
                       Project Loan shall be five percent (5.00%) simple interest per annum.
                                        (c)     Payments: Interest only payments shall begin in
                       Year 1, with a final balloon payment on the maturity date of all accrued
                       interest and unpaid principal.
                                        (d)     2008 PDC Project Loan Security. Security for the
                       2008 PDC Project Loan shall be a leasehold deed of trust on the Hotel
                       Condominium Unit. The Property Owner agrees to include in the deed of
                       trust a prohibition against the Property Owner recording or permitting the
                       recording of any encumbrances on the Hotel Condominium Unit after the
                       2008 Closing without the prior written consent of PDC which may be
                       withheld in its reasonable discretion; provided however that prior written
                       consent of PDC shall not be required for security interests granted to a
                       lender for (or refinancing thereof) the Real Estate Loan (including the
                       related CDE loans), the Prudential Bridge Loan or the 2008 Bridge Debt,

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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                       Exhibit A
December 12, 2007                                                                   Page 7 of 19


                       or the funding or refinancing of the Mezzanine Loan (as increased by the
                       2008 Mezzanine Additional Debt), if such debt does not exceed the
                       maximum total amount of $94,500,000 and do not negatively impact the
                       Developer’s repayment obligations with respect to the 2008 PDC Project
                       Loan. The deed of trust will acknowledge that PDC may not foreclose its
                       interest in the Hotel Condominium Unit during the New Markets Tax
                       Credit compliance period.
                                       (e)     Sale of Hotel Condominium Unit. The 2008 PDC
                       Project Loan will be due and payable in the event of a “Third Party Sale”
                       prior to the maturity date.
                                       (f)     Disbursement of 2008 PDC Project Loan Proceeds.
                       Disbursement of 2008 PDC Project Loan Proceeds will be described more
                       fully in the 2008 PDC Project Loan Documents.
                                       (g)     Final Form of 2008 PDC Project Loan Documents.
                       PDC shall submit forms of all Project Loan Documents to Developer at
                       least thirty (30) days prior to the 2008 Closing Date for review and
                       approval. Developer and/or Property Owner, as applicable, shall execute
                       the 2008 PDC Project Loan Documents, in form and substance acceptable
                       to all parties.

       7. ADDITION OF NEW SECTION 2.6 TO THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. A new Section 2.6 is hereby added to the
Third Amended and Restated Development Agreement to read as follows:

                      2.6    Closing of 2008 PDC Project Loan; Conditions Precedent to
                 Closing 2008 PDC Project Loan.

                               2.6.1 Closing of PDC Loans. The Developer shall notify PDC
                       when it believes all conditions to the 2008 Closing have been satisfied.
                       PDC shall have ten (10) business days after receipt of such notice to give
                       notice of any conditions not satisfied or waived. If PDC gives no notice,
                       all conditions shall be deemed satisfied. The 2008 PDC Project Loan shall
                       be closed within ten (10) days of the waiver or satisfaction of all
                       conditions precedent.

                                2.6.2 Conditions Precedent to Closing 2008 PDC Project
                       Loan. Developer and PDC are not obligated to close unless the following
                       conditions are satisfied to the reasonable satisfaction of the benefited
                       Party. The Party benefited by a particular condition shall not
                       unreasonably withhold condition or delay acknowledgment that the
                       condition has been satisfied. The Parties shall act diligently and in good
                       faith to satisfy conditions over which they have control or influence.


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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                          Exhibit A
December 12, 2007                                                                      Page 8 of 19


                                       (i)     To the Satisfaction of Both PDC and Developer
                                              (1)    Fully executed original counterparts of all
                                       2008 Transaction Documents shall have been delivered to
                                       the Escrow Agent or another agreed upon escrowee for the
                                       Closing.

                                              (2)    All 2008 Transaction Documents shall be in
                                       form and substance acceptable to PDC and Developer.

                                               (3)    There shall be no litigation pending that
                                       prevents PDC or Developer from performing their
                                       respective obligations under the Agreement.

                                               (4)     Neither party shall be in default under any
                                       material term or condition of the Agreement. Each Party
                                       represents to the other that, as of the date hereof, there are
                                       no material defaults under the Agreement or events, that
                                       now or with the passage of time would constitute a material
                                       default under the Agreement.

                                              (5)     Developer shall have provided to PDC a
                                       revised development budget (including itemized sources
                                       and uses of funds) for the Hotel Project, in form and
                                       substance satisfactory to PDC and Developer.

                                               (6)     Developer agrees to have secured a letter
                                       from its historic preservation consultant indicating
                                       preliminary agreement with the State Historic Preservation
                                       Office and the National Parks Service regarding all
                                       approvals which are necessary to ensure receipt of such
                                       amount of Historic Tax Credits in connection with the
                                       Hotel Project as will be necessary to generate net sales
                                       proceeds of approximately $13,100,000.

                                              (7)     Chicago Title Insurance Company shall
                                       have delivered to Developer and PDC a binding
                                       commitment satisfactory to PDC, as lender, to issue a


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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                        Exhibit A
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                                       Lender’s Extended Title Insurance Policy in the amount of
                                       the 2008 PDC Project Loan, showing that PDC will have a
                                       security interest in the Hotel Condominium Unit to be
                                       encumbered by a trust deed for the 2008 PDC Project Loan.

                                              (8)    Developer shall have provided to PDC such
                                       documentation as shall evidence (i) a forward commitment
                                       by the Mezzanine Lender to fund the 2008 Mezzanine
                                       Additional Debt and (ii) a forward commitment to fund the
                                       2008 Bridge Debt, all in form and substance satisfactory to
                                       PDC.

                                               (9)     Neither party shall be in default under any
                                       material term or condition of Transaction Documents or the
                                       2008 Transaction Documents. Each party represents to the
                                       other that, as of the date hereof, there are no material
                                       defaults under the Transaction Documents or 2008
                                       Transaction Documents or events, that now or with the
                                       passage of time would constitute a material default under
                                       the Transaction Documents or the 2008 Transaction
                                       Documents.

                                               (10) Developer shall have demonstrated the
                                       financial feasibility of the Hotel Project by providing to
                                       PDC evidence satisfactory to PDC that Developer will have
                                       access to such funds in such amount as shall be necessary
                                       to fund the Hotel Project (including the Additional Costs),
                                       not later than five (5) business days prior to the 2008
                                       Closing Date.

                                               (11) Developer shall have secured the 2008
                                       Bridge Debt and provided evidence in form and substance
                                       satisfactory to PDC to evidence such commitments.

                                              (12) Any amendments to the Portland Hotel
                                       Master Lessee, LLC Operating Agreement dated as of
                                       March 31, 2006 shall be in form and substance acceptable

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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                         Exhibit A
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                                       to PDC.


                                           (ii) The Developer’s Satisfaction:
                                                (1) PDC’s representations and warranties stated
                                     in Section 2.7 of the Agreement shall be true and correct as
                                     of the 2008 Closing Date.

                                           (iii)   To PDC’s Satisfaction:
                                              (1)     As of the 2008 Closing Date, Developer
                                     shall have irrevocably committed to forfeit no less than
                                     $1,000,000 of its development fee for the Hotel Project.
                                              (2)     Developer shall have provided to Escrow
                                     Agent (x) a certified copy of the Resolution adopted by the
                                     governing body of Property Owner authorizing the execution
                                     of the applicable 2008 Transaction Documents, and the
                                     performance of all obligations therein and (y) a certified copy
                                     of the Resolution adopted by the governing body of
                                     Developer authorizing the execution of the applicable 2008
                                     Transaction Documents and the performance of all
                                     obligations therein.

                                               (3)     Property Owner shall have provided to
                                     Escrow Agent articles of organization, bylaws and a
                                     certificate of good standing from the Secretary of State of the
                                     State of Oregon dated no earlier than ten (10) days prior to
                                     the 2008 Closing Date.

                                              (4)     Developer shall have provided to Escrow
                                     Agent articles of organization, bylaws and a certificate of
                                     good standing from the Secretary of State of the State of
                                     Oregon dated no earlier than ten (10) days prior to the 2008
                                     Closing Date.

                                              (5)    Property Owner and Developer shall have
                                     each provided evidence of all insurance coverage required by


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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                          Exhibit A
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                                     the 2008 PDC Project Loan Documents.

                                               (6)    Developer shall have executed and delivered
                                     to the Escrow Agent, all documentation reasonably necessary
                                     to evidence that Developer has obtained the 2008 Bridge
                                     Debt for the Hotel Project, which documents shall have been
                                     reviewed and approved by PDC (which approval shall not be
                                     unreasonably withheld) prior to delivery to the Escrow
                                     Agent.

                                               (7)     Developer’s representations and warranties
                                     stated in Section 2.8 of the Agreement are true and correct as
                                     of the 2008 Closing Date.

                                              (8)    At least five (5) days prior to the 2008
                                     Closing Date, Developer shall have provided to PDC for
                                     review and approval updated financial statements for Sage
                                     Hospitality Resources, LLC.

                                              (9)      At least five (5) days prior to the 2008
                                     Closing Date, Developer shall have provided to PDC for
                                     review and approval updated economic models to be
                                     prepared by C-Biz for the Hotel Project no earlier than 30
                                     days prior to the 2008 Closing Date.

                               2.6.3 Elections upon Non-Occurrence of Conditions. Except
                       as provided below, if any condition in Section 2.6.2 is not fulfilled to the
                       satisfaction of the benefited Party or Parties on the earlier of (i) the date
                       designated for satisfaction of the condition, or (ii) on the date scheduled
                       for the 2008 Closing, subject to any extension that may have been granted
                       pursuant to this Section 2.6.3, then such benefited Party or Parties may
                       elect to:
                                       (a)     Terminate this Amendment, which termination shall
                                       become effective sixty (60) days after the notice of
                                       termination is sent (“Termination Date”) unless, before
                                       the sixty (60) day period ends, the other Party fulfills such
                                       condition or conditions to the reasonable satisfaction of the
                                       benefited Party or Parties:

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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                         Exhibit A
December 12, 2007                                                                    Page 12 of 19


                                       (b)     Waive in writing the benefit of that condition
                                       precedent to its obligation to perform under this
                                       Amendment, and proceed in accordance with the terms
                                       thereof; or

                                       (c)     Extend the Termination Date by which the
                                       applicable condition may be satisfied, and if the other party
                                       agrees in writing to the extension.

                               2.6.4   2008 Final Amendment Termination Date.
                                       (a)     If all of the conditions precedent under Section
                                       2.6.2 have not been satisfied, waived or otherwise resolved
                                       pursuant to this Amendment on or before the 2008 Final
                                       Amendment Termination Date, then this Amendment shall
                                       automatically terminate on the 2008 Final Amendment
                                       Termination Date unless the date for satisfying the
                                       unsatisfied condition(s) is extended by agreement of the
                                       Parties prior to the 2008 Final Amendment Termination
                                       Date to no later than __________, 20____.

                                       (b)    The 2008 Final Amendment Termination Date may
                                       be extended by mutual agreement of the Parties in the event
                                       of unavoidable delay as described in Section 5.3 of the
                                       Agreement.

                                       (c)     If this Amendment is terminated for failure of
                                       satisfaction of the conditions precedent, then the
                                       obligations of the Parties to each other under this
                                       Amendment shall terminate as the exclusive remedy for
                                       such termination.

       8. ADDITION OF NEW SECTION 2.7 TO THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. A new Section 2.7 is hereby added to the
Third Amended and Restated Development Agreement to read as follows:

                2.7    PDC Representations and Warranties. PDC represents that:



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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                              Exhibit A
December 12, 2007                                                                         Page 13 of 19


                         2.7.1   PDC has full power and authority to enter into and perform this
                                 Amendment in accordance with its terms, and all requisite action has
                                 been taken by PDC in connection with the execution of this
                                 Amendment and the transactions contemplated hereby.

                         2.7.2   PDC is not a "foreign person" within the meaning of Section 1445(f)
                                 (3) of the Internal Revenue Code of 1986, as amended.

                         2.7.3   To the best of PDC's knowledge, there is no litigation, action, suit, or
                                 other government proceeding pending or threatened, which may
                                 affect the PDC's ability to perform its obligations under this
                                 Amendment.

                         2.7.4   No representation, warranty or statement of PDC in this Amendment
                                 or any of the exhibits attached contains any untrue statement of a
                                 material fact or omits a material fact necessary to make the
                                 statements of facts contained herein not misleading.

                         2.7.5   As of the date hereof, there are no defaults by PDC under this
                                 Amendment or events that with the passage of time would constitute
                                 a default of PDC under this Amendment.

                         2.7.6     “PDC's knowledge” shall mean the actual knowledge of the
                                   managerial and supervisory personnel of PDC having
                                   responsibility for the negotiation of the 2008 PDC Project Loan.

                         2.7.7     PDC shall not require Developer, Property Owner or Federated
                                   Retail Holdings, Inc. to take any action that would cause a
                                   recapture of the Historic Tax Credits for this Project.

       9. ADDITION OF NEW SECTION 2.8 TO THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. A new Section 2.8 is hereby added to the
Third Amended and Restated Development Agreement to read as follows:

                2.8        Developer Representations and Warranties. Developer represents that:

                        2.8.1       Developer has full power and authority to enter into and perform
                      this Amendment in accordance with its terms, and Developer has taken all
                      requisite action in connection with the execution of this Amendment and the
                      transactions contemplated hereby.



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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                           Exhibit A
December 12, 2007                                                                      Page 14 of 19


                    2.8.2       No representation, warranty or statement of Developer in this
                  Amendment or any of the exhibits attached contains any untrue statement of a
                  material fact or omits a material fact necessary to make the statements of facts
                  contained herein not misleading.

                    2.8.3     As of the date hereof there are no defaults by Developer under this
                  Amendment or events that with the passage of time would constitute a default
                  of Developer under this Amendment.

                    2.8.4        To the best of Developer's knowledge, there is no litigation, action,
                  suit, or other government proceeding pending or threatened, which may affect
                  Developer's ability to perform its obligations under this Amendment.

                     2.8.5      Developer enters into this Amendment without reliance upon any
                   verbal representation of any kind by PDC, its employees, agents or
                   consultants regarding any aspect of the Hotel Project site, the Hotel Project, its
                   feasibility, financing or compliance with any governmental regulation.

                     2.8.6    “Developer's knowledge” shall mean the actual knowledge of the
                   managerial and supervisory personnel of Developer having responsibility for
                   the development of the Hotel Project.



       10. AMENDMENT OF SUBSECTION 3.1.1 OF THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Subsection 3.1.1 of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by the following:

                       3.1.1           Diligent Completion. After the Closing of the PDC Loans
                               and the 2008 Closing of the 2008 PDC Project Loan as described
                               in Section 2 and in consideration of the PDC financial participation
                               described in the Agreement, and subject to the terms and
                               conditions of this Agreement, the Developer covenants to use the
                               loan proceeds derived from such loans to complete the Hotel
                               Project in accordance with the Scope of Development attached as
                               Exhibit B to the Agreement and the Schedule of Development
                               attached as Exhibit C to the Agreement and in substantial
                               conformance with the Final Construction Plans and Specifications,
                               all subject to extension for unavoidable delays pursuant to Section
                               5.3 (Force Majeure). Developer agrees to keep PDC informed of
                               its progress with respect to development of the Hotel Project

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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                             Exhibit A
December 12, 2007                                                                        Page 15 of 19


                                  during construction, with periodic reports to be issued no less
                                  frequently than once a month until PDC issues a Certificate of
                                  Partial Completion for the Hotel Project.

       11. AMENDMENT OF SECTION 3.2 OF THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Section 3.2 of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by the following:



                         3.2      Hotel Project Financing. Developer will obtain all private
                                  construction and permanent financing necessary to complete the
                                  Hotel Project at a total construction cost of approximately
                                  $133,000,000, based upon the construction budget attached as
                                  Exhibit D to the Agreement.


       12. ADDITION OF NEW SECTION 3.11 TO THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. A new Section 3.11 is hereby added to the
Third Amended and Restated Development Agreement to read as follows:

                     3.11 Reporting Covenant. Following completion of the Hotel Project,
Developer covenants to deliver to PDC for review and approval economic models to be prepared
by Novogradac & Company LLP for the Hotel Project within 30 days after such economic
models are made available to Developer by Novogradac & Company LLP.


         13. AMENDMENT OF PARAGRAPH (a) OF SUBSECTION 5.1.1 OF THE
THIRD AMENDED AND RESTATED DEVELOPMENT AGREEMENT. Paragraph (a) of
subsection 5.1.1 of the Third Amended and Restated Development Agreement is hereby deleted
in its entirety and replaced by the following:

                   (a)         A material default of this Agreement shall occur if Developer shall
                               breach any of the provisions of this Agreement, or any of the
                               provisions of the PDC Loan Documents and/or the 2008 PDC Project
                               Loan Documents, whether by action or inaction, and such breach shall
                               continue and not be remedied within sixty (60) days after the PDC
                               shall have given notice specifying the breach or in the case of a breach
                               which cannot with due diligence be cured within a period of sixty (60)
                               days, if Developer shall not within such sixty (60) day period

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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                        Exhibit A
December 12, 2007                                                                   Page 16 of 19


                           commence the cure of the breach and thereafter diligently prosecute to
                           completion such cure within a reasonable time after the notice from
                           the PDC.

                           Notwithstanding (a) above, PDC may give notice of immediate default
                           and need not allow Developer a period to cure in the case that
                           Developer has not completed the construction of the Hotel Project by
                           the Final Completion Date.

       14. AMENDMENT OF SECTION 5.2 OF THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Section 5.2 of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by the following:

                   5.2     Remedies. In the event of a Party’s default, the non-defaulting Party
                           shall have any and all rights otherwise available at law or in equity.
                           The exercise by either Party of any one or more of such remedies shall
                           not preclude the exercise by it, at the same or different times, of any
                           other such remedies for the same default or breach or of any of its
                           remedies for any other default or breach by the other Party, including,
                           without limitation the right to compel specific performance. In
                           addition, PDC shall have the right to accelerate the payments on the
                           PDC Loans and the 2008 PDC Project Loan, all according to the terms
                           of this Agreement and the PDC Loan Documents and the 2008 PDC
                           Project Loan Documents, respectively.



       15. AMENDMENT OF SECTION 6.17 OF THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Section 6.17 of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by the following


                           6.17        Non-waiver of Government Rights. Subject to the terms
                           and conditions of this Agreement, by making this Agreement, PDC is
                           specifically not obligating itself, the City, or any other bureau with
                           respect to any discretionary action relating to development or
                           operation of the improvements to be constructed on the Hotel
                           Condominium Unit, including, but not limited to, rezoning, variances,
                           environmental clearances or any other governmental approvals which
                           are or may be required, except as expressly set forth herein.



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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                        Exhibit A
December 12, 2007                                                                   Page 17 of 19


       16.    AMENDMENT OF EXHIBIT D TO THE THIRD AMENDED AND
RESTATED DEVELOPMENT AGREEMENT. Exhibit D of the Third Amended and
Restated Development Agreement is hereby deleted in its entirety and replaced by Exhibit C to
this Amendment.

        17.     MISCELLANEOUS PROVISIONS.

                (a) Modification. This Amendment may not be modified or amended except by
                    the written agreement of the parties.

                (b) Counterparts. This Amendment may be executed in counterparts, each of
                    which shall be deemed to be an original, and such counterparts shall constitute
                    one and the same instrument.

                (c) Binding Effect. The provisions of this Amendment shall be binding upon and
                    inure to the benefit of the parties and their respective respective successors
                    and assigns; provided that the foregoing shall be subject to the limitations on
                    assignment set forth in Section 5 of the Agreement.

                (d) Effect of Amendment. Except as expressly provided in this Amendment, the
                    Third Amended and Restated Development Agreement shall remain
                    unamended and in full force and effect.




                                [Remainder of page intentionally left blank]




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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                          Exhibit A
December 12, 2007                                                                     Page 18 of 19




        Executed in multiple counterparts as of the day and year first above written.

                                               CITY OF PORTLAND, a municipal corporation
                                               of the State of Oregon, acting by and through the
                                               PORTLAND DEVELOPMENT COMMISSION,
                                               as the duly designated Urban Renewal Agency of
                                               the City of Portland.



                                               By:      ________________________________
                                                        Bruce A. Warner
                                                        Executive Director


                                               PORTLAND HOTEL DEVELOPER, LLC, a
                                               Delaware limited liability company

                                               By: Sage Portland, LLC, its managing member

                                                     By: Sage Hexagon Holdings, LLC, its managing
                                                         member

                                                        By: Sage Investment Holdings, L.L.C., its
                                                            managing member

                                                           By: __________________________
                                                               Name:
                                                               Title:




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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment                   Exhibit A
December 12, 2007                                                              Page 19 of 19


                                                 EXHIBITS

        Exhibit A              Itemization of Additional Costs

        Exhibit B              Legal Description of Hotel Condominium Unit

        Exhibit C              Replacement Exhibit D to Third Amended and Restated
                               Development Agreement - Construction Budget




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Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment        Exhibit A-1
December 12, 2007                                                       Page 1 of 1


                                            EXHIBIT A

                          ITEMIZATION OF ADDITIONAL COSTS

                                          (See attachment)




Exhibit A
Meier & Frank Third Amended and Restated Development Agreement – Sage
NY 71096226v2
Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment        Exhibit A-2
December 12, 2007                                                       Page 1 of 1


                                            EXHIBIT B

                LEGAL DESCRIPTION OF HOTEL CONDOMINIUM UNIT




Exhibit B
Meier & Frank Third Amended and Restated Development Agreement – Sage
NY 71096226v2
Board Resolution No. 6543 ─ Meier & Frank Building Redevelopment   Exhibit A-3
December 12, 2007                                                  Page 1 of 1


                                      EXHIBIT C

       REPLACEMENT EXHIBIT D TO THIRD AMENDED AND RESTATED
                    DEVELOPMENT AGREEMENT



                              CONSTRUCTION BUDGET
                        Resolution Number 6543
Title: AUTHORIZING THE EXECUTIVE DIRECTOR TO EXECUTE AN
       AMENDMENT TO THE THIRD AMENDED AND RESTATED DEVELOPMENT
       AGREEMENT WITH PORTLAND HOTEL DEVELOPER, LLC FOR THE
       MEIER & FRANK BUILDING REUSE PROJECT FOR THE PURPOSE,
       AMONG OTHERS, OF AUTHORIZING AN ADDITIONAL PDC LOAN OF
       $3,000,000

  Adopted by the Portland Development Commission on December 12, 2007


  PRESENT                                                      VOTE
                      COMMISSIONERS
  FOR VOTE                                           Yea       Nay        Abstain
               Mark Rosenbaum, Chair
               Sal Kadri
               Bertha Ferrán
               Charles Wilhoite
               John Mohlis

                  Consent Agenda                     Regular Agenda


                                  Certification
   The undersigned hereby certifies that:

   The attached resolution is a true and correct copy of the resolution as finally
   adopted at a Board Meeting of the Portland Development Commission and
   duly recorded in the official minutes of the meeting.




                                                      Date: December 14, 2007

				
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