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30 Mike Morrison Development Agreement— Phase III Silver Lake Village Redevelopment August 10, 2010 Page 2 They requested an 18 -month timeframe to commence development on the two (2) phases. Based upon the above referenced development program, following is a listing of the proposed business terms for the new Phase III Development Agreement: 1. General a. Parties. The Agreement is between the City, IIRA and Apache Redevelopment LLC, the Master Redeveloper for Phase I and Phase II. The Redeveloper is acting more as a land Redeveloper in hying to find third parties to develop the Phase IIIA site (former Apache Office site which is currently vacant and the 7A Cadwallader site), the Phase IIIB site (former Don's Car Wash site which is currently vacant and the Baker's Square parking sites) and the Phase IIIC site (former Fuel Mart and Fuel Mart Carwash sites). b. Past claimed Defaults. The City/HRA and the Redeveloper will each waive all claims of past defaults and the relationship will be governed by the new Phase III contract going forward. 2. Surviving Provisions of the Phase I Development Agreement a. Below Market Profit Tax Increment Assistance Increase. Following the final cost and profit certification process for the Phase IA condos if the return to the Redeveloper is less than 12% of the Total Development Cost (TDC) the HRA was to provide the Redeveloper a note in a principal amount necessary for them to realize a 12% Profit. For Phase IA, the Redeveloper profit was expected to be $3,192,382. Due to the downturn in the condominium market and economy in general, sales slowed to level that wasn't expected. The TDC for the project rose due to holding costs associated with unsold units. The TDC were approximately $37.6 million. After paying the bank loan and other development related costs, the Redeveloper received no profit and actually has a loss of $635,095. In order to get to their desired 12% profit, the HRA would need to provide them with a subordinate TIF note for $5,080,000. This note is subordinate to the outstanding TIF revenue bonds that were sold for the project. These bonds have a "sinking" provision which means that any unused discount that isn't needed to pay debt service is used for prepayment on the bonds. Since these bonds do not have a call date until February 1, 2014, the first opportunity for the Redeveloper to receive any payment on this subordinate note is 2014, if the City is able to refinance these bonds at better rates. If the City is unable to finance the bonds with better rates, then the Redeveloper's payments will not be made until the bonds are paid in full. Overall, it is estimated at this time that there will only be approximately $980,000 available for payment on this subordinate note, which would only provide the Redeveloper with less than a 1% profit (conservative estimate based upon no inflation). 3. Surviving Provisions of the Phase II Development Agreement a. Shot_ Fall Note. The Redeveloper has finalized Phase IIA (town homes). Under the prior agreement, if the City sold tax-exempt TIF revenue bonds at the request of the Redeveloper and there were insufficient proceeds from this sale to repay the qualified costs, then the Redeveloper would get a subordinate, short fall note. The original PAYGO TIF note was for $937,520. Based upon preliminary sizing for tax-exempt TIF bonds completed in late 2009, it was estimated that the net proceeds would be approximately $610,000. Since the Redeveloper did expend the $937,520, they would get a subordinate TIF note in the amount of $327,520. '['his note would be payable from TIF generated from the town home