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HomeMy WebLinkAboutUnion at North Crossing, LP - Subordination Agreement - 6/5/2023SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT ("Agreement") is effective as of the 5th day of June, 2023 by the CITY OF WATERLOO, IOWA (the "City"), and UNION AT NORTH CROSSING, LP, an Iowa limited partnership ("Borrower"), for the benefit of THE HUNTINGTON NATIONAL BANK, as fiscal agent, a national banking association ("Mortgagee"). RECITALS A. Simultaneously herewith Borrower is acquiring certain real property located in the County of Black Hawk, State of Iowa, as more particularly described on Exhibit A attached hereto ("Property"). Borrower has assumed certain obligations under the Real Estate Purchase Agreement dated as of August 1, 2022 by and between City and Union Development Holdings, LLC filed October 14, 2022 as Instrument No. 2023-00006156, Official Records of Black Hawk County, Iowa (the "Official Records"), as assigned to and assumed by Borrower pursuant to that certain Assignment and Assumption of Real Estate Purchase Agreement effective as of April 13, 2023 and filed April 13, 2023 as Instrument No. 2023-000013814, and as amended by that certain Amendment to Real Estate Purchase Agreement dated April 17, 2023 and filed April 25, 2023 as Instrument No. 2023-00014312 (as assigned and amended, the "Development Agreement"), pursuant to which the Property and Borrower are subjected to certain restrictions and conditions by City in connection with the development of the Property. In connection with the acquisition and development of the Property by Borrower, Borrower has applied to Iowa Finance Authority (the "Governmental Lender") for a loan (the "Borrower Loan"), to finance the acquisition, construction and equipping of a multifamily apartment housing facility consisting of a total of 180 units and related personal property and equipment, to be located on the Property and known as "Union at North Crossing". D. The Borrower has requested the Governmental Lender to enter into that certain Funding Loan Agreement among Governmental Lender, Allianz Life Insurance Company of North America (the "Funding Lender") and Mortgagee as "Fiscal Agent" dated as of May 1, 2023 (the "Funding Loan Agreement") under which the Funding Lender will make a loan (the "Funding Loan") to the Governmental Lender in the amount of $25,000,000, the proceeds of which will be loaned to the Borrower pursuant to a Borrower Loan Agreement dated as of May 1, 2023 (as it may be supplemented or amended, the "Borrower Loan Agreement") to finance the acquisition, construction, rehabilitation, development, equipping and/or operation of the Property. Pursuant to the Borrower Loan Agreement and that certain Borrower Note dated as of June , 2023 in the original principal amount of $25,000,000 made by Borrower in favor of Subordination Agreement Governmental Lender (the `Borrower Note"), the Borrower agrees to make loan payments to the Governmental Lender in an amount which, when added to other funds available under the Funding Loan Agreement, will be sufficient to enable the Governmental Lender to repay the Funding Loan and to pay all costs and expenses related thereto when due. Contemporaneously herewith, Borrower has executed and delivered to Mortgagee a Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing (as amended, modified or supplemented from time to time, the "Mortgage"), encumbering the Property as fiuther security for Borrower's obligations under the Loan Documents (as defined below), including, without limitation, Borrower's obligations under the Borrower Note. Simultaneously with the execution of the Borrower Note and the execution of the other Funding Loan Documents, the Borrower will execute a Promissory Note in the amount of $2,800,000 in favor and for the benefit of Funding Lender in order to additionally finance construction of the Property (the "Bridge Note") and the Borrower will be obligated to make payment thereunder. The rights of the Governmental Lender under the Borrower Loan Agreement, the Borrower Note and the other Funding Loan Documents are being assigned contemporaneously with the execution and delivery hereof to the Fiscal Agent for the benefit of Funding Lender. The Funding Loan Agreement, the Borrower Loan Agreement, the Borrower Note, the Bridge Note and the Mortgage, together with all other documents executed with respect to the Loan, are hereinafter collectively referred to as the "Loan Documents". The Mortgagee and the Funding Lender are hereinafter collectively referred to as the "Lender". As a condition to making the Borrower Loan, Lender requires that the Loan Documents be a lien on the Property superior to the lien of the Development Agreement and that the rights of Lender under the Loan Documents be superior to the rights of City and Borrower under the Development Agreement. Lender will not make the Loan unless City and Borrower agree to subordinate their rights and obligations under the Development Agreement, including, without limitation, any right of reverter described therein in favor of City. E. Borrower and City hereby agree to subordinate the Development Agreement on and subject to the terms, conditions and requirements set forth in this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: Subordination Agreement Page 2 1. Recitals. The foregoing Recitals are hereby incorporated into this Agreement as agreements among the parties. 2. Subordination. The City hereby covenants and agrees that the Development Agreement is and will at all times continue to be, subordinate, subject and inferior to the rights of Lender under the Loan Documents and that the liens, rights (including approval and consent rights and any rights of reverter), remedies, payment interests, priority interests, and security interests granted to City pursuant to or in connection with the Development Agreement are hereby expressly acknowledged to be in all respects and at all times, subject, subordinate and inferior in all respects to the liens, rights (including approval and consent rights), remedies, payment, priority and security interests granted to Lender pursuant to the Loan Documents and the terms, covenants, conditions, operations and effects thereof. 3. Financing, Encumbrance and Transfer Approval. City hereby approves the transfer of the Property to the Borrower and the financing evidenced by the Mortgage. City further agrees that any transfer of the Property in connection with foreclosure or deed in lieu thereof will not require City's consent 4. Reserved. 5. Lender Notice of Default. In consideration of City's agreements contained in this Agreement, Lender agrees that in the event of any default by Borrower under the Loan Documents, City will be entitled to receive a copy of any notice of default given by Lender to Borrower under the Loan Documents. Neither the giving nor the failure to give a notice to City pursuant to this Section 5 will affect the validity of any notice given by Lender to the Borrower. 6. City Notice of Default. City must give Lender a concurrent copy of each material notice (including without limitation each notice of default) given by City under or with respect to the Development Agreement, and agrees that Lender, at Lender's sole election, will have the right (but not the obligation) to cure any default by Borrower under the Development Agreement on its and/or Borrower's behalf. City hereby represents and warrants that, to the best of its knowledge, there is no current default under the Development Agreement 7. City's Rights. Except as set forth in Sections 2 and 8 of this Agreement, nothing in this Agreement is intended to abridge or adversely affect any right or obligation of Borrower and/or City, respectively, under the Development Agreement; provided that, (A) the Development Agreement may not be modified, amended, changed or altered without the prior written consent of Lender so long as the Loan is secured by the Property and (B) for so long as the Loan is secured by the Property, notwithstanding the terms of the Development Agreement to the contrary, neither Borrower nor City will, without Lender's prior written consent, exercise or seek any right or remedy under the Development Agreement or available at law or in equity which will or could result in (i) a transfer of possession of the Property or the control, operations or management thereof, (ii) collection or possession of rents or revenues from or with respect to the Property by any party other than Borrower or Lender; (iii) appointment of a receiver for the Property; (iv) application Subordination Agreement Page 3 of insurance or condemnation proceeds other than as approved by Lender pursuant to the Loan Documents; (v) removal or replacement of the existing property manager of the Property; or (vi) a material adverse effect on Lender's security for the Loan. 8. Foreclosure by Lender. In the event of foreclosure, deed in lieu of foreclosure, or similar disposition of the Property by Lender, (a) no consent will be required from City, (b) the Development Agreement will automatically terminate, and (c) Lender will have no indemnification obligations to City for any period during which Lender does not own or is not in possession of the Property. 9. Refinancing. City agrees that its agreement to subordinate hereunder will extend to any new mortgage debt which is for the purpose of refinancing all or any part of the indebtedness evidenced by the Loan Documents (including reasonable and necessary costs associated with the closing and/or the refinancing, and any reasonable increase in proceeds for rehabilitation in the context of a preservation transaction). All terms and covenants of this Agreement will inure to the benefit of any holder of any such refinanced debt, and all references to the Loan Documents and Lender will mean, respectively, the refinance loan documents and the holder of such refinanced debt. 10. Miscellaneous Provisions. (a) This Agreement represents the entire understanding and agreement between the parties with regard to the matters addressed herein, and will supersede and cancel any prior agreements with regard to such matters. (b) If there is any conflict or inconsistency between the terms of the Development Agreement and the terms of this Agreement, then the terms of this Agreement will control. (c) This Agreement will be binding upon and will inure to the benefit of the respective legal successors and permitted assigns of the parties to this Agreement, which will include with regard to the City any permitted successor or assign of the City under or pursuant to the terms of the Development Agreement and, with regard to Lender, any subsequent holder of the Note. No other party will be entitled to any benefits hereunder, whether as a third -party beneficiary or otherwise. (d) If any one or more of the provisions contained in this Agreement, or any application of any such provisions, is invalid, illegal, or unenforceable in any respect, the validity, legality, enforceability, and application of the remaining provisions contained in this Agreement will not in any way be affected or impaired. (e) Each notice, request, demand, consent, approval or other communication (collectively, "Notices," and singly, a "Notice") which is required or permitted to be given pursuant to this Agreement will be in writing and will be deemed to have been duly and sufficiently given if (i) personally delivered with proof of delivery (any Notice so delivered will be deemed to have been received at the time so Subordination Agreement Page 4 delivered), or (ii) sent by a national overnight courier service (such as FedEx) designating earliest available delivery (any Notice so delivered will be deemed to have been received on the next Business Day following receipt by the courier), or (iii) sent by United States registered or certified mail, return receipt requested, postage prepaid, at a post office regularly maintained by the United States Postal Service (any Notice so sent will be deemed to have been received on the date of delivery as confirmed by the return receipt), addressed to the respective parties as follows: If to City: City of Waterloo, Iowa 715 Mulberry Street Waterloo, Iowa 50703 Attention: Mayor Facsimile: 319-291-4571 If to Lender: The Huntington National Bank 45 North Pennsylvania Street INHP61 Indianapolis, Indiana 46204 Attention: John Alexander E-mail: John.D.Alexander n,huntington corn With a copy to: Allianz Life Insurance Company of North America c/o R4 Capital Funding LLC 780 Third Avenue, 16th Floor New York, New York 10017 Attention: Jim Spound E-mail: jspound@r4cap.com With a copy to: R4 Servicer LLC 155 Federal Street, Suite 1400 Boston, Massachusetts 02110 Attention: Greg Doble E-mail: gdoble@r4cap com With a copy to: Subordination Agreement Page 5 (f) Kutak Rock LLP Two Logan Square 100 North 180t Street, Suite 1920 Philadelphia, Pennsylvania 19103 Attention: Andrew P. Schmutz, Esquir Email: andrew.schmutz@kutakrock com If to Borrower: Union at North Crossing, LP 409 Massachusetts Ave, Suite 300 Indianapolis, Indiana 46204 Attention: Ryan Clark Facsimile: Telephone: Any party, by Notice given pursuant to this Section, may change the person or persons and/or address or addresses, or designate an additional person or persons or an additional address or addresses, for its Notices, but Notice of a change of address will only be effective upon receipt. Neither party will refuse or reject delivery of any Notice given in accordance with this Section. Each of the parties will, whenever and as often as they are requested to do so by the other, execute, acknowledge and deliver, or cause to be executed, acknowledged or delivered, any and all such further instruments and documents as may be reasonably necessary to carry out the intent and purpose of this Agreement, and to do any and all further acts reasonably necessary to carry out the intent and purpose of this Agreement (g) This Agreement will be governed by the laws of the State in which the Property is located. (h) Each person executing this Agreement on behalf of a party hereto represents and warrants that such person is duly and validly authorized to do so on behalf of such party with full right and authority to execute this Agreement and to bind such party with respect to all of its obligations under this Agreement. (i) No failure or delay on the part of any party to this Agreement in exercising any right, power, or remedy under this Agreement will operate as a waiver of such right, power, or remedy, nor will any single or partial exercise of any such right, power or remedy preclude any other or further exercise of such right, power, or remedy or the exercise of any other right, power or remedy under this Agreement. (j) Each party to this Agreement acknowledges that if any party fails to comply with its obligations under this Agreement, the other parties will have all rights available at law and in equity, including the right to obtain specific performance of the Subordination Agreement Page 6 obligations of such defaulting party and injunctive relief. (k) This Agreement may be assigned at any time by Lender to any subsequent holder of the Note. (1) This Agreement may be amended, changed, modified, altered or terminated only by a written instrument signed by the parties to this Agreement or their successors or assigns. (m) This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. (n) Nothing in this Agreement is intended, nor will it be construed, to in any way limit the exercise by City of its governmental powers (including police, regulatory and taxing powers) with respect to Borrower or the Property to the same extent as if it were not a party to this Agreement or the transactions contemplated by this Agreement. NOTICE: THIS SUBORDINATION. AGREEMENT RESULTS IN THE DEVELOPMENT AGREEMENT BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF THE MORTGAGE. [SIGNATURE AND ACKNOWLEDGMENT PAGES FOLLOW] Subordination Agreement Page 7 IN WITNESS WFIEREOF, the undersigned have executed this Agreement as of the day and year above written. State of County o On personally appeared CITY CITY OF WATERLOO, IOWA BY: C, Name: Title: 20Z before me d Perklnsa Notary Public, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of that the foregoing paragraph is true and correct. WITNESS my hand and official seal. BPS I BRITNI C PERKINS I Tr COMMISSION NO. 845529 * iowp * JMY ANUARY SION 27, 2026RES Subordination Agreement Page 8 STATE OF COUNTY OF BORROWER UNION AT NORTH CROSSING, LP, an Iowa limited partnership By• Union at North Crossing GP, LLC, an Indiana limited liability company, its general partner By: Name: Kyle D. Bach Title: Manager On this day of , 2023, before me, , personally appeared Kyle D. Bach, known to me or proven on the basis of satisfactory evidence to be the manager of Union at North Crossing GP, LLC the general partner of Union at North Crossing, LP, the within named Grantor, and that he being authorized to do so, executed the foregoing Mortgage for the purposes therein contained by his signature on the instrument Union at North Crossing, LP executed the instrument. WITNESS my hand and official seal. Notary My Commission expires: (SEAL) Subordination Agreement Page 9 State of County of MORTGAGEE: THE HUNTINGTON NATIONAL BANK By: Name: Title: On , 20 , before me a Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Notary) Subordination Agreement Page 10 EXHIBIT A LEGAL DESCRIPTION Real property in the City of Waterloo, County of Black Hawk, State of Iowa, described as follows: LOT 1 OF NORTH CROSSING THIRD ADDITION, CITY OF WATERLOO, BLACK HAWK COUNTY, IOWA RECORDED APRIL 19, 2023 AS INSTRUMENT NO. 2023-00014075. Subordination Agreement Page 11