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HomeMy WebLinkAboutagenda.council.special.20250714AGENDA CITY COUNCIL SPECIAL MEETING July 14, 2025 3:30 PM, City Council Chambers I.Call to Order II.Roll Call III.Resolution #100, Series of 2025 III.A.Lumberyard Master Development Agreement with Gorman & Company IV.Adjourn ZOOM Join from PC, Mac, iPad, or Android: https://us06web.zoom.us/j/82954507609? pwd=bkrPVa1xndM9VKH0pnk2S9xAf7dDhe.1 Passcode:81611 Join via audio: +1 346 248 7799 Webinar ID: 829 5450 7609 Passcode: 81611 International numbers available: https://us06web.zoom.us/u/krafYNwSs r1 Memo 14JULY2025 Lumberyard Dev Agreement Continued.docx EXHIBIT A - Development Agreement v10 - Gorman Signed.pdf Resolution 100 of 2025.docx Exhibit B - Memo 8JULY2025 Lumberyard Dev Agreement.docx 1 1 Page 1 of 3 MEMORANDUM TO: Mayor and City Council FROM: Chris Everson, Affordable Housing Development Project Mgr. THROUGH: Rob Schober, Capital Asset Director MEMO DATE: July 10, 2025 MEETING DATE: July 14, 2025 RE: Resolution #100 of 2025, Lumberyard Master Development Agreement with Gorman & Company REQUEST OF COUNCIL: Staff recommend Council consider approval of Resolution #100 of 2025 and related Master Development Agreement (MDA) with Gorman & Company for private development and operation of the Lumberyard affordable housing development. BACKGROUND: At Council’s regular meeting on July 8, 2025, Council continued Resolution #100 and requested that the agreement with Gorman be amended with language which would limit the City’s expense exposure prior to closing. Council also requested additional information about the qualifications of the attorney which the City has hired to assist with the development of the agreement with Gorman. DISCUSSION: After considering the likely predevelopment expenses that Gorman expects, a topset cap on predevelopment expenses has been included in the revised agreement attached as Exhibit A. If the City is required to reimburse the developer directly for predevelopment expenses, the total reimbursement would be capped at $5 million per closing. According to Gorman’s proposed schedule, the two closings are expected to occur about a year apart. Prior to the first closing, the City’s maximum cost exposure would be $5 million. Once the first closing is complete, there would be no further cost exposure related to it. The City would then face a second period of cost exposure leading up to the second closing, again capped at $5 million. Under this structure, the City’s cost exposure before closing never exceeds $5 million at any given time. Staff feels the proposed cap provides Gorman with enough budget for expected predevelopment expenses in the areas of architecture, engineering, energy, survey, soils, drainage, accessibility, environmental, traffic, project management, modular preconstruction, legal services and other professional services which are typically 2 Page 2 of 3 needed. Staff feels that the cap provides further room for possible unforeseen conditi ons which sometimes arise on relatively large, complex multifamily project s in Aspen’s regulatory environment. Below is an illustrative project schedule as proposed by Gorman: If the agreement is terminated prior to closing, the City would own the deliverables produced up to the time of termination. This would include any construction plans and specifications created to that point, likely with additional survey work, due diligence reports, or other work products to that point. The City would then be able to leverage the work, to the degree possible at that stage of development, toward either self-developing the property or toward an effort to seek another developer to continue with the work. In that case, while difficult to quantify at this stage, staff anticipate some degree of lost time and effort that is unlikely to be recovered. To Council’s request for additional information about the qualifications of the attorney which the City has hired to assist with the development of the agreement with Gorman, a review of law firm Butler Snow’s website shows that Dalton Kelly’s areas of expertise include structuring private public partnerships. Mr. Kelley has confirmed that he has a wide range of experience representing various Colorado governmental entities on public private partnership projects, including affordable housing development. Butler Snow is one of the few firms in the state that has the experience to structure agreements with private partners on behalf of governmental entities because of the unique financing requirements governmental entities are bound by. 3 Page 3 of 3 ENVIRONMENTAL IMPACTS: n/a RECOMMENDATIONS: Staff recommend that Council consider the additional information provided and act on Resolution #100 of 2025. CITY MANAGER COMMENTS: ATTACHMENTS: Exhibit A – Revised Development Agreement, City of Aspen and Gorman & Company Exhibit B – Council Memo, Resolution #100 of 2025, July 8, 2025 4 53856979v10 DEVELOPMENT AGREEMENT by and among THE CITY OF ASPEN, COLORADO and GORMAN & COMPANY, LLC 5 53856979v10 EXHIBITS Exhibit A Legal Descriptions of the Development Property Exhibit B Property Depiction Exhibit C Ground Lease Terms Exhibit D Affordable Housing Restrictions 6 1 53856979v10 DEVELOPMENT AGREEMENT THIS DEVELOPMENT AGREEMENT (this “Agreement”), dated as of this __ day of _____, 2025 (the “Effective Date”), is made by and among the CITY OF ASPEN, a Colorado municipal corporation (the "City") and GORMAN & COMPANY, LLC or its assigns (the “Developer”). RECITALS WHEREAS, the City owns certain land which is legally described on Exhibit A and depicted on Exhibit B (the “Property”); and WHEREAS, the City has put in place entitlements on the Property related to the “Lumberyard Affordable Housing Subdivision”; and WHEREAS, the Developer intends to construct affordable multifamily housing and related amenities, as further described herein (the “Project”) on the Property; and WHEREAS, the City intends to provide financial assistance to the Developer in order to construct the Project; and WHEREAS, the City intends for Aspen/Pitkin County Affordable Housing Authority, a Colorado housing authority (“APCHA”) or another housing authority to materially participate in the Project, including by acting as a special limited member of the Development Entity (defined below) and enforcing certain use covenants, as further described herein; and WHEREAS, the Developer and APCHA will enter into separate negotiations, governed by a different document than this Agreement; and WHEREAS, the City and Developer desire to cooperate in the redevelopment of the Property as a public-private project in accordance with the terms of this Agreement; and WHEREAS, the parties hereby desire to enter into this Agreement to set forth the following mutual agreements and responsibilities of the parties. NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, the receipt and sufficiency of which are hereby acknowledged, the City and the Developer each hereby covenant and agree with the other as follows: ARTICLE I DEVELOPMENT AND OPERATION OF THE PROJECT Section 1.1. Development. The Developer will acquire from the City a leasehold 7 2 53856979v10 interest in the Property and redevelop the Property in accordance with this Agreement. The City intends to be a substantial participant in the Project, and, accordingly, the Developer and the City will cooperate with one another in connection therewith. No decisions or approvals required to be made hereunder shall be subject to any unreasonable condition or delay; provided that any financial commitment of the City is subject to specific annual appropriation by the City Council in its sole discretion. Notwithstanding anything to the contrary contained herein, the parties acknowledge that land use and development approvals for the Project involve legislative and quasi-judicial processes with final decision making authority being vested within the discretion of the approving governing board, including the City Council, and that the City is not representing or agreeing that any approvals will in fact be given. Section 1.2. Project Description. The Project contemplated by this Agreement consists of three buildings and horizontal infrastructure work known as “Phase 0” (as defined below) for multifamily housing, which are to be completed in two phases. The Project shall include approximately 277 affordable housing units that comply with the requirements contained in Exhibit C, and up to 435 on-site parking stalls unless the PD Documents (defined below) are amended. The total unit mix is currently contemplated to include 129 one-bedroom units; 106 two-bedroom units; and 42 three-bedroom units. The Developer will follow the unit mix set forth in the PD (described in Section 3.1 hereof), un less the City and the Developer agree to an amendment to the PD modifying the unit mix set forth therein. Section 1.3. Ground Lease. The City and Developer, or the Developer’s assigns, as permitted herein, shall enter into a ground lease (the “Ground Lease”) for the Property, materially on the terms contained in Exhibit C. Section 1.4. Development Entity Corporate Structure. The Developer may, in the Developer’s sole discretion, create separate development entities for the purpose of separately owning and financing the buildings on the Property as contemplated by the PD Documents (whether one or more, the “Development Entity”) provided that the Developer shall control any Development Entity, unless the City consents in writing to another entity controlling the applicable Development Entity. In recognition of the financial contribution made by the City, and to provide additional control over the Project, the Developer has agreed that the Development Entity shall be corporately structured to provide for cooperation between the parties. The Developer, or a subsidiary thereof, will be the manager of the Development Entity, or other similar corporate position depending on the form of the Development Entity (regardless of actual title, referred to herein as the “Manager”): (a) APCHA is contemplated to be a special limited partner or member; (b) To the extent APCHA (or another housing authority) is a special limited partner of member, it shall have provided a nominal capital contribution to the Development Entity; (c) In any event, the Developer will require an entity to be a special limited partner or member that permits the Project to qualify for property tax exemption under Colorado Statutes (which may be APCHA); 8 3 53856979v10 (d) The City is contemplated to be a special limited partner or member, contingent on its financial contributions to the Project (described herein) coming to each Development Entity as a capital contribution, rather than as a loan unless the Development Entity requests that any financial contribution be structured as a loan; (e) To the extent the City will be a special limited partner or member, it shall have provided a Capital Contribution, as defined in Section 2.2; (f) The City shall have the right to remove and replace the Manager and/or to cure defaults by the Development Entity under the Project’s loan documents or Ground Lease terms; (g) The City and APCHA shall have voting rights related to the sale of the Project, or a substantial portion thereof, election to file bankruptcy by the Development Entity, or election to liquidate the Development Entity or substantially all of its assets; (h) Limitations on City’s rights. The powers provided above shall be limited as follows: i. The right to remove and replace the Manager shall only be “for cause” where “cause” is defined as negligently or with willful misconduct or malfeasance operating the Development Entity in a manner that materially and adversely impacts the health or human safety of the tenants living in the Project or substantially impairs the City’s investment in (or loan to) the Development Entity(ies); ii. The right to remove and replace the Manager shall be subject to standstill limitations in favor of private investors and/or senior lenders, if any; iii. The removal and replacement of the Manager shall cause the Manager to be released from all future guaranty obligations arising out of actions or inactions from the date of removal going forward; and iv. Any removal and/or replacement of the Manager shall not remove the Developer (or its affiliate) as a member or limited partner of the Project Entity (merely in its role as the manager of the Development Entity). Section 1.5. Construction Contract. The Development Entity will enter into a construction contract with a qualified general contractor and any other direct contractors or vendors in the construction of the Project (including, without limitation, modular contractors) meeting all applicable program requirements; provided, however, the general contractor shall provide to the City a list of subcontractors, which the City may reject in its reasonable discretion (based on conflicts of interest or other issues raised by the City). The City hereby agrees and 9 4 53856979v10 acknowledges that Deneuve Design, Inc. d/b/a Deneuve Construction Services is an approved general contractor for the Project, and Gorman Architectural, LLC (the “Architect”) is an approved architect for the Project (as a subcontractor of the general contractor). The Architect fee (exclusive of any engineering fees) is contemplated to be 3% of the total hard construction costs. Section 1.6. Material Terms Related to Project Operation. (a) The Project will be managed by Developer’s affiliate, Gorman Property Management USA, LLC (the “Property Manager”). APCHA will have mutually agreeable duties related to tenant screening and compliance review of the Project. A customized tenant application and form of use covenant, in all cases meeting all APCHA regulating requirements may be developed for the Project and will be finalized within six (6) months of the date hereof. A lottery process is expected for initial lease-up and is likely for subsequent re-tenanting if a unit is vacated during operations. The City agrees that the lottery process will begin no fewer than 120 days before the anticipated issuance of a certificate of occupancy related to the occupancy of the units, unless the Developer determines, in its sole discretion, a date closer to certificate of occupancy is preferable. The Property Manager shall earn a lease up fee capitalized in the Project Budget (payable in four installments: (1) 25% of the units in a specific phase of the Project occupied; (2) 50% of the units in a specific phase of the Project occupied; (c) 75% of the units in a specific phase of the Project occupied; and (d) 95% of the units in a specific phase of the Project occupied. The Developer agrees and acknowledges that the provisions set forth in Exhibit D hereto are a material inducement for the City’s participation in the Project and, therefore, the Developer will cause the Property Manager to comply with the concepts set forth in Exhibit D. Developer intends to house staff of the Property Manager within the Project. Units of the Project will be set aside for the Property Manager to rent to its staff. Developer, the Property Manager, and the City will further determine such provisions related to the Property Manager’s employee units, including the quantity of units and the rent to be paid for such units, within 6 months of the date hereof. (b) Development Fee. Developer will earn and be paid a development fee of 4% of total development costs (other than development fee and capitalized reserve accounts set forth in the development budget, but expressly including general contractor contingency, profit, overhead, and general conditions) for the Project (the “Development Fee”), which shall be payable on a phase-by-phase basis (i.e., each Development Entity shall enter into a developer services agreement with the Developer for an amount equal to 4% of the total development costs of the phase owned by the applicable Development Entity). The Development Fee will be paid to Developer over the course of the construction for the applicable phase of the Project according to the following payment schedule appropriate to the specific Phase of construction: i. At financial closing of a Development Entity (i.e., a construction loan is closed and private equity is contributed): 40% ii. At 50% construction completion, defined by percentage of the 10 5 53856979v10 budget expended by the Development Entity on its phase of the Project: 30% iii. At certificate of occupancy for 100% of the units in the applicable phase: 10% iv. Upon lease up of at least 93% of the units in a particular phase owned by the Development Entity: 20% (c) Cash Flow Waterfall. The net cash flow generated from the operations of the completed Project after the payment of operating expenses (other than the Special Operating Equipment, as described below) and must-pay debt service related to the Project (or each phase) is contemplated to be distributed in the following order, as more fully described in each Development Entity’s operating agreement or limited partnership agreement (and subject to further negotiations with investors and lenders): i. To fund any Replacement reserve account to a minimum per a “to be agreed upon schedule” (unless said expenditure becomes a “must-pay” operating expense, payable above the line); ii. funding for an agreed responsible operating reserve (unless said expenditure becomes a “must-pay” operating expense, payable above the line); iii. the payment of any unpaid balance of the deferred Development Fee, deferred Development Fee loan, or other loans made by the Developer (or its affiliate) to fund Project cost overruns or operating deficits, or deemed equity contributions of overhead reimbursement not paid to the Developer at the financial closing; iv. 75% of available cash flow to the repayment of requirement payments on subordinate debt on terms and conditions set forth in subordinate debt documents; v. agreed upon distributions to investors based on the terms and conditions set forth in the negotiated operating or limited partnership agreement, perhaps denoted by membership or partnership class (including, if applicable, a portion of which going to the City or its affiliate as a return of its Capital Contribution, which the Development Entity understands the City intends to use to deposit in the City’s 150 Housing Development Fund). ARTICLE II PROJECT FINANCING AND SECURITY Section 2.1. As an incentive to acquire a leasehold interest in the Property, and construct the Project, the City agrees to provide the financial incentives described in this Article II (the “City Investment”), subject to specific annual appropriation therefor by the City Council. The City shall use good faith efforts to obtain necessary approvals for the City Investment. The City Manager or other officer of the City at any time charged with the responsibility of formulating budget proposals for the City is hereby directed to include items for all payments required for the City Investment in the ensuing fiscal year, if any, in the annual budget proposals submitted to the City Council. Notwithstanding this 11 6 53856979v10 directive regarding the formulation of budget proposals, it is the intention of the City that any decision to effect an appropriation for the City Investment will be made solely by the City Council in its absolute discretion and not by any other official of the City. Section 2.2. City Investment. The City agrees to provide the following City Investment, subject to annual appropriation by the City Council: (a) Primary Financing: $210,000,000 (plus the Infrastructure Expense, defined below) from the City to the Developer or Development Entity (the “Primary Financing”). The Primary Financing is contemplated to be a capital contribution (a “Capital Contribution”); however, upon mutual agreement of the City and the Developer, some portion of the Primary Financing may be structured as a loan (a “Loan”). The City anticipates all, or at least a substantial majority, of the Primary Financing will be in the form of a Capital Contribution; however, the City may reasonably determine that some portion of the Primary Financing will be structured as a Loan. If the City determines that some portion of the Primary Financing will be structured as a Loan, the City agrees to make such determination, and to communicate such determination timely to the Developer in a manner that allows the Developer to modify pitches made to investors or senior lenders; and provided, further, that the City acknowledges any such determination will be deemed a “Feasibility Change Request” as described below. In any event, whether a Capital Contribution or a Loan, the Primary Financing shall be subject to the following terms and conditions. i. Capital Contribution Terms. A Capital Contribution shall be made in conjunction with the City (or its subsidiary) receiving an interest described in Section 1.4. In addition to the rights provided in Section 1.4, the following shall apply: (1) The City shall not be obligated to fund any further capital contributions (other than cost overruns on the Phase 0 work in excess of the Infrastructure Expenses); (2) Private investors may receive a different class of ownership than the City, which would entitle the private investors to different returns on capital. (3) Day-to-day operations will be run by the Developer or the Manager without seeking approval from any owners. (4) The City, consistent with other members’ rights, will have a limited right to sell its interests in the Project to third parties, first being obligated to offer such shares to the Developer, second to the Development Entity, and third to other members before any such sale of interests may occur. The sale of interests to the Developer, the Development Entity, or other members may be required to be at a discount (i.e., below fair market value). ii. Material Loan Terms. 12 7 53856979v10 (1) Term Length. At least 50 years. (2) Interest rate: 0%. (3) Paid on construction draws. (4) Secured by a subordinated leasehold deed of trust (the “Deed of Trust”) on the Development Entity’s Ground Lease on the Property. The City will be required to enter into a commercially reasonable inter-creditor agreement with the senior construction and permanent financing lender. The Deed of Trust shall be insured by the Title Company as defined herein. (5) Note. Non-recourse to the Development Entity and will be evidenced by a “cash-flow note” payable from excess net operating income generated by the Project, or portion thereof, as further described in the Waterfall. The cash-flow note shall be in a form reasonable in the market. (6) Subject to “true debt” test to be determined by Developer’s accountants. (7) In the event the City elects not to use a Capital Contribution for the Primary Financing (subject to conditions set forth herein), the City shall be provided with an option agreement that allows the City to purchase the Developer Entity’s interest in the Project at fair market value in order to ensure the continued use of the Project as affordable housing. (b) Infrastructure Financing. The City previously budgeted and contracted for the performance of certain site preparation described in the PD (“Phase 0”), but has elected to include the scope of Phase 0 in the Project. The City intends to fund Phase 0 as part of the City Investment (in excess to $210,000,000) in an amount estimated to be up to $40,000,000.00 (the “Infrastructure Expenses”). The Infrastructure Expenses shall be paid on a reimbursement basis to the Developer for costs included in the Phase 0 scope that were originally contemplated to be completed prior to the Developer starting the Project. (c) Special Operating Equipment. The City has a design to 75% net-zero energy goal for the Project, which goal is contained in the PD Documents (the “City Energy Goals”). The City Energy Goals require that the Project contain certain novel energy equipment, including, without limitation, battery storage facilities (collectively with all such equipment, the “Special Operating Equipment”). The Developer is unable to determine operating costs, repair, maintenance, upkeep, and replacement of the Special Operating Equipment, which prevents the Developer from being able to create a workable, financially feasible operating budget for investors and lenders. To that end, the City 13 8 53856979v10 has agreed (subject to annual appropriation) to fund the reasonable operating costs, repair, maintenance, upkeep, and replacement of the Special Operating Equipment. For the avoidance of doubt, the Development Entity will not fund such costs of the Special Operating Equipment. Section 2.3. City Investment Authorization and Budget Approval. The City intends to fund the City Investment from a combination of debt, cash reserves, or other means as permitted in its budget, and as approved by the City Council. The City Investment shall be subject to the following conditions: (a) Developer agrees and understands the City Investment may be provided in tranches over a period as shown below, some of which may occur during the construction of the phased development of the Project: 2026 Cash from City Housing Fund: $110MM 2027 Proceeds from City debt, Housing Fund bond: $70MM 2027 Cash from City Housing Fund: $25MM 2028 Cash from City Housing Fund: $15MM 2029 Cash from City Housing Fund: $15MM 2030 Cash from City Housing Fund: $15MM Estimated Total: $250MM (b) City may issue a revenue bond backed by the annual revenues of the City 150 Housing Development Fund, which would be subject to requirements imposed by the Colorado Taxpayer Bill of Rights (TABOR) Amendment, which requires voter approval in advance. City shall not otherwise be liable for the failure to receive approval to issue revenue bonds (other than as expressly set forth herein). (c) City shall not have the right to reduce the City Investment except as provided in this Agreement. (d) Unless the City receives voter approval in advance to incur the City Investment as a multiple fiscal year financial obligation, any amounts payable as the City Investment shall be subject to annual appropriation by the City Council, in its sole discretion. Section 2.4. Developer’s Obligations and City Investment Adjustment. (a) Subject to the City Investment described above, Developer shall be responsible for all additional costs of the Project and will obtain total debt and equity commitments in excess of the City Investment but in an amount sufficient to construct the Project (the "Private Funding"), the sufficiency of which shall be in the sole discretion of the Developer, and which the City agrees Developer may originate, apply for, source, or otherwise obtain. The City agrees to cooperate, at no expense to the City, in any applications for the Private Funding. (b) Developer shall be responsible for the creation of a budget detailing the sources and uses of funds for the construction of the Project (the “Project Budget”). The 14 9 53856979v10 Project Budget will be based on reasonably ascertainable information as such information becomes available. The Project Budget shall be subject to the following: i. The City shall have the reasonable right to approve the final Project Budget in advance of Closing, as defined herein. Developer will provide updates to the Project Budget financing sources and City Investment requirements, commencing six (6) months from the date hereof, no less than every six (6) months to the City Council following the approval of this Agreement until Closing (the “Budget Review Period”). A final update shall be provided no less than ninety (90) days before Closing to set a final Project Budget (the “Final Project Budget”), provided, however, that even the “Final Project Budget” will be subject to changes until Closing, due to interest rate fluctuations, changes in the market, macroeconomic issues (including tariffs, the strength of the U.S. Dollar, bond markets, and impacts related to potential violations of norms and the rule of law). ii. As noted above, the City shall be responsible for the operating costs, repair, maintenance, upkeep, and replacement of the Special Operating Equipment. (c) During the Budget Review Period, any changes to the financial structure proposed or demanded by the City shall be deemed a “Feasibility Change Request”. The Developer shall have the sole right to approve or deny the request if the City makes a Feasibility Change Request, except that, in the event that the City provides additional funding to cover the costs associated with such Feasibility Change Request, Developer’s approval shall not unreasonably withheld. Rejection of the Feasibility Change Request shall be made in writing within fifteen (15) days of Developer’s receipt of the Feasibility Change Request (the “Feasibility Rejection Period”). Termination under this paragraph shall be subject to Section 4.3(d) to the extent Developer has denied the Feasibility Change Request and the City reiterates its demand with the Feasibility Change Request notwithstanding the denial (and the City’s inability or unwillingness to provide additional funding). ARTICLE III LAND USE APPROVALS; PERMITTING; CONSTRUCTION Section 3.1. Land Use Approvals. A planned development (PD) zoning was approved by the Aspen City Council in City of Aspen Ordinance #10, (Series of 2023). As a City of Aspen Planned Development (PD), the Project documentation includes the following documents which memorialize the PD: (1) the PD plan set, (2) the subdivision plat, and (3) the PD agreement (collectively, the “PD Documents”). Subject to the provisions of this Article III, Developer shall use best efforts to comply with the PD Documents. (a) PD Modifications. Developer may reasonably seek to modify the PD Documents, in accordance with the City of Aspen Land Use Code, if necessary to make the Project financially feasible, or to improve the living conditions of future residents (a “PD Objection”). 15 10 53856979v10 The parties agree and acknowledge that to the extent Developer learns of a building, operational, or financial feasibility issue, the Developer will promptly inform City staff (and its advisers and consultants) (the “City Lumberyard Development Team”) of such issue prior to any formal submission of a requested modification to the PD Documents (any such issue, a “PD Feasibility Objection”). City Lumberyard Development Team will expeditiously consider input of planning consultations, architects, landscape designers, and engineers, to determine whether to accept or reject the PD Objection and/or a PD Feasibility Objection (which Developer acknowledges and agrees is not sufficient to modify the PD Documents, such modification to be completed in accordance with the then-applicable City of Aspen Land Use Code). If the City Lumberyard Development Team rejects the modifications proposed by the Developer, then the Developer and the City Lumberyard Development Team shall have thirty (30) days to mutually agree to acceptable changes to the PD Documents (which, for the avoidance of doubt, would still require City approval in accordance with the City of Aspen Land Use Code). If the City Lumberyard Development Team and Developer cannot agree to PD modifications, then Developer shall have the right to terminate pursuant to Section 4.3(c). (b) Changes to financing or financial assistance to the Developer based on changes to cure a PD Objection or a PD Feasibility Objection shall be reviewed during the Budget Review Period. (c) City Cooperation. The City will reasonably cooperate with Developer in processing the applications for modified PD Documents or other land use approvals in connection with the Project. This section does not obligate the City to make any application on behalf of Developer, bear responsibility for gaining approvals or removing zoning conditions for the Project or alleviating Developer's obligations under Section 3.1(a). The parties acknowledge that land use and development approvals for the Project involve legislative and quasi-judicial processes with final decision making authority being vested within the discretion of the approving governing board, including the City Council, and that the City is not representing or agreeing that any approvals will in fact be given. Section 3.2. Building and Construction Permits; Fees. (a) Developer shall comply with all applicable City building codes and construction requirements and shall be responsible for obtaining all building permits with respect to demolition and construction of the Project. Developer shall pay the normal and customary City charges and shall be responsible for obtaining all building permits prior to such construction. (b) While the Developer will utilize best practices to ensure that project costs are based on market pricing, no portion of the Project shall be construed as "public construction" and, as such, Developer shall not be required to comply with Colorado public bidding requirements. Section 3.3. Current Site Conditions. In the event Phase 0 infrastructure work previously completed on the Property cannot be used for the final approved Project, the City shall be responsible, at its cost, to remove the infrastructure (unless the Developer or its designee completed the Phase 0 work, in which case it shall be the Development Entity’s 16 11 53856979v10 obligation to pay for such costs). ARTICLE IV PROJECT CLOSING Section 4.1. Due Diligence. Developer shall have eighteen (18) months from the date of this Agreement to evaluate the Property for development suitability purposes (the “Due Diligence Period”) and obtain building permits, all at Developer’s expense, subject to such expenses being included in the Project Budget. During the Due Diligence Period, Developer shall obtain a current survey of the Property prepared by a licensed surveyor in accordance with the 2021 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys. Developer shall order, at the cost of the City, a commitment for the issuance of a leasehold title policy (the “Title Commitment”) from a qualified title company (including without limitation Fidelity National Title in Denver, Colorado) (the “Title Company”). The final form of Title Commitment shall evidence that the leasehold interest in the Property is free and clear of all encumbrances except for municipal ordinances and agreement entered thereunder, and such other encumbrances approved by the Developer Entity. The Developer shall have the right to terminate this Agreement during the Due Diligence Period for any reason or no reason, in the sole discretion of the Developer. Section 4.2. Property Inspection. During the Due Diligence Period, Developer and its consultants shall have the right to access the Property to perform investigations to determine the suitability of the Property for development of the Project. These investigations may include, without limitation, geotechnical investigations and soil borings and may include Environmental Site Assessments. If a Phase II Environmental Site Assessment is warranted based on the recommendation of the Developer’s environmental consultant, then the Developer may reasonably extend the Due Diligence Period as necessary to obtain the Phase II Environmental Site Assessment. It is understood that the City has commissioned a cultural resource study, noise study, air quality study, Phase I ESA, Phase II ESA (and more), and is participating in the CDPHE VCUP program in an effort to provide a “clean site”. The Developer may have access to all pertinent reports which the City has commissioned or CDPHE documentation, when available, if the Developer requests such information of the City in writing, and the Developer will handle any further study or action which may be needed to facilitate completion of the Project. Section 4.3. Termination Rights Due to Feasibility Conditions. (a) Site Diligence. If the City is unable to deliver title in the form required in Section 4.1 due to an act or omission of the City or APCHA that occurs following the date of this Agreement, or if the City is unable to cause the delivery of an environmental site assessment showing no recognized environmental conditions, then the Private Developer has the option to terminate this Agreement and to seek repayment of its out-of-pocket expenses together with a termination fee of $150,000 to reimburse the Developer for overhead expenditures incurred as a result of work contemplated on the Project prior to the date of such termination. For the avoidance of doubt, if a prior existing encumbrance is on the Title Commitment and cannot be cleared, then Developer shall only have the right to terminate pursuant to Section 4.1 . Developer’s proposal for development of the Property assumes a “clean” site. If Developer’s investigations reveal the existence of environmental conditions that will require remediation work 17 12 53856979v10 on the Property in order to create a clean site that is suitable for residential development purposes, then the City may in its discretion remove the subject Property from the Project, terminate this Agreement, or complete the required remediation work prior to the Closing. If remediation is required, and if the City agrees to go forward with the remediation, then it should be pursued as a project cost. (b) Referendum. In the event the City’s referendum related to the Project does not pass (or if the City does not seek the referendum contemplated herein) on or before December 1, 2025, then the City may elect to proceed with funding the Project through alternative methods reasonably acceptable to Developer, or the City may choose to proceed with a reduced scope for the Project and, in either event, the City shall provide written notice to the Developer of the same, and the parties shall work in good faith to negotiate an amendment to this Agreement to effectuate such changes, along with reasonable extensions of timelines. In the event the City’s referendum related to the Project does not pass (or if the City does not seek the referendum contemplated herein) on or before December 1, 2025 and the City elects to not move forward with the Project or with a reduced scope of the Project, this Agreement shall terminate and the Developer may seek repayment of its out-of-pocket expenses, and shall receive a termination fee of $300,000 to reimburse the Developer for overhead expenditures incurred as a result of work completed on the Project prior to the date of such termination. (c) PD Feasibility Objection or PD Objection. In the event of a PD Feasibility Objection or a PD Objection, to which the City does not consent or approve of changes in the PD, the Private Developer has the option to terminate this Agreement and to seek repayment of its out-of-pocket expenses; provided, however, Developer shall not be entitled to a termination fee upon a termination arising solely due to a PD Feasibility Objection or a PD Objection. (d) Feasibility Change Request. In the event of a Feasibility Change Request, to which the Developer does not consent or approve (subject to Section 2.4(c)), the Developer has the option to terminate this Agreement and to seek repayment of its out-of-pocket expenses together with a termination fee of $25,000 per month beginning on the Effective Date until the end of the Feasibility Rejection Period, which termination fee shall reimburse the Developer for overhead expenditures incurred as a result of work completed on the Project prior to the date such Feasibility Change Request. (e) Economic and Political Conditions. The parties agree and acknowledge that various volatile elements may impact the ability of the Developer to complete the Project, which elements include, without limitation, inflationary pressures, stagflation, interest rate increases, attacks on the rule of law, tariffs on imports from historical allies, realigned international relations, an obligation to deploy cryptocurrency, an obligation to use electronic funding tools not wholly owned or controlled by the U.S. and not in widely in use as of February 2025, bans or embargoes on use of certain proceeds, the Federal government failing to provide funds that are contemplated in the financial stack, or any other destabilizing event outside the control of the Developer or the City. In the event of any such event, the Developer may elect to terminate this Agreement and to seek repayment of its out-of-pocket expenses provided, however, Developer shall not be entitled to a termination fee upon a termination arising solely due to events described in this paragraph. 18 13 53856979v10 (f) All payment obligations of the City under this Section are subject to annual appropriation by the City Council. Additionally, in each section, Developer’s ability to seek recovery of its out-of- pocket expenses shall be capped at $5,000,000 per “phase” of the Project, where each “phase” has its own closing. In order to be reimbursed for out-of-pocket expenses, the Developer shall submit paid invoices and any necessary backup documentation to evidence that such costs were incurred as a result of work contemplated on the Project pursuant to this Agreement. Only those out-of-pocket costs that are supported by such documentation will be paid by the City, subject to annual appropriation. Section 4.4. General Financial Closing Requirements. (a) Developer and the City shall cooperate in the performance of certain actions including, but not limited to, executing and delivering, as applicable, the following documents, or otherwise obtain necessary approvals as stated here as a condition to Developer’s obligation to undertake construction of Project. i. That all final zoning approvals have been obtained and building permits have been issued. ii. Private Funding has been secured and all conditions related to the Private Funding have been met, as determined in the discretion of the Developer Entity. iii. The Construction Contract is executed. iv. All construction loan terms have been agreed to and the construction lender, if any, is prepared to begin advancing construction loan proceeds for Project per the terms of the construction loan. v. All investors under other funding sources have approved the transaction and are committed to fund its investment. vi. The Final Project Budget is approved by the City. vii. The Ground Lease is executed and in recordable form. viii. The Deed of Trust is executed and in recordable form. ix. The Title Company is unconditionally committed to issuing title policies in an acceptable form to the insured. (b) The Project may require that certain additional, reasonably required conditions be met, which shall be communicated by the City to the Developer promptly, and the City shall cooperate in Developer’s satisfaction of those conditions. ARTICLE V RESERVED 19 14 53856979v10 ARTICLE VI REPRESENTATIONS AND WARRANTIES Section 6.1. Representations and Warranties by the City. The City represents and warrants that: (a) The City is a municipal corporation duly organized and existing under the laws of the State of Colorado. The City has the power to enter into this Agreement and carry out its obligations hereunder. (b) There is not pending, nor to the best of the City's knowledge after due inquiry is there threatened, any suit, action or proceeding against the City before any court, arbitrator, administrative agency or other governmental authority that materially and adversely affects the validity of any of the transactions contemplated hereby, the ability of the City to perform its obligations hereunder, or the validity or enforceability of this Agreement. Section 6.2. Representations and Warranties by the Developer. Developer represents and warrants that, as of the Effective Date, Developer: (a) is a limited liability company organized and validly existing under the laws of the State of Wisconsin and authorized to transact business in the State of Colorado. (b) has duly authorized the execution of this Agreement and the performance of its obligations hereunder, and neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement, is prevented, limited by or conflicts with or results in a breach of, any indebtedness, agreement or instrument of whatever nature to which Developer is now a party or by which it is bound, or constitutes a default under any of the foregoing. (c) There are no pending or threatened legal proceedings of which Developer has knowledge which seek to restrain or enjoin the transactions contemplated by this Agreement or which question the authority of Developer to execute and deliver this Agreement or the validity of this Agreement. ARTICLE VII EVENTS OF DEFAULT Section 7.1. Notice and Opportunity to Cure. Whenever any party to this Agreement alleges a default by the other, the party alleging the default shall provide written notice to the other specifying the nature of the default and the actions necessary to cure the default. Subject to reasonable unavoidable delays, if the alleged default is not cured within thirty (30) days after the defaulting party's receipt of such notice, the non-defaulting party may take any one or more of the actions set forth below: 20 15 53856979v10 (a) The non-defaulting party may suspend its performance under this Agreement until it receives assurances from the defaulting party that the defaulting party will cure its default and continue its performance under this Agreement. (b) The non-defaulting party may cancel and terminate this Agreement. (c) Take whatever action, including legal, equitable or administrative action, which may appear necessary or desirable to the non-defaulting party, including any actions to collect any payments due under this Agreement or to pursue any claims for monetary damages at law or to enforce performance and observance of any obligation, agreement, or covenant by the defaulting party under this Agreement. The non-defaulting party may elect to take no such action, notwithstanding an event of default not having been cured within said thirty (30) day period. No notice of such election by the non- defaulting party shall be required. Section 7.2. No Remedy Exclusive. No remedy hereunder is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right accruing upon any default shall impair any such right or shall be construed to be a waiver thereof, but any such right may be exercised from time to time and as often as may be deemed expedient. Section 7.3. No Implied Waiver. In the event any provision contained herein should be breached by any party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed a waiver of any rights or remedies which the non-breaching party shall have and shall not be deemed a waiver of any subsequent default of any such terms, conditions and covenants to be performed hereunder. Section 7.4. Duty to Provide Information. Each party shall have the obligation to communicate information upon the reasonable request of the other party where the information can reasonably be deemed necessary to ensure performance under this Agreement. Failure to comply with this section may be deemed a default under this Article VII. This section shall not apply to communications that are subject to attorney-client privilege or any other recognized privilege under the law, this section shall not apply to any legal actions by either party arising under separate statutes or contracts (including the Exhibits). ARTICLE VIII ADDITIONAL PROVISIONS Section 8.1. Amendments; Incorporation of Exhibits. As the parties continue work on the pre-development activities contemplated herein and prepare the various agreements referenced above in connection with the design, development, and financing of the Project, the parties will amend this Agreement to incorporate additional details, terms and conditions and the various agreements referenced above may be appended as exhibits to this Agreement. The 21 16 53856979v10 parties may amend this Agreement, including but not limited to extending any deadlines, only by a written document agreed to by the parties. Section 8.2. Consents and Approvals; Good Faith. Except for matters for which there is a standard of discretion specifically set forth herein, wherever this Agreement provides for a determination, decision, selection, consent, approval, acceptance, adoption, satisfaction, or other action, the parties hereto shall exercise good faith in undertaking such actions and shall not unreasonably withhold, condition or delay any determination, decision, selection, consent, approval, acceptance, adoption, satisfaction or other action that may be necessary to fully implement the terms of this Agreement. In making any denial, the City’s decision shall be supported by evidence and shall not be arbitrary and capricious, or done solely for the purpose of delaying or preventing the Developer from carrying out the Project. Section 8.3. Conflict of Interests. No official or employee of the City directly working on this Agreement shall have any personal interest, direct or indirect, in this Agreement, nor shall any such official or employee participate in any decision relating to this Agreement which affects his or her personal interests or the interests of any corporation, partnership, or association in which he or she is, directly or indirectly, interested. No official, or employee of any party to this Agreement shall be personally liable to any other party, or any of their respective successors in interest, in the event of any default or breach by a party to this Agreement for any amount which may become due to any other party on any obligations under the terms of this Agreement, except in the case of willful misconduct. Section 8.4. Broker's Commission. The parties acknowledge that no broker's commission or finder's fee is payable with regard to this transaction. Developer agrees to indemnify and hold the City harmless from and against all liability, claims, demands, damages, or costs of any kind arising from or connected with any broker's commission or finder's fee or other charge claimed to be due any person arising from the indemnifying party's conduct with respect to this transaction. Section 8.5. Titles of Articles and Sections. Any titles of the several parts, Articles and Sections of this Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. Section 8.6. Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand, or other communication under this Agreement by either party to the other shall be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, transmitted by facsimile, delivered by a recognized overnight carrier, or delivered personally to the following addresses: If to Developer: Gorman & Company, LLC Attn: Colorado Market President 200 N. Main Street Oregon, WI 53703 With a copy to: Reinhart Boerner Van Deuren s.c. Attn: William R. Cummings 22 17 53856979v10 1000 N. Water Street, Suite 1700 Milwaukee, WI 53202 If to City: The City of Aspen Attn: Affordable Housing Development Senior Project Manager 427 Rio Grande Place Aspen, CO 81611 With a copy to: Butler Snow Attn: Dalton L. Kelley 1801 California Street, Suite 5100 Denver, CO 80202 City Attorney 427 Rio Grande Place Aspen, CO 81611 Section 8.7. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute one and the same instrument. Section 8.8. No Third-Party Beneficiaries. It is the intention of the parties to this Agreement that no person who is not a party signatory to this Agreement shall, under a third party beneficiary theory or otherwise, have any rights or interests hereunder as against the City, and no such other party shall have standing to complain of the City's exercise of, or alleged failure to exercise, its rights and obligations, or of its performance or alleged lack thereof, under this Agreement. Section 8.9. Adequate Consideration. The parties acknowledge and agree that this Agreement is intended to be binding and enforceable and each party waives any right to challenge the enforceability of this Agreement based on discretion afforded either party in evaluating the fulfillment of certain conditions precedent to the Closing. Each party covenants and agrees to act diligently and expeditiously, and to exercise good faith, in seeking to satisfy such contingencies. The City acknowledges that this Agreement requires Developer to commit time and resources in pursuing the Project and that such expenditures constitute good and sufficient consideration to City for entry into this Agreement. Furthermore, the parties agree that, upon satisfaction or waiver of the last of the contingencies set forth herein, this Agreement shall be deemed affirmed without inclusion of such contingencies. Section 8.10. Colorado Law. This Agreement shall be deemed to have been made in the State of Colorado and its validity, construction, performance, breach and operation shall be governed by the laws of the State of Colorado. Section 8.11. Severability. If any term or provision of this Agreement or the application thereto to any person or circumstance, shall, to any extent, be held invalid, unlawful or otherwise unenforceable, the remainder of this Agreement, or the application of such term or 23 18 53856979v10 provisions to the persons or circumstances other than those as to which it is invalid, unlawful or otherwise unenforceable shall not be affected thereby and every other term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law. Section 8.12. Assignment. Developer shall have the right to assign this Agreement, or contracts arising hereunder to an affiliate of the Developer or the Development Entity without consent of the City. Section 8.13 Media Relations. The City and the Developer each acknowledge that they are entering into a partnership with one another. Without limiting free speech rights, the Developer and the City each agree that it will not participate in social media comments on public pages, interviews in media outlets, or personal posts that are meant to or have the explicit effect of disparaging one another. Rather, to the extent the parties have an issue that requires attention, the parties will work together in good faith, with open communication, to resolve such matters in a professional way. Although the City may not require the Developer to engage in specific media relations, the Developer may create its own media strategy related to the development and operation of the Project. Notwithstanding the forgoing, the parties recognize that nothing herein is intended to affect the rights of elected or appointed City officials from discussing this project in any public forum, in any manner they deem appropriate. Section 8.14 City Payment Obligations All payment obligations of the City under this Agreement are subject to annual appropriation by the City Council, and this Agreement does not constitute a general obligation, other indebtedness or a multiple fiscal year financial obligation of the City within the meaning of any constitutional, statutory or Charter debt limitation. ARTICLE IX TERMINATION OF AGREEMENT Section 9.1. Termination. (a) Prior to Closing, either party may choose to abandon the Project and terminate this Agreement during the Due Diligence Period. If the termination is due to an event set forth in Section 4.3, then that section shall govern the termination. (b) If the termination is for convenience, then (A) if it is initiated by the Developer or if it is mutual, then the Developer shall be entitled to reimbursement of its out-of- pocket expenses but shall not receive a termination fee and, upon reimbursement of the Developer’s out of pocket expenses, the City shall own all plans and specifications, drawings and designs for the Project and shall be permitted to use the same with unlimited license; and (B) if it is initiated by only the City, then the Developer shall be entitled to reimbursement of its out-of-pocket expenses and a fee equal to $50,000 per month from the date hereof to the month of the termination by the City for convenience upon reimbursement of the Developer’s out-of-pocket expenses and the applicable fee, the City shall own all plans and specifications, drawings and designs for the Project and shall be permitted to use the same with unlimited license. For the avoidance of doubt, “out-of-pocket” expenses as used 24 19 53856979v10 herein shall include expenses to affiliated architectural entities, including, without limitation, Gorman Architectural, LLC. As further clarification, and as noted above, Developer’s ability to seek recovery of its out-of-pocket expenses shall be capped at $5,000,000 per “phase” of the Project, where each “phase” has its own closing. In order to be reimbursed for out-of-pocket expenses, the Developer shall submit paid invoices and any necessary backup documentation to evidence that such costs were incurred as a result of work contemplated on the Project pursuant to this Agreement. Only those out-of-pocket costs that are supported by such documentation will be paid by the City, subject to annual appropriation. (c) City Ownership of Plans. Upon payment of any out of pocket fees and termination fees due under this Section 9.1(c), all plans and specifications, drawings and designs for the Project shall be and remain the property of the City to use with unlimited license. Section 9.2. Authority. Each of the undersigned individuals signing this Agreement represent and warrant that they have the power and authority to sign this Agreement on behalf of the entity they represent. (Signatures begin on next page.) 25 20 53856979v10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above. GORMAN & COMPANY, LLC By: _____________________________________ Brian Swanton, President CITY OF ASPEN By: ________________________________________ Pete Strecker, Interim City Manager Attest: By: ________________________________________ Nicole Henning, Clerk 26 1 53856979v10 EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY LUMBERYARD AFFORDABLE HOUSING SUBDIVISION, A PARCEL OF LAND SITUATED SECTION 3, TOWNSHIP 10 SOUTH, RANGE 85 WEST OF THE 6TH PM CITY OF ASPEN, COUNTY OF PITKIN, STATE OF COLORADO Including, but not limited to, the following parcels: LUMBERYARD AFFORDABLE HOUSING SUBDIVISION Parcel 1A LUMBERYARD AFFORDABLE HOUSING SUBDIVISION Parcel 1B LUMBERYARD AFFORDABLE HOUSING SUBDIVISION Parcel 1C LUMBERYARD AFFORDABLE HOUSING SUBDIVISION Parcel 1D LUMBERYARD AFFORDABLE HOUSING SUBDIVISION Parcel 2A LUMBERYARD AFFORDABLE HOUSING SUBDIVISION Parcel 2B LUMBERYARD AFFORDABLE HOUSING SUBDIVISION Parcel 3 LUMBERYARD AFFORDABLE HOUSING SUBDIVISION Parcel 4 LUMBERYARD AFFORDABLE HOUSING SUBDIVISION Parcel 5 27 2 53856979v10 EXHIBIT B PROPERTY DEPICTION 28 3 53856979v10 EXHIBIT C GROUND LEASE TERMS i. Commencement date of the Ground Lease will occur at the “Project Closing” (as defined below) after all funding approvals for the project have been obtained and the construction is ready to commence. ii. Initial term of 40 years with an option for the Project Entity to extend the term by one additional 20 year term. iii. Nominal rent of $10.00 per year (or paid upfront in one lump sum for the entire initial term). iv. The Development Entity, as the tenant under the Ground Leases, will be the owner of all the improvements existing or constructed on the Property, while public right of way (ROW) and transit facility (and any public plaza may be subject to an easement in favor of the public) will be owned by the City. v. The Development Entity, as the tenant, will be responsible for all operating and ownership costs for the Property, including the public plaza, and in such capacity may put reasonable, constitutionally valid limitations on the Project and public plaza spaces, except with respect to space on which any battery storage facilities (used to assist in the maintenance of the City’s 75% “design to” Net Zero goal). vi. The City will have an option to purchase the Project from the Development Entity and a right of first refusal in compliance with all funding source program requirements. The option will arise at the end of an initial 15-year period commencing after the Project converts to its permanent financing. The purchase price under the option will be equal to the greater of (I) fair market value of the Project less (A) the City’s then-current capital account (i.e., the City’s capital contribution less any distributions received by the City as a result of its ownership of the Development Entity plus any additional contributions made by the City), plus (a) assumption of all indebtedness or repayment thereof (provided, however, any City Loan outstanding at the time of such exercise by the City shall be disregarded in this calculation), plus (b) repayment to third party investors for the Project on such terms and conditions as is set forth in the Development Entity’s organizational documents or side agreements with any such investors; plus (c) any amounts owed by the Development Entity to the Developer or to its affiliates as set forth in writing as of the date of the acquisition, plus (d) 10% of the fair market value as a disposition fee to the Developer; or (II) the sum of: (a) all outstanding indebtedness and accrued but unpaid interest owed to lender(s) (other than the City), (b) repayment to third party investors for the Project on such terms and conditions as is set forth in the Development Entity’s organizational documents or side agreements with any such investors (but not including any required repayment to the City, which would be disregarded for this calculation); (c) the amount of all so-called “exit tax” obligations that will be incurred by the Development Entity or its members as a result of the 29 4 53856979v10 City exercising the option, (d) any amounts owed by the Development Entity to the Developer or to its affiliates as set forth in writing as of the date of the acquisition, and (e) funding of reserves as is required to ensure a healthy operating Project. The Development Entity and the Developer will use commercially reasonable efforts (with no guaranty) to prevent the participants in the Development Entity from having negative capital account balances. The capital accounts will be monitored. The Developer will produce downstream capital account projections as part of the budgeting process for the Project. For the avoidance of doubt, any portion of reserve accounts funded by the City and not otherwise accounted for in the formulas above shall be treated as being added to any “City Loan outstanding” solely for purposes of the formula calculations above. vii. To the extent feasible given the requirements of the other lender(s), the City will be given notice and cure rights with respect to any defaults by the Development Entity under its loan from the senior lender for the Project. The City will also have curative rights as the special limited partner/member in the Development Entity in order to prevent defaults from occurring under the senior loan. The City and the Developer acknowledge that the senior lender (for the construction phase and permanent financing phase) and/or any loan insurer will have its own requirements with respect to the Ground Lease to protect its interests in the event of a default by the Project Entity as the tenant, but the City will not be required to accept such requirements to the extent such requirements impact the City’s fee interest in the Property. viii. Upon the termination of the Ground Lease set forth above, all improvements on the property existing or constructed shall become the property of the City. This shall include but is not limited to any and all fixtures and personal property owned by the Development Entity within buildings and individual units and any infrastructure within the development installed by the City or the Development Entity. 30 5 53856979v10 EXHIBIT D AFFORDABLE HOUSING RESTRICTIONS The Property will be made subject to the following restrictions recorded in the real estate records of Pitkin County in forms approved by the City: i. A perpetual “Occupancy Deed Restriction and Agreement” for the benefit of APCHA and the City based on the form used by APCHA, but with some special provisions to avoid conflicts with the terms of other funding sources and to clarify certain restrictions. This deed restriction will be non-subordinated and will not be subject to termination as the result of any foreclosure by any lender for the Project. ii. It is the intention of the City of Aspen that tenant qualification, priorities, rents, incomes and tenant selection process be based on the APCHA Regulations and priority specifications of the City Council, and APCHA maintains approval over means and methods for income verification process. The City’s priorities for tenant selection should be documented by a resolution, on or about a date that is approximately 6 months from the date hereof (such tenant selection to baked into a draft use covenant, agreed to in form and substance by the City and the Developer). APCHA may choose to qualify applicants or APCHA may require Developer to qualify applicants. If Developer qualifies applicants, all qualification documentation for all applicants must be available via electronic file sharing for APCHA to audit, whether APCHA chooses to audit 100% or some lesser percentage at APCHA’s discretion. Unless otherwise defined, tenant selection process will be performed by lottery for initial lease up and for unit turnover. Developer and the City will collaborate to work together with APCHA to define the necessary processes, and how to manage processing of certain exceptions, to be executed within 6 months of the date hereof. The City maintains the right to create agreements with area employers permitting qualified tenants selected by said area employers to have priority for up to some maximum percentage (to be determined) of the units in any phase of the Project. This maximum cap will also be documented by resolution within 6 months. The contours of such restrictions will be established as part of the draft use covenant; provided, however, that the City may enter into separate agreements with employers from time to time (and will provide notice to the Developer promptly thereafter). Any tenant occupying units must qualify pursuant to the Occupancy Deed Restriction and Agreement (and any other such negotiated use covenants related to the Project), and any such tenant’s rent is contemplated to be payable to the Development Entity (akin to any other tenant). Developer acknowledges the City may charge fees or otherwise generate income in entering into such agreements, which the City may use for its own purposes. iii. Restrictions may be imposed by other funding program requirements and are typically for a 15-year compliance period and a 15-year extended-use period. The Developer and the City should collaborate such that any additional restrictions should be placed such that they do not effectively impose income and rent restrictions which differ from the APCHA Regulations. For example, using APCHA income levels with APCHA rents, where the net result of all restrictions is such that the requirement is that the Private Developer must comply with all restrictions, which will necessitate complying with the most stringent applicable requirements (i.e. APCHA 31 6 53856979v10 v. CHFA/HUD). iv. Reserve Study. As part of the Project’s initial operating budget, the Developer will ensure the establishment of a replacement reserve account that will be used to fund replacements at the Project. The initial replacement reserve is contemplated to be $350 per unit per year. Upon the five-year anniversary of substantial completion of construction, the Developer will commission a reserve study for the Project by a qualified reserve analysis professional. The study should include a physical inspection and inventory of all facilities outside the unit interiors which the Developer is responsible for maintaining and a visual inspection of those elements to determine their existing condition. The study should include a financial analysis with an evaluation of estimated remaining life and estimates of future major repair and replacement costs for components which Private Developer is responsible. Projected future reserve needs should be compared to existing reserves, and recommendations should be included as to the adequacy of the existing reserve balance and existing reserve savings plan or otherwise recommendations on adjustments to the amount of reserves to be set aside in order to adequately fund the reserve. The initial reserve study shall be submitted to the City upon the 5-year anniversary of construction completion, and the reserve study shall be updated and submitted to the City every 5 years along with the reserve account balance, report of annual amounts set aside into the reserve, and accounting for any capital repairs completed. 32 RESOLUTION #100 (Series of 2025) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ASPEN, COLORADO, APPROVING A DEVELOPMENT AGREEMENT BETWEEN THE CITY OF ASPEN AND GORMAN & COMPANY, LLC, AUTHORIZING THE CITY MANAGER TO EXECUTE SAID DEVELOPMENT AGREEMENT ON BEHALF OF THE CITY OF ASPEN, COLORADO. WHEREAS, there has been submitted to the City Council a development agreement between the City of Aspen and Gorman & Company, LLC, a true and accurate copy of which is attached hereto as “Exhibit A”; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ASPEN, COLORADO, That the City Council of the City of Aspen hereby approves the development agreement between the City of Aspen and Gorman & Company, LLC, a copy of which is annexed hereto and incorporated herein and does hereby authorize the City Manager to execute said contract on behalf of the City of Aspen. INTRODUCED, READ AND ADOPTED by the City Council of the City of Aspen on the 14th day of July 2025. Rachael E. Richards, Mayor I, Nicole Henning, duly appointed and acting City Clerk do certify that the foregoing is a true and accurate copy of that resolution adopted by the City Council of the City of Aspen, Colorado, at a meeting held July 14, 2025. Nicole Henning, City Clerk 33 Page 1 of 3 MEMORANDUM TO: Mayor and City Council FROM: Chris Everson, Affordable Housing Development Project Mgr. THROUGH: Rob Schober, Capital Asset Director MEMO DATE: June 27, 2025 MEETING DATE: July 8, 2025 RE: Resolution #100 of 2025, Lumberyard Master Development Agreement with Gorman & Company REQUEST OF COUNCIL: Staff recommend Council consider approval of Resolution #100 of 2025 and related Master Development Agreement (MDA) with Gorman & Company for private development and operation of the Lumberyard affordable housing development. BACKGROUND: Entitlements for the Lumberyard affordable housing development were approved by Aspen City Council in Ordinance 10 series of 2023. Council directed staff to seek a private developer to implement the project. Through a competitive procurement process, the City received twelve proposals from pre- qualified private developers. After evaluation and due diligence, Council supported negotiation of an agreement with Gorman & Company. At a work session on June 9, 2025, staff presented a description of the proposed development plan with Gorman, and the arrangements were discussed among Council, staff and Gorman’s Colorado market president. DISCUSSION: Gorman proposes to develop all phases of the Lumberyard affordable housing development based on the approved Lumberyard affordable housing Planned Development (PD), as described in the ordinance referenced above. Gorman’s plan includes initial financial closing in 2026 and lease-up of facilities beginning in 2028 and running through 2029, with ongoing operations thereafter. Under the proposed MDA, the City will lease the project property to the developer, who will form the necessary development entities to oversee both construction and ongoing operations. To support tax advantages, APCHA may serve as a special limited partner. The residential units will be leased through a lottery process governed by APCHA Regulations. Gorman Property Management will handle day-to-day operations, with the 34 Page 2 of 3 number of units to be set aside for property management staff to be determined by the developer within six months. Also within six months, the City must determine any lottery priority for employment location or essential workers as well as any lottery priority for employer partnerships. The City must also determine any cap to be placed on the quantity of employer partnership units as well as basic terms of employer partnership s for the developer to understand in advance. A work session is scheduled for July 21, 2025 so that Council may begin those discussions well in advance of the six-month deadline. The project’s budget will be supported by a significant capital contribution from the City estimated at $210 million plus an additional estimated $40 million for infrastructure. The developer is responsible for securing all additional funding and will receive a 4% fee based on total development costs, earned at progress milestones. The City will retain the right to cure any defaults and may issue a revenue bond backed by the City’s Housing Fund to meet its obligations. Excess net operating income will only be distributed to the City after all other debt and investor obligations are satisfied, and the City’s only debt obligation will be limited to repayment of its own bond issued through the Housing Fund. Should any modifications to the PD be necessary for feasibility, the developer must proceed through the City's formal land use code process. The developer is solely responsible for securing all necessary building permits before construction begins and will be responsible for operating and maintenance costs except for the project’s solar battery storage systems, which will be the City’s responsibility to maintain. Gorman and the City are expected to collaborate in good faith to prepare for the project’s closing(s). The developer will have an 18-month due diligence period, during which either party may terminate the agreement for any reason. If unresolvable title or environmental issues arise, the developer may receive expenses plus a termination fee. If the developer or both parties terminate, only reimbursement of out -of-pocket costs applies. However, if the City terminates, it must also pay a termination fee. In any case of termination, the City retains rights to all project plans and materials upon payment of applicable fees. FINANCIAL/BUDGET IMPACTS: Per the proposed MDA, City budgets to support the project are tentatively planned as shown below and require future City Council approval: 2026 Cash from City Housing Fund: $110 million 2027 Revenue Bond Proceeds Supported by Housing Fund: $70 million 2027 Cash from City Housing Fund: $25 million 2028 Cash from City Housing Fund: $15 million 2029 Cash from City Housing Fund: $15 million 2030 Cash from City Housing Fund: $15 million Estimated Total: $250 million Staff analysis has shown that the City’s Housing Fund can support the referenced budgets and associated debt service without constraining other housing initiatives. City 35 Page 3 of 3 Council is encouraged to consider the placement of a ballot question in the November 2025 election which would seek voter authorization for the issuance of up to $70 million in bond financing to support the City’s contribution and facilitate development of the entire Lumberyard project as part of Gorman's scope, rather than embarking on a program of long-term construction phasing, which the City has done on past projects. At the work session planned for July 21, 2025, staff will present proposed debt referendum ballot language for the November 2025 election for Council’s initial review. ENVIRONMENTAL IMPACTS: Project sustainability certification through the Enterprise Green Communities Plus program with 75% net zero offset via on-site solar photovoltaic systems and battery storage facilities is required in the Lumberyard PD. RECOMMENDATIONS: Staff have exhaustively negotiated with Gorman, and the enclosed MDA is recommended. Staff suggest that Council carefully review the proposed MDA with Gorman and consider approval so that this crucial community project can move forward in a timely manner. CITY MANAGER COMMENTS: ATTACHMENTS: Exhibit A – DEVELOPMENT AGREEMENT by and among THE CITY OF ASPEN, COLORADO and GORMAN & COMPANY, LLC (28 pages including Exhibits) 36