HomeMy WebLinkAbout08 ENA WITH AVALONBAY COMMUNITIES INC. AND ABODE COMMUNITIES DocuSign Envelope ID:C9915F3B-C1C1-4E4B-A3A8-677C852EA079
Agenda Item $
Reviewed: DS
AGENDA REPORT City Manager
Finance Director ya
MEETING DATE: MAY 3, 2022
TO: MATTHEW S. WEST, CITY MANAGER
FROM: ECONOMIC DEVELOPMENT DEPARTMENT
SUBJECT: EXCLUSIVE NEGOTIATING AGREEMENT WITH AVALONBAY
COMMUNITIES INC. AND ABODE COMMUNITIES FOR
PORTIONS OF TUSTIN LEGACY DISPOSITION AREAS 2B, 2C
AND 8
SUMMARY:
Request for authorization to enter into an Exclusive Negotiating Agreement (ENA) with
AvalonBay Communities Inc. (AvalonBay) and Abode Communities (Abode) (collectively,
"Developer") for the disposition and development of portions of Disposition Areas 2B, 2C
and 8 at Tustin Legacy for a multifamily mixed-use project.
RECOMMENDATION:
Authorize the City Manager to execute the Exclusive Negotiating Agreement between the
City and Developer.
FISCAL IMPACT:
Concurrent with the execution of the ENA, Developer will submit a good faith deposit of
$150,000 to be applied toward staff and third-party costs incurred by the City including
the retention of legal counsel associated with the negotiation. These costs are separate
from entitlement expenses that will be borne by Developer. Staff will negotiate the terms
and conditions under which the property will be sold including the purchase price. If
negotiations are successful, staff will present to the City Council a Disposition and
Development Agreement (DDA) for consideration.
CORRELATION TO THE STRATEGIC PLAN:
This action correlates to the City's Strategic Plan for Economic and Neighborhood
Development (Goal A).
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Agenda Report—AvalonBay/Abode ENA
May 3, 2022
Page 2
BACKGROUND:
Disposition Strategy
In April 2011 , the City Council adopted a revised Disposition Strategy for the Former
Master Developer Footprint at Tustin Legacy (Disposition Strategy) which authorizes the
City to enter into a controlled disposition strategy allowing the location of uses and
placement of products to provide an incremental, logical, orderly and planned phasing of
development of the former military base. Specifically, the Disposition Strategy authorizes
the City, among other things, to sell property at Tustin Legacy in a series of solicitations
to developers selected pursuant to Request for Proposals (RFP).
Under the Disposition Strategy, six properties have been sold; two apartment sites (758
units), three sites for single family housing (993 units), one phase of a creative office
campus (385,973 SF) and a neighborhood shopping center with medical office uses
(200,000 SF).
Competitive RFP
On September 15, 2021 , the City initiated an RFP process through a competitive
solicitation utilizing its broker CBRE. Proposals were requested from residential
developers and all entities identified in California Government Code Section 54222(a) for
a multi-family mixed use residential community with respect to approximately 19.4 acres
of land located within portions of Disposition Areas 213, 2C and 8 bounded by Legacy
Road to the east, Tustin Ranch Road to the south, future Compass Avenue to the west
and Warner Avenue to the north. The disposition parcels are located within Tustin Legacy
Specific Plan Neighborhood D and more specifically within Planning Areas 13 and 14.
Consistent with the Surplus Land Act (SLA) and the California Department of Housing
and Community Development (HCD) SLA Guidelines, the RFP required that twenty-five
percent (25%) of the total number of units be reserved for lower income households. The
RFP 25% affordability requirement is tied to an exemption within the SLA that requires a
competitive RFP with all HCD Housing Sponsors being invited to participate, and also
requires the site be larger than one (1) acre, have more than 300 units, and be "mixed
use."
Developer, a partnership of AvalonBay Communities, Inc. and Abode Communities,
submitted a proposal pursuant to the RFP for a phased purchase and development of the
disposition parcels. The Developer proposes a high-quality design for a multi-family mixed
use project, has significant expertise, experience and the financial capability to undertake
and complete the project; and was therefore selected for further negotiations.
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Agenda Report—AvalonBay/Abode ENA
May 3, 2022
Page 3
DISCUSSION:
The ENA defines the rights and responsibilities of the City and the Developer each in the
desire to negotiate the development transaction. If the terms and conditions of the
transaction are agreed upon and executed, the City will convey the property to AvalonBay
and AvalonBay and Abode will be co-developers of the project with AvalonBay developing
the market rate portion and Abode developing the affordable housing portion.
AvalonBay is a publicly traded Real Estate Investment Trust (REIT) with a $35.7 billion
market cap (as of April 21 , 2022). AvalonBay owns or has indirect ownership interest in
288 apartment communities with more than 85,750 homes in 11 states and the District of
Columbia. In Southern California they have a total of 62 communities with 18,900 homes.
AvalonBay is also a vertically integrated company offering development, construction
management, property management, and finance oversight all in-house.
Abode is a non-profit that was established in response to the Civil Rights movement to
address urban unrest and inequity through civic engagement, urban planning, and
architectural design projects. Abode has invested more than $700 million throughout
California, having developed nearly 50 mixed-use and multifamily residential
developments with some 3,400 affordable homes for more than 12,000 people. Abode's
current development pipeline includes nearly 1 ,900 affordable units across 19 projects
and 75,000 square feet of community-serving retail. Abode has previous experience
working with AvalonBay on affordable portions of other projects.
AvalonBay and Abode propose to develop the property with up to 1 ,208 multi-family
residential units with 25% of the units (302) reserved for persons and families of lower
incomes. The project is currently proposed to be constructed in multiple phases, with
portions of the affordable and market rate units to be constructed first. The market rate
units will consist of a combination of studios and 1-3 bedroom units. The affordable units,
which are intended to be funded through tax credit financing, are targeted for families and
are comprised of 1-3 bedroom units. The project would also contain approximately 5,000
square feet of retail, 7 acres of private and public open space, rooftop amenities for
market rate and affordable tenants, and approximately 2,500 square feet of co-working
space.
The site design includes multiple buildings on three street blocks which are
interconnected with pedestrian paseos, elevated walkways and public open spaces that
would create a vibrant and interconnected community for individuals and families of
various income levels. The buildings feature contemporary materials and finishes with
distinctive architectural features connecting various buildings, and interior gardens to
transition from semi-private to public open spaces. The varying heights of three to five
stories is compatible with the surrounding neighborhoods and provides for exceptional
opportunities for at grade and roof top amenities. In addition to the unique and quality
design of the buildings and landscape architecture, the attention to detail and amenities
is shared equally with both the market rate and the affordable units.
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Agenda Report—AvalonBay/Abode ENA
May 3, 2022
Page 4
As proposed, the development will provide much needed market rate and affordable
housing for the City and region. The development will also finish the Legacy Road edge
of Neighborhood D South and provide publicly accessible paseos for access through the
site to and from other projects nearby.
The ENA provides for an initial negotiating period of two hundred seventy (270) days from
the Effective Date which may be extended for one (1) additional period of ninety (90) days
at the discretion of the City Manager. If negotiations are successful, the project
entitlements will be reviewed by the Planning Commission and the Disposition and
Development Agreement (DDA) and project entitlements will be brought to the City
Council for consideration concurrently.
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Christopher Koster Ryan Swiontek
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Kenneth Piguee
Senior Management Analyst
Attachment: ENA between the City of Tustin and AvalonBay Communities Inc. and
Abode Communities
DocuSign Envelope ID:C9915F3B-C1C1-4E4B-A3A8-677C852EA079
EXCLUSIVE NEGOTIATING AGREEMENT
(TUSTIN LEGACY PORTION OF DISPOSITION AREAS 2B,2C and 8)
THIS EXCLUSIVE NEGOTIATING AGREEMENT (TUSTIN LEGACY PORTION OF
DISPOSITION AREAS 2B,2C &8) ("ENA")is made as of May 3,2022 ("Effective Date")by
and among the CITY OF TUSTIN ("City") and AVALONBAY COMMUNITIES, INC., a
Maryland corporation ("AvalonBay") and ABODE COMMUNITIES, a California non-profit
corporation("Abode"), as co-developers(AvalonBay and Abode,collectively"Developer"),with
respect to certain land referred to herein as the "Development Parcels" (as defined below). The
City and Developer, each sometimes referred to herein as a "Party" and collectively as the
"Parties,"hereby agree as follows:
1. Introduction.
1.1 Pursuant to the Defense Base Closure and Realignment Act of 1990 (Part A of Title
XXXIX of Public Law 101-510; 10 U.S.C. Section 2687 Note), as amended, the federal
government determined to close the Marine Corps Air Station-Tustin ("MCAS Tustin') located
substantially in the City of Tustin. In 1992, the City was designated as the Lead Agency or Local
Redevelopment Authority for preparation of a reuse plan for MCAS Tustin to facilitate the closure
of MCAS Tustin and its reuse in furtherance of the economic development of the City and
surrounding region. The MCAS Tustin Reuse Plan developed in accordance with this procedure
was adopted by the City Council of the City of Tustin ("City Council') on October 17, 1996, and
amended in September, 1998 ("Reuse Plan').
1.2 A Final Joint Environmental Impact Statement/Environmental Impact Report for
the Disposal and Reuse of MCAS Tustin and Mitigation Monitoring and Reporting Program for
the Final EIS/EIR were adopted by the City on January 16, 2001. In March 2001, a record of
decision was issued by the Department of the Navy (hereinafter, "Navy") approving the Final
EIS/EIR and the Reuse Plan with several subsequent supplements and addenda approved by the
City (the original EIS/EIR, as so amended, the"Final EIS/EIR").
1.3 In May 2002, the Navy approved an "Economic Development Conveyance of
Property at MCAS Tustin" and agreed to convey approximately 1,153 acres of MCAS Tustin to
the City. On May 13,2002, a total of approximately 977 acres,including the Development Parcels
(defined below) which are the subject of this ENA, were conveyed by the Navy to the City by
quitclaim deed, as further described below, in accordance with the provisions of that certain
Memorandum of Agreement by and between The United States of America(through the Secretary
of the Army or designee) and the City dated May 13, 2002 ("Memorandum of Agreement" or
"MOA"). The additional approximately 177 acres were made subject to a ground lease by the
City from the Navy and portions thereof have subsequently conveyed by the Navy to the City
pursuant to subsequent quitclaim deeds. The approximately 1,153 acres of MCAS Tustin located
within the City of Tustin and either conveyed by the Navy to the City or subject to ground lease
between the Navy and the City are referred to in this ENA as "Tustin Legacy".
1.4 On February 3, 2003, the City adopted an ordinance approving the MCAS Tustin
Specific Plan/Reuse Plan setting forth the zoning and entitlement framework for future
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development of Tustin Legacy. Since its initial adoption,the City has approved numerous Specific
Plan amendments. All references in this ENA to the "Specific Plan" shall be deemed to refer to
the MCAS Tustin Specific Plan/Reuse Plan, as the same may have been previously or may be
subsequently amended. The Specific Plan conforms to and implements the Reuse Plan and the
City's General Plan.
1.5 The City desires to effectuate development of Tustin Legacy through the sale and
development of property in accordance with applicable federal and local requirements. Tustin
Legacy shall be developed in accordance with all City requirements,including,without limitation,
the Reuse Plan and the Specific Plan.
1.6 Pursuant to the City's adopted Disposition Strategy for Former Master Developer
Footprint Tustin Legacy Project dated April,2011 ("Disposition Strategy"),the City is authorized
to enter into a controlled disposition strategy allowing the location of uses and placement of
products to provide an incremental, logical, orderly and planned phasing of development of the
former military base. Specifically, the Disposition Strategy authorizes the City, among other
things,to sell property at Tustin Legacy in a series of solicitations to developers selected pursuant
to Request for Proposals ("RFP").
1.7 As permitted by the Disposition Strategy, and consistent with the process identified
in Section 1.8, the City on September 15, 2021 initiated a competitive RFP process through a
solicitation requesting proposals from residential developers and all entities identified in California
Govt. Code("Govt.Code") Section 54222(a)for a multi-family mixed use residential community
with respect to approximately 19.4 acres of land located within portions of Disposition Areas 2B,
2C and 8 as depicted on the site map attached as Exhibit A to this ENA. The land depicted on
Exhibit A is referred to herein as the "Development Parcels".
1.8 Consistent with the requirements of Govt. Code Sections 54220-54234 ("Surplus
Land Act") and the California Department of Housing and Community Development ("HCD"),
issued Surplus Land Act Guidelines ("Guidelines", and collectively with the Surplus Land Act,
the "SLA Regulations"), the RFP required that twenty five percent(25%) of the total number of
units be reserved for lower income households, as defined in California Health and Safety Code
Section 50079.5 ("Affordable Housing Units").
1.9 Developer submitted a proposal pursuant to the RFP for a phased purchase and
development of the Development Parcels and was selected for further negotiations. A final
proposal dated January 11, 2022,was jointly submitted by AvalonBay and Abode.
1.10 Developer's proposal, and this ENA, contemplate negotiation of Transaction
Documents (as hereinafter defined) providing for a phased purchase and development of the
Development Parcels as a mixed-use development containing approximately 1,208 multi-family
residential units,which includes approximately 906 market rate units (the "Market Rate Portion
of the Project"), approximately 302 Affordable Housing Units (the "Affordable Housing
Portion of the Project"), and approximately 5,000 square feet of community serving retail space
(the"Retail Portion of the Project"),together with required on-site infrastructure and a complete
accompanying set of high quality amenities to be constructed by Developer, including rooftop
amenities, common open space, with a portion of such open space to be made accessible to the
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Exclusive Negotiating Agreement
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public pursuant to a recorded easement. The proposed development of the Development Parcels
described above and as further described in this ENA is referred to herein as the "Project".
1.11 The Development Parcels comprise a portion of the land conveyed by the Navy to
the City in Navy Quitclaim Deed D dated May 13, 2002 and recorded in the Orange County Clerk
Recorder Office on May 14, 2002 as Instrument No. 20020404594 ("Navy Quitclaim Deed").
The Development Parcels are located in Specific Plan Neighborhood D,Planning Areas 13 and 14
and are referred to in the Navy Reuse Plan as portions of Parcels 8, 14, and 40 and in the Navy
Quitclaim Deed as portions of Parcels I-D-3 and I-D-4.
1.12 The City is required by law to comply with the SLA Regulations with respect to
the Project, including by determining that the Project meets the requirements of the Surplus Land
Act exemption granted to local agencies in Govt. Code Section 54221(f)(1)(F)(ii). Developer
acknowledges that it is responsible to investigate the requirements of the SLA Regulations,
including the requirement in the Surplus Land Act that the City cause recording at the initial close
of escrow pursuant to the DDA of a restrictive covenant requiring that twenty five percent(25%)
of the total number of units on the Development Parcels shall be Affordable Housing Units
("SLA Covenant")that shall run with the Development Parcels for fifty five (55) years and shall
be enforceable against any owner who violates the SLA Covenant(and each successor in interest
who continues the violation)by the entities authorized to bring action under the SLA Regulations.
1.13 The City and Developer desire, for the ENA Negotiating Period(as defined below),
to negotiate diligently and in good faith,the terms and conditions of a disposition and development
agreement("DDA") and development agreement("DA") and related instruments and agreements
described by the DDA or DA (collectively with the DA and DDA, the "Transaction
Documents"), which if agreed upon and executed by the Parties, shall set forth the terms and
conditions of the conveyance of the Development Parcels to AvalonBay and the design,
construction and operation of the Project of the Project by AvalonBay or by transferees approved
by the City ("Transaction").
1.14 Nothing herein shall preclude the City from negotiating with other entities for other
developments on other portions of Tustin Legacy or other City owned properties that are not the
subject of this ENA.
2. Agreement to Negotiate.
2.1 Transaction Structure.
2.1.1 Rights and Responsibilities of AvalonBay. The City and Developer each
desire to negotiate Transaction Documents which if agreed upon and executed, shall set forth the
terms and conditions pursuant to which the Development Parcels shall be conveyed by the City to
AvalonBay and developed by Developer. It is the intent of the Parties with respect to negotiation
of the Transaction Documents that AvalonBay (a) bear responsibility for design, development,
construction and operation of the Project as a whole and that it cause guaranties for such
development as may be required by the City in the Transaction Documents to be provided, and
(b)be the"Developer"(as such term will be defined in the Transaction Documents)for the Project
with the right to (i) contract with or delegate to Abode or its Developer Affiliate, with respect to
Tustin AvalonBay Abode ENA 4.25.22 FINAL 3 Tustin/AvalonBay and Abode Communities
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financing,design,construction and operation of the Affordable Housing Portion of the Project(but
retaining the right and duty to enforce such assigned or delegated duties) and(b)upon satisfaction
of the conditions precedent thereto in the Transaction Documents, to convey the real property
required for construction of the Affordable Housing Portion of the Project to Abode as a permitted
transferee thereunder. It is understood that the development and construction of the Market Rate
Portion of the Project, the Retail Portion of the Project and the Affordable Housing Portion of the
Project may not align fully in terms of schedule and timing.
2.1.2 Waiver by Abode of ENA Provisions. Because it is intended that
AvalonBay have responsibility as Developer under the DDA and DA and that Abode is intended
to be an assignee of AvalonBay under the DDA and DA with respect to certain obligations of
AvalonBay to develop the Affordable Housing Units and the Affordable Housing Portion of the
Project and a delegatee with respect to certain related obligations of AvalonBay under the DDA
and DA, it is agreed by the Parties that(a) only AvalonBay (and not Abode) shall have the rights
set forth in the following Sections and that, notwithstanding that such Sections purport to grant
rights to Developer,Abode hereby expressly waives any right it may have as Developer under this
ENA with respect to each of the following provisions: (i) Section 4.2.1 (Term of Negotiations),
(ii) Section 4.2.2 (Request for Extension), (iii) Section 4.2.5 (Offer Period), (iv) Section 4.2.7
(Rights to Earlier Termination), except that Abode shall have the rights specifically set forth in
such Section to terminate its participation in this ENA, and (v) Section 4.4.1 (City Failure to
Negotiate in Good Faith), and (b) only AvalonBay (and not Abode) shall have the rights and
obligations set forth in Sections 4.3.1 through 4_3.4 of this ENA with respect to payment and return
of the Deposit or contest of City Transaction Expenses and Section 4.4.1 and 4.4.7 with respect to
enforcement of the obligations of the City to act in good faith and to negotiate exclusively.
Notwithstanding the foregoing, the City and AvalonBay shall ensure that Abode is copied on all
material correspondence with respect to this ENA, the DDA and DA between the City and
AvalonBay and that Abode shall have the right to have a representative present at all meetings
regarding this ENA,the DDA and/or DA. The other rights and obligations of Developer under this
ENA shall apply to both AvalonBay and Abode as Developer jointly and severally.
2.1.3 DDA and DA. Notwithstanding that the terms of the purchase and sale and
development of the Development Parcels are to be negotiated,Developer and the City have agreed
that the Transaction Documents to be negotiated to describe the transaction shall be in the form of
a DDA and DA. The City will prepare a draft of the Transaction Documents and submit the draft
documents to Developer for review and comment. The DDA and the DA shall not exist and shall
not be binding unless and until each is fully executed by AvalonBay and the City, approved by the
City Council of the City and by the authorized representatives of Developer.
2.2 ENA Not a Final Agreement. The Parties acknowledge and agree that:
(a) this ENA is entered into for the sole purpose of providing a
framework for and establishing and facilitating the initial basis for negotiation of the Transaction;
(b) this ENA is not, and the Parties do not intend that this ENA be, a
lease,purchase and sale agreement, option or similar contract setting forth the essential terms of a
land transaction ("Essential Terms Agreement");
Tustin AvalonBay Abode ENA 4.25.22 FINAL 4 Tustin/AvalonBay and Abode Communities
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(c) the City and Developer acknowledge that although the Parties have
set forth a framework for negotiations of essential terms of any transaction, the Parties have not
agreed upon the essential terms or the material elements of a transaction, including, without
limitation, the purchase price, the legal description of the Development Parcels to be conveyed
(including the exact amount of acreage, phasing, and precise location of the land), the time or
manner of and significant terms related to the conveyance,the conditions precedent to conveyance
(including without limitation, related to the design and entitlement of the Project) or the
requirements related to development of the Project, each of which are an essential component of
the transaction (collectively, the "Essential Terms") and which shall be a matter of their further
negotiation during the ENA Negotiating Period;
(d) this ENA does not contain the Essential Terms of the Transaction;
(e) this ENA is merely an agreement to enter into the ENA Negotiating
Period according to the concepts presented herein, reserving final discretion and approval of any
Transaction Documents by the City to the City Council and by Developer to the authorized
representatives of Developer, and unless and until a DDA and DA are approved as set forth in
Section 2.3 and executed by the City and AvalonBay,the Parties do not intend to be bound in any
way to an Essential Terms Agreement, nor do they intend to be bound by any other agreement
except for the specific undertakings of each set forth in this ENA;
(f) the concurrence of the City negotiators with the terms and
provisions of a proposed DDA and DA or other Transaction Documents shall not be construed or
interpreted as the City approving or accepting such terms. Such concurrence shall be viewed as
nothing more than the willingness of the City negotiators to recommend to the Planning
Commission of the City (as to the DA) and the City Council (as to the DDA and DA and other
Transaction Documents)that they approve such terms.
Further, Developer acknowledges that the design of the Project,the identity,stability and financial
capacity of Developer and any proposed manager/operator of the Project and the terms and
conditions of the sale of the Project, if any, and the ability of AvalonBay to deliver the Project,
including by causing Abode to deliver the required Affordable Housing Units,will be of material
concern to the City and comprise part of the Essential Terms that are not yet agreed upon by the
Parties.
2.3 Public Hearings and Compliance. The DDA and the DA shall not exist and shall
not be binding unless and until each is fully executed by AvalonBay and the City, approved by the
City Council of the City and by the authorized representatives of AvalonBay and with respect to
City action, only after and if the agreements have been considered and approved by the City
Council of the City at a properly noticed meeting and after compliance with the California
Environmental Quality Act ("CEQA"). Nothing in this ENA shall supersede or waive any
discretionary or regulatory approvals required to be obtained from the City pursuant to the Tustin
City Code or other City ordinance or the provisions of any applicable state of California("State"),
regional or federal law or regulation.
2.4 Assumption of Risk. The City and Developer each assume the risk that,
notwithstanding this ENA and good faith negotiations,the City and AvalonBay may not enter into
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any agreements due to the failure to agree upon Essential Terms of the transaction or the
Transaction Documents, or any of them. Accordingly,except as specifically set forth in this ENA,
no Party will have any liability to the other if the Parties are unable to reach such a definitive
agreement with respect to the proposed Transaction for any reason or no reason.
3. Developer's Representations,Warranties and Agreements.
Developer represents,warrants and agrees as follows:
3.1 Expertise and Financial Oualifications. Developer has the necessary expertise,
experience and financial capability to undertake development of the Project at the Development
Parcels as contemplated by this ENA.
3.2 No Speculation in Land Holding. Subject to Developer's right to Transfer this
ENA pursuant to Section 6.4, AvalonBay's intended acquisition of the Development Parcels and
its other intended undertakings pursuant to this ENA shall be used for the timely development of
the Project upon the Development Parcels and accompanying infrastructure and amenities and not
for speculation in land holding.
3.3 Experience. Developer is experienced in development and understands the process
and requirements required to design, construct, develop and otherwise implement development
projects such as the Project described herein.
3.4 Proiect Financing. AvalonBay is capable of acquiring all of the Development
Parcels and developing the Project without a capital partner or financing from a bank group or
other institutional lender, and without utilizing the Development Parcels and/or the Project as
collateral, other than as set forth in this ENA with respect to financing for the Affordable Portion
of the Project. At the initial close of escrow pursuant to the DDA, Developer shall cause
AvalonBay (provided it is then a publicly traded entity) or one or more guarantor(s) approved by
the City in its sole discretion to provide the City with a performance and completion guaranty for
the Project. Developer has represented that solely with respect to construction of the Affordable
Housing Units and the Affordable Housing Portion of the Project that it intends to provide a
combination of equity financing, financing from an institutional lender and federal and/or state tax
credits, and that it will support such financing with bank and tax credit investor guaranties and
indemnities.
3.5 Release. Except as specifically set forth in Sections 4.3, 4.4, 6.8 or 10.6,
Developer, on behalf of itself and its successors and assigns, hereby waives the right to recover
from and fully and irrevocably releases the City, the Successor Agency to the Tustin Community
Redevelopment Agency, the Tustin Housing Authority, the Tustin Finance Authority, and their
respective elected and appointed officials, employees,agents,representatives,attorneys, affiliates,
consultants,contractors,successors and assigns("City Parties")with respect to any and all Claims
(as defined below) that Developer or its officers, directors, employees, agents, representatives,
tenants and prospective tenants, consultants or contractors or any of them may now or hereafter
have or incur relating to or arising from: (a)the process by which Developer was selected or any
modification or defect thereto, or any information set forth in the RFP or provided as part of the
selection process; (b)the terms of this ENA including,without limitation,the information set forth
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in or the termination of this ENA in accordance with its terms; (c) except as set forth in Section
4_4, the breach by the City of its obligations under this ENA, (d) a violation by the City of the
SLA; (e)the failure of the Parties or any of them to agree upon the Essential Terms of the
Transaction contemplated by this ENA; (f) any disputes or Claims arising between AvalonBay and
Adobe, or between either of them and any third parties; (g) any information provided by the City
during the course of the selection or negotiation; (h)the negotiation of or failure to negotiate the
Transaction Documents, or any of them, or the failure of the City to approve any Transaction
Document; (i) any condition of the Development Parcels, or any current or future improvement
thereon, known or unknown, including, without limitation, the environmental condition of the
Development Parcels or the extent or effect of any grading of the Development Parcels;
0) economic or legal conditions on or affecting the Project, the Development Parcels or the
improvements thereon; (k)the ability of the City or any third party to complete, or the likelihood
of the completion or actual completion of, any of the improvements and infrastructure related to
the Project described by the General Plan, the Reuse Plan, the Specific Plan, the Tustin Legacy
Backbone Infrastructure Program, the agreements, environmental reports and statements listed on
Exhibit C ("Environmental Documents") or any other plan or policy of the City or any other
governmental entity, and/or(1) any action or inaction of the City or the City Parties in connection
with any of the foregoing (including, without limitation, the exercise by the City of its discretion,
decision or judgment with respect to the foregoing). This waiver and release includes, without
limitation, a waiver and release with respect to (1) any and all damages and/or monetary relief
(whether based in contract or in tort), including, without limitation, any right to claim direct,
compensatory, reliance, special, indirect, consequential, expectation, anticipation, exemplary or
punitive damages or losses relating to or arising out of this ENA, and any other rights or claims it
may otherwise have at law or at equity; (2) any right to payment or reimbursement from the City
except as expressly set forth in Sections 4.3 and/or 4.4; (3)the right to protest the terms of this
ENA or the selection process, any Transaction Document or the entry by City into exclusive
negotiations with Developer with respect to the Development Parcels, or the City's termination of
this ENA; (4) any right to specific performance or other injunctive relief, including without
limitation, for conveyance of or to claim any right of title or interest in the Development Parcels
or any portion thereof, and (5)the failure of the City to enter into any of the Transaction
Documents, to negotiate in good faith pursuant to this ENA or, except as set forth in Section 4.4,
to negotiate exclusively.. Nothing herein limits or releases Claims by Developer against the United
States Government, including but not limited to the Department of the Navy, regarding the
environmental condition of the Development Parcels. For avoidance of doubt, Claims by
Developer asserting a failure of the City to negotiate in good faith or exclusively pursuant to this
ENA shall not be waived but Developer's rights and remedies with respect to any such Claim shall
be covered exclusively by Section 4.4.1.
The term "Claim" or"Claims" as used in this ENA shall mean any and all claims, actions, causes
of action, demands, orders, or other means of seeking or recovering losses, damages, liabilities,
costs, expenses (including, without limitation, attorneys' fees,fees of expert witnesses, consultant
fees and court, arbitration and litigation costs), costs and expenses attributable to compliance with
judicial and regulatory orders and requirements, fines, penalties, liens, taxes or any other type of
compensation, monetary payment or reimbursements of any kind whatsoever, direct or indirect,
known or unknown, foreseen or unforeseen.
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3.6 Survival of Provisions. The provisions of this Section 3 shall survive the
termination of this ENA.
4. Negotiations.
4.1 Diligent and Good Faith Negotiations. The City and Developer agree for the
ENA Negotiating Period (as defined below) to exclusively negotiate with one another diligently
and in good faith to prepare Transaction Documents and related documents to be entered into
between the City and AvalonBay with respect to the purchase and sale of the Development Parcels
and development of the Project,which documents shall provide for the permitted assignment to or
delegation to Abode or its affiliate of the obligations related to design, development, financing,
construction and operation of the Affordable Housing Units.
4.2 ENA Ne2otiatin2 Period; Offer Period; Termination of Agreement.
4.2.1 Term of Negotiations. The initial period of negotiations pursuant to this
ENA shall terminate upon the date that is two hundred and seventy (270) calendar days from the
Effective Date ("Initial ENA Negotiating Period"), subject to extensions as further provided in
this Section 4.2. If at the expiration of the Initial ENA Negotiating Period(or within any extension
of time mutually approved by the City and Developer in accordance with the terms of this ENA),
AvalonBay has not, in accordance with Section 4.2.5, signed Transaction Documents in form and
substance prepared and approved by City staff, in its sole discretion, for submittal to the City
Council,then this ENA shall automatically terminate. The Initial ENA Negotiating Period, as the
same may be extended pursuant to Section 4.2.2 or earlier terminated pursuant to Sections 4.2.5,
4.2.6 or 4.2.7 is referred to herein as the "ENA Negotiating Period".
4.2.2 Requests for Extensions. AvalonBay may request from the City an
extension of the ENA Negotiating Period, with such request to be made in writing no later than
twenty (20)business days prior to the expiration of the ENA Negotiating Period, for an additional
period of ninety (90) calendar days. The City will determine whether Developer has negotiated
diligently and in good faith, whether reasonable and sufficient progress has been made toward
fulfillment of the requirements of this ENA and whether the City believes the Project is feasible
or financeable (collectively, the "Extension Standards") in its consideration of such requested
extension.
4.2.3 Authority to Extend. Upon receipt of a request from Developer for an
extension pursuant to Section 4.2.2 and a finding by the City Manager in his or her sole discretion
that the Extension Standards have been met, the City Manager of the City of Tustin ("City
Manager"), or his or her designated representative, shall have the authority to agree to grant one
(1)ninety (90)calendar day extension specified in Section 4.2.2.All extensions other than the one
(1) ninety (90) calendar day extension for which the City Manager has authority under this
Section 4.2.3 shall require approval by the City Council, which approval shall be at the sole
discretion of the City Council. No extension of the ENA Negotiating Period shall be effective
unless it is in writing.
4.2.4 HCD Documentation. Upon conclusion of negotiation of the Transaction
Documents and during the Offer Period (defined below), and provided there is agreement by
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AvalonBay and, subject to Section 2.2(d) and (f), the Transaction Documents are considered
acceptable by City staff for submittal to the City Council, the City shall submit the following to
HCD to ensure compliance with the SLA Regulations: (a) a description of the entities invited to
participate in the competitive developer solicitation as described in Section 1.7; (b) copies of the
Transaction Documents; and (c) a copy of the SLA Covenant (collectively, "Complete HCD
Submittal"). HCD will have the statutorily authorized time period following its receipt of the
Complete HCD Submittal to inform the City whether or not the Transaction Documents will
violate the SLA Regulations. If HCD concludes that the Transaction Documents are not in
compliance with the SLA Regulations,then the Parties shall meet in a good faith effort to resolve
any alleged non-compliance identified by HCD.
4.2.5 Offer to Purchase. The execution by AvalonBay of a form DDA and DA
that, subject to Sections 2.2.(d) andAD, is considered acceptable by City staff, and submittal by
AvalonBay of same to the City shall constitute an offer to purchase the Development Parcels. If
AvalonBay has not submitted an executed form of the DDA and DA to the City prior to the
termination of the ENA Negotiating Period,this ENA shall automatically terminate. If AvalonBay
does submit an executed DA and DDA, then this ENA shall remain in effect for an additional
period of ninety (90) calendar days following the submittal of the last of the executed DDA and
DA to the City ("Offer Period") to enable the City to (a) consider the environmental impacts of
the proposed Transaction Documents as evaluated in an environmental document prepared by the
City during the ENA Negotiating Period in accordance with the California Environmental Quality
Act; (b) determine whether it desires to enter into the Transaction Documents; (c) submit the
appropriate documentation to HCD as required pursuant to Section 4.2.4; (d) take the actions
necessary to authorize the City to sign the Transaction Documents if the City desires to do so; and
(e) sign the Transaction Documents. Developer hereby agrees that it shall not withdraw such offer
to purchase during the Offer Period. This ENA shall automatically terminate at the end of the
Offer Period, including any extension thereof agreed upon by the Parties. The City shall have the
right to request, in writing, an extension of the Offer Period to complete required CEQA
documentation for the Transaction Documents. If an extension of the Offer Period is requested by
the City for such purpose,Developer shall either consent to the extension within seven(7)calendar
days following such request or this ENA shall automatically terminate. This ENA shall remain in
full force and effect during the Offer Period.
4.2.6 -Rights of the Parties to Earlier Terminate ENA for Breach. Any
termination of this ENA or the ENA Negotiating Period authorized by this ENA shall be effective
only upon provision of seven (7) calendar days' prior written notice to the other Parties.
4.2.7 Rights to Earlier Terminate Due to Infeasibility or Non-Economic
Transaction. Either AvalonBay or the City may terminate this ENA and the ENA Negotiating
Period upon provision of seven (7) calendar days' prior written notice to the other if, during the
course of negotiations, investigations and evaluation of the Development Parcels,the Transaction
or the Project, either such Party determines in its good faith discretion that (a)the Project or the
Transaction is not feasible or financeable, (b)based on the terms offered by the other Party,that it
is unlikely to reach agreement on the terms of the DDA and/or the DA or (c)the terms offered by
the other Party do not meet its economic, or in the case of the City,public policy or health, safety
or welfare requirements. Abode shall have the right to terminate its participation in this ENA at
any time upon provision of seven (7) calendar days' prior notice to the City and AvalonBay if it
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determines in its good faith discretion with respect to the Affordable Housing Portion of the Project
that(x) the Project or the Transaction is not feasible or financeable, (y)based on the terms offered
by the other Parties, or either of them, that it is unlikely to reach agreement on an assignment or
delegation of the rights and obligations under the DDA and/or the DA or(z)the terms offered by
the other Parties do not meet its economic requirements. In such event, and subject to the Transfer
provisions of Section 6.4, AvalonBay shall have the right to identify a different affordable housing
provider acceptable to the City in its sole discretion, as a precondition to submittal of the DDA
and DA to the City pursuant to Section 4.2.5.
4.2.8 Termination Following Determination of City Council Not to Approve
DDA or DA. The effectiveness of the DA and DDA are conditioned on approval, execution and
effectiveness of both agreements. Therefore, notwithstanding any other provision of this ENA, if
the DDA and DA are executed and presented by Developer to the City pursuant to Section 4.2.5,
and the City Council disapproves (affirmatively or by failure to consider) either the DDA or DA
or the City Council approves either the DDA or the DA but does not approve (affirmatively or by
failure to consider) the second such document, then, upon the earlier of(i) the termination of the
Offer Period or(ii)the affirmative determination of the City Council not to approve either the DA
or DDA, this ENA and all rights of the Parties in and to the first document approved, if any, shall
automatically terminate and the Parties will cooperate and execute such instruments as may be
reasonably requested by the City to effect such termination. The determination of the City to
approve or disapprove the DDA and/or the DA, any other Transaction Documents or any
entitlements related to the Project shall be made in the sole discretion of the City Council and the
City Council's determination to disapprove or not to take action on the DDA, the DA, any other
Transaction Document or any Project entitlements shall not be a breach of the City's obligation to
negotiate diligently, in good faith or exclusively under this ENA.
4.2.9 Due Diligence Period. Developer acknowledges that execution of the
Transaction Documents by AvalonBay shall constitute its agreement that it has completed its
physical and environmental site inspections,title and survey,entitlements,and all other inspections
and investigations with respect to the Development Parcels, the Project and the Transaction and
that the DDA shall provide no additional due diligence period.
4.3 Deposits and Costs.
4.3.1 Good Faith Deposit. Within seven(7) calendar days following approval by
the City Council of this ENA, and prior and as a condition to execution of this ENA by the City,
Developer will submit to the City a good faith deposit in the sum of One Hundred Fifty Thousand
Dollars ($150,000.00) (together with interest, if any, accruing thereon and any additional amount
deposited as set forth below in this Section 4.3.1, the "ENA Deposit") in the form of a check or
wire transfer to the City to ensure that Developer will proceed diligently and in good faith to
negotiate and perform all of Developer's obligations under this ENA and to also be applied to
cover any City Transaction Expenses (as defined below) incurred by the City whether arising
before or after the Effective Date of this ENA. The ENA Deposit shall be deposited in an account
in a bank or trust company selected by the City. Interest, if any, shall accrue to any balances in
the account for the benefit of Developer and as additional security for Developer's obligations
hereunder. The ENA Deposit will be expended to cover the City Transaction Expenses, as further
described in Section 4.3.2 and the ENA Deposit will be depleted accordingly. Each time the
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amount of funds in the ENA Deposit account is depleted below Fifty Thousand Dollars ($50,000),
Developer shall be required to submit an additional Fifty Thousand Dollars ($50,000) to City
which shall be credited by the City to the ENA Deposit account. Amounts due to the City on
account of City Transaction Expenses and deducted by the City from the ENA Deposit are referred
to herein as "City Expense Payments".
4.3.2 City Transaction Expenses. The ENA Deposit may be used by the City to
pay the predevelopment and negotiation costs and expenses incurred or accrued by the City with
respect to the drafting, negotiation and execution of this ENA and during the ENA Negotiating
Period and the Offer Period, if any, including, without limitation, costs incurred by the City for
drafting, negotiation and execution of this ENA and Transaction Documents, City staff costs
attributable to the Project and fees and costs of third-parry consultants, legal counsel (including,
without, limitation, fees and expenses of the City Attorney and outside legal counsel), financial
advisors, engineers, appraisers and environmental and other consultants and any other
expenditures required in connection with the implementation of the Transaction, the drafting,
negotiation, execution, implementation and, if applicable, amendment or termination of the ENA
and the Transaction Documents,and other acts carried out in contemplation of the proposed Project
(collectively, the "City Transaction Expenses"). Fees and deposits required of Developer for
processing entitlement applications or complying with provisions of CEQA or the State CEQA
implementing regulations shall be separately funded by Developer and shall not constitute City
Transaction Expenses. Determination of costs, expenses, and fees constituting City Transaction
Expenses shall be made by the City in its sole discretion and Developer shall upon request be
entitled to receive summary notices, including summary invoices of third party consultants from
the City setting forth the identity of the provider or cost and the amounts attributable to each that
constitute City Transaction Expenses and related non-confidential documents evidencing such
expenses; provided that Developer shall identify its objections, if any, to each summary notice
provided by the City within fifteen(15)calendar days following its receipt of each such notice and
provided further that in no event shall Developer have the right to challenge the hourly rates of
City staff,nor those of the City's third party attorneys or consultants.
4.3.3 Return of Unapplied Deposit Funds Under Specified Conditions. If the
Parties enter into Transaction Documents, the Unapplied Deposit Funds (as defined below) shall
be returned to Developer or, at Developer's request, applied to any deposit required as security for
performance by Developer,or its authorized transferee,under the Transaction Documents. Except
as otherwise set forth in Section 4.4, if the Parties fail to enter into the Transaction Documents
within the ENA Negotiating Period or any subsequent Offer Period, then upon the termination of
this ENA,the City shall have the right to retain in full all City Expense Payments (and to be paid
any additional sums due to the City under this ENA on account of City Transaction Expenses or
otherwise) and, after deducting any amounts due to the City under this ENA from the ENA
Deposit, the City shall return to Developer the Unapplied Deposit Funds. "Unapplied Deposit
Funds" means the amount of the ENA Deposit (including any additional funds deposited by
Developer pursuant to this Section 4.3) remaining after the City has deducted therefrom the full
amount of the City Transaction Expenses incurred by the City to the date of termination of this
ENA and, if applicable, the Offer Period.
4.3.4 Additional Transaction Deposit. Developer acknowledges that it is
currently anticipated that the Transaction Documents shall require an additional deposit in an
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amount to be determined as security for the performance of Developer's obligations under the
Transaction Documents.
4.3.5 Costs and Expenses Borne by Developer. Developer acknowledges and
agrees that the City shall have no responsibility to pay or reimburse Developer for costs and
expenses incurred by Developer in connection with this ENA, the compliance by Developer with
its obligations under this ENA, the termination of this ENA, the negotiation of the DDA, DA or
any other Transaction Documents,or any other matters unless the City,in its sole discretion,agrees
to assume any specific responsibilities in the fully executed and delivered Transaction Documents.
Developer shall be responsible, without any cost or liability to the City (except as specifically set
forth in Sections 4.4.1, 6.9.2 or 10.6), for all City Transaction Expenses and all costs and expenses
incurred by Developer with respect to compliance with the terms of this ENA, including without
limitation, costs incurred by Developer in planning and designing the Project, preparing Plans,
submitting applications, conducting due diligence or property investigations, arranging financing,
negotiating the terms of the Transaction Documents or carrying out other acts in contemplation of
the possible purchase and sale of the Development Parcels.
4.3.6 Payment of Outstanding Amounts. Upon a termination of this ENA other
than as set forth in Section 4.4.1, to the extent that the ENA Deposit or other funds provided by
Developer to pay City Transaction Expenses are not sufficient to pay all City Transaction
Expenses, Developer shall promptly upon termination of this ENA fund the amount remaining
unpaid to the City.
4.3.7 Survival of Provisions. The provisions of this Section 4.3 shall survive the
termination of this ENA.
4.4 Exclusivity; Good Faith Negotiations and Remedies.
4.4.1 City Failure to Negotiate Exclusively and in Good Faith. During the ENA
Negotiating Period, the City covenants and agrees to negotiate exclusively with Developer and
any assignee or transferee of Developer authorized by or otherwise approved by the City in its sole
discretion pursuant to Section 6.4 and the City shall not solicit another Person (as defined below)
for the Project or enter into any agreement with any other Person regarding the disposition and
development of the Development Parcels or any portion thereof. The City acknowledges and
agrees that but for this exclusivity,Developer would not have entered into this ENA. In the event
a court of competent jurisdiction determines in a final decision that the City has breached this
exclusivity covenant, the City shall be deemed to have failed to negotiate diligently and in good
faith. Breach of this exclusivity covenant shall be the sole means by which City may be deemed
to have breached its obligation to negotiate diligently and in good faith under this ENA and
Developer's sole remedies for such breach shall be (a) the right to terminate this ENA, and(b)the
return to Developer of the ENA Deposit,including the refund of any City Expense Payments made.
Except as specifically required by this Section 4.4.1, the City shall at no time have any obligation
to return any City Expense Payments,nor, except as set forth in Sections 4.4.1, 6.9.2 and/or 10.6,
to make any other payments to Developer for any reason in connection with or pursuant to this
ENA.
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4.4.2 Developer Default. If Developer has not negotiated diligently and in good
faith or has not carried out its obligations under this ENA as evidenced by Developer's failure to
submit to the City plans, reports, studies, investigations, applications and materials specified in
Section 5 and Section 6 within the time periods specified therein, inasmuch as the actual damages
that would result from a breach by Developer of its obligations under this ENA are uncertain and
would be impractical or extremely difficult to determine, then in addition to the obligation of
Developer to pay all City Transaction Expenses incurred by the City, the City shall provide
Developer with written notice detailing the events upon which such default is based and Developer
shall have the following time periods in which to cure such default: (a) with respect to monetary
defaults, ten (10) calendar days from the date of such written notice and (b) with respect to non-
monetary defaults,thirty (30) calendar days from the date of such written notice; except that in the
case of both monetary and non-monetary defaults,in no event shall the time period for cure extend
beyond the term of the ENA Negotiating Period. Upon the expiration of such cure period, the
City shall be entitled to terminate this ENA and to retain the ENA Deposit including, without
limitation, the Unapplied Deposit Funds plus interest, if any, which has accrued thereon and on
the ENA Deposit, unless a court of competent jurisdiction determines in a final decision that the
City has not met the standard for negotiation in good faith set forth in Section 4.4.1. By the initials
of their respective signatories hereunder, the City and Developer acknowledge and agree that
forfeiture of the amount of the ENA Deposit by Developer (together with any interest earned and
accrued thereon) is not in lieu of any other relief, right or remedy to which the City might be
entitled by reason of Developer's default including,without limitation,the right of the City to seek
and receive payment for(a) amounts which Developer is obligated to pay pursuant to Section 4.3,
(b) amounts due to City pursuant to the indemnities set forth in this ENA including pursuant to
Sections 4.5.3, 6.3.2 or 10.2 or pursuant to Section 10.6 of this ENA, or (c) for direct monetary
damages for breach by Developer of Sections 4.2.6, 4.3.4, 4.3.5 or 4.3.6 of this ENA.
CITY INITIALS DEVELOPER INITIALS
4.4.3 Limitation on Damages Pa, a�y Ci1y. Developer acknowledges that the
City would not have entered into this ENA if the City could become liable for significant damages
under or with respect to this ENA or the proposed transaction. Consequently,and notwithstanding
any other provision of this ENA, except as set forth in Section 4.4.1 and the following sentence,
the City shall not be liable in damages under this ENA to Developer or any third party and
Developer, on behalf of itself and its successors and assigns, hereby waives any and all rights to
claim damages,reimbursements or monetary payments of any kind or nature from the City except
as set forth herein. Nothing herein shall be deemed to preclude Developer from seeking payment
for amounts which City is obligated to pay pursuant to Sections 4.4.1, 6.9.2 and/or 10.6 of this
ENA, provided that Developer shall not be entitled to any damages in addition to the actual
amounts owed by the City to Developer pursuant to such Sections.
4.4.4 Waiver of Certain Rights. Each of the Parties, on behalf of itself and its
successors and assigns,hereby expressly waives,releases and relinquishes any and all right to any
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expectation, anticipation, indirect, consequential, exemplary or punitive damages or damages or
monetary remedies not otherwise specifically set forth in this ENA.
4.4.5 Additional Limitations on Remedies of Abode. Abode hereby agrees that
its sole remedy with respect to breach by the City of this ENA shall be its right to terminate its
participation in this ENA. Therefore, notwithstanding any other provision of this ENA, Abode
hereby specifically waives in its entirety any right to seek damages or injunctive relief of any kind
or nature and for any purpose,known or unknown,under this ENA and Abode shall look solely to
AvalonBay to recover for any claim.
4.4.6 No Liens or Lis Pendens. AvalonBay and Abode, each on behalf of itself
and its successors and assigns, hereby expressly waives any and all rights to record a lis pendens
or to otherwise place a lien or restriction of any type upon or affecting the Development Parcels.
4.4.7 Other Remedies and Restrictions. In the event AvalonBay and the City
enter into one or more Transaction Documents, each Party, on behalf of itself and its successors
and assigns, hereby expressly waives its right to assert any breach by the other Party of the
covenants of good faith and exclusivity in this ENA. Nothing in this ENA shall preclude
AvalonBay or the City from seeking injunctive relief to enforce the ENA Negotiating Period, the
Offer Period, release and/or confidentiality requirements of this ENA.
4.4.8 Survival of Provisions. The provisions of this Section 4.4 shall survive the
termination of this ENA.
4.5 Inspection; License.
4.5.1 Access License. The City hereby grants to Developer,for use by Developer
and its employees, representatives, agents, contractors, subcontractors, officers and consultants
(collectively,the"Developer Parties"),a license during the ENA Negotiating Period to enter upon
the Development Parcels for purposes of conducting a due diligence inspection, provided that
Developer shall, and shall cause the Developer Parties to: (a) deliver to the City written evidence
that Developer has procured and then maintains in effect the insurance required under
Section 4.5.2 prior to entry on the Development Parcels; (b) give the City twenty-four (24) hours
advance telephonic or written notice of any intended access which involves work on or may result
in any impairment of the use of the Development Parcels; (c) access the Development Parcels in a
safe manner; (d) conduct invasive testing or boring only after obtaining the written consent of the
City to a work plan for such testing, which consent shall not be unreasonably withheld; (e) allow
no dangerous or hazardous condition created by Developer and/or the Developer Parties to
continue beyond the completion of such access; (f) comply with all laws and obtain all permits
required in connection with such access; (g)keep the Development Parcels free and clear of any
and all liens of any kind caused by Developer or the Developer Parties, including without
limitation,mechanics'liens or materialmen's liens related to Developer's or any Developer Parties'
access to or inspection of the Development Parcels; (h) conduct inspections and testing, subject to
the rights of any existing tenants or contractors doing work on the Development Parcels, if any
(which inspections and testing, if conducted at times other than normal business hours, shall be
conducted only after obtaining the City's consent, which shall not be unreasonably withheld) and
in accordance with reasonable terms and conditions established by the City; (i) cause the portion
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of the Development Parcels subject to such inspection to be restored to the condition existing
immediately prior to such inspection promptly upon completion of each inspection; and 0) in
accordance with Section 6.9.2, provide City, at no additional charge, with copies of the results of
each inspection made by or for Developer after Developer's receipt of such results. The limited
license granted herein is revocable by the City during the continuation of any breach of this ENA
by Developer and unless otherwise agreed by the Parties, shall be automatically revoked and
terminated,without further action of the City,upon the termination of this ENA.
4.5.2 Insurance. Prior to commencement of any access or investigative activities
on the Development Parcels, Developer, at its sole cost and expense, shall obtain or cause the
Developer Parties, with respect to their access and investigative activities, to obtain, such types
and amounts of insurance coverage as set forth in Exhibit B.
4.5.3 Indemnity. Developer hereby agrees to indemnify,defend,protect and hold
the City and the City Parties free and harmless from and against any and all Claims arising in
connection with or resulting from or related to Developer's or the Developer Parties': (a) exercise
of the license provided in Section 4.5.1, including without limitation, entry onto or access to the
Development Parcels,or breach by Developer or any Developer Parties of the terms and conditions
of the grant of license; (b) exercise of any rights hereunder, including, without limitation, any
inspections,surveys,tests or studies performed by Developer or the Developer Parties with respect
to the Development Parcels, the Project or the Transaction; (c)presence, activities or work on or
related to use of the Development Parcels and any mechanics' or materialmen's liens arising with
respect thereto; (d)bodily injury to or death of any person (including, without limitation, any of
the City Parties); or(e) damage to or loss of use of property resulting from any of the foregoing,
save and except to the extent such Claims result from (x)the discovery by Developer of any pre-
existing environmental conditions on the Development Parcels not caused or contributed to by
Developer or the Developer Parties, or (y) the gross negligence or willful misconduct of the City
or its agents or employees.
4.5.4 Survival of Provisions. The insurance obligations in Section 4.5.2 and
Exhibit B and the indemnification by Developer set forth in Section 4.5.3 shall survive the
termination of this ENA and, if applicable, the execution of the DDA and the closing and transfer
to AvalonBay and shall not merge into any deed conveying the Development Parcels.
5. Proposed Development Concept.
5.1 Compliance with Existing Land Use and Zoning Requirements. The proposed
Project to be negotiated hereunder shall include the development and use of the Development
Parcels consistent with the Reuse Plan, the City's General Plan, and the Specific Plan.
5.2 Terms of Transaction Documents to be Negotiated. Developer and the City
agree that it is their intent during the ENA Negotiating Period to negotiate Transaction Documents
which are anticipated to address the following terms and conditions and such other terms and
conditions as they may agree, and which will be binding upon the City and Developer and, to the
extent provided therein, their successors and assigns. The following terms and conditions shall
not be binding upon the Parties during the term of this ENA and are provided in this ENA only to
provide general guidance for negotiation of the DDA and DA:
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5.2.1 As-Is Conveyance. While Developer should undertake its own
investigation to determine the presence of hazardous materials and suitability of the Development
Parcels for development, Developer acknowledges and agrees that if the Development Parcels are
conveyed by the City pursuant to a DDA,the Development Parcels shall be conveyed on an "AS-
IS, WHERE-IS AND WITH ALL FAULTS" basis, and Developer shall be obligated to release,
defend, indemnify and hold harmless the City and the City Parties with respect to its acquisition
and development of the Development Parcels and the condition of the Development Parcels,
including, without limitation, any and all land use, soil and environmental conditions of the
Development Parcels.
5.2.2 Development. Developer shall design and construct the Project on the
Development Parcels at its own cost and expense in accordance with the scope of development,
phasing plan and schedule of performance to be negotiated as part of the Transaction Documents
and in accordance with plans and specifications prepared by Developer, and approved by the City
in accordance with such schedule of performance and in compliance with all requirements and
regulations of the City including, without limitation, the Specific Plan and applicable zoning.
Developer understands and acknowledges that the Project will be subject to approval by the City,
in its governmental and proprietary capacity, and will be required to comply with the applicable
requirements of the Surplus Land Act, as determined by the City from time to time, and all
necessary City entitlement approvals requested to carry out development of the Project on the
Development Parcels. The actual number, location, and size of units (including bedroom counts)
and the type, size and location of commercial uses will be based on compliance with development
standards in the Specific Plan and any requirements contained in the Transaction Documents. The
parties acknowledge and agree that the Project is currently contemplated as a phased purchase and
development of the Development Parcels as a mixed-use development, as set forth in Sections 1.9
and 1.10.
5.2.3 Tustin Legacy Backbone Infrastructure Program Costs. In connection with
development of the Development Parcels, Developer shall make a fair share contribution to the
Tustin Legacy Backbone Infrastructure Program based on the allocations to the Development
Parcels in the City's Tustin Legacy Backbone Infrastructure Financing Program-2017 Update
adopted October 17, 2017 as the same may be amended from time to time ("Tustin Legacy
Backbone Infrastructure Program"). Pursuant to the Tustin Legacy Backbone Infrastructure
Program, a fair share contribution shall be allocated to the Development Parcels ("Project Fair
Share Contribution"). The DDA shall address the timing of payment of the Project Fair Share
Contribution by Developer to the City.
5.2.4 Community Facilities District ("CFD"). Developer acknowledges that the
City has formed a community facilities district for services (CFD 18-01) funded by a Special Tax
"B" ("Tax B") imposed within the boundaries of the CFD to fund a portion of the City essential
services, including, without limitation, police and fire protection, ambulance and paramedic
services, recreation programs and services, street sweeping, traffic signal maintenance and the
maintenance of City-owned parks, parkways and open spaces, lighting, flood control and storm
drain services and other City services and facilities at Tustin Legacy. Developer acknowledges
and agrees that (a)the CFD shall impose Tax B upon the Development Parcels and the
improvements constructed thereon in connection with the Project in an amount to be determined
in a rate and method of apportionment ("RMA") to be adopted by the CFD for the residential
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(excluding the Affordable Housing Units) and retail components of the Project prior to the initial
close of escrow pursuant to the DDA; and(b) Tax B shall be perpetual and shall not be time limited
in any manner unless determined by the City in its sole discretion. Developer agrees that it shall
affirmatively support and shall cooperate with the City and CFD in the adoption of the RMA and
imposition of Tax B upon the Development Parcels. Although the CFD formation documents
permit the CFD to impose a Special Tax A ("Tax A") on portions of Tustin Legacy to pay for
construction of certain capital facilities described by the Tustin Legacy Backbone Infrastructure
Program, Developer acknowledges and agrees that its development plan for the Project will not
require use of community facility district proceeds (including, without limitation, Tax A funds)
and that neither assessment district nor community facilities district proceeds will be used to
reimburse Developer for its development costs, including Project Fair Share Contribution or
Project specific infrastructure costs and the City agrees that Tax A shall not be applicable to the
Development Parcels or the improvements thereon and Developer shall have no obligation or
liability on account thereof.
5.2.5 Construction of In-Tract and Off-Site Infrastructure. Other than as provided
in the Transaction Documents,Developer will be responsible for all costs of any necessary in-tract
improvements and other off-site improvements identified by the City in the DDA, the DA or the
Project entitlements, which work shall not be subject to reimbursement by the City. The off-site
infrastructure work may include installation of or modifications to utilities,roadways, sidewalks,
curb and parking on perimeter streets and will be further defined and described as the planning
effort for the Project evolves.
5.2.6 Applications. Developer shall prepare and process applications for and
obtain from the City and other federal, State and local jurisdictions, all applicable land use,
planning and zoning approvals for the proposed development with the support of the City. These
entitlements will be required to be consistent with the Specific Plan, unless, as part of approval of
any application, modifications to the Specific Plan or any development standards are granted by
the City.
5.2.7 Project Costs, Local Infrastructure. Project costs and revenues will be
separately analyzed and funding of all Project costs will be the sole responsibility of Developer,
except that the City shall construct mainline utilities to serve the Development Parcels. Project
costs for which Developer will be responsible shall include, without limitation, all costs of
planning, designing, entitling and constructing the Project and all costs of any necessary local
infrastructure improvements and in-tract improvements required in connection with development
of the Project. Nothing in this ENA waives or limits the applicability of the Tustin Legacy
Backbone Infrastructure Program.
5.2.8 Development Fees. In connection with its development of the Development
Parcels, Developer acknowledges that the Development Parcels will be subject to applicable
development fees, including, but not limited to, those required by the City or other jurisdictions
such as the Transportation Corridor Agencies' Foothill/Eastern Corridor Fee and school impact
fees and school facility bonds,if any,by the Tustin Unified School District, as well as utility meter
and connection fees from the Irvine Ranch Water District. Developer acknowledges that Tustin
Unified School District has imposed CFD 15-02 upon portions of Tustin Legacy which may be
applicable the Development Parcels.
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5.2.9 Transfer and Assignment Restrictions. Developer acknowledges that the
Transaction Documents shall contain limitations on transfer and assignment of the rights of
Developer including, among other things, the right of the City to approve in its sole discretion
certain assignments and transfers by Developer of interests in Developer, the Transaction
Documents, the Project or the Development Parcels. The Transaction Documents will allow the
future conveyance by AvalonBay of the real property required to develop the Affordable Housing
Portion of the Project to Abode or its Developer Affiliate on the terms and conditions, including
those applicable to such Transfer and such close of escrow, set forth in the DDA and DA.
5.2.10 Mortgagee Limitations and Subordination. Developer acknowledges that
the Transaction Documents shall contain limitations on the ability of Developer to obtain
mortgages on the Development Parcels for the Market Rate Portion of the Project or the Retail
Portion of the Project or to utilize such portion of the Development Parcels as collateral for any
such financing. However, the DDA shall permit and shall establish financing requirements for
development of the Affordable Housing Units on the Affordable Housing Portion of the Project
following conveyance of such property to Abode and as to such portion of the Development
Parcels shall not include provisions that conflict with market convention related to typical
mortgagor requirements.
5.2.11 Remedies and Termination Rights. Developer acknowledges that the
Transaction Documents shall contain remedies and reasonable termination rights in favor of the
City for breach by Developer of the Transaction Documents, which shall include without
limitation, rights of reverter and rights of repurchase in conveyed land.
5.2.12 Completion Guaranty. To secure the completion of the Project and the
performance of Developer's construction obligations under the DDA, Developer shall cause a
guarantor approved by the City in its sole discretion to execute a payment and completion guaranty
in form and substance acceptable to each of the Parties in its sole discretion or shall furnish the
City with another form of security meeting the requirements of the City in its sole discretion
("Guaranty").
5.2.13 Insurance. Developer shall be obligated in the Transaction Documents to
provide commercial general liability,workers compensation,builder's risk property insurance,and
environmental insurance as set forth therein.
5.2.14 Additional DDA Deposit. Developer acknowledges that the DDA shall
require additional deposits in amounts to be determined (a) as security for the performance of
Developer's obligations under the DDA and (b)to pay City costs and expenses (including all staff
and third-party costs and expenses, on the same basis as described in Section 4.3.2) incurred by
the City for the periods from execution of the DDA to issuance by the City of a final certificate of
compliance evidencing completion of all of the buildings and other improvements comprising the
Project and satisfaction of all other conditions precedent set forth in the DDA ("Certificate of
Compliance"). The purchase price deposit paid by Developer as a condition to execution of the
DDA, as negotiated by the Parties in the DDA, shall be non-refundable from and after the date the
Parties executed and deliver the DDA.
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5.2.15 Purchase Price. The purchase price for the Development Parcels shall
be payable at close of escrow and shall be applied pro rata to each phase.
5.2.16 Master Marketing Program Fees. Developer acknowledges that the City
acting in its proprietary capacity requires that all builders within Tustin Legacy pay a one-time
master marketing fee towards the marketing of Tustin Legacy by the City in the amount of Fifty
Thousand Dollars ($50,000).
5.2.17 Licenses and Covenants. The DDA shall include such construction
licenses as the Parties may mutually agree, each in its sole discretion and a Declaration of Special
Restrictions and other covenants recorded against the Development Parcels restricting the use of
the Development Parcels for residential uses (and with respect to the Affordable Housing Units,
affordable housing covenants and restrictions) and establishing certain maintenance requirements
and incorporating other City standard provisions, each in form approved by the Parties, each in its
sole discretion.
6. Developer's Responsibilities.
6.1 Status Reports. Developer agrees to make monthly oral and/or written reports
advising the City and/or its staff of all matters and studies being made (City acknowledging that
meeting minutes will be sufficient as a written report),including Developer's progress in analyzing
the feasibility of the Project and Developer's compliance with the requirements of this ENA, and
such other information as may be reasonably requested by the City or its staff and to meet as
requested by City staff during the ENA Negotiating Period to report on progress in development
of Project design and financial information, and such other matters as City may request from time
to time.
6.2 Development Team. Developer shall,within ten (10)calendar days following the
Effective Date, submit in writing to the City full disclosure of the names of Developer's agents,
authorized negotiators, professional employees or other associates of Developer who may be
participants in development of the Project and other relevant information concerning the above,
such as addresses, telephone numbers and employers. Developer shall also designate and submit
in writing to the City the names of all Developer's lead negotiators who shall have authority to
make decisions on behalf of Developer. Developer may amend and/or supplement such
information from time to time as necessary and shall provide prompt written notice to the City
(email being acceptable) with respect to any changes.
6.3 Financial Status.
6.3.1 Financial Capacity. Developer shall continue to be responsible for
demonstrating to the City Developer's financial capacity and capability to perform its obligations
under this ENA and the proposed Transaction Documents. Subject to the provisions of
Section 6.3.2 (the "Confidentiality Protocols"), Developer shall submit any additional financial
information required to demonstrate Developer's, and guarantor's, if any, financial capacity and
capability to perform its obligations under this ENA and the proposed Transaction Documents as
requested by the City within thirty (30) calendar days of a request, it being understood that
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AvalonBay's financial statements filed with the Securities and Exchange Commission ("SEC")
on a quarterly basis shall be a satisfactory form of such financial information.
6.3.2 Confidentiality Protocols. Developer acknowledges that documents or
other"records" (as that term is defined in the California Public Records Act("CPRA")related to
the Project may be required to be made public upon request. Govt. Code Section 6253(a)provides
that "Public records are open to inspection at all times during the office hours" of the City. If
Developer believes that any documents or other records provided to the City are exempt from the
CPRA, Developer shall state in writing the legal basis for Developer's belief that such documents
or other records are exempt from the CPRA, Developer and City shall meet and confer about
exemption of such documents or other records, and City shall evaluate the asserted basis for the
exemption(s) in good faith. If City determines that the requested documents or other records
qualify for an exemption, Developer shall conspicuously mark the documents and other records
"Confidential" and shall submit them to City, and City will not make the records public except as
otherwise required by law or by court order. City's failure to correctly determine the applicability
or inapplicability of an exemption to the CPRA shall not constitute a breach of this ENA or the
Transaction Documents. City will endeavor to notify Developer of any request made for records
related to the Project when the request for the records allows adequate time to provide such notice.
Developer agrees to defend, indemnify and hold harmless the City and the City Parties from any
claims for damages,costs,court costs,awards of attorney fees, or related claims in all lawsuits and
writ proceedings seeking to make records public that Developer has marked "Confidential"
hereunder. In no event shall the City be required to maintain as confidential any materials required
by law to be disclosed by Developer, or otherwise disclosed by Developer in connection with its
public filings.
6.4 Transfer. Except as otherwise permitted by this Section,neither this ENA nor the
interest of Developer, AvalonBay or Abode in this ENA shall be Transferred (as defined below)
without the prior written consent of the City in its sole discretion. Any Transfer shall take place
only in accordance with the requirements of this Section 6.4 and any attempted or purported
Transfer without the consent of the City as aforesaid shall be void and a breach by Developer of
its obligation to negotiate in good faith under this ENA.
6.4.1 Transfer to Joint Venture or Developer Affiliate. If AvalonBay and Abode
determine to establish a Joint Venture to develop the Project ("Joint Venture"), or if either
AvalonBay or Abode desires to Transfer its interest in this ENA or its Ownership Interests to a
Developer Affiliate, AvalonBay and/or Abode, as applicable, shall promptly inform the City of
such determination and, subject to the Confidentiality Protocols set forth in Section 6.3 above,
shall submit to the City the Joint Venture's or the proposed assignee's most recent financial
statements and the financial statements of its key principals and applicable formation documents
relating to such proposed assignee and any corporate members of such proposed assignee (i.e., as
applicable: articles of incorporation; partnership agreement; and/or limited liability corporation
articles of incorporation, statement of information and operating agreement). The assignment of
AvalonBay and/or Abode's rights and interests under this ENA may be approved in writing by the
City, provided that the City is satisfied, in its sole discretion, that the assignee has the financial
capability to perform under this ENA and, with respect to a Joint Venture, is Controlled by
AvalonBay individually or with shared ownership and Control by AvalonBay and Abode. Subject
to the terms of this Section 6.4 and Section 7.1, AvalonBay or Abode, or both of them, may
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Transfer their respective rights or obligations under this ENA to a Joint Venture or Developer
Affiliate in which event such transferee shall assume in writing all of the transferor's obligations
hereunder, but such transferor shall not be released from its obligations hereunder.
6.4.2 Restrictions on Transfer. Developer recognizes that the qualifications and
identity of Developer is important to the City in light of the importance of the development of the
Development Parcels and Tustin Legacy to the general welfare of the community; the fact that a
Transfer is for practical purposes a transfer of rights and obligations under this ENA and that it is
because of the qualifications and identity of Developer and its key employees that the City is
entering into this ENA with Developer. Therefore,except as specifically provided in Section 6.4.1,
none of AvalonBay, Abode or any Joint Venture shall Transfer and no Person having any
Ownership Interests in AvalonBay and/or Abode or any Joint Venture shall Transfer any such
Ownership Interests without the prior written consent of the City, which consent may be given or
withheld in the sole discretion of the City. AvalonBay and/or Abode, as applicable, shall provide
prior written notice to the City of any Transfer. Except as otherwise specifically provided in
Section 6.4.1, any consent or approval of the City to a Transfer shall require authorization by the
City Council.
6.4.3 Financial Capacity of Transferee. Prior and as a condition to the
effectiveness of any Transfer, Developer shall cause the proposed assignee to provide (a) the
information, including without limitation, assets and liquidity, of the proposed assignee and any
Guarantor as required by Section 7.1, which shall be subject to the approval of the City in its sole
discretion, and (b)where the City indicates that a Guaranty will be required as a condition of the
Transaction Documents,written assurance from such Guarantor to the City,satisfactory to the City
in its sole discretion,that Guarantor will provide, on behalf of assignee, a Guaranty for the Project
at close of escrow for the Development Parcels.
6.4.4 Definitions. As used in the main body of this ENA:
(1) the term "Control" "Controlled" or "Controlling", as used with
respect to any Person, shall mean the possession, directly or indirectly (including through one or
more intermediaries), of the power to direct or cause the direction of the management and policies
of such Person, including through the ownership or control of voting securities, partnership
interests,membership interests,or other equity interests,acting as the manager of a limited liability
company, or otherwise.
(2) The term "Developer Affiliate" shall mean with respect to
AvalonBay or the Joint Venture, any entity that directly or indirectly Controls, is Controlled by or
is under common Control with AvalonBay, and with respect to Abode, a limited partnership to be
formed by Abode in which a single purpose entity wholly owned by Abode will act as the sole
general partner.
(3) The term "Governmental Authority" shall mean any and all
federal, State, county, municipal and local governmental and quasi-governmental bodies and
authorities (including the United States of America,the State and any political subdivision, public
corporation, district, joint powers authority or other political or public entity) or departments
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thereof having or exercising jurisdiction over the Parties, the Project,the Development Parcels or
such portions of the foregoing as the context indicates.
(4) The term"Guarantor"shall mean an entity with assets and liquidity
meeting the requirements of the City and sufficient, in the determination of the City in its sole
discretion, to secure the development, construction and maintenance obligations of Developer
under the Transaction Documents.
(5) The term "Person" shall mean any individual, partnership, limited
partnership, trust, estate, association, corporation, limited liability company,joint venture, firm,
joint stock company, trust, unincorporated association, Governmental Authority, governmental
agency or other entity, domestic or foreign or any other entity or association.
(6) The term "Ownership Interests" shall mean the possession,
directly or indirectly, of voting securities or partnership,general partnership,membership or other
ownership interests (based upon value or vote) of a Person.
(7) The term "Transfer" shall mean any voluntary or involuntary
transfer, sale, assignment, pledge, hypothecation or the like to any Person, including without
limitation, any transfer, sale, assignment, pledge or hypothecation of this ENA, the Ownership
Interests in Developer, or of Developer's interest in this ENA or any part thereof.
6.5 Design Review/Entitlements Schedule and Submittals.
6.5.1 Entitlement Schedule. It is understood and agreed by Developer that
the quality, character and uses proposed for the Project are of particular importance to the City and
that planning and design review approval and other entitlements by the City will be required for
the development of the Development Parcels. Developer and the proposed architect and engineer
for the Project shall meet with representatives of the City to review and come to a clear
understanding of the planning and design criteria required by the City. Within twenty (20)
calendar days after the Effective Date, Developer shall submit a schedule for entitlement
processing that contains ENA milestones, anticipated submittal dates and City approvals.
6.5.2 Preliminary Design Review. Within ninety (90) calendar days after
the Effective Date, Developer shall submit, for proprietary approval by the City, preliminary
revised design drawings and related documents containing the overall plan for development of the
Project including,but not limited to,the following: a preliminary site plan showing building layout
and dimensions,product mix and unit counts for each product,parking,landscaping and access on
or related to each individual parcel, floor plans, preliminary materials call-outs and conceptual
building renderings and a development schedule.
6.6 Proiect Financial Pro Forma and Other Required Deliverables. Within
ninety (90) calendar days after the Effective Date, Developer shall submit the following business
plan and schedule in a mutually agreed upon format:
(a) overall cost and revenue estimates;
(b) Project cost and revenue data,including information on the Project's
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financial return adequate to enable the City to evaluate Developer's business offer and economic
feasibility of the proposed development of the Project, as proposed, on the Development Parcels.
Developer shall periodically update the financial pro formas for the Project throughout the ENA
Negotiating Period to reflect changes to the Project, the Plans (as defined below), expected costs
and revenue assumptions, and any comments the City provides to Developer on the Project,
including, without limitation, the preliminary site plan and Developer shall provide updated pro
formas to the City on a quarterly basis, or more frequently if reasonably requested by the City,
within thirty (30) calendar days of such reasonable request therefor by the City.
(c) a comprehensive Project proforma demonstrating the feasibility of
the Project, including a static analysis and a cash flow analysis by quarter, that shall reflect any
comments the City provides to Developer on the preliminary site plan;
(d) a Project schedule for land takedown and construction.
The financial proformas for the Project shall reflect any comments the City provides to Developer
on the preliminary site plan.
6.7 Additional Information. Developer understands and agrees that the City's
negotiating team reserves the right at any time to reasonably request from Developer additional
information,including data and commitments to ascertain the depth of Developer's capability and
desire to develop the Development Parcels expeditiously. The City's negotiating team will provide
a reasonable time in which Developer may obtain and submit to the City such additional
information.
6.8 Contacts During Negotiation. Developer shall only negotiate with the City's
negotiating team(as defined in writing by the City Manager or his or her designated representative)
and with no other Persons unless expressly authorized to do so by the City's negotiating team.
During the ENA Negotiating Period and Offer Period,no employee,member or agent of Developer
shall have any communications regarding this Project with any City official, its advisors or any of
its contractors or consultants involved with the Project or negotiations except for communications
expressly permitted by this ENA. Developer shall make no statements to the media and shall issue
no press releases about the proposed Project without the approval of the City Manager or his or
her designated representative. Developer's failure to comply with the provisions of this
Section 6.8 shall be conclusive evidence that Developer has not"negotiated in good faith". The
foregoing shall not preclude any proposer from applying for or processing entitlements for the
Project or participating in public meetings of the City Council and/or the Tustin Planning
Commission.
6.9 Environmental and Other Studies.
6.9.1 Environmental Requirements. Compliance with CEQA is a legal
precondition to any final City action to approve and execute Transaction Documents for the
Development Parcels. While the City has agreed to process and reflect the terms of a proposed
transaction in Transaction Documents to be considered by the City for approval, the Parties agree
that no obligation to enter into such Transaction Documents, or transaction, shall exist and no
project nor Transaction Document shall be approved or deemed to be approved on the part of any
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Party,until after the Project is reviewed by the City in accordance with the requirements of CEQA.
It is contemplated by the Parties that the City will commence preparation of any CEQA
documentation required in connection with the Transaction Documents and entitlements upon
submittal by Developer of an application for entitlements pursuant to Sections 5.2.6 and 6.5.
Developer agrees to finance and supply information and otherwise assist the City as requested to
enable the City to determine the environmental impact of the proposed development of the Project
as described by the Transaction Documents and to prepare such additional environmental
documents, if any, as may be needed to be completed for the development, including without
limitation, any supplement or addendum to the Final EIS/EIR and to cooperate with the City and
abide by the City's environmental compliance procedures and fee requirements, which include,
but are not limited to,the obligation to deposit funds to pay all of the City's costs of preparing any
additional required environmental studies as may be determined by the City based on its
independent judgment and analysis.
6.9.2 Plans, Reports, Studies and Investigations. Developer shall provide the
City, without cost or expense to the City, copies of all plans, reports, studies or investigations
(collectively, "Plans") prepared by or on behalf of Developer for development of the Project on
the Development Parcels. All Plans shall be prepared at Developer's sole cost and expense. Plans
prepared by Developer's surveyor,geotechnical consultant(s)or hazardous materials consultant(s)
shall be certified in favor of the City and Developer. If this ENA is terminated for any reason
other than a breach or default hereunder by the City pursuant to Section 4.4.1,the City may request
that Developer, for consideration to be mutually agreed, transfer Developer's rights to any or all
Plans identified by the City),but in no event shall the cost to the City exceed five hundred dollars
($500). In order to assure that the City shall be able to acquire Developer's interest in the contracts
and the Plans, Developer agrees as follows:
(a) All agreements with consultants and/or engineers shall state that the
contract is assignable by Developer to the City and either (i) such work product is assignable, to
the extent such work product is owned by the applicable consultant or engineer, or(ii) Developer
is the owner of the work product.
(b) Upon request from the City in connection with or following
termination of this ENA other than as a result of a breach or default hereunder by the City pursuant
to Section 4.4.1, Developer shall deliver to the City copies of all Plans requested by the City
together with a bill of sale executed by Developer pursuant to which Developer shall convey to
the City all right, title and interest of Developer in and to the contracts and the Plans requested by
the City, and such contracts and Plans shall be free of all claims or interests of Developer and all
liens or encumbrances, provided that Developer makes no representations, warranties or
guarantees whatsoever (express or implied) regarding the right to use such Plans or the
completeness or accuracy of the Plans, Developer does not covenant to convey the copyright or
other ownership rights of third parties thereto and such conveyance shall be subject to the rights
of the preparers thereof with respect to copyright or ownership of Plans as set forth in such assigned
contracts. Such Plans shall thereupon be free of all claims or interests of Developer or any liens
or encumbrances.
(c) Upon the City's acquiring Developer's rights to any or all of the
Plans,subject to the rights of the preparers thereof,the City shall be permitted to use,grant,license
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or otherwise dispose of such Plans to any Person for development of the Development Parcels;
provided,however,that Developer shall have no liability whatsoever to the City or any transferee
of title to the Plans in connection with the use of the Plans.
6.9.3 Hazardous Materials Assessment. Developer acknowledges that pursuant
to the Navy Quitclaim Deed, the Navy found and determined that there was no contamination on
the Development Parcels and issued a Finding of Suitability for Transfer for Southern Parcels 4-
8, 10-12, 14, and 42 and Parcels 25,26, 30-33, 37, and Portions of 40 and 41 dated September 28,
2001 ("FOST"). The City would intend upon approval of a DDA to sell and convey by quitclaim
in the same manner as the parcels were conveyed to the City to include the covenants and
warranties as identified in the Navy Quitclaim Deed.
7. Developer.
7.1 Nature of Developer. Developer acknowledges that the City will require that the
"Developer''under the DDA and DA be an entity with substantial development expertise and shall
have assets (i.e., assets in an amount sufficient to provide assurance to the City, in its sole
discretion,that Developer has the financial capacity to develop,construct and maintain the Project,
to secure such obligations and to comply with its obligations under the Transaction Documents
without requirement for any mortgage. Unless otherwise approved by the City pursuant to the
terms of the agreed-upon DDA, the "Developer" under the DDA and DA shall be AvalonBay
Communities, Inc., a Maryland corporation, or a business entity (such as a limited liability
company)that is a Developer Affiliate of AvalonBay Communities,Inc. Developer acknowledges
and agrees that the financial capacity of Developer is of critical importance to the City.
Accordingly, throughout the term of this ENA and the DDA, the City shall have the right (a) to
review and approve the Developer and its owners, including the financial capacity, assets and
liquidity of each of the foregoing and (b)to require, as a condition to execution of the DDA and
to close of escrow for the Development Parcels,security for performance of the obligations of such
entity to be provided by a Person approved by the City in its sole discretion as Guarantor. The
foregoing security shall be provided by a Guaranty provided by such approved Guarantor in a form
acceptable to the City and Developer each in its sole discretion and by other instrument approved
by the City in its sole discretion, as further described in the DDA.
7.2 Offices of Developer. The principal offices of AvalonBay Communities Inc.
Developer are located at 4040 Wilson Boulevard, Suite 1000, Arlington, Virginia, 22203. The
principal offices of Abode Communities are located at 1149 S.Hill Street, Suite 700,Los Angeles,
CA 90015.
7.3 Developer's Consultants and Professionals. Developer is required to make full
and prompt disclosure to the City of any changes to its lead negotiators and other reasonably
pertinent information concerning Developer, as may be requested by the City from time to time.
Developer agrees to substitute or supplement any of its consultants and professionals as reasonably
requested by the City.
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8. Developer's Financial Capacity.
8.1 Financial Capacity. Any additional financial information required to demonstrate
financial capacity and capability to perform the obligations under this ENA of Developer, if
requested, shall, subject to the Confidentiality Protocols set forth in Section 6.3, be submitted to
the City or its consultant as requested by the City for the purposes of this ENA. In addition,
AvalonBay shall provide the City with its quarterly SEC financial statement filings on a quarterly
basis.
8.2 Bank and Other Financial References.Abode(and AvalonBay and its successors
or assigns to the extent that they are not then publicly traded companies) shall provide the City
with Developer's bank and other financial references as requested by the City from time to time.
8.3 Restrictions on Financing. The DDA shall require that prior to issuance by the
City of the Certificate of Compliance for the Project, the Development Parcels shall be acquired
and the Project developed and constructed utilizing Developer funds and without utilizing the
Development Parcels as collateral; provided that following acquisition by Abode or its Developer
Affiliate of the real property required to develop the Affordable Housing Portion of the Project,
Abode or its Developer Affiliate shall have the right to secure such parcels with a mortgage or
similar financing meeting the requirements to be established in the DDA for the purpose of
constructing the Affordable Housing Units. With respect to any and all such financing,Developer
and/or Abode will be required to make and maintain full disclosure to the City to obtain City
consent to the financing documents to be used for such development, which consent shall not be
unreasonably withheld, conditioned or delayed.
9. City's Responsibilities.
9.1 Environmental Requirements. A final Environmental Impact
Statement/Environmental Impact Report ("EIS/EIR") has been prepared and certified for the
MCAS Tustin Reuse Plan. Developer agrees to finance and supply information and otherwise
assist the City as requested to enable the City to determine the environmental impact of the
proposed development of the Project as described by the Transaction Documents and to prepare
such additional environmental documents, if any, as may be needed to be completed for the
development.
9.2 Plans and Studies. The City shall, within ten (10) business days following the
Effective Date and at no cost to Developer, provide Developer with copies of all environmental
documents, plans, reports, studies, investigations and other materials the City may have pertinent
to disposition of the Development Parcels and/or development of the Project on the Development
Parcels ("City Plans and Studies"); provided, however, that the City makes no representations,
warrantee or guarantee regarding the completeness or accuracy of such plans, reports, studies,
investigations and other materials and the City shall have no liability whatsoever to Developer or
any transferee of Developer in connection with such plans and studies or the use thereof for any
purposes.
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10. Miscellaneous.
10.1 Assistance and Cooperation. Developer and the City shall cooperate in good faith
with one another to achieve the objectives and purposes of this ENA.
10.2 Real Estate Commissions. The City has retained CBRE pursuant to a separate
agreement which stated that Developer will be responsible for payment of amounts due to CBRE
thereunder in connection with the Transaction described in this ENA. Developer agrees to
indemnify and hold the City and the City Parties harmless from any and all Claims arising from or
in any way related to any claim by any broker, agent, or finder regarding this ENA or the sale or
development of the Development Parcels or any portion thereof. The provisions of this
Section 10.2 shall survive the termination of this ENA. City represents that it has not engaged any
broker, agent, or finder in connection with this ENA other than CBRE.
10.3 No City Duty. Except as expressly provided above in Sections 4.3 and 4.4, the
City shall have no obligations or duties hereunder and no liability whatsoever in the event the City
and Developer fail to agree upon or to execute a DDA, DA or any other Transaction Documents.
10.4 Non-Liability of City Officials and Employees. No elected or appointed official,
officer,representative,director,staff member, attorney or employee of the City shall be personally
liable to Developer or any successor in interest in the event of any default or breach by the City or
for any amount which may become due to Developer or to its successor, or on any obligations
under the terms of this ENA.
10.5 Entire Agreement. This ENA represents the entire agreement of the City and
Developer with respect to the matters set forth herein and supersedes any prior negotiations or
contemporaneous writings or statements. This ENA may not be amended except in writing signed
by each of the City and Developer hereunder.
10.6 Attorneys' Fees. If either the City or Developer institutes any action, suit,
counterclaim or other proceeding for any relief against another Party, declaratory or otherwise
(collectively an "Action"'), to enforce the terms hereof or to declare rights hereunder or with
respect to any inaccuracies or material omissions in connection with any of the covenants,
representations, warranties or obligations on the part of the other Party to this ENA, then the
Prevailing Party (as defined below) in such Action shall be entitled to have and recover of and
from the other Party all costs and expenses of the Action, including (a) the Prevailing Party's
reasonable attorneys' fees which shall be payable at the actual contractual hourly rate for City's
litigation counsel at the time the fees were incurred, but in no event more than $200 per hour and
(b) costs actually incurred in bringing and prosecuting such Action and/or enforcing any judgment,
order,ruling or award(collectively, a"Decision")granted therein, all of which shall be deemed to
have accrued on the commencement of such Action and shall be paid whether or not such Action
is prosecuted to a Decision. Any Decision entered in any final judgment shall contain a specific
provision providing for the recovery of all costs and expenses of suit, including reasonable
attorneys' fees and expert fees and costs (collectively "Costs") incurred in enforcing, perfecting
and executing such judgment. For the purposes of this paragraph, Costs shall include in addition
to Costs incurred in prosecution or defense of the underlying action, reasonable attorneys' fees,
costs,expenses and expert fees and costs incurred in the following: (a)postjudgment motions and
Tustin AvalonBay Abode ENA 4.25.22 FINAL 27 Tustin/AvalonBay and Abode Communities
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collection actions; (b) contempt proceedings; (c) garnishment, levy, debtor and third-party
examinations; (d)discovery; (e)bankruptcy litigation; and (f) appeals of any order or judgment.
"Prevailing Party"within the meaning of this Section 10.6 includes a Party who agrees to dismiss
an Action in consideration for the other Party's payment of the amounts allegedly due or
performance of the covenants allegedly breached, or obtains substantially the relief sought by such
Party.
10.7 Covenant Against Discrimination. Developer shall not discriminate against nor
segregate, any person or group of persons on account of sex, race, color, age, marital status,
religion, handicaps, creed, national origin or ancestry in the sale, lease, sublease, transfer, use,
occupancy, tenure or enjoyment of the Development Parcels, nor shall Developer establish or
permit any such practice or practices of discrimination or segregation in the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the
Development Parcels.
10.8 Notices/Submittals. All notices, demands, consents, requests and other
communications required or permitted to be given under this ENA shall be in writing and shall be
deemed conclusively to have been duly given (a)when hand delivered to the other Party; (b)three
(3) business days after such notice has been sent by U.S. Postal Service via certified mail, return
receipt requested,postage prepaid, and addressed to the other Party as set forth below; (c) the next
business day after such notice has been deposited with an overnight delivery service reasonably
approved by the Parties (Federal Express, Overnite Express,United Parcel Service and U.S.Postal
Service are deemed approved by the Parties), postage prepaid, addressed to the Party to whom
notice is being sent as set forth below with next-business-day delivery guaranteed, provided that
the sending Party receives a confirmation of delivery from the delivery service provider; or
(d)when transmitted if sent by email to the email address set forth below;provided,however,that
notices given by email shall not be effective unless either (i) a duplicate copy of such notice is
promptly sent by any method permitted under this Section 10.8 other than by email (provided that
the recipient Party need not receive such duplicate copy prior to any deadline set forth herein); or
(ii)the receiving Party delivers a written confirmation of receipt for such notice either by email or
any other method permitted under this Section. Any notice given by email shall be deemed
received on the next business day if such notice is received after 5:00 p.m. (recipient's time) or on
a non-business day. Unless otherwise provided in writing,all notices hereunder shall be addressed
as follows:
City: City Manager
City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: Matthew S. West
Email: mwest@tustinca.org
Tustin AvalonBay Abode ENA 4.25.22 FINAL 28 Tustin/AvalonBay and Abode Communities
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With a copy to: Director of Economic Development
City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: Christopher Koster
Email: ckostere,tustinca.org
And with a copy to: City Attorney
Woodruff, Spradlin & Smart
555 Anton Blvd., Suite 1200
Costa Mesa, CA 92626
Attention: David Kendig, Esq.
Email: dkendiggwss-law.com
And with a copy to: Hepner&Myers LLP
1241 Johnson Avenue, Suite 360
San Luis Obispo, CA 93401
Attention: Amy E. Freilich. Esq.
afreilich(c�r�,HepnerMyers.com
Developer: AvalonBay Communities Inc.
2050 Main Street, Suite 1200
Irvine, CA 92614
Attention: Mark Janda
Email: Mark.Janda(cr�,avalonbay.com
And with a copy to: AvalonBay Communities Inc.
4040 Wilson Road, Suite 1000
Arlington,VA 22203
Attention: Legal Department
Email: legal e,avalonba.
Abode Communities
1149 S. Hill Street, Suite 700
Los Angeles, CA 90015
Attention: Sara Tsay
Email: STsay(2abodecommunities.org
Mayer Brown LLP
350 S. Grand Avenue, 25th Floor
Los Angeles, CA 90071
Attention: Edgar Khalatian; Esq.
Email: ekhalatian(cr�,mayerbrown.com
Tustin AvalonBay Abode ENA 4.25.22 FINAL 29 Tustin/AvalonBay and Abode Communities
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Bocarsly Emden LLP
633 West Fifth Street, 64th Floor
Los Angeles, CA 90071
Attention: Nicole Deddens, Esq.
Email: ndeddensgbocarsl.
10.9 Action Taken. Following its approval by the City,this ENA shall be administered
by the City Manager or the City Manager's designee. Except where the terms of this ENA
expressly require the approval of a matter or the taking of any action by the City Council, any
matter to be approved by the City shall be deemed approved, and any action to be taken by the
City shall be deemed taken,upon the written approval by the City Manager(or the City Manager's
designee). The City Manager or the City Manager's designee shall have the authority to issue
interpretations,clarifications and confirmations with respect to this ENA and to determine whether
any action requires the approval of the City Council. All waivers of terms and conditions,
amendments and modifications of this ENA shall require the approval of the City Council.
10.10 No Third-Party Beneficiaries. Execution of this ENA is not intended to create or
confirm any third-parry beneficiary rights in or create any liability on the part of either the City or
Developer to any third parties.
10.11 Effect of Transaction Documents. Following mutual execution by the City and
AvalonBay of the Transaction Documents, this ENA shall be of no further force or effect, except
that, unless otherwise agreed in writing by Developer and the City, the release set forth in
Section 3.5, the insurance requirements set forth in Section 4.5.2 and Exhibit B, the indemnities
set forth in Sections 4.5.3, 6.3.2 and 10.2, and the confidentiality provisions of Section 10.12 shall
remain in effect with respect to Claims arising and documents and information delivered, during
the ENA Negotiating Period and the Offer Period. Following execution and delivery of the DDA
and DA by the City and AvalonBay, in the event of any conflict between the provisions of this
ENA and any Transaction Document approved by the City and Developer, the provisions of the
Transaction Document shall for all purposes prevail.
10.12 Confidentiality. Except as otherwise required by law or court order, the City and
Developer represent and warrant that each shall keep all information and/or reports obtained from
the other, or related to or connected with the Development Parcels, the other Parry,this ENA, and
until presentation to the City for approval, the Transaction Documents or any other documents
negotiated by the City and Developer, including but not limited to City Plans and Studies,
confidential and will not disclose any such information to any Person without obtaining the prior
written consent of the other Party, except that (a) the City shall have the right (i)to disclose any
information contained in any third party reports obtained by Developer and(ii)to make disclosures
to City's employees and independent contractors, including, but not limited to consultants,
financial planners, outside counsel, contractors and experts as necessary in order to determine if
the Project is feasible and financeable, provided such Persons are made aware the information is
confidential; and(b) Developer shall have the right to make disclosures to Developer's,investment
bankers in connection with capital markets' transactions, potential capital partners and lenders,
and Developer's employees, partners, members and independent contractors, including but not
limited to consultants, financial planners, outside counsel, and experts as necessary in order to
Tustin AvalonBay Abode ENA 4.25.22 FINAL 30 Tustin/AvalonBay and Abode Communities
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determine if the Project is feasible and financeable, provided such Persons are made aware the
information is confidential. Developer shall not disclose such information to any of its affiliates
not working on the Project. Notwithstanding the foregoing, (i) information which is or becomes
in the public domain, or which is required by the SEC or any law,rule or regulation to be disclosed
shall not be considered confidential, and (ii)this ENA, the draft Transaction Documents and all
other material relating to this ENA are subject to the provisions of the CPRA. The City's use and
disclosure of its agreements and records are governed by the Act and nothing herein limits the
City's right and obligation to comply with the Act or with laws mandating public notice or
disclosure of public records, including without limitation, agendas, public hearings, staff reports
and minutes produced in connection therewith,including,without limitation,the Ralph M. Brown
Act. The City makes no representation or warranty that writings and materials provided to or
generated by the City during negotiations will be exempt from the Public Records Act; provided
however that nothing in the foregoing shall relieve the City of its obligation to abide by the
Confidentiality Protocols as set forth in Section 6.3 of this ENA. The provisions of this Section
shall survive the termination of this ENA for a period of one (1) year with respect to matters
provided or disclosed during the ENA Negotiating Period and Offer Period, if any.
10.13 Governing Law/Exclusive Venue. This ENA shall be interpreted in accordance
with California law. The Parties agree that in the event of litigation, exclusive venue shall be in
Orange County, California.
10.14 Counterparts. This ENA may be signed in one or more counterparts each of
which, when so executed, shall be deemed to be an original, and with the signatures delivered by
submission of materials by electronic means,which may include using either DocuSign or similar
program ("Electronic Submission"), or email attachment, each of which shall constitute an
original and all of which together shall constitute one and the same agreement. Signature pages
may be detached from the counterparts and attached to a single copy of this ENA to physically
form one document. Such counterparts shall, together, constitute and shall be one and the same
instrument. This ENA shall not be effective until the execution and delivery by the Parties of at
least one set of counterparts.
10.15 Business Day Defined; Performance of Acts on Business Days. All references
to "business days" in this ENA shall mean and refer to days on which the City of Tustin City
Hall is open for business. In the event that the final date for payment of any amount or
performance of any act under this ENA falls on a day on which the City of Tustin City Hall is
closed, such payment may be made or act performed on the next succeeding day upon which the
City of Tustin City Hall is open.
(remainder ofpage is blank;signatures commence on following page)
Tustin AvalonBay Abode ENA 4.25.22 FINAL 31 Tustin/AvalonBay and Abode Communities
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IN WITNESS WHEREOF, authorized signatories of the City and Developer hereto have
executed this ENA as of the Effective Date.
CITY OF TUSTIN:
By: ,
Matthew S. West
City Manager
APPROVED AS TO FORM
By:
David Kendig
City Attorney
Hepner&Myers LLP
Special Real Estate Counsel to the City
By:
Amy E. Freilich, Partner
{signatures continued on following page)
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"DEVELOPER"
AVALONBAY COMMUNITIES, INC., a
Maryland corporation
By:
Name:
Title:
By:
Name:
Title:
ABODE COMMUNITIES, a California non-profit
corporation
By:
Name:
Title:
By:
Name:
Title:
Tustin AvalonBay Abode ENA 4.25.22 FINAL S-2 Tustin/AvalonBay and Abode Communities
Exclusive Negotiating Agreement
DocuSign Envelope ID:C9915F3B-C1C1-4E4B-A3A8-677C852EA079
Exhibit A
Depiction of Development Parcels
(Site Map)
{See Attached)
Tustin AvalonBay Abode ENA 4.25.22 FINAL Exhibit A Tustin/AvalonBay and Abode Communities
Exclusive Negotiating Agreement
DocuSign Envelope ID:C9915F3B-C1C1-4E4B-A3A8-677C852EA079
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DocuSign Envelope ID:C9915F3B-C1C1-4E4B-A3A8-677C852EA079
Exhibit B
Insurance Requirements
This Exhibit B is attached to and forms part of the ENA to which it is attached. Unless otherwise
indicated,Section references in this Exhibit B are to Sections in this Exhibit B. Initially capitalized
terms used and not defined in this Exhibit B shall be defined as set forth in the ENA.
1. Insurance.
1.1. Required Insurance.
Without limiting the City's rights to indemnification, Developer shall procure and
maintain, or cause to be procured and maintained, at no expense to the City, and furnish or cause
to be furnished to the City, evidence of the following policies of insurance (complying with the
requirements set forth below) naming Developer as insured with respect to the coverage required
by Sections 1.1.1 and 1.1.2 below, and, with respect to the commercial general liability and
business automobile liability required pursuant to Section 1.1.1, naming the City Parties as
additional insureds. With respect to the environmental liability insurance required pursuant to
Section 1.1.3 below,Developer shall cause its subcontractor or its consultants to procure,maintain
and evidence such insurance at no expense to the City and name the City Parties as additional
insured. All insurance required below shall be obtained by the times set forth below and kept in
force until termination of the ENA, or for such longer period as is described below. Claims
asserted after termination of the ENA for incidents and occurrences during the term of the ENA
shall be covered as provided herein.
I.I.I. Commercial General and Business Automobile Liability Insurance. Prior
to entry by Developer onto the Development Parcels (which entry shall be solely pursuant to the
terms of the license described in Section 4.5.1 of the ENA), Developer shall maintain or cause to
be maintained commercial general liability insurance and business automobile liability, to protect
against loss from liability imposed by law for damages on account of personal injury, including
death therefrom, suffered or alleged to be suffered by any Person or Persons whomsoever on or
about the Development Parcels, the Project and/or the improvements and the business of
Developer on the Development Parcels, or in connection with the entry, access, inspection and/or
investigative activity pursuant to the ENA and resulting directly or indirectly from any acts or
activities of Developer or anyone directly or indirectly employed or contracted with or acting for
Developer, or under its respective control or direction, and also to protect against loss from liability
imposed by law for damages to any property of any Person occurring on or about the Development
Parcels in connection with the entry, access, inspection and/or investigative activity pursuant to
the ENA, caused directly or indirectly by or from acts or activities of Developer or any Person
acting for Developer, or under its control or direction. Such insurance shall also provide for and
protect the City against incurring any legal cost in defending Claims for alleged loss.
Tustin AvalonBay Abode ENA 4.25.22 FINAL Exhibit B Tustin/AvalonBay and Abode Communities
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1.1.1.1. Minimum Requirements. Developer's policies of
commercial general liability and business automobile liability insurance shall be "occurrence"
based policies and shall be maintained in full force and effect at all times until termination of the
ENA. The amount of insurance required under commercial general liability is limits of at least
Five Million Dollars ($5,000,000.00) each occurrence and in the aggregate, and business
automobile liability with limits of at least Two Million Dollars ($2,000,000.00) combined single
limit each accident. Developer's subcontractors and consultants shall maintain policies of
commercial general liability and business automobile liability insurance "occurrence" based
policies that shall be in full force and effect at all times when subcontractor and consultant is
performing any work or inspections on or about the Development Parcels with commercial general
liability limits of at least One Million Dollars ($1,000,000.00) each occurrence and Two Million
Dollars ($2,000,000.00) aggregate limit and business automobile liability with limits of at least
One Hundred Thousand ($100,000.00) combined single limit each accident. The commercial
general liability and business automotive liability insurance shall be issued by a company
permitted by the Insurance Department of the State and rated A-/VII or better,by the latest edition
of AM Best's Key Rating Guide. Such insurance may be provided by a combination of underlying
commercial general liability and business automobile liability, self insurance, and an umbrella or
excess liability insurance policy otherwise meeting the requirements of this Section 1 provided
that such umbrella or excess liability insurance is primary insurance to the City's insurance and
the City has been provided an opportunity to review and confirm that the coverage evidence via
the policy or endorsements is equally protective.
1.1.1.2. Evidence of Insurance and Required Endorsements. An
ACORD certificate evidencing the foregoing and providing the following endorsements approved
by the authorized representative of the underwriter and approved by the City shall be delivered
prior to entry by Developer and annually (upon request from the City)evidencing renewals of each
policy until termination of the ENA. The commercial general liability and business automobile
liability policies shall be endorsed as follows: (a) designate the City Parties"as additional insureds
(b)the insurance coverage shall be primary, and not require contribution of any insurance or self-
insurance maintained by the City;and(c) a waiver of subrogation for the benefit of the City Parties.
The procuring of such insurance and the delivery of certificates and omnibus additional insured
endorsements evidencing the same shall not be construed as a limitation of Developer's obligation
to indemnify the City Parties as set forth in the ENA. The actual coverage provided by each
insurance policy required under the ENA shall be the minimum limits stated herein or the actual
policy limits,whichever is greater.
1.1.2. Workers' Compensation Insurance. Prior to entry by Developer onto the
Development Parcels (which entry shall be solely pursuant to the terms of the license described in
Section 4.5.1 of the ENA), Developer shall obtain, and thereafter maintain or cause to be
maintained,workers' compensation insurance issued by a responsible carrier authorized under the
laws of the State to insure employers against liability for compensation under the workers'
compensation laws now in force in California, or any laws hereafter enacted as an amendment or
supplement thereto or in lieu thereof. Such workers' compensation insurance shall cover all
Persons employed by Developer in connection with the Project and shall cover liability within
statutory limits for compensation under any such act aforesaid, based upon death or bodily injury
claims made by, for or on behalf of any Person employed by Developer incurring or suffering
Tustin AvalonBay Abode ENA 4.25.22 FINAL Exhibit B Tustin/AvalonBay and Abode Communities
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injury or death in connection with the Project or the operation thereof by Developer.
Notwithstanding the foregoing, Developer may, in compliance with the laws of the State and in
lieu of maintaining such insurance, self-insure for workers' compensation in which event
Developer shall deliver to the City evidence that such self-insurance has been approved by the
appropriate State authorities. Each such insurance policy, and each renewal or replacement
thereof,by endorsement approved by an authorized representative of the underwriter,shall contain
a waiver of rights of subrogation against the City Parties.
1.1.2.1. Contractor and Subcontractor Worker's Compensation
Insurance. Prior to entry on to the Development Parcels or otherwise pursuant to the ENA by each
contractor and subcontractor, Developer shall cause to be furnished to the City evidence
satisfactory to the City that such contractor and subcontractor involved in performance of work on
the Development Parcels or otherwise pursuant to the ENA maintains workers' compensation
insurance in compliance with all applicable State laws. Each such insurance policy, and each
renewal or replacement thereof, by endorsement approved by an authorized representative of the
underwriter, shall contain a waiver of rights of subrogation against the City Parties.
1.1.2.2. The insurance required by Sections 1.1.2 and 1.1.2.1 shall be
issued by a company rated A-/VII or better by the latest edition of AM Best's Key Rating Guide,
or by the State Compensation Fund.
1.1.3. Environmental Insurance. Prior to any invasive testing by Developer upon
the Development Parcels (which shall be solely pursuant to the terms of the license described in
Section 4.5.1 of the ENA),Developer shall obtain, or cause Developer's environmental consultant
or contractor to obtain, and shall thereafter maintain or cause to be maintained environmental and
pollution legal liability insurance coverage in connection with the investigative activity of
Developer on the Development Parcels pursuant to the ENA and, including coverage for loss,
remediation expense and legal defense expenses, and naming each of Developer and City Parties
as additional insureds to address pollution risks at the Development Parcels. Such policy shall
include coverage for pollution legal liability conditions to the extent that the conditions are created
or exacerbated by the activities or work of environmental consultant or contractor on or about the
Development Parcels.
Such policy shall comply with the following requirements:
(a) The policy shall be written by the insurance company selected by,
or reasonably approved by Developer, and approved by the City, which approval shall not be
unreasonably withheld, and which insurer(s) shall have a AM Best's rating of A-/VII or better;
(b) The policy shall provide not less than Five Million Dollars
($5,000,000) in coverage, subject to a maximum One Hundred Thousand Dollar ($100,000)
deductible and include a claim reporting period of not less than ten (10)years from the initial date
of access to the Development Parcels pursuant to Section 4.5.1 of the ENA. Such claim reporting
period shall survive expiration or termination of the ENA;
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(c) The policy shall be paid for in full at the time of issuance. Such
evidence of full policy premium payment shall be provided on contractor's, subcontractor's or
consultant's letterhead, or their agent's or broker's or insurer's letterhead. The policy shall contain
a waiver of right of subrogation against the City and shall contain a notice of cancellation
endorsement in favor of the City Parties which shall require written notice to the City by the insurer
at least seven (7) days prior to the effective date of cancellation. An endorsement that provides the
insurer"will endeavor to" provide the required notice, or similar non-committal language, is not
sufficient. As such, Developer's (or Developer's environmental consultant or contractor's)
obligation to maintain or cause the maintenance of the environmental insurance pursuant to this
Section 1.1.3 shall survive the termination of the ENA for the term required for such insurance
policy pursuant to Section 1.1.3(b); and
(d) Developer's insurance policies shall name the City Parties as
additional insureds with respect to any additional environmental and pollution legal liability
insurance coverage obtained pursuant to this Section 1.1.3.
The DDA will further address the requirements for indemnity and insurance
coverage for environmental and pollution legal liability. The provisions of this Section 1.1.3 shall
survive the termination of the ENA for the period set forth in Section 1.1.3(b).
1.2. General Insurance Requirements.
1.2.1. For all policies or certificates, the insurer endorsements (or a copy of the
policy binder, if applicable) shall identify the ENA in the description section and shall provide
evidence that either (a)the primary insured has paid for its premium in full for any policy that is
currently in place, or(b)that said insurance shall not be cancelled except if the City is given thirty
(30) calendar days advance written notice of any cancellation, except ten (10) day notice shall be
provided for cancellation or termination due to non-payment of premium.
1.2.2. All insurance provided under this Section 1 shall be for the benefit of the
City Parties and any additional parties that Developer may require. Developer agrees to timely
pay, or cause to be paid, all premiums for such Developer's insurance and, at no cost or expense
to the City, to comply and secure compliance with all insurance requirements necessary for the
maintenance of such insurance. Developer agrees to submit all required certificates and
endorsements evidencing the insurance required under this Exhibit B to the City prior to its entry
onto the Development Parcels. Except as provided in Section 1.2.2.1 below,between seven (7)to
thirty (3) calendar days before the expiration of any such policy, certificates and endorsements
evidencing renewal policies shall be submitted to the City.
1.2.2.1. In the event that endorsements are not available at the time
of initial renewal, the City will accept written confirmation of coverage ordered on behalf of
Developer by their agent/broker on agent/broker letterhead, followed by carrier-issued
endorsements within sixty (60) calendar days.
1.2.3. If Developer or its contractors or subcontractors or consultants fail or refuse
to procure and maintain insurance as required by the ENA, the City shall have the right, at the
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City's election, to suspend Developer's license to access the Development Parcels pursuant to
Section 4.5.1 of the ENA.
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Exhibit C
Environmental Documents
1. Department of Navy"Final Environmental Baseline Survey"dated March 2001
2. Finding of Suitability to Transfer for Southern Parcels 4-8, 10-12, 14, and 42 and Parcels 25,26,
30-33, 37, and Portions of 40 and 41 Marine Corps Air Station Tustin,California"dated
September 28,2001.
3. Agreement Between The United States of America and The City of Tustin,California for the
Conveyance of a Portion of the Former Marine Corps Air Station Tustin dated May 13,2002
4. Quitclaim Deed D and Environmental Restriction Pursuant to Civil Code Section 1471 dated May
13,2002
5. Geotechnical Report of Observation and Testing during Rough Grading, "Neighborhood D"
Phases I and II,Disposition Area 8,2C and a Portion of 213,Tustin Legacy,City of Tustin,
California dated September 26,2014.
6. Final Site Assessment and Soil Removal Action Report Tustin Neighborhood D-South,Areas 1
and 2 Total Petroleum Hydrocarbon Impacts Former Marine Corps Air Station Tustin,Tustin,
California dated September 2018.
7. Determination of No Further Action for Petroleum Release at Neighborhood D South at Former
Marine Corps Air Station Tustin,Orange County,California dated September 10,2018.
8. Final Summary Report for Per-and Polyfluoroalkyl Substances Presence/Absence Sampling in
Groundwater in Carve-Outs 5 and 6 dated November 2018.
9. Per-and Polyfluoroalkyl Substances(PFAS)Investigation Report Neighborhood D South Former
Marine Corps Air Station Tustin dates August 30,2019.
10. Final Summary Report Additional Assessment of Per and Polyfluoroalkyl Substances in
Groundwater in Carve-Outs 2, 5, 6, and 9, and Groundwater and Surface Water Near Operable
Unit 3 (Phase 1)Former Marine Corps Air Station Tustin dated June 2020.
11. Final Summary Report Additional Assessment of Per and Polyfluoroalkyl Substances in
Groundwater in Carve-Outs 2, 5, 6, and 9, and Groundwater and Surface Water Near Operable
Unit 3 (Phase 2)Former Marine Corps Air Station Tustin dated October 2020.
12. Final Fourth CERCLA Five Year Review Report,Operable Units IA, 1B North, 1B South, 3,and
4B Former Marine Corps Air Station Tustin dated October 2021.
13. Final Preliminary Assessment/Site Inspection Report,Basewide Investigation of Per- and
Polyfluoroalkyl Substances,Former Marine Corps Air Station Tustin dated December 2021.
Tustin AvalonBay Abode ENA 4.25.22 FINAL Exhibit C Tustin/AvalonBay and Abode Communities
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