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EXHIBIT 10.16
[THE IRVINE COMPANY LETTERHEAD]
June 8, 1999
Xx. Xxxxx X. Xxxxx
Xxxxxx Apartment Communities, L.P.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
RE: FUNDING AGREEMENT
Dear Sir:
This letter will serve to confirm the agreement of The Irvine Company ("TIC")
to fund certain costs and shortfalls in net operating income incurred by Irvine
Apartment Communities, L.P. ("IAC") in connection with the development and
operation of the apartment projects listed on Exhibit A attached to this letter
(individually, a "Property" and collectively, the "Properties") on the
following terms and conditions:
1. Upon receipt of a written request for funds, accompanied by
the information set forth herein, TIC, in its capacity as a member of TIC
Acquisition LLC ("TICALLC"), the general partner of IAC, will contribute to
TICALLC and will cause TICALLC to contribute to IAC, such amounts as may be
necessary to pay all 'Construction Cost Overruns'. As used herein, the term
'Construction Cost Overruns' means an amount equal to (i) the total cost
actually incurred by IAC to complete the construction of apartment units and
related improvements on the Properties, minus (ii) the amount budgeted for such
construction as reflected on the applicable construction budgets approved by
either the Board of Directors of Irvine Apartment Communities, Inc.
(predecessor to TICALLC) ("IAC, Inc.") or the Board of Directors or Executive
Committee of the Board of Directors of TIC (individually, the "Budgeted Amount"
and collectively, the "Budgeted Amounts"). A request for funds may be made at
any time, and from time to time (but not more frequently than monthly), after
the costs actually incurred by IAC with respect to the development of a
Property exceeds the Budgeted Amount for such Property and shall be accompanied
by the construction budget for such Property as approved by the applicable
Board of Directors or Executive Committee, as the
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Irvine Apartment Communities, L.P.
June 8, 1999
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case may be, and a variance report, by line item, reflecting actual costs
incurred. An apartment project shall be deemed to be "complete" at the time a
final certificate of occupancy has been issued for all of the improvements to be
constructed on the Property. IAC will use the funds contributed by TICALLC
pursuant to this Paragraph 1 for the purposes of paying Construction Cost
Overruns and for no other purpose.
2. Upon receipt of a written request for funds, accompanied by the
information set forth herein, TIC, in its capacity as a member of TIC
Acquisition LLC ("TICALLC"), the general partner of IAC, will contribute to
TICALLC and will cause TICALLC to contribute to IAC, the 'Shortfall Amount'. As
used herein, the term 'Shortfall Amount' means, with respect to each Property, a
positive amount equal to (i) pro forma stabilized net operating income for the
applicable Property as reflected on the budget for the development of the
Property approved by the Board of Directors of IAC, Inc. or the Board of
Directors or Executive Committee of TIC, minus (ii) the net operating income
actually received by IAC from the operation of such Property. A request for
contribution of the Shortfall Amount may be made at any time, and from time to
time (but not more frequently than monthly), during the 'Stabilization Period'.
As used herein, the term 'Stabilization Period' means a period beginning on the
date a final certificate of occupancy has been used for all improvements to be
constructed on the applicable Property and ending on the date which is the
earlier of (a) 24 months after the date such final certificate of occupancy was
issued and (b) 12 months after the date on which the apartment units on the
applicable Property have been 95% occupied for 30 consecutive days. Any request
for funds made pursuant to this Paragraph 2 shall be accompanied by the pro
forma statement of stabilized net operating income as approved by the applicable
Board of Directors or Executive Committee, as the case may be, a statement of
net operating income actually received by IAC from the operation of the
applicable property during the period in which a shortfall in net operating
income is claimed and a calculation of the Shortfall Amount.
3. In return for TIC's agreement to provide funds as set forth herein,
IAC shall pay to TIC a funding commitment fee equal to $1000 per year/ per
Property for so long as this agreement may be in effect with respect to a
particular Property. This agreement shall expire with respect to a particular
Property at the end of the Stabilization Period for that Property.
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Irvine Apartment Communities, L.P.
June 8, 1999
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If the above is consistent with your understanding of our agreement, please so
indicate by signing the enclosed copy of this letter in the space provided.
THE IRVINE COMPANY
By: /s/ XXXXXXX X. XXXXX
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Its: Executive Vice President
By: /s/ XXXXXXX XXXXXX
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Its: Senior Vice President
ACCEPTED AND AGREED:
IRVINE APARTMENT COMMUNITIES, L.P.
By: TIC Acquisition LLC,
Its General Partner
By: The Irvine Company
By: /s/ XXXXX X. XXXXX
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Its: Senior Vice President
By: /s/ XXXXXX X. XXXXXX
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Its: Senior Vice President and
Treasurer
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EXHIBIT A
PROJECT LOCATION
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Sonoma at Oak Creek Xxxxxx
Xxxxxxxx at Oak Creek Irvine
Arcadia at Stonecrest San Diego
0000 Xxxxx Xxxxxx Xxxx Xxx Xxxxxxx
Villas at Xxxx Island Marina Redwood City
The Colony at Aventine San Diego
Park Place Xxxxxx
Xxxxx Cherry Ranch Sunnyvale
Xxxxxxxx Redwood City
