MASTER SUBSTITUTION
AGREEMENT
(Revision Date
02/23/2009)
THIS MASTER
SUBSTITUTION AGREEMENT (this “ Agreement ”)
is made to be effective as of the 23rd day of April, 2009, among
DEUTSCHE BANK BERKSHIRE MORTGAGE, INC. , a Delaware
corporation (“ Lender ”), AVALONBAY TRAVILLE,
LLC , a Maryland limited liability company (the “ IDOT
Guarantor ”) and the entities identified on
Schedule B attached hereto and incorporated
herein by reference (each such entity is sometimes referred to
individually as an “ Original Borrower ”, and
all are sometimes referred to collectively as the “
Original Borrowers ”). An Original Borrower, the IDOT
Guarantor or “ New Borrower ” described below,
is sometimes referred to as a “ Borrower ”, and
all Original Borrowers, the IDOT Guarantor and New Borrowers are
sometimes referred to collectively as “ Borrowers
”.
A. Lender has
agreed to make certain loans to the Original Borrowers (each a
“ Loan ” and collectively, the “
Loans ”) described in the Substitution Schedule
described in Schedule A attached hereto and
incorporated herein by reference.
B. Each Loan
will be secured by a Multifamily Mortgage, Deed to Secure Debt or
Deed of Trust (a “ Security Instrument ”)
encumbering the multifamily residential rental project identified
in the Schedule A as an “ Original Property
” (collectively, the “ Original Properties
”).
C. AvalonBay
Communities, Inc. (“ AvalonBay ”) is a Borrower
and each other Borrower is owned directly or indirectly 100% by an
entity controlled by AvalonBay. Each Borrower is an affiliate of
the other Borrowers.
D. Each Loan
will be subject to a Master Cross-Collateralization Agreement of
even date with this Agreement and executed by each of the Borrowers
(the “ Cross-Collateralization Agreement
”).
E. The
Original Borrowers have requested, and Lender has consented to,
certain limited rights on the part of Borrowers to substitute other
multifamily residential rental projects as security for Loans. The
purpose of this Agreement is to set forth the terms and conditions
of such limited rights.
THEREFORE, Lender
and the Borrowers agree as follows:
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1.
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Definitions. With respect to each Loan, terms
used in this Agreement and not defined herein have the meanings
given to those terms (i) in the Security Instrument initially
securing such Loan until such time, if ever, that a “
Substitute Security Instrument ” is delivered with
respect to such Loan; and thereafter (ii) in the
then-effective Substitute Security Instrument. As used herein, a
“ Substitution ” means the substitution of
another multifamily residential rental project (the “
Substitute Property ”) for either an Original Property
or a previously substituted Substitute Property (as applicable, the
“ To-Be-Released Property ”), as security for a
Loan, all in accordance with the terms and conditions of this
Agreement.
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2.
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Substitution
Requirements. Not more than seven (7) times
in the aggregate during the period that any of the Loans remain
outstanding (the “ Substitution Number ”),
Lender will consent to a Substitution upon the Borrowers’
satisfaction, as determined by Lender in its sole, but reasonable,
discretion based on Lender’s then-current underwriting
standards, of all of the requirements set forth below.
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(a)
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The
Borrower proposing to effect the Substitution must deliver to
Lender a written request for Lender’s approval of the
proposed Substitution, such written request (the “
Substitution Request ”) to be delivered to Lender not
less than sixty (60) days prior to the proposed effective date of
the requested Substitution. The Borrower’s Substitution
Request must specifically identify the Loan to which the
Substitution Request relates and the To-Be-Released Property, and
must include all of the items set forth in subsections 2(i)(i)
through (vii) below. The sixty (60) day period will not
be calculated until Lender receives the requirements of this
subsection and subsection 2(i) in full. Upon Borrowers’
written request, Lender will confirm in writing that Borrower has
delivered all required items pursuant to this Section 2(a) and the
date on which the sixty (60) day period commenced to run. The
Borrower’s Substitution Request must be accompanied by a
non-refundable review fee in the amount of $10,000. The Borrower
may rescind its request for a Substitution by written notice to
Lender at any time prior to implementation of the Substitution, as
set forth in Section 4 below, but will not receive a refund of
the review fee.
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(b)
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Lender will not consider
Borrower’s Substitution Request if an Event of Default under
any Loan Document has occurred and is continuing or if an event or
condition that, with the giving of notice or the passage of time,
or both, could constitute such an Event of Default
exists.
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(c)
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As
the Substitution rights under this Agreement are personal to the
Original Borrowers, the IDOT Guarantor and to New Borrowers
described herein, (i) all Borrowers must continue to be owned
directly or indirectly 100% by an entity controlled by AvalonBay
(or any successors to such entities permitted pursuant to Section
21(c) of the Security Instrument), and (ii) an entity
controlled by AvalonBay (or a successor to such entity pursuant to
Section 21(c) of the Security Instrument) must own, directly or
indirectly, not less than a 51% managing interest in all Borrowers
and must be the sole party controlling (directly or indirectly) the
day to day management of the Borrower and operation of each
Original Property and each Substitute Property.
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(d)
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The
aggregate LTV, at the time of the Substitution, of (i) the
Substitute Property, as determined by Lender using Lender’s
then-standard underwriting procedures, including an evaluation of
market condition, and (ii) all remaining Original Properties
as the same may have been previously substituted in accordance with
the terms hereof (collectively, the “ New Pool
”), may not exceed seventy percent (70%). As used herein,
“ LTV ” means, the ratio, expressed as a
percentage, of (1) the aggregate outstanding principal balance
of the Loans attributable to the properties comprising the New
Pool, to (2) the value of the properties comprising the New
Pool, as determined by Lender using Lender’s then-standard
underwriting procedures. In the event the Substitute Property fails
to satisfy this requirement, Lender reserves the right, in its sole
discretion, to accept the Substitute Property and require
additional credit enhancement, including but not limited to
additional guaranties, in such amounts as shall be determined by
Lender using Lender’s then-standard underwriting
procedures.
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(e)
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The
aggregate DCR, at the time of the Substitution, of the New Pool,
may not be less than 1.25:1.00, assuming the Loans are amortizing
on a 30-year basis. As
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used herein, the term “
DCR ” means, the ratio, expressed as a percentage, of
(A) the aggregate annual net operating income (“
NOI ”) from the operations of the properties
comprising the New Pool, calculated on an annual basis based upon
December 31 operating statements of such properties, using
Lender’s standard underwriting procedures, to (B) the
aggregate annual principal and interest payable on the Loans
attributable to the properties comprising the New Pool. In the
event the Substitute Property fails to satisfy this requirement,
Lender reserves the right, in its sole discretion, to accept the
Substitute Property and require additional credit enhancement,
including but not limited to, additional guaranties, in such
amounts as shall be determined by Lender using Lender’s
then-standard underwriting procedures.
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Notwithstanding the foregoing, not
more than once in any twelve (12) month period in connection
with a Substitution under this Agreement, a proposed Transfer of a
Mortgaged Property (as such terms are defined in each Security
Instrument) under Section 21(f) of the applicable Security
Instrument or a release under Section 14 of the Cross
—Collateralization Agreement, a Borrower may request that
Lender calculate the DCR for purposes of the foregoing requirements
using an updated NOI, under Lender’s standard underwriting
procedures, provided that such Borrower (1) notifies Lender of such
request and provides Lender with the applicable operating
statements not less than ninety (90) days prior to the
proposed Substitution, (2) pays to Lender a fee equal to the
greater of (x) $1,800 per property in the New Pool or (y) $25,000
and (3) pays to Loan Servicer an aggregate fee equal to
$7,500.
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(f)
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Lender will not consider a
Substitution Request for a Substitution for which the effective
date of such Substitution will occur earlier than twelve months
after the date of the Note evidencing the Loan to which the
Substitution relates. The Substitution must be completed no later
than twelve (12) months prior to the Scheduled Maturity Date
set forth in the Note evidencing the Loan to which the Substitution
relates.
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(g)
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[Intentionally Deleted.]
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(h)
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The
Substitute Property must be the same type of property as the
To-Be-Released Property ( i.e. , a seniors housing property
must be replaced with another seniors housing property and a
multifamily property must be replaced with another multifamily
property)
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(i)
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Lender must have received, and in
its sole discretion approved the following, all meeting
Lender’s then current requirements for such items:
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(i)
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a
detailed description of the Substitute Property, including
historical and year-to-date operating statements,
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(ii)
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a
appraisal of the Substitute Property prepared by a member of the
Appraisal Institute (Borrower acknowledges that Lender is not bound
by any value set forth in such appraisal); provided, however, that
Lender will not require an appraisal of the To-Be-Released
Property,
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(iii)
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a
Phase I environmental report on the Substitute Property, and, if,
required by the Phase I environmental report, a Phase II
environmental report,
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(iv)
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an
engineering report on the Substitute Property (unless waived in
writing by Lender),
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(v)
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a
current ALTA/ACSM urban land survey of the Substitute
Property,
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(vi)
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a
commitment for a mortgagee’s title insurance policy to insure
the first lien mortgage to be secured by and encumber the
Substitute Property, in the form (including endorsements) required
by Lender, and containing only such exceptions as are acceptable to
Lender; provided, however, that Lender will not require Borrower to
provide date down endorsements with respect to the other properties
comprising the New Pool if no Supplemental Mortgage (as defined in
the Security Instruments) is being granted at such time on any of
the properties comprising the New Pool, and
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(vii)
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such other reports, certificates,
and documents with respect to the Substitute Property as Lender at
any time may require in its sole discretion.
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(j)
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The
physical condition, market condition, and other aspects of the
Substitute Property must be acceptable to Lender in Lender’s
sole, but reasonable, discretion based on Lender’s
then-standard underwriting requirements. Lender will not require an
evaluation of the geographic diversity of the New Pool in
connection with the Substitution, however, market factors and
conditions will be evaluated in Lender’s sole, but
reasonable, discretion.
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(k)
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Borrower must pay to Lender all of
Lender’s and Loan Servicer’s attorneys’ fees
(including imputed fees of Lender’s salaried attorneys) and
all other out
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