[LETTERHEAD OF EDISON SCHOOLS, INC.]
April 10, 2000
Museum for African Art
593 Broadway
New York, New York 10012
Attn: Ms. Elsie McCabe
PROPOSED DEVELOPMENT BY EDISON SCHOOLS, INC. AND
THE MUSEUM FOR AFRICAN ART ("MAA") OF PROPERTY
AT 5TH AVENUE AND 110TH STREET, NEW YORK, NEW YORK
Ladies and Gentlemen:
We are pleased to present you this letter of intent (this
"LETTER OF INTENT"), which sets forth the major business points we have agreed
upon with respect to the acquisition and development of the property referenced
above as a mixed-use project consisting of commercial office space, a school and
a museum (collectively, the "PROJECT"). We are very excited about this
opportunity and the prospect of working with you on this Project.
1. THE PROJECT.
We currently anticipate that the Project will consist of the
following elements:
- Museum -- approximately 75,000 to 84,000 square feet to be
used for the Museum for African Art, including space for uses
ancillary to the operation of the museum, such as office
space, museum store and cafeteria and/or restaurant
(collectively, the "MUSEUM").
- School -- approximately 63,200 to 75,000 square feet as a
school for grades K-5, to be operated by Edison, possibly
including ancillary office and other facilities in connection
with the operation thereof (collectively, the "SCHOOL").
- Offices -- approximately 80,000 to 90,000 square feet of
office space (the "OFFICE SPACE) to be used as the corporate
headquarters of Edison Schools, Inc. and/or its affiliate(s)
("EDISON"), and for non-profit entities involved in the
operation of the School and other educational, community or
charitable purposes.
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The actual square footage of each portion of the Project shall be determined in
accordance with the design development drawings approved by the parties in
accordance with Section 5 hereof.
2. THE SITE; OWNERSHIP. Edison has entered into a contract (the "CASTLE
CONTRACT") to acquire from Castle Senior Living LLC, Block 1615, Lot 1 (the
"FIFTH AVENUE PARCEL") for a purchase price of $10 Million. There are four
parcels of land adjacent to the Fifth Avenue Parcel, Block 1615, Lots 5, 7, 66
and 68 (the "CITY PARCELS") which are currently owned by the City of New York.
MAA has been in active negotiation with various agencies of the City with
respect to the location of the Museum on the City Parcels and it is anticipated
that the City Parcels will be donated by the City to MAA or the Venture or
conveyed to MAA or the Venture at nominal cost. While the parties intend that
Edison will cause the Fifth Avenue Parcel to be contributed to or acquired by
the Venture and MAA will cause the City Parcels to be contributed to or acquired
by the Venture, neither party intends to effect such contribution until such
time as the sum of (i) valid pledges for philanthropic contributions, (ii)
governmental or quasi-governmental grants, (iii) equity investment in the Office
Space, (iv) the Office Loan (as hereinafter defined), as evidenced by a valid
written loan commitment and (v) debt or equity investment in the School, is
sufficient to enable the construction lender to close the Office Loan
(collectively, the "FUNDING CONDITION"). The parties will agree upon appropriate
deadlines for the satisfaction of the Funding Condition.
Edison and MAA contemplate that the Site will be subjected to
condominium ownership, consisting of one or more units for the Office Space and
School and one or more units for the Museum, and they will negotiate an
appropriate condominium declaration providing for fair and reasonable
allocations of operating costs (to the extent it is not possible for the Edison
and Museum portions of the Project to be operated as independent physical
plants) and appropriate repair and maintenance obligations.
3. THE VENTURE. Edison and MAA shall form a Delaware limited liability
company (or such other entity as may be mutually agreed by the parties) (the
"VENTURE") the structure and ownership of which has not been determined. Control
of the Venture will be set forth in the definitive Venture agreements but the
parties intend that all major decisions of the Venture will require the consent
of both MAA and Edison. The Venture shall acquire and develop the Fifth Avenue
Parcel and the City Parcels (collectively, the "SITE"). A third party developer
and/or investor(s) may be retained by the Venture or participate with Edison in
a sub-venture or other arrangement in order to facilitate the development of the
Office Space. Edison and MAA will also consider the possibility of having an
appropriate state or city agency hold title to all or a portion of the Project
and lease or convey same to the Venture if mutually beneficial to the parties.
4. LAND USE APPROVALS. The Site is currently zoned for residential and
community facility use. Such zoning would permit development of the Museum and
School but not the Office Space. Edison intends to seek a re-zoning of the Site
and all other land use approvals
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necessary to develop the Office Space (the "LAND USE APPROVALS"). Edison will be
primarily responsible for obtaining the Land Use Approvals and MAA will be
primarily responsible for the acquisition of the City Parcels. Edison and MAA
acknowledge and agree, however, that the political and administrative issues and
processes involved in obtaining the Land Use Approvals are inextricably tied to
the political and administrative issues and processes involved in the donation
of the City Parcels. Consequently, MAA and Edison will regularly consult with
each other and endeavor to adopt a unified and consistent strategy with respect
to these political and administrative processes and shall keep each other fully
apprised of all developments and contacts with City or State officials. ULURP
applications for the Land Use Approvals and the disposition of the City Parcels
will be filed as "related applications" with the intention of being certified
and reviewed simultaneously; provided, however, that at the option of MAA, the
application for disposition of the City Parcels may provide for alternative
dispositions to (i) the Venture upon satisfaction of the Funding Condition or
(ii) to MAA in the event that this Letter of Intent is terminated, the Venture
is dissolved or the Funding Condition is not satisfied. Neither Edison nor MAA
shall submit or cause to be submitted any ULURP or other written application or
materials with respect to the Site to any governmental authority without the
prior approval of the other party which approval shall not be unreasonably
withheld. All portions of the Site would be combined into a single zoning lot.
The Venture shall retain land use counsel and other
consultants from time to time reasonably satisfactory to MAA and Edison in
connection with such re-zoning and related matters. MAA and Edison and their
respective counsel shall cooperate in the process of obtaining the Land Use
Approvals and the acquisition of the City Parcels, and shall, if necessary or
desirable, join in the applications and appear before governmental entities and
officials in order to obtain the Land Use Approvals.
Subsequent to the acquisition of the Site by the Venture,
(unless such demapping is necessary to obtain the Land Use Approvals for the
scope of the Project agreed upon in the preliminary schematic drawings, in which
case such demapping will be sought simultaneously with the Land Use Approvals)
the Venture may seek the demapping of the crescent-shaped parcel of land between
the Site and Frawley Circle (the "DEMAPPING PARCEL") and to acquire either title
to or right of use of the Demapping Parcel or other arrangements for the use of
the Demapping Parcel. If the Venture is successful in demapping the Demapping
Parcel and obtaining either title or use rights with respect thereto, Edison and
MAA agree that no permanent structure shall be erected upon such parcel and that
such parcel shall be utilized predominantly as on open space.
5. DESIGN. MAA and Edison acknowledge that architectural design is a
critical element to the success of the Project and that the parties are
interested in insuring a design that is compatible with their respective space
programs and institutional identity and that will exert a positive influence on
the neighborhood. The parties shall jointly select an architect and shall agree
upon a mutually satisfactory design development process, to be reflected in the
definitive agreements. The parties generally agree that any design must comply
with relevant bulk
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restrictions and not require any additional Land Use Approvals, and that the
Project will be designed such that the Museum will occupy a position of
prominence on Fifth Avenue and that the design scheme will reinforce the
separate and distinct architectural identity of the Museum, Office Space and
School, at least from a visual standpoint, except to the extent that the design
includes Fifth Avenue frontage for the Office Space. To the maximum extent
feasible, the Office Space, School and Museum will be designed with separate
physical plants such that operating costs can be directly attributed to each
unit with minimal allocation of common systems costs. The parties acknowledge
that the conceptual drawings attached hereto as Exhibit A set forth a design
that satisfies the design criteria set forth in this Section 5 (except that the
drawing attached as Exhibit A-2 does not satisfy all relevant bulk restrictions)
and represents the parties present consensus as to an acceptable design concept;
provided, however, that neither party shall be obligated to proceed with such
design and either MAA or Edison may subsequently reject such design concept for
any reason or no reason.
6. DEVELOPER. It is anticipated that the Venture will enter into a
contract with an experienced developer mutually acceptable to the parties (the
"PROJECT DEVELOPER"), who will be retained to develop the Project in accordance
with the design approved by the parties, the terms and conditions of the Land
Use Approvals or acquisition of the City Parcels and a construction budget and
schedule acceptable to the parties. The Project Developer or an affiliate may
also be the investor in the Office Space.
7. DEVELOPMENT BUDGET. The parties will develop a budget for the
Project (the "DEVELOPMENT BUDGET"). The Development Budget shall include all
hard and soft costs for the Project (collectively, "PROJECT COSTS").
8. PROJECT FINANCING. MAA and Edison currently anticipate that Project
Costs will be funded as follows:
- Projects Costs allocated to the Museum will be funded by a
combination of philanthropic donations and available grants,
if any from applicable government, quasi-government or private
entities.
- Projects Costs allocated to the School will be funded by
philanthropic donations and grants and/or third party debt or
equity investors.
- Projects Costs allocable to the Office will be funded by a
construction loan (the "OFFICE LOAN") by a commercial lender
(the "OFFICE LENDER") and/or an equity investment by Edison,
the Office Space developer or a third party. The Office Loan
will be secured by a mortgage on the Project, with customary
provisions for release of liens upon creation of the
condominium units and payment of Project Costs; provided,
however, that the terms and conditions of the Office Loan
and/or the Venture agreements will contain provisions
reasonably acceptable to MAA
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and Edison to protect the interests of the parties in the
event of a default under or foreclosure of the Office Loan.
Costs not directly allocable to any specific portion of the
Project (such as architectural, engineering and design and other soft costs and
land acquisition costs) shall, except as otherwise provided herein, be allocated
among the Museum, School and Office Space on an equitable basis to be set forth
in the definitive documents.
The foregoing notwithstanding, Edison acknowledges that it
shall take the primary responsibility for raising philanthropic contributions
sufficient to fund 100% of the Project Costs allocated to the Museum and School
(less any equity or debt investment in the school), plus an additional
$10,000,000 for the endowment of MAA; provided, however, that in no event shall
Edison have any liability to MAA arising from any failure to raise such funds or
otherwise in connection with or relating to its efforts in fund raising or the
manner in which the fund raising program was conducted. MAA shall cooperate
fully and actively participate in fund raising efforts both independently and as
directed by Edison as part of its overall fund raising effort for the Project.
Subject to the terms and conditions set forth in the definitive Venture
documents, Edison would also assist MAA in its fund raising efforts even after a
termination of this Letter of Intent or dissolution of the Venture.
Upon approval by MAA and Edison of the Development Budget
percentages shall be established for (i) the fraction, the numerator of which is
the $10,000,000 contribution to the endowment of MAA to be included in the
Project Budget and the denominator of which is the total Project Costs
(including for this purpose the $10,000,000 endowment contribution) allocable to
the Museum (the "ENDOWMENT PERCENTAGE") and (ii) the fraction, the numerator of
which is the portion of the total land acquisition costs allocable to the Museum
and the denominator of which is total Project Costs (including for this purpose
the $10,000,000 endowment contribution) allocable to the Museum (the "LAND
REIMBURSEMENT PERCENTAGE"). As and when any amount of available funds are
applied to pay Project Costs allocable to the Museum ("AVAILABLE MUSEUM FUNDS")
(A) an amount equal to the Endowment Percentage of such Available Museum Funds
shall be paid to MAA for application to MAA's endowment, (B) an amount equal to
the Land Reimbursement Percentage of such Available Museum Funds shall be paid
to Edison in reimbursement of the portion of the total land acquisition costs
allocable to the Museum and (C) the remainder of such Available Museum Funds
shall be applied to the payment of Project Costs other than the portion of the
total land acquisition costs allocable to the Museum or contributions to the
endowment of MAA. The Endowment Percentage and the Land Reimbursement shall each
be subject to re-computation in the event that either Edison of MAA receives
philanthropic contributions in connection with fund raising for the Project that
are earmarked for either MAA's endowment or land acquisition costs, as the case
may be. For avoidance of doubt, the $10,000,000 numerator of the fraction
described in clause (i) above would be reduced by contributions earmarked for
MAA's endowment and the numerator (i.e., the
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portion of total land acquisition costs allocable to the Museum) of the fraction
described in clause (ii) above would be reduced by contributions earmarked for
land acquisition costs.
The Parties intend that the Venture agreement will provide a
mechanism in the event that either Edison and MAA are unable to raise sufficient
money to fund the Project, such that the parties shall endeavor in consultation
with the Project Developer to identify ways to value engineer or otherwise scale
back the scope of the Project (or the applicable portion thereof) such that the
funds available, are sufficient to pay 100% of the Project Costs.
9. PREDEVELOPMENT. In order to facilitate the continued progress of the
project, Edison shall advance those Project Costs set forth on the
pre-development budget attached hereto as Exhibit B prior to the execution of
definitive documents or completion of the process of fund raising in order to
expedite the process of designing the Project and obtaining the Land Use
Approvals or acquiring the City Parcels. Such advances, along with any costs
advanced by Edison with respect to the acquisition of the Fifth Avenue Parcel
shall be reimbursed to Edison out of funds raised to pay Project Costs; provided
that such reimbursement shall be made only after satisfaction of the Funding
Condition, except and to the extent that any contribution received by Edison are
earmarked for any items included in the predevelopment budget.
In no event shall the proceeds of any philanthropic
contributions be applied to any construction costs allocable to the Office Space
unless (i) such application is agreed to by each of Edison and MAA, each in its
sole and absolute discretion and (ii) such funds are to be reimbursed from the
proceeds of the Office Loan and reapplied to other Project costs.
Anything to the contrary provided herein notwithstanding
neither MAA nor Edison shall have any liability to the other in the event that
such party is unable to raise sufficient funds to finance its allocable share of
Project Costs.
10. DEVELOPMENT SCHEDULE. Edison and MAA will agree on a preliminary
schedule for the development of the Project (the "DEVELOPMENT SCHEDULE"), which
Development Schedule will be updated as necessary during the course of
development. The Development Schedule will set forth, inter alia, the schedule
for obtaining Land Use Approvals and acquisition of the City Parcels, design
development, negotiation of definitive agreements between MAA and Edison and
other parties with respect to the Venture, closing of the purchase of the Fifth
Avenue Parcel and other key milestones in the development process. The parties
intend that on or before June 15, 2000 the parties shall agree upon and, where
applicable, execute and deliver definitive Venture documents, schematic drawings
for the Project, a cost estimate for the Project, a preliminary Development
Budget and Development Schedule, a business and operating plan for each portion
of the Project and a fund raising plan for the Project.
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11. LETTER OF INTENT ONLY. This Letter of Intent is indicative of our
current intentions with respect to this matter and the terms set forth herein
are subject to negotiation, execution and delivery of definitive agreements, and
to the appropriate approvals from the boards of directors or trustees of Edison
and MAA.
12. PRESS RELEASES; CONFIDENTIALITY. Edison and MAA will consult with
each other with respect to press releases and other publicity with respect to
the relationship contemplated hereby and the Project, and may, if mutually
agreed, cause the Venture to retain the services of a public relations
consultant. If any materials delivered to Edison or MAA are clearly identified
as confidential, the party receiving such materials shall keep them confidential
and shall not disclose same except (i) to their affiliates and their respective
directors, officers, employees, agents, consultants, attorneys, accountants,
architects, governmental officials and employees, Lenders and others who need to
know such information in connection with the transactions contemplated by this
Letter of Intent and who are informed of the obligation to keep such materials
confidential or (ii) as required by applicable law.
13. COSTS. Each party shall bear its own costs in connection with the
preparation and negotiation of this Letter of Intent and the definitive
agreements between Edison and MAA and any documentation and any due diligence
investigations with respect thereto and such costs shall not be included in the
Development Budget. Each party shall be responsible for and pay any fees payable
or other compensation payable to any broker, finder, investment banker or other
person or entity due as a result of any dealings that the applicable party had
with such person or entity.
Sincerely,
EDISON SCHOOLS, INC.
By:/s/ Benno C. Schmidt, Jr.
_______________________
Name: Benno C. Schmidt, Jr.
Title: Chairman
AGREED AND ACCEPTED
this ___ day of April, 2000
MUSEUM FOR AFRICAN ART
By:/s/ Elsie Crum-McCabe /s/Robert Rubin
_______________________ _______________
Name: Elsie Crum-McCabe Robert Rubin
Title: President Co-chair
5th Avenue and 110th Street (New York, NY) Property Development Letter of Intent - Edison Schools Inc. and Museum of African Art
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